Warburg Pincus Advisor Funds October 31, 1998
International Equity Fund
Emerging Markets Fund
Global Post-Venture Capital Fund
A
ANNUAL REPORT
More complete information about the funds,
including charges and expenses, is provided in
the Prospectus, which must precede or accom-
pany this document and which should be read
carefully before investing. You may obtain
additional copies by calling 800-369-2728 or
by writing to Warburg Pincus Advisor Funds,
P.O. Box 9030, Boston, MA 02205-9030.
[LOGO]
ASSET MANAGEMENT
<PAGE>
From time to time, the funds' investment adviser and co-administrators may waive
some fees and/or reimburse some expenses, without which performance would be
lower. Waivers and/or reimbursements are subject to change.
Returns are historical and include change in share price and reinvestment of
dividends and capital gains. Past performance cannot guarantee future results.
Returns and share price will fluctuate, and redemption value may be more or less
than original cost.
International investing entails special risk considerations, including currency
fluctuations, lower liquidity, economic and political risks, and differences in
accounting methods.
The views of the funds' management are as of the date of the letters and
portfolio holdings described in this document are as of October 31, 1998; these
views and portfolio holdings may have changed subsequent to these dates. Nothing
in this document is a recommendation to purchase or sell securities.
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WARBURG PINCUS ADVISOR INTERNATIONAL EQUITY FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998
- --------------------------------------------------------------------------------
December 11, 1998
Dear Shareholder:
The objective of Warburg Pincus International Equity Fund (the "Fund") is
long-term capital appreciation. The Fund pursues its objective by investing
primarily in a broadly diversified portfolio of equity securities of companies
that have their principal business activities and interests outside the U.S.
For the 12 months ended October 31, 1998, the Fund had a loss of 6.49%, vs.
a gain of 4.51% for the Morgan Stanley All Country World Excluding the U.S.
("MSCI") Index.
The period saw a marked divergence in performance among foreign stock
markets. European markets enjoyed impressive gains, benefiting from a host of
factors, including low inflation, falling interest rates and optimism regarding
the approach of European Monetary Union. Markets elsewhere saw far less
favorable results. Among developed markets, Japan was a noteworthy casualty,
weighed down by mounting concerns over its economy and in particular its
troubled banking sector. Emerging markets suffered sharp losses across the
board, as the economic and financial contagion that began following the Thai
baht devaluation in mid-1997 continued to spread, dragging down markets from
Asia to Eastern Europe to Latin America.
Set against this backdrop, Warburg Pincus International Equity Fund
suffered a disappointing performance, falling 6.12% over the 12 months and
underperforming its benchmark by a considerable margin. This reflected both
untimely regional allocations and weakness in specific stocks. Regional
allocations that hurt the Fund included its Latin American exposure, which,
while a relatively small portion of the Fund's assets through the period
(approximately 3% to 5%), proved a considerable liability, given the substantial
declines suffered by that region's stock markets. Also exerting a sizable drag
on the Fund's performance was its relatively high level of exposure to the
Asia-Pacific region heading into the period (we subsequently reduced that
exposure significantly), as these markets were then in the throes of a
substantial sell-off triggered by Thailand's currency devaluation. The Fund was
also hurt significantly on an opportunity-cost basis by its underweighting in
Europe in the first few months of 1998, a period that saw those markets rally
strongly.
Poor showings in individual stocks also took a toll on the Fund's returns.
In Europe, the Fund maintained a fairly large weighting in economically
sensitive stocks through the period, based on our view that there was
considerable value to be found in the group. This served the Fund well for a
time but ultimately proved costly, as these stocks sold off heavily (and, we
would argue, indiscriminately) in August and September amid the global market
sell-off and widening fears of global recession. The Fund also had a
1
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WARBURG PINCUS ADVISOR INTERNATIONAL EQUITY FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998 (CONT'D)
- --------------------------------------------------------------------------------
fair weighting in European financial stocks heading into that period, and these
too fell sharply, largely due to worries over these companies' exposure to
Russia and other emerging markets.
All told, it was a disappointing and frustrating year for the Fund and,
obviously, our shareholders. We believe, though, that with the recent return of
a degree of stability to global financial markets, our investment discipline --
which is fundamentally driven and seeks to identify undervalued stocks that have
the potential for strong gains over an 18- to 24-month period -- stands to
generate far better results going forward. Much of the extreme volatility in the
markets during the reporting period was emotionally, rather than rationally,
driven, with investors abandoning companies, countries and whole regions based
on knee-jerk, fear-based reactions. This worked to the advantage of certain
investment styles (e.g., "momentum" investing), but weighed heavily on those of
us who employ a more-patient, longer-term, stock-by-stock approach to the
markets. Thankfully, however, a calmer, more-rational mindset seems to have
returned to the markets during the past several months, one in which investors
appear to be valuing companies based primarily on fundamentals, rather than
emotion, and this is an environment in which we believe our methodology and
research efforts can add a considerable amount of value. (As evidence of how our
approach has served shareholders over time, we would point to the Fund's
since-inception performance vs. its benchmark. The Fund has achieved a 9.48%
average annual return since commencing operations in 1989, vs. a same-period
return of 4.56% for the MSCI Index.)
We would therefore encourage investors to stay the course, and continue to
view the Fund's performance, and in fact that of all international investments,
from a longer-term perspective, since that is the view we take in structuring
the portfolio. In turn, know that we will continue to strive to identify the
most attractive companies and the best candidates for long-term appreciation
within the international arena, as we have always done. We are hopeful that
those efforts will allow us to report vastly improved performance numbers to you
at this time next year.
Richard H. King Harold W. Ehrlich
Portfolio Manager Associate Portfolio Manager
P. Nicholas Edwards Vincent J. McBride
Associate Portfolio Manager Associate Portfolio Manager
International investing entails special risk considerations, including
currency fluctuations, lower liquidity, economic and political risks, and
differences in accounting methods.
2
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WARBURG PINCUS ADVISOR INTERNATIONAL EQUITY FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998 (CONT'D)
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GROWTH OF $10,000 INVESTED IN ADVISOR SHARES OF WARBURG PINCUS ADVISOR
INTERNATIONAL EQUITY FUND SINCE INCEPTION AS OF OCTOBER 31, 1998
The graph below illustrates a hypothetical investment of $10,000 in Warburg
Pincus Advisor International Equity Fund (the "Fund") from April 5, 1991
(inception) to October 31, 1998, compared to the Morgan Stanley All Country
World Excluding the U.S. Index ("MSCI")* for the same time period.
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts
the following plot points:
International MSCI-All Country World ex US
------------- ----------------------------
Apr-91 10000.00 10000.00
Apr-91 9847.79 10127.90
May-91 10000.00 10260.78
Jun-91 9519.33 9580.69
Jul-91 10069.85 10029.74
Aug-91 9993.39 9835.87
Sep-91 10337.46 10327.86
Oct-91 10444.50 10478.13
Nov-91 10062.20 10018.45
Dec-91 10409.25 10520.28
Jan-92 10510.39 10429.59
Feb-92 10417.03 10098.66
Mar-92 10222.54 9507.69
Apr-92 10401.47 9534.12
May-92 10821.58 10089.67
Jun-92 10346.63 9613.44
Jul-92 9909.67 9392.33
Aug-92 9933.07 9862.04
Sep-92 9753.61 9641.72
Oct-92 9519.52 9248.92
Nov-92 9738.00 9314.95
Dec-92 9906.62 9378.48
Jan-93 10143.06 9376.14
Feb-93 10363.73 9686.49
Mar-93 11025.75 10486.40
Apr-93 11679.88 11386.24
May-93 11884.79 11623.98
Jun-93 11606.20 11477.98
Jul-93 12031.97 11842.07
Aug-93 12788.89 12447.19
Sep-93 12733.70 12202.98
Oct-93 13332.93 12638.87
Nov-93 13104.28 11735.07
Dec-93 14917.11 12714.94
Jan-94 16323.50 13756.81
Feb-94 15936.35 13629.83
Mar-94 14648.48 13000.95
Apr-94 14956.62 13454.16
May-94 15446.48 13468.96
Jun-94 15225.25 13561.36
Jul-94 15730.92 13811.57
Aug-94 16410.41 14284.61
Sep-94 16031.16 13985.07
Oct-94 16102.27 14316.09
Nov-94 15406.98 13635.08
Dec-94 14878.77 13618.71
Jan-95 13592.75 12961.75
Feb-95 13348.57 12890.07
Mar-95 14219.48 13608.30
Apr-95 14642.73 14092.08
May-95 14626.45 14016.26
Jun-95 14479.45 13821.58
Jul-95 15392.06 14574.58
Aug-95 15620.21 14056.30
Sep-95 15962.43 14316.35
Oct-95 15612.06 13935.82
Nov-95 15848.36 14227.21
Dec-95 16345.02 14781.22
Jan-96 16805.33 14946.33
Feb-96 16830.43 14948.87
Mar-96 16989.45 15239.48
Apr-96 18002.12 15781.09
May-96 17608.77 15517.86
Jun-96 17818.00 15609.57
Jul-96 16930.86 15073.85
Aug-96 17081.51 15160.52
Sep-96 17349.32 15532.87
Oct-96 17156.83 15372.88
Nov-96 17893.32 15956.59
Dec-96 17989.65 15764.31
Jan-97 17980.96 15487.01
Feb-97 18172.16 15777.71
Mar-97 18024.42 15751.51
Apr-97 18372.04 15895.17
May-97 19623.50 16855.40
Jun-97 20457.80 17795.08
Jul-97 21066.14 18160.06
Aug-97 19293.25 16771.36
Sep-97 20153.63 17619.32
Oct-97 17850.60 16070.58
Nov-97 17293.66 15865.20
Dec-97 17117.27 16035.28
Jan-98 17168.62 16510.88
Feb-98 18445.97 17634.61
Mar-98 19510.30 18230.84
Apr-98 20017.57 18343.14
May-98 19967.52 17987.47
Jun-98 19258.67 17907.42
Jul-98 19553.33 18080.05
Aug-98 16573.40 15522.63
Sep-98 15812.69 15203.95
Oct-98 16695.03 16795.95
Average Annual Total Returns for periods ended 10/31/98 (Advisor Shares)
1 year -6.49%
5 year 4.60%
Since Inception (4/5/91) 6.99%
FUND
----
1 Year Total Return (9/30/97 to 9/30/98).................... -21.55%
5 Year Average Annual Total Return (9/30/93 to 9/30/98)..... 4.42%
Average Annual Total Return Since Inception (5/02/89 to
9/30/98).................................................. 6.30%
3
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WARBURG PINCUS ADVISOR INTERNATIONAL EQUITY FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998 (CONT'D)
- --------------------------------------------------------------------------------
In past annual reports, we have compared the Fund's performance to that of
the Morgan Stanley Europe, Australasia and Far East Index ("EAFE").** We believe
that the MSCI Index, which measures the performance of many issuers from
emerging markets in addition to issuers from countries included in the EAFE
Index, is a more descriptive benchmark for the Fund. The following compares
EAFE, MSCI and the Fund's annual value for the fiscal year ended October 31.
EAFE MSCI FUND
---- ---- ----
1991 $10,410 $10,478 $10,445
1992 9,035 9,249 9,520
1993 12,419 12,639 13,333
1994 13,674 14,316 16,102
1995 13,624 13,936 15,612
1996 15,051 15,373 17,157
1997 15,748 16,071 17,851
1998 17,266 16,796 16,695
- ------------------
* The Morgan Stanley All Country World Excluding the U.S. Index is a
market-capitalization weighted index of companies listed on stock exchanges
outside of the United States.
** The Morgan Stanley Europe, Australasia and Far East Index is an unmanaged
index of international equities (with no defined investment objective) that
includes reinvestment of dividends, and is the exclusive property of Morgan
Stanley & Co., Incorporated.
4
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WARBURG PINCUS ADVISOR EMERGING MARKETS FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998
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December 11, 1998
Dear Shareholder:
The objective of Warburg Pincus Emerging Markets Fund (the "Fund") is
growth of capital. The Fund pursues its objective by investing primarily in
equity securities of non-U.S. issuers consisting of companies in emerging
securities markets.
