[LOGO]
ANNUAL REPORT
AUGUST 31, 1995
/ / WARBURG PINCUS GROWTH & INCOME FUND
/ / WARBURG PINCUS BALANCED FUND
/ / WARBURG PINCUS TAX FREE FUND
A prospectus containing more complete information, including management fees and
expenses, may be obtained by calling 1-800-257-5614 or by writing to Warburg
Pincus Funds, P.O. Box 9030, Boston, MA 02205-9030. Investors should read the
prospectus carefully before investing.
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
ANNUAL INVESTMENT ADVISER'S REPORT
- --------------------------------------------------------------------------------
For the 12 months ended August 31, 1995, Warburg Pincus Growth & Income Fund
appreciated 15.62% vs. an increase of 21.38% in the S&P 500 Index.
Much of the Fund's underperformance relative to the S&P 500 during the
period is attributable to its underweighting in technology, the sector that has
led the market for the last several quarters. While we concur, in general, with
the market's assessment of the long-term earnings potential for many of these
companies, we differ in our views of what constitutes fair value for the
companies' securities. Many technology stocks, we believe, had been bid up to
levels unjustified by their fundamentals, hence our decision to exclude them
from the portfolio. We continue to monitor the sector closely, however, and will
use any periods of price weakness over the coming months to establish and build
positions that we think have particularly favorable prospects.
Among our top performers during the 12 months ended August 31, 1995 were
banking and financial-services stocks. We had established our position in these
issues last year, when rising interest rates and derivatives-related scandals
had driven their prices down to what we deemed to be attractive levels. This
year, though, the sector, particularly the banking area, has rebounded strongly,
buoyed by falling interest rates, merger activity and subsiding fears of the
industry's vulnerability to derivatives. We saw especially strong gains from
BankAmerica and First Interstate Bancorporation, two of our largest positions.
Industrial cyclical stocks, another heavily weighted area in our portfolio,
also performed well 12 months ended August 31, 1995. We took profits in some of
our top performers--e.g., Inco, whose share price jumped nearly 50% from June
through September. The company produces roughly 25% of the world's nickel, in
addition to copper and other metals and metal-related products. Less impressive
was the performance of our steel companies, which include Bethlehem Steel,
Inland Steel and USX-U.S. Steel Group. The steel group has significantly
underperformed the market thus far in 1995, but we believe shifts in the global
supply/demand balance will provide considerable support for steel prices, and
these companies' earnings, going forward. Hence we have viewed the stocks'
short-term price weakness as a buying opportunity.
Supply/demand factors argue strongly for higher prices in many of the
metals, but the case is particularly strong for precious metals. Accordingly, we
have maintained our exposure to gold- and silver-mining companies, including
Hecla Mining, Homestake Mining, Newmont Mining, Pegasus Gold and Placer Dome. We
believe these stocks have considerable upside potential, especially over the
intermediate and long term.
We remain similarly committed to the telecommunications sector, an area that
has done quite well for us in 1995. We expect these stocks to continue to excel
through the rest of this year and well into 1996, particularly after the new
telecommunications bill becomes law. Our holdings here include AirTouch
Communications, which provides cellular-telephone communication services and
related
1
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
ANNUAL INVESTMENT ADVISER'S REPORT (CONT'D)
- --------------------------------------------------------------------------------
products, and Qualcomm, whose technology to multiply tenfold the number of
telephone calls that can be carried over a single channel stands to
revolutionize the industry.
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
WARBURG PINCUS GROWTH & INCOME FUND AND THE S&P 500
FROM 12/31/91* AND AT EACH FISCAL YEAR END
- --------------------------------------------------------------------------
RBEGX S&P 500 RBEGX S&P 500
======================= ========================
$10,000 $10,000
12/31/91 - 08/31/92 $10,290 $10,126 2.90% 1.26%
12/31/91 - 08/31/93 $14,526 $11,664 41.17% 15.19%
12/31/91 - 08/31/94 $16,620 $12,301 14.41% 5.46%
12/31/91 - 08/31/95 $19,216 $14,931 15.62% 21.38%
Average Annual Total Return
One Year Ending 08/31/95 15.62%
From 12/31/91 to 08/31/95 19.51%
- --------------------------------------------------------------------------
* Hypothetical illustration of $10,000 investment since December 31, 1991.
Warburg, Pincus Counsellors, Inc. ("Counsellors") began to provide advisory
services to the Fund in late December 1991. Previous periods during which the
Fund was not advised by Counsellors are not shown.
Note: All figures cited here represent past performance and do not guarantee
future results. Investment return and the principal value of an investment
will fluctuate so that an investor's shares upon redemption may be more or
less than original shares.
2
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
ANNUAL INVESTMENT ADVISER'S REPORT
- --------------------------------------------------------------------------------
For the 12 months ended August 31, 1995, Warburg Pincus Balanced Fund gained
21.56%, vs. a gain of 13.11% for the Lipper Balanced Fund Index.
Falling interest rates, continued economic growth and the absence of
significant inflationary pressures provided an ideal backdrop for both stock and
bond markets through most of the period. Throughout, we attempted to maintain an
optimal mix of stocks and bonds, one intended to provide solid returns at a
relatively low level of volatility.
The Fund finished the reporting period with a 51.5% commitment to domestic
common stocks, with its heaviest weightings in, respectively, the technology,
financial services, metals and mining, manufacturing, and oil sectors. Good
stock selection within these sectors, especially in the technology and
financial-services groups, played a significant role in the Fund's relatively
strong performance during the period, and we believe the prospects of our
holdings in these categories remain positive going forward.
The Fund's foreign-equity exposure (8.7% of assets at the close of the
period) consists of a diversified mix of issues among Asian and European
countries, with the largest weightings in Japan (1.9%) and the United Kingdom
(1.8%). We continue to find attractive opportunities in Asian markets, broadly
speaking, and in European markets on a stock-by-stock basis.
The Fund's fixed-income weighting remains concentrated most heavily in
short-term U.S. Treasury obligations. We maintained a minimal exposure to the
fixed-income sector through much of the reporting period, reflecting our bullish
view on the relative prospects of stocks vs. bonds. Looking ahead, we believe
conditions remains favorable for both markets, but particularly so for stocks,
and we have allocated the Fund's assets accordingly.
3
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
ANNUAL INVESTMENT ADVISER'S REPORT (CONT'D)
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
WARBURG PINCUS BALANCED FUND, S&P 500 AND LIPPER BALANCED FUND INDEX
FROM 9/30/94* AND THE FISCAL YEAR END
- ------------------------------------------------------------------------
FUND * LIPPER S&P 500
======================================
$10,000 $10,000 $10,000
09/30/94 - 08/31/95 $12,301 $11,529 12,444
TOTAL RETURN (09/30/94 - 08/31/95) 23.01%
* LIPPER BALANCED FUND INDEX
- ------------------------------------------------------------------------
* Hypothetical illustration of $10,000 investment since September 30, 1994.
Warburg, Pincus Counsellors, Inc. ("Counsellors") began to provide advisory
services to the Fund in late September 1994. Previous periods during which the
Fund was not advised by Counsellors are not shown.
