<PAGE>1
As filed with the Securities and Exchange Commission
on January 16, 1996
Securities Act File No. 33-22817
Investment Company Act File No. 811-5600
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. 8 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. 9 [X]
(Check appropriate box or boxes)
Counsellors Intermediate Maturity Government 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 Intermediate Maturity Government Fund, Inc.
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
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
<PAGE>2
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.
DECLARATION PURSUANT TO RULE 24f-2
Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933, as amended (the "1933 Act"), pursuant to Section
(a)(1) of Rule 24f-2 under the Investment Company Act of 1940, as amended (the
"1940 Act"), and to the number or amount presently registered is added an
indefinite number or amount of such securities. The Rule 24f-2 Notice for
Registrant's fiscal year ended October 31, 1995 was filed on December 19,
1995.
<PAGE>3
COUNSELLORS INTERMEDIATE MATURITY GOVERNMENT FUND, INC.
FORM N-1A
CROSS REFERENCE SHEET
_______________________________
Part A
Item No. Prospectus Heading*
-------- --------------------
1. Cover Page . . . . . . . Cover Page
2. Synopsis . . . . . . . . The Funds' Expenses
3. Condensed Financial
Information . . . . . Financial Highlights
4. General Description of
Registrant . . . . . . Cover Page; Investment Objective
and Policies; Portfolio
Investments; Risk Factors
and Special
Considerations; Certain
Investment Strategies;
Investment Guidelines;
General Information
5. Management of the Fund . Management of the Funds
6. Capital Stock and Other
Securities . . . . . . General Information
7. Purchase of Securities
Being Offered . . . . How to Open an Account; How to
Purchase Shares; Net
Asset Value
8. Redemption or
Repurchase How to Redeem and Exchange Shares
9. Legal
Proceedings . . . . . Not applicable
- ------------------------
* Relates to Registrant's Common Share prospectus, which is substantially
similar to Registrant's Advisor Share prospectus.
<PAGE>4
Part B Heading in Statement
Item No. of Additional Information
-------- -------------------------
10. Cover Page . . . . . . . Cover Page
11. Table of Contents . . . Contents
12. General Information and
History . . . . . . . Management of the Fund; Notes to
Financial Statements; See
Prospectus--"General
Information"
13. Investment Objectives and
Policies . . . . . . . Investment Objective;
Investment Policies
14. Management of the
Registrant . . . . . . Management of the Fund; See
Prospectus--"Management
of the Funds"
15. Control Persons and
Principal Holders of
Securities . . . . . . Management of the Fund;
Miscellaneous; See
Prospectus--"General
Information"
16. Investment Advisory and
Other Services . . . . Management of the Fund; See
Prospectus--"Management
of the Funds" and
"Shareholder Servicing"
17. Brokerage Allocation . . Investment Policies; See
Prospectus--"Portfolio
Transactions and Turnover
Rate"
18. Capital Stock and Other
Securities . . . . . . Management of the Fund--
Organization of the Fund;
See Prospectus--"General
Information"
<PAGE>5
Part B Heading in Statement
Item No. of Additional Information
-------- -------------------------
19. Purchase, Redemption and
Pricing of Securities
Being Offered . . . . Additional Purchase and Redemption
Information; See
Prospectus--"How to Open
an Account," "How to
Purchase Shares," "How to
Redeem and Exchange
Shares" and "Net Asset
Value"
20. Tax Status . . . . . . . Additional Information Concerning
Taxes; See
Prospectus--"Dividends,
Distributions and Taxes"
21. Underwriters . . . . . . Investment Policies; Portfolio
Transactions; See
Prospectus --"Management
of the Funds" and
"Shareholder Servicing"
22. Calculation of
Performance Data . . . Determination of Performance
23. Financial Statements . . Report of Independent Auditors;
Financial Statements
Part C
- ------
Information required to be included in Part C is set forth after the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
The Fund's Common Share and Advisor Prospectuses are incorporated
by reference to the Prospectuses that form a part of Post-Effective Amendment
No. 13 to the Registration Statement on Form N-1A of Warburg, Pincus Fixed
Income Fund filed on January 16, 1996 (Securities Act File No. 33-12343;
Investment Co. Act File No. 811-5039).
<PAGE>1
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE A
PROSPECTUS.
<PAGE>1
Subject to Completion, dated January 16, 1996
STATEMENT OF ADDITIONAL INFORMATION
_______, 1996
WARBURG PINCUS INTERMEDIATE MATURITY
GOVERNMENT FUND
P.O. Box 9030, Boston, Massachusetts 02205-9030
For information, call (800) 888-6878
Contents
Page
----
Investment Objective . . . . . . . . . . . . . . . . 2
Investment Policies . . . . . . . . . . . . . . . . . 2
Management of the Fund . . . . . . . . . . . . . . . 22
Additional Purchase and Redemption Information . . . 30
Exchange Privilege . . . . . . . . . . . . . . . . . 30
Additional Information Concerning Taxes . . . . . . . 31
Determination of Performance . . . . . . . . . . . . 33
Auditors and Counsel . . . . . . . . . . . . . . . . 35
Miscellaneous . . . . . . . . . . . . . . . . . . . . 35
Financial Statements . . . . . . . . . . . . . . . . 36
Report of Coopers & Lybrand L.L.P.,
Independent Accountants . . . . . . . . . . . . . . A-1
This Statement of Additional Information is meant to be read in
conjunction with the combined Prospectus for the Common Shares of Warburg
Pincus Intermediate Maturity Government Fund (the "Fund"), Warburg Pincus
Fixed Income Fund, Warburg Pincus Global Fixed Income Fund and Warburg Pincus
New York Intermediate Municipal Fund, and with the Prospectus for the Advisor
Shares of the Fund, each dated _______, 1996, as amended or supplemented from
time to time, and is incorporated by reference in its entirety into those
Prospectuses. Because this Statement of Additional Information is not itself
a prospectus, no investment in shares of the Fund should be made solely upon
the information contained herein. Copies of the Fund's Prospectuses and
information regarding the Fund's current performance may be obtained by
calling the Fund at (800) 927-2874. Information regarding the status of
shareholder accounts may be obtained by calling the Fund at (800) 888-6878 or
by writing to the Fund, P.O. Box 9030, Boston, Massachusetts 02205-9030.
<PAGE>2
INVESTMENT OBJECTIVE
The investment objective of the Fund is to achieve as high a level
of current income as is consistent with the preservation of capital.
INVESTMENT POLICIES
The following policies supplement the descriptions of the Fund's
investment objective and policies in the Prospectuses.
Options and Futures Transactions
Securities Options. The Fund may write covered put and call options
on stock and debt securities and may purchase such options that are traded on
foreign and U.S. exchanges, as well as over-the-counter ("OTC").
The Fund realizes fees (referred to as "premiums") for granting the
rights evidenced by the options it has written. A put option embodies the
right of its purchaser to compel the writer of the option to purchase from the
option holder an underlying security at a specified price for a specified time
period or at a specified time. In contrast, a call option embodies the right
of its purchaser to compel the writer of the option to sell to the option
holder an underlying security at a specified price for a specified time period
or at a specified time.
The principal reason for writing covered options on a security is to
attempt to realize, through the receipt of premiums, a greater return than
would be realized on the securities alone. In return for a premium, the Fund
as the writer of a covered call option forfeits the right to any appreciation
in the value of the underlying security above the strike price for the life of
the option (or until a closing purchase transaction can be effected).
Nevertheless, the Fund as a put or call writer retains the risk of a decline
in the price of the underlying security. The size of the premiums that the
Fund may receive may be adversely affected as new or existing institutions,
including other investment companies, engage in or increase their
option-writing activities.
If security prices rise, a put writer would generally expect to
profit, although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that the
writer will also profit, because it should be able to close out the option at
a lower price. If security prices fall, the put writer would expect to suffer
a loss. This loss should be less than the loss from purchasing the underlying
instrument directly, however, because the premium received for writing the
option should mitigate the effects of the decline.
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In the case of options written by the Fund that are deemed covered
by virtue of the Fund's holding convertible or exchangeable preferred stock or
debt securities, the time required to convert or exchange and obtain physical
delivery of the underlying securities with respect to which the Fund has
written options may exceed the time within which the Fund must make delivery
in accordance with an exercise notice. In these instances, the Fund may
purchase or temporarily borrow the underlying securities for purposes of
physical delivery. By so doing, the Fund will not bear any market risk, since
the Fund will have the absolute right to receive from the issuer of the
underlying security an equal number of shares to replace the borrowed
securities, but the Fund may incur additional transaction costs or interest
expenses in connection with any such purchase or borrowing.
Additional risks exist with respect to certain of the securities for
which the Fund may write covered call options. For example, if the Fund
writes covered call options on mortgage-backed securities, the mortgage-backed
securities that it holds as cover may, because of scheduled amortization or
unscheduled prepayments, cease to be sufficient cover. If this occurs, the
Fund will compensate for the decline in the value of the cover by purchasing
an appropriate additional amount of mortgage-backed securities.
Options written by the Fund will normally have expiration dates
between one and nine months from the date written. The exercise price of the
options may be below, equal to or above the market values of the underlying
securities at the times the options are written. In the case of call options,
these exercise prices are referred to as "in-the-money," "at-the-money" and
"out-of-the-money," respectively. The Fund may write (i) in-the-money call
options when Warburg, Pincus Counsellors, Inc., the Fund's investment adviser
("Warburg"), expects that the price of the underlying security will remain
flat or decline moderately during the option period, (ii) at-the-money call
options when Warburg expects that the price of the underlying security will
remain flat or advance moderately during the option period and
(iii) out-of-the-money call options when Warburg expects that the premiums
received from writing the call option plus the appreciation in market price of
the underlying security up to the exercise price will be greater than the
appreciation in the price of the underlying security alone. In any of the
preceding situations, if the market price of the underlying security declines
and the security is sold at this lower price, the amount of any realized loss
will be offset wholly or in part by the premium received. Out-of-the-money,
at-the-money and in-the-money put options (the reverse of call options as to
the relation of exercise price to market price) may be used in the same market
environments that such call options are used in equivalent transactions. To
secure its obligation to deliver the underlying security when it writes a call
option, the Fund will be required to deposit in escrow the underlying security
or other assets in accordance with the rules of the Options Clearing
Corporation (the "Clearing Corporation") and of the securities exchange on
which the option is written.
Prior to their expirations, put and call options may be sold in
closing sale or purchase transactions (sales or purchases by the Fund prior to
the exercise of options that it has purchased or written, respectively, of
options of the same series) in which the Fund may
3
<PAGE>4
realize a profit or loss from the sale. An option position may be closed out
only where there exists a secondary market for an option of the same series on
a recognized securities exchange or in the over-the-counter market. When the
Fund has purchased an option and engages in a closing sale transaction,
whether the Fund realizes a profit or loss will depend upon whether the amount
received in the closing sale transaction is more or less than the premium the
Fund initially paid for the original option plus the related transaction
costs. Similarly, in cases where the Fund has written an option, it will
realize a profit if the cost of the closing purchase transaction is less than
the premium received upon writing the original option and will incur a loss if
the cost of the closing purchase transaction exceeds the premium received upon
writing the original option. The Fund may engage in a closing purchase
transaction to realize a profit, to prevent an underlying security with
respect to which it has written an option from being called or put or, in the
case of a call option, to unfreeze an underlying security (thereby permitting
its sale or the writing of a new option on the security prior to the
outstanding option's expiration). The obligation of the Fund under an option
it has written would be terminated by a closing purchase transaction, but the
Fund would not be deemed to own an option as a result of the transaction. So
long as the obligation of the Fund as the writer of an option continues, the
Fund may be assigned an exercise notice by the broker-dealer through which the
option was sold, requiring the Fund to deliver the underlying security against
payment of the exercise price. This obligation terminates when the option
expires or the Fund effects a closing purchase transaction. The Fund can no
longer effect a closing purchase transaction with respect to an option once it
has been assigned an exercise notice.
There is no assurance that sufficient trading interest will exist to
create a liquid secondary market on a securities exchange for any particular
option or at any particular time, and for some options no such secondary
market may exist. A liquid secondary market in an option may cease to exist
for a variety of reasons. In the past, for example, higher than anticipated
trading activity or order flow or other unforeseen events have at times
rendered certain of the facilities of the Clearing Corporation and various
securities exchanges inadequate and resulted in the institution of special
procedures, such as trading rotations, restrictions on certain types of orders
or trading halts or suspensions in one or more options. There can be no
assurance that similar events, or events that may otherwise interfere with the
timely execution of customers' orders, will not recur. In such event, it
might not be possible to effect closing transactions in particular options.
Moreover, the Fund's ability to terminate options positions established in the
over-the-counter market may be more limited than for exchange-traded options
and may also involve the risk that securities dealers participating in
over-the-counter transactions would fail to meet their obligations to the
Fund. The Fund, however, intends to purchase over-the-counter options only
from dealers whose debt securities, as determined by Warburg, are considered
to be investment grade. If, as a covered call option writer, the Fund is
unable to effect a closing purchase transaction in a secondary market, it will
not be able to sell the underlying security until the option expires or it
delivers the underlying security upon exercise. In either case, the Fund
would continue to be at market risk on the security and could face higher
transaction costs, including brokerage commissions.
4
<PAGE>5
Securities exchanges generally have established limitations
governing the maximum number of calls and puts of each class which may be held
or written, or exercised within certain time periods by an investor or group
of investors acting in concert (regardless of whether the options are written
on the same or different securities exchanges or are held, written or
exercised in one or more accounts or through one or more brokers). It is
possible that the Fund and other clients of Warburg and certain of its
affiliates may be considered to be such a group. A securities exchange may
order the liquidation of positions found to be in violation of these limits
and it may impose certain other sanctions. These limits may restrict the
number of options the Fund will be able to purchase on a particular security.
Securities Index Options. The Fund may purchase and write
exchange-listed and OTC put and call options on securities indexes. A
securities index measures the movement of a certain group of securities by
assigning relative values to the securities included in the index, fluctuating
with changes in the market values of the securities included in the index.
Securities index options may be based on a broad or narrow market index or on
a particular industry or market segment.
Options on securities indexes are similar to options on securities
except that (i) the expiration cycles of securities index options are monthly,
while those of securities options are currently quarterly, and (ii) the
delivery requirements are different. Instead of giving the right to take or
make delivery of securities at a specified price, an option on a securities
index gives the holder the right to receive a cash "exercise settlement
amount" equal to (a) the amount, if any, by which the fixed exercise price of
the option exceeds (in the case of a put) or is less than (in the case of a
call) the closing value of the underlying index on the date of exercise,
multiplied by (b) a fixed "index multiplier." Receipt of this cash amount
will depend upon the closing level of the index upon which the option is based
being greater than, in the case of a call, or less than, in the case of a put,
the exercise price of the index and the exercise price of the option times a
specified multiple. The writer of the option is obligated, in return for the
premium received, to make delivery of this amount. Index options may be
offset by entering into closing transactions as described above for securities
options.
OTC Options. The Fund may purchase OTC or dealer options or sell
covered OTC options. Unlike exchange-listed options where an intermediary or
clearing corporation, such as the Clearing Corporation, assures that all
transactions in such options are properly executed, the responsibility for
performing all transactions with respect to OTC options rests solely with the
writer and the holder of those options. A listed call option writer, for
example, is obligated to deliver the underlying securities to the clearing
organization if the option is exercised, and the clearing organization is then
obligated to pay the writer the exercise price of the option. If the Fund
were to purchase a dealer option, however, it would rely on the dealer from
whom it purchased the option to perform if the option were exercised. If the
dealer fails to honor the exercise of the option by the Fund, the Fund would
lose the premium it paid for the option and the expected benefit of the
transaction.
5
<PAGE>6
Listed options generally have a continuous liquid market while
dealer options have none. Consequently, the Fund will generally be able to
realize the value of a dealer option it has purchased only by exercising it or
reselling it to the dealer who issued it. Similarly, when the Fund writes a
dealer option, it generally will be able to close out the option prior to its
expiration only by entering into a closing purchase transaction with the
dealer to which the Fund originally wrote the option. Although the Fund will
seek to enter into dealer options only with dealers who will agree to and that
are expected to be capable of entering into closing transactions with the
Fund, there can be no assurance that the Fund will be able to liquidate a
dealer option at a favorable price at any time prior to expiration. The
inability to enter into a closing transaction may result in material losses to
the Fund. Until the Fund, as a covered OTC call option writer, is able to
effect a closing purchase transaction, it will not be able to liquidate
securities (or other assets) used to cover the written option until the option
expires or is exercised. This requirement may impair the Fund's ability to
sell portfolio securities at a time when such sale might be advantageous. In
the event of insolvency of the other party, the Fund may be unable to
liquidate a dealer option.
Futures Activities. The Fund may enter into interest rate and
securities index futures contracts and purchase and write (sell) related
options traded on exchanges designated by the Commodity Futures Trading
Commission (the "CFTC") or consistent with CFTC regulations on foreign
exchanges. These transactions may be entered into for "bona fide hedging"
purposes as defined in CFTC regulations and other permissible purposes
including hedging against changes in the value of portfolio securities due to
anticipated changes in interest rates and/or market conditions and increasing
return.
The Fund will not enter into futures contracts and related options
for which the aggregate initial margin and premiums (discussed below) required
to establish positions other than those considered to be "bona fide hedging"
by the CFTC exceed 5% of the Fund's net asset value after taking into account
unrealized profits and unrealized losses on any such contracts it has entered
into. The Fund reserves the right to engage in transactions involving futures
contracts and options on futures contracts to the extent allowed by CFTC
regulations in effect from time to time and in accordance with the Fund's
policies. There is no overall limit on the percentage of Fund assets that may
be at risk with respect to futures activities. The ability of the Fund to
trade in futures contracts and options on futures contracts may be limited by
the requirements of the Internal Revenue Code of 1986, as amended (the
"Code"), applicable to a regulated investment company.
Futures Contracts. An interest rate futures contract provides for
the future sale by one party and the purchase by the other party of a certain
amount of a specific interest rate sensitive financial instrument (debt
security) at a specified price, date, time and place. Securities indexes are
capitalization weighted indexes which reflect the market value of the
securities listed on the indexes. A securities index futures contract is an
agreement to be settled by delivery of an amount of cash equal to a specified
multiplier times the
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<PAGE>7
difference between the value of the index at the close of the last trading day
on the contract and the price at which the agreement is made.
No consideration is paid or received by the Fund upon entering into
a futures contract. Instead, the Fund is required to deposit in a segregated
account with its custodian an amount of cash or cash equivalents, such as U.S.
government securities or other liquid high-grade debt obligations, equal to
approximately 1% to 10% of the contract amount (this amount is subject to
change by the exchange on which the contract is traded, and brokers may charge
a higher amount). This amount is known as "initial margin" and is in the
nature of a performance bond or good faith deposit on the contract which is
returned to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied. The broker will have access to
amounts in the margin account if the Fund fails to meet its contractual
obligations. Subsequent payments, known as "variation margin," to and from
the broker, will be made daily as the financial instrument or index underlying
the futures contract fluctuates, making the long and short positions in the
futures contract more or less valuable, a process known as
"marking-to-market." The Fund will also incur brokerage costs in connection
with entering into futures transactions.
At any time prior to the expiration of a futures contract, the Fund
may elect to close the position by taking an opposite position, which will
operate to terminate the Fund's existing position in the contract. Positions
in futures contracts and options on futures contracts (described below) may be
closed out only on the exchange on which they were entered into (or through a
linked exchange). No secondary market for such contracts exists. Although
the Fund intends to enter into futures contracts only if there is an active
market for such contracts, there is no assurance that an active market will
exist at any particular time. Most futures exchanges limit the amount of
fluctuation permitted in futures contract prices during a single trading day.
Once the daily limit has been reached in a particular contract, no trades may
be made that day at a price beyond that limit or trading may be suspended for
specified periods during the day. It is possible that futures contract prices
could move to the daily limit for several consecutive trading days with little
or no trading, thereby preventing prompt liquidation of futures positions at
an advantageous price and subjecting the Fund to substantial losses. In such
event, and in the event of adverse price movements, the Fund would be required
to make daily cash payments of variation margin. In such situations, if the
Fund had insufficient cash, it might have to sell securities to meet daily
variation margin requirements at a time when it would be disadvantageous to do
so. In addition, if the transaction is entered into for hedging purposes, in
such circumstances the Fund may realize a loss on a futures contract or option
that is not offset by an increase in the value of the hedged position. Losses
incurred in futures transactions and the costs of these transactions will
affect the Fund's performance.
Options on Futures Contracts. The Fund may purchase and write put
and call options on interest rate and securities index futures contracts and
may enter into closing transactions with respect to such options to terminate
existing positions. There is no
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<PAGE>8
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 an interest rate or securities index futures contract,
as contrasted with the direct investment in such a contract, gives the
purchaser the right, in return for the premium paid, to assume a position in a
futures contract at a specified exercise price at any time prior to the
expiration date of the option. The writer of the option is required upon
exercise to assume an offsetting futures position (a short position if the
option is a call and a long position if the option is a put). Upon exercise
of an option, the delivery of the futures position by the writer of the option
to the holder of the option will be accompanied by delivery of the accumulated
balance in the writer's futures margin account, which represents the amount by
which the market price of the futures contract exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
futures contract. The potential loss related to the purchase of an option on
futures contracts is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed at the point of
sale, there are no daily cash payments by the purchaser to reflect changes in
the value of the underlying contract; however, the value of the option does
change daily and that change would be reflected in the net asset value of the
Fund.
Hedging. In addition to entering into options and futures
transactions for other purposes, including generating current income to offset
expenses or increase return, the Fund may enter into these transactions as
hedges to reduce investment risk, generally by making an investment expected
to move in the opposite direction of 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 and futures transactions for
hedging purposes could limit any potential gain from an increase in the value
of the position hedged. In addition, the movement in the portfolio position
hedged may not be of the same magnitude as movement in the hedge. With
respect to futures contracts, since the value of portfolio securities will far
exceed the value of the futures contracts sold by the Fund, an increase in the
value of the futures contracts could only mitigate, but not totally offset,
the decline in the value of the Fund's assets.
In hedging transactions based on an index, whether the Fund will
realize a gain or loss from the purchase or writing of options on an index
depends upon movements in the level of securities prices in the market
generally or, in the case of certain indexes, in an industry or market
segment, rather than movements in the price of a particular security. The
risk of imperfect correlation increases as the composition of the Fund's
portfolio varies from the composition of the index. In an effort to
compensate for imperfect correlation of relative movements in the hedged
position and the hedge, the Fund's hedge positions may be in a greater or
lesser dollar amount than the dollar amount of the hedged position. Such
"over hedging" or "under hedging" may adversely affect the Fund's net
investment results if market movements are not as anticipated when the hedge
is established. Securities index futures transactions may be subject to
additional correlation risks. First, all participants in
8
<PAGE>9
the futures market are subject to margin deposit and maintenance requirements.