For the 12 months ended October 31, 1998, the Fund had a loss of 37.71%,
vs. a loss of 30.98% for the Morgan Stanley Emerging Markets Free Index.
To say that the period was a difficult one for emerging markets would be an
understatement. The markets were battered by one negative development after
another: a sharp economic and financial contraction across the Asian-Pacific
region following Thailand's currency devaluation in mid-1997, which persisted
through the period; an economic and political meltdown in Russia in August,
which triggered a full-scale investor retreat from any and all forms of risk,
particularly emerging markets; and finally a settling of market contagion on
Latin America, most notably Brazil, the region's economic giant. Not
surprisingly, investor sentiment toward the asset class was decidedly poor
through most if not all of the period, with many markets suffering outsized
losses and only a handful managing gains.
Warburg Pincus Emerging Markets Fund's performance suffered
proportionately, hurt by the markets' broad weakness and by poor showings from a
number of individual stocks. In terms of general strategy through the period, we
attempted to strike a balance between avoiding the worst of the markets'
volatility and positioning the Fund for the longer term (i.e., buying battered
stocks whose longer-term prospects we viewed favorably, near-term weakness
notwithstanding). In practice, this translated into a relatively small presence
in Southeast Asia through most of the 12 months, and highly focused exposure to
the rest of the Asia-Pacific region; relatively large weightings in some of the
smaller Middle Eastern, Eastern European and European markets (e.g., Poland),
several of which enjoyed somewhat of a safe-haven status through much of the
period; and a fairly large stake in Latin America, concentrated most heavily in
Brazil. While these allocations met with mixed results -- the Fund's Latin
American exposure, in particular, proved quite costly at the end of the period,
given the sharp sell-off in the region's markets -- we believe we did succeed in
assembling a portfolio of attractively valued securities, one that has the
potential to show far more favorable results over a more extended time horizon.
5
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WARBURG PINCUS ADVISOR EMERGING MARKETS FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998 (CONT'D)
- --------------------------------------------------------------------------------
Though emerging markets obviously proved a less-than-timely investment
through the period, and in fact have given little cause for cheer over most of
the past several years, we see grounds for optimism heading into 1999. Several
hoped-for developments, including an international financial-support package for
Brazil and an economic-stimulus package for Japan (whose economy has a
significant impact on the rest of the Asia-Pacific region), have materialized in
recent weeks, and the effects thus far on investor psychology have been fairly
dramatic, witnessed by the explosive rallies in a number of markets. Several
emerging-market economies, including some of the previously hardest-hit in the
Asia-Pacific region, have also begun to show signs of improvement (aided by a
significant decline in interest rates), far earlier than most economists and
analysts had anticipated. The combination of improved sentiment and a
strengthening macroeconomic backdrop, coupled with the considerable amount of
value now present in these markets -- emerging-market equities currently trade
at extremely attractive valuations vs. their developed-market counterparts --
suggests a far better environment for emerging markets in 1999 than they
experienced in 1998.
Accordingly, we are optimistic, and believe the Fund is well-positioned in
terms of its regional allocations and specific holdings to benefit from a
recovery. As ever, though, we would encourage investors to approach the asset
class with realistic expectations. These markets can be extremely volatile over
the short term, as evidenced by the past 12 months, and individuals with a
relatively low tolerance for risk would probably be best served by choosing a
more conservative investment. For those with a longer-term investment horizon
and a sufficiently high threshold for risk, however, we believe emerging markets
offer the potential for very attractive returns going forward, and that they are
well worthy of consideration.
Richard H. King Vincent J. McBride
Co-Portfolio Manager Co-Portfolio Manager
International investing entails special risk considerations, including
currency fluctuations, lower liquidity, economic and political risks, and
differences in accounting methods; these risks are generally heightened for
emerging-market investments.
6
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WARBURG PINCUS ADVISOR EMERGING MARKETS FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998 (CONT'D)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN ADVISOR SHARES OF WARBURG PINCUS ADVISOR
EMERGING MARKETS FUND SINCE INCEPTION AS OF OCTOBER 31, 1998
The graph below illustrates a hypothetical investment of $10,000 in Advisor
Shares of Warburg Pincus Advisor Emerging Markets Fund (the "Fund") from
December 30, 1994 (inception) to October 31, 1998, compared to the Morgan
Stanley Emerging Markets Free Index ("MSCI")* for the same time periods.
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts
the following plot points:
Emerging Markets MS-Emerging Markets Free Index
---------------- ------------------------------
Dec-94 10000.00 10000.00
Jan-95 9860.00 8936.20
Feb-95 9890.00 8707.08
Mar-95 10410.00 8762.45
Apr-95 10570.00 9155.54
May-95 11230.00 9642.52
Jun-95 10928.00 9671.06
Jul-95 11770.16 9888.08
Aug-95 11639.82 9655.31
Sep-95 11840.34 9609.64
Oct-95 11329.03 9241.98
Nov-95 11248.82 9077.20
Dec-95 11702.72 9479.77
Jan-96 12422.10 10153.50
Feb-96 12553.82 9992.26
Mar-96 12867.92 10070.00
Apr-96 13931.81 10472.60
May-96 13577.18 10426.10
Jun-96 13415.06 10491.16
Jul-96 12452.50 9774.30
Aug-96 12523.43 10024.42
Sep-96 12746.34 10111.23
Oct-96 12371.44 9841.77
Nov-96 12746.34 10007.11
Dec-96 12842.49 10052.14
Jan-97 13653.38 10737.70
Feb-97 13977.74 11197.70
Mar-97 13663.52 10903.54
Apr-97 13987.87 10922.95
May-97 14727.81 11235.45
Jun-97 15224.48 11836.88
Jul-97 15366.39 12013.49
Aug-97 13572.29 10484.89
Sep-97 13764.88 10775.54
Oct-97 11017.99 9007.49
Nov-97 10409.79 8678.71
Dec-97 10251.56 8887.87
Jan-98 9463.22 8190.88
Feb-98 10795.64 9045.77
Mar-98 11073.09 9438.17
Apr-98 10944.64 9335.39
May-98 9410.20 8056.16
Jun-98 8813.59 7211.07
Jul-98 8706.95 7439.66
Aug-98 6127.95 5288.85
Sep-98 6330.17 5624.38
Oct-98 6863.17 6216.68
Average Annual Total Returns for periods ended 10/31/98 (Advisor Shares)
1 year -37.71%
Since Inception (12/30/94) -9.34%
FUND
----
1 Year Total Return (9/30/97 to 9/30/98).................... -54.01%
Average Annual Total Return Since Inception (12/30/94 to
9/30/98).................................................. -11.46%
- ------------------
* The Morgan Stanley Emerging Markets Free Index is a market-capitalization-
weighted index of emerging-market countries determined by Morgan Stanley. The
index includes only those countries open to non-local investors.
7
<PAGE>
WARBURG PINCUS ADVISOR GLOBAL POST-VENTURE CAPITAL FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998
- --------------------------------------------------------------------------------
December 11, 1998
Dear Shareholder:
The objective of Warburg Pincus Global Post-Venture Capital Fund (the
"Fund") is long-term growth of capital. The Fund pursues its objective by
investing primarily in equity securities of U.S. and foreign companies
considered to be in their post-venture-capital stage of development.
For the 12 months ended October 31, 1998, the Fund had a loss of 2.31%, vs.
gains of 5.76% and 13.80% for the Lipper Global Funds Index and the Morgan
Stanley World Index, respectively, and a loss of 15.86% for the Russell 2000
Growth Index.
The period saw strong performances from a number of the world's equity
markets (principally those in the U.S. and Europe), reflected in the
double-digit gain in the Morgan Stanley World Index. It was a difficult
environment, however, for shares of the smaller and more rapidly growing
businesses that the Fund targets. Weighing on the group was investors'
overwhelming preference, both domestically and abroad, for larger, more-liquid
securities. This persisted through the period and intensified during the global
market sell-off in August and September, resulting in disappointing performances
for the vast majority of smaller-cap and aggressive-growth companies.
Set against this backdrop, Warburg Pincus Global Post-Venture Capital Fund
had a modest loss for the 12 months, a disappointing showing in absolute terms
though a relatively solid one vs. that of other aggressive, globally oriented
funds. In terms of general investment strategy, we made few noteworthy changes
during the period. The Fund's assets remained divided between the U.S. and,
primarily, Europe, with the foreign component of the portfolio increasing
steadily as the period progressed, to approximately 35% of assets at period end.
This reflected our view that there was considerable, and growing, opportunity
abroad, especially in Europe, and that valuations on the whole were relatively
attractive. Regarding sector concentration, we maintained a fairly heavy bias
toward the technology area (broadly defined to include computer-related firms,
electronics manufacturers and telecommunications companies), which remains by
far the largest recipient of venture-capital financing both in the U.S. and
overseas. At period end, technology companies represented roughly a third of the
portfolio. The remainder of the portfolio was broadly diversified, with
weightings in such diverse areas as business services, health care,
environmental services, energy and financial services.
Looking ahead to 1999 and beyond, we are very positive on the Fund's
prospects. Much of this optimism reflects bullishness on the asset class. A
wealth of empirical data (e.g., the Eighth Annual Economic Impact of Venture
Capital Study, jointly produced by Coopers & Lybrand and the National
8
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WARBURG PINCUS ADVISOR GLOBAL POST-VENTURE CAPITAL FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998 (CONT'D)
- --------------------------------------------------------------------------------
Venture Capital Association, 1998) has attested to the growth potential of U.S.
venture-backed firms. Venture-backed companies tend to occupy the economy's most
rapidly growing industries, making them high-growth by definition. They have
historically generated superior earnings and revenue growth vs. their
non-venture-backed peers, and their shares have tended to outperform in the
stock market, at least in the first five years after going public.
Thus the case for investing in domestic venture-backed firms is well
established. The argument for investing in foreign venture-backed companies,
though, to date has had less evidence to back it, largely due to the fact that
venture-capital financing has been relatively uncommon in most non-U.S.
countries, with a few notable exceptions (e.g., the United Kingdom). But this is
changing, and changing rapidly. Venture-capital-backed firms have sprouted up in
increasing numbers overseas during the past several years, both in developed
markets and in emerging ones as well, and the trend shows every sign of
continuing, if not accelerating. What this means for investors in this asset
class is an ever-lengthening list of high-growth-potential companies from which
to choose. It also means increased opportunity for geographical diversification,
which can be a useful tool in managing risk.
We believe Warburg Pincus is uniquely well positioned to take advantage of
this exciting environment, given our considerable experience in the
venture-capital arena and our extensive research capabilities overseas, and that
the Fund represents an attractive opportunity for investors. We would caution
investors, however, that investing in venture-backed companies entails potential
risks (e.g., that of heightened volatility) along with the potential for
significant long-term rewards. Because of the nature of the Fund's holdings and
certain strategies it may use, an investment in the Fund should only be
considered for the aggressive portion of an investor's portfolio and may not be
appropriate for all investors. Investors should therefore review the Prospectus
carefully before committing assets.
Elizabeth B. Dater Harold E. Sharon
Co-Portfolio Manager Co-Portfolio Manager
International investing entails special risk considerations, including
currency fluctuations, lower liquidity, economic and political risks, and
differences in accounting methods. There are also special risk considerations
associated with post-venture-capital investments.
9
<PAGE>
WARBURG PINCUS ADVISOR GLOBAL POST-VENTURE CAPITAL FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998 (CONT'D)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN ADVISOR SHARES OF WARBURG PINCUS ADVISOR
GLOBAL POST-VENTURE CAPITAL FUND SINCE INCEPTION AS OF OCTOBER 31, 1998
The graph below illustrates a hypothetical investment of $10,000 in Advisor
Shares of Warburg Pincus Advisor Global Post-Venture Capital Fund (the "Fund")
from September 30, 1996 (inception) to October 31, 1998, compared to the Lipper
Global Funds Index* ("Lipper") the Morgan Stanley World Index ("MSCI")** and the
Russell 2000 Growth Index*** ("Russell") for the same time period.
