<PAGE>1
As filed with the U.S. Securities and Exchange Commission
on September 22, 1995
Securities Act File No. 33-27031
Investment Company Act File No. 811-5765
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 10 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT of 1940 [X]
Amendment No. 12 [X]
(Check appropriate box or boxes)
Counsellors International Equity 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 International Equity Fund
466 Lexington Avenue
New York, New York 10017-3147
.........................................
(Name and Address of Agent for Service)
Copy to:
Rose F. DiMartino, Esq.
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
Page 1 of Pages
Exhibit Index at Page
<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"). The Rule 24f-2 Notice for Registrant's fiscal year ending on
October 31, 1994 was filed on December 29, 1994.
<PAGE>3
WARBURG, PINCUS INTERNATIONAL EQUITY FUND
FORM N-1A
CROSS REFERENCE SHEET
Heading for the
Common Shares
Part A and the Advisor
Item No. Shares Prospectuses*
- -------- --------------------
1. Cover Page......................... Cover Page
2. Synopsis........................... The Funds' Expenses
3. Condensed Financial Information.... Financial Highlights
4. General Description of
Registrant....................... Cover Page;
Investment Objectives
and Policies;
General Information
5. Management of the Fund............. Management of the Funds
6. Capital Stock and Other
Securities....................... Dividends, Distributions
and Taxes;
Management of the Funds;
General Information
7. Purchase of Securities Being
Offered.......................... How to Purchase Shares;
Management of the Funds
8. Redemption or Repurchase........... How to Redeem and
Exchange Shares
9. Legal Proceedings.................. Not applicable
- ------------------------
* With respect to the Advisor Prospectus, all references to "the Funds" in
this cross reference sheet should be read as "the Fund."
<PAGE>4
Part B Heading in Statement of
Item No. Additional Information
- -------- -----------------------
10. Cover Page......................... Cover Page
11. Table of Contents.................. Table of Contents
12. General Information and History.... Management of the Fund;
Notes to Financial
Statements;
See Prospectuses --
"General Information"
13. Investment Objectives
and Policies..................... Investment Objective;
Investment Policies
14. Management of the Registrant....... Management of the Fund
15. Control Persons and Principal
Holders of Securities............ Management of the Fund;
Miscellaneous;
See Prospectuses--
"General Information"
16. Investment Advisory and
Other Services................... Management of the Fund;
See Prospectuses--
"Management of the Funds"
17. Brokerage Allocation
and Other Practices.............. Investment Objective;
Investment Policies
18. Capital Stock and Other
Securities....................... Management of the Fund;
See Prospectuses--
"Dividends, Distributions
and Taxes" and
"General Information"
19. Purchase, Redemption and Pricing
of Securities Being Offered...... Additional Purchase and
Redemption Information
20. Tax Status......................... Additional Information
Concerning Taxes;
See Prospectuses--"Dividends,
Distributions and Taxes"
<PAGE>5
Part B Heading in Statement of
Item No. Additional Information
- -------- -----------------------
21. Underwriters....................... Management of the Fund;
Additional Purchase and
Redemption Information;
See Prospectuses--
"Management of the Funds"
and "Shareholder Servicing"
22. Calculation of Performance Data.... Determination of
Performance
23. Financial Statements............... Report of
Independent Accountants;
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>1
PROSPECTUS
The Fund's Prospectus is incorporated by reference to the Prospectus
that forms part of Pre-Effective Amendment No. 2 to the Registration Statement
on Form N-1A of Warburg, Pincus Post-Venture Capital Fund, Inc. (Securities
Act File No. 33-61225; Investment Co. Act File No. 811-07327).
<PAGE>
[Logo]
PROSPECTUS
SEPTEMBER 29, 1995
[ ] WARBURG PINCUS INTERNATIONAL EQUITY FUND
<PAGE>
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 PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED SEPTEMBER 22, 1995
WARBURG PINCUS ADVISOR FUNDS
P.O. BOX 9030
BOSTON, MASSACHUSETTS 02205-9030
TELEPHONE NUMBER: (800) 888-6878
September 29, 1995
PROSPECTUS
Warburg Pincus Advisor Funds are a family of open-end mutual funds that are
offered to financial institutions investing on behalf of their customers and to
retirement plans that elect to make one or more Advisor Funds an investment
option for participants in the plans. One Advisor Fund is described in this
Prospectus:
WARBURG, PINCUS INTERNATIONAL EQUITY FUND seeks long-term capital appreciation
by investing in international equity securities that are considered by the
Fund's investment adviser to have above-average potential for appreciation.
International investing entails special risk considerations, including currency
fluctuations, lower liquidity, economic instability, political uncertainty and
differences in accounting methods. See 'Risk Factors and Special
Considerations.'
The Fund currently offers two classes of shares, one of which, the Series 2
Shares (referred to as the Advisor Shares), is offered pursuant to this
Prospectus. The Series 2 (Advisor) Shares of the Fund, as well as Advisor Shares
of certain other Warburg Pincus-advised funds, are sold under the name 'Warburg
Pincus Advisor Funds.' The Advisor Shares may not be purchased by individuals
directly but institutions and retirement plans ('Institutions') may purchase
Advisor Shares for individuals. The Advisor Shares impose a 12b-1 fee of up to
.75% per annum, which is the economic equivalent of a sales charge. Common
Shares are available for purchase by individuals directly and are offered by a
separate prospectus.
NO MINIMUM INVESTMENT
There is no minimum amount of initial or subsequent purchases of shares imposed
on Institutions. See 'How to Purchase Shares.'
This Prospectus briefly sets forth certain information about the Fund that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about the
Fund, contained in a Statement of Additional Information, has been filed with
the Securities and Exchange Commission (the 'SEC') and is available to investors
without charge by calling Warburg Pincus Advisor Funds at (800) 888-6878.
Information regarding the status of shareholder accounts may also be obtained by
calling Warburg Pincus Advisor Funds at (800) 888-6878. The Statement of
Additional Information bears the same date as this Prospectus and is
incorporated by reference in its entirety into this Prospectus.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE>
THE FUND'S EXPENSES
The Fund currently offers two separate classes of shares: Common Shares and
Advisor Shares. See 'General Information' and 'Shareholder Servicing.' Because
of the higher fees borne by Advisor Shares, the total return on such shares can
be expected, at any time, to be lower than the total return on Common Shares.
<TABLE>
<S> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage of offering price).......................... 0
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees...................................................................................... 1.00%
12b-1 Fees........................................................................................... .75%*
Other Expenses....................................................................................... .44%
--------
Total Fund Operating Expenses........................................................................ 2.19%
EXAMPLE
You would pay the following expenses
on a $1,000 investment, assuming (1) 5% annual return
and (2) redemption at the end of each time period:
1 year............................................................................................... $22
3 years.............................................................................................. $69
5 years.............................................................................................. $117
10 years............................................................................................. $252
</TABLE>
- ------------
* At least a portion of these fees should be considered by the investor to be
the economic equivalent of a sales charge.
------------------------
The expense table shows the costs and expenses that an investor will bear
directly or indirectly as an Advisor Shareholder of the Fund. Institutions also
may charge their clients fees in connection with investments in the Fund's
Shares, which fees are not reflected in the table. The Example should not be
considered a representation of past or future expenses; actual Fund expenses may
be greater or less than those shown.
Moreover, while the Example assumes a 5% annual return, the Fund's actual
performance will vary and may result in a return greater or less than 5%.
Long-term holders of Advisor Shares may pay more than the economic equivalent of
the maximum front-end sales charges permitted by the National Association of
Securities Dealers, Inc. (the 'NASD').
2
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR AN ADVISOR SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The information regarding the Fund for the two fiscal years ending October
31, 1994 has been derived from information audited by Coopers & Lybrand L.L.P.,
independent auditors, whose report dated December 12, 1994 appears in the Fund's
Statement of Additional Information. The information for the prior fiscal
year/period ending October 31, 1992 has been audited by Ernst & Young LLP, whose
report was unqualified. The information for the six months ended April 30, 1995
is unaudited. Further information about the performance of the Fund is contained
in the annual report, dated October 31, 1994, copies of which may be obtained
without charge by calling Warburg Pincus Advisor Funds at (800) 888-6878.
<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS APRIL 5, 1991
ENDED (INITIAL
APRIL 30, FOR THE YEAR ENDED OCTOBER 31, ISSUANCE)
1995 --------------------------------------- THROUGH
(UNAUDITED) 1994 1993 1992 OCTOBER 31, 1991
----------- ----------- ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..... $ 20.38 $ 16.91 $ 12.20 $13.66 $13.14
----------- ----------- ----------- ---------- -------
Income from Investment Operations
Net Investment Income (Loss)........... .05 0.16 (.01) .13 .00
Net Gains (Losses) from Securities and
Foreign Currency Related Items (both
realized and unrealized)............ (1.88) 3.35 4.86 (1.32) .58
----------- ----------- ----------- ---------- -------
Total from Investment Operations....... (1.83) 3.51 4.85 (1.19) .58
----------- ----------- ----------- ---------- -------
Less Distributions
Dividends (from net investment
income)............................. (.03) .00 (.01) (.12) (.06)
Distributions (from capital gains)..... (.53) (.04) (.13) (.15) .00
----------- ----------- ----------- ---------- -------
Total Distributions.................... (.56) (.04) (.14) (.27) (.06)
----------- ----------- ----------- ---------- -------
Net Asset Value, End of Period........... $ 17.99 $ 20.38 $ 16.91 $12.20 $13.66
----------- ----------- ----------- ---------- -------
----------- ----------- ----------- ---------- -------
Total Return............................. (17.44%)* 20.77% 40.06% (8.86%) 7.85%*
Ratios/Supplemental Data
Net Assets, End of Period (000s)......... $ 258,866 $ 199,404 $44,244 $1,472 $ 153
Ratios to Average Daily Net Assets:
Operating expenses..................... 1.88%* 1.94% 2.00% 2.00% 2.23%*
Net investment income (loss)........... .44%* (.29%) (.36%) .54% .30%*
Decrease reflected in above expense
ratios due to waivers/
reimbursements...................... .00% .00% .00% .07% .17%*
Portfolio Turnover Rate.................. 22.67%* 17.02% 22.60% 53.29% 54.95%
</TABLE>
- ------------
* Annualized.
3
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks long-term capital appreciation. This objective is a
fundamental policy and may not be amended without first obtaining the approval
of a majority of the outstanding shares of the Fund. Any investment involves
risk and, therefore, there can be no assurance that the Fund will achieve its
investment objective. See 'Certain Investment Strategies' for descriptions of
certain types of investments the Fund may make.
The Fund is a diversified management investment company that pursues its
investment objective by investing primarily in a broadly diversified portfolio
of equity securities of companies, wherever organized, that in the judgment of
Warburg, Pincus Counsellors, Inc., the Fund's investment adviser ('Counsellors')
have their principal business activities and interests outside the United
States. The Fund will ordinarily invest substantially all of its assets -- but
no less than 65% of its total assets -- in common stocks, warrants and
securities convertible into or exchangeable for common stocks. Ordinarily the
Fund will hold no less than 65% of its total assets in at least three countries
other than the United States. The Fund intends to be widely diversified across
securities of many corporations located in a number of foreign countries.
Counsellors anticipates, however, that the Fund may from time to time invest a
significant portion of its assets in a single country such as Japan, which may
involve special risks. See 'Risk Factors and Special Considerations -- Japanese
Investments' below. In appropriate circumstances, such as when a direct
investment by the Fund in the securities of a particular country cannot be made
or when the securities of an investment company are more liquid than the
underlying portfolio securities, the Fund may, consistent with the provisions of
the Investment Company Act of 1940, as amended (the '1940 Act'), invest in the
securities of closed-end investment companies that invest in foreign securities.
The Fund intends to invest principally in the securities of financially
strong companies with opportunities for growth within growing international
economies and markets through increased earning power and improved utilization
or recognition of assets. Investment may be made in equity securities of
companies of any size, whether traded on or off a national securities exchange.
PORTFOLIO INVESTMENTS
INVESTMENT GRADE DEBT. The Fund may invest up to 35% of its total assets in
investment grade debt securities (other than money market instruments) and
preferred stocks that are not convertible into common stock for the purpose of
seeking capital appreciation. The interest income to be derived may be
considered as one factor in selecting debt securities for investment by
Counsellors. Because the market value of debt obligations can be expected to
vary inversely to changes in prevailing interest rates, investing in debt
obligations may provide an opportunity for capital appreciation when interest
rates are expected to decline. The success of such a strategy is dependent upon
Counsellors' ability to accurately forecast changes in interest rates. The
market value of debt obligations may also be expected to vary depending upon,
among other factors, the ability of the issuer to repay principal and interest,
any change in investment rating and general economic conditions. A security will
be deemed to be investment grade if it is rated within the four highest grades
by Moody's Investors Service, Inc. ('Moody's') or Standard & Poor's Ratings
Group ('S&P') or, if unrated, is determined to be of comparable quality by
Counsellors. Bonds rated in the fourth highest grade may have speculative
characteristics and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade bonds. Subsequent to its purchase by
the Fund, an issue of securities may cease to be rated or its rating
4
<PAGE>
may be reduced below the minimum required for purchase by the Fund. Neither
event will require sale of such securities. Counsellors will consider such event
in its determination of whether the Fund should continue to hold the securities.
When Counsellors believes that a defensive posture is warranted, the Fund
may invest temporarily without limit in investment grade debt obligations and in
domestic and foreign money market obligations, including repurchase agreements
as discussed below. When such a defensive posture is warranted, the Fund may
also invest temporarily without limit in securities of U.S. companies.
MONEY MARKET OBLIGATIONS. The Fund is authorized to invest, under normal
circumstances, up to 20% of its total assets in domestic and foreign money
market obligations having a maturity of one year or less at the time of purchase
and for temporary defensive purposes may invest in these securities without
limit. These short-term instruments consist of obligations issued or guaranteed
by the United States government, its agencies or instrumentalities ('U.S.
government securities') (including repurchase agreements with respect to such
securities); bank obligations (including certificates of deposit, time deposits
and bankers' acceptances of domestic or foreign banks, domestic savings and
loans and similar institutions) that are high quality investments or, if
unrated, deemed by Counsellors to be high quality investments; commercial paper
rated no lower than A-2 by S&P or Prime-2 by Moody's or the equivalent from
another major rating service or, if unrated, of an issuer having an outstanding,
unsecured debt issue then rated within the three highest rating categories.
Repurchase Agreements. Among the types of money market instruments in which
the Fund may invest are repurchase agreement transactions on portfolio
securities with member banks of the Federal Reserve System and certain non-bank
dealers. Repurchase agreements are contracts under which the buyer of a security
simultaneously commits to resell the security to the seller at an agreed-upon
price and date. Under the terms of a typical repurchase agreement, the Fund
would acquire any underlying security for a relatively short period (usually not
more than one week) subject to an obligation of the seller to repurchase, and
the Fund to resell, the obligation at an agreed-upon price and time, thereby
determining the yield during the Fund's holding period. This arrangement results
in a fixed rate of return that is not subject to market fluctuations during the
Fund's holding period. The value of the underlying securities will at all times
be at least equal to the total amount of the purchase obligation, including
interest. The Fund bears a risk of loss in the event that the other party to a
repurchase agreement defaults on its obligations or becomes bankrupt and the
Fund is delayed or prevented from exercising its right to dispose of the
collateral securities, including the risk of a possible decline in the value of
the underlying securities during the period while the Fund seeks to assert this
right. Counsellors, acting under the supervision of the Fund's Board of
Directors (the 'Board'), monitors the creditworthiness of those bank and
non-bank dealers with which the Fund enters into repurchase agreements to
evaluate this risk. A repurchase agreement is considered to be a loan under the
1940 Act.
Money Market Mutual Funds. Where Counsellors believes that it would be
beneficial to the Fund and appropriate considering the factors of return and
liquidity, the Fund may invest up to 5% of its assets in securities of money
market mutual funds that are unaffiliated with the Fund or Counsellors. As a
shareholder in any mutual fund, the Fund will bear its ratable share of the
mutual fund's expenses, including management fees, and will remain subject to
payment of the Fund's administration fees and other expenses with respect to
assets so invested.
U.S. GOVERNMENT SECURITIES. U.S. government securities in which the Fund may
invest include: direct obligations of the U.S. Treasury and obligations issued
by U.S. government agencies
5
<PAGE>
and instrumentalities, including instruments that are supported by the full
faith and credit of the United States, 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.
CONVERTIBLE SECURITIES. Convertible securities in which the Fund may invest,
including both convertible debt and convertible preferred stock, may be
converted at either a stated price or stated rate into underlying shares of
common stock. Because of this feature, convertible securities enable an investor
to benefit from increases in the market price of the underlying common stock.
Convertible securities provide higher yields than the underlying equity
securities, but generally offer lower yields than non-convertible securities of
similar quality. The value of convertible securities fluctuates in relation to
changes in interest rates like bonds and, in addition, fluctuates in relation to
the underlying common stock. The Fund does not currently intend during the
coming year to hold more than 5% of its net assets in the aggregate of
investment grade convertible securities and investment grade debt downgraded
below investment grade subsequent to acquisition by the Fund.
RISK FACTORS AND SPECIAL
CONSIDERATIONS
Investing in common stocks and securities convertible into common stocks is
subject to the inherent risk of fluctuations in the prices of such securities.
For certain additional risks relating to the Fund's investments, see 'Portfolio
Investments' beginning at page 4 and 'Certain Investment Strategies' beginning
at page 8.
JAPANESE INVESTMENTS. Investing in Japanese securities may involve the risks
described below associated with investing in foreign securities generally. In
addition, because the Fund may from time to time have a large position in
Japanese securities, the Fund will be subject to general economic and political
conditions in Japan.
Securities in Japan are denominated and quoted in 'yen.' Yen are fully
convertible and transferable based on floating exchange rates into all
currencies, without administrative or legal restrictions for both non-residents
and residents of Japan. In determining the net asset value of shares of the
Fund, assets or liabilities initially expressed in terms of Japanese yen will be
translated into U.S. dollars at the current selling rate of Japanese yen against
U.S. dollars. As a result, the value of the Fund's assets as measured in U.S.
dollars may be affected favorably or unfavorably by fluctuations in the value of
Japanese yen relative to the U.S. dollar.
Japan is largely dependent upon foreign economies for raw materials.
International trade is important to Japan's economy, as exports provide the
means to pay for many of the raw materials it must import. Because of the
concentration of Japanese exports in highly visible products such as
automobiles, machine tools and semiconductors, and the large trade surpluses
ensuing therefrom, Japan has entered a difficult phase in its relations with its
trading partners, particularly with respect to the United States, with whom the
trade imbalance is the greatest.
The decline in the Japanese securities markets since 1989 has contributed
to a weakness in the Japanese economy, and the impact of a further decline
cannot be ascertained. The common stocks of many Japanese companies continue to
trade at high price-earnings ratios in comparison with those in the United
States, even after the recent market decline. Differences in accounting methods
make it difficult to compare the earnings of Japanese companies with those of
companies in other countries, especially the United States.
Japan has a parliamentary form of government. In 1993 a coalition
government was formed which, for the first time since 1955, did not include the
Liberal Democratic Party. Since mid-1993, there have been several changes in
leadership in Japan. What, if any, effect the current political situation will
have on prospec-
6
<PAGE>
tive regulatory reforms on the economy in Japan cannot be predicted. Recent and
future developments in Japan and neighboring Asian countries may lead to changes
in policy that might adversely affect the Fund to the extent it invests there.
For additional information, see 'Investment Policies -- Japanese Investments'
beginning at page 4 of the Statement of Additional Information.
EMERGING MARKETS. The Fund may invest in securities of issuers located in less
developed countries considered to be 'emerging markets.' Investing in securities
of issuers located in emerging markets involves not only the risks described
below with respect to investing in foreign securities, but also other risks,
including exposure to economic structures that are gener-ally less diverse and
mature than, and to political systems that can be expected to have less
stability than, those of developed countries. Other characteristics of emerging
markets that may affect investment there include certain national policies that
may restrict investment by foreigners in issuers or industries deemed sensitive
to relevant national interests and the absence of developed legal structures
governing private and foreign investments and private property. The typically
small size of the markets for securities of issuers located in emerging markets
and the possibility of a low or nonexistent volume of trading in those
securities may also result in a lack of liquidity and in price volatility of
those securities.
INVESTMENTS IN NON-PUBLICLY TRADED SECURITIES. Although the Fund expects to
invest primarily in publicly traded equity securities, it may invest up to 10%
of its assets in non-publicly traded equity securities, which may involve a high
degree of business and financial risk and may result in substantial losses.
Because of the absence of any liquid trading market currently for these
investments, the Fund may take longer to liquidate these positions than would be
the case for publicly traded securities. Although these securities may be resold
in privately negotiated transactions, the prices realized on such sales could be
less than those originally paid by the Fund. Further, companies whose securities
are not publicly traded may not be subject to the disclosure and other investor
protection requirements applicable to companies whose securities are publicly
traded. The Fund's investment in illiquid securities is subject to the risk that
should the Fund desire to sell any of these securities when a ready buyer is not
available at a price that is deemed to be representative of their value, the
value of the Fund's net assets could be adversely affected.
PORTFOLIO TRANSACTIONS AND
TURNOVER RATE
The Fund will attempt to purchase securities with the intent of holding
them for investment but may purchase and sell portfolio securities whenever
Counsellors believes it to be in the best interests of the Fund. The Fund will
not consider portfolio turnover rate a limiting factor in making investment
decisions consistent with its investment objective and policies. High portfolio
turnover rates (100% or more) may result in dealer mark ups or underwriting
commissions as well as other transaction costs, including correspondingly higher
brokerage commissions. In addition, short-term gains realized from portfolio
turnover may be taxable to shareholders as ordinary income. See 'Dividends,
Distributions and Taxes -- Taxes' below and 'Investment Policies -- Portfolio
Transactions' in the Statement of Additional Information.
All orders for transactions in securities or options on behalf of the Fund
are placed by Counsellors with broker-dealers that it selects, including
Counsellors Securities Inc., the Fund's distributor ('Counsellors Securities').
The Fund may utilize Counsellors Securities in connection with a purchase or
sale of securities when Counsellors believes that the charge for the
transaction does not exceed usual and customary levels and when doing so is
consistent with guidelines adopted by the Board.
7
<PAGE>
CERTAIN INVESTMENT STRATEGIES
Although there is no intention of doing so during the coming year, the Fund
is authorized to engage in the following investment strategies: (i) purchasing
securities on a when-issued basis and purchasing or selling securities for
delayed delivery and (ii) lending portfolio securities. As described below, the
Funds may invest in instruments commonly referred to as 'derivative securities,'
such as options on securities and stock indexes; futures contracts and options
on futures contracts; and currency forward contracts. These strategies may be
used for the purpose of hedging against a decline in value of its portfolio
holdings or to generate income to offset expenses or increase return. SUCH
TRANSACTIONS THAT ARE NOT CONSIDERED HEDGING SHOULD BE CONSIDERED SPECULATIVE
AND MAY SERVE TO INCREASE THE FUND'S INVESTMENT RISK. Detailed information
concerning these and other strategies and their related risks is contained below
and in the Fund's Statement of Additional Information.
FOREIGN SECURITIES. The Fund will ordinarily hold no less than 65% of its total
assets in foreign securities. There are certain risks involved in investing in
securities of companies and governments of foreign nations which are in addition
to the usual risks inherent in domestic investments. These risks include those
resulting from fluctuations in currency exchange rates, revaluation of
currencies, future adverse political and economic developments and the possible
imposition of currency exchange blockages or other foreign governmental laws or
restrictions, reduced availability of public information concerning issuers, the
lack of uniform accounting, auditing and financial reporting standards and other
regulatory practices and requirements that are often generally less rigorous
than those applied in the United States. Moreover, securities of many foreign
companies may be less liquid and their prices more volatile than those of
securities of comparable U.S. companies. Certain foreign countries are known to
experience long delays between the trade and settlement dates of securities
purchased or sold. In addition, with respect to certain foreign countries, there
is the possibility of expropriation, nationalization, confiscatory taxation and
limitations on the use or removal of funds or other assets of the Fund,
including the withholding of dividends. Foreign securities may be subject to
foreign government taxes that would reduce the net yield on such securities.
Moreover, individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments positions. Investment in foreign securities will also result in higher
operating expenses due to the cost of converting foreign currency into U.S.
dollars, the payment of fixed brokerage commissions on foreign exchanges, which
generally are higher than commissions on U.S. exchanges, higher valuation and
communications costs and the expense of maintaining securities with foreign
custodians.
RULE 144A SECURITIES. The Fund may purchase securities that are not registered
under the Securities Act of 1933, as amended (the '1933 Act'), but that can be
sold to 'qualified institutional buyers' in accordance with Rule 144A under the
1933 Act ('Rule 144A Securities'). An investment in Rule 144A Securities will be
considered illiquid and therefore subject to the Fund's limitation on the
purchase of illiquid securities, unless the Board determines on an ongoing basis
that an adequate trading market exists for the security. In addition to an
adequate trading market, the Board will also consider factors such as trading
activity, availability of reliable price information and other relevant
information in determining whether a Rule 144A Security is liquid. This
investment practice could have the effect of increasing the level of illiquidity
in the Fund to the extent that qualified institutional buyers become
uninterested for a time in purchasing Rule 144A Securities. The
Board will carefully monitor any investments by the Fund in Rule 144A
Securities. The Board may adopt guidelines and delegate to Counsel-
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lors the daily function of determining and monitoring the liquidity of Rule 144A
Securities, although the Board will retain ultimate responsibility for any
determination regarding liquidity.
WRITING OPTIONS ON SECURITIES. The Fund may write covered call options on up to
25% of the net asset value of the stock and debt securities in its portfolio and
will realize fees (referred to as 'premiums') for granting the rights evidenced
by the options. 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. Thus, the
purchaser of a call option written by the Fund has the right to purchase from
the Fund the underlying security owned by the Fund at the agreed-upon price for
a specified time period or at a specified time. Upon the exercise of a call
option written by a Fund, the Fund may suffer an economic loss equal to the
excess of the security's market value at the time of the option exercise over
the Fund's acquisition cost of the security, less the premium received for
writing the option.
The Fund will write only covered call options. Accordingly, whenever the
Fund writes a call option it will continue to own or have the present right to
acquire the underlying security for as long as it remains obligated as the
writer of the option.
The Fund may engage in a closing purchase transaction to realize a profit,
to prevent an underlying security from being called or 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). To effect a closing
purchase transaction, the Fund would purchase, prior to the holder's exercise of
an option that the Fund has written, an option of the same series as that on
which the Fund desires to terminate its obligation. The obligation of the Fund
under an option that it has written would be terminated by a closing purchase
transaction, but the Fund would not be deemed to own an option as the result of
the transaction. The ability of the Fund to engage in closing transactions with
respect to options depends on the existence of a liquid secondary market. While
the Fund generally will purchase or write options only if there appears to be a
liquid secondary market for the options purchased or sold, for some options, no
such secondary market may exist or the market may cease to exist, particularly
with respect to options that trade over-the-counter ('OTC options').
Option writing for the Fund may be limited by position and exercise limits
established by securities exchanges and the NASD. Furthermore, the Fund may, at
times, have to limit its option writing in order to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
'Code').
In addition to writing covered options to generate income, the Fund may
enter into options 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 on a portfolio position
with a gain on the hedge position; at the same time, however, a properly
correlated hedge will result in a gain on the portfolio position being offset by
a loss on the hedge position. The Fund bears the risk that the prices of the
securities being hedged will not move in the same amount as the hedge. The Fund
will engage in hedging transactions only when deemed advisable by Counsellors.
Successful use by the Fund of options for hedging purposes will depend on
Counsellors' ability to correctly predict movements in the direction of the
security underlying the option or, in the case of stock index options (described
below), the underlying securities market, which could prove to be inaccurate.
Losses incurred in options transactions and the costs of these transactions will
affect the Fund's performance. Even if Counsellors' expectations are correct,
where options are used as a hedge there may be an imperfect correlation between
the change in the value of the options and of the portfolio securi-
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<PAGE>
ties hedged. Therefore, an investment in the Fund may involve a greater risk
than an investment in other mutual funds that seek capital growth.
PURCHASING PUT AND CALL OPTIONS ON SECURITIES. The Fund may utilize up to 10% of
its assets to purchase put and call options on stocks and debt securities that
are traded on foreign as well as U.S. exchanges, as well as OTC options.
By buying a put, the Fund limits its risk of loss from a decline in the
market value of the underlying security until the put expires. Any appreciation
in the value of and yield otherwise available from the underlying security,
however, will be partially offset by the amount of the premium paid for the put
option and any related transaction costs. Call options may be purchased by the
Fund in order to acquire the underlying securities for the Fund at a price that
avoids any additional cost that would result from a substantial increase in the
market value of a security. The Fund also may purchase call options to increase
its return to investors at a time when the option is expected to increase in
value due to anticipated appreciation of the underlying security.
Prior to their expirations, put and call options may be sold in closing
sale transactions (sales by the Fund, prior to the exercise of options that it
has purchased, of options of the same series), and profit or loss from the sale
will depend on whether the amount received is more or less than the premium paid
for the option plus the related transaction costs.
STOCK INDEX OPTIONS. In addition to purchasing and writing options on
securities, the Fund may utilize up to 10% of its total assets to purchase
exchange-listed and OTC put and call options on stock indexes, and may write put
and call options on such indexes. A stock index measures the movement of a
certain group of stocks by assigning relative values to the common stocks
included in the index. Options on stock indexes are similar to options on stock
except that (i) the expiration cycles of stock index options are monthly, while
those of stock options are currently quarterly, and (ii) the delivery
requirements are different. Instead of giving the right to take or make delivery
of stock at a specified price, an option on a stock 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.' The
discussion of options on securities above, and the related risks, is applicable
to options on securities indexes.
FUTURES CONTRACTS AND OPTIONS. The Fund may enter into foreign currency,
interest rate and stock index futures contracts and purchase and write (sell)
related options that are traded on an exchange designated by the Commodity
Futures Trading Commission (the 'CFTC') or consistent with CFTC regulations on
foreign exchanges. These transactions may be entered into for 'bona fide
hedging' as defined in CFTC regulations and other permissible purposes including
(i) protecting against anticipated changes in the value of portfolio securities
the Fund intends to purchase and (ii) increasing return.
A foreign currency futures contract provides for the future sale by one
party and the purchase by the other party of a certain amount of a specified
foreign currency at a specified price, date, time and place. An interest rate
futures contract is a standardized contract for the future delivery of a
specified interest rate sensitive security (such as a U.S. Treasury Bond or U.S.
Treasury Note or its equivalent) at a future date at a price set at the time of
the contract. Stock indexes are capitalization weighted indexes which reflect
the market value of the stock listed on the indexes. A stock index futures
contract is an agreement to be settled by delivery of an amount of cash equal to
a specified multiplier
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<PAGE>
times the difference between the value of the index at the beginning and at the
end of the contract period. An option on a futures contract gives the purchaser
the right, in return for the premium paid, to assume a position in a futures
contract at a specified exercise price at any time prior to the expiration date
of the option.
Parties to a futures contract must make 'initial margin' deposits to secure
performance of the contract. There are also requirements to make 'variation
margin' deposits from time to time as the value of the futures contract
fluctuates. The Fund is not a commodity pool and, in compliance with CFTC
regulations currently in effect, may enter into any futures contracts and
related options for 'bona fide hedging' purposes and, in addition, for other
purposes, provided that aggregate initial margin and premiums required to
establish positions other than those considered by the CFTC to be 'bona fide
hedging' will not exceed 5% of the Fund's net asset value, after taking into
account unrealized profits and unrealized losses on any such contracts. The Fund
reserves the right to engage in transactions involving futures and options
thereon to the extent allowed by CFTC regulations in effect from time to time
and in accordance with the Fund's policies. Certain provisions of the Code may
limit the extent to which the Fund may enter into futures contracts or engage in
options transactions.
There are several risks in connection with the use of futures contracts.
Successful use of futures contracts is subject to the ability of Counsellors to
predict correctly movements in the direction of the currency, interest rate or
stock index underlying the particular futures contract or related option. These
predictions and, thus, the use of futures contracts involve skills and
techniques that are different from those involved in the management of portfolio
securities. In addition, there can be no assurance that there will be a
correlation between movements in the currencies, interest rate or index
underlying the futures contract and movements in the price of the portfolio
securities which are the subject of a hedge. A decision concerning whether, when
and how to utilize futures involves the exercise of skill and judgment, and even
a well-conceived hedge may be unsuccessful to some degree because of unexpected
market behavior or trends in foreign currencies, interest rates or stock
indexes. Losses incurred in futures transactions and the costs of these
transactions will affect the Fund's performance.
A further risk involves the lack of a liquid secondary market for a futures
contract and the resulting inability to close out a futures contract. Futures
and options contracts may only be closed out by entering into offsetting
transactions on the exchange where the position was entered into (or a linked
exchange), and as a result of daily price fluctuation limits there can be no
assurance that an offsetting transaction could be entered into at an
advantageous price at any particular time. Consequently, the Fund may realize a
loss on a futures contract or option that is not offset by an increase in the
value of the Fund's securities that are being hedged or the Fund may not be able
to close a futures or options position without incurring a loss in the event of
adverse price movements.
CURRENCY EXCHANGE TRANSACTIONS. The Fund will conduct its currency exchange
transactions (i) on a spot (i.e., cash) basis at the rate prevailing in the
currency exchange market, (ii) through entering into forward contracts to
purchase or sell currency or (iii) as described above, through entering into
foreign currency futures contracts or options on such contracts. The Fund may
engage in currency exchange transactions to protect against uncertainty in the
level of future exchange rates and, in the case of (i) and (iii) in the
preceding sentence, to increase the Fund's income and total return.
A forward currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract agreed upon by the parties, at a price set at the time
of the con-
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<PAGE>
tract. These contracts are entered into in the interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. The use of forward currency contracts does not eliminate fluctuations
in the underlying prices of the securities, but it does establish a rate of
exchange that can be achieved in the future. In addition, although forward
currency contracts limit the risk of loss due to a decline in the value of the
hedged currency, at the same time they also limit any potential gain that might
result should the value of the currency increase. The Fund will segregate cash,
U.S. government securities or other high-grade liquid debt obligations with its
custodian in an amount at all times equal to or exceeding the Fund's commitment
with respect to these contracts.
ASSET COVERAGE FOR FORWARD CONTRACTS, OPTIONS, FUTURES AND OPTIONS ON FUTURES.
The Fund will comply with guidelines established by the SEC designed to
eliminate any potential for leverage with respect to currency forward contracts;
options written by the Fund on currencies, securities and indexes; currency,
interest rate and index futures contracts and options on these futures
contracts. The use of these strategies may require that the Fund maintain cash
or certain liquid high-grade debt securities or other assets that are acceptable
as collateral to the appropriate regulatory authority in a segregated account
with its custodian or a designated sub-custodian to the extent the Fund's
obligations with respect to these strategies are not otherwise 'covered' through
ownership of the underlying security, financial instrument or currency or by
other portfolio positions or by other means consistent with applicable
regulatory policies. Segregated assets cannot be sold or transferred unless
equivalent assets are substituted in their place or it is no longer necessary to
segregate them. As a result, there is a possibility that segregation of a large
percentage of the Fund's assets could impede portfolio management or the Fund's
ability to meet redemption requests or other current obligations.
INVESTMENT GUIDELINES
The Fund may invest up to 10% of its total assets in securities with
contractual or other restrictions on resale and other instruments that are not
readily marketable, including (i) securities issued as part of a privately
negotiated transaction between an issuer and one or more purchasers; (ii)
repurchase agreements with maturities greater than seven days; and (iii) time
deposits maturing in more than seven calendar days. In addition, up to 5% of the
Fund's total assets may be invested in the securities of issuers which have been
in continuous operation for less than three years and up to an additional 5% of
its total assets may be invested in warrants. The Fund may borrow from banks for
temporary or emergency purposes, such as meeting anticipated redemption
requests, provided that borrowings by the Fund may not exceed 30% of its total
assets and may pledge up to 10% of its assets in connection with borrowings.
Whenever borrowings exceed 5% of the value of the Fund's total assets, the Fund
will not make any investments (including roll-overs). Except for the limitations
on borrowing, the investment guidelines set forth in this paragraph may be
changed at any time without shareholder consent by vote of the governing Board,
subject to the limitations contained in the 1940 Act. A complete list of
investment restrictions that the Fund has adopted identifying additional
restrictions that cannot be changed without the approval of the majority of the
Fund's outstanding shares is contained in the Statement of Additional
Information.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER. The Fund employs Counsellors as investment adviser to the
Fund. Counsellors, subject to the control of the Fund's officers
and the Board, manages the investment and reinvestment of the assets of the Fund
in accordance with the Fund's investment objective and stated investment
policies. Counsellors
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<PAGE>
makes investment decisions for the Fund and places orders to purchase or sell
securities on behalf of the Fund. Counsellors also employs a support staff of
management personnel to provide services to the Fund and furnishes the Fund with
office space, furnishings and equipment.
For the services provided by Counsellors, the Fund pays Counsellors a fee
calculated at an annual rate of 1.00% of the Fund's average daily net assets.
Although this advisory fee is higher than that paid by most other investment
companies, including money market and fixed income funds, Counsellors believes
that it is comparable to fees charged by other mutual funds with similar
policies and strategies. The advisory agreement between the Fund and Counsellors
provides that Counsellors will reimburse the Fund to the extent certain expenses
that are described in the Statement of Additional Information exceed applicable
state expense limitations. Counsellors and the Fund's co-administrators may
voluntarily waive a portion of their fees from time to time and temporarily
limit the expenses to be borne by the Fund.
Counsellors is a professional investment counselling firm which provides
investment services to investment companies, employee benefit plans, endowment
funds, foundations and other institutions and individuals. As of August 31,
1995, Counsellors managed approximately $11.4 billion of assets, including
approximately $5.8 billion of assets of twenty investment companies or
portfolios. Incorporated in 1970, Counsellors is a wholly owned subsidiary of
Warburg, Pincus Counsellors G.P. ('Counsellors G.P.'), a New York general
partnership. E.M. Warburg, Pincus & Co., Inc. ('EMW') controls Counsellors
through its ownership of a class of voting preferred stock of Counsellors.
Counsellors G.P. has no business other than being a holding company of
Counsellors and its subsidiaries. Counsellors' address is 466 Lexington Avenue,
New York, New York 10017-3147.
PORTFOLIO MANAGERS. The portfolio manager and president of the Fund is Richard
H. King, who has been president and portfolio manager of the Fund since its
inception on May 2, 1989. Mr. King has been a managing director of EMW since
1989. From 1984 until 1988 he was chief investment officer and a director at
Fiduciary Trust Company International S.A. in London, with responsibility for
all international equity management and investment strategy. From 1982 to 1984
he was a director in charge of Far East equity investments at N.M. Rothschild
International Asset Management, a London merchant bank.
Nicholas P.W. Horsley, Nicholas Edwards, Harold W. Ehrlich and Vincent J.
McBride are associate portfolio managers and research analysts for the Fund. Mr.
Horsley is a senior vice president of Counsellors and has been with Counsellors
and the Fund since 1993, before which time he was a director, portfolio manager
and analyst at Barclays deZoete Wedd in New York City. Mr. Edwards has been with
Counsellors and the Fund since August 1995, before which time he was a director
at Jardine Fleming Investment Advisers, Tokyo. He was a vice president of Robert
Fleming Inc. in New York City from 1988 to 1991. Mr. Ehrlich is a senior vice
president of Counsellors and has been with Counsellors and the Fund since
February 1995, before which time he was a senior vice president, portfolio
manager and analyst at Templeton Investment Counsel Inc. Mr. McBride has been
with Counsellors and the Fund since 1994. Prior to joining Counsellors, Mr.
McBride was an international equity analyst at Smith Barney Inc. from 1993 to
1994 and at General Electric Investment Corporation from 1992 to 1993. From 1989
to 1992 he was a portfolio manager/analyst at United Jersey Bank.
CO-ADMINISTRATORS. The Fund employs Counsellors Funds Service, Inc.
('Counsellors Service'), a wholly owned subsidiary of Counsellors, as a
co-administrator. As co-administrator, Counsellors Service provides shareholder
liaison services to the Fund including responding to shareholder inquiries and
providing information on share-
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<PAGE>
holder investments. Counsellors Service also performs a variety of other
services, including furnishing certain executive and administrative services,
acting as liaison between the Fund and its various service providers, furnishing
corporate secretarial services, which include preparing materials for meetings
of the governing Board, preparing proxy statements and annual, semiannual and
quarterly reports, assisting in other regulatory filings as necessary and
monitoring and developing compliance procedures for the Fund. As compensation,
the Fund pays Counsellors Service a fee calculated at an annual rate of .10% of
its average daily net assets.
Counsellors may, at its own expense, provide promotional incentives to
qualified recipients who support the sale of shares of the Funds. Qualified
recipients are securities dealers who have sold Fund shares or others, including
banks and other financial institutions, under special arrangements. In some
instances, these incentives may be offered only to certain institutions whose
representatives provide services in connection with the sale or expected sale of
significant amounts of Fund shares.
The Fund employs PFPC Inc. ('PFPC'), an indirect, wholly owned subsidiary
of PNC Bank Corp., as a co-administrator. As a co-administrator, PFPC calculates
the Fund's net asset value, provides all accounting services for the Fund and
assists in related aspects of the Fund's operations. As compensation, the Fund
pays to PFPC a fee calculated at an annual rate of .12% of the Fund's 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, subject to a minimum annual
fee and exclusive of out-of-pocket expenses. PFPC has its principal offices at
400 Bellevue Parkway, Wilmington, Delaware 19809.
CUSTODIAN. Fiduciary Trust Company International ('Fiduciary') serves as
custodian of the Fund's assets. Fiduciary's principal business address is Two
World Trade Center, New York, New York 10048 and State Street's address is set
forth under 'Transfer Agent' above. PNC Bank, National Association ('PNC') also
provides certain custodial services generally in connection with purchases and
sales of Fund shares. PNC is a subsidiary of PNC Bank Corp. and its principal
business address is Broad and Chestnut Streets, Philadelphia, Pennsylvania
19101.
TRANSFER AGENT. State Street Bank and Trust Company ('State Street') acts as
shareholder servicing agent, transfer agent and dividend disbursing agent for
the Fund. It has delegated to Boston Financial Data Services, Inc., a 50% owned
subsidiary ('BFDS'), responsibility for most shareholder servicing functions.
State Street's principal business address is 225 Franklin Street, Boston,
Massachusetts 02110. BFDS's principal business address is 2 Heritage Drive,
North Quincy, Massachusetts 02171.
DISTRIBUTOR. Counsellors Securities serves as distributor of the shares of the
Fund. Counsellors Securities is a wholly owned subsidiary of Counsellors and is
located at 466 Lexington Avenue, New York, New York 10017-3147. No compensation
is payable by the Fund to Counsellors Securities for distribution services.
DIRECTORS AND OFFICERS. The officers of the Fund manage its day-to-day
operations and are directly responsible to the Board. The Board sets broad
policies for the Fund and chooses its officers. A list of the Directors and
officers of the Fund and a brief statement of their present positions and
principal occupations during the past five years is set forth in the Statement
of Additional Information.
HOW TO PURCHASE SHARES
Warburg Pincus Advisor Fund shares are only available for investment by
Institutions on behalf of their customers and through retirement plans that
elect to make the Advisor Funds an option for participants in the plans.
Individuals, including participants in retirement plans, cannot
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<PAGE>
invest directly in Advisor Shares of the Fund, but may do so only through a
participating Institution. The Fund reserves the right to make Advisor Shares
available to other investors in the future. References in this Prospectus to
shareholders or investors are generally to Institutions as the record holders of
the Advisor Shares.
Each Institution separately determines the rules applicable to its
customers investing in the Fund, including minimum initial and subsequent
investment requirements and the procedures to be followed to effect purchases,
redemptions and exchanges of Advisor Shares. There is no minimum amount of
initial or subsequent purchases of Advisor Shares imposed on Institutions,
although the Fund reserves the right to impose minimums in the future.
Orders for the purchase of Advisor Shares are placed with an Institution by
its customers. The Institution is responsible for the prompt transmission of the
order to the Fund or its agent.
Institutions may purchase Advisor Shares by telephoning the Fund and
sending payment by wire. After telephoning (800) 888-6878 for instructions, an
Institution should then wire federal funds to Counsellors Securities Inc. using
the following wire address:
State Street Bank and Trust Co.
225 Franklin St.
Boston, MA 02101
ABA# 0110 000 28
Attn: Mutual Funds/Custody Dept.
Warburg Pincus Advisor International Equity
Fund
DDA# 9904-649-2
[Shareowner name]
[Shareowner account number]
Orders by wire will not be accepted until a completed account application
has been received in proper form, and an account number has been established. If
a telephone order is received by the close of regular trading on the New York
Stock Exchange (the 'NYSE') (currently 4:00 p.m., Eastern time) and payment by
wire is received on the same day in proper form in accordance with instructions
set forth above, the shares will be priced according to the net asset value of
the Fund on that day and are entitled to dividends and distributions beginning
on that day. If payment by wire is received in proper form by the close of the
NYSE without a prior telephone order, the purchase will be priced according to
the net asset value of the Fund on that day and is entitled to dividends and
distributions beginning on that day. However, if a wire in proper form that is
not preceded by a telephone order is received after the close of regular trading
on the NYSE, the payment will be held uninvested until the order is effected at
the close of business on the next business day. Payment for orders that are not
accepted will be returned after prompt inquiry. Certain organizations that have
entered into agreements with the Fund or its agent may enter confirmed purchase
orders on behalf of customers, with payment to follow no later than the Fund's
pricing on the following business day. If payment is not received by such time,
the organization could be held liable for resulting fees or losses.
After an investor has made his initial investment, additional shares may be
purchased at any time by mail or by wire in the manner outlined above. Wire
payments for initial and subsequent investments should be preceded by an order
placed with the Fund or its agent and should clearly indicate the investor's
account number. In the interest of economy and convenience, physical
certificates representing shares in the Fund are not normally issued.
The Fund understands that some broker-dealers (other than Counsellors
Securities), financial institutions, securities dealers and other industry
professionals may impose certain conditions on their clients that invest in the
Fund, which are in addition to or different than those described in this
Prospectus, and, to the extent permitted by applicable regulatory authority, may
charge their clients direct fees. Certain
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<PAGE>
features of the Fund, such as the initial and subsequent investment minimums,
and administrative charges may be imposed for the services rendered. Therefore,
a client or customer should contact the organization acting on his behalf
concerning the fees (if any) charged in connection with a purchase or redemption
of Fund shares and should read this Prospectus in light of the terms governing
his accounts with the organization.
