ANNUAL
REPORT
October 31, 1998
WARBURG PINCUS
MAJOR FOREIGN MARKETS FUND
o
WARBURG PINCUS
INTERNATIONAL EQUITY FUND
o
WARBURG PINCUS
INTERNATIONAL SMALL COMPANY FUND
o
WARBURG PINCUS
EMERGING MARKETS FUND
o
WARBURG PINCUS
GLOBAL POST-VENTURE CAPITAL FUND
More complete information about the funds, including charges and expenses, is
provided in the Prospectus, which must precede or accompany this document and
which should be read carefully before investing. You may obtain additional
copies by calling 800-WARBURG (800-927-2874) or by writing to Warburg Pincus
Funds, P.O. Box 9030, Boston, MA 02205-9030.
[LOGO]
<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.
<PAGE>
WARBURG PINCUS MAJOR FOREIGN MARKETS FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998
- --------------------------------------------------------------------------------
December 11, 1998
Dear Shareholder:
The objective of Warburg Pincus Major Foreign Markets Fund (the "Fund") is
long-term capital appreciation. The Fund pursues its objective by investing
primarily in common stocks of issuers that have their principal business
activities and interests in countries considered to be major foreign securities
markets. Currently we define those markets to include the following European and
Pacific Basin countries: Australia, Austria, Belgium, Denmark, Finland, France,
Germany, Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway,
Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom.
For the 12 months ended October 31, 1998, the Fund had a gain of 2.26%, vs.
a gain of 9.65% for the Morgan Stanley Europe, Australasia and Far East ("EAFE")
Index.
Major foreign stock markets had mixed results for the reporting period,
with performance divided sharply along regional lines. Virtually all European
markets rose, and several (e.g., Italy and Spain) enjoyed very strong gains,
benefiting from a confluence of factors, including low inflation, falling
interest rates and optimism regarding the approach of European Monetary Union.
In contrast, nearly all Pacific Basin markets fell, with several (e.g., Malaysia
and New Zealand) suffering sizable setbacks, victims of the financial and
economic contagion that began following Thailand's currency devaluation in
mid-1997.
Set against this backdrop, Warburg Pincus Major Foreign Markets Fund
managed a modest gain for the period but fell short of its benchmark, the EAFE
Index. The Fund's underperformance reflects poor showings from a number of
holdings, principally among the Fund's European exposure. Particularly
problematic for the Fund was its fairly large weighting in European cyclical, or
economically sensitive, stocks, many of which fell sharply in August and
September amid the sell-off in global markets and growing fears of a global
recession. The Fund was also hurt by its exposure to European financial stocks
heading into that period, as these issues too suffered significant declines due
to worries over these companies' exposure to Russia and other emerging markets.
The losses in these two groups during that brief span negated a good portion of
the gains generated by the Fund's other holdings over the course of the
reporting period.
1
<PAGE>
WARBURG PINCUS MAJOR FOREIGN MARKETS FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998 (CONT'D)
- --------------------------------------------------------------------------------
In terms of general strategy, we concentrated predominantly on Europe at
the expense of the Pacific Basin through the 12 months, and increased the Fund's
European exposure as the period progressed. (Europe represented approximately
61% of the Fund's equity exposure heading into the period; by period end that
weighting had risen to over 75% of assets, a function both of appreciation and
active buying on our part.) This reflected our view that there was a
considerable amount of value to be found among Europe's markets, and that the
general macroeconomic and investment backdrop supporting these markets was
relatively favorable. In terms of country emphasis, the Fund's weightings did
not stray materially from those of the EAFE Index during the period, though in
specific cases (e.g., Austria and Denmark) we did overweight countries when we
believed the opportunities were sufficiently compelling.
We were cautious, as a rule, in our approach to Pacific Basin countries,
given the deteriorating economic environment and the considerable amount of
earnings uncertainty facing most of the region's companies. Most of our exposure
was concentrated in Japan, in a handful of primarily export-oriented companies
(e.g., Sony and Canon) whose prospects we viewed favorably, that country's
particular economic woes notwithstanding. We maintained limited and highly
focused exposure to Australia, Hong Kong, New Zealand and Singapore through the
period, and avoided Malaysia (which had been a component of the EAFE Index until
recently) completely, based on the belief that better risk-adjusted
opportunities were available elsewhere.
Heading into 1999, we see numerous attractive investment opportunities
among the world's developed markets, particularly in Europe, which remains the
focus of the portfolio as of this writing. We remain generally guarded toward
the Pacific Basin, though we have been encouraged by the recent stabilization in
the region's currencies and by some signs of economic improvement, and hence may
look to selectively increase our exposure at some point in the months ahead.
<TABLE>
<S> <C> <C>
Richard H. King Harold W. Ehrlich P. Nicholas Edwards
Co-Portfolio Manager Co-Portfolio Manager Co-Portfolio Manager
</TABLE>
International investing entails special risk considerations, including
currency fluctuations, lower liquidity, economic and political risks, and
differences in accounting methods.
2
<PAGE>
WARBURG PINCUS MAJOR FOREIGN MARKETS FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998 (CONT'D)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN WARBURG PINCUS
MAJOR FOREIGN MARKETS FUND SINCE INCEPTION AS OF OCTOBER 31, 1998
The graph below illustrates a hypothetical investment of $10,000 in Common
Shares of Warburg Pincus Major Foreign Markets Fund (the "Fund") from March 31,
1997 (inception) to October 31, 1998, compared to the Morgan Stanley Europe,
Australasia and Far East Index ("EAFE")* for the same time period.
[GRAPHIC]
In the printed version of the document, a line graph
appears which depicts the following plot points:
Major Foreign Mkts MS-EAFE
------------------ -------
Mar-97 10000 10000
Apr-97 10210 10053
May-97 11069.68 10707.25
Jun-97 11629.81 11297.75
Jul-97 12310.15 11480.55
Aug-97 11539.54 10623.18
Sep-97 12119.97 11218.29
Oct-97 11059.48 10355.61
Nov-97 10649.17 10249.98
Dec-97 10448.97 10339.16
Jan-98 10700.79 10812.07
Feb-98 11508.7 11505.77
Mar-98 12358.04 11860.03
Apr-98 12725.07 11953.97
May-98 12882.86 11895.99
Jun-98 12599.44 11986.04
Jul-98 12767.01 12107.58
Aug-98 11192.84 10607.57
Sep-98 10700.35 10282.34
Oct-98 11309.2 11354.17
Average Annual
Total Returns
for periods ended
10/31/98
(Common Shares)
1 year
2.26%
Since Inception
(3/31/97)
8.06%
<TABLE>
<CAPTION>
FUND
----
<S> <C>
1 Year Total Return (9/30/97 to 9/30/98).................... -11.70%
Average Annual Total Return Since Inception
(3/31/97 to 9/30/98)...................................... 4.61%
</TABLE>
- ------------------
* The Morgan Stanley Europe, Australasia and Far East Index is an unmanaged
index (with no defined investment objective) of international equities that
includes reinvestment of dividends, and is the exclusive property of Morgan
Stanley & Co. Incorporated.
3
<PAGE>
WARBURG PINCUS 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 6.12%, 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
4
<PAGE>
WARBURG PINCUS 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.