[GRAPHIC]
In the printed version of the document, a line graph appears which depicts
the following plot points:
Global Russell LIPPER GLOBAL
Post Venture 2000 Growth FUNDS INDEX MSCI World Index
Sep-96 10000 10000 10000 10000
Oct-96 9850 9568.7 10003 10055.9
Nov-96 10009.57 9834.81 10476.14 10603.24
Dec-96 10049.61 10026.58 10492.9 10419.17
Jan-97 10329.99 10277.05 10726.9 10529.61
Feb-97 9740.15 9656.52 10792.33 10635.54
Mar-97 9119.7 8975.16 10662.82 10410.07
Apr-97 9159.83 8871.4 10798.24 10735.17
May-97 10089.55 10204.86 11458.01 11382.4
Jun-97 10359.95 10550.91 11948.41 11935.01
Jul-97 11120.37 11091.54 12545.84 12469.7
Aug-97 10940.22 11424.4 11850.8 11620.39
Sep-97 11720.26 12336.06 12589.1 12236.62
Oct-97 11110.81 11595.16 11797.25 11577.31
Nov-97 10970.81 11319.19 11822.02 11766.95
Dec-97 10885.24 11325.99 11962.7 11895.09
Jan-98 10646.85 11175.01 12096.92 12211.38
Feb-98 11840.36 12161.54 12913.47 13021.85
Mar-98 12650.24 12671.72 13563.27 13555.88
Apr-98 13366.25 12749.4 13760.75 13672.46
May-98 12847.64 11823.15 13643.1 13485.42
Jun-98 13044.21 11944.1 13685.53 13789.65
Jul-98 12411.56 10946.65 13691.41 13751.59
Aug-98 9806.38 8419.73 11697.26 11901.72
Sep-98 10221.18 9273.4 11704.04 12096.08
Oct-98 10853.88 9757.1 12478.85 13173.36
Average Annual Total Returns for periods ended 10/31/98 (Advisor Shares)
1 year -2.31%
Since Inception (9/30/96) 4.00%
FUND
----
1 Year Total Return (9/30/97 to 9/30/98).................... -12.79%
Average Annual Total Return Since Inception (9/30/96 to
9/30/98).................................................. 1.10%
- ------------------
* The Lipper Global Funds Index is an equal-weighted performance index,
adjusted for capital-gains distributions and income dividends, of the
largest qualifying funds in this investment objective, and is compiled by
Lipper Analytical Services Inc.
** The Morgan Stanley World Index is a market-weighted average of the
performance of securities listed on the stock exchanges of all developing
countries.
*** The Russell 2000 Growth Index is an unmanaged index (with no defined
investment objective) of those securities in the Russell 2000 Index with a
greater-than-average growth orientation. It includes reinvestment of
dividends, and is compiled by Frank Russell Company.
10
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCKS (92.2%)
Argentina (1.8%)
Telefonica de Argentina SA ADR 235,200 $ 7,776,300
YPF SA ADR 694,600 20,099,987
--------------
27,876,287
--------------
Australia (0.1%)
Burns, Philp & Company, Ltd.+ 32,221,810 1,704,307
--------------
Austria (2.1%)
Erste Bank Der Oesterreichischen Sparkassen AG 89,999 5,267,652
Maculan Holdings AG Vorzuege+ 1,820 11,871
Radex-Heraklith Industries 294,896 9,237,550
VA Technologie AG 73,886 6,848,271
Wienerberger Baustoffindustrie AG 54,769 11,431,007
--------------
32,796,351
--------------
Denmark (3.7%)
International Service System AS Class B 358,500 24,200,158
Tele Danmark AS Class B 123,200 13,423,783
Unidanmark AS Class A + 269,800 20,569,479
--------------
58,193,420
--------------
Finland (0.1%)
Rauma OY 134,173 1,584,493
--------------
France (13.3%)
Banque Nationale de Paris 137,572 8,712,009
Compagnie de Saint Gobain 53,035 7,845,188
Elf Aquitaine SA 167,400 19,370,258
Etablissements Economiques du Casino Guichard-Perrachon
SA 226,100 22,500,630
Lagardere Groupe SCA 598,987 24,102,283
PSA Peugeot Citroen 152,000 25,356,675
Rhone-Poulenc, Ltd. Class A 356,563 16,298,175
Societe Generale d'Enterprises SA 732,800 35,209,974
Suez Lyonaise des Eaux SA 172,500 30,887,386
Total SA Class B 172,505 19,898,883
--------------
210,181,461
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
11
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
---------- --------------
COMMON STOCKS (CONT'D)
<S> <C> <C>
Germany (12.3%)
BHF Bank AG 712,250 $ 27,480,573
Degussa AG 353,100 17,056,117
Fresenius Medical Care AG 334,600 15,152,339
Hannover Rueckversicherungs AG 162,400 18,826,939
Hoechst AG 558,930 23,319,967
Mannesmann AG 145,560 14,097,395
Muenchener Rueckversicherung-Gesellschaft AG 36,400 16,571,629
Preussag AG 9,800 3,639,097
Schering AG 244,700 28,589,555
Schmalbach Lubeca AG 12,861 1,902,538
Viag AG 41,800 28,368,414
--------------
195,004,563
--------------
Hong Kong (1.1%)
New World Development Co., Ltd. 1,318,000 3,062,817
Smartone Telecommunications 4,905,000 13,931,403
--------------
16,994,220
--------------
India (0.8%)
Bharat Petroleum Corp., Ltd. 200 1,204
Hindalco Industries, Ltd. 5,303 64,036
Mahanagar Telephone Nigam, Ltd. 2,909,300 12,568,877
Reliance Industries, Ltd. 44,184 114,427
State Bank of India, Ltd. 15,570 57,195
Tata Engineering & Locomotive Co., Ltd. 25 67
--------------
12,805,806
--------------
Ireland (1.4%)
Bank of Ireland 939,600 17,364,744
Greencore Group PLC 1,198,807 4,683,202
--------------
22,047,946
--------------
Israel (2.6%)
ECI Telecommunications Limited Designs 836,100 27,695,813
Orbotech, Ltd.+ 363,900 12,736,500
--------------
40,432,313
--------------
Italy (5.7%)
Alleanza Assicurazioni 1,086,500 13,397,195
Instituto Bancario San Paolo de Torino SpA 1,674,300 24,631,059
SEAT Pagine Gialle SpA 25,183,000 15,756,658
Telecom Italia SpA 5,013,000 36,261,755
--------------
90,046,667
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
12
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
---------- --------------
COMMON STOCKS (CONT'D)
<S> <C> <C>
Japan (12.7%)
Advantest Corp. 151,000 $ 9,524,440
Hankyu Realty Co., Ltd. 1,448,000 5,964,650
Matsushita Electric Industrial Group 413,000 19,103,545
Minebea Co., Ltd. 1,942,000 18,248,976
Nichiei Co. Ltd. 172,700 13,961,060
NTT Mobile Communications Network, Inc. 282 10,188,409
Orix Corp. 446,800 32,016,569
Rohm Co., Ltd. 298,000 26,340,780
Shohkoh Fund & Co., Ltd. 72,400 22,025,712
Sony Corp. 270,300 17,165,360
Takefuji Corp. 227,400 12,118,733
TDK Corp. 226,000 14,895,147
--------------
201,553,381
--------------
Mexico (1.4%)
Fomento Economico Mexicano SA de CV ADR + 602,600 15,705,263
Gruma SA de CV Class B+ 2,842,339 6,738,920
--------------
22,444,183
--------------
Netherlands (5.9%)
CSM NV 332,000 16,353,979
ING Groep NV 332,309 16,084,519
Koninklijke Pakhoed NV 506,700 12,479,761
Laurus NV 495,530 12,469,968
Philips Electronics NV 248,400 13,220,123
Vedior NV 144A 241,100 6,144,714
Vendex Non-Foods NV 707,900 18,003,753
--------------
94,756,817
--------------
Singapore (0.1%)
Oversea-Chinese Banking Corp. Ltd. 313,000 1,364,856
--------------
South Africa (0.4%)
Sappi, Ltd.+ 1,311,600 6,546,497
--------------
Spain (3.8%)
Argentaria Caja Postal y Banco Hipotecario SA 988,286 21,465,329
Endesa SA 1,539,100 38,718,597
--------------
60,183,926
--------------
Sweden (3.1%)
Biora AB ADR+ 154,000 2,820,125
Electrolux AB Series B 1,135,135 17,062,908
Ericsson LM-B 937,100 21,099,214
Kinnevik AB Series B 320,800 8,289,978
--------------
49,272,225
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
13
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
---------- --------------
COMMON STOCKS (CONT'D)
<S> <C> <C>
Switzerland (5.4%)
Novartis AG 12,362 $ 22,275,683
Roche Holding AG 1,821 21,248,071
Sulzer AG 26,569 15,304,610
Swisscom AG+ 52,000 17,626,598
TAG Heuer International SA 138,680 9,063,785
--------------
85,518,747
--------------
United Kingdom (14.4%)
Barclays PLC 969,900 20,904,757
Bass PLC 1,398,900 16,984,951
British Aerospace PLC 56,300 419,102
British Airport Authority PLC 1,941,764 21,868,971
British Energy PLC 3,759,600 36,770,040
Glaxo Wellcome PLC 568,800 17,679,793
Lloyds TSB Group PLC 407,100 5,028,087
Orange PLC+ 3,419,967 31,816,001
Reed International PLC 2,143,200 18,143,600
Royal & Sun Alliance Insurance Group PLC 1,780,300 16,308,730
Standard Chartered Bank PLC 1,079,700 11,617,585
Williams PLC 4,953,092 30,919,585
--------------
228,461,202
--------------
TOTAL COMMON STOCKS (Cost $1,381,772,870) 1,459,769,668
--------------
</TABLE>
<TABLE>
<S> <C> <C>
PREFERRED STOCKS (1.1%)
Brazil (0.1%)
Companhia Energetica de Minas Gerais 70,650,000 1,374,064
Telecomunicacoes de Sao Paulo SA 4,411,000 739,561
--------------
2,113,625
--------------
Germany (0.8%)
GEA AG 312,500 7,453,145
KSB AG 36,700 5,938,726
--------------
13,391,871
--------------
United Kingdom (0.2%)
Singer & Friedlander Group PLC 8.50% (Convertible) 1,334,737 2,537,063
--------------
TOTAL PREFERRED STOCKS (Cost $25,141,520) 18,042,559
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
14
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR
(000) VALUE
----- -----
<S> <C> <C>
SHORT-TERM INVESTMENT (8.8%)
Repurchase agreement with State Street Bank & Trust Co.
dated 10/30/98 at 5.400% to be repurchased at
$139,398,701 on 11/02/98. (Collateralized by pro rata
amount of U.S. Treasury Notes ranging in par values from
$21,390,000 to $50,000,000, 3.375%-5.500%,
02/28/03-04/15/28. Pro rata market value of collateral is
$142,123,502.) (Cost $139,336,000) $139,336 $ 139,336,000
--------------
TOTAL INVESTMENTS AT VALUE (102.1%) (Cost $1,546,250,390*) 1,617,148,227
LIABILITIES IN EXCESS OF OTHER ASSETS (2.1%) (33,208,785)
--------------
NET ASSETS (100.0%) (applicable to 77,159,685 Common Shares
and 18,235,640 Advisor Shares) $1,583,939,442
==============
NET ASSET VALUE, offering and redemption price per Common
Share ($1,283,673,490 divided by 77,159,685) $ 16.64
==============
NET ASSET VALUE, offering and redemption price per Advisor
Share ($300,265,952 divided by 18,235,640) $ 16.47
==============
</TABLE>
INVESTMENT ABBREVIATIONS
ADR = American Depository Receipt
- --------------------------------------------------------------------------------
+ Non-income producing security.
* Cost for federal income tax purposes is $1,548,360,351.
See Accompanying Notes to Financial Statements.