Note: All figures cited here represent past performance and do not guarantee
future results. Investment return and the principal value of an investment
will fluctuate so that an investor's shares upon redemption may be more or
less than original shares.
4
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS TAX FREE FUND
ANNUAL INVESTMENT ADVISER'S REPORT
- --------------------------------------------------------------------------------
For the 12 months ended August 31, 1995, Warburg Pincus Tax Free Fund gained
8.89% vs. a gain of 7.34% for the Lipper General Municipal Debt Funds Average.
Municipal bond prices have risen with the rest of the fixed-income sector in
1995, driven by falling interest rates, moderate economic growth and the absence
of significant inflationary pressures. This comes as welcome relief after 1994,
when the Federal Reserve raised interest rates aggressively in an effort to
quell inflation. The rate hikes had a disastrous impact on the entire bond
market, including both the taxable and tax-free sectors.
While municipal bonds' performance has been strong in absolute terms in
1995, it has lagged the broad fixed-income group in relative terms. Weighing on
the municipal market have been investors' fears of significant tax reform.
Particularly troubling to municipal investors has been talk of the so-called
flat tax, which, if adopted, would greatly reduce the attractiveness of
tax-exempt bonds relative to their taxable counterparts. While congressional
passage of significant tax reform is viewed by many as unlikely, and is at least
a year away if reform is enacted at all, the mere fact that it is being
discussed in serious tones has been sufficient to keep municipal investors on
edge in 1995.
That cautious investor sentiment has created excellent buying opportunities
in municipals, especially in long-term issues. Indeed, yields on long-term
municipal bonds have risen to a relatively high 90% to 95% of the yields on
similar-maturity Treasuries, creating the potential for significant capital
appreciation if inflation stays low and no significant tax reform is passed. We
have used the opportunity to purchase attractively valued, high-quality bonds,
maintaining our emphasis on issues from the states of Maryland, New Jersey and
Georgia.
One factor that has supported the municipal market in 1995 is a shortage of
new supply. New issuance of municipal bonds is down sharply relative to 1994. We
do, though, expect the supply of new issues to pick up somewhat in the months
ahead, as municipalities attempt to take advantage of the current
low-interest-rate environment to call and refinance outstanding issues. This
could result in temporary short-term upward pressure on yields, especially in
some of the higher-tax states like New Jersey. We will use the opportunity to
selectively add high-quality bonds to our portfolios at attractive yields.
5
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS TAX FREE FUND
ANNUAL INVESTMENT ADVISER'S REPORT (CONT'D)
- --------------------------------------------------------------------------------
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE
WARBURG PINCUS TAX FREE FUND AND THE LIPPER GENERAL MUNICIPAL DEBT FUNDS AVERAGE
FROM 4/30/95* AND THE FISCAL YEAR END
- ------------------------------------------------------------------------
FUND * LIPPER
===========================
$10,000 $10,000
4/30/95 - 08/31/95 10,431 10,371
TOTAL RETURN (04/30/95 - 08/31/95)
AGGREGATE 4.31%
* Lipper General Municipal Debt Funds Avg.
* Performance measured from 4/30/95 - 8/31/95
- ------------------------------------------------------------------------
* Hypothetical illustration of $10,000 investment since April 30, 1995. Warburg,
Pincus Counsellors, Inc. ("Counsellors") began to provide advisory services to
the Fund in April 1995. Previous periods during which the Fund was not advised
by Counsellors are not shown.
Note: All figures cited here represent past performance and do not guarantee
future results. Investment return and the principal value of an investment
will fluctuate so that an investor's shares upon redemption may be more or
less than original shares.
6
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- -------------------------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF NET ASSETS
August 31, 1995
- -------------------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCKS AND WARRANTS (82.2%)
Aerospace (1.3%)
Allied-Signal, Inc. 325,000 $ 14,421,875
--------------
Agriculture Production Corporations (0.4%)
Terra Industries, Inc. 320,300 4,284,013
--------------
Air Conditioning & Heating (0.9%)
Management Systems Johnson Controls, Inc. 170,000 10,348,750
--------------
Automobiles (1.3%)
Navistar International** 1,130,000 14,690,000
--------------
Banking (3.2%)
First Interstate Bancorp 368,000 35,144,000
--------------
Chemicals (1.4%)
PPG Industries, Inc. 355,000 15,176,250
--------------
Construction (2.2%)
Stone & Webster, Inc. 655,000 24,235,000
--------------
Electronic Computers (6.2%)
GRC International, Inc.** 667,000 16,341,500
Honeywell, Inc. 655,000 28,656,250
International Business Machines Corp. 221,000 22,845,875
--------------
67,843,625
--------------
Electronics (1.2%)
Motorola, Inc. 175,000 13,081,250
--------------
Entertainment (3.8%)
Acclaim Entertainment, Inc.** 1,420,000 35,855,000
Boardwalk Casino, Inc.** 525,000 4,528,125
Boardwalk Casino, Inc. Warrants (expire 02/14/98)** 375,000 1,453,125
--------------
41,836,250
--------------
Financial Services (7.0%)
BankAmerica Corp. 655,000 37,007,500
Crestar Financial Corp. 270,000 15,221,250
Loyola Capital Corp. 247,500 8,662,500
Midlantic Corp. 302,000 15,553,000
--------------
76,444,250
--------------
Insurance (3.3%)
Chubb Corp. 150,000 13,687,500
USF&G Corp. 1,234,000 22,366,250
--------------
36,053,750
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
7
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- -------------------------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- -------------------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCKS AND WARRANTS (CONT'D)
Manufacturing (4.5%)
Corning Glass, Inc. 909,000 $ 29,656,125
Rauma OY Sponsored ADR** 102,900 2,443,875
Trinity Industries, Inc. 500,000 16,187,500
Whitman Corp. 50,000 1,006,250
--------------
49,293,750
--------------
Medical & Medical Services (1.9%)
Acuson Corp.** 210,000 2,756,250
Foxmeyer Health Corp.** 689,000 17,741,750
--------------
20,498,000
--------------
Metals & Mining (19.0%)
Echo Bay Mines Ltd. 500,000 5,187,500
Hecla Mining Co.** 1,940,000 22,310,000
Homestake Mining Co. 2,282,500 37,661,250
Inco Ltd. 985,000 34,475,000
Newmont Mining Corp. 903,000 39,280,500
Pegasus Gold, Inc.** 1,419,000 17,737,500
Placer Dome, Inc. 1,519,600 39,699,550
Prime Resources Group, Inc.** 1,400,000 11,210,360
--------------
207,561,660
--------------
Oil (1.0%)
Quaker State Corp. 715,000 10,725,000
--------------
</TABLE>
<TABLE>
<S> <C> <C>
Oil Services (4.4%)
Baker Hughes, Inc. 871,500 19,608,750
Halliburton Co. 521,000 22,077,375
Occidental Petroleum Corp. 280,000 6,090,000
--------------
47,776,125
--------------
Steel (13.0%)
AK Steel Holding Corp.** 454,000 14,471,250
Bethlehem Steel Corp.** 1,581,000 23,122,125
CBI Industries, Inc. 1,160,000 28,420,000
Inland Steel Industries, Inc. 585,000 16,014,375
LTV Corp.** 1,122,500 17,539,062
USX-US Steel Group 1,050,000 34,387,500
WHX Corp.** 623,000 7,865,376
--------------
141,819,688
--------------
Telecommunications (5.6%)
Airtouch Communications, Inc.** 363,400 11,810,500
Comcast Corp. Special Class A Non-Voting 1,000,000 21,375,000
Qualcomm, Inc.** 280,000 13,650,000
Tele-Communications, Inc. Class A** 800,000 14,800,000
--------------
61,635,500
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
8
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- -------------------------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF NET ASSETS (CONCLUDED)
August 31, 1995
- -------------------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCKS AND WARRANTS (CONT'D)
Tire & Rubber (0.4%)
Cooper Tire & Rubber Co. 160,000 $ 4,160,000
--------------
Transportation (0.2%)
Consolidated Freightways, Inc. 100,000 2,587,500
--------------
TOTAL COMMON STOCKS AND WARRANTS (Cost $781,860,824) 899,616,236
--------------
</TABLE>
<TABLE>
<CAPTION>
MATURITY PAR (000)
-------- ---------
<S> <C> <C> <C>
UNITED STATES TREASURY OBLIGATIONS (2.7%)
U.S. Treasury Bills 5.40% (Cost $29,973,000) 09/07/95 $ 30,000 29,973,000
--------------
REPURCHASE AGREEMENTS (13.8%)
Greenwich Capital Markets Inc. 5.83% 09/01/95 151,138 151,138,000
(Agreement dated 08/31/95 to be repurchased at
$151,162,476, collateralized by $150,000,000 U.S.