<TABLE>
<S> <C>
Richard H. King Harold W. Ehrlich
Portfolio Manager Associate Portfolio Manager
P. Nicholas Edwards Vincent J. McBride
Associate Portfolio Manager Associate Portfolio Manager
</TABLE>
International investing entails special risk considerations, including
currency fluctuations, lower liquidity, economic and political risks, and
differences in accounting methods.
5
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998 (CONT'D)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN COMMON SHARES OF WARBURG PINCUS
INTERNATIONAL EQUITY FUND SINCE INCEPTION AS OF OCTOBER 31, 1998
The graph below illustrates a hypothetical investment of $10,000 in Common
Shares of Warburg Pincus International Equity Fund (the "Fund") from May 2, 1989
(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 Except US
------------- --------------------------------
May-89 10000 10000
May-89 10040 9569.7
Jun-89 10220 9399.26
Jul-89 11080 10499.07
Aug-89 11220 10116.07
Sep-89 12050 10558.54
Oct-89 11350 10171.04
Nov-89 11740 10595.48
Dec-89 12434.5 10998.85
Jan-90 12323.39 10689.45
Feb-90 12040.56 9996.14
Mar-90 12040.56 9002.32
Apr-90 11767.82 8867.92
May-90 12868.85 9776.17
Jun-90 13131.07 9639.5
Jul-90 13884.33 9795.75
Aug-90 12418.54 8820
Sep-90 11227.58 7637.59
Oct-90 12021.55 8723.96
Nov-90 11828.15 8281.57
Dec-90 11866.32 8428.81
Jan-91 12357.7 8669.2
Feb-91 13298.64 9610.59
Mar-91 13235.91 9102.1
Apr-91 13528.65 9218.51
May-91 13737.75 9339.46
Jun-91 13084.52 8720.44
Jul-91 13830.71 9129.17
Aug-91 13736.12 8952.7
Sep-91 14219.57 9400.51
Oct-91 14356.19 9537.29
Nov-91 13830.71 9118.89
Dec-91 14311.21 9575.65
Jan-92 14461.18 9493.11
Feb-92 14332.63 9191.9
Mar-92 14075.55 8653.99
Apr-92 14321.92 8678.04
May-92 14921.79 9183.71
Jun-92 14263.65 8750.24
Jul-92 13661.26 8548.99
Aug-92 13704.29 8976.52
Sep-92 13467.64 8775.99
Oct-92 13144.93 8418.45
Nov-92 13446.13 8478.56
Dec-92 13689.34 8536.38
Jan-93 14026.14 8534.25
Feb-93 14330.35 8816.73
Mar-93 15253.83 9544.82
Apr-93 16166.46 10363.86
May-93 16459.8 10580.26
Jun-93 16066.61 10447.37
Jul-93 16675.77 10778.76
Aug-93 17730.93 11329.56
Sep-93 17654.78 11107.27
Oct-93 18492.38 11504.02
Nov-93 18187.8 10681.37
Dec-93 20706.13 11573.26
Jan-94 22669.83 12521.58
Feb-94 22124.36 12406
Mar-94 20346.12 11833.59
Apr-94 20771.59 12246.11
May-94 21458.88 12259.58
Jun-94 21160.4 12343.68
Jul-94 21870.85 12571.42
Aug-94 22832.68 13001.99
Sep-94 22318.98 12729.34
Oct-94 22417.35 13030.64
Nov-94 21466.44 12410.78
Dec-94 20737.73 12395.88
Jan-95 18955.05 11797.91
Feb-95 18616.57 11732.66
Mar-95 19835.11 12386.41
Apr-95 20433.09 12826.74
May-95 20421.81 12757.74
Jun-95 20227.75 12580.53
Jul-95 21506.84 13265.92
Aug-95 21846.42 12794.18
Sep-95 22321.83 13030.87
Oct-95 21846.42 12684.51
Nov-95 22186 12949.75
Dec-95 22884.09 13454.01
Jan-96 23548.24 13604.29
Feb-96 23583.2 13606.6
Mar-96 23816.23 13871.12
Apr-96 25249.97 14364.1
May-96 24714.67 14124.5
Jun-96 25018.66 14207.98
Jul-96 23783.46 13720.36
Aug-96 24004.86 13799.25
Sep-96 24389.41 14138.16
Oct-96 24108.93 13992.54
Nov-96 25157.64 14523.84
Dec-96 25301.04 14348.82
Jan-97 25288.9 14096.43
Feb-97 25568.14 14361.02
Mar-97 25373.89 14337.18
Apr-97 25883.79 14467.93
May-97 27644.18 15341.94
Jun-97 28833.96 16197.26
Jul-97 29695.95 16529.46
Aug-97 27219.3 15265.45
Sep-97 28444.17 16037.27
Oct-97 25201.54 14627.6
Nov-97 24425.33 14440.66
Dec-97 24185.96 14595.46
Jan-98 24256.1 15028.36
Feb-98 26060.75 16051.19
Mar-98 27582.7 16593.88
Apr-98 28294.34 16696.1
May-98 28223.6 16372.36
Jun-98 27230.13 16299.51
Jul-98 27641.3 16456.63
Aug-98 23450.88 14128.84
Sep-98 22386.21 13838.78
Oct-98 23635.36 15287.84
Average Annual
Total Returns
for periods ended
10/31/98
(Common Shares)
1 year
-6.12%
5 year
5.05%
Since Inception
(5/02/89)
9.48%
<TABLE>
<CAPTION>
FUND
----
<S> <C>
1 Year Total Return (9/30/97 to 9/30/98).................... -21.21%
5 Year Average Annual Total Return (9/30/93 to9/30/98)...... 4.88%
Average Annual Total Return Since Inception
(5/02/89 to 9/30/98)...................................... 8.94%
</TABLE>
6
<PAGE>
WARBURG PINCUS 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 years ended October 31.
<TABLE>
<CAPTION>
EAFE MSCI FUND
------- ------- -------
<S> <C> <C> <C>
1989...................................... $10,029 $10,171 $11,350
1990...................................... 8,744 8,724 12,022
1991...................................... 9,353 9,537 14,356
1992...................................... 8,117 8,418 13,145
1993...................................... 11,158 11,504 18,492
1994...................................... 12,285 13,031 22,417
1995...................................... 12,240 12,685 21,846
1996...................................... 13,522 13,993 24,109
1997...................................... 14,148 14,628 25,202
1998...................................... 15,512 15,288 23,635
</TABLE>
- ------------------
* 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.
7
<PAGE>
WARBURG PINCUS INTERNATIONAL SMALL COMPANY FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998
- --------------------------------------------------------------------------------
December 11, 1998
Dear Shareholder:
The objective of Warburg Pincus International Small Company Fund (the
"Fund") is capital appreciation. The Fund seeks to achieve its objective by
investing in a portfolio of equity securities of non-U.S. small-sized companies.
For the five months ended October 31, 1998 (the Fund commenced operations
on May 29, 1998), the Fund had a loss of 13.90%, vs. a loss of 15.39% for the
Morgan Stanley EAFE Small Cap Index.
The period was a difficult one for international stock markets, and for
small-company shares in particular. Smaller stocks posted relatively modest
losses in June and July, but then proceeded to sell off sharply during the
global market correction in August and September, bearing the brunt of
investors' so-called "flight to quality." The group bounced back strongly in
October, but the gains were insufficient to make up for the earlier losses.