15
<PAGE>
WARBURG PINCUS EMERGING MARKETS FUND
STATEMENT OF NET ASSETS
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCKS (75.1%)
Argentina (4.8%)
Banco de Galicia y Buenos Aires SA de CV ADR 34,077 $ 581,439
Telefonica de Argentina SA ADR 13,760 454,940
YPF SA ADR 63,100 1,825,956
------------
2,862,335
------------
Australia (2.5%)
Novus Petroleum, Ltd. 565,723 679,423
Oil Search, Ltd. 535,800 800,189
------------
1,479,612
------------
Brazil (2.2%)
Companhia Paranaense de Energia ADR 171,500 1,329,125
------------
Croatia (3.3%)
Pliva GDR 136,900 2,015,852
------------
Egypt (0.0%)
Commercial International Bank, Ltd. 125 1,008
------------
Greece (2.1%)
STET Hellas Telecommunications SA ADR+ 48,770 1,280,212
------------
Hong Kong (7.3%)
Cosco Pacific, Ltd. 2,406,000 1,180,354
New World Development Co., Ltd. 465,000 1,080,584
Smartone Telecommunications 429,840 1,220,851
Wing Hang Bank, Ltd. 490,100 933,276
------------
4,415,065
------------
India (7.1%)
Aptech, Ltd. 89,600 908,506
Bombay Suburban Electric Supply Co., Ltd. 3,300 11,655
Grasim Industries, Ltd. 506 1,654
Hindalco Industries, Ltd. 165 1,992
Mahanager Telephone Nigam, Ltd. 349,100 1,508,196
Pentafour Software & Exports, Ltd. 60,300 911,787
Reliance Industries, Ltd. 2,259 5,850
State Bank of India, Ltd. 119,900 440,439
State Bank of India, Ltd. GDR 63,000 504,000
Tata Engineering & Locomotive Co., Ltd. 70 187
------------
4,294,266
------------
Israel (7.2%)
Blue Square Israel Co., Ltd. ADR 96,889 1,247,446
ECI Telecommunications, Ltd. 35,000 1,159,375
</TABLE>
See Accompanying Notes to Financial Statements.
16
<PAGE>
WARBURG PINCUS EMERGING MARKETS FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
---------- ------------
<S> <C> <C>
COMMON STOCKS (CONT'D)
Israel (cont'd)
Formula Systems, Ltd.+ 17,400 $ 370,865
Formula Systems, Ltd. ADR+ 2,300 51,750
Orbotech, Ltd.+ 43,821
----------
4,363,171
----------
Kazakhstan (1.6%)
Hurricane Hydrocarbons, Ltd.+ (CAN) 391,300 811,962
Hurricane Hydrocarbons, Ltd.+ (US) 74,000 152,625
----------
964,587
----------
Mexico (11.4%)
Cintra SA 2,020,700 1,197,723
Fomento Economico Mexicano SA de CV ADR + 85,230 2,221,307
Grupo Industrial Durango SA ADR 74,700 373,500
Grupo Industrial Saltillo SA de CV 500,000 1,126,181
Panamerican Beverages, Inc. Class A 21,700 439,425
Telefonos de Mexico SA ADR 12,590 664,909
TV Azteca SA de CV ADR 99,400 869,750
----------
6,892,795
----------
Poland (6.8%)
Bank Slaski SA 23,811 1,188,687
Big Bank Gdanski SA 938,555 967,052
Elektrim Spolka Akcyjna SA 164,616 1,958,924
----------
4,114,663
----------
Portugal (3.6%)
Banco Mello SA 92,316 1,016,912
Portugal Telecom SA 24,300 1,152,304
----------
2,169,216
----------
Singapore (4.0%)
Development Bank of Singapore, Ltd. 315,200 1,974,561
Keppel Tatlee Bank, Ltd. 376,000 413,357
----------
2,387,918
----------
South Africa (6.0%)
Sappi, Ltd.+ 499,700 2,494,117
South African Breweries, Ltd. 56,300 1,091,910
----------
3,586,027
----------
</TABLE>
See Accompanying Notes to Financial Statements.
17
<PAGE>
WARBURG PINCUS EMERGING MARKETS FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
---------- ------------
<S> <C> <C>
COMMON STOCKS (CONT'D)
South Korea (2.0%)
Samsung Display Devices Co. 18,500 $ 694,033
Samsung Heavy Industries Co., Ltd.+ 86,000 482,318
----------
1,176,351
----------
Thailand (1.6%)
Hana Microelectronics Public Co., Ltd.+ 357,300 957,820
----------
Turkey (1.6%)
Turkiye Is Bankasi AS Class C 18,859,375 517,330
Yapi ve Kredi Bankasi AS 37,595,370 424,259
----------
941,589
----------
TOTAL COMMON STOCKS (Cost $52,141,898) 45,231,612
----------
PREFERRED STOCKS (7.3%)
Brazil (7.3%)
Companhia Energetica de Minas Gerais 58,330,000 1,134,454
Telecomunicacoes de Sao Paulo Celular SA Class B+ 14,926,000 738,248
Telecomunicacoes de Sao Paulo SA 9,755,300 1,635,602
Telecomunicacoes do Parana SA 2,607,000 437,097
Telecomunicacoes do Rio de Janeiro Celular SA Class B+ 14,230,000 441,381
----------
4,386,782
----------
TOTAL PREFERRED STOCKS (Cost $6,855,896) 4,386,782
----------
</TABLE>
<TABLE>
<CAPTION>
PAR
(000)
-----
<S> <C> <C>
CORPORATE BONDS (10.3%)
Hong Kong (2.1%)
Cosco Treasury Co., Ltd. (Convertible), 1.000%,
03/13/03 (A) 1,739 1,230,343
------------
Philippines (3.0%)
Metro Pacific Capital (Convertible), 2.500%, 04/11/01 $1,720 1,271,424
Piltel International Holding Corp. (Convertible),
1.750%, 01/17/02 1,625 522,113
------------
1,793,537
------------
South Korea (5.2%)
Republic of Korea, 8.875%, 04/15/08 1,500 1,380,000
Samsung Electronics Co. (Convertible), 0.000% 12/31/07 700 536,375
Ssangyong Oil Refining Co., Ltd. (Convertible), 3.750%,
07/20/01 1,405 1,236,400
------------
3,152,775
------------
TOTAL CORPORATE BONDS (Cost $6,241,847) 6,176,655
------------
</TABLE>
See Accompanying Notes to Financial Statements.
18
<PAGE>
WARBURG PINCUS EMERGING MARKETS FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR
(000) VALUE
----- -----
<S> <C> <C>
SHORT TERM INVESTMENT (6.6%)
Repurchase agreement with State Street Bank & Trust Co.
dated 10/30/98 at 5.400% to be repurchased at $3,969,786
on 11/02/98. (Collateralized by a pro rata amount of
U.S. Treasury Notes ranging in par values from
$21,390,000 to $50,000,000, 3.375%-5.500%,
02/28/03-04/15/28. Pro rata market value of collateral
is $4,047,382.) (Cost $3,968,000) $3,968 $ 3,968,000
------------
TOTAL INVESTMENTS AT VALUE (99.3%) (Cost $69,207,641*) 59,763,049
OTHER ASSETS IN EXCESS OF LIABILITIES (0.7%) 451,495
------------
NET ASSETS (100.0%) (applicable to 9,127,952 Common Shares
and 4,016 Advisor Shares $ 60,214,544
============
NET ASSET VALUE, offering and redemption price per Common
Share ($60,188,688 divided by 9,127,952) $ 6.59
============
NET ASSET VALUE, offering and redemption price per Advisor
Share ($25,856 divided by 4,016) $ 6.44
============
</TABLE>
INVESTMENT ABBREVIATIONS
ADR = American Depository Receipt
GDR = Global Depository Receipt
- --------------------------------------------------------------------------------
+ Non-income producing security.
(A) Denominated in Hong Kong Dollars.
* Cost for federal income tax purposes is $69,577,195.
See Accompanying Notes to Financial Statements.
19
<PAGE>
WARBURG PINCUS GLOBAL POST-VENTURE CAPITAL FUND
STATEMENT OF NET ASSETS
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCKS (60.4%)
Aerospace & Defense (0.8%)
Gulfstream Aerospace Corp. + 700 $ 30,975
-----------
Business Services (8.1%)
CSG Systems International, Inc. + 800 43,600
Lason Holdings, Inc. + 800 43,800
On Assignment, Inc. + 1,100 37,400
QRS Corp. + 1,200 45,600
Realty Information Group, Inc. + 1,500 12,562
Robert Half International, Inc. + 700 28,087
SunGard Data Systems, Inc. + 1,000 33,750
Wilmar Industries, Inc. + 800 19,800
Young & Rubicam, Inc. + 1,200 31,350
-----------
295,949
-----------
Capital Equipment (0.7%)
Sauer, Inc. 3,500 25,375
-----------
Communications & Media (5.4%)
America Online, Inc. + 300 38,119
Central European Media Enterprises, Ltd. Class A + 1,900 12,112
Infoseek Corp. + 1,500 44,344
Outdoor Systems, Inc. + 2,363 52,123
Yahoo!, Inc. + 400 52,337
-----------
199,035
-----------
Computers (10.2%)
BMC Software, Inc. + 1,200 57,675
Citrix Systems, Inc. + 1,000 70,875
Compuware Corp. + 900 48,769
Documentum, Inc. + 800 27,200
Network Appliance, Inc. + 700 38,325
New Era of Networks, Inc. + 1,900 93,575
Transaction Systems Architects, Inc. Class A + 1,000 36,094
-----------
372,513
-----------
Consumer Services (1.2%)
Stewart Enterprises, Inc. Class A 1,900 43,819
-----------
Electronics (5.3%)
Maxim Integrated Products, Inc. + 900 32,119
Uniphase Corp. + 2,200 108,900
Vitesse Semiconductor Corp. + 1,600 51,600
-----------
192,619
-----------
Energy (0.9%)
Stone Energy Corp. + 1,000 32,125
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
20
<PAGE>
WARBURG PINCUS GLOBAL POST-VENTURE CAPITAL FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
------ -----------
COMMON STOCKS (CONT'D)
<S> <C> <C>
Environmental Services (3.2%)
Allied Waste Industries, Inc. + 1,650 $ 35,681
Republic Services, Inc. Class A + 1,700 37,187
Waste Management, Inc. 1,000 45,125
-----------
117,993
-----------
Financial Services (3.7%)
Newcourt Credit Group, Inc. 3,400 111,775
T. Rowe Price Associates, Inc. 700 24,894
-----------
136,669
-----------
Food, Beverages & Tobacco (1.1%)
Horizon Organic Holding Corp. + 1,300 16,412
Suiza Foods Corp. + 700 22,838
-----------
39,250
-----------
Healthcare (1.7%)
Alternative Living Services, Inc. + 900 23,513
Sunrise Assisted Living, Inc. + 900 38,756
-----------
62,269
-----------
Industrial Mfg. & Processing (1.0%)
Mettler-Toledo International, Inc. + 1,600 35,000
-----------
Leisure & Entertainment (1.9%)
Coach USA, Inc. + 800 21,450
Premier Parks, Inc. + 2,200 48,813
-----------
70,263
-----------
Lodging & Restaurants (0.7%)
Garden Fresh Restaurant Corp. + 1,600 25,700
-----------
Pharmaceuticals (3.8%)
Incyte Pharmaceuticals, Inc. + 800 24,400
SangStat Medical Corp. + 1,000 20,750
Serologicals Corp. + 1,650 37,331
Watson Pharmaceuticals, Inc. + 1,000 55,625
-----------
138,106
-----------
Publishing (1.3%)
Petersen Companies, Inc. Class A + 1,800 47,813
-----------
Retail (2.9%)
Staples, Inc. + 2,300 75,038
Whole Foods Market, Inc. + 800 32,050
-----------
107,088
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
21
<PAGE>
WARBURG PINCUS GLOBAL POST-VENTURE CAPITAL FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCKS (CONT'D)
NUMBER
OF
SHARES VALUE
------ -----
<S> <C> <C>
Telecommunications & Equipment (6.5%)
Cisco Systems, Inc. + 775 $ 48,825
Intermedia Communications, Inc. + 1,400 25,900
MCI WorldCom, Inc. + 1,080 59,670
McLeodUSA, Inc. Class A + 1,600 58,500
Shaw Communications, Inc. Class B + 600 12,000
TTI Team Telecom International, Ltd. + 6,900 32,775
-----------
237,670
-----------
TOTAL COMMON STOCKS (Cost $1,810,904) 2,210,231
-----------
FOREIGN COMMON STOCKS (32.2%)
Belgium (0.8%)
Mobistar SA + 700 30,698
-----------
Canada (3.0%)
Certicom Corp. + 2,300 15,611
KAP Resources, Ltd. + 30,000 8,533
Research In Motion, Ltd. + 25,000 86,460
-----------
110,604
-----------
France (1.1%)
Transgene SA ADR + 2,800 40,950
-----------
Germany (3.7%)
Deutsche Babcock AG + 2,000 99,989
Teldafax AG + 1,000 36,107
-----------
136,096
-----------
Italy (5.6%)
Ericsson SpA 900 36,699
SEAT Pagine Gialle SpA 150,000 122,512
SEAT Pagine Gialle SpA-RNC 70,000 43,798
-----------
203,009
-----------
Norway (0.9%)
Petroleum Geo-Services ADR + 1,600 34,200
-----------
Switzerland (6.2%)
Barry Callebaut AG + 200 44,753
Gretag Imaging Group + 625 56,772
SAIA-Burgess Electronics AG + 520 125,959
-----------
227,484
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
22
<PAGE>
WARBURG PINCUS GLOBAL POST-VENTURE CAPITAL FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
------ -----
<S> <C> <C>
FOREIGN COMMON STOCKS
United Kingdom (10.9%)
3i Group PLC 5,583 $ 47,685
AMVESCAP PLC ADR 940 34,428
Dialog Corp. PLC ADR + 4,500 47,672
EMAP PLC 3,100 52,902
Expro International Group PLC 4,700 26,368
Hays PLC 4,536 66,887
London Bridge Software Holdings PLC 3,500 57,882
Schroders PLC 1,700 32,314
Sema Group PLC 4,000 32,422
-----------
398,560
-----------
TOTAL FOREIGN COMMON STOCKS (Cost $1,264,130) 1,181,601
-----------
FOREIGN PREFERRED STOCK (1.3%)
Germany (1.3%)
Escada AG 400 49,270
-----------
TOTAL FOREIGN PREFERRED STOCK (Cost $60,284) 49,270
-----------
WARRANT (1.3%)
Switzerland (1.3%)
Gretag Imaging (Strike Price 160 CMF) 11/11/99 + 40,000 47,264
-----------
TOTAL WARRANT (Cost $98,756) 47,264
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
(000)
-----
<S> <C> <C>
SHORT-TERM INVESTMENT (4.9%)
Repurchase agreement with State Street Bank & Trust Co.