HOW TO REDEEM AND EXCHANGE
SHARES
REDEMPTION OF SHARES. An investor may redeem (sell) shares on any day that the
Fund's net asset value is calculated (see 'Net Asset Value' below). Requests for
the redemption (or exchange) of Advisor Shares are placed with an Institution by
its customers, which is then responsible for the prompt transmission of the
request to the Fund or its agent.
Institutions may redeem Advisor Shares by calling Warburg Pincus Advisor
Funds at (800) 888-6878 between 9:00 a.m. and 4:00 p.m. (Eastern time) on any
day on which the Fund's net asset value is calculated. An investor making a
telephone withdrawal should state (i) the name of the Fund, (ii) the account
number of the Fund, (iii) the name of the investor(s) appearing on the Fund's
records, (iv) the amount to be withdrawn and (v) the name of the person
requesting the redemption.
After receipt of the redemption request, the redemption proceeds will be
wired to the investor's bank as indicated in the account application previously
filled out by the investor. The Fund does not currently impose a service charge
for effecting wire transfers but reserves the right to do so in the future.
During periods of significant economic or market change, telephone redemptions
may be difficult to implement. If an investor is unable to contact Warburg
Pincus Advisor Funds by telephone, an investor may deliver the redemption
request to Warburg Pincus Advisor Funds by mail at Warburg Pincus Advisor Funds,
P.O. Box 9030, Boston, Massachusetts 02205-9030.
If a redemption order is received prior to the close of regular trading on
the NYSE, the redemption order will be effected at the net asset value per share
as determined on that day. If a redemption order is received after the close of
regular trading on the NYSE, the redemption order will be effected at the net
asset value as next determined. Redemption proceeds will normally be wired to an
investor on the next business day following the date a redemption order is
effected. If, however, in the judgment of Counsellors, immediate payment would
adversely affect the Fund, the Fund reserves the right to pay the redemption
proceeds within seven days after the redemption order is effected. Furthermore,
the Fund may suspend the right of redemption or postpone the date of payment
upon redemption (as well as suspend or postpone the recordation of an exchange
of shares) for such periods as are permitted under the 1940 Act.
The proceeds paid upon redemption may be more or less than the amount
invested depending upon a share's net asset value at the time of redemption. If
an investor redeems all the shares in his account, all dividends and
distributions declared up to and including the date of redemption are paid along
with the proceeds of the redemption.
EXCHANGE OF SHARES. An Institution may exchange Advisor Shares of the Fund for
Advisor Shares of the other Warburg Pincus Advisor Funds at their respective net
asset values. Exchanges may be effected in the manner described under
'Redemption of Shares' above. If an exchange request is received by Warburg
Pincus Advisor Funds prior to 4:00 p.m. (Eastern time), the exchange will be
made at each fund's net asset value determined at the end of that business
day. Exchanges may be effected without a sales charge but must satisfy any
minimum dollar amount necessary for new purchases. The
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<PAGE>
exchange privilege may be modified or terminated at any time upon 60 days'
notice to shareholders.
The exchange privilege is available to shareholders residing in any state
in which the Advisor Shares being acquired may legally be sold. When an investor
effects an exchange of shares, the exchange is treated for federal income tax
purposes as a redemption. Therefore, the investor may realize a taxable gain or
loss in connection with the exchange. Investors wishing to exchange Advisor
Shares of the Fund for Advisor Shares in another Warburg Pincus Advisor Fund
should review the prospectus of the other fund prior to making an exchange. For
further information regarding the exchange privilege or to obtain a current
prospectus for another Warburg Pincus Advisor Fund, an investor should contact
Warburg Pincus Advisor Funds at (800) 888-6878.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS. The Fund calculates its dividends from net
investment income. Net investment income includes interest accrued and dividends
earned on the Fund's portfolio securities for the applicable period less
applicable expenses. The Fund declares dividends from its net investment income
semiannually and pays them in the calendar year in which they are declared. Net
investment income earned on weekends and when the NYSE is not open will be
computed as of the next business day. Distributions of net realized long-term
and short-term capital gains are declared annually and, as a general rule, will
be distributed or paid in November or December of each calendar year. Unless an
investor instructs the Fund to pay dividends or distributions in cash, dividends
and distributions will automatically be reinvested in additional Advisor Shares
of the Fund at net asset value. The election to receive dividends in cash may be
made on the account application or, subsequently, by writing to Warburg Pincus
Advisor Funds at the address set forth under 'How to Redeem and Exchange Shares'
or by calling Warburg Pincus Advisor Funds at (800) 888-6878.
The Fund may be required to withhold for U.S. federal income taxes 31% of
all distributions payable to shareholders who fail to provide the Fund with
their correct taxpayer identification number or to make required certifications,
or who have been notified by the U.S. Internal Revenue Service that they are
subject to backup withholding.
TAXES. The Fund intends to continue to qualify each year as a 'regulated
investment company' within the meaning of the Code. The Fund, if it qualifies as
a regulated investment company, will be subject to a 4% non-deductible excise
tax measured with respect to certain undistributed amounts of ordinary income
and capital gain. The Fund expects to pay such additional dividends and to make
such additional distributions as are necessary to avoid the application of this
tax.
Dividends paid from net investment income and distributions of net realized
short-term capital gains are taxable to investors as ordinary income, and
distributions derived from net realized long-term capital gains are taxable to
investors as long-term capital gains, in each case regardless of how long
investors have held Advisor Shares or whether received in cash or reinvested in
additional Advisor Shares. As a general rule, an investor's gain or loss on a
sale or redemption of its Fund shares will be a long-term capital gain or loss
if it has held its shares for more than one year and will be a short-term
capital gain or loss if it has held its shares for one year or less. However,
any loss realized upon the sale or redemption of shares within six months from
the date of their purchase will be treated as a long-term capital loss to the
extent of any amounts treated as distributions of long-term capital gain during
such six-month period with respect to such shares. Investors may be
proportionately liable for taxes on income and gains of
17
<PAGE>
the Fund, but investors not subject to tax on their income will not be required
to pay tax on amounts distributed to them. The Fund's investment activities will
not result in unrelated business taxable income to a tax-exempt investor. The
Fund's dividends, to the extent not derived from dividends attributable to
certain types of stock issued by U.S. domestic corporations, will not qualify
for the dividends received deduction for corporations.
Dividends and interest received by the Fund may be subject to withholding
and other taxes imposed by foreign countries. However, tax conventions between
certain countries and the United States may reduce or eliminate such taxes.
If the Fund qualifies as a regulated investment company, if certain asset
and distribution requirements are satisfied and if more than 50% of the Fund's
total assets at the close of its fiscal year consist of stock or securities of
foreign corporations, the Fund may elect for U.S. income tax purposes to treat
foreign income taxes paid by it as paid by its shareholders. The Fund may
qualify for and make this election in some, but not necessarily all, of its
taxable years. If the Fund were to make an election, shareholders of the Fund
would be required to take into account an amount equal to their pro rata
portions of such foreign taxes in computing their taxable income and then treat
an amount equal to those foreign taxes as a U.S. federal income tax deduction or
as a foreign tax credit against their U.S. federal income taxes. Shortly after
any year for which it makes such an election, the Fund will report to its
shareholders the amount per share of such foreign income tax that must be
included in each shareholder's gross income and the amount which will be
available for the deduction or credit. No deduction for foreign taxes may be
claimed by a shareholder who does not itemize deductions. Certain limitations
will be imposed on the extent to which the credit (but not the deduction) for
foreign taxes may be claimed.
GENERAL. Statements as to the tax status of each investor's dividends and
distributions are mailed annually. Each investor will also receive, if
applicable, various written notices after the close of the Fund's prior taxable
year with respect to certain dividends and distributions which were received
from the Fund during the Fund's prior taxable year. Investors should consult
their own tax advisers with specific reference to their own tax situations,
including their state and local tax liabilities. Individuals investing in the
Fund through Institutions should consult those Institutions or their own tax
advisers regarding the tax consequences of investing in the Fund.
NET ASSET VALUE
The Fund's net asset value per share is calculated as of the close of
regular trading on the NYSE (currently 4:00 p.m., Eastern time) on each business
day, Monday through Friday, except on days when the NYSE is closed. The NYSE is
currently scheduled to be closed on New Year's Day, Washington's Birthday, Good
Friday, Memorial Day (observed), Independence Day, Labor Day, Thanksgiving Day
and Christmas Day, and on the preceding Friday or subsequent Monday when one of
these holidays falls on a Saturday or Sunday, respectively. The net asset value
per share of the Fund generally changes each day.
The net asset value per Advisor Share of the Fund is computed by adding the
Advisor Shares' pro rata share of the value of the Fund's assets, deducting the
Advisor Shares' pro rata share of the Fund's liabilities and the liabilities
specifically allocated to Advisor Shares and then dividing the result by the
total number of outstanding Advisor Shares. Generally, the Fund's investments
are valued at market value or, in the absence of a quoted market value with
respect to any portfolio securities, at fair value as determined by or under the
direction of the Board.
Portfolio securities that are primarily traded on foreign exchanges are
generally valued at the
18
<PAGE>
closing values of such securities on their respective exchanges preceding the
calculation of the Fund's net asset value, except that when an occurrence
subsequent to the time a value was so established is likely to have changed such
value, then the fair market value of those securities will be determined by
consideration of other factors by or under the direction of the Board.
Securities listed on a U.S. securities exchange (including securities
traded through the NASDAQ National Market System) or foreign securities exchange
will be valued on the basis of the closing value on the date on which the
valuation is made. Other U.S. over-the-counter securities, foreign
over-the-counter securities and securities listed or traded on certain foreign
stock exchanges whose operations are similar to the U.S. over-the-counter market
are valued on the basis of the bid price at the close of business on each day.
Option or futures contracts will be valued at the last sale price at 4:00 p.m.
(Eastern time) on the date on which the valuation is made, as quoted on the
primary exchange or board of trade on which the option or futures contract is
traded, or in absence of sales, at the mean between the last bid and asked
prices. Unless the Board determines that using this valuation method would not
reflect the investments' value, short-term investments that mature in 60 days or
less are valued on the basis of amortized cost, which involves valuing a
portfolio instrument at its cost initially 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. Any assets and
liabilities initially expressed in non-U.S. dollar currencies are translated
into U.S. dollars at the prevailing rate as quoted by an independent pricing
service on the date of valuation. Further information regarding valuation
policies is contained in the Statement of Additional Information.
PERFORMANCE
The Fund quotes the performance of Advisor Shares separately from Common
Shares. The net asset value of the Advisor Shares is listed in The Wall Street
Journal each business day under the heading Warburg Pincus Advisor Funds. From
time to time, the Fund may advertise the average annual total return of Advisor
Shares over various periods of time. These total return figures show the average
percentage change in value of an investment in the Advisor Shares from the
beginning of the measuring period to the end of the measuring period. The
figures reflect changes in the price of the Advisor Shares assuming that any
income dividends and/or capital gain distributions made by the Fund during the
period were reinvested in Advisor Shares. Total return will be shown for recent
one-, five- and ten-year periods, and may be shown for other periods as well
(such as on a year-by-year, quarterly or current year-to-date basis).
When considering average total return figures for periods longer than one
year, it is important to note that the annual total return for one year in the
period might have been greater or less than the average for the entire period.
When considering total return figures for periods shorter than one year,
investors should bear in mind that the Fund seeks long-term appreciation and
that such return may not be representative of the Fund's return over a longer
market cycle. The Fund may also advertise aggregate total return figures of
Advisor Shares for various periods, representing the cumulative change in value
of an investment in the Advisor Shares for the specific period (again reflecting
changes in share prices and assuming reinvestment of dividends and
distributions). Aggregate and average total returns may be shown by means of
schedules, charts or graphs and may indicate various components of total return
(i.e., change in value of initial investment, income dividends and capital gain
distributions).
19
<PAGE>
Investors should note that total return figures are based on historical
earnings and are not intended to indicate future performance. The Statement of
Additional Information describes the method used to determine the total return.
Current total return figures may be obtained by calling Warburg Pincus Advisor
Funds at (800) 888-6878.
In reports or other communications to investors or in advertising material,
the Fund may describe general economic and market conditions affecting the Fund.
The Fund may compare its performance with (i) that of other mutual funds as
listed in the rankings prepared by Lipper Analytical Services, Inc. or similar
investment services that monitor the performance of mutual funds or as set forth
in the publications listed below; (ii) the Morgan Stanley Capital International
Europe, Australia and Far East ('EAFE') Index, the Salomon Russell Global Equity
Index and the FT-Actuaries World Indices (jointly compiled by The Financial
Times, Ltd., Goldman, Sachs & Co. and NatWest Securities Ltd.) and the S&P 500,
which are unmanaged indexes of common stocks; or (iii) other appropriate indexes
of investment securities or with data developed by Counsellors derived from such
indexes. The Fund may also include evaluations of the Fund published by
nationally recognized ranking services and by financial publications that are
nationally recognized, such as The Wall Street Journal, Investor's Daily, Money,
Inc., Institutional Investor, Barron's, Fortune, Forbes, Business Week,
Morningstar, Inc. and Financial Times.
In reports or other communications to investors or in advertising, the Fund
may also describe the general biography or work experience of the portfolio
managers of the Fund and may include quotations attributable to the portfolio
managers describing approaches taken in managing the Fund's investments,
research methodology underlying stock selection or the Fund's investment
objective. The Fund may also discuss the continuum of risk and return relating
to different investments and the potential impact of foreign stocks on a
portfolio otherwise composed of domestic securities. In addition, the Fund may
from time to time compare the expense ratio of Advisor Shares to that of
investment companies with similar objectives and policies, based on data
generated by Lipper Analytical Services, Inc. or similar investment services
that monitor mutual funds.
GENERAL INFORMATION
ORGANIZATION. The Fund was incorporated on February 9, 1989 under the laws of
the State of Maryland. Although the Fund's name as set forth in its charter is
'Counsellors International Equity Fund, Inc.,' it does business under the name
'Warburg, Pincus International Equity Fund.' The charter of the Fund authorizes
the governing Board 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). Under the Fund's charter documents, the
Board has the power to classify or reclassify any unissued shares of the Fund
into one or more additional classes by setting or changing in any one or more
respects their relative rights, voting powers, restrictions, limitations as to
dividends, qualifications and terms and conditions of redemption. The Board may
similarly classify or reclassify any class of its shares into one or more series
and, without shareholder approval, may increase the number of authorized shares
of the Fund.
MULTI-CLASS STRUCTURE. The Fund offers a separate class of shares, the Common
Shares, directly to individuals pursuant to a separate prospectus. Shares of
each class represent equal pro rata interests in the Fund and accrue dividends
and calculate net asset value and performance quotations in the same manner, as
described elsewhere in this Prospectus, except that Advisor Shares bear fees
payable by the Fund to service organizations for services they provide to the
beneficial
20
<PAGE>
owners of such shares and enjoy certain exclusive voting rights on matters
relating to these fees. Because of the higher fees borne by the Advisor Shares,
the total return on such shares can be expected to be lower than the total
return on Common Shares. Investors may obtain information concerning the Common
Shares by calling Counsellors Securities at (800) 888-6878.
VOTING RIGHTS. Investors in the Fund are entitled to one vote for each full
share held and fractional votes for fractional shares held. Shareholders of the
Fund will vote in the aggregate except where otherwise required by law and
except that each class will vote separately on certain matters pertaining to its
distribution and shareholder servicing arrangements. There will normally be no
meetings of investors for the purpose of electing members of the Board unless
and until such time as less than a majority of the members holding office have
been elected by investors. Any member of the Board may be removed from office
upon the vote of shareholders holding at least a majority of the Fund's
outstanding shares, at a meeting called for that purpose. A meeting will be
called for the purpose of voting on the removal of a Board member at the written
request of holders of 10% of the outstanding shares of the Fund. John L. Furth,
a 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 as
of August 31, 1995 because they may be deemed to possess or share investment
power over shares owned by clients of Counsellors and certain other entities.
SHAREHOLDER COMMUNICATIONS. Each investor will receive a quarterly statement of
its account, as well as a statement of its account after any transaction that
affects its share balance or share registration (other than the reinvestment of
dividends or distributions). The Fund will also send to its investors a
semiannual report and an audited annual report, each of which includes a list of
the investment securities held by the Fund and a statement of the performance of
the Fund. Each Institution that is the record owner of Advisor Shares on behalf
of its customers will send a statement to those customers periodically showing
their indirect interest in Advisor Shares, as well as providing other
information about the Fund. See 'Shareholder Servicing.'
SHAREHOLDER SERVICING
The Fund is authorized to offer Advisor Shares exclusively to Institutions
whose clients or customers (or participants in the case of retirement plans)
('Customers') are beneficial owners of Advisor Shares. Either those Institutions
or companies providing certain services to Customers (together, 'Service
Organizations') will enter into account servicing agreements ('Agreements') with
the Fund pursuant to a Distribution Plan as described below. Pursuant to the
terms of an Agreement, the Service Organization agrees to provide certain
distribution, shareholder servicing, administrative and/or accounting services
for its Customers. Distribution services would be marketing or other services in
connection with the promotion and sale of Advisor Shares. Shareholder services
that may be provided include responding to Customer inquiries, providing
information on Customer investments and providing other shareholder liaison
services. Administrative and accounting services related to the sale of the
Advisor Shares may include (i) aggregating and processing purchase and
redemption requests from Customers and placing net purchase and redemption
orders with the Fund's transfer agent, (ii) processing dividend payments from
the Fund on behalf of Customers and (iii) providing sub-accounting related to
the sale of Advisor Shares beneficially owned by Customers or the information to
the Fund necessary for sub-accounting. The Board has approved a Distribution
Plan (the 'Plan') pursuant to Rule 12b-1 under the 1940 Act under which the Fund
will pay each participating Service Organization a negotiated fee on an annual
basis not to exceed .75% (up to a .25% annual service fee and a .50% annual
distribu-
21
<PAGE>
tion fee) of the value of the average daily net assets of its Customers invested
in the Advisor Shares. The Board evaluates the appropriateness of the Plan on a
continuing basis and in doing so considers all relevant factors.
Counsellors and Counsellors Securities may, from time to time, at their own
expense, provide compensation to these institutions. To the extent they do so,
such compensation does not represent an additional expense to the Fund or its
shareholders since it will be paid from the assets of Counsellors, Counsellors
Service or their affiliates.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE FUND'S
STATEMENT OF ADDITIONAL INFORMATION OR THE FUND'S OFFICIAL SALES LITERATURE IN
CONNECTION WITH THE OFFERING OF SHARES OF THE FUND, AND IF GIVEN OR MADE, SUCH
OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF THE
ADVISOR SHARES IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER MAY
NOT LAWFULLY BE MADE.
22
<PAGE>
TABLE OF CONTENTS
THE FUND'S EXPENSES ...................................................... 2
FINANCIAL HIGHLIGHTS ..................................................... 3
INVESTMENT OBJECTIVE AND POLICIES ........................................ 4
PORTFOLIO INVESTMENTS .................................................... 4
RISK FACTORS AND SPECIAL
CONSIDERATIONS ........................................................ 6
PORTFOLIO TRANSACTIONS AND TURNOVER
RATE .................................................................. 7
CERTAIN INVESTMENT STRATEGIES ............................................ 8
INVESTMENT GUIDELINES ................................................... 12
MANAGEMENT OF THE FUND .................................................. 12
HOW TO PURCHASE SHARES .................................................. 14
HOW TO REDEEM AND EXCHANGE
SHARES ............................................................... 16
DIVIDENDS, DISTRIBUTIONS AND TAXES ...................................... 17
NET ASSET VALUE ......................................................... 18
PERFORMANCE ............................................................. 19
GENERAL INFORMATION ..................................................... 20
SHAREHOLDER SERVICING ................................................... 21
ADIEQ-1-0995
[LOGO]
[ ] WARBURG PINCUS
INTERNATIONAL EQUITY FUND
PROSPECTUS
SEPTEMBER 29, 1995
<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 September 22, 1995
STATEMENT OF ADDITIONAL INFORMATION
September 29, 1995
WARBURG PINCUS INTERNATIONAL EQUITY 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 . . . . . . . . . . . . . . . . 28
Additional Purchase and Redemption Information . . . . 37
Exchange Privilege . . . . . . . . . . . . . . . . . . 38
Additional Information Concerning Taxes . . . . . . . . 39
Determination of Performance . . . . . . . . . . . . . 42
Auditors and Counsel . . . . . . . . . . . . . . . . . 45
Miscellaneous . . . . . . . . . . . . . . . . . . . . . 45
Financial Statements . . . . . . . . . . . . . . . . . 46
Appendix -- Description of Ratings . . . . . . . . . . A-1
Report of Coopers & Lybrand L.L.P.,
Independent Auditors . . . . . . . . . . . . . . . . A-3
This Statement of Additional Information is meant to be read in
conjunction with the combined Prospectus for the Common Shares of Warburg
Pincus International Equity Fund (the "Fund"), Warburg Pincus Capital
Appreciation Fund, Warburg Pincus Emerging Growth Fund, Warburg Pincus Post-
Venture Capital Fund and Warburg Pincus Japan OTC Fund, and with the
Prospectus for the Advisor Shares of the Fund, each dated September 29, 1995,
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) 257-5614. Information regarding the status of
<PAGE>2
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.
INVESTMENT OBJECTIVE
The investment objective of the Fund is long-term capital
appreciation.
INVESTMENT POLICIES
The following policies supplement the descriptions of the Fund's
investment objective and policies in the Prospectuses.
Additional Information on Investment Practices
Foreign Investments. Investors should recognize that investing in
foreign companies involves certain risks, including those discussed below,
which are not typically associated with investing in U.S. issuers. Since the
Fund will be investing substantially in securities denominated in currencies
other than the U.S. dollar, and since the Fund may temporarily hold funds in
bank deposits or other money market investments denominated in foreign
currencies, the Fund may be affected favorably or unfavorably by exchange
control regulations or changes in the exchange rate between such currencies
and the dollar. A change in the value of a foreign currency relative to the
U.S. dollar will result in a corresponding change in the dollar value of the
Fund assets denominated in that foreign currency. Changes in foreign currency
exchange rates may also affect the value of dividends and interest earned,
gains and losses realized on the sale of securities and net investment income
and gains, if any, to be distributed to shareholders by the Fund. The rate of
exchange between the U.S. dollar and other currencies is determined by the
forces of supply and demand in the foreign exchange markets. Changes in the
exchange rate may result over time from the interaction of many factors
directly or indirectly affecting economic and political conditions in the
United States and a particular foreign country, including economic and
political developments in other countries. Of particular importance are rates
of inflation, interest rate levels, the balance of payments and the extent of
government surpluses or deficits in the United States and the particular
foreign country, all of which are in turn sensitive to the monetary, fiscal
and trade policies pursued by the governments of the United States and foreign
countries important to international trade and finance. Governmental
intervention may also play a significant role. National governments rarely
voluntarily allow their currencies to float freely in response to economic
forces. Sovereign governments use a variety of techniques, such as
intervention by a country's central bank or imposition of regulatory controls
or taxes, to affect the exchange rates of their currencies.
The rate of exchange between the U.S. dollar and other currencies is
determined by the forces of supply and demand in the foreign exchange markets.
Changes in the exchange rate may result over time from the interaction of many
factors directly or indirectly affecting
<PAGE>3
economic and political conditions in the United States and a particular
foreign country, including economic and political developments in other
countries. Of particular importance are rates of inflation, interest rate
levels, the balance of payments and the extent of government surpluses or
deficits in the United States and the particular foreign country, all of which
are in turn sensitive to the monetary, fiscal and trade policies pursued by
the governments of the United States and foreign countries important to
international trade and finance. Governmental intervention may also play a
significant role. National governments rarely voluntarily allow their
currencies to float freely in response to economic forces. Sovereign
governments use a variety of techniques, such as intervention by a country's
central bank or imposition of regulatory controls or taxes, to affect the
exchange rates of their currencies.
Many of the securities held by the Fund will not be registered with,
nor the issuers thereof be subject to reporting requirements of, the U.S.
Securities and Exchange Commission (the "SEC"). Accordingly, there may be
less publicly available information about the securities and about the foreign
company or government issuing them than is available about a domestic company
or government entity. Foreign companies are generally not subject to uniform
financial reporting standards, practices and requirements comparable to those
applicable to U.S. companies. In addition, with respect to some foreign
countries, there is the possibility of expropriation or confiscatory taxation,
limitations on the removal of funds or other assets of the Fund, political or
social instability, or domestic developments which could affect U.S.
investments in those countries. Moreover, individual foreign economies may
differ favorably or unfavorably from the U.S. economy in such respects as
growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency, and balance of payments positions. The Fund may
invest in securities of foreign governments (or agencies or instrumentalities
thereof), and many, if not all, of the foregoing considerations apply to such
investments as well.
Securities of some foreign companies are less liquid and their
prices are more volatile than securities of comparable U.S. companies.
Certain foreign countries are known to experience long delays between the
trade and settlement dates of securities purchased or sold. Due to the
increased exposure of the Fund to market and foreign exchange fluctuations
brought about by such delays, and due to the corresponding negative impact on
Fund liquidity, the Fund will avoid investing in countries which are known to
experience settlement delays which may expose the Fund to unreasonable risk of
loss.
The operating expenses of the Fund can be expected to be higher than
that of an investment company investing exclusively in U.S. securities, since
the expenses of the Fund, such as custodial costs, valuation costs and
communication costs, as well as the rate of the investment advisory fees,
though similar to such expenses of some other international funds, are higher
than those costs incurred by other investment companies. Additionally, the
operating expenses of the Fund can be expected to be higher than that of an
investment company investing exclusively in domestic securities, since the
expenses of the Fund, such as custodial costs, valuation costs and
communication costs, as well as the rate of the
<PAGE>4
investment advisory fees, though similar to such expenses of some other
international funds, are higher than those costs incurred by other investment
companies.
Japanese Investments. From time to time depending on current market
conditions, the Fund may invest a significant portion of its assets in
Japanese securities. Like any investor in Japan, the Fund will be subject to
general economic and political conditions in the country. In addition to the
considerations discussed above, these include future political and economic
developments, the possible imposition of, or changes in, exchange controls or
other Japanese governmental laws or restrictions applicable to such
investments, diplomatic developments, political or social unrest and natural
disasters.
The information set forth in this section has been extracted from
various governmental publications and other sources. The Fund makes no
representation as to the accuracy of the information, nor has the Fund
attempted to verify it. Furthermore, no representation is made that any
correlation exists between Japan or its economy in general and the performance
of the Fund.
Economic Background. Over the past 30 years Japan has experienced
significant economic development. During the era of high economic growth in
the 1960's and early 1970's the expansion was based on the development of
heavy industries such as steel and shipbuilding. In the 1970's Japan moved
into assembly industries which employ high levels of technology and consume
relatively low quantities of resources, and since then has become a major
producer of electrical and electronic products and automobiles. Moreover,
since the mid-1980's Japan has become a major creditor nation. With the
exception of the periods associated with the oil crises of the 1970's, Japan
has generally experienced very low levels of inflation. In the mid-1990's,
Japan has been plagued by rising unemployment, excess capacity and significant
bad debts in the banking sector. On January 17, 1995, the Great Hanshin
Earthquake severely damaged Kobe, Japan's largest container port. The
government has announced a $5.9 billion plan to repair the port and estimates
that damage to the region equals $96 billion. However, the long-term economic
effects of the earthquake cannot be predicted.
Japan is largely dependent upon foreign economies for raw materials.
For instance, almost all of its oil is imported, the majority from the Middle
East. Oil prices therefore have a major impact on the domestic economy, as is
evidenced by the current account deficits triggered by the two oil crises of
the 1970's. Oil prices have declined mainly due to a worldwide easing of
demand for crude oil. The stabilized price of oil contributed to Japan's
sizeable current account surplus and stability of wholesale and consumer
prices since 1981. While Japan is working to reduce its dependence on foreign
materials, its lack of natural resources poses a significant obstacle to this
effort.
International trade is important to Japan's economy, as exports
provide the means to pay for many of the raw materials it must import.
Japan's trade surplus has increased dramatically in recent years, exceeding
$100 billion per year since 1991 and
<PAGE>5
reaching a record high of $145 billion in 1994. In 1995, however, the trade
surplus has decreased due to a drop in exports. The reduced exports are due
primarily to the strength of the yen and the impact of threatened U.S. trade
sanctions. Because of the concentration of Japanese exports in highly visible
products such as automobiles, machine tools and semiconductors, and the large
trade surpluses resulting therefrom, Japan has entered a difficult phase in
its relations with its trading partners, particularly with respect to the
United States, with whom the trade imbalance is the greatest. The United
States and Japan have engaged in "economic framework" negotiations to help
increase United States' share in Japanese markets and reduce Japan's current
account surplus, but progress in the negotiations has been hampered by the
recent political upheaval in Japan. On June 28, 1995, the United States
agreed not to impose trade sanctions in return for a modest commitment by
Japan to buy more American cars and auto parts. Any trade sanctions imposed
upon Japan by the United States as a result of the current friction or
otherwise could adversely impact Japan and the Fund's investments there.
The following table sets forth the composition of Japan's trade
balance, as well as other components of its current account, for the years
shown.
CURRENT ACCOUNT
Trade
<TABLE>
<CAPTION>
Year Exports Imports Trade Balance Current Balance
---- ------- ------- ------------- ---------------
(U.S. dollars in millions)
<S> <C> <C> <C> <C>
1989 269,570 192,653 76,917 57,157
1990 280,374 216,846 63,528 35,761
1991 306,557 203,513 103,044 72,901
1992 330,850 198,502 132,348 117,551
1993 351,292 209,778 141,514 131,448
1994 384,176 238,232 145,944 129,140
</TABLE>
Source: Institute of Fiscal and Monetary Policy, Ministry of Finance of
Japan
Economic Trends. The following tables set forth Japan's gross
domestic product, wholesale price index and consumer price index for the years
shown.
<PAGE>6
GROSS DOMESTIC PRODUCT (GDP)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
GDP (yen billions)
(Expenditures) 469,149 465,972 463,145 451,297 24,537 396,197
Change in GDP
from Preceding
Year
Nominal terms 0.7% 0.6% 2.6% 6.3% 7.2% 6.7%
Real Terms 0.5% -0.2% 1.1% 4.3% 4.8% 4.7%
</TABLE>
Source: Institute of Fiscal and Monetary Policy, Ministry of Finance of
Japan
WHOLESALE PRICE INDEX
<TABLE>
<CAPTION>
Change from
All Preceding
Year Commodities Year
---- ----------- -----------
(Base year: 1990)
<S> <C> <C>
1989 98.0 2.5
1990 100.0 2.0
1991 99.4 (0.6)
1992 97.8 (1.6)
1993 95.0 (2.9)
1994 93.0 2.1
</TABLE>
Source: Financial Statistics of Japan (1993 ed. and June 1994 supp.),
Institute of Fiscal and Monetary Policy, Ministry of Finance of
Japan; International Monetary Fund
<PAGE>7
CONSUMER PRICE INDEX
<TABLE>
<CAPTION>
Change from
Year General Preceding Year
---- ------- --------------
(Base Year: 1990)
<S> <C> <C>
1989 97.0 2.3
1990 100.0 3.1
1991 103.3 3.3
1992 105.0 1.6
1993 106.4 1.3
1994 107.1 0.7
</TABLE>
Source: Financial Statistics of Japan (1993 ed. and June 1994 supp.),
Institute of Fiscal and Monetary Policy, Ministry of Finance of
Japan; International Monetary Fund
Securities markets. There are eight stock exchanges in Japan. Of
these, the Tokyo Stock Exchange is by far the largest, followed by the Osaka
Stock Exchange and the Nagoya Stock Exchange. These exchanges divide the
market for domestic stocks into two sections, with newly listed companies and
smaller companies assigned to the Second Section and larger companies assigned
to the First Section.
<PAGE>8
The following table sets forth the number of Japanese companies
listed on the three major Japanese stock exchanges as of the end of 1994.
NUMBER OF LISTED DOMESTIC COMPANIES
<TABLE>
<CAPTION>
Tokyo Osaka Nagoya
----------------------------- ---------------------------- --------------------------
<S> <C> <C> <C>
1st 2nd 1st 2nd 1st 2nd
Sec. Sec. Sec. Sec. Sec. Sec.
---- ---- ---- ---- ---- ----
1,235 454 855 344 431 129
</TABLE>
Source: Tokyo Stock Exchange, Fact Book 1995
The following table sets forth the trading volume and value of
Japanese stocks on the eight Japanese stock exchanges for the years shown.
STOCK TRADING VOLUME & VALUE ON ALL STOCK EXCHANGES
(shares in millions; yen in billions)
<TABLE>
<CAPTION>
Year Volume Value
---- ------ -----
<S> <C> <C>
1989 . . . . . . . . . . 256,296 386,395
1990 . . . . . . . . . . 145,837 231,837
1991 . . . . . . . . . . 107,844 134,160
1992 . . . . . . . . . . 82,563 80,456
1993 . . . . . . . . . . 101,172 106,123
1994 . . . . . . . . . . 105,936 114,622
Source: Tokyo Stock Exchange, Fact Book 1995
</TABLE>
<PAGE>9
Securities Indexes. The Tokyo Stock Price Index ("TOPIX") is a
composite index of all common stocks listed on the First Section of the Tokyo
Stock Exchange. TOPIX reflects the change in the aggregate market value of
the common stocks as compared to the aggregate market value of those stocks as
of the close on January 4, 1968.
The following table sets forth the high, low and year-end TOPIX for
the years shown.
TOPIX
(January 4, 1968=100)
<TABLE>
<CAPTION>
Year Year-end High Low
---- -------- ---- ---
<S> <C> <C> <C>
1989 2,881.37 2,884.80 2,364.33
1990 1,733.83 2,867.70 1,523.43
1991 1,714.68 2,028.85 1,638.06
1992 1,307.66 1,763.43 1,102.50
1993 1,439.31 1,698.67 1,250.06
1994 1,559.09 1,712.73 1,445.97
Source: Tokyo Stock Exchange, Fact Book 1995
</TABLE>
Currency Fluctuation. The Fund's investments in Japanese securities
will be denominated in yen and most income received by the Fund from such
investments will be in yen. However, the Fund's net asset value will be
reported, and distributions will be made, in U.S. dollars. Therefore, a
decline in the value of the yen relative to the U.S. dollar could have an
adverse effect on the value of the Fund's Japanese investments. The following
table presents the average exchange rates of Japanese yen for U.S. dollars for
the years shown:
Year Yen Per U.S. Dollar
---- -------------------
1994 102.18
1993 111.08
1992 126.79
1991 134.59
1990 145.00
1989 138.07
Source: Board of Governors of the Federal Reserve System, Federal Reserve
Bulletin
On September 19, 1995, the noon buying rate in New York for cable
transfers payable in Japanese yen was 104.20 per U.S. dollar.
<PAGE>10
Currency Transactions. The value in U.S. dollars of the assets of the
Fund that are invested in foreign securities may be affected favorably or
unfavorably by changes in exchange control regulations, and the Fund may incur
costs in connection with conversion between various currencies. The Fund,
therefore, may engage in currency exchange transactions to protect against
uncertainty in the level of future exchange rates and, with respect to (i) and
(iii) below, may also engage in currency transactions to increase income and
total return. Currency exchange transactions may be from any non-U.S.
currency into U.S. dollars or into other appropriate currencies. The Fund
will conduct its currency exchange transactions (i) on a spot (i.e., cash)
basis at the rate prevailing in the currency exchange market, (ii) through
entering into forward contracts to purchase or sell currency or (iii) through
entering into foreign currency futures contracts or options on such contracts.
If a devaluation is generally anticipated, the Fund may not be able to
contract to sell the currency at a price above the devaluation level it
anticipates. The cost to the Fund of engaging in currency transactions varies
with factors such as the currency involved, the length of the contract period
and the market conditions then prevailing. Because transactions in currency
exchange are usually conducted on a principal basis, no fees or commissions
are generally involved.
Forward Currency Contracts. A forward currency contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract as agreed upon by
the parties, at a price set at the time of the contract. These contracts are
entered into in the interbank market conducted directly between currency
traders (usually large commercial banks) and their customers.
At or before the maturity of a forward contract, the Fund may either sell
a portfolio security and make delivery of the currency, or retain the security
and fully or partially offset its contractual obligation to deliver the
currency by negotiating with its trading partner to purchase a second,
offsetting contract. If the Fund retains the portfolio security and engages
in an offsetting transaction, the Fund, at the time of execution of the
offsetting transaction, will incur a gain or a loss to the extent that
movement has occurred in forward contract prices.
Foreign Currency Futures. As described below under "Futures Activities,"
the Fund may enter into foreign currency futures contracts and related
options.
Currency Hedging. The Fund's currency hedging will be limited to hedging
involving either specific transactions or portfolio positions. Transaction
hedging is the purchase or sale of forward currency with respect to specific
receivables or payables of the Fund generally accruing in connection with the
purchase or sale of its portfolio securities. Position hedging is the sale of
forward currency with respect to portfolio security positions. The Fund may
not position hedge to an extent greater than the aggregate market value (at
the time of entering into the hedge) of the hedged securities.
A decline in the dollar value of a foreign currency in which the Fund's
securities are denominated will reduce the dollar value of the securities,
even if their value in the foreign
<PAGE>11
currency remains constant. The use of currency hedges does not eliminate
fluctuations in the underlying prices of the securities, but it does establish
a rate of exchange that can be achieved in the future. For example, in order
to protect against such diminutions in the value of securities it holds, the
Fund may purchase put options on the foreign currency. If the value of the
currency does decline, the Fund will have the right to sell the currency for a
fixed amount in dollars and will thereby offset, in whole or in part, the
adverse effect on its securities that otherwise would have resulted.
Conversely, if a rise in the dollar value of a currency in which securities to
be acquired are denominated is projected, thereby potentially increasing the
cost of the securities, the Fund may purchase call options on the particular
currency. The purchase of these options could offset, at least partially, the
effects of the adverse movements in exchange rates. Currency hedging involves
some of the same risks and considerations as other transactions with similar
instruments. Although currency hedges limit the risk of loss due to a decline
in the value of a hedged currency, at the same time, they also limit any
potential gain that might result should the value of the currency increase.
While the values of forward currency contracts, currency options,
currency futures and options on futures may be expected to correlate with
exchange rates, they will not reflect other factors that may affect the value
of the Fund's investments. A currency hedge, for example, should protect a
Yen-denominated bond against a decline in the Yen, but will not protect the
Fund against a price decline if the issuer's creditworthiness deteriorates.
Because the value of the Fund's investments denominated in foreign currency
will change in response to many factors other than exchange rates, a currency
hedge may not be entirely successful in mitigating changes in the value of the
Fund's investments denominated in that currency over time.
Futures Activities. The Fund may enter into foreign currency, interest
rate and stock 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, currency values and/or market
conditions and increasing return. The ability of the Fund to trade in 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.
The Fund will not enter into futures contracts and related options for
which the aggregate initial margin and premiums 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.
There is no overall limit on the percentage of Fund assets that may be at risk
with respect to futures activities.
Futures Contracts. A foreign currency futures contract provides for the
future sale by one party and the purchase by the other party of a certain
amount of a specified non-U.S.
<PAGE>12
currency at a specified price, date, time and place. Foreign currency futures
are similar to forward currency contracts, except that they are traded on
commodities exchanges and are standardized as to contract size and delivery
date. 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
financial instrument (debt security) at a specified price, date, time and
place. Stock indexes are capitalization weighted indexes which reflect the
market value of the firms listed on the indexes. A stock index futures
contract is an agreement to be settled by delivery of an amount of cash equal
to a specified multiplier times the difference between the value of the index
at the beginning and at the end of the contract period. In entering into
these contracts, the Fund will incur brokerage costs and be required to make
and maintain certain "margin" deposits on a mark-to-market basis, as described
below.
One of the purposes of entering into a futures contract may be to protect
the Fund from fluctuations in value of its portfolio securities without its
necessarily buying or selling the securities. 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. No consideration is paid or received by the Fund upon entering into a
futures contract. Instead, the Fund will be 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 obliga-
tions, equal to approximately 1% to 10% of the contract amount (this amount
is subject to change by the exchange on which the contract is traded, and
brokers may charge a higher amount). This amount is known as "initial margin"
and is in the nature of a performance bond or good faith deposit on the
contract which is returned to the Fund upon termination of the futures
contract, assuming all contractual obligations have been satisfied. The
broker will have access to amounts in the margin account if the Fund fails to
meet its contractual obligations. Subsequent payments, known as "variation
margin," to and from the broker, will be made daily as the currency, financial
instrument or stock 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." 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 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 for the contracts 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. 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 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
circumstances, an increase in the value of
<PAGE>13
the portion of the Fund's securities being hedged, if any, may partially or
completely offset losses on the futures contract. However, as described
above, there is no guarantee that the price of the securities being hedged
will, in fact, correlate with the price movements in a futures contract and
thus provide an offset to losses on the futures contract.
If the Fund has hedged against the possibility of an event adversely
affecting the value of securities held in its portfolio and that event does
not occur, the Fund will lose part or all of the benefit of the increased
value of securities which it has hedged because it will have offsetting losses
in its futures positions. Losses incurred in futures transactions and the
costs of these transactions will affect the Fund's performance. In addition,
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. These sales of securities could, but will not
necessarily, be at increased prices which reflect the change in currency
values, interest rates or stock indexes, as the case may be.
Options on Futures Contracts. The Fund may purchase and write put and
call options on foreign currency, interest rate and stock index futures
contracts and may enter into closing transactions with respect to such options
to terminate existing positions. There is no guarantee that such closing
transactions can be effected.
An option on a currency, interest rate or stock 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
currency, interest rate or stock index futures contract at a specified
exercise price at any time prior to the expiration date of the option. 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.
There are several risks relating to options on futures contracts. The
ability to establish and close out positions on such options will be subject
to the existence of a liquid market. In addition, the purchase of put or call
options will be based upon predictions as to anticipated trends in interest
rates and securities markets by Warburg, Pincus Counsellors, Inc., the Fund's
investment adviser ("Counsellors"). 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 portfolio strategies will be
successful. Even if Counsellors' expectations are correct, where options on
futures are used for hedging purposes, there may be an imperfect correlation
between the change in the value of the options and of the portfolio securities
hedged.
<PAGE>14
U.S. Government Securities. The Fund may invest in debt obligations of
varying maturities issued or guaranteed by the United States government, its
agencies or instrumentalities ("U.S. government securities"). Direct
obligations of the U.S. Treasury include a variety of securities that differ
in their interest rates, maturities and dates of issuance. U.S. government
securities also include securities issued or guaranteed by the Federal Housing
Administration, Farmers Home Loan Administration, Export-Import Bank of the
United States, Small Business Administration, Government National Mortgage
Association ("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"), Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory Board
and Student Loan Marketing Association. The Fund may also invest in
instruments that are supported by the right of the issuer to borrow from the
U.S. Treasury and instruments that are supported by the credit of the
instrumentality. Because the U.S. government is not obligated by law to
provide support to an instrumentality it sponsors, the Fund will invest in
obligations issued by such an instrumentality only if Counsellors, determines
that the credit risk with respect to the instrumentality does not make its
securities unsuitable for investment by the Fund.
Securities of Other Investment Companies. The Fund may invest in
securities of other investment companies to the extent permitted under the
Investment Company Act of 1940, as amended (the "1940 Act"). Presently, under
the 1940 Act, the Fund may hold securities of another investment company in
amounts which (i) do not exceed 3% of the total outstanding voting stock of
such company, (ii) do not exceed 5% of the value of the Fund's total assets
and (iii) when added to all other investment company securities held by the
Fund, do not exceed 10% of the value of the Fund's total assets.
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 20% of
the Fund's total assets taken at value. The Fund will not lend portfolio
securities to E.M. Warburg, Pincus & Co., Inc. ("EMW") or its affiliates
unless it has applied for and received specific authority to do so from the
SEC. Loans of portfolio securities will be collateralized by cash, letters of
credit or U.S. government securities, which are maintained at all times in an
amount equal to at least 100% of the current market value of the loaned
securities. Any gain or loss in the market price of the securities loaned
that might occur during the term of the loan would be for the account of the
Fund. From time to time, the Fund may return a part of the interest earned
from the investment of collateral received for securities loaned to the
borrower and/or a third party that is unaffiliated with the Fund and that is
acting as a "finder."
By lending its securities, the Fund can increase its income by continuing
to receive interest and any dividends on the loaned securities as well as by
either investing the collateral received for securities loaned in short-term
instruments or obtaining yield in the form of interest paid by the borrower
when U.S. government securities are used as collateral.
<PAGE>15
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 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.
Options on Securities. The Fund may purchase put and call options on
stocks and debt securities that are traded on foreign and U.S. exchanges, as
well as over-the-counter ("OTC") options, to the extent permitted by the
policies of state securities authorities in states where shares of the Fund
are qualified for offer and sale. The Fund may utilize up to 2% of its assets
to purchase exchange-traded put and call options on stocks and debt securities
and may do so at or about the same time that it purchases the underlying
security or at a later time. In order to hedge against adverse market shifts,
the Fund may utilize up to 10% of its total assets to purchase exchange-traded
and OTC options on stock and debt securities. In addition, the Fund may write
covered call options on up to 25% of the stock and debt securities in its
portfolio.
The Fund realizes fees (referred to as "premiums") for granting the
rights evidenced by the call 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
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 period or
at a specified time.
The principal reason for writing covered call 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 the 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.
<PAGE>16
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 Counsellors 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 Counsellors 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 Counsellors expects that
the premiums received from writing the call option plus the appreciation in
market price of the underlying security up to the exercise price will be
greater than the appreciation in the price of the underlying security alone.
In any of the preceding situations, if the market price of the underlying
security declines and the security is sold at this lower price, the amount of
any realized loss will be offset wholly or in part by the premium received.
To secure its obligation to deliver the underlying security when it writes a
call option, 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.
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 common stock with respect to which the Fund has
written options may exceed the time within which the Fund must make delivery
in accordance with an exercise notice. In these instances, 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 stock,
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. 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.
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 Counsellors 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
<PAGE>17
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.
Prior to their expirations, put and call options may be sold in closing
sale transactions (sales by the Fund, prior to the exercise of options that it
has purchased, of options of the same series) in which the Fund may realize a
profit or loss from the sale. An option position may be closed out only where
there exists a secondary market for an option of the same series on a
recognized securities exchange or in the over-the-counter market. 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. Similarly, 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. 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.
