<PAGE>1
As filed with the U.S. Securities and Exchange Commission
on August 18, 1995
Securities Act File No. 33-47880
Investment Company Act File No. 811-6670
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 4 [x]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 [x]
Amendment No. 5 [x]
(Check appropriate box or boxes)
Warburg, Pincus Institutional Fund, Inc.
. . . . . . . . . . . . . . . . . . . . . .
(Exact Name of Registrant as Specified in Charter)
466 Lexington Avenue
New York, New York 10017-3147
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 878-0600
Mr. Eugene P. Grace
Warburg, Pincus Institutional Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3147
. . . . . . . . . . . . . . . . . . . . .
(Name and Address of Agent for Service)
Copy to:
Rose F. DiMartino, Esq.
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
Page 1 of ___ Pages
Exhibit Index at Page
<PAGE>2
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on [date] pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on [date] pursuant to paragraph (a)(1)
[X] 75 days after filing pursuant to paragraph (a)(2)
[ ] on [date] pursuant to paragraph (a)(2)
of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
__________________________________
DECLARATION PURSUANT TO RULE 24f-2
Registrant has registered an indefinite number or amount of
securities under the Securities Act of 1933, as amended, pursuant to Section
(a)(1) of Rule 24f-2 under the Investment Company Act of 1940, as amended.
The Rule 24f-2 Notice for Registrant's fiscal year ending on October 31, 1994
was filed on December 29, 1994.
<PAGE>3
WARBURG, PINCUS INSTITUTIONAL FUND, INC.
FORM N-1A
CROSS REFERENCE SHEET
Part A
Item No. Prospectus Heading
-------- ------------------
1. Cover Page . . . . . . . . . . . . Cover Page
2. Synopsis . . . . . . . . . . . . . The Fund's Expenses
3. Condensed Financial Information . Financial Highlights
4. General Description of
Registrant . . . . . . . . . . . Cover Page;
Investment Objectives
and Policies;
Special Risk Considerations
and Certain Investment
Strategies;
Investment Guidelines;
Additional Information
5. Management of the Fund . . . . . . Management of the Fund
6. Capital Stock and Other
Securities . . . . . . . . . . . Management of the Fund;
Additional Information
7. Purchase of Securities Being
Offered . . . . . . . . . . . . How to Open an Account
in the Fund;
How to Purchase Shares
in the Portfolios;
Management of the Fund;
Net Asset Value
8. Redemption or Repurchase . . . . . How to Redeem and Exchange
Shares in the Portfolios
9. Pending Legal Proceedings . . . . Not applicable
<PAGE>4
Part B Statement of Additional
Item No. Information Heading
-------- -----------------------
10. Cover Page . . . . . . . . . . . . Cover Page
11. Table of Contents . . . . . . . . Contents
12. General Information and History . Management of the Fund
13. Investment Objectives
and Policies . . . . . . . . . . Investment Objectives;
Investment Policies
14. Management of the Registrant . . . Management of the Fund
15. Control Persons and Principal
Holders of Securities . . . . . Management of the Fund;
See Prospectus--
"Management of the Fund"
16. Investment Advisory and
Other Services . . . . . . . . . Management of the Fund;
See Prospectus--
"Management of the Fund"
17. Brokerage Allocation
and Other Practices . . . . . . Investment Policies; --
Portfolio Transactions
See Prospectus--
"Portfolio Transactions
and Turnover Rate"
18. Capital Stock and Other
Securities . . . . . . . . . . . Management of the Fund--
Organization of the Fund;
See Prospectus--"Additional
Information"
19. Purchase, Redemption and Pricing
of Securities Being Offered . . Additional Purchase and
Redemption Information;
See Prospectus--"Net
Asset Value"
20. Tax Status . . . . . . . . . . . . Additional Information
Concerning Taxes;
See Prospectus--"Dividends,
Distributions and Taxes"
<PAGE>5
Part B Statement of Additional
Item No. Information Heading
-------- -----------------------
21. Underwriters . . . . . . . . . . . See Prospectus--
"Management of the Fund"
22. Calculation of Performance Data.. Determination of
Performance
23. Financial Statements . . . . . . . Report of Independent
Auditors; Financial
Statements
Part C
Information required to be included in Part C is set forth after the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE>6
[Logo]
PROSPECTUS
NOVEMBER 1, 1995
WARBURG PINCUS INSTITUTIONAL FUND, INC.
[ ] INTERNATIONAL EQUITY PORTFOLIO
[ ] SMALL COMPANY GROWTH PORTFOLIO
[ ] GLOBAL FIXED INCOME PORTFOLIO
<PAGE>7
SUBJECT TO COMPLETION, DATED AUGUST 18, 1995
WARBURG PINCUS FUNDS
P.O. BOX 9030
BOSTON, MASSACHUSETTS 02205-9030
TELEPHONE NUMBER: (800) 888-6878
PROSPECTUS November 1, 1995
WARBURG, PINCUS INSTITUTIONAL FUND, INC. (the 'Fund') is an open-end management
investment company that currently offers three managed investment funds (the
'Portfolios'):
INTERNATIONAL EQUITY PORTFOLIO seeks long-term capital appreciation
by investing primarily in equity securities of non-United States issuers.
SMALL COMPANY GROWTH PORTFOLIO seeks capital growth by investing
primarily in equity securities of small-sized domestic companies.
GLOBAL FIXED INCOME PORTFOLIO seeks to maximize total investment
return consistent with prudent investment management while preserving
capital by investing in investment grade fixed income securities of issuers
throughout the world, including United States issuers.
International investment entails special risk considerations, including currency
fluctuations, lower liquidity, economic instability, political uncertainty and
differences in accounting methods. See 'Risk Factors and Special
Considerations.'
Shares of the International Equity and Global Fixed Income Portfolios are
offered only to investors that make a minimum initial investment in the
Portfolio of $3,000,000 or more, although the minimum investment for any group
of related persons is an aggregate of $4,000,000. Shares of the Small Company
Growth Portfolio are offered only to investors that make a minimum initial
investment in the Portfolio of $1,000,000. The Fund is designed for
institutional investors although, in its discretion, the Fund may permit shares
to be purchased by individuals, as well as institutions, who meet the minimum
investment requirements.
This Prospectus briefly sets forth certain information about the Fund and the
Portfolios that investors should know before investing. Investors are encouraged
to read this Prospectus carefully and retain it for future reference. Additional
information about the Fund and the Portfolios has been filed with the Securities
and Exchange Commission (the 'SEC') in a document entitled 'Statement of
Additional Information,' which is available upon request and without charge by
calling Warburg Pincus Funds at (800) 888-6878. Information regarding the status
of shareholder accounts may also be obtained by calling Warburg Pincus Funds at
(800) 888-6878. The Statement of Additional Information bears the same date as
this Prospectus and is incorporated by reference into this Prospectus.
------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------------------------------------------------------------
******************************************************************************
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION
STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE
ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION
OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
******************************************************************************
<PAGE>8
THE FUND'S EXPENSES
The following expense table lists the costs and expenses that an investor
will incur directly or indirectly as a shareholder of a Portfolio based upon an
estimate of each Portfolio's operating expenses:
<TABLE>
<CAPTION>
INTERNATIONAL SMALL COMPANY GLOBAL FIXED
EQUITY GROWTH INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
------------- ------------- ------------
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price).............................................. 0 0 0
Annual Portfolio Operating Expenses (as a percentage of average net
assets) (after fee waivers)
Management Fees................................................ .55% .45% .08%
12b-1 Fees..................................................... 0 0 0
Other Expenses................................................. .40% .70% .52%
--- ------ -----
Total Portfolio Operating Expenses............................. .95% 1.15% .60%
EXAMPLE
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of
each time period:
1 year............................................................. $10 $12 $6
3 years............................................................ $30 $37 $19
5 years............................................................ $53 n.a. n.a.
10 years............................................................ $117 n.a. n.a.
</TABLE>
------------------
The expense table shows the costs and expenses that an investor will bear
directly or indirectly as a shareholder of a Portfolio. In the case of the Small
Company Growth Portfolio and the Global Fixed Income Portfolio, which had not
commenced operations as of October 31, 1994, Other Expenses are based on
estimated amounts for the fiscal period. Warburg, Pincus Counsellors Inc., the
Portfolios' investment adviser ('Counsellors'), and, under certain
circumstances, the Portfolios' co-administrator, had undertaken to waive fees
payable to them until October 31, 1994 so that Total Portfolio Operating
Expenses of the International Equity Portfolio would not exceed the amount set
forth in the table above. Counsellors has continued in the current fiscal year
to waive its fees but is under no obligation to continue to do so. Absent the
waiver of fees payable to Counsellors and each Portfolio's co-administrator,
Management Fees for the International Equity Portfolio and the Global Fixed
Income Portfolio would have equalled .80% and .65%, respectively, Other Expenses
would have equalled .44% and .63%, respectively, and Total Portfolio Operating
Expenses would have equalled 1.24% and 1.28%, respectively, of average net
assets. Counsellors has undertaken to reduce or otherwise limit the Small
Company Growth Portfolio's operating expenses through December 31, 1996. In the
absence of this undertaking, Other Expenses would be equal to .75% and Total
Portfolio Operating Expenses would be equal to 1.65% for the Small Company
Growth Portfolio. This example should not be considered a representation of past
or future expenses; actual expenses may be greater or less than those shown.
Moreover, while the table assumes a 5% annual return, a Portfolio's actual
performance will vary and may result in an actual return greater or less than
5%.
2
<PAGE>9
FINANCIAL HIGHLIGHTS
(FOR A SHARE OF THE INTERNATIONAL EQUITY PORTFOLIO OUTSTANDING THROUGHOUT THE
PERIOD)`D'
The following information for the fiscal years ending October 31, 1993 and
October 31, 1994 has been derived from information audited by Coopers & Lybrand
L.L.P., independent auditors, whose report dated December 12, 1994 appears in
the Statement of Additional Information. The information for the period
September 1, 1992 (commencement of operations) through October 31, 1992 has been
audited by Ernst & Young LLP, whose report was unqualified. The information for
the six months ended April 30, 1995 is unaudited. Further information about the
performance of the International Equity Portfolio is contained in the Fund's
annual report, dated October 31, 1994, copies of which may be obtained without
charge by calling Warburg Pincus Funds at (800) 888-6878.
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
APRIL 30, 1995 FOR THE YEAR ENDED OCTOBER 31,
(UNAUDITED) 1994 1993
-------------- ------------------------------ ------------------------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period......... $ 16.34 $ 13.49 $ 9.62
----------- ----------- -----------
Income from Investment Operations
Net Investment Income...................... .12 .17 .10
Net Gains (Loss) from Securities and
Foreign Currency Related Items (both
realized and unrealized)................ (1.55) 2.87 3.87
----------- ----------- -----------
Total from Investment Operations........... (1.43) 3.04 3.97
----------- ----------- -----------
Less Distributions
Dividends (from net investment income)..... (.18) (.07) (.10)
Distributions (from capital gains)......... (.57) (.12) .00
----------- ----------- -----------
Total Distributions..................... (.75) (.19) (.10)
----------- ----------- -----------
Net Asset Value, End of Period............... $ 14.16 $ 16.34 $ 13.49
----------- ----------- -----------
----------- ----------- -----------
Total Return................................. (17.10%)* 22.62% 41.61%
Ratios/Supplemental Data
Net Assets, End of Period (000s)............. $375,089 $331,297 $109,280
Ratios to Average Daily Net Assets:
Operating expenses......................... .95%* .95% .95%
Net investment income...................... 1.41%* .59% .75%
Decrease reflected in above expense ratios
due to waivers/reimbursements........... .25%* .29% .44%
Portfolio Turnover Rate...................... 25.43%* 19.34% 19.40%
<CAPTION>
FOR THE PERIOD
SEPTEMBER 1, 1992
(COMMENCEMENT OF
OPERATIONS) THROUGH
OCTOBER 31, 1992
-------------------
<S> <C>
Net Asset Value, Beginning of Period......... $ 10.00
----------
Income from Investment Operations
Net Investment Income...................... .02
Net Gains (Loss) from Securities and
Foreign Currency Related Items (both
realized and unrealized)................ (.40)
----------
Total from Investment Operations........... (.38)
----------
Less Distributions
Dividends (from net investment income)..... .00
Distributions (from capital gains)......... .00
----------
Total Distributions..................... .00
----------
Net Asset Value, End of Period............... $ 9.62
----------
----------
Total Return................................. (20.69%)*
Ratios/Supplemental Data
Net Assets, End of Period (000s)............. $18,613
Ratios to Average Daily Net Assets:
Operating expenses......................... .95%*
Net investment income...................... 1.22%*
Decrease reflected in above expense ratios
due to waivers/reimbursements........... .85%*
Portfolio Turnover Rate...................... 50.16%
</TABLE>
------------
`D' No financial highlights have been presented with respect to the Small
Company Growth Portfolio and the Global Fixed Income Portfolio, which had
not commenced operations as of April 30, 1995. The reports of Coopers &
Lybrand L.L.P. on the financial statement of the Small Company Growth
Portfolio as of August 8, 1995 and the Global Fixed Income Portfolio as of
February 14, 1995 (audited) and as of July 31, 1995 (unaudited) appear in
the Statement of Additional Information.
* Annualized.
3
<PAGE>10
INVESTMENT OBJECTIVES AND POLICIES
Set forth below is a description of the investment objective and policies
of each Portfolio. The investment objective of a Portfolio is a fundamental
policy and may not be changed without the approval of the holders of a majority
of the outstanding voting securities of that Portfolio. Any investment involves
risk and, therefore, there can be no assurance that a Portfolio will achieve its
investment objective. See 'Special Risk Considerations and Certain Investment
Strategies' for descriptions of certain other types of investments the
Portfolios may make.
INTERNATIONAL EQUITY PORTFOLIO. The International Equity Portfolio's investment
objective is long-term capital appreciation. The Portfolio pursues its
investment objective by investing, under normal market conditions, substantially
all of its assets -- but no less than 65% of its total assets -- in common
stocks and securities convertible into or exchangeable for common stocks of non-
United States issuers.
The Portfolio currently intends to spread investments among countries to
reduce currency risk and, under normal market conditions, will invest in at
least three countries other than the United States. The Portfolio intends to be
widely diversified across securities of many corporations located in a number of
foreign countries. Management of the Portfolio anticipates, however, that the
Portfolio may from time to time invest a significant portion of its assets in a
single country, such as Japan, which may involve special risks (described
below). If it did, like any investor in Japan, the Portfolio would be subject to
general economic and political conditions in Japan. The Japanese economy is
heavily industrial and the manufacturing sector is export oriented; however,
domestic demand is now growing in relative importance. Although Japan is
dependent upon foreign economies for raw materials, Japan's balance of payments
in recent years has been strong and positive.
The Portfolio intends to invest principally in the securities of
financially strong companies with opportunities for growth within international
economies and markets through increased earning power and improved utilization
or recognition of assets. Investments may be made in equity securities of
companies of any size, whether traded on or off a national securities exchange.
The Portfolio is a 'diversified' investment company under the Investment
Company Act of 1940, as amended (the '1940 Act'), which means that the Portfolio
is limited by the 1940 Act, with respect to 75% of its total assets, from
investing more than 5% of its total assets in the securities of any one issuer
and from purchasing more than 10% of the voting securities of any one issuer.
In appropriate circumstances, such as when a direct investment by the
Portfolio in the securities of a particular country cannot be made or when the
securities of an investment company are more liquid than the underlying
portfolio securities, the Portfolio may, consistent with the provisions of the
1940 Act, invest in the securities of closed-end investment companies that
invest in foreign securities. When Counsellors believes that a conservative or
defensive posture is warranted, the Portfolio may invest temporarily without
limit in securities of U.S. issuers and money market obligations (described
below).
SMALL COMPANY GROWTH PORTFOLIO. The Small Company Growth Portfolio's investment
objective is capital growth. The Portfolio will pursue its investment objective
by investing primarily in a portfolio of equity securities of small market
capitalization domestic companies (i.e., companies having stock market
capitalizations of $1 billion or less at the time of initial purchase, 'small
companies'). The Portfolio intends to invest at least 90% of its total assets in
common stocks or warrants of small companies that present attractive
opportunities for capital growth and, under normal market conditions, will
invest at least 65% of its total assets in such securities. The Portfolio is not
required to dispose of securities of issuers whose market capitalizations grow
to exceed $1 billion after acquisition by the Portfolio. The Portfolio will
invest primarily in compa-
4
<PAGE>11
nies whose securities are traded on domestic stock exchanges or in the domestic
over-the-counter market, but may invest up to 20% of its assets in foreign
securities. Small companies may still be in the developmental stage, may be
older companies that appear to be entering a new stage of growth progress owing
to factors such as management changes or development of new technology, products
or markets or may be companies providing products or services with a high unit
volume growth rate. The Portfolio's investments will be made on the basis of
their equity characteristics, and securities ratings generally will not be a
factor in the selection process.
The Portfolio may also invest in securities of emerging growth companies,
which can be either small- or medium-sized companies that have passed their
start-up phase and that show positive earnings and prospects of achieving
significant profit and gain in a relatively short period of time. Emerging
growth companies generally stand to benefit from new products or services,
technological developments or changes in management and other factors.
The Portfolio is classified as a 'non-diversified' investment company under
the 1940 Act, which means that the Portfolio is not limited by the 1940 Act in
the proportion of its assets that may be invested in the securities of a single
issuer. The Portfolio, however, intends to comply with the diversification
requirements imposed by the Internal Revenue Code of 1986, as amended (the
'Code'), for qualification as a regulated investment company. As a
non-diversified investment company, the Portfolio may invest a greater
proportion of its assets in the obligations of a smaller number of issuers and,
as a result, may be subject to greater risk with respect to portfolio
securities.
GLOBAL FIXED INCOME PORTFOLIO. The Global Fixed Income Portfolio's investment
objective is to maximize total investment return consistent with prudent
investment management while preserving capital. The Portfolio will seek to
achieve its objective by investing, under normal market conditions,
substantially all of its assets -- but no less than 65% of its total
assets -- in bonds, debentures and notes of United States and foreign issuers,
denominated in U.S. dollars or in other currencies or multi-currency units such
as European Currency Units ('ECUs'). These debt obligations include obligations
issued or guaranteed by the United States government or a foreign government,
its agencies or instrumentalities, securities of supranational entities,
Eurobonds and corporate bonds.
Up to 5% of the Portfolio's net assets may be rated below investment grade
at the time of the investment but not lower than 'B' by Standard & Poor's
Ratings Group or Moody's Investors Service, Inc. Such securities are regarded as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations and involve
large uncertainties or major risk exposures to adverse conditions. The Fund may
have difficulty disposing of certain lower quality obligations because there may
be a thin trading market for such securities. In addition, the market value of
lower quality securities may be more volatile than that of higher quality
securities.
Counsellors' approach to multicurrency fixed-income management is strategic
and value-based. Counsellors' assessment of the bond markets and currencies is
based on an analysis of real interest rates. Current nominal yields of
securities are adjusted for inflation prevailing in each currency sector using
an analysis of past and projected inflation rates. The Portfolio's aim is to
invest in bond markets that offer attractive real returns relative to inflation.
Counsellors invests largely in medium-term securities (i.e., those with a
remaining maturity of between three and five years) and responds to changing
interest rate levels by shortening or lengthening portfolio maturity through
investment in longer- or shorter-term instruments. For example, Counsellors
responds to high levels of real interest rates through a lengthening in
portfolio maturity. Accordingly, while the bulk of
5
<PAGE>12
the Portfolio is expected to be invested in medium-term securities, Counsellors
is not restricted to any maximum or minimum time to maturity in purchasing
portfolio securities. Current and historical yield spreads among the three main
market segments -- the Government, Foreign and Euro markets -- guide
Counsellors' selection of markets and particular securities within those
markets. The analysis of currencies is made independent of the analysis of
markets. Value in foreign exchange is determined by relative purchasing power
parity of a given currency. The Portfolio seeks to invest in currencies
currently undervalued based on purchasing power parity. Counsellors analyzes
current account and capital account performance and real interest rates to
adjust for shorter-term currency flows.
The Portfolio will not invest 25% or more of its total assets in the
securities issued by any one foreign government, its agencies, instrumentalities
or political subdivisions and, under normal market conditions, will invest in at
least three countries, including the United States. When Counsellors believes
that a conservative or defensive posture is warranted, the Portfolio may invest
temporarily without limit in securities denominated in U.S. dollars and
securities of U.S. issuers.
The Portfolio may invest in 'zero coupon securities.' Zero coupon
securities pay no cash income to their holders until they mature and are issued
at substantial discounts from their value at maturity. When held to maturity,
their entire return comes from the difference between their purchase price and
their maturity value. The values of zero coupon securities may be highly
volatile as interest rates rise or fall.
Like the Small Company Growth Portfolio, the Global Fixed Income Portfolio
is classified as a 'non-diversified' investment company under the 1940 Act and,
as such, may be subject to greater risk with respect to portfolio securities.
ADDITIONAL INVESTMENTS
MONEY MARKET INVESTMENTS. Each Portfolio may invest, under normal circumstances,
in short-term money market obligations, although each Portfolio intends to stay
invested in securities satisfying its investment objective to the extent
practical. In addition, on occasion, Counsellors may deem it advisable to adopt
a temporary defensive posture by investing without limit in short-term money
market obligations. These short-term instruments consist of obligations of the
U.S. government and foreign governments, their agencies or instrumentalities;
obligations of foreign and U.S. banks; commercial paper; and money market mutual
funds that invest in the foregoing. A shareholder in the Portfolio would bear
both its ratable share of that mutual fund's expenses, as well as the
Portfolio's fees with respect to assets so invested.
Repurchase Agreements. The Portfolios may invest in repurchase agreement
transactions on portfolio securities with member banks of the Federal Reserve
System and certain non-bank dealers. Under the terms of a typical repurchase
agreement, a Portfolio would acquire an underlying security for a relatively
short period (usually not more than one week) subject to an obligation of the
seller to repurchase, and the Portfolio to resell, the obligation at an
agreed-upon price and time, thereby determining the yield during the Portfolio's
holding period. The value of the underlying securities will at all times be at
least equal to the total amount of the purchase obligation, including accrued
interest. A Portfolio bears a risk of loss in the event that the other party to
a repurchase agreement defaults on its obligations or becomes bankrupt and the
Portfolio is delayed or prevented from exercising its right to dispose of the
collateral securities.
U.S. GOVERNMENT SECURITIES. The U.S. government securities in which each
Portfolio may invest include: direct obligations of the U.S. Treasury (such as
Treasury bills, notes and bonds) and obligations issued by U.S. government
agencies and instrumentalities.
6
<PAGE>13
PERFORMANCE OF INVESTMENT FUND
MANAGED BY COUNSELLORS
Set forth below are certain performance data provided by Counsellors
relating to Warburg Pincus Global Fixed Income Fund (the 'Warburg Pincus Fund'),
a registered open-end investment company managed by Counsellors. The Global
Fixed Income Portfolio has substantially the same investment objective and
policies and will be managed using substantially the same investment strategies
and techniques as the Warburg Pincus Fund. Investors should not rely on the
following performance data as an indication of future performance of the
Portfolio. As of September 30, 1995, the Warburg, Pincus Fund had net assets of
approximately $ million and an overall expense ratio of %. The Warburg
Pincus Fund has waived fees from time to time, which has resulted in higher
performance figures than had such waivers not been in place. The Portfolio will
have the same types of expenses as the Warburg Pincus Fund.
The performance of two indexes for the same periods as shown for the
Warburg Pincus Fund is also set forth. Unlike the Global Fixed Income Portfolio
and the Warburg Pincus Fund, the indexes, which are unmanaged, do not reflect
the payment of any expenses.
WARBURG PINCUS FUND -- TOTAL RETURN FOR PERIODS ENDING SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
LIPPER
GENERAL WORLD
INCOME FUND J.P. MORGAN
FUND AVERAGE* BOND INDEX**
--------- ------------- --------------
<S> <C> <C> <C>
One year............. %`D' % %
From inception***
annualized....... %`D' % %
aggregate........ %`D' % %
</TABLE>
------------
* The Lipper General World Income Fund Average is an unmanaged index of the
average of funds that invest in non-U.S. dollar and U.S. dollar debt
instruments with unspecified maturities or duration, or other
income-producing securities.
** The J.P. Morgan Global Government Bond Index is an unmanaged market value-
weighted index of approximately 160 international bonds of issuers in 12
countries that is compiled by J.P. Morgan and stated in U.S. dollars.
*** The Warburg Pincus Fund commenced investment operations on November 1, 1990.
`D' Absent the waiver of fees payable to the Warburg Pincus Fund's investment
adviser and co-administrators, the average total return for the year
ending September 30, 1995 was % and the annualized and aggregate total
return for the approximately four-year period commencing November 1, 1990
(commencement of operations) and ending September 30, 1995 was % and
%, respectively.
PORTFOLIO TRANSACTIONS AND
TURNOVER RATE
A Portfolio will attempt to purchase securities with the intent of holding
them for investment but may purchase and sell portfolio securities whenever
Counsellors believes it is to be in the best interests of the relevant Portfolio
and will not consider portfolio turnover rate a limiting factor in making
investment decisions consistent with its investment objective and policies. In
addition, to the extent it is consistent with a Portfolio's investment
objective, each Portfolio also may engage in short-term trading. This investment
approach and the use of certain of the investment strategies described below may
result in a high portfolio turnover rate for the Portfolios. It is not possible
to predict the portfolio turnover rates for the Small Company Growth Portfolio
and the Global Fixed Income Portfolio. However, the Small Company Growth
Portfolio's annual turnover rate should not exceed 125%, and the Global Fixed
Income Portfolio may experience portfolio turnover as high as 150% to 200%. High
portfolio turnover rates (100% or more) may result in dealer markups or
underwriting commissions as well as other transaction costs, including
correspondingly higher brokerage commissions. In addition, short-term gains
realized from portfolio turnover may be taxable to shareholders as ordinary
income. See 'Dividends, Distributions and
7
<PAGE>14
Taxes -- Taxes' and 'Investment Policies -- Portfolio Transactions' in the
Statement of Additional Information.