Treasury Notes 7.50% due 01/31/97. Market value of
collateral is $154,312,500).
(Cost $151,138,000)
--------------
TOTAL INVESTMENTS AT VALUE (Cost $962,971,826*) (98.7%) 1,080,727,236
OTHER ASSETS IN EXCESS OF LIABILITIES (1.3%) 14,368,010
--------------
NET ASSETS (Applicable to 63,295,201 Common Shares and
3,472,875 Advisor Shares) (100.0%) $1,095,095,246
--------------
--------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
COMMON SHARE ($1,038,193,292 : 63,295,201) $16.40
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
ADVISOR SHARE ($56,901,954 : 3,472,875) $16.38
======
</TABLE>
* Cost for Federal income tax purposes at August 31, 1995, is $963,365,013. The
gross appreciation (depreciation) on a tax basis is as follows:
Gross Appreciation $126,262,394
Gross Depreciaton (8,900,171)
------------
Net Appreciation $117,362,223
------------
------------
** Non-income producing.
See Accompanying Notes to Financial Statements.
9
- --------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF OPERATIONS
For the Year Ended August 31, 1995
- -------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 10,389,100
Interest 11,731,546
------------
Total investment income 22,120,646
------------
EXPENSES:
Investment advisory fees 5,824,947
Administration fees 1,941,649
Distribution fees 71,233
Custodian fees 162,248
Transfer agent fees 1,060,279
Legal fees 63,384
Audit fees 55,268
Registration fees 264,509
Insurance expense 23,560
Printing expense 86,973
Other expenses 26,827
------------
Total expenses 9,580,877
------------
Net investment income 12,539,769
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investment transactions 41,087,749
Futures contracts (2,798,582)
------------
38,289,167
------------
Net change in unrealized appreciation of investments 96,772,046
------------
Net gain on investments and future contracts 135,061,213
------------
Net increase in net assets resulting from operations $147,600,982
------------
------------
See Accompanying Notes to Financial Statements.
10
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- --------------------------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
August 31, 1995 August 31, 1994
--------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 12,539,769 $ 572,031
Net gain on investments and future contracts 135,061,213 17,971,937
--------------- ---------------
Net increase in net assets resulting from operations 147,600,982 18,543,968
--------------- ---------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
Common shares ($.1824 and $.0785, respectively,
per share) (9,949,389) (572,031)
Advisor shares ($.0459 per share for 1995) (137,213) --
Distributions to shareholders from net realized capital
gains:
Common shares ($.1834 and $3.9751, respectively,
per share) (8,067,592) (10,054,939)
--------------- ---------------
Total distributions to shareholders (18,154,194) (10,626,970)
--------------- ---------------
Net capital share transactions 554,990,830 342,051,251
--------------- ---------------
Total increase in net assets 684,437,618 349,968,249
Net assets:
Beginning of year 410,657,628 60,689,379
--------------- ---------------
End of year $ 1,095,095,246 $ 410,657,628
--------------- ---------------
--------------- ---------------
</TABLE>
See Accompanying Notes to Financial Statements.
11
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS
August 31, 1995
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
COMMON STOCKS (60.1%)
U.S. COMMON STOCKS
Aerospace (0.2%)
Allied-Signal, Inc. 300 $ 13,313
-----------
Banking (2.5%)
Bank of Boston Corp. 2,200 96,800
First Interstate Bancorp 400 38,200
-----------
135,000
-----------
Business Services (1.2%)
Paging Network, Inc.** 1,600 63,200
-----------
Chemicals (0.2%)
PPG Industries, Inc. 300 12,825
-----------
Communications & Media (1.1%)
Infinity Broadcast Corp.** 1,600 57,400
-----------
Computer & Office Equipment (2.1%)
Shared Medical Systems Corp. 1,800 66,375
Synopsys, Inc.** 800 46,400
-----------
112,775
-----------
Construction (0.7%)
Stone & Webster, Inc. 1,000 37,000
-----------
Electronic Computers (7.4%)
Cabletron Systems, Inc.** 500 26,438
GRC International, Inc.** 2,100 51,450
Honeywell, Inc. 800 35,000
International Business Machines Corp. 300 31,013
Linear Technology Corp. 400 32,400
Netscape Communications Corp.** 1,500 74,250
Platinum Technology, Inc. 2,400 56,700
System Software Associates, Inc. 800 25,250
Xilinx, Inc.** 1,500 64,312
-----------
396,813
-----------
See Accompanying Notes to Financial Statements.
12
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
COMMON STOCKS (CONT'D)
Electronics (1.5%)
Motorola, Inc. 200 $ 14,950
Thermospectra Corp.** 3,500 62,563
-----------
77,513
-----------
Entertainment (1.2%)
Acclaim Entertainment, Inc.** 1,500 37,875
Boardwalk Casino, Inc.** 3,000 25,875
-----------
63,750
-----------
Financial Services (5.2%)
BankAmerica Corp. 700 39,550
Citicorp Bank 800 53,100
Crestar Financial Corp. 500 28,188
Midlantic Corp. 300 15,450
Olympic Financial Ltd.** 3,300 75,488
United Companies Financial Corp. 1,100 68,475
-----------
280,251
-----------
Insurance (1.0%)
Chubb Corp. 300 27,375
USF&G Corp. 1,300 23,563
-----------
50,938
-----------
Manufacturing (3.8%)
Allied Products Corp. 1,500 32,438
Corning Glass, Inc. 800 26,100
Maxim Integrated Products, Inc. 1,000 76,250
Roper Industries, Inc. 1,500 51,000
Trinity Industries, Inc. 500 16,188
-----------
201,976
-----------
Medical & Medical Services (1.0%)
Foxmeyer Health Corp.** 2,000 51,500
-----------
See Accompanying Notes to Financial Statements.