Although the Fund will generally purchase or write only those options for
which Counsellors believes there is an active secondary market so as to
facilitate closing transactions, 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 Counsellors, are considered to be investment grade. If, as a
covered call option writer, the Fund is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise. In either case, the Fund would continue to be at market risk on the
security and could face higher transaction costs, including brokerage
commissions.
<PAGE>18
Options as a Hedge. In addition to writing covered options for other
purposes, including generating current income, the Fund may enter into options
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 on a portfolio position with a gain on
the hedged position; at the same time, however, a properly correlated hedge
will result in a gain on the portfolio position being offset by a loss on the
hedged position. The Fund bears the risk that the prices of the securities
being hedged will not move in the same amount as the hedge. The Fund will
engage in hedging transactions only when deemed advisable by Counsellors.
Successful use by the Fund of options will be subject to Counsellors' ability
to predict correctly movements in the direction of the stock underlying the
option used as a hedge. Losses incurred in hedging transactions and the costs
of these transactions will affect the Fund's performance.
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 stock to the clearing organization if the
option is exercised, and the clearing corporation 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.
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 dealer call option writer, is able to
effect a closing purchase transaction, it will not be able to liquidate
securities (or other assets) used to cover the written option until the option
expires or is exercised. This requirement may impair the Fund's ability to
sell portfolio securities or, with respect to currency options, currencies at
a time when such sale might be advantageous. In the event of insolvency of
the other party, the Fund may be unable to liquidate a dealer option.
The Board has amended investment limitation number 12 of the Fund to
permit the determination by the Board on an ongoing basis that an adequate
trading market exists for the security.
<PAGE>19
Stock Index Options. The Fund may utilize up to 10% of its total assets
to purchase exchange-listed and OTC put and call options on stock indexes and
may write options on such indexes to hedge against the effects of market-wide
price movements. A stock index measures the movement of a certain group of
stocks by assigning relative values to the common stocks included in the
index, fluctuating with changes in the market values of the stocks included in
the index. Some stock index options are based on a broad market index such as
the New York Stock Exchange ("NYSE") Composite index, or a narrower market
index such as the Standard & Poor's 100. Indexes may also be based on a
particular industry or market segment.
Options on stock indexes are similar to options on stock except that (i)
the expiration cycles of stock index options are monthly, while those of stock
options are currently quarterly, and (ii) the delivery requirements are
different. Instead of giving the right to take or make delivery of stock at a
specified price, an option on a stock 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 stock
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 expressed in dollars times a specified
multiple. The writer of the option is obligated, in return for the premium
received, to make delivery of this amount. The writer may offset its position
in stock index options prior to expiration by entering into a closing
transaction on an exchange or it may let the option expire unexercised.
Stock Index Options as a Hedge. The effectiveness of purchasing or
writing stock index options as a hedging technique will depend upon the extent
to which price movements in the portion of a securities portfolio being hedged
correlate with price movements of the stock index selected. Because the value
of an index option depends upon movements in the level of the index rather
than the price of a particular stock, 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 stock prices in the stock market generally or, in
the case of certain indexes, in an industry or market segment, rather than
movements in the price of a particular stock. Accordingly, successful use by
the Fund of options on stock indexes will be subject to Counsellors' ability
to predict correctly movements in the direction of the stock market generally
or of a particular industry. This requires different skills and techniques
than predicting changes in the price of individual stocks, and there can be no
assurance that the use of these portfolio strategies will be successful.
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 SEC with respect to coverage of currency forward
contracts; options written by the Fund on securities and indexes; currency,
interest rate and index futures contracts and options on these futures
contracts. These guidelines may, in certain instances, require segregation by
<PAGE>20
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. The Fund could purchase a put
option if the strike price of that option is the same or higher than the
strike price of a put option sold by the Fund. If the Fund holds a futures or
forward contract, the Fund could purchase a put option on the same futures or
forward contract with a strike price as high or higher than the price of the
contract held. The Fund may enter into fully or partially offsetting
transactions so that its net position, coupled with any segregated assets
(equal to any remaining obligation), equals its net obligation. Asset coverage
may be achieved by other means when consistent with applicable regulatory
policies.
When-Issued Securities and Delayed-Delivery Transactions. The Fund may
utilize up to 20% of its total assets to purchase securities on a
"when-issued" basis or purchase or sell securities for delayed delivery (i.e.,
payment or delivery occur beyond the normal settlement date at a stated price
and yield). When-issued transactions normally settle within 30-45 days. The
Fund will enter into a when-issued transaction for the purpose of acquiring
portfolio securities and not for the purpose of leverage, but may sell the
securities before the settlement date if Counsellors 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 com-
mitment. 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, U.S. 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.
<PAGE>21
American, European and Continental Depositary Receipts. The assets of
the Fund may be invested in the securities of foreign issuers in the form of
American Depositary Receipts ("ADRs") and European Depositary Receipts
("EDRs"). These securities may not necessarily be denominated in the same
currency as the securities into which they may be converted. ADRs are
receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. EDRs,
which are sometimes referred to as Continental Depositary Receipts ("CDRs"),
are receipts issued in Europe typically by non-U.S. banks and trust companies
that evidence ownership of either foreign or domestic securities. Generally,
ADRs in registered form are designed for use in U.S. securities markets and
EDRs and CDRs in bearer form are designed for use in European securities
markets.
Convertible Securities. Convertible securities in which the Fund may
invest, including both convertible debt and convertible preferred stock, may
be converted at either a stated price or stated rate into underlying shares of
common stock. Because of this feature, convertible securities enable an
investor to benefit from increases in the market price of the underlying
common stock. Convertible securities provide higher yields than the
underlying equity securities, but generally offer lower yields than
non-convertible securities of similar quality. Like bonds, the value of
convertible securities fluctuates in relation to changes in interest rates
and, in addition, also fluctuates in relation to the underlying common stock.
Warrants. The Fund may invest up to 5% of net assets in warrants (valued
at the lower of cost or market) (other than warrants acquired by the Fund as
part of a unit or attached to securities at the time of purchase), provided
that not more than 2% of net assets may be invested in warrants not listed on
a recognized U.S. or foreign stock exchange, to the extent permitted by
applicable securities laws. Because a warrant does not carry with it the
right to dividends or voting rights with respect to the securities which it
entitles a holder to purchase, and because it does not represent any rights in
the assets of the issuer, warrants may be considered more speculative than
certain other types of investments. Also, the value of a warrant does not
necessarily change with the value of the underlying securities and a warrant
ceases to have value if it is not exercised prior to its expiration date.
Non-Publicly Traded and Illiquid Securities. The Fund may not invest
more than 10% of its total assets, in 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 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
placements or restricted
<PAGE>22
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 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. Counsellors 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.
Counsellors will monitor the liquidity of restricted securities in the
Fund under the supervision of the Board. In reaching liquidity decisions,
Counsellors 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% of the
Fund's total 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.
<PAGE>23
Other Investment Limitations
The investment limitations numbered 1 through 11 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 12 through 16
may be changed by a vote of the Board at any time.
The Fund may not:
1. Purchase the securities of any issuer if as a result more than 5% of
the value of the Fund's total assets would be invested in the securities of
such issuer, except that this 5% limitation does not apply to U.S. government
securities and except that up to 25% of the value of the Fund's total assets
may be invested without regard to this 5% limitation.
2. Borrow money or issue senior securities except that the Fund may (a)
borrow from banks for temporary or emergency purposes, and not for leveraging,
and then in amounts not in excess of 30% of the value of the Fund's total
assets at the time of such borrowing and (b) enter into futures contracts; or
mortgage, pledge or hypothecate any assets except in connection with any bank
borrowing and in amounts not in excess of the lesser of the dollar amounts
borrowed or 10% of the value of the Fund's total assets at the time of such
borrowing. Whenever borrowings described in (a) exceed 5% of the value of the
Fund's total assets, the Fund will not make any investments (including
roll-overs). For purposes of this restriction, (a) the deposit of assets in
escrow in connection with the purchase of securities on a when-issued or
delayed-delivery basis and (b) collateral arrangements with respect to initial
or variation margin for futures contracts will not be deemed to be pledges of
the Fund's assets.
3. Purchase any securities which would cause 25% or more of the value of
the Fund's total assets at the time of purchase to be invested in the
securities of issuers conducting their principal business activities in the
same industry; provided that there shall be no limit on the purchase of U.S.
government securities.
4. Make loans, except that the Fund may purchase or hold publicly
distributed fixed-income securities, lend portfolio securities and enter into
repurchase agreements.
5. Underwrite any issue of securities except to the extent that the
investment in restricted securities and the purchase of fixed-income
securities directly from the issuer thereof in accordance with the Fund's
investment objective, policies and limitations may be deemed to be
underwriting.
6. Purchase or sell real estate, real estate investment trust
securities, commodities or commodity contracts, or invest in oil, gas or
mineral exploration or development programs, except that the Fund may invest
in (a) fixed-income securities secured by real estate,
<PAGE>24
mortgages or interests therein, (b) securities of companies that invest in or
sponsor oil, gas or mineral exploration or development programs and
(c) futures contracts and related options. The entry into forward foreign
currency exchange contracts is not and shall not be deemed to involve
investing in commodities.
7. Make short sales of securities or maintain a short position.
8. Purchase, write or sell puts, calls, straddles, spreads or
combinations thereof, except that the Fund may (a) purchase put and call
options on securities, (b) write covered call options on securities, (c)
purchase and write put and call options on stock indices and (d) enter into
options on futures contracts.
9. Purchase securities of other investment companies except in
connection with a merger, consolidation, acquisition, reorganization or offer
of exchange, or as otherwise permitted under the 1940 Act.
10. Purchase more than 10% of the voting securities of any one issuer,
more than 10% of the securities of any class of any one issuer or more than
10% of the outstanding debt securities of any one issuer; provided that this
limitation shall not apply to investments in U.S. government securities.
11. Purchase securities on margin, except that the Fund may obtain any
short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of
initial or variation margin in connection with futures contracts or related
options will not be deemed to be a purchase of securities on margin.
12. Invest more than 10% of the value of the Fund's total assets in
securities which may be illiquid because of legal or contractual restrictions
on resale or securities for which there are no readily available market
quotations. For purposes of this limitation, (a) repurchase agreements with
maturities greater than seven days and (b) time deposits maturing in more than
seven calendar days shall be considered illiquid securities.
13. 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.
14. 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 Counsellors individually owns more than 1/2 of 1% of the outstanding
securities of such company and together they own beneficially more than 5% of
the securities.
15. Invest in warrants (other than warrants acquired by the Fund as part
of a unit or attached to securities at the time of purchase) if, as a result,
the investments (valued at the lower of cost or market) would exceed 5% of the
value of the Fund's net assets of which not
<PAGE>25
more than 2% of the Fund's net assets may be invested in warrants not listed
on a recognized U.S. or foreign stock exchange.
16. Invest in oil, gas, or mineral leases.
The Fund may make commitments more restrictive than the restrictions
listed above so as to permit the sale of Fund shares in certain states.
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. If a percentage
restriction 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 on a foreign securities
exchange will be valued on the basis of the closing value on the date on which
the valuation is made or, in the absence of sales, at the mean between the
closing bid and asked prices. Other U.S. over-the-counter securities, foreign
over-the-counter securities and securities listed or traded on certain foreign
stock exchanges whose operations are similar to the U.S. over-the-counter
market will be valued on the basis of the bid price at the close of business
on each day, or, if market quotations for those securities are not readily
available, at fair value, as determined in good faith pursuant to consistently
applied procedures established by the Board. A security which is listed or
traded on more than one exchange is valued at the quotation on the exchange
determined to be the primary market for such security. In determining the
market value of portfolio investments, the Fund may employ outside
organizations (a "Pricing Service") which may use a matrix or formula method
that takes into consideration market indexes, matrices, yield curves and other
specific adjustments. The procedures of Pricing Services are reviewed
periodically by the officers of the Fund under the general supervision and
responsibility of the Board, which may replace any such Pricing Service at any
time. Short-term obligations with maturities of 60 days or less are valued at
amortized cost, which constitutes fair value as determined by the Board. The
amortized cost method of valuation may also be used with respect to 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.
<PAGE>26
Trading in securities in certain foreign countries is completed at
various times prior to the close of business on each business day in New York
(i.e., a day on which the NYSE is open for trading). In addition, securities
trading in a particular country or countries may not take place on all
business days in New York. Furthermore, trading takes place in various
foreign markets on days which are not business days in New York and days on
which the Fund's net asset value is not calculated. As a result, calculation
of the Fund's net asset value may not take place contemporaneously with the
determination of the prices of certain portfolio securities used in such
calculation. All assets and liabilities initially expressed in foreign
currency values will be converted into U.S. dollar values at the prevailing
rate as quoted by a Pricing Service. If such quotations are not available,
the rate of exchange will be determined in good faith pursuant to consistently
applied procedures established by the Board. Events affecting the values of
portfolio securities that occur between the time their prices are determined
and the close of regular trading on the NYSE will not be reflected in the
Fund's calculation of net asset value unless the Board or its delegates deems
that the particular event would materially affect net asset value, in which
case an adjustment may be made.
Portfolio Transactions
Counsellors is responsible for establishing, reviewing and, where
necessary, modifying the Fund's investment program to achieve its investment
objective. Purchases and sales of newly issued portfolio securities are
usually principal transactions without brokerage commissions effected directly
with the issuer or with an underwriter acting as principal. Other purchases
and sales may be effected on a securities exchange or over-the-counter,
depending on where it appears that the best price or execution will be
obtained. The purchase price paid by the Fund to underwriters of newly issued
securities usually includes a concession paid by the issuer to the
underwriter, and purchases of securities from dealers, acting as either
principals or agents in the after market, are normally executed at a price
between the bid and asked price, which includes a dealer's mark-up or
mark-down. Transactions on U.S. stock exchanges and some foreign stock
exchanges involve the payment of negotiated brokerage commissions. On
exchanges on which commissions are negotiated, the cost of transactions may
vary among different brokers. On most foreign exchanges, commissions are
generally fixed. There is generally no stated commission in the case of
securities traded in domestic or foreign over-the-counter markets, but the
price of securities traded in over-the-counter markets includes an undisclosed
commission or mark-up. U.S. government securities are generally purchased
from underwriters or dealers, although certain newly issued U.S. government
securities may be purchased directly from the U.S. Treasury or from the
issuing agency or instrumentality.
Counsellors will select specific portfolio investments and effect
transactions for the Fund. Counsellors seeks to obtain the best net price and
the most favorable execution of orders. In evaluating prices and executions,
Counsellors 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
<PAGE>27
basis. In addition, to the extent that the execution and price offered by
more than one broker or dealer are comparable, Counsellors 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, as amended) to the Fund and/or
other accounts over which Counsellors exercises investment discretion.
Research and other services received may be useful to Counsellors 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 Counsellors in carrying out its obligations to the Fund. The fee to
Counsellors under its advisory agreement with the Fund is 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
Counsellors. 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 Counsellors 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, Counsellors 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.
During the fiscal years ended October 31, 1992, October 31, 1993 and
October 31, 1994, the Fund paid an aggregate of approximately $451,525,
$963,744 and $3,525,445, respectively, in commissions to broker-dealers for
execution of portfolio transactions. The fiscal 1993 and 1994 commission
figures were a result of sharp increases in the volume of share-related
activity as the Fund received a large inflow of capital. No portfolio
transactions have been executed through Counsellors Securities Inc., the
Fund's distributor ("Counsellors Securities"), since the commencement of the
Fund's operation.
Any portfolio transaction for the Fund may be executed through
Counsellors Securities if, in Counsellors' 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.
In no instance will portfolio securities be purchased from or sold to
Counsellors or Counsellors Securities or any affiliated person of such
companies. In addition, the Fund will not give preference to any institutions
with whom the Fund enters into distribution or shareholder servicing
agreements ("Agreements") concerning the provision of distribution services or
support services to customers ("Customers") who beneficially own the Fund's
Common Stock, par value $.001 per share, designated Common Stock - Series 1
(the "Series
<PAGE>28
1 Shares") or Common Stock - Series 2 (the "Advisor Shares"). See the
Prospectuses, "Shareholder Servicing."
Transactions for the Fund may be effected on foreign securities
exchanges. In transactions for securities not actively traded on a foreign
securities exchange, the Fund will deal directly with the dealers who make a
market in the securities involved, except in those circumstances where better
prices and execution are available elsewhere. Such dealers usually are acting
as principal for their own account. On occasion, securities may be purchased
directly from the issuer. Such portfolio securities are generally traded on a
net basis and do not normally involve brokerage commissions. Securities firms
may receive brokerage commissions on certain portfolio transactions, including
options, futures and options on futures transactions and the purchase and sale
of underlying securities upon exercise of options.
The Fund may participate, if and when practicable, in bidding for the
purchase of securities for the Fund's portfolio directly from an issuer in
order to take advantage of the lower purchase price available to members of
such a group. The Fund will engage in this practice, however, only when
Counsellors, in its sole discretion, believes such practice to be otherwise in
the Fund's interest.
Portfolio Turnover
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. 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 decrease in the
Fund's portfolio turnover rate for the fiscal year ended October 31, 1993 was
due to the large growth in Fund assets.
Certain practices that may be employed by the Fund could result in high
portfolio turnover. For example, options on securities may be sold in
anticipation of a decline in the price of the underlying security (market
decline) or purchased in anticipation of a rise in the price of the underlying
security (market rise) and later sold.
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.
<PAGE>29
Richard N. Cooper (60) . . . . Director
Room 7E47OHB National Intelligence Counsel;
Central Intelligence Agency Professor at Harvard University;
930 Dolly Madison Blvd. Director or Trustee of CNA
McClain, Virginia 22107 Financial Corporation, Circuit City Stores,
Inc.
(retail electronics and appliances) and
Phoenix Home Life Insurance
Donald J. Donahue (71) . . . . Director
99 Indian Field Road Chairman of Magma Copper Company since
Greenwich, Connecticut 06830 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
P.O. Box 483 and 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* (64) . . . . . . Chairman of the Board
466 Lexington Avenue Vice Chairman and Director of EMW;
New York, New York 10017-3147 Associated with EMW since 1970; Chairman of
the Board of 15 other investment companies
advised by Counsellors; President of one other
investment company advised by Counsellors.
Thomas A. Melfe (63) . . . . . Director
30 Rockefeller Plaza Partner in the law firm of
New York, New York 10112 Donovan 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-
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
- ------------------------
* Indicates a Director who is an "interested person" of the Fund as defined
in the 1940 Act.
<PAGE>30
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).
Richard H. King (51) . . . . . President and Portfolio Manager
466 Lexington Avenue Portfolio Manager or Co-Portfolio
New York, New York 10017-3147 Manager of other Warburg Pincus Funds;
Managing Director of EMW since 1989;
Associated with EMW since 1989; President or
Vice President of 3 other investment companies
advised by Counsellors.
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; President or Executive Vice
President of 15 other investment companies
advised by Counsellors.
Eugene L. Podsiadlo (38) . . . Senior Vice President
466 Lexington Avenue Managing Director of EMW; Associated with
New York, New York 10017-3147 EMW since 1991; Vice President of Citibank,
N.A. from 1987-1991; Senior Vice President of
Counsellors Securities and 15 other investment
companies advised by Counsellors.
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 15
<PAGE>31
other investment companies advised by
Counsellors.
Stephen Distler (42) . . . . . Vice President and
466 Lexington Avenue Chief Financial 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 15 other investment companies
advised by Counsellors.
Howard Conroy (41) . . . . . . Vice President, Treasurer
466 Lexington Avenue and Chief Accounting Officer
New York, New York 10017-3147 Associated with EMW since 1992; Associated
with Martin Geller, C.P.A. from 1990-1992;
Vice President, Finance with Gabelli/Rosenthal
& Partners, L.P. until 1990; Vice President,
Treasurer and Chief Accounting Officer of 14
other investment companies advised by
Counsellors.
Karen Amato (31) . . . . . . . Assistant Secretary
466 Lexington Avenue Associated with EMW since 1987; Assistant
New York, New York 10017-3147 Secretary of 15 other investment companies
advised by Counsellors.
No employee of Counsellors 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 Counsellors, 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.
<PAGE>32
Directors' Compensation
(for the fiscal year ended October 31, 1994)
<TABLE>
<CAPTION>
Total Total Compensation from
Compensation from all Investment Companies
Name of Director Fund Managed by Counsellors*
---------------- ----------------- ------------------------
<S> <C> <C>
John L. Furth None** None**
Richard N. Cooper $2,000 $36,500
Donald J. Donahue $2,000 $36,500
Jack W. Fritz $2,000 $36,500
Thomas A. Melfe $2,000 $36,500
Alexander B. Trowbridge $2,000 $36,500
</TABLE>
__________________________
* Each Director also serves as a Director or Trustee of 15 other investment
companies advised by Counsellors.
** Mr. Furth is considered to be an interested person of the Fund and
Counsellors, 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 Counsellors.
Mr. Richard H. King, president and portfolio manager of the Fund,
earned a B.A. degree from Durham University in England. Mr. King has been a
portfolio manager of the Fund since its inception on May 2, 1989 and is also a
co-portfolio manager of Warburg Pincus Japan OTC Fund and Warburg Pincus
Emerging Markets Fund and portfolio manager of the International Equity
Portfolios of Warburg Pincus Institutional Fund, Inc. and Warburg Pincus
Trust. From 1968 to 1982, he worked at W.I. Carr Sons & Company (Overseas), a
leading international brokerage firm. He resided in the Far East as an
investment analyst from 1970 to 1977, became director, and later relocated to
the U.S. where he became founder and president of W.I. Carr (America), based
in New York. From 1982 to 1984 Mr. King was a director in charge of the Far
East equity investments at N.M. Rothschild International Asset Management, a
London merchant bank. In 1984 Mr. King became chief investment officer and
director for all international investment strategy with Fiduciary Trust
Company International S.A., in London. He managed an EAFE mutual fund (FTIT)
1985-1986 which grew from $3 million to over $100 million during this two-year
period.
<PAGE>33
Mr. Nicholas P.W. Horsley, associate portfolio manager and research
analyst of the Fund, is also a co-portfolio manager of Warburg Pincus Japan
OTC Fund and Warburg Pincus Emerging Markets Fund and an associate portfolio
manager and research analyst of the International Equity Portfolios of Warburg
Pincus Institutional Fund, Inc. and Warburg Pincus Trust. He joined
Counsellors in 1993. From 1981 to 1984 Mr. Horsley was a Securities Analyst
at Barclays Merchant Bank in London, UK and Johannesburg, RSA. From 1984 to
1986 he was a Senior Analyst with BZW Investment Management in London. From
1986 to 1993 he was a director, portfolio manager and analyst at Barclays
deZoete Wedd in New York City. Mr. Horsley earned B.A. and M.A. degrees with
honors from University College, Oxford.
Mr. Nicholas Edwards, associate portfolio manager and research
analyst of the Fund, is also a co-portfolio manager of Warburg Pincus Japan
OTC Fund and an associate portfolio manager and research analyst of the
International Equity Portfolios of Warburg Pincus Institutional Fund, Inc. and
Warburg Pincus Trust. Prior to joining Counsellors in August 1995, Mr.
Edwards was a director at Jardine Fleming Investment Advisers, Tokyo. He was
a vice president of Robert Fleming Inc. in New York City from 1988 to 1991.
Mr. Edwards earned M.A. degrees from Oxford University and Hiroshima
University in Japan.
Mr. Harold W. Ehrlich, associate portfolio manager and research
analyst of the Fund, is also an associate portfolio manager and research
analyst of Warburg Pincus Emerging Markets Fund and the International Equity
Portfolios of Warburg Pincus Institutional Fund, Inc. and Warburg Pincus
Trust. Prior to joining Counsellors, Mr. Ehrlich was a senior vice president,
portfolio manager and analyst at Templeton Investment Counsel Inc. from 1987
to 1995. He was a research analyst and assistant portfolio manager at
Fundamental Management Corporation from 1985 to 1986 and a research analyst at
First Equity Corporation of Florida from 1983 to 1985. Mr. Ehrlich earned a
B.S.B.A. degree from the University of Florida and earned his Chartered
Financial Analyst designation in 1990.
Mr. Vincent J. McBride, associate portfolio manager and research
analyst of the Fund, is also an associate portfolio manager of Warburg Pincus
Emerging Markets Fund and the International Equity Portfolios of Warburg
Pincus Institutional Fund, Inc. and Warburg Pincus Trust. Prior to joining
Counsellors in 1994, Mr. McBride was an international equity analyst at Smith
Barney Inc. from 1993 to 1994 and at General Electric Investment Corp. from
1992 to 1993. He was also a portfolio manager/analyst at United Jersey Bank
from 1989 to 1992 and a portfolio manager at First Fidelity Bank from 1987 to
1989. Mr. McBride earned a B.S. degree from the University of Delaware and an
M.B.A. degree from Rutgers University.
As of August 31, 1995, directors and officers of the Fund as a group
owned of record 152,822 of the Fund's outstanding Common Shares. As of the
same date, Mr. John L. Furth may be deemed to have beneficially owned 20.44%
of the Fund's outstanding Common Shares, including shares owned by clients for
which Counsellors has investment
<PAGE>34
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
Counsellors serves as investment adviser to the Fund, Counsellors
Funds Service, Inc. ("Counsellors Service") serves as a co-administrator to
the Fund and PFPC serves as a co-administrator to the Fund pursuant to
separate written agreements (the "Advisory Agreement," the "Counsellors
Service Co-Administration Agreement" and the "PFPC Co-Administration
Agreement," respectively). The services provided by, and the fees payable by
the Fund to, Counsellors under the Advisory Agreement, Counsellors Service
under the Counsellors Service Co-Administration Agreement and PFPC under the
PFPC Co-Administration Agreement are described in the Prospectuses. Each
class of shares of the Fund bears its proportionate share of fees payable to
Counsellors, Counsellors Service and PFPC 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.
Counsellors 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.
The advisory fee payable by the Fund is calculated at an annual rate
based on a percentage of the Fund's average daily net assets. See the
Prospectuses, "Management of the Fund." During the fiscal year ending October
31, 1992, Counsellors voluntarily waived $64,290 of the $1,020,876 in
investment advisory fees earned. For the years ending October 31, 1993 and
October 31, 1994, Counsellors earned $1,934,531 and $9,879,319, respectively,
in investment advisory fees. PFPC received $122,746, $227,714 and $851,564,
respectively, for the fiscal years ending October 31, 1992, October 31, 1993
and October 31, 1994, respectively. Counsellors Service received $54,456,
$97,928 and $871,165 during the fiscal years ending October 31, 1992, October
31, 1993 and October 31, 1994, respectively.
Organization of the Fund
The Fund was incorporated on February 9, 1989 under the laws of the
State of Maryland under the name "Counsellors International Equity Fund, Inc."
As of
<PAGE>35
approximately February 28, 1992, the Fund began doing business as "Warburg,
Pincus International Equity 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 Stock ("Common Shares"), Common Stock - Series 1 and
Advisor Shares have been authorized by the Fund's charter, although only
Common Shares and Advisor Shares have been issued by the Fund. When matters
are submitted for shareholder vote, each shareholder will have one vote for
each share owned and proportionate, fractional votes for fractional shares
held. Shareholders generally vote in the aggregate, except with respect to
(i) matters affecting only the shares of a particular class, in which case
only the shares of the affected class would be entitled to vote, or (ii) when
the 1940 Act requires that shares of the classes be voted separately. There
will normally be no meetings of shareholders for the purpose of electing
Directors unless and until such time as less than a majority of the Directors
holding office have been elected by shareholders. The Directors will call a
meeting for any purpose when requested to do so in writing by shareholders of
record of not less than 10% of the Fund's outstanding shares.
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.
Custodians and Transfer Agent
Fiduciary Trust Company International ("Fiduciary") is custodian of
the Fund's assets pursuant to a custodian agreement (the "Custodian
Agreement"). Under the Custodian Agreement, Fiduciary (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. Fiduciary is authorized to select one or more foreign
or domestic banks or trust companies to serve as sub-custodian on behalf of
the Fund, provided that Fiduciary 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. The principal business address
of Fiduciary is Two World Trade Center, New York, New York 10048.
PNC Bank, National Association ("PNC") also provides certain
custodial services generally in connection with purchases and sales of Fund
shares. 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,
<PAGE>36
(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. The principal business address of State Street is 225 Franklin
Street, Boston, Massachusetts 02110. 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.
Distribution and Shareholder Servicing
The Fund has entered into a distribution agreement with an
institution (the "Service Organization") pursuant to which support services
are provided to the holders of Advisor Shares in consideration of the Fund's
payment, out of the assets attributable to the Advisor Shares, of .50%, on an
annualized basis (a .25% annual service fee and a .25% annual distribution
fee), of the average daily net assets of the Advisor Shares held of record.
See the Advisor Prospectus, "Shareholder Servicing." The Fund's Advisor
Shares paid the Service Organization $593,276 in such fees for the year ending
October 31, 1994. The Fund may, in the future, enter into additional
Agreements with institutions ("Institutions") to perform certain distribution,
shareholder servicing, administrative and accounting services for their
Customers who are beneficial owners of Advisor Shares. See the Prospectuses,
"Shareholder Servicing." The Fund's Agreements with Institutions with respect
to Advisor Shares will be governed by a distribution plan (the "Distribution
Plan"). 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
with respect to its Advisor Shares may charge a Customer one or more of the
following types of fees, as agreed upon by the Institution and the Customer,
with respect to the cash management or other services provided by the
Institution: (i) account fees (a fixed amount per month or per year); (ii)
transaction fees (a fixed amount per transaction processed); (iii)
compensation balance requirements (a minimum dollar amount a Customer must
maintain in order to obtain the 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.
<PAGE>37
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 manner
described above. 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.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The offering price of the Fund's shares is equal to the per share
net asset value of the relevant class of shares of the Fund. Information on
how to purchase and redeem Fund shares and how such shares are priced is
included in the Prospectuses under "Net Asset Value."
Under the 1940 Act, the Fund may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed, other than customary weekend and holiday closings, or during
which trading on the NYSE is restricted, or during which (as determined by the
SEC) an emergency exists as a result of which disposal or fair valuation of
portfolio securities is not reasonably practicable, or for such other periods
as the SEC may permit. (The Fund may also suspend or postpone the recordation
of an exchange of its shares upon the occurrence of any of the foregoing
conditions.)
If the Board determines that conditions exist which make payment of
redemption proceeds wholly in cash unwise or undesirable, the Fund may make
payment wholly or partly in securities or other property. 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
<PAGE>38
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
Counsellors is available to investors in the Fund. The funds into which
exchanges can be made by holders of Common Shares currently are the Common
Shares of Warburg Pincus Cash Reserve Fund, Warburg Pincus New York Tax Exempt
Fund, Warburg Pincus New York Intermediate Municipal Fund, Warburg, Pincus
Tax-Free Fund, Warburg Pincus Intermediate Maturity Government Fund, Warburg
Pincus Fixed Income Fund, Warburg Pincus Short-Term Tax-Advantaged Bond Fund,
Warburg Pincus Global Fixed Income Fund, Warburg Pincus Balanced Fund, Warburg
Pincus Growth & Income Fund, Warburg Pincus Capital Appreciation Fund, Warburg
Pincus Emerging Growth Fund, Warburg Pincus Post-Venture Capital Fund, Warburg
Pincus Emerging Markets Fund and Warburg Pincus Japan OTC Fund. Common
Shareholders of the Fund may exchange all or part of their shares for Common
Shares of these or other mutual funds organized by Counsellors in the future
on the basis of their relative net asset values per share at the time of
exchange. Exchanges of Advisor Shares may currently be made with Advisor
Shares of Warburg Pincus Balanced Fund, Warburg Pincus Capital Appreciation
Fund, Warburg Pincus Emerging Growth Fund and Warburg Pincus Growth & Income
Fund at their relative net asset values at the time of the exchange.
The exchange privilege enables shareholders to acquire shares in a
fund with a different investment objective when they believe that a shift
between funds is an appropriate investment decision. This privilege is
available to shareholders residing in any state in which the Common Shares or
Advisor Shares being acquired, as relevant, may legally be sold. Prior to any
exchange, the investor should obtain and review a copy of the current
prospectus of the relevant class of each fund into which an exchange is being
considered. Shareholders may obtain a prospectus of the relevant class of the
fund into which they are contemplating an exchange from Counsellors
Securities.
Upon receipt of proper instructions and all necessary supporting
documents, shares submitted for exchange are redeemed at the then-current net
asset value of the relevant class and the proceeds are invested on the same
day, at a price as described above, in shares of the relevant class of the
fund being acquired. Counsellors 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.
<PAGE>39
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 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.
<PAGE>40
The Fund's transactions, if any, in foreign currencies, forward
contracts, options and futures contracts (including options and forward
contracts on foreign currencies) will be subject to special provisions of the
Code that, among other things, may affect the character of gains and losses
recognized by the Fund (i.e., may affect whether gains or losses are ordinary
or capital), accelerate recognition of income to the Fund, defer Fund losses
and cause the Fund to be subject to hyperinflationary currency rules. These
rules could therefore affect the character, amount and timing of distributions
to shareholders. These provisions also (i) will require the Fund to
mark-to-market certain types of its positions (i.e., treat them as if they
were closed out) and (ii) may cause the Fund to recognize income without
receiving cash with which to pay dividends or make distributions in amounts
necessary to satisfy the distribution requirements for avoiding income and
excise taxes. The Fund will monitor its transactions, will make the
appropriate tax elections and will make the appropriate entries in its books
and records when it acquires any foreign currency, forward contract, option,
futures contract or hedged investment so that (a) neither the Fund nor its
shareholders will be treated as receiving a materially greater amount of
capital gains or distributions than actually realized or received, (b) the
Fund will be able to use substantially all of its losses for the fiscal years
in which the losses actually occur and (c) the Fund will continue to qualify
as a regulated investment company.
A shareholder of the Fund receiving dividends or distributions in
additional shares should be treated for federal income tax purposes as
receiving a distribution in an amount equal to the amount of money that a
shareholder receiving cash dividends or distributions receives, and should
have a cost basis in the shares received equal to that amount.
Investors considering buying shares just prior to a dividend or
capital gain distribution should be aware that, although the price of shares
purchased at that time may reflect the amount of the forthcoming distribution,
those who purchase just prior to a distribution will receive a distribution
that will nevertheless be taxable to them. Upon the sale or exchange of
shares, a shareholder will realize a taxable gain or loss depending upon the
amount realized and the basis in the shares. Such gain or loss will be
treated as capital gain or loss if the shares are capital assets in the
shareholder's hands, and, as described above, will be long-term or short-term
depending upon the shareholder's holding period for the shares. Any loss
realized on a sale or exchange will be disallowed to the extent the shares
disposed of are replaced, including replacement through the reinvestment of
dividends and capital gains distributions in the Fund, within a period of 61
days beginning 30 days before and ending 30 days after the disposition of the
shares. In such a case, the basis of the shares acquired will be increased to
reflect the disallowed loss.
Each shareholder will receive an annual statement as to the federal
income tax status of his dividends and distributions from the Fund for the
prior calendar year. Furthermore, shareholders will also receive, if
appropriate, various written notices after the close of the Fund's taxable
year regarding the federal income tax status of certain dividends
<PAGE>41
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 dis-
tributions and (ii) the proceeds of any sales or repurchases of shares of the
Fund. An individual's taxpayer identification number is his social security
number. Corporate shareholders and other shareholders specified in the Code
are or may be exempt from backup withholding. The backup withholding tax is
not an additional tax and may be credited against a taxpayer's federal income
tax liability. Dividends and distributions also may be subject to state and
local taxes depending on each shareholder's particular situation.
Investment in Passive Foreign Investment Companies
If the Fund purchases shares in certain foreign entities classified
under the Code as "passive foreign investment companies" ("PFICs"), the Fund
may be subject to federal income tax on a portion of an "excess distribution"
or gain from the disposition of the shares, even though the income may have to
be distributed as a taxable dividend by the Fund to its shareholders. In
addition, gain on the disposition of shares in a PFIC generally is treated as
ordinary income even though the shares are capital assets in the hands of the
Fund. Certain interest charges may be imposed on either the Fund or its
shareholders with respect to any taxes arising from excess distributions or
gains on the disposition of shares in a PFIC.
The Fund may be eligible to elect to include in its gross income its
share of earnings of a PFIC on a current basis. Generally, the election would
eliminate the interest charge and the ordinary income treatment on the
disposition of stock, but such an election may have the effect of accelerating
the recognition of income and gains by the Fund compared to a fund that did
not make the election. In addition, information required to make such an
election may not be available to the Fund.
On April 1, 1992 proposed regulations of the Internal Revenue
Service (the "IRS") were published providing a mark-to-market election for
regulated investment companies. The IRS subsequently issued a notice
indicating that final regulations will provide that regulated investment
companies may elect the mark-to-market election for tax years ending after
March 31, 1992 and before April 1, 1993. Whether and to what extent the
notice will apply to taxable years of the Fund is unclear. If the Fund is not
able to make the foregoing election, it may be able to avoid the interest
charge (but not the ordinary income treatment) on disposition of the stock by
electing, under proposed regulations, each year to mark-to-market the stock
(that is, treat it as if it were sold for fair market value). Such an
election could result in acceleration of income to the Fund.
<PAGE>42
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 six-month period ended April 30,
1995 was -17.05%, the average annual total return for the one-year period
ended October 31, 1994 was 21.22%, the average annual total return for the
five-year period ending October 31, 1994 was 14.57% (14.39% without waivers)
and the average annual total return for the period commencing May 2, 1989
(commencement of operations) and ending October 31, 1994 was 15.80% (15.63%
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] = ERV. For purposes of this formula, "P" is a hypothetical
investment of $1,000; "T" is average annual total return; "n" is number of
years; and "ERV" is the ending redeemable value of a hypothetical $1,000
payment made at the beginning of the one-, five- or ten-year periods (or
fractional portion thereof). Total return or "T" is computed by finding the
average annual change in the value of an initial $1,000 investment over the
period and assumes that all dividends and distributions are reinvested during
the period. The Advisor Shares average annual total return for the six-month
period ended April 30, 1995 was -17.44%, the average annual total return for
the one-year period ended October 31, 1994 was 20.77% and the average annual
total return for the period commencing April 5, 1991 (initial issuance) and
ending October 31, 1994 was 14.24% (14.21% without waivers).
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. With respect to the Fund's Common Shares, the
Fund's actual total return for the calendar year and for the three-month
period ended on December 31, 1994 was 0.15% and 7.08%, respectively (0.15% and
7.08% without waivers, respectively). With respect to the Advisor Shares, the
Fund's actual total return for the calendar year and for the three-month
period ending December 31, 1994 was -0.26% and -7.19%, respectively.
Investors should note that this performance may not be representative of the
Fund's total return in longer market cycles.
The performance of a class of Fund shares will vary from time to
time depending upon market conditions, the composition of the Fund's portfolio
and operating expenses allocable to it. As described above, total return is
based on historical earnings and is not intended to indicate future
performance. Consequently, any given performance quotation should not be
considered as representative of performance for any specified period
- ------------------------
* - The expression (1 + T) is being raised to the nth power.
<PAGE>43
in the future. Performance information may be useful as a basis for
comparison with other investment alternatives. However, the Fund's perfor-
mance 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
total return, and such fees, if charged, will reduce the actual return
received by customers on their investments.
The Fund intends to diversify its assets among countries, and in
doing so, would expect to be able to reduce the risk arising from economic
problems affecting a single country. Counsellors thus believes that, by
spreading risk throughout many diverse markets outside the United States, the
Fund will reduce its exposure to country-specific economic problems.
Counsellors also believes that a diversified portfolio of international equity
securities, when combined with a similarly diversified portfolio of domestic
equity securities, tends to have a lower volatility than a portfolio composed
entirely of domestic securities. Furthermore, international equities have
been shown to reduce volatility in single asset portfolios regardless of
whether the investments are in all domestic equities or all domestic fixed-
income instruments, and research indicates that volatility can be
significantly decreased when international equities are added.
To illustrate this point, the performance of international equity
securities, as measured by the Morgan Stanley Capital International (EAFE)
Europe, Australia and Far East Index (the "MS-EAFE Index"), has equalled or
exceeded that of domestic equity securities, as measured by the Standard &
Poor's 500 Composite Stock Index (the "S & P 500 Index") in 14 of the last 23
years. The following table compares annual total returns of the MS-EAFE Index
and the S & P 500 Index for the calendar years shown.
<PAGE>44
MS-EAFE Index vs. S&P 500 Index
1972 - 1994
Annual Total Return
Year MS-EAFE Index S&P 500 Index
---- ------------- -------------
1972* 36.36 18.61
1973* -14.91 -14.92
1974* -23.61 -26.56
1975 35.39 37.07
1976 2.55 23.54
1977* 18.06 -7.20
1978* 32.62 6.37
1979 4.75 18.61
1980 22.58 32.27
1981* -2.27 -5.24
1982 -1.85 21.42
1983* 23.70 22.50
1984* 7.39 6.27
1985* 56.16 31.73
1986* 69.44 18.62
1987* 24.64 5.28
1988* 28.27 16.49
1989 10.54 31.61
1990 -23.44 -3.11
1991 12.13 30.36
1992 -12.17 7.60
1993* 32.60 10.06
1994* 7.78 1.28
_________________
* The MS-EAFE Index has outperformed the S&P 500 Index 14 out of the last
23 years.
The quoted performance information shown above is not intended to
indicate the future performance of the Fund.
From time to time, the Fund may advertise evaluations of a class of
Fund shares published by nationally recognized financial publications, such as
Morningstar Inc. or Lipper Analytical Services, Inc. Morningstar, Inc. rates
funds in broad categories based on risk/reward analyses over various time
periods. In addition, advertising or supplemental sales literature relating
to the Fund may describe the percentage decline from all-time high
<PAGE>45
levels for certain foreign stock markets. It may also describe how the Fund
differs from the MS-EAFE Index in composition.
AUDITORS AND COUNSEL
Coopers & Lybrand L.L.P. ("Coopers & Lybrand"), with principal
offices at 2400 Eleven Penn Center, Philadelphia, Pennsylvania 19103, serves
as independent auditors for the Fund. The financial statements for the fiscal
years ended October 31, 1993 and October 31, 1994 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 auditors 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 auditors, 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 Counsellors, Counsellors Service and Counsellors Securities.
MISCELLANEOUS
As of August 31, 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 were as follows:
Common Shares
Charles Schwab & Co., Inc. Reinvest Account, Attn: Mutual Funds
Department, 101 Montgomery Street, San Francisco, CA 94104-4122 -- 30.68_% and
Nat'l Financial Services Corp., FBO Customers, 200 Liberty St., 1 World
Financial Ctr., New York, NY 10281-1003 -- 6.17%. The Fund believes that
these entities are not the beneficial owners of shares held of record by them.
Mr. Lionel I. Pincus, Chairman of the Board and Chief Executive Officer of
EMW, may be deemed to have beneficially owned 20.48% of the Common Shares
outstanding, including shares owned by clients for which Counsellors 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.
<PAGE>46
Advisor Shares
Connecticut General Life Ins. Co. on behalf of its separate accounts
55E 55F 55G c/o Melissa Spencer, M110, Cigna Corp., P.O. Box 2975, Hartford,
CT 06104-2975 -- 99.84%.
FINANCIAL STATEMENTS
The Fund's financial statements for the fiscal year ended October
31, 1994 (audited) and for the period ended April 30, 1995 (unaudited) follow
the Report of Independent Auditors.
<PAGE>A-1
APPENDIX
DESCRIPTION OF RATINGS
Commercial Paper Ratings
Commercial paper rated A-1 by Standard and Poor's Ratings Group
("S&P") indicates that the degree of safety regarding timely payment is
strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign designation. Capacity for timely
payment on commercial paper rated A-2 is satisfactory, but the relative degree
of safety is not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned
by Moody's Investors Services, Inc. ("Moody's"). Issuers rated Prime-1 (or
related supporting institutions) are considered to have a superior capacity
for repayment of short-term promissory obligations. Issuers rated Prime-2 (or
related supporting institutions) are considered to have a strong capacity for
repayment of short-term promissory obligations. This will normally be
evidenced by many of the characteristics of issuers rated Prime-1 but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternative
liquidity is maintained.
Corporate Bond Ratings
The following summarizes the ratings used by S&P for corporate
bonds:
AAA - This is the highest rating assigned by S&P to a debt
obligation and indicates an extremely strong capacity to pay interest and
repay principal.
AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from AAA issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher-rated
categories.
BBB - This is the lowest investment grade. Debt rated BBB is
regarded as having an adequate capacity to pay interest and repay principal.
Although it normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this category than
for bonds in higher-rated categories.
<PAGE>A-2
To provide more detailed indications of credit quality, the ratings from
"AA" to "BBB" may be modified by the addition of a plus or minus sign to show
relative standing within this major rating category.
The following summarizes the ratings used by Moody's for corporate bonds:
Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred
to as "gilt edged." Interest payments are protected by a large or
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may
be present which suggest a susceptibility to impairment sometime in the
future.
Baa - Bonds which are rated Baa are considered as medium-grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Moody's applies numerical modifiers (1, 2 and 3) with respect to the
bonds rated "Aa" through "Baa". The modifier 1 indicates that the bond being
rated ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the bond
ranks in the lower end of its generic rating category.
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Boards of Directors, Trustees and Shareholders of
Warburg Pincus Equity Funds:
We have audited the accompanying statements of net assets of the following
Warburg Pincus Funds (consisting of Warburg Pincus Capital Appreciation Fund
('Capital Appreciation Fund'), Warburg Pincus Emerging Growth Fund ('Emerging
Growth Fund') and Warburg Pincus International Equity Fund ('International
Equity Fund') and the accompanying statement of assets and liabilities including
the schedule of investments of Warburg Pincus Japan OTC Fund (with the Capital
Appreciation Fund, Emerging Growth Fund and International Equity Fund, the
'Warburg Pincus Equity Funds') as of October 31, 1994, and the related
statements of operations for the year (or period) then ended, and the statements
of changes in net assets and the financial highlights for each of the two years
(or period) 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 the Warburg Pincus Equity Funds
for each of the three years in the period ended October 31, 1992, except for the
Warburg Pincus Japan OTC Fund, which commenced operations on September 30, 1994,
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, 1994 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 Equity Funds as of October 31, 1994, and the results
of their operations for the year (or period) then ended, and the changes in
their net assets and their financial highlights for the two years (or period) in
the period then ended, in conformity with generally accepted accounting
principles.