All orders for transactions on behalf of the Portfolios are placed by
Counsellors with broker-dealers that it selects. In selecting brokers or dealers
to execute portfolio transactions for each Portfolio, Counsellors will seek the
best overall terms available. In assessing the best overall terms available for
any transaction, Counsellors will consider the factors it deems relevant,
including the breadth of the market in the security, the financial condition and
execution capability of the broker or dealer and the reasonableness of the
commission, if any, for the specific transaction and on a continuing basis.
SPECIAL RISK CONSIDERATIONS AND
CERTAIN INVESTMENT STRATEGIES
In attempting to achieve its investment objective, a Portfolio may engage
in one or more of the strategies set forth below. Detailed information
concerning these strategies and their related risks is contained in the
Statement of Additional Information.
CONVERTIBLE SECURITIES. Each Portfolio may invest in fixed income obligations
convertible into equity securities at either a stated price or at a stated rate.
Convertible securities provide higher yields than the underlying equity
securities, but generally offer lower yields than non-convertible securities of
similar quality. The Global Fixed Income Portfolio does not intend to retain in
its portfolio the common stock received upon conversion of a convertible
security and will sell it as promptly as it can and in a manner which it
believes will reduce the risk to the Portfolio of loss in connection with the
sale.
OPTIONS. Each Portfolio may, from time to time, purchase put or call options, or
write (sell) covered call or put options on securities, currencies and
securities indexes that are listed on foreign or U.S. securities exchanges to
generate income or reduce investment risk. Options on securities and currencies
are agreements by a Portfolio, in exchange for a premium, to purchase or sell
securities or currencies if the option is exercised at a specified price for a
specified time period or at a specified time. An option on a securities index
gives a Portfolio the right to receive a cash settlement based on the difference
between the exercise price and the value of the index.
A Portfolio may purchase or sell options that are listed on foreign or U.S.
securities exchanges. A Portfolio may also, subject to certain limitations,
purchase or sell options that trade over-the-counter ('OTC'). Put options will
be written only when the underlying securities are ones that a Portfolio would
otherwise purchase. Risks associated with writing options include the possible
inability of a Portfolio to effect closing transactions at favorable prices and
a limit on the appreciation on the securities or currencies set aside for
settlement. The holder of options that are allowed to expire will lose the
premium paid for the option. There is no assurance that a liquid secondary
market for options will always exist, particularly with respect to OTC options.
Where options are used as a hedge there may be an imperfect correlation between
the value of the options and of the portfolio securities hedged. The exchanges
on which certain options trade have generally established limitations governing
the maximum number of call or put options on the same underlying security or
currency that may be written by a single investor, whether acting alone or in
concert with others. A Portfolio may also have to limit its option writing at
times in order to qualify as a regulated investment company under the Code.
FOREIGN SECURITIES. The International Equity Portfolio and the Global Fixed
Income Portfolio will invest substantially in foreign securities, and the Small
Company Growth Portfolio may invest up to 20% of its total assets in the
securities of foreign issuers. There are certain risks involved in investing in
securities of companies and governments of foreign nations which are in addition
to the usual risks inherent in domestic
8
<PAGE>15
investments. These risks include those resulting from fluctuations in currency
exchange rates, revaluation of currencies, future adverse political and economic
developments and the possible imposition of currency exchange blockages or other
foreign governmental laws or restrictions, reduced availability of public
information concerning issuers and the lack of uniform accounting, auditing and
financial reporting standards and other regulatory practices and requirements
that are often generally less rigorous than those applied in the United States.
Moreover, securities of many foreign companies may be less liquid and their
prices more volatile than those of securities of comparable U.S. companies.
Certain foreign countries are known to experience long delays between the trade
and settlement dates of securities purchased or sold. In addition, with respect
to certain foreign countries, there is the possibility of expropriation,
nationalization, confiscatory taxation and limitations on the use or removal of
funds or other assets of a Portfolio, including the withholding of dividends.
Foreign securities may be subject to foreign government taxes that would reduce
the net yield on such securities. Moreover, individual foreign economies may
differ favorably or unfavorably from the U.S. economy in such respects as growth
of gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Investment in foreign
securities will also result in higher expenses due to the cost of converting
foreign currency into U.S. dollars, the payment of fixed brokerage commissions
on foreign exchanges, which generally are higher than commissions on U.S.
exchanges, and the expense of maintaining securities with foreign custodians.
CURRENCY EXCHANGE TRANSACTIONS. Each Portfolio may engage in currency exchange
transactions in order to meet settlement requirements for foreign securities, to
protect against uncertainty in the level of future exchange rates between a
particular foreign currency and the U.S. dollar or between foreign currencies in
which the Portfolio's securities are or may be denominated and to increase the
Portfolio's income and total return. Each Portfolio will conduct its currency
exchange transactions (i) on a spot (i.e., cash) basis at the rate prevailing in
the currency exchange market, (ii) through entering into forward contracts to
purchase or sell currency, (iii) by purchasing or writing covered currency
options or (iv) through entering into foreign currency futures contracts or
options on such contracts.
Forward Currency Contracts. A forward currency contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. These contracts are entered
into in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. The use of forward
currency contracts as a hedge does not eliminate fluctuations in the underlying
prices of the securities, but it does establish a rate of exchange that can be
achieved in the future. In addition, although forward currency contracts limit
the risk of loss due to a decline in the value of the hedged currency, at the
same time they also limit any potential gain that might result should the value
of the currency increase.
FUTURES CONTRACTS AND COMMODITY OPTIONS. Each Portfolio may enter into futures
contracts and purchase and write (sell) commodity options (options on futures
contracts and on physical commodities), including, but not limited to, foreign
currency, interest rate and stock index futures contracts and put and call
options on these futures contracts. Such contracts will be entered into on
exchanges designated by the Commodity Futures Trading Commission ('CFTC') or
consistent with CFTC regulations on foreign exchanges. These transactions may be
entered into for 'bona fide hedging' as defined in CFTC regulations and other
permissible purposes including protecting against anticipated changes in the
value of portfolio securities a Portfolio intends to purchase.
9
<PAGE>16
A Portfolio will not enter into futures contracts and commodity options for
which the aggregate initial margin and premiums required to establish positions
other than those considered to be 'bona fide hedging' by the CFTC exceed 5% of
the Portfolio's net asset value after taking into account unrealized profits and
unrealized losses on any such contracts it has entered into.
A Portfolio may lose the expected benefit of these futures or options
transactions and may incur losses if the prices of the underlying commodities
move in an unanticipated manner. In addition, changes in the value of a
Portfolio's futures and options positions may not prove to be perfectly or even
highly correlated with changes in the value of its portfolio securities.
Moreover, futures and options contracts may only be closed out by entering into
offsetting transactions on the exchange where the position was entered into (or
a linked exchange), and as a result of daily price fluctuation limits there can
be no assurance that an offsetting transaction could be entered into at an
advantageous price at any particular time. Consequently, a Portfolio may realize
a loss on a futures contract or option that is not offset by an increase in the
value of the Portfolio's securities that are being hedged or the Portfolio may
not be able to close a futures or options position without incurring a loss in
the event of adverse price movements.
ASSET COVERAGE FOR FORWARD CONTRACTS, OPTIONS, FUTURES AND OPTIONS ON FUTURES.
Each Portfolio will comply with guidelines established by the Securities and
Exchange Commission designed to eliminate any potential for leverage with
respect to currency forward contracts; options written by the Portfolio on
currencies, securities and indexes; and futures contracts and commodity options.
The use of these strategies may require that a Portfolio maintain cash or
certain liquid high-grade debt securities in a segregated account with its
custodian or a designated sub-custodian to the extent the Portfolio's
obligations with respect to these strategies are not otherwise 'covered' through
ownership of the underlying security, financial instrument or currency, by other
portfolio positions or by other means consistent with applicable regulatory
policies. Segregated assets cannot be sold or transferred unless equivalent
assets are substituted in their place or it is no longer necessary to segregate
them. As a result, there is a possibility that segregation of a large percentage
of a Portfolio's assets could impede portfolio management or the Portfolio's
ability to meet redemption requests or other current obligations.
RULE 144A SECURITIES. A Portfolio may purchase securities that are not
registered under the Securities Act of 1933, as amended (the '1933 Act'), but
that can be sold to 'qualified institutional buyers' in accordance with Rule
144A under the 1933 Act ('Rule 144A Securities'). A Rule 144A Security will be
considered illiquid and therefore subject to the Portfolio's 10% limitation (15%
in the case of the Small Company Growth Portfolio) on the purchase of illiquid
securities unless the Fund's Board of Directors (the 'Board') determines on an
ongoing basis that an adequate trading market exists for the security.
Non-publicly traded securities (including Rule 144A Securities) may be less
liquid than publicly traded securities. Although these securities may be resold
in privately negotiated transactions, the prices realized from these sales could
be less than those originally paid by the Portfolio. In addition, companies
whose securities are not publicly traded are not subject to the disclosure and
other investor protection requirements that would be applicable if their
securities were publicly traded. A Portfolio's investment in illiquid securities
is subject to the risk that should the Portfolio desire to sell any of these
securities when a ready buyer is not available at a price that is deemed to be
representative of their value, the value of the Portfolio's net assets could be
adversely affected.
SHORT SALES AGAINST THE BOX. Each Portfolio may make short sales of its
portfolio holdings if, at all times when a short position is open, the Portfolio
owns the security sold short or owns debt securities convertible or exchangeable
into the security sold short (i.e., short sales 'against the
10
<PAGE>17
box'). Not more than 10% of a Portfolio's net assets (taken at current value)
may be held as collateral for such sales at any one time. The extent to which a
Portfolio may make short sales may be further limited by Code requirements for
qualification as a regulated investment company.
WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS. Each Portfolio may
utilize up to 20% of its total assets to purchase securities on a when-issued
basis and purchase or sell securities on a delayed-delivery basis. In these
transactions, payment for and delivery of the securities occurs beyond the
regular settlement dates, normally within 30-45 days after the transaction. A
Portfolio will not enter into a when-issued or delayed-delivery transaction for
the purpose of leverage, but may sell the right to acquire a when-issued
security prior to its acquisition or dispose of its right to deliver or receive
securities in a delayed-delivery transaction if Counsellors deems it
advantageous to do so. The payment obligation and the interest rate that will be
received in when-issued and delayed-delivery transactions are fixed at the time
the buyer enters into the commitment. Due to fluctuations in the value of
securities purchased or sold on a when-issued or delayed-delivery basis, the
yields obtained on such securities may be higher or lower than the yields
available in the market on the dates when the investments are actually delivered
to the buyers. A Portfolio will establish a segregated account with its
custodian consisting of cash, U.S. government securities or other liquid high-
grade debt obligations or other securities that are acceptable as collateral to
the appropriate regulatory authority in an amount equal to the amount of its
when-issued and delayed-delivery purchase commitments, and will segregate the
securities underlying commitments to sell securities for delayed delivery.
LENDING PORTFOLIO SECURITIES. Each Portfolio is authorized to lend securities it
holds to brokers, dealers and other financial organizations. Loans of a
Portfolio's securities may not exceed 33 1/3% of the Portfolio's net assets. A
Portfolio's loans of securities will be collateralized by cash, letters of
credit or U.S. government securities which are maintained at all times in an
amount at least equal to the current market value of the loaned securities. From
time to time, a Portfolio may pay a part of the interest earned from the
investment collateral received for securities loaned to the borrower and/or a
third party that is unaffiliated with the Portfolio and that is acting as a
'finder.' The risks associated with loans of portfolio securities are
substantially similar to those associated with repurchase agreements. As with
any extensions of credit, there are risks of delay in recovery and in some cases
even loss of rights in the collateral should the borrower of the securities fail
financially.
INVESTMENT GUIDELINES
The International Equity Portfolio and the Global Fixed Income Portfolio
may each invest up to 10% of its net assets, and the Small Company Growth
Portfolio may invest up to 15% of its net assets, in securities with contractual
or other restrictions on resale and other instruments that are not readily
marketable, including (i) securities issued as part of a privately negotiated
transaction between an issuer and one or more purchasers; (ii) repurchase
agreements with maturities greater than seven days; and (iii) time deposits
maturing in more than seven calendar days. In addition, up to 5% of a
Portfolio's total assets may be invested in the securities of issuers which have
been in continuous operation for less than three years, and up to an additional
5% of its net assets may be invested in warrants. A Portfolio may borrow from
banks for temporary or emergency purposes in an amount up to 30% of its total
assets and may pledge its assets to the same extent in connection with these
borrowings. Whenever borrowings exceed 5% of the value of a Portfolio's total
assets, the Portfolio will not make any investments (including roll-overs).
Except for the limitations on borrowing, the investment guidelines set forth in
this paragraph may be changed at any time without shareholder consent by vote of
the Board, subject to the
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<PAGE>18
limitations contained in the 1940 Act. A complete list of investment
restrictions that a Portfolio has adopted identifying additional restrictions
that cannot be changed without the approval of the majority of the Portfolio's
outstanding shares is contained in the Statement of Additional Information.
MANAGEMENT OF THE FUND
INVESTMENT ADVISER. The Fund employs Counsellors as investment adviser to each
Portfolio. Counsellors, subject to the control of the Fund's officers and the
Board, manages the investment and reinvestment of the assets of the Portfolios
in accordance with each Portfolio's investment objective and stated investment
policies. Counsellors makes investment decisions for the Portfolios and places
orders to purchase or sell securities on behalf of the Portfolios. Counsellors
also employs a support staff of management personnel to provide services to the
Fund and furnishes the Fund with office space, furnishings and equipment.
For the services provided by Counsellors, the Fund will pay Counsellors a
fee at an annual rate equal to percentages of the relevant Portfolio's average
net assets, as follows: International Equity Portfolio -- .80%, Small Company
Growth Portfolio -- .90% and Global Fixed Income Portfolio -- .65%. The advisory
agreement between the Fund and Counsellors with respect to each Portfolio
provides that Counsellors will reimburse the Fund to the extent certain expenses
that are described in the Statement of Additional Information exceed the
applicable state expense limitations. Counsellors and the Portfolios' co-
administrators may voluntarily waive a portion of their fees from time to time
and temporarily limit the expenses to be borne by the Portfolios.
Counsellors is a professional investment counselling firm which provides
investment services to investment companies, employee benefit plans, endowment
funds, foundations and other institutions and individuals. As of September 30,
1995, Counsellors managed approximately $ billion of assets, including
approximately $ billion of assets of sixteen investment companies or
portfolios. Incorporated in 1970, Counsellors is a wholly owned subsidiary of
Warburg, Pincus Counsellors G.P. ('Counsellors G.P.'), a New York general
partnership. E.M. Warburg, Pincus & Co., Inc. ('EMW') controls Counsellors
through its ownership of a class of voting preferred stock of Counsellors.
Counsellors G.P. has no business other than being a holding company of
Counsellors and its subsidiaries. Counsellors' address is 466 Lexington Avenue,
New York, New York 10017-3147.
PORTFOLIO MANAGERS. The portfolio manager of the International Equity Portfolio
is Richard H. King. Mr. King has been a portfolio manager of the Portfolio since
its inception on May 13, 1992. He has been a managing director of EMW since
1989, before which time he was chief investment officer and a director at
Fiduciary Trust Company International S.A. in London. Nicholas P.W. Horsely,
Harold W. Ehrlich and Vincent McBride have been associate portfolio managers of
the International Equity Portfolio since joining Counsellors. Mr. Horsely is a
senior vice president of Counsellors and has been with Counsellors since 1993,
before which time he was a director, portfolio manager and analyst at Barclays
deZoete Wedd in New York City. Mr. Ehrlich is a senior vice president of
Counsellors and has been with Counsellors since February 1995, before which time
he was a senior vice president, portfolio manager and analyst at Templeton
Investment Counsel Inc. Mr. McBride has been with Counsellors since 1994. Prior
to joining Counsellors, Mr. McBride was an international equity analyst at Smith
Barney Inc. from 1993 to 1994 and at General Electric Investment Corporation
from 1992 to 1993. From 1989 to 1992 he was a portfolio manager/analyst at
United Jersey Bank.
The co-portfolio managers of the Small Company Growth Portfolio are
Elizabeth B. Dater and Stephen J. Lurito. Ms. Dater is a managing director of
EMW and has been a portfolio manager of Counsellors since 1978. Mr.
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<PAGE>19
Lurito is a managing director of EMW and has been with Counsellors since 1978,
before which time he was a research analyst at Sanford C. Bernstein & Company,
Inc.
The portfolio manager of the Global Fixed Income Portfolio is Dale C.
Christensen. Mr. Christensen has been the portfolio manager of the Global Fixed
Income Portfolio since May 13, 1992. He is a managing director of EMW and has
been associated with EMW since 1989, before which time he was a senior vice
president at Citibank, N.A.
CO-ADMINISTRATORS. The Fund employs Counsellors Funds Service, Inc.
('Counsellors Service'), a wholly owned subsidiary of Counsellors, as a
co-administrator. As co-administrator, Counsellors Service provides shareholder
liaison services to the Portfolios, including responding to shareholder
inquiries and providing information on shareholder investments. Counsellors
Service also performs a variety of other services, including furnishing certain
executive and administrative services, acting as liaison between each Portfolio
and its various service providers, furnishing corporate secretarial services,
which include preparing materials for meetings of the Board, preparing proxy
statements and annual, semiannual and quarterly reports, assisting in other
regulatory filings as necessary and developing and monitoring compliance
procedures for the Portfolios. As compensation, each Portfolio pays Counsellors
Service a fee calculated at an annual rate of .10% of the Portfolio's average
daily net assets.
Counsellors may, at its own expense, provide promotional incentives to
qualified recipients who support the sale of shares of the Fund. Qualified
recipients are securities dealers who have sold Fund shares or others, including
banks and other financial institutions, under special arrangements. In some
instances, these incentives may be offered only to certain institutions whose
representatives provide services in connection with the sale or expected sale of
Fund shares.
The Fund employs PFPC Inc., an indirect, wholly owned subsidiary of PNC
Bank Corp. ('PFPC'), as a co-administrator. As a co-administrator, PFPC
calculates each Portfolio's net asset value, provides all accounting services
for the Portfolios and assists in related aspects of the Portfolios' operations.
As compensation, the International Equity Portfolio and the Small Company Growth
Portfolio each pays PFPC a fee calculated at an annual rate of .12% of the
Portfolio's first $250 million in average daily net assets, .10% of the next
$250 million in average daily net assets, .08% of the next $250 million in
average daily net assets, and .05% of average daily net assets over $750
million, and the Small Company Growth Portfolio pays PFPC a fee calculated at an
annual rate of .10% of the Portfolio's average daily net assets, subject in each
case to a minimum annual fee and exclusive of out-of-pocket expenses. PFPC has
its principal offices at 400 Bellevue Parkway, Wilmington, Delaware 19809.
CUSTODIAN. Fiduciary Trust Company International ('Fiduciary') and PNC Bank,
National Association ('PNC') serve as custodians of the International Equity and
Global Fixed Income Portfolios' assets. The principal business address of
Fiduciary is Two World Trade Center, New York, New York 10048. Like PFPC, PNC is
an indirect wholly owned subsidiary of PNC Bank Corp., and its principal
business address is Broad and Chestnut Streets, Philadelphia, Pennsylvania
19101.
PNC also serves as custodian of the Small Company Growth Portfolio's U.S.
assets, and State Street Bank and Trust Company ('State Street') serves as
international custodian of the Portfolio's non-U.S assets. State Street's
principal business address is 225 Franklin Street, Boston, Massachusetts 02110.
TRANSFER AGENT. State Street serves as shareholder servicing agent, transfer
agent and dividend disbursing agent for the Fund. It has delegated to Boston
Financial Data Services, Inc., a 50% owned subsidiary ('BFDS'), responsibility
for most shareholder servicing functions.
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<PAGE>20
BFDS's principal business address is 2 Heritage Drive, North Quincy,
Massachusetts 02171.
DISTRIBUTOR. Counsellors Securities Inc. ('Counsellors Securities') serves
without compensation as distributor of the shares of each Portfolio. Counsellors
Securities is a wholly owned subsidiary of Counsellors and is located at 466
Lexington Avenue, New York, New York 10017-3147.
OTHER. Fund shares may be sold to or through institutions that will not be paid
by the Fund a distribution fee pursuant to Rule 12b-1 under the 1940 Act for
services to their clients or customers who are beneficial owners of Fund shares.
These institutions may be paid a fee by the Fund for transfer agency,
administrative or other services provided to their customers that invest in the
Fund. These services include maintaining account records, processing orders to
purchase, redeem and exchange Fund shares and responding to certain customer
inquiries. Counsellors and Counsellors Securities may, from time to time, at
their expense, also provide compensation to these institutions. To the extent
they do so, such compensation does not represent an additional expense to a
Portfolio or its shareholders, since it will be paid from the assets of
Counsellors, Counsellors Securities or their affiliates.
From time to time Counsellors or its affiliates may compensate insurance
companies, broker-dealers or other entities whose customers hold shares of a
Portfolio for providing a variety of record-keeping, administrative, marketing
and/or shareholder support services. This compensation will be based on the net
asset value of shares held by those customers, depending on the nature, extent
and quality of the services provided, and may be paid from Counsellors or its
affiliates' own resources or may, to the extent related to certain types of
services, be paid from the assets of the Portfolios.
DIRECTORS AND OFFICERS. The officers of the Fund manage its day-to-day
operations and are directly responsible to the Board. The Board sets broad
policies for the Fund and choose its officers. A list of the Directors and
officers of the Fund and a brief statement of their present positions and
principal occupations during the past five years is set forth in the Statement
of Additional Information.
HOW TO OPEN AN ACCOUNT IN
THE FUND
In order to invest in a Portfolio, an investor must first complete and sign
an account application. To obtain an account application, an investor may
telephone Warburg Pincus Funds at (800) 888-6878. An investor may also obtain an
account application by writing to:
Warburg Pincus Funds
P.O. Box 9030
Boston, Massachusetts 02205-9030
Completed and signed account applications should be mailed to Warburg
Pincus Funds at the above address.
THE INTERNATIONAL EQUITY AND GLOBAL FIXED INCOME PORTFOLIOS' SHARES ARE
ONLY OFFERED TO INVESTORS THAT MAKE A MINIMUM INITIAL INVESTMENT IN THE
PORTFOLIO OF $3,000,000 OR MORE, ALTHOUGH THE MINIMUM INVESTMENT FOR ANY GROUP
OF RELATED PERSONS IS AN AGGREGATE OF $4,000,000. SHARES OF THE SMALL COMPANY
GROWTH PORTFOLIO ARE OFFERED ONLY TO INVESTORS THAT MAKE A MINIMUM INITIAL
INVESTMENT IN THE PORTFOLIO OF $1,000,000.
THE FUND IS DESIGNED FOR INSTITUTIONAL INVESTORS ALTHOUGH, IN ITS
DISCRETION, THE FUND MAY PERMIT SHARES TO BE PURCHASED BY INDIVIDUALS, AS WELL
AS INSTITUTIONS, WHO MEET THE MINIMUM INVESTMENT REQUIREMENTS.
HOW TO PURCHASE SHARES IN
THE PORTFOLIOS
Shares of the Portfolios may be purchased either by mail or, with special
advance instructions, by wire.
BY MAIL. If the investor desires to purchase shares by mail, a check or money
order made
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<PAGE>21
payable to Warburg, Pincus Institutional Fund, Inc. or Warburg Pincus Funds (in
U.S. currency) should be sent along with the completed account application to
Warburg Pincus Funds through its distributor, Counsellors Securities Inc., at
the address set forth above and should indicate the Portfolio in which shares
are to be purchased. Checks payable to the investor and indorsed to the order of
the Fund or Warburg Pincus Funds will not be accepted as payment and will be
returned to the sender. If payment is received in proper form before 4:00 p.m.
(Eastern time) on a day that the Fund calculates its net asset value (a
'business day'), the purchase will be made at the relevant Portfolio's net asset
value calculated at the end of that day. If payment is received after 4:00 p.m.,
the purchase will be effected at the relevant Portfolio's net asset value
determined for the next business day after payment has been received. Checks or
money orders that are not in proper form or that are not accompanied or preceded
by a complete account application will be returned to the sender. Shares
purchased by check or money order are entitled to receive dividends and
distributions beginning on the day after payment has been received. Checks or
money orders in payment for more than one Portfolio or Warburg Pincus Fund
should be accompanied by a breakdown of amounts to be invested in each Portfolio
or fund. If a check used for the purchase does not clear, the Fund will cancel
the purchase and the investor may be liable for losses or fees incurred. For a
description of the manner of calculating each Portfolio's net asset value, see
'Net Asset Value' below.
BY WIRE. Investors may also purchase shares in a Portfolio by wiring funds from
their banks. Telephone orders by wire will not be accepted until a completed
account application in proper form has been received and an account number has
been established. Investors should place an order with the Fund prior to wiring
funds by telephoning (800) 888-6878. Federal funds may be wired to Counsellors
Securities Inc. using the following wire address:
State Street Bank and Trust Co.
225 Franklin St.
Boston, MA 02101
ABA #0110 000 28
Attn: Mutual Funds/Custody Dept.