13
- ------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
COMMON STOCKS (CONT'D)
Metals & Mining (5.3%)
Coeur D'Alene Mines Corp. 2,100 $ 40,163
Hecla Mining Co.** 3,000 34,500
Homestake Mining Co. 2,100 34,650
Inco LTD. 1,000 35,000
Newmont Mining Corp. 1,000 43,500
Pegasus Gold, Inc.** 2,500 31,250
Placer Dome, Inc. 1,500 39,188
Prime Resources Group, Inc.** 3,000 24,022
-----------
282,273
-----------
Office Furniture (1.3%)
Viking Office Products, Inc.** 1,900 68,400
-----------
Oil (3.4%)
Barrett Resources Corp.** 2,500 53,750
Petroleum Geo Services** 2,500 64,063
Quaker State Corp. 500 7,500
Texas Meridian Resources Corp.** 5,000 55,000
-----------
180,313
-----------
Oil Services (0.8%)
Baker Hughes, Inc. 1,000 22,500
Halliburton Co. 500 21,188
-----------
43,688
-----------
Paper Mills (0.8%)
Champion International Corp. 800 45,300
-----------
Pharmaceuticals (1.8%)
Al Laboratories, Inc. Class A 2,000 42,000
Gilead Sciences, Inc.** 2,500 54,375
-----------
96,375
-----------
Retail--Retail Stores (1.1%)
Borders Group, Inc.** 3,000 60,750
-----------
Retail--Women's Clothing Stores (1.0%)
Talbots, Inc. 1,500 51,750
-----------
See Accompanying Notes to Financial Statements.
14
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- ---------------------------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- ---------------------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCKS (CONT'D)
Steel (3.0%)
Bethlehem Steel Corp.** 2,000 $ 29,250
CBI Industries, Inc. 1,000 24,500
LTV Corp. 1,500 23,438
Republic Engineered Steels** 3,000 20,625
USX-US Steel Group 1,300 42,575
WHX Corp.** 1,600 20,200
-----------
160,588
-----------
Telecommunications (3.2%)
Airtouch Communications, Inc.** 300 9,750
Comcast Corp. Special Class A Non-Voting 1,000 21,375
Mobile Telecommunications Technologies Corp.** 1,900 58,425
Qualcomm, Inc.** 300 14,625
Tele-Communications, Inc. Series A Liberty Media Group** 2,000 53,125
Tele-Communications, Inc. Class A** 800 14,800
-----------
172,100
-----------
Textiles (0.6%)
Westpoint Stevens, Inc.** 1,500 33,562
-----------
FOREIGN COMMON STOCKS
Australia (0.4%)
BTR Nylex Limited 8,500 22,610
-----------
Austria (0.7%)
Va Technologie AG 330 36,446
-----------
Denmark (1.0%)
International Service System B 1,900 51,716
-----------
France (0.8%)
Bouygues 240 29,196
Compagnie Francaise de Petroleum Total 280 16,443
-----------
45,639
-----------
Hong Kong (0.6%)
Jardine Matheson Holdings LTD. 4,400 31,680
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
15
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- ---------------------------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- ---------------------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
COMMON STOCKS (CONT'D)
<S> <C> <C>
Israel (0.4%)
Clal Electronics Industries LTD.** 180 $ 21,505
-----------
Japan (1.9%)
Keyence Corp. 800 102,301
-----------
Malaysia (0.5%)
Westmont B. 6,000 25,496
-----------
Sweden (0.6%)
Astra B Free 960 31,180
-----------
United Kingdom (1.8%)
Central European Media Enterprises LTD.** ADR 2,700 67,837
Takare PLC 8,200 26,715
-----------
94,552
-----------
TOTAL COMMON STOCKS (Cost $2,772,251) 3,212,478
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
-------- ----- -----
<S> <C> <C> <C>
AGENCY OBLIGATIONS (0.2%)
Government National Mortgage Association 6.50% (Cost $12,661) 08/15/03 $ 13 $ 12,858
----------
UNITED STATES TREASURY OBLIGATIONS (26.4%)
U.S. Treasury Notes
5.875% 05/31/96 300 300,390
6.875% 10/31/96 200 202,572
8.125% 02/15/98 20 21,007
8.50% 11/15/00 800 885,536
----------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $1,384,454) 1,409,505
----------
</TABLE>
See Accompanying Notes to Financial Statements.
16
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- -------------------------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- -------------------------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ----- -----
<S> <C> <C> <C>
REPURCHASE AGREEMENTS (8.8%)
State Street Bank & Trust Co. 5.78% 09/01/95 468 $ 468,000
(Agreement dated 08/31/95 to be repurchased at $468,081,
collateralized by $480,000 U.S Treasury Notes 6.25% due
08/31/96. Market value of collateral is $481,800.) (Cost
$468,000)
----------
TOTAL INVESTMENTS AT VALUE (Cost $4,637,366*) (95.5%) 5,102,841
OTHER ASSETS IN EXCESS OF LIABILITIES (4.5%) 239,008
----------
NET ASSETS (Applicable to 480,061 Common Shares and 110 Advisor Shares)
(100.0%) $5,341,849
----------
----------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
COMMON SHARE ($5,340,625 : 480,061) $11.12
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
ADVISOR SHARE ($1,224 : 110) $11.13
======
</TABLE>
* Cost for Federal income tax purposes at August 31, 1995 is $4,641,506. The
gross appreciation (depreciation) on a tax basis is as follows:
Gross Appreciation $487,617
Gross Depreciation (26,282)
---------
Net Appreciation $461,335
---------
---------
** Non-income producing.
See Accompanying Notes to Financial Statements.
17
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF OPERATIONS
For the Year Ended August 31, 1995
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 52,298
Dividends 11,828
Foreign taxes withheld (202)
--------
Total investment income 63,924
--------
EXPENSES:
Investment advisory fees 14,729
Administration fees 3,991
Distribution fees 4,155
Custodian fees 21,198
Transfer agent fees 27,158
Registration fees 15,075
Printing expense 10,393
Other expenses 4,330
--------
101,029
Less fees waived (17,123)
Less expense reimbursement by advisor (58,364)
--------
Total expenses 25,542
--------
Net investment income 38,382
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investment transactions 115,816
Foreign currency related transactions (679)
--------
115,137
--------
Net change in unrealized appreciation (depreciation) on:
Investments 380,862
Foreign currency related transactions (7)
--------
380,855
--------
Net gain on investments and foreign currency transactions 495,992
--------
Net increase in net assets resulting from operations $534,374
========
See Accompanying Notes to Financial Statements.
18
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- -----------------------------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
August 31, 1995 August 31, 1994
--------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 38,382 $ 29,100
Net gain on investments 495,992 23,057
--------------- ---------------
Net increase in net assets resulting from operations 534,374 52,157
--------------- ---------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
Common shares ($.3136 and $.4586, respectively, per share) (38,909) (31,049)
Distributions to shareholders from net realized capital gains:
Common shares ($1.5069 and $.9794, respectively, per share) (111,945) (63,790)
--------------- ---------------
Total distributions to shareholders (150,854) (94,839)
--------------- ---------------
Net capital share transactions 4,150,301 88,893
--------------- ---------------
Total increase in net assets 4,533,821 46,211
Net Assets:
Beginning of year 808,028 761,817
--------------- ---------------
End of year $ 5,341,849 $ 808,028
=============== ===============
</TABLE>
See Accompanying Notes to Financial Statements.