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
December 12, 1994
40
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS
October 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- --------------
<S> <C> <C>
COMMON STOCK (87.6%)
Argentina (3.5%)
Banco De Galicia & Buenos Aires SA 304,339 $ 2,048,611
Banco De Galicia & Buenos Aires SA ADR 154,305 4,166,235
Banco Frances del Rio de la Plata SA 407,700 3,466,143
Banco Frances del Rio de la Plata SA ADR 57,400 1,470,875
Capex SA ADR + 726,500 14,166,750
YPF SA ADR 1,443,100 34,814,788
--------------
60,133,402
--------------
Australia (5.3%)
BTR Nylex Ltd. 10,408,069 18,464,924
News Corp., Ltd. 3,121,798 19,210,505
Niugini Mining Ltd. + 1,385,000 5,448,853
Pasminco Ltd. + 6,069,000 10,181,342
Reinsurance Australia Corp., Ltd. + 9,523,400 13,219,441
Woodside Petroleum Ltd. 6,835,200 25,470,320
--------------
91,995,385
--------------
Austria (2.2%)
Austria Mikro Systeme-International AG 109,200 8,104,107
Maculan Holding AG Vorzuege 68,360 6,979,731
V.A. Technologie AG + 216,400 22,320,035
--------------
37,403,873
--------------
Finland (1.7%)
Metsa-Serla Class B 615,200 28,693,154
--------------
France (6.1%)
Cetelem 44,126 8,605,983
Fives-Lille (Compagnie De) 84,060 8,025,911
Lagardere Groupe 1,033,675 24,372,504
Scor SA 631,553 13,849,309
Societe Nationale Elf Aquitaine SA ADR 679,500 24,886,687
Total Cie Franc Des Petroles Class B 391,030 25,337,651
Total Petroles SA ADR 30,600 1,009,800
--------------
106,087,845
--------------
India (2.6%)
Hindalco Industries Ltd. GDR 627,300 21,955,500
Reliance Industries Ltd. GDS 915,500 23,574,125
--------------
45,529,625
--------------
Indonesia (0.9%)
P.T. Dynaplast Ltd. 866,100 2,034,831
P.T. Hadtex Indosyntec 1,301,500 689,497
P.T. Modern Photo Film Co. 835,000 4,577,450
P.T. Tri Polyta Indonesia ADR + 273,200 8,127,700
--------------
15,429,478
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
17
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- --------------
<S> <C> <C>
COMMON STOCK (CONT'D)
Israel (0.6%)
Ampal-American Israel Corp. Class A + 1,374,000 $ 10,906,125
--------------
Japan (23.4%)
Canon Inc. 1,508,000 28,026,846
Canon Inc. ADR 118,040 10,889,190
DDI Corp. 28,410 25,755,271
East Japan Railway Co. 7,669 38,246,022
Fuji Denki Reiki Co., Ltd. 110,691 1,748,655
Fujitsu Ltd. 1,816,000 20,813,216
Fujitsu Ltd. ADR 16,000 908,000
Hitachi Ltd. 1,080,250 11,265,385
Japan Securities Finance Co., Ltd. 970,000 15,924,626
Kao Corp. 2,570,000 30,516,262
Murata Mfg. Co., Ltd. 299,310 12,238,179
NEC Corp. 1,164,000 14,903,046
Nippon Telegraph & Telephone Corp. 3,757 35,106,711
Sankyo Co., Ltd. 86,000 6,659,783
Seikisui House Ltd. 1,273,000 14,458,441
Shin-Etsu Chemical Co., Ltd. 1,344,400 28,595,395
Sony Corp. 451,900 27,575,932
Sony Corp. ADR 103,500 6,248,812
TDK Corp. 674,000 33,125,865
Toho Co., Ltd. 104,700 20,215,694
Tsuchiya Home Co. 253,400 6,881,177
York-Benimaru Co., Ltd. 385,700 16,248,384
--------------
406,350,892
--------------
Korea (5.9%)
Hana Bank 216,000 4,742,785
Hanil Bank 1,026,742 16,154,761
Inchon Iron & Steel Co., Ltd. 101,760 5,575,733
Korea Electric Power Corp. 693,810 27,695,816
Korea Electric Power Corp. ADR + 73,000 1,423,500
Korea Europe Fund Ltd. 1,210 5,142,500
Korea Long Term Credit Bank 147,937 5,976,878
Samsung Electronics Co., Ltd. 41,657 8,898,500
Samsung Electronics Co., Ltd. GDR 53,843 3,270,962
Samsung Heavy Industries Co., Ltd. 406,288 23,158,926
--------------
102,040,361
--------------
Malaysia (0.5%)
Arab-Malaysian Merchant Bank BHD 219,000 2,400,470
Westmont BHD 967,000 6,851,713
--------------
9,252,183
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
18
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- --------------
<S> <C> <C>
COMMON STOCK (CONT'D)
Mexico (6.9%)
Cemex SA de CV ADR 1,566,250 $ 28,290,391
Grupo Financiero Bancomer SA de CV ADR + 1,239,500 28,508,500
Grupo Financiero Bancomer SA de CV Series B 800,000 768,671
Grupo Mexicano de Desarrollo SA ADR Series B + 363,280 6,584,450
Grupo Mexicano de Desarrollo SA ADR Series L + 151,563 3,069,15l
Grupo Radio Centro SA de CV ADR 268,900 4,537,687
Grupo Tribasa SA de CV ADR + 649,940 20,391,867
Telefonos de Mexico SA de CV ADR 497,000 27,335,000
--------------
119,485,717
--------------
New Zealand (4.2%)
Brierley Investments Ltd. 27,245,896 20,459,216
Fletcher Challenge Ltd. 8,141,087 21,947,475
Lion Nathan Ltd. 10,091,700 19,131,239
Wrightson Ltd. 14,548,458 10,835,037
--------------
72,372,967
--------------
Norway (1.8%)
Norsk Hydro AS ADR 775,522 31,214,761
--------------
Pakistan (0.8%)
Pakistan Telecommunications Corp. GDR + 88,500 14,646,750
--------------
Singapore (1.2%)
Development Bank of Singapore Ltd. 906,250 9,627,171
Development Bank of Singapore Ltd. ADR 79,500 3,388,687
IPC Corp., Ltd. + 9,131,000 7,399,312
--------------
20,415,170
--------------
South Africa (1.1%)
Anglovaal Ltd. 132,000 4,020,974
Barlow Ltd. 1,073,800 8,713,733
Barlow Ltd. ADR 171,000 1,368,000
Genbel Investments Ltd. 2,098,400 4,977,478
--------------
19,080,185
--------------
Spain (2.3%)
Banco De Santander 136,167 5,533,653
Banco De Santander ADR 825,000 33,515,625
--------------
39,049,278
--------------
Sweden (3.8%)
Asea AB Series B 244,500 17,803,398
Astra AB Series B 792,250 21,218,614
Celsius Industrier Series B 603,850 13,898,456
</TABLE>
See Accompanying Notes to Financial Statements.
19
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- --------------
<S> <C> <C>
COMMON STOCK (CONT'D)
Foreningsbanken AB Series A + 6,924,100 $ 13,522,124
--------------
66,442,592
--------------
Switzerland (2.1%)
BBC Brown Boveri AG 23,993 20,617,341
Danzas Holding AG 10,182 12,783,300
Immuno International AG 7,720 3,698,461
--------------
37,099,102
--------------
Taiwan (4.1%)
Baring International Taiwan Fund + 120,000 1,320,000
China Steel Corp. GDR + 435,500 7,947,875
Evergreen Marine Corp. Ltd + 4,348,000 9,015,205
Grand Pacific Fund 12,100,000 4,669,214
Hocheng Corp. + 220,000 1,068,576
Hocheng Corp. GDR 191,800 5,566,995
Kwang Hua Growth Fund 10,000,000 4,837,966
President Enterprises GDS + 300,800 5,564,800
Taipei Fund A 33,000 2,927,430
Taipei Fund B IDR 105 9,314,550
Tuntex Distinct Corp. 11,894,000 13,837,667
Tuntex Distinct Corp. GDS + 469,792 5,167,712
--------------
71,237,990
--------------
Thailand (1.0%)
Egco 258,000 384,919
Industrial Finance Corp. of Thailand 4,719,900 12,275,547
Thai Military Bank Ltd. 867,250 4,056,492
--------------
16,716,958
--------------
United Kingdom (5.5%)
AAF Industries PLC + 847,750 568,289
British Air Authority PLC 2,633,908 22,307,357
Govett & Co., Ltd 2,967,500 17,588,002
Queens Moat Houses PLC + 1,649,500 0
Singer & Friedlander Group PLC 9,093,000 11,744,973
Takare PLC 5,386,600 19,948,061
Thorn EMI PLC 1,346,758 21,469,006
Trio Holdings PLC 5,245,900 2,530,229
--------------
96,155,917
--------------
Zimbabwe (0.1%)
Delta Corp., Ltd. 53,000 885,134
--------------
TOTAL COMMON STOCK (Cost $1,383,957,438) 1,518,624,844
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
20
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
---------- --------------
<S> <C> <C>
PREFERRED STOCK (0.7%)
Austria (0.7%)
Maculan Holdings AG Vorzuege 113,775 $ 11,616,718
United Kingdom (0.0%)
Queens Moat Houses PLC, 7.50% Convertible + 82,700 0
--------------
TOTAL PREFERRED STOCK (Cost $10,705,685) 11,616,718
--------------
STOCK RIGHTS AND WARRANTS (0.4%)
India (0.2%)
Hindalco Industries Ltd. Wts., 11/02/95 + 156,650 2,976,350
--------------
Israel (0.0%)
Ampal-American Israel Corp. Class A Wts., 01/31/99 + 455,000 398,125
--------------
Japan (0.2%)
Bandai Industries Wts. 11/04/97 + 2,936 3,780,100
--------------
Malaysia (0.0%)
Arab-Malaysian Merchant Bank Rts., 11/08/94 + 219,000 34,292
--------------
Switzerland (0.0%)
Danzas Holding AG Wts., 08/02/96 + 9,050 176,744
--------------
TOTAL STOCK RIGHTS AND WARRANTS (Cost $5,672,706) 7,365,611
--------------
OPTIONS (0.3%)
CONTRACTS
----------
Korea (0.2%)
Korea Composite Index, 09/24/95 + 6,000,000 3,106,800
--------------
Mexico (0.1%)
Mexican Inmex, 03/29/96 + 249,080 1,713,670
--------------
Switzerland (0.0%)
Danzas Holding AG, 08/02/96 + 1,000 211,240
--------------
TOTAL OPTIONS (Cost $2,876,635) 5,031,710
--------------
PAR
----------
</TABLE>
<TABLE>
<S> <C> <C>
CONVERTIBLE BONDS/NOTES (3.8%)
Australia (0.2%)
BTR Nylex 9.00%, 11/30/49 (D) 57,300,000 4,253,379
--------------
France (0.7%)
Scor SA 3.00%, 01/01/01 (B) 74,513,250 13,217,665
--------------
India (0.2%)
Reliance Industries Ltd. 3.50%, 11/03/99 $ 2,250,000 3,037,500
--------------
Japan (1.3%)
Matsushita Electric Works Ltd. 2.70%, 05/31/02 (C) 2,002,000,000 23,358,389
--------------
New Zealand (0.1%)
Brierley Investments Ltd. 9.00%, 06/30/98 (A) 1,314,875 914,515
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
21
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONVERTIBLE BONDS/NOTES (CONT'D) PAR VALUE
------------- --------------
<S> <C> <C>
Taiwan (1.3%)
United Microelectronics Corp. 1.25%, 06/08/04 $ 6,550,000 $ 9,186,375
Yang Ming Marine Transport Corp. 2.00%, 10/06/01 11,800,000 12,891,500
--------------
22,077,875
--------------
TOTAL CONVERTIBLE BONDS/NOTES (Cost $65,267,068) 66,859,323
--------------
SHORT-TERM INVESTMENTS (6.5%)
Repurchase agreement with J.P. Morgan dated 10/31/94 at 4.45% to be
repurchased at $111,271,753 on 11/01/94. (Collateralized by $50,000,000 U.S.
Treasury Note 7.875%, due 02/15/96, $50,000,000 U.S. Treasury Bond
7.875%, due 02/15/21, and $15,772,000 U.S. Treasury Note 4.25%,
due 12/31/95. Market value of collateral is $118,386,861.) 111,258,000 111,258,000
Repurchase agreement with PNC Securities Corp. dated 10/31/94 at 4.30% to be
repurchased at $574,069 on 11/01/94. (Collateralized by $590,000 U.S. Treasury
Bill, due 03/16/95, with a market value of $577,905.) 574,000 574,000
--------------
TOTAL SHORT-TERM INVESTMENTS (Cost $111,832,000) 111,832,000
--------------
TOTAL INVESTMENTS (99.3%) (Cost $1,580,311,532*) 1,721,330,206
OTHER ASSETS IN EXCESS OF LIABILITIES (0.7%) 11,945,297
--------------
NET ASSETS (100.0%) (applicable to 74,775,476 Common Shares and 9,784,047
Series 2 Shares) $1,733,275,503
--------------
--------------
NET ASSET VALUE, offering and redemption price per Common Share
($1,533,871,948[div]74,775,476) $20.51
------
------
NET ASSET VALUE, offering and redemption price per Series 2 Share
($199,403,555[div]9,784,047) $20.38
------
------
</TABLE>
+ Non-income producing security.
* Also cost for Federal income tax purposes.
Unless otherwise indicated below, all securities are denominated in $U.S.
(A) Denominated in New Zealand Dollars.
(B) Denominated in French Francs.
(C) Denominated in Japanese Yen.
(D) Denominated in Australian Dollars.
See Accompanying Notes to Financial Statements.
22
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
STATEMENTS OF OPERATIONS
For the Year or Period Ended October 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus Warburg Pincus Warburg Pincus
Capital Appreciation Emerging Growth International Equity Japan OTC
Fund Fund Fund Fund*
-------------------- --------------- -------------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 1,956,407 $ 739,797 $ 15,187,073 $ 0
Interest 239,527 876,658 2,739,415 15,656
Foreign taxes withheld (1,168) (24,340) (1,836,587) 0
-------------------- --------------- -------------------- --------------
Total investment income 2,194,766 1,592,115 16,089,901 15,656
-------------------- --------------- -------------------- --------------
EXPENSES:
Investment advisory 1,172,857 2,234,376 9,879,319 13,176
Administrative services 300,806 451,159 1,722,729 8,138
Audit 24,264 27,121 65,628 15,000
Custodian/Sub-custodian 50,291 90,040 1,017,575 1,054
Directors/Trustees 10,000 10,000 11,000 1,250
Distribution 0 0 0 2,635
Insurance 15,532 15,918 32,972 0
Legal 25,034 31,983 47,493 0
Organizational 0 0 4,756 3,011
Printing 29,531 42,588 94,447 1,000
Registration 28,348 77,436 580,302 14,597
Shareholder servicing 53,002 226,626 593,276 0
Transfer agent 79,364 131,476 675,657 3,000
Miscellaneous 32,670 32,446 53,814 0
-------------------- --------------- -------------------- --------------
1,821,699 3,371,169 14,778,968 62,861
Less: fees waived and expenses
reimbursed (11,179) (100,408) 0 (52,320)
-------------------- --------------- -------------------- --------------
Total expenses 1,810,520 3,270,761 14,778,968 10,541
-------------------- --------------- -------------------- --------------
Net investment income (loss) 384,246 (1,678,646) 1,310,933 5,115
-------------------- --------------- -------------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENTS AND FOREIGN CURRENCY RELATED
ITEMS:
Net realized gain (loss) from security
transactions 11,173,174 (5,721,525) 48,091,665 0
Net realized loss from foreign currency
related items 0 0 (2,772,944) (294,437)
Net increase (decrease) in unrealized
appreciation from investments and
foreign currency related items (9,106,613) 10,930,919 82,484,415 (35,099)
-------------------- --------------- -------------------- --------------
Net realized and unrealized gain
(loss) from investments and
foreign currency related
items 2,066,561 5,209,394 127,803,136 (329,536)
-------------------- --------------- -------------------- --------------
Net increase (decrease) in net
assets from operations $ 2,450,807 $ 3,530,748 $129,114,069 $ (324,421)
-------------------- --------------- -------------------- --------------
-------------------- --------------- -------------------- --------------
</TABLE>
* For the period September 30, 1994 (Commencement of Operations) through
October 31, 1994.
See Accompanying Notes to Financial Statements.
27
- --------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus
Capital Appreciation Emerging Growth
Fund Fund
------------------------ ------------------------
For the Year Ended October 31, For the Year Ended October 31,
1994 1993 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ 384,246 $ 401,157 ($1,678,646) $(902,442)
Net realized gain (loss) from
security transactions 11,173,174 13,675,715 (5,721,525) 12,312,484
Net realized loss from foreign
currency related items 0 0 0 0
Net change in unrealized
appreciation (depreciation) from
investments and foreign currency
related items (9,106,613) 14,209,067 10,930,919 26,564,947
----------- ----------- ----------- -----------
Net increase (decrease) in net
assets resulting from
operations 2,450,807 28,285,939 3,530,748 37,974,989
----------- ----------- ----------- -----------
FROM DISTRIBUTIONS:
Dividends from net investment
income:
Common shares (419,337) (459,634) 0 0
Series 2 shares (27,724) (95) 0 0
Distributions in excess of net
investment income:
Common shares 0 0 0 0
Series 2 shares 0 0 0 0
Distributions from capital gains:
Common shares (12,899,141) (6,877,271) (10,576,150) (2,054,285)
Series 2 shares (852,608) (102,444) (1,639,316) (132,545)
------------ ----------- ----------- -----------
Net decrease from distributions (14,198,810) (7,439,444) (12,215,466) (2,186,830)
------------ ----------- ----------- -----------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 45,617,531 46,439,011 180,813,270 89,478,924
Reinvested dividends 13,809,167 7,199,391 12,758,387 2,166,694
Net asset value of shares redeemed (49,851,500) (24,352,588) (71,767,717) (40,840,041)
------------ ------------ ----------- -----------
Net increase in net assets from
capital share transactions 9,575,198 29,285,814 121,803,940 50,805,577
------------ ------------ ----------- -----------
Net increase (decrease) in net
assets (2,172,805) 50,132,309 113,119,222 86,593,736
NET ASSETS:
Beginning of period 169,687,298 119,554,989 191,553,536 104,959,800
------------- ------------ ----------- -----------
End of period $167,514,493 $169,687,298 $304,672,758 $191,553,536
------------- ------------ ----------- -----------
------------- ------------ ----------- -----------
</TABLE>
28
- ------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus
Warburg Pincus Japan OTC
International Equity Fund
Fund --------------
------------------------ For the Period
September 30, 1994
For the Year Ended (Commencement of
October 31, Operations) through
1994 1993 October 31, 1994
----------- ----------- ------------------
<S> <C> <C> <C>
$1,310,933 $ 638,986 $ 5,115
48,091,665 1,176,172 0
(2,772,944) (48,647) (294,437)
82,484,415 63,734,670 (35,099)
----------- ----------- --------------
129,114,069 65,501,181 (324,421)
----------- ----------- --------------
(1,764,380) (242,119) 0
(218,961) (9,224) 0
(223,659) 0 0
0 0 0
(1,047,367) (995,091) 0
(129,979) (16,719) 0
----------- ----------- --------------
(3,384,346) (1,263,153) 0
----------- ----------- --------------
1,430,739,923 283,608,350 20,287,158
2,950,772 1,184,585 0
(249,050,078) (29,360,993) (185,101)
------------- ----------- --------------
1,184,640,617 255,431,942 20,102,057
------------- ----------- --------------
1,310,370,340 319,669,970 19,777,636
422,905,163 103,235,193 101,000
-------------- ------------ --------------
$1,733,275,503 $422,905,163 $19,878,636
-------------- ------------ --------------
-------------- ------------ --------------
</TABLE>
See Accompanying Notes to Financial Statements.
29
- ------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
(For a Share of the Fund Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Shares Series 2 Shares
-------------------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Year Ended October
For the Year Ended October 31, 31,
-------------------------------------------------- --------------------------
1994 1993 1992 1991 1990 1994 1993 1992
------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, BEGINNING OF PERIOD $17.00 $12.22 $13.66 $11.81 $11.35 $16.91 $12.20 $13.66
------ ------ ------ ------ ------ ------ ------ ------
Income from Investment Operations:
Net Investment Income (Loss) .09 .09 .15 .19 .13 .16 (.01) .13
Net Gain (Loss) on Securities and
Foreign Currency Related Items (both
realized and unrealized) 3.51 4.84 (1.28) 2.03 .55 3.35 4.86 (1.32)
------ ------ ------ ------ ------ ------ ------ ------
Total from Investment Operations 3.60 4.93 (1.13) 2.22 .68 3.51 4.85 (1.19)
------ ------ ------ ------ ------ ------ ------ ------
Less Distributions:
Dividends from net investment income (.04) (.02) (.16) (.33) (.10) .00 (.01) (.12)
Distributions in excess of
net investment income (.01) .00 .00 .00 .00 .00 .00 .00
Distributions from capital gains (.04) (.13) (.15) (.04) (.12) (.04) (.13) (.15)
------ ------ ------ ------ ------ ------ ------ ------
Total Distributions (.09) (.15) (.31) (.37) (.22) (.04) (.14) (.27)
------ ------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $20.51 $17.00 $12.22 $13.66 $11.81 $20.38 $16.91 $12.20
------ ------ ------ ------ ------ ------ ------ ------
------ ------ ------ ------ ------ ------ ------ ------
Total Return 21.22% 40.68% (8.44%) 19.42% 5.92% 20.77% 40.06% (8.86%)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $1,533,872 $378,661 $101,763 $72,553 $38,946 $199,404 $44,244 $1,472
Ratios to average daily net assets:
Operating expenses 1.44% 1.48% 1.49% 1.50% 1.46% 1.94% 2.00% 2.00%
Net investment income (loss) .19% .38% .88% 1.19% 1.58% (.29%) (.36%) .54%
Decrease reflected in above expense
ratios due to waivers/reimbursements .00% .00% .07% .17% .38% .00% .00% .07%
Portfolio Turnover Rate 17.02% 22.60% 53.29% 54.95% 66.12% 17.02% 22.60% 53.29%
<CAPTION>
Series 2 Shares
--------------------------
<S> <C>
April 5, 1991
(Initial
Issuance)
through
October 31, 1991
----------------
NET ASSET VALUE, BEGINNING OF PERIOD $13.14
------
Income from Investment Operations:
Net Investment Income (Loss) .00
Net Gain (Loss) on Securities and
Foreign Currency Related Items (both
realized and unrealized) .58
------
Total from Investment Operations .58
------
Less Distributions:
Dividends from net investment income (.06)
Distributions in excess of
net investment income .00
Distributions from capital gains .00
------
Total Distributions (.06)
------
NET ASSET VALUE, END OF PERIOD $13.66
------
------
Total Return 7.85%*
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $153
Ratios to average daily net assets:
Operating expenses 2.23%*
Net investment income (loss) .30%*
Decrease reflected in above expense
ratios due to waivers/reimbursements .17%*
Portfolio Turnover Rate 54.95%
</TABLE>
* Annualized
See Accompanying Notes to Financial Statements.
TAX STATUS OF 1994 DIVIDENDS (Unaudited)
Dividends paid by the Fund taxable as ordinary income were as follows: Common
Shares -- $.09 per share; Series 2 Shares -- $.04 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 1995.
32
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1994
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Warburg Pincus Equity Funds are comprised of Warburg Pincus Capital
Appreciation Fund (the 'Capital Appreciation Fund') and Warburg Pincus
International Equity Fund (the 'International Equity Fund') which are registered
under the Investment Company Act of 1940, as amended (the '1940 Act'), as
diversified, open-end management investment companies, and Warburg Pincus
Emerging Growth Fund (the 'Emerging Growth Fund') and Warburg Pincus Japan OTC
Fund (the 'Japan OTC Fund,' together with the Capital Appreciation Fund, the
International Equity Fund and the Emerging Growth Fund, the 'Funds') which are
registered under the 1940 Act as non-diversified, open-end management investment
companies.
Investment objectives for each Fund are as follows: the Capital
Appreciation Fund, the International Equity Fund and the Japan OTC Fund seek
long-term capital appreciation; the Emerging Growth Fund seeks maximum capital
appreciation.
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 valued at the last
reported bid price. In the absence of a quoted market value, investments are
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 Funds do not isolate that portion of
gains and losses on investments in equity securities which are due to changes in
the foreign exchange rate from that which is due to changes in market prices of
equity 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.
Income, expenses (excluding class-specific expenses) and realized/unrealized
gains/losses are allocated proportionately to each class of shares based upon
the relative net asset value of outstanding shares. The cost of investments sold
is determined by use of the specific identification method for both financial
reporting and income tax purposes.
Dividends from net investment income are declared and paid semiannually for
all Funds. Distributions 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.
Each Fund intends to continue to comply with the special provisions of the
Internal Revenue Code available to investment companies and therefore no Federal
income tax provision is required.
Costs incurred by the Japan OTC Fund in connection with its organization
have been deferred and are being amortized over a period of five years from the
date the Japan OTC Fund commenced its operations.
34
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1994
- --------------------------------------------------------------------------------
Each Fund may enter into repurchase agreement transactions. Under the terms
of a typical repurchase agreement, each Fund acquires an underlying security
subject to an obligation of the seller to repurchase. The value of the
underlying security 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.
As of November 1, 1993, or inception, in the case of the Japan OTC Fund,
each Fund implemented AICPA Statement of Position 93-2 -- Determination,
Disclosure and Financial Statement Presentation of Income, Capital Gain, and
Return of Capital Distributions by Investment Companies. Adoption of this
standard results in the reclassification to paid-in capital of permanent
differences between tax and financial reporting of net investment income and net
realized gain (loss). The change has had no material effect on paid-in capital
or other components of the net assets of any of the Funds at November 1, 1993 or
inception, as the case may be. Distributions to shareholders and net asset
values were not affected by this change.
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR
Warburg, Pincus Counsellors, Inc. ('Counsellors'), a wholly owned
subsidiary of Warburg, Pincus Counsellors G.P. ('Counsellors G.P.'), serves as
each Fund's investment adviser. For its investment advisory services,
Counsellors receives the following fees based on each Fund's average daily net
assets:
<TABLE>
<CAPTION>
FUND ANNUAL RATE
- --------------------------------- ----------------------------------
<S> <C>
Capital Appreciation .70% of average daily net assets
Emerging Growth .90% of average daily net assets
International Equity 1.00% of average daily net assets
Japan OTC 1.25% of average daily net assets
</TABLE>
For the period or year ended October 31, 1994, investment advisory fees,
waivers and reimbursements were as follows:
<TABLE>
<CAPTION>
GROSS NET EXPENSE
FUND ADVISORY FEE WAIVER ADVISORY FEE REIMBURSEMENTS
- ------------------------------------------- ------------ --------- -------------- ------------
<S> <C> <C> <C> <C>
Capital Appreciation $1,172,857 $ (11,179) $1,161,678 0
Emerging Growth 2,234,376 (100,408) 2,133,968 0
International Equity 9,879,319 0 9,879,319 0
Japan OTC 13,176 (13,176) 0 $(39,144)
</TABLE>
SPARX Investment & Research, USA, Inc. ('SPARX USA') serves as
sub-investment adviser for the Japan OTC Fund. From its investment advisory fee,
Counsellors pays SPARX USA a fee at an annual rate of .625% of the average daily
net assets of the Japan OTC Fund. No compensation is payable by the Japan OTC
Fund to SPARX USA for its sub-investment advisory services.
35
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1994
- --------------------------------------------------------------------------------
Counsellors Funds Service, Inc. ('CFSI'), a wholly owned subsidiary of
Counsellors, and PFPC Inc. ('PFPC'), an indirect, wholly owned subsidiary of PNC
Bank Corp. ('PNC'), serve as each Fund's co-administrators. For its
administrative services, CFSI currently receives a fee calculated at an annual
rate of .10% of each Fund's average daily net assets. For the period or year
ended October 31, 1994, administrative services fees earned by CFSI were as
follows:
<TABLE>
<CAPTION>
FUND CO-ADMINISTRATION FEE
- ------------------------------------------- ------------------------------
<S> <C>
Capital Appreciation $133,255
Emerging Growth 202,895
International Equity 871,165
Japan OTC 1,054
</TABLE>
Counsellors Securities Inc. ('CSI'), also a wholly owned subsidiary of
Counsellors, serves as each Fund's distributor. No compensation is payable by
the Capital Appreciation Fund, the Emerging Growth Fund or the International
Equity Fund to CSI for distribution services. For distribution services with
respect to the Common Shares of the Japan OTC Fund, CSI receives a fee at the
annual rate of .25% of the Japan OTC Fund's average daily net assets
attributable to the Common Shares; no compensation is payable to CSI with
respect to the Fund's Series 2 Shares. For the period ended October 31, 1994,
CSI earned $2,635 in distribution fees.
3. INVESTMENTS IN SECURITIES
For the period or year ended October 31, 1994, purchases and sales of
investment securities (excluding short-term investments) were as follows:
<TABLE>
<CAPTION>
FUND PURCHASES SALES
- ----------------------------------------------------------- -------------- ------------
<S> <C> <C>
Capital Appreciation $ 89,218,905 $ 82,854,233
Emerging Growth 245,154,617 138,723,249
International Equity 1,224,880,044 155,267,110
Japan OTC 13,713,446 0
</TABLE>
At October 31, 1994, 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>
Capital Appreciation $ 34,034,231 $ (4,091,250) $ 29,942,981
Emerging Growth 59,051,417 (8,336,497) 50,714,920
International Equity 198,971,180 (57,952,506) 141,018,674
Japan OTC 254,382 (299,413) (45,031)
</TABLE>
36
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1994
- --------------------------------------------------------------------------------
4. FORWARD FOREIGN CURRENCY CONTRACTS
The International Equity Fund and the Japan OTC 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. Each Fund 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, 1994, the Japan OTC Fund had the following open forward
foreign currency contract and had recorded an unrealized gain of $11,591:
<TABLE>
<CAPTION>
SETTLEMENT CURRENCY CURRENCY
DATE BOUGHT SOLD
- --------- ----------------------- --------------------------
<S> <C> <C>
11/30/94 14,000,000 U.S. Dollars 1,351,700,000 Japanese Yen
</TABLE>
5. SERIES 2 SHARES
The Emerging Growth Fund, the International Equity Fund and the Japan OTC
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 Capital Appreciation Fund is authorized to issue
an unlimited number of full and fractional shares of beneficial interest, $.001
par value per share, of which one billion shares are classified as Series 2
Shares. Series 2 Shares are identical to Common Shares in all respects except
that Series 2 Shares are sold to institutions ('Service Organizations') that
perform certain distribution, shareholder servicing, accounting and/or
administrative services for their customers who are beneficial owners of Series
2 Shares. Series 2 Shares bear the fees paid pursuant to a distribution plan
adopted by each Fund in an amount not to exceed .75 of 1.00% (on an annualized
basis) of the average daily net asset value of the shares held by the
institutions for the benefit of their customers and enjoy certain exclusive
voting rights on matters relating to those fees.
With respect to Series 2 Shares, Service Organizations earned the following
shareholder servicing fees for the year ended October 31, 1994:
<TABLE>
<CAPTION>
FUND SHAREHOLDER SERVICING FEES
- ----------------------------------------------- --------------------------
<S> <C>
Capital Appreciation $ 53,002
Emerging Growth 226,626
International Equity 593,276
</TABLE>
37
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1994
- --------------------------------------------------------------------------------
Transactions in shares of each Fund were as follows:
<TABLE>
<CAPTION>
CAPITAL APPRECIATION FUND EMERGING GROWTH FUND
Common Shares Series 2 Shares Common Shares Series 2 Shares
------------------------ ----------------------- ------------------------- ------------------------
For the Year Ended October 31, For the Year Ended October 31,
------------------------------------------------- ---------------------------------------------------
1994 1993 1994 1993 1994 1993 1994 1993
----------- ----------- ----------- ---------- ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 2,958,494 2,705,720 290,193 588,424 6,133,751 3,295,313 2,233,737 871,054
Shares issued to
shareholders on
reinvestment of
dividends 920,210 535,112 61,526 7,739 506,720 101,352 80,473 6,644
Shares redeemed (3,126,497) (1,710,437) (460,020) (38,003) (2,859,413) (1,870,167) (517,898) (67,545)
----------- ----------- ----------- ---------- ------------ ----------- ----------- -----------
Net increase
(decrease) in
shares
outstanding 752,207 1,530,395 (108,301) 558,160 3,781,058 1,526,498 1,796,312 810,153
----------- ----------- ----------- ---------- ------------ ----------- ----------- -----------
----------- ----------- ----------- ---------- ------------ ----------- ----------- -----------
Proceeds from sale
of shares $41,570,590 $38,018,578 $ 4,046,941 $8,420,433 $132,922,995 $71,149,417 $47,890,275 $18,329,507
Reinvested
dividends 12,945,690 7,096,852 863,477 102,539 11,015,146 2,034,149 1,743,241 132,545
Net asset value of
shares redeemed (43,449,501) (23,821,721) (6,401,999) (530,867) (61,126,667) (39,393,274) (10,641,050) (1,446,767)
----------- ----------- ----------- ---------- ------------ ----------- ----------- -----------
Net increase
(decrease) from
capital share
transactions $11,066,779 $21,293,709 $(1,491,581) $7,992,105 $ 82,811,474 $33,790,292 $38,992,466 $17,015,285
----------- ----------- ----------- ---------- ------------ ----------- ----------- -----------
----------- ----------- ----------- ---------- ------------ ----------- ----------- -----------
</TABLE>
6. NET ASSETS
Net Assets at October 31, 1994, consisted of the following:
<TABLE>
<CAPTION>
CAPITAL APPRECIATION FUND EMERGING GROWTH FUND
Common Shares Series 2 Shares Total Common Shares Series 2 Shares Total
------------- --------------- ------------ ------------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Capital contributed, net $118,516,377 $ 8,060,714 $126,577,091 $199,119,705 $60,627,302 $259,747,007
Accumulated net investment
income (loss) 0 0 0 0 0 0
Accumulated net realized
gain (loss) from security
transactions 10,795,522 198,899 10,994,421 (3,706,511 ) (2,122,042) (5,828,553)
Net unrealized appreciation
(depreciation) from
investments and foreign
currency related items 30,034,085 (91,104) 29,942,981 45,250,539 5,503,765 50,754,304
------------- --------------- ------------ ------------- --------------- ------------
Net assets $159,345,984 $ 8,168,509 $167,514,493 $240,663,733 $64,009,025 $304,672,758
------------- --------------- ------------ ------------- --------------- ------------
------------- --------------- ------------ ------------- --------------- ------------
</TABLE>
7. CAPITAL LOSS CARRYOVER
At October 31, 1994, the Emerging Growth Fund has a capital loss carryover
of $5,789,170 expiring in 2002 to offset possible future capital gains of the
Fund.
38
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND JAPAN OTC FUND
Common Series 2
Shares Shares
Common Shares Series 2 Shares ------------- ------------
---------------------------- ------------------------- For the Period
For the Year Ended October 31, September 30, 1994
------------------------------------------------------- (Commencement of Operations)
1994 1993 1994 1993 through October 31, 1994
-------------- ------------ ------------ ----------- ------------------------------
<S> <C> <C> <C> <C> <C> <C>
64,218,907 15,914,077 7,956,088 2,510,712 2,025,697 15
147,031 89,544 6,879 1,957 0 0
(11,861,720) (2,060,764) (795,406) (16,861) (18,605) 0
-------------- ------------ ------------ ----------- ------------- ---------------
52,504,218 13,942,857 7,167,561 2,495,808 2,007,092 15
-------------- ------------ ------------ ----------- ------------- ---------------
-------------- ------------ ------------ ----------- ------------- ---------------
$1,275,306,263 $244,888,526 $155,433,660 $38,719,824 $20,287,008 $ 150
2,820,903 1,158,643 129,869 25,942 0 0
(233,614,600) (29,121,414) (15,435,478) (239,579) (185,101) 0
-------------- ------------ ------------ ----------- ------------- ---------------
$1,044,512,566 $216,925,755 $140,128,051 $38,506,187 $20,101,907 $ 150
-------------- ------------ ------------ ----------- ------------- ---------------
-------------- ------------ ------------ ----------- ------------- ---------------
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND JAPAN OTC FUND
Common Shares Series 2 Shares Total Common Shares Series 2 Shares Total
-------------- --------------- -------------- ------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
$1,368,158,592 $ 180,212,108 $1,548,370,700 $19,924,176 $ 1,150 $19,925,326
4,309,014 429,089 4,738,103 0 0 0
34,680,906 4,327,914 39,008,820 (11,574) (17) (11,591)
126,723,436 14,434,444 141,157,880 (35,099) 0 (35,099)
-------------- --------------- -------------- ------------- ------ -----------
$1,533,871,948 $ 199,403,555 $1,733,275,503 $19,877,503 $1,133 $19,878,636
-------------- --------------- -------------- ------------- ------ -----------
-------------- --------------- -------------- ------------- ------ -----------
</TABLE>
39
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS
April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------ --------------
<S> <C> <C>
COMMON STOCK (87.7%)
Argentina (2.6%)
Banco De Galicia & Buenos Aires SA 365,990 $ 1,502,362
Banco De Galicia & Buenos Aires SA ADR 209,720 3,381,735
Banco Frances del Rio de la Plata SA 465,100 2,956,933
Banco Frances del Rio de la Plata SA ADR 461,600 8,481,900
Capex SA GDR + 706,500 10,685,813
YPF SA ADR 1,319,500 26,719,875
--------------
53,728,618
--------------
Australia (4.7%)
BTR Nylex Ltd. 13,197,369 25,727,373
News Corp., Ltd. 1,817,927 8,833,365
Niugini Mining Ltd. + 1,385,000 4,382,403
Pasminco Ltd. + 8,629,600 9,290,213
Reinsurance Australia Corp., Ltd. + 9,523,400 16,625,571
United Construction Group Ltd. 1,600,000 744,858
Woodside Petroleum Ltd. 7,670,800 31,358,139
--------------
96,961,922
--------------
Austria (3.1%)
Bohler-Uddeholm 262,000 15,651,103
Maculan Holdings AG Vorzuege 71,360 2,995,703
V.A. Technologie AG + 399,555 44,127,519
--------------
62,774,325
--------------
Denmark (0.5%)
Copenhagen Airport 101,300 6,535,484
International Service System Class B 115,000 3,289,318
--------------
9,824,802
--------------
Finland (1.4%)
Metsa-Serla Class B 658,650 28,708,089
--------------
France (7.8%)
Bouygues 131,320 16,012,352
Cetelem 44,126 9,332,705
Fives-Lille (Compagnie De) 84,060 8,042,382
Lagardere Groupe 1,355,075 30,425,399
Scor SA 664,153 14,871,619
Societe Nationale Elf Aquitaine SA 27,830 2,224,700
Societe Nationale Elf Aquitaine SA ADR 969,600 38,541,600
Total Cie Franc Des Petroles Class B 645,030 40,336,533
Total Petroles SA ADR 30,600 960,075
--------------
160,747,365
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
12
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS (CONT'D)
April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------ --------------
<S> <C> <C>
COMMON STOCK (CONT'D)
Hong Kong (2.3%)
Hong Kong Electric 3,072,500 $ 9,429,719
HSBC Holdings PLC 1,486,900 17,244,850
HSBC Holdings PLC (UK) 190,000 2,238,630
Jardine Matheson 2,245,400 17,850,930
--------------
46,764,129
--------------
India (1.6%)
Hindalco Industries Ltd. GDR 627,300 16,623,450
Reliance Industries Ltd. GDS 1,035,500 16,697,438
--------------
33,320,888
--------------
Indonesia (0.5%)
P.T. Dynaplast Ltd. 1,732,200 1,863,415
P.T. Modem Photo Film Co. 835,000 3,499,440
P.T. Tri Polyta Indonesia ADR + 273,200 5,873,800
--------------
11,236,655
--------------
Israel (0.8%)
Ampal-American Israel Corp. Class A + 1,374,000 8,759,250
ECI Telecommunications Ltd. 465,200 7,850,250
--------------
16,609,500
--------------
Japan (26.0%)
Canon Inc. 2,028,000 33,558,571
Canon Inc. ADR 98,040 8,174,085
DDI Corp. 3,675 32,375,000
East Japan Railway Co. 9,636 50,130,143
Fujitsu Ltd. 2,496,000 25,524,571
Hitachi Ltd. 4,147,250 42,213,080
Japan Securities Finance Co., Ltd. 970,000 15,242,857
Kao Corp. 3,107,000 37,727,857
Kirin Beverage 74,000 1,154,048
Murata Mfg. Co., Ltd. 281,310 11,319,379
NEC Corp. 1,853,000 20,515,357
Nippon Communication Systems Corp. 1,204,700 16,779,750
Nippon Express Co., Ltd. 761,000 7,528,464
Nippon Telegraph & Telephone Corp. 5,877 51,983,464
Sankyo Co., Ltd. (Gunma) 107,000 6,203,452
Seikisui House Ltd. 1,345,000 17,773,214
Shin-Etsu Chemical Co., Ltd. 1,843,400 35,770,738
Sony Corp. 547,800 27,650,857
Sony Corp. ADR 113,500 5,774,313
TDK Corp. 884,000 40,411,429
Toho Co., Ltd. 118,400 21,283,810
Tsuchiya Home Co. 334,620 5,776,179
York-Benimaru Co., Ltd. 487,900 19,283,668
--------------
534,154,286
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
13
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS (CONT'D)
April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------ --------------
<S> <C> <C>
COMMON STOCK (CONT'D)
Korea (4.7%)
Daewoo Heavy Industries 567,406 $ 6,996,742
Hana Bank 421,150 7,568,877
Hanil Bank 1,827,292 23,071,869
Korea Electric Power Corp. 634,610 24,387,905
Korea Europe Fund Ltd. 1,210 4,310,625
Korea Long Term Credit Bank 243,584 7,414,880
Samsung Electronics Co., Ltd. 41,315 7,170,372
Samsung Electronics Co., Ltd. GDR 77,814 3,832,340
Samsung Heavy Industries Co., Ltd. 421,706 12,613,008
--------------
97,366,618
--------------
Malaysia (0.4%)
Arab-Malaysian Merchant Bank BHD 120,000 1,186,049
Westmont BHD 1,525,000 6,609,754
--------------
7,795,803
--------------
Mexico (2.0%)
Cemex SA de CV ADR 2,824,750 17,654,687
Grupo Financiero Banamex Accival SA de CV Class B 165,000 277,200
Grupo Financiero Banamex Accival SA de CV Class C 3,864,500 6,440,833
Telefonos de Mexico SA de CV ADR 529,400 16,014,350
--------------
40,387,070
--------------
New Zealand (5.3%)
Brierley Investments Ltd. 38,776,304 29,214,998
Fletcher Challenge Ltd. 10,019,687 26,960,974
Fletcher Forestry 8,123,000 11,365,832
Lion Nathan Ltd. 13,328,200 29,049,452
Wrightson Ltd. 14,548,459 11,744,097
--------------
108,335,353
--------------
Norway (2.1%)
Norsk Hydro AS ADR 1,096,022 43,977,883
--------------
Pakistan (0.5%)
Pakistan Telecommunications Corp. 1,430 156,317
Pakistan Telecommunications Corp. GDR + 93,200 9,739,400
--------------
9,895,717
--------------
Singapore (1.5%)
DBS Land Ltd. 3,866,000 10,655,642
Development Bank of Singapore Ltd. 1,123,250 12,012,938
Development Bank of Singapore Ltd. ADR 79,500 3,408,563
IPC Corp., Ltd. + 10,026,000 5,397,286
--------------
31,474,429
--------------
South Africa (0.0%)
Anglovaal Ltd. 23,000 787,954
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
14
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS (CONT'D)
April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------ --------------
<S> <C> <C>
COMMON STOCK (CONT'D)
Spain (3.5%)
Banco De Santander 144,866 $ 5,300,551
Banco De Santander ADR 1,172,200 42,492,250
Repsol SA ADR 757,400 24,236,800
--------------
72,029,601
--------------
Sweden (3.3%)
Asea AB Series B 244,500 20,587,491
Astra AB Series B 968,400 27,580,254
Celsius Industrier Series B 536,850 8,420,365
Foreningsbaken AB Series A + 6,107,100 10,587,141
--------------
67,175,251
--------------
Switzerland (2.5%)
BBC Brown Boveri AG 39,008 38,531,046
Danzas Holding AG 12,824 10,528,000
Immuno International AG 5,120 2,459,389
--------------
51,518,435
--------------
Taiwan (1.7%)
Baring International Taiwan Fund + 120,000 1,200,000
Evergreen Marine Corp., Ltd. + 4,348,000 9,072,956
Grand Pacific Fund 2,872,000 944,179
Kwang Hua Growth Fund 6,346,000 2,823,332
Tuntex Distinct Corp. 13,533,368 15,558,657
Tuntex Distinct Corp. GDS + 545,425 6,272,387
--------------
35,871,511
--------------
Thailand (0.9%)
Industrial Finance Corp. of Thailand 6,992,400 14,971,493
Thai Military Bank Ltd. 855,250 2,755,495
--------------
17,726,988
--------------
United Kingdom (8.0%)
AAF Industries PLC + 847,750 477,262
British Air Authority PLC 3,721,908 28,376,906
BTR PLC 5,570,800 29,480,479
Govett and Co., Ltd. 3,005,000 13,872,267
International Cabletel Inc. 128,500 3,790,750
Queens Moat Houses PLC + 1,649,500 0
Reckitt & Colman PLC 1,952,000 20,126,067
Singer and Friedlander Group PLC 9,093,000 12,285,916
Takare PLC 5,657,400 18,108,857
Thorn EMI PLC 1,931,631 35,326,914
Trio Holdings PLC 7,868,850 2,151,697
--------------
163,997,115
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
15
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS (CONT'D)
April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------------ --------------
<S> <C> <C>
COMMON STOCK (CONT'D)
Zimbabwe (0.0%)
Delta Corp., Ltd. 53,000 $ 741,331
--------------
TOTAL COMMON STOCK (Cost $1,773,211,885) 1,803,911,638
--------------
PREFERRED STOCK (1.0%)
Australia (0.4%)
News Corp. 1,695,899 7,487,933
--------------
Austria (0.2%)
Maculan Holdings AG Vorzuege 113,775 4,694,546
--------------
Korea (0.3%)
Samsung Electronics Co., Ltd. 57,547 5,181,721
--------------
United Kingdom (0.1%)
Queens Moat Houses PLC, 7.50% Convertible + 82,700 0
Singer & Friedlander Group PLC, 8.50% Convertible 1,435,737 2,442,172
--------------
2,442,172
--------------
TOTAL PREFERRED STOCK (Cost $22,372,969) 19,806,372
--------------
STOCK RIGHTS AND WARRANTS (0.2%)
India (0.1%)
Hindalco Industries Ltd. Wts., 11/02/95 + 156,650 1,801,475
--------------
Israel (0.0%)
Ampal-American Israel Corp. Class A Wts., 01/31/99 + 455,000 241,719
--------------
Japan (0.1%)
Bandai Industries Wts., 11/04/97 + 2,936 1,468,000
--------------
Switzerland (0.0%)
Danzas Holding AG Wts., 08/02/96 + 9,050 5,928
--------------
Thailand (0.0%)
Thai Military Bank Ltd. Rts., 05/08/95 + 171,050 341,821
--------------
TOTAL STOCK RIGHTS AND WARRANTS (Cost $5,672,707) 3,858,943
--------------
CONTRACTS
OPTIONS (0.4%) ------------
Japan (0.3%)
Topix Index, 03/08/96 strike price 1,251.24 + 20,426 2,786,923
Topix Index, 03/08/96 strike price 1,261.12 + 21,024 2,721,977
Topix Index, 03/08/96 strike price 1,349.00 + 9,152 695,460
--------------
6,204,360
--------------
Korea (0.1%)
Korea Composite Index, 09/24/95 + 6,000,000 1,354,200
--------------
Mexico (0.0%)
Mexican Index, 09/95 + 308 7,700
Mexican Inmex, 03/29/96 + 249,080 4,982
--------------
12,682
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
16
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS (CONT'D)
April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CONTRACTS VALUE
------------ --------------
<S> <C> <C>
OPTIONS (CONT'D)
Switzerland (0.0%)
Danzas Holding AG, 08/02/96 + 1,000 $ 6,550
--------------
TOTAL OPTIONS (Cost $8,311,011) 7,577,792
--------------
PAR
------------
CONVERTIBLE BONDS/NOTES (3.5%)
Argentina (0.3%)
Banco De Galicia 7.00%, 08/01/02 $ 7,648,000 5,353,600
--------------
Australia (0.2%)
BTR Nylex 9.00%, 11/30/49 (C) 57,300,000 4,543,122
--------------
India (0.2%)
Reliance Industries Ltd. 3.50%, 11/03/99 $ 3,850,000 3,888,500
--------------
Japan (1.5%)
Matsushita Electric Works Ltd. 2.70%, 05/31/02 (B) 2,385,000,000 31,658,036
--------------
New Zealand (0.0%)
Brierley Investments Ltd. 9.00%, 06/30/98 (A) 1,314,875 902,207
--------------
Taiwan (1.3%)
United Microelectronics Corp. 1.25%, 06/08/04 $ 7,160,000 11,259,100
Yang Ming Marine Transport Corp. 2.00%, 10/06/01 14,870,000 15,241,750
--------------
26,500,850
--------------
TOTAL CONVERTIBLE BONDS/NOTES (Cost $67,027,378) 72,846,315
--------------
SHORT-TERM INVESTMENTS (7.1%)
Repurchase agreement with State Street Bank & Trust dated 04/28/95 at 5.87% to be
repurchased at $146,171,467 on 05/01/95. (Collateralized by $147,920,000 U.S.