Warburg Pincus Institutional Fund, Inc.: [Port-
folio name]
DDA #9904-649-2
[Shareowner name]
[Shareowner account number]
If a telephone order is received by the close of regular trading on the New
York Stock Exchange (the 'NYSE') (currently 4:00 p.m., Eastern time) and payment
by wire is received on the same day in proper form in accordance with
instructions set forth above, the shares will be priced according to the net
asset value of the relevant Portfolio on that day and are entitled to dividends
and distributions beginning on that day. If payment by wire is received in
proper form by the close of the NYSE without a prior telephone order, the
purchase will be priced according to the net asset value of the relevant
Portfolio on that day and is entitled to dividends and distributions beginning
on that day. However, if a wire in proper form that is not preceded by a
telephone order is received after the close of regular trading on the NYSE, the
payment will be held uninvested until the order is effected at the close of
business on the next business day. Payment for orders that are not received or
accepted will be returned to the prospective investor after prompt inquiry. If a
telephone order is placed and payment by wire is not received on the same day,
the Fund will cancel the purchase and the investor may be liable for losses or
fees incurred.
Shares of the Fund are sold without a sales charge. The minimum initial
investment in the International Equity Portfolio and the Global Fixed Income
Portfolio is $3,000,000 (although the minimum investment for any group of
related persons is an aggregate of $4,000,000), and the minimum subsequent
investment is $50,000 (except for certain retirement plans for which
record-keeping is performed on an omni-
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<PAGE>22
bus basis for multiple participants, which are not subject to a subsequent
investment minimum). The minimum initial investment in the Small Company Growth
Portfolio is $1,000,000, with no subsequent investment minimum. The investment
minimums may be waived for investors maintaining advisory accounts with
Counsellors or brokerage accounts with Counsellors Securities. The Fund reserves
the right to change the initial and subsequent investment minimum requirements
at any time. Existing investors will be given 15 days' notice by mail of any
increase in subsequent investment minimum requirements.
After an investor has made an initial investment, additional shares may be
purchased at any time by mail or by telephone in the manner outlined above. Wire
payments for initial and subsequent investments should be preceded by an order
placed with the Fund and should clearly indicate the investor's account number
and the Portfolio in which shares are being purchased. In the interest of
economy and convenience, physical certificates representing shares of a
Portfolio are not normally issued.
The Fund understands that some broker-dealers (other than Counsellors
Securities), financial institutions, securities dealers and other industry
professionals may impose certain conditions on their clients which are in
addition to or different than those described in this Prospectus, and, to the
extent permitted by applicable regulatory authority, may charge their clients
direct fees. Certain features of the Fund, such as the initial and subsequent
investment minimums, may be modified in these programs, and administrative
charges may be imposed for the services rendered. Therefore, a client or
customer should contact the organization acting on its behalf concerning the
fees (if any) charged in connection with a purchase or redemption of Fund shares
and should read this Prospectus in light of the terms governing its accounts
with the organization. These organizations will be responsible for promptly
transmitting client or customer purchase and redemption orders to the Fund in
accordance with their agreements with clients or customers. Certain
organizations that have entered into agreements with the Fund or its agent may
enter confirmed purchase orders on behalf of customers, with payment to follow
no later than the Fund's pricing on the following business day. If payment is
not received by such time, the organization could be held liable for resulting
fees or losses.
HOW TO REDEEM AND EXCHANGE SHARES IN THE PORTFOLIOS
REDEMPTION OF SHARES. An investor in a Portfolio may redeem (sell) shares on any
day that the Portfolio's net asset value is calculated (see 'Net Asset Value'
below).
Shares of a Portfolio may either be redeemed by mail or by telephone.
Investors should realize that in using the telephone redemption and exchange
option, they may be giving up a measure of security that they may have if they
were to redeem or exchange their shares in writing. If an investor desires to
redeem shares by mail, a written request for redemption should be sent to
Warburg Pincus Funds at the address indicated above under 'How to Open an
Account in the Fund.' An investor should be sure that the redemption request
identifies the relevant Portfolio, the number of shares to be redeemed and the
investor's account number. In order to change the bank account designated to
receive the redemption proceeds, the investor must send a written request (with
signature guarantee of all investors listed on the account when such a change is
made in conjunction with a redemption request) to Warburg Pincus Funds. Each
mail redemption request must be signed by the registered owner(s) (or legal
representative(s)) exactly as the shares are registered. If an investor has
applied for the telephone redemption feature on the account application, the
investor may redeem the shares by telephone by calling Warburg Pincus Funds at
(800) 888-6878 between 9:00 a.m. and 4:00 p.m. (Eastern time) on any business
day. An investor making a telephone withdrawal should state (i) the name
16
<PAGE>23
of the relevant Portfolio, (ii) the account number of the Portfolio, (iii) the
name of the investor(s) appearing on the Portfolio's records, (iv) the amount to
be withdrawn and (v) the name of the person requesting the redemption.
After receipt of the redemption request by mail or by telephone, the
redemption proceeds will, at the option of the investor, be paid by check and
mailed to the investor of record or be wired to the investor's bank as indicated
in the account application previously filled out by the investor. The Fund does
not currently impose a service charge for effecting wire transfers but it
reserves the right to do so in the future. During periods of significant
economic or market change, telephone redemptions may be difficult to implement.
If an investor is unable to contact Warburg Pincus Funds by telephone, an
investor may deliver the redemption request to Warburg Pincus Funds by mail at
the address shown above under 'How to Open an Account in the Fund.' Although the
Fund will redeem shares purchased by check before the check has cleared, payment
of the redemption proceeds will be delayed until such check has cleared, which
may take up to 15 days from the purchase date. Investors should consider
purchasing shares using a certified or bank check or money order if they
anticipate an immediate need for a redemption.
If a redemption order is received prior to the close of regular trading on
the NYSE, the redemption order will be effected at the relevant Portfolio's net
asset value per share as determined on that day. If a redemption order is
received after the close of trading on the NYSE, the redemption order will be
effected at the relevant Portfolio's net asset value as next determined.
Redemption proceeds will normally be mailed or wired to an investor on the next
business day following the date a redemption order is effected. If, however, in
the judgment of Counsellors, immediate payment would adversely affect a
Portfolio, the Portfolio reserves the right to pay the redemption proceeds
within seven days after the redemption order is effected. Furthermore, a
Portfolio may suspend the right of redemption or postpone the date of payment
upon redemption (as well as suspend or postpone the recordation of an exchange
of shares) for such periods as are permitted under the 1940 Act.
The proceeds paid upon redemption may be more or less than the amount
invested depending upon a share's net asset value at the time of redemption. If
an investor redeems all the shares in the account, all dividends and
distributions declared up to and including the date of redemption are paid along
with the proceeds of the redemption.
If, due to redemptions, the value of an investor's account in a Portfolio
drops to less than $250,000, the Fund reserves the right to redeem the shares in
that account at net asset value. Prior to any redemption, the Fund will notify
an investor in writing that the account has a value of less than the minimum.
The investor will then have 60 days to make an additional investment before a
redemption will be processed by the Fund.
TELEPHONE TRANSACTIONS. In order to request redemptions by telephone, investors
must have completed and returned to Warburg Pincus Funds an account application
containing a telephone election. Unless contrary instructions are elected, an
investor will be entitled to make exchanges by telephone. Neither the Fund nor
its agents will be liable for following instructions communicated by telephone
that it reasonably believes to be genuine. Reasonable procedures will be
employed on behalf of the Fund to confirm that instructions communicated by
telephone are genuine. Such procedures include providing written confirmation of
telephone transactions, tape recording telephone instructions and requiring
specific personal information prior to acting upon telephone instructions.
EXCHANGE OF SHARES. An investor may exchange shares of one Portfolio for shares
of another Portfolio at their respective net asset values. Exchanges may be
effected by mail or by
17
<PAGE>24
telephone in the manner described under 'Redemption of Shares' above. If an
exchange request is received by Warburg Pincus Funds prior to 4:00 p.m. (Eastern
time), the exchange will be made at each Portfolio's net asset value determined
at the end of that business day. Exchanges will be effected without a sales
charge but must satisfy the minimum dollar amount necessary for new purchases.
Due to the costs involved in effecting exchanges, the Fund reserves the right to
refuse to honor more than three exchange requests by a shareholder in any 30-day
period. The exchange privilege may be modified or terminated at any time upon 60
days' notice to shareholders. The exchange privilege is available to investors
in any state in which the shares being acquired may be legally sold. An exchange
is treated for federal income tax purposes as a redemption. Therefore, the
investor may realize a taxable gain or loss in connection with the exchange. For
further information regarding the exchange privilege an investor should contact
Warburg Pincus Funds at (800) 888-6878.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS. Each Portfolio calculates its dividends from net
investment income. Net investment income includes interest accrued on the
Portfolio's portfolio securities for the applicable period (which includes
amortization of market discounts) less amortization of market premium and
applicable expenses. Each Portfolio declares dividends from its net investment
income and net realized short-term and long-term capital gains annually and pays
them in the calendar year in which they are declared. Net investment income
earned on weekends and when the NYSE is not open will be computed as of the next
business day. Unless an investor instructs the Fund to pay dividends or
distributions in cash, dividends and distributions will automatically be
reinvested in additional shares of the relevant Portfolio at net asset value.
The election to receive dividends in cash may be made on the account application
or, subsequently, by writing to Warburg Pincus Funds at the address set forth
under 'How to Open an Account in the Fund' or by calling Warburg Pincus Funds at
(800) 888-6878.
The Fund may be required to withhold for U.S. federal income taxes 31% of
all distributions payable to shareholders who fail to provide the Fund with
their correct taxpayer identification number or to make required certifications,
or who have been notified by the U.S. Internal Revenue Service that they are
subject to backup withholding.
TAXES. The International Equity Portfolio and the Global Fixed Income Portfolio
intend to continue to qualify each year, and the Small Company Growth Portfolio
intends to qualify each year, as a 'regulated investment company' within the
meaning of the Code. A Portfolio, if it qualifies as a regulated investment
company, will be subject to a 4% non-deductible excise tax measured with respect
to certain undistributed amounts of ordinary income and capital gain. Each
Portfolio expects to pay such additional dividends and to make such additional
distributions as are necessary to avoid the application of this tax.
Dividends paid from net investment income and distributions derived from
net realized short-term capital gains are taxable to investors as ordinary
income whether received in cash or reinvested in additional Portfolio shares.
Distributions derived from net realized long-term capital gains will be taxable
to investors as long-term capital gains, regardless of how long investors have
held Portfolio shares or whether such distributions are received in cash or
reinvested in Portfolio shares. As a general rule, an investor's gain or loss on
a sale or redemption of Portfolio shares will be a long-term capital gain or
loss if the investor has held the shares for more than one year and will be a
short-term capital gain or loss if the investor has held the shares for one year
or less. However, any loss realized upon the sale or redemption of shares within
six months from the date of their purchase will be treated as a long-term
capital loss to the extent of any
18
<PAGE>25
amounts treated as distributions of long-term capital gain during such six-month
period with respect to such shares. Investors may be proportionately liable for
taxes on income and gains of the Portfolios, but investors not subject to tax on
their income will not be required to pay tax on amounts distributed to them. The
Portfolios' dividends, to the extent not derived from dividends attributable to
certain types of stock issued by U.S. domestic corporations, will not qualify
for the dividends received deduction for corporations.
Dividends and interest received by each Portfolio may be subject to
withholding and other taxes imposed by foreign countries. However, tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. If a Portfolio qualifies as a regulated investment
company, if certain distribution requirements are satisfied and if more than 50%
of the Portfolio's total assets at the close of its fiscal year consist of stock
or securities of foreign corporations, the Portfolio may elect for U.S. income
tax purposes to treat any foreign income taxes paid by it that can be treated as
income taxes under U.S. income tax principles as paid by its shareholders. A
Portfolio may qualify for and make this election in some, but not necessarily
all, of its taxable years. If a Portfolio were to make an election, shareholders
of the Portfolio would be required to take into account an amount equal to their
pro rata portions of such foreign taxes in computing their taxable income and
then treat an amount equal to those foreign taxes as a U.S. federal income tax
deduction or as a foreign tax credit against their U.S. federal income taxes.
Shortly after any year for which it makes such an election, a Portfolio will
report to its shareholders, in writing, the amount per share of such foreign
income tax that must be included in each shareholder's gross income and the
amount which will be available for the deduction or credit. No deduction for
foreign taxes may be claimed by a shareholder who does not itemize deductions.
Certain limitations will be imposed on the extent to which the credit (but not
the deduction) for foreign taxes may be claimed.
GLOBAL FIXED INCOME PORTFOLIO. Zero coupon securities do not make interest
payments, although a portion of the difference between a zero coupon security's
maturity value and its purchase price is imputed as income to the Portfolio each
year even though the Portfolio receives no cash distribution until maturity.
Under the U.S. federal tax laws, the Portfolio will not be subject to tax on
this income if it pays dividends to its shareholders substantially equal to all
the income received from, or imputed with respect to, its investments during the
year, including its zero coupon securities. These dividends ordinarily will
constitute taxable income to the shareholders of the Portfolio.
GENERAL. Statements as to the tax status of each investor's dividends and
distributions are mailed annually. Each investor will also receive, if
applicable, various written notices after the close of each Portfolio's prior
taxable year with respect to certain dividends and distributions which were
received from the Portfolio during the Portfolio's prior taxable year. Investors
should consult their tax advisers with specific reference to their own tax
situations, including their state and local tax liabilities.
NET ASSET VALUE
Each Portfolio's net asset value per share is calculated as of the close of
regular trading on the NYSE (currently 4:00 p.m., Eastern time) on each business
day, Monday through Friday, except on days when the NYSE is closed. The NYSE is
currently scheduled to be closed on New Year's Day, Washington's Birthday, Good
Friday, Memorial Day (observed), Independence Day, Labor Day, Thanksgiving Day
and Christmas Day, and on the preceding Friday or subsequent Monday when one of
these holidays falls on a Saturday or Sunday, respectively. The net asset value
per share of each Portfolio generally changes each day.
The net asset value per share of each Portfolio is computed by dividing the
value of a Portfolio's net assets by the total number of its shares outstanding.
Generally, a Portfolio's
19
<PAGE>26
investments are valued at market value or, in the absence of a quoted market
value with respect to any portfolio securities, at fair value as determined by
or under the direction of the Board.
Portfolio securities that are primarily traded on foreign exchanges are
generally valued at the closing values of such securities on their respective
exchanges preceding the calculation of a Portfolio's net asset value, except
that when an occurrence subsequent to the time a value was so established is
likely to have changed such value, then the fair market value of those
securities will be determined by consideration of other factors by or under the
direction of the Board.
Securities listed on a U.S. securities exchange (including securities
traded through the NASDAQ National Market System) or foreign securities exchange
will be valued on the basis of the last sale on the date on which the valuation
is made. Other U.S. over-the-counter securities, foreign over-the-counter
securities and securities listed or traded on certain foreign stock exchanges
whose operations are similar to the U.S. over-the-counter market are valued on
the basis of the bid price at the close of business on each day. Option or
futures contracts will be valued at the last sale price at 4:00 p.m. (Eastern
time) on the date on which the valuation is made, as quoted on the primary
exchange or board of trade on which the option or futures contract is traded, or
in the absence of sales, at the mean between the last bid and asked prices.
Unless the Board determines that using this valuation method would not reflect
the investments' value, short-term investments that mature in 60 days or less
are valued on the basis of amortized cost, which involves valuing a portfolio
instrument at its cost initially and thereafter assuming a constant amortization
to maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. The valuation of short
sales of securities, which are not traded on a national exchange, will be at the
mean of bid and asked prices. Any assets and liabilities initially expressed in
non-U.S. dollar currencies are translated into U.S. dollars at the prevailing
rate as quoted by an independent pricing service on the date of valuation.
Further information regarding valuation policies is contained in the Statement
of Additional Information.
THE PORTFOLIOS' PERFORMANCE
From time to time, a Portfolio may advertise its yield or average annual
total return over various periods of time. The yield of a Portfolio refers to
net investment income generated by the Portfolio over a specified 30-day period,
which is then annualized. Total return figures show the average percentage
change in value of an investment in a Portfolio from the beginning of the
measurement period to the end of the measurement period. The figures reflect
changes in the price of the Portfolio's shares assuming that any income
dividends and/or capital gain distributions made by the Portfolio during the
period were reinvested in shares of the Portfolio. Total return will be shown
for recent one-, five- and ten-year periods, and may be shown for other periods
as well (such as from commencement of the Portfolio's operations or on a
year-to-date basis).
When considering average total return figures for periods longer than one
year, it is important to note that the annual total return for one year in the
period might have been greater or less than the average for the entire period.
When considering total return figures for periods shorter than one year,
investors should bear in mind that such return may not be representative of any
Portfolio's return over a longer market cycle. A Portfolio may also advertise
aggregate total return figures for various periods, representing the cumulative
change in value of an investment in the relevant Portfolio for the specific
period. Aggregate and average total returns may be shown by means of schedules,
charts or graphs, and may indicate various components of total return (i.e.,
change in value of initial investment, income dividends and capital gain
distributions).
Investors should note that yield and total return figures are based on
historical earnings
20
<PAGE>27
and are not intended to indicate future performance. The Statement of Additional
Information describes the method used to determine each Portfolio's yield and
total return. Current yield and total return figures may be obtained by calling
Warburg Pincus Funds at (800) 888-6878.
In reports or other communications to investors or in advertising material,
a Portfolio may describe general economic and market conditions affecting the
Portfolio and may compare its performance with (i) that of other mutual funds
with similar investment objectives and policies, which may be based on the
rankings prepared by Lipper Analytical Services, Inc. or similar investment
services that monitor the performance of mutual funds; (ii) in the case of the
International Equity Portfolio, the Morgan Stanley Capital International EAFE
Index, the Salomon Russell Global Equity Index, the FT-Actuaries World Indices
(jointly compiled by The Financial Times, Ltd., Goldman, Sachs & Co. and NatWest
Securities Ltd.) and the S&P 500; in the case of the Small Company Growth
Portfolio, with the Russell 2000 Small Stock Index; and, in the case of the
Global Fixed Income Portfolio, with the J.P. Morgan Global Government Bond
Index, which are unmanaged indexes or (iii) other appropriate indexes of
investment securities or with data developed by Counsellors derived from such
indexes. A Portfolio may also include evaluations of the Portfolio published by
nationally recognized ranking services and by financial publications that are
nationally recognized, such as The Wall Street Journal, Money, Inc.,
Institutional Investor, Barron's, Fortune, Forbes, Business Week, Morningstar,
Inc., Investor's Daily and Financial Times.
In reports or other communications to investors or in advertising, each
Portfolio may also describe the general biography or work experience of the
portfolio managers of the Portfolio and may include quotations attributable to
the portfolio managers describing approaches taken in managing the Portfolio's
investments, research methodology underlying stock selection or the Portfolio's
investment objective. Each Portfolio may also discuss the continuum of risk and
return relating to different investments, and the potential impact of foreign
stocks on a portfolio otherwise composed of domestic securities. In addition,
each Portfolio may from time to time compare its expense ratio to that of
investment companies with similar objectives and policies, based on data
generated by Lipper Analytical Services, Inc. or similar investment services
that monitor mutual funds.
ADDITIONAL INFORMATION
The Fund is a no-load investment company that was incorporated on May 13,
1992 under the laws of the State of Maryland. The Fund's charter authorizes the
Board to issue three billion full and fractional shares of capital stock, par
value $.001 per share. Shares of three series have been authorized, which
constitute the interests in the Portfolios.
When matters are submitted for shareholder vote, shareholders of each
Portfolio will have one vote for each full share owned and proportionate,
fractional votes for fractional shares held. Generally, shares of the Fund vote
in the aggregate on all matters except where otherwise required by law. There
will normally be no meetings of shareholders for the purpose of electing
Directors unless and until such time as less than a majority of the members
holding office have been elected by shareholders. Any Director may be removed
from office upon the vote of shareholders holding at least a majority of the
Fund's outstanding shares at a meeting called for that purpose. A meeting will
be called for any purpose at the written request of holders of 10% of the Fund's
outstanding shares.
Each investor will receive a quarterly statement of the investor's account,
as well as a statement after any transaction that affects the investor's share
balance or share registration (other than reinvestment of dividends or
distributions). The Fund will also send to its investors a semiannual report and
an audited annual report, each of which includes a list of the investment
securities held by each Portfolio and a statement of the performance of the
Portfolio.
21
<PAGE>28
John L. Furth, a Director of the Fund, and Lionel I. Pincus, Chairman of the
Board and Chief Executive Officer of EMW, may be deemed to be controlling
persons of the International Equity Portfolio as of September 30, 1995 because
they may be deemed to possess or share investment power over shares owned by
clients of Counsellors and certain other entities.
------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE STATEMENT OF
ADDITIONAL INFORMATION OR THE FUND'S OFFICIAL SALES LITERATURE IN CONNECTION
WITH THE OFFERING OF SHARES OF THE PORTFOLIOS, AND IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF SHARES IN ANY STATE
WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE. SHARES OF
THE GLOBAL FIXED INCOME PORTFOLIO ARE NOT CURRENTLY AVAILABLE TO NEW HAMPSHIRE
INVESTORS.
22
<PAGE>29
TABLE OF CONTENTS
THE FUND'S EXPENSES ...................................................... 2
FINANCIAL HIGHLIGHTS ..................................................... 3
INVESTMENT OBJECTIVES AND POLICIES ....................................... 4
PERFORMANCE OF INVESTMENT FUND
MANAGED BY COUNSELLORS ................................................ 7
PORTFOLIO TRANSACTIONS AND TURNOVER
RATE .................................................................. 7
SPECIAL RISK CONSIDERATIONS
AND CERTAIN INVESTMENT STRATEGIES ..................................... 8
INVESTMENT GUIDELINES ................................................... 11
MANAGEMENT OF THE FUND .................................................. 12
HOW TO OPEN AN ACCOUNT IN THE FUND ...................................... 14
HOW TO PURCHASE SHARES IN THE
PORTFOLIOS ........................................................... 14
HOW TO REDEEM AND EXCHANGE SHARES
IN THE PORTFOLIOS .................................................... 16
DIVIDENDS, DISTRIBUTIONS AND TAXES ...................................... 18
NET ASSET VALUE ......................................................... 19
THE PORTFOLIOS' PERFORMANCE ............................................. 20
ADDITIONAL INFORMATION .................................................. 21
WPINS-1-1195
<PAGE>30
[LOGO]
WARBURG PINCUS
INSTITUTIONAL FUND, INC.
[ ] INTERNATIONAL EQUITY
PORTFOLIO
[ ] SMALL COMPANY GROWTH
PORTFOLIO
[ ] GLOBAL FIXED INCOME
PORTFOLIO
PROSPECTUS
NOVEMBER 1, 1995
<PAGE>31
Subject to Completion, dated August 18, 1995
STATEMENT OF ADDITIONAL INFORMATION
November 1, 1995
____________________________________
WARBURG PINCUS INSTITUTIONAL FUND, INC.
P.O. Box 9030, Boston, Massachusetts 02205-9030
For information, call (800) 888-6878
____________________________________
Contents
Page
Investment Objectives . . . . . . . . . . . . . . . . . . . . 2
Investment Policies . . . . . . . . . . . . . . . . . . . . . 2
Management of the Fund . . . . . . . . . . . . . . . . . . . 32
Additional Purchase and Redemption Information . . . . . . . 40
Exchange Privilege . . . . . . . . . . . . . . . . . . . . . 40
Additional Information Concerning Taxes . . . . . . . . . . . 41
Determination of Performance . . . . . . . . . . . . . . . . 43
Auditors and Counsel . . . . . . . . . . . . . . . . . . . . 45
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . 45
Financial Statements . . . . . . . . . . . . . . . . . . . . 45
Appendix -- Description of Ratings . . . . . . . . . . . . A-1
Reports of Coopers & Lybrand L.L.P.,
Independent Auditors . . . . . . . . . . . . . . . . . A-4
This Statement of Additional Information is meant to be read in
conjunction with the Prospectus of Warburg Pincus Institutional Fund, Inc.
(the "Fund") dated November 1, 1995, and is incorporated by reference in its
entirety into that Prospectus. The Fund currently offers two managed
investment funds, the International Equity Portfolio and the Small Company
Growth Portfolio. Shares of the Global Fixed Income Portfolio are not
currently being offered. Because this Statement of Additional Information is
not itself a prospectus, no investment in shares of the International Equity
Portfolio, the Small Company Growth Portfolio or the Global Fixed Income
Portfolio (the "Portfolios") should be made solely upon the information
contained herein. Copies of the Fund's Prospectus and information regarding
each of the Portfolios' current performance may be obtained by calling
******************************************************************************
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT
BE SOLD NOR MAY ANY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE
REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS STATEMENT OF ADDITIONAL
INFORMATION DOES NOT CONSTITUTE A PROSPECTUS.
*******************************************************************************
<PAGE>32
Warburg Pincus Funds at (800) 888-6878. Information regarding the status of
shareholder accounts may also be obtained by calling Warburg Pincus Funds at
(800) 888-6878 or by writing to Warburg Pincus Funds, P.O. Box 9030, Boston,
Massachusetts 02205-9030.
INVESTMENT OBJECTIVES
The investment objective of the International Equity Portfolio is
long-term capital appreciation. The International Equity Portfolio will
pursue its objective by investing primarily in equity securities of non-United
States issuers. The investment objective of the Small Company Growth
Portfolio is capital growth. The Small Company Growth Portfolio will pursue
its objective by investing primarily in equity securities of small-sized
domestic companies. The investment objective of the Global Fixed Income
Portfolio is to maximize total investment return consistent with prudent
investment management while preserving capital. The Global Fixed Income
Portfolio will pursue its objective by investing in investment grade fixed
income securities of issuers throughout the world, including United States
issuers.
INVESTMENT POLICIES
The following policies supplement the descriptions of each
Portfolio's investment objective and policies in the Prospectus.
Additional Information on Investment Practices
Foreign Investments. Investors should recognize that investing in
foreign companies involves certain risks, including those discussed below,
which are not typically associated with investing in U.S. issuers. Since the
International Equity and Global Fixed Income Portfolios will, and the Small
Company Growth Portfolio may, be investing in securities denominated in
currencies other than the U.S. dollar, and since a Portfolio may temporarily
hold funds in bank deposits or other money market investments denominated in
foreign currencies, each Portfolio may be affected favorably or unfavorably by
exchange control regulations or changes in the exchange rate between such
currencies and the dollar. A change in the value of a foreign currency
relative to the U.S. dollar will result in a corresponding change in the
dollar value of a Portfolio's assets denominated in that foreign currency.
