WARBURG PINCUS EMERGING GROWTH FUND INC /PA/, 485APOS, 1998-12-03

WARBURG PINCUS EMERGING GROWTH FUND INC /PA/
485APOS, 1998-12-03

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<PAGE> 1

As filed with the U.S. Securities and Exchange Commission
on December 3, 1998

Securities Act File No. 33-18632
Investment Company Act File No. 811-5396

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]

Pre-Effective Amendment No. [ ]

Post-Effective Amendment No. 16 [X]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT of 1940 [X]

Amendment No. 18 [X]

(Check appropriate box or boxes)

Warburg, Pincus Emerging Growth Fund, Inc.
(Exact Name of Registrant as Specified in Charter)

466 Lexington Avenue
New York, New York 10017-3147
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (212) 878-0600

Mr. Eugene P. Grace
Warburg, Pincus Emerging Growth Fund
466 Lexington Avenue
New York, New York 10017-3147
(Name and Address of Agent for Service)

Copy to:

Rose F. DiMartino, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099

<PAGE> 2

Approximate Date of Proposed Public Offering: February 1, 1999

It is proposed that this filing will become effective (check appropriate box):

[ ] immediately upon filing pursuant to paragraph (b)

[ ] on (date) pursuant to paragraph (b)

[X] 60 days after filing pursuant to paragraph (a)(1)

[ ] on (date) pursuant to paragraph (a)(1)

[ ] 75 days after filing pursuant to paragraph (a)(2)

[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.

If appropriate, check the following box:

[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

<PAGE> 3

Subject to Completion, dated December 3, 1998
PROSPECTUS
Common Class
February 1, 1999

WARBURG PINCUS
EMERGING GROWTH FUND

WARBURG PINCUS
SMALL COMPANY VALUE FUND

WARBURG PINCUS
SMALL COMPANY GROWTH FUND

WARBURG PINCUS
POST-VENTURE CAPITAL FUND

As with all mutual funds, the Securities and Exchange
Commission has not approved these funds, nor has it passed
upon the adequacy or accuracy of this Prospectus. It is a
criminal offense to state otherwise.

[Warburg Pincus Funds Logo]

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT
AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY
THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

<PAGE> 4

CONTENTS

<TABLE>
<S> <C>
KEY POINTS.................... .................... 4
Goals and Principal Strategies.................. 4
Investor Profile................................ 4
A Word About Risk............................... 5
PERFORMANCE SUMMARY............... ................ 6
Year-by-Year Total Returns...................... 6
Average Annual Total Returns.................... 7
INVESTOR EXPENSES................ ................. 8
Fees and Fund Expenses.......................... 8
Example......................................... 9
THE FUNDS IN DETAIL............... ................ 10
The Management Firms............................ 10
Multi-Class Structure........................... 10
Fund Information Key............................ 11
EMERGING GROWTH FUND............... ............... 12
SMALL COMPANY VALUE FUND............. ............. 14
SMALL COMPANY GROWTH FUND............ ............. 16
POST-VENTURE CAPITAL FUND............ ............. 18
MORE ABOUT RISK................. .................. 20
Introduction.................................... 20
Types of Investment Risk........................ 20
Certain Investment Practices.................... 23
MEET THE MANAGERS................ ................. 27
ABOUT YOUR ACCOUNT................ ................ 29
Share Valuation................................. 29
Buying and Selling Shares....................... 29
Account Statements.............................. 30
Distributions................................... 30
Taxes........................................... 30
OTHER INFORMATION................ ................. 32
About the Distributor........................... 32
FOR MORE INFORMATION............... ............... back cover
</TABLE>

<PAGE> 5

KEY POINTS
GOALS AND PRINCIPAL STRATEGIES
<TABLE>
<CAPTION>
FUND/RISK FACTORS GOAL STRATEGY
<S> <C> <C>
EMERGING GROWTH FUND Maximum capital - Invests in U.S. equity
Risk factors: appreciation securities
Market risk - Focuses on emerging growth
Start-up and other companies
small companies - Looks for growth characteristics
Special-situation such as positive earnings and
companies potential for accelerated growth
Non-diversified
status
SMALL COMPANY VALUE Long-term capital - Invests in equity securities of
FUND appreciation small U.S. companies
Risk factors: - Analyzes factors such as
Market risk price-to-earnings, price-to-book
Small companies and price-to-cash flow ratios,
Special-situation using a value investment style
companies
SMALL COMPANY GROWTH Capital growth - Invests in equity securities of
FUND small U.S. companies
Risk factors: - Using a growth investment style,
Market risk may look for either developing or
Start-up and other older companies in a growth
small companies stage or companies providing
Special-situation products or services with a high
companies unit-volume growth rate
POST-VENTURE CAPITAL Long-term growth of - Invests primarily in equity
FUND capital securities of U.S. companies
Risk factors: considered to be in their
Market risk post-venture-capital stage of
Start-up and other development
small companies - May invest in companies of any
Special-situation size
companies - Takes a growth investment
approach to identifying attractive
post-venture-capital investments
</TABLE>

INVESTOR PROFILE

These funds are designed for investors who:

- -have longer time horizons

- -are willing to assume the risk of losing money in exchange for attractive
potential long-term returns

-are investing for total return, growth and income, or capital appreciation

-want to diversify their portfolios with more aggressive stock funds

-are investing for long-term goals that may include college or retirement

They may NOT be appropriate if you:

-are investing for a shorter time horizon

-are uncomfortable with an investment that will fluctuate in value

-are looking primarily for income

You should base your selection of a fund on your own goals, risk preferences
and time horizon.
4

<PAGE> 6

A WORD ABOUT RISK

All investments involve some level of risk. Simply defined, risk is the
possibility that you will lose money or not make money.

Principal risk factors for the funds are discussed below. Before you invest,
please make sure you understand the risks that apply to your fund. As with any
mutual fund, you could lose money over any period of time.

Investments in the funds are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

MARKET RISK
All funds

The market value of a security may move up and down, sometimes rapidly and
unpredictably. These fluctuations, which are often referred to as "volatility,"
may cause a security to be worth less than it was worth at an earlier time.
Market risk may affect a single issuer, industry, sector of the economy, or the
market as a whole. Market risk is common to most investments--including stocks
and bonds, and the mutual funds that invest in them.

START-UP AND OTHER SMALL COMPANIES
All funds

Start-up and other small companies may have less-experienced management,
limited product lines, unproven track records or inadequate capital reserves.
Their securities may carry increased market, liquidity and other risks. Key
information about the company may be inaccurate or unavailable.

SPECIAL-SITUATION COMPANIES
All funds

"Special situations" are unusual developments that affect a company's market
value. Examples include mergers, acquisitions and reorganizations. Securities of
special-situation companies may decline in value if the anticipated benefits of
the special situation do not materialize.

NON-DIVERSIFIED STATUS
Emerging Growth Fund

Compared to a diversified mutual fund, a non-diversified fund may invest a
greater share of its assets in the securities of fewer companies. The portfolio
managers typically have diversified the fund's investments. However, to the
extent that the fund uses non-diversification, it may be more volatile than a
diversified fund.

<PAGE> 7

PERFORMANCE SUMMARY

The bar chart below and the table on the next page provide an indication of the
risks of investing in these funds. The bar chart shows you how each fund's
performance has varied from year to year for up to ten years. The table compares
each fund's performance over time to that of a broadly based securities market
index and other indexes, if applicable. As with all mutual funds, past
performance is not a prediction of the future.

YEAR-BY-YEAR TOTAL RETURNS

[BAR CHART]

<TABLE>
<CAPTION>
YEAR ENDED 12/31:
<S> <C>
EMERGING GROWTH FUND
BEST QUARTER: 26.43% (Q1 91)
WORST QUARTER: -19.16% (Q3 90)
INCEPTION DATE: 1/21/88
1989 21.73
1990 -9.86
1991 56.13
1992 12.14
1993 18.11
1994 -1.43
1995 46.22
1996 9.87
1997 21.26
1998
</TABLE>

[BAR CHART]

<TABLE>
<CAPTION>
SMALL COMPANY VALUE FUND
<S> <C>
BEST QUARTER: 17.16% (Q3 97)
WORST QUARTER: -7.41% (Q4 97)
INCEPTION DATE: 12/29/95
1996 56.20
1997 19.16
</TABLE>

[BAR CHART]

<TABLE>
<CAPTION>
SMALL COMPANY GROWTH FUND

<S> <C>
BEST QUARTER: 19.28% (Q3 97
WORST QUARTER: -7.50% (Q1 97)
INCEPTION DATE: 12/31/96
1997 22.29
</TABLE>

[BAR CHART]

<TABLE>
<CAPTION>
POST-VENTURE CAPITAL FUND
<S> <C>
BEST QUARTER: 15.32% (Q3 97)
WORST QUARTER: -11.02% (Q1 97)
INCEPTION DATE: 9/29/95
1996 17.26
1997 9.67
</TABLE>

<PAGE> 8

AVERAGE ANNUAL TOTAL RETURNS

<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS 10 YEARS LIFE OF INCEPTION
PERIOD ENDED 12/31/98: 1998 1994-1998 1989-1998 FUND DATE
<S> <C> <C> <C> <C> <C>
EMERGING GROWTH FUND XX.xx% XX.xx% XX.xx% XX.xx% 1/21/88
S&P 500 XX.xx% XX.xx% XX.xx% XX.xx%
SMALL COMPANY VALUE FUND XX.xx% NA NA XX.xx% 12/29/95
RUSSELL 2000 XX.xx% XX.xx% XX.xx% XX.xx%
SMALL COMPANY GROWTH FUND XX.xx% NA NA XX.xx% 12/31/96
RUSSELL 2000 GROWTH XX.xx% XX.xx% XX.xx% XX.xx%
POST-VENTURE CAPITAL FUND XX.xx% NA NA XX.xx% 12/29/95
RUSSELL 2000 GROWTH XX.xx% XX.xx% XX.xx% XX.xx%
</TABLE>

UNDERSTANDING PERFORMANCE

-TOTAL RETURN tells you how much an investment in a fund has changed in
value over a given time period. It assumes that all dividends and capital
gains (if any) were reinvested in additional shares. The change in value
can be stated either as a cumulative return or as an average annual rate
of return.

-A CUMULATIVE TOTAL RETURN is the actual return of an investment for a
specified period. The year-by-year total returns in the bar chart are
examples of one-year cumulative total returns.

-An AVERAGE ANNUAL TOTAL RETURN applies to periods longer than one year.
It smoothes out the variations in year-by-year performance to tell you
what constant annual return would have produced the investment's actual
cumulative return. This gives you an idea of an investment's annual
contribution to your portfolio, assuming you held it for the entire
period.

-Because of compounding, the average annual total returns in the table
cannot be computed by averaging the returns in the bar chart.

<PAGE> 9

INVESTOR EXPENSES

FEES AND FUND EXPENSES

This table describes the fees and expenses you may bear as a shareholder. Annual
fund operating expense figures are for the fiscal year ended October 31, 1998.

<S> <C> <C> <C> <C>
SMALL SMALL POST-VENTURE
EMERGING COMPANY COMPANY CAPITAL
GROWTH FUND VALUE FUND GROWTH FUND FUND
SHAREHOLDER FEES
(paid directly from your
investment)
Sales charge "load" on
purchases NONE NONE NONE NONE
Deferred sales charge
"load" NONE NONE NONE NONE
Sales charge "load" on
reinvested
distributions NONE NONE NONE NONE
Redemption fees NONE NONE NONE NONE
Exchange fees NONE NONE NONE NONE
ANNUAL FUND OPERATING EXPENSES
(deducted from fund assets)
Management fee .90% 1.00% 1.00% 1.25%
Distribution and service
(12b-1) fee NONE .25% .25% .25%
Other expenses xx% xx% xx% xx%
TOTAL ANNUAL FUND
OPERATING EXPENSES*
xx% xx% xx% xx%
</TABLE>

* Actual fees and expenses for the fiscal year ended October 31, 1998 are shown
below. Fee waivers and expense reimbursements or credits reduced expenses for
some funds during 1998 but may be discontinued at any time.

<TABLE>
<CAPTION>
SMALL SMALL POST-VENTURE
EXPENSES AFTER WAIVERS EMERGING COMPANY COMPANY CAPITAL
AND REIMBURSEMENTS GROWTH FUND VALUE FUND GROWTH FUND FUND
<S> <C> <C> <C> <C>
Management fee xx% xx% xx% xx%
Distribution and service
(12b-1) fee NONE .25% .25% .25%
Other expenses xx% xx% xx% xx%
TOTAL ANNUAL FUND
OPERATING EXPENSES
xx% xx% xx% xx%
</TABLE>

<PAGE> 10

EXAMPLE

This example may help you compare the cost of investing in these funds with the
cost of investing in other mutual funds. Because it uses hypothetical
conditions, your actual costs may be higher or lower.

Assume you invest $10,000, each fund returns 5% annually, expense ratios remain
as listed in the first table on the opposite page (before fee waivers and
expense reimbursements or credits) and you close your account at the end of each
of the time periods shown. Based on these assumptions, your cost would be:

<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS 10 YEARS
<S> <C> <C> <C> <C>
EMERGING GROWTH FUND $xx $xx $xx $xx
SMALL COMPANY VALUE FUND $xx $x $xx $xx
SMALL COMPANY GROWTH FUND $xx $xx $xx $xx
POST-VENTURE CAPITAL FUND $xx $xx $xx $xx
</TABLE>

<PAGE> 11

THE FUNDS IN DETAIL

THE MANAGEMENT FIRMS

WARBURG PINCUS ASSET
MANAGEMENT, INC.
466 Lexington Avenue
New York, NY 10017-3147

-Investment adviser for the funds

-Responsible for managing each fund's assets according to its goal and strategy
and supervising Abbott's activities for the Post-Venture Capital Fund

-A professional investment advisory firm providing investment services to
individuals since 1970 and to institutions since 1973

-Currently manages approximately $xx billion in assets

For easier reading, Warburg Pincus Asset Management, Inc. will be referred to
as "Warburg Pincus" or "we" throughout this prospectus.

ABBOTT CAPITAL MANAGEMENT, LLC
50 Rowes Wharf, Suite 240
Boston, MA 02110-3328
-Sub-adviser for the Post-Venture Capital Fund

-Responsible for managing the fund's investments in private equity portfolios

-A registered investment adviser concentrating on venture capital, buyout, and
special-situations investments

-Currently manages approximately $2.3 billion in assets
MULTI-CLASS STRUCTURE

This prospectus offers Common Class shares of the funds. Common Class shares
are no-load.

Each of the Funds accept the Small Company Growth Fund offers Advisor Class
shares described in separate prospectuses. Advisor Class shares are available
through financial-services firms.

<PAGE> 12

FUND INFORMATION KEY

Concise fund-by-fund descriptions begin on the next page. Each description
provides the following information:

GOAL AND STRATEGY
The fund's particular investment goals and the strategies it intends to use
in pursuing them. Percentages of fund assets are based on total assets unless
indicated otherwise.

PORTFOLIO INVESTMENTS
The primary types of securities in which the fund invests. Secondary
investments are described in "More About Risk."

RISK FACTORS
The major risk factors associated with the fund. Additional risk factors are
included in "More About Risk."

PORTFOLIO MANAGEMENT
The individuals designated by the investment adviser to handle the fund's
day-to-day management.

INVESTOR EXPENSES
Actual fund expenses for the 1998 fiscal year. Future expenses may be higher
or lower.

-MANAGEMENT FEE The fee paid to the investment adviser and sub-adviser for
providing investment advice to the fund. Expressed as a percentage of average
net assets after waivers.

-DISTRIBUTION AND SERVICE (12B-1) FEES Fees paid by the fund to the distributor
for making shares of the fund available to you. Expressed as a percentage of
average net assets.

-OTHER EXPENSES Fees paid by the fund for items such as administration,
transfer agency, custody, auditing, legal and registration fees and
miscellaneous expenses. Expressed as a percentage of average net assets after
waivers, credits and reimbursements.

FINANCIAL HIGHLIGHTS
A table showing the fund's audited financial performance for up to five
years.

-TOTAL RETURN How much you would have earned on an investment in the fund,
assuming you had reinvested all dividend and capital gain distributions.

-PORTFOLIO TURNOVER An indication of trading frequency.

The funds may sell securities without regard to the length of time they have
been held. A high turnover rate may increase the fund's transaction costs and
negatively affect its performance. Portfolio turnover may also result in
capital-gain distributions that could raise your income tax liability.

The Annual Report includes the auditor's report, along with the fund's
financial statements. It is available free upon request.

<PAGE> 13

EMERGING GROWTH FUND

GOAL AND STRATEGY

The Emerging Growth Fund seeks maximum capital appreciation. To pursue this
goal, it invests in equity securities of emerging growth companies.

Emerging growth companies are small or medium-size companies that:

- -have passed their start-up phase

- -show positive earnings

- -offer the potential for accelerated earnings growth

Emerging growth companies generally stand to benefit from new products or
services, technological developments, management changes or other factors. They
include "special-situation companies"--companies experiencing unusual
developments affecting their market value.

Under normal market conditions, the fund will invest at least 65% of assets
in equity securities of emerging-growth companies that represent attractive
capital-appreciation opportunities.

Its non-diversified status allows the fund to invest a greater share of its
assets in the securities of fewer companies. However, the portfolio managers
typically have diversified the fund's investments.

PORTFOLIO INVESTMENTS

This fund invests in a portfolio of U.S. equity securities consisting of:

- -common and preferred stocks

- -securities convertible into common stocks

Brights and warrants

The fund may invest up to 20% of assets in foreign securities. To a limited
extent, it may also engage in other investment practices.

RISK FACTORS

This fund's principal risk factors are:

Bmarket risk

- -start-up and other small companies

- -special-situation companies

- -non-diversified status

The value of your investment will fluctuate in response to stock market
movements. Investing in start-up and other small companies may expose the fund
to increased market, information and liquidity risks. These risks are defined in
"More About Risk."

Securities of companies in special situations may decline in value and hurt
the fund's performance if the anticipated benefits of the special situation do
not materialize. Non-diversification might cause the fund to be more volatile
than a diversified fund.

"More About Risk" details certain other investment practices the fund may
use. Please read that section carefully before you invest.

<PAGE> 14

PORTFOLIO MANAGEMENT

Elizabeth B. Dater and Stephen J. Lurito manage the fund's investment
portfolio. You can find out more about them in "Meet the Managers."

INVESTOR EXPENSES

Management fee .xx%
All other expenses .xx%
Total expenses X.xx%
FINANCIAL HIGHLIGHTS

The figures below have been audited by the fund's independent auditors,
PricewaterhouseCoopers LLP.

PERIOD ENDED: 10/98 10/97 10/96 10/95 10/94
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $32.80 $29.97 $22.38 $23.74
Investment activities:
Net investment income (0.19) (0.02) (0.05) (0.06)
Net gains or losses on investments
(both realized and unrealized) 7.12 4.60 7.64 0.06
Total from investment activities 6.93 4.58 7.59 0.00
Distributions:
From net investment income 0.00 0.00 0.00 0.00
From realized capital gains (0.07) (1.75) 0.00 (1.36)
Total distributions (0.07) (1.75) 0.00 (1.36)
Net asset value, end of period $39.66 $32.80 $29.97 $22.38
Total return 21.18% 16.14% 33.91% .16%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s
omitted) $1,515,385 $1,104,684 $487,537 $240,664
Ratio of expenses to average net
assets(1) 1.22% 1.28% 1.26% 1.22%
Ratio of net income to average net
assets (.59%) (.63%) (.58%) (.58%)
Decrease reflected in above operating
expense ratios due to
waivers/reimbursements .00% .00% .00% .04%
Portfolio turnover rate 87.03% 65.77% 84.82% 60.38%
</TABLE>

- --------------------------------------------------------------------------------
(1) Interest earned on uninvested cash balances is used to offset portions of
transfer agent expense. These arrangements resulted in a reduction to the Common
Shares' expenses by %, .01% and .01% for the years ended October 31, 1998,
1997 and 1996, respectively. The Common Shares operating expense ratio after
reflecting these arrangements were %, 1.21% and 1.27% for the years ended
October 31, 1998, 1997 and 1996, respectively.
13

<PAGE> 15

SMALL COMPANY VALUE FUND

GOAL AND STRATEGY

The Small Company Value Fund seeks long-term capital appreciation. To pursue
this goal, it invests in equity securities of small U.S. value companies.
Current income is a secondary consideration in selecting portfolio investments.

Value companies are companies whose earnings power or asset value does not
appear to be reflected in the current stock price. As a result, value companies
look underpriced according to financial measurements of their intrinsic worth or
business prospects. These measurements include price-to-earnings, price-to-book,
price-to-cash flow and debt-to-equity ratios. The portfolio manager determines
value based upon research and analysis, taking all relevant factors into
account.

Under normal market conditions, the fund will invest at least 65% of assets
in equity securities of small U.S. companies. The fund considers a "small"
company to be one whose market capitalization is within the range of
capitalizations of companies in the Russell 2000 Index. [As of January 31, 1998,
market capitalizations of Russell 2000 companies ranged from $23.7 million to
$2.7 billion.]

Some companies may outgrow the definition of a small company after the fund
has purchased their securities. These companies continue to be considered small
for purposes of the fund's 65% minimum allocation to small-company equities. In
addition, the fund may invest in companies of any size once the 65% policy is
met. As a result, the fund's average market capitalization may sometimes exceed
that of the largest company in the Russell 2000 Index.

PORTFOLIO INVESTMENTS

This fund invests primarily in equity securities of small-capitalization
value companies. Equity holdings may consist of:

- -common and preferred stocks

- -securities convertible into common stocks

- -rights and warrants

The fund may invest up to 20% of assets in foreign securities. To a limited
extent, it may also engage in other investment practices.

RISK FACTORS

This fund's principal risk factors are:

- -market risk

- -start-up and other small companies

- -special-situation companies

Small companies are often involved in "special situations." Securities of
special-situation companies may decline in value and hurt the fund's performance
if the anticipated benefits of the special situation do not materialize. "More

<PAGE> 16

About Risk" details certain other investment practices the fund may use. Please
read that section carefully before you invest.

PORTFOLIO MANAGEMENT

Kyle F. Frey manages the fund's investment portfolio. You can find out more
about him in "Meet the Managers."

INVESTOR EXPENSES

Management fee .xx%
Distribution and service
(12b-1) fee .xx%
All other expenses .xx%

Total expenses X.xx%

FINANCIAL HIGHLIGHTS

The figures below have been audited by the fund's independent auditors,
PricewaterhouseCoopers LLP.

PERIOD ENDED: 10/98 10/97 10/96(1
<S> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $14.38 $10.00
Investment activities:
Net investment income (0.08) (0.02)
Net gains or losses on investments
(both realized and unrealized) 4.64 4.40
Total from investment activities 4.56 4.38
Distributions:
From net investment income 0.00 0.00
From realized capital gains (0.17) 0.00
Total distributions (0.17) 0.00
Net asset value, end of period $18.77 $14.38
Total return 32.05% 43.80%(2)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(000s omitted) $223,675 $84,045
Ratio of expenses to average net assets(3) 1.70% 1.75%(4)
Ratio of net income to average net assets (.63%) (.43%)(4)
Decrease reflected in above operating expense
ratio due to waivers/reimbursements .03% .44%*
Portfolio turnover rate 105.87% 43.14%(2)
</TABLE>

(1) For the Period December 29, 1995 (Commencement of Operations) through
October 31, 1996.

(2) Non annualized.

(3) Interest earned on uninvested cash balances is used to offset portions of
transfer agent expense. These arrangements resulted in a reduction to the Common
Shares' expenses by %, .01% and .00% for its year or period ended October 31,
1998, 1997 and 1996, respectively. The Common Shares' operating expense ratio
after reflecting these arrangements were %, 1.69% and 1.75% for the years
ended October 31, 1998, 1997 and 1996, respectively.

(4) Annualized.
15

<PAGE> 17

SMALL COMPANY GROWTH FUND

GOAL AND STRATEGY

The Small Company Growth Fund seeks capital growth. To pursue this goal, it
invests in equity securities of small U.S. growth companies.

In seeking to identify growth companies--companies with attractive
capital-growth potential--the fund's portfolio managers often look for:

-companies still in the developmental stage

-older companies that appear to be entering a new stage of growth

-companies providing products or services with a high unit-volume growth rate

The fund may also invest in emerging growth companies--small or medium-size
companies that have passed their start-up phase, show positive earnings, and
offer the potential for accelerated earnings growth. Emerging growth companies
generally stand to benefit from new products or services, technological
developments, changes in management or other factors.

Some companies may outgrow the definition of a small company after the fund
has purchased their securities. These companies continue to be considered small
for purposes of the fund's minimum 65% allocation to small-company equities. In
addition, the fund may invest in companies of any size once the 65% policy is
met. As a result, the fund's average market capitalization may sometimes exceed
that of the largest company in the Russell 2000 Index.

PORTFOLIO INVESTMENTS

This fund intends to invest at least 80% of assets in equity securities of
small-capitalization growth companies. Equity holdings may consist of:

-common and preferred stocks

-securities convertible into common stocks

-rights and warrants

The fund may invest up to 20% of assets in foreign securities. To a limited
extent, it may also engage in other investment practices.

RISK FACTORS

This fund's principal risk factors are:

-market risk

-start-up and other small companies

-special-situation companies

The value of your investment will fluctuate in response to stock market
movements. Investing in start-up and other small companies may expose the fund
to increased market, information and

<PAGE> 18

liquidity risks. These risks are defined in "More About Risk."

Small companies and emerging growth companies are often involved in "special
situations." Securities of special-situation companies may decline in value and
hurt the fund's performance if the anticipated benefits of the special situation
do not materialize.

"More About Risk" details certain other investment practices the fund may
use. Please read that section carefully before you invest.

PORTFOLIO MANAGEMENT

Stephen J. Lurito manages the fund's investment portfolio. You can find out
more about him in "Meet the Managers."