dated 10/30/98 at 5.400% to be repurchased at $178,080 on
11/02/98. (Collateralized by a pro rata amount of U.S.
Treasury Notes ranging in par values from $21,390,000 to
$50,000,000, 3.375%-5.500%, 02/28/03-04/15/28. Pro rata
market value of collateral is $181,561.) (Cost $178,000) $178 178,000
-----------
TOTAL INVESTMENTS AT VALUE (100.1%) (Cost $3,412,074*) 3,666,366
LIABILITIES IN EXCESS OF OTHER ASSETS (0.1%) (4,069)
-----------
NET ASSETS (100.0%) (applicable to 347,838 Common Shares and
112 Advisor Shares) $ 3,662,297
===========
NET ASSET VALUE, offering and redemption price per Common
Share ($3,661,126 divided by 347,838) $ 10.53
===========
NET ASSET VALUE, offering and redemption price per Advisor
Share ($1,171 divided by 112) $ 10.46
===========
</TABLE>
INVESTMENT ABBREVIATIONS
ADR = American Depository Receipt
- --------------------------------------------------------------------------------
+ Non-income producing security.
* Also cost for federal income tax purposes.
See Accompanying Notes to Financial Statements.
23
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
STATEMENTS OF OPERATIONS
For the Year or Period Ended October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL EMERGING GLOBAL POST-VENTURE
EQUITY FUND MARKETS FUND CAPITAL FUND
------------- ------------ -------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 43,766,090 $ 2,327,122 $ 10,664
Interest 4,416,768 649,852 12,977
Foreign taxes withheld (4,803,223) (359,344) (1,363)
------------- ------------ ---------
Total investment income 43,379,635 2,617,630 22,278
------------- ------------ ---------
EXPENSES:
Investment advisory 21,710,859 1,232,557 43,604
Administrative services 3,657,301 232,506 12,809
Audit 109,518 13,917 14,517
Custodian/Sub-custodian 1,351,688 168,388 19,746
Directors 16,052 10,708 10,751
Interest 48,361 0 495
Legal 118,931 19,179 25,553
Offering/Organizational costs 0 43,040 1,186
Printing 210,166 20,207 13,168
Registration 73,031 58,686 34,710
Shareholder servicing/distribution 1,982,695 247,287 8,724
Transfer agent 1,774,263 203,463 8,926
Miscellaneous 112,304 8,264 0
------------- ------------ ---------
31,165,169 2,258,202 194,189
Less fees waived, expenses reimbursed and
transfer agent offsets (88,524) (630,761) (136,629)
------------- ------------ ---------
Total expenses 31,076,645 1,627,441 57,560
------------- ------------ ---------
Net investment income (loss) 12,302,990 990,189 (35,282)
------------- ------------ ---------
NET REALIZED AND UNREALIZED LOSS FROM INVESTMENTS
AND FOREIGN CURRENCY RELATED ITEMS:
Net realized gain (loss) from security and other
related transactions (213,451,199) (62,658,535) 16,393
Net realized gain (loss) from foreign currency
related items 51,944,476 (420,100) (1,517)
Net change in unrealized appreciation
(depreciation) from investments and foreign
currency related items 47,688,281 21,064,753 (224,948)
------------- ------------ ---------
Net realized and unrealized loss from
investments and foreign currency related items (113,818,442) (42,013,882) (210,072)
------------- ------------ ---------
Net decrease in net assets resulting from
operations $(101,515,452) $(41,023,693) $(245,354)
============= ============ =========
</TABLE>
See Accompanying Notes to Financial Statements.
24
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
---------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
OCTOBER 31, 1998 OCTOBER 31, 1997
---------------- ----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 12,302,990 $ 16,595,226
Net realized gain (loss) from security and other related
transactions (213,451,199) 242,233,285
Net realized gain (loss) from foreign currency related
items 51,944,476 81,782,235
Net change in unrealized appreciation (depreciation) from
investments and foreign currency related items 47,688,281 (164,531,003)
-------------- --------------
Net increase (decrease) in net assets resulting from
operations (101,515,452) 176,079,743
-------------- --------------
FROM DISTRIBUTIONS:
Dividends from net investment income
Common Shares (13,983,166) 15,677,127
Advisor Shares (776,129) (959,277)
Distributions from realized gains
Common Shares (276,226,122) (101,110,864)
Advisor Shares (61,851,043) (17,984,137)
-------------- --------------
Net decrease in net assets from distributions (352,836,460) (135,731,405)
-------------- --------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 945,589,502 910,099,943
Reinvested dividends 335,103,766 122,187,954
Net asset value of shares redeemed (2,054,917,142) (1,646,039,200)
-------------- --------------
Net increase (decrease) in net assets from capital share
transactions (774,223,874) (613,751,303)
-------------- --------------
Net increase (decrease) in net assets (1,228,575,786) (573,402,965)
NET ASSETS:
Beginning of period 2,812,515,228 3,385,918,193
-------------- --------------
End of period $1,583,939,442 $2,812,515,228
============== ==============
UNDISTRIBUTED NET INVESTMENT INCOME: $ 0 $ 31,630,382
============== ==============
</TABLE>
See Accompanying Notes to Financial Statements.
25
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
STATEMENTS OF CHANGES IN NET ASSETS (CONT'D)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EMERGING MARKETS FUND GLOBAL POST-VENTURE CAPITAL FUND
----------------------------------- -----------------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
OCTOBER 31, 1998 OCTOBER 31, 1997 OCTOBER 31, 1998 OCTOBER 31, 1997
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ 990,189 $ 590,856 $ (35,282) $ (37,882)
Net realized gain (loss) from
security and other related
transactions (62,658,535) 3,573,949 16,393 40,384
Net realized gain (loss) from foreign
currency related items (420,100) (692,650) (1,517) 736
Net change in unrealized appreciation
(depreciation) from investments and
foreign currency related items 21,064,753 (19,880,535) (224,948) 514,579
------------ ------------ ---------- ----------
Net increase (decrease) in net assets
resulting from operations (41,023,693) (16,408,380) (245,354) 517,817
------------ ------------ ---------- ----------
FROM DISTRIBUTIONS:
Dividends from net investment income
Common Shares (427,377) (559,579) (80,461) 0
Advisor Shares (880) 0 (30) 0
Distributions from realized gains
Common Shares (5,226,322) (717,029) (29,917) 0
Advisor Shares (10,768) (55) (12) 0
------------ ------------ ---------- ----------
Net decrease in net assets from
distributions (5,665,347) (1,276,663) (110,420) 0
------------ ------------ ---------- ----------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 120,358,207 209,438,660 1,626,747 2,110,772
Reinvested dividends 5,383,994 1,143,771 108,155 0
Net asset value of shares redeemed (174,910,995) (255,395,357) (915,348) (2,443,987)
------------ ------------ ---------- ----------
Net increase (decrease) in net
assets from capital share
transactions (49,168,794) (44,812,926) 819,554 (333,215)
------------ ------------ ---------- ----------
Net increase (decrease) in net
assets (95,857,834) (62,497,969) 463,780 184,602
NET ASSETS:
Beginning of period 156,072,378 218,570,347 3,198,517 3,013,915
------------ ------------ ---------- ----------
End of period $ 60,214,544 $156,072,378 $3,662,297 $3,198,517
============ ============ ========== ==========
UNDISTRIBUTED NET INVESTMENT INCOME: $ 0 $ (2,119,820) $ 0 $ 0
============ ============ ========== ==========
</TABLE>
See Accompanying Notes to Financial Statements.
26
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
(For an Advisor Share of the Fund Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
PERIOD ENDED: -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $ 20.54 $ 20.50 $ 19.16 $ 20.38 $ 16.91
-------- -------- -------- -------- --------
INVESTMENT ACTIVITIES:
Net investment income 0.04(a) 0.04 0.18 0.03 0.16
Net gains or losses on investments and
foreign currency related items (both
realized and unrealized) (1.36) 0.78 1.68 (0.67) 3.35
-------- -------- -------- -------- --------
Total from investment activities (1.32) 0.82 1.86 (0.64) 3.51
-------- -------- -------- -------- --------
DISTRIBUTIONS:
From net investment income (0.03) (0.04) (0.52) (0.05) 0.00
From realized capital gains (2.72) (0.74) 0.00 (0.53) (0.04)
-------- -------- -------- -------- --------
Total distributions (2.75) (0.78) (0.52) (0.58) (0.04)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD $ 16.47 $ 20.54 $ 20.50 $ 19.16 $ 20.38
======== ======== ======== ======== ========
Total return (6.49)% 4.04% 9.89% (3.04)% 20.77%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $300,266 $500,473 $500,465 $317,736 $199,404
Ratio of expenses to average net assets 1.76%@ 1.76%@ 1.81%@ 1.89% 1.94%
Ratio of net income or loss to average net
assets .21% .15% .18% .20% (.29)%
Portfolio turnover rate 95.44% 61.80% 32.49% 32.24% 17.02%
</TABLE>
- --------------------------------------------------------------------------------
(a) Per share information is calculated using the average shares
outstanding method.
@ Interest earned on uninvested cash balances is used to
offset portions of the transfer agent expenses. These
arrangements resulted in a reduction to the Advisor Shares'
expenses by .00%, .00% and .01%, for the years ending
October 31, 1998, 1997 and 1996, respectively. The Advisor
Shares' operating expense ratio after reflecting these
arrangements were 1.76%, 1.76% and 1.80% for the years ended
October 31, 1998, 1997 and 1996, respectively.
See Accompanying Notes to Financial Statements.