Our general strategy through the period, in terms of geographic allocation,
was to emphasize Europe at the expense of the Asia, Latin America and the rest
of the emerging-market universe. This reflected our view that the backdrop
supporting European markets (relatively strong economic growth, a favorable
profit outlook, falling interest rates and positive investor sentiment) made
them far more attractive from a risk-reward calculation than markets elsewhere.
We also found in Europe a multitude of rapidly growing companies selling at what
we deemed to be compelling valuations, hence we considered the region attractive
from both top-down and bottom-up perspectives.
Looking ahead to 1999, we believe the prospects for foreign small-company
stocks collectively are quite strong. Many of these companies, particularly
those in Europe, are innovative businesses that are enjoying impressive growth
in earnings, yet their shares are very inexpensively priced, reflecting one or
more factors that we believe will prove temporary (e.g., the relative lack of
research coverage, investors' current bias toward large-capitalization stocks,
etc.). As these markets continue to develop, both in depth and breadth, and
assuming the global economy remains healthy, we think these stocks could see a
substantial pickup in buying interest and a proportional upward move in share
prices, suggesting a fair amount of opportunity for those who invest early and
pick the right stocks.
8
<PAGE>
WARBURG PINCUS INTERNATIONAL SMALL COMPANY FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998 (CONT'D)
- --------------------------------------------------------------------------------
Accordingly, we remain optimistic, and will continue our efforts to identify
those small companies that we believe have the best long-term potential for
appreciation.
<TABLE>
<S> <C>
Harold E. Sharon J.H. Collum Clark
Portfolio Manager Associate Portfolio Manager
</TABLE>
International investing entails special risk considerations, including
currency fluctuations, lower liquidity, economic and political risks, and
differences in accounting methods.
- ------------------
* The Morgan Stanley EAFE Small Cap Index is composed of small cap stocks of
companies from developed markets outside of North America.
9
<PAGE>
WARBURG PINCUS EMERGING MARKETS FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998
- --------------------------------------------------------------------------------
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 35.95%,
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.
10
<PAGE>
WARBURG PINCUS 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.
<TABLE>
<S> <C>
Richard H. King Vincent J. McBride
Co-Portfolio Manager Co-Portfolio Manager
</TABLE>
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.
11
<PAGE>
WARBURG PINCUS EMERGING MARKETS FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998 (CONT'D)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN COMMON SHARES OF WARBURG PINCUS
EMERGING MARKETS FUND SINCE INCEPTION AS OF OCTOBER 31, 1998
The graph below illustrates a hypothetical investment of $10,000 in Common
Shares of Warburg Pincus 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 period.
[GRAPHIC]
In the printed version of the document, a line graph
appears which depicts the following plot points:
Emerging Markets MSCI
---------------- ----
Dec-94 10000 10000
Jan-95 9860 8936.2
Feb-95 9890 8707.08
Mar-95 10410 8762.45
Apr-95 10570 9155.54
May-95 11230 9642.52
Jun-95 10928 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 9077.2
Dec-95 11702.72 9479.77
Jan-96 12422.1 10153.5
Feb-96 12553.82 9992.26
Mar-96 12867.92 10070
Apr-96 13931.81 10472.6
May-96 13577.18 10426.1
Jun-96 13415.06 10491.16
Jul-96 12452.5 9774.3
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 10737.7
Feb-97 13977.74 11197.7
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 9410.2 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
(Common Shares)
1 year
-35.95%
Since Inception
(12/30/94)
-8.55%
<TABLE>
<CAPTION>
FUND
----
<S> <C>
1 Year Total Return (9/30/97 to 9/30/98).................... -52.68%
Average Annual Total Return Since Inception
(12/30/94 to 9/30/98)..................................... -10.67%
</TABLE>
- ------------------
* 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.
12
<PAGE>
WARBURG PINCUS 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 1.91%, 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
13
<PAGE>
WARBURG PINCUS GLOBAL POST-VENTURE CAPITAL FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998 (CONT'D)
- --------------------------------------------------------------------------------
wealth of empirical data (e.g., the Eighth Annual Economic Impact of Venture
Capital Study, jointly produced by Coopers & Lybrand and the National 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.
<TABLE>
<S> <C>
Elizabeth B. Dater Harold E. Sharon
Co-Portfolio Manager Co-Portfolio Manager
</TABLE>
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.
14
<PAGE>
WARBURG PINCUS GLOBAL POST-VENTURE CAPITAL FUND
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1998 (CONT'D)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN COMMON SHARES OF WARBURG PINCUS
GLOBAL POST-VENTURE CAPITAL FUND SINCE INCEPTION AS OF OCTOBER 31, 1998
The graph below illustrates a hypothetical investment of $10,000 in Common
Shares of Warburg Pincus 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 period.
[GRAPHIC]
In the printed version of the document, a line graph
appears which depicts the following plot points:
<TABLE>
<CAPTION>
Global Post Venture Russell 2000 Growth LIPPER GLOBAL FUNDS INDEX MSCI World Index
------------------- ------------------- ------------------------- ----------------
<S> <C> <C> <C> <C>
Sept-96 10000 10000 10000 10000
Oct-96 9860.00 9568.7 10003 10055.9
Nov-96 10020.00 9834.81 10476.14 10603.24
Dec-96 10060.00 10026.58 10492.9 10419.17
Jan-97 10340.00 10277.05 10726.9 10529.61
Feb-97 9760.00 9656.52 10792.33 10635.54
Mar-97 9140.00 8975.16 10662.82 10410.07
Apr-97 9180.00 8871.4 10798.24 10735.17
May-97 10120.00 10204.86 11458.01 11382.4
Jun-97 10380.00 10550.91 11948.41 11935.01
Jul-97 11160.00 11091.54 12545.84 12469.7
Aug-97 10970.00 11424.4 11850.8 11620.39
Sep-97 11760.00 12336.06 12589.1 12236.62
Oct-97 11150.00 11595.16 11797.25 11577.31
Nov-97 11019.55 11319.19 11822.02 11766.95
Dec-97 10936.90 11325.99 11962.7 11895.09
Jan-98 10698.47 11175.01 12096.92 12211.38
Feb-98 11903.12 12161.54 12913.47 13021.85
Mar-98 12713.72 12671.72 13563.27 13555.88
Apr-98 13440.95 12749.4 13760.75 13672.46
May-98 12922.13 11823.15 13643.1 13485.42
Jun-98 13119.84 11944.1 13685.53 13789.65
Jul-98 12486.15 10946.65 13691.41 13751.59
Aug-98 9867.80 8419.73 11697.26 11901.72
Sep-98 10283.24 9273.4 11704.04 12096.08
Oct-98 10937.25 9757.1 12478.85 13173.36
</TABLE>
Average Annual
Total Returns
for periods ended
10/31/98
(Common Shares)
1 year
-1.91%
Since Inception
(9/30/96)
4.38%
<TABLE>
<CAPTION>
FUND
----
<S> <C>
1 Year Total Return (9/30/97 to 9/30/98).................... -12.56%
Average Annual Total Return Since Inception
(9/30/96 to 9/30/98)...................................... 1.40%
</TABLE>
- ------------------
* 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 developed
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.