INVESTOR EXPENSES

Management fee .xx%
Distribution and service
(12b-1) fee .xx%
All other expenses .xx%

Total expenses X.xx%
FINANCIAL HIGHLIGHTS
The figures below have been audited by the fund's independent auditors,
PricewaterhouseCoopers LLP.

PERIOD ENDED: 10/98 10/97(1)
<S> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $10.00
Investment activities:
Net investment income (0.04)
Net gains or losses on investments (both realized and
unrealized) 2.29
Total from investment activities 2.25
Distributions:
From net investment income 0.00
From realized capital gains 0.00
Total distributions 0.00
Net asset value, end of period $12.25
Total return 22.50%(2)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $11,977
Ratio of expenses to average net assets(3) 1.41%(4)
Ratio of net income to average net assets (.53%)(4)
Decrease reflected in above operating expense ratio due to
waivers/reimbursements 3.66%(3)
Portfolio turnover rate 123.24%(2)
</TABLE>

(1) For the Period December 31, 1996 (Commencement of Operations) through
October 31, 1997.

(2) Non annualized.

(3) Interest earned on uninvested cash balances is used to offset portions of
transfer agent expense. These arrangements reduced the Common Shares' expense
ratio by % and .01% for the period or year ended October 31, 1998 and 1997,
respectively. The Common Shares' operating expense ratio after reflecting these
arrangements was % and 1.40% for the period or year ended October 31, 1998
and 1997, respectively.

(4) Annualized.
17

<PAGE> 19

POST-VENTURE CAPITAL FUND

GOAL AND STRATEGY

The Post-Venture Capital Fund seeks long-term growth of capital. To pursue
this goal, it invests in equity securities of U.S. companies considered to be in
their post-venture-capital stage of development.

A post-venture-capital company is one that has received venture-capital
financing either:

-during the early stages of the company's existence or the early stages of the
development of a new product or service, or

-as part of a restructuring or recapitalization of the company

In either case, one or more of the following will have occurred within 10
years prior to the fund's purchase of the company's securities:

-the investment of venture-capital financing

-distribution of the company's securities to venture-capital investors

-the initial public offering

Under normal market conditions, the fund will invest at least 65% of assets
in equity securities of post-venture-capital companies. The fund may invest in
companies of any size.

PORTFOLIO INVESTMENTS

This fund invests primarily in equity securities of post-venture-capital
companies. Equity holdings may consist of:

-common and preferred stocks

-warrants

-securities convertible into or exchangeable for common stocks

-partnership interests

The fund may invest up to:

-10% of assets in special-situation companies

-10% of assets in private equity portfolios that invest in venture capital
companies

-20% of assets in foreign securities

To a limited extent, the fund may also engage in other investment practices.
RISK FACTORS

This fund's principal risk factors are:

-market risk

-start-up and other small companies

-special-situation companies

Post-venture-capital companies are often involved in "special situations."
Securities of special-situation companies may decline in value and hurt the
fund's performance if the anticipated benefits of the special situation do not
materialize.

To the extent that it invests in private equity portfolios, the fund takes on
additional liquidity, valuation and other risks. "More About Risk" details
certain other investment practices the fund may use. Please read that section
carefully before you invest.

<PAGE> 20

PORTFOLIO MANAGEMENT

Elizabeth B. Dater and Stephen J. Lurito are Co-Portfolio Managers of the
fund. Associate Portfolio Managers Robert S. Janis and Christopher M. Nawn
assist them. Raymond L. Held and Thaddeus I. Grey manage the fund's investments
in private equity portfolios. You can find out more about the fund's managers in
"Meet the Managers."
INVESTOR EXPENSES

Management fee .xx%
Distribution and service (12b-1) fee .xx%
All other expenses .xx%
Total expenses X.xx%

FINANCIAL HIGHLIGHTS

The figures below have been audited by the fund's independent auditors,
PricewaterhouseCoopers LLP.

PERIOD ENDED: 10/98 10/97 10/96 10/95(1)
<S> <C> <C> <C> <C>
PER-SHARE DATA
- -------------------------------------------------------------------------------------------------------------
Net asset value, beginning of
period $16.03 $10.69 $10.00
- -------------------------------------------------------------------------------------------------------------
Investment activities:
Net investment income (0.35) (0.11) 0.00
Net gains or losses on investments
(both realized and unrealized) 1.93 5.45 0.69
- -------------------------------------------------------------------------------------------------------------
Total from investment activities 1.58 5.34 0.69
- -------------------------------------------------------------------------------------------------------------
Distributions:
From net investment income 0.00 0.00 0.00
From realized capital gains 0.00 0.00 0.00
- -------------------------------------------------------------------------------------------------------------
Total distributions 0.00 0.00 0.00
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of period $17.61 $16.03 $10.69
- -------------------------------------------------------------------------------------------------------------
Total return 9.86% 49.95% 6.90%(2)
- -------------------------------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s
omitted) $109,575 $165,081 $3,024
Ratio of expenses to average net
assets(3) 1.66% 1.66% 1.65%(4)
Ratio of net income to average net
assets (1.27%) (1.13%) .25%(4)
Decrease reflected in above
operating expense ratio due to
waivers/reimbursements .41%* .66% 23.76%
Portfolio turnover rate 197.56% 168.46% 16.90%(2)
- -------------------------------------------------------------------------------------------------------------
</TABLE>

(1) For the Period September 29, 1995 (Commencement of Operations) through
October 31, 1995.

(2) Non annualized.

(3) Interest earned on uninvested cash balances is used to offset portions of
transfer agent expense. These arrangements resulted in a reduction to the Common
Shares' expenses by %, .01% and .01% for the years ended October 31, 1998,
1997 and 1996, respectively. The Common Shares' operating expense ratio after
reflecting these arrangements were %, 1.65% and 1.65% for the years ended
October 31, 1998, 1997 and 1996, respectively.

(4) Annualized.

<PAGE> 21

MORE ABOUT RISK
INTRODUCTION

A fund's goal and principal strategies largely determine its risk profile.
You will find a concise description of each fund's risk profile in "Key Points."
The fund-by-fund discussions contain more detailed information. This section
discusses other risks that may affect the funds.

The funds may use certain investment practices that have higher risks
associated with them. However, each fund has limitations and policies designed
to reduce many of the risks. The "Certain Investment Practices" table describes
these practices and the limitations on their use.

TYPES OF INVESTMENT RISK

The following risks are referred to throughout this prospectus.

CORRELATION RISK The risk that changes in the value of a hedging instrument
will not match those of the investment being hedged.

CREDIT RISK The issuer of a security or the counterparty to a contract may
default or otherwise become unable to honor a financial obligation.

CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Adverse changes in
exchange rates may erode or reverse any gains produced by foreign-currency
denominated investments and may widen any losses.

EURO CONVERSION RISK The planned introduction of a new single European
currency, the euro, may result in uncertainties for securities of European
companies, European markets and the operation of the funds. The euro will be
introduced on January 1, 1999 by eleven European Union member countries who are
participating in European Monetary Union (EMU).

The introduction of the euro will result in the redenomination of certain
European debt and equity securities over a period of time which may result in
differences in various accounting, tax and/or legal treatments that would not
otherwise occur. Market disruptions may occur before or after the introduction
of the euro that could adversely affect the value of European securities and
currencies held by the funds. Other risks relate to the ability of financial
institutions' systems to process euro transactions. Additional economic and
operational issues are raised by the fact that certain European Union member
countries, including the United Kingdom, will not be participating in EMU on
January 1, 1999 and therefore will not be implementing the euro on the date.

<PAGE> 22

The adviser and sub-adviser are working to address euro-related issues,
including systems readiness, and are working with other key service providers on
this issue. However, at this time no one knows what the degree of impact will
be. To the extent that the market impact or effect on a fund holding is negative
or fund service provider systems cannot process the euro conversion, the fund's
performance could be hurt.

EXPOSURE RISK The risk associated with investments (such as derivatives) or
practices (such as short selling) that increase the amount of money a fund could
gain or lose on an investment.

-HEDGED Exposure risk could multiply losses generated by a derivative or
practice used for hedging purposes. Such losses should be substantially
offset by gains on the hedged investment. However, while hedging can reduce
or eliminate losses, it can also reduce or eliminate gains.

-SPECULATIVE To the extent that a derivative or practice is not used as a
hedge, the fund is directly exposed to its risks. Gains or losses from
speculative positions in a derivative may be much greater than the
derivative's original cost. For example, potential losses
from writing uncovered call options and from speculative short sales
are unlimited.

INFORMATION RISK Key information about an issuer, security or market may be
inaccurate or unavailable.

INTEREST-RATE RISK Changes in interest rates may cause a decline in the
market value of an investment. With bonds and other fixed-income securities, a
rise in interest rates typically causes a fall in values, while a fall in
interest rates typically causes a rise in values.

LIQUIDITY RISK Certain fund securities may be difficult or impossible to sell
at the time and the price that the fund would like. A fund may have to lower the
price, sell other securities instead or forego an investment opportunity. Any of
these could have a negative effect on fund management or performance.

MARKET RISK The market value of a security may move up and down, sometimes
rapidly and unpredictably. These fluctuations, which are often referred to as
"volatility," may cause a security to be worth less than it was worth at an
earlier time. Market risk may affect a single issuer, industry, sector of the
economy, or the market as a whole. Market risk is common to most
investments--including stocks and bonds, and the mutual funds that invest in
them.

OPERATIONAL RISK Some countries have less developed securities markets (and
related transaction, registration and custody practices) that could subject a
fund to losses from fraud, negligence, delay or other actions.

<PAGE> 23

to bring its capital or income back to the U.S. Other political risks include
economic policy changes, social and political instability, military action and
war.

VALUATION RISK The lack of an active trading market may make it difficult to
obtain an accurate price for a fund security.

YEAR 2000 PROCESSING RISK The funds' adviser and sub-adviser are working to
address the Year 2000 issue relating to the change from "99" to "00" on January
1, 2000 and have obtained assurances from service providers that they are taking
similar steps. The adviser and sub-adviser are working on the Year 2000 issue
pursuant to a plan designed to address potential problems and progress is
proceeding according to the plan. The adviser and sub-adviser anticipate the
completion of testing of internal systems in early 1999, and are developing
contingency plans intended to address any unexpected service problems. However,
there can be no assurance that these efforts will be sufficient, and any
noncompliant computer systems could hurt key fund operations, such as
shareholder servicing, pricing and trading.

The Year 2000 issue affects practically all companies, organizations,
governments, markets and economies throughout the world -- including companies
or governmental entities in which the funds invest and markets in which they
trade. However, at this time no one knows precisely what the degree of impact
will be. To the extent that the impact on a fund holding or on markets or
economies is negative, it could seriously affect a fund's performance.

<PAGE> 24

CERTAIN INVESTMENT PRACTICES

For each of the following practices, this table shows the applicable investment
limitation. Risks are indicated for each practice.

KEY TO TABLE:

<TABLE>
<S> <C>
- - Permitted without limitation; does not indicate
actual use
20% Italic type (e.g., 20%) represents an investment
limitation as a percentage of NET fund assets; does
not indicate actual use
20% Roman type (e.g., 20%) represents an investment
limitation as a percentage of TOTAL fund assets; does
not indicate actual use
- -- Permitted, but not expected to be used to a
significant extent
- -- Not permitted
</TABLE>

<TABLE>
<CAPTION>
SMALL SMALL
EMERGING COMPANY COMPANY POST-VENTURE
GROWTH VALUE GROWTH CAPITAL
<S> <C> <C> <C> <C>
BORROWING The borrowing of money from banks to meet
redemptions or for other temporary or emergency purposes.
Speculative exposure risk. 10% 30% 30% 30%
- -----------------------------------------------------------------------------------------------------
FUTURES AND OPTIONS ON FUTURES Exchange-traded contracts
that enable a fund to hedge against or speculate on future
changes in currency values, interest rates or stock indexes.
Futures obligate the fund (or give it the right, in the case
of options) to receive or make payment at a specific future
time based on those future changes.* Correlation, currency,
hedged exposure, interest-rate, market, speculative exposure
risks.** -- -- -- --
- -----------------------------------------------------------------------------------------------------
FOREIGN SECURITIES Securities of foreign issuers. May
include depositary receipts. Currency, euro conversion,
information, liquidity, market, political, valuation risks. 10% 10% 10% 20%
- -----------------------------------------------------------------------------------------------------
NON-INVESTMENT-GRADE DEBT SECURITIES Debt securities rated
below the fourth-highest grade (BBB/Baa) by Standard &
Poor's or Moody's rating service, and unrated securities of
comparable quality. Commonly referred to as junk bonds.
Credit, information, interest-rate, liquidity, market,
valuation risks. -- -- 5% --
- -----------------------------------------------------------------------------------------------------
OPTIONS Instruments that provide a right to buy (call) or
sell (put) a particular security, currency or index of
securities at a fixed price within a certain time period. A
fund may purchase or sell (write) both put and call options
for hedging or speculative purposes.* Correlation, credit,
hedged exposure, liquidity, market, speculative exposure
risks. 25% 25% 25% 25%
- -----------------------------------------------------------------------------------------------------
PRIVATE EQUITY PORTFOLIOS Private limited partnerships or
other investment funds that themselves invest in equity or
debt securities of:
- -companies in the venture capital or post-venture capital
stages of development
- -companies engaged in special situations or changes in
corporate control, including buyouts
Information, liquidity, market, valuation risks. -- -- -- 10%
- -----------------------------------------------------------------------------------------------------
</TABLE>

<PAGE> 25

<TABLE>
<CAPTION>
SMALL SMALL
EMERGING COMPANY COMPANY POST-VENTURE
GROWTH VALUE GROWTH CAPITAL
<S> <C> <C> <C> <C>
RESTRICTED AND OTHER ILLIQUID SECURITIES Securities with
restrictions on trading, or those not actively traded. May
include private placements. Liquidity, market, valuation
risks. 10% 10% 15% 15%
- ------------------------------------------------------------------------------------------------------
SECURITIES LENDING Lending portfolio securities to financial
institutions; a fund receives cash, U.S. government
securities or bank letters of credit as collateral. Credit,
liquidity, market, operational risks. -- -- -- --
- ------------------------------------------------------------------------------------------------------
SHORT SALES Selling borrowed securities with the intention
of repurchasing them for a profit on the expectation that
the market price will drop. Liquidity, market, speculative
exposure risks. -- -- 10% 10%
- ------------------------------------------------------------------------------------------------------
SPECIAL-SITUATION COMPANIES Companies experiencing unusual
developments affecting their market values. Special
situations may include acquisition, consolidation,
reorganization, recapitalization, merger, liquidation,
special distribution, tender or exchange offer, or
potentially favorable litigation. Securities of a
special-situation company could decline in value and hurt a
fund's performance if the anticipated benefits of the
special situation do not materialize. Information, market
risks. - - - -
- ------------------------------------------------------------------------------------------------------
START-UP AND OTHER SMALL COMPANIES Companies with small
relative market capitalizations, including those with
continuous operations of less than three years. Information,
liquidity, market, valuation risks. - - - -
- ------------------------------------------------------------------------------------------------------
TEMPORARY DEFENSIVE TACTICS Placing some or all of a fund's
assets in investments such as money market obligations and
investment-grade debt securities for defensive purposes.
Although intended to avoid losses in adverse market,
economic, political or other conditions, defensive tactics
might be inconsistent with a fund's principal investment
strategies and might prevent a fund from achieving its goal. -- -- -- --
- ------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE> 26

<TABLE>
<CAPTION>
SMALL SMALL
EMERGING COMPANY COMPANY POST-VENTURE
GROWTH VALUE GROWTH CAPTIAL
<S> <C> <C> <C> <C>

WARRANTS Options issued by a company granting the holder the
right to buy certain securities, generally common stock, at
a specified price and usually for a limited time. Liquidity,
market, speculative exposure risks. 10% 10% 15% 10%
- -------------------------------------------------------------------------------------------------------
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The purchase
or sale of securities for delivery at a future date; market
value may change before delivery. Liquidity, market,
speculative exposure risks. 20% -- 20% 20%
- -------------------------------------------------------------------------------------------------------
</TABLE>

* The funds are not obligated to pursue any hedging strategy. In addition,
hedging practices may not be available, may be too costly to be used
effectively or may be unable to be used for other reasons.
** Each fund is limited to 5% of net assets for initial margin and premium
amounts on futures positions considered to be speculative by the Commodity
Futures Trading Commission.

<PAGE> 27

[THIS PAGE IS INTENTIONALLY LEFT BLANK.]

<PAGE> 28

MEET THE MANAGERS

[Elizabeth B. Dater Photo]

ELIZABETH B. DATER
Managing Director

- -Co-Portfolio Manager,
Emerging Growth Fund
since fund inception

- -Co-Portfolio Manager,
Post-Venture Capital Fund
since fund inception

- -With Warburg Pincus since 1978

[Steven J. Lurito Photo]

STEVEN J. LURITO
Managing Director

- -Portfolio Manager,
Small Company Growth Fund
since fund inception

- -Co-Portfolio Manager,
merging Growth Fund
ince 1990

- -Co-Portfolio Manager,
Post-Venture Capital Fund
since fund inception

- -With Warburg Pincus since 1987

Job titles indicate position with the adviser.

<PAGE> 29

[PHOTO]
KYLE F. FREY
Senior Vice President

-Portfolio Manager,
Small Company Value Fund
since fund inception

-With Warburg Pincus since 1989

[PHOTO]
CHRISTOPHER M. NAWN
Senior Vice President

-Associate Portfolio Manager
Post-Venture Capital Fund
since fund inception

-With Warburg Pincus since 1994

-Previously vice president and senior research analyst with Dreyfus Corporation

[PHOTO]
Robert S. Janis
Senior Vice President

-Associate Portfolio Manager
Post-Venture Capital Fund
since fund inception

-With Warburg Pincus since 1994

-Previously vice president and senior research analyst with U.S. Trust Company
of New York

SUB-ADVISER PORTFOLIO MANAGERS

Post-Venture Capital Fund

RAYMOND L. HELD and THADDEUS I. GRAY manage the Post-Venture Capital
Fund's investments in private equity portfolios. Both are Investment
Managers and Managing Directors of Abbott Capital Management LLC, the
fund's sub-adviser. Mr. Held has been with Abbott since 1986, while Mr.
Gray joined the firm in 1989.

<PAGE> 30

ABOUT YOUR ACCOUNT

SHARE VALUATION

The price of your shares is also referred to as their net asset value (NAV).

The NAV is determined at the close of regular trading on the New York Stock
Exchange (NYSE) (usually 4 p.m. Eastern Time) each day the NYSE is open for
business. It is calculated by dividing the Common Class's total assets, less its
liabilities, by the number of Common Class shares outstanding.

Each fund values its securities based on market quotations when it calculates
its NAV. If market quotations are not readily available, securities and other
assets are valued by another method that the Board believes accurately reflects
fair value. Debt obligations that will mature in 60 days or less are valued on
the basis of amortized cost, unless the Board determines that using this method
would not reflect an investment's value.

Some fund securities may be listed on foreign exchanges that are open on days
(such as U.S. holidays) when the funds do not compute their prices. This could
cause the value of a fund's portfolio investments to be affected by trading on
days when you cannot buy or sell shares.

The Post-Venture Capital Fund initially values its investments in private
equity portfolios at cost. After that, the fund values these investments
according to reports from the portfolios that the sub-adviser generally receives
on a quarterly basis. The fund's net asset value typically will not reflect
interim changes in the values of its private-equity-portfolio investments.

BUYING AND
SELLING SHARES

The accompanying Shareholder Guide explains how to invest directly with the
funds. You will find information about purchases, redemptions, exchanges and
services.

Each fund is open on those days when the NYSE is open, typically Monday
through Friday. If we receive your request in proper form by the close of the
NYSE (usually 4 p.m. ET), your transaction will be priced at that day's NAV. If
we receive it after that time, it will be priced at the next business day's NAV.

FINANCIAL-SERVICES FIRMS
You can also buy and sell fund shares through a variety of financial-services
firms such as banks, brokers and financial advisors. The funds have authorized
these firms (and other intermediaries that the firms may designate) to accept
orders. When an authorized firm or its designee has received your order, it is
considered received by the fund and will be priced at the next-computed NAV.

Financial-services firms may charge transaction fees or other fees that you
could avoid by investing directly with the fund. Please read their program
materials for any special provisions or additional service features that may
apply to your investment. Certain features of the fund, such as the minimum
initial or

<PAGE> 31

subsequent investment amounts, may
be modified.

Some of the firms through which the funds are available include:

-Charles Schwab & Co., Inc. Mutual Fund OneSource(R) service

-Fidelity Brokerage Services, Inc. FundsNetwork(TM) Program

-Waterhouse Securities, Inc.

ACCOUNT STATEMENTS

In general, you will receive account statements as follows:

-after every transaction that affects your account balance (except for
distribution reinvestments and automatic transactions)

-after any changes of name or address of the registered owner(s)

-otherwise, every quarter

You will receive annual and semiannual financial reports.

DISTRIBUTIONS

As a fund investor, you are entitled to your share of the fund's net income
and gains on its investments. The fund passes these earnings along to its
shareholders as distributions.

Each fund earns dividends from stocks and interest from bond, money market
and other investments. These are passed along as dividend distributions. A fund
realizes capital gains whenever it sells securities for a higher price than it
paid for them. These are passed along as capital gain distributions.

The funds typically distribute net income and capital gains annually, usually
in December.

Most investors have their distributions reinvested in additional shares of
the same fund. Distributions will be reinvested unless you choose on your
account application to have a check for your distributions mailed to you or sent
by electronic transfer.

TAXES

As with any investment, you should consider how your investment in a fund
will be taxed. Unless your account is an IRA or other tax-advantaged account,
you should be aware of the potential tax implications. Please consult your tax
professional concerning your own tax situation.

TAXES ON DISTRIBUTIONS
As long as a fund continues to meet the requirements for being a
tax-qualified regulated investment company, it pays no federal income tax on the
earnings it distributes to shareholders.

Distributions you receive from a fund, whether reinvested or taken in cash,
are generally considered taxable. Fund distributions are taxed based on the
length of time the fund holds its assets, regardless of how long you have held
fund shares. Distributions from a fund's long-term capital gains are taxed as
30

<PAGE> 32

capital gains; distributions from other sources are generally taxed as ordinary
income. The Funds will mostly make capital gains distributions.

If you buy shares shortly before or on the "record date"--the date that
establishes you as the person to receive the upcoming distribution--you will
receive a portion of the money you just invested in the form of a taxable
distribution.

The Form 1099 that is mailed to you every January details your distributions
and their federal tax category.

TAXES ON TRANSACTIONS
Any time you sell or exchange shares, it is considered a taxable event for
you. Depending on the purchase price and the sale price of the shares you sell
or exchange, you may have a gain or loss on the transaction. You are responsible
for any tax liabilities generated by your transactions.

<PAGE> 33

OTHER INFORMATION

ABOUT THE DISTRIBUTOR

Counsellors Securities Inc., a wholly owned subsidiary of Warburg Pincus, is
responsible for:

-making the funds available to you

-account servicing and maintenance

-sub-transfer agency services, sub-accounting services, and administrative
services related to sale of the Common Class

As part of their business strategies, each of the funds except the Emerging
Growth Fund has adopted a Rule 12b-1 shareholder servicing and distribution plan
to compensate Counsellors Securities for the above services. Under the plan,
Counsellors Securities receives fees at an annual rate of 0.25% of average daily
net assets of the fund's Common Class. Because the fees are paid out of a fund's
assets on an on-going basis, over time they will increase the cost of your
investment and may cost you more than paying other types of sales charges.

Certain financial-services firms may receive service fees from the
distributor, the adviser or their affiliates for providing recordkeeping or
other services in connection with investments in the funds. Financial-services
firms may also be reimbursed for marketing costs. The service fee may be up to
0.35% per year (0.40% for certain retirement plan programs) of the value of fund
accounts maintained by the firm. The funds may reimburse part of the service fee
at rates they would normally pay to the transfer agent for providing the
services.

<PAGE> 34

More information about these funds is available free upon request, including
the following:

SHAREHOLDER GUIDE

Explains how to buy and sell shares. The Shareholder Guide is incorporated by
reference into (is legally part of )
this prospectus.

ANNUAL/SEMIANNUAL REPORT TO SHAREHOLDERS

Includes financial statements, portfolio investments and detailed performance
information.

The Annual Report also contains a letter from the fund's manager discussing
market conditions and investment strategies that significantly affected fund
performance during its past fiscal year.

OTHER INFORMATION

A current Statement of Additional Information (SAI) which provides more
details about the funds is on file with the Securities and Exchange Commission
(SEC) and is incorporated by reference.

You may visit the SEC's Internet Web site (www.sec.gov) to view the SAI,
material incorporated by reference, and other information. You can also obtain
copies by visiting the SEC's Public Reference Room in Washington, DC (phone
800-SEC-0330) or by sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington, DC 20549-6009.