Treasury Note, due 08/31/96, with a market value of $150,561,859.) (Cost
$146,100,000) 146,100,000 146,100,000
--------------
TOTAL INVESTMENTS (99.9%) (Cost $2,022,695,950*) 2,054,101,060
OTHER ASSETS IN EXCESS OF LIABILITIES (0.1%) 1,468,145
--------------
NET ASSETS (100.0%) (applicable to 99,206,770 Common Shares and 14,392,117 Advisor
Shares**) $2,055,569,205
--------------
--------------
NET ASSET VALUE, offering and redemption price per Common Share
($1,796,703,177 [div] 99,206,770) $18.11
------
------
NET ASSET VALUE, offering and redemption price per Advisor
Share**($258,866,028 [div] 14,392,117) $17.99
------
------
</TABLE>
+ Non-income producing security.
* Also cost for Federal income tax purposes.
** Advisor Shares refer to Series 2 Shares herein and in the prospectus.
Unless otherwise indicated below, all convertible bonds/notes are denominated in
$U.S.
(A) Denominated in New Zealand Dollars.
(B) Denominated in Japanese Yen.
(C) Denominated in Australian Dollars.
See Accompanying Notes to Financial Statements.
17
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
STATEMENTS OF OPERATIONS
For the Six Months Ended April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus Warburg Pincus Warburg Pincus
Capital Appreciation Emerging Growth International Equity Japan OTC
Fund Fund Fund Fund
-------------------- --------------- -------------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 866,566 $ 385,287 $ 16,884,622 $ 92,394
Interest 417,191 777,120 6,035,578 52,639
Foreign taxes withheld (2,423) 0 (2,632,413) (13,859)
-------------------- --------------- -------------------- --------------
Total investment income 1,281,334 1,162,407 20,287,787 131,174
-------------------- --------------- -------------------- --------------
EXPENSES:
Investment advisory 572,180 1,428,874 8,871,020 141,840
Administrative services 163,480 317,528 1,516,613 53,847
Audit 11,486 11,348 25,098 9,837
Custodian/Sub-custodian 26,453 56,264 900,807 22,943
Directors/Trustees 4,960 4,960 4,960 3,720
Distribution 0 0 0 28,368
Insurance 7,467 7,935 20,767 2,266
Legal 13,889 13,785 24,437 12,397
Organizational 0 0 0 19,066
Printing 12,853 16,604 39,399 7,690
Registration 16,018 43,913 292,491 24,613
Shareholder servicing 20,418 188,426 532,559 0
Transfer agent 37,099 60,883 532,321 41,327
Miscellaneous 17,498 15,667 38,126 3,712
-------------------- --------------- -------------------- --------------
903,801 2,166,187 12,798,598 371,626
Less: fees waived and expenses
reimbursed 0 0 0 (258,152)
-------------------- --------------- -------------------- --------------
Total expenses 903,801 2,166,187 12,798,598 113,474
-------------------- --------------- -------------------- --------------
Net investment income (loss) 377,533 (1,003,780) 7,489,189 17,700
-------------------- --------------- -------------------- --------------
NET REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENTS AND
FOREIGN CURRENCY RELATED ITEMS:
Net realized gain (loss) from security
transactions 6,497,435 14,451,273 (53,266,705) (1,943,522)
Net realized gain (loss) from foreign
currency related items 0 0 3,272,321 (3,394,945)
Net increase (decrease) in unrealized
appreciation from investments and
foreign currency related items 3,936,137 11,679,784 (110,594,381) 70,023
-------------------- --------------- -------------------- --------------
Net realized and unrealized gain
(loss) from investments and
foreign currency related
items 10,433,572 26,131,057 (160,588,765) (5,268,444)
-------------------- --------------- -------------------- --------------
Net increase (decrease) in net
assets from operations $ 10,811,105 $25,127,277 $ (153,099,576) $ (5,250,744)
-------------------- --------------- -------------------- --------------
-------------------- --------------- -------------------- --------------
</TABLE>
See Accompanying Notes to Financial Statements.
21
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus
Capital Appreciation Emerging Growth
Fund Fund
----------------------------------- -----------------------------------
For the For the
Six Months Ended For the Six Months Ended For the
April 30, 1995 Year Ended April 30, 1995 Year Ended
(Unaudited) October 31, 1994 (Unaudited) October 31, 1994
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ 377,533 $ 384,246 $ (1,003,780) $ (1,678,646)
Net realized gain (loss) from security
transactions 6,497,435 11,173,174 14,451,273 (5,721,525)
Net realized gain (loss) from foreign currency
related items 0 0 0 0
Net change in unrealized appreciation
(depreciation) from investments and foreign
currency related items 3,936,137 (9,106,613) 11,679,784 10,930,919
---------------- ---------------- ---------------- ----------------
Net increase (decrease) in net assets
resulting from operations 10,811,105 2,450,807 25,127,277 3,530,748
---------------- ---------------- ---------------- ----------------
FROM DISTRIBUTIONS:
Dividends from net investment income:
Common shares 0 (419,337) 0 0
Advisor shares 0 (27,724) 0 0
Distributions in excess of net investment
income:
Common shares 0 0 0 0
Advisor shares 0 0 0 0
Distributions from capital gains:
Common shares (10,460,742) (12,899,141) 0 (10,576,150)
Advisor shares (575,892) (852,608) 0 (1,639,316)
---------------- ---------------- ---------------- ----------------
Net decrease from distributions (11,036,634) (14,198,810) 0 (12,215,466)
---------------- ---------------- ---------------- ----------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 39,742,671 45,617,531 111,724,784 180,813,270
Reinvested dividends 10,763,492 13,809,167 347,867 12,758,387
Net asset value of shares redeemed (27,720,617) (49,851,500) (54,921,210) (71,767,717)
---------------- ---------------- ---------------- ----------------
Net increase in net assets from capital
share transactions 22,785,546 9,575,198 57,151,441 121,803,940
---------------- ---------------- ---------------- ----------------
Net increase (decrease) in net assets 22,560,017 (2,172,805) 82,278,718 113,119,222
NET ASSETS:
Beginning of period 167,514,493 169,687,298 304,672,758 191,553,536
---------------- ---------------- ---------------- ----------------
End of period $190,074,510 $167,514,493 $386,951,476 $304,672,758
---------------- ---------------- ---------------- ----------------
---------------- ---------------- ---------------- ----------------
</TABLE>
See Accompanying Notes to Financial Statements.
22
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus
International Equity Japan OTC
Fund Fund
------------------------------------ ---------------------------------------
For the Period
For the For the September 30, 1994
Six Months Ended For the Six Months Ended (Commencement of
April 30, 1995 Year Ended April 30, 1995 Operations) through
(Unaudited) October 31, 1994 (Unaudited) October 31, 1994
---------------- ---------------- ---------------- -------------------
<S> <C> <C> <C>
$ 7,489,189 $ 1,310,933 $ 17,700 $ 5,115
(53,266,705) 48,091,665 (1,943,522) 0
3,272,321 (2,772,944) (3,394,945) (294,437)
(110,594,381) 82,484,415 70,023 (35,099)
---------------- ---------------- ---------------- -------------------
(153,099,576) 129,114,069 (5,250,744) (324,421)
---------------- ---------------- ---------------- -------------------
(5,808,212) (1,764,380) 0 0
(332,184) (218,961) 0 0
0 (223,659) 0 0
0 0 0 0
(42,332,078) (1,047,367) 0 0
(5,756,403) (129,979) 0 0
---------------- ---------------- ---------------- -------------------
(54,228,877) (3,384,346) 0 0
---------------- ---------------- ---------------- -------------------
826,097,889 1,430,739,923 17,783,234 20,287,158
49,503,945 2,950,772 0 0
(345,979,679) (249,050,078) (5,837,595) (185,101)
---------------- ---------------- ---------------- -------------------
529,622,155 1,184,640,617 11,945,639 20,102,057
---------------- ---------------- ---------------- -------------------
322,293,702 1,310,370,340 6,694,895 19,777,636
1,733,275,503 422,905,163 19,878,636 101,000
---------------- ---------------- ---------------- -------------------
$2,055,569,205 $1,733,275,503 $ 26,573,531 $19,878,636
---------------- ---------------- ---------------- -------------------
---------------- ---------------- ---------------- -------------------
</TABLE>
23
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
(For a Share of the Fund Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Shares
------------------------------------------------------------------
For the Six
Months
Ended
April 30, For the Year Ended October 31,
1995 ------------------------------------------------
(Unaudited) 1994 1993 1992 1991 1990
----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $20.51 $17.00 $12.22 $13.66 $11.81 $11.35
----------- ------ ------ ------ ------ ------
Income from Investment Operations:
Net Investment Income (Loss) .09 .09 .09 .15 .19 .13
Net Gain (Loss) from Securities and
Foreign Currency Related Items (both
realized and unrealized) (1.89) 3.51 4.84 (1.28) 2.03 .55
----------- ------ ------ ------ ------ ------
Total From Investment Operations (1.80) 3.60 4.93 (1.13) 2.22 .68
----------- ------ ------ ------ ------ ------
Less Distributions:
Dividends from net investment income (.07) (.04) (.02) (.16) (.33) (.10)
Distributions in excess of net
investment income .00 (.01) .00 .00 .00 .00
Distributions from capital gains (.53) (.04) (.13) (.15) (.04) (.12)
----------- ------ ------ ------ ------ ------
Total Distributions (.60) (.09) (.15) (.31) (.37) (.22)
----------- ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $18.11 $20.51 $17.00 $12.22 $13.66 $11.81
----------- ------ ------ ------ ------ ------
----------- ------ ------ ------ ------ ------
Total Return (17.05%)* 21.22% 40.68% (8.44%) 19.42% 5.92%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $1,796,703 $1,533,872 $378,661 $101,763 $72,553 $38,946
Ratios to average daily net assets:
Operating expenses 1.38%* 1.44% 1.48% 1.49% 1.50% 1.46%
Net investment income (loss) .90%* .19% .38% .88% 1.19% 1.58%
Decrease reflected in above expense
ratios due to waivers/reimbursement .00% .00% .00% .07% .17% .38%
Portfolio turnover rate 22.67%* 17.02% 22.60% 53.29% 54.95% 66.12%
<CAPTION>
Advisor Shares
-----------------------------------------------------------------
For the Period
For the Six April 4, 1991
Months Ended For the Year Ended October (Initial Issuance)
April 30, 31, Through
1995 --------------------------- October 31,
(Unaudited) 1994 1993 1992 1991
------------ ------ ------ ------ ------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $20.38 $16.91 $12.20 $13.66 $13.14
------ ------ ------ ------ ------
Income from Investment Operations:
Net Investment Income (Loss) .05 .16 (.01) .13 .00
Net Gain (Loss) from Securities and
Foreign Currency Related Items (both
realized and unrealized) (1.88) 3.35 4.86 (1.32) .58
------ ------ ------ ------ ------
Total From Investment Operations (1.83) 3.51 4.85 (1.19) .58
------ ------ ------ ------ ------
Less Distributions:
Dividends from net investment income (.03) .00 (.01) (.12) (.06)
Distributions in excess of net
investment income .00 .00 .00 .00 .00
Distributions from capital gains (.53) (.04) (.13) (.15) .00
------ ------ ------ ------ ------
Total Distributions (.56) (.04) (.14) (.27) (.06)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $17.99 $20.38 $16.91 $12.20 $13.66
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Total Return (17.44%)* 20.77% 40.06% (8.86%) 7.85%*
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $ 258,866 $199,404 $44,244 $1,472 $ 153
Ratios to average daily net assets:
Operating expenses 1.88%* 1.94% 2.00% 2.00% 2.23%*
Net investment income (loss) .44%* (.29%) (.36%) .54% .30%*
Decrease reflected in above expense
ratios due to waivers/reimbursement .00% .00% .00% .07% .17%*
Portfolio turnover rate 22.67%* 17.02% 22.60% 53.29% 54.95%
</TABLE>
* Annualized
See Accompanying Notes to Financial Statements.
26
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS
April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Warburg Pincus Equity Funds are comprised of Warburg Pincus Capital
Appreciation Fund (the 'Capital Appreciation Fund') and Warburg Pincus
International Equity Fund (the 'International Equity Fund') which are registered
under the Investment Company Act of 1940, as amended (the '1940 Act'), as
diversified, open-end management investment companies, and Warburg Pincus
Emerging Growth Fund (the 'Emerging Growth Fund') and Warburg Pincus Japan OTC
Fund (the 'Japan OTC Fund,' together with the Capital Appreciation Fund, the
International Equity Fund and the Emerging Growth Fund, the 'Funds') which are
registered under the 1940 Act as non-diversified, open-end management investment
companies.
Investment objectives for each Fund are as follows: the Capital
Appreciation Fund, the International Equity Fund and the Japan OTC Fund seek
long-term capital appreciation; the Emerging Growth Fund seeks maximum capital
appreciation.
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
generally valued at market value, which is currently determined using the last
reported sales price. If no sales are reported, investments are 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 attempts to approximate 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.
Translation gains or losses resulting from changes in the exchange rate during
the reporting period and realized gains and losses on the settlement of foreign
currency transactions are reported in the results of operations for the current
period. The Funds do not isolate that portion of gains and losses on investments
in equity securities which are due to changes in the foreign exchange rate from
that which are due to changes in market prices of equity securities.
Security transactions are accounted for on trade date. Interest income is
recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
Income, expenses (excluding class-specific expenses) and realized/unrealized
gains/losses are allocated proportionately to each class of shares based upon
the relative net asset value of outstanding shares. The cost of investments sold
is determined by use of the specific identification method for both financial
reporting and income tax purposes.
Dividends from net investment income are declared and paid semiannually for
all Funds. Distributions of net realized capital gains, if any, are declared
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. Income and
capital gain distributions are determined in accordance with Federal income tax
regulations which may differ from generally accepted accounting principles.
Each Fund intends to continue to comply with the special provisions of the
Internal Revenue Code available to investment companies and therefore no Federal
income tax provision is required.
28
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
Costs incurred by the Japan OTC Fund in connection with its organization
have been deferred and are being amortized over a period of five years from the
date the Japan OTC 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. ('Counsellors'), 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,
Counsellors receives the following fees based on each Fund's average daily net
assets:
<TABLE>
<CAPTION>
FUND ANNUAL RATE
- --------------------------------- ----------------------------------
<S> <C>
Capital Appreciation .70% of average daily net assets
Emerging Growth .90% of average daily net assets
International Equity 1.00% of average daily net assets
Japan OTC 1.25% of average daily net assets
</TABLE>
For the six months ended April 30, 1995, investment advisory fees, waivers
and reimbursements were as follows:
<TABLE>
<CAPTION>
GROSS NET EXPENSE
FUND ADVISORY FEE WAIVER ADVISORY FEE REIMBURSEMENTS
- ------------------------------------------ ------------ ---------- ------------ --------------
<S> <C> <C> <C> <C>
Capital Appreciation $ 572,180 $ 0 $ 572,180 $ 0
Emerging Growth 1,428,874 0 1,428,874 0
International Equity 8,871,020 0 8,871,020 0
Japan OTC 141,840 (141,840) 0 116,312
</TABLE>
SPARX Investment & Research, USA, Inc. ('SPARX USA') serves as
sub-investment adviser for the Japan OTC Fund. From its investment advisory fee,
Counsellors pays SPARX USA a fee at an annual rate of .625% of the average daily
net assets of the Japan OTC Fund. No compensation is payable by the Japan OTC
Fund to SPARX USA for its sub-investment advisory services.
Counsellors Funds Service, Inc. ('CFSI'), a wholly owned subsidiary of
Counsellors, and PFPC Inc. ('PFPC'), an indirect, wholly owned subsidiary of PNC
Bank Corp. ('PNC'), serve as each Fund's co-administrators. For its
administrative services, CFSI receives a fee calculated at an annual rate of
.10% of each Fund's average daily net assets. For the six months ended April 30,
1995, administrative services fees earned by CFSI were as follows:
<TABLE>
<CAPTION>
FUND CO-ADMINISTRATION FEE
- ------------------------------------------- ------------------------------
<S> <C>
Capital Appreciation $ 81,740
Emerging Growth 158,764
International Equity 887,102
Japan OTC 11,347
</TABLE>
29
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
For the six months ended April 30, 1995, administrative services fees
earned by PFPC were as follows:
<TABLE>
<CAPTION>
FUND CO-ADMINISTRATION FEE
- ------------------------------------------- ------------------------------
<S> <C>
Capital Appreciation $ 81,740
Emerging Growth 158,764
International Equity 629,511
Japan OTC 42,500
</TABLE>
Counsellors Securities Inc. ('CSI'), also a wholly owned subsidiary of
Counsellors, serves as each Fund's distributor. No compensation is payable by
the Capital Appreciation Fund, the Emerging Growth Fund or the International
Equity Fund to CSI for distribution services. For distribution services with
respect to the Common Shares of the Japan OTC Fund, CSI receives a fee at an
annual rate of .25% of the Japan OTC Fund's average daily net assets
attributable to the Common Shares; no compensation is payable to CSI with
respect to the Fund's Advisor Shares. For the six months ended April 30, 1995,
CSI earned $28,368 in distribution fees.
3. INVESTMENTS IN SECURITIES
For the six months ended April 30, 1995, purchases and sales of investment
securities (excluding short-term investments) were as follows:
<TABLE>
<CAPTION>
FUND PURCHASES SALES
- ------------------------------------------------------------- ------------ ------------
<S> <C> <C>
Capital Appreciation $132,677,612 $117,699,248
Emerging Growth 191,272,370 144,738,127
International Equity 550,909,981 176,630,818
Japan OTC 23,632,862 13,544,562
</TABLE>
At April 30, 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>
Capital Appreciation $ 35,905,406 $ (2,026,288) $ 33,879,118
Emerging Growth 69,461,748 (7,067,044) 62,394,704
International Equity 174,273,357 (142,868,247) 31,405,110
Japan OTC 1,197,112 (1,147,261) 49,851
</TABLE>
4. FORWARD FOREIGN CURRENCY CONTRACTS
The International Equity Fund and the Japan OTC 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
30
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
terms of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar. Each Fund may enter into forward
contracts for hedging purposes or to increase income and total return. 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 April 30, 1995, the International Equity Fund had the following open
forward currency contract and had recorded an unrealized loss of $1,662,070:
<TABLE>
<CAPTION>
SETTLEMENT CURRENCY CURRENCY
DATE BOUGHT SOLD
- ---------- ------------------------ ---------------------------
<S> <C> <C>
06/21/95 55,000,000 U.S. Dollars 4,725,050,000 Japanese Yen
</TABLE>
At April 30, 1995, the Japan OTC Fund had the following open forward
currency contract and had recorded an unrealized gain of $13,751:
<TABLE>
<CAPTION>
SETTLEMENT CURRENCY CURRENCY
DATE BOUGHT SOLD
- ---------- ------------------------ ---------------------------
<S> <C> <C>
05/31/95 23,000,000 U.S. Dollars 1,922,340,000 Japanese Yen
</TABLE>
5. CAPITAL SHARE TRANSACTIONS; ADVISOR SHARES
The Emerging Growth Fund, the International Equity Fund and the Japan OTC
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 Advisor Shares. The Capital Appreciation Fund is authorized to issue
an unlimited number of full and fractional shares of beneficial interest, $.001
par value per share, of which one billion shares are classified as Advisor
Shares. Advisor Shares are identical to Common Shares in all respects except
that Advisor Shares are sold to institutions ('Service Organizations') that
perform certain distribution, shareholder servicing, accounting and/or
administrative services for their customers who are beneficial owners of Advisor
Shares. Advisor Shares bear the fees paid pursuant to a distribution plan
adopted by each Fund in an amount not to exceed .75% (on an annualized basis) of
the average daily net asset value of the shares held by the Service
Organizations for the benefit of their customers and enjoy certain exclusive
voting rights on matters relating to those fees.
With respect to Advisor Shares, Service Organizations earned the following
shareholder servicing fees for the six months ended April 30, 1995:
<TABLE>
<CAPTION>
FUND SHAREHOLDER SERVICING FEES
- ----------------------------------------------- --------------------------
<S> <C>
Capital Appreciation $ 20,418
Emerging Growth 188,426
International Equity 532,559
</TABLE>
31
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
April 30, 1995 (Unaudited)
- --------------------------------------------------------------------------------
Transactions in shares of each Fund were as follows:
<TABLE>
<CAPTION>
CAPITAL APPRECIATION FUND EMERGING GROWTH FUND
Common Shares Advisor Shares Common Shares Advisor Shares
-------------------------- -------------------------- -------------------------- --------------------------
For the Six For the Six For the Six For the Six
Months Ended For the Months Ended For the Months Ended For the Months Ended For the
April 30, Year Ended April 30, Year Ended April 30, Year Ended April 30, Year Ended
1995 October 31, 1995 October 31, 1995 October 31, 1995 October 31,
(Unaudited) 1994 (Unaudited) 1994 (Unaudited) 1994 (Unaudited) 1994
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 2,912,613 2,958,494 78,480 290,193 3,619,699 6,133,751 1,394,795 2,233,737
Shares issued to
shareholders on
reinvestment of
dividends 818,282 920,210 46,554 61,526 15,653 506,720 0 80,473
Shares redeemed (2,028,054) (3,126,497) (58,310) (460,020) (2,361,976) (2,859,413) (162,815) (517,898)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Net increase
(decrease) in
shares
outstanding 1,702,841 752,207 66,724 (108,301 ) 1,273,376 3,781,058 1,231,980 1,796,312
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Proceeds from
sale of shares $38,700,495 $41,570,590 $1,042,176 $ 4,046,941 $81,131,951 $132,922,995 $30,592,833 $47,890,275
Reinvested
dividends 10,187,616 12,945,690 575,876 863,477 347,867 11,015,146 0 1,743,241
Net asset value
of shares
redeemed (26,954,367) (43,449,501) (766,250) (6,401,999) (51,476,215) (61,126,667) (3,444,995) (10,641,050)
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
Net increase
(decrease) from
capital share
transactions $21,933,744 $11,066,779 $ 851,802 $(1,491,581 ) $30,003,603 $82,811,474 $27,147,838 $38,992,466
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
6. NET ASSETS
Net Assets at April 30, 1995, consisted of the following:
<TABLE>
<CAPTION>
CAPITAL APPRECIATION FUND EMERGING GROWTH FUND
Common Shares Advisor Shares Total Common Shares Advisor Shares Total
------------- -------------- ------------ ------------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Capital contributed, net $140,449,920 $8,912,717 $149,362,637 $228,499,590 $ 87,395,078 $315,894,668
Accumulated net investment
income (loss) 377,867 (334) 377,533 0 0 0
Accumulated net realized
gain (loss) from security
transactions 6,503,951 (48,729) 6,455,222 7,352,467 1,270,253 8,622,720
Net unrealized appreciation
(depreciation) from
investments and foreign
currency related items 33,776,938 102,180 33,879,118 53,373,929 9,060,159 62,434,088
------------- -------------- ------------ ------------- -------------- ------------
Net assets $181,108,676 $8,965,834 $190,074,510 $289,225,986 $ 97,725,490 $386,951,476
------------- -------------- ------------ ------------- -------------- ------------
------------- -------------- ------------ ------------- -------------- ------------
</TABLE>
32
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
Common Shares Advisor Shares
----------------------------- ---------------------------
For the Six For the Six
Months Ended For the Months Ended For the
April 30, Year Ended April 30, Year Ended
1995 October 31, 1995 October 31,
(Unaudited) 1994 (Unaudited) 1994
------------ -------------- ------------ ------------
<S> <C> <C> <C>
41,252,304 64,218,907 4,502,485 7,956,088
2,339,190 147,031 329,647 6,879
(19,160,200) (11,861,720) (224,062) (795,406)
------------ -------------- ------------ ------------
24,431,294 52,504,218 4,608,070 7,167,561
------------ -------------- ------------ ------------
------------ -------------- ------------ ------------
$745,654,489 $1,275,306,263 $80,443,400 $155,433,660
43,415,366 2,820,903 6,088,579 129,869
(341,896,486) (233,614,600) (4,083,193 ) (15,435,478)
------------ -------------- ------------ ------------
$447,173,369 $1,044,512,566 $82,448,786 $140,128,051
------------ -------------- ------------ ------------
------------ -------------- ------------ ------------
<CAPTION>
JAPAN OTC FUND
Common Shares Advisor Shares
----------------------------------- ----------------------------------
For the Period For the Period
For the Six September 30, 1994 For the Six September 30, 1994
Months Ended (Commencement of Months Ended (Commencement of
April 30, Operations) Through April 30, Operations) Through
1995 October 31, 1995 October 31,
(Unaudited) 1994 (Unaudited) 1994
------------- ------------------- ------------ -------------------
<S> <C> <C> <C>
2,027,520 2,025,697 0 15
0 0 0 0
(657,861) (18,605) 0 0
------------- ---------- - ---
1,369,659 2,007,092 0 15
------------- ---------- - ---
------------- ---------- - ---
$ 17,783,234 $20,287,008 $0 $ 150
0 0 0 0
(5,837,595) (185,101) 0 0
------------- ---------- - ---
$ 11,945,639 $20,101,907 $0 $ 150
------------- ---------- - ---
------------- ---------- - ---
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND JAPAN OTC FUND
Common Shares Advisor Shares Total Common Shares Advisor Shares Total
-------------- -------------- -------------- ------------- -------------- -----------
<S> <C> <C> <C> <C> <C>
$1,815,331,961 $262,660,894 $2,077,992,855 $28,492,692 $1,028 $28,493,720
8,381,424 977,793 9,359,217 0 0 0
(54,458,264) (7,888,102) (62,346,366) (1,955,020) (93) (1,955,113)
27,448,056 3,115,443 30,563,499 34,958 (34) 34,924
-------------- -------------- -------------- ------------- ------ -----------
$1,796,703,177 $258,866,028 $2,055,569,205 $26,572,630 $ 901 $26,573,531
-------------- -------------- -------------- ------------- ------ -----------
-------------- -------------- -------------- ------------- ------ -----------
</TABLE>
33
- --------------------------------------------------------------------------------
STATEMENT OF DIFFERENCES
The divided by symbol will be expressed as ....................... [div]
<PAGE>6
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial Statements included in Part A:
(a) Financial Highlights
(2) Audited Financial Statements included in
Part B:
(a) Report of Coopers & Lybrand L.L.P., Independent
Auditors
(b) Statement of Net Assets at October 31, 1994
(c) Statement of Operations for the year ended October
31, 1994
(d) Statement of Changes in Net Assets for the years
ended October 31, 1994 and October 31, 1993
(e) Financial Highlights (for a share of the Fund
outstanding throughout each period) at October 31 of
each of the years 1990-1994 (for common shares) and
from April 4, 1991 through October 31, 1991 and for
each of the three years ended October 31, 1992-1994
(for Advisor shares)
(f) Notes to Financial Statements
(3) Unaudited Financial Statements included in Part B
(a) Statement of Net Assets at April 30, 1995
(b) Statement of Operations for the six months ended
April 30, 1995
(c) Statement of Changes in Net Assets for the year ended
October 31, 1994 and the six months ended April 30,
1995
(d) Financial Highlights (for a share of the Fund
outstanding throughout each period) at October 31 of
each of the years 1990-1994 and for the six months
ended April 30, 1995 (common shares); and for the
period April 4, 1991 through October 31, 1991, at
October 31 of each of the years 1992-1994 and for the
six months ended April 30, 1995 (Advisor shares)
(e) Notes to Financial Statements
<PAGE>7
(b) Exhibits:
Exhibit No. Description of Exhibit
- ----------- ----------------------
1 Articles of Incorporation.
2 Amended and Restated By-Laws.
3 Not applicable.
4 Forms of Share Certificates.*
5 Investment Advisory Agreement.
6 (a) Form of Distribution Agreement between the Fund and Counsellors
Securities Inc.
(b) Form of Distribution Agreement between the Fund and CIGNA
Securities Inc.
(c) Form of Selected Dealer Agreement between Counsellors
Securities Inc. and CIGNA Securities, Inc.
7 Not applicable.
8 (a) Form of Custodian Agreement with PNC Bank, as amended.
(b) Form of Custodian Agreement with Fiduciary Trust Company
International, as amended.
9 (a) Form of Transfer Agency Agreement.**
(b-1) Form of Co-Administration Agreement with Counsellors Funds
Service, Inc.**
- ------------------------
* Incorporated by reference; material provisions of this exhibit
substantially similar to those of this exhibit in Pre-Effective Amendment
No. 2 to the Registration Statement on Form N-1A of Warburg, Pincus Post-
Venture Capital Fund, Inc. filed on September 22, 1995 (Securities Act
File No. 33-61225).
** Incorporated by reference; material provisions of this exhibit
substantially similar to those of this 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; EDGAR Accession
No. 950117-95-221).
<PAGE>8
Exhibit No. Description of Exhibit
----------- ----------------------
(b-2) Form of Co-Administration Agreement with PFPC Inc.
10 (a) Consent of Willkie Farr & Gallagher.
(b) Opinion of Willkie Farr & Gallagher***
11 (a) Consent of Coopers & Lybrand L.L.P., Independent Auditors.
(b) Consent of Ernst & Young LLP, Independent Auditors.
12 Not applicable
13 Form of Purchase Agreement.
14 Retirement Plans.****
15 (a) Form of Shareholder Services Plan.
(b) Form of Distribution Plan.
(c) Rule 18f-3 Plan.
16 Schedule for Computation of Total Return Performance Quotation.
17 (a) Financial Data Schedule relating to semiannual financials
(Common Shares).
(b) Financial Data Schedule relating to semiannual financials
(Advisor Shares).
- ------------------------
** Incorporated by reference; material provisions of this exhibit
substantially similar to those of this 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; EDGAR Accession
No. 950117-95-221).
*** Incorporated by reference to Opinion of Willkie Farr & Gallagher filed
with Registrant's Rule 24f-2 Notice filed on December 29, 1994.
**** Incorporated by reference to Post-Effective Amendment No. 1 to the
Registration Statement on Form N-1A of Warburg, Pincus Managed Bond
Trust, filed on February 28, 1995 (Securities Act File No. 33-73672).
<PAGE>9
Item 25. Persons Controlled by or Under Common Control
with Registrant
Warburg, Pincus Counsellors, Inc. ("Counsellors"), 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 Counsellors through its ownership of a class of voting
preferred stock of Counsellors. 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
Counsellors and certain other entities.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of August 31, 1995
-------------- ------------------------
Shares of common stock 54,581
par value $.001 per share
Shares of common stock
par value $.001 per share - 0
Series 1
Shares of common stock
par value $.001 per share -
Series 2 (Advisor shares) 6
Item 27. Indemnification
Registrant, officers and directors or trustees of Counsellors, 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
<PAGE>10
relates to Registrant, the coverage is limited in amount and, in certain
circumstances, is subject to a deductible.
Article V of Registrant's By-Laws limits the liability of the
Directors by providing that 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 Registrant, or is or was serving while a director or officer of Registrant
at the request of Registrant 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
Registrant 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 1933 Act and the
1940 Act, as such statutes are now or hereafter in force, except that such
indemnity shall not protect any such person against any liability to
Registrant 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.
Item 28. Business and Other Connections of
Investment Adviser
Counsellors, a wholly owned subsidiary of Warburg, Pincus
Counsellors G.P., acts as investment adviser to Registrant. Counsellors
renders investment advice to a wide variety of individual and institutional
clients. The list required by this Item 28 of officers and directors of
Counsellors, 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
Counsellors (SEC File No. 801-07321).
Item 29. Principal Underwriter
(a) Counsellors Securities will act as distributor for Registrant.
Counsellors Securities currently acts as distributor for 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
Growth & Income Fund; Warburg, Pincus Institutional Fund, Inc.; Warburg,
Pincus Intermediate Maturity Government Fund; Warburg, Pincus Japan OTC Fund;
Warburg, Pincus New York Intermediate Municipal
<PAGE>11
Fund; Warburg, Pincus Post-Venture Capital Fund; Warburg, Pincus New York Tax
Exempt Fund; The RBB Fund, Inc.; Warburg, Pincus Short-Term Tax-Advantaged
Bond 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, as
amended.
Item 30. Location of Accounts and Records
(1) Warburg, Pincus International Equity 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) Fiduciary Trust Company International
Two World Trade Center
New York, New York 10048
(records relating to its functions
as custodian)
(7) Counsellors Securities Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as distributor)
<PAGE>12
(8) 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
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>13
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 the Registration Statement 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 22nd day of September, 1995.
COUNSELLORS INTERNATIONAL
EQUITY FUND, INC.
By:/s/ Richard H. King
Richard H. King
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/ John L. Furth Chairman of September 22, 1995
John L. Furth the Board and
Director
/s/ Richard H. King President September 22, 1995
Richard H. King
/s/ Stephen Distler Vice President September 22, 1995
Stephen Distler and Chief
Financial Officer
/s/ Howard Conroy Vice President, September 22, 1995
Howard Conroy Treasurer and Chief
Accounting Officer
/s/ Richard N. Cooper Director September 22, 1995
Richard N. Cooper
/s/ Donald J. Donahue Director September 22, 1995
Donald J. Donahue
/s/ Jack W. Fritz Director September 22, 1995
Jack W. Fritz
/s/ Thomas A. Melfe Director September 22, 1995
Thomas A. Melfe
/s/ Alexander B. Trowbridge Director September 22, 1995
Alexander B. Trowbridge
<PAGE>14
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
- ----------- ----------------------
1 Articles of Incorporation.
2 Amended and Restated By-Laws.
3 Not applicable.
4 Forms of Share Certificates.*
5 Investment Advisory Agreement.
6 (a) Form of Distribution Agreement between the Fund and
Counsellors Securities Inc.
(b) Form of Distribution Agreement between the Fund and CIGNA
Securities Inc.
(c) Form of Selected Dealer Agreement between Counsellors
Securities Inc. and CIGNA Securities, Inc.
7 Not applicable.
8 (a) Form of Custodian Agreement with PNC Bank, as amended.
(b) Form of Custodian Agreement with Fiduciary Trust Company
International, as amended.
9 (a) Form of Transfer Agency Agreement.**
(b-1) Form of Co-Administration Agreement with Counsellors Funds
Service, Inc.**
- ------------------------
* Incorporated by reference; material provisions of this exhibit
substantially similar to those of this exhibit in Pre-Effective Amendment
No. 2 to the Registration Statement on Form N-1A of Warburg, Pincus Post-
Venture Capital Fund, Inc. filed on September 22, 1995 (Securities Act
File No. 33-61225).
** Incorporated by reference; material provisions of this exhibit
substantially similar to those of this 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; EDGAR Accession
No. 950117-95-221).
<PAGE>15
(b-2) Form of Co-Administration Agreement with PFPC Inc.
10 (a) Consent of Willkie Farr & Gallagher.
(b) Opinion of Willkie Farr & Gallagher***
11 (a) Consent of Coopers & Lybrand L.L.P., Independent Auditors.
(b) Consent of Ernst & Young LLP, Independent Auditors.
12 Not applicable
13 Form of Purchase Agreement.
14 Retirement Plans.****
15 (a) Form of Shareholder Services Plan.
(b) Form of Distribution Plan.
(c) Rule 18f-3 Plan.
16 Schedule for Computation of Total Return Performance Quotation.
17 (a) Financial Data Schedule relating to semiannual financials
(Common Shares).
(b) Financial Data Schedule relating to semiannual financials
(Advisor Shares).
- ------------------------
*** Incorporated by reference to Opinion of Willkie Farr & Gallagher filed
with Registrant's Rule 24f-2 Notice filed on December 29, 1994.
**** Incorporated by reference to Post-Effective Amendment No. 1 to the
Registration Statement on Form N-1A of Warburg, Pincus Managed Bond
Trust, filed on February 28, 1995 (Securities Act File No. 33-73672).
<PAGE>1
ARTICLES OF INCORPORATION
OF
COUNSELLORS INTERNATIONAL EQUITY FUND, INC.
ARTICLE I
The undersigned, Rose F. DiMartino, 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 International Equity
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,
<PAGE>2
incidental, appropriate or desirable for the accomplishment of 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 Company 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 Company 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
<PAGE>3
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.
(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
<PAGE>4
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 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
initially shall be one (1) and may in the future be 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. Jamie G.
Stockel is appointed director of the Corporation to hold office until the
first meeting of stockholders or until her successor is elected and qualified.
(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.
<PAGE>5
(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 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.
<PAGE>6
(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 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.
<PAGE>7
* * *
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/ Rose F. DiMartino
Incorporator
Dated the 9th day of February, 1989
<PAGE>1
AMENDED AND RESTATED
BY-LAWS
OF
COUNSELLORS INTERNATIONAL EQUITY 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 10 (ten) percent 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
<PAGE>2
(twelve) months. A written request shall state the purpose or purposes of the
proposed meeting.
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
<PAGE>3
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
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 1.
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
<PAGE>4
stockholders entitled to vote at any meeting of the stockholders. The record
date for a particular meeting shall be not more than 90 (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.
<PAGE>5
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 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 1,
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
<PAGE>7
the time of the decrease. A director need not be a stockholder of the
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
<PAGE>8
being named in the proxy statement as a nominee and to serving as a Director
if elected and whether any 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
<PAGE>9
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 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
<PAGE>10
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, 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
<PAGE>11
the Board may be taken without a meeting if all members of the Board or
committee, as the case may be, consent thereto in 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
<PAGE>12
offices for such terms as may be prescribed by the Board or by the appointing
authority.
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.
<PAGE>13
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.
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.
<PAGE>14
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.
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
<PAGE>15
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 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
<PAGE>16
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 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
<PAGE>17
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 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.
<PAGE>18
SECTION 5. Other Rights. The indemnification provided by this
Article V shall not be deemed exclusive of any other right, in respect of
indemnification 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 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
<PAGE>19
affixed or in any other manner reproduced, or by placing the word "(seal)"
adjacent to the signature of the authorized officer of the Corporation.
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
April 27, 1989
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue
New York, New York 10017-3147
Dear Sirs:
Counsellors International Equity 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 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 respect
to the securities that the Fund may hold or contemplate purchasing.
<PAGE>2
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 1.0% 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
<PAGE>3
shall be prorated according to the proportion that such period bears to the
full yearly period. Upon any termination of this 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
<PAGE>4
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 an
annual basis.
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, 1991 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 1940) 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 said 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 said Act).
<PAGE>5
11. Representation by the Fund
The Fund represents that a copy of its Articles of Incorporation,
dated February 9, 1989, together with all amendments thereto, is on file in
the Department of Assessments and Taxation 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
"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 INTERNATIONAL EQUITY
FUND, INC.
By: /s/ Richard H. King
President
Accepted:
WARBURG, PINCUS COUNSELLORS, INC.
By: /s/ Arnold M. Reichman
Authorized Officer
<PAGE>1
DISTRIBUTION AGREEMENT
April 27, 1989
Counsellors Securities Inc.
466 Lexington Avenue
New York, New York 10017-3147
Dear Sirs:
This is to confirm that, in consideration of the agreements
hereinafter contained, the undersigned, Counsellors International Equity Fund,
Inc. (the "Fund"), an open-end, diversified, management investment company
organized as a corporation under the laws of the State of Maryland, has agreed
that Counsellors Securities Inc. ("Counsellors Securities") shall be, for the
period of this Agreement, the distributor of shares of common stock, par value
$.001 per share, issued by the Fund (the "Shares").
1. Services as Distributor
1.1 Counsellors Securities will act as agent for the distribution
of the Shares covered by the registration statement, prospectus and statement
of additional information then in effect (the "Registration Statement") under
the Securities Act of 1933, as amended (the "1933 Act"), and the Investment
Company Act of 1940, as amended (the "1940 Act").
1.2 Counsellors Securities agrees to use appropriate efforts to
solicit orders for the sale of the Shares at a price and on the terms and
conditions set forth in the Registration Statement, and will undertake such
advertising and promotion as it believes is reasonable in connection with such
solicitation. Counsellors Securities agrees to bear all selling expenses,
including the cost of printing prospectuses and distributing them to
prospective shareholders.
1.3 All activities by Counsellors Securities as distributor of the
Shares shall comply with all applicable laws, rules and regulations,
including, without limitation, all rules and regulations made or adopted by
the Securities and Exchange Commission (the "SEC") or by any securities
association registered under the Securities Exchange Act of 1934.
1.4 Counsellors Securities agrees to (a) provide one or more
persons during normal business hours to respond to
<PAGE>2
telephone questions concerning the Fund and its performance, (b) provide
prospectuses of other funds advised by Warburg, Pincus Counsellors, Inc. to
shareholders considering exercising the exchange privilege and (c) perform
such other services as are described in the Registration Statement as to be
performed by Counsellors Securities, including, without limitation,
distributing and receiving subscription order forms and receiving written
redemption requests.
1.5 Counsellors Securities acknowledges that, whenever in the
judgment of the Fund's officers such action is warranted for any reason,
including, without limitation, market, economic or political conditions, those
officers may decline to accept any orders for, or make any sales of, the
Shares until such time as those officers deem it advisable to accept such
orders and to make such sales.
1.6 Counsellors Securities will act only on its own behalf as
principal should it choose to enter into selling agreements with selected
dealers or others.
1.7 Counsellors Securities will transmit any orders received by it
for purchase or redemption of the Shares to Provident Financial Processing
Corporation ("PFPC"), the Fund's transfer and dividend agent, or its successor
of which Counsellors Securities is notified in writing.
2. Duties of the Fund
2.1 The Fund agrees at its own expense to execute any and all
documents, to furnish any and all information and to take any other actions
that may be reasonably necessary in connection with the qualification of the
Shares for sale in those states that Counsellors Securities may designate.
2.2 The Fund shall furnish from time to time, for use in connection
with the sale of the Shares, such information reports with respect to the Fund
and the Shares as Counsellors Securities may reasonably request, all of which
shall be signed by one or more of the Fund's duly authorized officers; and the
Fund warrants that the statements contained in any such reports, when so
signed by one or more of the Fund's officers, shall be true and correct. The
Fund shall also furnish Counsellors Securities upon request with: (a) annual
audits of the Fund's books and accounts made by independent public accountants
regularly retained by the Fund, (b) semiannual unaudited financial statements
pertaining to the Fund, (c) quarterly earnings statements prepared by the
Fund, (d) a monthly itemized list of the securities held by the Fund, (e)
monthly balance
<PAGE>3
sheets as soon as practicable after the end of each month and (f) from time to
time such additional information regarding the Fund's financial condition as
Counsellors Securities may reasonably request.
3. Representations and Warranties
The Fund represents to Counsellors Securities that all registration
statements, prospectuses and statements of additional information filed by the
Fund with the SEC under the 1933 Act and the 1940 Act with respect to the
Shares have been carefully prepared in conformity with the requirements of the
1933 Act, the 1940 Act and the rules and regulations of the SEC thereunder.
As used in this Agreement the terms "registration statement", "prospectus" and
"statement of additional information" shall mean any registration statement,
prospectus and statement of additional information filed by the Fund with the
SEC and any amendments and supplements thereto which at any time shall have
been filed with the SEC. The Fund represents and warrants to Counsellors
Securities that any registration statement, prospectus and statement of
additional information, when such registration statement becomes effective,
will include all statements required to be contained therein in conformity
with the 1933 Act, the 1940 Act and the rules and regulations of the SEC; that
all statements of fact contained in any registration statement, prospectus or
statement of additional information will be true and correct when such
registration statement becomes effective; and that neither any registration
statement nor any prospectus or statement of additional information when such
registration statement becomes effective will include an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading to a purchaser of
the Shares. Counsellors Securities may, but shall not be obligated to,
propose from time to time such amendment or amendments to any registration
statement and such supplement or supplements to any prospectus or statement of
additional information as, in the light of future developments, may, in the
opinion of Counsellors Securities' counsel, be necessary or advisable. If the
Fund shall not propose such amendment or amendments and/or supplement or
supplements within fifteen days after receipt by the Fund of a written request
from Counsellors Securities to do so, Counsellors Securities may, at its
option, terminate this Agreement. The Fund shall not file any amendment to
any registration statement or supplement to any prospectus or statement of
additional information without giving Counsellors Securities reasonable notice
thereof in advance; provided, however, that nothing contained in this
Agreement shall in any way limit the Fund's right to file at any time such
amendments
<PAGE>4
to any registration statement and/or supplements to any prospectus or
statement of additional information, of whatever character, as the Fund may
deem advisable, such right being in all respects absolute and unconditional.