19
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- ----------------------------------------------------------------------------------------------------
WARBURG PINCUS TAX FREE FUND
STATEMENT OF NET ASSETS
August 31, 1995
- ----------------------------------------------------------------------------------------------------
PAR
RATE MATURITY (000) VALUE
----- -------- ----- ----------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (97.9%)
Arizona (2.5%)
Phoenix GO Bond (Aa, AA+) 6.375% 07/01/13 $ 100 $ 104,375
----------
California (2.4%)
Palm Springs Community Redevelopment Agency Certificates
VRDN + (AA-, A-1+) 3.70 09/06/95 100 100,000
----------
Georgia (10.0%)
Georgia Municipal Electric Authority/(FGIC Insurance)
(Aaa, AAA) 6.125 01/01/14 200 204,750
Gwinnett County GO Bonds (Aa1, AA) 6.00 01/01/10 200 210,000
----------
414,750
----------
Kansas (4.9%)
Kansas Department of Transportation Series A (Aa, AA) 6.00 09/01/12 200 202,500
----------
Kentucky (8.0%)
Jefferson County PCR RB (Louisville Gas and Electric
Co.) Project A (Aa2, AA) 7.45 06/15/15 300 329,625
----------
Maryland (27.4%)
Baltimore Maryland Consolidated Public Improvement MB
Series 1991C (Aaa, AAA) 7.50 10/15/09 400 485,500
Baltimore Maryland Port Facility RB Consolidated Coal
Sales Series 1984A (Aa2, AA) 6.50 10/01/11 300 321,000
Montgomery County Parking RB (Silver Spring Group)/
(FGIC Insurance) (Aaa, AAA) 6.25 06/01/07 300 322,500
----------
1,129,000
----------
Massachusetts (5.3%)
Massachusetts Bay Transportation Authority (General
Transportation Systems) Series A (A1, A+) 6.25 03/01/05 200 219,500
----------
Michigan (4.9%)
Michigan Underground Storage Tank Financial Assurance
Authority 1995 Revenue Bonds Series I VDRN (Canadian
Imperial Bank LOC)+ (P-1, A-1+) 3.60 09/06/95 200 200,000
----------
New Jersey (10.6%)
New Jersey State Turnpike Authority RB Refunding Series
1991 (MBIA Insurance) (Aaa, AAA) 6.50 01/01/16 400 439,000
----------
North Carolina (5.0%)
North Carolina Municipal Power Agency (Catawba Electric)
RB/(MBIA Insurance) (Aaa, AAA) 6.00 01/01/10 200 207,750
----------
</TABLE>
See Accompanying Notes to Financial Statements.
20
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- --------------------------------------------------------------------------------------------------------
WARBURG PINCUS TAX FREE FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------------------------------
PAR
RATE MATURITY (000) VALUE
----- -------- ----- ----------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (CONT'D)
Pennsylvania (5.2%)
Philadelphia Water & Waste Water Revenue Bonds (Aaa, AAA) 6.25% 08/01/09 $ 200 $ 214,250
----------
Puerto Rico (5.3%)
Puerto Rico Electric Power Authority Power Revenue Bonds
Series W (Aaa, AAA) 6.00 07/01/03 200 217,000
----------
South Carolina (5.1%)
Spartanburg Water Systems Improvement RB (A1, AA-) 6.20 06/01/09 200 208,500
----------
Utah (1.3%)
Intermountain Power Agency (Utah Power Supply) RB Series B
(Aa, AA) 7.625 07/01/08 50 54,375
----------
TOTAL INVESTMENTS AT VALUE (Cost $3,799,912*) (97.9%) 4,040,625
OTHER ASSETS IN EXCESS OF LIABILITIES 2.1% 86,488
----------
NET ASSETS (Applicable to 396,470 Shares) 100.0% $4,127,113
==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE ($4,127,113 : 396,470) $10.41
==========
</TABLE>
+ Variable Rate Demand Notes--The interest rate shown is the rate as of August
31, 1995 and the maturity date shown is the longer of the next interest
readjustment date or the date the principal amount can be recovered through
demand.
* Also cost for Federal income tax purposes. The gross appreciation
(depreciation) on a tax basis is as follows:
Gross and Net Appreciation $240,713
========
The Moody's Investors Service, Inc. and Standard & Poor's Ratings Group's
ratings indicated are the most recent ratings available at August 31,1995. These
ratings have not been audited by the Independent Accountants and, therefore, are
not covered by the Report of Independent Accountants.
INVESTMENT ABBREVIATIONS
VRDN....................................... Variable Rate Demand Note
GO......................................... General Obligations
LOC........................................ Letter of Credit
MB......................................... Municipal Bond
PCR........................................ Pollution Control Revenue
RB......................................... Revenue Bond
See Accompanying Notes to Financial Statements.
21
<PAGE>
- ------------------------------------------------------------------------------
WARBURG PINCUS TAX FREE FUND
STATEMENT OF OPERATIONS
For the Year Ended August 31, 1995
- ------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $274,436
--------
EXPENSES
Investment advisory fees 22,949
Administration fees 5,051
Distribution fees 14,565
Custodian fees 12,615
Transfer agent fees 17,862
Registration fees 11,966
Printing expense 8,636
Other expenses 2,961
--------
96,605
Less fees waived (32,249)
Less expense reimbursement by advisor (42,354)
--------
Total expenses 22,002
--------
Net investment income 252,434
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Amortized market discount 1,429
Net realized loss on investments (53,450)
Net change in unrealized appreciation of investments 159,794
--------
Net gain on investments 107,773
--------
Net increase in net assets resulting from operations $360,207
========
See Accompanying Notes to Financial Statements.
22
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- -----------------------------------------------------------------------------------------------------
WARBURG PINCUS TAX FREE FUND
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
AUGUST 31, 1995 AUGUST 31, 1994
--------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 252,434 $ 328,396
Net gain (loss) on investments 107,773 (334,661)
--------------- ---------------
Net increase (decrease) in net assets resulting from
operations 360,207 (6,265)
--------------- ---------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
Common shares ($.5426 and $.6092, respectively,
per share) (252,796) (332,187)
Distributions to shareholders in excess of net investment
income ($.0135 per share for 1994) -- (7,110)
Distributions to shareholders from net realized capital gains:
Common shares ($.2977 and $.4886, respectively, per share) (137,718) (276,466)
--------------- ---------------
Total distributions to shareholders (390,514) (615,763)
--------------- ---------------
Net capital share transactions (1,307,539) (544,098)
--------------- ---------------
Total decrease in net assets (1,337,846) (1,166,126)
Net Assets:
Beginning of year 5,464,959 6,631,085
--------------- ---------------
End of year $ 4,127,113 $ 5,464,959
=============== ===============
</TABLE>
See Accompanying Notes to Financial Statements.