Please contact Warburg Pincus Funds to obtain information, without charge,
the SAI and Annual and Semiannual Reports and to make shareholder inquiries:

BY TELEPHONE:
800-WARBURG
(800-927-2874)

BY MAIL:
Warburg Pincus Funds
P.O. Box 9030
Boston, MA 02205-9030

BY OVERNIGHT OR COURIER SERVICE:
Boston Financial
Attn: Warburg Pincus Funds
2 Heritage Drive
North Quincy, MA 02171

ON THE INTERNET:
www.warburg.com

SEC FILE NUMBERS:

Warburg Pincus Emerging Growth Fund 811-05396

Warburg Pincus Small Company
Value Fund 811-07375

Warburg Pincus Small Company
Growth Fund 811-07909

Warburg Pincus Post-Venture
Capital Fund 811-07327

FOR MORE INFORMATION

LOGO

P.O. BOX 9030, BOSTON, MA 02205-9030
800-WARBURG (800-927-2874) B www.warburg.com
COUNSELLORS SECURITIES INC., DISTRIBUTOR. WPUSS-1-0299

<PAGE> 35

Subject to Completion, dated December 3, 1998
PROSPECTUS
Advisor Class
February 1, 1999

WARBURG PINCUS
EMERGING GROWTH FUND

[Warburg Pincus Funds Logo]

<PAGE> 36

CONTENTS

PERFORMANCE SUMMARY............... ................ 6
Year-by-Year Total Returns...................... 6
Average Annual Total Returns.................... 6

INVESTOR EXPENSES................ ................. 8
Fees and Fund Expenses.......................... 8
Example......................................... 9

THE FUND IN DETAIL................ ................ 10
The Management Firms............................ 10
Multi-Class Structure........................... 10
Fund Information Key............................ 11
Goal and Strategy............................... 12
Portfolio Investments........................... 12
Risk Factors.................................... 12
Portfolio Management............................ 13
Investor Expenses............................... 13

MORE ABOUT RISK................. .................. 14
Introduction.................................... 14
Types of Investment Risk........................ 14
Certain Investment Practices.................... 17

MEET THE MANAGERS................ ................. 19

ABOUT YOUR ACCOUNT................ ................ 20
Share Valuation................................. 20
Account Statements.............................. 20
Distributions................................... 21
Taxes........................................... 21

OTHER INFORMATION................ ................. 22
About the Distributor........................... 22

BUYING SHARES.................. ................... 23

SELLING SHARES.................. .................. 25

SHAREHOLDER SERVICES............... ............... 27

OTHER POLICIES.................. .................. 28

FOR MORE INFORMATION............... ............... back cover
</TABLE>

<PAGE> 37

KEY POINTS
GOALS AND PRINCIPAL STRATEGIES

<TABLE>
<CAPTION>
FUND/RISK FACTORS GOAL STRATEGY
<S> <C> <C>
EMERGING GROWTH FUND Maximum capital - Invests in U.S. equity
Risk factors: appreciation securities
Market risk - Focuses on emerging growth
Start-up and other companies
small companies - Looks for growth characteristics
Special-situation such as positive earnings and
companies potential for accelerated growth
Non-diversified
status
</TABLE>

INVESTOR PROFILE

The fund is designed for investors who:

- have longer time horizons

- are willing to assume the risk of losing money in exchange for attractive
potential long-term returns

- are investing for capital appreciation

- want to diversify their portfolios with more aggressive stock funds

- are investing for long-term goals that may include college or retirement

It may NOT be appropriate if you:

- are investing for a shorter time horizon

- are uncomfortable with an investment that will fluctuate in value

- are looking primarily for income

You should base your selection of a fund on your own goals, risk preferences
and time horizon.

<PAGE> 38

A WORD ABOUT RISK

All investments involve some level of risk. Simply defined, risk is the
possibility that you will lose money or not make money.

Principal risk factors for the fund are discussed below. Before you invest,
please make sure you understand the risks that apply to the fund. As with any
mutual fund, you could lose money over any period of time.

Investments in the fund are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

MARKET RISK

START-UP AND OTHER SMALL COMPANIES

SPECIAL-SITUATION COMPANIES

NON-DIVERSIFIED STATUS

<PAGE> 39

PERFORMANCE SUMMARY

The bar chart and the table below provide an indication of the risks of
investing in this fund. The bar chart shows you how the fund's performance has
varied from year to year for up to ten years. The table compares the fund's
performance over time to that of a broadly based securities market index. As
with all mutual funds, past performance is not a prediction of the future.

YEAR-BY-YEAR TOTAL RETURNS

[BAR CHART]

<TABLE>
<CAPTION>
YEAR ENDED 12/31:
<S> <C>
EMERGING GROWTH FUND
BEST QUARTER: 26.43%(Q191)
WORST QUARTER: -19.16%(Q390)
INCEPTION DATE: 1/21/88
1989 21.73%
1990 -9.86
1991 56.13
1992 12.14
1993 18.11
1994 -1.43
1995 46.22
1996 9.87
1997 21.26
1998
</TABLE>

AVERAGE ANNUAL TOTAL RETURNS

<PAGE> 40

UNDERSTANDING PERFORMANCE

-A CUMULATIVE TOTAL RETURN is the actual return of an investment for a
specified period. The year-by-year total returns in the bar chart are
examples of one-year cumulative total returns.

-Because of compounding, the average annual total returns in the table
cannot be computed by averaging the returns in the bar chart.

<PAGE> 41

INVESTOR EXPENSES

FEES AND FUND EXPENSES

This table describes the fees and expenses you may bear as a shareholder. Annual
fund operating expense figures are for the fiscal year ended October 31, 1998.

<TABLE>
<S> <C>
SHAREHOLDER FEES
(paid directly from your investment)
Sales charge "load" on purchases NONE
Deferred sales charge "load" NONE
Sales charge "load" on reinvested distributions NONE
Redemption fees NONE
Exchange fees NONE
ANNUAL FUND OPERATING EXPENSES
(deducted from fund assets)
Management fee .90%
Distribution and service (12b-1) fee .50%
Other expenses xx%
TOTAL ANNUAL FUND OPERATING EXPENSES* xx%
</TABLE>

* Actual fees and expenses for the fiscal year ended October 31, 1998 are shown
below. Fee waivers and expense reimbursements or credits reduced expenses for
the fund during 1998 but may be discontinued at any time.

<TABLE>
<CAPTION>
EXPENSES AFTER WAIVERS AND REIMBURSEMENTS
<S> <C>
Management fee xx%
Distribution and service (12b-1) fee .50%
Other expenses xx%
TOTAL ANNUAL FUND OPERATING EXPENSES xx%
</TABLE>

<PAGE> 42

EXAMPLE

This example may help you compare the cost of investing in this fund with the
cost of investing in other mutual funds. Because it uses hypothetical
conditions, your actual costs may be higher or lower.

Assume you invest $10,000, the fund returns 5% annually, expense ratios remain
as listed in the first table on the opposite page (before fee waivers and
expense reimbursements or credits) and you close your account at the end of each
of the time periods shown. Based on these assumptions, your cost would be:

<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS 10 YEARS
<S> <C> <C> <C>
$xx $xx $xx $xx
</TABLE>

<PAGE> 43

THE FUND IN DETAIL

THE MANAGEMENT FIRMS

WARBURG PINCUS ASSET
MANAGEMENT, INC.
466 Lexington Avenue
New York, NY 10017-3147

- Investment adviser for the fund

- Responsible for managing the fund's assets according to its goal and strategy

- A professional investment advisory firm providing investment services to
individuals since 1970 and to institutions since 1973

- Currently manages approximately $xx billion in assets

For easier reading, Warburg Pincus Asset Management, Inc. will be referred to
as "Warburg Pincus" or "we" throughout this prospectus.

MULTI-CLASS STRUCTURE

This fund offers two classes of shares, Common and Advisor. This prospectus
offers the Advisor Class of shares, which are sold through financial-services
firms.

The Common Class is described in a separate prospectus.

<PAGE> 44

FUND INFORMATION KEY

The description on the next page provides the following information about the
fund:

GOAL AND STRATEGY
The fund's particular investment goals and the strategies it intends to use
in pursuing them. Percentages of fund
assets are based on total assets unless indicated otherwise.

PORTFOLIO INVESTMENTS
The primary types of securities in which the fund invests. Secondary
investments are described in "More About Risk."

RISK FACTORS
The major risk factors associated with the fund. Additional risk factors are
included in "More About Risk."

PORTFOLIO MANAGEMENT
The individuals designated by the investment adviser to handle the fund's
day-to-day management.

INVESTOR EXPENSES
Actual fund expenses for the 1998 fiscal year. Future expenses may be higher
or lower.

- MANAGEMENT FEE The fee paid to the investment adviser and sub-adviser for
providing investment advice to the fund. Expressed as a percentage of average
net assets after waivers.

- DISTRIBUTION AND SERVICE (12b-1) FEES Fees paid by the fund to the
distributor for making shares of the fund available to you. Expressed as a
percentage of average net assets.

- OTHER EXPENSES Fees paid by the fund for items such as administration,
transfer agency, custody, auditing, legal and registration fees and
miscellaneous expenses. Expressed as a percentage of average net assets after
waivers, credits and reimbursements.

FINANCIAL HIGHLIGHTS
A table showing the fund's audited financial performance for up to five
years.

- TOTAL RETURN How much you would have earned on an investment in the fund,
assuming you had reinvested all dividend and capital gain distributions.

- PORTFOLIO TURNOVER An indication of trading frequency.

The fund may sell securities without regard to the length of time they have
been held. A high turnover rate may increase the fund's transaction costs and
negatively affect its performance. Portfolio turnover may also result in
capital-gain distributions that could raise your income tax liability.

The Annual Report includes the auditor's report, along with the fund's
financial statements. It is available free upon request.

<PAGE> 45

GOAL AND STRATEGY

The Emerging Growth Fund seeks maximum capital appreciation. To pursue this
goal, it invests in equity securities of emerging growth companies.

Emerging growth companies are small or medium-size companies that:

- have passed their start-up phase

- show positive earnings

- offer the potential for accelerated earnings growth

Under normal market conditions, the fund will invest at least 65% of assets
in equity securities of emerging-growth companies that represent attractive
capital-appreciation opportunities.

PORTFOLIO INVESTMENTS

This fund invests in a portfolio of U.S. equity securities consisting of:

- common and preferred stocks

- securities convertible into common stocks

- rights and warrants

The fund may invest up to 20% of assets in foreign securities. To a limited
extent, it may also engage in other investment practices.

RISK FACTORS

This fund's principal risk factors are:

- market risk

- start-up and other small companies

- special-situation companies

- non-diversified status

"More About Risk" details certain other investment practices the fund may
use. Please read that section carefully before you invest.
12

<PAGE> 46

PORTFOLIO MANAGEMENT

Elizabeth B. Dater and Stephen J. Lurito manage the fund's investment
portfolio. You can find out more about them in "Meet the Managers."

INVESTOR EXPENSES

Management fee .xx%
Distribution and service
(12b-1) fees xx%
All other expenses .xx%
Total expenses X.xx%

FINANCIAL HIGHLIGHTS

The figures below have been audited by the fund's independent auditors,
PricewaterhouseCoopers LLP.

PERIOD ENDED: 10/98 10/97 10/96 10/95 10/94
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $31.99 $29.38 $22.05 $23.51
Investment activities:
Net investment income (0.33) (0.09) (0.09) (0.08)
Net gains or losses on investments
(both realized and unrealized) 6.91 4.45 7.42 (0.02)
Total from investment activities 6.58 4.36 7.33 (0.10)
Distributions:
From net investment income 0.00 0.00 0.00 0.00
From realized capital gains (0.07) (1.75) 0.00 (1.36)
Total distributions (0.07) (1.75) 0.00 (1.36)
Net asset value, end of period $38.50 $31.99 $29.38 $22.05
Total return 20.62% 15.69% 33.24% (.29%)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s
omitted) $457,432 $362,696 $167,225 $64,009
Ratio of expenses to average net
assets(1) 1.63%(1) 1.70%(1) 1.76% 1.72%
Ratio of net income to average net
assets (1.01%) (1.05%) (1.08%) (1.08%)
Decrease reflected in above operating
expense ratios due to
waivers/reimbursements .00% .00% .00% .04%
Portfolio turnover rate 87.03% 65.77% 84.82% 60.38%
</TABLE>

- --------------------------------------------------------------------------------
(1) Interest earned on uninvested cash balances is used to offset portions of
transfer agent expense. These arrangements resulted in a reduction to the
Advisor Shares' expenses by . %, .00% and .01% for the years ended October 31,
1998, 1997 and 1996, respectively. The Advisor Shares' operating expense ratio
after reflecting these arrangements were %, 1.63% and 1.69% for the years
ended October 31, 1998, 1997 and 1996, respectively.

<PAGE> 47

MORE ABOUT RISK

INTRODUCTION

The fund's goal and principal strategies largely determine its risk profile.
You will find a concise description of the fund's risk profile in "Key Points."
The fund discussion contains more detailed information. This section discusses
other risks that may affect the fund.

The fund may use certain investment practices that have higher risks
associated with them. However, the fund has limitations and policies designed to
reduce many of the risks. The "Certain Investment Practices" table describes
these practices and the limitations on their use.

TYPES OF INVESTMENT RISK

The following risks are referred to throughout this prospectus.

CORRELATION RISK The risk that changes in the value of a hedging instrument
will not match those of the investment being hedged.

CREDIT RISK The issuer of a security or the counterparty to a contract may
default or otherwise become unable to honor a financial obligation.

EURO CONVERSION RISK The planned introduction of a new single European
currency, the euro, may result in uncertainties for securities of European
companies, European markets and the operation of the fund. The euro will be
introduced on January 1, 1999 by eleven European Union member countries who are
participating in European Monetary Union (EMU).

The introduction of the euro will result in the redenomination of certain
European debt and equity securities over a period of time which may result in
differences in various accounting, tax and/or legal treatments that would not
otherwise occur. Market disruptions may occur before or after the introduction
of the euro that could adversely affect the value of European securities and
currencies held by the fund. Other risks relate to the ability of financial
institutions' systems to process euro transactions. Additional economic and
operational issues are raised by the fact that certain European Union member
countries, including the United Kingdom, will not be participating in EMU on
January 1, 1999 and therefore will not be implementing the euro on the date.

The adviser is working to address euro-related issues, including systems
readiness, and is working with other key service providers on this issue.
However, at this time no one knows what the degree of impact will be. To the
extent that the market impact or effect on a fund

<PAGE> 48

holding is negative or fund service provider systems cannot process the euro
conversion, the fund's performance could be hurt.

EXPOSURE RISK The risk associated with investments (such as derivatives) or
practices (such as short selling) that increase the amount of money a fund could
gain or lose on an investment.

BHEDGED Exposure risk could multiply losses generated by a derivative or
practice used for hedging purposes. Such losses should be substantially
offset by gains on the hedged investment. However, while hedging can reduce
or eliminate losses, it can also reduce or eliminate gains.

BSPECULATIVE To the extent that a derivative or practice is not used as a
hedge, the fund is directly exposed to its risks. Gains or losses from
speculative positions in a derivative may be much greater than the
derivative's original cost. For example, potential losses
from writing uncovered call options and from speculative short sales
are unlimited.

INFORMATION RISK Key information about an issuer, security or market may be
inaccurate or unavailable.

OPERATIONAL RISK Some countries have less developed securities markets (and
related transaction, registration and custody practices) that could subject the
fund to losses from fraud, negligence, delay or other actions.

POLITICAL RISK Foreign governments may expropriate assets, impose capital
controls or punitive taxes, or nationalize a company or industry. Any of these
actions could have a severe effect on security prices and impair a fund's
ability to bring its capital or income back to the U.S. Other political risks
include economic policy changes, social and political instability, military
action and war.

VALUATION RISK The lack of an active trading market may make it

<PAGE> 49

difficult to obtain an accurate price for a fund security.

YEAR 2000 PROCESSING RISK The fund's adviser is working to address the Year
2000 issue relating to the change from "99" to "00" on January 1, 2000 and have
obtained assurances from service providers that they are taking similar steps.
The adviser is working on the Year 2000 issue pursuant to a plan designed to
address potential problems and progress is proceeding according to the plan. The
adviser anticipates the completion of testing of internal systems in early 1999,
and is developing contingency plans intended to address any unexpected service
problems. However, there can be no assurance that these efforts will be
sufficient, and any noncompliant computer systems could hurt key fund
operations, such as shareholder servicing, pricing and trading.

The Year 2000 issue affects practically all companies, organizations,
governments, markets and economies throughout the world -- including companies
or governmental entities in which the fund invests and markets in which they
trade. However, at this time no one knows precisely what the degree of impact
will be. To the extent that the impact on a fund holding or on markets or
economies is negative, it could seriously affect the fund's performance.

<PAGE> 50

CERTAIN INVESTMENT PRACTICES

For each of the following practices, this table shows the applicable investment
limitation. Risks are indicated for each practice.

KEY TO TABLE:

<TABLE>
<S> <C>
- - Permitted without limitation; does not indicate actual use
20% Italic type (e.g., 20%) represents an investment limitation
as a percentage of NET fund assets; does not indicate actual
use
20% Roman type (e.g., 20%) represents an investment limitation
as a percentage of TOTAL fund assets; does not indicate
actual use
- -- Permitted, but not expected to be used to a significant
extent
</TABLE>

<TABLE>
<S> <C>
- -------------------------------------------------------------------
INVESTMENT PRACTICE LIMIT
- -------------------------------------------------------------------
BORROWING The borrowing of money from banks to meet
redemptions or for other temporary or emergency purposes.
Speculative exposure risk. 10%
- -------------------------------------------------------------------
FUTURES AND OPTIONS ON FUTURES Exchange-traded contracts
that enable a fund to hedge against or speculate on future
changes in currency values, interest rates or stock indexes.
Futures obligate the fund (or give it the right, in the case
of options) to receive or make payment at a specific future
time based on those future changes.* Correlation, currency,
hedged exposure, interest-rate, market, speculative exposure
risks.** --
- -------------------------------------------------------------------
FOREIGN SECURITIES Securities of foreign issuers. May
include depositary receipts. Currency, euro conversion,
information, liquidity, market, political, valuation risks. 10%
- -------------------------------------------------------------------
NON-INVESTMENT-GRADE DEBT SECURITIES Debt securities rated
below the fourth-highest grade (BBB/Baa) by Standard &
Poor's or Moody's rating service, and unrated securities of
comparable quality. Commonly referred to as junk bonds.
Credit, information, interest-rate, liquidity, market,
valuation risks. --
- -------------------------------------------------------------------
OPTIONS Instruments that provide a right to buy (call) or
sell (put) a particular security, currency or index of
securities at a fixed price within a certain time period. A
fund may purchase or sell (write) both put and call options
for hedging or speculative purposes.* Correlation, credit,
hedged exposure, liquidity, market, speculative exposure
risks. 25%
- -------------------------------------------------------------------
PRIVATE EQUITY PORTFOLIOS Private limited partnerships or
other investment funds that themselves invest in equity or
debt securities of:
- -companies in the venture capital or post-venture capital
stages of development
- -companies engaged in special situations or changes in
corporate control, including buyouts
Information, liquidity, market, valuation risks. --
- -------------------------------------------------------------------
RESTRICTED AND OTHER ILLIQUID SECURITIES Securities with
restrictions on trading, or those not actively traded. May
include private placements. Liquidity, market, valuation
risks. 10%
- -------------------------------------------------------------------
</TABLE>

<PAGE> 51

- -------------------------------------------------------------------
INVESTMENT PRACTICE LIMIT
- -------------------------------------------------------------------
SECURITIES LEADING Lending portfolio securities to financial
institutions; a fund receives cash, U.S. government
securities or bank letters of credit as collateral. Credit,
liquidity, market, operational risks. --
- -------------------------------------------------------------------
SPECIAL-SITUATION COMPANIES Companies experiencing unusual
developments affecting their market values. Special
situations may include acquisition, consolidation,
reorganization, recapitalization, merger, liquidation,
special distribution, tender or exchange offer, or
potentially favorable litigation. Securities of a
special-situation company could decline in value and hurt a
fund's performance if the anticipated benefits of the
special situation do not materialize. Information, market
risks. -
- -------------------------------------------------------------------
START-UP AND OTHER SMALL COMPANIES Companies with small
relative market capitalizations, including those with
continuous operations of less than three years. Information,
liquidity, market, valuation risks. -
- -------------------------------------------------------------------
TEMPORARY DEFENSIVE TACTICS Placing some or all of a fund's
assets in investments such as money market obligations and
investment-grade debt securities for defensive purposes.
Although intended to avoid losses in adverse market,
economic, political or other conditions, defensive tactics
might be inconsistent with a fund's principal investment
strategies and might prevent a fund from achieving its goal. --
- -------------------------------------------------------------------
WARRANTS Options issued by a company granting the holder the
right to buy certain securities, generally common stock, at
a specified price and usually for a limited time. Liquidity,
market, speculative exposure risks. 10%
- -------------------------------------------------------------------
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The purchase
or sale of securities for delivery at a future date; market
value may change before delivery. Liquidity, market,
speculative exposure risks. 20%
- -------------------------------------------------------------------
</TABLE>

* The fund is not obligated to pursue any hedging strategy. In addition,
hedging practices may not be available, may be too costly to be used
effectively or may be unable to be used for other reasons.
** The fund is limited to 5% of net assets for initial margin and premium
amounts on futures positions considered to be speculative by the Commodity
Futures Trading Commission.
18

<PAGE> 52

MEET THE MANAGERS

[Elizabeth B. Dater Photo]

ELIZABETH B. DATER
Managing Director

- Co-Portfolio Manager,
Emerging Growth Fund
since fund inception

- With Warburg Pincus since 1978

[Steven J. Lurito Photo]

STEVEN J. LURITO
Managing Director

- Co-Portfolio Manager,
Emerging Growth Fund
since 1990

- With Warburg Pincus since 1987

Job titles indicate position with the adviser.

<PAGE> 53

ABOUT YOUR ACCOUNT

SHARE VALUATION

The price of your shares is also referred to as their net asset value (NAV).

The NAV is determined at the close of regular trading on the New York Stock
Exchange (NYSE) (usually 4 p.m. Eastern Time) each day the NYSE is open for
business. It is calculated by dividing the Advisor Class's total assets, less
its liabilities, by the number of Advisor Class shares outstanding.

The fund values its securities based on market quotations when it calculates
its NAV. If market quotations are not readily available, securities and other
assets are valued by another method that the Board believes accurately reflects
fair value. Debt obligations that will mature in 60 days or less are valued on
the basis of amortized cost, unless the Board determines that using this method
would not reflect an investment's value.

Some fund securities may be listed on foreign exchanges that are open on days
(such as U.S. holidays) when the fund does not compute its prices. This could
cause the value of a fund's portfolio investments to be affected by trading on
days when you cannot buy or sell shares.

FINANCIAL-SERVICES FIRMS
You can buy and sell fund shares through a variety of financial-services
firms such as banks, brokers and financial advisors. The fund has authorized
these firms (and other intermediaries that the firms may designate) to accept
orders. When an authorized firm or its designee has received your order, it is
considered received by the fund and will be priced at the next-computed NAV.

To offset start-up costs and expenses associated with certain qualified
retirement plans making Advisor Shares available to plan participants,
Counsellors Securities pays CIGNA Financial Advisors, Inc., a registered
broker-dealer which is the broker of record for Connecticut General Life
Insurance Company, a one-time fee of .25% of the average aggregate account
balances of plan participants during the first year of implementation.

ACCOUNT STATEMENTS

In general, you will receive account statements as follows:

- after every transaction that affects your account balance (except for
distribution reinvestments and automatic transactions)

- after any changes of name or address of the registered owner(s)

- otherwise, every quarter

You will receive annual and semiannual financial reports.
20

<PAGE> 54

DISTRIBUTIONS

As a fund investor, you are entitled to your share of the fund's net income
and gains on its investments. The fund passes these earnings along to its
shareholders as distributions.

The fund earns dividends from stocks and interest from bond, money market and
other investments. These are passed along as dividend distributions. The fund
realizes capital gains whenever it sells securities for a higher price than it
paid for them. These are passed along as capital gain distributions.

The fund typically distributes net income and capital gains annually, usually
in December.

TAXES

As with any investment, you should consider how your investment in the fund
will be taxed. Unless your account is an IRA or other tax-advantaged account,
you should be aware of the potential tax implications. Please consult your tax
professional concerning your own tax situation.

TAXES ON DISTRIBUTIONS
As long as the fund continues to meet the requirements for being a
tax-qualified regulated investment company, it pays no federal income tax on the
earnings it distributes to shareholders.

Distributions you receive from the fund, whether reinvested or taken in cash,
are generally considered taxable. Fund distributions are taxed based on the
length of time the fund holds its assets, regardless of how long you have held
fund shares. Distributions from the fund's long-term capital gains are taxed as
capital gains; distributions from other sources are generally taxed as ordinary
income. The fund will mostly make capital gains distributions.

The Form 1099 that is mailed to you every January details your distributions
and their federal tax category.

TAXES ON TRANSACTIONS
Any time you sell or exchange shares, it is considered a taxable event for
you. Depending on the purchase price and the sale price of the shares you sell
or exchange, you may have a gain or loss on the transaction. You are
responsible for any tax liabilities generated by your transactions.

<PAGE> 55

OTHER INFORMATION

ABOUT THE DISTRIBUTOR

Counsellors Securities Inc., a wholly owned subsidiary of Warburg Pincus, is
the fund's distributor. Counsellors Securities is responsible for:

- making the fund available to you

- account servicing and maintenance

- sub-transfer agency services, and administrative services related to sale of
the Advisor Class

Certain institutions and financial services firms may offer Advisor Class
shares to their clients and customers (or participants in the case of retirement
plans). These firms provide distribution, administrative and shareholder
services for fund shareholders. The fund has adopted Rule 12b-1 shareholder
servicing and distribution plans to compensate these firms for their services.
The current 12b-1 fee is .50% per annum of the fund's average daily net assets,
although under the 12b-1 plan the fund is authorized to pay up to .75%.

Certain financial-services firms may receive additional fees from the
distributor, the adviser or their affiliates for providing supplemental services
in connection with investments in the fund. Financial-services firms may also be
reimbursed for marketing costs. Additional fees may be up to 0.10% per year of
the value of fund accounts maintained by the firm. To the extent that the
distributor, the adviser or their affiliates provide additional compensation or
reimbursements for marketing expenses, such payments would not represent an
additional expense to the fund or its shareholders.

<PAGE> 56

BUYING SHARES

OPENING AN ACCOUNT

Your account application provides us with key information we need to set up
your account correctly. It also lets you authorize services that you may find
convenient in the future.

If you need an application, call our Institutional Service Center to receive
one by mail or fax.