Rather than meeting additional margin deposit requirements, investors may
close futures contracts through offsetting transactions which would distort
the normal relationship between the index and futures markets. Secondly, from
the point of view of speculators, the deposit requirements in the futures
market are less onerous than margin requirements in the securities market.
Therefore, increased participation by speculators in the futures market also
may cause temporary price distortions. Because of the possibility of price
distortions in the futures market and the imperfect correlation between
movements in an index and movements in the price of index futures, a correct
forecast of general market trends by Warburg still may not result in a
successful hedging transaction.
The Fund will engage in hedging transactions only when deemed
advisable by Warburg, and successful use by the Fund of hedging transactions
will be subject to Warburg's ability to predict trends in interest rate or
securities markets, as the case may be, and to correctly predict movements in
the directions of the hedge and the hedged position and the correlation
between them, which predictions could prove to be inaccurate. This requires
different skills and techniques than predicting changes in the price of
individual securities, and there can be no assurance that the use of these
strategies will be successful. Even a well-conceived hedge may be
unsuccessful to some degree because of unexpected market behavior or trends.
Losses incurred in hedging transactions and the costs of these transactions
will affect the Fund's performance.
Asset Coverage for Forward Contracts, Options, Futures and Options
on Futures. As described in the Prospectuses, the Fund will comply with
guidelines established by the U.S. Securities and Exchange Commission (the
"SEC") with respect to coverage of options written by the Fund on securities
and indexes; and interest rate and index futures contracts and options on
these futures contracts. These guidelines may, in certain instances, require
segregation by the Fund of cash or liquid high-grade debt securities or other
securities that are acceptable as collateral to the appropriate regulatory
authority.
For example, a call option written by the Fund on securities may
require the Fund to hold the securities subject to the call (or securities
convertible into the securities without additional consideration) or to
segregate assets (as described above) sufficient to purchase and deliver the
securities if the call is exercised. A call option written by the Fund on an
index may require the Fund to own portfolio securities that correlate with the
index or to segregate assets (as described above) equal to the excess of the
index value over the exercise price on a current basis. A put option written
by the Fund may require the Fund to segregate assets (as described above)
equal to the exercise price. The Fund could purchase a put option if the
strike price of that option is the same or higher than the strike price of a
put option sold by the Fund. If the Fund holds a futures or forward contract,
the Fund could purchase a put option on the same futures or forward contract
with a strike price as high or higher than the price of the contract held.
The Fund may enter into fully or partially offsetting transactions so that its
net position, coupled with any segregated assets (equal to
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<PAGE>10
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
Government Securities. As noted in the Prospectus, the Fund intends
to invest at least 65% of its total assets in debt obligations of varying
maturities issued or guaranteed by the United States Government, its agencies
or instrumentalities ("Government Securities"). Direct obligations of the
U.S. Treasury include a variety of securities that differ in their interest
rates, maturities and dates of issuance. Government Securities also include
securities issued or guaranteed by the Federal Housing Administration, Farmers
Home Loan Administration, Export-Import Bank of the United States, Small
Business Administration, Government National Mortgage Association ("GNMA"),
General Services Administration, Central Bank for Cooperatives, Federal Farm
Credit Banks, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation
("FHLMC"), Federal Intermediate Credit Banks, Federal Land Banks, Federal
National Mortgage Association ("FNMA"), Federal Maritime Administration,
Tennessee Valley Authority, District of Columbia Armory Board and Student Loan
Marketing Association. The Fund may also invest in instruments that are
supported by the right of the issuer to borrow from the U.S. Treasury and
instruments that are supported by the credit of the instrumentality. Because
the United States Government is not obligated by law to provide support to an
instrumentality it sponsors, the Fund will invest in obligations issued by
such an instrumentality only if Warburg determines that the credit risk with
respect to the instrumentality does not make its securities unsuitable for
investment by the Fund.
Zero Coupon Securities. As described in the Prospectuses, the Fund
may invest in (i) Government Securities that have been stripped of their
unmatured interest coupons, (ii) the coupons themselves and (iii) receipts or
certificates representing interests in stripped Government Securities and
coupons (collectively referred to as "zero coupon securities"). The Fund
anticipates that it will not normally hold zero coupon securities to maturity.
Federal tax law requires that a holder of a zero coupon security accrue a
portion of the discount at which the security was purchased as income each
year, even though the holder receives no interest payment on the security
during the year. Such accrued discount will be includible in determining the
amount of dividends the Fund must pay each year and, in order to generate cash
necessary to pay such dividends, the Fund may liquidate portfolio securities
at a time when it would not otherwise have done so. At present, the U.S.
Treasury and certain U.S. agencies issue stripped Government Securities. In
addition, in the recent past, a number of banks and brokerage firms have
separated the principal portions from the coupon portions of U.S. Treasury
bonds and notes and sold them separately in the form of receipts or
certificates representing undivided interests in these instruments.
Securities of Other Investment Companies. The Fund may invest in
securities of other investment companies to the extent permitted under the
Investment Company Act of 1940, as amended (the "1940 Act"). Presently, under
the 1940 Act, the Fund may hold
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<PAGE>11
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. The Fund may lend portfolio
securities to brokers, dealers and other financial organizations that meet
capital and other credit requirements or other criteria established by the
Fund's Board of Directors (the "Board"). These loans, if and when made, may
not exceed 30% of the Fund's total assets taken at value. The Fund will not
lend portfolio securities to E.M. Warburg, Pincus & Co., Inc. ("EMW") or its
affiliates unless it has applied for and received specific authority to do so
from the SEC. Loans of portfolio securities will be collateralized by cash,
letters of credit or Government Securities, which are maintained at all times
in an amount equal to at least 100% of the current market value of the loaned
securities. Any gain or loss in the market price of the securities loaned
that might occur during the term of the loan would be for the account of the
Fund. From time to time, the Fund may return a part of the interest earned
from the investment of collateral received for securities loaned to the
borrower and/or a third party that is unaffiliated with the Fund and that is
acting as a "finder."
By lending its securities, the Fund can increase its income by
continuing to receive interest and any dividends on the loaned securities as
well as by either investing the collateral received for securities loaned
in short-term instruments or obtaining yield in the form of interest paid by
the borrower when Government Securities are used as collateral. Although, the
generation of income is not an investment objective of the Fund, income
received could be used to pay the Fund's expenses and would increase an
investor's total return. The Fund will adhere to the following conditions
whenever its portfolio securities are loaned: (i) the Fund must receive at
least 100% cash collateral or equivalent securities of the type discussed in
the preceding paragraph from the borrower; (ii) the borrower must increase
such collateral whenever the market value of the securities rises above the
level of such collateral; (iii) the Fund must be able to terminate the loan at
any time; (iv) the Fund must receive reasonable interest on the loan, as well
as any dividends, interest or other distributions on the loaned securities and
any increase in market value; (v) the Fund may pay only reasonable custodian
fees in connection with the loan; and (vi) voting rights on the loaned
securities may pass to the borrower, provided, however, that if a material
event adversely affecting the investment occurs, the Board of Directors must
terminate the loan and regain the right to vote the securities. Loan
agreements involve certain risks in the event of default or insolvency of the
other party including possible delays or restrictions upon the Fund's ability
to recover the loaned securities or dispose of the collateral for the loan.
When-Issued Securities and Delayed-Delivery Transactions. The Fund
may purchase Government Securities on a "when-issued" basis or purchase or
sell securities for delayed delivery (i.e., payment or delivery occur beyond
the normal settlement date at a stated price and yield). When-issued
transactions normally settle within 30-45 days. The Fund will enter into a
when-issued transaction for the purpose of acquiring portfolio
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<PAGE>12
securities and not for the purpose of leverage, but may sell the securities
before the settlement date if Warburg deems it advantageous to do so. The
payment obligation and the interest rate that will be received on when-issued
securities are fixed at the time the buyer enters into the commitment. Due to
fluctuations in the value of securities purchased or sold on a when-issued or
delayed-delivery basis, the yields obtained on such securities may be higher
or lower than the yields available in the market on the dates when the
investments are actually delivered to the buyers.
When the Fund agrees to purchase when-issued or delayed delivery
securities, its custodian will set aside cash, Government Securities or other
liquid high-grade debt obligations or other securities that are acceptable as
collateral to the appropriate regulatory authority equal to the amount of the
commitment in a segregated account. Normally, the custodian will set aside
portfolio securities to satisfy a purchase commitment, and in such a case the
Fund may be required subsequently to place additional assets in the segregated
account in order to ensure that the value of the account remains equal to the
amount of the Fund's commitment. It may be expected that the Fund's net
assets will fluctuate to a greater degree when it sets aside portfolio
securities to cover such purchase commitments than when it sets aside cash.
When the Fund engages in when-issued or delayed delivery transactions, it
relies on the other party to consummate the trade. Failure of the seller to
do so may result in the Fund's incurring a loss or missing an opportunity to
obtain a price considered to be advantageous.
Loan Participations and Assignments. The Fund may invest in fixed
and floating rate loans ("Loans") arranged through private negotiations
between a foreign government (a "Borrower") and one or more financial
institutions ("Lenders"). The majority of the Fund's investments in Loans are
expected to be in the form of participations in Loans ("Participations") and
assignments of portions of Loans from third parties ("Assignments").
Participations typically will result in the Fund having a contractual
relationship only with the Lender, not with the Borrower. The Fund will have
the right to receive payments of principal, interest and any fees to which it
is entitled only from the Lender selling the Participation and only upon
receipt by the Lender of the payments from the Borrower. In connection with
purchasing Participations, the Fund generally will have no right to enforce
compliance by the Borrower with the terms of the loan agreement relating to
the Loan, nor any rights of set-off against the Borrower, and the Fund may not
directly benefit from any collateral supporting the Loan in which it has
purchased the Participation. As a result, the Fund will assume the credit
risk of both the Borrower and the Lender that is selling the Participation.
In the event of the insolvency of the Lender selling a Participation, the Fund
may be treated as a general creditor of the Lender and may not benefit from
any set-off between the Lender and the Borrower. The Fund will acquire
Participations only if the Lender interpositioned between the Fund and the
Borrower is determined by Warburg to be creditworthy.
When the Fund purchases Assignments from Lenders, the Fund will
acquire direct rights against the Borrower on the Loan. However, since
Assignments are generally
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<PAGE>13
arranged through private negotiations between potential assignees and
potential assignors, the rights and obligations acquired by the Fund as the
purchaser of an Assignment may differ from, and be more limited than, those
held by the assigning Lender.
There are risks involved in investing in Participations and
Assignments. The Fund may have difficulty disposing of them because there is
no liquid market for such securities. The lack of a liquid secondary market
will have an adverse impact on the value of such securities and on the Fund's
ability to dispose of particular Participations or Assignments when necessary
to meet the Fund's liquidity needs or in response to a specific economic
event, such as a deterioration in the creditworthiness of the Borrower. The
lack of a liquid market for Participations and Assignments also may make it
more difficult for the Fund to assign a value to these securities for purposes
of valuing the Fund's portfolio and calculating its net asset value.
Mortgage-Backed Securities. The Fund may invest in mortgage-backed
securities, such as those issued by the GNMA, FNMA, FHLMC or certain foreign
issuers. Mortgage-backed securities represent direct or indirect
participations in, or are secured by and payable from, mortgage loans secured
by real property. The mortgages backing these securities include, among other
mortgage instruments, conventional 30-year fixed-rate mortgages, 15-year
fixed-rate mortgages, graduated payment mortgages and adjustable rate
mortgages. The government or the issuing agency typically guarantees the
payment of interest and principal of these securities. However, the
guarantees do not extend to the securities' yield or value, which are likely
to vary inversely with fluctuations in interest rates, nor do the guarantees
extend to the yield or value of the Fund's shares. These securities generally
are "pass-through" instruments, through which the holders receive a share of
all interest and principal payments from the mortgages underlying the
securities, net of certain fees.
Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and
the associated average life assumption. The average life of pass-through
pools varies with the maturities of the underlying mortgage loans. A pool's
term may be shortened by unscheduled or early payments of principal on the
underlying mortgages. The occurrence of mortgage prepayments is affected by
various factors, including the level of interest rates, general economic
conditions, the location, scheduled maturity and age of the mortgage and other
social and demographic conditions. Because prepayment rates of individual
pools vary widely, it is not possible to predict accurately the average life
of a particular pool. For pools of fixed-rate 30-year mortgages, a common
industry practice in the U.S. has been to assume that prepayments will result
in a 12-year average life. At present, pools, particularly those with loans
with other maturities or different characteristics, are priced on an
assumption of average life determined for each pool. In periods of falling
interest rates, the rate of prepayment tends to increase, thereby shortening
the actual average life of a pool of mortgage-related securities. Conversely,
in periods of rising rates the rate of prepayment tends to decrease, thereby
lengthening the actual average life of the pool. However, these
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<PAGE>14
effects may not be present, or may differ in degree, if the mortgage loans in
the pools have adjustable interest rates or other special payment terms, such
as a prepayment charge. Actual prepayment experience may cause the yield of
mortgage-backed securities to differ from the assumed average life yield.
Reinvestment of prepayments may occur at higher or lower interest rates than
the original investment, thus affecting the Fund's yield.
The rate of interest on mortgage-backed securities is lower than the
interest rates paid on the mortgages included in the underlying pool due to
the annual fees paid to the servicer of the mortgage pool for passing through
monthly payments to certificate holders and to any guarantor, such as GNMA,
and due to any yield retained by the issuer. Actual yield to the holder may
vary from the coupon rate, even if adjustable, if the mortgage-backed
securities are purchased or traded in the secondary market at a premium or
discount. In addition, there is normally some delay between the time the
issuer receives mortgage payments from the servicer and the time the issuer
makes the payments on the mortgage-backed securities, and this delay reduces
the effective yield to the holder of such securities.
Short Sales "Against the Box". In a short sale, the Fund sells a
borrowed security and has a corresponding obligation to the lender to return
the identical security. The seller does not immediately deliver the
securities sold and is said to have a short position in those securities until
delivery occurs. If the Fund engages in a short sale, the collateral for the
short position will be maintained by the Fund's custodian or qualified
sub-custodian. While the short sale is open, the Fund will maintain in a
segregated account an amount of securities equal in kind and amount to the
securities sold short or securities convertible into or exchangeable for such
equivalent securities. These securities constitute the Fund's long position.
The Fund does not intend to engage in short sales against the box
for investment purposes. The Fund may, however, make a short sale as a hedge,
when it believes that the price of a security may decline, causing a decline
in the value of a security owned by the Fund (or a security convertible or
exchangeable for such security), or when the Fund wants to sell the security
at an attractive current price, but also wishes to defer recognition of gain
or loss for U.S. federal income tax purposes and for purposes of satisfying
certain tests applicable to regulated investment companies under the Code. In
such case, any future losses in the Fund's long position should be offset by a
gain in the short position and, 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.
Reverse Repurchase Agreements and Dollar Rolls. The Fund may enter
into reverse repurchase agreements with the same parties with whom it may
enter into repurchase
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<PAGE>15
agreements. Reverse repurchase agreements involve the sale of securities held
by the Fund pursuant to its agreement to repurchase them at a mutually agreed
upon date, price and rate of interest. At the time the Fund enters into a
reverse repurchase agreement, it will establish and maintain a segregated
account with an approved custodian containing cash or liquid high-grade debt
securities having a value not less than the repurchase price (including
accrued interest). The assets contained in the segregated account will be
marked-to-market daily and additional assets will be placed in such account on
any day in which the assets fall below the repurchase price (plus accrued
interest). The Fund's liquidity and ability to manage its assets might be
affected when it sets aside cash or portfolio securities to cover such
commitments. Reverse repurchase agreements involve the risk that the market
value of the securities retained in lieu of sale may decline below the price
of the securities the Fund has sold but is obligated to repurchase. In the
event the buyer of securities under a reverse repurchase agreement files for
bankruptcy or becomes insolvent, such buyer or its trustee or receiver may
receive an extension of time to determine whether to enforce a Fund's
obligation to repurchase the securities, and the Fund's use of the proceeds of
the reverse repurchase agreement may effectively be restricted pending such
decision.
The Fund also may enter into "dollar rolls," in which the Fund sells
fixed-income securities for delivery in the current month and simultaneously
contracts to repurchase similar but not identical (same type, coupon and
maturity) securities on a specified future date. During the roll period, the
Fund would forego principal and interest paid on such securities. The Fund
would be compensated by the difference between the current sales price and the
forward price for the future purchase, as well as by the interest earned on
the cash proceeds of the initial sale. At the time the Fund enters into a
dollar roll transaction, it will place in a segregated account maintained with
an approved custodian cash or other liquid high-grade debt obligations having
a value not less than the repurchase price (including accrued interest) and
will subsequently monitor the account to ensure that its value is maintained.
Reverse repurchase agreements are considered to be borrowings under the 1940
Act.
Non-Publicly Traded and Illiquid Securities. The Fund may not
invest more than 15% of its net assets, in non-publicly traded and illiquid
securities, including securities that are illiquid by virtue of the absence of
a readily available market, repurchase agreements which have a maturity of
longer than seven days and time deposits maturing in more than seven calendar
days. Securities that have legal or contractual restrictions on resale but
have a readily available market are not considered illiquid for purposes of
this limitation. Repurchase agreements subject to demand are deemed to have a
maturity equal to the notice period.
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
15
<PAGE>16
placements or restricted securities and are purchased directly from the issuer
or in the secondary market. Mutual funds do not typically hold a significant
amount of these restricted or other illiquid securities because of the
potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A mutual fund might also
have to register such restricted securities in order to dispose of them
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities Act
including repurchase agreements, commercial paper, foreign securities,
municipal securities and corporate bonds and notes. Institutional investors
depend on an efficient institutional market in which the unregistered security
can be readily resold or on an issuer's ability to honor a demand for
repayment. The fact that there are contractual or legal restrictions on
resale to the general public or to certain institutions may not be indicative
of the liquidity of such investments.
Rule 144A Securities. Rule 144A under the Securities Act adopted by
the SEC allows for a broader institutional trading market for securities
otherwise subject to restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of the
Securities Act for resales of certain securities to qualified institutional
buyers. Warburg anticipates that the market for certain restricted securities
such as institutional commercial paper will expand further as a result of this
regulation and use of automated systems for the trading, clearance and
settlement of unregistered securities of domestic and foreign issuers, such as
the PORTAL System sponsored by the National Association of Securities Dealers,
Inc.
An investment in Rule 144A Securities will be considered illiquid
and therefore subject to the Fund's limit on the purchase of illiquid
securities unless the Fund's Board of Trustees (the "Board") or its delegates
determines that the Rule 144A Securities are liquid. In reaching liquidity
decisions, the Board and its delegates may consider, inter alia, the following
factors: (i) the unregistered nature of the security; (ii) the frequency of
trades and quotes for the security; (iii) the number of dealers wishing to
purchase or sell the security and the number of other potential purchasers;
(iv) dealer undertakings to make a market in the security and (v) the nature
of the security and the nature of the marketplace trades (e.g., the time
needed to dispose of the security, the method of soliciting offers and the
mechanics of the transfer).
Borrowing. The Fund may borrow up to 30% of its total assets for
temporary or emergency purposes, including to meet portfolio redemption
requests so as to permit the orderly disposition of portfolio securities or to
facilitate settlement transactions on portfolio securities. Investments
(including roll-overs) will not be made when borrowings exceed 5%
16
<PAGE>17
of the Fund's net assets. Although the principal of such borrowings will be
fixed, the Fund's assets may change in value during the time the borrowing is
outstanding. The Fund expects that some of its borrowings may be made on a
secured basis. In such situations, either the custodian will segregate the
pledged assets for the benefit of the lender or arrangements will be made with
a suitable subcustodian, which may include the lender.
Other Investment Limitations
The investment limitations numbered 1 through 12 may not be changed
without the affirmative vote of the holders of a majority of the Fund's
outstanding shares. Such majority is defined as the lesser of (i) 67% or more
of the shares present at the meeting, if the holders of more than 50% of the
outstanding shares of the Fund are present or represented by proxy, or (ii)
more than 50% of the outstanding shares. Investment limitations 13 through 18
may be changed by a vote of the Board at any time.
The Fund may not:
1. Borrow money except that the Fund may (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. For purposes of this restriction, short sales, the entry
into currency transactions, options, futures contracts, options on futures
contracts, forward commitment transactions and dollar roll transactions that
are not accounted for as financings (and the segregation of assets in
connection with any of the foregoing) shall not constitute borrowing.
2. Purchase any securities which would cause 25% or more of the
value of the Fund's total assets at the time of purchase to be invested in the
securities of issuers conducting their principal business activities in the
same industry; provided that there shall be no limit on the purchase of
Government Securities.
3. Make loans except that the Fund may purchase or hold fixed
income securities, including loan participations, assignments and structured
securities; lend portfolio securities and enter into repurchase agreements.
4. Underwrite any securities issued by others except to the extent
that the investment in restricted securities and the sale of securities in
accordance with the Fund's investment objective, policies and limitations may
be deemed to be underwriting.
5. Purchase or sell real estate, real estate investment trust
securities or invest in oil, gas or mineral exploration or development
programs, except that the Fund may invest in securities secured by real
estate, mortgages or interests therein.
17
<PAGE>18
6. Make short sales of securities or maintain a short position,
except the Fund may maintain short positions in forward currency contracts,
options, futures contracts and options on futures contracts and make short
sales "against the box".
7. Purchase more than 10% of the voting securities of any one
issuer; provided that this limitation shall not apply to investments in
Government Securities.
8. Purchase securities on margin, except that the Fund may obtain
any short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of
initial or variation margin in connection with transactions in currencies,
options, futures contracts or related options will not be deemed to be a
purchase of securities on margin.
9. Invest in commodities, except that the Fund may purchase and
sell futures contracts, including those relating to securities, currencies and
indexes, and options on futures contracts, securities, currencies or indexes,
and purchase and sell currencies or securities on a forward commitment or
delayed-delivery basis.
10. Issue any senior security except as permitted in these
Investment Restrictions.
11. Purchase the securities of any issuer if as a result more than
5% of the value of the Fund's total assets would be invested in the securities
of such issuer, except that this 5% limitation does not apply to Government
Securities and except that up to 25% of the value of the Fund's total assets
may be invested without regard to this 5% limitation.
12. Purchase securities of other investment companies except in
connection with a merger, consolidation, acquisition, reorganization or offer
of exchange or as permitted under the 1940 Act.
13. Pledge, mortgage or hypothecate its assets, except to the
extent necessary to secure permitted borrowings and to the extent related to
the deposit of assets in escrow in connection with the writing of covered put
and call options and purchase of securities on a forward commitment or
delayed-delivery basis and collateral and initial or variation margin
arrangements with respect to currency transactions, options, futures
contracts, and options on futures contracts.