4. Indemnification
4.1 The Fund authorizes Counsellors Securities and any dealers with
whom Counsellors Securities has entered into dealer agreements to use any
prospectus or statement of additional information furnished by the Fund from
time to time, in connection with the sale of the Shares. The Fund agrees to
indemnify, defend and hold Counsellors Securities, its several officers and
directors, and any person who controls Counsellors Securities within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the cost of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) which Counsellors Securities, its
officers and directors, or any such controlling person, may incur under the
1933 Act, the 1940 Act or common law or otherwise, arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
contained in any registration statement, any prospectus or any statement of
additional information, or arising out of or based upon any omission or
alleged omission to state a material fact required to be stated in any
registration statement, any prospectus or any statement of additional
information, or necessary to make the statements in any of them not
misleading; provided, however, that the Fund's agreement to indemnify
Counsellors Securities, its officers or directors, and any such controlling
person shall not be deemed to cover any claims, demands, liabilities or
expenses arising out of or based upon any statements or representations made
by Counsellors Securities or its representatives or agents other than such
statements and representations as are contained in any registration statement,
prospectus or statement of additional information and in such financial and
other statements as are furnished to Counsellors Securities pursuant to
paragraph 2.2 hereof; and further provided that the Fund's agreement to
indemnify Counsellors Securities and the Fund's representations and warranties
hereinbefore set forth in paragraph 3 shall not be deemed to cover any
liability to the Fund or its shareholders to which Counsellors Securities
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of its duties, or by reason of Counsellors
Securities' reckless disregard of its obligations and duties under this
Agreement. The Fund's agreement to indemnify Counsellors Securities, its
officers and directors, and any such controlling person, as aforesaid, is
expressly conditioned upon
<PAGE>5
the Fund's being notified of any action brought against Counsellors
Securities, its officers or directors, or any such controlling person, such
notification to be given by letter or by telegram addressed to the Fund at its
principal office in New York, New York and sent to the Fund by the person
against whom such action is brought, within ten days after the summons or
other first legal process shall have been served. The failure so to notify the
Fund of any such action shall not relieve the Fund from any liability that the
Fund may have to the person against whom such action is brought by reason of
any such untrue or alleged untrue statement or omission or alleged omission
otherwise than on account of the Fund's indemnity agreement contained in this
paragraph 4.1. The Fund's indemnification agreement contained in this
paragraph 4.1 and the Fund's representations and warranties in this Agreement
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of Counsellors Securities, its officers and
directors, or any controlling person, and shall survive the delivery of any of
the Fund's shares. This agreement of indemnity will inure exclusively to
Counsellors Securities' benefit, to the benefit of its several officers and
directors, and their respective estates, and to the benefit of the controlling
persons and their successors. The Fund agrees to notify Counsellors
Securities promptly of the commencement of any litigation or proceedings
against the Fund or any of its officers or directors in connection with the
issuance and sale of any of the Shares.
4.2 Counsellors Securities agrees to indemnify, defend and hold the
Fund, its several officers and directors, and any person who controls the Fund
within the meaning of Section 15 of the 1933 Act, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
costs of investigating or defending such claims, demands or liabilities and
any counsel fees incurred in connection therewith) that the Fund, its officers
or directors or any such controlling person may incur under the 1933 Act, the
1940 Act or common law or otherwise, but only to the extent that such
liability or expense incurred by the Fund, its officers or directors or such
controlling person resulting from such claims or demands shall arise out of or
be based upon (a) any unauthorized sales literature, advertisements,
information, statements or representations or (b) any untrue or alleged untrue
statement of a material fact contained in information furnished in writing by
Counsellors Securities to the Fund and used in the answers to any of the items
of the registration statement or in the corresponding statements made in the
prospectus or statement of additional information, or shall arise out of or be
based upon any omission or alleged omission to state a material fact in
<PAGE>6
connection with such information furnished in writing by Counsellors
Securities to the Fund and required to be stated in such answers or necessary
to make such information not misleading. Counsellors Securities' agreement to
indemnify the Fund, its officers and directors, and any such controlling
person, as aforesaid, is expressly conditioned upon Counsellors Securities'
being notified of any action brought against the Fund, its officers or
directors, or any such controlling person, such notification to be given by
letter or telegram addressed to Counsellors Securities at its principal office
in New York, New York and sent to Counsellors Securities by the person against
whom such action is brought, within ten days after the summons or other first
legal process shall have been served. The failure so to notify Counsellors
Securities of any such action shall not relieve Counsellors Securities from
any liability that Counsellors Securities may have to the Fund, its officers
or directors, or to such controlling person by reason of any such untrue or
alleged untrue statement or omission or alleged omission otherwise than on
account of Counsellors Securities' indemnity agreement contained in this
paragraph 4.2. Counsellors Securities agrees to notify the Fund promptly of
the commencement of any litigation or proceedings against Counsellors
Securities or any of its officers or directors in connection with the issuance
and sale of any of the Shares.
4.3. In case any action shall be brought against any indemnified
party under paragraph 4.1 or 4.2, and it shall timely notify the indemnifying
party of the commencement thereof, the indemnifying party shall be entitled to
participate in, and, to the extent that it shall wish to do so, to assume the
defense thereof with counsel satisfactory to such indemnified party. If the
indemnifying party opts to assume the defense of such action, the indemnifying
party will not be liable to the indemnified party for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof other than (a) reasonable costs of investigation or the
furnishing of documents or witnesses and (b) all reasonable fees and expenses
of separate counsel to such indemnified party if (i) the indemnifying party
and the indemnified party shall have agreed to the retention of such counsel
or (ii) the indemnified party shall have concluded reasonably that
representation of the indemnifying party and the indemnified party by the same
counsel would be inappropriate due to actual or potential differing interests
between them in the conduct of the defense of such action.
<PAGE>7
5. Effectiveness of Registration
None of the Shares shall be offered by either Counsellors Securities
or the Fund under any of the provisions of this Agreement and no orders for
the purchase or sale of the Shares shall be accepted by the Fund if and so
long as the effectiveness of the registration statement then in effect or any
necessary amendments thereto shall be suspended under any of the provisions of
the 1933 Act or if and so long as a current prospectus as required by Section
5(b)(2) of the 1933 Act is not on file with the SEC; provided, however, that
nothing contained in this paragraph 5 shall in any way restrict or have an
application to or bearing upon the Fund's obligation to repurchase its shares
from any shareholder in accordance with the provisions of the Fund's
prospectus or statement of additional information.
6. Notice to Counsellors Securities
The Fund agrees to advise Counsellors Securities immediately in
writing:
(a) of any request by the SEC for amendments to the registration
statement, prospectus or statement of additional information then in
effect or for additional information;
(b) in the event of the issuance by the SEC of any stop order
suspending the effectiveness of the registration statement, prospectus or
statement of additional information then in effect or the initiation of
any proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement
of a material fact made in the registration statement, prospectus or
statement of additional information then in effect or that requires the
making of a change in such registration statement, prospectus or
statement of additional information in order to make the statements
therein not misleading; and
(d) of all actions of the SEC with respect to any amendment to any
registration statement, prospectus or statement of additional information
which may from time to time be filed with the SEC.
<PAGE>8
7. Term of Agreement
This Agreement shall continue until April 17, 1991 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 Fund's Board of Directors or (b) a vote of a majority (as
defined in the 1940 Act) of the Fund's outstanding voting securities, provided
that in either event the continuance is also approved by a vote of a majority
of the Fund's Directors who are not interested persons (as defined in the
1940 Act) of the Fund or 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, (a) on 60 days' written notice, by
vote of the Fund's Board of Directors or by vote of a majority (as defined in
the 1940 Act) of the outstanding voting securities of the Fund or (b) on 90
days' written notice by Counsellors Securities. This agreement will also
terminate automatically in the event of its assignment (as defined in the 1940
Act).
8. Miscellaneous
The Fund recognizes that directors, officers and employees of
Counsellors Securities 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 "Counsellors" or "Counsellors Securities" as part of their names, and
that Counsellors Securities or its affiliates may enter into distribution or
other agreements with such other corporations and trusts. If Counsellors
Securities ceases to act as the distributor of the Fund's shares, the Fund
agrees that, at Counsellors Securities' 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
<PAGE>9
place below indicated, whereupon it shall become a binding agreement between
us.
Very truly yours,
COUNSELLORS INTERNATIONAL EQUITY
FUND, INC.
By:
President
Accepted:
COUNSELLORS SECURITIES INC.
By:
Authorized Officer
<PAGE>1
DISTRIBUTION AGREEMENT
April 14, 1993
CIGNA Securities Inc.
900 Cottage Grove Road
Bloomfield, Connecticut
Gentlemen:
This is to confirm that, in consideration of the agreements hereinafter
contained, the undersigned, Counsellors International Equity Fund, Inc., an
open-end management investment company formed as a business corporation under
the laws of the State of Maryland (the "Fund"), has agreed that CIGNA
Securities Inc. (the "Service Organization") shall provide certain
distribution services in connection with the offer and sale of shares of the
Fund, as well as certain shareholder servicing, administrative and accounting
services to certain of its customers ("Customers"), who from time to time may
beneficially own the Fund's shares of beneficial interest, par value $.001
per share, designated Shares - Series 2 ("Shares"). The Fund acknowledges
that Shares may be sold by the Service Organization directly to investors or
to a separate account of Connecticut General Life Insurance Company, which
will issue group annuity contracts to qualified pension or profit-sharing
plans, such investors and separate account being referred to herein by the
term "Customers".
Section 1. (a) The Service Organization agrees to provide personal
service and/or the maintenance of shareholder accounts to Customers who may
from time to time own Shares. Such services shall include (i) responding to
Customer inquiries, (ii) providing information on Customer investments and
(iii) providing other shareholder liaison services.
(b) The Service Organization also agrees to provide distribution and
marketing services in connection with the promotion and sale of the Shares.
(c) The Service Organization further agrees to provide the following
administrative and accounting services to Customers who may from time to time
own Shares: (i) aggregating and processing purchase and redemption requests
for Shares from Customers and placing net purchase and redemption orders with
the Fund's transfer agent; (ii) providing Customers with a service that
invests the assets of their accounts in Shares; (iii)
<PAGE>2
processing dividend payments from the Fund on behalf of Customers; (iv)
providing information periodically to Customers showing their positions in
Shares; (v) arranging for bank wires; (vi) providing sub-accounting with
respect to Shares beneficially owned by Customers or the information to the
Fund necessary for sub-accounting; (vii) if required by law, forwarding
shareholder communications from the Fund (such as proxies, shareholder
reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to Customers; and (viii) providing such other
similar services as the Fund may reasonably request to the extent permitted
under applicable statutes, rules and regulations.
Section 2. Orders received from the Service Organization for Shares
will be accepted only at the public offering price per share applicable to
each order, as set forth in the Prospectus and Statement of Additional
Information of the Fund. The procedure relating to the handling of orders
shall be in accordance with oral or written instructions that the Fund shall
forward to the Service Organization from time to time. Payment for Shares
must be received as provided in the Prospectus. All orders are subject to
acceptance or rejection by the Fund in its sole discretion and orders shall be
effective only upon receipt in proper form. There are no minimum initial and
subsequent purchase requirements of the Fund applicable to purchases of Shares
by the Service Organization.
Section 3. The Service Organization agrees to purchase Shares only in
transactions contemplating the simultaneous resale of such Shares to
investors. The Service Organization also agrees not to offer or sell any
Shares except under circumstances that will result in compliance with the
applicable federal and state securities laws and that in connection with sales
and offers to sell Shares it will furnish or cause to be furnished to each
person to whom any such sale or offer is made, at or prior to the time of
offering or sale, a copy of the Prospectus and, if requested, the Statement
(as then amended or supplemented) and will not furnish to any person any
information relating to the Fund that is inconsistent in any respect with the
information contained in the Prospectus and Statement (as then amended or
supplemented) or cause any written materials to be used in connection with
sales of Shares or any advertisement to be published in any newspaper,
broadcast by television, radio or other means or posted in any public place
without the prior written consent of the Fund. The Service Organization also
agrees to send confirmations of orders to Customers as required by Rule 10b-10
of the Securities Exchange Act of 1934 and agrees to pay any costs in
connection therewith. The Service Organization also agrees to use all
reasonable efforts to ensure
<PAGE>3
that taxpayer identification numbers provided on behalf of Customers are
correct.
Section 4. The Service Organization shall not withhold placing orders
for the Shares received from Customers so as to profit itself as a result of
such withholding; e.g., by a change in the net asset value from that used in
determining the offering price to Customers.
Section 5. The Fund reserves the right in its discretion, upon
providing reasonable notice under the particular circumstances to the Service
Organization, to suspend sales or withdraw the offering of Shares or to amend
this Agreement. The Service Organization agrees that any order to purchase
Shares placed by it after notice of any amendment to this Agreement has been
sent to it shall constitute the Service Organization's agreement to such
amendment.
Section 6. The Service Organization will provide such office space and
equipment, telephone facilities and personnel (which may be any part of the
space, equipment and facilities currently used in its business, or any
personnel employed by it) as may be reasonably necessary or beneficial in
order to provide the aforementioned services to Customers.
Section 7. Neither the Service Organization nor any of its officers,
employees or agents are authorized to make any representations concerning the
Fund or the Shares except those contained in the Fund's then current
Prospectus and Statement of Additional Information for such Shares, copies of
which will be supplied by the Fund to the Service Organization, or in such
supplemental literature or advertising as may be authorized by the Fund in
writing.
Section 8. For all purposes of this Agreement, the Service
Organization will be deemed to be an independent contractor, and will have no
authority to act as agent for the Fund in any matter or in any respect. By
its written acceptance of this Agreement, the Service Organization agrees to
and does release, indemnify and hold the Fund, its investment adviser and
their respective officers, trustees and controlling persons harmless from and
against any and all direct or indirect liabilities or losses resulting from
requests, directions, actions or inactions of or by the Service Organization
or its officers, employees or agents regarding its responsibilities hereunder
or the purchase, redemption, transfer or registration of Shares by or on
behalf of Customers. The Service Organization and its employees will, upon
request, be available during normal business hours to consult with the Fund or
its designees
<PAGE>4
concerning the performance of their responsibilities under this Agreement.
Section 9. (a) In consideration of the shareholder services provided
by the Service Organization pursuant to Section 1(a) of this Agreement, the
Fund will pay to the Service Organization, and the Service Organization will
accept as full payment therefor, a fee at the annual rate of .25% of the
average daily net assets of the Shares held of record by the Service
Organization from time to time on behalf of Customers (the "Customers'
Shares"), which fee will be computed daily and payable quarterly.
(b) In consideration of the distribution, administrative and
accounting services and facilities provided by the Service Organization
pursuant to Sections 1(b) and (c) of this Agreement, the Fund will pay to the
Service Organization, and the Service Organization will accept as full payment
therefor, a fee at the annual rate of .25% of the average daily net assets of
the Shares, which fee will be computed daily and payable quarterly.
(c) For purposes of determining the fees payable under this Section 9,
the average daily net assets of the Customers' Shares will be computed in the
manner specified in the Fund's registration statement (as the same is in
effect from time to time) in connection with the computation of the net asset
value of Shares for purposes of purchases and redemptions. The fee rate
stated above may be prospectively increased or decreased by the Fund, in its
sole discretion, at any time upon at least 30 days' prior written notice to
the Service Organization.
Section 10. Any person authorized to direct the disposition of monies
paid or payable by the Fund pursuant to this Agreement will provide to the
Fund's Board of Directors, and the Fund will review, at least quarterly, a
written report of the amounts so expended and the purposes for which such
expenditures were made. In addition, the Service Organization will furnish
the Fund or its designees with such information as it or they may reasonably
request (including, without limitation, periodic certifications confirming
the provision to Customers of the services described herein), and will
otherwise cooperate with the Fund and its designees (including, without
limitation, any auditors designated by the Fund), in connection with the
preparation of reports to its Board of Directors concerning this Agreement
and the monies paid or payable by the Fund pursuant hereto, as well as any
other reports or filings that may be required by law.
Section 11. The Fund may enter into other similar Distribution
Agreements or into Shareholder Servicing Agreements
<PAGE>5
with any other person or persons without the consent of the Service
Organization.
Section 12. The Fund is qualified for sale under, or exempt from the
requirements of, Connecticut securities laws. Upon application to the Fund,
the Fund will inform the Service Organization as to the other states and
jurisdictions in which the Shares have been qualified for sale under, or are
exempt from the requirements of, the respective securities laws of such other
states and jurisdictions, but the Fund assumes no responsibility or obligation
as to the Service Organization's right to sell Shares in any state or
jurisdiction. The Service Organization agrees to indemnify the Fund, the
principal underwriter of its shares and their respective officers, trustees,
directors and controlling persons for any claim, liability, expense or loss in
any way arising out of a sale of Shares in any state or jurisdiction in which
such Shares are not so qualified or exempt unless such claim, liability,
expense or loss results from conduct by the Service Organization that is in
strict conformity with written information furnished to the Service
Organization by the Fund, in which case the Fund shall indemnify the Service
Organization, its officers and directors, for such claim, liability, expense
or loss.
Section 13. By its written acceptance of this Agreement, the Service
Organization represents, warrants and agrees that: (a) the Service
Organization will provide to Customers a schedule of fees showing the
compensation payable to the Service Organization hereunder, along with any
other fees charged by it to Customers relating to their assets that are
invested in Shares; (b) the Service Organization is fully authorized by
applicable law and regulation and by any agreement it may have with any
customer or client for whom it may act pursuant to this Agreement to perform
the services and receive the compensation therefor described in this
Agreement; and (c) the compensation payable to the Service Organization
hereunder, together with any other compensation it receives from Customers
for services contemplated by this Agreement, will not be excessive or
unreasonable under the laws and instruments governing its relationships with
Customers.
Section 14. This Agreement will become effective on the date a fully
executed copy of this Agreement is received by the Fund or its designee.
Unless sooner terminated, this Agreement will continue until one year from
the date hereof, and thereafter will continue automatically for successive
annual periods provided such continuance is specifically approved at least
annually by the Fund in the manner described in Section 15 hereof. This
Agreement is terminable with or without cause, without penalty, at any time
by the Fund (which termination may be by vote of a
<PAGE>6
majority of (a) the Disinterested Trustees as defined in Section 15 hereof or
(b) the outstanding Series 2 Shares of the Fund) or by the Service
Organization upon 30 days' notice to the other party hereto.
Section 15. Anything in this Agreement to the contrary
notwithstanding, no compensation may be paid under this Agreement until this
Agreement has been approved by vote of a majority of (i) the Fund's Board of
Trustees and (ii) those Trustees who are not "interested persons" (as defined
in the Investment Company Act of 1940) of the Fund and have no direct or
indirect financial interest in the operation of the Distribution Plan adopted
by the Fund regarding the provision of distribution and support services to
the beneficial owners of the Shares or in any agreements related thereto
("Disinterested Trustees"), cast in person at a meeting for the purpose of
voting on such approval.
Section 16. All notices and other communications to either the Service
Organization or the Fund, respectively, will be duly given if mailed,
telegraphed, telexed or transmitted by similar telecommunications device to
the Service Organization at the address shown above and to the Fund at 466
Lexington Avenue, New York, New York 10017.
Section 17. This Agreement will be construed in accordance with the
laws of the State of New York, is non-assignable by the parties hereto and
would terminate automatically in the event of its assignment (as such term is
defined in the Investment Company Act of 1940, as amended).
* * *
<PAGE>7
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 INTERNATIONAL EQUITY FUND, INC.
By: __________________________
Arnold M. Reichman
Vice President
Accepted:
CIGNA SECURITIES INC.
By:_____________________________
Authorized Officer
<PAGE>1
SELECTED DEALER AGREEMENT
Gentlemen:
We have agreements (the "Distribution Agreements") with the Warburg,
Pincus funds listed in Appendix A to this Agreement (each a "Fund" and
collectively the "Funds"), pursuant to which we act as the distributor of
shares of common stock or beneficial interest, as the case may be, of the
Funds, par value $.001 per share (collectively the "Shares"), and as such have
the right to distribute Shares for resale. Each Fund has authorized one or
more series of Shares representing interests in the Funds' investment
portfolios (each a "Portfolio" and, collectively, the "Portfolios"). Each
Fund is a diversified, open-end, management investment company registered
under the Investment Company Act of 1940, as amended, and Shares are
registered under the Securities Act of 1933, as amended (the "Act"). The
terms "Prospectus" and "Statement" as used herein refer respectively to the
prospectuses and statements of additional information forming parts of the
Registration Statements on Form N-lA of the Funds under the Act.
As principal we offer to sell to you Shares on the following terms
and conditions:
1. In all sales of Shares you shall act as dealer for your own
account and in no transaction shall you or a broker through whom you clear
securities transactions (the "Clearing Broker"), if any, have any authority to
act as agent for us or any Fund or Funds. You agree that you shall purchase
Shares only from us.
2. Orders received from you for shares of a Fund will be accepted
by us directly or through such agent ("Agent") for us and the Fund as we shall
identify to you, only at the public offering price applicable to each order,
as set forth in the Prospectus and Statement of the Fund. The procedure
relating to the handling of orders shall be in accordance with oral or written
instructions that we or the Funds shall forward to you from time to time.
Payment for Shares must be received as provided in the Prospectus. We reserve
the right, from time to time and in our sole discretion, to limit the
aggregate orders for Shares of the Funds placed by you for which payment has
not yet been received. In addition, all orders are subject to acceptance or
rejection by us or the relevant Fund in the sole discretion of either, or by
Agent acting on our behalf, and orders shall be effective only upon receipt by
Agent in proper form. There are no minimum initial and subsequent purchase
requirements of the Funds applicable to purchases of Shares by you.
<PAGE>2
3. You agree to purchase Shares of the Funds only in transactions
contemplating the simultaneous resale of such Shares to investors and in no
event shall you place orders for Shares unless you have already received
purchase orders for Shares at the applicable public offering price and subject
to the terms hereof. You agree that you will not offer or sell any Shares
except under circumstances that will result in compliance with the applicable
federal and state securities laws and that in connection with sales and offers
to sell Shares you will furnish or cause to be furnished to each person to
whom any such sale or offer is made, at or prior to the time of offering or
sale, a copy of the Prospectus of the relevant Fund and, if requested, the
Statement (as then amended or supplemented) of the relevant Fund and will not
furnish to any person any information relating to such Fund that is
inconsistent in any respect with the information contained in the relevant
Prospectus and relevant Statement (as then amended or supplemented) or cause
any written materials to be used in connection with sales of Shares or any
advertisement to be published in any newspaper, broadcast by television, radio
or other means or posted in any public place without the prior written consent
of us or the Fund. You agree to send confirmations of orders to your
customers as required by Rule l0b-10 under the Securities Exchange Act of 1934
(the "1934 Act") and agree to pay any costs in connection therewith. You
agree to use all reasonable efforts to ensure that taxpayer identification
numbers provided by you on behalf of investors are correct.
4. No person is authorized to make any representations concerning
the Fund or the Shares except those contained in the Prospectus and Statement
for such Funds and in such printed information subsequently issued by us or
the Funds as information supplemental to the Prospectus and Statement. In
purchasing Shares through us you shall rely solely on the representations
contained in the Prospectus and Statement and supplemental information above
mentioned. Any printed information that we furnish to you other than the
Prospectuses, Statements, information supplemental to the Prospectuses and
Statements issued by the Funds, periodic reports and proxy solicitation
materials are our sole responsibility and not the responsibility of the Funds,
and you agree that the Funds, the shareholders of the Funds and the Trustees
or Directors of the Funds shall have no liability or responsibility to you in
these respects. If you should make an unauthorized representation concerning
the Shares, you agree to indemnify the relevant Fund and us from and against
any and all claims, liability, expense or loss in any way arising out of or in
any way connected with such representation.
<PAGE>3
5. You shall not withhold placing orders for the Shares received
from your customers so as to profit yourself as a result of such withholding;
e.g., by a change in the net asset value from that used in determining the
offering price to your customers.
6. We reserve the right in our discretion and without notice to
you to suspend sales or withdraw the offering of Shares or, upon notice to
you, to amend this Agreement. You agree that any order to purchase Shares
placed by you after notice of any amendment to this Agreement has been sent to
you shall constitute your agreement to such amendment. The provisions of the
Distribution Agreements and the related Shareholder Servicing Plans for each
Fund (the "Plans") are incorporated herein by reference and this Agreement
shall continue in effect as to a Portfolio or a Fund only so long as the
continuation of the Distribution Agreement to which the Fund is a party and,
only so long as the continuation of the Plan relating to a Portfolio or a Fund
are approved at least annually by the governing board of the relevant Fund in
the manner contemplated by the relevant Distribution Agreement and Plan, if
any, and by applicable law. This Agreement shall also be terminable without
penalty upon 30 days' written notice to us by you and upon 10 days' written
notice to you by us; provided, however, that any termination of this Agreement
by operation of this Paragraph 6 shall not affect any unpaid obligations under
Paragraphs 3 or 9 of this Agreement.
7. We shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the continuous offering of
Shares. We and you shall be under no liability to each other except for lack
of good faith and for obligations expressly assumed by you and us herein.
Nothing contained in this Paragraph 7 is intended to operate as, and the
provisions of this Paragraph 7 shall not in any way whatsoever constitute, a
waiver by you or us of compliance with any provision of the Act or of the
rules and regulations of the Securities and Exchange Commission issued
thereunder.
8. You agree to provide the following services to customers who
may from time to time own Shares: (i) aggregating and processing purchase and
redemption requests for Shares from customers and placing net purchase and
redemption orders with each Fund's transfer agent; (ii) providing customers
with a service that invests the assets of their accounts in Shares; (iii)
processing dividend payments from the Fund on behalf of customers; (iv)
providing information periodically to customers showing their positions in
Shares; (v) arranging for bank wires; (vi) responding to customer inquiries
relating to the services performed by it; (vii) providing sub-accounting with
respect to Shares beneficially owned by customers or the information to the
<PAGE>4
Fund necessary for sub-accounting; (viii) if required by law, forwarding
shareholder communications from the Fund (such as proxies, shareholder
reports, annual and semi-annual financial statements and dividend,
distribution and tax notices) to customers; and (ix) providing such other
similar services as the Fund may reasonably request to the extent permitted
under applicable statutes, rules and regulations.
9. We both hereby agree to abide by the Rules of Fair Practice of
the National Association of Securities Dealers, Inc. (the "NASD") and all
applicable federal and state laws. Reference is specifically made to Section
26 of Article III of such Rules, which Section is incorporated herein by
reference. The signing of this Agreement and the purchase of Shares pursuant
hereto is a representation to us that you are a member in good standing of the
NASD and a properly registered broker-dealer under the 1934 Act. Nothing in
this Agreement shall be deemed or construed to make you an employee, agent,
representative or partner of any of the Funds or of us, and you are not
authorized to act for us or for any Fund or to make any representations on our
or its behalf. This Agreement shall be in substitution for any prior
agreements between us regarding Shares of the Funds and shall terminate
automatically in the event of your ceasing to be a member in good standing of
the NASD or upon the occurrence of any event adversely affecting your
registration as a broker-dealer under the 1934 Act. This Agreement shall not
be assignable by you.
10. Upon application to us, we will inform you as to the states and
jurisdictions in which we believe the Shares have been qualified for sale
under, or are exempt from the requirements of, the respective securities laws
of such states and jurisdictions, but we assume no responsibility or
obligation as to your right to sell Shares in any state or jurisdiction. You
agree to indemnify us and/or the relevant Fund or Funds for any claim,
liability, expense or loss in any way arising out of a sale of Shares in any
state or jurisdiction in which such Shares are not so qualified or exempt.
11. Except as otherwise noted, any notice to the other party hereto
shall be duly given if mailed or telecopied to such party at the address
thereof specified below.
12. This agreement shall be governed by and construed in accordance
with the laws (except the conflict of law rules) of the State of New York.
13. This Agreement shall not be assignable by either party hereto.
Nothing in this Agreement is intended to confer upon any person (including,
without limitation, any Clearing
<PAGE>5
Broker) other than the parties hereto and their successors, any rights or
remedies under or by reason of this Agreement.
COUNSELLORS SECURITIES INC.
Date: By:
Please indicate your confirmation and acceptance of this Agreement
as of the date first above written by signing below and returning one copy of
this Agreement to Counsellors Securities Inc., 466 Lexington Avenue, New York,
New York 10017.
Accepted and Agreed:
By:
CIGNA Securities, Inc.
By:
Name (Print):
Title:
Address:
<PAGE>6
Appendix A
Counsellors International Equity Fund, Inc.
d/b/a Warburg, Pincus International Equity Fund
Counsellors Emerging Growth Fund, Inc.
d/b/a Warburg, Pincus Emerging Growth Fund
Warburg, Pincus Capital Appreciation Fund
<PAGE>1
CUSTODIAN AGREEMENT
THIS AGREEMENT is made as of April 27, 1989 by and between COUNSELLORS
INTERNATIONAL EQUITY, INC., a Maryland corporation (the "Fund"), and PROVIDENT
NATIONAL BANK, a national banking association ("Provident").
W I T N E S S E T H :
WHEREAS, the Fund is registered as an open-end, diversified management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Fund desires to retain Provident to serve as the Fund's
custodian and Provident is willing to serve as the Fund's custodian;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Fund hereby appoints Provident to act as custodian
of the portfolio securities, cash and other property belonging to the Fund for
the period and on the terms set forth in this Agreement. Provident accepts
such appointment and agrees to furnish the services herein set forth in return
for the compensation as provided in Paragraph 21 of this Agreement. Provident
agrees to comply with all relevant provisions of the
<PAGE>2
1940 Act and applicable rules and regulations thereunder. The Fund may from
time to time issue separate series, classes or classify and reclassify shares
of such series or class. Provident shall identify to each such series or
class property belonging to such series or class and in such reports,
confirmations and notices to the Fund called for under this Agreement shall
identify the series or class to which such report, confirmation or notice
pertains.
2. Delivery of Documents. The Fund has furnished Provident with copies
properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Directors authorizing the
appointment of Provident as custodian of the portfolio securities, cash and
other property belonging to the Fund and approving this Agreement;
(b) Appendix A identifying and containing the signatures of the
Fund's officers and/or other persons authorized to issue Oral Instructions and
to sign Written Instructions, as hereinafter defined, on behalf of the Fund;
(c) The Fund's Articles of Incorporation filed with the Maryland
Department of Assessments and Taxation on February 9, 1989 and all amendments
thereto (such Articles of Incorporation, as presently in effect and as they
shall from time to time be amended, are herein called the "Articles");
<PAGE>3
(d) The Fund's By-Laws and all amendments thereto (such By-Laws, as
presently in effect and as they shall from time to time be amended, are herein
called the "By-Laws");
(e) The Investment Advisory Agreement between Warburg, Pincus
Counsellors, Inc. (the "Advisor") and the Fund dated as of April 27, 1989 (the
"Advisory Agreement");
(f) The Distribution Agreement between the Fund and Counsellors
Securities Inc. dated April 27, 1989 (the "Underwriting Agreement");
(g) The Transfer Agency Agreement between Provident Financial
Processing Corporation (the "Transfer Agent") and the Fund dated as of April
27, 1989 (the "Transfer Agency Agreement");
(h) The Administration and Accounting Services Agreement between
the Transfer Agent and the Fund dated as of April 27, 1989 (the "Accounting
Services Agreement");
(i) The Fund's Notification of Registration filed pursuant to
Section 8(a) of the 1940 Act on Form N-8A under the 1940 Act as filed with the
Securities and Exchange Commission ("SEC") on February 13, 1989;
(j) The Fund's most recent Registration Statement on Form N-lA
under the Securities Act of 1933, as amended ("the 1933 Act") (File No.33-
27031) and under the 1940 Act (File No. 811-5765) as filed with the SEC on
March 30,,1989 relating to shares
<PAGE>4
of the Fund's shares of capital stock, $.001 par value ("Shares"), and all
amendments thereto;
(k) The Fund's most recent prospectus or prospectuses relating to
Shares (such prospectus or prospectuses, as presently in effect and all
amendments and supplements thereto are herein called the "Prospectus"); and
(l) Before the Fund engages in any transaction regulated by the
Commodity Futures Trading Commission ("CFTC"), a copy of either (i) a filed
notice of eligibility to claim the exclusion from the definition of "commodity
pool operator" contained in Section 2(a)(1)(A) of the Commodity Exchange Act
("CEA") that is provided in Rule 4.5 under the CEA, together with all
supplements as are required by the CFTC, or (ii) a letter which has been
granted the Fund by the CFTC which states that the Fund will not be treated as
a "pool" as defined in Section 4.10(d) of the CFTC's General Regulations, or
(iii) a letter which has been granted the Fund by the CFTC which states that
the CFTC will not take any enforcement action if the Fund does not register as
a "commodity pool operator."
The Fund will furnish Provident from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing, if any.
3. Definitions.
(a) "Authorized Person". As used in this Agreement, the term
"Authorized Person" means any of the officers of the
<PAGE>5
Fund and any other person, whether or not any such person is an officer or
employee of the Fund, duly authorized by the Board of Directors of the Fund to
give Oral and Written Instructions on behalf of the Fund and listed on the
Certificate annexed hereto as Appendix A or any amendment thereto as may be
received by Provident from time to time.
(b) "Book-Entry System". As used in this Agreement, the term
"Book-Entry System" means the Federal Reserve Treasury book-entry system for
United States and federal agency securities, its successor or successors and
its nominee or nominees and any book-entry system maintained by a clearing
agency registered with the SEC under Section 17A of the Securities Exchange
Act of 1934 (the "1934 Act").
(c) "Oral Instructions". As used in this Agreement, the term "Oral
Instructions" means oral instructions actually received by Provident from an
Authorized Person or from a person reasonably believed by Provident to-be an
Authorized Person. The Fund agrees to deliver to Provident, at the time and
in the manner specified in Paragraph 8(b) of this Agreement, Written
Instructions confirming Oral Instructions.
(d) "Property". The term "Property", as used in this Agreement,
means:
(i) any and all securities and other property which the Fund
may from time to time deposit, or cause to be
<PAGE>6
deposited, with Provident or which Provident may from time to time hold for
the Fund;
(ii) all income in respect of any of such securities or other
property;
(iii) all proceeds of the sale of any of such securities or
other property; and
(iv) all proceeds of the sale of securities issued by the
Fund, which are received by Provident from time to time from or on behalf
of the Fund.
(e) "Written Instructions". As used in this Agreement, the term
"Written Instructions" means written instructions delivered by hand, mail,
tested telegram, cable, telex or facsimile sending device, and received by
Provident and signed by an Authorized Person.
4. Delivery and Registration of the Property. The Fund will deliver or
cause to be delivered to Provident all securities and all moneys owned by it,
including cash received for the issuance of its Shares, at any time during the
period of this Agreement. Provident will not be responsible for such
securities and such moneys until actually received by it. All securities
delivered to Provident (other than in bearer form) shall be registered in the
name of the Fund or in the name of a nominee of the Fund or in the name of any
nominee of Provident (with or without indication of fiduciary status), or in
the name of any sub-custodian or any nominee of any such sub-custodian
appointed
<PAGE>7
pursuant to Paragraph 6 hereof or shall be properly endorsed and in form for
transfer satisfactory to Provident.
5. Receipt and Disbursement of Money.
(a) Provident shall open and maintain a separate custodial account
or accounts in the name of the Fund, subject only to draft or order by
Provident acting pursuant to the terms of this Agreement, and shall hold in
such account or accounts, subject to the provisions hereof, all cash received
by it from or for the account of the Fund. Provident shall make payments of
cash to, or for the account of, the Fund from such cash only (i) for the
purchase of securities for the Fund's portfolio as provided in Paragraph 13
hereof; (ii) upon receipt of Written Instructions, for the payment of
interest, dividends, taxes, administration, accounting, distribution, advisory
or management fees or expenses which are to be borne by the Fund under the
terms of this Agreement, the Advisory Agreement, the Accounting Services
Agreement, the Transfer Agency Agreement and the Underwriting Agreement; (iii)
upon receipt of Written Instructions, for payments in connection with the
conversion, exchange or surrender of securities owned or subscribed to by the
Fund and hold by or to be delivered to Provident; (iv) to a sub-custodian
pursuant to Paragraph 6 hereof; (v) for the redemption of Fund Shares; (vi)
for payment of the amount of dividends received in respect of securities sold
short; or (vii) upon receipt of Written Instructions, for other proper Fund
purposes.
<PAGE>8
No payment pursuant to (i) above shall be made unless Provident has received a
copy of the broker's or dealer's confirmation or the payee's invoice, as
appropriate.
(b) Provident is hereby authorized to endorse and collect all
checks, drafts or other orders for the payment of money received as custodian
for the account of the Fund.
6. Receipt of Securities.
(a) Except as provided by Paragraph 7 hereof, Provident shall hold
and physically segregate in a separate account, identifiable at all times from
those of any other persons, firms, or corporations, all securities and non-
cash property received by it for the account of the Fund. All such securities
and non-cash property are to be held or disposed of by Provident for the Fund
pursuant to the terms of this Agreement. In the absence of Written
Instructions accompanied by a certified resolution of the Fund's Board of
Directors authorizing the transaction, Provident shall have no power or
authority to withdraw, deliver, assign, hypothecate, pledge or otherwise
dispose of any such securities and investments except in accordance with the
express terms provided for in this Agreement. In no case may any Director,
officer, employee or agent of the Fund withdraw any securities. In connection
with its duties under this Paragraph 6, Provident may, at its own expense,
enter into sub-custodian agreements with other banks or trust companies for
the receipt of certain securities and cash to be held by
<PAGE>9
Provident for the account of the Fund pursuant to this Agreement; provided
that each such bank or trust company has an aggregate capital, surplus and
undivided profits, as shown by its last published report, of not less than one
million dollars ($1,000,000) for a Provident subsidiary or affiliate, or of
not less than twenty million dollars ($20,000,000) if such bank or trust
company is not a Provident subsidiary or affiliate and that in either case
such bank or trust company agrees with Provident to comply with all relevant
provisions of the 1940 Act and applicable rules and regulations thereunder.
Provident shall remain responsible for the performance of all of its duties
under this Agreement and shall hold the Fund harmless from the acts and
omissions, under the standards of care provided for herein, of any bank or
trust company that it might choose pursuant to this Paragraph 6.
(b) Where securities are transferred to an account of the Fund
established pursuant to Paragraph 7 hereof, Provident shall also by book-entry
or otherwise identify as belonging to the Fund the quantity of securities in a
fungible bulk of securities registered in the name of Provident (or its
nominee) or shown in Provident's account on the books of the Book-Entry
System. At least monthly and from time to time, Provident shall furnish the
Fund with a detailed statement of the Property held for the Fund under this
Agreement.
<PAGE>10
7. Use of Book-Entry System. The Fund shall deliver to Provident
certified resolutions of the Board of Directors of the Fund approving,
authorizing and instructing Provident on a continuous and on-going basis until
instructed to the contrary by Oral or Written Instructions actually received
by Provident (a) to deposit in the Book-Entry System all securities belonging
to the Fund eligible for deposit therein and (b) to utilize the Book-Entry
System to the extent possible in connection with settlements of purchases and
sales of securities by the Fund, and deliveries and returns of securities
loaned, subject to repurchase agreements or used as collateral in connection
with borrowings. Without limiting the generality of such use, it is agreed
that the following provisions shall apply thereto:
(a) Securities and any cash of the Fund deposited in the Book-Entry
System will at all times be segregated from any assets and cash controlled by
Provident in other than a fiduciary or custodian capacity but may be
commingled with other assets held in such capacities. Provident and its sub-
custodian, if any, will pay out money only upon receipt of securities and will
deliver securities only upon the receipt of money.
(b) All books and records maintained by Provident which relate to
the Fund's participation in the Book-Entry System will at all times during
Provident's regular-business hours be open to the inspection of the Fund's
duly authorized employees or
<PAGE>11
agents, and the Fund will be furnished with all information in respect of the
services rendered to it as it may require.
(c) Provident will provide the Fund with copies of any report
obtained by Provident on the system of internal accounting control of the
Book-Entry System promptly after receipt of such a report by Provident.
Provident will also provide the Fund with such reports on its own system of
internal control as the Fund may reasonably request from time to time.
8. Instructions Consistent with Articles etc.
(a) Unless otherwise provided in this Agreement, Provident shall
act only upon Oral and Written Instructions. Although Provident may know of
the provisions of the Articles and By-laws of the Fund, Provident may assume
that any Oral or Written Instructions received hereunder are not in any way
inconsistent with any provisions of such Articles or By-laws or any vote,
resolution or proceeding of the Shareholders, or of the Board of Directors, or
of any committee thereof.
(b) Provident shall be entitled to rely upon any Oral Instructions
and any Written Instructions actually received by Provident pursuant to this
Agreement. The Fund agrees to forward to Provident Written Instructions
confirming Oral Instructions in such manner that the Written Instructions are
received by Provident by the close of business of the same day that such Oral
Instructions are given to Provident. The Fund agrees that the fact that such
confirming Written Instructions are not received
<PAGE>12
by Provident shall in no way affect the validity of the transactions or
enforceability of the transactions authorized by the Fund by giving Oral
Instructions. The Fund agrees that Provident shall incur no liability to the
Fund in acting upon Oral Instructions given to Provident hereunder concerning
such transactions provided such instructions reasonably appear to have been
received from an Authorized Person.
9. Transactions Not Requiring Instructions. In the absence of contrary
Written Instructions, Provident is authorized to take the following actions:
(a) Collection of Income and Other Payments.
Provident shall:
(i) collect and receive for the account of the Fund, all
income and other payments and distributions, including (without
limitation) stock dividends, rights, bond coupons, option premiums and
similar items, included or to be included in the Property, and promptly
advise the Fund of such receipt and shall credit such income, as
collected, to the Fund's custodian account;
(ii) endorse and deposit for collection, in the name of the
Fund, checks, drafts, and negotiable instruments or other orders for the
payment of money on the same day as received;
(iii) receive and hold for the account of the Fund all
securities received as a distribution on the Fund's
<PAGE>13
portfolio securities as a result of a stock dividend, share split-up or
reorganization, recapitalization, readjustment or other rearrangement or
distribution of rights or similar securities issued with respect to any
portfolio securities belonging to the Fund held by Provident hereunder;
(iv) present for payment and collect the amount payable upon
all securities which may mature or be called, redeemed, or retired, or
otherwise become payable on the date such securities become payable; and
(v) take any action which may be necessary and proper in
connection with the collection and receipt of such income and other
payments and the endorsement for collection of checks, drafts, and other
negotiable instruments to the extent described in Paragraph 24 of this
Agreement.
(b) Miscellaneous Transactions. Provident is authorized to deliver
or cause to be delivered Property against payment or other consideration or
written receipt therefor in the following cases:
(i) for examination by a broker selling for the account of the
Fund in accordance with street delivery custom;
(ii) for the exchange of interim receipts or temporary
securities for definitive securities; and
(iii) for transfer of securities into the name of the Fund or
Provident or nominee of either, or for exchange
<PAGE>14
of securities for a different number of bonds, certificates, or other
evidence, representing the same aggregate face amount or number of units
bearing the same interest rate, maturity date and call provisions, if any;
provided that, in any such case, the new securities are to be delivered to
Provident.
10. Transactions Requiring Instructions. Upon receipt of Oral or
Written Instructions and not otherwise. Provident, directly or through the
use of the Book-Entry System, shall:
(a) execute and deliver to such persons as may be designated in
such Oral or Written Instructions, proxies, consents, authorizations, and any
other instruments whereby the authority of the Fund as owner of any securities
may be exercised;
(b) deliver any securities held for the Fund against receipt of
other securities or cash issued or paid in connection with the liquidation,
reorganization, refinancing, tender offer, merger, consolidation or
recapitalization of any corporation, or the exercise of any conversion
privilege;
(c) deliver any securities held for the Fund to any protective
committee, reorganization committee or other person in connection with the
reorganization, refinancing, merger, consolidation, recapitalization or sale
of assets of any corporation, and receive and hold under the terms of this
Agreement such certificates of deposit, interim receipts or other
<PAGE>15
instruments or documents as may be issued to it to evidence such delivery;
(d) make such transfers or exchanges of the assets of the Fund and
take such other steps as shall be stated in said Oral or Written Instructions
to be for the purpose of effectuating any duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the Fund;
(e) release securities belonging to the Fund to any bank or trust
company for the purpose of pledge or hypothecation to secure any loan incurred
by the Fund; provided, however, that securities shall be released only upon
payment to Provident of the monies borrowed, except that in cases where
additional collateral is required to secure a borrowing already made, subject
to proper prior authorization, further securities may be released for that
purpose; and repay such loan upon redelivery to it of the securities pledged
or hypothecated therefor and upon surrender of the note or notes evidencing
the loan;
(f) release and deliver securities owned by the Fund in connection
with any repurchase agreement entered into on behalf of the Fund, but only on
receipt of payment therefor; and pay out moneys of the Fund in connection with
such repurchase agreements, but only upon the delivery of the securities; and
(g) otherwise transfer, exchange or deliver securities in
accordance with Oral or Written Instructions.
<PAGE>16
11. Segregated Accounts.
(a) Provident shall upon receipt of Written or Oral Instructions
establish and maintain a segregated account or accounts on its records for and
on behalf of the Fund, into which account or accounts may be transferred cash
and/or securities, including securities in the Book-Entry System (i) for the
purposes of compliance by the Fund with the procedures required by a
securities or option exchange, providing such procedures comply with the 1940
Act and Release No. 10666 or any subsequent release or releases of the SEC
relating to the maintenance of segregated accounts by registered investment
companies, and (ii) for other proper corporate purposes, but only, in the case
of clause (ii), upon receipt of Written Instructions.