You can make your initial investment by check or wire. The "By Wire" method
in the table on page xx, enables you to buy shares on a particular day at that
day's closing NAV.

BUYING AND SELLING SHARES

The fund is open on those days when the NYSE is open, typically Monday
through Friday. If we receive your request in proper form by the close of the
NYSE (usually 4 p.m. ET), your transaction will be priced at that day's NAV. If
we receive it after that time, it will be priced at the next business day's NAV.

FINANCIAL-SERVICES FIRMS

You can also buy and sell fund shares through a variety of financial-services
firms such as banks, brokers and financial advisors. The fund has authorized
these firms (and other intermediaries that the firms may designate) to accept
orders. When an authorized firm or its designee has received your order, it is
considered received by the fund and will be priced at the next-computed NAV.

ADDING TO AN ACCOUNT

You can add to your account in a variety of ways, as shown in the table on
page xx. If you want to use ACH transfer, be sure to complete the "ACH on
Demand" section of the account application.

INVESTMENT CHECKS

Please use either a personal or bank check payable in U.S. dollars to Warburg
Pincus Advisor Funds. Unfortunately, we cannot accept "starter" checks that do
not have your name pre-printed on them. We also cannot accept checks payable to
you or to another party and endorsed to the order of Warburg Pincus Advisor
Funds. These types of checks may be returned to you and your purchase order may
not be processed. Limited exceptions include properly endorsed UTMA and UGMA
Rollovers and government checks.

WIRE INSTRUCTIONS

State Street Bank and Trust Company
ABA# 0110 000 28
Attn: Mutual Funds/Custody Dept.
[Warburg Pincus Advisor Fund Name]
DDA# 9904-649-2
F/F/C: [Account Number and Registration]

<PAGE> 57

<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
<S> <C>
BY CHECK
- - Complete the New Account Application. - Make your check payable to Warburg
- - Make your check payable to Warburg Pincus Advisor Funds.
Pincus Advisor Funds. - Write the account number and the fund
- - Mail to Warburg Pincus Advisor Funds. name on your check.
- Mail to Warburg Pincus Advisor Funds.
BY EXCHANGE
- - Call our Institutional Service Center - Call our Institutional Service Center
to request an exchange. Be sure to read to request an exchange.
the current prospectus for the new If you do not have telephone privileges,
fund. mail or fax a letter of instruction.
If you do not have telephone privileges,
mail or fax a letter of instruction.

BY WIRE
- - Complete and sign the New Account - Call our Institutional Service Center
Application. by 4 p.m. ET to inform us of the incoming
- - Call our Institutional Service Center wire. Please be sure to specify your
and fax the signed New Account name, account number and the fund name
Application by 4 p.m. ET. on your wire advice.
- - Institutional Services will telephone - Wire the money for receipt that day.
you with your account number. Please be
sure to specify your name, account
number and the fund name on your wire
advice.
- - Wire your initial investment for
receipt that day.
- - Mail the original, signed application
to Warburg Pincus Advisor Funds.

BY ACH TRANSFER

- - Cannot be used to open an account. - Call our Institutional Service Center
to request an ACH transfer from your
bank.
- Your purchase will be effective at the
next NAV calculated after we receive your
order in proper form.

Requires ACH on Demand privileges.
</TABLE>

INSTITUTIONAL SERVICES 800-222-8977
MONDAY - FRIDAY, 8 A.M. - 5 P.M. ET
24

<PAGE> 58

SELLING SHARES

<TABLE>
<CAPTION>
SELLING SOME OR ALL OF YOUR SHARES CAN BE USED FOR
<S> <C>
BY MAIL

Write us a letter of instruction that - Sales of any amount.
includes:
- - your name(s) and signature(s) or, if
redeeming on an investor's behalf, the
name(s) of the registered owner(s) and
the signature(s) of their legal
representative(s)
- - the fund name and account number
- - the dollar amount you want to sell
- - how to send the proceeds
Obtain a signature guarantee or other
documentation, if required (see "Selling
Shares in Writing").

Mail the materials to Warburg Pincus
Advisor Funds.

If only a letter of instruction is
required, you can fax it to the
Institutional Service Center.

BY EXCHANGE
- - Call our Institutional Service Center - Accounts with telephone privileges.
to request an exchange. Be sure to read If you do not have telephone privileges,
the current prospectus for the new fund. mail or fax a letter of instruction to
exchange shares.
BY PHONE

Call our Institutional Service Center to - Accounts with telephone privileges.
request a redemption. You can receive the
proceeds as:
- - a check mailed to the address of record
- - an ACH transfer to your bank
- - a wire to your bank
See "By Wire or ACH Transfer" for
details.

BY WIRE OR ACH TRANSFER
- - Complete the "Wire Instructions" or - Requests by phone or mail.
"ACH on Demand" section of your New
Account Application.
- - For federal-funds wires, proceeds will
be wired on the next business day. For
ACH transfers, proceeds will be
delivered within two business days.
</TABLE>

<PAGE> 59

SELLING SHARES IN WRITING

Some circumstances require a written sell order, along with a signature
guarantee. These include:

- accounts whose address of record has been changed within the past 30 days

- redemption in certain large accounts (other than by exchange)

- requests to send the proceeds to a different payee or address

- shares represented by certificates, which must be returned with your sell
order

A signature guarantee helps protect against fraud. You can obtain one from
most banks or securities dealers, but not from a notary public.

RECENTLY PURCHASED SHARES

If the fund has not yet collected payment for the shares you are selling, it
will delay sending you the proceeds until your purchase payment clears. This may
take up to 10 calendar days after the purchase. To avoid the collection period,
consider buying shares by bank wire, bank check, certified check or money order.

INSTITUTIONAL SERVICES 800-222-8977
MONDAY - FRIDAY, 8 A.M. - 5 P.M. ET
26

<PAGE> 60

SHAREHOLDER SERVICES

AUTOMATIC SERVICES

Buying or selling shares automatically is easy with the services described
below. You can set up most of these services with your account application or by
calling our Institutional Service Center.

AUTOMATIC MONTHLY INVESTMENT PLAN

For making automatic investments from a designated bank account.

AUTOMATIC WITHDRAWAL PLAN

For making automatic monthly, quarterly, semiannual or annual withdrawals.

TRANSFERS/GIFTS TO MINORS

Depending on state laws, you can set up a custodial account under the Uniform
Transfers-to-Minors Act (UTMA) or the Uniform Gifts-to-Minors Act (UGMA). Please
consult your tax professional about these types of accounts.

ACCOUNT CHANGES

Call our Institutional Service Center to update your account records whenever
you change your address. Institutional Services can also help you change your
account information or privileges.

<PAGE> 61

OTHER POLICIES

TRANSACTION DETAILS

You are entitled to capital-gain and earned dividend distributions as soon as
your purchase order is executed.

Your purchase order will be canceled and you may be liable for losses or fees
incurred by the fund if:

- your investment check or ACH transfer does not clear

- you place a telephone order by 4 p.m. ET and we do not receive your wire that
day

If you wire money without first calling our Institutional Service Center to
place an order, and your wire arrives after the close of regular trading on the
NYSE, then your order will not be executed until the end of the next business
day. In the meantime, your payment will be held uninvested. Your bank or other
financial-services firm may charge a fee to send or receive wire transfers.

While we monitor telephone servicing resources carefully, during periods of
significant economic or market change it may be difficult to place orders by
telephone.

Uncashed redemption or distribution checks do not earn interest.

SPECIAL SITUATIONS

The fund reserves the right to:

- refuse any purchase or exchange request, including those from any person or
group who, in the fund's view, is likely to engage in excessive trading

- change or discontinue its exchange privilege after 30 days' notice to current
investors, or temporarily suspend this privilege during unusual market
conditions

- impose minimum investment amounts after 15 days' notice to current investors
of any increases

- charge a wire redemption fee

- make a "redemption in kind"--payment in portfolio securities rather than
cash--for certain large redemption amounts that could hurt fund operations

- suspend redemptions or postpone payment dates as permitted by the Investment
Company Act of 1940 (such as periods other than weekends or holidays where
the NYSE is closed, periods where trading on the NYSE is restricted, or any
other time that the SEC permits)

- stop offering its shares for a period of time (such as when management
believes that a substantial increase in assets could adversely affect it)

INSTITUTIONAL SERVICES 800-222-8977
MONDAY - FRIDAY, 8 A.M. - 5 P.M. ET
28

<PAGE> 62

More information about this fund is available free upon request, including
the following:

ANNUAL/SEMIANNUAL REPORT TO SHAREHOLDERS

Includes financial statements, portfolio investments and detailed performance
information.

The Annual Report also contains a letter from the fund's manager discussing
market conditions and investment strategies that significantly affected fund
performance during its past fiscal year.

OTHER INFORMATION

A current Statement of Additional Information (SAI) which provides more
details about the fund is on file with the Securities and Exchange Commission
(SEC) and is incorporated by reference.

Please contact Warburg Pincus Funds to obtain information, without charge,
the SAI and Annual and Semiannual Reports and to make shareholder inquiries:

BY TELEPHONE:
800-222-8977

BY MAIL:
Warburg Pincus Advisor Funds
P.O. Box 4906
Grand Central Station
New York, NY 10113
Attn: Institutional Services

BY OVERNIGHT OR COURIER SERVICE:
Warburg Pincus Advisor Funds
335 Madison Avenue
15th Floor
New York, NY 10017
Attn: Institutional Services

ON THE INTERNET:
www.warburg.com

SEC FILE NUMBER:

Warburg Pincus Emerging Growth Fund 811-05396

FOR MORE INFORMATION

LOGO

P.O. BOX 4906, GRAND CENTRAL STATION, NEW YORK, NY 10163
800-369-2728 B www.warburg.com
COUNSELLORS SECURITIES INC., DISTRIBUTOR. ADEMG-1-0299

<PAGE> 63
The information in this Statement of Additional Information is not complete and
may be changed. We may not sell these securities until the Registration filed
with the Securities and Exchange Commission is effective. This Statement of
Additional Information is not an offer to sell these securities and is not
soliciting an offer to buy any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION DATED December 3, 1999

STATEMENT OF ADDITIONAL INFORMATION

FEBRUARY 1, 1999

WARBURG PINCUS EMERGING GROWTH FUND

WARBURG PINCUS POST-VENTURE CAPITAL FUND

WARBURG PINCUS SMALL COMPANY GROWTH FUND

WARBURG PINCUS SMALL COMPANY VALUE FUND

This combined Statement of Additional Information provides information about
Warburg Pincus Emerging Growth Fund (the "Emerging Growth Fund"), Warburg Pincus
Post-Venture Capital Fund (the "Post-Venture Capital Fund"), Warburg Pincus
Small Company Growth Fund (the "Small Company Growth Fund") and Warburg Pincus
Small Company Value Fund (the "Small Company Value Fund" and collectively with
the Emerging Growth Fund, the Small Company Growth Fund and the Small Company
Value Fund, the "Funds") that is contained in the combined Prospectus for the
Common Shares of the Funds and the Prospectuses for the Advisor Shares of the
Funds, each dated _________ __, 1999.

This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Prospectuses. Copies of the Prospectuses and the Annual
Report can be obtained by writing or telephoning:

Common Shares Advisor Shares
Warburg Pincus Funds Warburg Pincus Advisor Funds
P.O. Box 9030 P.O. Box 4906
Boston, Massachusetts 02205-9030 Grand Central Station
800-WARBURG New York, NY 10163
Attn: Institutional Services
800-222-8977

<PAGE> 64

TABLE OF CONTENTS

Page

INVESTMENT OBJECTIVES AND POLICIES.............................................1
Options, Futures and Currency Exchange Transactions...................1
Securities Options....................................................1
Securities Index Options..............................................4
OTC Options...........................................................4
Futures Activities....................................................5
Currency Exchange Transactions........................................7
Hedging Generally.....................................................9
Asset Coverage for Forward Contracts, Options,
Futures and Options on Futures....................................10
Additional Information on Other Investment Practices.................11
U.S. Government Securities...........................................11
Money Market Obligations.............................................11
Convertible Securities...............................................12
Debt Securities......................................................13
Securities of Other Investment Companies.............................13
Lending of Portfolio Securities......................................14
Foreign Investments..................................................14
Foreign Debt Securities..............................................16
Short Sales..........................................................17
Warrants.............................................................18
Depositary Receipts..................................................19
Non-Publicly Traded and Illiquid Securities..........................19
Borrowing............................................................20
Reverse Repurchase Agreements and Dollar Rolls.......................21
When-Issued Securities and Delayed-Delivery Transactions.............22
Small Capitalization and Emerging
Growth Companies; Unseasoned Issuers..............................22
Strategy Available to the Emerging Growth Fund.......................23
Non-Diversified Status...............................................23
Strategy Available to the Post-Venture Capital Fund..................23
Strategy Available to the Small Company Growth Fund..................25
Below Investment Grade Securities...........................25
INVESTMENT RESTRICTIONS.......................................................26
All Funds............................................................26
Emerging Growth Fund.................................................26
Post-Venture Capital and Small Company Growth Funds..................28
Small Company Value Fund.............................................29

(i)
<PAGE> 65

PORTFOLIO VALUATION...........................................................31
PORTFOLIO TRANSACTIONS........................................................32
PORTFOLIO TURNOVER............................................................35
MANAGEMENT OF THE FUNDS.......................................................36
Officers and Board of Directors............................................36
Directors' Total Compensation..............................................39
Portfolio Managers.........................................................40
Investment Advisers and Co-Administrators..................................41
Custodians and Transfer Agent..............................................43
Organization of the Funds..................................................44
Distribution and Shareholder Servicing.....................................44
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION................................46
Automatic Cash Withdrawal Plan.............................................46
EXCHANGE PRIVILEGE............................................................47
ADDITIONAL INFORMATION CONCERNING TAXES.......................................47
The Funds and Their Investments............................................48
Passive Foreign Investment Companies.......................................50
Dividends and Distributions................................................51
Sales of Shares............................................................52
Backup Withholding.........................................................52
Notices....................................................................52
Other Taxation.............................................................52
DETERMINATION OF PERFORMANCE..................................................53
INDEPENDENT ACCOUNTANTS AND COUNSEL...........................................55
MISCELLANEOUS.................................................................55
FINANCIAL STATEMENTS..........................................................58
APPENDIX - DESCRIPTION OF RATINGS............................................A-1

(ii)
<PAGE> 66

INVESTMENT OBJECTIVES AND POLICIES

The following information supplements the discussion of each
Fund's investment objective and policies in the Prospectuses. There are no
assurances that the funds will achieve their investment objectives.

The investment objective of the Emerging Growth Fund is
maximum capital appreciation.

The investment objective of the Post-Venture Capital Fund is
long-term growth of capital.

The investment objective of the Small Company Growth Fund is
capital growth.

The investment objective of the Small Company Value Fund is
long-term capital appreciation.

Unless otherwise indicated, all of the Funds are permitted to
engage in the following investment strategies.

Options, Futures and Currency Exchange Transactions

Securities Options. Each Fund may write covered call and, in
the case of the Small Company Value Fund, put options on up to 25% of the net
asset value of the stock and debt securities in its portfolio. The Emerging
Growth Fund may utilize up to 2% of its assets to purchase U.S. exchange-traded
and over-the-counter ("OTC") options; each of the Post-Venture Capital, Small
Company Growth and Small Company Value Funds may utilize up to 10% of its assets
to purchase options on stocks and debt securities that are traded on U.S. and
foreign exchanges, as well as OTC options.

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

The potential loss associated with purchasing an option is
limited to the premium paid, and the premium would partially offset any gains
achieved from its use. However, for an option writer the exposure to adverse
price movements in the underlying security or index is potentially unlimited
during the exercise period. Writing securities options may result in substantial
losses to a Fund, force the sale or purchase of portfolio securities at
inopportune times or at less advantageous prices, limit the amount of
appreciation the Fund could realize on its investments or require the Fund to
hold securities it would otherwise sell.

<PAGE> 67

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

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

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

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

2
<PAGE> 68
Options Clearing Corporation (the "Clearing Corporation") and of the securities
exchange on which the option is written.

Prior to their expirations, put and call options may be sold
in closing sale or purchase transactions (sales or purchases by a Fund prior to
the exercise of options that it has purchased or written, respectively, of
options of the same series) in which the Fund may realize a profit or loss from
the sale. An option position may be closed out only where there exists a
secondary market for an option of the same series on a recognized securities
exchange or in the OTC market. When a Fund has purchased an option and engages
in a closing sale transaction, whether the Fund realizes a profit or loss will
depend upon whether the amount received in the closing sale transaction is more
or less than the premium the Fund initially paid for the original option plus
the related transaction costs. Similarly, in cases where a Fund has written an
option, it will realize a profit if the cost of the closing purchase transaction
is less than the premium received upon writing the original option and will
incur a loss if the cost of the closing purchase transaction exceeds the premium
received upon writing the original option. A Fund may engage in a closing
purchase transaction to realize a profit, to prevent an underlying security with
respect to which it has written an option from being called or put or, in the
case of a call option, to unfreeze an underlying security (thereby permitting
its sale or the writing of a new option on the security prior to the outstanding
option's expiration). The obligation of a Fund under an option it has written
would be terminated by a closing purchase transaction (a Fund would not be
deemed to own an option as a result of the transaction). So long as the
obligation of a Fund as the writer of an option continues, the Fund may be
assigned an exercise notice by the broker-dealer through which the option was
sold, requiring the Fund to deliver the underlying security against payment of
the exercise price. This obligation terminates when the option expires or the
Fund effects a closing purchase transaction. A Fund cannot effect a closing
purchase transaction with respect to an option once it has been assigned an
exercise notice.

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

3
<PAGE> 69

purchase transaction in a secondary market, it will not be able to sell the
underlying security and would continue to be at market risk on the security.

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

Securities Index Options. Each Fund may utilize up to 10% of
its total assets to purchase and write exchange-listed and OTC put and call
options on securities indexes. A securities index measures the movement of a
certain group of securities by assigning relative values to the securities
included in the index, fluctuating with changes in the market values of the
securities included in the index. Some securities index options are based on a
broad market index, such as the NYSE Composite Index, or a narrower market index
such as the Standard & Poor's 100. Indexes may also be based on a particular
industry or market segment.

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

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

4
<PAGE> 70
from whom it purchased the option to perform if the option were exercised. If
the dealer fails to honor the exercise of the option by the Fund, the Fund would
lose the premium it paid for the option and the expected benefit of the
transaction.

Exchange-traded options generally have a continuous liquid
market while OTC or dealer options do not. Consequently, a Fund will generally
be able to realize the value of a dealer option it has purchased only by
exercising it or reselling it to the dealer who issued it. Similarly, when a
Fund writes a dealer option, it generally will be able to close out the option
prior to its expiration only by entering into a closing purchase transaction
with the dealer to which the Fund originally wrote the option. Although each
Fund will seek to enter into dealer options only with dealers who will agree to
and that are expected to be capable of entering into closing transactions with
the Fund, there can be no assurance that the Fund will be able to liquidate a
dealer option at a favorable price at any time prior to expiration. The
inability to enter into a closing transaction may result in material losses to a
Fund. Until the Fund, as a covered OTC call option writer, is able to effect a
closing purchase transaction, it will not be able to liquidate securities (or
other assets) used to cover the written option until the option expires or is
exercised. This requirement may impair a Fund's ability to sell portfolio
securities or, with respect to currency options, currencies at a time when such
sale might be advantageous.

Futures Activities. Each Fund may enter into foreign currency,
interest rate and securities index futures contracts and purchase and write
(sell) related options traded on exchanges designated by the Commodity Futures
Trading Commission (the "CFTC") or consistent with CFTC regulations on foreign
exchanges. These futures contracts are standardized contracts for the future
delivery of a non-U.S. currency, an interest rate sensitive security or, in the
case of index futures contracts or certain other futures contracts, a cash
settlement with reference to a specified multiplier times the change in the
index. An option on a futures contract gives the purchaser the right, in return
for the premium paid, to assume a position in a futures contract.

These transactions may be entered into for "bona fide hedging"
purposes as defined in CFTC regulations and other permissible purposes including
hedging against changes in the value of portfolio securities due to anticipated
changes in currency values, interest rates and/or market conditions and
increasing return. Aggregate initial margin and premiums (discussed below)
required to establish positions other than those considered to be "bona fide
hedging" by the CFTC will not exceed 5% of the Fund's net asset value after
taking into account unrealized profits and unrealized losses on any such
contracts it has entered into. Each Fund reserves the right to engage in
transactions involving futures contracts and options on futures contracts to the
extent allowed by CFTC regulations in effect from time to time and in accordance
with the Fund's policies. There is no overall limit on the percentage of Fund
assets that may be at risk with respect to futures activities.

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

5
<PAGE> 71

provides for the future sale by one party and the purchase by the other party of
a certain amount of a specific interest rate sensitive financial instrument
(debt security) at a specified price, date, time and place. Securities indexes
are capitalization weighted indexes which reflect the market value of the
securities represented in the indexes. A securities index futures contract is an
agreement to be settled by delivery of an amount of cash equal to a specified
multiplier times the difference between the value of the index at the close of
the last trading day on the contract and the price at which the agreement is
made.

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

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

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

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

Currency Exchange Transactions. The value in U.S. dollars of
the assets of a Fund that are invested in foreign securities may be affected
favorably or unfavorably by a variety of factors not applicable to investment in
U.S. securities, and the Fund may incur costs in connection with conversion
between various currencies. Currency exchange transactions may be from any
non-U.S. currency into U.S. dollars or into other appropriate currencies. Each
Fund will conduct its currency exchange transactions (i) on a spot (i.e., cash)
basis at the rate prevailing in the currency exchange market, (ii) through
entering into futures contracts or options on such contracts (as described
above), (iii) through entering into forward contracts to purchase or sell
currency or (iv) by purchasing exchange-traded currency options. Risks
associated with currency forward contracts and purchasing currency options are
similar to those described herein for futures contracts and securities and stock
index options. In addition, the use of currency transactions could result in
losses from the imposition of foreign exchange controls, suspension of
settlement or other governmental actions or unexpected events. The Emerging
Growth Fund will only engage in currency exchange transactions for hedging
purposes.

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

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futures contracts are traded on commodities exchanges and are standardized as to
contract size and delivery date.

At or before the maturity of a forward contract, a Fund may
either sell a portfolio security and make delivery of the currency, or retain
the security and fully or partially offset its contractual obligation to deliver
the currency by negotiating with its trading partner to enter into an offsetting
transaction. If a Fund retains the portfolio security and engages in an
offsetting transaction, the Fund, at the time of execution of the offsetting
transaction, will incur a gain or a loss to the extent that movement has
occurred in forward contract prices.

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

Currency Hedging. Each Fund's currency hedging will be limited
to hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of forward currency with respect to
specific receivables or payables of a Fund generally accruing in connection with
the purchase or sale of its portfolio securities. Position hedging is the sale
of forward currency with respect to portfolio security positions. No Fund may
position hedge to an extent greater than the aggregate market value (at the time
of entering into the hedge) of the hedged securities.

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

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<PAGE> 74
increase. If a devaluation is generally anticipated, a Fund may not be able to
contract to sell a currency at a price above the devaluation level it
anticipates.

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

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

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

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<PAGE> 75
correct forecast of general market trends by Warburg still may not result in a
successful hedging transaction.

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

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

Asset Coverage for Forward Contracts, Options, Futures and
Options on Futures. Each Fund will comply with guidelines established by the
U.S. Securities and Exchange Commission (the "SEC") and other applicable
regulatory bodies with respect to coverage of forward currency contracts;
options written by the Fund on securities and indexes; and currency, interest
rate and index futures contracts and options on these futures contracts. These
guidelines may, in certain instances, require that the Fund segregate cash or
liquid securities with its custodian or a designated sub-custodian to the extent
the Fund's obligations with respect to these strategies are not otherwise
"covered" through ownership of the underlying security or financial instrument
or by other portfolio positions or by other means consistent with applicable
regulatory policies. Segregated assets cannot be sold or transferred unless
equivalent assets are substituted in their place or it is no longer necessary to
segregate them. As a result, there is a possibility that segregation of a large
percentage of a Fund's assets could impede portfolio management or the Fund's
ability to meet redemption requests or other current obligations.

For example, a call option written by a Fund on securities may
require the Fund to hold the securities subject to the call (or securities
convertible into the securities without additional consideration) or to
segregate assets (as described above) sufficient to purchase and deliver the
securities if the call is exercised. A call option written by a Fund on an index
may require the Fund to own portfolio securities that correlate with the index
or to segregate assets (as described above) equal to the excess of the index
value over the exercise price on a current basis. A Fund could purchase a put
option if the strike price of that option is the same or higher than the strike
price of a put option sold by the Fund. If a Fund holds a futures or forward

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contract, the Fund could purchase a put option on the same futures or forward
contract with a strike price as high or higher than the price of the contract
held. A Fund may enter into fully or partially offsetting transactions so that
its net position, coupled with any segregated assets (equal to any remaining
obligation), equals its net obligation. Asset coverage may be achieved by other
means when consistent with applicable regulatory policies.

Additional Information on Other Investment Practices

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

Other U.S. Government Securities the Funds may invest in
include securities issued or guaranteed by the Federal Housing Administration,
Farmers Home Loan Administration, Export-Import Bank of the United States, Small
Business Administration, General Services Administration, Central Bank for
Cooperatives, Federal Farm Credit Banks, Federal Intermediate Credit Banks,
Federal Land Banks, Maritime Administration, Tennessee Valley Authority,
District of Columbia Armory Board and Student Loan Marketing Association.
Because the U.S. government is not obligated by law to provide support to an
instrumentality it sponsors, a Fund will invest in obligations issued by such an
instrumentality only if Warburg determines that the credit risk with respect to
the instrumentality does not make its securities unsuitable for investment by
the Fund.