Changes in foreign currency exchange rates may also affect the value of
dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and gains, if any, to be distributed to
shareholders by a Portfolio with respect to its foreign investments.
The rate of exchange between the U.S. dollar and other currencies is
determined by the forces of supply and demand in the foreign exchange markets.
Changes in the exchange rate may result over time from the interaction of many
factors directly or indirectly affecting economic and political conditions in
the United States and a particular foreign country, including economic and
political developments in other countries. Of
<PAGE>33
particular importance are rates of inflation, interest rate levels, the
balance of payments and the extent of government surpluses or deficits in the
United States and the particular foreign country, all of which are in turn
sensitive to the monetary, fiscal and trade policies pursued by the
governments of the United States and other foreign countries important to
international trade and finance. Governmental intervention may also play a
significant role. National governments rarely voluntarily allow their
currencies to float freely in response to economic forces. Sovereign
governments use a variety of techniques, such as intervention by a country's
central bank or imposition of regulatory controls or taxes, to affect the
exchange rates of their currencies.
Many of the foreign securities held by a Portfolio will not be
registered with, nor the issuers thereof be subject to reporting requirements
of, the U.S. Securities and Exchange Commission (the "SEC"). Accordingly,
there may be less publicly available information about the securities and
about the foreign company or government issuing them than is available about a
domestic company or government entity. Foreign companies are generally not
subject to uniform financial reporting standards, practices and requirements
comparable to those applicable to U.S. companies. In addition, with respect
to some foreign countries, there is the possibility of expropriation or
confiscatory taxation, limitations on the removal of funds or other assets of
the Portfolio, political or social instability, or domestic developments which
could affect U.S. investments in those countries. Moreover, individual
foreign economies may differ favorably or unfavorably from the U.S. economy in
such respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and balance of payments positions.
Each of the Portfolios may invest in securities of foreign governments (or
agencies or instrumentalities thereof), and many, if not all, of the foregoing
considerations apply to such investments as well.
Securities of some foreign companies are less liquid and their
prices are more volatile than securities of comparable U.S. companies.
Certain foreign countries are known to experience long delays between the
trade and settlement dates of securities purchased or sold. Due to the
increased exposure of a Portfolio to market and foreign exchange fluctuations
brought about by such delays, and due to the corresponding negative impact on
a Portfolio's liquidity, the Portfolios will avoid investing in countries
which are known to experience settlement delays which may expose the
Portfolios to unreasonable risk of loss.
The interest payable on the Portfolios' foreign securities may be
subject to foreign withholding taxes, and while investors may be able to claim
some credit for deductions for such taxes with respect to their allocated
shares of such foreign tax payments, the general effect of these taxes will be
to reduce a Portfolio's income. Additionally, the operating expenses of the
Portfolios, to the extent they invest in foreign securities, can be expected
to be higher than that of an investment company investing exclusively in U.S.
securities, since the expenses of the Portfolios associated with foreign
investing, such as custodial costs, valuation costs and communication costs,
as well as, in the case of the International Equity and Global Fixed Income
Portfolios, the rate of the investment advisory
<PAGE>34
fees, though similar to such expenses of some other funds investing
internationally, are higher than those costs incurred by other investment
companies.
Japanese Investments (International Equity Portfolio). From time to
time depending on current market conditions, the Portfolio may invest a
significant portion of its assets in Japanese securities. Like any investor
in Japan, the Portfolio will be subject to general economic and political
conditions in the country. In addition to the considerations discussed above,
these include future political and economic developments, the possible
imposition of, or changes in, exchange controls or other Japanese governmental
laws or restrictions applicable to such investments, diplomatic developments,
political or social unrest and natural disasters.
The information set forth in this section has been extracted from
various governmental publications and other sources. The Fund makes no
representation as to the accuracy of the information, nor has the Fund
attempted to verify it. Furthermore, no representation is made that any
correlation exists between Japan or its economy in general and the performance
of the Fund.
Economic Background. Over the past 30 years Japan has experienced
significant economic development. During the era of high economic growth in
the 1960's and early 1970's the expansion was based on the development of
heavy industries such as steel and shipbuilding. In the 1970's Japan moved
into assembly industries which employ high levels of technology and consume
relatively low quantities of resources, and since then has become a major
producer of electrical and electronic products and automobiles. Moreover,
since the mid-1980's Japan has become a major creditor nation. With the
exception of the periods associated with the oil crises of the 1970's, Japan
has generally experienced very low levels of inflation. On January 17, 1995,
the Great Hanshin Earthquake severely damaged Kobe, Japan's largest container
port. The economic effects of the earthquake cannot be predicted.
Japan is largely dependent upon foreign economies for raw materials.
For instance, almost all of its oil is imported, the majority from the Middle
East. Oil prices therefore have a major impact on the domestic economy, as is
evidenced by the current account deficits triggered by the two oil crises of
the 1970's. Oil prices have declined mainly due to a worldwide easing of
demand for crude oil. The stabilized price of oil contributed to Japan's
sizeable current account surplus and stability of wholesale and consumer
prices since 1981. While Japan is working to reduce its dependence on foreign
materials, its lack of natural resources poses a significant obstacle to this
effort.
International trade is important to Japan's economy, as exports
provide the means to pay for many of the raw materials it must import.
Japan's trade surplus has increased dramatically in recent years, exceeding
$100 billion per year since 1991 and reaching a record high of $145 billion in
1994. Because of the concentration of Japanese exports in highly visible
products such as automobiles, machine tools and semiconductors,
<PAGE>35
and the large trade surpluses resulting therefrom, Japan has entered a
difficult phase in its relations with its trading partners, particularly with
respect to the United States, with whom the trade imbalance is the greatest.
The United States and Japan have engaged in "economic framework" negotiations
to help raise United States' share in Japanese markets and reduce Japan's
current account surplus but progress in the negotiations has been hampered by
recent political upheaval in Japan. Any trade sanctions imposed upon Japan by
the United States as a result of the current friction or otherwise could
adversely impact Japan and the Portfolio's investments there.
<PAGE>36
The following table sets forth the composition of Japan's trade
balance, as well as other components of its current account, for the years
shown.
CURRENT ACCOUNT
Trade
<TABLE>
<CAPTION>
Year Exports Imports Trade Balance Current Balance
<S> <C> <C> <C> <C>
(U.S. dollars in millions)
1989 269,570 192,653 76,917 57,157
1990 280,374 216,846 63,528 35,761
1991 306,557 203,513 103,044 72,901
1992 330,850 198,502 132,348 117,551
1993 351,292 209,778 141,514 131,448
1994 384,176 283,232 145,944 129,140
</TABLE>
Source: Financial Statistics of Japan (1993 ed. and June 1994 supp.),
Institute of Fiscal and Monetary Policy, Ministry of Finance of
Japan
Economic Trends. The following tables set forth Japan's gross
domestic product, wholesale price index and consumer price index for the years
shown.
GROSS DOMESTIC PRODUCT (GDP)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
GDP (yen billions)
(Expenditures) 469,149 465,972 463,145 451,297 424,537 396,197
Change in GDP
from Preceding
Year
Nominal terms 0.7% 0.6% 2.6% 6.3% 7.2% 6.7%
Real Terms 0.5% -0.2% 1.1% 4.3% 4.8% 4.7%
</TABLE>
Source: Financial Statistics of Japan (1993 ed. and June 1994 supp.),
Institute of Fiscal and Monetary Policy, Ministry of Finance of
Japan
<PAGE>37
WHOLESALE PRICE INDEX
<TABLE>
<CAPTION>
Change from
All Preceding
Year Commodities Year
<S> <C> <C>
(Base year: 1990)
1989 98.0 2.5
1990 100.0 2.0
1991 99.4 (0.6)
1992 97.8 (1.6)
1993 95.0 (2.9)
1994 93.0 2.1
</TABLE>
Source: Financial Statistics of Japan (1993 ed. and June 1994 supp.),
Institute of Fiscal and Monetary Policy, Ministry of Finance of
Japan; International Monetary Fund
CONSUMER PRICE INDEX
<TABLE>
<CAPTION>
Change from
Year General Preceding Year
<S> <C> <C>
(Base Year: 1990)
1989 97.0 2.3
1990 100.0 3.1
1991 103.3 3.3
1992 105.0 1.6
1993 106.4 1.3
1994 107.1 0.7
</TABLE>
Source: Financial Statistics of Japan (1993 ed. and June 1994 supp.),
Institute of Fiscal and Monetary Policy, Ministry of Finance of
Japan; International Monetary Fund
Securities markets. There are eight stock exchanges in Japan. Of
these, the Tokyo Stock Exchange is by far the largest, followed by the Osaka
Stock Exchange and the Nagoya Stock Exchange. These exchanges divide the
market for domestic stocks into two sections, with newly listed companies and
smaller companies assigned to the Second Section and larger companies assigned
to the First Section.
<PAGE>38
The following table sets forth the number of Japanese companies
listed on the three major Japanese stock exchanges as of the end of 1994.
<TABLE>
<CAPTION>
NUMBER OF LISTED DOMESTIC COMPANIES
<S> <C> <C> <C> <C> <C>
Tokyo Osaka Nagoya
1st 2nd 1st 2nd 1st 2nd
Sec. Sec. Sec. Sec. Sec. Sec.
1,235 454 855 344 431 129
</TABLE>
Source: Tokyo Stock Exchange, Fact Book 1995
The following table sets forth the trading volume and value of
Japanese stocks on the eight Japanese stock exchanges for the years shown.
STOCK TRADING VOLUME & VALUE ON ALL STOCK EXCHANGES
(shares in millions; yen in billions)
<TABLE>
<CAPTION>
Year Volume Value
<S> <C> <C>
1989 . . . . . . . . . . . . . . . . . . . . 256,296 386,395
1990 . . . . . . . . . . . . . . . . . . . . 145,837 231,837
1991 . . . . . . . . . . . . . . . . . . . . 107,844 134,160
1992 . . . . . . . . . . . . . . . . . . . . 82,563 80,456
1993 . . . . . . . . . . . . . . . . . . . . 101,173 106,123
1994 . . . . . . . . . . . . . . . . . . . . 105,937 114,622
</TABLE>
Source: Tokyo Stock Exchange, Fact Book 1995
<PAGE>39
Securities Indexes. The Tokyo Stock Price Index ("TOPIX") is a
composite index of all common stocks listed on the First Section of the Tokyo
Stock Exchange. TOPIX reflects the change in the aggregate market value of
the common stocks as compared to the aggregate market value of those stocks as
of the close on January 4, 1968.
The following table sets forth the high, low and year-end TOPIX for
the years shown.
TOPIX
(January 4, 1968=100)
<TABLE>
<CAPTION>
Year Year-end High Low
<S> <C> <C> <C>
1989 2,881.37 2,884.80 2,364.33
1990 1,733.83 2,867.70 1,523.43
1991 1,714.68 2,028.85 1,638.06
1992 1,307.66 1,763.43 1,102.50
1993 1,439.31 1,698.67 1,250.06
1994 1,559.09 1,712.73 1,445.97
</TABLE>
Source: Tokyo Stock Exchange, Fact Book 1995
Currency Transactions. The value in U.S. dollars of the assets of a
Portfolio that are invested in foreign securities may be affected favorably or
unfavorably by changes in exchange control regulations, and the Portfolio may
incur costs in connection with conversion between various currencies. Each
Portfolio, therefore, may engage in currency exchange transactions to protect
against uncertainty in the level of future exchange rates and may also engage
in currency transactions to increase income and total return. Each Portfolio
will conduct its currency exchange transactions (i) on a spot (i.e., cash)
basis at the rate prevailing in the currency exchange market, (ii) through
entering into forward contracts to purchase or sell currency, (iii) by
purchasing currency options or (iv) through entering into foreign currency
futures contracts or options on such contracts. If a devaluation is generally
anticipated, the Portfolio may not be able to contract to sell the currency at
a price above the devaluation level it anticipates. The cost to a Portfolio
of engaging in currency transactions varies with factors such as the currency
involved, the length of the contract period and the market conditions then
prevailing. Because transactions in currency exchange are usually conducted
on a principal basis, no fees or commissions are generally involved. In light
of the requirements that the Portfolio must meet to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"), for a given year, each Portfolio currently intends to limit its gross
income from currency transactions to less than 10% of its gross income for
that taxable year.
Forward Currency Contracts. A forward currency contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract as agreed upon by
the parties, at a price set at
<PAGE>40
the time of the contract. These contracts are entered into in the interbank
market conducted directly between currency traders (usually large commercial
banks) and their customers.
At or before the maturity of a forward contract, the Portfolio may
either sell a portfolio security and make delivery of the currency, or retain
the security and fully or partially offset its contractual obligation to
deliver the currency by negotiating with its trading partner to purchase a
second, offsetting contract. If the Portfolio retains the portfolio security
and engages in an offsetting transaction, the Portfolio, at the time of
execution of the offsetting transaction, will incur a gain or a loss to the
extent that movement has occurred in forward contract prices.
Currency Options. Each Portfolio may purchase put and call options
on foreign currencies. Foreign currency options generally have three, six,
nine and twelve month expiration cycles. Put options convey the right to sell
the underlying currency at a price which is anticipated to be higher than the
spot price of the currency at the time the option is exercised. Call options
convey the right to buy the underlying currency at a price which is expected
to be lower than the spot price of the currency at the time the option is
exercised.
Foreign Currency Futures. As described below under "Futures
Activities," a Portfolio may enter into foreign currency futures contracts and
related options.
Currency Hedging. A Portfolio's currency hedging will be limited to
hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of forward currency with respect
to specific receivables or payables of the Portfolio generally accruing in
connection with the purchase or sale of its portfolio securities. Position
hedging is the sale of forward currency with respect to portfolio security
positions. The Portfolio may not position hedge to an extent greater than the
aggregate market value (at the time of entering into the hedge) of the hedged
securities.
A decline in the dollar value of a foreign currency in which the
Portfolio's securities are denominated will reduce the dollar value of the
securities, even if their value in the foreign currency remains constant. The
use of currency hedges does not eliminate fluctuations in the underlying
prices of the securities, but it does establish a rate of exchange that can be
achieved in the future. For example, in order to protect against such
diminutions in the value of securities it holds, the Portfolio may purchase
put options on the foreign currency. If the value of the currency does
decline, the Portfolio will have the right to sell the currency for a fixed
amount in dollars and will thereby offset, in whole or in part, the adverse
effect on its securities that otherwise would have resulted. Conversely, if a
rise in the dollar value of a currency in which securities to be acquired are
denominated is projected, thereby potentially increasing the cost of the
securities, the Portfolio may purchase call options on the particular
currency. The purchase of these options could offset, at least partially, the
effects of the adverse movements in exchange rates. Currency hedging involves
some of the same risks and considerations as other transactions with similar
instruments. Currency transactions can result in losses to the Portfolio if
the currency being
<PAGE>41
hedged fluctuates in value to a degree or in a direction that is not
anticipated. Although currency hedges limit the risk of loss due to a decline
in the value of a hedged currency, at the same time, they also limit any
potential gain that might result should the value of the currency increase.
To reduce the effect of currency fluctuations on the value of
existing or anticipated holdings of portfolio securities, the Portfolios may
also engage in cross-hedging. Cross-hedging is often used when the currency
to which a Portfolio's portfolio is exposed is difficult to hedge or to hedge
against the dollar. Cross-hedging entails using forward contracts in one
currency to hedge against fluctuations in the value of securities denominated
in a different currency if the relative changes in value of the currencies are
generally considered to be linked. The amount of the contract would not
exceed the value of the Portfolio's securities denominated in linked
currencies. The risk exists that the perceived linkage between various
currencies may not be present or may not be present during the particular time
that a Portfolio is engaging in cross-hedging.
While the values of forward currency contracts, currency options,
and options on futures may be expected to correlate with exchange rates, they
will not reflect other factors that may affect the value of a Portfolio's
investments. A currency hedge, for example, should protect a Yen-denominated
bond against a decline in the Yen, but will not protect the Portfolio against
price decline if the issuer's creditworthiness deteriorates. Because the
value of a Portfolio's investments denominated in foreign currency will change
in response to many factors other than exchange rates, a currency hedge may
not be entirely successful in mitigating changes in the value of the
Portfolio's investments denominated in that currency over time.
Futures Activities and Commodity Options. A Portfolio may enter
into futures contracts and purchase and write (sell) commodity options
(options on futures contracts and on physical commodities) including, but not
limited to, foreign currency, interest rate and stock index futures. Such
contracts will be entered into on exchanges or boards of trade designated by
the Commodity Futures Trading Commission (the "CFTC") or consistent with CFTC
regulations on foreign exchanges. These transactions may be entered into for
"bona fide hedging" purposes as defined in CFTC regulations and other
permissible purposes including hedging against changes in the value of
portfolio securities due to anticipated changes in interest rates, currency
values and/or market conditions and increasing return. The ability of a
Portfolio to trade in futures contracts may be limited by the requirements of
the Code applicable to a regulated investment company.
A Portfolio will not enter into futures contracts and related
options for which the aggregate initial margin and premiums required to
establish positions other than those considered to be "bona fide hedging" by
the CFTC exceed 5% of the Portfolio's net asset value after taking into
account unrealized profits and unrealized losses on any such contracts it has
entered into. There is no overall limit on the percentage of a Portfolio's
assets that may be at risk with respect to futures activities.
<PAGE>42
Futures Contracts. A foreign currency futures contract provides for
the future sale by one party and the purchase by the other party of a certain
amount of a specified non-U.S. currency at a specified price, date, time and
place. Foreign currency futures are similar to forward currency contracts,
except that they are traded on commodities exchanges and are standardized as
to contract size and delivery date. An interest rate futures contract
provides for the future sale by one party and the purchase by the other party
of a certain amount of a specific financial instrument (debt security) at a
specified price, date, time and place. Stock indexes are capitalization
weighted indexes which reflect the market value of the companies listed on the
indexes. A stock index futures contract is an agreement to be settled by
delivery of an amount of cash equal to a specified multiplier times the
difference between the value of the index at the beginning and at the end of
the contract period. In entering into these contracts, the Portfolios will
incur brokerage costs and be required to make and maintain certain "margin"
deposits on a mark-to-market basis, as described below.
One of the purposes of entering into a futures contract may be to
protect the Portfolio from fluctuations in value of its portfolio securities
without its necessarily buying or selling the securities. Since the value of
portfolio securities will far exceed the value of the futures contracts sold
by the Portfolio, an increase in the value of the futures contracts could only
mitigate, but not totally offset, the decline in the value of the Portfolio's
assets. No consideration is paid or received by the Portfolio upon entering
into a futures contract. Instead, the Portfolio will be required to deposit
in a segregated account with its custodian an amount of cash or cash
equivalents, such as U.S. government securities or other liquid high-grade
debt obligations, equal to approximately 1% to 10% of the contract amount
(this amount is subject to change by the exchange on which the contract is
traded, and brokers may charge a higher amount). This amount is known as
"initial margin" and is in the nature of a performance bond or good faith
deposit on the contract which is returned to the Portfolio upon termination of
the futures contract, assuming all contractual obligations have been
satisfied. The broker will have access to amounts in the margin account if
the Portfolio fails to meet its contractual obligations. Subsequent payments,
known as "variation margin," to and from the broker, will be made daily as the
currency, financial instrument or stock index underlying the futures contract
fluctuates, making the long and short positions in the futures contract more
or less valuable, a process known as "marking-to-market." At any time prior
to the expiration of a futures contract, the Portfolio may elect to close the
position by taking an opposite position, which will operate to terminate the
Portfolio's existing position in the contract.
Positions in futures contracts and options on futures contracts may
be closed out only on the exchange on which they were entered into (or through
a linked exchange). No secondary market for such contracts exists. Although
each Portfolio intends to enter into futures contracts only if there is an
active market for such contracts, there is no assurance that an active market
will exist for the contracts at any particular time. Most futures exchanges
limit the amount of fluctuation permitted in futures contract prices during a
single trading day. Once the daily limit has been reached in a particular
contract, no trades may be made that day at a price beyond that limit. It is
possible that futures contract prices could move to the daily limit for
several consecutive trading days with little or no trading, thereby
<PAGE>433
preventing prompt liquidation of futures positions and subjecting the
Portfolio to substantial losses. In such event, and in the event of adverse
price movements, the Portfolio would be required to make daily cash payments
of variation margin. In such circumstances, an increase in the value of the
portion of the Portfolio's securities being hedged, if any, may partially or
completely offset losses on the futures contract. However, as described
above, there is no guarantee that the price of the securities being hedged
will, in fact, correlate with the price movements in a futures contract and
thus provide an offset to losses on the futures contract.
If a Portfolio has hedged against the possibility of an event
adversely affecting the value of securities held in its portfolio and that
event does not occur, the Portfolio will lose part or all of the benefit of
the increased value of securities which it has hedged because it will have
offsetting losses in its futures positions. Losses incurred in futures
transactions and the costs of these transactions will affect the Portfolio's
performance. In addition, in such situations, if the Portfolio had insuf-
ficient cash, it might have to sell securities to meet daily variation margin
requirements at a time when it would be disadvantageous to do so. These sales
of securities could, but will not necessarily, be at increased prices which
reflect the change in currency values, interest rates or stock indexes, as the
case may be.
Options on Futures Contracts. Each Portfolio may purchase and write
put and call options on foreign currency, interest rate and stock index
futures contracts and may enter into closing transactions with respect to such
options to terminate existing positions. There is no guarantee that such
closing transactions can be effected.
An option on a currency, interest rate or stock index futures
contract, as contrasted with the direct investment in such a contract, gives
the purchaser the right, in return for the premium paid, to assume a position
in a currency, interest rate or stock index futures contract at a specified
exercise price at any time prior to the expiration date of the option. Upon
exercise of an option, the delivery of the futures position by the writer of
the option to the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's futures margin account, which represents
the amount by which the market price of the futures contract exceeds, in the
case of a call, or is less than, in the case of a put, the exercise price of
the option on the futures contract. The potential loss related to the
purchase of an option on futures contracts is limited to the premium paid for
the option (plus transaction costs). Because the value of the option is fixed
at the point of sale, there are no daily cash payments by the purchaser to
reflect changes in the value of the underlying contract; however, the value of
the option does change daily and that change would be reflected in the net
asset value of the Portfolio.
There are several risks relating to options on futures contracts.
The ability to establish and close out positions on such options will be
subject to the existence of a liquid market. In addition, the purchase of put
or call options will be based upon predictions as to anticipated trends in
interest rates and securities markets by Warburg, Pincus Counsellors, Inc.,
the Portfolios' investment adviser ("Counsellors"). This requires different
skills and techniques than predicting changes in the price of individual
securities, and there can be no
<PAGE>444
assurance that the use of these portfolio strategies will be successful. Even
if Counsellors' expectations are correct, where options on futures are used
for hedging purposes, there may be an imperfect correlation between the change
in the value of the options and of the portfolio securities hedged.
Options on Securities. A Portfolio may purchase and write put and
call options on stocks and debt securities that are traded on foreign and U.S.
exchanges, as well as over-the-counter ("OTC") options, to the extent
permitted by the policies of state securities authorities in states where
shares of the Portfolio are qualified for offer and sale.
A Portfolio realizes fees (referred to as "premiums") for granting
the rights evidenced by the call options it has written. A put option
embodies the right of its purchaser to compel the writer of the option to
purchase from the option holder an underlying security at a specified price
for a specified time period or at a specified time. In contrast, a call
option embodies the right of its purchaser to compel the writer of the option
to sell to the option holder an underlying security at a specified price for a
specified time period or at a specified time.
The principal reason for writing covered call options on a security
is to attempt to realize, through the receipt of premiums, a greater return
than would be realized on the securities alone. In return for a premium, a
Portfolio as the writer of a covered call option forfeits the right to any
appreciation in the value of the underlying security above the strike price
for the life of the option (or until a closing purchase transaction can be
effected). Nevertheless, the Portfolio as the call writer retains the risk of
a decline in the price of the underlying security. The size of the premiums
that the Portfolio may receive may be adversely affected as new or existing
institutions, including other investment companies, engage in or increase
their option-writing activities.
Options written by a Portfolio will normally have expiration dates
between one and nine months from the date written. The exercise price of the
options may be below, equal to or above the market values of the underlying
securities at the times the options are written. In the case of call options,
these exercise prices are referred to as "in-the-money," "at-the-money" and
"out-of-the-money," respectively. The Portfolio may write (i) in-the-money
call options when Counsellors expects that the price of the underlying
security will remain flat or decline moderately during the option period,
(ii) at-the-money call options when Counsellors expects that the price of the
underlying security will remain flat or advance moderately during the option
period and (iii) out-of-the-money call options when Counsellors expects that
the premiums received from writing the call option plus the appreciation in
market price of the underlying security up to the exercise price will be
greater than the appreciation in the price of the underlying security alone.
In any of the preceding situations, if the market price of the underlying
security declines and the security is sold at this lower price, the amount of
any realized loss will be offset wholly or in part by the premium received.
To secure its obligation to deliver the underlying security when it writes a
call option, the Portfolio may be required to deposit in escrow the underlying
security or other
<PAGE>45
assets in accordance with the rules of the Options Clearing Corporation (the
"Clearing Corporation") and of the securities exchange on which the option is
written.
In the case of options written by a Portfolio that are deemed
covered by virtue of the Portfolio's holding convertible or exchangeable
preferred stock or debt securities, the time required to convert or exchange
and obtain physical delivery of the underlying common stock with respect to
which the Portfolio has written options may exceed the time within which the
Portfolio must make delivery in accordance with an exercise notice. In these
instances, the Portfolio may purchase or temporarily borrow the underlying
securities for purposes of physical delivery. By so doing, the Portfolio will
not bear any market risk, since the Portfolio will have the absolute right to
receive from the issuer of the underlying security an equal number of shares
to replace the borrowed stock, but the Portfolio may incur additional
transaction costs or interest expenses in connection with any such purchase or
borrowing.