14. Invest more than 15% of the value of the Fund's net assets in
securities which may be illiquid because of legal or contractual restrictions
on resale or securities for 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.
18
<PAGE>19
15. Purchase any security if as a result the Fund would then have
more than 5% of its total assets invested in securities of companies
(including predecessors) that have been in continuous operation for fewer than
three years.
16. Purchase or retain securities of any company if, to the
knowledge of the Fund, any of the Fund's officers or Directors or any officer
or director of the Fund's investment adviser individually owns more than 1/2
of 1% of the outstanding securities of such company and together they own
beneficially more than 5% of the securities.
17. Invest in warrants.
18. Make additional investments (including roll-overs) if the
Fund's borrowings exceed 5% of its net assets.
The aggregate of all Rule 144A securities, non-publicly traded and
illiquid securities and securities of companies (including predecessors) that
have been in continuous operation for less than three years is limited to 15%
of total assets. These and other non-fundamental investment limitations are
currently required by one or more states in which shares of the Fund are sold.
These may be more restrictive than the limitations set forth above. Should
the Fund determine that any such commitment is no longer in the best interest
of the Fund and its shareholders, the Fund will revoke the commitment by
terminating the sale of Fund shares in the state involved. In addition, the
relevant state may change or eliminate its policy regarding such investment
limitations.
If a percentage restriction (other than the percentage limitation
set forth in No. 1 above) is adhered to at the time of an investment, a later
increase or decrease in the percentage of assets resulting from a change in
the values of portfolio securities or in the amount of the Fund's assets will
not constitute a violation of such restriction.
Portfolio Valuation
The Prospectuses discuss the time at which the net asset value of
the Fund is determined for purposes of sales and redemptions. The following
is a description of the procedures used by the Fund in valuing its assets.
Securities listed on a U.S. securities exchange (including
securities traded through the NASDAQ National Market System) or foreign
securities exchange or traded in an over-the-counter market will be valued at
the most recent sale as of the time the valuation is made or, in the absence
of sales, at the mean between the bid and asked quotations. If there are no
such quotations, the value of the securities will be taken to be the highest
bid quotation on the exchange or market. Options or futures contracts will be
valued similarly. A security which is listed or traded on more than one
exchange is valued at the quotation on the exchange determined to be the
primary market for such security. Notwithstanding the
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<PAGE>20
foregoing, in determining the market value of portfolio investments, the Fund
may employ outside organizations (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
the 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. All other securities
and other assets of the 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.
Portfolio Transactions
Warburg is responsible for establishing, reviewing and, where
necessary, modifying the Fund's investment program to achieve its investment
objective. Government Securities are generally purchased from underwriters or
dealers, although certain newly issued Government Securities may be purchased
directly from the United States Treasury or from the issuing agency or
instrumentality. No brokerage commissions are typically paid on purchases and
sales of Government Securities. The purchase price paid by the Fund to
underwriters of newly issued securities usually includes a concession paid by
the issuer to the underwriter, and purchases of securities from dealers,
acting as either principals or agents in the after market, are normally
executed at a price between the bid and asked price, which includes a dealer's
mark-up or mark-down. Government Securities are generally purchased from
underwriters or dealers, although certain newly issued Government Securities
may be purchased directly from the U.S. Treasury or from the issuing agency or
instrumentality.
Warburg will select specific portfolio investments and effect
transactions for the Fund and in doing so seeks to obtain the overall best
execution of portfolio transactions. In evaluating prices and executions,
Warburg will consider the factors it deems relevant, which may include the
breadth of the market in the security, the price of the security, the
financial condition and execution capability of a broker or dealer and the
reasonableness of the commission, if any, for the specific transaction and on
a continuing basis. Warburg may, in its discretion, effect transactions in
portfolio securities with dealers who provide brokerage and research services
(as those terms are defined in Section 28(e) of the Securities Exchange Act of
1934) to the Fund and/or other accounts over which Warburg exercises
investment discretion. Warburg may place portfolio transactions with a broker
or dealer with whom it has negotiated a commission that is in excess of the
commission another broker or dealer would have charged for effecting the
transaction if Warburg determines in good faith
20
<PAGE>21
that such amount of commission was reasonable in relation to the value of such
brokerage and research services provided by such broker or dealer viewed in
terms of either that particular transaction or of the overall responsibilities
of Warburg. Research and other services received may be useful to Warburg in
serving both the Fund and its other clients and, conversely, research or other
services obtained by the placement of business of other clients may be useful
to Warburg in carrying out its obligations to the Fund. Research may include
furnishing advice, either directly or through publications or writings, as to
the value of securities, the advisability of purchasing or selling specific
securities and the availability of securities or purchasers or sellers of
securities; furnishing seminars, information, analyses and reports concerning
issuers, industries, securities, trading markets and methods, legislative
developments, changes in accounting practices, economic factors and trends and
portfolio strategy; access to research analysts, corporate management
personnel, industry experts, economists and government officials; comparative
performance evaluation and technical measurement services and quotation
services; and products and other services (such as third party publications,
reports and analyses, and computer and electronic access, equipment, software,
information and accessories that deliver, process or otherwise utilize
information, including the research described above) that assist Warburg in
carrying out its responsibilities. Research received from brokers or dealers
is supplemental to Warburg's own research program. The fees to Warburg under
its advisory agreement with the Fund are not reduced by reason of its
receiving any brokerage and research services.
Investment decisions for the Fund concerning specific portfolio
securities are made independently from those for other clients advised by
Warburg. Such other investment clients may invest in the same securities as
the Fund. When purchases or sales of the same security are made at
substantially the same time on behalf of such other clients, transactions are
averaged as to price and available investments allocated as to amount, in a
manner which Warburg believes to be equitable to each client, including the
Fund. In some instances, this investment procedure may adversely affect the
price paid or received by the Fund or the size of the position obtained or
sold for the Fund. To the extent permitted by law, Warburg may aggregate the
securities to be sold or purchased for the Fund with those to be sold or
purchased for such other investment clients in order to obtain best execution.
Any portfolio transaction for the Fund may be executed through
Counsellors Securities Inc., the Fund's distributor ("Counsellors
Securities"), if, in Warburg's judgment, the use of Counsellors Securities is
likely to result in price and execution at least as favorable as those of
other qualified brokers, and if, in the transaction, Counsellors Securities
charges the Fund a commission rate consistent with those charged by
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 Fund's
operations.
In no instance will portfolio securities be purchased from or sold
to Warburg or Counsellors Securities or any affiliated person of such
companies. In addition, the Fund
21
<PAGE>22
will not give preference to any institutions with whom the Fund enters into
distribution or shareholder servicing agreements concerning the provision of
distribution services or support services. See the Prospectuses, "Shareholder
Servicing."
The Fund may participate, if and when practicable, in bidding for
the purchase of securities for the Fund's portfolio directly from an issuer in
order to take advantage of the lower purchase price available to members of
such a group. The Fund will engage in this practice, however, only when
Warburg, in its sole discretion, believes such practice to be otherwise in the
Fund's interest.
Portfolio Turnover
The Fund's portfolio turnover rate is calculated by dividing the
lesser of purchases or sales of its portfolio securities for the year by the
monthly average value of the portfolio securities. Securities with remaining
maturities of one year or less at the date of acquisition are excluded from
the calculation.
The Fund does not intend to seek profits through short-term trading,
but the rate of turnover will not be a limiting factor when the Fund deems it
desirable to sell or purchase securities. Certain practices that may be
employed by the Fund could result in high portfolio turnover. For example,
portfolio securities may be sold in anticipation of a rise in interest rates
(market decline) or purchased in anticipation of a decline in interest rates
(market rise) and later sold. In addition, a security may be sold and another
of comparable quality purchased at approximately the same time to take
advantage of what Warburg believes to be a temporary disparity in the normal
yield relationship between the two securities. These yield disparities may
occur for reasons not directly related to the investment quality of particular
issues or the general movement of interest rates, such as changes in the
overall demand for, or supply of, various types of securities.
MANAGEMENT OF THE FUND
Officers and Board of Directors
The names (and ages) of the Fund's Directors and officers, their
addresses, present positions and principal occupations during the past five
years and other affiliations are set forth below.
22
<PAGE>23
Richard N. Cooper* (61) . . . . Director
Room 7E470HB Professor at Harvard University;
Central Intelligence Agency Director or Trustee of Circuit City
930 Dolly Madison Blvd. Stores, Inc. (retail electronics and
McClain, Virginia 22107 appliances) and Phoenix Home Life Insurance
Co.
Donald J. Donahue (71) . . . . Director
99 Indian Field Road Chairman of Magma Copper Company
Greenwich, Connecticut 06830 since January 1987; Director or Trustee of
GEV Corporation and Signet Star Reinsurance
Company; Chairman and Director of NAC
Holdings from September 1990-June 1993.
Jack W. Fritz (68) . . . . . . Director
2425 North Fish Creek Road Private investor; Consultant and
P.O. Box 483 Director of Fritz Broadcasting, Inc. and
Wilson, Wyoming 83014 Fritz Communications (developers and
operators of radio stations); Director of
Advo, Inc. (direct mail advertising).
John L. Furth* (65) . . . . . . Chief Executive Officer and
466 Lexington Avenue Director
New York, New York 10017-3147 Vice Chairman and Director of EMW; Associated
with EMW since 1970; Director and officer of
other investment companies advised by
Warburg.
Thomas A. Melfe (63) . . . . . Director
30 Rockefeller Plaza Partner in the law firm of Donovan
New York, New York 10112 Leisure Newton & Irvine; Director of
Municipal Fund for New York Investors, Inc.
Alexander B. Trowbridge (66) . Director
1155 Connecticut Avenue, N.W. President of Trowbridge Partners, Inc.
Suite 700 (business consulting) from January 1990-
- ------------------------
* Indicates a Director who is an "interested person" of the Fund as defined
in 1940 Act.
23
<PAGE>24
Washington, DC 20036 January 1994; President of the National
Association of Manufacturers from 1980-1990;
Director or Trustee of New England Mutual
Life Insurance Co., ICOS Corporation
(biopharmaceuticals), P.H.H. Corporation
(fleet auto management; housing and plant
relocation service), WMX Technologies Inc.
(solid and hazardous waste collection and
disposal), The Rouse Company (real estate
development), SunResorts International Ltd.
(hotel and real estate management), Harris
Corp. (electronics and communications
equipment), The Gillette Co. (personal care
products) and Sun Company Inc. (petroleum
refining and marketing).
Dale C. Christensen (48) . . . President and Co-Portfolio Manager of
466 Lexington Avenue the Fund
New York, New York 10017-3147 Portfolio Manager or Co-Portfolio Manager of
other Warburg Pincus Funds; Managing Director
of EMW; Associated with EMW since 1989; Vice
President at Citibank, N.A. from 1985-1989;
President of other investment companies
advised by Warburg.
Arnold M. Reichman (47) . . . . Executive Vice President
466 Lexington Avenue Managing Director and Assistant
New York, New York 10017-3147 Secretary of EMW; Associated with EMW since
1984; Senior Vice President, Secretary and
Chief Operating Officer of Counsellors
Securities; Officer of other investment
companies advised by Warburg.
Eugene L. Podsiadlo (38) . . . Senior Vice President
466 Lexington Avenue Managing Director of EMW;
New York, New York 10017-3147 Associated with EMW since 1991; Vice
President of Citibank, N.A. from 1987-1991;
Senior Vice President of Counsellors
Securities and officer of other investment
companies advised by Warburg.
24
<PAGE>25
Stephen Distler (42) . . . . . Vice President, and Chief Financial
466 Lexington Avenue Officer
New York, New York 10017-3147 Managing Director, Controller and Assistant
Secretary of EMW; Associated with EMW since
1984; Treasurer of Counsellors Securities;
Vice President, Treasurer and Chief
Accounting Officer or Vice President and
Chief Financial Officer of other investment
companies advised by Warburg.
Eugene P. Grace (44) . . . . . Vice President and Secretary
466 Lexington Avenue Associated with EMW since April 1994;
New York, New York 10017-3147 Attorney-at-law from September 1989-
April 1994; life insurance agent, New York
Life Insurance Company from 1993-1994;
General Counsel and Secretary, Home Unity
Savings Bank from 1991-1992; Vice President
and Chief Compliance Officer of Counsellors
Securities, Vice President and Secretary of
other investment companies advised by
Warburg.
Howard Conroy (41) . . . . . . Vice President, Treasurer and Chief
466 Lexington Avenue Accounting Officer Associated with EMW
New York, New York 10017-3147 since 1992; Associated with Martin Geller,
C.P.A. from 1990-1992; Vice President,
Finance with Gabelli/Rosenthal & Partners,
L.P. until 1990; Vice President, Treasurer
and Chief Accounting Officer of other
investment companies advised by Warburg.
Karen Amato (32) . . . . . . . Assistant Secretary
466 Lexington Avenue Associated with EMW since 1987;
New York, New York 10017-3147 Assistant Secretary of other investment
companies advised by Warburg.
No employee of Warburg or PFPC Inc., the Fund's co-administrator
("PFPC"), or any of their affiliates receives any compensation from the Fund
for acting as an officer or director of the Fund. Each Director who is not a
director, trustee, officer or employee of Warburg, PFPC or any of their
affiliates receives an annual fee of $1,000 and $250 for each meeting of the
Board attended by him for his services as Director and is reimbursed for
expenses incurred in connection with his attendance at Board meetings.
25
<PAGE>26
Directors' Compensation
(for the fiscal year ended October 31, 1995)
<TABLE>
<CAPTION>
Total Total Compensation from
Compensation from all Investment Companies
Name of Director Fund Managed by Warburg*
---------------- ----------------- ------------------------
<S> <C> <C>
John L. Furth None** None**
Richard N. Cooper $2,000 $41,083
Donald J. Donahue $2,250 $43,833
Jack W. Fritz $1,750 $35,333
Thomas A. Melfe $2,250 $43,583
Alexander B. Trowbridge $2,250 $43,833
</TABLE>
____________________
* Each Director also serves as a Director or Trustee of 15 other investment
companies advised by Warburg.
** Mr. Furth is considered to be an interested person of the Fund and
Warburg, as defined under Section 2(a)(19) of the 1940 Act, and,
accordingly, receives no compensation from the Fund or any other
investment company managed by Warburg.
Mr. Dale C. Christensen, president and co-portfolio manager of the
Fund, earned a B.S. in Agriculture from the University of Alberta and a B.Ed.
in Mathematics from the University of Calgary, both located in Canada. Mr.
Christensen is also co-portfolio manager of Warburg Pincus Fixed Income Fund,
Warburg Pincus Global Fixed Income Fund and Warburg Pincus New York
Intermediate Municipal Fund. Mr. Christensen directs the fixed income group
at Warburg, which he joined in 1989, providing portfolio management for
Warburg Pincus Funds and institutional clients around the world. Mr.
Christensen was a vice president in the International Private Banking division
and the domestic pension fund management division at Citicorp from 1984 to
1989. Prior to that, Mr. Christensen was also a fixed income portfolio
manager at CIC Asset Management from 1982 to 1984.
Mr. M. Anthony E. van Daalen, co-portfolio manager of the Fund,
earned a B.A. degree from Wesleyan University and a M.B.A. degree from New
York University. Mr. van Daalen is also co-portfolio manager of Warburg Pincus
Fixed Income Fund. He has been with the Fund since joining Warburg in 1992,
specializing in government and high yield bonds. Mr. van Daalen was an
assistant vice president, portfolio manager at Citibank in the Private Banking
Group from 1985 to 1991. Prior to that Mr. van Daalen was a retail
26
<PAGE>27
banking manager at The Connecticut Bank and Trust Co. from 1983 to 1985 and an
analyst at Goldstein/Knoll Market Research from 1982 to 1983.
As of December 28, 1995, Directors and officers of the Fund as a
group owned of record less than 1% of the Fund's outstanding Common Shares.
As of the same date, Mr. John L. Furth may be deemed to have beneficially
owned 41.84%, of the Fund's outstanding Common Shares, including shares owned
by clients for which Warburg has investment discretion. Mr. Furth disclaims
ownership of these shares and does not intend to exercise voting rights with
respect to these shares. No Directors or officers owned of record any Advisor
Shares.
Investment Adviser and Co-Administrators
Warburg serves as investment adviser to the Fund, PFPC serves as co-
administrator to the Fund and Counsellors Funds Service, Inc. ("Counsellors
Service") serves as co-administrator to the Fund pursuant to separate written
agreements (the "Advisory Agreement," the "PFPC Co-Administration Agreement"
and the "Counsellors Service Co-Administration Agreement," respectively). The
services provided by, and the fees payable by the Fund to, Warburg under the
Advisory Agreement, PFPC under the PFPC Co-Administration Agreement and
Counsellors Service under the Counsellors Service Co-Administration Agreement
are described in the Prospectuses. See the Prospectuses, "Management of the
Fund." Each class of shares of the Fund bears its proportionate share of fees
payable to Warburg. PFPC and Counsellors Service in the proportion that its
assets bear to the aggregate assets of the Fund at the time of calculation.
Prior to March 1, 1994, PFPC served as administrator to the Fund and
Counsellors Service served as administrative services agent to the Fund
pursuant to separate written agreements.
Warburg agrees that if, in any fiscal year, the expenses borne by
the Fund exceed the applicable expense limitations imposed by the securities
regulations of any state in which shares of the Fund are registered or
qualified for sale to the public, it will reimburse the Fund to the extent
required by such regulations. Unless otherwise required by law, such
reimbursement would be accrued and paid on a monthly basis. At the date of
this Statement of Additional Information, the most restrictive annual expense
limitation applicable to the Fund is 2.5% of the first $30 million of the
average net assets of the Fund, 2% of the next $70 million of the average net
assets of the Fund and 1.5% of the remaining average net assets of the Fund.
During the fiscal year ended October 31, 1993, October 31, 1994 and
October 31, 1995, Warburg waived $199,486, $216,793 and $226,320,
respectively, of the $475,090, $260,193 and $253,734, respectively, earned
under the Advisory Agreement. During the fiscal years ending October 31,
1993, October 31, 1994 and October 31, 1995, $76,621, $52,039, and $51,914,
respectively, in administration fees or, in the case of the two most recent
fiscal years, co-administration fees were paid to PFPC. During the fiscal
year ended October 31, 1994 and October 31, 1995, PFPC waived $1,502 and
$21,872, respectively, of
27
<PAGE>28
such fees. Counsellors Service earned $52,685, $38,171 and $50,747,
respectively, in administrative services fees or, in the case of the two most
recent fiscal years, co-administration fees during the fiscal years ending
October 31, 1993, October 31, 1994 and October 31, 1995, respectively.
Custodian and Transfer Agent
PNC Bank, National Association ("PNC") is custodian of the Fund's
assets pursuant to a custodian agreement (the "Custodian Agreement"). Under
the Custodian Agreement, PNC (i) maintains a separate account or accounts in
the name of the Fund, (ii) holds and transfers portfolio securities on account
of the Fund, (iii) makes receipts and disbursements of money on behalf of the
Fund, (iv) collects and receives all income and other payments and
distributions on account of the Fund's portfolio securities and (v) makes
periodic reports to the Board concerning the Fund's custodial arrangements.
PNC is authorized to select one or more banks or trust companies to serve as
sub-custodian on behalf of the Fund, provided that PNC remains responsible for
the performance of all its duties under the Custodian Agreement and holds the
Fund harmless from the acts and omissions of any sub-custodian. PNC is an
indirect wholly owned subsidiary of PNC Bank Corp., and its principal business
address is Broad and Chestnut Streets, Philadelphia, Pennsylvania 19101.
State Street Bank and Trust Company ("State Street") serves as the
shareholder servicing, transfer and dividend disbursing agent of the Fund
pursuant to a Transfer Agency and Service Agreement, under which State Street
(i) issues and redeems shares of the Fund, (ii) addresses and mails all
communications by the Fund to record owners of Fund shares, including reports
to shareholders, dividend and distribution notices and proxy material for its
meetings of shareholders, (iii) maintains shareholder accounts and, if
requested, sub-accounts and (iv) makes periodic reports to the Board
concerning the transfer agent's operations with respect to the Fund. State
Street has delegated to Boston Financial Data Services, Inc., a 50% owned
subsidiary ("BFDS"), responsibility for most shareholder servicing functions.
BFDS's principal business address is 2 Heritage Drive, Boston, Massachusetts
02171.
Organization of the Fund
The Fund's charter authorizes the Board to issue three billion full
and fractional shares of common stock, $.001 par value per share ("Common
Shares"), of which one billion shares are designated Common Stock - Series 1
and one billion shares are designated Common Stock - Series 2 (the "Advisor
Shares"). Only Common Shares and Advisor Shares have been issued by the Fund.
All shareholders of the Fund in each class, upon liquidation, will
participate ratably in the Fund's net assets. Shares do not have cumulative
voting rights, which means that holders of more than 50% of the shares voting
for the election of Directors can elect all Directors. Shares are
transferable but have no preemptive, conversion or subscription rights.
28
<PAGE>29
Distribution and Shareholder Servicing
The Fund may, in the future, enter into additional Agreements
("Agreements") with institutional shareholders of record, broker-dealers,
financial institutions, depository institutions, retirement plans and
financial intermediaries ("Institutions") to provide certain distribution,
shareholder servicing, administrative and/or accounting services for their
clients or customers (or participants in the case retirement plans)
("customers") who are beneficial owners of Advisor Shares. See the Advisor
Prospectus, "Shareholder Servicing." Agreements will be governed by a
distribution plan (the "Distribution Plan") pursuant to Rule 12b-1 under the
1940 Act. The Distribution Plan requires the Board, at least quarterly, to
receive and review written reports of amounts expended under the Distribution
Plan and the purposes for which such expenditures were made.
An Institution with which the Fund has entered into an Agreement may
charge a Customer one or more of the following types of fees, as agreed upon
by the Institution and the Customer, with respect to the cash management or
other services provided by the Institution: (i) account fees (a fixed amount
per month or per year); (ii) transaction fees (a fixed amount per transaction
processed); (iii) compensation balance requirements (a minimum dollar amount a
Customer must maintain in order to obtain the services offered); or (iv)
account maintenance fees (a periodic charge based upon the percentage of
assets in the account or of the dividend paid on those assets). Services
provided by an Institution to Customers are in addition to, and not
duplicative of, the services to be provided under the Fund's co-administration
and distribution arrangements. A Customer of an Institution should read the
relevant Prospectus and Statement of Additional Information in conjunction
with the Agreement and other literature describing the services and related
fees that would be provided by the Institution to its Customers prior to any
purchase of Fund shares. Prospectuses are available from the Fund's
distributor upon request. No preference will be shown in the selection of
Fund portfolio investments for the instruments of Institutions.