Money Market Obligations. Each Fund is authorized to invest,
under normal market conditions, up to 20% of its total assets in domestic and
foreign short-term (one year or less remaining to maturity) and medium-term
(five years or less remaining to maturity) money market obligations and for
temporary defensive purposes may invest in these securities without limit. These
instruments consist of obligations issued or guaranteed by the U.S. government
or a foreign government, their agencies or instrumentalities; bank obligations
(including certificates of deposit, time deposits and bankers' acceptances of
domestic or foreign banks, domestic savings and loans and similar institutions)
that are high quality investments or, if unrated, deemed by Warburg

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<PAGE> 77

to be high quality investments; commercial paper rated no lower than A-2 by S&P
or Prime-2 by Moody's or the equivalent from another major rating service or, if
unrated, of an issuer having an outstanding, unsecured debt issue then rated
within the three highest rating categories; and repurchase agreements with
respect to the foregoing.

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

Money Market Mutual Funds. Where Warburg believes that it
would be beneficial to the Fund and appropriate considering the factors of
return and liquidity, each Fund may invest up to 5% of its assets in securities
of money market mutual funds that are unaffiliated with the Fund or Warburg. As
a shareholder in any mutual fund, a Fund will bear its ratable share of the
mutual fund's expenses, including management fees, and will remain subject to
payment of the Fund's management fees and other expenses with respect to assets
so invested.

Convertible Securities. Convertible securities in which a Fund
may invest, including both convertible debt and convertible preferred stock, may
be converted at either a stated price or stated rate into underlying shares of
common stock. Because of this feature, convertible securities enable an investor
to benefit from increases in the market price of the underlying common stock.
Convertible securities provide higher yields than the underlying equity
securities, but generally offer lower yields than non-convertible securities of
similar quality. The value of convertible securities fluctuates in relation to
changes in interest rates like bonds and, in addition, fluctuates in relation to
the underlying common stock. Subsequent to purchase by a Fund, convertible
securities may cease to be rated or a rating may be reduced below the minimum
required for purchase by the Fund. Neither event will require sale of such
securities, although

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Warburg will consider such event in its determination of whether a Fund should
continue to hold the securities. Each of the Small Company Growth and Small
Company Value Funds does not currently intend during the coming year to hold
more than 5% of its net assets in convertible securities rated below investment
grade.

Debt Securities. Each Fund may invest up to 20% of its total
assets in debt securities (other than money market obligations) and, in the case
of the Emerging Growth Fund, preferred stocks that are not convertible into
common stock. The interest income to be derived may be considered as one factor
in selecting debt securities for investment by Warburg. Because the market value
of debt obligations can be expected to vary inversely to changes in prevailing
interest rates, investing in debt obligations may provide an opportunity for
capital appreciation when interest rates are expected to decline. The success of
such a strategy is dependent upon Warburg's ability to accurately forecast
changes in interest rates. The market value of debt obligations may also be
expected to vary depending upon, among other factors, the ability of the issuer
to repay principal and interest, any change in investment rating and general
economic conditions. Each Fund's holdings of debt securities will be considered
investment grade at the time of purchase, except that up to 5% of the Small
Company Growth Fund's assets may be below investment grade.

A security will be deemed to be investment grade if it is
rated within the four highest grades by Moody's or S&P or, if unrated, is
determined to be of comparable quality by Warburg Bonds rated in the fourth
highest grade may have speculative characteristics and changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher grade
bonds. The Small Company Growth Fund's holdings of debt securities rated below
investment grade (commonly referred to as "junk bonds") may be rated as low as C
by Moody's or D by S&P at the time of purchase, or may be unrated securities
considered to be of equivalent quality. Securities that are rated C by Moody's
comprise the lowest rated class and can be regarded as having extremely poor
prospects of ever attaining any real investment standing. Debt rated D by S&P is
in default or is expected to default upon maturity or payment date. Subsequent
to its purchase by a Fund, an issue of securities may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Fund.
Neither event will require sale of such securities, although Warburg will
consider such event in its determination of whether the Fund should continue to
hold the securities.

When Warburg believes that a defensive posture is warranted,
each Fund may invest temporarily without limit in investment grade debt
obligations and in domestic and foreign money market obligations, including
repurchase agreements.

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

Lending of Portfolio Securities. Each Fund may lend portfolio
securities to brokers, dealers and other financial organizations that meet
capital and other credit requirements or other criteria established by the
Fund's Board of Directors (the "Board"). These loans, if and when made, may not
exceed 20% of a Fund's total assets taken at value. No Fund will lend portfolio
securities to its investment adviser, any sub-investment adviser or their
affiliates unless it has applied for and received specific authority to do so
from the SEC. Loans of portfolio securities will be collateralized by cash,
letters of credit or U.S. Government Securities, which are maintained at all
times in an amount equal to at least 100% of the current market value of the
loaned securities. Any gain or loss in the market price of the securities loaned
that might occur during the term of the loan would be for the account of a Fund.
From time to time, a Fund may return a part of the interest earned from the
investment of collateral received for securities loaned to the borrower and/or a
third party that is unaffiliated with the Fund and that is acting as a "finder."

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

There is no current intention by each Fund to lend portfolio
securities.

Foreign Investments. Each Fund may invest up to 20% of its
total assets in the securities of foreign issuers. Investors should recognize
that investing in foreign

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companies involves certain risks, including those discussed below, which are in
addition to those associated with investing in U.S. issuers. Individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and balance of payments positions. The
Funds may invest in securities of foreign governments (or agencies or
instrumentalities thereof), and many, if not all, of the foregoing
considerations apply to such investments as well.

Foreign Currency Exchange. Since the Funds may be investing in
securities denominated in currencies of non-U.S. countries, and since a Fund may
temporarily hold funds in bank deposits or other money market investments
denominated in foreign currencies, the Funds may be affected favorably or
unfavorably by exchange control regulations or changes in the exchange rate
between such currencies and the dollar. A change in the value of a foreign
currency relative to the U.S. dollar will result in a corresponding change in
the dollar value of the Fund assets denominated in that foreign currency.
Changes in foreign currency exchange rates may also affect the value of
dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and gains, if any, to be distributed to
shareholders by a Fund. Unless otherwise contracted, the rate of exchange
between the U.S. dollar and other currencies is determined by the forces of
supply and demand in the foreign exchange markets. Changes in the exchange rate
may result over time from the interaction of many factors directly or indirectly
affecting economic and political conditions in the United States and a
particular foreign country, including economic and political developments in
other countries. Governmental intervention may also play a significant role.
National governments rarely voluntarily allow their currencies to float freely
in response to economic forces. Sovereign governments use a variety of
techniques, such as intervention by a country's central bank or imposition of
regulatory controls or taxes, to affect the exchange rates of their currencies.
The Funds may use hedging techniques with the objective of protecting against
loss through the fluctuation of the value of foreign currencies against the U.S.
dollar, particularly the forward market in foreign exchange, currency options
and currency futures.

Euro Conversion. The planned introduction of a single European
currency, the euro, on January 1, 1999 for participating European nations in the
Economic and Monetary Union presents unique risks and uncertainties for
investors in those countries, including (i) whether the payment and operational
systems of banks and other financial institutions will be ready by the scheduled
launch date; (ii) the creation of suitable clearing and settlement payment
schemes for the euro; (iii) the legal treatment of outstanding financial
contracts after January 1, 1999 that refer to existing currencies rather than
the euro; (iv) the fluctuation of the euro relative to non-euro currencies
during the transition period from January 1, 1999 to December 31, 2000 and
beyond; and (v) whether the interest rate, tax and labor regimes of the European
countries participating in the euro will converge over time. Further, the
conversion of the currencies of other Economic and Monetary Union countries,
such as the United Kingdom, and the admission of other countries, including
Central and Eastern European

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countries, to the Economic and Monetary Union could adversely affect the euro.
These or other factors may cause market disruptions before or after the
introduction of the euro and could adversely affect the value of foreign
securities and currencies held by the Funds.

Information. Many of the foreign securities held by the Funds
will not be registered with, nor will the issuers thereof be subject to
reporting requirements of the SEC. Accordingly, there may be less publicly
available information about the securities and about the foreign company or
government issuing them than is available about a domestic company or government
entity. Foreign companies are generally subject to financial reporting
standards, practices and requirements that are either not uniform or less
rigorous than those applicable to U.S. companies.

Political Instability. With respect to some foreign countries,
there is the possibility of expropriation or confiscatory taxation, limitations
on the removal of funds or other assets of the Funds, political or social
instability, or domestic developments which could affect U.S. investments in
those and neighboring countries.

Foreign Markets. Securities of some foreign companies are less
liquid and their prices are more volatile than securities of comparable U.S.
companies. Certain foreign countries are known to experience long delays between
the trade and settlement dates of securities purchased or sold.

Increased Expenses. The operating expenses of a Fund, to the
extent it invests in foreign securities, may be higher than that of an
investment company investing exclusively in U.S. securities, since the expenses
of the Funds, such as cost of converting foreign currency into U.S. dollars, the
payment of fixed brokerage commissions on foreign exchanges, custodial costs,
valuation costs and communication costs, may be higher than those costs incurred
by other investment companies not investing in foreign securities.

Dollar-Denominated Debt Securities of Foreign Issuers. The
returns on foreign debt securities reflect interest rates and other market
conditions prevailing in those countries. The relative performance of various
countries' fixed income markets historically has reflected wide variations
relating to the unique characteristics of each country's economy. Year-to-year
fluctuations in certain markets have been significant, and negative returns have
been experienced in various markets from time to time.

Foreign Debt Securities. The returns on foreign debt
securities reflect interest rates and other market conditions prevailing in
those countries and the effect of gains and losses in the denominated currencies
against the U.S. dollar, which have had a substantial impact on investment in
foreign fixed-income securities. The relative performance of various countries'
fixed-income markets historically has reflected wide

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variations relating to the unique characteristics of each country's economy.
Year-to-year fluctuations in certain markets have been significant, and negative
returns have been experienced in various markets from time to time.

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

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

Short Sales (Post-Venture Capital and Small Company Growth
Funds only). The current market value of securities sold short (excluding short
sales "against the box") will not exceed 10% of a Fund's assets. These Funds may
engage in "short sales." In a short sale, the investor sells a borrowed security
and has a corresponding obligation to the lender to return the identical
security. The seller does not immediately deliver the securities sold and is
said to have a short position in those securities until delivery occurs. To
deliver the securities to the buyer, the Fund must arrange through a broker to
borrow the securities and, in so doing, the Fund becomes obligated to replace
the securities borrowed at their market price at the time of replacement,
whatever that price may be. The Fund will make a profit or incur a loss as a
result of a short sale depending on whether the price of the security decreases
or increases between the date of the short sale and the date on which the Fund
purchases the security to replace the borrowed securities that have been sold.
The amount of any loss would be increased (and any gain decreased) by any
premium or interest the Fund is required to pay in connection with a short sale.

The Fund's obligation to replace the securities borrowed in
connection with a short sale will be secured by cash or liquid securities
deposited as collateral with the broker. In addition, the Fund will place in a
segregated account with its custodian or a qualified subcustodian an amount of
cash or liquid securities equal to the difference, if

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<PAGE> 83

any, between (i) the market value of the securities sold at the time they were
sold short and (ii) any cash or liquid securities deposited as collateral with
the broker in connection with the short sale (not including the proceeds of the
short sale). Until it replaces the borrowed securities, the Portfolio will
maintain the segregated account daily at a level so that (a) the amount
deposited in the account plus the amount deposited with the broker (not
including the proceeds from the short sale) will equal the current market value
of the securities sold short and (b) the amount deposited in the account plus
the amount deposited with the broker (not including the proceeds of the short
sale) will not be less than the market value of the securities at the time they
were sold short.

Short Sales "Against the Box" (Each Fund except the Emerging
Growth Fund). Not more than 10% of a Fund's net assets (taken at current value)
may be held as collateral for short sales against the box at any one time. While
a short sale is made by selling a security a Fund does not own, a short sale is
"against the box" to the extent that a Fund contemporaneously owns or has the
right to obtain, at no added cost, securities identical to those sold short. A
Fund will deposit, in a segregated account with its custodian or a qualified
subcustodian, the securities sold short or convertible or exchangeable preferred
stocks or debt securities in connection with short sales against the box. No
Fund intends to engage in short sales against the box for investment purposes. A
Fund may, however, make a short sale as a hedge, when it believes that the price
of a security may decline, causing a decline in the value of a security owned by
the Fund (or a security convertible or exchangeable for such security). In such
case, any future losses in the Fund's long position should be offset by a gain
in the short position and, conversely, any gain in the long position should be
reduced by a loss in the short position. The extent to which such gains or
losses are reduced will depend upon the amount of the security sold short
relative to the amount the Fund owns. There will be certain additional
transaction costs associated with short sales against the box, but the Fund will
endeavor to offset these costs with the income from the investment of the cash
proceeds of short sales.

If a Fund effects a short sale of securities at a time when it
has an unrealized gain on the securities, it may be required to recognize that
gain as if it had actually sold the securities (as a "constructive sale") on the
date it effects the short sale. However, such constructive sale treatment may
not apply if the Fund closes out the short sale with securities other than the
appreciated securities held at the time of the short sale and if certain other
conditions are satisfied. Uncertainty regarding the tax consequences of
effecting short sales may limit the extent to which a Fund may effect short
sales.

Warrants. Each Fund may invest up to 10% of its net assets
(15% in the case of the Small Company Growth Fund) in warrants. Each Fund may
purchase warrants issued by domestic and foreign companies to purchase newly
created equity securities consisting of common and preferred stock. Warrants are
securities that give the holder the right, but not the obligation, to purchase
equity issues of the company issuing the warrants, or a related company, at a
fixed price either on a date certain or

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<PAGE> 84

during a set period. The equity security underlying a warrant is authorized at
the time the warrant is issued or is issued together with the warrant.

Investing in warrants can provide a greater potential for
profit or loss than an equivalent investment in the underlying security, and,
thus, can be a speculative investment. At the time of issue, the cost of a
warrant is substantially less than the cost of the underlying security itself,
and price movements in the underlying security are generally magnified in the
price movements of the warrant. This leveraging effect enables the investor to
gain exposure to the underlying security with a relatively low capital
investment. This leveraging increases an investor's risk, however, in the event
of a decline in the value of the underlying security and can result in a
complete loss of the amount invested in the warrant. In addition, the price of a
warrant tends to be more volatile than, and may not correlate exactly to, the
price of the underlying security. If the market price of the underlying security
is below the exercise price of the warrant on its expiration date, the warrant
will generally expire without value. The value of a warrant may decline because
of a decline in the value of the underlying security, the passage of time,
changes in interest rates or in the dividend or other policies of the company
whose equity underlies the warrant or a change in the perception as to the
future price of the underlying security, or any combination thereof. Warrants
generally pay no dividends and confer no voting or other rights other than to
purchase the underlying security.

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

Non-Publicly Traded and Illiquid Securities. Each of the
Post-Venture Capital and Small Company Growth Funds may invest up to 15% of its
net assets (10% of total assets in the case of the Emerging Growth and Small
Company Value Funds) in non-publicly traded and illiquid securities, including
securities that are illiquid by virtue of the absence of a readily available
market, repurchase agreements which have a maturity of longer than seven days,
certain Rule 144A Securities (as defined below), time deposits maturing in more
than seven days and, with respect to the Post-Venture Capital Fund, private
equity portfolios that invest in venture capital companies ("Private

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<PAGE> 85

Funds"). Securities that have legal or contractual restrictions on resale but
have a readily available market are not considered illiquid for purposes of this
limitation. Repurchase agreements subject to demand are deemed to have a
maturity equal to the notice period.

Historically, illiquid securities have included securities
subject to contractual or legal restrictions on resale because they have not
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), securities which are otherwise not readily marketable and repurchase
agreements having a maturity of longer than seven days. Securities which have
not been registered under the Securities Act are referred to as private
placements or restricted securities and are purchased directly from the issuer
or in the secondary market. Mutual funds do not typically hold a significant
amount of these restricted or other illiquid securities because of the potential
for delays on resale and uncertainty in valuation. Companies whose securities
are not publicly traded may not be subject to the disclosure and other investor
protection requirements applicable to companies whose securities are publicly
traded. Limitations on resale may have an adverse effect on the marketability of
portfolio securities and a mutual fund might be unable to dispose of restricted
or other illiquid securities promptly or at reasonable prices and might thereby
experience difficulty satisfying redemptions within seven days without
borrowing. A mutual fund might also have to register such restricted securities
in order to dispose of them resulting in additional expense and delay. Adverse
market conditions could impede such a public offering of securities.

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

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

An investment in Rule 144A Securities will be considered
illiquid and therefore subject to a Fund's limit on the purchase of illiquid
securities unless the Board or its delegates determines that the Rule 144A
Securities are liquid. In reaching liquidity decisions, the Board and its
delegates may consider, inter alia, the following factors: (i) the unregistered
nature of

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<PAGE> 86
the security; (ii) the frequency of trades and quotes for the security; (iii)
the number of dealers wishing to purchase or sell the security and the number of
other potential purchasers; (iv) dealer undertakings to make a market in the
security and (v) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of the transfer).

This investment practice could have the effect of increasing
the level of illiquidity in the Funds to the extent that qualified institutional
buyers become uninterested for a time in purchasing Rule 144A Securities. The
Board of each Fund will carefully monitor any investments by the Fund in Rule
144A Securities. The Boards may adopt guidelines and delegate to Warburg the
daily function of determining and monitoring the liquidity of Rule 144A
Securities, although each Board will retain ultimate responsibility for any
determination regarding liquidity.

Borrowing. Each of the Post-Venture Capital, Small Company
Growth and Small Company Value Funds may borrow up to 30%, and the Emerging
Growth Fund may borrow up to 10%, of its total assets for temporary or emergency
purposes, including to meet portfolio redemption requests so as to permit the
orderly disposition of portfolio securities or to facilitate settlement
transactions on portfolio securities. Investments (including roll-overs) will
not be made when borrowings exceed 5% of a Fund's total assets. Although the
principal of such borrowings will be fixed, a Fund's assets may change in value
during the time the borrowing is outstanding. Each Fund expects that some of its
borrowings may be made on a secured basis. In such situations, either the
custodian will segregate the pledged assets for the benefit of the lender or
arrangements will be made with a suitable subcustodian, which may include the
lender.

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

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<PAGE> 87

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

There is no current intention by each Fund to enter into
reverse repurchase agreements and dollar rolls.

When-Issued Securities and Delayed-Delivery Transactions. Each
of the Emerging Growth, Post-Venture Capital and Small Company Growth Funds may
utilize up to 20% of its total assets to purchase securities on a "when-issued"
basis or purchase or sell securities for delayed delivery (i.e., payment or
delivery occur beyond the normal settlement date at a stated price and yield). A
Fund will not enter into a when-issued or delayed-delivery transaction for the
purpose of leverage, but may sell the right to acquire a when-issued security
prior to its acquisition or dispose of its right to deliver or receive
securities in a delayed-delivery transaction if Warburg deems it advantageous to
do so. The payment obligation and the interest rate that will be received on
when-issued and delayed-delivery transactions are fixed at the time the buyer
enters into the commitment. Due to fluctuations in the value of securities
purchased or sold on a when-issued or delayed-delivery basis, the prices of such
securities may be higher or lower than the prices available in the market on the
dates when the investments are actually delivered to the buyers. Each Fund will
segregate with its custodian cash or liquid securities in an amount equal to its
when-issued and delayed-delivery purchase commitments and will segregate the
securities underlying commitments to sell securities for delayed delivery.

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

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<PAGE> 88

The Small Company Value Fund has no intention during the
coming year to purchase securities on a when-issued basis and purchase or sell
securities for delayed delivery.

Small Capitalization and Emerging Growth Companies; Unseasoned
Issuers. Investments in small- and medium-sized and emerging growth companies,
as well as companies with continuous operations of less than three years
("unseasoned issuers") involve considerations that are not applicable to
investing in securities of established, larger-capitalization issuers, including
reduced and less reliable information about issuers and markets, less stringent
financial disclosure requirements, illiquidity of securities and markets, higher
brokerage commissions and fees and greater market risk in general. In addition,
securities of small- and medium-sized and emerging growth companies and
unseasoned issuers may involve greater risks since these securities may have
limited marketability and, thus, may be more volatile.

"Special situation companies" are involved in an actual or
prospective acquisition or consolidation; reorganization; recapitalization;
merger, liquidation or distribution of cash, securities or other assets; a
tender or exchange offer; a breakup or workout of a holding company; or
litigation which, if resolved favorably, would improve the value of the
company's stock. If the actual or prospective situation does not materialize as
anticipated, the market price of the securities of a "special situation company"
may decline significantly. Warburg believes, however, that if it analyzes
"special situation companies" carefully and invests in the securities of these
companies at the appropriate time, the Fund may achieve maximum capital
appreciation. There can be no assurance, however, that a special situation that
exists at the time of an investment will be consummated under the terms and
within the time period contemplated. Up to 10% of the Post-Venture Capital
Fund's assets may be invested, directly or through Private Funds, in securities
of issuers engaged at the time of purchase in "special situations."

Strategy Available to the Emerging Growth Fund

Non-Diversified Status. The Emerging Growth Fund is classified
as non-diversified within the meaning of the 1940 Act, which means that it is
not limited by such Act in the proportion of its assets that it may invest in
securities of a single issuer. As a non-diversified fund, the Fund may invest a
greater proportion of its assets in the obligations of a smaller number of
issuers and, as a result, may be subject to greater risk with respect to
portfolio securities. The Fund's investments will be limited, however, in order
to qualify as a "regulated investment company" for purposes of the Internal
Revenue Code of 1986, as amended (the "Code"). To qualify, the Fund will comply
with certain requirements, including limiting its investments so that at the
close of each quarter of the taxable year (a) not more than 25% of the market
value of its total assets will be invested in the securities of a single issuer,
and (b) with respect to 50% of the market value of its total assets, not more
than 5% of the market value of its total assets will be invested in the
securities of a single issuer and the will not own more than 10% of the
outstanding voting securities of a single issuer.

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<PAGE> 89

Strategy Available to the Post-Venture Capital Fund

Post-Venture Capital Companies. Although the Fund may invest
up to 10% of its assets in venture capital and other investment funds, the Fund
is not designed primarily to provide venture capital financing. Rather, under
normal market conditions, the Fund will invest at least 65% of its total assets
in equity securities of "post-venture capital companies." A post-venture capital
company is a company that has received venture capital financing either (a)
during the early stages of the company's existence or the early stages of the
development of a new product or service, or (b) as part of a restructuring or
recapitalization of the company. The investment of venture capital financing,
distribution of such company's securities to venture capital investors, or
initial public offering, whichever is later, will have been made within ten
years prior to the Fund's purchase of the company's securities.

Private Funds. Up to 10% of the Fund's assets may be invested
in United States or foreign private limited partnerships or other investment
funds ("Private Funds") that themselves invest in equity or debt securities of
(a) companies in the venture capital or post-venture capital stages of
development or (b) companies engaged in special situations or changes in
corporate control, including buyouts. In selecting Private Funds for investment,
Abbott Capital Management, LLC, the Fund's sub-investment adviser with respect
to Private Funds ("Abbott"), attempts to invest in a mix of Private Funds that
will provide an above average internal rate of return (i.e., the discount rate
at which the present value of an investment's future cash inflows (dividend
income and capital gains) are equal to the cost of the investment). Warburg
believes that the Portfolio's investments in Private Funds offer individual
investors a unique opportunity to participate in venture capital and other
private investment funds, providing access to investment opportunities typically
available only to large institutions and accredited investors. Although
investments in Private Funds offer the opportunity for significant capital
gains, these investments involve a high degree of business and financial risk
that can result in substantial losses in the portion of the Post-Venture Capital
Fund's assets invested in these investments. Among these are the risks
associated with investment in companies in an early stage of development or with
little or no operating history, companies operating at a loss or with
substantial variation in operation results from period to period, companies with
the need for substantial additional capital to support expansion or to maintain
a competitive position, or companies with significant financial leverage. Such
companies may also face intense competition from others including those with
greater financial resources or more extensive development, manufacturing,
distribution or other attributes, over which the Portfolio will have no control.

Interests in the Private Funds in which the Post-Venture
Capital Fund may invest will be subject to substantial restrictions on transfer
and, in some instances, may be non-transferable for a period of years. Private
Funds may participate in only a limited number of investments and, as a
consequence, the return of a particular Private Fund may be substantially
adversely affected by the unfavorable performance of even a single investment.
Certain of the Private Funds in which the Fund may invest may pay

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<PAGE> 90

their investment managers a fee based on the performance of the Fund, which may
create an incentive for the manager to make investments that are riskier or more
speculative than would be the case if the manager was paid a fixed fee. Private
Funds are not registered under the 1940 Act and, consequently, are not subject
to the restrictions on affiliated transactions and other protections applicable
to regulated investment companies. The valuation of companies held by Private
Funds, the securities of which are generally unlisted and illiquid, may be very
difficult and will often depend on the subjective valuation of the managers of
the Private Funds, which may prove to be inaccurate. Inaccurate valuations of a
Private Fund's portfolio holdings may affect the Fund's net asset value
calculations. Private Funds in which the Fund invests will not borrow to
increase the amount of assets available for investment or otherwise engage in
leverage. Debt securities held by a Private Fund will tend to be rated below
investment grade and may be rated as low as C by Moody's or D by S&P. Securities
in these rating categories are in payment default or have extremely poor
prospects of attaining any investment standing. The Fund may also hold
non-publicly traded equity securities of companies in the venture and
post-venture stages of development, such as those of closely held companies or
private placements of public companies. The portion of the Fund's assets
invested in these non-publicly traded securities will vary over time depending
on investment opportunities and other factors. The Portfolio's illiquid assets,
including interests in Private Funds and other illiquid non-publicly traded
securities, may not exceed 15% of the Fund's net assets.