Additional risks exist with respect to certain of the securities for
which the Portfolio may write covered call options. If a Portfolio writes
covered call options on mortgage-backed securities, the mortgage-backed
securities that it holds as cover may, because of scheduled amortization or
unscheduled prepayments, cease to be sufficient cover. If this occurs, the
Portfolio will compensate for the decline in the value of the cover by
purchasing an appropriate additional amount of mortgage-backed securities.
Securities exchanges generally have established limitations
governing the maximum number of calls and puts of each class which may be held
or written, or exercised within certain time periods by an investor or group
of investors acting in concert (regardless of whether the options are written
on the same or different securities exchanges or are held, written or
exercised in one or more accounts or through one or more brokers). It is
possible that a Portfolio and other clients of Counsellors and certain of its
affiliates may be considered to be such a group. A securities exchange may
order the liquidation of positions found to be in violation of these limits
and it may impose certain other sanctions. These limits may restrict the
number of options a Portfolio will be able to purchase on a particular
security.
Prior to their expirations, put and call options may be sold in
closing sale transactions (sales by a Portfolio, prior to the exercise of
options that it has purchased, of options of the same series) in which the
Portfolio may realize a profit or loss from the sale. An option position may
be closed out only where there exists a secondary market for an option of the
same series on a recognized securities exchange or in the over-the-counter
market. In cases where the Portfolio has written an option, it will realize a
profit if the cost of the closing purchase transaction is less than the
premium received upon writing the original option and will incur a loss if the
cost of the closing purchase transaction exceeds the premium received upon
writing the original option. Similarly, when the Portfolio has purchased an
option and engages in a closing sale transaction, whether the Portfolio
realizes a profit or loss will depend upon whether the amount received in the
closing sale transaction is more or less than the premium the Portfolio
initially paid for the original option plus the related transaction costs. So
long as the obligation of a Portfolio as the writer of an option
<PAGE>46
continues, the Portfolio may be assigned an exercise notice by the broker-
dealer through which the option was sold, requiring the Portfolio to deliver
the underlying security against payment of the exercise price. This
obligation terminates when the option expires or the Portfolio effects a
closing purchase transaction. The Portfolio can no longer effect a closing
purchase transaction with respect to an option once it has been assigned an
exercise notice.
Although a Portfolio will generally purchase or write only those
options for which Counsellors believes there is an active secondary market so
as to facilitate closing transactions, there is no assurance that sufficient
trading interest will exist to create a liquid secondary market on a
securities exchange for any particular option or at any particular time, and
for some options no such secondary market may exist. A liquid secondary
market in an option may cease to exist for a variety of reasons. In the past,
for example, higher than anticipated trading activity or order flow or other
unforeseen events have at times rendered certain of the facilities of the
Clearing Corporation and various securities exchanges inadequate and resulted
in the institution of special procedures, such as trading rotations,
restrictions on certain types of orders or trading halts or suspensions in one
or more options. There can be no assurance that similar events, or events
that may otherwise interfere with the timely execution of customers' orders,
will not recur. In such event, it might not be possible to effect closing
transactions in particular options. Moreover, as discussed below, a
Portfolio's ability to terminate options positions established in the
over-the-counter market may be more limited than for exchange-traded options
and may also involve the risk that securities dealers participating in
over-the-counter transactions would fail to meet their obligations to the
Portfolio. The Portfolios, however, intend to purchase over-the-counter
options only from dealers whose debt securities, as determined by Counsellors,
are considered to be investment grade. If, as a covered call option writer, a
Portfolio is unable to effect a closing purchase transaction in a secondary
market, it will not be able to sell the underlying security until the option
expires or it delivers the underlying security upon exercise. In either case,
the Portfolio would continue to be at market risk on the security and could
face higher transaction costs, including brokerage commissions.
Options as a Hedge. In addition to entering into options for other
purposes, including generating current income, each Portfolio may enter into
options transactions as hedges to reduce investment risk, generally by making
an investment expected to move in the opposite direction of a portfolio
position. A hedge is designed to offset a loss on a portfolio position with a
gain on the hedged position; at the same time, however, a properly correlated
hedge will result in a gain on the portfolio position being offset by a loss
on the hedged position. The Portfolio bears the risk that the prices of the
securities being hedged will not move in the same amount as the hedge. The
Portfolio will engage in hedging transactions only when deemed advisable by
Counsellors. Successful use by the Portfolio of options will be subject to
Counsellors' ability to predict correctly movements in the direction of the
stock underlying the option used as a hedge. Losses incurred in hedging
transactions and the costs of these transactions will affect the Portfolio's
performance.
OTC Options. Each Portfolio may purchase OTC or dealer options or
sell covered OTC options. Unlike exchange-listed options where an
intermediary or clearing
<PAGE>47
corporation, such as the Clearing Corporation, assures that all transactions
in such options are properly executed, the responsibility for performing all
transactions with respect to OTC options rests solely with the writer and the
holder of those options. A listed call option writer, for example, is
obligated to deliver the underlying stock to the clearing organization if the
option is exercised, and the clearing corporation is then obligated to pay the
writer the exercise price of the option. If a Portfolio were to purchase a
dealer option, however, it would rely on the dealer from whom it purchased the
option to perform if the option were exercised. If the dealer fails to honor
the exercise of the option by the Portfolio, the Portfolio would lose the
premium it paid for the option and the expected benefit of the transaction.
Listed options generally have a continuous liquid market while
dealer options have none. Consequently, a Portfolio will generally be able to
realize the value of a dealer option it has purchased only by exercising it or
reselling it to the dealer who issued it. Similarly, when the Portfolio
writes a dealer option, it generally will be able to close out the option
prior to its expiration only by entering into a closing purchase transaction
with the dealer to which the Portfolio originally wrote the option. Although
the Portfolio will seek to enter into dealer options only with dealers who
will agree to and that are expected to be capable of entering into closing
transactions with the Portfolio, there can be no assurance that the Portfolio
will be able to liquidate a dealer option at a favorable price at any time
prior to expiration. The inability to enter into a closing transaction may
result in material losses to the Portfolio. Until the Portfolio, as a covered
dealer call option writer, is able to effect a closing purchase transaction,
it will not be able to liquidate securities (or other assets) used to cover
the written option until the option expires or is exercised. This requirement
may impair the Portfolio's ability to sell portfolio securities or, with
respect to currency options, currencies at a time when such sale might be
advantageous. In the event of insolvency of the other party, the Portfolio
may be unable to liquidate a dealer option.
Stock Index Options. Each Portfolio may purchase exchange-listed
and OTC put and call options on stock indexes, and may write options on such
indexes to hedge against the effects of market-wide price movements or to
increase income and total return. A stock index measures the movement of a
certain group of stocks by assigning relative values to the common stocks
included in the index, fluctuating with changes in the market values of the
stocks included in the index. Some stock index options are based on a broad
market index such as the New York Stock Exchange ("NYSE") Composite index, or
a narrower market index such as the Standard & Poor's 100. Indexes may also
be based on a particular industry or market segment.
Options on stock indexes are similar to options on stock except that
(i) the expiration cycles of stock index options are monthly, while those of
stock options are currently quarterly, and (ii) the delivery requirements are
different. Instead of giving the right to take or make delivery of stock at a
specified price, an option on a stock index gives the holder the right to
receive a cash "exercise settlement amount" equal to (a) the amount, if any,
by which the fixed exercise price of the option exceeds (in the case of a put)
or is less than (in the case of a call) the closing value of the underlying
index on the date of exercise,
<PAGE>48
multiplied by (b) a fixed "index multiplier." Receipt of this cash amount
will depend upon the closing level of the stock index upon which the option is
based being greater than, in the case of a call, or less than, in the case of
a put, the exercise price of the index and the exercise price of the option
expressed in dollars times a specified multiple. The writer of the option is
obligated, in return for the premium received, to make delivery of this
amount. The writer may offset its position in stock index options prior to
expiration by entering into a closing transaction on an exchange or it may let
the option expire unexercised.
Stock Index Options as a Hedge. The effectiveness of purchasing or
writing stock index options as a hedging technique will depend upon the extent
to which price movements in the portion of a securities portfolio being hedged
correlate with price movements of the stock index selected. Because the value
of an index option depends upon movements in the level of the index rather
than the price of a particular stock, whether a Portfolio will realize a gain
or loss from the purchase or writing of options on an index depends upon
movements in the level of stock prices in the stock market generally or, in
the case of certain indexes, in an industry or market segment, rather than
movements in the price of a particular stock. Accordingly, successful use by
each Portfolio of options on stock indexes will be subject to Counsellors'
ability to predict correctly movements in the direction of the stock market
generally or of a particular industry. This requires different skills and
techniques than predicting changes in the price of individual stocks, and
there can be no assurance that the use of these portfolio strategies will be
successful.
Asset Coverage for Forward Contracts, Options, Futures and Options
on Futures. As described in the Prospectus, each Portfolio will comply with
guidelines established by the SEC designed to eliminate any potential for
leverage with respect to currency forward contracts; options written by the
Portfolio on securities, currencies and indexes; and futures contracts and
commodity options. These guidelines may, in certain instances, require
segregation by the Portfolio of cash or liquid high-grade debt securities.
For example, a call option written by a Portfolio on securities may
require the Portfolio to hold the securities subject to the call (or
securities convertible into the securities without additional consideration)
or to segregate cash or liquid high-grade debt obligations sufficient to
purchase and deliver the securities if the call is exercised. A call option
written by the Portfolio on an index may require the Portfolio to own
portfolio securities that correlate with the index or to segregate cash or
liquid high-grade debt obligations equal to the excess of the index value over
the exercise price on a current basis. A put option written by the Portfolio
may require the Portfolio to segregate cash or liquid high-grade debt
obligations equal to the exercise price. Each Portfolio may enter into fully
or partially offsetting transactions so that its net position, coupled with
any segregated assets (equal to any remaining obligation), equals its net
obligation. The Portfolio could purchase a put option if the strike price of
that option is the same or higher than the strike price of a put option sold
by the Portfolio. If a Portfolio holds a futures or forward contract, the
Portfolio could purchase a put option on the same futures or forward contract
with a strike price as high or higher than the price of the contract held.
Asset coverage may be achieved by other means when consistent with applicable
regulatory policies.
<PAGE>49
American, European and Continental Depositary Receipts. The assets
of a Portfolio may be invested in the securities of foreign issuers in the
form of American Depositary Receipts ("ADRs") and European Depositary Receipts
("EDRs"). These securities may not necessarily be denominated in the same
currency as the securities into which they may be converted. ADRs are
receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. EDRs,
which are sometimes referred to as Continental Depositary Receipts ("CDRs"),
are receipts issued in Europe typically by non-U.S. banks and trust companies
that evidence ownership of either foreign or domestic securities. Generally,
ADRs in registered form are designed for use in U.S. securities markets and
EDRs and CDRs in bearer form are designed for use in European securities
markets.
Short Sales "Against the Box." In a short sale, a Portfolio sells a
borrowed security and has a corresponding obligation to the lender to return
the identical security. A Portfolio may engage in short sales if at the time
of the short sale the Portfolio owns or has the right to obtain without
additional cost an equal amount of the security being sold short. This
investment technique is known as a short sale "against the box."
In a short sale, the seller does not immediately deliver the
securities sold and is said to have a short position in those securities until
delivery occurs. If a Portfolio engages in a short sale, the collateral for
the short position will be maintained by the Portfolio's custodian or
qualified sub-custodian. While the short sale is open, the Portfolio will
maintain in a segregated account an amount of securities equal in kind and
amount to the securities sold short or securities convertible into or
exchangeable for such equivalent securities. These securities constitute the
Portfolio's long position. Not more than 10% of a Portfolio's net assets
(taken at current value) may be held as collateral for such short sales at any
one time.
The Portfolios do not intend to engage in short sales against the
box for investment purposes. A Portfolio may, however, make a short sale as a
hedge, when it believes that the price of a security may decline, causing a
decline in the value of a security owned by the Portfolio (or a security
convertible or exchangeable for such security), or when a Portfolio wants to
sell the security at an attractive current price, but also wishes to defer
recognition of gain or loss for U.S. federal income tax purposes and for
purposes of satisfying certain tests applicable to regulated investment
companies under the Code. In such case, any future losses in the Portfolio's
long position should be offset by a gain in the short position and,
conversely, any gain in the long position should be reduced by a loss in the
short position. The extent to which such gains or losses are reduced will
depend upon the amount of the security sold short relative to the amount the
Portfolio owns. There will be certain additional transaction costs associated
with short sales against the box, but the Portfolio will endeavor to offset
these costs with the income from the investment of the cash proceeds of short
sales.
U.S. Government Securities. Each Portfolio may invest in debt
obligations of varying maturities issued or guaranteed by the United States
government, its agencies or
<PAGE>50
instrumentalities ("U.S. Government Securities"). Direct obligations of the
U.S. Treasury include a variety of securities that differ in their interest
rates, maturities and dates of issuance. U.S. Government Securities also
include securities issued or guaranteed by the Federal Housing Administration,
Farmers Home Loan Administration, Export-Import Bank of the United States,
Small Business Administration, Government National Mortgage Association,
General Services Administration, Central Bank for Cooperatives, Federal Farm
Credit Banks, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation,
Federal Intermediate Credit Banks, Federal Land Banks, Federal National
Mortgage Association, Maritime Administration, Tennessee Valley Authority,
District of Columbia Armory Board and Student Loan Marketing Association.
Each Portfolio may also invest in instruments that are supported by the right
of the issuer to borrow from the U.S. Treasury and instruments that are
supported by the credit of the instrumentality. Because the U.S. government
is not obligated by law to provide support to an instrumentality it sponsors,
a Portfolio will invest in obligations issued by such an instrumentality only
if Counsellors determines that the credit risk with respect to the
instrumentality does not make its securities unsuitable for investment by the
Portfolio.
Securities of Other Investment Companies. Each Portfolio may invest
in securities of other investment companies to the extent permitted under the
Investment Company Act of 1940, as amended (the "1940 Act"). Presently, under
the 1940 Act, a Portfolio may hold securities of another investment company in
amounts which (i) do not exceed 3% of the total outstanding voting stock of
such company, (ii) do not exceed 5% of the value of the Portfolio's total
assets and (iii) when added to all other investment company securities held by
the Portfolio, do not exceed 10% of the value of the Portfolio's total assets.
Repurchase Agreements. A Portfolio may enter into repurchase
agreements with member banks of the Federal Reserve System or certain non-bank
dealers. Repurchase agreements are contracts under which the buyer of a
security simultaneously commits to resell the security to the seller at an
agreed-upon price and date. Under each repurchase agreement, the selling
institution will be required to maintain the value of the securities subject
to the repurchase agreement at not less than their repurchase price.
Repurchase agreements involve certain risks in the event of default or
insolvency of the other party, including possible delays or restrictions upon
a Portfolio's ability to dispose of the underlying securities.
Lending of Portfolio Securities. A Portfolio may lend portfolio
securities to brokers, dealers and other financial organizations that meet
capital and other credit requirements or other criteria established by the
Fund's Board of Directors (the "Board"). These loans, if and when made, may
not exceed 33-1/3% of a Portfolio's total assets taken at value. A Portfolio
will not lend portfolio securities to E.M. Warburg, Pincus & Co., Inc. ("EMW")
or its affiliates unless it has applied for and received specific authority to
do so from the SEC. Loans of portfolio securities will be collateralized by
cash, letters of credit or U.S. Government Securities, which are maintained at
all times in an amount equal to at least 100% of the current market value of
the loaned securities. Any gain or loss in the market
<PAGE>51
price of the securities loaned that might occur during the term of the loan
would be for the account of the Portfolio involved. From time to time, a
Portfolio may return a part of the interest earned from the investment of
collateral received for securities loaned to the borrower and/or a third party
that is unaffiliated with the Portfolio and that is acting as a "finder."
By lending its securities, the Portfolio can increase its income by
continuing to receive interest and any dividends on the loaned securities as
well as by either investing the collateral received for securities loaned
in short-term instruments or obtaining yield in the form of interest paid by
the borrower when U.S. Government Securities are used as collateral. Income
received could be used to pay a Portfolio's expenses and would increase its
total return. Each Portfolio will adhere to the following conditions whenever
its portfolio securities are loaned: (i) the Portfolio must receive at least
100% cash collateral or equivalent securities of the type discussed in the
preceding paragraph from the borrower; (ii) the borrower must increase such
collateral whenever the market value of the securities rises above the level
of such collateral; (iii) the Portfolio must be able to terminate the loan at
any time; (iv) the Portfolio must receive reasonable interest on the loan, as
well as any dividends, interest or other distributions on the loaned
securities and any increase in market value; (v) the Portfolio may pay only
reasonable custodian fees in connection with the loan; and (vi) voting rights
on the loaned securities may pass to the borrower, provided, however, that if
a material event adversely affecting the investment occurs, the Board must
terminate the loan and regain the right to vote the securities. Loan
agreements involve certain risks in the event of default or insolvency of the
other party including possible delays or restrictions upon the Portfolio's
ability to recover the loaned securities or dispose of the collateral for the
loan.
When-Issued Securities and Delayed-Delivery Transactions. Each
Portfolio may utilize up to 20% of its total assets to purchase securities on
a "when-issued" basis or purchase or sell securities for delayed delivery
(i.e., payment or delivery occur beyond the normal settlement date at a stated
price and yield). When-issued transactions normally settle within 30-45 days.
A Portfolio will enter into a when-issued transaction for the purpose of
acquiring portfolio securities and not for the purpose of leverage, but may
sell the securities before the settlement date if Counsellors deems it
advantageous to do so. The payment obligation and the interest rate that will
be received on when-issued securities are fixed at the time the buyer enters
into the commitment. Due to fluctuations in the value of securities purchased
or sold on a when-issued or delayed-delivery basis, the yields obtained on
such securities may be higher or lower than the yields available in the market
on the dates when the investments are actually delivered to the buyers.
When a Portfolio agrees to purchase when-issued or delayed-delivery
securities, its custodian will set aside cash, U.S. Government Securities or
other liquid high-grade debt obligations or other securities that are
acceptable as collateral to the appropriate regulatory authority equal to the
amount of the commitment in a segregated account. Normally, the custodian
will set aside portfolio securities to satisfy a purchase commitment, and in
such a case the Portfolio may be required subsequently to place additional
assets in the segregated account in order to ensure that the value of the
account
<PAGE>52
remains equal to the amount of the Portfolio's commitment. It may be expected
that the Portfolio's net assets will fluctuate to a greater degree when it
sets aside portfolio securities to cover such purchase commitments than when
it sets aside cash. When the Portfolio engages in when-issued or delayed-
delivery transactions, it relies on the other party to consummate the trade.
Failure of the seller to do so may result in the Portfolio's incurring a loss
or missing an opportunity to obtain a price considered to be advantageous.
Convertible Securities. Convertible securities in which a Portfolio
may invest, including both convertible debt and convertible preferred stock,
may be converted at either a stated price or stated rate into underlying
shares of common stock. Because of this feature, convertible securities
enable an investor to benefit from increases in the market price of the
underlying common stock. Convertible securities provide higher yields than
the underlying equity securities, but generally offer lower yields than
non-convertible securities of similar quality. Like bonds, the value of
convertible securities fluctuates in relation to changes in interest rates
and, in addition, also fluctuates in relation to the underlying common stock.
Warrants. Each Portfolio may invest up to 5% of net assets in
warrants, provided that not more than 2% of net assets may be invested in
warrants not listed on a recognized U.S. or foreign stock exchange. Because a
warrant does not carry with it the right to dividends or voting rights with
respect to the securities which it entitles a holder to purchase, and because
it does not represent any rights in the assets of the issuer, warrants may be
considered more speculative than certain other types of investments. Also,
the value of a warrant does not necessarily change with the value of the
underlying securities and a warrant ceases to have value if it is not
exercised prior to its expiration date.
Non-Publicly Traded and Illiquid Securities. Each of the
International Equity and Global Fixed Income Portfolio may not invest more
than 10% of its net assets, and the Small Company Growth Portfolio may not
invest more than 15% of its net assets, in illiquid securities, including
securities that are illiquid by virtue of the absence of a readily available
market, repurchase agreements which have a maturity of longer than seven days
and time deposits maturing in more than seven days. Securities that have
legal or contractual restrictions on resale but have a readily available
market are not considered illiquid for purposes of this limitation.
Repurchase agreements subject to demand are deemed to have a maturity equal to
the notice period.
Historically, illiquid securities have included securities subject
to contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities
Act"), securities which are otherwise not readily marketable and repurchase
agreements having a maturity of longer than seven days. Securities which have
not been registered under the Securities Act are referred to as private
placements or restricted securities and are purchased directly from the issuer
or in the secondary market. Mutual funds do not typically hold a significant
amount of these restricted or other illiquid securities because of the
potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of
<PAGE>53
restricted or other illiquid securities promptly or at reasonable prices and
might thereby experience difficulty satisfying redemptions within seven days.
A mutual fund might also have to register such restricted securities in order
to dispose of them resulting in additional expense and delay. Adverse market
conditions could impede such a public offering of securities.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities Act
including repurchase agreements, commercial paper, foreign securities,
municipal securities and corporate bonds and notes. Institutional investors
depend on an efficient institutional market in which the unregistered security
can be readily resold or on an issuer's ability to honor a demand for
repayment. The fact that there are contractual or legal restrictions on
resale to the general public or to certain institutions may not be indicative
of the liquidity of such investments.
Rule 144A adopted by the SEC allows for a broader institutional
trading market for securities otherwise subject to restriction on resale to
the general public. Rule 144A establishes a "safe harbor" from the
registration requirements of the Securities Act for resales of certain
securities to qualified institutional buyers. Counsellors anticipates that
the market for certain restricted securities such as institutional commercial
paper will expand further as a result of this regulation and use of automated
systems for the trading, clearance and settlement of unregistered securities
of domestic and foreign issuers, such as the PORTAL System sponsored by the
National Association of Securities Dealers, Inc.
Counsellors will monitor the liquidity of restricted securities in a
Portfolio under the supervision of the Board. In reaching liquidity
decisions, Counsellors may consider, inter alia, the following factors: (i)
the unregistered nature of the security; (ii) the frequency of trades and
quotes for the security; (iii) the number of dealers wishing to purchase or
sell the security and the number of other potential purchasers; (iv) dealer
undertakings to make a market in the security and (v) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer).
Borrowing. Each Portfolio may borrow up to 30% of its total assets
for temporary or emergency purposes, including to meet portfolio redemption
requests so as to permit the orderly disposition of portfolio securities or to
facilitate settlement transactions on portfolio securities. Investments
(including roll-overs) will not be made when borrowings exceed 5% of the
Portfolio's total assets. Although the principal of such borrowings will be
fixed, the Portfolio's assets may change in value during the time the
borrowing is outstanding. Each Portfolio expects that some of its borrowings
may be made on a secured basis. In such situations, either the custodian will
segregate the pledged assets for the benefit of the lender or arrangements
will be made with a suitable subcustodian, which may include the lender.
<PAGE>54
Non-Diversified Status (Small Company Growth Portfolio and Global
Fixed Income Portfolio). The Portfolios are classified as non-diversified
within the meaning of the 1940 Act, which means that each Portfolio is not
limited by such Act in the proportion of its assets that it may invest in
securities of a single issuer. Each Portfolio's investments will be limited,
however, in order to qualify as a "regulated investment company" for purposes
of the Code. See "Additional Information Concerning Taxes." To qualify, the
Portfolio will comply with certain requirements, including limiting its
investments so that at the close of each quarter of the taxable year (i) not
more than 25% of the market value of its total assets will be invested in the
securities of a single issuer, and (ii) with respect to 50% of the market
value of its total assets, not more than 5% of the market value of its total
assets will be invested in the securities of a single issuer and the Portfolio
will not own more than 10% of the outstanding voting securities of a single
issuer.
Special Situation Companies (Small Company Growth Portfolio). The
Small Company Growth Portfolio may invest in the securities of "special
situation companies" involved in an actual or prospective acquisition or
consolidation; reorganization; recapitalization; merger, liquidation or
distribution of cash, securities or other assets; a tender or exchange offer;
a breakup or workout of a holding company; or litigation which, if resolved
favorably, would improve the value of the company's stock. If the actual or
prospective situation does not materialize as anticipated, the market price of
the securities of a "special situation company" may decline significantly.
The Portfolio believes, however, that if Counsellors analyzes "special
situation companies" carefully and invests in the securities of these
companies at the appropriate time, the Portfolio may achieve capital growth.
There can be no assurance, however, that a special situation that exists at
the time the Portfolio makes its investment will be consummated under the
terms and within the time period contemplated.
Ratings as Investment Criteria (Global Fixed Income Portfolio). Up
to 5% of the Global Fixed Income Portfolio's net assets may be invested in
securities rated below investment grade at the time of the investment, but not
lower than "B" by Standard & Poor's Corporation or Moody's Investors Service,
Inc. Subsequent to its purchase by a Portfolio, an issue of securities may
cease to be rated or its rating may be reduced below the minimum required for
purchase by the Portfolio. Neither event will require sale of such securities
by a Portfolio, but Counsellors will consider such event in its determination
of whether the Portfolio should continue to hold the securities.
Other Investment Limitations
International Equity Portfolio and Global Fixed Income Portfolio.
The investment limitations numbered 1 through 12, as applied to a Portfolio,
may not be changed without the affirmative vote of the holders of a majority
of the Portfolio's outstanding shares. Such majority is defined as the lesser
of (i) 67% or more of the shares present at the meeting, if the holders of
more than 50% of the outstanding shares of the Portfolio are present or
represented by proxy, or (ii) more than 50% of the outstanding shares.