15
<PAGE>
WARBURG PINCUS MAJOR FOREIGN MARKETS FUND
STATEMENT OF NET ASSETS
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCKS (90.2%)
Austria (1.5%)
Erste Bank Der Oesterreichischen Sparkassen AG 1,700 $ 99,501
Radex-Heraklith Industriebeteiligungs AG 2,600 81,444
VA Technologie AG 1,440 133,469
Wienerberger Baustoffindustrie AG 1,304 272,162
-----------
586,576
-----------
Denmark (4.9%)
International Service System AS Class B 11,900 803,297
Tele Danmark AS Class B 4,700 512,109
Unidanmark AS Class A + 7,780 593,145
-----------
1,908,551
-----------
Finland (0.1%)
Huhtamaki OY Class I 700 23,480
Rauma OY 1,985 23,442
-----------
46,922
-----------
France (14.1%)
Banque Nationale de Paris 4,075 258,057
Compagnie de Saint Gobain 1,243 183,870
Compagnie Generale des Eaux 9,600 461,266
Elf Aquitaine SA 4,330 501,035
Etablissements Economiques du Casino Guichard-Perrachon
SA 7,300 726,469
Lagardere Groupe SCA 13,800 555,290
PSA Peugeot Citroen 3,660 610,562
Rhone-Poulenc SA Class A 7,448 340,441
Suez Lyonnaise des Eaux SA 4,600 823,664
Total SA Class B 4,200 484,480
Vivendi 2,500 570,914
-----------
5,516,048
-----------
Germany (12.8%)
BHF Bank AG 17,900 690,631
Degussa AG 8,990 434,252
Fresenius Medical Care AG 12,330 558,363
Hannover Rueckversicherungs AG 4,000 463,718
Hoechst AG 13,166 549,319
Mannesmann AG 3,927 380,327
Muenchener Rueckversicherungs-Gesellschaft AG 900 409,738
Preussag AG 279 103,603
Schering AG 5,800 677,644
Schmalbach Lubeca AG 250 36,983
Viag AG 1,003 680,706
-----------
4,985,284
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
16
<PAGE>
WARBURG PINCUS MAJOR FOREIGN MARKETS FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
--------- -----------
COMMON STOCKS (CONT'D)
<S> <C> <C>
Hong Kong (1.0%)
New World Development Co., Ltd. 33,000 $ 76,687
Smartone Telecommnicatons 117,200 332,877
-----------
409,564
-----------
Ireland (1.4%)
Bank of Ireland 23,100 426,911
Kerry Group PLC Class A 10,400 131,260
-----------
558,171
-----------
Israel (1.7%)
ECI Telecommunications, Ltd. 20,000 662,500
-----------
Italy (7.0%)
Alleanza Assicurazioni 25,600 315,663
Ericsson SpA 9,300 379,221
Istituto Bancario San Paolo de Torino SpA 41,825 615,298
SEAT Pagine Gialle SpA 780,300 488,223
Telecom Italia SpA 127,800 924,447
-----------
2,722,852
-----------
Japan (11.8%)
Advantest Corp. 4,900 309,071
Matsushita Electric Industrial Group 13,000 601,322
Minebea Co., Ltd. 49,000 460,453
Nichiei Co., Ltd. 2,800 226,352
NTT Mobile Communications Network, Inc. 7 252,904
Orix Corp. 10,700 766,735
Rohm Co., Ltd. 7,000 618,743
Shohkoh Fund & Co., Ltd. 1,900 578,023
Sony Corp. 6,300 400,081
Takefuji Corp. 3,300 175,866
TDK Corp. 3,000 197,723
-----------
4,587,273
-----------
Netherlands (5.9%)
CSM NV 7,500 369,442
ING Groep NV 7,878 381,313
Koninklijke Pakhoed NV 14,200 349,739
Laurus NV 13,370 336,455
Philips Electronics NV 4,310 229,383
Vedior NV 144A 5,600 142,723
Vendex Non-Foods NV 19,100 485,763
-----------
2,294,818
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
17
<PAGE>
WARBURG PINCUS MAJOR FOREIGN MARKETS FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
COMMON STOCKS (CONT'D)
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
------ -----
<S> <C> <C>
Norway (0.1%)
Smedvig ASA ADR Class B 6,150 $ 52,275
-----------
Singapore (0.1%)
Oversea-Chinese Banking Corp. Ltd. 8,000 34,885
-----------
South Africa (0.3%)
Sappi, Ltd. + 26,600 132,767
-----------
Spain (4.0%)
Argentaria Caja Postal y Banco Hipotecario SA 24,734 537,216
Endesa SA 40,300 1,013,813
-----------
1,551,029
-----------
Sweden (2.9%)
Biora AB ADR + 4,800 87,900
Electrolux AB Series B 25,206 378,887
Ericsson LM-B 21,600 486,333
Kinnevik AB Series B 7,500 193,812
-----------
1,146,932
-----------
Switzerland (5.3%)
Novartis AG 302 544,188
Roche Holding AG 45 525,076
SAIA-Burgess Electronics AG + 900 218,006
Sulzer AG 489 281,680
Swisscom AG + 1,300 440,665
TAG Heuer International SA ADR 5,600 37,100
-----------
2,046,715
-----------
United Kingdom (15.3%)
Barclays PLC 24,700 532,372
Bass PLC 41,900 508,735
British Aerospace PLC 1,400 10,422
British Energy PLC 90,700 887,074
Glaxo Wellcome PLC 12,700 394,749
Guardian Royal Exchange PLC 111,228 539,265
Lloyds TSB Group PLC 9,800 121,040
Orange PLC + 83,900 780,523
Reed International PLC 50,900 430,902
Royal & Sun Alliance Insurance Group PLC 35,900 328,868
Somerfield PLC 75,400 486,783
Standard Chartered PLC 19,200 206,592
Williams PLC 117,823 735,508
-----------
5,962,833
-----------
TOTAL COMMON STOCKS (Cost $35,095,945) 35,205,995
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
18
<PAGE>
WARBURG PINCUS MAJOR FOREIGN MARKETS FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
------ -----
<S> <C> <C>
PREFERRED STOCKS (0.6%)
Germany (0.6%)
GEA AG 7,000 $ 166,950
KSB AG 430 69,582
-----------
236,532
-----------
TOTAL PREFERRED STOCKS (Cost $364,960) 236,532
-----------
<CAPTION>
PAR
(000)
------
<S> <C> <C>
SHORT-TERM INVESTMENT (12.1%)
Repurchase agreement with State Street Bank & Trust Co.
dated 10/30/98 at 5.400% to be repurchased at $4,738,131
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 $4,830,747.) (Cost
$4,736,000) $4,736 4,736,000
-----------
TOTAL INVESTMENTS AT VALUE (102.9%) (Cost $40,196,905*) 40,178,527
LIABILITIES IN EXCESS OF OTHER ASSETS (2.9%) (1,157,483)
-----------
NET ASSETS (100.0%) (applicable to 3,620,852 Common Shares) $39,021,044
===========
NET ASSET VALUE, offering and redemption price per Common
Share ($39,021,044 divided by 3,620,852) $ 10.78
===========
</TABLE>
INVESTMENT ABBREVIATIONS
ADR = American Depository Receipt
- --------------------------------------------------------------------------------
+ Non-income producing security.
* Cost for federal income tax purposes is $40,415,336.
See Accompanying Notes to Financial Statements.