The Distribution Plan will continue in effect for so long as its
continuance is specifically approved at least annually by the Board, including
a majority of the Directors who are not interested persons of the Fund and who
have no direct or indirect financial interest in the operation of the
Distribution Plan ("Independent Directors"). Any material amendment of the
Distribution Plan would require the approval of the Board in the same manner.
The Distribution Plan may not be amended to increase materially the amount to
be spent under it without shareholder approval of the Advisor Shares. The
Distribution Plan may be terminated at any time, without penalty, by vote of a
majority of the Independent Directors or by a vote of a majority of the
outstanding voting securities of the Advisor Shares of the Fund.
29
<PAGE>30
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The offering price of the Fund's shares is equal to the per share
net asset value of the relevant class of shares of the Fund. Information on
how to purchase and redeem Fund shares and how such shares are priced is
included in the Prospectuses under "Net Asset Value."
Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
New York Stock Exchange (the "NYSE") is closed, other than customary weekend
and holiday closings, or during which trading on the NYSE is restricted, or
during which (as determined by the SEC) an emergency exists as a result of
which disposal or fair valuation of portfolio securities is not reasonably
practicable, or for such other periods as the SEC may permit. (The Fund may
also suspend or postpone the recordation of an exchange of its shares upon the
occurrence of any of the foregoing conditions.)
If the Board determines that conditions exist which make payment of
redemption proceeds wholly in cash unwise or undesirable, the Fund may make
payment wholly or partly in securities or other investment instruments which
may not constitute securities as such term is defined in the applicable
securities laws. If a redemption is paid wholly or partly in securities or
other property, a shareholder would incur transaction costs in disposing of
the redemption proceeds. The Fund intends to comply with Rule 18f-1
promulgated under the 1940 Act with respect to redemptions in kind.
Automatic Cash Withdrawal Plan. An automatic cash withdrawal plan
(the "Plan") is available to shareholders who wish to receive specific amounts
of cash periodically. Withdrawals may be made under the Plan by redeeming as
many shares of the Fund as may be necessary to cover the stipulated withdrawal
payment. To the extent that withdrawals exceed dividends, distributions and
appreciation of a shareholder's investment in the Fund, there will be a
reduction in the value of the shareholder's investment and continued
withdrawal payments may reduce the shareholder's investment and ultimately
exhaust it. Withdrawal payments should not be considered as income from
investment in the Fund. All dividends and distributions on shares in the Plan
are automatically reinvested at net asset value in additional shares of the
Fund.
EXCHANGE PRIVILEGE
An exchange privilege with certain other funds advised by Warburg is
available to investors in the Fund. The funds into which exchanges of Common
Shares currently can be made are listed in the Common Share Prospectus.
Exchanges may also be made between certain Warburg Pincus Advisor Funds.
30
<PAGE>31
The exchange privilege enables shareholders to acquire shares in a
fund with a different investment objective when they believe that a shift
between funds is an appropriate investment decision. This privilege is
available to shareholders residing in any state in which the Common Shares or
Advisor Shares being acquired, as relevant, may be legally sold. Prior to any
exchange, the investor should obtain and review a copy of the current
prospectus of the relevant class of each fund into which an exchange is being
considered. Shareholders may obtain a prospectus of the relevant class of the
fund into which they are contemplating an exchange from Counsellors
Securities.
Upon receipt of proper instructions and all necessary supporting
documents, shares submitted for exchange are redeemed at the then-current net
asset value of the relevant class and the proceeds are invested on the same
day, at a price as described above, in shares of the relevant class of the
fund being acquired. Warburg reserves the right to reject more than three
exchange requests by a shareholder in any 30-day period. The exchange
privilege may be modified or terminated at any time upon 60 days' notice to
shareholders.
ADDITIONAL INFORMATION CONCERNING TAXES
The discussion set out below of tax considerations generally
affecting the Fund and its shareholders is intended to be only a summary and
is not intended as a substitute for careful tax planning by prospective
shareholders. Shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in the
Fund.
The Fund has qualified and intends to continue to qualify each year
as a "regulated investment company" under Subchapter M of the Code. If it
qualifies as a regulated investment company, the Fund will pay no federal
income taxes on its taxable net investment income (that is, taxable income
other than net realized capital gains) and its net realized capital gains that
are distributed to shareholders. To qualify under Subchapter M, the Fund
must, among other things: (i) distribute to its shareholders at least 90% of
its taxable net investment income (for this purpose consisting of taxable net
investment income and net realized short-term capital gains); (ii) derive at
least 90% of its gross income from dividends, interest, payments with respect
to loans of securities, gains from the sale or other disposition of
securities, or other income (including, but not limited to, gains from
options, futures, and forward contracts) derived with respect to the Fund's
business of investing in securities; (iii) derive less than 30% of its annual
gross income from the sale or other disposition of securities, options,
futures or forward contracts held for less than three months; and (iv)
diversify its holdings so that, at the end of each fiscal quarter of the Fund
(a) at least 50% of the market value of the Fund's assets is represented by
cash, U.S. government securities and other securities, with those other
securities limited, with respect to any one issuer, to an amount no greater in
value than 5% of the Fund's total assets and to not more than 10% of the
outstanding voting securities of the issuer, and (b) not more than
31
<PAGE>32
25% of the market value of the Fund's assets is invested in the securities of
any one issuer (other than U.S. government securities or securities of other
regulated investment companies) or of two or more issuers that the Fund
controls and that are determined to be in the same or similar trades or
businesses or related trades or businesses. In meeting these requirements,
the Fund may be restricted in the selling of securities held by the Fund for
less than three months and in the utilization of certain of the investment
techniques described above and in the Fund's Prospectuses. As a regulated
investment company, the Fund will be subject to a 4% non-deductible excise tax
measured with respect to certain undistributed amounts of ordinary income and
capital gain required to be but not distributed under a prescribed formula.
The formula requires payment to shareholders during a calendar year of
distributions representing at least 98% of the Fund's taxable ordinary income
for the calendar year and at least 98% of the excess of its capital gains over
capital losses realized during the one-year period ending October 31 during
such year, together with any undistributed, untaxed amounts of ordinary income
and capital gains from the previous calendar year. The Fund expects to pay
the dividends and make the distributions necessary to avoid the application of
this excise tax.
The Fund's transactions, if any, in options and futures contracts
will be subject to special provisions of the Code that, among other things,
may affect the character of gains and losses recognized by the Fund (i.e., may
affect whether gains or losses are ordinary or capital), accelerate
recognition of income to the Fund and defer Fund losses. These rules could
therefore affect the character, amount and timing of distributions to
shareholders. These provisions also (i) will require the Fund to
mark-to-market certain types of its positions (i.e., treat them as if they
were closed out) and (ii) may cause the Fund to recognize income without
receiving cash with which to pay dividends or make distributions in amounts
necessary to satisfy the distribution requirements for avoiding income and
excise taxes. The Fund will monitor its transactions, will make the
appropriate tax elections and will make the appropriate entries in its books
and records when it acquires any option, futures contract or hedged investment
so that (a) neither the Fund nor its shareholders will be treated as receiving
a materially greater amount of capital gains or distributions than actually
realized or received, (b) the Fund will be able to use substantially all of
its losses for the fiscal years in which the losses actually occur and (c) the
Fund will continue to qualify as a regulated investment company.
A shareholder of the Fund receiving dividends or distributions in
additional shares should be treated for federal income tax purposes as
receiving a distribution in an amount equal to the amount of money that a
shareholder receiving cash dividends or distributions receives, and should
have a cost basis in the shares received equal to that amount.
Investors considering buying shares just prior to a dividend or
capital gain distribution should be aware that, although the price of shares
purchased at that time may reflect the amount of the forthcoming distribution,
those who purchase just prior to a distribution will receive a distribution
that will nevertheless be taxable to them. Upon the
32
<PAGE>33
sale or exchange of shares, a shareholder will realize a taxable gain or loss
depending upon the amount realized and the basis in the shares. Such gain or
loss will be treated as capital gain or loss if the shares are capital assets
in the shareholder's hands, and, as described in the Prospectuses, will be
long-term or short-term depending on the shareholder's holding period for the
shares. Any loss realized on a sale or exchange will be disallowed to the
extent the shares disposed of are replaced, including replacement through the
reinvestment of dividends and capital gains distributions in the Fund, within
a period of 61 days beginning 30 days before and ending 30 days after the
disposition of the shares. In such a case, the basis of the shares acquired
will be increased to reflect the disallowed loss.
Each shareholder will receive an annual statement as to the federal
income tax status of his dividends and distributions from the Fund for the
prior calendar year. Furthermore, shareholders will also receive, if
appropriate, various written notices after the close of the Fund's taxable
year regarding the federal income tax status of certain dividends and
distributions that were paid (or that are treated as having been paid) by the
Fund to its shareholders during the preceding year.
If a shareholder fails to furnish a correct taxpayer identification
number, fails to report fully dividend or interest income, or fails to certify
that he has provided a correct taxpayer identification number and that he is
not subject to "backup withholding," the shareholder may be subject to a 31%
"backup withholding" tax with respect to (i) taxable dividends and
distributions and (ii) the proceeds of any sales or repurchases of shares of
the Fund. An individual's taxpayer identification number is his social
security number. Corporate shareholders and other shareholders specified in
the Code are or may be exempt from backup withholding. The backup withholding
tax is not an additional tax and may be credited against a taxpayer's federal
income tax liability. Dividends and distributions also may be subject to
state and local taxes depending on each shareholder's particular situation.
DETERMINATION OF PERFORMANCE
From time to time, the Fund may quote the total return of its Common
Shares and/or Advisor Shares in advertisements or in reports and other
communications to shareholders. With respect to the Fund's Common Shares, the
Fund's average annual total return for the one-year period ended October 31,
1995 was 12.32% (11.76% without waivers), the average annual total return for
the five-year period ended October 31, 1995 was 8.53% (8.17% without waivers)
and the average annual total return for the period commenced August 22, 1988
(commencement of operations) and ended October 31, 1995 was 8.79% (8.06%
without waivers). These figures are calculated by finding the average annual
compounded rates of return for the one-, five- and ten- (or such shorter
period as the relevant class of shares has been offered) year periods that
would equate the initial amount invested to the ending redeemable value
according to the following formula: P (1 + T)[*GRAPHIC OMITTED-SEE FOOTNOTE
BELOW] = ERV. For purposes of this formula, "P" is a hypothetical investment
of $1,000; "T" is average annual total return; "n" is number of years; and
"ERV" is the ending redeemable
- ------------------------
* The expression (1 + T) is being raised to the nth power.
33
<PAGE>34
value of a hypothetical $1,000 payment made at the beginning of the one-,
five- or ten-year periods (or fractional portion thereof). Total return or
"T" is computed by finding the average annual change in the value of an
initial $1,000 investment over the period and assumes that all dividends and
distributions are reinvested during the period.
The Fund may advertise, from time to time, comparisons of the
performance of its Common Shares and/or Advisor Shares with that of one or
more other mutual funds with similar investment objectives. The Fund may
advertise average annual calendar year-to-date and calendar quarter returns,
which are calculated according to the formula set forth in the preceding
paragraph, except that the relevant measuring period would be the number of
months that have elapsed in the current calendar year or most recent three
months, as the case may be. Investors should note that this performance may
not be representative of the Fund's total return in longer market cycles.
Yield is calculated by annualizing the net investment income
generated by the Fund over a specified thirty-day period according to the
following formula:
YIELD = 2[( a-b +1)[*GRAPHIC OMITTED-SEE FOOTNOTE BELOW]-1]
---
cd
For purposes of this formula: "a" is dividends and interest earned during the
period; "b" is expenses accrued for the period (net of reimbursements); "c" is
the average daily number of shares outstanding during the period that were
entitled to receive dividends; and "d" is the maximum offering price per share
on the last day of the period. The yield for the thirty-day period ending
October 31, 1995 for the Fund was 5.67%.
The performance of a class of Fund shares will vary from time to
time depending upon market conditions, the composition of the Fund's portfolio
and operating expenses. As described above, total return and yield are based
on historical earnings and are not intended to indicate future performance.
Consequently, any given performance quotation should not be considered as
representative of performance for any specified period in the future.
Performance information may be useful as a basis for comparison with other
investment alternatives. However, the Fund's performance will fluctuate,
unlike certain bank deposits or other investments which pay a fixed yield for
a stated period of time. Any fees charged by Institutions or other
institutional investors directly to their customers in connection with
investments in Fund shares are not reflected in the Fund's performance figures
and such fees, if charged, will reduce the actual return received by customers
on their investments.
- ------------------------
* The expression ( a-b +1) is being raised to the 6th power.
34
<PAGE>35
AUDITORS AND COUNSEL
Coopers & Lybrand L.L.P. ("Coopers & Lybrand"), with principal
offices at 2400 Eleven Penn Center, Philadelphia, Pennsylvania 19103, serves
as independent accountants for the Fund. The financial statements for the
fiscal years ended October 31, 1994 and October 31, 1995 that appear in this
Statement of Additional Information have been audited by Coopers & Lybrand,
whose report thereon appears elsewhere herein and have been included herein in
reliance upon the report of such firm of independent accountants given upon
their authority as experts in accounting and auditing.
The financial statements for the periods beginning with commencement
of the Fund through October 31, 1992 have been audited by Ernst & Young LLP
("Ernst & Young"), independent accountants, as set forth in their report, and
have been included in reliance on such report and upon the authority of such
firm as experts in accounting and auditing. Ernst & Young's address is 787
7th Avenue, New York, New York 10019.
Willkie Farr & Gallagher serves as counsel for the Fund as well as
counsel to Warburg, Counsellors Service and Counsellors Securities.
MISCELLANEOUS
As of December 28, 1995, the name, address and percentage of
ownership of each person (other than Mr. Furth, see "Management of the Fund")
that owns of record 5% or more of the Fund's outstanding shares:
Common Shares
Charles Schwab & Co., Inc. ("Schwab"), Reinvest Account, Attn:
Mutual Funds Dept., 101 Montgomery Street, San Francisco, CA 94104-4122 --
16.94%. The Fund believes that Schwab is not the beneficial owner of shares
held of record by it. Mr. Lionel I. Pincus, Chairman of the Board and Chief
Executive Officer of EMW, may be deemed to have beneficially owned 42.14% of
the Common Shares outstanding, including shares owned by clients for which
Warburg has investment discretion and by companies that EMW may be deemed to
control. Mr. Pincus disclaims ownership of these shares and does not intend
to exercise voting rights with respect to these shares.
35
<PAGE>36
FINANCIAL STATEMENTS
The Fund's audited financial statements for the fiscal year ended
October 31, 1995 follow the Report of Independent Accountants.
36
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Boards of Directors, Trustees and Shareholders of
Warburg Pincus Fixed Income Funds:
We have audited the accompanying statement of assets and liabilities including
the schedule of investments of the Warburg Pincus Intermediate Maturity
Government Fund and the statements of net assets of the Warburg Pincus Fixed
Income Fund, Warburg Pincus Global Fixed Income Fund and Warburg Pincus New York
Intermediate Municipal Fund (all Funds collectively referred to as the 'Warburg
Pincus Fixed Income Funds') as of October 31, 1995, and the related statements
of operations for the year then ended and the statements of changes in net
assets for each of the two years and the financial highlights for each of the
three years in the period then ended. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights of each of the Warburg Pincus
Fixed Income Funds for each of the two years in the period ended October 31,
1992, were audited by other auditors, whose report dated December 15, 1992,
expressed an unqualified opinion.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodians and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the Warburg Pincus Fixed Income Funds as of October 31, 1995, and the results
of their operations for the year then ended, and the changes in their net assets
for each of the two years and the financial highlights for each of the three
years in the period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, PA
December 14, 1995
34
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS INTERMEDIATE MATURITY GOVERNMENT FUND
- --------------------------------------------------------------------------------
December 8, 1995
Dear Shareholder:
The objective of Warburg Pincus Intermediate Maturity Government Fund (the
'Fund') is achieving a high level of current income as is consistent with
capital preservation. The Fund invests primarily in high-quality U.S. government
bonds with very low credit risk and an average maturity of between three and 10
years.
For the 12 months ended October 31, 1995, the Fund gained 12.32%, vs. an
11.79% gain in the Lehman Brothers Intermediate Government Bond Index. The
Fund's 30-day annualized SEC yield as of October 31, 1995 was 5.67%. Its total
net assets were $55,897,903.
Tame reports on inflation caused interest rates to fall throughout most of
the reporting period, driving bond prices higher. We extended the Fund's average
maturity and duration in order to take advantage of the decline in rates while
maintaining our primary emphasis on current income and limited volatility. As of
October 31, 1995 the Fund's average maturity and duration were 6.47 and 4.62
years, respectively.
Currently, the Fund's predominant focus is on U.S. Treasury securities,
which we believe are the most attractively valued issues in the present
environment. Treasuries accounted for 73.0% of the Portfolio as of October 31,
1995. We hold smaller positions in agency issues (19.5%) and mortgage-backed
securities issued by the Federal National Mortgage Association (5.0%).
Looking ahead, we believe that the combination of low inflation, stable or
falling interest rates, and the possibility of congressional passage of a
credible deficit-reduction plan augurs well for the fixed-income market. We
believe the Fund is positioned to take full advantage of this environment.
<TABLE>
<S> <C>
Dale C. Christensen M. Anthony E. van Daalen
Co-Portfolio Manager Co-Portfolio Manager
</TABLE>
6
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS INTERMEDIATE MATURITY GOVERNMENT FUND
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN WARBURG PINCUS INTERMEDIATE MATURITY GOVERNMENT
FUND
SINCE INCEPTION AS OF OCTOBER 31, 1995
The graph below illustrates the hypothetical investment of $10,000 in
Warburg Pincus Intermediate Maturity Government Fund (the 'Fund') from August
22, 1988 (inception) to October 31, 1995, assuming the reinvestment of dividends
and capital gains at net asset value, compared to the Lehman Intermediate
Government Bond Index ('LIG')* for the same time period.
<TABLE>
<CAPTION>
[PERFORMANCE GRAPH]
Average Annual
Total Returns
for periods ending
FUND LIG 10/31/95
<S> <C> <C> <C>
8/22/88 10,000.0 10,000.0 1 year
10/31/88 10,427.0 10,313.0 12.32%
10/31/89 11,370.0 11,387.0 5 year
10/31/90 12,177.0 12,278.0 8.53%
10/31/91 13,847.0 13,911.0 Since Inception
10/31/92 15,279.0 15,280.0 (08/22/88)
10/31/93 16,623.0 16,687.0 8.79%
10/31/94 16,327.0 16,400.0
10/31/95 18,338.0 18,334.0
</TABLE>
<TABLE>
<CAPTION>
FUND
------
<S> <C>
1 Year Total Return (9/30/94-9/30/95).................................................................. 10.66%
5 Year Average Annual Total Return (9/30/90-9/30/95)................................................... 8.54%
Average Annual Total Return Since Inception (8/22/88-9/30/95).......................................... 8.69%
</TABLE>
All figures cited here represent past performance and do not guarantee
future results. Investment return and principal value of an investment will
fluctuate so that an investor's shares upon redemption may be worth more or less
than original cost. For periods ending 9/30/95 and 10/31/95, respectively,
without waivers or reimbursement of Fund expenses, average annual total returns
would have been 10.11% and 11.76% for 1-year, 8.18% and 8.17% for 5-year, and
7.96% and 8.06% since inception.
- ------------
* LIG Index is an unmanaged index of intermediate and long-term government bonds
that is compiled by Lehman Brothers Inc. and has no defined investment
objective.
7
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS INTERMEDIATE MATURITY GOVERNMENT FUND
SCHEDULE OF INVESTMENTS
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR SECURITY DESCRIPTION MATURITY RATE VALUE
----------- ---------------------------------------------------------------------- --------- ----- -----------
<C> <S> <C> <C> <C>
AGENCY OBLIGATIONS (19.5%)
Small Business Administration (5.3%)
$ 1,350,147 Small Business Administration Guaranteed Development Participation
Certificate 07/01/02 6.600% $ 1,350,147
1,512,686 Small Business Administration Guaranteed Development Participation
Certificate Debenture Series 1992-10 B 04/01/02 7.450 1,529,704
-----------
Total Small Business Administration 2,879,851
-----------
Other (14.2%)
5,490,000 Government Trust Certificate Israel State Series 2 Class 2-E
Registered 05/15/02 9.400 6,169,387
1,500,000 Private Export Funding Group Secured Notes Series BB 10/30/98 9.100 1,621,875
-----------
Total Other 7,791,262
-----------
TOTAL AGENCY OBLIGATIONS (Cost $10,890,147) 10,671,113
-----------
MORTGAGE-BACKED SECURITIES (5.0%)
316,575 Federal National Mortgage Association 10/25/00 8.500 315,427
2,428,342 Federal National Mortgage Association 08/01/25 7.500 2,454,902
-----------
TOTAL MORTGAGE-BACKED SECURITIES (Cost $2,759,598) 2,770,329
-----------
UNITED STATES TREASURY OBLIGATIONS (73.0%)
U.S. Treasury Notes (66.4%)
2,000,000 U.S. Treasury Note 10/15/98 7.125 2,076,440
13,750,000 U.S. Treasury Note 05/15/01 8.000 15,129,124
17,500,000 U.S. Treasury Note 02/15/05 7.500 19,296,025
-----------
Total U.S. Treasury Notes 36,501,589
-----------
U.S. Treasury Strip Note (6.6%)
4,800,000 U.S. Treasury Strip Note 11/15/00 -- 3,600,240
-----------
TOTAL UNITED STATES TREASURY OBLIGATIONS (Cost $38,856,742) 40,101,829
-----------
SHORT-TERM INVESTMENTS (2.5%)
1,392,000 Repurchase agreement with State Street Bank and Trust Co. dated
10/31/95 at 5.83% to be repurchased at $1,392,225 on 11/01/95.
(Collateralized by $1,405,000 U.S. Treasury Note at 6.875%, due
10/31/96, with a market value of $1,422,563.) (Cost $1,392,000) 1,392,000
-----------
TOTAL INVESTMENTS AT VALUE (100.0%) (Cost $53,898,487*) $54,935,271
-----------
-----------
</TABLE>
* Also cost for Federal income tax purposes.
See Accompanying Notes to Financial Statements.
14
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS INTERMEDIATE MATURITY GOVERNMENT FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at value (Cost $53,898,487) $54,935,271
Receivable for investment securities sold 3,804,823
Dividends and interest receivable 1,091,532
Receivable for Fund shares sold 86,945
Other assets 2,580
-----------
Total assets 59,921,151
-----------
LIABILITIES
Payable for investment securities purchased 3,910,560
Accrued expenses 43,783
Payable for Fund shares redeemed 7,469
Other liabilities 61,436
-----------
Total liabilities 4,023,248
-----------
NET ASSETS applicable to 5,467,154 shares outstanding $55,897,903
-----------
-----------
NET ASSET VALUE, offering and redemption price per share
($55,897,903[div]5,467,154) $10.22
------
------
</TABLE>
See Accompanying Notes to Financial Statements.