Strategy Available to the Small Company Growth Fund

Below Investment Grade Securities. Below investment grade debt
securities may be rated as low as C by Moody's or D by S&P, or be deemed by
Warburg to be of equivalent quality. Securities that are rated C by Moody's are
the lowest rated class and can be regarded as having extremely poor prospects of
ever attaining any real investment standing. A security rated D by S&P is in
default or is expected to default upon maturity or payment date. Below
investment grade securities (commonly referred to as "junk bonds"), (i) will
likely have some quality and protective characteristics that, in the judgment of
the rating organizations, are outweighed by large uncertainties or major risk
exposures to adverse conditions and (ii) are predominantly speculative with
respect to the issuer's capacity to pay interest and repay principal in
accordance with the terms of the obligation. The market values of certain of
these securities also tend to be more sensitive to individual corporate
developments and changes in economic conditions than investment grade
securities. In addition, these securities generally present a higher degree of
credit risk. The risk of loss due to default is significantly greater because
these securities generally are unsecured and frequently are subordinated to the
prior payment of senior indebtedness. While the market values of below
investment grade securities tend to react less to fluctuations in interest rate
levels than do those of investment grade securities, the market values of
certain of these securities also tend to be more sensitive to individual
corporate developments and changes in economic conditions than investment grade
securities. In addition, below investment grade securities generally present a
higher degree of credit risk. Issuers of below investment grade securities are
often highly leveraged and may not have more

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<PAGE> 91
traditional methods of financing available to them so that their ability to
service their obligations during an economic downturn or during sustained
periods of rising interest rates may be impaired. The risk of loss due to
default by such issuers is significantly greater because below investment grade
securities generally are unsecured and frequently are subordinated to the prior
payment of senior indebtedness.

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

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

INVESTMENT RESTRICTIONS

All Funds

Certain investment limitations of each Fund may not be changed without the
affirmative vote

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of the holders of a majority of the Fund's outstanding shares ("Fundamental
Restrictions"). Such majority is defined as the lesser of (i) 67% or more of the
shares present at the meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy, or (ii) more
than 50% of the outstanding shares. If a percentage restriction (other than the
percentage limitation set forth in No. 1 with respect to each Fund) is adhered
to at the time of an investment, a later increase or decrease in the percentage
of assets resulting from a change in the values of portfolio securities or in
the amount of a Fund's assets will not constitute a violation of such
restriction.

Emerging Growth Fund

The investment limitations numbered 1 through 9 are
Fundamental Restrictions. Investment limitations 10 through 13 may be changed by
a vote of the Board at any time.

The Emerging Growth Fund may not:

1. Borrow money or issue senior securities except that the
Fund may (a) borrow from banks for temporary or emergency purposes, and not for
leveraging, and then in amounts not in excess of 10% of the value of the Fund's
total assets at the time of such borrowing and (b) enter into futures contracts;
or mortgage, pledge or hypothecate any assets except in connection with any bank
borrowing and in amounts not in excess of the lesser of the dollar amounts
borrowed or 10% of the value of the Fund's total assets at the time of such
borrowing. Whenever borrowings described in (a) exceed 5% of the value of the
Fund's total assets, the Fund will not make any additional investments
(including roll-overs). For purposes of this restriction, (a) the deposit of
assets in escrow in connection with the purchase of securities on a when-issued
or delayed-delivery basis and (b) collateral arrangements with respect to
initial or variation margin for futures contracts will not be deemed to be
pledges of the Fund's assets.

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

3. Make loans, except that the Fund may purchase or hold
publicly distributed fixed-income securities, lend portfolio securities and
enter into repurchase agreements.

4. Underwrite any issue of securities except to the extent
that the investment in restricted securities and the purchase of fixed-income
securities directly from the issuer thereof in accordance with the Fund's
investment objective, policies and limitations may be deemed to be underwriting.

5. Purchase or sell real estate, real estate investment trust
securities, real estate limited partnerships, commodities or commodity
contracts, or invest in oil, gas or mineral exploration or development programs,
except that the Fund may invest in (a) fixed-

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<PAGE> 93
income securities secured by real estate, mortgages or interests therein, (b)
securities of companies that invest in or sponsor oil, gas or mineral
exploration or development programs and (c) futures contracts and related
options.

6. Make short sales of securities or maintain a short
position.

7. Purchase, write or sell puts, calls, straddles, spreads or
combinations thereof, except that the Fund may (a) purchase put and call options
on securities, (b) write covered call options on securities, (c) purchase and
write put and call options on stock indices and (d) enter into options on
futures contracts.

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

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

10. Invest more than 10% of the value of the Fund's total
assets in securities which may be illiquid because of legal or contractual
restrictions on resale or securities for which there are no readily available
market quotations. For purposes of this limitation, repurchase agreements with
maturities greater than seven days shall be considered illiquid securities.

11. Invest more than 10% of the value of the Fund's total
assets in time deposits maturing in more than seven calendar days.

12. Invest in warrants (other than warrants acquired by the
Fund as part of a unit or attached to securities at the time of purchase) if, as
a result, the investments (valued at the lower of cost or market) would exceed
10% of the value of the Fund's net assets.

13. Invest in oil, gas or mineral leases.

Post-Venture Capital and Small Company Growth Funds

The investment limitations numbered 1 through 9 are
Fundamental Restrictions. Investment limitations 10 through 13 may be changed by
a vote of the Board at any time.

Each of the Post-Venture Capital and Small Company Growth
Funds may not:

28
<PAGE> 94
and any other transactions constituting borrowing by the Fund may not exceed 30%
of the value of the Fund's total assets at the time of such borrowing. For
purposes of this restriction, short sales, the entry into currency transactions,
options, futures contracts, options on futures contracts, forward commitment
transactions and dollar roll transactions that are not accounted for as
financings (and the segregation of assets in connection with any of the
foregoing) shall not constitute borrowing.

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

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

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

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

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

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

9. Issue any senior security except as permitted in the Fund's
investment limitations.

29
<PAGE> 95
10. Purchase securities of other investment companies except
in connection with a merger, consolidation, acquisition, reorganization or offer
of exchange, or as otherwise permitted under the 1940 Act.

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

12. Invest more than 15% of the Fund's net assets in
securities which may be illiquid because of legal or contractual restrictions on
resale or securities for which there are no readily available market quotations.
For purposes of this limitation, repurchase agreements with maturities greater
than seven days shall be considered illiquid securities.

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

Small Company Value Fund

The investment limitations numbered 1 through 10 are
Fundamental Restrictions. Investment limitations 11 through 15 may be changed by
a vote of the Board at any time.

The Small Company Value Fund may not:

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

30
<PAGE> 96
4. Make loans, except that the Fund may purchase or hold
fixed-income securities, including loan participations, assignments and
structured securities, lend portfolio securities and enter into repurchase
agreements.

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

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

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

10. Issue any senior security except as permitted in the
Fund's investment limitations.

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

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

13. Invest more than 10% of the Fund's net assets in
securities which may be illiquid because of legal or contractual restrictions on
resale or securities for which there are no readily available market quotations.
For purposes of this limitation, repurchase agreements with maturities greater
than seven days shall be considered illiquid securities.

<PAGE> 97
14. Invest in warrants (other than warrants acquired by the Fund as
part of a unit or attached to securities at the time of purchase) if, as a
result, the investments (valued at the lower of cost or market) would exceed 10%
of the value of the Fund's net assets.

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

PORTFOLIO VALUATION

The following is a description of the procedures used by the Funds
in valuing its assets.

Securities listed on a U.S. securities exchange (including
securities traded through the Nasdaq National Market System) or foreign
securities exchange or traded in an over-the-counter market will be valued at
the most recent sale as of the time the valuation is made or, in the absence of
sales, at the mean between the highest bid and lowest asked quotations. Options
or futures contracts will be valued similarly. A security which is listed or
traded on more than one exchange is valued at the quotation on the exchange
determined to be the primary market for such security. In determining the market
value of portfolio investments, each Fund may employ outside organizations
(each, a "Pricing Service") which may use a matrix, formula or other objective
method that takes into consideration market indexes, matrices, yield curves and
other specific adjustments. The procedures of Pricing Services are reviewed
periodically by the officers of each Fund under the general supervision and
responsibility of the Board, which may replace a Pricing Service at any time.
Short-term obligations with maturities of 60 days or less are valued at
amortized cost, which constitutes fair value as determined by the Board.
Amortized cost involves valuing a portfolio instrument at its initial cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. The amortized cost method of valuation may also be used
with respect to other debt obligations with 60 days or less remaining to
maturity. Securities, options, futures contracts and other assets for which
market quotations are not available and certain other assets of each Fund will
be valued at their fair value as determined in good faith pursuant to
consistently applied procedures established by the Board. In addition, the Board
or its delegates may value a security at fair value if it determines that such
security's value determined by the methodology set forth above does not reflect
its fair value.

Trading in securities in certain foreign countries is completed at
various times prior to the close of business on each business day in New York
(i.e., a day on which The New York Stock Exchange, Inc. (the "NYSE") is open for
trading). In addition, securities trading in a particular country or countries
may not take place on all business days in New York. Furthermore, trading takes
place in various foreign markets on days which are not business days in New York
and days on which a Fund's net asset value is not calculated. As a result,
calculation of a Fund's net asset value may not take place contemporaneously
with the determination of the prices of certain foreign portfolio securities
used in such calculation. All assets and liabilities initially expressed in
foreign currency values will be converted into U.S.

32
<PAGE> 98

dollar values at the prevailing rate as quoted by a Pricing Service as of 12:00
noon (Eastern time). If such quotations are not available, the rate of exchange
will be determined in good faith pursuant to consistently applied procedures
established by the Board.

PORTFOLIO TRANSACTIONS

Warburg is responsible for establishing, reviewing and, where
necessary, modifying each Fund's investment program to achieve its investment
objective. Purchases and sales of newly issued portfolio securities are usually
principal transactions without brokerage commissions effected directly with the
issuer or with an underwriter acting as principal. Other purchases and sales may
be effected on a securities exchange or over-the-counter, depending on where it
appears that the best price or execution will be obtained. The purchase price
paid by a Fund to underwriters of newly issued securities usually includes a
concession paid by the issuer to the underwriter, and purchases of securities
from dealers, acting as either principals or agents in the after market, are
normally executed at a price between the bid and asked price, which includes a
dealer's mark-up or mark-down. Transactions on U.S. stock exchanges and some
foreign stock exchanges involve the payment of negotiated brokerage commissions.
On exchanges on which commissions are negotiated, the cost of transactions may
vary among different brokers. On most foreign exchanges, commissions are
generally fixed. Purchases of Private Funds by the Post-Venture Capital Fund
through a broker or placement agent may also involve a commission or other fee.
There is generally no stated commission in the case of securities traded in
domestic or foreign over-the-counter markets, but the price of securities traded
in over-the-counter markets includes an undisclosed commission or mark-up. U.S.
Government Securities are generally purchased from underwriters or dealers,
although certain newly issued U.S. Government Securities may be purchased
directly from the U.S. Treasury or from the issuing agency or instrumentality.
No brokerage commissions are typically paid on purchases and sales of U.S.
Government Securities.

Except for Private Funds investments managed by Abbott Capital
Management, LLC, the Post-Venture Capital Fund's sub-investment adviser with
respect to Private Funds ("Abbott"), Warburg will select specific portfolio
investments and effect transactions for each Fund and in doing so seeks to
obtain the overall best execution of portfolio transactions. In evaluating
prices and executions, Warburg will consider the factors it deems relevant,
which may include the breadth of the market in the security, the price of the
security, the financial condition and execution capability of a broker or dealer
and the reasonableness of the commission, if any, for the specific transaction
and on a continuing basis.

Warburg may, in its discretion, effect transactions in portfolio
securities with brokers and dealers who provide brokerage and research services
(as those terms are defined in Section 28(e) of the Securities Exchange Act of
1934, as amended) to a Fund and/or other accounts over which Warburg exercises
investment discretion. Warburg may place portfolio transactions with a broker or
dealer with whom it has negotiated a commission that is in excess of the
commission another broker or dealer would have charged for effecting the
transaction if Warburg determines in good faith that such amount of commission
was reasonable in relation to the value of such brokerage and research services
provided by such broker or dealer viewed

33
<PAGE> 99

in terms of either that particular transaction or of the overall
responsibilities of Warburg. Research and other services received may be useful
to Warburg in serving both the Fund and its other clients and, conversely,
research or other services obtained by the placement of business of other
clients may be useful to Warburg in carrying out its obligations to a Fund.
Research may include furnishing advice, either directly or through publications
or writings, as to the value of securities, the advisability of purchasing or
selling specific securities and the availability of securities or purchasers or
sellers of securities; furnishing seminars, information, analyses and reports
concerning issuers, industries, securities, trading markets and methods,
legislative developments, changes in accounting practices, economic factors and
trends and portfolio strategy; access to research analysts, corporate management
personnel, industry experts, economists and government officials; comparative
performance evaluation and technical measurement services and quotation
services; and products and other services (such as third party publications,
reports and analyses, and computer and electronic access, equipment, software,
information and accessories that deliver, process or otherwise utilize
information, including the research described above) that assist Warburg in
carrying out its responsibilities. For the fiscal year ended October 31, 1998,
$_______, $______, $______ and $______ of total brokerage commissions was paid
by the Emerging Growth, Post-Venture Capital, Small Company Growth and Small
Company Value Funds, respectively, to brokers and dealers who provided such
research and other services. Research received from brokers or dealers is
supplemental to Warburg's own research program.

The following table details amounts paid by each Fund in commissions
to broker-dealers for execution of portfolio transactions during the indicated
fiscal years or period ended October 31.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FUND YEAR COMMISSIONS
- -------------------------------------------------------------------------------
<S> <C> <C>
Emerging Growth Fund 1996 $1,592,936
- -------------------------------------------------------------------------------
1997 $2,702,386*
- -------------------------------------------------------------------------------
1998
- -------------------------------------------------------------------------------

- -------------------------------------------------------------------------------
Post-Venture Capital Fund 1996 $ 200,468
- -------------------------------------------------------------------------------
1997 $ 335,766
- -------------------------------------------------------------------------------
1998
- -------------------------------------------------------------------------------

- -------------------------------------------------------------------------------
Small Company Growth Fund 1997 $ 24,051
- -------------------------------------------------------------------------------
1998
- -------------------------------------------------------------------------------

</TABLE>

34
<PAGE> 100

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FUND YEAR COMMISSIONS
- -------------------------------------------------------------------------------
<S> <C> <C>
- -------------------------------------------------------------------------------
Small Company Value Fund 1996 $ 144,319
- -------------------------------------------------------------------------------
1997 $ 547,325*
- -------------------------------------------------------------------------------
1998
- -------------------------------------------------------------------------------
</TABLE>

* The increase in brokerage commissions paid in the most recent fiscal
year was due to an increase in overall assets of the Fund and
increased equity investments.

The table below shows the amount of outstanding repurchase
agreements that each Fund had, as of October 31, 1998, with Goldman, Sachs &
Co., one of the regular broker-dealers of each Fund.

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
<S> <C>
Emerging Growth Fund $
- -------------------------------------------------------------------------------

Post-Venture Capital Fund $
- -------------------------------------------------------------------------------

Small Company Growth Fund $
- -------------------------------------------------------------------------------

Small Company Value Fund $
- -------------------------------------------------------------------------------
</TABLE>

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

Any portfolio transaction for a Fund may be executed through
Counsellors Securities Inc., located at 466 Lexington Avenue, New York, New York
10017, each Fund's distributor and a wholly-owned subsidiary of Warburg
("Counsellors Securities"), if, in Warburg's judgment, the use of Counsellors
Securities is likely to result in price and execution at least as favorable as
those of other qualified brokers, and if, in the transaction, Counsellors
Securities charges the Fund a commission rate consistent with those charged by
Counsellors Securities to comparable unaffiliated customers in similar
transactions. All transactions with affiliated brokers will comply with Rule
17e-1 under the 1940 Act. No portfolio transactions have been executed through
Counsellors Securities since the commencement of the Funds' operations.

35
<PAGE> 101

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

Transactions for a Fund may be effected on foreign securities
exchanges. In transactions for securities not actively traded on a foreign
securities exchange, a Fund will deal directly with the dealers who make a
market in the securities involved, except in those circumstances where better
prices and execution are available elsewhere. Such dealers usually are acting as
principal for their own account. On occasion, securities may be purchased
directly from the issuer. Such portfolio securities are generally traded on a
net basis and do not normally involve brokerage commissions. Securities firms
may receive brokerage commissions on certain portfolio transactions, including
options, futures and options on futures transactions and the purchase and sale
of underlying securities upon exercise of options.

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

PORTFOLIO TURNOVER

Each Fund does not intend to seek profits through short-term
trading, but the rate of turnover will not be a limiting factor when the Fund
deems it desirable to sell or purchase securities. Each Fund's portfolio
turnover rate is calculated by dividing the lesser of purchases or sales of its
portfolio securities for the year by the monthly average value of the portfolio
securities. Securities with remaining maturities of one year or less at the date
of acquisition are excluded from the calculation.

Certain practices that may be employed by a Fund could result in
high portfolio turnover. For example, options on securities may be sold in
anticipation of a decline in the price of the underlying security (market
decline) or purchased in anticipation of a rise in the price of the underlying
security (market rise) and later sold. To the extent that its portfolio is
traded for the short-term, a Fund will be engaged essentially in trading
activities based on short-term considerations affecting the value of an issuer's
stock instead of long-term investments based on fundamental valuation of
securities. Because of this policy, portfolio securities may be sold without
regard to the length of time for which they have been held. Consequently, the
annual portfolio turnover rate of a Fund may be higher than mutual funds having
similar objectives that do not utilize these strategies.

It is not possible to predict the Funds' portfolio turnover rates.
High portfolio turnover rates (100% or more) may result in higher dealer
mark-ups or underwriting commissions as well as other transaction costs,
including correspondingly higher brokerage commissions. In addition, short-term
gains realized from portfolio

36
<PAGE> 102

turnover may be taxable to shareholders as ordinary income. Each Fund's
portfolio turnover rate is set forth on the table under the caption "Financial
Highlights" in the Prospectuses.

MANAGEMENT OF THE FUNDS

Officers and Board of Directors

The business and affairs of the Funds are managed by the Board of
Directors in accordance with the laws of the State of Maryland. The Board elects
officers who are responsible for the day-to-day operations of the Fund and who
execute policies authorized by the Board. Under each Fund's Charter, the Board
may classify or reclassify any unissued shares of each Fund into one or more
additional classes by setting or changing in any one or more respects their
relative rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption. The Board may similarly
classify or reclassify any class of its shares into one or more series and,
without shareholder approval, may increase the number of authorized shares of
each Fund.

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

<TABLE>
<CAPTION>
<S> <C>
Richard N. Cooper (64) * Director
Harvard University Professor at Harvard University; National
1737 Cambridge Street Intelligence Council from June 1995 until
Cambridge, Massachusetts 02138 January 1997; Director or Trustee of
CircuitCity Stores, Inc. (retail electronics
and appliances) and Phoenix Home Life Mutual
Insurance Company; Director/Trustee of other
investment companies advised by Warburg.

Jack W. Fritz (71) Director
2425 North Fish Creek Road Private investor; Consultant and Director of
P.O. Box 483 Fritz Broadcasting, Inc. and Fritz
Wilson, Wyoming 83014 Communications (developers and operators of
radio stations); Director of Advo, Inc.
(direct mail advertising); Director/Trustee
of other investment companies advised by
Warburg.
</TABLE>

37
<PAGE> 103

<TABLE>
<CAPTION>
<S> <C>
John L. Furth* (68) Chairman of the Board
466 Lexington Avenue Chief Executive Officer and Director of
New York, New York 10017-3147 Warburg; Associated with Warburg since 1970.
Chairman of the Board and officer of other
investment companies advised by Warburg.
Director/Trustee of other investment
companies advised by Warburg.

Jeffrey E. Garten (52) Director
Box 208200 Dean of Yale School of Management and
New Haven, Connecticut 06520-8200 William S. Beinecke Professor in the
Practice of International Trade and
Finance; Undersecretary of Commerce for
International Trade from November 1993 to
October 1995; Professor at Columbia
University from September 1992 to November
1993; Director/Trustee of other investment
companies advised by Warburg.

Thomas A. Melfe (67) Director
1251 Avenue of the Americas Partner in the law firm of Piper & Marbury;
29th Floor Partner in the law firm of Donovan Leisure
New York, New York 10020-1104 Newton & Irvine from April 1984 to April
1998; Chairman of the Board, Municipal Fund
for New York Investors, Inc.; Director/
Trustee of other investment companies
advised by Warburg.

Arnold M. Reichman* (50) Director
466 Lexington Avenue Managing Director, Chief Operating Officer
New York, New York 10017-3147 and Assistant Secretary of Warburg;
Associated with Warburg since 1984; Officer
of Counsellors Securities; Director/Trustee
of other investment companies advised by
Warburg.
</TABLE>

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

38
<PAGE> 104

<TABLE>
<CAPTION>
<S> <C>
Alexander B. Trowbridge (69) Director
1317 F Street, N.W., 5th Floor President of Trowbridge Partners, Inc.
Washington, DC 20004 (business consulting) from January 1990 to
November 1996; Director or Trustee of New
England Life Insurance Co., ICOS Corporation
(biopharmaceuticals), WMX Technologies Inc.
(solid and hazardous waste collection and
disposal), The Rouse Company (real estate
development), Harris Corp. (electronics and
communications equipment), The Gillette Co.
(personal care products) and Sun Company Inc.
(petroleum refining and marketing);
Director/Trustee of other investment
companies advised by Warburg.

Eugene L. Podsiadlo (42) President
466 Lexington Avenue Managing Director of Warburg; Associated with
New York, New York 10017-3147 Warburg since 1991; Officer of Counsellors
Securities and of other investment companies
advised by Warburg.

Stephen Distler (45) Vice President
466 Lexington Avenue Managing Director of Warburg; Associated with
New York, New York 10017-3147 Warburg since 1984; Officer of Counsellors
Securities; and of other investment companies
advised by Warburg.

Eugene P. Grace (47) Vice President and Secretary
466 Lexington Avenue Senior Vice President of Warburg; Associated
New York, New York 10017-3147 with Warburg since April 1994;
Attorney-at-law from September 1989 to April
1994; life insurance agent, New York Life
Insurance Company from 1993 to 1994; Officer
of Counsellors Securities and of other
investment companies advised by Warburg.

Howard Conroy, CPA (45) Vice President and Chief Financial Officer
466 Lexington Avenue Vice President of Warburg; Associated with
New York, New York 10017-3147 Warburg since 1992; Officer of other
investment companies advised by Warburg.
</TABLE>

39
<PAGE> 105

<TABLE>
<CAPTION>
<S> <C>
Daniel S. Madden, CPA (33) Treasurer and Chief Accounting Officer
466 Lexington Avenue Vice President of Warburg; Associated with
New York, New York 10017-3147 Warburg since 1995; Associated with BlackRock
Financial Management, Inc. from September
1994 to October 1995; Associated with BEA
Associates from April 1993 to September 1994;
Associated with Ernst & Young LLP from 1990
to 1993; Officer of other investment
companies advised by Warburg.

Janna Manes, Esq. (31) Assistant Secretary
466 Lexington Avenue Vice President of Warburg; Associated with
New York, New York 10017-3147 Warburg since 1996; Associated with the law
firm of Willkie Farr & Gallagher from 1993 to
1996; Officer of other investment companies
advised by Warburg.
</TABLE>

No employee of Warburg, PFPC Inc., the Funds' co-administrator
("PFPC"), or any of their affiliates receives any compensation from the Funds
for acting as an officer or director/trustee of a Fund. Each Director who is not
a director, trustee, officer or employee of Warburg, PFPC or any of their
affiliates receives the following annual and per-meeting fees:

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
FUND ANNUAL FEE FEE FOR EACH MEETING ATTENDED
- -------------------------------------------------------------------------------
<S> <C> <C>
Emerging Growth Fund $1,000 $250
- -------------------------------------------------------------------------------
Post-Venture Capital Fund $ 500 $250
- -------------------------------------------------------------------------------
Small Company Growth Fund $ 500 $250
- -------------------------------------------------------------------------------
Small Company Value Fund $ 500 $250
- -------------------------------------------------------------------------------
</TABLE>

Each Director is reimbursed for expenses incurred in connection
with his attendance at Board meetings.

Directors' Total Compensation
(for the fiscal year ended October 31, 1998)

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
POST-VENTURE SMALL ALL
EMERGING CAPITAL COMPANY SMALL INVESTMENT
GROWTH FUND GROWTH COMPANY COMPANIES
NAME OF DIRECTOR FUND FUND VALUE FUND MANAGED BY
WARBURG*
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
John L. Furth** None None None None None
- -------------------------------------------------------------------------------------------
Arnold M. None None None None None
Reichman**
- -------------------------------------------------------------------------------------------
Richard N. Cooper $2,000 $1,500 $1,500 $1,500 [$73,250]
- -------------------------------------------------------------------------------------------
</TABLE>

40
<PAGE> 106

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------
POST-VENTURE SMALL ALL
EMERGING CAPITAL COMPANY SMALL INVESTMENT
GROWTH FUND GROWTH COMPANY COMPANIES
NAME OF DIRECTOR FUND FUND VALUE FUND MANAGED BY
WARBURG*
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Donald J. Donahue $2,000 $1,500 $1,500 $1,500 [$44,500]
- -----------------------------------------------------------------------------------------
Jack W. Fritz*** $2,000 $1,500 $1,500 $1,500 [$73,250]
- -----------------------------------------------------------------------------------------
Jeffrey E. Garten N/A N/A N/A N/A N/A
- -----------------------------------------------------------------------------------------
Thomas A. Melfe $2,000 $1,500 $1,500 $1,500 [$44,500]
- -----------------------------------------------------------------------------------------
Alexander B. $2,000 $1,500 $1,500 $1,500 [$73,250]
Trowbridge
- -----------------------------------------------------------------------------------------
</TABLE>

* Each Director serves as a Director or Trustee of [39] investment companies
advised by Warburg except for Mr. Melfe, who serves as a Director/Trustee
of [22] investment companies advised by Warburg.