19
<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.
20
<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 Bnak 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.
21
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
COMMON STOCKS (CONT'D)
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
---------- --------------
<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.
22
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
COMMON STOCKS (CONT'D)
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
---------- --------------
<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.
23
<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.
24
<PAGE>
WARBURG PINCUS INTERNATIONAL SMALL COMPANY FUND
STATEMENT OF NET ASSETS
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCKS (75.9%)
Belgium (1.1%)
Mobistar SA+ 300 $ 13,156
------------
Canada (5.5%)
Kap Resources, Ltd.+ 20,000 5,689
Newcourt Credit Group, Inc. 650 21,369
Research in Motion, Ltd.+ 12,000 41,501
------------
68,559
------------
Chile (1.9%)
Administradora de Fondos de Pensiones Provida 800 11,350
Banco Santiago SA ADR 900 12,262
------------
23,612
------------
Denmark (0.9%)
Kapital Holdings+ 180 10,435
------------
Finland (1.2%)
Jot Automation Group Oyj+ 600 14,648
------------
France (8.8%)
AIGLE 310 27,335
Cegedim SA 600 25,385
Genset ADR+ 300 8,812
L'Europeenne d'Extincteurs 200 10,402
Le Carbone - Lorraine 320 18,428
Leon de Bruxelles SA 130 10,527
Transgene SA ADR+ 550 8,044
------------
108,933
------------
Germany (4.6%)
Deutsche Babcock AG+ 350 17,498
Krones AG 144 3,434
Pfeiffer Vacuum Technology AG ADR+ 500 23,688
Phoenix AG 600 12,680
------------
57,300
------------
Israel (7.0%)
Blue Square Israel Co., Ltd. ADR 1,600 20,600
First International Bank of Israel, Ltd. 3,600 15,859
Orbotech, Ltd.+ 1,450 50,750
------------
87,209
------------
</TABLE>
See Accompanying Notes to Financial Statements.
25
<PAGE>
WARBURG PINCUS INTERNATIONAL SMALL COMPANY FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
COMMON STOCKS (CONT'D)
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
---------- ------------
<S> <C> <C>
Italy (6.8%)
Banco di Napoli SpA+ 15,000 $ 17,168
Compagnia Assicuratrice Unipol SpA 4,000 15,163
Ericsson SpA 300 12,233
Gruppo Editoriale L'Espresso 2,700 24,063
Interpump Group SpA 4,050 16,366
------------
84,993
------------
Japan (3.0%)
Hikari Tsushin, Inc. 300 11,328
Shohkoh Fund & Co., Ltd. 50 15,211
Sysmex Corp. 1,000 9,955
------------
36,494
------------
Portugal (2.0%)
Banco Mello SA 2,266 24,961
------------
Sweden (5.0%)
Biora AB ADR+ 1,270 23,257
Esselte AB Series B 900 13,125
Haldex AB 2,300 25,893
------------
62,275
------------
Switzerland (6.9%)
Forbo Holding AG 40 16,542
Gretag Imaging Group+ 100 9,084
SAIA-Burgess Electronics AG+ 90 21,801
Swisslog Holding AG 270 24,625
TAG Heuer International SA ADR 2,100 13,913
------------
85,965
------------
United Kingdom (21.2%)
AMVESCAP PLC ADR 150 5,494
Chiroscience Group PLC+ 8,800 41,265
Dialog Corp. PLC+ 13,400 35,457
Dialog Corp. PLC ADR+ 2,300 24,366
Electronics Boutique PLC 33,000 45,318
</TABLE>
See Accompanying Notes to Financial Statements.
26
<PAGE>
WARBURG PINCUS INTERNATIONAL SMALL COMPANY FUND
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER
OF
SHARES VALUE
---------- ------------
<S> <C> <C>
COMMON STOCKS (CONT'D)
United Kingdom (cont'd)
Euromoney Publications PLC 650 $ 15,784
Freepages Group PLC+ 60,100 23,150
London Bridge Software Holdings PLC 2,400 39,691
M & G Group PLC 250 6,228
Perpetual PLC 130 5,987
Schroders PLC 300 5,702
Taylor Nelson Sofres PLC 10,300 15,093
--------
263,535
--------
TOTAL COMMON STOCKS (Cost $1,091,225) 942,075
--------
PREFERRED STOCKS (4.7%)
Germany (4.7%)
Escada AG 230 28,330
Marschollek, Lautenschlaeger und Partner AG 60 30,540
--------
58,870
--------
TOTAL PREFERRED STOCKS (Cost $67,407) 58,870
--------
WARRANT (1.4%)
Switzerland (1.4%)
Gretag Imaging Group (Strike Price 160 CHF) 11/11/1999+ 15,000 17,724
--------
TOTAL WARRANT (Cost $36,607) 17,724
--------
</TABLE>
<TABLE>
<CAPTION>
PAR
(000)
-----
<S> <C> <C>
SHORT-TERM INVESTMENT (16.2%)
Repurchase agreement with State Street Bank & Trust Co.
dated 10/30/98 at 5.400% to be repurchased at $201,090 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
$205,021.) (Cost $201,000) $ 201 201,000
------------
TOTAL INVESTMENTS AT VALUE (98.2%) (Cost $1,396,239*) 1,219,669
OTHER ASSETS IN EXCESS OF LIABILITIES (1.8%) 22,484
------------
NET ASSETS (100.0%) (applicable to 144,321 Common Shares) $ 1,242,153
============
NET ASSET VALUE, offering and redemption price per Common
Share ($1,242,153 divided by 144,321) $ 8.61
============
</TABLE>
INVESTMENT ABBREVIATIONS
ADR = American Depository Receipt
- --------------------------------------------------------------------------------
+ Non-income producing security.
* Also cost for federal income tax purposes.
See Accompanying Notes to Financial Statements.
27
<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.
28
<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 1,533,735
----------
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.
29
<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.
30
<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.
31
<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.
32
<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.
33
<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>
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.
34
<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) 11/11/1999 + 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.
35
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
STATEMENTS OF OPERATIONS
For the Year or Period Ended October 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAJOR FOREIGN INTERNATIONAL
MARKETS FUND EQUITY FUND
------------- -------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends $ 419,108 $ 43,766,090
Interest 202,320 4,416,768
Foreign taxes withheld (47,619) (4,803,223)
----------- -------------
Total investment income 573,809 43,379,635
----------- -------------
EXPENSES:
Investment advisory 230,682 21,710,859
Administrative services 67,490 3,657,301
Audit 15,025 109,518
Custodian/Sub-custodian 17,729 1,351,688
Directors 11,273 16,052
Interest 5 48,361
Legal 26,995 118,931
Offering/Organizational costs 57,218 0
Printing 0 210,166
Registration 35,303 73,031
Shareholder servicing/distribution 2,142 1,982,695
Transfer agent 8,256 1,774,263
Miscellaneous 1,589 112,304
----------- -------------
473,707 31,165,169
Less fees waived, expenses reimbursed and transfer agent
offsets (253,303) (88,524)
----------- -------------
Total expenses 220,404 31,076,645
----------- -------------
Net investment income (loss) 353,405 12,302,990
----------- -------------
NET REALIZED AND UNREALIZED LOSS FROM INVESTMENTS AND
FOREIGN CURRENCY RELATED ITEMS:
Net realized gain (loss) from security and other related
transactions (2,195,858) (213,451,199)
Net realized gain (loss) from foreign currency related
items (60,144) 51,944,476
Net change in unrealized appreciation (depreciation) from
investments and foreign currency related items (325,873) 47,688,281
----------- -------------
Net realized and unrealized loss from investments and
foreign currency related items (2,581,875) (113,818,442)
----------- -------------
Net decrease in net assets resulting from operations $(2,228,470) $(101,515,452)
=========== =============
</TABLE>
- ------------------
(1) For the period May 29, 1998 (commencement of operations) through October 31,
1998.