27
<PAGE>
WARBURG PINCUS EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS
(For an Advisor Share of the Fund Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996 1995**
PERIOD ENDED: ------- ------- ------ ------
<S> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $ 10.87 $ 12.21 $11.30 $10.00
------- ------- ------ ------
INVESTMENT ACTIVITIES:
Net investment income or loss 0.21 0.00 (0.08) 0.14
Net gains or losses on investments and foreign currency
related items (both realized and unrealized) (4.16) (1.33) 1.11 1.19
------- ------- ------ ------
Total from investment activities (3.95) (1.33) 1.03 1.33
------- ------- ------ ------
DISTRIBUTIONS:
From net investment income (0.04) 0.00 (0.05) (0.03)
From realized capital gains (0.44) (0.01) (0.07) 0.00
------- ------- ------ ------
Total distributions (0.48) (0.01) (0.12) (0.03)
------- ------- ------ ------
NET ASSET VALUE, END OF PERIOD $ 6.44 $ 10.87 $12.21 $11.30
======= ======= ====== ======
Total return (37.71)% (10.94)% 9.20% 13.29%+
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 26 $ 266 $ 149 $ 1
Ratio of expenses to average net assets 1.90%@ 1.90%@ 1.90%@ 1.22%*
Ratio of net income or loss to average net assets 1.01% (.09)% (.57)% 1.76%*
Decrease reflected in above operating expense ratios due
to waivers/reimbursements .94% .58% .65% 16.36%*
Portfolio turnover rate 125.59% 92.48% 61.84% 57.76%+
</TABLE>
- --------------------------------------------------------------------------------
** For the period December 30, 1994 (commencement of
operations) through October 31, 1995.
@ Interest earned on uninvested cash balances is used to
offset portions of the transfer agent expense. These
arrangements had no effect on the Advisor Shares' expense
ratio.
+ Non annualized.
* Annualized.
See Accompanying Notes to Financial Statements.
28
<PAGE>
WARBURG PINCUS EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS
(For an Advisor Share of the Fund Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997 1996
PERIOD ENDED: ------- ------- ------
<S> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $ 11.11 $ 9.85 $10.00
------- ------- ------
INVESTMENT ACTIVITIES:
Net investment loss (0.15) (0.15) 0.00
Net gains or losses on investments and foreign currency
related items (both realized and unrealized) (0.11) (1.41) (0.15)
------- ------- ------
Total from investment activities (0.26) (1.26) (0.15)
------- ------- ------
DISTRIBUTIONS:
From net investment income (0.28) 0.00 0.00
From realized capital gains (0.11) 0.00 0.00
------- ------- ------
Total distributions (0.39) 0.00 0.00
------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 10.46 $ 11.11 $ 9.85
======= ======= ======
Total return (2.31)% 12.79% (1.50)%+
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 1 $ 1 $ 6
Ratio of expenses to average net assets 1.90%@ 1.90%@ 1.90%@
Ratio of net income or loss to average net assets (1.26)% (1.15)% (.78)%*
Decrease reflected in above operating expense ratios due
to waivers/reimbursements 45.95% 11.16% 22.23%*
Portfolio turnover rate 186.67% 207.25% 5.85%+
</TABLE>
- --------------------------------------------------------------------------------
** For the period December 30, 1994 (commencement of
operations) through October 31, 1995.
@ Interest earned on uninvested cash balances is used to
offset portions of the transfer agent expense. These
arrangements had no effect on the Advisor Shares' expense
ratio.
+ Non annualized.
* Annualized.
See Accompanying Notes to Financial Statements.
29
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Warburg Pincus International Equity Funds (the "Funds") are comprised of
Warburg Pincus Major Foreign Markets Fund ("Major Foreign Markets Fund")
(formerly, the Warburg Pincus Managed EAFE@ Countries Fund), Warburg Pincus
International Equity Fund (the "International Equity Fund"), Warburg Pincus
International Small Company Fund (the International Small Company Fund"), and
Warburg Pincus Global Post-Venture Capital Fund (the "Global Post-Venture
Capital Fund") which are registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as diversified, open-end management investment
companies, and the Warburg Pincus Emerging Markets Fund (the "Emerging Markets
Fund") which is registered under the 1940 Act as a non-diversified, open-end
management investment company.
Investment objectives for each Fund are as follows: the Major Foreign Markets
Fund, the International Equity Fund, and the International Small Company Fund
seek long-term capital appreciation; the Emerging Markets Fund seeks growth of
capital; and the Global Post-Venture Capital Fund seeks long-term growth of
capital.
Each Fund (except for the Major Foreign Markets Fund and the International
Small Company Fund) currently offers two classes of shares, one class being
referred to as Common Shares and one class being referred to as Advisor Shares.
Common and Advisor Shares in each Fund represent an equal pro rata interest in
such Fund, except that they bear different expenses which reflect the difference
in the range of services provided to them. Common Shares for the Major Foreign
Markets Fund, the International Small Company Fund, the Emerging Markets Fund,
and the Global Post-Venture Capital Fund bear expenses paid pursuant to a
shareholder servicing and distribution plan adopted by each Fund at an annual
rate not to exceed .25% of the average daily net asset value of each Fund's
outstanding Common Shares. Advisor Shares for each Fund bear expenses paid
pursuant to a distribution plan adopted by each Fund at an annual rate not to
exceed .75% of the average daily net asset value of each Fund's outstanding
Advisor Shares. Advisor Shares are currently bearing expenses of .50% of average
daily net assets. Effective October 30, 1998, the Global Post-Venture Capital
Fund ceased offering its Advisor Shares.
The net asset value of each Fund is determined daily as of the close of
regular trading on the New York Stock Exchange. Each Fund's investments are
valued at market value, which is generally determined using the last
30
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES -- (CONT'D)
reported sales price. If no sales are reported, investments are generally valued
at the mean between the last reported bid and asked price. In the absence of
market quotations, investments are generally valued at fair value as determined
by or under the direction of the Fund's Board. Short-term investments that
mature in 60 days or less are valued on the basis of amortized cost, which
approximates market value.
When a Fund writes or purchases a call or a put option, an amount equal to the
premium received or paid by the Fund is recorded as a liability or asset, the
value of which is marked-to-market daily to reflect the current market value of
the option. When the option expires, the Fund realizes a gain or loss equal to
the amount of the premium received or paid. When the Fund exercises an option or
enters into a closing transaction by purchasing or selling an offsetting option,
it realizes a gain or loss without regard to any unrealized gain or loss on the
underlying security. The potential loss associated with purchasing an option is
limited to the premium paid, and the premium would partially offset any gains
achieved from its use.
The books and records of the Funds are maintained in U.S. dollars.
Transactions denominated in foreign currencies are recorded at the current
prevailing exchange rates. All assets and liabilities denominated in foreign
currencies are translated into U.S. dollar amounts at the current exchange rate
at the end of the period. Translation gains or losses resulting from changes in
the exchange rate during the reporting period and realized gains and losses on
the settlement of foreign currency transactions are reported in the results of
operations for the current period. The Funds do not isolate that portion of
realized gains and losses on investments in equity securities which are due to
changes in the foreign exchange rate from that which are due to changes in
market prices of equity securities. The Funds isolate that portion of realized
gains and losses on investments in debt securities which are due to changes in
the foreign exchange rate from that which are due to changes in market prices of
debt securities.
The Funds may invest in securities of foreign countries and governments which
involve certain risks in addition to those inherent in domestic investments.
Such risks generally include, among other things, fluctuations in currency
exchange rates, revaluation of currencies, future adverse political and economic
developments and the imposition of other laws and restrictions. Securities of
foreign issuers are often subject to less rigorous regulatory practices and
requirements than those applied in the United States and may
31
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES -- (CONT'D)
also be less liquid (and their prices more volatile) than securities of
comparable U.S. companies. Moreover, individual foreign economies may differ
favorably or unfavorably from the U.S. economy in many respects.
A Fund's investments in securities of issuers located in less developed
countries considered to be "emerging markets" involve risks in addition to those
generally applicable to foreign securities. Investments in the securities of
issuers located in emerging markets expose the Fund to economic structures that
are generally less diverse and mature than, and to political systems that can be
expected to have less stability than, those of developed countries. The
typically small size of the markets for securities of issuers located in
emerging markets may also result in a lack of liquidity and greater price
volatility.
Security transactions are accounted for on a trade date basis. Interest income
is recorded on the accrual basis. Dividends are recorded on the ex-dividend
date. Income, expenses (excluding class-specific expenses, principally
distribution, shareholder servicing fees and transfer agent fees) and
realized/unrealized gains/losses are allocated proportionately to each class of
shares based upon the relative net asset value of outstanding shares. Effective
November 1, 1998, class specific expenses no longer include transfer agent fees;
accordingly these fees will be allocated proportionately based upon the relative
net asset value of outstanding shares. The cost of investments sold is
determined by use of the specific identification method for both financial
reporting and income tax purposes.
Dividends from net investment income and distributions of net realized capital
gains, if any, are declared and paid annually for all Funds. However, to the
extent that a net realized capital gain can be reduced by a capital loss
carryover, such gain will not be distributed. Income and capital gain
distributions are determined in accordance with federal income tax regulations
which may differ from generally accepted accounting principles.
No provision is made for federal taxes as it is each Fund's intention to
continue to qualify for and elect the tax treatment applicable to regulated
investment companies under the Internal Revenue Code of 1986, as amended, and
make the requisite distributions to its shareholders which will be sufficient to
relieve it from federal income and excise taxes.
Costs incurred in connection with organization and offering of shares have
been deferred and are being amortized over a period of five years and one year,
respectively, from the date each Fund commenced its operations.
32
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES -- (CONT'D)
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, each Fund, along with other Warburg Funds, transfers uninvested cash
balances to a pooled cash account, which is invested in repurchase agreements
secured by U.S. government securities. Securities pledged as collateral for
repurchase agreements are held by the Funds' custodian bank until the agreements
mature. Each agreement requires that the market value of the collateral be
sufficient to cover payments of interest and principal; however, in the event of
default or bankruptcy by the other party to the agreement, retention of the
collateral may be subject to legal proceedings.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these estimates.
The Funds have an arrangement with their transfer agent whereby interest
earned on uninvested cash balances is used to offset a portion of the transfer
agent expense. For the fiscal period ended October 31, 1998, the Funds received
credits or reimbursements under this arrangement as follows:
FUND AMOUNT
- ---- ------
International Equity $88,524
Emerging Markets 4,057
Global Post-Venture Capital 131
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR
Warburg, which is indirectly controlled by Warburg, Pincus & Co., serves as
each Fund's investment adviser. For its investment advisory services, Warburg is
entitled to receive the following fees computed daily and payable monthly based
on each Fund's average daily net assets:
FUND ANNUAL RATE
- ---- -----------
International Equity 1.00% of average daily net assets
Emerging Markets 1.25% of average daily net assets
Global Post-Venture Capital 1.25% of average daily net assets
33
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR -- (CONT'D)
For the fiscal period ended October 31, 1998, 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>
International Equity $21,710,859 $ 0 $21,710,859 $ 0
Emerging Markets 1,232,557 (524,180) 708,377 (91,151)
Global Post-Venture Capital 43,604 (43,604) 0 (88,708)
</TABLE>
Abbott Capital Management, LLC ("Abbott") serves as sub-investment adviser for
the Global Post-Venture Fund's assets invested in U.S. or foreign private
limited partnerships or other investment funds ("Private Fund Investments").
Pursuant to the sub-advisory agreement between Abbott and Warburg, Abbott is
entitled to a quarterly fee from Warburg at the annual rate of 1.00% of the net
asset value of Private Fund Investments, which fee amount or a portion thereof
may be waived by Abbott. No compensation is paid by the Global Post-Venture
Capital Fund to Abbott for its sub-investment advisory services.