18
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
STATEMENTS OF OPERATIONS
For the Year Ended October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg
Warburg Pincus Warburg Pincus
Warburg Pincus Intermediate New York
Pincus Global Maturity Intermediate
Fixed Income Fixed Income Government Municipal
Fund Fund Fund Fund
------------ ------------ ---------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 8,376,182 $6,507,144 $3,252,179 $3,982,642
Dividends 470,438 552,228 98,083 45,198
------------ ------------ ---------- --------------
Total investment income 8,846,620 7,059,372 3,350,262 4,027,840
------------ ------------ ---------- --------------
EXPENSES:
Investment advisory 555,483 773,318 253,734 316,050
Administrative services 222,194 170,130 102,661 158,024
Audit 15,674 16,985 16,975 15,975
Custodian/Sub-custodian 48,401 44,270 17,340 23,471
Directors/Trustees 10,500 10,500 10,500 10,500
Insurance 6,127 5,754 3,692 4,479
Legal 73,175 72,631 58,060 70,563
Printing 11,861 4,525 5,236 12,489
Registration 31,178 31,790 26,398 16,631
Transfer agent 48,503 51,309 43,347 33,447
Miscellaneous 14,281 38,611 14,726 14,365
------------ ------------ ---------- --------------
1,037,377 1,219,823 552,669 675,994
Less: fees waived (204,153) (485,160) (248,192) (201,919)
------------ ------------ ---------- --------------
Total expenses 833,224 734,663 304,477 474,075
------------ ------------ ---------- --------------
Net investment income 8,013,396 6,324,709 3,045,785 3,553,765
------------ ------------ ---------- --------------
NET REALIZED AND UNREALIZED GAIN FROM INVESTMENTS
AND FOREIGN CURRENCY RELATED ITEMS:
Net realized gain from security transactions 1,132,052 508,655 514,443 818,720
Net realized loss from futures contracts (606,653) (849,500) 0 0
Net realized gain (loss) from foreign currency
related items 49,446 (961,036) 0 0
Net decrease in unrealized depreciation from
investments and foreign currency related
items 4,869,743 2,015,972 2,406,718 1,979,229
------------ ------------ ---------- --------------
Net realized and unrealized gain from
investments and foreign currency
related items 5,444,588 714,091 2,921,161 2,797,949
------------ ------------ ---------- --------------
Net increase in net assets resulting
from operations $ 13,457,984 $7,038,800 $5,966,946 $6,351,714
------------ ------------ ---------- --------------
------------ ------------ ---------- --------------
</TABLE>
See Accompanying Notes to Financial Statements.
19
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus
Fixed Income Global Fixed
Fund Income Fund
----------------------------- -----------------------------
For the Year Ended October For the Year Ended October
31, 31,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 8,013,396 $ 5,867,260 $ 6,324,709 $ 5,807,634
Net realized gain (loss) from security
transactions 1,132,052 (1,660,108) 508,655 (1,869,553)
Net realized gain (loss) from futures
contracts (606,653) 117,484 (849,500) 269,845
Net realized gain (loss) from foreign
currency related items 49,446 18,246 (961,036) (2,237,413)
Net change in unrealized appreciation
(depreciation) from investments and
foreign currency related items 4,869,743 (4,804,661) 2,015,972 (4,227,712)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
resulting from operations 13,457,984 (461,779) 7,038,800 (2,257,199)
------------ ------------ ------------ ------------
FROM DISTRIBUTIONS:
Dividends from net investment income (8,013,396) (5,926,356) (3,445,878) (3,215,939)
Distributions from capital gains 0 (732,704) 0 (827,403)
Return of capital 0 0 0 (366,074)
------------ ------------ ------------ ------------
Net decrease from distributions (8,013,396) (6,659,060) (3,445,878) (4,409,416)
------------ ------------ ------------ ------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 47,678,747 58,018,967 42,488,917 61,614,112
Reinvested dividends 6,555,741 5,623,287 2,941,954 3,798,759
Net asset value of shares redeemed (44,942,286) (35,456,760) (75,776,818) (30,346,474)
------------ ------------ ------------ ------------
Net increase (decrease) in net assets
from capital share transactions 9,292,202 28,185,494 (30,345,947) 35,066,397
------------ ------------ ------------ ------------
Net increase (decrease) in net assets 14,736,790 21,064,655 (26,753,025) 28,399,782
NET ASSETS:
Beginning of year 102,246,118 81,181,463 90,394,069 61,994,287
------------ ------------ ------------ ------------
End of year $116,982,908 $102,246,118 $ 63,641,044 $ 90,394,069
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
20
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
Warburg Pincus Warburg Pincus
Intermediate Maturity New York Intermediate
Government Fund Municipal Fund
--------------------------------- ---------------------------------
For the Year Ended October 31, For the Year Ended October 31,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<C> <C> <C> <C>
$ 3,045,785 $ 2,827,703 $ 3,553,765 $ 3,215,210
514,443 (58,020) 818,720 47,719
0 0 0 0
0 0 0 0
2,406,718 (3,492,181) 1,979,229 (3,387,003)
------------ ------------ ------------ ------------
5,966,946 (722,498) 6,351,714 (124,074)
------------ ------------ ------------ ------------
(3,045,785) (2,827,703) (3,553,765) (3,222,899)
0 (3,937,754) (47,531) (912,745)
0 0 0 0
------------ ------------ ------------ ------------
(3,045,785) (6,765,457) (3,601,296) (4,135,644)
------------ ------------ ------------ ------------
26,773,501 24,310,135 32,441,402 50,293,197
2,288,064 5,552,546 3,073,742 3,404,096
(22,818,476) (53,205,957) (40,620,180) (43,299,063)
------------ ------------ ------------ ------------
6,243,089 (23,343,276) (5,105,036) 10,398,230
------------ ------------ ------------ ------------
9,164,250 (30,831,231) (2,354,618) 6,138,512
46,733,653 77,564,884 75,716,095 69,577,583
------------ ------------ ------------ ------------
$ 55,897,903 $ 46,733,653 $ 73,361,477 $ 75,716,095
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See Accompanying Notes to Financial Statements.
21
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS INTERMEDIATE MATURITY GOVERNMENT FUND
FINANCIAL HIGHLIGHTS
(For a Share of the Fund Outstanding Throughout Each Year)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended October 31,
-------------------------------------------------
1995 1994 1993 1992 1991
------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $ 9.66 $ 11.03 $ 11.23 $ 10.83 $ 10.24
------- ------- -------- -------- -------
Income from Investment Operations:
Net Investment Income .59 .54 .59 .68 .76
Net Gain (Loss) on Securities (both realized and
unrealized) .56 (.73) .34 .41 .59
------- ------- -------- -------- -------
Total from Investment Operations 1.15 (.19) .93 1.09 1.35
------- ------- -------- -------- -------
Less Distributions:
Dividends from Net Investment Income (.59) (.55) (.59) (.68) (.76)
Distributions from Capital Gains .00 (.63) (.54) (.01) .00
------- ------- -------- -------- -------
Total Distributions (.59) (1.18) (1.13) (.69) (.76)
------- ------- -------- -------- -------
NET ASSET VALUE, END OF YEAR $ 10.22 $ 9.66 $ 11.03 $ 11.23 $ 10.83
------- ------- -------- -------- -------
------- ------- -------- -------- -------
Total Return 12.32% (1.78%) 8.79% 10.34% 13.71%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Year (000s) $55,898 $46,734 $77,565 $113,336 $89,006
Ratios to average daily net assets:
Operating expenses .60% .60% .60% .60% .57%
Net investment income 6.00% 5.43% 5.34% 6.10% 7.29%
Decrease reflected in above operating expense ratios due
to waivers/reimbursements .49% .42% .21% .25% .30%
Portfolio Turnover Rate 105.79% 115.37% 108.00% 165.70% 39.13%
</TABLE>
See Accompanying Notes to Financial Statements.
TAX STATUS OF 1995 DIVIDENDS (Unaudited)
Dividends paid by the Fund taxable as ordinary income amounted to $.59 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.
24
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Warburg Pincus Fixed Income Funds are comprised of the Warburg Pincus
Fixed Income Fund (the 'Fixed Income Fund') and the Warburg Pincus Intermediate
Maturity Government Fund (the 'Intermediate Government Fund') which are
registered under the Investment Company Act of 1940, as amended (the '1940
Act'), as diversified, open-end management investment companies and the Warburg
Pincus Global Fixed Income Fund (the 'Global Fixed Income Fund') and the Warburg
Pincus New York Intermediate Municipal Fund (the 'New York Municipal Fund')
which are registered under the 1940 Act as non-diversified, open-end management
investment companies.
Investment objectives for each Fund are as follows: the Fixed Income Fund
seeks to generate high current income consistent with reasonable risk with
capital appreciation a secondary objective; the Global Fixed Income Fund seeks
to maximize total investment return consistent with prudent investment
management, consisting of a combination of interest income, currency gains and
capital appreciation; the Intermediate Government Fund seeks to achieve as high
a level of current income as is consistent with preservation of capital; and the
New York Municipal Fund seeks to maximize current interest income exempt from
Federal income tax and New York State and New York City personal income tax to
the extent consistent with prudent investment and preservation of capital.
The net asset value of each Fund is determined daily as of the close of
regular trading on the New York Stock Exchange. Each Fund's investments are
valued at market value, which is currently determined using the last reported
sales price. If no sales are reported, investments are generally valued at the
last reported bid price. In the absence of market quotations, investments are
generally valued at fair value as determined by or under the direction of the
Fund's governing Board. Short-term investments that mature in 60 days or less
are valued on the basis of amortized cost, which approximates market value.
The books and records of the Funds are maintained in U.S. dollars.
Transactions denominated in foreign currencies are recorded at the current
prevailing exchange rates. All assets and liabilities denominated in foreign
currencies are translated into U.S. dollar amounts at the current exchange rate
at the end of the period. Translation gains or losses resulting from changes in
the exchange rate during the reporting period and realized gains and losses on
the settlement of foreign currency transactions are reported in the results of
operations for the current period. The Global Fixed Income Fund isolates that
portion of gains and losses on investments in debt securities which are due to
changes in the foreign exchange rate from that which are due to changes in
market prices of debt securities.
Security transactions are accounted for on trade date. Interest income is
recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
The cost of investments sold is determined by use of the specific identification
method for both financial reporting and income tax purposes.
Dividends from net investment income are declared daily and paid monthly
for the Fixed Income Fund, the Intermediate Government Fund and the New York
Municipal Fund. Dividends from net investment income are declared and paid
quarterly for the Global Fixed Income Fund. Distributions for all Funds of net
realized capital gains, if any, are declared and paid annually. However, to the
extent that a net realized capital gain can be reduced by a capital loss
carryover, such gain will not be distributed.
26
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
Income and capital gain distributions are determined in accordance with Federal
income tax regulations which may differ from generally accepted accounting
principles.
Certain amounts in the Statements of Changes in Net Assets have been
reclassified to conform to current year presentation.
No provision is made for Federal taxes as it is each Fund's intention to
continue to qualify for and elect the tax treatment applicable to regulated
investment companies under the Internal Revenue Code and make the requisite
distributions to its shareholders which will be sufficient to relieve it from
Federal income and excise taxes.
Costs incurred by the Global Fixed Income Fund in connection with its
organization have been deferred and are being amortized over a period of five
years from the date the Global Fixed Income Fund commenced its operations.
Each Fund may enter into repurchase agreement transactions. Under the terms
of a typical repurchase agreement, a Fund acquires an underlying security
subject to an obligation of the seller to repurchase. The value of the
underlying security collateral will be maintained at an amount at least equal to
the total amount of the purchase obligation, including interest. The collateral
is in the Fund's possession.
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR
Warburg, Pincus Counsellors, Inc. ('Warburg'), a wholly owned subsidiary of
Warburg, Pincus Counsellors G.P. ('Counsellors G.P.'), serves as each Fund's
investment adviser. For its investment advisory services, Warburg receives the
following fees based on each Fund's average daily net assets:
<TABLE>
<CAPTION>
FUND ANNUAL RATE
- --------------------------------- ----------------------------------
<S> <C>
Fixed Income .50% of average daily net assets
Global Fixed Income 1.00% of average daily net assets
Intermediate Government .50% of average daily net assets
New York Municipal .40% of average daily net assets
</TABLE>
For the year ended October 31, 1995, investment advisory fees and waivers
were as follows:
<TABLE>
<CAPTION>
GROSS NET
FUND ADVISORY FEE WAIVER ADVISORY FEE
- --------------------------------------------------- ------------ --------- ------------
<S> <C> <C> <C>
Fixed Income $555,483 $(162,585) $392,898
Global Fixed Income 773,318 (435,848) 337,470
Intermediate Government 253,734 (226,320) 27,414
New York Municipal 316,050 (168,856) 147,194
</TABLE>
Counsellors Funds Service, Inc. ('CFSI'), a wholly owned subsidiary of
Warburg, and PFPC Inc. ('PFPC'), an indirect, wholly owned subsidiary of PNC
Bank Corp. ('PNC'), serve as each Fund's co-administrators. For administrative
services, CFSI currently receives a fee calculated at an annual rate of
27
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
.10% of each Fund's average daily net assets. For the year ended October 31,
1995, administrative services fees earned by CFSI were as follows:
<TABLE>
<CAPTION>
FUND CO-ADMINISTRATION FEE
- ----------------------------------------------------------------------- ---------------------
<S> <C>
Fixed Income $ 111,097
Global Fixed Income 77,332
Intermediate Government 50,747
New York Municipal 79,012
</TABLE>
For its administrative services, PFPC currently receives a fee calculated
at an annual rate of .10% of the average daily net assets of the Fixed Income
Fund, the Intermediate Government Fund and the New York Municipal Fund. For the
Global Fixed Income Fund, PFPC currently receives a fee calculated at an annual
rate of .12% of the first $250 million in average daily net assets, .10% of the
next $250 million in average daily net assets, .08% of the next $250 million in
average daily net assets and .05% of average daily net assets over $750 million.
For the year ended October 31, 1995, administrative services fees earned
and voluntarily waived by PFPC were as follows:
<TABLE>
<CAPTION>
FUND GROSS FEE WAIVER NET
- ----------------------------------------------------------- --------- -------- -------
<S> <C> <C> <C>
Fixed Income $ 111,097 $(41,568) $69,529
Global Fixed 92,798 (49,312) 43,486
Intermediate Government 51,914 (21,872) 30,042
New York Municipal 79,012 (33,063) 45,949
</TABLE>
Counsellors Securities Inc. ('CSI'), also a wholly owned subsidiary of
Warburg, serves as each Fund's distributor. No compensation is paid by the Funds
to CSI for distribution services.
3. INVESTMENTS IN SECURITIES
For the year ended October 31, 1995, purchases and sales of investment
securities (excluding short-term investments) and United States government and
agency obligations were as follows:
<TABLE>
<CAPTION>
U.S. GOVERNMENT AND
INVESTMENT SECURITIES AGENCY OBLIGATIONS
--------------------------- ----------------------------
FUND PURCHASES SALES PURCHASES SALES
- --------------------------------------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Fixed Income $69,506,438 $ 59,600,888 $144,593,744 $131,853,246
Global Fixed Income 79,097,036 108,742,015 9,808,921 11,805,050
Intermediate Government 0 0 61,570,880 50,413,561
New York Municipal 79,189,466 87,267,702 0 0
</TABLE>
28
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
At October 31, 1995, the net unrealized appreciation from investments for
those securities having an excess of value over cost and net unrealized
depreciation from investments for those securities having an excess of cost over
value (based on cost for Federal income tax purposes) was as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
FUND APPRECIATION DEPRECIATION (DEPRECIATION)
- ------------------------------------------------ ------------ ------------ --------------
<S> <C> <C> <C>
Fixed Income $2,550,123 $ (1,273,784) $1,276,339
Global Fixed Income 1,658,696 (1,472,059) 186,637
Intermediate Government 1,299,887 (263,103) 1,036,784
New York Municipal 1,976,753 (16,768) 1,959,985
</TABLE>
4. FORWARD FOREIGN CURRENCY CONTRACTS
The Fixed Income Fund and the Global Fixed Income Fund may enter into
forward currency contracts for the purchase or sale of a specific foreign
currency at a fixed price on a future date. Risks may arise upon entering into
these contracts from the potential inability of counterparties to meet the terms
of their contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar. The Funds will enter into forward
contracts primarily for hedging purposes. The forward currency contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded for financial statement purposes as unrealized until the
contract settlement date.
At October 31, 1995, the Global Fixed Income Fund had the following open
forward foreign currency contracts:
<TABLE>
<CAPTION>
FOREIGN UNREALIZED
FORWARD CURRENCY EXPIRATION CURRENCY CONTRACT CONTRACT FOREIGN EXCHANGE
CONTRACT DATE TO BE SOLD AMOUNT VALUE GAIN (LOSS)
- ------------------------ ---------- ---------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Australian Dollars 12/18/95 914,990 $ 690,818 $ 695,209 $ (4,391)
British Pounds 12/27/95 3,510,984 5,435,003 5,541,737 (106,734)
Danish Krone 12/18/95 29,059,448 5,281,904 5,319,710 (37,806)
German Marks 11/29/95 14,200,000 9,588,116 10,109,640 (521,524)
German Marks 11/29/95 375,092 255,164 267,045 (11,881)
German Marks 12/18/95 10,514,444 1,918,694 1,924,806 (6,112)
German Marks 12/18/95 10,513,889 1,934,834 1,924,704 10,130
German Marks 12/18/95 6,013,700 4,243,966 4,285,704 (41,738)
Irish Punt 12/18/95 2,881,250 4,639,677 4,671,371 (31,694)
Netherlands Guilder 11/29/95 4,577,075 2,760,600 2,896,883 (136,283)
Netherlands Guilder 11/29/95 79,014 49,138 50,009 (871)
----------- ----------- ----------------
$36,797,914 $37,686,818 $ (888,904)
----------- ----------- ----------------
----------- ----------- ----------------
</TABLE>
5. FUTURES CONTRACTS
Each Fund may enter into futures contracts for hedging purposes to the
extent permitted by its investment policies and objectives. To enter into a
futures contract, a Fund must make a deposit of an initial margin with its
custodian in a segregated account. Subsequent payments, which are dependent on
29
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
the daily fluctuations in the value of the underlying instrument, are made or
received by a Fund each day (daily variation margin) and are recorded as
unrealized gains or losses until the contracts are closed. When the contract is
closed, a Fund records a realized gain or loss equal to the difference between
the proceeds from (or cost of) the closing transactions and a Fund's basis in
the contract. Risks of entering into futures contracts include the possibility
that a change in the value of the contract may not correlate with the changes in
the value of the underlying instruments. The Fixed Income Fund and the Global
Fixed Income Fund entered into futures contracts during the year ended October
31, 1995. However, the Fixed Income Fund and Global Fixed Income Fund had no
futures contracts open at October 31, 1995.
6. CAPITAL SHARE TRANSACTIONS
The Global Fixed Income Fund and the Intermediate Government Fund are each
authorized to issue three billion full and fractional shares of capital stock,
$.001 par value per share, of which one billion shares are designated Series 2
Shares (the Advisor Shares). The Fixed Income Fund and the New York Municipal
Fund are each authorized to issue an unlimited number of full and fractional
shares of beneficial interest, $.001 par value per share, of which one billion
shares are designated Series 2 Shares (the Advisor Shares). At October 31, 1995,
no Advisor Shares were outstanding.
30
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
[THIS PAGE INTENTIONALLY LEFT BLANK]
31
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FIXED INCOME FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
6. CAPITAL SHARE TRANSACTIONS (cont'd)
Transactions in shares of each Fund were as follows:
<TABLE>
<CAPTION>
FIXED INCOME FUND GLOBAL FIXED INCOME FUND
For the Year Ended October 31, For the Year Ended October 31,
---------------------------------------- ----------------------------------
1995 1994 1995 1994
------------------- ------------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Shares sold 4,918,036 5,837,372 4,066,768 5,678,256
Shares issued to
shareholders on
reinvestment of
dividends 672,751 566,407 281,288 350,063
Shares redeemed (4,609,035) (3,561,347) (7,231,335) (2,829,142)
------------------- ------------------- ---------------- ----------------
Net increase (decrease)
in shares outstanding 981,752 2,842,432 (2,883,279) 3,199,177
------------------- ------------------- ---------------- ----------------
------------------- ------------------- ---------------- ----------------
</TABLE>
7. NET ASSETS
Net assets at October 31, 1995, consisted of the following:
<TABLE>
<CAPTION>
FIXED INCOME FUND GLOBAL FIXED INCOME FUND
---------------------------- ------------------------
<S> <C> <C>
Capital contributed, net $116,808,286 $ 63,963,915
Accumulated net investment income
(loss) (66,850) 1,917,795
Accumulated net realized gain
(loss) from security transactions (1,034,867) (1,533,335)
Net unrealized appreciation
(depreciation) from investments
and foreign currency related
items 1,276,339 (707,331)
---------------- ------------------------
Net assets $116,982,908 $ 63,641,044
---------------- ------------------------
---------------- ------------------------
</TABLE>
8. CAPITAL LOSS CARRYOVER
At October 31, 1995, capital loss carryovers available to offset possible
future capital gains of each Fund were as follows:
<TABLE>
<CAPTION>
Capital Loss Carryover Total Capital
Expiring In Loss Carryover
-------------------------- --------------
2002 2003
---------- ----------
<S> <C> <C> <C>
Fixed Income $1,034,867 $1,034,867
Global Fixed Income 653,329 1,284,612 1,937,941
32
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<CAPTION>
INTERMEDIATE GOVERNMENT FUND NEW YORK MUNICIPAL FUND
For the Year Ended October 31, For the Year Ended October 31,
---------------------------------------- ----------------------------------
1995 1994 1995 1994
------------------- ------------------- ---------------- ----------------
<C> <C> <C> <C>
2,723,498 2,426,890 3,181,012 4,835,896
230,993 538,360 299,821 328,635
(2,323,291) (5,159,908) (3,957,382) (4,178,180)
------------------- ------------------- ---------------- ----------------
631,200 (2,194,658) (476,549) 986,351
------------------- ------------------- ---------------- ----------------
------------------- ------------------- ---------------- ----------------
<CAPTION>
INTERMEDIATE GOVERNMENT FUND NEW YORK MUNICIPAL FUND
------------------------------------------ ---------------------------------
<C> <C>
$ 54,407,628 $ 70,580,636
(5,346) 0
458,837 818,908
1,036,784 1,961,933
--------------- ---------------
$ 55,897,903 $ 73,361,477
--------------- ---------------
--------------- ---------------
</TABLE>
33
- --------------------------------------------------------------------------------
<PAGE>C-1
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements relating to Common Shares
(1) Financial Statements included in Part A:
(a) Financial Highlights
(2) Financial Statements included in Part B:
(a) Report of Coopers & Lybrand L.L.P., Independent
Accountants
(b) Statement of Net Assets
(c) Statement of Operations
(d) Statement of Changes in Net Assets
(e) Financial Highlights
(f) Notes to Financial Statements
(b) Exhibits:
Exhibit No. Description of Exhibit
- ----------- ----------------------
1 Articles of Incorporation.
2 Amended and Restated By-Laws.
3 Not applicable.
4 Form of Stock Certificates.(1)
5 Investment Advisory Agreement.
6 Form of Distribution Agreement.(2)
7 Not applicable.
- ------------------------
(1)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 of Warburg, Pincus
Post-Venture Capital Fund, Inc. filed on September 25, 1995 (Securities
Act File No. 33-61225).