36
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL SMALL EMERGING GLOBAL POST-VENTURE
COMPANY FUND(1) MARKETS FUND CAPITAL FUND
------------------- ------------ -------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 3,880 $ 2,327,122 $ 10,664
Interest 5,605 649,852 12,977
Foreign taxes withheld (670) (359,344) (1,363)
--------- ----------- ---------
Total investment income 8,815 2,617,630 22,278
--------- ----------- ---------
EXPENSES:
Investment advisory 5,026 1,232,557 43,604
Administrative services 4,445 232,506 12,809
Audit 12,000 13,917 14,517
Custodian/Sub-custodian 811 168,388 19,746
Directors 2,600 10,708 10,751
Interest 10 0 495
Legal 400 19,179 25,553
Offering/Organizational costs 25,532 43,040 1,186
Printing 3,500 20,207 13,168
Registration 2,721 58,686 34,710
Shareholder servicing/distribution 1,143 247,287 8,724
Transfer agent 1,113 203,463 8,926
Miscellaneous 350 8,264 0
--------- ----------- ---------
59,651 2,258,202 194,189
Less fees waived, expenses reimbursed and transfer agent
offsets (52,569) (630,761) (136,629)
--------- ----------- ---------
Total expenses 7,082 1,627,441 57,560
--------- ----------- ---------
Net investment income (loss) 1,733 990,189 (35,282)
--------- ----------- ---------
NET REALIZED AND UNREALIZED LOSS FROM INVESTMENTS AND
FOREIGN CURRENCY RELATED ITEMS:
Net realized gain (loss) from security and other related
transactions (43,204) (62,658,535) 16,393
Net realized gain (loss) from foreign currency related
items (4,124) (420,100) (1,517)
Net change in unrealized appreciation (depreciation) from
investments and foreign currency related items (176,546) 21,064,753 (224,948)
--------- ----------- ---------
Net realized and unrealized loss from investments and
foreign currency related items (223,874) (42,013,882) (210,072)
--------- ----------- ---------
Net decrease in net assets resulting from operations $(222,141) $(41,023,693) $(245,354)
========= =========== =========
</TABLE>
See Accompanying Notes to Financial Statements.
37
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAJOR FOREIGN MARKETS FUND
------------------------------------------
FOR THE PERIOD
MARCH 31, 1997
FOR THE (COMMENCEMENT OF
YEAR ENDED OPERATIONS) THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997
---------------- -------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 353,405 $ 18,658
Net realized gain (loss) from security and other related
transactions (2,195,858) 91,300
Net realized gain (loss) from foreign currency related
items (60,144) (1,829)
Net change in unrealized appreciation (depreciation) from
investments and foreign currency related items (325,873) (144,276)
----------- ----------
Net increase (decrease) in net assets resulting from
operations (2,228,470) (36,147)
----------- ----------
FROM DISTRIBUTIONS:
Dividends from net investment income
Common Shares (104,762) 0
Advisor Shares 0 0
Distributions from realized gains
Common Shares (106,758) 0
Advisor Shares 0 0
----------- ----------
Net decrease in net assets from distributions (211,520) 0
----------- ----------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 48,022,233 4,832,000
Reinvested dividends 211,520 0
Net asset value of shares redeemed (11,568,572) 0
----------- ----------
Net increase (decrease) in net assets from capital share
transactions 36,665,181 4,832,000
----------- ----------
Net increase (decrease) in net assets 34,225,191 4,795,853
NET ASSETS:
Beginning of period 4,795,853 0
----------- ----------
End of period $39,021,044 $4,795,853
=========== ==========
UNDISTRIBUTED NET INVESTMENT INCOME: $ 409,014 $ 62,604
=========== ==========
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL SMALL
COMPANY FUND
-------------------
INTERNATIONAL EQUITY FUND FOR THE PERIOD
----------------------------------- MAY 29, 1998
FOR THE FOR THE (COMMENCEMENT OF
YEAR ENDED YEAR ENDED OPERATIONS) THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997 OCTOBER 31, 1998
---------------- ---------------- -------------------
<S> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 12,302,990 $ 16,595,226 $ 1,733
Net realized gain (loss) from security and other related
transactions (213,451,199) 242,233,285 (43,204)
Net realized gain (loss) from foreign currency related
items 51,944,476 81,782,235 (4,124)
Net change in unrealized appreciation (depreciation) from
investments and foreign currency related items 47,688,281 (164,531,003) (176,546)
-------------- -------------- ----------
Net increase (decrease) in net assets resulting from
operations (101,515,452) 176,079,743 (222,141)
-------------- -------------- ----------
FROM DISTRIBUTIONS:
Dividends from net investment income
Common Shares (13,983,166) (15,677,127) 0
Advisor Shares (776,129) (959,277) 0
Distributions from realized gains
Common Shares (276,226,122) (101,110,864) 0
Advisor Shares (61,851,043) (17,984,137) 0
-------------- -------------- ----------
Net decrease in net assets from distributions (352,836,460) (135,731,405) 0
-------------- -------------- ----------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 945,589,502 910,099,943 1,465,804
Reinvested dividends 335,103,766 122,187,954 0
Net asset value of shares redeemed (2,054,917,142) (1,646,039,200) (101,510)
-------------- -------------- ----------
Net increase (decrease) in net assets from capital share
transactions (774,223,874) (613,751,303) 1,364,294
-------------- -------------- ----------
Net increase (decrease) in net assets (1,228,575,786) (573,402,965) 1,142,153
NET ASSETS:
Beginning of period 2,812,515,228 3,385,918,193 100,000
-------------- -------------- ----------
End of period $1,583,939,442 $2,812,515,228 $1,242,153
============== ============== ==========
UNDISTRIBUTED NET INVESTMENT INCOME: $ 0 $ 31,630,382 $ 0
============== ============== ==========
</TABLE>
See Accompanying Notes to Financial Statements.
39
<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.
40
<PAGE>
WARBURG PINCUS MAJOR FOREIGN MARKETS FUND
FINANCIAL HIGHLIGHTS
(For a Common Share of the Fund Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997**
PERIOD ENDED: ------- ------
<S> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $ 11.06 $10.00
------- ------
INVESTMENT ACTIVITIES:
Net investment income 0.27 0.08
Net gains or losses on investments and foreign currency
related items (both realized and unrealized) (0.06) 0.98
------- ------
Total from investment activities 0.21 1.06
------- ------
DISTRIBUTIONS:
From net investment income (0.24) 0.00
From realized capital gains (0.25) 0.00
------- ------
Total distributions (0.49) 0.00
------- ------
NET ASSET VALUE, END OF PERIOD $ 10.78 $11.06
======= ======
Total return 2.26% 10.60%+
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $39,021 $4,796
Ratios of expenses to average net assets .95%@ .95%@*
Ratio of net income to average net assets 1.50% 1.18%*
Decrease reflected in above operating expense ratios
due to waivers/reimbursements 1.07% 6.69%*
Portfolio turnover rate 115.76% 30.29%+
</TABLE>
- --------------------------------------------------------------------------------
** For the period March 31, 1997 (commencement of operations) through October
31, 1997.