Counsellors Funds Service, Inc. ("CFSI"), a wholly owned subsidiary of
Warburg, and PFPC Inc. ("PFPC"), an indirect, wholly owned subsidiary of PNC
Bank Corp. ("PNC"), serve as each Fund's co-administrators. For 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 fiscal period
ended October 31, 1998, administrative services fees earned by CFSI were as
follows:
FUND CO-ADMINISTRATION FEE
- ---- ---------------------
International Equity $2,171,086
Emerging Markets 98,604
Global Post-Venture Capital 3,489
For administrative services, PFPC receives a fee calculated at an annual rate
of .12% on each Fund's first $250 million in average daily net assets, .10% on
the next $250 million in average daily net assets, .08% on the next $250 million
in average daily net assets, and .05% of the average daily net assets over $750
million. For the fiscal period ended October 31, 1998, administrative service
fees earned and voluntarily waived by PFPC (including out of pocket) were as
follows:
<TABLE>
<CAPTION>
NET
FUND CO-ADMINISTRATION FEE WAIVER CO-ADMINISTRATION FEE
- ---- --------------------- -------- ---------------------
<S> <C> <C> <C>
International Equity $1,486,215 $ 0 $1,486,215
Emerging Markets 133,902 (11,373) 122,529
Global Post-Venture Capital 9,320 (4,186) 5,134
</TABLE>
34
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR -- (CONT'D)
Counsellors Securities Inc. ("CSI"), also a wholly-owned subsidiary of
Warburg, serves as each Fund's distributor. No compensation is paid by the
International Equity Fund to CSI for distribution services. For its shareholder
servicing and distribution services, CSI receives a fee at an annual rate of
.25% of the average daily net assets of each Fund's Common Shares pursuant to a
shareholder servicing and distribution plan adopted by each Fund pursuant to
Rule 12b-1 under the 1940 Act. On February 6, 1998, the Board of Directors
approved suspension of the fee for the Major Foreign Markets Fund. For its
shareholder servicing and distribution services, CSI receives a fee at an annual
rate of .50%, respectively, of the average daily net assets of the Advisor
Shares of the International Equity Fund, the Emerging Markets Fund, and the
Global Post-Venture Capital Fund pursuant to distribution plan adopted by each
Fund pursuant to Rule 12b-1 under the 1940 Act. For the fiscal period ended
October 31, 1998, shareholder servicing and distribution fees earned by CSI were
as follows:
SHAREHOLDER SERVICING/
FUND DISTRIBUTION FEE
- ---- ----------------------
Major Foreign Markets Fund
Common shares $ 2,142
==========
International Equity Fund
Advisor shares $1,982,695
==========
International Small Company Fund
Common shares $ 1,143
==========
Emerging Markets Fund
Common shares $ 246,045
Advisor shares 1,242
----------
$ 247,287
==========
Global Post-Venture Capital Fund
Common shares $ 8,718
Advisor shares 6
----------
$ 8,724
==========
3. LINE OF CREDIT
The Funds, together with other funds advised by Warburg Pincus Asset
Management, Inc., the Funds' investment adviser ("Warburg") (collectively the
"Warburg Funds"), have established committed and uncommitted lines of credit
facilities with PNC Bank, National Association ("PNC") and an uncommitted line
of credit facility with Deutche Bank, AG ("Deutche Bank") for temporary or
emergency purposes primarily relating to unanticipated
35
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
3. LINE OF CREDIT -- (CONT'D)
fund share redemptions. Effective December 31, 1997, the terms of the committed
line of credit with PNC was amended. Under the terms of the committed line of
credit, the Warburg Funds with access to the facility pay a comittment fee at a
rate of .07% per annum on the average daily balance of the line of credit, which
is undisbursed and uncanceled during the preceding quarter. In addition, the
Warburg Funds will pay interest on borrowings at the bank's base rate plus .45%.
Under the terms of the uncommitted lines of credit, the Warburg Funds will pay
interest on borrowings at the bank's base rate plus .55%. Aggregate borrowings
for each fund under the committed and uncommitted lines of credit with PNC may
not exceed the lowest of (a) thirty-three and one-third percent (33 1/3%) of the
assets of such fund, for any fund that does not invest at least sixty-five
percent (65%) of its assets in international equity or fixed income securities
(an "International Fund") and twenty-five percent (25%) of the assets of any
fund that is an International Fund or (b) the maximum amount permitted by such
fund's investment policies and restrictions. Aggregate borrowings for each fund
under the uncommitted line of credit facility with Deutsche Bank may not exceed
thirty-three and one-third (33 1/3%) of the net assets of such fund. At October
31, 1998 and during the fiscal period ended October 31, 1998, the following
funds had borrowings under the lines of credit agreement:
<TABLE>
<CAPTION>
AVERAGE MAXIMUM LOAN
AVERAGE DAILY INTEREST DAILY LOAN OUTSTANDING
FUND LOAN BALANCE RATE % OUTSTANDING AT 10/31/98
- ---- -------------- -------- ----------- -----------
<S> <C> <C> <C> <C>
International Equity $689,762 5.622% $51,585,000 $0
Emerging Markets 4,373 6.266% 798,000 0
</TABLE>
4. INVESTMENTS IN SECURITIES
For the fiscal period ended October 31, 1998, purchases and sales of
investment securities (excluding short-term investments) were as follows:
FUND PURCHASES SALES
- ---- -------------- --------------
International Equity $1,957,964,355 $2,907,497,198
Emerging Markets 111,977,975 160,008,709
Global Post-Venture Capital 6,847,698 6,091,741
At October 31, 1998, 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:
36
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
4. INVESTMENTS IN SECURITIES -- (CONT'D)
<TABLE>
<CAPTION>
NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
FUND APPRECIATION DEPRECIATION (DEPRECIATION)
- ---- ------------ ------------- --------------
<S> <C> <C> <C>
International Equity $213,072,750 $(144,284,874) $68,787,876
Emerging Markets 3,606,442 (13,420,588) (9,814,146)
Global Post-Venture Capital 607,126 (352,834) 254,292
</TABLE>
5. FORWARD FOREIGN CURRENCY CONTRACTS
Each Fund may enter into forward currency contracts for the purchase or sale
of a specific foreign currency at a fixed price on a future date. Risks may
arise upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar. Each
Fund will enter into forward contracts primarily for hedging purposes. Forward
currency contracts are adjusted by the daily exchange rate of the underlying
currency and any gains or losses are recorded for financial statement purposes
as unrealised until the contract settlement date or an offsetting position is
entered into.
At October 31, 1998, the International Equity Fund had the following open
forward foreign currency contracts:
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
- -----------------------------------------------------------------------------------------------------------
UNREALIZED
FOREIGN
EXPIRATION FOREIGN CURRENCY CONTRACT EXCHANGE
FORWARD CURRENCY CONTRACT DATE TO BE SOLD AMOUNT CONTRACT VALUE GAIN (LOSS)
------------------------- ---------- ---------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
Japanese Yen 02/26/1999 8,921,842,000 $ 66,795,253 $ 77,896,138 $(11,100,885)
Japanese Yen 02/26/1999 5,880,000,000 44,011,976 51,337,974 (7,325,998)
Japanese Yen 02/26/1999 75,000,000 561,377 654,821 (93,444)
Japanese Yen 02/26/1999 717,000,000 5,350,746 6,260,089 (909,343)
Japanese Yen 02/26/1999 1,395,000,000 11,940,426 12,179,672 (239,246)
Japanese Yen 02/26/1999 620,000,000 5,399,286 5,413,188 (13,902)
------------ ------------ ------------
$134,059,064 $153,741,882 $(19,682,818)
============ ============ ============
</TABLE>
37
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
6. EQUITY SWAP TRANSACTIONS
The International Equity Fund and the Emerging Markets Fund each entered into
a Korean equity swap agreement dated March 21, 1997, where each Fund received a
quarterly payment, representing the total return (defined as market appreciation
and dividend income) on a basket of Korean common stocks ("Common Stocks"). In
return, the International Equity Fund and the Emerging Markets Fund paid
quarterly the LIBOR rate (London Interbank Offered Rate), plus 2.00% and 1.97%,
respectively, per annum on the market value of the Common Stocks ("Notional
Amount"). The Notional Amount is marked-to-market on each quarterly reset date.
In the event that the Common Stocks decline in value, each Fund will be required
to pay quarterly, the amount of any depreciation in value of the Notional Amount
from the previous quarter.
During the term of the equity swap transaction, changes in the value of the
Common Stocks as compared to the Notional Amount and the difference between the
accrued interest expense and dividend income are recognized as unrealized gain
or loss. At the quarterly reset date, the change in value of the Common Stock,
adjusted for accrued interest expense and dividend income, is recognized as
realized gain or loss. At October 31, 1998, each Fund realized a loss of
$6,553,028 and $853,210, respectively, on the equity swap transaction which is
included in the net realized gain (loss) from security and other related
transactions. At October 31, 1998, each Fund no longer held a position in the
swap.
7. CAPITAL SHARE TRANSACTIONS
Each Fund, except the Global Post-Venture Capital Fund, is authorized to issue
three billion full and fractional shares of capital stock, $.001 par value per
share, of which two billion shares of each Fund are designated as Advisor
Shares. The Global Post-Venture Capital Fund is authorized to issue three
billion full and fractional shares of capital stock, $.001 par value per share,
of which one billion shares are designated as Advisor Shares.
38
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
7. CAPITAL SHARE TRANSACTIONS -- (CONT'D)
Transactions in shares of each Fund were as follows:
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
COMMON SHARES ADVISOR SHARES
--------------------------------- ----------------------------
FOR THE YEAR ENDED OCTOBER 31,
----------------------------------------------------------------
1998 1997 1998 1997
--------------- --------------- ------------- ------------
<S> <C> <C> <C> <C>
Shares sold 49,208,088 37,712,671 2,638,046 3,593,153
Shares issued to shareholders on
reinvestment of dividends 16,336,304 5,078,533 3,778,779 937,692
Shares redeemed (99,781,019) (70,827,349) (12,548,585) (4,577,298)
--------------- --------------- ------------- ------------
Net (decrease) in shares outstanding (34,236,627) (28,036,145) (6,131,760) (46,453)
=============== =============== ============= ============
Proceeds from sale of shares $ 896,359,095 $ 832,097,028 $ 49,230,407 $ 78,002,915
Reinvested dividends 272,489,395 103,246,572 62,614,371 18,941,382
Net asset value of shares redeemed (1,826,723,786) (1,548,688,920) (228,193,356) (97,350,280)
--------------- --------------- ------------- ------------
Net (decrease) from capital share
transactions $ (657,875,296) $ (613,345,320) $(116,348,578) $ (405,983)
=============== =============== ============= ============
</TABLE>
<TABLE>
<CAPTION>
EMERGING MARKETS FUND
COMMON SHARES ADVISOR SHARES
----------------------------- -----------------------
FOR THE YEAR ENDED OCTOBER 31,
-------------------------------------------------------
1998 1997 1998 1997
------------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Shares sold 13,544,543 15,395,660 235,380 13,980
Shares issued to shareholders on reinvestment
of dividends 582,196 92,759 1,113 4
Shares redeemed (19,392,450) (19,011,433) (256,959) (1,743)
------------- ------------- ----------- ---------
Net increase (decrease) in shares outstanding (5,265,711) (3,523,014) (20,466) 12,241
============= ============= =========== =========
Proceeds from sale of shares $ 118,390,331 $ 209,234,551 $ 1,967,876 $ 204,109
Reinvested dividends 5,373,673 1,143,716 10,321 55
Net asset value of shares redeemed (172,692,012) (255,371,760) (2,218,983) (23,597)
------------- ------------- ----------- ---------
Net increase (decrease) from capital share
transactions $ (48,928,008) $ (44,993,493) $ (240,786) $ 180,567
============= ============= =========== =========
</TABLE>
<TABLE>
<CAPTION>
GLOBAL POST-VENTURE CAPITAL FUND
COMMON SHARES ADVISOR SHARES
--------------------------- -----------------
FOR THE YEAR ENDED OCTOBER 31,
--------------------------------------------------
1998 1997 1998 1997
---------- ----------- ---- -------
<S> <C> <C> <C> <C>
Shares sold 131,789 209,142 0 15
Shares issued to shareholders on reinvestment of
dividends 10,620 0 4 0
Shares redeemed (81,397) (227,374) 0 (564)
---------- ----------- --- -------
Net increase (decrease) in shares outstanding 61,012 (18,232) 4 (549)
========== =========== === =======
Proceeds from sale of shares $1,626,747 $ 2,110,622 $ 0 $ 150
Reinvested dividends 108,115 0 40 0
Net asset value of shares redeemed (915,348) (2,438,359) 0 (5,627)
---------- ----------- --- -------
Net increase (decrease) from capital share
transactions $ 819,514 $ (327,737) $40 $(5,477)
========== =========== === =======
</TABLE>
39
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
8. LIABILITIES
At October 31, 1998, the Funds had the following affiliated and investment
related liabilities:
<TABLE>
<CAPTION>
EMERGING GLOBAL
INTERNATIONAL MARKETS POST-VENTURE
EQUITY FUND FUND CAPITAL FUND
------------- ---------- ------------
<S> <C> <C> <C>
Payable for securities purchased (at value) $18,530,833 $1,627,777 $23,490
Investment advisory fee payable 1,285,034 58,331 680
Administration services fee payable 128,504 4,844 279
Distribution fee payable 566,573 12,903 15
Payable for Fund shares redeemed 8,920,231 267,495 4,720
Payable for forward contracts 11,862,462 0 0
</TABLE>
9. NET ASSETS
At October 31, 1998, capital contributions, undistributed net investment
income, accumulated net realized gain (loss) from security transactions and
current period distribution have been adjusted for current period permanent
book/tax differences which arose principally from differing book/tax treatments
of foreign currency and equity swap transactions. The International Equity Fund,
the Emerging Markets Fund, and the Global Post-Venture Capital Fund reclassified
($14,782,299), $901,416, and ($1,517), respectively, from accumulated net
realized gain (loss) on security transactions and foreign currency related items
to undistributed net investment income. The International Equity Fund, and the
Emerging Markets Fund reclassified $4,592,556, and $283,298, respectively, from
accumulated net investment loss to capital contributions. The Global
Post-Venture Capital Fund reclassified offering costs of $116,731 from
undistributed net investment income (loss) to capital contributions. The Global
Post-Venture Capital Fund reclassified $559 of book distributions of net
investment income to distributions from realized gains (losses). In addition,
the International Equity Fund, and the Emerging Markets Fund reclassified
$18,984,334, and ($373,174), respectively, of book distributions from realized
gains (losses) to distributions of net investment income. Net investment income,
net realized gain (loss) on investments and net assets were not affected by this
reclassification.