23
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- -------------------------------------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS (B)
(For a Share Outstanding Throughout Each Year)
- -------------------------------------------------------------------------------------------------------------
For the Years Ended August 31,
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
NET ASSET VALUE, BEGINNING OF YEAR $14.56 $16.72 $11.99 $12.11 $11.00
------ ------ ------ ------ ------
Income From Investment Operations:
Net Investment Income 0.2224 0.0785 0.0464 0.1912 0.3744
Net Gains on Securities (both
realized and unrealized) 1.9834 1.8151 4.8499 0.0402 1.6891
------ ------ ------ ------ ------
Total from Investment Operations 2.2058 1.8936 4.8963 0.2314 2.0635
------ ------ ------ ------ ------
Less Distributions:
Dividends (from net investment income) (0.1824) (0.0785) (0.0875) (0.1871) (0.4043)
Distributions (from capital gains) (0.1834) (3.9751) (0.0788) (0.1643) (0.5492)
-------- -------- -------- -------- --------
Total Distributions (0.3658) (4.0536) (0.1663) (0.3514) (0.9535)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $16.40 $14.56 $16.72 $11.99 $12.11
====== ====== ====== ====== ======
Total Return 15.62% 14.41% 41.17% 1.99% 19.91%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (000) $1,038,193 $410,658 $60,689 $28,976 $24,726
Ratios of Expenses to Average Net Assets 1.22% 1.28%(a) 1.14%(a) 1.25%(a) 1.30%(a)
Ratios of Net Investment Income to
Average Net Assets 1.64% 0.41% 0.30% 1.66% 3.42%
Portfolio Turnover Rate 109% 150% 344% 175% 41%
</TABLE>
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Warburg Pincus Growth & Income Fund would have
been 1.28%, 1.14%, 1.28% and 2.17% for the years ended August 31, 1994,
1993, 1992 and 1991, respectively.
(b) Financial Highlights relate solely to the Common Class of shares with the
Fund.
See Accompanying Notes to Financial Statements.
TAX STATUS OF 1995 DIVIDENDS (Unaudited)
Dividends paid by the Fund taxable as ordinary income amounted to $0.3658
per share; 49.48% of ordinary income dividends qualify for the dividends
received deduction available to corporate shareholders for U.S. income tax
purposes.
Because the Fund's fiscal year is not the calendar year, amounts to be used
by calendar year taxpayers on their Federal return will be reflected on Form
1099-DIV and will be mailed in January 1996.
24
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- ------------------------------------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
FINANCIAL HIGHLIGHTS (B)
(For a Share Outstanding Throughout Each Year)
- ------------------------------------------------------------------------------------------------------------
For the Years Ended August 31,
---------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $11.01 $11.71 $12.04 $12.05 $10.60
------ ------ ------ ------ ------
Income From Investment Operations:
Net Investment Income 0.2080 0.4132 0.5555 0.4408 0.4213
Net Gains on Securities (both realized
and unrealized) 1.7225 0.3248 1.1253 0.5155 1.7196
------ ------ ------ ------ ------
Total from Investment Operations 1.9305 0.7380 1.6808 0.9563 2.1409
------ ------ ------ ------ ------
Less Distributions:
Dividends (from net investment income) (0.3136) (0.4586) (0.5412) (0.3713) (0.4128)
Distributions (from capital gains) (1.5069) (0.9794) (1.4696) (0.5950) (0.2781)
-------- -------- -------- -------- --------
Total Distributions (1.8205) (1.4380) (2.0108) (0.9663) (0.6909)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $11.12 $11.01 $11.71 $12.04 $12.05
====== ====== ====== ====== ======
Total Return 21.56% 6.86% 15.27% 8.07% 21.18%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (000) $5,342 $808 $762 $1,026 $1,290
Ratios of Expenses to Average Net Assets 1.53%(a) 0%(a) 0%(a) .67%(a) 1.40%(a)
Ratios of Net Investment Income to
Average Net Assets 2.27% 3.76% 4.13% 3.68% 3.58%
Portfolio Turnover Rate 107% 32% 30% 93% 76%
</TABLE>
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Warburg Pincus Balanced Fund would have been
6.04%, 5.46%, 5.37%, 3.88% and 3.89% for the years ended August 31, 1995,
1994, 1993, 1992 and 1991, respectively.
(b) Financial Highlights relate solely to the Common Class of shares with the
Fund.
See Accompanying Notes to Financial Statements.
TAX STATUS OF 1995 DIVIDENDS (Unaudited)
Dividends paid by the Fund taxable as ordinary income amounted to $0.4755
per share; 18.60% of ordinary income dividends qualify for the dividend received
deduction available to corporate shareholders for U.S. income tax purposes.
Long-term capital gain dividends amounted to $1.3450 per share.
Because the Fund's fiscal year is not the calendar year, amounts to be used
by calendar year taxpayers on their Federal return will be reflected on Form
1099-DIV and will be mailed in January 1996.
25
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- ------------------------------------------------------------------------------------------------------------
WARBURG PINCUS TAX FREE FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each Year)
- ------------------------------------------------------------------------------------------------------------
For the Years Ended August 31,
---------------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $10.40 $11.53 $11.04 $10.46 $10.05
------ ------ ------ ------ ------
Income From Investment Operations:
Net Investment Income 0.5426 0.6026 0.6385 0.6771 0.6027
Net Gains (Losses) on Securities (both
realized and unrealized) 0.3077 (0.6259) 0.8654 0.6145 0.4402
------ -------- ------ ------ ------
Total from Investment Operations 0.8503 (0.0233) 1.5039 1.2916 1.0429
------ -------- ------ ------ ------
Less Distributions:
Dividends (from net investment income) (0.5426) (0.6092) (0.6725) (0.6345) (0.6212)
Distributions (in excess of net
investment income) -- (0.0135) -- -- --
Distributions (from capital gains) (0.2979) (0.4886) (0.3414) (0.0771) (0.0117)
-------- -------- -------- -------- --------
Total Distributions (0.8403) (1.1113) (1.0139) (0.7116) (0.6329)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $10.41 $10.40 $11.53 $11.04 $10.46
====== ====== ====== ====== ======
Total Return 8.89% (0.30%) 14.45% 12.77% 10.66%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (000) $4,127 $5,465 $6,631 $6,491 $8,840
Ratios of Expenses to Average Net Assets .48%(a) .15%(a) .17%(a) .33%(a) .83%(a)
Ratios of Net Investment Income to
Average Net Assets 5.53% 5.51% 5.71% 6.21% 6.02%
Portfolio Turnover Rate 38% 20% 70% 78% 63%
</TABLE>
(a) Without the waiver of advisory, administration and custody fees and without
the reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Warburg Pincus Tax Free Fund would have been
2.12%, 1.84%, 1.76%, 1.61% and 3.06% for the years ended August 31, 1995,
1994, 1993, 1992 and 1991, respectively.
See Accompanying Notes to Financial Statements.
TAX STATUS OF 1995 DIVIDENDS (Unaudited)
Long term capital gain dividends amounted to $0.2979 per share.
Because the Fund's fiscal year is not the calendar year, amounts to be used
by calendar year taxpayers on their Federal return will be reflected on Form
1099-DIV and will be mailed in January 1996.