@ Interest earned on uninvested cash balances is used to offset portions of the
transfer agent expenses. These arrangements had no effect on the fund's
expense ratio.
+ Non annualized.
* Annualized.
See Accompanying Notes to Financial Statements.
41
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
(For a Common Share of the Fund Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
PERIOD ENDED: ---------- ----------
<S> <C> <C>
PER SHARE DATA
Net asset value, beginning of period: $ 20.76 $ 20.69
---------- ----------
INVESTMENT ACTIVITIES:
Net investment income 0.12(a) 0.04
Net gains or losses on investments and foreign currency
related items (both realized and unrealized) (1.38) 0.88
---------- ----------
Total from investment activities (1.26) 0.92
---------- ----------
DISTRIBUTIONS:
From net investment income (0.14) (0.11)
In excess of net investment income 0.00 0.00
From realized capital gains (2.72) (0.74)
---------- ----------
Total distributions (2.86) (0.85)
---------- ----------
NET ASSET VALUE, END OF PERIOD $ 16.64 $ 20.76
========== ==========
Total return (6.12)% 4.54%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $1,283,673 $2,312,042
Ratio of expenses to average net assets 1.36%@ 1.33%@
Ratio of net income to average net assets .65% .56%
Portfolio turnover rate 95.44% 61.80%
</TABLE>
42
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
PERIOD ENDED: ---------- ---------- ----------
<S> <C> <C> <C>
PER SHARE DATA
Net asset value, beginning of period: $ 19.30 $ 20.51 $ 17.00
---------- ---------- ----------
INVESTMENT ACTIVITIES:
Net investment income 0.22 0.12 0.09
Net gains or losses on investments and foreign currency
related items (both realized and unrealized) 1.73 (0.67) 3.51
---------- ---------- ----------
Total from investment activities 1.95 (0.55) 3.60
---------- ---------- ----------
DISTRIBUTIONS:
From net investment income (0.56) (0.13) (0.04)
In excess of net investment income 0.00 0.00 (0.01)
From realized capital gains 0.00 (0.53) (0.04)
---------- ---------- ----------
Total distributions (0.56) (0.66) (0.09)
---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD $ 20.69 $ 19.30 $ 20.51
========== ========== ==========
Total return 10.35% (2.55)% 21.22%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $2,885,453 $2,068,207 $1,533,872
Ratio of expenses to average net assets 1.38%@ 1.39% 1.44%
Ratio of net income to average net assets .62% .69% .19%
Portfolio turnover rate 32.49% 39.24% 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.
See Accompanying Notes to Financial Statements.
43
<PAGE>
WARBURG PINCUS INTERNATIONAL SMALL COMPANY FUND
FINANCIAL HIGHLIGHTS
(For a Common Share of the Fund Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1998**
PERIOD ENDED: ------
<S> <C>
PER SHARE DATA
Net asset value, beginning of period $10.00
------
INVESTMENT ACTIVITIES:
Net investment income 0.01
Net losses on investments and foreign currency related
items (both realized and unrealized) (1.40)
------
Total from investment activities (1.39)
------
NET ASSET VALUE, END OF PERIOD $ 8.61
======
Total return (13.90)%+
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $1,242
Ratio of expenses to average net assets 1.55%@*
Ratio of net income to average net assets .38%*
Decrease reflected in above operating expense ratios
due to waivers/reimbursements 11.50%*
Portfolio turnover rate 61.33%+
</TABLE>
- --------------------------------------------------------------------------------
** For the period May 29, 1998 (commencement of operations)
through October 31, 1998.
@ Interest earned on uninvested cash balances is used to
offset portions of the transfer agent expenses. These
arrangements had no effect on the fund's expense ratio.
+ Non annualized.
* Annualized.
See Accompanying Notes to Financial Statements.
44
<PAGE>
WARBURG PINCUS EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS
(For a Common 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 $ 10.82 $ 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.
See Accompanying Notes to Financial Statements.
45
<PAGE>
WARBURG PINCUS GLOBAL POST-VENTURE CAPITAL FUND
FINANCIAL HIGHLIGHTS
(For a Common 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 $ 11.15 $ 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.
See Accompanying Notes to Financial Statements.
46
<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
47
<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
48
<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.
49
<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
- ---- -------
Major Foreign Markets $ 765
International Equity 88,524
International Small Company 12
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
- ---- -----------
Major Foreign Markets 1.00% of average daily net assets
International Equity 1.00% of average daily net assets
International Small Company 1.10% 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
For the fiscal period ended October 31, 1998, investment advisory fees,
waivers and reimbursements were as follows:
50
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR -- (CONT'D)
<TABLE>
<CAPTION>
GROSS NET EXPENSE
FUND ADVISORY FEE WAIVER ADVISORY FEE REIMBURSEMENTS
- ---- ------------ --------- ------------ --------------
<S> <C> <C> <C> <C>
Major Foreign Markets $ 230,682 ($202,603) $ 28,079 ($22,094)
International Equity 21,710,859 0 21,710,859 0
International Small Company 5,026 (5,026) 0 (46,983)
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
- ---- ---------------------
Major Foreign Markets $ 23,200
International Equity 2,171,086
International Small Company 457
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:
51
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR -- (CONT'D)
<TABLE>
<CAPTION>
NET
FUND CO-ADMINISTRATION FEE WAIVER CO-ADMINISTRATION FEE
- ---- --------------------- -------- ---------------------
<S> <C> <C> <C>
Major Foreign Markets $ 44,290 $(27,841) $ 16,449
International Equity 1,486,215 0 1,486,215
International Small Company 3,988 (548) 3,440
Emerging Markets 133,902 (11,373) 122,529
Global Post-Venture Capital 9,320 (4,186) 5,134
</TABLE>
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 Market 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
==========
52
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
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 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>
53
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
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
- ---- -------------- --------------
Major Foreign Markets $ 56,007,005 $ 22,966,267
International Equity 1,957,964,355 2,907,497,198
International Small Company 1,734,260 480,889
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:
<TABLE>
<CAPTION>
NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
FUND APPRECIATION DEPRECIATION (DEPRECIATION)
- ---- ------------ ------------- --------------
<S> <C> <C> <C>
Major Foreign Markets $ 2,510,298 $ (2,747,107) $ (236,809)
International Equity 213,072,750 (144,284,874) 68,787,876
International Small Company 32,433 (209,003) (176,570)
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.