<PAGE>55
Investment limitations 13 through 16, as applied to a Portfolio, may be
changed by a vote of the Board at any time.
The International Equity Portfolio or the Global Fixed Income
Portfolio may not:
1. Borrow money or issue senior securities except that the
Portfolio may (a) borrow from banks for temporary or emergency purposes, and
not for leveraging, and then in amounts not in excess of 30% of the value of
the Portfolio's total assets at the time of such borrowing and (b) enter into
futures contracts; or mortgage, pledge or hypothecate any assets except in
connection with any bank borrowing and in amounts not in excess of the lesser
of the dollar amounts borrowed. Whenever borrowings described in (a) exceed
5% of the value of the Portfolio's total assets, the Portfolio will not make
any investments (including roll-overs). For purposes of this restriction, (a)
the deposit of assets in escrow in connection with certain of the Portfolio's
investment strategies and (b) collateral arrangements with respect to initial
or variation margin for futures contracts will not be deemed to be pledges of
the Portfolio's assets.
2. Purchase any securities which would cause 25% or more of the
value of the Portfolio's total assets at the time of purchase to be invested
in the securities of issuers conducting their principal business activities in
the same industry; provided that there shall be no limit on the purchase of
U.S. Government Securities.
3. Make loans, except that the Portfolio may purchase or hold
publicly distributed fixed income securities, lend portfolio securities and
enter into repurchase agreements.
4. Underwrite any issue of securities except to the extent that the
investment in restricted securities and the purchase of fixed income
securities directly from the issuer thereof in accordance with the Portfolio's
investment objective, policies and limitations may be deemed to be
underwriting.
5. Purchase or sell real estate, real estate investment trust
securities, commodities or commodity contracts, or invest in real estate
limited partnerships, oil, gas or mineral exploration or development programs
or oil, gas and mineral leases, except that the Portfolio may invest in (a)
securities secured by real estate, mortgages or interests therein, (b)
securities of companies that invest in or sponsor oil, gas or mineral
exploration or development programs and (c) futures contracts and related
options and commodity options. The entry into forward foreign currency
exchange contracts is not and shall not be deemed to involve investing in
commodities.
6. Make short sales of securities or maintain a short position,
except that a Portfolio may maintain short positions in forward currency
contracts, options and futures contracts and make short sales "against the
box."
<PAGE>56
7. Purchase, write or sell puts, calls, straddles, spreads or
combinations thereof, except that the Portfolio may (a) purchase put and call
options on securities and foreign currencies, (b) write covered call options
on securities and (c) purchase or write options on futures contracts.
8. Purchase securities of other investment companies except in
connection with a merger, consolidation, acquisition, reorganization or offer
of exchange, or as otherwise permitted under the 1940 Act.
9. Purchase securities on margin, except that the Portfolio may
obtain any short-term credits necessary for the clearance of purchases and
sales of securities. For purposes of this restriction, the deposit or payment
of initial or variation margin in connection with futures contracts or related
options will not be deemed to be a purchase of securities on margin.
10. With respect to the International Equity Portfolio only,
purchase the securities of any issuer if as a result more than 5% of the value
of the Portfolio's total assets would be invested in the securities of such
issuer, except that this 5% limitation does not apply to U.S. Government
Securities and except that up to 25% of the value of the Portfolio's total
assets may be invested without regard to this 5% limitation.
11. Purchase any security if as a result the Portfolio would then
have more than 5% of its total assets invested in securities of companies
(including predecessors) that have been in continuous operation for fewer than
three years.
12. With respect to the International Equity Portfolio only,
purchase more than 10% of the voting securities of any one issuer; provided
that this limitation shall not apply to investments in U.S. Government
Securities.
13. Invest more than 10% of the value of the Portfolio's net assets
in securities which may be illiquid because of legal or contractual
restrictions on resale or securities for which there are no readily available
market quotations. For purposes of this limitation, (a) repurchase agreements
with maturities greater than seven days and (b) time deposits maturing in more
than seven calendar days shall be considered illiquid securities.
14. Purchase or retain securities of any company if, to the
knowledge of the Portfolio, any of the Fund's officers or Directors or any
officer or director of Counsellors individually owns more than 1/2 of 1% of
the outstanding securities of such company and together they own beneficially
more than 5% of the securities.
15. Invest in warrants (other than warrants acquired by the
Portfolio as part of a unit or attached to securities at the time of purchase)
if, as a result, the investments (valued at the lower of cost or market) would
exceed 5% of the value of the Portfolio's net assets of which not more than 2%
of the Portfolio's net assets may be invested in warrants not listed on a
recognized U.S. or foreign stock exchange.
<PAGE>57
16. Invest in oil, gas or mineral leases.
Small Company Growth Portfolio. The investment limitations numbered
1 through 9 may not be changed without the affirmative vote of the holders of
a majority of the Portfolio's outstanding shares. Such majority is defined as
the lesser of (i) 67% or more of the shares present at the meeting, if the
holders of more than 50% of the outstanding shares of the Portfolio are
present or represented by proxy, or (ii) more than 50% of the outstanding
shares. Investment limitations 10 through 16 may be changed by a vote of the
Board at any time.
The Small Company Growth Portfolio may not:
1. Borrow money except that the Portfolio may (a) borrow from banks
for temporary or emergency purposes and (b) enter into reverse repurchase
agreements; provided that reverse repurchase agreements, dollar roll
transactions that are accounted for as financings and any other transactions
constituting borrowing by the Portfolio may not exceed 30% of the value of the
Portfolio's total assets at the time of such borrowing. For purposes of this
restriction, short sales, the entry into currency transactions, options,
futures contracts, options on futures contracts, forward commitment
transactions and dollar roll transactions that are not accounted for as
financings (and the segregation of assets in connection with any of the
foregoing) shall not constitute borrowing.
2. Purchase any securities which would cause 25% or more of the
value of the Portfolio's total assets at the time of purchase to be invested
in the securities of issuers conducting their principal business activities in
the same industry; provided that there shall be no limit on the purchase of
U.S. Government Securities.
3. Make loans, except that the Portfolio may purchase or hold
fixed-income securities, including loan participations, assignments and
structured securities, lend portfolio securities and enter into repurchase
agreements.
4. Underwrite any securities issued by others except to the extent
that the investment in restricted securities and the sale of securities in
accordance with the Portfolio's investment objective, policies and limitations
may be deemed to be underwriting.
5. Purchase or sell real estate or invest in oil, gas or mineral
exploration or development programs, except that the Portfolio may invest in
(a) securities secured by real estate, mortgages or interests therein and (b)
securities of companies that invest in or sponsor oil, gas or mineral
exploration or development programs.
6. Make short sales of securities or maintain a short position,
except that the Portfolio may maintain short positions in forward currency
contracts, options, futures contracts and options on futures contracts and
make short sales "against the box".
<PAGE>58
7. Purchase securities on margin, except that the Portfolio may
obtain any short-term credits necessary for the clearance of purchases and
sales of securities. For purposes of this restriction, the deposit or payment
of initial or variation margin in connection with transactions in currencies,
options, futures contracts or related options will not be deemed to be a
purchase of securities on margin.
8. Invest in commodities, except that the Portfolio may purchase
and sell futures contracts, including those relating to securities, currencies
and indexes, and options on futures contracts, securities, currencies or
indexes, and purchase and sell currencies on a forward commitment or delayed-
delivery basis.
9. Issue any senior security except as permitted in the Portfolio's
investment limitations.
10. Purchase securities of other investment companies except in
connection with a merger, consolidation, acquisition, reorganization or offer
of exchange, or as otherwise permitted under the 1940 Act.
11. Pledge, mortgage or hypothecate its assets, except to the
extent necessary to secure permitted borrowings and to the extent related to
the deposit of assets in escrow and in connection with the writing of covered
put and call options and purchase of securities on a forward commitment or
delayed-delivery basis and collateral and initial or variation margin
arrangements with respect to currency transactions, options, futures
contracts, and options on futures contracts.
12. Invest more than 15% of the Portfolio's net assets in
securities which may be illiquid because of legal or contractual restrictions
on resale or securities for which there are no readily available market
quotations. For purposes of this limitation, repurchase agreements with
maturities greater than seven days shall be considered illiquid securities.
13. Purchase any security if as a result the Portfolio would then
have more than 5% of its total assets invested in securities of companies
(including predecessors) that have been in continuous operation for fewer than
three years.
14. Purchase or retain securities of any company if, to the
knowledge of the Fund, any of the Portfolio's officers or Directors or any
officer or director of Counsellors individually owns more than 1/2 of 1% of
the outstanding securities of such company and together they own beneficially
more than 5% of the securities.
15. Invest in warrants (other than warrants acquired by the
Portfolio as part of a unit or attached to securities at the time of purchase)
if, as a result, the investments (valued at the lower of cost or market) would
exceed 5% of the value of the Portfolio's net assets.
<PAGE>59
16. Make additional investments (including roll-overs) if the
Portfolio's borrowings exceed 5% of its net assets.
General. Each Portfolio may make commitments more restrictive than
the restrictions listed above so as to permit the sale of Portfolio shares in
certain states. Should a Portfolio determine that any such commitment is no
longer in the best interest of the Portfolio and its shareholders, the
Portfolio will revoke the commitment by terminating the sale of Portfolio
shares in the state involved. If a percentage restriction is adhered to at
the time of an investment, a later increase or decrease in the percentage of
assets resulting from a change in the values of portfolio securities or in the
amount of the Portfolio's assets will not constitute a violation of such
restriction.
Portfolio Valuation
The Prospectus discusses the time at which the net asset value of
each Portfolio is determined for purposes of sales and redemptions. The
following is a description of the procedures used by each Portfolio in valuing
its assets.
Securities listed on a U.S. securities exchange (including
securities traded through the NASDAQ National Market System) or on a foreign
securities exchange will be valued on the basis of the closing value on the
date on which the valuation is made or, in the absence of sales, at the mean
between the closing bid and asked prices. Other U.S. over-the-counter
securities, foreign over-the-counter securities and securities listed or
traded on certain foreign stock exchanges whose operations are similar to the
U.S. over-the-counter market will be valued on the basis of the bid price at
the close of business on each day, or, if market quotations for those
securities are not readily available, at fair value, as determined in good
faith pursuant to consistently applied procedures established by the Board. A
security which is listed or traded on more than one exchange is valued at the
quotation on the exchange determined to be the primary market for such
security. The valuation of short sales of securities, which are not traded on
a national exchange, will be at the mean of bid and asked prices. In
determining the market value of portfolio investments, the Portfolio may
employ outside organizations (a "Pricing Service") which may use a matrix or
formula method that takes into consideration market indexes, matrices, yield
curves and other specific adjustments. The procedures of Pricing Services are
reviewed periodically by the officers of the Fund under the general
supervision and responsibility of the Board, which may replace any such
Pricing Service at any time. Short-term obligations with maturities of 60
days or less are valued at amortized cost, which constitutes fair value as
determined by the Board. The amortized cost method of valuation may also be
used with respect to debt obligations with 60 days or less remaining to
maturity. All other securities and other assets of the Portfolio will be
valued at their fair value as determined in good faith pursuant to
consistently applied procedures established by the Board. In addition, the
Board or its delegates may value a security at fair value if it determines
that such security's value determined by the methodology set forth above does
not reflect its fair value.
<PAGE>60
Trading in securities in certain foreign countries is completed at
various times prior to the close of business on each business day in New York
(i.e., a day on which the NYSE is open for trading). In addition, securities
trading in a particular country or countries may not take place on all
business days in New York. Furthermore, trading takes place in various
foreign markets on days which are not business days in New York and days on
which a Portfolio's net asset value is not calculated. As a result,
calculation of the Portfolio's net asset value may not take place
contemporaneously with the determination of the prices of certain portfolio
securities used in such calculation. All assets and liabilities initially
expressed in foreign currency values will be converted into U.S. dollar values
at the prevailing rate as quoted by a Pricing Service. If such quotations are
not available, the rate of exchange will be determined in good faith pursuant
to consistently applied procedures established by the Board. Events affecting
the values of portfolio securities that occur between the time their prices
are determined and the close of regular trading on the NYSE will not be
reflected in the Portfolio's calculation of net asset value unless the Board
or its delegates deems that the particular event would materially affect net
asset value, in which case an adjustment may be made.
Portfolio Transactions
Counsellors is responsible for establishing, reviewing and, where
necessary, modifying each Portfolio's investment program to achieve its
investment objective. Purchases and sales of newly issued portfolio
securities are usually principal transactions without brokerage commissions
effected directly with the issuer or with an underwriter acting as principal.
Other purchases and sales may be effected on a securities exchange or
over-the-counter, depending on where it appears that the best price or
execution will be obtained. The purchase price paid by a Portfolio to
underwriters of newly issued securities usually includes a concession paid by
the issuer to the underwriter, and purchases of securities from dealers,
acting as either principals or agents in the after market, are normally
executed at a price between the bid and asked price, which includes a dealer's
mark-up or mark-down. Transactions on U.S. stock exchanges and some foreign
stock exchanges involve the payment of negotiated brokerage commissions. On
exchanges on which commissions are negotiated, the cost of transactions may
vary among different brokers. On most foreign exchanges, commissions are
generally fixed. There is generally no stated commission in the case of
securities traded in domestic or foreign over-the-counter markets, but the
price of securities traded in over-the-counter markets includes an undisclosed
commission or mark-up. U.S. Government Securities are generally purchased
from underwriters or dealers, although certain newly issued U.S. Government
Securities may be purchased directly from the U.S. Treasury or from the
issuing agency or instrumentality.
Counsellors will select specific portfolio investments and effect
transactions for each Portfolio. Counsellors seeks to obtain the best net
price and the most favorable execution of orders. In evaluating prices and
executions, Counsellors will consider the factors it deems relevant, which may
include the breadth of the market in the security, the price of the security,
the financial condition and execution capability of a broker or dealer and the
reasonableness of the commission, if any, for the specific transaction and on
a
<PAGE>61
continuing basis. In addition, to the extent that the execution and price
offered by more than one broker or dealer are comparable, Counsellors may, in
its discretion, effect transactions in portfolio securities with dealers who
provide brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934, as amended) to a Portfolio
and/or other accounts over which Counsellors exercises investment discretion.
Research and other services received may be useful to Counsellors in serving
both the Portfolios and its other clients and, conversely, research or other
services obtained by the placement of business of other clients may be useful
to Counsellors in carrying out its obligations to the Portfolios. The fees to
Counsellors under its advisory agreements with the Fund are not reduced by
reason of its receiving any brokerage and research services.
Investment decisions for each Portfolio concerning specific
portfolio securities are made independently from those for other clients
advised by Counsellors. Such other investment clients may invest in the same
securities as a Portfolio. When purchases or sales of the same security are
made at substantially the same time on behalf of such other clients,
transactions are averaged as to price and available investments allocated as
to amount, in a manner which Counsellors believes to be equitable to each
client, including the Portfolios. In some instances, this investment
procedure may adversely affect the price paid or received by a Portfolio or
the size of the position obtained or sold for a Portfolio. To the extent
permitted by law, Counsellors may aggregate the securities to be sold or
purchased for a Portfolio with those to be sold or purchased for such other
investment clients in order to obtain best execution.
During the fiscal period or years ended October 31, 1992,
October 31, 1993 and October 31, 1994, the Fund, on behalf of the
International Equity Portfolio, paid an aggregate of approximately $12,602,
$305,110 and $612,312, respectively, in commissions to broker-dealers for
execution of portfolio transactions. The fiscal 1993 and 1994 commission
figures were a result of sharp increases in the volume of share-related
activity as the Portfolio received a large inflow of capital. In no instance
will portfolio securities be purchased from or sold to Counsellors or
Counsellors Securities Inc., the Fund's distributor ("Counsellors
Securities"), or any affiliated person of such companies.
Each Portfolio may participate, if and when practicable, in bidding
for the purchase of securities for the Portfolio's portfolio directly from an
issuer in order to take advantage of the lower purchase price available to
members of such a group. A Portfolio will engage in this practice, however,
only when Counsellors, in its sole discretion, believes such practice to be
otherwise in the Portfolio's interest.
Portfolio Turnover
The Portfolios do not intend to seek profits through short-term
trading, but the rate of turnover will not be a limiting factor when a
Portfolio deems it desirable to sell or purchase securities. A Portfolio's
portfolio turnover rate is calculated by dividing the lesser of purchases or
sales of its portfolio securities for the year by the monthly average value of
the portfolio securities. Securities with remaining maturities of one year or
less at the date
<PAGE>62
of acquisition are excluded from the calculation. The decrease in the
portfolio turnover rate of the International Equity Portfolio during the year
ended October 31, 1993 was due to a large growth in assets.
Certain practices that may be employed by a Portfolio could result
in high portfolio turnover. For example, options on securities may be sold in
anticipation of a decline in the price of the underlying security (market
decline) or purchased in anticipation of a rise in the price of the underlying
security (market rise) and later sold. The Small Company Growth Portfolio's
investment in special situation companies could result in high portfolio
turnover. To the extent that its portfolio is traded for the short-term, the
Portfolio will be engaged essentially in trading activities based on short-
term considerations affecting the value of an issuer's stock instead of long-
term investments based on fundamental valuation of securities. Because of
this policy, portfolio securities may be sold without regard to the length of
time for which they have been held. Consequently, the annual portfolio
turnover rate of the Small Company Growth Portfolio may be higher than mutual
funds having a similar objective that do not invest in special situation
companies.
MANAGEMENT OF THE FUND
Officers and Board of Directors
The names (and ages) of the Fund's Directors and officers, their
addresses, present positions and principal occupations during the past five
years and other affiliations are set forth below.
Richard N. Cooper (60) . . . . . Director
Harvard University Professor at Harvard University;
1737 Cambridge Street Director or Trustee of CNA Financial
Cambridge, Massachusetts 02138 Corporation, Circuit City Stores, Inc.
(retail electronics and appliances)
and Phoenix Home Life Insurance Co.
Donald J. Donahue (70) . . . . . Director
99 Indian Field Road Chairman of Magma Copper Company since
Greenwich, Connecticut 06830 January 1987; Director or Trustee of GEV
Corporation and Signet Star Reinsurance
Company; Chairman and Director of NAC
Holdings from September 1990-June 1993.
<PAGE>63
Jack W. Fritz (67) . . . . . . . Director
2425 North Fish Creek Road Private investor; Consultant and
P.O. Box 483 Director of Fritz Broadcasting, Inc. and
Wilson, Wyoming 83014 Fritz Communications (developers and
operators of radio stations); Director of
Advo, Inc. (direct mail advertising).
John L. Furth* (64) . . . . . Chairman of the Board and President
466 Lexington Avenue Vice Chairman and Director of EMW;
Associated
New York, New York 10017-3147 with EMW since 1970; Chairman of the Board
of 14 other investment companies advised by
Counsellors.
Thomas A. Melfe (63) . . . . . . Director
30 Rockefeller Plaza Partner in the law firm of Donovan
New York, New York 10112 Leisure Newton & Irvine; Director of
Municipal Fund for New York
Investors, Inc.
Alexander B. Trowbridge (65) . . Director
1155 Connecticut Avenue, N.W. President of Trowbridge Partners, Inc.
Suite 700 (business consulting) from January 1990-
Washington, DC 20036 January 1994; President of the National
Association of Manufacturers from
1980-1990; Director or Trustee of New
England Mutual Life Insurance Co., ICOS
Corporation (biopharmaceuticals), P.H.H.
Corporation (fleet auto management; housing
and plant relocation service), WMX
Technologies Inc. (solid and hazardous
waste collection and disposal), The Rouse
Company (real estate development),
SunResorts International Ltd. (hotel and
real estate management), Harris Corp.
(electronics and communications equipment),
The Gillette Co. (personal care products)
and Sun Company Inc. (petroleum refining
and marketing).
_____________
* Indicates a Director who is an "interested person" of the Fund as defined
in the 1940 Act.
<PAGE>64
Dale C. Christensen (47) . . . . Vice President of the Fund and Portfolio
466 Lexington Avenue Manager of Global Fixed Income Portfolio
New York, New York 10017-3147 Portfolio Manager or Co-Portfolio Manager
of other Warburg Pincus Funds; Managing
Director of EMW; Associated with EMW since
1989; Vice President at Citibank, N.A. from
1985-1989; Vice President of Counsellors
Securities; President of 6 other investment
companies advised by Counsellors.
Richard H. King (50) . . . . . . Vice President of the Fund and Portfolio
466 Lexington Avenue Manager of International Equity Portfolio
New York, New York 10017-3147 Portfolio Manager or Co-Portfolio Manager
of other Warburg Pincus Funds; Managing
Director of EMW since 1989; Associated with
EMW since 1989; President of 3 other
investment companies advised by
Counsellors.
Arnold M. Reichman (46) . . . . . Executive Vice President
466 Lexington Avenue Managing Director and Assistant Secretary
New York, New York 10017-3147 of EMW; Associated with EMW since 1984;
Senior Vice President, Secretary and Chief
Operating Officer of Counsellors
Securities; President or Executive Vice
President or Vice President and Secretary
of 14 other investment companies advised by
Counsellors.
Eugene L. Podsiadlo (38) . . . . Senior Vice President
466 Lexington Avenue Managing Director of EMW; Associated
New York, New York 10017-3147 with EMW since 1991; Vice President of
Citibank, N.A. from 1987-1991; Senior Vice
President of Counsellors Securities and 14
other investment companies advised by
Counsellors.
Eugene P. Grace (43) . . . . . . Vice President and Secretary
466 Lexington Avenue Associated with EMW since April 1994;
New York, New York 10017-3147 Attorney-at-law from September 1989-April
1994; life insurance agent, New York Life
Insurance Company from 1993-1994; General
Counsel and Secretary, Home Unity Savings
Bank from 1991-1992; Vice President and
Chief Compliance Officer of Counsellors
Securities; Vice President and Secretary of
14 other investment companies advised by
Counsellors.
<PAGE>65
Stephen Distler (40) . . . . . . Vice President and Chief Financial
Officer
466 Lexington Avenue Managing Director, Controller and Assistant
New York, New York 10017-3147 Secretary of EMW; Associated with EMW since
1984; Treasurer of Counsellors Securities;
Vice President, Treasurer and Chief
Accounting Officer or Treasurer and Chief
Financial Officer of 14 other investment
companies advised by Counsellors.
Howard Conroy(41) . . . . . . . . Vice President, Treasurer and Chief
466 Lexington Avenue Accounting Officer
New York, New York 10017-3147 Associated with EMW since 1992;
Associated with Martin Geller, C.P.A. from
1990- 1992; Vice President, Finance with Gabelli/Rosenthal & Partners, L.P.
until 1990; Vice President, Treasurer and
Chief Accounting Officer of 13 other
investment companies advised by
Counsellors.
Karen Amato (31) . . . . . . . . Assistant Secretary
466 Lexington Avenue Associated with EMW since 1987;
New York, New York 10017-3147 Assistant Secretary of 14 other investment
companies advised by Counsellors.
No employee of Counsellors or PFPC Inc., the Fund's co-administrator
("PFPC"), or any of their affiliates receives any compensation from the Fund
for acting as an officer or director of the Fund. Each Director who is not a
director, trustee, officer or employee of Counsellors, PFPC or any of their
affiliates receives an annual fee of $500, and $250 for each meeting of the
Board attended by him for his services as Director and is reimbursed for
expenses incurred in connection with his attendance at Board meetings.
<PAGE>66
Directors' Compensation
(for the fiscal year ended October 31, 1994)
<TABLE>
<CAPTION>
Total Total Compensation from
Compensation from all Investment Companies
Name of Director Fund Managed by Counsellors*
<S> <C> <C>
John L. Furth None** None**
Richard N. Cooper $1,500 $36,500
Donald J. Donahue $1,500 $36,500
Jack W. Fritz $1,500 $36,500
Thomas A. Melfe $1,500 $36,500
Alexander B. Trowbridge $1,500 $36,500
</TABLE>
________________________
* Each Director also serves as a Director or Trustee of 14 other investment
companies advised by Counsellors.
** Mr. Furth is considered to be an interested person of the Fund and
Counsellors, as defined under Section 2(a)(19) of the 1940 Act, and,
accordingly, receives no compensation from the Fund or any other
investment company managed by Counsellors.
Richard H. King, vice president of the Fund and portfolio manager of
the International Equity Portfolio, earned a B.A. degree from Durham
University in England. Mr. King has been a portfolio manager of the Fund
since its inception on May 2, 1989 and is also portfolio manager of Warburg,
Pincus International Equity Fund and the International Equity Portfolio of
Warburg, Pincus Trust and a co-portfolio manager of Warburg, Pincus Emerging
Markets Fund and Warburg, Pincus Japan OTC Fund. From 1968 to 1982, he worked
at W.I. Carr Sons & Company (Overseas), a leading international brokerage
firm. He resided in the Far East as an investment analyst from 1970 to 1977,
became director, and later relocated to the U.S. where he became founder and
president of W.I. Carr (America), based in New York. From 1982 to 1984 Mr.
King was a director in charge of the Far East equity investments at N.M.
Rothschild International Asset Management, a London merchant bank. In 1984
Mr. King became chief investment officer and director for all international
investment strategy with Fiduciary Trust Company International S.A., in
London. He managed an EAFE mutual fund (FTIT) 1985-1986 which grew from $3
million to over $100 million during this two-year period.
Nicholas P.W. Horsley, associate portfolio manager and research
analyst of the International Equity Portfolio, has been with the Portfolio
since joining Counsellors in 1993 and is also a co-portfolio manager of
Warburg, Pincus Emerging Markets Fund and Warburg, Pincus Japan OTC Fund and
an associate portfolio manager and research analyst of
<PAGE>67
Warburg, Pincus International Equity Fund and the International Equity
Portfolio of Warburg, Pincus Trust. From 1981 to 1984 he was a securities
analyst at Barclays Merchant Bank in London, UK and Johannesburg, RSA. From
1984 to 1986 he was a senior analyst with BZW Investment Management in London.