26
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS
August 31, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The RBB Fund, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Company was incorporated in Maryland on February 29, 1988, and currently has
seventeen investment Portfolios, three of which are included in these financial
statements.
The Company has authorized capital of thirty billion shares of common stock
of which 12.2 billion are currently classified into sixty-one classes. Each
class represents an interest in one of seventeen investment portfolios of the
Company, fifteen of which are currently in operation. The classes have been
grouped into fifteen separate "families", eight of which have begun investment
operations including the Warburg Pincus Family. The Warburg Pincus Family is
comprised of Warburg Pincus Growth & Income Fund (the "Growth & Income Fund"),
Warburg Pincus Balanced Fund (the "Balanced Fund") and Warburg Pincus Tax Free
Fund (the "Tax Free Fund"), which are covered in this report. The Growth &
Income Fund and the Balanced Fund each have two classes of shares: Common Class
and Advisor Class.
The net asset value of each Fund is determined daily as of the close of
regular trading on the New York Stock Exchange. Each Fund's securities are
valued at market value, which is currently determined using the last reported
sales price. If no sales are reported, as in the case of some securities traded
over-the-counter, portfolio securities are valued at the mean between the last
reported bid and asked prices. Corporate bonds, tax-exempt bonds and notes and
government securities are valued on the basis of quotations provided by an
independent pricing service which uses information with respect to transactions
on bonds, quotations from bond dealers, market transactions in comparable
securities and various relationships between securities in determining value.
Short-term obligations with maturities of 60 days or less are valued at
amortized cost which approximates market value.
Security transactions are accounted for on the trade date. The cost of
investments sold is determined by use of the specific identification method for
both financial reporting and income tax purposes. Interest income is recorded on
the accrual basis. Dividends are recorded on the ex-dividend date. Certain
expenses, principally distribution, transfer agent and printing, are class
specific expenses and vary by class. Expenses not directly attributable to a
specific portfolio or class are allocated based on relative net assets of each
Portfolio and class, respectively.
For the Growth & Income and the Balanced Funds, dividends from net
investment income, if any, are declared and paid at least quarterly. For the Tax
Free Fund, dividends from net investment income, if any, are declared daily and
paid monthly. For all Funds, any net realized capital gains will be distributed
at least annually. Income distributions and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principals.
27
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
No provision is made for Federal taxes as it is the Company's intention to
have each portfolio continue to qualify for and elect the tax treatment
applicable to regulated investment companies under the Internal Revenue Code and
make the requisite distributions to its shareholders which will be sufficient to
relieve it from Federal income and excise taxes.
Money market instruments may be purchased subject to the seller's agreement
to repurchase them at an agreed upon date and price. The seller will be required
on a daily basis to maintain the value of the securities subject to the
agreement at not less than the repurchase price. The agreements are conditioned
upon the collateral being deposited under the Federal Reserve book-entry system
or with the Fund's custodian or a third party sub-custodian.
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR
Warburg, Pincus Counsellors, Inc. ("Counsellors"), a wholly owned subsidiary
of Warburg, Pincus Counsellors G.P. ("Counsellors G.P.") serves as investment
advisor for the Growth & Income Fund. The advisory fee is computed daily and
payable monthly at the annual rate of .75% of the Growth & Income Fund's average
daily net assets.
Pursuant to a vote on September 30, 1994, shareholders approved a new
advisory contract between the Balanced Fund and Counsellors. Under the new
agreement, the Balanced Fund pays Counsellors an advisory fee at an annual rate
of .90% of the Fund's average daily net assets. The prior advisory agreement
between the Fund and PNC Institutional Management Corp. ("PIMC") was terminated
as of that date.
Pursuant to a vote on March 31, 1995, shareholders approved a new advisory
contract between Tax Free Fund and Counsellors. Under the new agreement, Tax
Free Fund pays Counsellors an advisory fee at an annual rate of .50% of the Fund
s average daily net assets. The prior agreement between the Fund and PIMC was
terminated as of that date.
Counsellors may, at its discretion, voluntarily waive all or any portion of
its advisory fees for any of the Funds. For the year ended August 31, 1995,
investment advisory fees and waivers were as follows:
GROSS NET
ADVISORY FEE WAIVER ADVISORY FEE
------------ ------- ------------
Growth & Income Fund $ 5,824,947 $ -- $ 5,824,947
Balanced Fund 14,729 (14,729) --
Tax Free Fund 22,949 (22,949) --
PFPC Inc. ("PFPC"), an indirect wholly owned subsidiary of PNC Bank Corp.,
and Counsellors Fund Services, Inc. ("CFSI"), a wholly owned subsidiary of
Counsellors, serve as co-administrators for each of the Funds. For the Growth &
Income Fund, the co-administration fees are computed daily and payable monthly
at an annual rate of .20% of the first $125 million of average daily net assets
and .15%
28
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
of average daily net assets in excess of $125 million for PFPC and .05% of the
first $125 million of average daily net assets and .10% of average daily net
assets in excess of $125 million for CFSI.
For the Balanced and Tax Free Funds, the co-administration fees are computed
daily and payable monthly at an annual rate of .15% of average daily net assets
for PFPC and .10% of average daily net assets for CFSI.
CFSI and PFPC may, at their discretion, voluntarily waive all or any portion
of their co-administration fees for any of the Funds. For the year ended August
31, 1995, CFSI and PFPC's co-administration fees and waivers were as follows:
<TABLE><CAPTION>
GROSS NET
CO-ADMINISTRATION FEES WAIVERS CO-ADMINISTRATION FEES
---------------------- ------- ----------------------
<S> <C> <C> <C>
Growth & Income Fund $1,941,649 $ -- $1,941,649
Balanced Fund 3,991 (2,394) 1,597
Tax Free Fund 5,051 (3,239) 1,812
</TABLE>
The Company, on behalf of each class of shares within the investment
portfolios, has adopted Distribution Plans pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, and has entered into Distribution
Contracts with Counsellors Securities Inc. ("CSI"), also a wholly owned
subsidiary of Counsellors, which provide for each class to make monthly
payments, based on average daily net assets, to CSI. No compensation is payable
by the Growth & Income Fund's Common Shares. For distribution services with
respect to the Balanced and the Tax Free Funds' Common Shares, CSI receives a
fee at the annual rate of .25%, computed daily and payable monthly, on average
daily net assets. For distribution services with respect to the Growth & Income
and the Balanced Funds' Advisor Shares, CSI receives a fee of .25% and .50%,
respectively, computed daily and payable monthly, on average daily net assets.