54
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
5. FORWARD FOREIGN CURRENCY CONTRACTS -- (CONT'D)
At October 31, 1998, the Major Foreign Markets Fund and the International
Equity Fund had the following open forward foreign currency contracts:
<TABLE>
<CAPTION>
MAJOR FOREIGN MARKETS 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 1,162,000 $ 8,698 $ 10,145 $ (1,447)
Japanese Yen 02/26/1999 229,750,000 1,720,072 2,005,935 (285,863)
Japanese Yen 02/26/1999 62,100,000 465,169 542,192 (77,023)
Japanese Yen 02/26/1999 46,000,000 344,311 401,624 (57,313)
Japanese Yen 02/26/1999 23,000,000 171,642 200,812 (29,170)
Japanese Yen 02/26/1999 28,300,000 242,232 247,086 (4,854)
Japanese Yen 02/26/1999 10,144,000 88,339 88,567 (228)
------------ ------------ ------------
$ 3,040,463 $ 3,496,361 $ (455,898)
============ ============ ============
<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>
55
<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.
56
<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>
MAJOR FOREIGN MARKETS FUND
COMMON SHARES
--------------------------------------
MARCH 31, 1997
FOR THE (COMMENCEMENT OF
YEAR ENDED OPERATIONS) THROUGH
OCTOBER 31, 1998 OCTOBER 31, 1997
---------------- -------------------
<S> <C> <C>
Shares sold 4,210,721 433,621
Shares issued to shareholders on
reinvestment of dividends 21,323 0
Shares redeemed (1,044,813) 0
------------ ----------
Net increase (decrease) in
shares outstanding 3,187,231 433,621
============ ==========
Proceeds from sale of shares $ 48,022,233 $4,832,000
Reinvested dividends 211,520 0
Net asset value of shares
redeemed (11,568,572) 0
------------ ----------
Net increase (decrease) from
capital share transactions $ 36,665,181 $4,832,000
============ ==========
<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 increase (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 increase (decrease) from
capital share transactions $ (657,875,296) $ (613,345,320) $(116,348,578) $ (405,983)
=============== =============== ============= ============
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL
SMALL COMPANY
FUND EMERGING MARKETS FUND
COMMON SHARES COMMON SHARES ADVISOR SHARES
------------------- ----------------------------- -----------------------
FOR THE PERIOD
MAY 29, 1998
(COMMENCEMENT OF FOR THE YEAR ENDED OCTOBER 31,
OPERATIONS) THROUGH -------------------------------------------------------
OCTOBER 31, 1998 1998 1997 1998 1997
------------------- ------------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Shares sold 146,577 13,544,543 15,395,660 235,380 13,980
Shares issued to
shareholders on
reinvestment of dividends 0 582,196 92,759 1,113 4
Shares redeemed (12,256) (19,392,450) (19,011,433) (256,959) (1,743)
----------- ------------- ------------- ----------- ---------
Net increase (decrease) in
shares outstanding 134,321 (5,265,711) (3,523,014) (20,466) 12,241
=========== ============= ============= =========== =========
Proceeds from sale of shares $ 1,465,804 $ 118,390,331 $ 209,234,551 $ 1,967,876 $ 204,109
Reinvested dividends 0 5,373,673 1,143,716 10,321 55
Net asset value of shares
redeemed (101,510) (172,692,012) (255,371,760) (2,218,983) (23,597)
----------- ------------- ------------- ----------- ---------
Net increase (decrease) from
capital share transactions $ 1,364,294 $ (48,928,008) $ (44,993,493) $ (240,786) $ 180,567
=========== ============= ============= =========== =========
</TABLE>
57
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
7. CAPITAL SHARE TRANSACTIONS -- (CONT'D)
<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>
8. LIABILITIES
At October 31, 1998, the Funds had the following affiliated and investment
related liabilities:
<TABLE>
<CAPTION>
MAJOR INTERNATIONAL
FOREIGN SMALL EMERGING GLOBAL
MARKETS INTERNATIONAL COMPANY MARKETS POST-VENTURE
FUND EQUITY FUND FUND FUND CAPITAL FUND
-------- ------------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Payable for securities purchased (at
value) $266,398 $18,530,833 $ 0 $1,627,777 $23,490
Investment advisory fee payable 0 1,285,034 0 58,331 680
Administration services fee payable 3,122 128,504 99 4,844 279
Distribution fee payable 0 566,573 372 12,903 15
Payable for Fund shares redeemed 481,307 8,920,231 0 267,495 4,720
Payable for forward contracts 255,862 11,862,462 0 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 Major Foreign Markets
Fund, the International Equity Fund, the International Small Company Fund, the
Emerging Markets Fund, and the Global Post-Venture Capital Fund reclassified
$26,301, ($14,782,299), ($4,124), $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, the International Small Company Fund, and the Emerging Markets Fund
reclassified $4,592,556, $2,391, and $283,298, respectively, from accumulated
net investment loss to capital contributions. The Major Foreign Markets Fund and
the Global Post-
58
<PAGE>
WARBURG PINCUS INTERNATIONAL EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1998
- --------------------------------------------------------------------------------
9. NET ASSETS -- (CONT'D)
Venture Capital Fund reclassified offering costs of $59,585 and $116,731,
respectively, 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 Major Foreign Markets Fund, the International Equity
Fund, and the Emerging Markets Fund reclassified ($11,881), $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.
Net Assets at October 31, 1998, consisted of the following:
<TABLE>
<CAPTION>
INTERNATIONAL
SMALL EMERGING GLOBAL
MAJOR FOREIGN INTERNATIONAL COMPANY MARKETS POST-VENTURE
MARKETS FUND EQUITY FUND FUND FUND CAPITAL FUND
------------- -------------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Capital contributed, net $41,381,770 $1,696,752,863 $1,461,903 $133,955,470 $3,397,104
Undistributed net investment income 409,014 0 0 0 0
Accumulated net realized gain (loss)
from security transactions (2,299,591) (164,288,256) (43,204) (64,293,799) 10,895
Net unrealized appreciation
(depreciation) from investments and
foreign currency related items (470,149) 51,474,835 (176,546) (9,447,127) 254,298
----------- -------------- ---------- ------------ ----------
Net assets $39,021,044 $1,583,939,442 $1,242,153 $ 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
- ---- ----------------------
Major Foreign Markets $ 2,537,058
International Equity 181,861,023
International Small Company 43,204
Emerging Markets 63,924,245
59
<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, Advisor Shares,
representing equal prorata interests in each of the respective Warburg Pincus
International Funds. The financial highlights for an Advisor Share of each Fund
are as follows:
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
----------------------------------------------------
ADVISOR SHARES
----------------------------------------------------
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.
60
<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
-----------------------------------
ADVISOR SHARES
-----------------------------------
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.
61
<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
--------------------------------
ADVISOR SHARES
--------------------------------
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 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 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 expense. These
arrangements had no effect on the Advisor Shares' expense
ratio.
+ Non annualized.
* Annualized.
62
<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
-------- -------- -------
Major Foreign Markets
Common Shares $ 0.4513 $ 0.0000 $0.0365 $0.0434 $0.0078
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>
The International Small Company Fund did not pay any ordinary income
dividends or capital gain distributions during the current fiscal year. 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.
63
<PAGE>
WARBURG PINCUS FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
WARBURG, PINCUS MAJOR FOREIGN MARKETS FUND, INC.;
WARBURG, PINCUS INTERNATIONAL EQUITY FUND, INC.;
WARBURG, PINCUS INTERNATIONAL SMALL COMPANY 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 Major Foreign Markets Fund, Inc., Warburg, Pincus International
Equity Fund, Inc., Warburg, Pincus International Small Company 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 (or
period) then ended, changes in their net assets for each of the two years (or
periods) presented 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
64
<PAGE>
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