40
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
9. NET ASSETS -- (CONT'D)
Net Assets at October 31, 1998, consisted of the following:
<TABLE>
<CAPTION>
EMERGING GLOBAL
INTERNATIONAL MARKETS POST-VENTURE
EQUITY FUND FUND CAPITAL FUND
-------------- ------------ ------------
<S> <C> <C> <C>
Capital contributed, net $1,696,752,863 $133,955,470 $3,397,104
Undistributed net investment income 0 0 0
Accumulated net realized gain (loss) from security
transactions (164,288,256) (64,293,799) 10,895
Net unrealized appreciation (depreciation) from investments
and foreign currency related items 51,474,835 (9,447,127) 254,298
-------------- ------------ ----------
Net assets $1,583,939,442 $ 60,214,544 $3,662,297
============== ============ ==========
</TABLE>
10. CAPITAL LOSS CARRYOVER
At October 31, 1998, capital loss carryovers available to offset possible
future capital gains of each Fund were as follows:
CAPITAL LOSS CARRYOVER
FUND EXPIRING IN 2006
- ---- ----------------------
International Equity $181,861,023
Emerging Markets 63,924,245
41
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
11. OTHER FINANCIAL HIGHLIGHTS
Each Fund (except the Major Foreign Markets Fund and the International Small
Company Fund) currently offers one other class of shares, Common Shares,
representing equal pro rata interests in each of the respective Warburg Pincus
International Funds. The financial highlights for a Common Share of each Fund
are as follows:
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
--------------------------------------------------------------
COMMON SHARES
--------------------------------------------------------------
1998 1997 1996 1995 1994
PERIOD ENDED: ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of
period $ 20.76 $ 20.69 $ 19.30 $ 20.51 $ 17.00
---------- ---------- ---------- ---------- ----------
INVESTMENT ACTIVITIES:
Net investment income 0.12(a) 0.04 0.22 0.12 0.09
Net gains or losses on investments
and foreign currency related
items (both realized and
unrealized) (1.38) 0.88 1.73 (0.67) 3.51
---------- ---------- ---------- ---------- ----------
Total from investment
activities (1.26) 0.92 1.95 (0.55) 3.60
---------- ---------- ---------- ---------- ----------
DISTRIBUTIONS:
From net investment income (0.14) (0.11) (0.56) (0.13) (0.04)
In excess of net investment income 0.00 0.00 0.00 0.00 (0.01)
From realized capital gains (2.72) (0.74) 0.00 (0.53) (0.04)
---------- ---------- ---------- ---------- ----------
Total distributions (2.86) (0.85) (0.56) (0.66) (0.09)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 16.64 $ 20.76 $ 20.69 $ 19.30 $ 20.51
========== ========== ========== ========== ==========
Total return (6.12)% 4.54% 10.35% (2.55)% 21.22%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s
omitted) $1,283,673 $2,312,042 $2,885,453 $2,068,207 $1,533,872
Ratio of expenses to average net
assets 1.36%@ 1.33%@ 1.38%@ 1.39% 1.44%
Ratio of net income to average net
assets .65% .56% .62% .69% .19%
Portfolio turnover rate 95.44% 61.80% 32.49% 32.24% 17.02%
</TABLE>
- --------------------------------------------------------------------------------
(a) Per share information is calculated using the average shares outstanding
method.
@ Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expenses. These arrangements resulted in a reduction to
the Common Shares' expenses by .00%, .01% and .01%, for the years ending
October 31, 1998, 1997 and 1996, respectively. The Common Shares' operating
expense ratio after reflecting these arrangements were 1.36%, 1.32% and
1.37% for the years ended October 31, 1998, 1997 and 1996, respectively.
42
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
11. OTHER FINANCIAL HIGHLIGHTS -- (CONT'D)
<TABLE>
<CAPTION>
EMERGING MARKETS FUND
--------------------------------------
COMMON SHARES
--------------------------------------
1998 1997 1996 1995**
PERIOD ENDED: ------- -------- -------- ------
<S> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $ 10.82 $ 12.19 $ 11.28 $10.00
------- -------- -------- ------
INVESTMENT ACTIVITIES:
Net investment income 0.11 0.04 0.07 0.08
Net gains or losses on investments and foreign currency
related items (both realized and unrealized) (3.86) (1.34) 0.99 1.25
------- -------- -------- ------
Total from investment activities (3.75) (1.30) 1.06 1.33
------- -------- -------- ------
DISTRIBUTIONS:
From net investment income (0.04) (0.03) (0.08) (0.05)
From realized capital gains (0.44) (0.04) (0.07) 0.00
------- -------- -------- ------
Total distributions (0.48) (0.07) (0.15) (0.05)
------- -------- -------- ------
NET ASSET VALUE, END OF PERIOD $ 6.59 $ 10.82 $ 12.19 $11.28
======= ======== ======== ======
Total return (35.95)% (10.71)% 9.46% 13.33%+
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $60,189 $155,806 $218,421 $6,780
Ratio of expenses to average net assets 1.65%@ 1.66%@ 1.62%@ 1.00%*
Ratio of net income to average net assets 1.00% .24% .31% 1.25%*
Decrease reflected in above operating expense ratios due
to waivers/reimbursements .63% .46% .77% 11.08%*
Portfolio turnover rate 125.59% 92.48% 61.84% 57.76%+
</TABLE>
- --------------------------------------------------------------------------------
** For the period December 30, 1994 (commencement of operations) through
October 31, 1995.
@ Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expenses. These arrangements resulted in a reduction to
the Common Shares' expenses by .00%, .01% and .01%, for the years ended
October 31, 1998, 1997 and 1996, respectively. The Common Shares' operating
expense ratio after reflecting these arrangements were 1.65%, 1.65% and
1.61% for the years ended October 31, 1998, 1997 and 1996, respectively.
+ Non annualized.
* Annualized.
43
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
11. OTHER FINANCIAL HIGHLIGHTS -- (CONT'D)
<TABLE>
<CAPTION>
GLOBAL POST-VENTURE CAPITAL FUND
--------------------------------
COMMON SHARES
--------------------------------
1998 1997 1996**
PERIOD ENDED: ------- ------- ------
<S> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $ 11.15 $ 9.86 $10.00
------- ------- ------
INVESTMENT ACTIVITIES:
Net investment loss (0.02) (0.13) 0.00
Net gains or losses on investments and foreign currency
related items (both realized and unrealized) (0.20) 1.42 (0.14)
------- ------- ------
Total from investment activities (0.22) 1.29 (0.14)
------- ------- ------
DISTRIBUTIONS:
From net investment income (0.29) 0.00 0.00
From realized capital gains (0.11) 0.00 0.00
------- ------- ------
Total distributions (0.40) 0.00 0.00
------- ------- ------
NET ASSET VALUE, END OF PERIOD $ 10.53 $ 11.15 $ 9.86
======= ======= ======
Total return (1.91)% 13.08% (1.40)%+
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 3,661 $ 3,197 $3,007
Ratio of expenses to average net assets 1.65%@ 1.66%@ 1.65%*@
Ratio of net income to average net assets (1.01)% (.96)% (.20)%*
Decrease reflected in above operating expense ratios
due to waivers/reimbursements 3.90% 6.48% 21.71%*
Portfolio turnover rate 186.67% 207.25% 5.85%+
</TABLE>
- --------------------------------------------------------------------------------
** For the period September 30, 1996 (commencement of operations) through
October 31, 1996.
@ Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expenses. These arrangements resulted in a reduction to
the Common Shares' expenses by .00%, .01% and .00%, for the years ended
October 31, 1998, 1997 and 1996, respectively. The Common Shares' operating
expense ratio after reflecting these arrangements were 1.65%, 1.65% and
1.65% for the years ended October 31, 1998, 1997 and 1996, respectively.
+ Non annualized.
* Annualized.
44
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUND
SHAREHOLDER TAX INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
Each Fund is required by Subchapter M of the Internal Revenue Code of 1986, as
amended, to advise its shareholders within 60 days of each Fund's fiscal year
end as to the U.S. federal tax status of distributions received by the Fund's
shareholders in respect of such fiscal year. During the fiscal year ended
October 31, 1998, the following dividends and distributions per share were paid
by each of the Funds:
<TABLE>
<CAPTION>
ORDINARY MID-TERM LONG-TERM FOREIGN SOURCE FOREIGN TAXES
INCOME CAPITAL GAINS CAPITAL GAINS INCOME PAID OR WITHHELD
FUND PER SHARE PER SHARE PER SHARE PER SHARE PER SHARE
- ---- --------- ------------- ------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
PAYMENT DATE 12/19/97 12/19/97 12/19/97
-------- -------- -------
International Equity
Common Shares $ 0.9494 $ 0.0000 $1.9077 $0.2017 $0.0516
Advisor Shares 0.8454 0.0000 1.9077 0.1367 0.0516
Emerging Markets
Common Shares 0.4758 0.0000 0.0000 0.0134 0.0331
Advisor Shares 0.4758 0.0000 0.0000 0.0109 0.0331
Global Post Venture
Capital*
Common Shares 0.2867 0.1066 0.0000 N/A N/A
Advisor Shares 0.2750 0.1066 0.0000 N/A N/A
</TABLE>
Further, the above information was provided to calendar year taxpayers via
Form 1099-DIV mailed in January of 1998.
Because the fiscal year of the Funds is not a calendar year, another
notification will be sent with respect to calendar year 1998. The second
notification, which will reflect the amount to be used by calendar year
taxpayers on their U.S. federal income tax returns, will be made in conjunction
with Form 1099-DIV and will be mailed in January 1999.
- ------------------
* Of the ordinary income distributions made during 1997, 5.69% qualify for the
dividends received deduction available to corporation shareholders.
45
<PAGE>
WARBURG PINCUS FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
WARBURG, PINCUS INTERNATIONAL EQUITY FUND, INC.;
WARBURG, PINCUS EMERGING MARKETS FUND, INC. AND
WARBURG, PINCUS GLOBAL POST-VENTURE CAPITAL FUND, INC.:
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Warburg, Pincus International Equity Fund, Inc., Warburg, Pincus Emerging
Markets Fund, Inc. and Warburg, Pincus Global Post-Venture Capital Fund, Inc.
(all funds collectively referred to as the "Funds") at October 31, 1998, the
results of their operations for the year then ended, changes in their net assets
for each of the two years in the period then ended and their financial
highlights for each of the years (or periods) presented, in conformity with
generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities owned at October 31, 1998 by
correspondence with the custodian and brokers, provide a reasonable basis for
the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
2400 Eleven Penn Center
Philadelphia, Pennsylvania
December 11, 1998
46
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WARBURG PINCUS
ADVISOR FUNDS
COUNSELLORS
SECURITIES INC.,
DISTRIBUTOR
800-369-2728
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ASSET MANAGEMENT
ADISF-2-1098