For the year ended August 31, 1995, distribution fees were as follows:
DISTRIBUTION FEES
-----------------
Growth & Income Fund
Advisor Shares $71,233
=======
Balanced Fund
Common Shares $ 4,155
Advisor Shares --
-------
$ 4,155
=======
Tax Free Fund
Common Shares $14,565
=======
29
- -----------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- -------------------------------------------------------------------------------
3. INVESTMENT IN SECURITIES
For the year ended August 31, 1995, purchases and sales of investment
securities (other than short-term investments) were as follows:
INVESTMENT SECURITIES
------------------------------
PURCHASES SALES
-------------- ------------
Growth & Income Fund $1,108,363,903 $617,767,292
Balanced Fund 5,047,134 1,602,287
Tax Free Fund 1,669,358 3,357,298
4. CAPITAL SHARES
Transactions in capital shares for each year were as follows:
<TABLE><CAPTION>
GROWTH & INCOME FUND BALANCED FUND
-------------------------------------------------------- ------------------------------------------------------
For the Year Ended For the Year Ended For the Year Ended For the Year Ended
August 31, 1995 August 31, 1994 August 31, 1995 August 31, 1994
--------------------------- -------------------------- --------------------------- ------------------------
Shares Value Shares Value Shares Value Shares Value
----------- ------------- ----------- ------------ ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold
Common Shares 46,345,660 $ 670,088,619 29,256,806 $410,956,025 423,875 $ 4,348,625 609 $ 6,495
Advisor Shares 3,521,620 52,908,038 -- -- 110 1,180 -- --
Shares issued in
reinvestment of
dividends
Common Shares 6,891 96,291 67,788 894,152 16,171 148,491 8,690 93,303
Advisor Shares 9,051 137,213 -- -- -- -- -- --
Shares repurchased
Common Shares (11,270,725) (167,348,709) (4,741,678) (69,798,926) (33,364) (347,995) (982) (10,905)
Advisor Shares (57,795) (890,622) -- -- -- -- -- --
----------- ------------- ----------- ------------ ----------- ------------- ----------- -----------
Net increase 38,554,702 $ 554,990,830 24,582,916 $342,051,251 406,792 $ 4,150,301 8,317 88,893
=========== ============= =========== ============ =========== ============= =========== ===========
Common Shares
authorized 100,000,000 100,000,000 100,000,000 100,000,000
=========== =========== =========== ===========
</TABLE>
30
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- ------------------------------------------------------------------------------------------------
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- ------------------------------------------------------------------------------------------------
TAX FREE FUND
--------------------------------------------------------
For the Year Ended For the Year Ended
August 31, 1995 August 31, 1994
-------------------------- --------------------------
Shares Value Shares Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Shares sold:
Common Shares 16,896 $ 172,004 4,183 $ 47,154
Shares issued in reinvestment
of dividends:
Common Shares 24,384 240,772 37,807 414,727
Shares repurchased:
Common Shares (170,342) (1,720,315) (91,398) (1,005,979)
----------- ----------- ----------- -----------
Net decrease (129,062) $(1,307,539) (49,408) $ (544,098)
=========== =========== =========== ===========
Common Shares authorized 100,000,000 100,000,000
=========== ===========
</TABLE>
5. NET ASSETS
At August 31, 1995, net assets consisted of the following:
<TABLE><CAPTION>
GROWTH & INCOME FUND BALANCED FUND TAX FREE FUND
-------------------- -------------- -------------
<S> <C> <C> <C>
Capital paid-in $ 943,960,297 $4,808,416 $ 3,935,026
Undistributed net
investment income (loss) 2,453,167 7,138 --
Amortized market discount -- -- 4,824
Accumulated net realized gain (loss) on
investments transactions, futures
contracts and foreign exchange
transactions 30,926,372 60,835 (53,450)
Unrealized appreciation on investments 117,755,410 465,460 240,713
--------------- -------------- -------------
$1,095,095,246 $5,341,849 $ 4,127,113
=============== ============== =============
</TABLE>
6. FUTURES CONTRACTS
The Growth & Income Fund may enter into futures contracts for hedging or
portfolio management strategy purposes to the extent permitted by its investment
policies and objectives. To enter into a futures contract, the Growth & Income
Fund must make a deposit of an initial margin with its custodian in a segregated
account. Subsequent payments, which are dependent on the daily fluctuations in
the value of the underlying instrument, are made or received by the Fund each
day (daily variation margin) and are recorded as unrealized gains or losses
until the contracts are closed. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the proceeds from (or
31
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
cost of) the closing transactions and the Fund's basis in the contract. Risks of
entering into futures contracts include the possibility that a change in the
value of the contract may not correlate with the changes in the value of the
underlying instruments. The Growth & Income Fund entered into futures
transactions during the year ended August 31, 1995. However, the Growth & Income
Fund had no futures contracts open at August 31, 1995.
7. CAPITAL LOSS CARRYOVER
At August 31, 1995, $53,450 capital loss carryover in the Tax Free Fund was
available to offset future realized gains which expires in 2003.
8. OTHER FINANCIAL HIGHLIGHTS
The Growth & Income and the Balanced Funds currently offer one other class
of shares, Advisor Shares, representing an additional interest in each of the
Funds. The financial highlights of each of the Advisor shares are as follows:
32
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- ---------------------------------------------------------------------------------------------------------
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- ---------------------------------------------------------------------------------------------------------
ADVISOR SHARES
--------------------------------------
GROWTH & INCOME BALANCED
FUND FUND
----------------- -----------------
FOR THE PERIOD FOR THE PERIOD
MAY 15, 1995 JULY 31, 1995
(COMMENCEMENT (COMMENCEMENT
OF OPERATIONS) TO OF OPERATIONS) TO
AUGUST 31, 1995 AUGUST 31, 1995
----------------- -----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.87 $ 10.72
------- ------
Income From Investment Operations:
Net Investment Income 0.0236 0.0170
Net Gains (Losses) on Securities (both realized and unrealized) 1.5323 0.3930
------- ------
Total from Investment Operations 1.5559 0.4100
------- ------
Less Distributions
Dividends (from net investment income) (0.0459) 0.0000
------- ------
Total Distributions (0.0459) 0.0000
------- ------
NET ASSET VALUE, END OF PERIOD $ 16.38 $11.13
======= ======
Total Returns 10.49%(c) 3.82%(c)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $56,902 $ 1
Ratios of Expenses to Average Net Assets 1.92%(b) 1.76%(a)(b)
Ratios of Net Investment Income to Average Net Assets 0.43%(b) 2.00%(b)
Portfolio Turnover Rate 109%(b) 107%(b)
</TABLE>
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Balanced Fund would have been 628.47% annualized
for the period ended August 31, 1995.
(b) Annualized.
(c) Not Annualized.
33
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Directors of The RBB Fund, Inc.:
We have audited the accompanying statements of net assets of Warburg Pincus
Growth & Income Fund, Warburg Pincus Balanced Fund and Warburg Pincus Tax Free
Fund of The RBB Fund, Inc., as of August 31, 1995, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments held as of
August 31, 1995, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Warburg Pincus Growth & Income Fund, Warburg Pincus Balanced Fund and Warburg
Pincus Tax Free Fund of The RBB Fund, Inc., as of August 31, 1995, and the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and their financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
October 16, 1995
- --------------------------------------------------------------------------------
<PAGE>
WARBURG PINCUS FUNDS
[LOGO]
ANNUAL REPORT
AUGUST 31, 1995
/ / WARBURG PINCUS
GROWTH & INCOME FUND
Warburg Pincus Funds / / WARBURG PINCUS
P.O. Box 9030 BALANCED FUND
Boston, Massachusetts 02205-9030
Shareholder Services / / WARBURG PINCUS
1-800-888-6878 TAX FREE FUND
Prospectuses
1-800-257-5614 Counsellors Securities Inc.,
Distributor
WPGBT-2-0895