(b) Provident may enter into separate custodial agreements with
various futures commission merchants ("FCMs") that the Fund uses (each an "FCM
Agreement"), pursuant to which the Fund's margin deposits in any transactions
involving futures contracts and options on futures contracts will be held by
Provident in accounts (each an "FCM Account") subject to the disposition by
the FCM involved in such contracts in accordance with the customer contract
between FCM and the Fund ("FCM Contract"), SEC rules governing such segregated
accounts, CFTC rules and the rules of the applicable commodities exchange.
Such FCM Agreements shall only be entered into upon receipt of Written
Instructions from the Fund which state that (i) a customer
<PAGE>17
agreement between the FCM and the Fund has been entered into; and (ii) the
Fund is in compliance with all the rules and regulations of the CFTC.
Transfers of initial margin shall be made into an FCM Account only upon
Written Instructions; transfers of premium and variation margin may be made
into an FCM Account pursuant to Oral Instructions. Transfers of funds from an
FCM Account to the FCM for which Provident holds such an account may only
occur upon certification by the FCM to Provident that pursuant to the FCM
Agreement and the FCM Contract, all conditions precedent to its right to give
Provident such instruction have been satisfied.
12. Dividends and Distributions. The Fund shall furnish Provident with
appropriate evidence of action by the Fund's Board of Directors declaring and
authorizing the payment of any dividends and distributions. Upon receipt by
Provident of Written Instructions with respect to dividends and distributions
declared by the Fund's Board of Directors and payable to Shareholders who have
elected in the proper manner to receive their distributions or dividends in
cash, and in conformance with procedures mutually agreed upon by Provident,
the Fund, and the Fund's Transfer Agent, Provident shall pay to the Fund's
Transfer Agent, as agent for the Shareholders, an amount equal to the amount
indicated in said Written Instructions as payable by the Fund to such
Shareholders. In lieu of paying the Fund's Transfer Agent cash dividends and
distributions, Provident may arrange for the direct payment of cash dividends
and distributions to
<PAGE>18
Shareholders by Provident in accordance with such procedures and controls as
are mutually agreed upon from time to time by and among the Fund, Provident
and the Fund's Transfer Agent.
In accordance with the Prospectus, the Internal Revenue Code and
regulations promulgated thereunder, and with such procedures and controls as
are mutually agreed upon from time to time by and among the Fund, Provident
and the Fund's Transfer Agent, Provident shall arrange for the establishment
of IRA custodian accounts for such Shareholders holding Shares through IRA
accounts.
13. Purchases of Securities. Promptly after each decision to purchase
securities by the Advisor, the Fund, through the Advisor, shall deliver to
Provident Oral Instructions specifying with respect to each such purchase:
(a) the name of the issuer and the title of the securities, (b) the number of
shares or the principal amount purchased and accrued interest, if any, (c) the
date of purchase and settlement, (d) the purchase price per unit, (e) the
total amount payable upon such purchase and (f) the name of the person from
whom or the broker through whom the purchase was made. Provident shall upon
receipt of securities purchased by or for the Fund pay out of the moneys held
for the account of the Fund the total amount payable to the person from whom
or the broker through whom the purchase was made, provided that the same
conforms to the-total amount payable as set forth in such Oral Instructions.
<PAGE>19
14. Sales of Securities. Promptly after each decision to sell
securities by the Advisor or exercise of an option written by the Fund, the
Fund, through the Advisor, shall deliver to Provident Oral Instructions,
specifying with respect to each such sale: (a) the name of the issuer and the
title of the security, (b) the number of shares or principal amount sold, and
accrued interest, if any, (c) the date of sale, (d) the sale price per unit,
(e) the total amount payable to the Fund upon such sale, and (f) the name of
the broker through whom or the person to whom the sale was made. Provident
shall deliver the securities upon receipt of the total amount payable to the
Fund upon such sale, provided that the same conforms to the total amount
payable as set forth in such Oral Instructions. Subject to the foregoing,
Provident may accept payment in such form as shall be satisfactory to it, and
may deliver securities and arrange for payment in accordance with the customs
prevailing among dealers in securities.
15. Records. The books and records pertaining to the Fund which are in
the possession of Provident shall be the property of the Fund. Such books and
records shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws and regulations. The Fund, or the Fund's
authorized representatives, shall have access to such books and records at all
times during Provident's normal business hours. Upon the reasonable request
of the Fund, copies of any such books
<PAGE>20
and records shall be provided by Provident to the Fund or the Fund's
authorized representative at the Fund's expense.
16. Reports.
(a) Provident shall furnish the-Fund the following reports:
(1) such periodic and special reports as the Fund may
reasonably request;
(2) a monthly statement summarizing all transactions and
entries for the account of the Fund, listing the portfolio securities
belonging to the Fund with the adjusted average cost of each issue and
the market value at the end of such month, and stating the cash account
of the Fund including disbursements;
(3) the reports to be furnished to the Fund pursuant to Rule
17f-4; and
(4) such other information as may be agreed upon from time to
time between the Fund and Provident.
(b) Provident shall transmit promptly to the Fund any proxy
statement, proxy materials, notice of a call or conversion or similar
communications received by it as Custodian of the Property.
17. Cooperation with Accountants. Provident shall cooperate with the
Fund's independent public accountants and shall take all reasonable action in
the performance of its obligations under this Agreement to assure that the
necessary
<PAGE>21
information is made available to such accountants for the expression of their
opinion, as such may be required from time to time by the Fund.
18. Confidentiality. Provident agrees on behalf of itself and its
employees to treat confidentially all records and other information relative
to the Fund and its prior, present, or potential Shareholders, except, after
prior notification to and approval in writing by the Fund, which approval
shall not be unreasonably withheld and may not be withheld where Provident may
be exposed to civil or criminal contempt proceedings for failure to comply,
when requested to divulge such information by duly constituted authorities, or
when so requested by the Fund.
19. Right to Receive Advice.
(a) Advice of Fund. If Provident shall be in doubt as to any
action to be taken or omitted by it, it may request, and shall receive, from
the Fund directions or advice, including Oral or Written Instructions where
appropriate.
(b) Advice of Counsel. If Provident shall be in doubt as to any
question of law involved in any action to be taken or omitted by Provident, it
may request advice at its own cost from counsel of its own choosing (who may
be counsel for the Advisor, the Fund or Provident, at the option of
Provident).
(c) Conflicting Advice. In case of conflict between directions,
advice or Oral or Written Instructions received by Provident pursuant to
subparagraph (a) of this paragraph and
<PAGE>22
advice received by Provident pursuant to subparagraph (b) of this paragraph,
Provident shall be entitled to rely on and follow the advice received pursuant
to the latter provision alone.
(d) Protection of Provident. Provident shall be protected in any
action or inaction which it takes in reliance on any directions, advice or
Oral or Written Instructions received pursuant to subparagraphs (a) or (b) of
this paragraph which Provident, after receipt of any such directions, advice
or Oral or Written Instructions, in good faith believes to be consistent with
such directions, advice or Oral or Written Instructions, as the case may be.
However, nothing in this paragraph shall be construed as imposing upon
Provident any obligation (i) to seek such directions, advice or Oral or
Written Instructions, or (ii) to act in accordance with such directions,
advice or Oral or Written Instructions when received, unless, under the terms
of another provision of this Agreement, the same is a condition to Provident's
properly taking or omitting to take such action. Nothing in this subsection
shall excuse Provident when an action or omission on the part of Provident
constitutes willful misfeasance, bad faith, gross negligence or reckless
disregard by Provident of any duties or obligations under this Agreement.
20. Compliance with Governmental Rules and Regulations. The Fund
assumes full responsibility for insuring that the Fund complies with all
applicable requirements of the 1933 Act, the
<PAGE>23
1934 Act, the 1940 Act, the CEA, and any laws, rules and regulations of
governmental authorities having jurisdiction.
21. Compensation. As compensation for the services rendered by
Provident during the term of this Agreement, the Fund will pay to Provident
monthly fees that shall be agreed upon from time to time in writing by
Provident and the Fund.
22. Indemnification. The Fund, as sole owner of the Property, agrees to
indemnify and hold harmless Provident and its nominees from all taxes,
charges, expenses, assessments, claims and liabilities (including, without
limitation, liabilities arising under the 1933 Act, the 1934 Act, the 1946
Act, the CEA, and any state and foreign securities and blue sky laws, all as
or to be amended from time to time) and expenses, including (without
limitation) attorneys' fees and disbursements, arising directly or indirectly
(a) from the fact that securities included in the Property are registered in
the name of any such nominee or (b) without limiting the generality of the
foregoing clause (a) from any action or thing which Provident takes or does or
omits to take or do (i) at the request or on the direction of or in reliance
on the advice of the Fund or (ii) upon Oral or Written Instructions, provided,
that neither Provident nor any of its nominees shall be indemnified against
any liability to the Fund or to its Shareholders (or any expenses incident to
such liability) arising out of Provident's or such nominee's own willful
misfeasance, bad faith, negligence or reckless disregard
<PAGE>24
of its duties or responsibilities specifically described in this Agreement.
In the event of any advance of cash for any purpose made by Provident
resulting from Oral or Written Instructions of the Fund, or in the event that
Provident or its nominee shall incur or be assessed any taxes, charges,
expenses, assessments, claims or liabilities in connection with the
performance of this Agreement, except such as may arise from its or its
nominee's own negligent action, negligent failure to act or willful
misconduct, any Property at any time held for the account of the Fund shall be
security therefor.
23. Responsibility of Provident. Provident shall be under no duty to
take any action on behalf of the Fund except as specifically set forth herein
or as may be specifically agreed to by Provident in writing. In the
performance of its duties hereunder, Provident shall be obligated to exercise
care and diligence and to act in good faith and to use its best efforts within
reasonable limits to insure the accuracy and completeness of all services
performed under this Agreement. Provident shall be responsible for its own
negligent failure to perform its duties under this Agreement, but to the
extent that duties, obligations and responsibilities are not expressly set
forth in this Agreement, Provident shall not be liable for any act or omission
which does not constitute willful misfeasance, bad faith or gross negligence
on the part of Provident or reckless disregard of such duties, obligations and
responsibilities.
<PAGE>25
Without limiting the generality of the foregoing or of any other provision of
this Agreement, Provident in connection with its duties under this Agreement
shall not be under any duty or obligation to inquire into and shall not be
liable for or in respect of (a) the validity or invalidity or authority or
lack thereof of any Oral or Written Instruction, notice or other instrument
which conforms to the applicable requirements of this Agreement, if any, and
which Provident reasonably believes to be genuine; (b) the validity or
invalidity of the issuance of any securities included or to be included in the
Property, the legality or illegality of the purchase of such securities, or
the propriety or impropriety of the amount paid therefor; (c) the legality or
illegality of the sale (or exchange) of any Property or the propriety or
impropriety of the amount for which such Property is sold (or exchanged); or
(d) delays or errors or loss of data occurring by reason of circumstances
beyond Provident's control, including acts of civil or military authority,
national emergencies, labor difficulties, fire, mechanical breakdown, flood or
catastrophe, acts of God, insurrection, war, riots or failure of the mails,
transportation, communication or power supply, nor shall Provident be under
any duty or obligation to ascertain whether any Property at any time delivered
to or held by Provident may properly be held by or for the Fund.
24. Collections. All collections of monies or other property in
respect, or which are to become part, of the Property
<PAGE>26
(but not the safekeeping thereof upon receipt by Provident) and all
collections of money pursuant to conditional payments for Shares shall be at
the sole risk of the Fund. In any case in which Provident does not receive
any payment due the Fund within a reasonable time after Provident has made
proper demands for the same, it shall so notify the Fund in writing, including
copies of all demand letters, any written responses thereto, and memoranda of
all oral responses thereto and to telephonic demands, and await instructions
from the Fund. Provident shall not be obligated to reimburse the Fund for
dividends paid to Shareholders on Shares issued on the basis of conditional
payments which failed to convert to federal funds or any other loss arising
out of such failure to convert. Provident shall not be obliged to take legal
action for collection unless and until reasonably indemnified to its
satisfaction. Provident shall also notify the Fund as soon as reasonably
practicable whenever income due on securities is not collected in due course.
25. Duration and Termination. This Agreement shall continue until
termination by the Fund or by Provident in either case on sixty (60) days'
written notice. Upon any termination of this Agreement, pending appointment
of a successor to Provident or vote of the Shareholders of the Fund to
dissolve or to function without a custodian of its cash, securities or other
property, Provident shall not deliver cash, securities or other property of
the Fund to the Fund, but may deliver them to a bank
<PAGE>27
or trust company of its own selection, having an aggregate capital, surplus
and undivided profits, as shown by its last published report, of not less than
twenty million dollars ($20,000,000) as a custodian for the Fund to be held
under terms similar to those of this Agreement, provided, however, that
Provident shall not be required to make any such delivery or payment until
full payment shall have been made by the Fund of all liabilities constituting
a charge on or against the properties of the Fund then held by Provident or on
or against Provident and until full payment shall have been made to Provident
of all of its fees, compensation, costs and expenses.
26. Notices. All notices and other communications, including Written
Instructions (collectively referred to as "Notice" or "Notices" in this
paragraph), hereunder shall be in writing or by confirming telegram, cable,
telex or facsimile sending device. Notices shall be addressed (a) if to
Provident at Provident's address, 17th and Chestnut Streets, Philadelphia,
Pennsylvania 19103, marked for the attention of the Custodian Services
Department (or its successor); (b) if to the Fund, at the address of the Fund;
or (c) if to neither of the foregoing, at such other address as shall have
been notified to the sender of any such Notice or other communication. If the
location of the sender of a Notice and the address of the addressee thereof
are, at the time of sending, more than 100 miles apart, the Notice may be sent
by first-class mail, in which case it shall be
<PAGE>28
deemed to have been given five days after it is sent, or if sent by confirming
telegram, cable, telex or facsimile sending device, it shall be deemed to have
been given immediately, and, if the location of the sender of a Notice and the
address of the addressee thereof are, at the time of sending, not more than
100 miles apart, the Notice may be sent by first-class mail, in which case it
shall be deemed to have been given three days after it is sent, or if sent by
messenger, it shall be deemed to have been given on the day it is delivered,
or if sent by confirming telegram, cable, telex or facsimile sending device,
it shall be deemed to have been given immediately. All postage, cable,
telegram, telex and facsimile sending device charges arising from the sending
of a Notice hereunder shall be paid by the sender.
27. Further Actions. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
28. Amendments. This Agreement or any part hereof may be changed or
waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
29. Delegation. On thirty (30) days prior written notice to the Fund,
Provident may assign its rights and delegate its duties hereunder to any
wholly-owned direct or indirect subsidiary of Provident National Bank or PNC
Financial Corp, provided that (i) the delegate agrees with Provident to comply
<PAGE>29
with all relevant provisions of the 1940 Act; and (ii) Provident and such
delegate shall promptly provide such information as the Fund may request, and
respond to such questions as the Fund may ask, relative to the delegation,
including (without limitation) the capabilities of the delegate.
30. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
31. Miscellaneous. This Agreement embodies the entire agreement and
understanding between the parties hereto, and supersedes all prior agreements
and understandings relating to the subject matter hereof, provided that the
parties hereto may embody in one or more separate documents their agreement,
if any, with respect to delegated and/or Oral Instructions. The captions in
this Agreement are included for convenience of reference only and in no way
define or delimit any of the provisions hereof or otherwise affect their
construction or effect. This Agreement shall be deemed to be a contract made
in Pennsylvania and governed by Pennsylvania law. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby.
This Agreement shall be binding and shall inure to the benefit of the parties
hereto and their respective successors.
<PAGE>30
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
[SEAL] COUNSELLORS INTERNATIONAL
EQUITY FUND, INC.
ATTEST: ______________________ By: _________________________
[SEAL] PROVIDENT NATIONAL BANK
ATTEST: ______________________ By: _________________________
<PAGE>31
INDEX
Paragraph Page
1. Appointment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Delivery of Documents . . . . . . . . . . . . . . . . . . . . . . . 2
3. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4. Delivery and Registration of the Property . . . . . . . . . . . . . 6
5. Receipt and Disbursement of Money . . . . . . . . . . . . . . . . . 7
6. Receipt of Securities . . . . . . . . . . . . . . . . . . . . . . . 8
7. Use of Book-Entry System . . . . . . . . . . . . . . . . . . . . . . 10
8. Instructions Consistent with Articles etc. . . . . . . . . . . . . . 11
9. Transactions Not Requiring Instructions . . . . . . . . . . . . . . 12
10. Transactions Requiring Instructions . . . . . . . . . . . . . . . . 14
11. Segregated Accounts . . . . . . . . . . . . . . . . . . . . . . . . 16
12. Dividends and Distributions . . . . . . . . . . . . . . . . . . . . 17
13. Purchases of Securities . . . . . . . . . . . . . . . . . . . . . . 18
14. Sales of Securities . . . . . . . . . . . . . . . . . . . . . . . . 19
15. Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
16. Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
17. Cooperation with Accountants . . . . . . . . . . . . . . . . . . . . 20
18. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . 21
19. Right to Receive Advice . . . . . . . . . . . . . . . . . . . . . . 21
20. Compliance with Governmental Rules and Regulations . . . . . . . . . 22
21. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
22. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 23
23. Responsibility of Provident . . . . . . . . . . . . . . . . . . . . 24
24. Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
25. Duration and Termination . . . . . . . . . . . . . . . . . . . . . . 26
26. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
27. Further Actions . . . . . . . . . . . . . . . . . . . . . . . . . . 28
28. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
29. Delegation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
30. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
31. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
<PAGE>1
AMENDMENT TO CUSTODIAN AGREEMENTS
This Amendment is made as of ____________________, 1995 by and between
PNC BANK, National Association ("PNC"), and each of the investment companies
listed on Schedule A attached hereto (together the "Funds" and each a "Fund")
to amend the Custodian Agreement between PNC and each of the Funds listed on
such Schedule A (each a "Custodian Agreement").
WITNESSETH:
WHEREAS, each Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended; and
WHEREAS, PNC serves as custodian of each Fund's assets pursuant to a
Custodian Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Section 3(e) of each Custodian Agreement is hereby replaced in its
entirety with the following:
(e) "Written Instructions". As used in this Agreement, the term
"Written Instructions" means written instructions delivered by hand,
mail, tested telegram, cable, telex or facsimile sending device and
received by Provident and signed by two Authorized Persons.
2. Except as specifically modified herein, the terms of each Custodian
Agreement remain in full force and effect.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment
to be executed in its name and on its behalf by its duly authorized
representative as of the date first above written.
COUNSELLORS EMERGING GROWTH
FUND, INC.
COUNSELLORS INTERMEDIATE MATURITY
GOVERNMENT FUND, INC.
COUNSELLORS INTERNATIONAL EQUITY
FUND, INC.
<PAGE>2
WARBURG, PINCUS CAPITAL
APPRECIATION FUND
WARBURG, PINCUS FIXED INCOME
FUND
WARBURG, PINCUS NEW YORK
INTERMEDIATE MUNICIPAL FUND
By:
Name:
Title:
PNC BANK, NATIONAL ASSOCIATION
By:
Name:
Title:
<PAGE>3
SCHEDULE A
FUND CUSTODIAN AGREEMENT DATED
---- -------------------------
Counsellors Emerging Growth
Fund, Inc. January 21, 1988
Counsellors Intermediate
Maturity Government Fund, Inc. August 22, 1988
Counsellors International
Equity Fund, Inc. April 27, 1989
Warburg, Pincus Capital
Appreciation Fund
(formerly Counsellors
Capital Appreciation Fund) July 10, 1987
Warburg, Pincus Fixed Income
Fund (formerly Counsellors
Fixed Income Fund) July 10, 1987
Warburg, Pincus New York
Intermediate Municipal Fund
(formerly Counsellors New York
Municipal Bond Fund) April 1, 1987
<PAGE>1
AGREEMENT dated April 28, 1989 between FIDUCIARY TRUST COMPANY INTERNATIONAL
("Bank") and COUNSELLORS INTERNATIONAL EQUITY FUND, INC. ("Fund").
1. Custody Account. The Bank agrees to establish and maintain (a) a
custody account in the name of the Fund ("Custody Account") for any and all
stocks, shares, bonds, debentures, notes, mortgages or other obligations for
the payment of money and any certificates, receipts, warrants or other
instruments representing rights to receive, purchase or subscribe for the same
or evidencing or representing any other rights or interests therein and other
similar property (hereinafter called "Securities") from time to time received
by the Bank or its subcustodian (as defined in the last sentence of Section 3)
for the account of the Fund, and (b) a deposit account in the name of the Fund
("Deposit Account") for any and all cash in any currency received by the Bank
or its subcustodian for the account of the Fund, which cash shall not be
subject to withdrawal by draft or check.
2. Maintenance of Securities. Securities in the Custody Account shall
be held in the country or other jurisdiction as shall be specified from time
to time in Instructions (as defined in Section 9 hereof), provided that such
country or other jurisdiction shall be one in which the principal trading
market for such Securities is located or the country or other jurisdiction in
which such Securities are to be presented for payment or are acquired for the
Custody Account and cash in the Deposit Account shall be credited to an
account in such amounts and in the country or other jurisdiction as shall be
specified from time to time in Instructions, provided that such country or
other jurisdiction shall be one in which such cash is the legal currency for
the payment of public or private debts.
3. Eligible Subcustodians.
The Board of the Fund authorizes the Bank to hold the Securities in the
Custody Account and the cash in the Deposit Account in custody and deposit
accounts, respectively, which have been established by the Bank with (a) a
securities system, (b) one of the Bank's branches, a branch of a qualified
U.S. bank, an eligible foreign custodian or an eligible foreign securities
depository and (c) a subcustodian of an eligible foreign custodian, that
itself is an eligible foreign custodian or an eligible foreign securities
depository with which that subcustodian has entered into an agreement for the
custody of Fund assets; provided, however, that the Board of the Fund has
approved the use of the securities system and the Bank's or its subcustodian's
contract with, such eligible foreign custodian or eligible foreign securities
depository by resolution, and Instructions to such effect have been provided
to the Bank. For purposes of this Agreement, "qualified U.S. bank," "eligible
<PAGE>2
foreign custodian" and "eligible foreign securities depository" shall have the
meanings provided in Rule 17f-5 under the Investment Company Act of 1940 as
interpreted by the staff of the Securities and Exchange Commission and a
"securities system" shall mean a clearing agency registered with the
Securities and Exchange Commission under Section 17A of the Securities
Exchange Act of 1934, which acts as a securities depository, or a book-entry
system authorized by the U.S. Department of the Treasury and certain federal
agencies.
Hereinafter the term "subcustodian" will refer to (a) any securities system,
(b) any branch of a qualified U.S. bank, any eligible foreign custodian or any
eligible foreign securities depository with which the Bank has entered into an
agreement of the type contemplated hereunder regarding Securities and/or cash
held in or to be acquired for the Custody Account or the Deposit Account, and
(c) any subcustodian of an eligible foreign custodian with which the eligible
foreign custodian has entered into an agreement like that between the Bank and
such eligible foreign custodian or an eligible foreign securities depository
in which the subcustodians participate.
4. Use of Subcustodian. With respect to Securities and other assets
which are maintained by the Bank in the physical custody of a subcustodian
pursuant to Section 3 (as used in this Section 4, the term "Securities" means
such Securities and other assets):
(a) The Bank will identify on its books as belonging to the Fund any
Securities held by such subcustodian.
(b) In the event that a subcustodian permits any of the Securities
placed in its care to be held in an eligible foreign securities depository,
such subcustodian will be required by its agreement with the Bank to identify
on its books such Securities as being held for the account of the Bank as a
custodian for its customers.
(c) Any Securities in the Custody Account held by a subcustodian of the
Bank will be subject only to the instructions of the Bank or its agents, and
any Securities held in an eligible foreign securities depository for the
account of a subcustodian will be subject only to the instructions of such
subcustodian.
(d) The Bank will only deposit Securities other than cash in an account
with a subcustodian which includes exclusively the assets held by the Bank for
its customers, and the Bank will cause such account to be designated by such
subcustodian as a special custody account for the exclusive benefit of
customers of the Bank.
<PAGE>3
(e) Any agreement the Bank shall enter into with a subcustodian with
respect to the holding of Securities shall require that (i) the Securities are
not subject to any right, charge, security interest, lien or claim of any kind
in favor of such subcustodian or its creditors except for their safe custody
or administration and (ii) beneficial ownership of such Securities is freely
transferable without the payment of money or value other than for safe custody
or administration; provided, however, that the foregoing shall not apply to
the extent that any of the above-mentioned rights, charges, etc. result from
any compensation or other expenses arising with respect to the safekeeping of
Securities pursuant to such agreement or from any arrangements made by the
Fund with any such subcustodian.
(f) The Bank shall allow independent public accountants of the Fund such
reasonable access to the records of the Bank relating to the Securities held
in the Custody Account as required by such accountants in connection with
their examination of the books and records pertaining to the affairs of the
Fund. The Bank shall, subject to restrictions under applicable law, also
obtain from any subcustodian with which the Bank maintains the physical
possession of any Securities in the Custody Account an undertaking to permit
independent public accountants of the Fund such reasonable access to the
records of such subcustodian as may be required in connection with their
examination of the books and records pertaining to the affairs of the Fund.
Upon a reasonable request from the Fund, the Bank shall furnish to the Fund
such reports (or portions thereof) of the Bank's external auditors as relate
directly to the Bank's system of internal accounting controls applicable to
the Bank's duties under this Agreement. The Bank shall use its best efforts
to obtain and furnish the Fund with such similar reports as the Fund may
reasonably request with respect to each eligible foreign custodian and
eligible foreign securities depository holding Securities of the Fund.
(g) The Bank will supply to the Fund at least monthly a statement in
respect to any Securities in the Custody Account held by a subcustodian,
including an identification of the entity having possession of the Securities,
and the Bank will send to the Fund an advice or notification of any transfers
of Securities to or from the Custody Account, indicating, as to Securities
acquired for the Fund, the identity of the entity having physical possession
of such Securities. In the absence of the filing in writing with the Bank by
the Fund of exceptions or objections to any such statement within sixty (60)
days of the Fund's receipt of such statement, or within sixty (60) days after
the date that a material defect is reasonably discoverable, the Fund shall be
deemed to have approved such statement; in such case or upon written approval
of the Fund of any such statement, the Bank shall, to the extent permitted by
law, be released, relieved and discharged with respect to all matters and
things set forth in
<PAGE>4
such statement as though such statement had been settled by the decree of a
court of competent jurisdiction in an action in which the Fund and all persons
having any equity interest in the Fund were parties.
(h) The Bank hereby warrants to the Fund that in the Bank's opinion,
after due inquiry, the established procedures to be followed by each of its
branches, each branch of a qualified U.S. bank, each eligible foreign
custodian and each eligible foreign securities depository holding Securities
of the Fund pursuant to this Agreement afford protection for such Securities
at least equal to that afforded by the Bank's established procedures with
respect to similar securities held by the Bank (and its securities
depositories) in New York.
(i) The Bank hereby warrants to the Fund that, as of the date of this
Agreement, the Bank is maintaining a Bankers Blanket Bond, and the Bank hereby
agrees to notify the Fund in the event its Bankers Blanket Bond is cancelled
or otherwise lapses.
5. Deposit Account Payment. Subject to the provisions of Section 7, the
Bank shall make, or cause its subcustodians to make, payments of cash credited
to the Deposit Account only:
(a) in connection with the purchase of Securities for the Fund and the
delivery of such securities to, or the crediting of such Securities to the
account of, the Bank or its subcustodian, each such payment to be made at
prices as confirmed by Instructions;
(b) for the purchase or redemption of shares of the capital stock of the
Fund and the delivery to, or crediting to the account of, the Bank or its
subcustodian of such shares to be so purchased or redeemed;
(c) for the payment for the account of the Fund of dividends, interest,
taxes, management or supervisory fees, capital distributions or operating
expenses;
(d) for the payments to be made in connection with the conversion,
exchange or surrender of Securities held in the Custody Account;
(e) for other proper corporate purposes of the Fund; or
(f) upon the termination of the Custody Agreement as hereinafter set
forth.
All payments of cash for a purpose permitted by subsection (a), (b), (c) or
(d) of this Section 5 will be made only upon receipt by the Bank of
Instructions which shall specify the purpose for
<PAGE>5
which the payment is to be made. In the case of any payment to be made for
the purpose permitted by subsection (e) of this Section 5, the Bank must first
receive a certified copy of a resolution of the Board of the Fund adequately
describing such payment, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom such payment is to be made.
Any payment pursuant to subsection (f) of this Section 5 will be made in
accordance with Section 17.
In the event that any payment made under this Section 5 exceeds the funds
available in the Deposit Account, the Bank may, in its discretion, advance the
Fund an amount equal to such excess and such advance shall be deemed a loan
from the Bank to the Fund, payable on demand, bearing interest at the rate of
interest customarily charged by the Bank on similar loans.
If the Bank causes the Deposit Account to be credited on the payable date
for interest, dividends or redemptions, the Fund will promptly return to the
Bank any such amount or property so credited upon oral or written notification
that neither the Bank nor its subcustodian can collect such amount or property
in the ordinary course of business. The Bank or its subcustodian, as the case
may be, shall have no duty or obligation to institute legal proceedings, file
a claim or proof of claim in any insolvency proceeding or take any other
action with respect to the collection of such amount or property beyond its
ordinary collection procedures.
6. Custody Account Transactions. Subject to the provisions of Section
7, Securities in the Custody Account will be transferred, exchanged or
delivered by the Bank or its subcustodians only:
(a) upon sale of such Securities for the Fund and receipt by the Bank or
its subcustodian only of payment therefore, each such payment to be in the
amount confirmed by Instructions from Authorized Persons;
(b) when such Securities are called, redeemed or retired, or otherwise
become payable;
(c) in exchange for or upon conversion into other Securities alone or
other Securities and cash pursuant to any plan of merger, consolidation,
reorganization, recapitalization or readjustment;
(d) upon conversion of such Securities pursuant to their terms into
other Securities;
(e) upon exercise of subscription, purchase or other similar rights
represented by such Securities;
<PAGE>6
(f) for the purpose of exchanging interim receipts or temporary
Securities for definitive Securities;
(g) for the purpose of redeeming in kind shares of the capital stock of
the Fund against delivery to the Bank or its subcustodian of such shares to be
so redeemed;
(h) for other proper corporate purposes of the Fund; or
(i) upon the termination of this Custody Agreement as hereinafter set
forth.
All transfers, exchanges or deliveries of Securities in the Custody Account
for a purpose permitted by either subsection (a), (b), (c), (d), (e) or (f) of
this Section 6 will be made, except as provided in Section 8, only upon
receipt by the Bank of Instructions which shall specify the purpose of the
transfer, exchange or delivery to be made. In the case of any transfer or
delivery to be made for the purpose permitted by subsection (g) of this
Section 6, the Bank must first receive Instructions from Authorized Persons
specifying the shares held by the Bank of its subcustodian to be so
transferred or delivered and naming the person or persons to whom transfers or
delivery of such shares shall be made. In the case of any transfer, exchange
or delivery to be made for the purpose permitted by subsection (h) of this
Section 6, the Bank must first receive a certified copy of a resolution of the
Board of the Fund adequately describing such transfer, exchange or delivery,
declaring such purpose to be a proper corporate purpose, and naming the person
or persons to whom delivery of such Securities shall be made. Any transfer or
delivery pursuant to subsection (i) of this Section 6 will be made in
accordance with Section 17.
7. Custody Account Procedures. With respect to any transaction
involving Securities held in or to be acquired for the Custody Account, the
Bank shall cause the Deposit Account to be credited on the contractual
settlement date with the proceeds of any sale or exchange of Securities from
the Custody Account and to be debited on the contractual settlement date for
the cost of Securities purchased or acquired for the Custody Account. The
Bank may reverse any such credit or debit if the transaction with respect to
which such credit or debit was made fails to settle within a reasonable
period, determined by the Bank in its discretion, after the contractual
settlement date, except that if any Securities delivered pursuant to this
Section 7 are returned by the recipient thereof, the Bank may cause any such
credits and debits to be reversed at any time.
Notwithstanding the preceding paragraph, settlement and payment for
Securities received for, and delivery of Securities out of, the Custody
Account may be effected in accordance with the
<PAGE>7
customary or established securities trading or securities processing practices
and procedures in the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering Securities to the purchaser thereof
or to a dealer therefore (or an agent for such purchaser or dealer) against a
receipt with the expectation of receiving later payment for such Securities
from such purchaser or dealer.
8. Actions of the Bank. Until the Bank receives Instructions from
Authorized Persons to the contrary, the Bank will, or will instruct its
subcustodian, to:
(a) present for payment any Securities in the Custody Account which are
called, redeemed or retired or otherwise become payable and all coupons and
other income items which call for payment upon presentation to the extent that
the Bank or subcustodian is aware of such opportunities for payment, and hold
cash received upon presentation of such Securities in accordance with the
provisions of Sections 2, 3 and 4 of this Agreement;
(b) in respect of Securities in the Custody Account, execute in the name
of the Fund such ownership and other certificates as may be required to obtain
payments in respect thereof;
(c) exchange interim receipts or temporary Securities in the Custody
Account for definitive Securities;
(d) in respect of trades reported on the Fund's behalf through Depository
Trust Company ("DTC"), accept instructions from DTC (whether in a DTC report
or otherwise) as though they were given by an Authorized Person;
(e) convert moneys received with respect to Securities of foreign issue
into United States dollars or any other currency necessary to effect any
transaction involving the Securities whenever it is practicable to do so
through customary banking channels, using any method or agency available,
including, but not limited to, the facilities of the Bank, its subsidiaries,
affiliates or subcustodians, which shall be entitled to receive compensation
for such services; and
(f) appoint brokers and dealers for any transaction involving the
Securities in the Custody Account in accordance with Section 11(a) of the
Securities and Exchange Act of 1934 and Rule lla2-2(T) thereunder, including,
without limitation, affiliates of the Bank or any subcustodian, which brokers
and dealers shall be entitled to receive compensation for their services.
9. Instructions. As used in this Agreement, the term "Instructions"
means instructions of (or on behalf of) the Fund received by the Bank, via
telephone, telex, TWX, facsimile
<PAGE>8
transmission, bank wire or other teleprocess or electronic instruction system
acceptable to the Bank which the Bank believes in good faith to have been
given by Authorized Persons or which are transmitted with proper testing or
authentication pursuant to terms and conditions which the Bank may specify.
Any instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but the Fund will hold the
Bank harmless for any failure on the part of the Fund or its agents to send
such confirmation in writing, the failure of such confirmation to conform to
the telephone instructions received, and the Bank's failure to produce such
confirmation at any subsequent time. Unless otherwise expressly provided, all
Instructions shall continue in full force and effect until cancelled or
superseded. If the Bank requires test arrangements, authentication methods or
other security devices to be used with respect to Instructions, any
Instructions thereafter shall be given and processed in accordance with such
terms and conditions for the use of such arrangements, methods or devices as
the Bank may put into effect and modify from time to time. The Fund shall
safeguard and shall cause its agents, if applicable, to safeguard any
testkeys, identification codes or other security devices which the Bank shall
make available to the Fund or its agents. The Bank may electronically record
any instructions given by telephone, and any other telephone discussions, with
respect to the Custody Account.
10. Authorized Persons. As used in this Agreement, the term "Authorized
Persons" means such officers or such agents of the Fund as have been
designated by a resolution of the Board of the Fund, a certified copy of which
has been provided to the Bank, to act on behalf of the Fund in the performance
of any acts which Authorized Persons may do under this Agreement. Such
persons shall continue to be Authorized Persons until such time as the Bank
receives Instructions from Authorized Persons that any such officer or agent
is no longer an Authorized Person.
11. Nominees. Securities in the Custody Account which are ordinarily
held in registered form may be registered in the name of the Bank's nominee
or, as to any Securities in the possession of an entity other than the Bank,
in the name of such entity's nominee. The Fund agrees to hold any such
nominee harmless from any liability as a holder of record of such Securities,
but not if such liability is a result of such nominee's negligence. The Bank
may without notice to the Fund cause any such Securities to cease to be
registered in the name of any such nominee and to be registered in the name of
the Fund. In the event that any Securities registered in the name of the
Bank's nominee or held by one of its subcustodians and registered in the name
of such subcustodian's nominee are called for partial redemption by the
<PAGE>9
issuer of such Security, the Bank may allot, or cause to be allotted, the
called portion to the respective beneficial holders of such class of security
in any manner the Bank deems to be fair and equitable.
12. Standard of Care. The Bank shall be responsible for the performance
of only such duties as are set forth herein or contained in Instructions given
to the Bank by Authorized Persons which are not contrary to the provisions of
this Agreement. The Bank will use reasonable care with respect to the
safekeeping of Securities in the Custody Account and cash in the Deposit
Account. The Bank shall be liable to the Fund for any loss which shall occur
as the result of a failure of a subcustodian or an eligible foreign securities
depository engaged by such subcustodian to exercise reasonable care with
respect to the safekeeping of such Securities and other assets to the same
extent that the Bank would be liable to the Fund if the Bank were holding such
Securities and other assets in New York. In the event of any loss to the Fund
by reason of the failure of the Bank or its subcustodian or an eligible
foreign securities depository engaged by such subcustodian to utilize
reasonable care, the Bank shall be liable to the Fund to the extent of the
Fund's damages, to be determined based on the market value of the property
which is the subject of the loss at the date of discovery of such loss and
without reference to any special conditions or circumstances. The Bank shall
be held to the exercise of reasonable care in carrying out this Agreement but
shall be indemnified by, and shall be without liability to, the Fund for any
action authorized by this Agreement taken or omitted by the Bank in good faith
without negligence. The Bank shall be entitled to rely, and may act, on the
prior, written advice of counsel (who may be counsel for the Fund) on all
matters and shall be without liability for any action reasonably taken or
omitted in good faith pursuant to such advice. The Bank need not maintain any
insurance for the benefit of the Fund. The Bank shall provide to the Fund, on
an annual basis, a report stating whether any events have occurred which would
render the arrangements hereunder to cease to be in compliance with the rules
of the Securities and Exchange Commission governing such arrangements and
describing any such event.
All collections of funds or other property paid or distributed in respect
of Securities in the Custody Account shall be made at the risk of the Fund.
The Bank shall have no liability for any loss occasioned by delay in the
actual receipt of notice by the Bank or by its subcustodian of any payment,
redemption or other transaction regarding Securities in the Custody Account in
respect of which the Bank has agreed to take action as provided in Section 8
hereof. The Bank shall not be liable for any action taken in good faith upon
Instructions or upon any certified copy of any resolution and may rely on the
genuineness of any such documents which it may in good faith believe to be
validly executed. The
<PAGE>10
Bank shall not be liable for any loss resulting from, or caused by, the
direction of the Fund to maintain custody of any Securities or cash in a
foreign country including, but not limited to, losses resulting from
nationalization, expropriation, currency restrictions, act of war or
terrorism, insurrection, revolution, nuclear fusion, fission or radiation, or
acts of God.
13. Compliance with Securities and Exchange Commission Rules and Orders.
Except to the extent the Bank has specifically agreed pursuant to this
Agreement to comply with a condition of a rule, regulation, interpretation, or
exemptive order promulgated by or under the authority of the Securities and
Exchange Commission, the Fund shall be solely responsible to assure that the
maintenance of Securities and cash under this Agreement complies with any such
rule, regulation, interpretation or exemptive order.
14. Corporate Action. The Bank or its subcustodian is to forward to
Provident National Bank ("Provident") (or any successor thereto appointed by
the Fund) only such communications relative to the Securities in the Custody
Account as call for voting or the exercise of rights or other specific action
(including material relative to legal proceedings intended to be transmitted
to security holders) to the extent sufficient copies are received by the Bank
or its subcustodian in time for forwarding to each customer. The Bank or its
subcustodian will cause its nominee to execute and deliver to Provident (or
its successor) proxies relating to Securities in the Custody Account
registered in the name of such nominee but without indicating the manner in
which such proxies are to be voted. Proxies relating to bearer Securities
will be delivered in accordance with written instructions from Authorized
Persons.
15. Fees and Expenses. The Fund agrees to Pay to the Bank from time to
time such compensation for its services pursuant to this Agreement as may be
mutually agreed upon in writing from time to time. The Fund hereby agrees to
hold the Bank harmless from any liability or loss resulting from any taxes or
other governmental charges, and any expenses related thereto, which may be
imposed or assessed with respect to the Custody Account and also agrees to
hold the Bank, its subcustodians, and their respective nominees harmless from
any liability as a record holder of Securities in the Custody Account. The
Bank is authorized to charge any account of the Fund for such items and the
Bank shall have a lien on Securities in the Custody Account and on cash in the
Deposit Account for any amount owing to the Bank from time to time under this
Agreement.
16. Effectiveness. This Agreement shall be effective on the date first
noted above.
<PAGE>11
17. Termination. This Agreement may be terminated by the Fund or the
Bank by 60 days written notice to the other, sent by registered mail, provided
that any termination by the Fund shall be authorized by a resolution of the
Board of the Fund, a certified copy of which shall accompany such notice of
termination, and provided further, that such resolution shall specify the
names of the persons to whom the Bank shall deliver the Securities in the
Custody Account and to whom the cash in the Deposit Account shall be paid. If
notice of termination is given by the Bank, the Fund shall, within 60 days
following the giving of such notice, deliver to the Bank a certified copy of a
resolution of its Board specifying the names of the persons to whom the Bank
shall deliver such Securities and cash to the persons so specified, after
deducting therefrom any amounts which the Bank determines to be owed to it
under Section 15. If within 60 days following the giving of a notice of
termination by the Bank, the Bank does not receive from the Fund a certified
copy of a resolution of the Board specifying the names of the persons to whom
the cash in the Cash Account shall be paid, the Bank, at its election, may
deliver such Securities and pay such cash to a bank or trust company doing
business in the State of New York to be held and disposed of pursuant to the
provisions of this Agreement, or to Authorized Persons, or may continue to
hold such Securities and cash until a certified copy of one or more
resolutions as aforesaid is delivered to the Bank. The obligations of the
parties hereto regarding the use of reasonable care indemnities and payment of
fees and expenses shall survive the termination of this Agreement.
18. Notices. Any notice or other communication from the Fund or its
agents to the Bank is to be sent to the office of the Bank at Two World Trade
Center, New York, New York 10048, Attention: Global Custody Division, or such
other address as may hereafter be given to the Fund in accordance with the
notice provisions hereunder, and any notice from the Bank to the Fund is to be
mailed postage prepaid, addressed to the Fund at the address appearing below,
or as the same may hereafter be changed on the Bank's records in accordance
with notice hereunder from the Fund.
19. Governing Law and Successors and Assigns. This Agreement shall be
governed by the law of the State of New York and shall not be assignable by
any party, but shall bind the respective successors and assigns of the Fund
and the Bank.
20. Headings. The headings of the paragraphs hereof are included for
convenience of reference only and do not form a part of this Agreement.
21. Counterpart Execution. This Agreement may be executed in any number
of counterparts with the same effect as if all parties
<PAGE>12
hereto had signed the same documents. All counterparts shall be construed
together and shall constitute one agreement.
COUNSELLORS INTERNATIONAL EQUITY
FUND, INC.
By:
Title:
Address for record:
466 Lexington Avenue
New York, NY 10017-3147
FIDUCIARY TRUST COMPANY
INTERNATIONAL
By:
Title:
<PAGE>1
April 28, 1989
Mr. Arnold M. Reichman
Managing Director
Counsellors International Equity Fund, Inc.
466 Lexington Avenue
New York, NY 10017
Dear Mr. Reichman:
Re: Amendment to Custody Agreement - Repurchase Agreements
Reference is made to the Custody Agreement between us dated April 28,
1989 (the "Agreement"). In order to provide for the short-term investment of
uncommitted cash balances in your custody account, the Agreement is hereby
amended by deleting any previous provisions relating to repurchase
transactions and adding a new section entitled "Investment of Uncommitted Cash
Balances - Repurchase Agreements" in the following form:
Investment of Uncommitted Cash Balances - Repurchase Agreements
Counsellors International Equity Fund, Inc. has authority to authorize
and hereby authorizes Fiduciary Trust Company International to invest any
uncommitted cash balances held in the Custody Account, in increments of $5,000
in repurchase transactions ("repos") in accordance with the Memorandum from
Fiduciary Trust Company International to Counsellors International Equity
Fund, Inc. dated April 28, 1989, a copy of which is attached hereto.
Fiduciary Trust Company International is also hereby authorized to execute as
agent for Counsellors International Equity Fund, Inc. a written agreement
regarding
<PAGE>2
repos with the entities specified in such Memorandum. Neither Fiduciary Trust
Company International nor any of its officers, directors, employees or agents
shall be liable for any loss or damage resulting from any action or failure to
act relating to such repos, except when it or any of them have acted
negligently, and in any event neither it nor they shall be liable for any
action or failure to act that is substantially consistent with the attached
Memorandum. Fiduciary Trust Company International shall have no liability for
any failure of the Seller (as defined in the attached Memorandum) to perform
any of its obligations under any repo agreement. Counsellors International
Equity Fund, Inc. will indemnify and reimburse Fiduciary Trust Company
International for all taxes, liabilities and expenses incurred in connection
with the repos authorized hereunder (including but not limited to those
incurred as a result of Counsellors International Equity Fund, Inc. failure to
keep securities purchased under a repo free of pledges or other transfer
obligations).
Except as provided above, the Agreement shall remain unchanged and in
full force and effect. This letter of amendment shall be governed by the laws
of the State of New York.
If the foregoing meets with your approval, please sign the enclosed copy
of this letter in the space provided and return it
<PAGE>3
to us, whereupon the Agreement will be amended in accordance with this letter.
Very truly yours,
FIDUCIARY TRUST COMPANY INTERNATIONAL
By:
Senior Vice President
AGREED:
Counsellors International Equity Fund, Inc.
By
<PAGE>4
MEMORANDUM
DATE: April 28, 1989
To: Counsellors International Equity Fund, Inc.
From: Fiduciary Trust Company International
Subject: Short-Term Investment of Cash in
Repurchase Agreements ("Repos")
Introduction
As a service to you, Fiduciary Trust Company International ("Fiduciary"),
if authorized to do so by you, will use its best efforts as your agent to
secure a return on any uncommitted cash balances held in your account by
investing such funds on an overnight (or next business day) basis in
repurchase transactions ("repos") involving securities issued or guaranteed by
the U.S. Government or an agency of the U.S. Government. There will be no
additional fee for this service, and transaction charges will not apply.