** Mr. Furth and Mr. Reichman receive compensation as affiliates of
Warburg and, accordingly, receive no compensation from any Fund or any
other investment company advised by Warburg.

*** Mr. Donohue resigned as a Director of each Fund effective February
6, 1998.

As of January 30, 1999, the Directors and officers of each Fund as a
group owned less than 1% of the outstanding shares of each Fund.

Portfolio Managers

Emerging Growth Fund. Ms. Elizabeth B. Dater is Co-Portfolio
Manager of the Emerging Growth Fund and manages other funds advised by
Warburg Pincus. Prior to joining Warburg in 1978, she was a vice president
of research at Fiduciary Trust Company of New York and an institutional sales
assistant at Lehman Brothers. Ms. Dater has been a regular panelist on
Maryland Public Television's Wall Street Week with Louis Rukeyser since
1976. Ms. Dater earned a B.A. degree from Boston University in Massachusetts.

Mr. Stephen J. Lurito is Co-Portfolio Manager of the Emerging
Growth Fund and manages other funds advised by Warburg Pincus. Mr. Lurito
has been with Warburg since 1987. Prior to that he was a research analyst at
Sanford C. Bernstein & Company, Inc. Mr. Lurito earned a B.A. degree from
the University of Virginia and an M.B.A. from The Wharton School, University
of Pennsylvania.

Post-Venture Capital Fund. Ms. Dater and Mr. Lurito, described
above, are also Co-Portfolio Managers of the Post-Venture Capital Fund.

Mr. Robert S. Janis and Christopher M. Nawn are Associate
Portfolio Managers and Research Analysts of the Post-Venture Fund and of
other Warburg Pincus Funds. Prior to joining Warburg in October 1994, Mr.
Janis was a vice president and senior research analyst at U.S. Trust Company
of New York. He earned B.A. and M.B.A. degrees from the University of
Pennsylvania. Prior to joining Warburg in September 1994, Mr. Nawn

41
<PAGE> 107
was a senior sector analyst and portfolio manager at the Dreyfus Corporation. He
earned a B.A. degree from the Colorado College and an M.B.A. degree from the
University of Texas.

Raymond L. Held and Thaddeus I. Gray, Investment Managers and
Managing Directors of Abbott, manage the Post-Venture Capital Fund's
investments in Private Funds. Abbott also acts as sub-investment adviser for
other Warburg Pincus Funds. Prior to co-founding a predecessor of Abbott in
1986, Mr. Held had been an investment analyst and portfolio manager at
Manufacturers Hanover Investment Corporation since 1970, before which time he
had been a security analyst with Weis, Voisin, Cannon, Inc., L.M. Rosenthal &
Co., Shearson, Hammill & Co. and Standard & Poor's Corporation. Mr. Held
earned an M.B.A. from New York University, an M.A. from Columbia University
and a B.A. from Queens College.

Prior to joining a predecessor of Abbott in 1989, Mr. Gray was an
assistant vice president at Commerzbank Capital Markets Corporation, where he
managed the area responsible for underwriting and distributing all new issues
of securities. Prior to this, he was an associate with Credit Commercial de
France in Paris in the Corporate Finance Department. Mr. Gray received his
B.A. in History from the University of Pennsylvania and his M.B.A. in Finance
from New York University. He is also a Chartered Financial Analyst.

Small Company Growth Fund. Mr. Lurito (described above) is also
Portfolio Manager of the Small Company Growth Fund.

Small Company Value Fund. Mr. Kyle F. Frey, Portfolio Manager of
the Small Company Value Fund, serves in similar positions with other Warburg
Pincus Funds. Mr. Frey, a Senior Vice President of Warburg, is also a
Research Analyst and Assistant Portfolio Manager for small-cap growth equity
and distribution management products. Prior to joining Warburg in 1989, Mr.
Frey was with Goldman, Sachs & Co. in the institutional sales division. Mr.
Frey earned a B.S. degree from the University of New Hampshire and an M.B.A.
from New York University.

Investment Advisers and Co-Administrators

Warburg serves as investment adviser to each Fund, Abbott serves as
sub-investment adviser to the Post-Venture Capital Fund and Counsellors Funds
Service, Inc. ("Counsellors Service") and PFPC serve as co-administrators to the
Fund pursuant to separate written agreements (the "Advisory Agreement," the
"Counsellors Service Co-Administration Agreement" and the "PFPC
Co-Administration Agreement," respectively). For the services provided by
Warburg under the Advisory Agreements, the Emerging Growth Fund, Post-Venture
Capital Fund, Small Company Growth Fund and Small Company Value Fund each pay
Warburg a fee calculated at an annual rate of .90%, 1.25%, 1.00% and 1.00%,
respectively, of the Fund's average daily net assets.+ For the services provided
by

- --------------
+ With respect to the Post-Venture Capital Fund, the services provided by
Abbott under the Sub-Investment Advisory Agreement are also described in
the Prospectus; Warburg pays Abbott for sub-investment advisory services
out of the fees Warburg receives from the Fund.

42
<PAGE> 108

Counsellors Service under the Counsellors Service Co-Administration Agreement,
each Fund pays Counsellors Service a fee calculated at an annual rate of .10% of
the Fund's average daily net assets. For the services provided by PFPC under the
PFPC Co-Administration Agreement, each Fund pays PFPC a fee calculated at an
annual rate of .10% of the Fund's first $500 million in average daily net
assets, .075% of the next $1 billion in assets and .055 of assets exceeding $1.5
billion, exclusive of out-of-pocket expenses. Each class of shares of the Fund
bears its proportionate share of fees payable to Warburg, Counsellors Service
and PFPC in the proportion that its assets bear to the aggregate assets of the
Fund at the time of calculation. These fees are calculated at an annual rate
based on a percentage of a Portfolio's average daily net assets.

For the following fiscal years or period ended October 31 during
which a Fund had investment operations, investment advisory fees earned by
Warburg, waivers and net advisory fees for each Fund were as follows:

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
GROSS NET
FUND YEAR ADVISORY FEE WAIVER ADVISORY FEE
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Emerging Growth Fund 1996 $ 9,738,214 0 $ 9,738,214
------------------------------------------------------
1997 $14,879,436 0 $14,879,436
------------------------------------------------------
1998
- -----------------------------------------------------------------------------
Post-Venture Capita 1996 $ 1,253,423 $634,122 $ 629,301
Fund
------------------------------------------------------
1997 $ 1,704,057 $553,243 $ 1,150,814

------------------------------------------------------
1998
- -----------------------------------------------------------------------------
Small Company Growth 1997 $ 69,204 $ 69,204
Fund
(commenced operations
12/31/96)
------------------------------------------------------
1998
- -----------------------------------------------------------------------------
Small Company Value 1996 $ 280,663 $115,171 $ 165,492
Fund (commenced
operations 12/29/95)
------------------------------------------------------
1997 $ 1,735,893 $ 55,966 $ 1,679,927
------------------------------------------------------
1998
- -----------------------------------------------------------------------------
</TABLE>

During the following fiscal years or period ended October 31 during
which a Fund had investment operations, PFPC and Counsellors Service earned the
following amounts in co-administration fees.

43
<PAGE> 109

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
FUND YEAR PFPC COUNSELLORS SERVICE
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Post-Venture Capital 1996 $ 100,274 $ 100,274
Fund
------------------------------------------------------
1997 $ 136,324 $ 136,324
------------------------------------------------------
1998
- -----------------------------------------------------------------------------
Small Company Growth 1997 $ 6,920 $ 6,920
Fund (fully waived)
(commenced operations
12/31/96)
------------------------------------------------------
1998
- -----------------------------------------------------------------------------
Small Company Value 1996 $ 237 $ 28,066
Fund (commenced (fully waived)
operations 12/29/95)
------------------------------------------------------
1997 $ 173,589 $ 173,589
------------------------------------------------------
1998
- -----------------------------------------------------------------------------
</TABLE>

Custodians and Transfer Agent

Pursuant to separate custodian agreements with each Fund (the
"Custodian Agreements"), PNC Bank, National Association ("PNC") is custodian of
Fund's U.S. assets and State Street serves as custodian of the Funds' non-U.S.
assets. Under the Custodian Agreements, PNC and State Street each (i) maintains
a separate account or accounts in the name of the Fund, (ii) holds and transfers
portfolio securities on account of the Fund, (iii) makes receipts and
disbursements of money on behalf of the Fund, (iv) collects and receives all
income and other payments and distributions on account of the Fund's portfolio
securities and (v) makes periodic reports to the Board concerning the Fund's
custodial arrangements. PNC may delegate its duties under its Custodian
Agreement with the Fund to a wholly owned direct or indirect subsidiary of PNC
or PNC Bank Corp. upon notice to the Fund and upon the satisfaction of certain
other conditions. State Street is authorized to select one or more foreign
banking institutions and foreign securities depositories to serve as
sub-custodian on behalf of the Small Company Growth Fund. PNC is an indirect,
wholly owned subsidiary of PNC Bank Corp. and its principal business address is
1600 Market Street, Philadelphia, Pennsylvania 19103. The principal business
address of State Street is 225 Franklin Street, Boston, Massachusetts 02110.

State Street also serves as the shareholder servicing, transfer and
dividend disbursing agent of each Fund pursuant to a Transfer Agency and Service
Agreement, under which State Street (i) issues and redeems shares of the Fund,
(ii) addresses and mails all communications by the Fund to record owners of Fund
shares, including reports to shareholders, dividend and distribution notices and
proxy material for its meetings of shareholders, (iii) maintains shareholder
accounts and, if requested, sub-accounts and (iv) makes periodic reports to the
Board concerning the transfer agent's operations with respect to the Fund. State
Street has delegated to Boston Financial Data Services, Inc., an affiliate

44
<PAGE> 110

of State Street ("BFDS"), responsibility for most shareholder servicing
functions. BFDS's principal business address is 2 Heritage Drive, North Quincy,
Massachusetts 02171.

Organization of the Funds

The Funds are open-end management investment companies within the
meaning of the 1940 Act. The Emerging Growth Fund was incorporated on November
12, 1987 under the laws of the State of Maryland under the name "Counsellors
Emerging Growth Fund, Inc." On October 27, 1995, the Fund amended its charter to
change its name to "Warburg, Pincus Emerging Growth Fund, Inc." The Post-Venture
Capital Fund was incorporated on July 12, 1995 under the laws of the State of
Maryland under the name "Warburg, Pincus Post-Venture Capital Fund, Inc." The
Small Company Growth Fund was incorporated on October 31, 1996 under the laws of
the State of Maryland under the name "Warburg, Pincus Small Company Growth Fund,
Inc." The Small Company Value Fund was incorporated on October 23, 1995 under
the laws of the State of Maryland under the name "Warburg, Pincus Small Company
Value Fund, Inc." Each of the Funds is diversified, with the exception of the
Emerging Growth Fund which is not diversified. Each Fund offers two classes of
shares, Common Shares and Advisor Shares. Unless otherwise indicated, references
to a "Fund" apply to each class of shares of that Fund.

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

Distribution and Shareholder Servicing

Post-Venture Capital, Small Company Growth and Small Company Value
Funds, Common Shares. Each of these Funds has entered into a Shareholder
Servicing and Distribution Plan (the "12b-1 Plan"), pursuant to Rule 12b-1 under
the 1940 Act, pursuant to which the Fund will pay Counsellors Securities, in
consideration for Services (as defined below), a fee calculated at an annual
rate of .25% of the average daily net assets of the Common Shares of the Fund.
Services performed by Counsellors Securities include (i) the sale of the Common
Shares, as set forth in the 12b-1 Plan ("Selling Services"), (ii) ongoing
servicing and/or maintenance of the accounts of Common Shareholders of the Fund,
as set forth in the 12b-1 Plan ("Shareholder Services"), and (iii) sub-transfer
agency services, subaccounting services or administrative services related to
the sale of the Common Shares, as set forth in the 12b-1 Plan ("Administrative
Services" and collectively with Selling Services and Administrative Services,
"Services") including, without limitation, (a) payments reflecting an allocation
of overhead and other office expenses of Counsellors Securities related to
providing Services; (b) payments made to, and reimbursement of expenses of,
persons who provide support services in connection with the distribution of the
Common Shares including, but not limited to, office space and equipment,
telephone facilities, answering routine inquiries regarding the Fund, and
providing any other Shareholder Services; (c) payments made to

45
<PAGE> 111
compensate selected dealers or other authorized persons for providing any
Services; (d) costs relating to the formulation and implementation of marketing
and promotional activities for the Common Shares, including, but not limited to,
direct mail promotions and television, radio, newspaper, magazine and other mass
media advertising, and related travel and entertainment expenses; (e) costs of
printing and distributing prospectuses, statements of additional information and
reports of the Fund to prospective shareholders of the Fund; and (f) costs
involved in obtaining whatever information, analyses and reports with respect to
marketing and promotional activities that the Fund may, from time to time, deem
advisable.

Pursuant to the 12b-1 Plan, Counsellors Securities provides the
Board with periodic reports of amounts expended under the 12b-1 Plan and the
purpose for which the expenditures were made. For the fiscal year ended October
31, 1998, the Common Shares of the Post-Venture Capital, Small Company Growth
and Small Company Value Funds paid $________, $________ and $________,
respectively, pursuant to the 12b-1 Plan, which was spent on advertising,
marketing communications and public relations.

All Funds, Advisor Shares. The Funds have entered into agreements
("Agreements") with institutional shareholders of record, broker-dealers,
financial institutions, depository institutions, retirement plans and financial
intermediaries ("Institutions") to provide certain distribution, shareholder
servicing, administrative and/or accounting services for their customers (or
participants in the case of retirement plans) ("Customers") who are beneficial
owners of Advisor Shares. Agreements will be governed by a distribution plan
(the "Distribution Plan") pursuant to Rule 12b-1 under the 1940 Act. The
Distribution Plan requires the Board, at least quarterly, to receive and review
written reports of amounts expended under the Distribution Plan and the purposes
for which such expenditures were made. For the fiscal year ended October 31,
1998, the Advisor Shares of the Emerging Growth, Post-Venture Capital and Small
Company Value Funds paid $_________, $_________, and $__________, respectively,
all of which were paid to Institutions.

In addition to the 12b-1 fees payable by a Fund, Warburg or
Counsellors Securities may pay Service Organizations a fee of up to .10% (the
"Service Fee") of the average annual value of accounts with the Fund maintained
by such Service Organizations for services provided or expenses incurred by the
Service Organization that are not covered by an Agreement under the Fund's
Distribution Plan. A portion of the Service Fee paid may be reimbursed by the
Fund. The Service Fee payable to any particular Service Organization is
determined based upon a number of factors, including the nature and quality of
services provided, the operations processing requirements of the relationship
and the standardized fee schedule of the Service Organization.

An Institution with which a Fund has entered into an Agreement with
respect to its Advisor Shares may charge a Customer one or more of the following
types of fees, as agreed upon by the Institution and the Customer, with respect
to the cash management or other services provided by the Institution: (i)
account fees (a fixed amount per month or per year); (ii) transaction fees (a
fixed amount per transaction processed); (iii) compensation balance requirements
(a minimum dollar amount a Customer must maintain in order to obtain the

46
<PAGE> 112
services offered); or (iv) account maintenance fees (a periodic charge based
upon the percentage of assets in the account or of the dividend paid on those
assets). Services provided by an Institution to Customers are in addition to,
and not duplicative of, the services to be provided under each Fund's
co-administration and distribution and shareholder servicing arrangements. A
Customer of an Institution should read the relevant Prospectus and this
Statement of Additional Information in conjunction with the Agreement and other
literature describing the services and related fees that would be provided by
the Institution to its Customers prior to any purchase of Fund shares.
Prospectuses are available from each Fund's distributor upon request. No
preference will be shown in the selection of Fund portfolio investments for the
instruments of Institutions.

General. The Distribution Plans and the 12b-1 Plans will continue in
effect for so long as its continuance is specifically approved at least annually
by each Fund's Board, including a majority of the Directors who are not
interested persons of the Fund and who have no direct or indirect financial
interest in the operation of the Distribution Plans or the 12b-1 Plans, as the
case may be ("Independent Directors"). Any material amendment of the
Distribution Plans or the 12b-1 Plans would require the approval of the Board in
the same manner. Neither the Distribution Plans nor the 12b-1 Plans may be
amended to increase materially the amount to be spent thereunder without
shareholder approval of the relevant class of shares. Each Distribution Plan or
12b-1 Plan may be terminated at any time, without penalty, by vote of a majority
of the Independent Directors or by a vote of a majority of the outstanding
voting securities of the relevant class of shares.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

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

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

If the Board determines that conditions exist which make payment of
redemption proceeds wholly in cash unwise or undesirable, a Fund may make
payment wholly or partly in securities or other investment instruments which may
not constitute securities as such term is defined in the applicable securities
laws. If a redemption is paid wholly or partly in securities or other property,
a shareholder would incur transaction costs in disposing of the redemption
proceeds. Each Fund will comply with Rule 18f-1 promulgated under the 1940 Act
with respect to redemptions in kind.

Automatic Cash Withdrawal Plan

47
<PAGE> 113
An automatic cash withdrawal plan (the "Plan") is available to
shareholders who wish to receive specific amounts of cash periodically.
Withdrawals may be made under the Plan by redeeming as many shares of the
relevant Fund as may be necessary to cover the stipulated withdrawal payment. To
the extent that withdrawals exceed dividends, distributions and appreciation of
a shareholder's investment in a Fund, there will be a reduction in the value of
the shareholder's investment and continued withdrawal payments may reduce the
shareholder's investment and ultimately exhaust it. Withdrawal payments should
not be considered as income from investment in a Fund.

EXCHANGE PRIVILEGE

An exchange privilege with certain other funds advised by Warburg is
available to investors in each Fund. A Common Shareholder may exchange Common
Shares of a Fund for Common Shares of another Fund or for Common Shares of
another Warburg Pincus fund at their respective net asset values. An Advisor
Shareholder may exchange Advisor Shares of a Fund for Advisor Shares of another
Warburg Pincus fund at their respective net asset values. If an exchange request
is received by Warburg Pincus Funds or their agent prior to the close of regular
trading on the NYSE, the exchange will be made at each Fund's net asset value
determined at the end of that business day. Exchanges will be effected without a
sales charge but must satisfy the minimum dollar amount necessary for new
purchases. The Fund may refuse exchange purchases at any time without prior
notice.

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

Each Fund reserves the right to refuse exchange purchases by any
person or group if, in Warburg's judgment, the Fund would be unable to invest
the money effectively in accordance with its investment objective and policies,
or would otherwise potentially be adversely affected. Examples of when an
exchange purchase could be refused are when a Fund receives or anticipates
receiving large exchange orders at or about the same time and/or when a pattern
of exchanges within a short period of time (often associated with a "market
timing" strategy) is discerned. Each Fund reserves the right to terminate or
modify the exchange privilege at any time upon 30 days' notice to shareholders.

48
<PAGE> 114
ADDITIONAL INFORMATION CONCERNING TAXES

The following is a summary of the material United States federal
income tax considerations regarding the purchase, ownership and disposition of
shares in each Fund. Each prospective shareholder is urged to consult his own
tax adviser with respect to the specific federal, state, local and foreign tax
consequences of investing in a Fund. The summary is based on the laws in effect
on the date of this Statement of Additional Information, which are subject to
change.

The Funds and Their Investments

Each Fund intends to continue to qualify to be treated as a
regulated investment company each taxable year under the Code. To so qualify, a
Fund must, among other things: (a) derive at least 90% of its gross income in
each taxable year from dividends, interest, payments with respect to securities
loans and gains from the sale or other disposition of stock or securities or
foreign currencies, or other income (including, but not limited to, gains from
options, futures or forward contracts) derived with respect to its business of
investing in such stock, securities or currencies; and (b) diversify its
holdings so that, at the end of each quarter of the Fund's taxable year, (i) at
least 50% of the market value of the Fund's assets is represented by cash,
securities of other regulated investment companies, U.S. Government Securities
and other securities, with such other securities limited, in respect of any one
issuer, to an amount not greater than 5% of the Fund's assets and not greater
than 10% of the outstanding voting securities of such issuer and (ii) not more
than 25% of the value of its assets is invested in the securities (other than
United States government securities or securities of other regulated investment
companies) of any one issuer or any two or more issuers that the Fund controls
and are determined to be engaged in the same or similar trades or businesses or
related trades or businesses. Each Fund expects that all of its foreign currency
gains will be directly related to its principal business of investing in stocks
and securities.

As a regulated investment company, each Fund will not be subject to
United States federal income tax on its net investment income (i.e., income
other than its net realized long- and short-term capital gains) and its net
realized long-and short-term capital gains, if any, that it distributes to its
shareholders, provided that an amount equal to at least 90% of the sum of its
investment company taxable income (i.e., 90% of its taxable income minus the
excess, if any, of its net realized long-term capital gains over its net
realized short-term capital losses (including any capital loss carryovers), plus
or minus certain other adjustments as specified in the Code) and its net
tax-exempt income for the taxable year is distributed, but will be subject to
tax at regular corporate rates on any taxable income or gains that it does not
distribute. Any dividend declared by a Fund in October, November or December of
any calendar year and payable to shareholders of record on a specified date in
such a month shall be deemed to have been received by each shareholder on
December 31 of such calendar year and to have been paid by the Fund not later
than such December 31, provided that such dividend is actually paid by the Fund
during January of the following calendar year.

49
<PAGE> 115

If for any taxable year the Fund does not qualify for the special
federal income tax treatment afforded regulated investment companies, all of its
taxable income will be subject to federal income tax at regular corporate rates
(without any deduction for distributions to its shareholders). In such event,
dividend distributions, including amounts derived from interest on tax-exempt
obligations, would be taxable to shareholders to the extent of current and
accumulated earnings and profits, and would be eligible for the dividends
received deduction for corporations in the case of corporate shareholders.

Each Fund intends to distribute annually to its shareholders
substantially all of its investment company taxable income. The Board of
Directors of each Fund will determine annually whether to distribute any net
realized long-term capital gains in excess of net realized short-term capital
losses (including any capital loss carryovers). Each Fund currently expects to
distribute any excess annually to its shareholders. However, if a Fund retains
for investment an amount equal to all or a portion of its net long-term capital
gains in excess of its net short-term capital losses and capital loss
carryovers, it will be subject to a corporate tax (currently at a rate of 35%)
on the amount retained. In that event, the Fund will designate such retained
amounts as undistributed capital gains in a notice to its shareholders who (a)
will be required to include in income for United Stares federal income tax
purposes, as long-term capital gains, their proportionate shares of the
undistributed amount, (b) will be entitled to credit their proportionate shares
of the 35% tax paid by the Fund on the undistributed amount against their United
States federal income tax liabilities, if any, and to claim refunds to the
extent their credits exceed their liabilities, if any, and (c) will be entitled
to increase their tax basis, for United States federal income tax purposes, in
their shares by an amount equal to 65% of the amount of undistributed capital
gains included in the shareholder's income. Organizations or persons not subject
to federal income tax on such capital gains will be entitled to a refund of
their pro rata share of such taxes paid by a Fund upon filing appropriate
returns or claims for refund with the Internal Revenue Service (the "IRS"). Even
if a Fund makes such an election, it is possible that it may incur an excise tax
as a result of not having distributed net capital gains.

The Code imposes a 4% nondeductible excise tax on each Fund to the
extent the Fund does not distribute by the end of any calendar year at least 98%
of its net investment income for that year and 98% of the net amount of its
capital gains (both long- and short-term) for the one-year period ending, as a
general rule, on October 31 of that year. For this purpose, however, any income
or gain retained by a Fund that is subject to corporate income tax will be
considered to have been distributed by year-end. In addition, the minimum
amounts that must be distributed in any year to avoid the excise tax will be
increased or decreased to reflect any underdistribution or overdistribution, as
the case may be, from the previous year. Each Fund anticipates that it will pay
such dividends and will make such distributions as are necessary in order to
avoid the application of this tax.

With regard to each Fund's investments in foreign securities,
exchange control regulations may restrict repatriations of investment income and
capital or the proceeds of securities sales by foreign investors such as the
Fund and may limit the Fund's ability to pay

50
<PAGE> 116
sufficient dividends and to make sufficient distributions to satisfy the 90% and
excise tax distribution requirements.

If, in any taxable year, a Fund fails to qualify as a regulated
investment company under the Code or fails to meet the distribution requirement,
it would be taxed in the same manner as an ordinary corporation and
distributions to its shareholders would not be deductible by the Fund in
computing its taxable income. In addition, in the event of a failure to qualify,
the Fund's distributions, to the extent derived from the Fund's current or
accumulated earnings and profits, would constitute dividends (eligible for the
corporate dividends-received deduction) which are taxable to shareholders as
ordinary income, even though those distributions might otherwise (at least in
part) have been treated in the shareholders' hands as long-term capital gains.
If a Fund fails to qualify as a regulated investment company in any year, it
must pay out its earnings and profits accumulated in that year in order to
qualify again as a regulated investment company. In addition, if the Fund failed
to qualify as a regulated investment company for a period greater than one
taxable year, the Fund may be required to recognize any net built-in gains (the
excess of the aggregate gains, including items of income, over aggregate losses
that would have been realized if it had been liquidated) in order to qualify as
a regulated investment company in a subsequent year.