(2)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).
<PAGE>C-2
8 Form of Custodian Agreement with PNC Bank,
as amended. (2)
9(a) Form of Transfer Agency Agreement.(3)
(b) Form of Co-Administration Agreement with Counsellors Funds
Service, Inc. (3)
(b-1) Form of Co-Administration Agreement with PFPC Inc. (3)
(c) Forms of Services Agreements. (4)
10(a) Opinion of Willkie Farr & Gallagher, counsel to the
Fund. (5)
(b) Consent of Willkie Farr & Gallagher, counsel to the Fund.
11(a) Consent of Coopers & Lybrand L.L.P., Independent Accountants.
(b) Consent of Ernst & Young LLP, Independent Accountants.
12 Not applicable.
13 Form of Purchase Agreement. (2)
14 Form of Retirement Plans. (6)
- ------------------------
(3)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).
(4)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 Japan Growth Fund, Inc. filed on December 18, 1995
(Securities Act File No. 33-63653).
(5)Incorporated by reference to Opinion of Willkie Farr &
Gallagher filed with Registrant's Rule 24f-2 Notice, filed on
December 19, 1995.
(6)Incorporated by reference to Post-Effective Amendment No. 1 to
the Registration Statement of Warburg, Pincus Managed Bond
Trust, filed on February 28, 1995 (Securities Act File No. 33-
73672).
<PAGE>C-3
15(a) Shareholder Services Plan. (7)
(b) Amended and Restated Distribution Plan.(4)
(c) Form of Rule 18f-3 Plan. (8)
16 Schedule for Computation of Total Return and Yield
Quotations relating to Common Shares.
17 Financial Data Schedule relating to Common Shares.
- ------------------------
(7)Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit in
Post-Effective Amendment No. 12 to the Registration Statement on
Form N-1A of Counsellors Cash Reserve Fund, Inc. filed on
June 28, 1995 (Securities Act File No. 2-94840).
(8)Incorporated by reference; material provisions of this Exhibit
substantially similar to those of the corresponding exhibit in Post-
Effective Amendment No. 13 to the Registration Statement on Form N-1A of
Warburg, Pincus International Equity Fund, Inc. filed on December 28, 1995
(Securities Act File No. 33-27031.
<PAGE>C-4
Item 25. Persons Controlled by or Under Common Control
with Registrant
Warburg, Pincus Counsellors, Inc. ("Warburg"), Registrant's
investment adviser, may be deemed a controlling person of Registrant because
it possesses or shares investment or voting power with respect to more than
25% of the outstanding securities of Registrant. E.M. Warburg, Pincus & Co.,
Inc. ("EMW") controls Warburg through its ownership of a class of voting
preferred stock of Warburg. John L. Furth, director of the Fund, and Lionel
I. Pincus, Chairman of the Board and Chief Executive Officer of EMW, may be
deemed to be controlling persons of the Fund because they may be deemed to
possess or share investment power over shares owned by clients of Warburg and
certain other entities.
Item 26. Number of Holders of Securities
<TABLE>
<CAPTION>
Number of Record Holders
Title of Class As of December 28, 1995
-------------- ------------------------
<S> <C>
Shares of common stock, par value $.001 per share 539
Shares of common stock - Series 1, par value $.001 per share 0
Shares of common stock - Series 2 ("Advisor Shares"), par value 0
$.001 per share
</TABLE>
Item 27. Indemnification
Registrant, officers and directors or trustees of Warburg, of
Counsellors Securities Inc. ("Counsellors Securities") and of Registrant are
covered by insurance policies indemnifying them for liability incurred in
connection with the operation of Registrant. These policies provide insurance
for any "Wrongful Act" of an officer, director or trustee. Wrongful Act is
defined as breach of duty, neglect, error, misstatement, misleading statement,
omission or other act done or wrongfully attempted by an officer, Director or
Trustee in connection with the operation of Registrant. Insurance coverage
does not extend to (a) conflicts of interest or gaining in fact any profit or
advantage to which one is not legally entitled, (b) intentional non-compliance
with any statute or regulation or (c) commission of dishonest, fraudulent acts
or omissions. Insofar as it relates to Registrant, the coverage is limited in
amount and, in certain circumstances, is subject to a deductible.
Under Article VII of the Registrant's charter, no provision of the
charter shall be effective to protect or purport to protect any director or
officer of the Registrant against any liability to the Registrant or its
security holders to which he
<PAGE>C-5
would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
Under Article V, Sections 1 and 2, of Registrant's By-Laws, any past
or present director or officer of Registrant will be indemnified to the
fullest extent permitted by law against liability and all expenses reasonably
incurred by him in connection with any action, suit or proceeding to which he
may be a party or otherwise involved by reason of his being or having been a
director or officer of Registrant. This provision does not authorize
indemnification when it is determined, in the manner specified in the By-Laws,
that the director or officer would otherwise be liable to Registrant or its
shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of his duties ("disqualifying conduct"). Expenses of a
director or officer may be paid by Registrant in advance of the final
disposition of any action, suit or proceeding upon the satisfaction of certain
conditions including receipt of an undertaking by the director or officer to
repay the expenses to Registrant in the event that it is ultimately determined
that indemnification of the expenses is not authorized under the charter and
upon the satisfaction of any other conditions set forth in Registrant's
By-Laws.
Under Article V, Section 6, of Registrant's By-Laws, Registrant may
purchase insurance on behalf of a director, officer, employee or agent of
Registrant against liability arising out of his acting as such or while
serving in similar capacities in other entities at Registrant's request.
Registrant may not obtain insurance for liabilities arising out of
disqualifying conduct.
Registrant's Investment Advisory Agreement with Warburg and
Distribution Agreement with Counsellors Securities contain provision designed
to protect certain persons from liability, as follows: Section 5 of the
Investment Advisory Agreement provides that Warburg will not be liable for any
error of judgment or mistake of law or for any loss suffered by Registrant in
connection with matters to which the Agreement relates, except that Warburg is
not protected from liability by reason of disqualifying conduct. Section 4 of
the Distribution Agreement provides that Registrant will indemnify Counsellors
Securities and its officers, directors and control persons from liability
arising out of a misstatement or omission in Registrant's Registration
Statement, other than liability arising out of statements made by Counsellors
Securities and liability arising out of disqualifying conduct.
Insofar as indemnification for liability arising under the 1933 Act
may be permitted to directors, officers and controlling persons of Registrant
pursuant to the foregoing
<PAGE>C-6
provisions, or otherwise, Registrant has been advised that in the opinion of
the Securities and Exchange Commission ("SEC") such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by Registrant of expenses incurred or paid by a director,
officer or controlling person of Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered,
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
Item 28. Business and Other Connections of
Investment Adviser
Warburg a wholly owned subsidiary of Warburg, Pincus Counsellors
G.P., 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 28 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 29. Principal Underwriter
(a) Counsellors Securities acts as distributor for Registrant, as
well as for The RBB Fund, Inc., Warburg Pincus Capital Appreciation Fund,
Warburg Pincus Cash Reserve Fund, Warburg Pincus Emerging Growth Fund, Warburg
Pincus Emerging Markets Fund, Warburg Pincus Fixed Income Fund, Warburg Pincus
Global Fixed Income Fund, Warburg Pincus Institutional Fund, Inc., Warburg
Pincus International Equity Fund, Warburg Pincus Japan Growth Fund, Warburg
Pincus Japan OTC Fund, Warburg Pincus New York Intermediate Municipal Fund,
Warburg Pincus Post-Venture Capital Fund, Warburg Pincus New York Tax Exempt
Fund, Warburg Pincus Short-Term Tax-Advantaged Bond Fund, Warburg Pincus Small
Company Value Fund and Warburg Pincus Trust.
(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.
<PAGE>C-7
Item 30. Location of Accounts and Records
(1) Warburg, Pincus Intermediate Maturity Government Fund
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 transfer agent and
dividend disbursing agent)
(3) PFPC Inc.
103 Bellevue Parkway
Wilmington, Delaware 19809
(records relating to its functions as co-administrator)
(4) Counsellors Funds Service, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as
co-administrator)
(5) PNC Bank, National Association
Broad and Chestnut Streets
Philadelphia, Pennsylvania 19101
(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 Counsellors, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as investment adviser)
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of
<PAGE>C-8
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.
<PAGE>C-9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, 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 11th day of January,
1996.
COUNSELLORS INTERMEDIATE
MATURITY GOVERNMENT FUND, INC.
By:/s/ Dale C. Christensen
Dale C. Christensen
President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment has been signed below by the following persons in the
capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Lionel I. Pincus Chairman of January 11, 1996
Lionel I. Pincus the Board and
Director
/s/ John L. Furth Chief Executive January 11, 1996
John L. Furth Officer and
Director
/s/ Dale C. Christensen President January 11, 1996
Dale C. Christensen
/s/ Reuben S. Leibowitz Vice President January 11, 1996
Reuben S. Leibowitz and Chief
Financial
Officer
/s/ Stephen Distler Treasurer and January 11, 1996
Stephen Distler Principal
Accounting
Officer
/s/ Richard N. Cooper Director January 11, 1996
Richard N. Cooper
/s/ Donald J. Donahue Director January 11, 1996
Donald J. Donahue
<PAGE>C-10
/s/ Jack W. Fritz Director January 11, 1996
Jack W. Fritz
/s/ Thomas A. Melfe Director January 11, 1996
Thomas A. Melfe
/s/ Alexander B. Trowbridge Director January 11, 1996
Alexander B. Trowbridge
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
- ----------- ----------------------
1(a) Articles of Incorporation.
2 Amended and Restated By-Laws.
3 Not applicable.
4 Form of Stock Certificates.(1)
5 Investment Advisory Agreement.
6 Form of Distribution Agreement.(2)
7 Not applicable.
8 Form of Custodian Agreement with PNC Bank,
as amended. (2)
9(a) Form of Transfer Agency Agreement.(3)
(b) Form of Co-Administration Agreement with Counsellors Funds
Service, Inc. (3)
(b-1) Form of Co-Administration Agreement with PFPC Inc. (3)
(c) Forms of Services Agreements. (4)
- ------------------------
(1)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 of Warburg, Pincus
Post-Venture Capital Fund, Inc. filed on September 25, 1995 (Securities
Act File No. 33-61225).
(2)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).
(3)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).
(4)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 Japan Growth Fund, Inc. filed on
December 18, 1995 (Securities Act File No. 33-63653).
<PAGE>
10(a) Opinion of Willkie Farr & Gallagher, counsel to the Fund.(5)
(b) Consent of Willkie Farr & Gallagher, counsel to the Fund.
11(a) Consent of Coopers & Lybrand L.L.P., Independent Accountants.
(b) Consent of Ernst & Young LLP, Independent Accountants.
12 Not applicable.
13 Form of Purchase Agreement. (2)
14 Form of Retirement Plans. (6)
15(a) Shareholder Services Plan.(7)
(b) Amended and Restated Distribution Plan.(4)
(c) Form of Rule 18f-3 Plan. (8)
16 Schedule for Computation of Total Return and Yield Quotations
relating to Common Shares.
17 Financial Data Schedule relating to Common Shares.
- ------------------------
(5)Incorporated by reference to Opinion of Willkie Farr & Gallagher filed
with Registrant's Rule 24f-2 Notice, filed on December 19, 1995.
(6)Incorporated by reference to Post-Effective Amendment No. 1 to the
Registration Statement of Warburg, Pincus Managed Bond Trust, filed on
February 28, 1995 (Securities Act File No. 33-73672).
(7)Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit in
Post-Effective Amendment No. 12 to the Registration Statement
on Form N-1A of Counsellors Cash Reserve Fund, Inc. filed
on June 28, 1995 (Securities Act File No. 2-94840).
(8)Incorporated by reference; material provisions of this Exhibit
substantially similar to those of the corresponding exhibit in
Post-Effective Amendment No. 13 to the Registration Statement on Form N-1A
of Warburg, Pincus International Equity Fund, Inc. filed on December 28,
1995 (Securities Act File No. 33-27031).
<PAGE>1
ARTICLES OF INCORPORATION
OF
COUNSELLORS INTERMEDIATE MATURITY GOVERNMENT FUND, INC.
ARTICLE I
The undersigned Michael E. Lombardozzi, whose post office address is
c/o Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New
York, New York 10022, being at least 18 years of age, does hereby act as an
incorporator and forms a corporation, under and by virtue of the Maryland
General Corporation Law.
ARTICLE II
NAME
The name of the Corporation is COUNSELLORS INTERMEDIATE MATURITY
GOVERNMENT FUND, INC.
ARTICLE III
PURPOSES AND POWERS
The Corporation is formed for the following purposes:
(1) To conduct and carry on the business of an investment company.
(2) To hold, invest and reinvest its assets in securities and other
investments or to hold part or all of its assets in cash.
(3) To issue and sell shares of its capital stock in such amounts
and on such terms and conditions and for such purposes and for such amount or
kind of consideration as may now or hereafter be permitted by law.
(4) To redeem, purchase or acquire in any other manner, hold,
dispose of, resell, transfer, reissue or cancel (all without the vote or
consent of the stockholders of the Corporation) shares of its capital stock,
in any manner and to the extent now or hereafter permitted by law and by these
Articles of Incorporation.
(5) To do any and all additional acts and to exercise any and all
additional powers or rights as may be necessary, incidental, appropriate or
desirable for the accomplishment of
<PAGE>2
all or any of the foregoing purposes.
The Corporation shall be authorized to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations by
the Maryland General Corporation Law now or hereafter in force, and the
enumeration of the foregoing shall not be deemed to exclude any powers, rights
or privileges so granted or conferred.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The post office address of the principal office of the Corporation in
the State of Maryland is c/o The Corporation Trust Incorporated, 32 South
Street, Baltimore, Maryland, 21201. The name and address of the resident
agent of the Corporation in the State of Maryland is The Corporation Trust
Incorporated, a Maryland Corporation, 32 South Street, Baltimore, Maryland
21202.
ARTICLE V
CAPITAL STOCK
(1) The total number of shares of capital stock that the Corporation
shall have authority to issue is three billion (3,000,000,000) shares, of the
par value of one tenth of one cent ($.001) per share and of the aggregate par
value of three million dollars ($3,000,000), all of which three billion
(3,000,000,000) shares are designated Common Stock.
(2) Any fractional share shall carry proportionately the rights of a
whole share including, without limitation, the right to vote and the right to
receive dividends. A fractional share shall not, however, have the right to
receive a certificate evidencing it.
(3) All persons who shall acquire stock in the Corporation shall
acquire the same subject to the provisions of this Charter and the By-Laws of
the Corporation.
(4) No holder of stock of the Corporation by virtue of being such a
holder shall have any right to purchase or subscribe for any shares of the
Corporation's capital stock or any other security that the Corporation may
issue or sell (whether out of the number of shares authorized by this Charter
or out of any shares of the Corporation's capital stock that the Corporation
may acquire) other than a right that the Board of Directors in its discretion
may determine to grant.
<PAGE>3
(5) The Board of Directors shall have authority by resolution to
classify and reclassify any authorized but unissued shares of capital stock
from time to time by setting or changing in any one or more respects the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or conditions of
redemption of the capital stock.
(6) Notwithstanding any provision of law requiring any action to be
taken or authorized by the affirmative vote of a greater proportion of the
votes of all classes or of any class of stock of the Corporation, such action
shall be effective and valid if taken or authorized by the affirmative vote of
a majority of the total number of votes entitled to be cast thereon, except as
otherwise provided in this Charter.
ARTICLE VI
REDEMPTION
Each holder of shares of the Corporation's capital stock shall be
entitled to require the Corporation to redeem all or any part of the shares of
capital stock of the Corporation standing in the name of the holder on the
books of the Corporation, and all shares of capital stock issued by the
Corporation shall be subject to redemption by the Corporation, at the
redemption price of the shares as in effect from time to time as may be
determined by or pursuant to the direction of the Board of Directors of the
Corporation in accordance with the provisions of Article VI, subject to the
right of the Board of Directors of the Corporation to suspend the right of
redemption or postpone the date of payment of the redemption price in
accordance with provisions of applicable law. Without limiting the generality
of the foregoing, the Corporation shall, to the extent permitted by applicable
law, have the right at any time to redeem the shares owned by any holder of
capital stock of the Corporation (i) if the redemption is, in the opinion of
the Board of Directors of the Corporation, desirable in order to prevent the
Corporation from being deemed a "personal holding company" within the meaning
of the Internal Revenue Code of 1986 or (ii) if the value of the shares in the
account maintained by the Corporation or its transfer agent for any class of
stock for the stockholder is $10,000 (ten thousand dollars) or less and the
stockholder has been given at least 60 (sixty) days' written notice of the
redemption and has failed to make additional purchases of shares in an amount
sufficient to bring the value in his account to $10,000 (ten thousand dollars)
or more before the redemption is effected by the Corporation. Payment of the
redemption price shall be made in cash by the Corporation at the time and in
the manner as may be determined from time to time by the Board of
<PAGE>4
Directors of the Corporation unless, in the opinion of the Board of Directors,
which shall be conclusive, conditions exist that make payment wholly in cash
unwise or undesirable; in such event the Corporation may make payment wholly
or partly by securities or other property included in the assets belonging or
allocable to the class of the shares redemption of which is being sought, the
value of which shall be determined as provided herein. The Board of Directors
may establish procedures for redemption of shares.
ARTICLE VII
BOARD OF DIRECTORS
(1) The number of directors constituting the Board of Directors
shall be one (1) or such other number as may be set forth in the By-laws or
determined by the Board of Directors pursuant to the By-laws. The number of
Directors shall at no time be less than the minimum number required under the
Maryland General Corporation Law. The name of the initial director who shall
act until the first annual meeting of shareholders held after the initial
public offering of the shares of the Corporation (the "Initial Annual
Meeting") or until his successor is duly chosen and qualified is:
Arnold M. Reichman
(2) In furtherance, and not in limitation, of the powers conferred
by the laws of the State of Maryland, the Board of Directors is expressly
authorized:
(i) To make, alter or repeal the By-Laws of the Corporation, except where
such power is reserved by the By-Laws to the stockholders, and except as
otherwise required by the Investment Company Act of 1940, as amended.
(ii) From time to time to determine whether and to what extent and at what
times and places and under what conditions and regulations the books and
accounts of the Corporation, or any of them other than the stock ledger, shall
be open to the inspection of the stockholders. No stockholder shall have any
right to inspect
any account or book or document of the Corporation, except as conferred by law
or authorized by resolution of the Board of Directors or of the stockholders.
(iii) Without the assent or vote of the stockholders, to authorize the
issuance from time to time of shares of the stock of any class of the
Corporation, whether now or hereafter authorized, and securities convertible
into
<PAGE>5
shares of stock of the Corporation of any class or classes, whether now or
hereafter authorized, for such consideration as the Board of Directors may
deem advisable.
(iv) Without the assent or vote of the stockholders, to authorize and issue
obligations of the Corporation, secured and unsecured, as the Board of
Directors may determine, and to authorize and cause to be executed mortgages
and liens upon the real or personal property of the Corporation.
(v) Notwithstanding anything in this Charter to the contrary, to establish in
its absolute discretion the basis or method for determining the value of the
assets belonging to any class, the value of the liabilities belonging to any
class and the net asset value of each share of any class of the Corporation's
stock.
(vi) To determine in accordance with generally accepted accounting principles
and practices what constitutes net profits, earnings, surplus or net assets in
excess of capital, and to determine what accounting periods shall be used by
the Corporation for any purpose; to set apart out of any funds of the
Corporation reserves for such purposes as it shall determine and to abolish
the same; to declare and pay any dividends and distributions in cash,
securities or other property from surplus or any funds legally available
therefor, at such intervals as it shall determine; to declare dividends or
distributions by means of a formula or other method of determination, at
meetings held less frequently than the frequency of the effectiveness of such
declarations; and to establish payment dates for dividends or any other
distributions on any basis, including dates occurring less frequently than the
effectiveness of declarations thereof.
(vii) In addition to the powers and authorities granted herein and by statute
expressly conferred upon it, the Board of Directors is authorized to exercise
all powers and do all acts that may be exercised or done by the Corporation
pursuant to the provisions of the laws of the State of Maryland, this Charter
and the By-Laws of the Corporation.
(3) Any determination made in good faith, and in accordance with
accepted accounting practices, if applicable, by or pursuant to the direction
of the Board of Directors, with respect to the amount of assets, obligations
or liabilities of the Corporation, as to the amount of net income of the
Corporation from dividends and interest for any period or amounts at any time
legally available for the payment of dividends, as to the amount of any
reserves or charges set up and the propriety thereof, as to the time of or
purpose for creating reserves or as to the use, alteration or cancellation of
any reserves or charges (whether or not any obligation or liability for which
the reserves or charges have been created has been paid or discharged
<PAGE>6
or is then or thereafter required to be paid or discharged), as to the value
of any security owned by the Corporation, the determination of the net asset
value of shares of any class of the Corporation's capital stock, or as to any
other matters relating to the issuance, sale or other acquisition or
disposition of securities or shares of capital stock of the Corporation, and
any reasonable determination made in good faith by the Board of Directors
whether any transaction constitutes a purchase of securities on "margin," a
sale of securities "short," or an underwriting of the sale of, or a
participation in any underwriting or selling group in connection with the
public distribution of, any securities, shall be final and conclusive, and
shall be binding upon the Corporation and all holders of its capital stock,
past, present and future, and shares of the capital stock of the Corporation
are issued and sold on the condition and understanding, evidenced by the
purchase of shares of capital stock or acceptance of share certificates, that
any and all such determinations shall be binding as aforesaid. No provision
of this Charter of the Corporation shall be effective to (i) require a waiver
of compliance with any provision of the Securities Act of 1933, as amended, or
the Investment Company Act of 1940, as amended, or of any valid rule,
regulation or order of the Securities and Exchange Commission under those Acts
or (ii) protect or purport to protect any director or officer of the
Corporation against any liability to the Corporation or its security holders
to which he would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office.