From 1986 to 1993 he was a director, portfolio manager and analyst at Barclays
deZoete Wedd in New York City. Mr. Horsley earned B.A. and M.A. degrees with
honors from University College, Oxford. Harold W. Ehrlich, associate
portfolio manager and research analyst of the International Equity Portfolio,
is also an associate portfolio manager and research analyst of Warburg, Pincus
International Equity Fund, the International Equity Portfolio of Warburg,
Pincus Trust and Warburg, Pincus Emerging Markets Fund. Prior to joining
Counsellors, Mr. Ehrlich was a senior vice president, portfolio manager and
analyst at Templeton Investment Counsel Inc. from 1987 to 1995. He was a
research analyst and assistant portfolio manager at Fundamental Management
Corporation from 1985 to 1986 and a research analyst at First Equity
Corporation of Florida from 1983 to 1985. Mr. Ehrlich earned a B.S.B.A.
degree from University of Florida and earned his Chartered Financial Analyst
designation in 1990. Vincent McBride, associate portfolio manager and
research analyst of the International Equity Portfolio, is also an associate
portfolio manager and research analyst of Warburg, Pincus International Equity
Fund, the International Equity Portfolio of Warburg, Pincus Trust and Warburg,
Pincus Emerging Markets Fund. Prior to joining Counsellors in 1994, Mr.
McBride was an international equity analyst at Smith Barney Inc. from 1993 to
1994 and at General Electric Investment Corporation from 1992 to 1993. He was
also a portfolio manager/analyst at United Jersey Bank from 1989 to 1992 and a
portfolio manager at First Fidelity Bank from 1987 to 1989. Mr. McBride
earned a B.S. degree from the University of Delaware and an M.B.A. degree from
Rutgers University.
Elizabeth B. Dater, co-portfolio manager of the Small Company Growth
Portfolio is also co-portfolio manager of Warburg, Pincus Emerging Growth
Fund, manages a post-venture capital fund and is the former director of
research for Counsellors' investment management activities. Prior to joining
Counsellors in 1978, she was a vice president of Research at Fiduciary Trust
Company of New York and an institutional sales assistant at Lehman Brothers.
Ms. Dater has been a regular panelist on Maryland Public Television's "Wall
Street Week" since 1976. Ms. Dater earned a B.A. degree from Boston
University in Massachusetts.
Stephen J. Lurito, co-portfolio manager of the Small Company Growth
Portfolio, is also co-portfolio manager of Warburg, Pincus Emerging Growth
Fund. Mr. Lurito, also the research coordinator and a portfolio manager for
micro-cap equity and post-venture products, has been with EMW since 1987.
Prior to that he was a research analyst at Sanford C. Bernstein & Company,
Inc. Mr. Lurito earned a B.A. degree from the University of Virginia and a
M.B.A. from the University of Pennsylvania.
Dale C. Christensen, vice president of the Fund and portfolio
manager of the Global Fixed Income Portfolio, earned a B.S. in Agriculture
from the University of Alberta and a B.Ed. in Mathematics from the University
of Calgary, both located in Canada. Mr. Christensen directs the Fixed Income
Group at Counsellors, which he joined in 1989,
<PAGE>68
providing portfolio management for Warburg Pincus Funds and institutional
clients around the world. Mr. Christensen was a vice president in the
International Private Banking division and the domestic pension fund
management division at Citicorp, N.A. from 1985 to 1989. Prior to that, Mr.
Christensen was a fixed income portfolio manager at CIC Asset Management from
1982 to 1984.
As of September 30, 1995, Directors and officers of the Fund as a
group owned of record ______ of the outstanding shares of the International
Equity Portfolio. As of the same date Mr. Furth may be deemed to have
beneficially owned ____% of the International Equity Portfolio's shares
outstanding, including shares owned by clients for which Counsellors has
investment discretion. Mr. Furth disclaims ownership of these shares and does
not intend to exercise voting rights with respect to these shares.
Investment Adviser and Co-Administrators
Counsellors serves as investment adviser to each Portfolio,
Counsellors Funds Service, Inc. ("Counsellors Service") serves as co-
administrator to the Fund, and PFPC serves as a co-administrator to the Fund
pursuant to separate written agreements (the "Advisory Agreements," the
"Counsellors Service Co-Administration Agreements" and the "PFPC Co-
Administration Agreements," respectively). The services provided by, and the
fees payable by the Fund to, Counsellors under the Advisory Agreements,
Counsellors Service under the Counsellors Service Co-Administration Agreements
and PFPC under the PFPC Co-Administration Agreements are described in the
Prospectus. Prior to March 1, 1994, PFPC served as administrator to the Fund
and Counsellors Service served as administrative services agent to the Fund
pursuant to separate written agreements.
Counsellors agrees that if, in any fiscal year, the expenses borne
with respect to each Portfolio exceed the applicable expense limitations
imposed by the securities regulations of any state in which shares of the
Portfolio are registered or qualified for sale to the public, it will
reimburse the Fund to the extent required by such regulations. Unless
otherwise required by law, such reimbursement would be accrued and paid on a
monthly basis. At the date of this Statement of Additional Information, the
most restrictive annual expense limitation applicable to a Portfolio is 2.5%
of the first $30 million of the average net assets of the Portfolio, 2% of the
next $70 million of the average net assets of the Portfolio and 1.5% of the
remaining average net assets of the Portfolio.
The advisory fee payable by each Portfolio is calculated at an
annual rate based on a percentage of the Portfolio's average daily net assets.
See the Prospectus, "Management of the Fund." During the two-month period
beginning September 1, 1992 (commencement of operations) through October 31,
1992, Counsellors voluntarily waived $21,393 of the $23,021 in investment
advisory fees earned with respect to the International Equity Portfolio. For
the years ending October 31, 1993 and October 31, 1994, Counsellors earned
$406,466 and $1,736,864, respectively, and waived $195,081 and $542,549,
respectively, in investment advisory fees. Counsellors Service earned $1,775,
$24,631 and $188,503 during the fiscal period or years ending October 31,
1992, October 31, 1993 and
<PAGE>69
October 31, 1994, respectively. PFPC received $3,453, $60,970 and $259,290,
respectively, in fees and voluntarily waived $3,028, $29,253 and $81,358 of
such fees for the fiscal period or years ending October 31, 1992, October 31,
1993 and October 31, 1994. Since the Small Company Growth Portfolio and the
Global Fixed Income Portfolio had not commenced investment operations as of
October 31, 1994, no fees were paid to Counsellors, PFPC or Counsellors
Service with respect to them.
Organization of the Fund
The Fund was incorporated on May 13, 1992 under the laws of the
State of Maryland. The Fund's charter authorizes the Board to issue three
billion full and fractional shares of separate series of common stock, $.001
par value per share. Shares of three series have been authorized, which
constitute the interests in the Portfolios. When matters are submitted for
shareholder vote, shareholders of each Portfolio will have one vote for each
share owned and proportionate, fractional votes for fractional shares held.
Shareholders generally vote in the aggregate, except with respect to (i)
matters affecting only the shares of a particular Portfolio, in which case
only the shares of the affected Portfolio would be entitled to vote, or (ii)
when the 1940 Act requires that shares of the Portfolios be voted separately.
There will normally be no meetings of shareholders for the purpose of electing
Directors unless and until such time as less than a majority of the Directors
holding office have been elected by shareholders. The Directors will call a
meeting for any purpose when requested to do so in writing by shareholders of
record of not less than 10% of the Fund's outstanding shares.
All shareholders of a Portfolio, upon liquidation, participate
ratably in the Portfolio's net assets. Shares do not have cumulative voting
rights, which means that holders of more than 50% of the shares voting for the
election of Directors can elect all Directors. Shares are transferable but
have no preemptive, conversion or subscription rights.
Custodians and Transfer Agent
Fiduciary Trust Company International ("Fiduciary") serves as
custodian of the International Equity and Global Fixed Income Portfolio's
assets pursuant to separate custodian agreements (the "Fiduciary Custodian
Agreements"). Under the Fiduciary Custodian Agreements, Fiduciary (i)
maintains a separate account or accounts in the name of each Portfolio, (ii)
holds and transfers portfolio securities on account of each Portfolio,
(iii) makes receipts and disbursements of money on behalf of each Portfolio,
(iv) collects and receives all income and other payments and distributions on
account of each Portfolio's portfolio securities and (v) makes periodic
reports to the Board concerning each Portfolio's operations. Fiduciary is
authorized to select one or more foreign or domestic banks or trust companies
to serve as sub-custodian on behalf of the Portfolios, provided that Fiduciary
remains responsible for the performance of all its duties under the Fiduciary
Custodian Agreements and holds the Fund harmless from the acts and omissions
of any sub-custodian, in accordance with the Fiduciary Custodian Agreements.
The principal business address of Fiduciary is Two World Trade Center, New
York, New York 10048.
<PAGE>70
PNC Bank, National Association ("PNC") and State Street Bank and
Trust Company ("State Street") serve as custodians of the Small Company Growth
Portfolio's U.S. and foreign assets, respectively, pursuant to separate
custodian agreements (the "Custodian Agreements"). Under the Custodian
Agreements, PNC and State Street each (i) maintains a separate account or
accounts in the name of the Portfolio, (ii) holds and transfers portfolio
securities for the account of the Portfolio, (iii) makes receipts and
disbursements of money on behalf of the Portfolio, (iv) collects and receives
all income and other payments and distributions on account of the Portfolio's
portfolio securities held by it and (v) makes periodic reports to the Board
concerning the Portfolio's custodial arrangements. PNC may delegate its
duties under its Custodian Agreement with the Fund to a wholly owned direct or
indirect subsidiary of PNC or PNC Bank Corp. upon notice to the Fund and upon
the satisfaction of certain other conditions. With the approval of the Board,
State Street is authorized to select one or more foreign banking institutions
and foreign securities depositaries as sub-custodian on behalf of the
Portfolios; State Street is not relieved of any responsibility or liability to
the Fund on account of any actions or omissions of any such sub-custodian.
PNC is an indirect, wholly owned subsidiary of PNC Bank Corp., and its
principal business address is Broad and Chestnut Streets, Philadelphia,
Pennsylvania 19101. The principal business address of State Street is 225
Franklin Street, Boston, Massachusetts 02110. PNC also provides certain
custodial services generally in connection with purchases and sales of the
International Equity and Global Fixed Income Portfolios' shares.
State Street also serves as the shareholder servicing, transfer and
dividend disbursing agent of the Fund pursuant to a Transfer Agency and
Service Agreement, under which State Street (i) issues and redeems shares of
each Portfolio, (ii) addresses and mails all communications by the Fund to
record owners of Portfolio shares, including reports to shareholders, dividend
and distribution notices and proxy material for its meetings of shareholders,
(iii) maintains shareholder accounts and, if requested, sub-accounts and
(iv) makes periodic reports to the Board concerning the transfer agent's
operations with respect to the Fund.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The offering price of each Portfolio's shares is equal to its per
share net asset value. Additional information on how to purchase and redeem a
Portfolio's shares and how such shares are priced is included in the
Prospectus under "Net Asset Value."
Under the 1940 Act, a Portfolio may suspend the right of redemption
or postpone the date of payment upon redemption for any period during which
the NYSE is closed, other than customary weekend and holiday closings, or
during which trading on the NYSE is restricted, or during which (as determined
by the SEC) an emergency exists as a result of which disposal or fair
valuation of portfolio securities is not reasonably practicable, or for such
other periods as the SEC may permit. (A Portfolio may also suspend or
postpone the recordation of an exchange of its shares upon the occurrence of
any of the foregoing conditions.)
<PAGE>71
If the Board determines that conditions exist which make payment of
redemption proceeds wholly in cash unwise or undesirable, a Portfolio may make
payment wholly or partly in securities or other property. If a redemption is
paid wholly or partly in securities or other property, a shareholder would
incur transaction costs in disposing of the redemption proceeds. The Fund
intends to comply with Rule 18f-1 promulgated under the 1940 Act with respect
to redemptions in kind.
EXCHANGE PRIVILEGE
Shareholders of a Portfolio may exchange all or part of their shares
for shares of another Portfolio or other portfolios of the Fund organized by
Counsellors in the future on the basis of their relative net asset values per
share at the time of exchange.
The exchange privilege enables shareholders to acquire shares in a
Portfolio with a different investment objective when they believe that a shift
between Portfolios is an appropriate investment decision. This privilege is
available to shareholders residing in any state in which the Portfolio's
shares being acquired may legally be sold.
Upon receipt of proper instructions and all necessary supporting
documents, shares submitted for exchange are redeemed at the then-current net
asset value of the Portfolio and the proceeds are invested on the same day at
a price as described above, in shares of the Portfolio being acquired.
Counsellors reserves the right to reject more than three exchange requests by
a shareholder in any 30-day period. The exchange privilege may be modified or
terminated at any time.
ADDITIONAL INFORMATION CONCERNING TAXES
The discussion set out below of tax considerations generally
affecting the Fund and its shareholders is intended to be only a summary and
is not intended as a substitute for careful tax planning by prospective
shareholders. Shareholders are advised to consult their own tax advisers with
respect to the particular tax consequences to them of an investment in a
Portfolio.
The International Equity Portfolio and the Global Fixed Income
Portfolio have qualified and intend to continue to qualify separately each
year, and the Small Company Growth Portfolio intends to qualify each year, as
a "regulated investment company" under Subchapter M of the Code. If it
qualifies as a regulated investment company, a Portfolio will pay no federal
income taxes on its taxable net investment income (that is, taxable income
other than net realized capital gains) and its net realized capital gains that
are distributed to shareholders. To qualify under Subchapter M, a Portfolio
must, among other things: (i) distribute to its shareholders at least 90% of
its taxable net investment income (for this purpose consisting of taxable net
investment income and net realized short-term capital gains); (ii) derive at
least 90% of its gross income from dividends, interest, payments with
<PAGE>72
respect to loans of securities, gains from the sale or other disposition of
securities, or other income (including, but not limited to, gains from
options, futures, and forward contracts) derived with respect to its business
of investing in securities; (iii) derive less than 30% of its annual gross
income from the sale or other disposition of securities, options, futures or
forward contracts held for less than three months; and (iv) diversify its
holdings so that, at the end of each fiscal quarter of the Portfolio (a) at
least 50% of the market value of the Portfolio's assets is represented by
cash, U.S. Government Securities and other securities, with those other
securities limited, with respect to any one issuer, to an amount no greater in
value than 5% of the Portfolio's total assets and to not more than 10% of the
outstanding voting securities of the issuer, and (b) not more than 25% of the
market value of the Portfolio's assets is invested in the securities of any
one issuer (other than U.S. Government Securities or securities of other
regulated investment companies) or of two or more issuers that the Portfolio
controls and that are determined to be in the same or similar trades or
businesses or related trades or businesses. In meeting these requirements, a
Portfolio may be restricted in the selling of securities held by the Portfolio
for less than three months and in the utilization of certain of the investment
techniques described above and in the Prospectus. As a regulated investment
company, a Portfolio will be subject to a 4% non-deductible excise tax
measured with respect to certain undistributed amounts of ordinary income and
capital gain required to be but not distributed under a prescribed formula.
The formula requires payment to shareholders during a calendar year of
distributions representing at least 98% of the Portfolio's taxable ordinary
income for the calendar year and at least 98% of the excess of its capital
gains over capital losses realized during the one-year period ending October
31 during such year, together with any undistributed, untaxed amounts of
ordinary income and capital gains from the previous calendar year. The
Portfolios expect to pay the dividends and make the distributions necessary to
avoid the application of this excise tax.
A Portfolio's transactions, if any, in foreign currencies, forward
contracts, options and futures contracts (including options and forward
contracts on foreign currencies) will be subject to special provisions of the
Code that, among other things, may affect the character of gains and losses
recognized by the Portfolio (i.e., may affect whether gains or losses are
ordinary or capital), accelerate recognition of income to the Portfolio, defer
Portfolio losses and cause the Portfolio to be subject to hyperinflationary
currency rules. These rules could therefore affect the character, amount and
timing of distributions to shareholders. These provisions also (i) will
require a Portfolio to mark-to-market certain types of its positions (i.e.,
treat them as if they were closed out) and (ii) may cause the Portfolio to
recognize income without receiving cash with which to pay dividends or make
distributions in amounts necessary to satisfy the distribution requirements
for avoiding income and excise taxes. Each Portfolio will monitor its
transactions, will make the appropriate tax elections and will make the
appropriate entries in its books and records when it acquires any foreign
currency, forward contract, option, futures contract or hedged investment so
that (a) neither the Portfolio nor its shareholders will be treated as
receiving a materially greater amount of capital gains or distributions than
actually realized or received, (b) the Portfolio will be able to use
substantially all of its losses for the fiscal years in which the losses
actually occur and (c) the Portfolio will continue to qualify as a regulated
investment company.
<PAGE>73
A shareholder of a Portfolio receiving dividends or distributions in
additional shares should be treated for federal income tax purposes as
receiving a distribution in an amount equal to the amount of money that a
shareholder receiving cash dividends or distributions receives, and should
have a cost basis in the shares received equal to that amount.
Investors considering buying shares just prior to a dividend or
capital gain distribution should be aware that, although the price of shares
purchased at that time may reflect the amount of the forthcoming distribution,
those who purchase just prior to a distribution will receive a distribution
that will nevertheless be taxable to them. Any loss realized on a sale or
exchange of a shareholder's shares will be disallowed to the extent the shares
disposed of are replaced, including replacement through the reinvestment of
dividends and capital gains distributions in a Portfolio, within a period of
61 days beginning 30 days before and ending 30 days after the disposition of
the shares. In such a case, the basis of the shares acquired will be
increased to reflect the disallowed loss.
Each shareholder will receive an annual statement as to the federal
income tax status of his dividends and distributions from the relevant
Portfolio for the prior calendar year. Furthermore, shareholders will also
receive, if appropriate, various written notices after the close of the
Portfolio's taxable year regarding the federal income tax status of certain
dividends and distributions that were paid (or that are treated as having been
paid) by the Portfolio to its shareholders during the preceding year.
If a shareholder fails to furnish a correct taxpayer identification
number, fails to report fully dividend or interest income, or fails to certify
that he has provided a correct taxpayer identification number and that he is
not subject to "backup withholding," the shareholder may be subject to a 31%
"backup withholding" tax with respect to (i) taxable dividends and
distributions and (ii) the proceeds of any sales or repurchases of shares of
the Portfolio. An individual's taxpayer identification number is his social
security number. Corporate shareholders and other shareholders specified in
the Code are or may be exempt from backup withholding. The backup withholding
tax is not an additional tax and may be credited against a taxpayer's federal
income tax liability. Dividends and distributions also may be subject to
state and local taxes depending on each shareholder's particular situation.
Investment in Passive Foreign Investment Companies
If a Portfolio purchases shares in certain foreign entities
classified under the Code as "passive foreign investment companies" ("PFICs"),
the Portfolio may be subject to federal income tax on a portion of an "excess
distribution" or gain from the disposition of the shares, even though the
income may have to be distributed as a taxable dividend by the Portfolio to
its shareholders. In addition, gain on the disposition of shares in a PFIC
generally is treated as ordinary income even though the shares are capital
assets in the hands of the Portfolio. Certain interest charges may be imposed
on either the Portfolio or its shareholders with respect to any taxes arising
from excess distributions or gains on the disposition of shares in a PFIC.
<PAGE>74
A Portfolio may be eligible to elect to include in its gross income
its share of earnings of a PFIC on a current basis. Generally, the election
would eliminate the interest charge and the ordinary income treatment on the
disposition of stock, but such an election may have the effect of accelerating
the recognition of income and gains by the Portfolio compared to a fund that
did not make the election. In addition, information required to make such an
election may not be available to the Portfolio.
On April 1, 1992 proposed regulations of the Internal Revenue
Service (the "IRS") were published providing a mark-to-market election for
regulated investment companies. The IRS subsequently issued a notice
indicating that final regulations will provide that regulated investment
companies may elect the mark-to-market election for tax years ending after
March 31, 1992 and before April 1, 1993. Whether and to what extent the
notice will apply to taxable years of a Portfolio is unclear. If the
Portfolio is not able to make the foregoing election, it may be able to avoid
the interest charge (but not the ordinary income treatment) on disposition of
the stock by electing, under proposed regulations, each year to mark-to-market
the stock (that is, treat it as if it were sold for fair market value). Such
an election could also result in acceleration of income to the Portfolio.
DETERMINATION OF PERFORMANCE
From time to time, a Portfolio may quote its total return and, in
the case of the Global Fixed Income Portfolio, yield in advertisements or in
reports and other communications to shareholders. The average total return of
the International Equity Portfolio for the fiscal year ended October 31, 1994
was 22.62% (21.56% without waivers). The average annual total return of the
International Equity Portfolio for the period beginning September 1, 1992
(inception) to October 31, 1994 was 26.75% (26.02% without waivers). A
Portfolio's average annualized total return is calculated by finding the
average annual compounded rates of return for the one-, five- and ten- (or
such shorter period as the Portfolio has been offered) year periods that would
equate the initial amount invested to the ending redeemable value according to
the following formula: P (1 + T)n = ERV. For purposes of this formula, "P"
is a hypothetical investment of $1,000; "T" is average annual total return;
"n" is number of years; and "ERV" is the ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the one-, five- or ten-
year periods (or fractional portion thereof). Total return or "T" is computed
by finding the average annual change in the value of an initial $1,000
investment over the period and assumes that all dividends and distributions
are reinvested during the period.
A Portfolio may advertise, from time to time, comparisons of its
performance with that of one or more other mutual funds with similar
investment objectives. A Portfolio may advertise its average annual
calendar-year-to-date and calendar quarter returns, which are calculated
according to the formula set forth in the preceding paragraph except that the
relevant measuring period would be the number of months that have elapsed in
the current calendar year or most recent three months, as the case may be.
The actual total return of the
<PAGE>75
International Equity Portfolio for the calendar year ended December 31, 1994
and for the six-month period ended April 30, 1995 was .86% and -8.94%,
respectively (.63% and -9.01%, respectively, without waivers). Investors
should note that this performance may not be representative of the Portfolio's
total return in longer market cycles.
Yield is calculated by annualizing the net investment income
generated by the Portfolio over a specified thirty-day period according to the
following formula:
YIELD = 2[( a-b +1)6-1]
cd
For purposes of this formula: "a" is dividends and interest earned during the
period; "b" is expenses accrued for the period (net of reimbursements); "c" is
the average daily number of shares outstanding during the period that were
entitled to receive dividends; and "d" is the maximum offering price per share
on the last day of the period.
A Portfolio's performance will vary from time to time depending upon
market conditions, the composition of its portfolio and operating expenses
allocable to it. As described above, total return and yield are based on
historical earnings and is not intended to indicate future performance.
Consequently, any given performance quotation should not be considered as
representative of performance for any specified period in the future.
Performance information may be useful as a basis for comparison with other
investment alternatives. However, a Portfolio's performance will fluctuate,
unlike certain bank deposits or other investments which pay a fixed yield for
a stated period of time.
AUDITORS AND COUNSEL
Coopers & Lybrand L.L.P. ("Coopers & Lybrand"), with principal
offices at 2400 Eleven Penn Center, Philadelphia, Pennsylvania 19103, serves
as independent auditors for the Fund. The financial statements (except for
the International Equity and the Global Fixed Income Portfolios' unaudited
financial statements for the period ending April 30, 1995 and July 31, 1995,
respectively) for the Portfolios that appear in this Statement of Additional
Information have been audited by Coopers & Lybrand, whose reports thereon
appear elsewhere herein and have been included herein in reliance upon the
report of such firm of independent auditors given upon their authority as
experts in accounting and auditing.
The financial statements for the periods beginning with commencement
of the Fund through October 31, 1992 have been audited by Ernst & Young LLP
("Ernst & Young"), independent auditors, as set forth in their report, and
have been included in reliance on such report and upon the authority of such
firm as experts in accounting and auditing. Ernst & Young's address is 787
7th Avenue, New York, New York 10019.
Willkie Farr & Gallagher serves as counsel for the Fund as well as
counsel to Counsellors, Counsellors Service and Counsellors Securities.
<PAGE>76
MISCELLANEOUS
As of September 30, 1995, the name, address and percentage of
ownership of each person (other than Mr. Furth, see "Management of the Fund")
that owned of record 5% or more of the outstanding shares of the International
Equity Portfolio were as follows: University of Iowa Foundation IIEF Account,
c/o Mr. Larry Bruse, Treasurer, 500 Alumni Center, P.O. Box 4550, Iowa City,
IA 52244-4550 -- ____% and North Carolina Trust Company, NC Trust Co., Attn:
Trust Accounting, P.O. Box 1108, 301 North Elm Street, Greensboro, NC 27401-
2111 -- ____%. Mr. Lionel I. Pincus, Chairman of the Board and Chief
Executive Officer of EMW, may be deemed to have beneficially owned _____% of
the International Equity Portfolio's shares outstanding, including shares
owned by clients for which Counsellors has investment discretion and by
companies that EMW may be deemed to control. Mr. Pincus disclaims ownership
of these shares and does not intend to exercise voting rights with respect to
these shares.
FINANCIAL STATEMENTS
The International Equity Portfolio's financial statements for the
fiscal year ended October 31, 1994 (audited) and for the period ended April
30, 1995 (unaudited); the statement of assets and liabilities of the Small
Company Growth Portfolio as of August 8, 1995; and the statement of assets and
liabilities as of February 14, 1995 (audited) and as of July 31, 1995
(unaudited) of the Global Fixed Income Portfolio follow the Reports of
Independent Auditors.