Each Fund's short sales against the box, if any, and transactions in
foreign currencies, forward contracts, options and futures contracts (including
options and futures contracts on foreign currencies) will be subject to special
provisions of the Code that, among other things, may affect the character of
gains and losses realized by the Fund (i.e., may affect whether gains or losses
are ordinary or capital), accelerate recognition of income to the Fund and defer
Fund losses. These rules could therefore affect the character, amount and timing
of distributions to shareholders. These provisions also (a) will require each
Fund to mark-to-market certain types of the positions in its portfolio (i.e.,
treat them as if they were closed out) and (b) may cause the Fund to recognize
income without receiving cash with which to pay dividends or make distributions
in amounts necessary to satisfy the distribution requirements for avoiding
income and excise taxes. Each Fund will monitor its transactions, will make the
appropriate tax elections and will make the appropriate entries in its books and
records when it engages in short sales against the box or acquires any foreign
currency, forward contract, option, futures contract or hedged investment in
order to mitigate the effect of these rules and prevent disqualification of the
Fund as a regulated investment company.

Passive Foreign Investment Companies

If a Fund purchases shares in certain foreign investment entities,
called "passive foreign investment companies" (a "PFIC"), it may be subject to
United States federal income tax on a portion of any "excess distribution" or
gain from the disposition of such shares even if such income is distributed as a
taxable dividend by the Fund to its shareholders. Additional charges in the
nature of interest may be imposed on the Fund in respect of deferred taxes
arising from such distributions or gains. If a Fund were to invest in a PFIC and
elected to treat the PFIC as a "qualified electing fund" under the Code, in lieu
of the foregoing requirements, the Fund might be required to include in income
each year a portion of the

51
<PAGE> 117

ordinary earnings and net capital gains of the qualified electing fund, even if
not distributed to the Fund, and such amounts would be subject to the 90% and
excise tax distribution requirements described above. In order to make this
election, the Fund would be required to obtain certain annual information from
the passive foreign investment companies in which it invests, which may be
difficult or not possible to obtain.

Alternatively, a Fund may make a mark-to-market election that will
result in a Fund being treated as if it had sold and repurchased all of the PFIC
stock at the end of each year. In this case, the Fund would report gains as
ordinary income and would deduct losses as ordinary losses to the extent of
previously recognized gains. The election, once made, would be effective for all
subsequent taxable years of the Fund, unless revoked with the consent of the
IRS. By making the election, a Fund could potentially ameliorate the adverse tax
consequences with respect to its ownership of shares in a PFIC, but in any
particular year may be required to recognize income in excess of the
distributions it receives from PFICs and its proceeds from dispositions of PFIC
company stock. The Fund may have to distribute this "phantom" income and gain to
satisfy its distribution requirement and to avoid imposition of the 4% excise
tax. The Fund will make the appropriate tax elections, if possible, and take any
additional steps that are necessary to mitigate the effect of these rules.

Dividends and Distributions

Dividends of net investment income and distributions of net realized
short-term capital gains are taxable to a United States shareholder as ordinary
income, whether paid in cash or in shares. Distributions of net-long-term
capital gains, if any, that a Fund designates as capital gains dividends are
taxable as long-term capital gains, whether paid in cash or in shares and
regardless of how long a shareholder has held shares of the Fund. Dividends and
distributions paid by a Fund (except for the portion thereof, if any,
attributable to dividends on stock of U.S. corporations received by the Fund)
will not qualify for the deduction for dividends received by corporations.
Distributions in excess of a Fund's current and accumulated earnings and profits
will, as to each shareholder, be treated as a tax-free return of capital, to the
extent of a shareholder's basis in his shares of the Fund, and as a capital gain
thereafter (if the shareholder holds his shares of the Fund as capital assets).

Shareholders receiving dividends or distributions in the form of
additional shares should be treated for United States federal income tax
purposes as receiving a distribution in the amount equal to the amount of money
that the shareholders receiving cash dividends or distributions will receive,
and should have a cost basis in the shares received equal to such amount.

Investors considering buying shares just prior to a dividend or
capital gain distribution should be aware that, although the price of shares
just purchased at that time may reflect the amount of the forthcoming
distribution, such dividend or distribution may nevertheless be taxable to them.

If a Fund is the holder of record of any stock on the record date
for any dividends payable with respect to such stock, such dividends are
included in the Fund's gross

52
<PAGE> 118
income not as of the date received but as of the later of (a) the date such
stock became ex-dividend with respect to such dividends (i.e., the date on which
a buyer of the stock would not be entitled to receive the declared, but unpaid,
dividends) or (b) the date the Fund acquired such stock. Accordingly, in order
to satisfy its income distribution requirements, the Fund may be required to pay
dividends based on anticipated earnings, and shareholders may receive dividends
in an earlier year than would otherwise be the case.

Sales of Shares

Upon the sale or exchange of his shares, a shareholder will realize
a taxable gain or loss equal to the difference between the amount realized and
his basis in his shares. Such gain or loss will be treated as capital gain or
loss, if the shares are capital assets in the shareholder's hands, and will be
long-term capital gain or loss if the shares are held for more than one year and
short-term capital gain or loss if the shares are held for one year or less. Any
loss realized on a sale or exchange will be disallowed to the extent the shares
disposed of are replaced, including replacement through the reinvesting of
dividends and capital gains distributions in a Fund, within a 61-day period
beginning 30 days before and ending 30 days after the disposition of the shares.
In such a case, the basis of the shares acquired will be increased to reflect
the disallowed loss. Any loss realized by a shareholder on the sale of a Fund
share held by the shareholder for six months or less will be treated for United
States federal income tax purposes as a long-term capital loss to the extent of
any distributions or deemed distributions of long-term capital gains received by
the shareholder with respect to such share.

Backup Withholding

Each Fund may be required to withhold, for United States federal
income tax purposes, 31% of the dividends and distributions payable to
shareholders who fail to provide the Fund with their correct taxpayer
identification number or to make required certifications, or who have been
notified by the IRS that they are subject to backup withholding. Certain
shareholders are exempt from backup withholding. Backup withholding is not an
additional tax and any amount withheld may be credited against a shareholder's
United States federal income tax liabilities.

Notices

Shareholders will be notified annually by each Fund as to the United
States federal income tax status of the dividends, distributions and deemed
distributions attributable to undistributed capital gains (discussed above in
"The Funds and Their Investments") made by the Fund to its shareholders.
Furthermore, shareholders will also receive, if appropriate, various written
notices after the close of a Fund's taxable year regarding the United States
federal income tax status of certain dividends, distributions and deemed
distributions that were paid (or that are treated as having been paid) by the
Fund to its shareholders during the preceding taxable year.

53
<PAGE> 119
Other Taxation

Distributions also may be subject to additional state, local and
foreign taxes depending on each shareholder's particular situation.

THE FOREGOING IS ONLY A SUMMARY OF CERTAIN MATERIAL TAX CONSEQUENCES AFFECTING
EACH FUND AND ITS SHAREHOLDERS. SHAREHOLDERS ARE ADVISED TO CONSULT THEIR OWN
TAX ADVISERS WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO
THEM OF AN INVESTMENT IN A FUND.

DETERMINATION OF PERFORMANCE

From time to time, a Fund may quote the total return of its Common
Shares and/or Advisor Shares in advertisements or in reports and other
communications to shareholders. With respect to the Funds' Common and Advisor
Shares, the Funds' average annual total returns for the indicated periods ended
October 31, 1998 were as follows (performance figures calculated without waiver
by a Fund's service providers(s), if any, are noted in italics):

TOTAL RETURN

COMMON SHARES

<TABLE>
<CAPTION>
Period from the
commencement
One-Year Five-Year Ten-Year of operations
-------- --------- -------- -------------
<S> <C> <C> <C> <C>
Emerging Growth Fund
(1/21/88)

Post-Venture
Capital Fund
(9/29/95)

Small Company
Growth Fund+
(12/31/96)

Small Company Value
Fund
(12/29/95)

+ Non-annualized.
</TABLE>

ADVISOR SHARES*

<TABLE>
<CAPTION>
Period from the
commencement
One-Year Five-Year Ten-Year of operations
-------- --------- -------- -------------
<S> <C> <C> <C> <C>
Emerging Growth Fund
(4/4/91)
</TABLE>

54
<PAGE> 120

<TABLE>
<CAPTION>
Period from the
commencement
One-Year Five-Year Ten-Year of operations
-------- --------- -------- -------------
<S> <C> <C> <C> <C>
Post-Venture
Capital Fund
(9/29/95)

Small Company Value
Fund+
(12/29/95)
</TABLE>

* No Small Company Growth Fund Advisor shares were outstanding as of
October 31, 1998.
+ Non-annualized.

These total return figures show the average percentage change in
value of an investment in a Fund from the beginning of the measurement period to
the end of the measurement period. The figures reflect changes in the price of
the Fund's shares assuming that any income dividends and/or capital gain
distributions made by the Fund during the period were reinvested in shares of
the Fund. Total return will be shown for recent one-, five- and ten-year
periods, and may be shown for other periods as well (such as from commencement
of the Fund's operations or on a year-by-year, quarterly or current year-to-date
basis).

These figures are calculated by finding the average annual
compounded rates of return for the one-, five- and ten- (or such shorter period
as the relevant class of shares has been offered) year periods that would equate
the initial amount invested to the ending redeemable value according to the
following formula: P (1 + T)(n) = ERV. For purposes of this formula, "P" is a
hypothetical investment of $1,000; "T" is average annual total return; "n" is
number of years; and "ERV" is the ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the one-, five- or ten-year periods (or
fractional portion thereof). Total return or "T" is computed by finding the
average annual change in the value of an initial $1,000 investment over the
period and assumes that all dividends and distributions are reinvested during
the period.

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

A Fund may advertise, from time to time, comparisons of the
performance of its Common Shares and/or Advisor Shares with that of one or more
other mutual funds with

55
<PAGE> 121
similar investment objectives. A Fund may advertise average annual calendar
year-to-date and calendar quarter returns, which are calculated according to the
formula set forth in the preceding paragraph, except that the relevant measuring
period would be the number of months that have elapsed in the current calendar
year or most recent three months, as the case may be. Investors should note that
this performance may not be representative of the Fund's total return in longer
market cycles.

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

INDEPENDENT ACCOUNTANTS AND COUNSEL

PricewaterhouseCoopers LLP ("PwC"), with principal offices at 2400
Eleven Penn Center, Philadelphia, Pennsylvania 19103, serves as independent
accountants for each Fund. The financial statements that are incorporated by
reference into this Statement of Additional Information have been audited by
PwC, and have been incorporated by reference herein in reliance upon the report
of such firm of independent accountants given upon their authority as experts in
accounting and auditing.

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

MISCELLANEOUS

As of January 30, 1998, the name, address and percentage of
ownership of each person that owns of record 5% or more of each Fund's
outstanding shares were as follows:

EMERGING GROWTH FUND

<TABLE>
<CAPTION>
Common Shares Advisor Shares
------------- --------------
<S> <C> <C>
Charles Schwab & Co., Inc.* 18.42%
Reinvest Account
Attn: Mutual Funds Dept.
101 Montgomery Street
San Francisco, California
94104-4122
</TABLE>

56
<PAGE> 122

<TABLE>
<CAPTION>
Common Shares Advisor Shares
------------- --------------
<S> <C> <C>
Nationwide Life Insurance Company* 11.47%
Nationwide QPVA
c/o IPO Portfolio Accounting
PO Box 182029
Columbus, Ohio 43218-2029

National Financial Services Corp.* 6.80%
FBO Customers
PO Box 3908
Church Street Station
New York, New York 10008-3908

First Trust NA TR* 6.69%
United Healthcare Corp. 401K
Savings TR UAD 6-9-93
Attn: Mutual Funds #21740224
PO Box 64010
St. Paul, Minnesota 55164-0010

Fidelity Investment Institutional* 6.24%
Operations Cnt as Agent for CERTA
Employee Benefit Plans
100 Magellan Way
Covington, Kentucky 41015-1999

Connecticut General Life Ins. Co.* 98.35%
On behalf of its separate accounts
55E c/o Melissa Spencer M110
CIGNA Corp. PO Box 2975
Hartford, Connecticut 06104-2975
</TABLE>

POST-VENTURE CAPITAL FUND

<TABLE>
<CAPTION>
Common Shares Advisor Shares
------------- --------------
<S> <C> <C>
Charles Schwab & Co. Inc.* 32.51%
Reinvest Account
Attn Mutual Funds Dept
101 Montgomery St.
San Francisco, CA 94104-4122

National Financial Services Corp.* 13.74
FBO Customers
PO Box 3908
Church Street Station
New York, New York 10008-3908
</TABLE>

57
<PAGE> 123

<TABLE>
<CAPTION>
Common Shares Advisor Shares
------------- --------------
<S> <C> <C>
Donaldson Lufkin & Jenrette Secs.* 48.57%
PO Box 2052
Jersey City, New Jersey 07303-2052

State Street Bank & Trust Co. 14.49%
Cust. for the IRA of
Peggy D. Polonkey
150 Stable Rd.
Norristown, Pennsylvania 19403-2664

Daniel R. Hurley 12.15%
Mary C. Hurley, Jt Ten
4399 Boulder Creek Dr.
Gahanna, Ohio 43230-1395
</TABLE>

SMALL COMPANY VALUE FUND

<TABLE>
<CAPTION>
Common Shares Advisor Shares
------------- --------------
<S> <C> <C>
Charles Schwab & Co. Inc.* 28.48%
Reinvest Account
Attn Mutual Funds Dept
101 Montgomery St.
San Francisco, CA 94104-4122

National Financial Services Corp.* 12.14% 10.85%
FBO Customers
PO Box 3908
Church Street Station
New York, New York 10008-3908

Donaldson Lufkin & Jenrette Secs.* 32.61%
PO Box 2052
Jersey City, New Jersey 07303-2052

FTC & Co.* 24.93%
Attn Datalynx - House Account
PO Box 173736
Denver, Colorado 80217-3736

Donald J. Smith, Robert J. Smith TTEES* 10.58%
E.M. Smith Jewelers Inc.
PS Pension Fund Trust
1334 Bridge St.
Chillicothe, Ohio 45601
</TABLE>

58
<PAGE> 124

<TABLE>
<CAPTION>
Common Shares Advisor Shares
------------- --------------
<S> <C> <C>
Donald J. Smith, Robert J. Smith, 5.71%
David E. Smith, TTEES
Eugene M. Smith Revocable Trust*
UAD 4 8 80
17 Briarcliff Dr.
Chillicothe, Ohio 45601
</TABLE>

* Each Fund believes these entities are not the beneficial owners
of shares held of record by them.

Mr. Lionel I. Pincus, Chief Executive Officer of Warburg, may be
deemed to have beneficially owned [11.3%, 4.9%, 66.4% and 23.8%] of the Common
Shares outstanding of each of the Emerging Growth, Post-Venture Capital, Small
Company Growth and Small Company Value Funds, respectively, including shares
owned by clients for which Warburg has investment discretion and by companies
that Warburg may be deemed to control. Mr. Pincus disclaims ownership of these
shares and does not intend to exercise voting rights with respect to these
shares.

FINANCIAL STATEMENTS

Each Fund's audited annual report dated October 31, 1998, which
either accompanies this Statement of Additional Information or has previously
been provided to the investor to whom this Statement of Additional Information
is being sent, is incorporated herein by reference. Each Fund will furnish
without charge a copy of its annual report upon request by calling Warburg
Pincus Funds at 800-927-2874.

59
<PAGE> 125
APPENDIX

DESCRIPTION OF RATINGS

Commercial Paper Ratings

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

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

Corporate Bond Ratings

The following summarizes the ratings used by S&P for corporate
bonds:

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

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

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

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

BB, B and CCC - Debt rated BB and B is regarded, on balance, as
predominately speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB represents a lower
degree of speculation than B, and CCC the highest degree of speculation. While
such bonds will likely have some quality
<PAGE> 126
and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.

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

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

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

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

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

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

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

The following summarizes the ratings used by Moody's for corporate
bonds:

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

Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds.

A-2
<PAGE> 127
They are rated lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.

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

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

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

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

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

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

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

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

A-3
<PAGE> 128

PART C

OTHER INFORMATION

Item 23. Exhibits

Exhibit No. Description of Exhibit

a(1) Articles of Incorporation.(1)

(2) Amendment to Articles of Incorporation.(2)

(3) Articles Supplementary.(3)

(4) Articles of Amendment.(3)

b(1) Amended and Restated By-Laws.(1)

(2) Amendment to By-Laws.(4)

c Forms of Share Certificates.(5)

d Investment Advisory Agreement.(1)

e Form of Distribution Agreement.(3)

f Not applicable.

g(1) Form of Custodian Agreement with PNC Bank, as amended.(6)

- --------

(1) Incorporated by reference to Post-Effective Amendment No. 11 to
Registrant's Registration Statement on Form N-1A, filed on September
25, 1995.

(2) Incorporated by reference to Post-Effective Amendment No. 13 to
Registrant's Registration Statement on Form N-1A, filed on December 29,
1995.

(3) Incorporated by reference to Post-Effective Amendment No. 14 to
Registrant's Registration Statement on Form N-1A, filed on February 20,
1997.

(4) Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit to
Post-Effective Amendment No. 8 to Registration Statement on Form N-1A
of Warburg, Pincus Global Fixed Income Fund, Inc. filed on February 17,
1998 (Securities Act File No. 33-36066; Investment Company Act File
No. 811-06143).

(5) Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit in
Pre-Effective Amendment No. 2 to the Registration Statement on Form
N-1A of Warburg, Pincus Post-Venture Capital Fund, Inc. filed on
September 25, 1995 (Securities Act File No. 33-61225).
<PAGE> 129

(2) Form of Custody Agreement with State Street Bank & Trust
Company.(7)

h(1) Form of Transfer Agency Agreement.(8)

(1-A) Form of Co-Administration Agreement with Counsellors Funds
Service, Inc.(8)

(1-B) Form of Co-Administration Agreement with PFPC Inc.(6)

(2) Form of Services Agreements.(3)

i Opinion and Consent of Willkie Farr & Gallagher, counsel to
the Fund.(9)

j Consent of PricewaterhouseCoopers LLP., Independent
Accountants.(9)

k Not applicable.

l Form of Purchase Agreement.(6)

m(1) Form of Shareholder Services Plan.(7)

(2) Form of Distribution Plan.(7)

(3) Form of Distribution Agreement between the Fund and CIGNA
Securities Inc.(6)

(4) Form of Selected Dealer Agreement between Counsellors
Securities Inc. and CIGNA Securities, Inc.(6)

- --------

(6) Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit in
Post-Effective Amendment No. 10 to the Registration Statement on Form
N-1A of Warburg, Pincus International Equity Fund, Inc. filed on
September 22, 1995 (Securities Act File No. 33-27031).

(7) Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit to the
Registration Statement on Form N-14 of Warburg, Pincus Major Foreign
Markets Fund, Inc. (formerly known as Warburg, Pincus Managed EAFE(R)
Countries Fund, Inc.) filed on November 5, 1997 (Securities Act File
No. 333-39611).

(8) Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit in
Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-1A of Warburg, Pincus Trust filed on June 14, 1995 (Securities Act
File No. 33-58125).

(9) To be filed by amendment.

C-2
<PAGE> 130

n (1) Financial Data Schedule relating to the Common Shares.(9)

(2) Financial Data Schedule relating to the Advisor Shares.(9)

o Form of Rule 18f-3 Plan.(9)

Item 24. Persons Controlled by or Under Common Control
with Registrant

From time to time, Warburg Pincus Asset Management, Inc.
("Warburg"), Registrant's investment adviser, may be deemed to control
Registrant and other registered investment companies it advises through its
beneficial ownership of more than 25% of the relevant fund's shares on behalf of
discretionary advisory clients. Warburg has seven wholly-owned subsidiaries:
Counsellors Securities Inc., a New York corporation; Counsellors Funds Service,
Inc., a Delaware corporation; Counsellors Agency Inc., a New York corporation;
Warburg, Pincus Investments International (Bermuda), Ltd., a Bermuda
corporation; Warburg, Pincus Asset Management International, Inc., a Delaware
corporation; Warburg Pincus Asset Management (Japan), Inc., a Japanese
corporation and Warburg Pincus Asset Management (Dublin) Limited, an Irish
corporation.

Item 25. Indemnification

Registrant and officers and directors of Warburg, Counsellors
Securities Inc. ("Counsellors Securities") and Registrant are covered by
insurance policies indemnifying them for liability incurred in connection with
the operation of Registrant. Discussion of this coverage is incorporated by
reference to Item 27 of Part C of Post-Effective Amendment No. 13 to
Registrant's Registration Statement on Form N-1A, filed on December 29, 1995.

Item 26. Business and Other Connections of Investment Adviser

Warburg, a wholly owned subsidiary of Warburg, Pincus Asset
Management Holdings, Inc. acts as investment adviser to Registrant. Warburg
renders investment advice to a wide variety of individual and institutional
clients. The list required by this Item 26 of officers and directors of Warburg,
together with information as to their other business, profession, vocation or
employment of a substantial nature during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by Warburg (SEC File No.
801-07321).

Item 27. Principal Underwriter

(a) Counsellors Securities will act as distributor for
Registrant, as well as for Warburg Pincus Balanced Fund; Warburg

C-3
<PAGE> 131

Pincus Capital Appreciation Fund; Warburg Pincus Cash Reserve Fund; Warburg
Pincus Central & Eastern Europe Fund; Warburg Pincus Emerging Markets Fund;
Warburg Pincus Emerging Markets II Fund; Warburg Pincus European Equity Fund;
Warburg Pincus Fixed Income Fund; Warburg Pincus Global Fixed Income Fund;
Warburg Pincus Global Post-Venture Capital Fund; Warburg Pincus Global
Telecommunications Fund; Warburg Pincus Growth & Income Fund; Warburg Pincus
Health Sciences Fund; Warburg Pincus High Yield Fund; Warburg Pincus
Institutional Fund; Warburg Pincus Intermediate Maturity Government Fund;
Warburg Pincus International Equity Fund; Warburg Pincus International Growth
Fund; Warburg Pincus International Small Company Fund; Warburg Pincus Japan
Growth Fund; Warburg Pincus Japan Small Company Fund; Warburg Pincus Long-Short
Equity Fund; Warburg Pincus Long-Short Market Neutral Fund; Warburg Pincus Major
Foreign Markets Fund; Warburg Pincus Municipal Bond Fund; Warburg Pincus New
York Intermediate Municipal Fund; Warburg Pincus New York Tax Exempt Fund;
Warburg Pincus Post-Venture Capital Fund; Warburg Pincus Select Economic Value
Equity Fund; Warburg Pincus Small Company Growth Fund; Warburg Pincus Small
Company Value Fund; Warburg Pincus Strategic Global Fixed Income Fund; Warburg
Pincus Strategic Value Fund; Warburg Pincus Trust; Warburg Pincus Trust II;
Warburg Pincus U.S. Core Equity Fund; Warburg Pincus U.S. Core Fixed Income
Fund; Warburg Pincus WorldPerks Money Market Fund and Warburg Pincus WorldPerks
Tax Free Money Market Fund.

(b) For information relating to each director, officer or
partner of Counsellors Securities, reference is made to Form BD (SEC File No.
8-32482) filed by Counsellors Securities under the Securities Exchange Act of
1934, as amended.

Item 28. Location of Accounts and Records

(1) Warburg, Pincus Emerging Growth Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(Fund's Articles of Incorporation, by-laws and minute
books)

(2) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
(records relating to its functions as custodian,
transfer agent and dividend disbursing agent)

(3) PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
(records relating to its functions as
co-administrator)

(4) Counsellors Funds Service, Inc.
466 Lexington Avenue

C-4
<PAGE> 132
New York, New York 10017-3147
(records relating to its functions as
co-administrator)

(5) PNC Bank, National Association
1600 Market Street
Philadelphia, Pennsylvania 19103
(records relating to its functions as custodian)

(6) Counsellors Securities Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as distributor)

(7) Warburg Pincus Asset Management, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as investment
adviser)

(8) Boston Financial Data Services, Inc.
2 Heritage Drive
North Quincy, Massachusetts 02171
(records relating to its functions as transfer agent
and dividend disbursing agent)

Item 29. Management Services

Not applicable.

Item 30. Undertakings

(a) Registrant hereby undertakes to furnish each person to
whom a prospectus is delivered with a copy of Registrant's latest annual report
to shareholders, upon request and without charge.

(b) Registrant hereby undertakes to call a meeting of its
shareholders for the purpose of voting upon the question of removal of a
director or directors of Registrant when requested in writing to do so by the
holders of at least 10% of Registrant's outstanding shares. Registrant
undertakes further, in connection with the meeting, to comply with the
provisions of Section 16(c) of the 1940 Act relating to communications with the
shareholders of certain common-law trusts.

C-5
<PAGE> 133
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as
amended (the "Securities Act"), and the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Amendment to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and the State of New York, on the 3rd day of December, 1998.

WARBURG, PINCUS EMERGING
GROWTH FUND, INC.

By:/s/Eugene L. Podsiadlo
------------------------------------
Eugene L. Podsiadlo
President

Pursuant to the requirements of the Securities Act, this
Amendment has been signed below by the following persons in the capacities and
on the date indicated:

<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ John L. Furth Chairman of the December 3, 1998
- ---------------------------- Board and Director
John L. Furth President

/s/ Eugene L. Podsiadlo December 3, 1998
- ----------------------------
Eugene L. Podsiadlo

/s/ Howard Conroy Vice President and December 3, 1998
- ---------------------------- Chief Financial
Howard Conroy Officer

/s/ Daniel S. Madden Treasurer and Chief December 3, 1998
- ---------------------------- Accounting Officer
Daniel S. Madden Director

/s/ Richard N. Cooper December 3, 1998
- ----------------------------
Richard N. Cooper

/s/ Jack W. Fritz Director December 3, 1998
- ----------------------------
Jack W. Fritz

/s/Jeffrey E. Garten Director December 3, 1998
- ----------------------------
Jeffrey E. Garten

/s/ Thomas A. Melfe Director December 3, 1998
- ----------------------------
Thomas A. Melfe

/s/ Arnold M. Reichman Director December 3, 1998
- ----------------------------
Arnold M. Reichman

/s/ Alexander B. Trowbridge Director December 3, 1998
- ----------------------------
Alexander B. Trowbridge
</TABLE>