ARTICLE VIII
AMENDMENTS
The Corporation reserves the right from time to time to make any
amendment to its Charter, now or hereafter authorized by law, including any
amendment that alters the contract rights, as expressly set forth in this
Charter, of any outstanding stock.
* * *
IN WITNESS WHEREOF, I have adopted and signed these Articles of
Incorporation and do hereby acknowledge that the adoption and signing are my
act.
By: /s/ Michael E. Lombardozzi
Michael E. Lombardozzi
Incorporator
Dated the 21st day of June, 1988
<PAGE>1
AMENDED AND RESTATED
BY-LAWS
OF
COUNSELLORS INTERMEDIATE MATURITY GOVERNMENT FUND, INC.
A Maryland Corporation
ARTICLE I
STOCKHOLDERS
SECTION 1. Annual Meetings. No annual meeting of the stockholders
of the Corporation shall be held in any year in which the election or
directors is not required to be acted upon under the Investment Company Act of
1940, as amended unless otherwise determined by the Board of Directors. An
annual meeting may be held at any place within the United States as may be
determined by the Board of Directors and as shall be designated in the notice
of the meeting, and at the time specified by the Board of Directors. Any
business of the Corporation may be transacted at an annual meeting without
being specifically designated in the notice unless otherwise provided by
statute, the Corporation's Articles of Incorporation or these By-Laws.
SECTION 2. Special Meetings. Special meetings of the stockholders
for any purpose or purposes, unless otherwise prescribed by statute or by the
Corporation's Articles of Incorporation, may be held at any place within the
United States, and may be called at any time by the Board of Directors or by
the President, and shall be called by the President or Secretary at the
request in writing of a majority of the Board of Directors or at the request
in writing of stockholders entitled to cast at least 25 (twenty-five) percent
(at least ten (10) percent for the purpose of removing a director) of the
votes entitled to be cast at the meeting upon payment by such stockholders to
the Corporation of the reasonably estimated cost of preparing and mailing a
notice of the meeting (which estimated cost shall be provided to such
stockholders by the Secretary of the Corporation). Notwithstanding the
foregoing, unless requested by stockholders entitled to cast a majority of
the votes entitled to be cast at the meeting, a special meeting of the
stockholders need not be called at the request of stockholders to consider any
matter which is substantially the same as a matter voted on at any special
meeting of the stockholders held during the preceding 12 (twelve) months. A
written request shall state the purpose or purposes of the proposed meeting.
<PAGE>2
SECTION 3. Notice of Meetings. Written or printed notice of the
purpose or purposes and of the time and place of every meeting of the
stockholders shall be given by the Secretary of the Corporation to each
stockholder of record entitled to vote at the meeting, by placing the notice
in the mail at least 10 (ten) days, but not more than 90 (ninety) days, prior
to the date designated for the meeting addressed to each stockholder at his
address appearing on the books of the Corporation or supplied by the
stockholder to the Corporation for the purpose of notice. The notice of any
meeting of stockholders may be accompanied by a form of proxy approved by the
Board of Directors in favor of the actions or persons as the Board of
Directors may select. Notice of any meeting of stockholders shall be deemed
waived by any stockholder who attends the meeting in person or by proxy, or
who before or after the meeting submits a signed waiver of notice that is
filed with the records of the meeting.
SECTION 4. Quorum. Except as otherwise provided by statute or by
the Corporation's Articles of Incorporation, the presence in person or by
proxy of stockholders of the Corporation entitled to cast at least a majority
of the votes to be cast shall constitute a quorum at each meeting of the
stockholders and all questions shall be decided by majority vote of the shares
so represented in person or by proxy at the meeting and entitled to vote. In
the absence of a quorum, the stockholders present in person or by proxy, by
majority vote and without notice other than by announcement, may adjourn the
meeting from time to time as provided in Section 5 of this Article I until a
quorum shall attend. The stockholders present at any duly organized meeting
may continue to do business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum. The absence from any
meeting in person or by proxy of holders of the number of shares of stock of
the Corporation in excess of a majority that may be required by the laws of
the State of Maryland, the Investment Company Act of 1940, as amended, or
other applicable statute, the Corporation's Articles of Incorporation or these
By-Laws, for action upon any given matter shall not prevent action at the
meeting on any other matter or matters that may properly come before the
meeting, so long as there are present, in person or by proxy, holders of the
number of shares of stock of the Corporation required for action upon the
other matter or matters.
SECTION 5. Adjournment. Any meeting of the stockholders may be
adjourned from time to time, without notice other than by announcement at the
meeting at which the adjournment is taken. At any adjourned meeting at which
a quorum shall be present any action may be taken that could have been taken
at the meeting
<PAGE>3
originally called. A meeting of the stockholders may not be adjourned to a
date more than 120 (one hundred twenty) days after the original record date.
SECTION 6. Organization. At every meeting of the stockholders, the
Chairman of the Board, or in his absence or inability to act, the President,
or in his absence or inability to act, a Vice President, or in the absence or
inability to act of the Chairman of the Board, the President and all the Vice
Presidents, a chairman chosen by the stockholders, shall act as Chairman of
the meeting. The Secretary, or in his absence or inability to act, a person
appointed by the chairman of the meeting, shall act as secretary of the
meeting and keep the minutes of the meeting.
SECTION 7. Order of Business. The order of business at all meetings
of the stockholders shall be as determined by the chairman of the meeting.
SECTION 8. Voting. Except as otherwise provided by statute or the
Corporation's Articles of Incorporation, each holder of record of shares of
stock of the Corporation having voting power shall be entitled at each meeting
of the stockholders to one vote for every share of stock standing in his name
on the records of the Corporation as of the record date determined pursuant to
Section 9 of this Article I.
Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him by a proxy signed by the
stockholder or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven months from the date thereof, unless otherwise provided
in the proxy. Every proxy shall be revocable at the pleasure of the
stockholder executing it, except in those cases in which the proxy states
that it is irrevocable and in which an irrevocable proxy is permitted by law.
If a vote shall be taken on any question other than the election of
directors, which shall be by written ballot, then unless required by statute
or these By-Laws, or determined by the chairman of the meeting to be
advisable, any such vote need not be by ballot. On a vote by ballot, each
ballot shall be signed by the stockholder voting, or by his proxy, and shall
state the number of shares voted.
SECTION 9. Fixing of Record Date. The Board of Directors may set a
record date for the purpose of determining stockholders entitled to vote at
any meeting of the stockholders. The record date for a particular meeting
shall be not more than 90
<PAGE>4
(ninety) nor fewer than 10 (ten) days before the date of the meeting. All
persons who were holders of record of shares as of the record date of a
meeting, and no others, shall be entitled to vote at such meeting and any
adjournment thereof.
SECTION 10. Inspectors. The Board of Directors may, in advance of
any meeting of stockholders, appoint one or more inspectors to act at the
meeting or at any adjournment of the meeting. If the inspectors shall not be
so appointed or if any of them shall fail to appear or act, the chairman of
the meeting may, and on the request of any stockholder entitled to vote at the
meeting shall, appoint inspectors. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath to execute faithfully the
duties of inspector at the meeting with strict impartiality and according to
the best of his ability. The inspectors shall determine the number of shares
outstanding and the voting power of each share, the number of shares
represented at the meeting, the existence of a quorum and the validity and
effect of proxies, and shall receive votes, ballots or consents, hear and
determine all challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots or consents, determine the
result, and do those acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the chairman of the meeting or
any stockholder entitled to vote at the meeting, the inspectors shall make a
report in writing of any challenge, request or matter determined by them and
shall execute a certificate of any fact found by them. No director or
candidate for the office of director shall act as inspector of an election of
directors. Inspectors need not be stockholders of the Corporation.
SECTION 11. Consent of Stockholders in Lieu of Meeting. Except as
otherwise provided by statute or the Corporation's Articles of Incorporation,
any action required to be taken at any meeting of stockholders, or any action
that may be taken at any meeting of the stockholders, may be taken without a
meeting, without prior notice and without a vote, if the following are filed
with the records of stockholders' meetings: (i) a unanimous written consent
that sets forth the action and is signed by each stockholder entitled to vote
on the matter and (ii) a written waiver of any right to dissent signed by each
stockholder entitled to notice of the meeting but not entitled to vote at the
meeting.
SECTION 12. Notice of Stockholder Business.
(a) At any Annual or Special Meeting of the Stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought
<PAGE>5
before an Annual or Special Meeting business must be (A) (i) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, (ii) otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (iii) subject to the
provisions of Section 13 of this Article I, otherwise properly brought before
the meeting by a Stockholder and (B) a proper subject under applicable law for
Stockholder action.
(b) For business to be properly brought before an Annual or Special
Meeting by a Stockholder, the Stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, any
such notice must be delivered to or mailed and received at the principal
executive offices of the Corporation not later than 60 days prior to the date
of the meeting; provided, however, that if less than 70 days' notice or prior
public disclosure of the date of the meeting is given or made to Stockholders,
any such notice by a Stockholder to be timely must be so received not later
than the close of business on the 10th day following the day on which notice
of the date of the Annual or Special Meeting was given or such public
disclosure was made.
(c) Any such notice by a Stockholder shall set forth as to each
matter the Stockholder proposes to bring before the Annual or Special Meeting
(i) a brief description of the business desired to be brought before the
Annual or Special Meeting and the reasons for conducting such business at the
Annual or Special Meeting, (ii) the name and address, as they appear on the
Corporation's books, of the Stockholder proposing such business, (iii) the
class and number of shares of the capital stock of the Corporation which are
beneficially owned by the Stockholder, and (iv) any material interest of the
Stockholder in such business.
(d) Notwithstanding anything in the By-Laws to the contrary, no
business shall be conducted at any Annual or Special Meeting except in
accordance with the procedures set forth in this Section 12. The Chairman of
the Annual or Special Meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the
meeting and in accordance with the provisions of this Section 12, and if he
should so determine, he shall so declare to the meeting and any such business
not properly brought before the meeting shall not be considered or transacted.
<PAGE>6
SECTION 13. Stockholder Business not Eligible for Consideration.
(a) Notwithstanding anything in these By-Laws to the contrary, any
proposal that is otherwise properly brought before an Annual or Special
Meeting by a Stockholder will not be eligible for consideration by the
Stockholders at such Annual or Special Meeting if such proposal is
substantially the same as a matter properly brought before such Annual or
Special Meeting by or at the direction of the Board of Directors of the
Corporation. The Chairman of such Annual or Special Meeting shall, if the
facts warrant, determine and declare that a Stockholder proposal is
substantially the same as a matter properly brought before the meeting by or
at the direction of the Board of Directors, and, if he should so determine, he
shall so declare to the meeting and any such Stockholder proposal shall not be
considered at the meeting.
(b) This Section 13 shall not be construed or applied to make
ineligible for consideration by the Stockholders at any Annual or Special
Meeting any Stockholder proposal required to be included in the Corporation's
proxy statement relating to such meeting pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934, or any successor rule thereto.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. General Powers. Except as otherwise provided in the
Corporation's Articles of Incorporation, the business and affairs of the
Corporation shall be managed under the direction of the Board of Directors.
All powers of the Corporation may be exercised by or under authority of the
Board of Directors except as conferred on or reserved to the stockholders by
law, by the Corporation's Articles of Incorporation or by these By-Laws.
SECTION 2. Number of Directors. The number of directors shall he
fixed from time to time by resolution of the Board of Directors adopted by a
majority of the Directors then in office; provided, however, that the number
of directors shall in no event be fewer than one nor more than fifteen. Any
vacancy created by an increase in Directors may be filled in accordance with
Section 6 of this Article II. No reduction in the number of directors shall
have the effect of removing any director from office prior to the expiration
of his term unless the director is specifically removed pursuant to Section 5
of this Article II at the time of the decrease. A director need not be a
stockholder of the
<PAGE>7
Corporation, a citizen of the United States or a resident of the State of
Maryland.
SECTION 3. Election and Term of Directors. The term of office of
each director shall be from the time of his election and qualification until
his successor shall have been elected and shall have qualified, or until his
death, or until he shall have resigned or have been removed as provided in
these By-laws, or as otherwise provided by statute or the Corporation's
Articles of Incorporation.
SECTION 3.1 Director Nominations.
(a) Only persons who are nominated in accordance with the procedures
set forth in this Section 3.1 shall be eligible for election or re-election as
Directors. Nominations of persons for election or re-election to the Board of
Directors of the Corporation may be made at a meeting of Stockholders by or at
the direction of the Board of Directors or by any Stockholder of the
Corporation who is entitled to vote for the election of such nominee at the
meeting and who complies with the notice procedures set forth in this Section
3.1.
(b) Such nominations, other than those made by or at the direction
of the Board of Directors, shall be made pursuant to timely notice delivered
in writing to the Secretary of the Corporation. To be timely, any such notice
by a Stockholder must be delivered to or mailed and received at the principal
executive offices of the Corporation not later than 60 days prior to the
meeting; provided, however, that if less than 70 days' notice or prior public
disclosure of the date of the meeting is given or made to Stockholders, any
such notice by a Stockholder to be timely must be so received not later than
the close of business on the 10th day following the day on which notice of the
date of the meeting was given or such public disclosure was made.
(c) Any such notice by a Stockholder shall set forth (i) as to each
person whom the Stockholder proposes to nominate for election or re-election
as a Director, (A) the name, age, business address and residence address of
such person, (B) the principal occupation or employment of such person, (C)
the class and number of shares of the capital stock of the Corporation which
are beneficially owned by such person and (D) any other information relating
to such person that is required to be disclosed in solicitations of proxies
for the election of Directors pursuant to Regulation 14A under the Securities
Exchange Act of 1934 or any successor regulation thereto (including without
limitation such persons' written consent to being named in the proxy statement
as a nominee and to serving as a Director if elected and whether any
<PAGE>8
person intends to seek reimbursement from the Corporation of the expenses of
any solicitation of proxies should such person be elected a Director of the
Corporation); and (ii) as to the Stockholder giving the notice (A) the name
and address, as they appear on the Corporation's books, of such Stockholder
and (B) the class and number of shares of the capital stock of the Corporation
which are beneficially owned by such Stockholder. At the request of the Board
of Directors any person nominated by the Board of Directors for election as a
Director shall furnish to the Secretary of the Corporation that information
required to be set forth in a Stockholder's notice of nomination which
pertains to the nominee.
(d) If a notice by a Stockholder is required to be given pursuant to
this Section 3.1, no person shall be entitled to receive reimbursement from
the Corporation of the expenses of a solicitation of proxies for the election
as a Director of a person named in such notice unless such notice states that
such reimbursement will be sought from the Corporation. No person shall be
eligible for election as a Director of the Corporation unless nominated in
accordance with the procedures set forth in this Section 3.1. The Chairman of
the meeting shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the procedures prescribed by
the By-Laws, and if he should so determine, he shall so declare to the meeting
and the defective nomination shall be disregarded for all purposes.
SECTION 4. Resignation. A director of the Corporation may resign at
any time by giving written notice of his resignation to the Board of Directors
or the Chairman of the Board or to the President or the Secretary of the
Corporation. Any resignation shall take effect at the time specified in it
or, should the time when it is to become effective not be specified in it,
immediately upon its receipt. Acceptance of a resignation shall not be
necessary to make it effective unless the resignation states otherwise.
SECTION 5. Removal of Directors. Any director of the Corporation
may be removed by the stockholders with or without cause at any time by a vote
of a majority of the votes entitled to be cast for the election of directors.
SECTION 6. Vacancies. Subject to the provisions of the Investment
Company Act of 1940, as amended, any vacancies in the Board of Directors,
whether arising from death, resignation, removal or any other cause except an
increase in the number of directors, shall be filled by a vote of the majority
of the Board of Directors then in office even though that majority is less
than
<PAGE>9
a quorum, provided that no vacancy or vacancies shall be filled by action of
the remaining directors if, after the filling of the vacancy or vacancies,
fewer than two-thirds of the directors then holding office shall have been
elected by the stockholders of the Corporation. A majority of the entire
Board may fill a vacancy which results from an increase in the number of
directors. In the event that at any time a vacancy exists in any office of a
director that may not be filled by the remaining directors, a special meeting
of the stockholders shall be held as promptly as possible and in any event
within 60 (sixty) days, for the purpose of filling the vacancy or vacancies.
Any director elected or appointed to fill a vacancy shall hold office until a
successor has been chosen and qualifies or until his earlier resignation or
removal.
SECTION 7. Place of Meetings. Meetings of the Board may be held at
any place that the Board of Directors may from time to time determine or that
is specified in the notice of the meeting.
SECTION 8. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at the time and place determined by the
Board of Directors.
SECTION 9. Special Meetings. Special meetings of the Board of
Directors may be called by two or more directors of the Corporation or by the
Chairman of the Board or the President.
SECTION 10. Notice of Special Meetings. Notice of each special
meeting of the Board of Directors shall be given by the Secretary as
hereinafter provided. Each notice shall state the time and place of the
meeting and shall be delivered to each director, either personally or by
telephone or other standard form of telecommunication, at least 24
(twenty-four) hours before the time at which the meeting is to be held, or by
first-class mail, postage prepaid, addressed to the director at his residence
or usual place of business, and mailed at least 3 (three) days before the day
on which the meeting is to be held.
SECTION 11. Waiver of Notice of Meetings. Notice of any special
meeting need not be given to any director who shall, either before or after
the meeting, sign a written waiver of notice that is filed with the records of
the meeting or who shall attend the meeting.
SECTION 12. Quorum and Voting. One-third (but not fewer than 1
(one)) of the members of the entire Board of Directors shall be present in
person at any meeting of the Board in order to constitute a quorum for the
transaction of business at the meeting, and except as otherwise expressly
required by statute,
<PAGE>10
the Corporation's Articles of Incorporation, these By-Laws, the Investment
Company Act of 1940, as amended, or any other applicable statute, the act of
a majority of the directors present at any meeting at which a quorum is
present shall be the act of the Board. In the absence of a quorum at any
meeting of the Board, a majority of the directors present may adjourn the
meeting to another time and place until a quorum shall be present. Notice of
the time and place of any adjourned meeting shall be given to the directors
who were not present at the time of the adjournment and, unless the time and
place were announced at the meeting at which the adjournment was taken, to the
other directors. At any adjourned meeting at which a quorum is present, any
business may be transacted that might have been transacted at the meeting as
originally called.
SECTION 13. Organization. The Board of Directors may, by resolution
adopted by a majority of the entire Board, designate a Chairman of the Board,
who shall preside at each meeting of the Board. In the absence or inability
of the Chairman of the Board to act, the President, or, in his absence or
inability to act, another director chosen by a majority of the directors
present, shall act as chairman of the meeting and preside at the meeting. The
Secretary, or, in his absence or inability to act, any person appointed by the
chairman, shall act as secretary of the meeting and keep the minutes thereof.
SECTION 14. Committees. The Board of Directors may designate one or
more committees of the Board of Directors, each consisting of 2 (two) or more
directors. To the extent provided in the resolution, and permitted by law,
the committee or committees shall have and may exercise the powers of the
Board of Directors in the management of the business and affairs of the
Corporation and may authorize the seal of the Corporation to be affixed to all
papers that may require it. Any committee or committees shall have the name
or names determined from time to time by resolution adopted by the Board of
Directors. Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required. The members of a
committee present at any meeting, whether or not they constitute a quorum,
may appoint a director to act in the place of an absent member.
SECTION 15. Written Consent of Directors in Lieu of a Meeting.
Subject to the provisions of the Investment Company Act of 1940, as amended,
any action required or permitted to be taken at any meeting of the Board of
Directors or of any committee of the Board may be taken without a meeting if
all members of the Board or committee, as the case may be, consent thereto in
<PAGE>11
writing, and the writing or writings are filed with the minutes of the
proceedings of the Board or committee.
SECTION 16. Telephone Conference. Members of the Board of Directors
or any committee of the Board may participate in any Board or committee
meeting by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other
at the same time. Participation by such means shall constitute presence in
person at the meeting.
SECTION 17. Compensation. Each director shall be entitled to
receive compensation, if any, as may from time to time be fixed by the Board
of Directors, including a fee for each meeting of the Board or any committee
thereof, regular or special, he attends. Directors may also be reimbursed by
the Corporation for all reasonable expenses incurred in traveling to and from
the place of a Board or committee meeting.
ARTICLE III
OFFICERS, AGENTS AND EMPLOYEES
SECTION 1. Number and Qualifications. The officers of the
Corporation shall be a President, a Secretary and a Treasurer, each of whom
shall be elected by the Board of Directors. The Board of Directors may elect
or appoint one or more Vice Presidents and may also appoint any other
officers, agents and employees it deems necessary or proper. Any two or more
offices may be held by the same person, except the offices of President and
Vice President, but no officer shall execute, acknowledge or verify any
instrument in more than one capacity. Officers shall be elected by the Board
of Directors each year at its first meeting held after the annual meeting of
stockholders, each to hold office until the meeting of the Board following the
next annual meeting of the stockholders and until his successor shall have
been duly elected and shall have qualified, or until his death, or until he
shall have resigned or have been removed, as provided in these By-Laws. The
Board of Directors may from time to time elect, or designate to the President
the power to appoint, such officers (including one or more Assistant Vice
Presidents, one or more Assistant Treasurers and one or more Assistant
Secretaries) and such agents as may be necessary or desirable for the business
of the Corporation. Such other officers and agents shall have such duties and
shall hold their offices for such terms as may be prescribed by the Board or
by the appointing authority.
<PAGE>12
SECTION 2. Resignations. Any officer of the Corporation may resign
at any time by giving written notice of his resignation to the Board of
Directors, the Chairman of the Board, the President or the Secretary. Any
resignation shall take effect at the time specified therein or, if the time
when it shall become effective is not specified therein, immediately upon its
receipt. Acceptance of a resignation shall not be necessary to make it
effective unless the resignation states otherwise.
SECTION 3. Removal of Officer, Agent or Employee. Any officer,
agent or employee of the Corporation may be removed by the Board of Directors
with or without cause at any time, and the Board may delegate the power of
removal as to agents and employees not elected or appointed by the Board of
Directors. Removal shall be without prejudice to the person's contract
rights, if any, but the appointment of any person as an officer, agent or
employee of the Corporation shall not of itself create contract rights.
SECTION 4. Vacancies. A vacancy in any office whether arising from
death, resignation, removal or any other cause, may be filled for the
unexpired portion of the term of the office that shall be vacant, in the
manner prescribed in these By-Laws for the regular election or appointment to
the office.
SECTION 5, Compensation. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any officer with respect to other officers under his control.
SECTION 6. Bonds or Other Security. If required by the Board, any
officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his duties, in an amount and with any
surety or sureties as the Board may require.
SECTION 7. President. The President shall be the chief executive
officer of the Corporation. In the absence or inability of the Chairman of
the Board (or if there is none) to act, the President shall preside at all
meetings of the stockholders and of the Board of Directors. The President
shall have, subject to the control of the Board of Directors, general charge
of the business and affairs of the Corporation, and may employ and discharge
employees and agents of the Corporation, except those elected or appointed by
the Board, and he may delegate these powers.