For purposes of this Memorandum, a repo is a transaction under a written
agreement between a Seller (as that term is hereinafter defined) and you,
which discloses your identity to the Seller and is signed by Fiduciary as your
agent. Under this agreement, Fiduciary agrees to purchase securities from the
Seller subject to an obligation of the Seller to repurchase the securities
from Fiduciary, and an obligation of Fiduciary to resell them to the Seller,
on the next business day, for a price (the "repurchase price") equal to the
sum of the initial purchase price and an agreed-upon amount of interest. Such
initial
<PAGE>5
purchase price will always be at least 100% of the market value of the
purchase securities at the time of the repo is agreed upon. (Inasmuch as each
repo will terminate the morning of the next business day, the daily mark-to-
market procedure to determine whether there is a margin excess or deficit does
not apply). The agreement with the Seller contains provisions protecting each
party against the other's default, and includes a promise by you that the
purchased securities will not be pledged, resold or otherwise transferred to
another person while the repo is outstanding. (A copy of the agreement with
the Seller will be provided to you upon request).
The amount of your funds used to purchase securities in a repo is
referred to in this Memorandum as an amount "invested" in a repo. Your funds
will be invested in repos only in increments of $5,000.
All repos entered into by Fiduciary for you will be entered into with
J.P. Morgan Securities Inc. (the "Seller"). J.P. Morgan Securities Inc. is a
broker/dealer registered with the SEC and a wholly owned subsidiary of J.P.
Morgan Securities Holdings Inc., a wholly owned subsidiary of J.P. Morgan &
Co. Incorporated. J.P. Morgan & Co. Incorporated has its principal offices in
New York City, has stock that is traded on the New York Stock Exchange, and
files publicly available reports under the Securities Exchange Act of 1934.
<PAGE>6
You should note that, as a purchaser of securities in a repo, you will
not (except in certain circumstances if the Seller fails to repurchase the
securities in accordance with a repo agreement) have the right to retain any
interest paid on the purchased securities or the right to retain, pledge, sell
or transfer any of such securities. Accordingly, you will not benefit from
any increase in the market value of the purchased securities while a repo is
outstanding, and the repurchase price for a repo does not depend upon the
interest paid on the purchased securities.
You should also note that all actions of Fiduciary under this Memorandum
with respect to your account are taken by Fiduciary as your agent.
Accordingly, any reference to a repo agreement between Fiduciary and the
Seller means, insofar as such agreement applies to your account, an agreement
between you (acting through Fiduciary) and the Seller, and any right or
obligation of Fiduciary under such repo agreement is your right or obligation.
By authorizing Fiduciary to invest your funds in repos under the this
Memorandum, you authorize Fiduciary, as your agent, to take such action with
respect to the purchased securities (including their subsequent sale) as it
considers appropriate if the Seller should fail to repurchase the securities
in accordance with the relevant repo agreement.
Method of Operation
By authorizing Fiduciary to invest your funds in repos under this
Memorandum, you authorize Fiduciary each day to withdraw, in
<PAGE>7
increments of $5,000, the uncommitted cash balance from your account with
Fiduciary. For administrative convenience, Fiduciary on each business day
invests in a single repo all of the funds available for such investment from
the accounts of all of its clients purchasing repos. Each client whose funds
are invested in such a repo will have an undivided pro rata interest in the
securities purchased in that repo, and will be entitled to a pro rata share of
the repurchase price for that repo.
By approximately 1:00 p.m. (New York time) on the day a repo is agreed
to, Fiduciary instructs the Federal Reserve Bank of New York (the "Reserve
Bank") (i) to pay the Seller, from a cash account maintained at the Reserve
Bank by Fiduciary (the "Cash Account"), the amount of the purchase price for
that day's repo against receipt into an account maintained at the Reserve Bank
by Fiduciary, as agent for its clients ("Repo Account"), of the purchased
securities, and (ii) to deliver the purchased securities back to the Seller on
the following business day against receipt into the Cash Account of the agreed
repurchase price.
The Transfer of the purchased securities into the Repo Account has the
effect of transferring record ownership of the purchased securities to
Fiduciary, as agent for its clients. As a result, if the record date for any
interest payable on the purchased securities occurs while the repo is
outstanding, that interest will be paid to Fiduciary. However, under the repo
agreement with the Seller, Fiduciary (as agent for its clients) is
<PAGE>8
obligated to remit to the Seller any such interest payment promptly upon its
receipt by Fiduciary.
Each increment of $5,000 of your funds invested in a repo will be
reflected in your statement as the purchase of a repo on the day it is
invested. For administrative purposes, each increment of $5,000 is treated by
Fiduciary as being continuously invested in a repo until that $5,000 increment
is no longer available for such investment. However, during that period, one
repo is completed and another one commenced each business day. On each
business day's completion of a repo in which your funds are invested,
Fiduciary will credit your account with your share of the profit generated by
such repo.
You may at any time notify Fiduciary that you wish to terminate
Fiduciary's authority to invest the uncommitted cash balance in your account
in repos. If such notice is received by Fiduciary on or before 12:00 noon on
a business day, the termination will take effect on the day the notice is
received. If the notice is received by Fiduciary after 12:00 noon on a
business day (or is received on a day which is not a business day), the
termination will take effect on the following business day.
Risks
With respect to funds invested for you by Fiduciary in a repo with J.P.
Morgan Securities Inc., the Securities Investor Protection Corporation has
taken the position that the provisions
<PAGE>9
of the Securities Investor Protection Act of 1970 does not provide protection
to you with respect to such a repo. An obligation on the part of J.P. Morgan
Securities Inc. to repurchase securities in any repo is not guaranteed by
Fiduciary or by the U.S. Government or any agency thereof that may be an
issuer or guarantor of any of the purchased securities.
If the Seller fails to repurchase securities in accordance with a repo
agreement, you may suffer losses because of delays and costs in liquidating
the purchased securities. Such delays could result in losses to you if the
market value of the security diminishes before they can be sold. To the
extent that your share of the repurchase price for any purchased securities
exceeds your share of the amount obtained upon liquidation of such securities,
you would be an unsecured creditor of the Seller. If a bankruptcy or other
insolvency proceeding with respect to the Seller commenced while a repo was
outstanding, there could be a substantial delay in the liquidation of the
purchased securities (during which time interest may cease to accrue).
<PAGE>10
FEE FOR INTERNATIONAL CUSTODY SERVICES
The following fee schedule will apply to the Counsellors International
Equity Fund.
Base Fee
--------
20 basis points on the first $50 million of market value
16 basis points on the next $50 million of market value
13.6 basis points on the next $100 million of market value
12 basis points on the next $100 million of market value
10.4 basis points on the next $200 million of market value
8 basis points on the balance
plus any additional extraordinary out of pocket expense (such as, but
not limited to, any stamp duty assessed on the movement of
securities).
- ------------------------------------------------------------------------------
All compensation will be calculated and charged/billed at the end of each
calendar month.
Agreed To and Accepted By Agreed To and Accepted By
Counsellors International Fiduciary Trust Company
Equity Fund International
By: By:
Dated: Dated:
<PAGE>1
AMENDMENT TO AGREEMENTS
This Amendment is made as of ____________, 1995 by and between FIDUCIARY
TRUST COMPANY INTERNATIONAL (the "Bank") and each of the investment companies
listed on Schedule A attached hereto (together the "Funds" and each a "Fund")
to amend the Agreement between the Bank and each of the Funds listed on such
Schedule A (each a "Custodian Agreement").
WITNESSETH:
WHEREAS, the Funds are registered as an open-end management investment
companies under the Investment Company Act of 1940, as amended; and
WHEREAS, the Bank serves as custodian of the Funds' assets pursuant to a
Custodian Agreement;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Section 9 of each Agreement is hereby replaced in its entirety with
the following:
9. Instructions. As used in this Agreement, the term "Instructions"
means instructions of (or on behalf of) the Fund received by the Bank,
via telephone, telex, TWX, facsimile transmission, bank wire or other
teleprocess or electronic instruction system acceptable to the Bank which
the Bank believes in good faith to have been given by two Authorized
Persons or which are transmitted with proper testing or authentication
pusuant to terms and conditions which the Bank may specify.
Any instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in a writing signed by two Authorized Persons
(which confirmation may bear the facsimile signature of such Persons),
but the Fund will hold the Bank harmless for any failure on the part of
the Fund or its agents to send such confirmation in writing, the failure
of such confirmation to conform to the telephone instructions received,
and the Bank's failure to produce such confirmation at any subsequent
time. Unless otherwise expressly provided, all Instructions shall
continue in full force and effect until cancelled or superseded. If the
Bank requires test arrangements, authentication methods or other security
devices to be used with respect to Instructions, any Instructions
thereafter shall be given and processed in accordance with such terms and
conditions for the use of
<PAGE>2
such arrangements, methods or devices as the Bank may put into effect and
modify from time to time. The Fund shall safeguard and shall cause its
agents, if applicable, to safeguard any testkeys, identification codes or
other security devices which the Bank shall make available to the Fund or its
agents. The Bank may electronically record any instructions given by
telephone, and any other telephone discussions, with respect to the Custody
Account.
2. Except as specifically modified herein, the terms of each Agreement
remain in full force and effect.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment
to be executed in its name and on its behalf by its duly authorized
representative as of the date first above written.
COUNSELLORS GLOBAL FIXED INCOME
FUND, INC.
COUNSELLORS INTERNATIONAL EQUITY
FUND, INC.
WARBURG, PINCUS INSTITUTIONAL
FUND, INC.
By:
Name:
Title:
FIDUCIARY TRUST COMPANY
INTERNATIONAL
By:
Name:
Title:
<PAGE>3
SCHEDULE A
FUND CUSTODIAN AGREEMENT DATED
---- -------------------------
Counsellors Global Fixed
Income Fund, Inc. April 28, 1989
Counsellors International
Equity Fund, Inc. November 1, 1990
Warburg, Pincus Institutional
Fund, Inc.-
International Equity
Portfolio August 25, 1992
Global Fixed Income
Portfolio August 25, 1992
<PAGE>1
CO-ADMINISTRATION AGREEMENT
TERMS AND CONDITIONS
This Agreement is made as of February 28, 1994 by and between
Warburg, Pincus International Equity Fund, Inc. (the "Fund"), a Maryland
corporation, and PFPC Inc. ("PFPC"), a Delaware corporation, which is an
indirect, wholly-owned subsidiary of PNC Bank Corp.
The Fund is registered as an open-end investment company under the
Investment Company Act of 1940 (the "1940 Act"), as amended. The Fund wishes
to retain PFPC to provide certain administration and accounting services, and
PFPC wishes to furnish such services.
In consideration of the promises and mutual covenants herein
contained, the parties agree as follows:
1. Definitions.
(a) "Authorized Person." The term "Authorized Person" shall mean
any officer of the Fund and any other person, who is duly authorized by the
Fund's Governing Board, to give Oral and Written Instructions on behalf of the
Fund. Such persons are listed in the Certificate attached hereto as the
Authorized Persons Appendix to each Services Attachment to this Agreement. If
PFPC provides more than one service hereunder, the Fund's designation of
Authorized Persons may vary by service.
(b) "CFTC." The term "CFTC" shall mean the Commodities Futures
Trading Commission.
(c) "Governing Board." The Term "Governing Board" shall mean the
Fund's Board of Directors if the Fund is a corporation or the Fund's Board of
Trustees if the Fund is a trust, or, where duly authorized, a competent
committee thereof.
(d) "Oral Instructions." The term "Oral Instructions" shall mean
oral instructions received by PFPC from an Authorized Person or from a person
reasonably believed by PFPC to be an Authorized Person.
(e) "PNC." The term "PNC" shall mean PNC Bank or a subsidiary or
affiliate of PNC Bank.
(f) "SEC." The term "SEC" shall mean the Securities and Exchange
Commission.
<PAGE>2
(g) "Securities and Commodities Laws." The terms the "1933 Act"
shall mean the Securities Act of 1933, the "1934 Act" shall mean the
Securities Exchange Act of 1934, the "1940 Act" shall mean the Investment
Company Act 1940, as amended, and the "CEA" shall mean the Commodities
Exchange Act, as amended.
(h) "Services." The term "Services" shall mean the service
provided to the Fund by PFPC.
(i) "Shares." The terms "Shares" shall mean the shares of stock of
any series or class of the Fund, or, where appropriate, units of beneficial
interest in a trust where the Fund is organized as a Trust.
(j) "Property." The term "Property" shall mean:
(i) any and all securities and other investment items
which the Fund may from time to time deposit, or
cause to be deposited, with PNC or which PNC may from
time to time hold for the Fund;
(ii) all income in respect of any of such securities or
other investment items;
(iii) all proceeds of the sale of any of such securities or
investment items; and
(iv) all proceeds of the sale of securities issued by the
Fund, which are received by PNC from time to time,
from or on behalf of the Fund.
(k) "Written Instructions." The term "Written Instructions" shall
mean written instructions signed by one Authorized Person and received by
PFPC. The instructions may be delivered by hand, mail, tested telegram,
cable, telex or facsimile sending device.
2. Appointment.
The Fund hereby appoints PFPC to provide administration and
accounting services, in accordance with the terms set forth in this Agreement.
PFPC accepts such appointment and agrees to furnish such services.
3. Delivery of Documents.
The Fund has provided or, where applicable, will provide PFPC with
the following:
<PAGE>3
(a) certified or authenticated copies of the resolutions of the
Fund's Governing Board, approving the appointment of PNC or its
affiliates to provide services;
(b) a copy of the Fund's most recent effective registration
statement;
(c) a copy of the Fund's advisory agreement or agreements;
(d) a copy of the Fund's distribution agreement or agreements;
(e) a copy of the Fund's administration or co-administration
agreement if PFPC is not providing the Fund with such services;
(f) copies of any shareholder servicing agreements made in respect
of the Fund; and
(g) certified or authenticated copies of any and all amendments or
supplements to the foregoing.
4. Compliance with Government rules and Regulations. PFPC undertakes
to comply with all applicable requirements of the 1933 Act, the 1934 Act, the
1940 Act, and the CEA, and any laws, rules and regulations of governmental
authorities having jurisdiction with respect to all duties to be performed by
PFPC hereunder. Except as specifically set forth herein, PFPC assumes no
responsibility for such compliance by the Fund.
5. Instructions.
Unless otherwise provided in this Agreement, PFPC shall act only
upon Oral and Written Instructions.
PFPC shall be entitled to rely upon any Oral and Written
Instructions it receives from an Authorized Person (or from a person
reasonably believed by PFPC to be an Authorized Person) pursuant to this
Agreement. PFPC may assume that any Oral or Written Instruction received
hereunder is not in any way inconsistent with the provisions of organizational
documents or this Agreement or of any vote, resolution or proceeding of the
Fund's Governing Board or of the Fund's shareholders.
The Fund agrees to forward to PFPC Written Instructions confirming
Oral Instructions so that PFPC receives the Written Instructions by the close
of business on the same day that such
<PAGE>4
Oral Instructions are received. The fact that such confirming Written
Instructions are not received by PFPC shall in no way invalidate the
transactions or enforceability of the transactions authorized by the Oral
Instructions. The Fund further agrees that PFPC shall incur no liability to
the Fund in acting upon Oral or Written Instructions provided such
instructions reasonably appear to have been received from an Authorized
Person.
6. Right to Receive Advice.
(a) Advice of the Fund. If PFPC is in doubt as to any action it
should or should not take, PFPC may request directions or advice, including
Oral or Written Instructions, from the Fund.
(b) Advice of Counsel. If PFPC shall be in doubt as to any
questions of law pertaining to any action it should or should not take, PFPC
may request advice at its own cost from such counsel of its own choosing (who
may be counsel for the Fund, the Fund's advisor or PFPC, at the option of
PFPC).
(c) Conflicting Advice. In the event of a conflict between
directions, advice or Oral or Written Instructions PNC receives from the Fund,
and the advice it receives from counsel, PFPC shall be entitled to rely upon
and follow the advice of counsel.
(d) Protection of PFPC. PFPC shall be protected in any action it
takes or does not take in reliance upon directions, advice or Oral or Written
Instructions it receives from the Fund or from counsel and which PFPC
believes, in good faith, to be consistent with those directions, advice and
Oral or Written Instructions.
Nothing in this paragraph shall be construed so as to impose an
obligation upon PFPC (i) to seek such directions, advice or Oral or Written
Instructions, or (ii) to act in accordance with such directions, advice or
Oral or Written Instructions unless, under the terms of other provisions of
this Agreement, the same is a condition of PFPC's properly taking or not
taking such action.
7. Records.
The book and records pertaining to the Fund, which are in the
possession of PFPC, shall be the property of the Fund. Such books and records
shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws, rules and regulations. The Fund, or the Fund's
Authorized Persons, shall have access to such books and records at all times
<PAGE>5
during PFPC's normal business hours. Upon the reasonable request of the Fund,
copies of any such books and records shall be provided by PFPC to the Fund or
to an Authorized Person of the Fund, at the Fund's expense.
PFPC shall keep the following records:
(a) all books and records with respect to the Fund's books of
account;
(b) records of the Fund's securities transactions;
(c) all other books and records as PFPC is required to maintain
pursuant to Rule 31a-1 of the 1940 Act and as specifically set
forth in Appendix A hereto.
8. Confidentiality.
PPFC agrees to keep confidential all records of the Fund and
information relative to the Fund and its shareholders (past, present and
potential), unless the release of such records or information is otherwise
consented to, in writing, by the Fund. The Fund agrees that such consent
shall not be unreasonably withheld. The Fund further agrees that, should PFPC
be required to provide such information or records to duly constituted
authorities (who may institute civil or criminal contempt proceedings for
failure to comply), PFPC shall not be required to seek the Fund's consent
prior to disclosing such information.
9. Liaison with Accountants.
PFPC shall act as liaison with the Fund's independent public
accountants and shall provide account analyses, fiscal year summaries, and
other audit-related schedules. PFPC shall take all reasonable action in the
performance of its obligations under this Agreement to assure that the
necessary information is made available to such accountants for the expression
of their opinion, as such may be required by the Fund from time to time.
10. Disaster Recovery.
PFPC shall enter into and shall maintain in effect with appropriate
parties one or more agreements making reasonable provision of emergency use of
electronic data processing equipment to the extent appropriate equipment is
available. In the event of equipment failures, PFPC shall, at no additional
expense to the Fund, take reasonable steps to minimize service interruptions
but shall have no liability with respect thereto.
<PAGE>6
11. Compensation.
As compensation for services rendered by PFPC during the term of
this Agreement, the Fund will pay to PFPC a fee or fees as may be agreed to in
writing by the Fund and Provident.
12. Indemnification.
The Fund agrees to indemnify and hold harmless PFPC and its nominees
from all taxes, charges, expenses, assessments, claims and liabilities
(including, without limitation, liabilities arising under the 1933 Act, the
1934 Act, the 1940 Act, the CEA, and any state and foreign securities and blue
sky laws, and amendments thereto, and expenses, including (without limitation)
attorneys' fees and disbursements, arising directly or indirectly from any
action which PFPC takes or does not take (i) at the request or on the
direction of or in reliance on the advice of the Fund or (ii) upon Oral or
Written Instructions. Neither PFPC, nor any of its nominees, shall be
indemnified against any liability to the Fund or to its shareholders (or any
expenses incident to such liability) arising out of PFPC's own willful
misfeasance, bad faith, negligence or reckless disregard of its duties and
obligations under this Agreement.
13. Responsibility of PFPC.
PFPC shall be under no duty to take any action on behalf of the Fund
except as specifically set forth herein or as may be specifically agreed to by
PFPC, in writing. PFPC shall be obligated to exercise care and diligence in
the performance of its duties hereunder, to act in good faith and to use its
best efforts, within reasonable limits, in performing services provided for
under this Agreement. PFPC shall be responsible for its own negligent failure
to perform its duties under this Agreement. Notwithstanding the foregoing,
PFPC shall not be responsible for losses beyond its control, provided that
PFPC has acted in accordance with the standard of care set forth above; and
provided further that PFPC shall only be responsible for that portion of
losses or damages suffered by the Fund that are attributable to the negligence
of PFPC.
Without limiting the generality of the foregoing or of any other
provision of this Agreement, PFPC, in connection with its duties under this
Agreement, shall not be liable for (a) the validity or invalidity or authority
or lack thereof of any Oral or Written Instruction, notice or other instrument
which conforms to the applicable requirements of this Agreement, and which
PFPC reasonably believes to be genuine; or (b) delays or errors or loss of
data occurring by reason of circumstances beyond PFPC's
<PAGE>7
control, including acts of civil or military authority, national emergencies,
labor difficulties, fire, flood or catastrophe, acts of God, insurrection,
war, riots or failure of the mails, transportation, communication or power
supply.
Notwithstanding anything in this Agreement to the contrary, PFPC
shall have no liability to the Fund for any consequential, special or indirect
losses or damages which the Fund may incur or suffer by or as a consequence of
PFPC's performance of the services provided hereunder, whether or not the
likelihood of such losses or damages was known by PFPC.
14. Description of Accounting Services.
(a) Services on a Continuing Basis. PFPC will perform the
following accounting functions if required:
(i) Journalize the Fund's investment, capital share and
income and expense activities;
(ii) Verify investment buy/sell trade tickets when
received from the Fund's investment advisor and
transmit trades to the Fund's custodian for proper
settlement;
(iii) Maintain individual ledgers for investment
securities;
(iv) Maintain historical tax lots for each security;
(v) Reconcile cash and investment balances of the Fund
with the custodian, and provide the Fund's investment
advisor with the beginning cash balance available for
investment purposes;
(vi) Update the cash availability throughout the day as
required by the Fund's advisor;
(vii) Post to and prepare the Fund's Statement of Assets
and Liabilities and the Statement of Operations;
(viii) Calculate various contractual expenses (e.q.,
advisory and custody fees);
<PAGE>8
(ix) Monitor the expense accruals and notify Fund
management of any proposed adjustments;
(x) Control all disbursements from the Fund and authorize
such disbursements upon Written Instructions;
(xi) Calculate capital gains and losses;
(xii) Determine the Fund's net income;
(xiii) Obtain security market quotes from independent
pricing services approved by the Advisor, or if such
quotes are unavailable, then obtain such prices from
the Advisor, and in either case calculate the market
value of the Fund's investments;
(xiv) Transmit or mail a copy of the daily portfolio
valuation to the Advisor;
(xv) Compute the net asset value of the Fund;
(xvi) As appropriate, compute the Fund's yields, total
return, expense ratios, portfolio turnover rate, and,
if required, portfolio average dollar-weighted
maturity; and
(xvii) Prepare a monthly financial statement, which will
include the following items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement
Schedule of Capital Gains and Losses.
15. Description of Administration Services.
(a) Services on a Continuing Basis.
(i) Prepare quarterly broker security transactions
summaries;
(ii) Prepare monthly security transaction listings;
<PAGE>9
(iii) Prepare for execution and file the Fund's Federal and
state tax returns;
(iv) Assist in the preparation of the Fund's Semi-Annual
Reports with the SEC on Form N-SAR;
(v) Assist in the preparation of the Fund's annual and
semi-annual shareholder reports;
(vi) Assist with the preparation of registration
statements and other filings relating to the
registration of Shares; and
(vii) Monitor the Fund's status as a regulated investment
company under Sub-Chapter M of the Internal Revenue
Code of 1986, as amended.
16. Duration and Termination.
This Agreement shall continue until terminated by the Fund or by
PFPC on sixty (60) days prior written notice to the other party.
17. Notices.
All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. If notice is sent by confirming telegram, cable,
telex or facsimile sending device, it shall be deemed to have been given
immediately. If notice is sent by first-class mail, it shall be deemed to
have been given three days after it has been mailed. If notice is sent by
messenger, it shall be deemed to have been given on the day it is delivered.
Notices shall be addressed (a) if to PFPC at PFPC's address, 103 Bellevue
Parkway, Wilmington, Delaware 19809; (b) if to the Fund, at the address of the
Fund; or (c) if to neither of the foregoing, at such other address as shall
have been notified to the sender of any such Notice or other communication.
18. Amendments.
This Agreement, or any term thereof, may be changed or waived only
by written amendment, signed by the party against whom enforcement of such
change or waiver is sought.
<PAGE>10
19. Delegation.
PFPC may assign its rights and delegate its duties hereunder to any
wholly-owned direct or indirect subsidiary of PNC Bank or PNC Bank Corp,
provided that (i) PFPC gives the Fund thirty (30) days prior written notice;
(ii) the delegate agrees with PFPC to comply with all relevant provisions of
the 1940 Act; and (iii) PFPC and such delegate promptly provide such
information as the Fund may request, and respond to such questions as the Fund
may ask, relative to the delegation, including (without limitation) the
capabilities of the delegate.
20. Counterparts.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
21. Further Actions.
Each party agrees to perform such further acts and execute such
further documents as are necessary to effectuate the purposes hereof.
22. Miscellaneous.
This Agreement embodies the entire agreement and understanding
between the parties and supersedes all prior agreements and understandings
relating to the subject matter hereof, provided that the parties may embody in
one or more separate documents their agreement, if any, with respect to
delegated and/or Oral Instructions.
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
This Agreement shall be deemed to be a contract made in Delaware and
governed by Delaware law. If any provision of this agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby. This Agreement shall be binding
and shall inure to the benefit of the parties hereto and their respective
successors.
<PAGE>11
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their officers designated below on the day and year first above
written.
PFPC INC.
By:
WARBURG, PINCUS INTERNATIONAL
EQUITY FUND, INC.
By:
<PAGE>
APPENDIX A
None.
<PAGE>1
February 28, 1994
Warburg, Pincus International
Equity Fund, Inc.
466 Lexington Avenue
New York, New York 10017
RE: CO-ADMINISTRATION SERVICE FEES
Gentlemen:
This letter constitutes our agreement with respect to compensation
to be paid to PFPC Inc. ("PFPC") under the terms of a Co-Administration
Agreement dated February 28, 1994 between you (the "Fund") and PFPC. Pursuant
to Paragraph 11 of that Agreement, and in consideration of the services to be
provided to you, you will pay PFPC an annual co-administration fee, to be
calculated daily and paid monthly. You will also reimburse PFPC for its
out-of-pocket expenses incurred on behalf of the Fund, including, but not
limited to: postage and handling, telephone, telex, Federal Express and
outside pricing service charges.
The annual administration and accounting fee shall be .12% of the
Fund's 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, with
a minimum annual fee of $75,000.00.
In each month the Fund shall pay to PFPC the greater of the asset
based fee as calculated above or the minimum fee. The fee for the period from
the day of the year this agreement is entered into until the end of that year
shall be pro-rated according to the proportion which such period bears to the
full annual period.
If the foregoing accurately sets forth our agreement, and you intend
to be legally bound thereby, please execute a copy of this letter and return
it to us.
Very truly yours,
PFPC INC.
By:
<PAGE>2
Accepted: WARBURG, PINCUS INTERNATIONAL EQUITY FUND, INC.
By:
<PAGE>1
CONSENT OF COUNSEL
Counsellors International Equity Fund, Inc.
We hereby consent to being named in the Statement of Additional
Information included in Post-Effective Amendment No. 10 (the "Amendment") to
the Registration Statement on Form N-1A (Securities Act File No. 33-27031,
Investment Company Act File No. 811-5765) of Counsellors International Equity
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.
Willkie Farr & Gallagher
September 20, 1995
New York, New York
<PAGE>1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Post-Effective Amendment No. 10 to the
Registration Statement under the Securities Act of 1933 on Form N-1A (File No.
33-27031) of our report dated December 12, 1994 on our audit of the financial
statements and financial highlights of Counsellors International Equity Fund,
Inc. We also consent to the reference to our Firm under the captions
"Financial Highlights" and "Auditors and Counsel."
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
September 22, 1995
<PAGE>1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" in the Prospectus and "Auditors and Counsel" in the Statement of
Additional Information and to the incorporation by reference of our report
dated December 15, 1992 in this Registration Statement (Form N-1A No. 33-
27031) of Counsellors International Equity Fund, Inc.
ERNST & YOUNG LLP
New York, New York
September 22, 1995
<PAGE>1
PURCHASE AGREEMENT
Counsellors International Equity Fund, Inc. (the "Fund"), a
corporation organized under the laws of the State of Maryland, and E.M.
Warburg, Pincus & Co., Inc. ("EMW") hereby agree as follows:
1. The Fund offers EMW and EMW hereby purchases 10,000 shares of
the Fund having a par value $.001 per share (the "Shares") at a price of
$10.00 per Share (the "Initial Shares"). EMW hereby acknowledges receipt of
one certificate representing the Initial Shares and the Fund hereby
acknowledges receipt from EMW of $100,000.00 in full payment for the Initial
Shares.
2. EMW represents and warrants to the Fund that the Initial Shares
are being acquired for investment purposes and not for the purpose of
distributing them.
3. EMW agrees that if any holder of the Initial Shares redeems any
Initial Share in the Fund before five years after the date upon which the Fund
commences its investment activities, the redemption proceeds will be reduced
by the amount of unamortized organizational expenses, in the same proportion
as the number of Initial Shares being redeemed bears to the number of Initial
Shares outstanding at the time of redemption. The parties hereby acknowledge
that any Shares acquired by EMW other than the Initial Shares have not been
acquired to fulfill the requirements of Section 14 of the Investment Company
Act of 1940 and, if redeemed, their redemption proceeds will not be subject to
<PAGE>2
reduction based on the unamortized organizational expenses of the Fund.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the 27th day of April, 1989.
COUNSELLORS INTERNATIONAL
EQUITY FUND, INC.
By:
ATTEST:
E.M. WARBURG, PINCUS & CO., INC.
By:
ATTEST:
<PAGE>1
SHAREHOLDER SERVICES PLAN
This Shareholder Services Plan (the "Plan") is adopted by
Counsellors International Equity Fund, Inc., a corporation organized under the
laws of the State of Maryland (the "Fund"), subject to the following terms and
conditions:
Section 1. Servicing Agreements; Annual Fee.
Any officer of the Fund is authorized to execute and deliver, in the
name and on behalf of the Fund, written agreements in substantially the form
attached hereto or in any form duly approved by the Board of Directors of the
Fund (the "Servicing Agreements") with institutional shareholders of record
("Service Organizations") of shares of the Fund's common stock, par value
$.001 per share, designated Common Stock - Series 1 (the "Series 1 Shares").
Pursuant to the Servicing Agreements, Service Organizations will be paid an
annual fee for providing certain shareholder servicing, administrative and
accounting services to their customers or clients who beneficially own the
Series 1 Shares ("Customers"). The annual fee paid to a Service Organization
under the Plan will be calculated daily and paid monthly will consist of a
service fee at an annual rate of up to .25% of the average daily net assets of
the Series 1 Shares held by the Service Organization on behalf of its
customers (the "Customers' Shares") and an administrative fee at an annual
rate of up to .25% of the average daily net assets of the Customers' Shares.
<PAGE>2
Section 2. Services.
The service fee paid to Service Organizations under Section 1 of the
Plan will compensate Service Organizations for (i) personal service and/or the
maintenance of shareholder accounts, including, but not limited to, (a)
responding to Customer inquiries, (b) providing information on Customer
investments and (c) providing other shareholder liaison services. The
administrative fee paid to Service Organizations under Section 1 of the Plan
will compensate Service Organizations for certain sub-transfer agency,
administrative and/or sub-accounting services to their Customers, including,
but not limited to: (a) aggregating and processing purchase and redemption
requests from Customers and placing net purchase and redemption orders with
the Fund's distributor or transfer agent; (b) providing Customers with a
service that invests the assets of their accounts in Fund Shares;
(c) processing dividend payments from the Fund on behalf of Customers;
(d) providing information periodically to Customers showing their positions in
Fund Shares; (e) arranging for bank wires; (f) providing sub-accounting with
respect to Series 1 Shares beneficially owned by Customers or the information
to the Fund necessary for sub-accounting; (g) forwarding shareholder
communications from the Fund (for example, proxies, shareholder reports,
annual and semi-annual financial statements and dividend, distribution and tax
notices) to Customers, if required
<PAGE>3
by law; and (h) providing other similar services to the extent permitted under
applicable statutes, rules and regulations.
Section 3. Monitoring.
PFPC, Inc., the Fund's administrator and transfer agent ("PFPC"),
shall monitor the arrangements pertaining to the Fund's Servicing Agreements
with Service Organizations.
Section 4. Approval by Directors.
The Plan will not take effect and payments under any related
agreement will not be made until the Plan and such agreement are approved by a
majority vote of both (a) the full Board of Directors of the Fund and
(b) those Directors who are not interested persons of the Fund and who have no
direct or indirect financial interest in the operation of the Plan or in any
agreements related to it (the "Qualified Directors"), cast in person at a
meeting called for the purpose of voting on the Plan and the related
agreements.
Section 5. Continuance of the Plan.
The Plan will continue in effect for so long as its continuance is
specifically approved at least annually by the Fund's Board of Directors in
the manner described in Section 4 above.
<PAGE>4
Section 6. Termination.
The Plan may be terminated at any time by a majority vote of the
Qualified Directors or by a majority vote of the outstanding Series 1 Shares
of the Fund.
Section 7. Amendments.
The Plan may be amended at any time by the Board of Directors,
provided that no material amendment to the Plan shall become effective unless
approved by the Fund's Board of Directors in the manner described in Section 4
above.
Section 8. Selection of Certain Directors.
While the Plan is in effect, the selection and nomination of the
Fund's Directors who are not interested persons of the Fund will be committed
to the discretion of the Directors then in office who are not interested
persons of the Fund.
Section 9. Written Reports.
In each year during which the Plan remains in effect, PFPC will
furnish to the Fund's Board of Directors, and the Board will review, at least
quarterly, written reports, which set out the amounts expended under the Plan
and the purposes for which those expenditures were made.
Section 10. Preservation of Materials.
The Fund will preserve copies of the Plan, any agreement relating to
the Plan and any report made pursuant to Section 9 above, for a period of not
less than six years (the
<PAGE>5
first two years in an easily accessible place) from the date of the Plan,
agreement or report.
Section 11. Meanings of Certain Terms.
As used in the Plan, the terms "interested person" will be deemed to
have the same meaning that the term has under the Investment Company Act of
1940 and the rules and regulations thereunder, subject to any exemption that
may be granted to the Fund under that Act by the Securities and Exchange
Commission.
IN WITNESS WHEREOF, the Fund has executed the Plan as of April 14,
1993.
COUNSELLORS INTERNATIONAL EQUITY
FUND, INC.
By:
President
Acknowledged this
day of April, 1993.
PFPC, INC.
By:
Title:
<PAGE>1
DISTRIBUTION PLAN
This Distribution Plan (the "Plan") is adopted in accordance with
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act"), by Counsellors International Equity Fund, Inc., a corporation organized
under the laws of the State of Maryland (the "Fund"), subject to the following
terms and conditions:
Section 1. Distribution Agreements; Annual Fee.
Any officer of the Fund is authorized to execute and deliver, in the
name and on behalf of the Fund, written agreements in substantially the form
attached hereto or in any form duly approved by the Board of Directors of the
Fund (the "Distribution Agreements") with institutional shareholders of record
("Service Organizations") of shares of the Fund's common stock, par value
$.001 per share, designated Common Stock - Series 2 (the "Series 2 Shares").
Pursuant to the Distribution Agreements, Service Organizations will be paid an
annual fee for providing (a) services primarily intended to result in the sale
of Fund Shares ("Distribution Services"), (b) shareholder servicing to their
customers or clients who beneficially own the Series 2 Shares ("Customers")
("Shareholder Services"), and (c) administrative and accounting services to
Customers ("Administrative Services"). A Service Organization will be paid an
annual service fee under the Plan calculated daily and paid monthly at an
annual rate of up to .25% of the average daily net
<PAGE>2
assets of the Series 2 Shares held by the Service Organization on behalf of
its Customers ("Customers' Shares") with respect to Shareholder Services and
an annual distribution fee of up to .50% of the average daily net assets of
Customers' Shares with respect to Distribution Services and Administrative
Services.
Section 2. Services.
The annual fee paid to Service Organizations under Section 1 of the
Plan with respect to Distribution Services will compensate Service
Organizations to cover certain expenses primarily intended to result in the
sale of the Fund's shares, including, but not limited to: (a) costs of
payments made to employees that engage in the distribution of the Fund's
shares; (b) payments made to, and expenses of, persons who provide support
services in connection with the distribution of the Fund's shares, including,
but not limited to, office space and equipment, telephone facilities,
processing shareholder transactions and providing any other shareholder
services not otherwise provided by the Fund's transfer agent; (c) costs
relating to the formulation and implementation of marketing and promotional
activities, including, but not limited to, direct mail promotions and
television, radio, newspaper, magazine and other mass media advertising; (d)
costs of printing and distributing prospectuses, statements of additional
information and reports of the Fund to prospective shareholders of the Fund;
<PAGE>3
(e) costs involved in preparing, printing and distributing sales literature
pertaining to the Fund; and (f) costs involved in obtaining whatever
information, analyses and reports with respect to marketing and promotional
activities that the Fund may, from time to time, deem advisable.
The annual fee paid to Service Organizations under Section 1 of the
Plan with respect to Shareholder Services will compensate Service
Organizations for personal service and/or the maintenance of shareholder
accounts, including but not limited to (a) responding to Customer inquiries,
(b) providing information on Customer investments and (c) providing other
shareholder liaison services.
The annual fee paid to Service Organizations under Section 1 of the
Plan with respect to Administrative Services will compensate Service
Organizations for administrative and accounting services to their Customers,
including, but not limited to: (a) aggregating and processing purchase and
redemption requests from Customers and placing net purchase and redemption
orders with the Fund's distributor or transfer agent; (b) providing Customers
with a service that invests the assets of their accounts in Fund Shares;
(c) processing dividend payments from the Fund on behalf of Customers;
(d) providing information periodically to Customers showing their positions in
Fund Shares; (e) arranging for bank wires; (f) providing sub-accounting with
<PAGE>4
respect to Series 2 Shares beneficially owned by Customers or the information
to the Fund necessary for sub-accounting; (g) forwarding shareholder
communications from the Fund (for example, proxies, shareholder reports,
annual and semi-annual financial statements and dividend, distribution and tax
notices) to Customers, if required by law; and (h) providing other similar
services to the extent permitted under applicable statutes, rules and
regulations.
Section 3. Monitoring.
PFPC, Inc., the Fund's administrator and transfer agent ("PFPC"),
shall monitor the arrangements pertaining to the Fund's Distribution
Agreements with Service Organizations.
Section 4. Approval by Shareholders.
The Plan will not take effect, and no fee will be payable in
accordance with Section 1 of the Plan until the Plan has been approved by a
vote of at least a majority of the outstanding Series 2 Shares.
Section 5. Approval by Directors.
The Plan will not take effect and payments under any related
agreement will not be made until the Plan and such agreement are approved by a
majority vote of both (a) the full Board of Directors of the Fund and
(b) those Directors who are not interested persons of the Fund and who have no
direct or indirect financial interest in the operation of the Plan or in
<PAGE>5
any agreements related to it (the "Qualified Directors"), cast in person at a
meeting called for the purpose of voting on the Plan and the related
agreements.
Section 6. Continuance of the Plan.
The Plan will continue in effect for so long as its continuance is
specifically approved at least annually by the Fund's Board of Directors in
the manner described in Section 5 above.
Section 7. Termination.
The Plan may be terminated at any time by a majority vote of the
Qualified Directors or by a majority vote of the outstanding Series 2 Shares.
Section 8. Amendments.
The Plan may be amended at any time by the Board of Directors,
provided that no material amendment to the Plan shall become effective unless
approved by the Fund's Board of Directors in the manner described in Section 5
above.
Section 9. Selection of Certain Directors.
While the Plan is in effect, the selection and nomination of the
Fund's Directors who are not interested persons of the Fund will be committed
to the discretion of the Directors then in office who are not interested
persons of the Fund.
<PAGE>6
Section 10. Written Reports.
In each year during which the Plan remains in effect, PFPC will
furnish to the Fund's Board of Directors, and the Board will review, at least
quarterly, written reports, which set out the amounts expended under the Plan
and the purposes for which those expenditures were made.
Section 11. Preservation of Materials.
The Fund will preserve copies of the Plan, any agreement relating to
the Plan and any report made pursuant to Section 10 above, for a period of not
less than six years (the first two years in an easily accessible place) from
the date of the Plan, agreement or report.
Section 12. Meanings of Certain Terms.
As used in the Plan, the terms "interested person" will be deemed to
have the same meaning that the term has under the 1940 Act and the rules and
regulations thereunder, subject to any exemption that may be granted to the
Fund under the 1940 Act by the Securities and Exchange Commission.
<PAGE>7
IN WITNESS WHEREOF, the Fund has executed the Plan as of April 14,
1993.
COUNSELLORS INTERNATIONAL EQUITY
FUND, INC.
By:
President
Acknowledged this
day of April, 1993.
PFPC, INC.
By:
Title:
<PAGE>1
WARBURG PINCUS CASH RESERVE, NEW YORK TAX EXEMPT, FIXED INCOME, GLOBAL FIXED
INCOME, INTERMEDIATE MATURITY GOVERNMENT, NEW YORK INTERMEDIATE MUNICIPAL,
CAPITAL APPRECIATION, EMERGING GROWTH, and INTERNATIONAL EQUITY FUNDS
Rule 18f-3 Plan
Rule 18f-3 (the "Rule") under the Investment Company Act of 1940, as
amended (the "1940 Act"), requires that the Board of an investment company
desiring to offer multiple classes pursuant to the Rule adopt a plan setting
forth the separate arrangement and expense allocation of each class, and any
related conversion features or exchange privileges. The differences in
distribution arrangements and expenses among these classes of shares, and the
exchange features of each class, are set forth below in this Plan, which is
subject to change, to the extent permitted by law and by the governing
documents of each Fund, by action of the Board of each Fund.
The Board, including a majority of the non-interested Board members, of
each of the investment companies, or series thereof, listed on Schedule A
attached hereto (each, a "Fund") which desires to offer multiple classes has
determined that the following plan is in the best interests of each class
individually and the Fund as a whole:
1. Class Designation: Fund shares shall be divided into Common Shares
("Common Shares"), Common Shares - Series 1 ("Series 1 Shares") and Common
Shares - Series 2 ("Series 2 Shares").
2. Differences in Services: Support services will be provided by
financial institutions and/or retirement plans to customers and plan
participants who beneficially own Series 1 Shares or Series 2 Shares, as the
case may be; distribution assistance will also be provided in connection with
Series 2 Shares.
3. Differences in Distribution Arrangements: Common Shares are sold to
the general public and are not subject to any annual distribution fee.
Specified minimum initial and subsequent purchase amounts are applicable to
the Common Shares.
Series 1 Shares may be sold to certain financial institutions and can be
charged a shareholder service fee payable at an annual rate of up to .25%, and
an administrative fee payable at an annual rate of up to .25%, of the average
daily net assets of such Class pursuant to a Shareholder Services Plan.
<PAGE>2
Series 2 Shares are designed for institutional investors and are
available for purchase by financial institutions investing on behalf of their
customers and by retirement plans that make a Fund an investment option for
participants in the Plans (collectively, "Institutions"). Series 2 Shares are
charged a shareholder service fee payable at an annual rate of up to .25%, and
a distribution fee payable at an annual rate of up to .50%, of the average
daily net assets of such Class under a Distribution Plan adopted pursuant to
Rule 12b-1 under the 1940 Act. There is no minimum amount of initial or
subsequent purchases of Series 2 Shares imposed on Institutions.
4. Expense Allocation. The following expenses shall be allocated, to
the extent practicable, on a Class-by-Class basis: (a) fees under the
Distribution Plan and Shareholder Services Plan; (b) printing and postage
expenses related to preparing and distributing materials, such as shareholder
reports, prospectuses and proxies, to current shareholders of a specific
Class; (c) Securities and Exchange Commission and Blue Sky registration fees
incurred by a specific Class; (d) the expense of administrative personnel and
services required to support the shareholders of a specific Class; (e)
auditors' fees, litigation or other legal expenses relating solely to a
specific Class; (f) transfer agent fees identified by the Fund's transfer
agent as being attributable to a specific Class; (g) expenses incurred in
connection with shareholders' meetings as a result of issues relating to a
specific Class; and (h) accounting expenses relating solely to a specific
Class.
The distribution, administrative and shareholder servicing fees and other
expenses listed above which are attributable to a particular Class are charged
directly to the net assets of the particular Class and, thus, are borne on a
pro rata basis by the outstanding shares of that Class; provided, however,
that money market funds and other funds making daily distributions of their
net investment income may allocate these items to each share regardless of
class or on the basis of relative net assets (settled shares), applied in each
case consistently.
5. Conversion Features. No Class shall be subject to any automatic
conversion feature.
6. Exchange Privileges. Shares of a Class shall be exchangeable only
for (a) shares of the same Class of other investment companies advised by
Warburg, Pincus Counsellors, Inc. and (b) shares of certain other investment
companies specified from time to time.
<PAGE>3
7. Additional Information. This Plan is qualified by and subject to the
terms of the then current prospectus for the applicable Class; provided,
however, that none of the terms set forth in any such prospectus shall be
inconsistent with the terms of the Classes contained in this Plan. The
prospectus for each Class contains additional information about that Class and
the applicable Fund's multiple class structure.
Dated: July 25, 1995
<PAGE>4
SCHEDULE A
Warburg Pincus Cash Reserve Fund
Warburg Pincus New York Tax Exempt Fund
Warburg Pincus Fixed Income Fund
Warburg Pincus Global Fixed Income Fund
Warburg Pincus Intermediate Maturity Government Fund
Warburg Pincus New York Intermediate Municipal Fund
Warburg Pincus Capital Appreciation Fund
Warburg Pincus Emerging Growth Fund
Warburg Pincus International Equity Fund
<PAGE>
Warburg Pincus International Equity Fund
For the Period November 1, 1995 to April 30, 1995
Common Shares
Annualized Total Return With Waivers:
((9,115/10,000)[*OMITTED GRAPHIC-SEE FOOTNOTE BELOW] -1) = -17.05%
Annualized Total Return Without Waivers:
((9,115/10,000)[*OMITTED GRAPHIC-SEE FOOTNOTE BELOW] -1) = -17.05%
Series 2 Shares
Annualized Total Return With Waivers:
((9,094/10,000)[*OMITTED GRAPHIC-SEE FOOTNOTE BELOW] -1) = -17.44%
Annualized Total Return Without Waivers:
((9,094/10,000)[*OMITTED GRAPHIC-SEE FOOTNOTE BELOW] -1) = -17.44%
The Schedule for Calculation of Performance Quotations for the annual
period ended 10/31/94 is incorporated herein by reference to Post-Effective
Amendment No. 9 to Registrant's Registration Statement.
- --------------------------
* - The graphic omitted above is the exponent 1/.49589
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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