SECTION 8. Vice President. Each Vice President shall have the
powers and perform the duties that the Board of Directors or the President may
from time to time prescribe.
<PAGE>13
SECTION 9. Treasurer. Subject to the provisions of any contract
that may be entered into with any custodian pursuant to authority granted by
the Board of Directors, the Treasurer shall have charge of all receipts and
disbursements of the Corporation and shall have or provide for the custody of
the Corporation's funds and securities; he shall have full authority to
receive and give receipts for all money due and payable to the Corporation,
and to endorse checks, drafts and warrants, in its name and on its behalf and
to give full discharge for the same; he shall deposit all funds of the
Corporation, except those that may be required for current use, in such banks
or other places of deposit as the Board of Directors may from time to time
designate; and, in general, he shall perform all duties incident to the office
of Treasurer and such other duties as may from time to time be assigned to him
by the Board of Directors or the President.
SECTION 10. Secretary. The Secretary shall
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board of Directors, the committees
of the Board and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all stock certificates of the Corporation (unless
the seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents to
be executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly kept
and filed; and
(e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board of Directors or the President.
SECTION 11. Delegation of Duties. In case of the absence of any
officer of the Corporation, or for any other reason that the Board of
Directors may deem sufficient, the Board may confer for the time being the
powers or duties, or any of them, of such officer upon any other officer or
upon any director.
<PAGE>14
ARTICLE IV
STOCK
SECTION 1. Stock Certificates. Each holder of stock of the
Corporation shall be entitled upon specific written request to such person as
may be designated by the Corporation to have a certificate or certificates, in
a form approved by the Board, representing the number of shares of stock of
the Corporation owned by him; provided, however, that certificates for
fractional shares will not be delivered in any case. The certificates
representing shares of stock shall be signed by or in the name of the
Corporation by the President or a Vice President and by the Secretary or an
Assistant Secretary or the Treasurer or an Assistant Treasurer and sealed with
the seal of the Corporation. Any or all of the signatures or the seal on the
certificate may be facsimiles. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate shall be issued, it may be issued by the Corporation
with the same effect as if such officer, transfer agent or registrar were
still in office at the date of issue.
SECTION 2. Books of Account and Record of Stockholders. There shall
be kept at the principal executive office of the Corporation correct and
complete books and records of account of all the business and transactions of
the Corporation. There shall be made available upon request of any
stockholder, in accordance with Maryland law, a record containing the number
of shares of stock issued during a specified period not to exceed 12 (twelve)
months and the consideration received by the Corporation for each such share.
SECTION 3. Transfers of Shares. Transfers of shares of stock of the
Corporation shall be made on the stock records of the Corporation only by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent
or transfer clerk, and on surrender of the certificate or certificates, if
issued, for the shares properly endorsed or accompanied by a duly executed
stock transfer power and the payment of all taxes thereon. Except as
otherwise provided by law, the Corporation shall be entitled to recognize the
exclusive right of a person in whose name any share or shares stand on the
record of stockholders as the owner of the share or shares for all purposes,
including, without limitation, the rights to receive dividends or other
distributions and to vote as the owner, and the Corporation shall not be bound
to recognize any equitable or legal claim to or
<PAGE>15
interest in any such share or shares on the part of any other person.
SECTION 4. Regulations. The Board of Directors may make any
additional rules and regulations, not inconsistent with these By-Laws, as it
may deem expedient concerning the issue, transfer and registration of
certificates for shares of stock of the Corporation. It may appoint, or
authorize any officer or officers to appoint, one or more transfer agents or
one or more transfer clerks and one or more registrars and may require all
certificates for shares of stock to bear the signature or signatures of any of
them.
SECTION 5. Stolen, Lost, Destroyed or Mutilated Certificates. The
holder of any certificate representing shares of stock of the Corporation
shall immediately notify the Corporation of its theft, loss, destruction or
mutilation and the Corporation may issue a new certificate of stock in the
place of any certificate issued by it that has been alleged to have been
stolen, lost or destroyed or that shall have been mutilated. The Board may,
in its discretion, require the owner (or his legal representative) of a
stolen, lost, destroyed or mutilated certificate: to give to the Corporation
a bond in a sum, limited or unlimited, and in a form and with any surety or
sureties, as the Board in its absolute discretion shall determine, to
indemnify the Corporation against any claim that may be made against it on
account of the alleged theft, loss or destruction of any such certificate, or
issuance of a new certificate. Anything herein to the contrary
notwithstanding, the Board of Directors, in its absolute discretion, may
refuse to issue any such new certificate, except pursuant to legal proceedings
under the laws of the State of Maryland.
SECTION 6. Fixing of Record Date for Dividends, Distributions, etc.
The Board may fix, in advance, a date not more than 90 (ninety) days preceding
the date fixed for the payment of any dividend or the making of any
distribution or the allotment of rights to subscribe for securities of the
Corporation, or for the delivery of evidences of rights or evidences of
interests arising out of any change, conversion or exchange of common stock or
other securities, as the record date for the determination of the stockholders
entitled to receive any such dividend, distribution, allotment, rights or
interests, and in such case only the stockholders of record at the time so
fixed shall be entitled to receive such dividend, distribution, allotment,
rights or interests.
SECTION 7. Information to Stockholders and Others. Any stockholder
of the Corporation or his agent may inspect and copy
<PAGE>16
during the Corporation's usual business hours the Corporation's By-Laws,
minutes of the proceedings of its stockholders, annual statements of its
affairs and voting trust agreements on file at its principal office.
ARTICLE V
INDEMNIFICATION AND INSURANCE
SECTION 1. Indemnification of Directors and Officers. Any person
who was or is a party or is threatened to be made a party in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person is a
current or former director or officer of the Corporation, or is or was serving
while a director or officer of the Corporation at the request of the
Corporation as a director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust,
enterprise or employee benefit plan, shall be indemnified by the Corporation
against judgments, penalties, fines, excise taxes, settlements and reasonable
expenses (including attorneys' fees) actually incurred by such person in
connection with such action, suit or proceeding to the full extent permissible
under the Maryland General Corporation Law, the Securities Act of 1933 and the
Investment Company Act of 1940, as such statutes are now or hereafter in
force, except that such indemnity shall not protect any such person against
any liability to the Corporation or any stockholder thereof to which such
person would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct
of his office ("disabling conduct").
SECTION 2. Advances. Any current or former director or officer of
the Corporation claiming indemnification within the scope of this Article V
shall be entitled to advances from the Corporation for payment of the
reasonable expenses incurred by him in connection with proceedings to which he
is a party in the manner and to the full extent permissible under the Maryland
General Corporation Law, the Securities Act of 1933 and the Investment Company
Act of 1940, as such statutes are now or hereafter in force; provided however,
that the person seeking indemnification shall provide to the Corporation a
written affirmation of his good faith belief that the standard of conduct
necessary for indemnification by the Corporation has been met and a written
undertaking to repay any such advance unless it is ultimately determined that
he is entitled to indemnification, and provided further that at least one of
the following additional
<PAGE>17
conditions is met: (1) the person seeking indemnification shall provide a
security in form and amount acceptable to the Corporation for his undertaking;
(2) the Corporation is insured against losses arising by reason of the
advance; or (3) a majority of a quorum of directors of the Corporation who are
neither "interested persons" as defined in Section 2(a)(19) of the Investment
Company Act of 1940, as amended, nor parties to the proceeding
("disinterested non-party directors"), or independent legal counsel, in a
written opinion, shall determine, based on a review of facts readily available
to the Corporation at the time the advance is proposed to be made, that there
is reason to believe that the person seeking indemnification will ultimately
be found to be entitled to indemnification.
SECTION 3. Procedure. At the request of any current or former
director or officer, or any employee or agent whom the Corporation proposes to
indemnify, the Board of Directors shall determine, or cause to be determined,
in a manner consistent with the Maryland General Corporation Law, the
Securities Act of 1933 and the Investment Company Act of 1940, as such
statutes are now or hereafter in force, whether the standards required by this
Article V have been met; provided, however, that indemnification shall be made
only following: (1) a final decision on the merits by a court or other body
before whom the proceeding was brought that the person to be indemnified was
not liable by reason of disabling conduct or (2) in the absence of such a
decision, a reasonable determination, based upon a review of the facts, that
the person to be indemnified was not liable by reason of disabling conduct, by
(a) the vote of a majority of a quorum of disinterested non-party directors or
(b) an independent legal counsel in a written opinion.
SECTION 4. Indemnification of Employees and Agents. Employees and
agents who are not officers or directors of the Corporation may be
indemnified, and reasonable expenses may be advanced to such employees or
agents, in accordance with the procedures set forth in this Article V to the
extent permissible under the Investment Company Act of 1940, the Securities
Act of 1933 and the Maryland General Corporation Law, as such statutes are now
or hereafter in force, and to such further extent, consistent with the
foregoing, as may be provided by action of the Board of Directors or by
contract.
SECTION 5. Other Rights. The indemnification provided by this
Article V shall not be deemed exclusive of any other right, in respect of
indemification or otherwise, to which those seeking such indemnification may
be entitled under any insurance or other agreement, vote of stockholders or
disinterested directors or otherwise, both as to action by a director or
officer
<PAGE>18
of the Corporation in his official capacity and as to action by such person in
another capacity while holding such office or position, and shall continue as
to a person who has ceased to be a director or officer and shall inure to the
benefit of the heirs, executors and administrators of such a person.
SECTION 6. Insurance. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or who, while a
director, officer, employee or agent of the Corporation, is or was serving at
the request of the Corporation as a director, officer, partner, trustee,
employee, agent or fiduciary of another corporation, partnership, joint
venture, trust, enterprise or employee benefit plan, against any liability
asserted against and incurred by him in any such capacity, or arising out of
his status as such, provided that no insurance may be obtained by the
Corporation for liabilities against which it would not have the power to
indemnify him under this Article V or applicable law.
SECTION 7. Constituent, Resulting or Surviving Corporations. For
the purposes of this Article V, references to the "Corporation" shall include
all constituent corporations absorbed in a consolidation or merger as well the
resulting or surviving corporation so that any person who is or was a
director, officer, employee or agent of a constituent corporation or is or was
serving at the request of a constituent corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise shall stand in the same position under this Article V with
respect to the resulting or surviving corporation as he would if he had served
the resulting or surviving corporation in the same capacity.
ARTICLE VI
SEAL
The seal of the Corporation shall be circular in form and shall bear
the name of the Corporation, the year of its incorporation, the words
"Corporate Seal" and "Maryland" and any emblem or device approved by the Board
of Directors. The seal may be used by causing it or a facsimile to be
impressed or affixed or in any other manner reproduced, or by placing the word
"(seal)" adjacent to the signature of the authorized officer of the
Corporation.
<PAGE>19
ARTICLE VII
FISCAL YEAR
The Corporation's fiscal year shall be fixed by the Board of
Directors.
ARTICLE VIII
AMENDMENTS
These By-Laws may be amended or repealed by the affirmative vote of a
majority of the Board of Directors at any regular or special meeting of the
Board of Directors, subject to the requirements of the Investment Company Act
of 1940, as amended.
As adopted, February 7, 1990
<PAGE>1
INVESTMENT ADVISORY AGREEMENT
August 22, 1988
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue
New York, New York 10017-3147
Dear Sirs:
Counsellors Intermediate Maturity Government Fund, Inc. (the
"Fund"), a corporation organized under the laws of the State of Maryland,
herewith confirms its agreement with Warburg, Pincus Counsellors, Inc. (the
"Adviser") as follows:
1. Investment Description; Appointment
The Fund desires to employ its capital by investing and reinvesting
in investments of the kind and in accordance with the limitations specified in
its Articles of Incorporation as may be amended from time to time, and in its
Prospectus and Statement of Additional Information as from time to time in
effect, and in such manner and to such extent as may from time to time be
approved by the Board of Directors of the Fund. Copies of the Fund's
Prospectus, Statement of Additional Information and Articles of Incorporation,
as may be amended from time to time, have been or will be submitted to the
Adviser. The Fund desires to employ and hereby appoints the Adviser to act as
its investment adviser. The Adviser accepts the appointment and agrees to
furnish the services for the compensation set forth below.
2. Services as Investment Adviser
Subject to the supervision and direction of the Board of Directors
of the Fund, the Adviser will (a) act in strict conformity with the Fund's
Articles of Incorporation, the Investment Company Act of 1940 (the "Investment
Company Act") and the Investment Advisers Act of 1940, as the same may from
time to time be amended, (b) manage the Fund in accordance with the Fund's
investment objective and policies as stated in the Fund's Prospectus and
Statement of Additional Information as from time to time in effect, (c) make
investment decisions for the Fund and (d) place purchase and sale orders for
securities on behalf of the Fund. In providing those services, the Adviser
will provide investment research and supervision of the Fund's investments and
conduct a continual program of investment, evaluation and, if appropriate,
sale and reinvestment of the Fund's assets. In addition, the Adviser will
furnish the Fund with whatever statistical information the Fund may reasonably
request with
<PAGE>2
respect to the securities that the Fund may hold or contemplate purchasing.
3. Brokerage
In executing transactions for the Fund and selecting brokers or
dealers, the Adviser will use its best efforts to seek the best overall terms
available. In assessing the best overall terms available for any portfolio
transaction, the Adviser will consider all factors it deems relevant
including, but not limited to, breadth of the market in the security, the
price of the security, the financial condition and execution capability of the
broker or dealer and the reasonableness of any commission for the specific
transaction and for transactions executed through the broker or dealer in the
aggregate. In selecting brokers or dealers to execute a particular
transaction and in evaluating the best overall terms available, the Adviser
may consider the brokerage and research services (as those terms are defined
in Section 28(e) of the Securities Exchange Act of 1934) provided to the Fund
and/or other accounts over which the Adviser or an affiliate exercises
investment discretion.
4. Information Provided to the Fund
The Adviser will keep the Fund informed of developments materially
affecting the Fund, and will, on its own initiative, furnish the Fund from
time to time with whatever information the Adviser believes is appropriate for
this purpose.
5. Standard of Care
The Adviser shall exercise its best judgment in rendering the
services listed in paragraphs 2, 3 and 4 above. The Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund in connection with the matters to which this Agreement relates,
provided that nothing herein shall be deemed to protect or purport to protect
the Adviser against any liability to the Fund or to shareholders of the Fund
to which the Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of
its duties or by reason of the Adviser's reckless disregard of its obligations
and duties under this Agreement.
6. Compensation
In consideration of the services rendered pursuant to this
Agreement, the Fund will pay the Adviser an annual fee calculated at an annual
rate of .50% of the Fund's average daily net assets. The fee for the period
from the date the Fund's initial registration statement is declared effective
by the Securities and Exchange Commission to the end of the year during which
the initial registration statement is declared effective shall be prorated
according to the proportion that such period bears to the full yearly period.
Upon any termination of this
<PAGE>3
Agreement before the end of a year, the fee for such part of that year shall
be prorated according to the proportion that such period bears to the full
yearly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to the Adviser, the
value of the Fund's net assets shall be computed at the times and in the
manner specified in the Fund's Prospectus or Statement of Additional
Information as from time to time in effect.
7. Expenses
The Adviser will bear all expenses in connection with the
performance of its services under this Agreement. The Fund will bear certain
other expenses to be incurred in its operation, including: investment
advisory and administration fees; taxes, interest, brokerage fees and
commissions, if any; fees of directors of the Fund who are not officers,
directors, or employees of the Adviser, Provident National Bank or any of
their affiliates; fees of any pricing service employed to value shares of the
Fund; Securities and Exchange Commission fees and state Blue Sky qualification
fees; charges of custodians and transfer and dividend disbursing agents; the
Fund's proportionate share of insurance premiums; outside auditing and legal
expenses; costs of maintenance of the Fund's existence; costs attributable to
investor services, including, without limitation, telephone and personnel
expenses; costs of preparing and printing prospectuses and statements of
additional information for regulatory purposes and for distribution to
existing shareholders; costs of shareholders' reports and meetings of the
shareholders of the Fund and of the officers or Board of Directors of the
Fund; and any extraordinary expenses.
The Fund, will be responsible for nonrecurring expenses which may
arise, including costs of litigation to which the Fund is a party and of
indemnifying officers and Directors of the Fund with respect to such
litigation and other expenses as determined by the Directors.
8. Reimbursement to the Fund
If in any fiscal year the aggregate expenses of the Fund (including
fees pursuant to this Agreement and the Fund's administration agreement, but
excluding interest, taxes, brokerage and, if permitted by state securities
commissions, extraordinary expenses) exceed the expense limitation of any
state having jurisdiction over the Fund, the Adviser will reimburse the Fund
for such excess expense. The Adviser's expense reimbursement obligation will
be limited to the amount of its fees received pursuant to this Agreement.
Such expense reimbursement, if any, will be estimated, reconciled and paid on
a monthly basis.
<PAGE>4
9. Services to Other Companies or Accounts
The Fund understands that the Adviser now acts, will continue to act
and may act in the future as investment adviser to fiduciary and other managed
accounts and to one or more other investment companies or series of investment
companies, and the Fund has no objection to the Adviser so acting, provided
that whenever the Fund and one or more other accounts or investment companies
or portfolios advised by the Adviser have available funds for investment,
investments suitable and appropriate for each will be allocated in accordance
with a formula believed to be equitable to each entity. The Fund recognizes
that in some cases this procedure may adversely affect the size of the
position obtainable for the Fund. In addition, the Fund understands that the
persons employed by the Adviser to assist in the performance of the Adviser's
duties hereunder will not devote their full time to such service and nothing
contained herein shall be deemed to limit or restrict the right of the Adviser
or any affiliate of the Adviser to engage in and devote time and attention to
other businesses or to render services of whatever kind or nature.
10. Term of Agreement
This Agreement shall continue until April 17, 1990, and thereafter
shall continue automatically for successive annual periods ending on April
17th of each year, provided such continuance is specifically approved at least
annually by (a) the Board of Directors of the Fund or (b) a vote of a
"majority" (as defined in the Investment Company Act) of the Fund's
outstanding voting securities, provided that in either event the continuance
is also approved by a majority of the Board of Directors who are not
"interested persons" (as defined in the Investment Company Act) of any party
to this Agreement, by vote cast in person at a meeting called for the purpose
of voting on such approval. This Agreement is terminable, without penalty, on
60 days' written notice, by the Board of Directors of the Fund or by vote of
holders of a majority of the Fund's shares, or upon 90 days' written notice,
by the Adviser. This Agreement will also terminate automatically in the event
of its assignment (as defined in the Investment Company Act).
11. Representation by the Fund
The Fund represents that a copy of its Articles of Incorporation,
together with all amendments thereto, is on file in the office of the
Secretary of State of the State of Maryland.
12. Miscellaneous
The Fund recognizes that directors, officers and employees of the
Adviser may from time to time serve as directors, trustees, officers and
employees of corporations and business trusts (including other investment
companies) and that such other corporations and trusts may include the name
<PAGE>5
"Counsellors" or "Counsellors Securities" as part of their names, and that the
Adviser or its affiliates may enter into advisory or other agreements with
such other corporations and trusts. If the Adviser ceases to act as the
investment adviser of the Fund's shares, the Fund agrees that, at the
Adviser's request, the Fund's license to use the word "Counsellors" will
terminate and that the Fund will take all necessary action to change the name
of the Fund to a name not including the word "Counsellors."
Please confirm that the foregoing is in accordance with your
understanding by indicating your acceptance hereof at the place below
indicated, whereupon it shall become a binding agreement between us.
Very truly yours,
COUNSELLORS INTERMEDIATE MATURITY
GOVERNMENT FUND, INC.
By: /s/ Stuart M. Goode
Stuart M. Goode
President
Accepted:
WARBURG, PINCUS COUNSELLORS, INC.
By: /s/ Arnold M. Reichman
Authorized Officer
<PAGE>
CONSENT OF COUNSEL
Counsellors Intermediate Maturity Government Fund, Inc.
We hereby consent to being named in the Statement of Additional
Information included in Post-Effective Amendment No. 8 (the "Amendment") to
the Registration Statement on Form N-1A (Securities Act File No. 33-22817,
Investment Company Act File No. 811-5600) of Counsellors Intermediate
Maturity Government Fund, Inc. (the "Fund") under the caption "Auditors and
Counsel" and to the Fund's filing a copy of this Consent as an exhibit to the
Amendment.
/s/ Willkie Farr & Gallagher
_______________________________
Willkie Farr & Gallagher
New York, New York
January 12, 1996
<PAGE>1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Post-Effective Amendment No. 13 to
the Registration Statement under the Securities Act of 1933 on Form N-1A
(File No. 33-22817) of our report dated December 14, 1995 on our audit of
the financial statements and financial highlights of Counsellors
Intermediate Maturity Government Fund, Inc. We also consent to the
reference to our Firm under the captions "Financial Highlights"
and "Auditors and Counsel."
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
January 16, 1996
<PAGE>1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Auditors and Counsel" and to the use of our report
dated December 15, 1992 in this Registration Statement (Form N-1A No.
33-22817) of Counsellors Intermediate Maturity Government Fund, Inc.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
January 16, 1996
<PAGE>1
Warburg Pincus Funds
Schedule 16 Calculations
Warburg Pincus Intermediate Maturity
For the One Year Ended October 31, 1995
Total Return With Waivers:
((11,232-10,000)/10,000) = 12.32%
Total Return Without Waivers:
((11,176-10,000)/10,000) = 11.76%
For the Five Years Ended October 31, 1995
Total Return With Waivers:
((15,060/10,000)[*GRAPHIC OMITTED-SEE FOOTNOTE BELOW] -1) = 8.53%
Total Return Without Waivers:
((14,810/10,000)[*GRAPHIC OMITTED-SEE FOOTNOTE BELOW] -1) = 8.17%
- ------------------------
* - The preceding expression is being raised to the power of 1/5.00274
Inception Thru October 31, 1995
Total Return With Waivers:
((18,338/10,000)[*GRAPHIC OMITTED-SEE FOOTNOTE BELOW] -1) = 8.79%
Total Return Without Waivers:
((17,467/10,000)[*GRAPHIC OMITTED-SEE FOOTNOTE BELOW] -1) = 8.06%
- -----------------------
* - The preceding expression is being raised to the power of 1/7.19726
30 Day SEC Yield at 10/31/95
288-514.32-27,457.42
2[( --------------------- +1)[*GRAPHIC OMITTED-SEE FOOTNOTE BELOW]-1]=5.66%
5,458,531.142 x 10.26
- --------------------------
* - The preceding expression is being raised to the 6th power
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<NAME> WARBURG PINCUS INTERMEDIATE MATURITY GOV'T FUND
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<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
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<SHARES-REINVESTED> 230993
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