<PAGE>77
APPENDIX
DESCRIPTION OF RATINGS
Commercial Paper Ratings
Commercial paper rated A-1 by Standard and Poor's Ratings Group
("S&P") indicates that the degree of safety regarding timely payment is
strong. Those issues determined to possess extremely strong safety
characteristics are denoted a plus sign designation. Capacity for timely
payment on commercial paper rated A-2 is satisfactory, but the relative degree
of safety is not as high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned
by Moody's Investors Services, Inc. ("Moody's"). Issuers rated Prime-1 (or
related supporting institutions) are considered to have a superior capacity
for repayment of short-term promissory obligations. Issuers rated Prime-2 (or
related supporting institutions) are considered to have a strong capacity for
repayment of short-term promissory obligations. This will normally be
evidenced by many of the characteristics of issuers rated Prime-1 but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternative
liquidity is maintained.
Corporate Bond Ratings
The following summarizes the ratings used by S&P for corporate
bonds:
AAA - This is the highest rating assigned by S&P to a debt
obligation and indicates an extremely strong capacity to pay interest and
repay principal.
AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from AAA issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher-rated
categories.
BBB - This is the lowest investment grade. Debt rated BBB has an
adequate capacity to pay interest and repay principal. Although they normally
exhibit adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for bonds in this category than for bonds in
higher rated categories.
BB - Bonds rated BB have less near-term vulnerability to default
than other speculative issues. However, they face major ongoing uncertainties
or exposure to adverse business, financial, or economic conditions, which
could lead to inadequate capacity to meet
<PAGE>78
timely interest and principal payments. The BB rating category is also used
for debt subordinated to senior debt that is assigned an actual or implied BBB
rating.
B - Bonds rated B have a greater vulnerability to default but
currently have the capacity to meet interest payments and principal
repayments. Adverse business, financial, or economic conditions will likely
impair capacity or willingness to pay interest and repay principal. The B
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BB or BBB rating.
To provide more detailed indications of credit quality, the ratings
from "AA" to "B" may be modified by the addition of a plus or minus sign to
show relative standing within this major rating category.
The following summarizes the ratings used by Moody's for corporate
bonds:
Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high-grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A - Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium-grade obligations.
Factors giving security to principal and interest are considered adequate, but
elements may be present which suggest a susceptibility to impairment sometime
in the future.
Baa - Bonds which are rated Baa are considered as medium-grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
<PAGE>79
B - Bonds which are rated B generally lack characteristics of the
desirable investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Moody's applies numerical modifiers (1, 2 and 3) with respect to the
bonds rated "Aa" through "B". The modifier 1 indicates that the bond being
rated ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the bond
ranks in the lower end of its generic rating category.
<PAGE>80
[LETTERHEAD OF COOPERS & LYBRAND L.L.P.]
To the Board of Directors and Shareholders of
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO:
We have audited the accompanying statement of net assets of Warburg Pincus
Institutional Fund, Inc. -- International Equity Portfolio as of October 31,
1994, and the related statement of operations for the year then ended, and the
statements of changes in net assets, and the financial highlights for each of
the two years in the period then ended. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits. The financial highlights of Warburg Pincus Institutional
Fund, Inc. -- International Equity Portfolio for the period ended October 31,
1992, were audited by other auditors, whose report dated December 15, 1992,
expressed an unqualified opinion.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Warburg Pincus Institutional Fund, Inc. -- International Equity Portfolio as of
October 31, 1994, and the results of its operations for the year then ended, and
the changes in its net assets and its financial highlights for each of the two
years in the period then ended, in conformity with generally accepted accounting
principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
December 12, 1994
<PAGE>81
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
October 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------------- ------------
<S> <C> <C>
COMMON STOCK (87.7%)
Argentina (3.3%)
Banco De Galicia & Buenos Aires SA 78,700 $ 529,757
Banco De Galicia & Buenos Aires SA ADR 1,500 40,500
Banco Frances del Rio de la Plata SA 107,200 911,382
Banco Frances del Rio de la Plata SA ADR 30,300 776,438
Capex SA GDR + 130,900 2,552,550
YPF SA ADR 254,200 6,132,575
------------
10,943,202
------------
Australia (5.6%)
BTR Nylex Ltd. 2,163,525 3,838,303
News Corp., Ltd. 701,651 4,317,727
Niugini Mining Ltd. + 313,000 1,231,401
Pasminco Ltd. + 835,000 1,400,794
Reinsurance Australia Corp., Ltd. + 1,988,600 2,760,378
Woodside Petroleum Ltd. 1,314,500 4,898,282
------------
18,446,885
------------
Austria (2.2%)
Austria Mikro-Systeme International AG 25,300 1,877,600
Maculan Holding AG Vorzuege 8,090 826,009
V.A. Technologie AG + 44,900 4,631,098
------------
7,334,707
------------
Finland (1.8%)
Metsa-Serla Class B 127,500 5,946,647
------------
France (5.9%)
Cetelem 8,879 1,731,689
Fives-Lille (Compagnie De) 26,740 2,553,091
Lagardere Groupe 167,700 3,954,114
Scor SA 104,296 2,287,104
Societe Nationale Elf Aquitaine SA ADR 127,300 4,662,363
Total Cie Franc Des Petroles Class B 68,925 4,466,147
------------
19,654,508
------------
</TABLE>
See Accompanying Notes to Financial Statements.
2
--------------------------------------------------------------------------------
<PAGE>82
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------------- ------------
<S> <C> <C>
COMMON STOCK (CONT'D)
India (2.6%)
Hindalco Industries Ltd. GDR 148,000 $ 5,180,000
Reliance Industries Ltd. GDS 135,000 3,476,250
------------
8,656,250
------------
Indonesia (1.1%)
P.T. Dynaplast Ltd. 170,400 400,341
P.T. Hadtex Indosyntec 283,000 149,925
P.T. Modern Photo Film Co. 280,000 1,534,953
P.T. Tri Polyta Indonesia ADR + 51,600 1,535,100
------------
3,620,319
------------
Israel (0.6%)
Ampal-American Israel Corp. Class A + 233,000 1,849,438
------------
Japan (22.8%)
Canon Inc. 320,000 5,947,341
Canon Inc. ADR 30,200 2,785,950
DDI Corp. 7,960 7,216,190
East Japan Railway Co. 1,630 8,128,962
Fuji Denki Reiki Co., Ltd. 29,221 461,622
Fujitsu Ltd. 397,000 4,550,026
Fujitsu Ltd. ADR 4,000 227,000
Hitachi Ltd. 190,750 1,989,236
Japan Securities Finance Co., Ltd. 208,000 3,414,765
Kao Corp. 443,000 5,260,196
Murata Mfg. Co., Ltd. 37,290 1,524,712
NEC Corp. 110,000 1,408,363
Nippon Telegraph & Telephone Corp. 382 3,569,541
Sankyo Co., Ltd. 19,000 1,471,347
Sekisui House Ltd. 282,000 3,202,891
Shin-Etsu Chemical Co., Ltd. 265,600 5,649,313
Sony Corp. 55,000 3,356,221
Sony Corp. ADR 34,900 2,107,088
TDK Corp. 107,000 5,258,854
</TABLE>
See Accompanying Notes to Financial Statements.
3
--------------------------------------------------------------------------------
<PAGE>83
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------------- ------------
<S> <C> <C>
COMMON STOCK (CONT'D)
Toho Co., Ltd. 21,000 $ 4,054,724
Tsuchiya Home Co. 68,600 1,862,860
York-Benimaru Co., Ltd. 52,800 2,224,306
------------
75,671,508
------------
Korea (5.9%)
Hana Bank 50,000 1,097,867
Hanil Bank 212,223 3,339,117
Inchon Iron & Steel Co., Ltd. 27,830 1,524,888
Korea Electric Power Corp. 83,700 3,341,174
Korea Europe Fund Ltd. 289 1,228,250
Korea Long Term Credit Bank 30,903 1,248,528
Samsung Electronics Co., Ltd. 10,414 2,224,571
Samsung Electronics Co., Ltd. GDR 12,803 777,782
Samsung Heavy Industries Co., Ltd. 80,495 4,588,316
------------
19,370,493
------------
Malaysia (0.6%)
Arab-Malaysian Merchant Bank BHD 54,000 591,897
Westmont BHD 211,000 1,495,048
------------
2,086,945
------------
Mexico (6.8%)
Cemex SA de CV ADR 331,062 5,979,807
Grupo Financiero Bancomer SA de CV ADR + 144,200 3,316,600
Grupo Financiero Bancomer SA de CV Series B 300,000 288,252
Grupo Mexicano de Desarrollo SA ADR Series B + 58,021 1,051,631
Grupo Mexicano de Desarrollo SA ADR Series L + 37,891 767,293
Grupo Radio Centro SA de CV ADR 75,100 1,267,312
Grupo Tribasa SA de CV ADR + 166,404 5,220,926
Telefonos de Mexico SA de CV ADR 86,400 4,752,000
------------
22,643,821
------------
</TABLE>
See Accompanying Notes to Financial Statements.
4
--------------------------------------------------------------------------------
<PAGE>84
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------------- ------------
<S> <C> <C>
COMMON STOCK (CONT'D)
New Zealand (4.3%)
Brierley Investments Ltd. 4,571,336 $ 3,432,662
Fletcher Challenge Ltd. 1,946,050 5,246,337
Lion Nathan Ltd. 1,716,600 3,254,227
Wrightson Ltd. 3,271,735 2,436,641
------------
14,369,867
------------
Norway (1.7%)
Norsk Hydro AS ADR 141,444 5,693,121
------------
Pakistan (0.8%)
Pakistan Telecommunications Corp. GDR + 15,300 2,532,150
------------
Singapore (1.4%)
Development Bank of Singapore Ltd. 143,562 1,525,071
Development Bank of Singapore Ltd. ADR 34,750 1,481,219
IPC Corp., Ltd. + 2,136,000 1,730,909
------------
4,737,199
------------
South Africa (1.2%)
Anglovaal Ltd. 28,000 852,934
Barlow Ltd. 202,700 1,644,881
Barlow Ltd. ADR 42,000 336,000
Genbel Investments Ltd. 464,700 1,102,285
------------
3,936,100
------------
Spain (2.3%)
Banco De Santander 28,500 1,158,204
Banco De Santander ADR 160,700 6,528,437
------------
7,686,641
------------
Sweden (4.0%)
Asea AB Series B 42,000 3,058,252
Astra AB Series B 148,150 3,967,861
Celsius Industrier AB Series B 131,650 3,030,110
Foreningsbanken AB Series A + 1,556,000 3,038,723
------------
13,094,946
------------
</TABLE>
See Accompanying Notes to Financial Statements.
5
--------------------------------------------------------------------------------
<PAGE>85
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------------- ------------
<S> <C> <C>
COMMON STOCK (CONT'D)
Switzerland (1.9%)
BBC Brown Boveri AG 4,164 $ 3,578,152
Danzas Holding AG 1,240 1,556,796
Immuno International AG 2,050 982,104
------------
6,117,052
------------
Taiwan (3.9%)
Baring International Taiwan Fund + 100,000 1,100,000
China Steel Corp. GDR + 101,500 1,852,375
Evergreen Marine Corp. Ltd. + 240,000 497,619
Grand Pacific Fund 1,200,000 463,063
Hocheng Corp. + 49,000 238,001
Hocheng Corp. GDR 32,200 934,605
Kwang Hua Growth Fund 1,000,000 483,797
President Enterprises GDS + 63,039 1,166,222
Taipei Fund A 31,000 2,750,010
Taipei Fund B IDR 19 1,685,490
Tuntex Distinct Corp. 779,800 907,232
Tuntex Distinct Corp. GDS + 86,306 949,366
------------
13,027,780
------------
Thailand (1.2%)
Egco 52,000 77,581
Industrial Finance Corp. of Thailand 1,077,100 2,801,329
Thai Military Bank Ltd. 249,050 1,164,911
------------
4,043,821
------------
United Kingdom (5.7%)
AAF Industries PLC + 208,500 139,768
British Air Authority PLC 475,820 4,029,862
Govett & Co., Ltd. 606,000 3,596,640
Queens Moat Houses PLC + 646,700 0
Singer & Friedlander Group PLC 2,210,000 2,854,547
Takare PLC 1,167,900 4,334,602
Thorn EMI PLC 207,783 3,312,321
Trio Holdings PLC 1,099,000 530,075
------------
18,797,815
------------
</TABLE>
See Accompanying Notes to Financial Statements.
6
--------------------------------------------------------------------------------
<PAGE>86
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
--------------- ------------
<S> <C> <C>
COMMON STOCK (CONT'D)
Zimbabwe (0.1%)
Delta Corp., Ltd. 10,500 $ 175,357
------------
TOTAL COMMON STOCK (Cost $254,042,619) 290,436,572
------------
PREFERRED STOCK (0.9%)
Austria (0.9%)
Maculan Holdings AG Vorzuege 31,100 3,175,390
------------
United Kingdom (0.0%)
Queens Moat Houses PLC, 7.50% Convertible + 15,300 0
------------
TOTAL PREFERRED STOCK (Cost $2,748,839) 3,175,390
------------
STOCK RIGHTS & WARRANTS (0.4%)
India (0.2%)
Hindalco Industries Ltd. Wts., 11/02/95 + 36,500 693,500
------------
Israel (0.0%)
Ampal-American Israel Corp. Class A Wts., 01/31/99 + 95,000 83,125
------------
Japan (0.2%)
Bandai Industries Wts., 11/04/97 + 440 566,500
------------
Malaysia (0.0%)
Arab-Malaysian Merchant Bank Rts., 11/08/94 + 54,000 8,456
------------
Switzerland (0.0%)
Danzas Holding AG Wts., 08/02/96 + 2,000 39,059
------------
TOTAL RIGHTS & WARRANTS (Cost $876,768) 1,390,640
------------
OPTIONS (0.4%) CONTRACTS
---------------
Korea (0.2%)
Korea Composite Index, 09/24/95 + 1,500,000 776,700
------------
Mexico (0.2%)
Mexico Inmex, 03/29/96 + 62,434 429,546
------------
TOTAL OPTIONS (Cost $629,520) 1,206,246
------------
</TABLE>
See Accompanying Notes to Financial Statements.
7
--------------------------------------------------------------------------------
<PAGE>87
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
CONVERTIBLE BONDS/NOTES (4.6%) Par Value
--------------- ------------
Australia (0.3%)
BTR Nylex Ltd. 9.00%, 11/30/49 (A) 11,200,000 $ 831,376
------------
France (0.9%)
Scor SA 3.00%, 01/01/01 (B) 15,975,225 2,833,794
------------
India (0.2%)
Reliance Industries Ltd. 3.50%, 11/03/99 $ 500,000 675,000
------------
Japan (1.5%)
Matsushita Electric Works Ltd. 2.70%, 05/31/02 (C) 425,000,000 4,958,699
------------
New Zealand (0.2%)
Brierley Investments Ltd. 9.00%, 06/30/98 (D) 1,028,875 715,598
------------
Taiwan (1.5%)
United Microelectronics Corp. 1.25%, 06/08/04 $ 1,750,000 2,454,375
Yang Ming Marine Transport Corp. 2.00%, 10/06/01 2,400,000 2,622,000
------------
5,076,375
------------
TOTAL CONVERTIBLE BONDS/NOTES (Cost $14,488,426) 15,090,842
------------
SHORT-TERM INVESTMENTS (4.9%)
Repurchase agreement with J.P. Morgan dated 10/31/94 at 4.45% to be
repurchased at $16,374,024 on 11/01/94.
(Collateralized by $17,343,000 U.S. Treasury Note 4.25%, due
12/31/95, with a market value of $17,437,609) (Cost $16,372,000) 16,372,000 16,372,000
------------
TOTAL INVESTMENTS AT VALUE (98.9%) (Cost $289,158,172*) 327,671,690
OTHER ASSETS IN EXCESS OF LIABILITIES (1.1%) 3,625,522
------------
NET ASSETS (100.0%) (applicable to 20,269,033 shares) $331,297,212
------------
------------
NET ASSET VALUE, offering and redemption price per share
($331,297,212[div]20,269,033 shares) $16.34
</TABLE>
+ Non-income producing security.
* Also cost for Federal income tax purposes.
Unless as otherwise indicated below, all securities are denominated in $U.S.
(A) Denominated in Australian Dollars.
(B) Denominated in French Francs.
(C) Denominated in Japanese Yen.
(D) Denominated in New Zealand Dollars.
See Accompanying Notes to Financial Statements.
8
--------------------------------------------------------------------------------
<PAGE>88
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1994
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $464,361) $ 2,847,410
Interest 491,929
-----------
Total investment income 3,339,339
-----------
EXPENSES:
Investment advisory 1,736,864
Administrative services 447,793
Audit 15,649
Custodian/Sub-custodian 232,766
Directors 7,500
Insurance 7,863
Legal 20,031
Organizational 24,705
Printing 19,906
Registration 128,069
Transfer agent 31,953
Miscellaneous 13,334
-----------
2,686,433
Less fees waived (623,907)
-----------
Total expenses 2,062,526
-----------
Net investment income 1,276,813
-----------
NET REALIZED AND UNREALIZED GAIN FROM INVESTMENTS AND
FOREIGN CURRENCY RELATED ITEMS:
Net realized gain from security transactions 11,710,325
Net realized loss from foreign currency related items (456,151)
Net change in unrealized appreciation from investments and
foreign currency related items 22,452,714
-----------
Net realized and unrealized gain from investments and
foreign currency related items 33,706,888
-----------
Net increase in net assets resulting from operations $34,983,701
-----------
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
9
--------------------------------------------------------------------------------
<PAGE>89
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the For the
Year Ended Year Ended
October 31, 1994 October 31, 1993
---------------- -------------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 1,276,813 $ 383,504
Net realized gain from security transactions 11,710,325 1,240,473
Net realized gain (loss) from foreign currency related items (456,151) 88,756
Net change in unrealized appreciation from investments and foreign
currency related items 22,452,714 16,749,988
---------------- -------------------
Net increase in net assets resulting
from operations 34,983,701 18,462,721
---------------- -------------------
FROM DISTRIBUTIONS:
Dividends from net investment income (526,855) (236,392)
Distributions from capital gains (1,146,187) 0
---------------- -------------------
Net decrease from distributions (1,673,042) (236,392)
---------------- -------------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 196,715,545 72,675,006
Reinvested dividends 1,270,243 128,555
Net asset value of shares redeemed (9,279,255) (363,333)
---------------- -------------------
Net increase in net assets from capital share transactions 188,706,533 72,440,228
---------------- -------------------
Net increase in net assets 222,017,192 90,666,557
NET ASSETS:
Beginning of year 109,280,020 18,613,463
---------------- -------------------
End of year $331,297,212 $ 109,280,020
---------------- -------------------
---------------- -------------------
</TABLE>
See Accompanying Notes to Financial Statements.
10
--------------------------------------------------------------------------------
<PAGE>90
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
(For a Share of the Fund Outstanding Throughout Each Period)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year Ended
October 31,
----------------------------------------
1994 1993
------------------ ------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $13.49 $ 9.62
------- -------
Income from Investment Operations:
Net Investment Income .17 .10
Net Gain (Loss) from Securities and Foreign Currency Related
Items (both realized and unrealized) 2.87 3.87
------- -------
Total from Investment Operations 3.04 3.97
------- -------
Less Distributions:
Dividends from net investment income (.07) (.10)
Distributions from capital gains (.12) .00
------- -------
Total Distributions (.19) (.10)
------- -------
NET ASSET VALUE, END OF PERIOD $16.34 $13.49
------- -------
------- -------
Total Return 22.62% 41.61%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $331,297 $109,280
Ratios to average daily net assets:
Operating expenses .95% .95%
Net investment income .59% .75%
Decrease reflected in above expense ratios due to
waivers/reimbursements .29% .44%
Portfolio Turnover Rate 19.34% 19.40%
<CAPTION>
September 1, 1992
(Commencement of
Operations) through
October 31, 1992
-------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-------
Income from Investment Operations:
Net Investment Income .02
Net Gain (Loss) from Securities and Foreign Currency Related
Items (both realized and unrealized) (.40)
-------
Total from Investment Operations (.38)
-------
Less Distributions:
Dividends from net investment income .00
Distributions from capital gains .00
-------
Total Distributions .00
-------
NET ASSET VALUE, END OF PERIOD $ 9.62
-------
-------
Total Return (20.69%)*
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $18,613
Ratios to average daily net assets:
Operating expenses .95%*
Net investment income 1.22%*
Decrease reflected in above expense ratios due to
waivers/reimbursements .85%*
Portfolio Turnover Rate 50.16%
</TABLE>
* Annualized
See Accompanying Notes to Financial Statements.
TAX STATUS OF 1994 DIVIDENDS (Unaudited)
Dividends paid by the Fund taxable as ordinary income amounted to $.18 per
share.
Long-term capital gains dividends paid by the Fund amounted to $.01 per share.
Because the Fund's fiscal year is not the calendar year, amounts to be used by
calendar year taxpayers on their Federal return will be reflected on Form
1099-DIV and will be mailed in January 1995.
11
--------------------------------------------------------------------------------
<PAGE>91
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
October 31, 1994
--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Warburg Pincus Institutional Fund, Inc. (the 'Fund') is an open-end
management investment company and currently offers two managed investment funds
(the 'Portfolios'): International Equity Portfolio, which commenced operations
on September 1, 1992, seeks long-term capital appreciation by investing in
equity securities of principally non-United States issuers; and Global Fixed
Income Portfolio, which as of October 31, 1994, had not commenced operations,
seeks to maximize total investment return consistent with prudent investment
management while preserving capital by investing in investment grade fixed
income securities of issuers throughout the world, including United States
issuers.
The net asset values of the Portfolios are determined daily as of the close
of regular trading on the New York Stock Exchange. The Fund's investments are
valued at market value, which is currently determined using the last reported
sales price. If no sales are reported, investments are valued at the last
reported bid price. In the absence of a quoted market value, investments are
valued at fair value as determined by or under the direction of the Fund's Board
of Directors. Short-term investments that mature in 60 days or less are valued
on the basis of amortized cost, which approximates market value.
The books and records of the Portfolios 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 Fund does not isolate that portion of
gains and losses on investments in equity securities which is due to changes in
the foreign exchange rate from that which is due to changes in market prices of
equity securities.
Security transactions are accounted for on trade date. Interest income is
recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
The cost of investments sold is determined by use of the specific
indentification method for both financial reporting and income tax purposes.
Dividends from net investment income are declared and paid annually.
Distributions of net realized capital gains, if any, are declared annually.
However, to the extent that a net realized capital gain can be reduced by a
capital loss carryover, such gain will not be distributed.
The Fund intends to continue to comply with the special provisions of the
Internal Revenue Code available to investment companies and therefore no Federal
income tax provision is required.
Costs incurred by the Portfolios in connection with their organization have
been deferred and are being amortized over a period of five years from the date
each Portfolio commences its operations.
The Portfolios may enter into repurchase agreement transactions. Under the
terms of a typical repurchase agreement, the Portfolios acquire an underlying
security subject to an obligation of the seller
12
--------------------------------------------------------------------------------
<PAGE>92
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1994
--------------------------------------------------------------------------------
to repurchase. The value of the underlying security will be maintained at an
amount at least equal to the total amount of the purchase obligation, including
interest. The collateral is in the Portfolio's possession.
As of November 1, 1993, the Fund implemented AICPA Statement of Position
93-2 -- Determination, Disclosure and Financial Statement Presentation of
Income, Capital Gain, and Return of Capital Distributions by Investment
Companies. Adoption of this standard results in the reclassification to paid-in
capital of permanent differences between tax and financial reporting of net
investment income and net realized gain (loss). The change has had no material
effect on paid-in capital or other components of the net assets of the Fund at
November 1, 1993. Distributions to shareholders and net asset values were not
affected by this change.
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR
Warburg, Pincus Counsellors, Inc. ('Counsellors'), a wholly owned
subsidiary of Warburg, Pincus Counsellors G.P. ('Counsellors G.P.'), serves as
the Portfolios' investment adviser. The International Equity Portfolio pays
Counsellors an investment advisory fee calculated at an annual rate of .80% of
the Portfolio's average daily net assets. For the year ended October 31, 1994,
Counsellors earned $1,736,864 for investment advisory services to the
International Equity Portfolio, of which $542,549 was voluntarily waived. The
Global Fixed Income Portfolio will pay Counsellors an investment advisory fee
calculated at an annual rate of .65% of the Portfolio's average daily net
assets.
Counsellors Funds Service, Inc. ('CFSI'), a wholly owned subsidiary of
Counsellors, and PFPC Inc. ('PFPC'), an indirect, wholly owned subsidiary of PNC
Bank Corp. ('PNC'), serve as the Fund's co-administrators. For its
administrative services, CFSI receives a fee calculated at an annual rate of
.10% of the Fund's average daily net assets. For the year ended October 31,
1994, CFSI earned $188,503 in administrative services fees. For the year ended
October 31, 1994, PFPC earned $259,290 and voluntarily waived $81,358 in
administrative services fees.
Counsellors Securities Inc. ('CSI'), also a wholly owned subsidiary of
Counsellors, acts as distributor of the International Equity Portfolio's shares.
No compensation is payable by the International Equity Portfolio to CSI for its
distribution services.
3. INVESTMENTS IN SECURITIES
The International Equity Portfolio's purchases and sales of investment
securities for the year ended October 31, 1994 (excluding short-term
investments) were $203,964,620 and $38,657,383, respectively.
At October 31, 1994, with respect to the International Equity Portfolio,
the net unrealized appreciation from investments of $38,513,518 was comprised of
appreciation of $47,439,221 for those securities having an excess of value over
cost, and depreciation of $8,925,703 for those securities having an excess of
cost over value (based on cost for Federal income tax purposes).
13
--------------------------------------------------------------------------------
<PAGE>93
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1994
--------------------------------------------------------------------------------
4. FOREIGN FORWARD CURRENCY CONTRACTS
The Portfolios may enter into forward currency contracts for the purchase
or sale of a specific foreign currency at a fixed price on a future date. Risks
may arise upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar. The
Portfolios will enter into forward contracts primarily for hedging purposes. The
forward currency contracts are adjusted by the daily exchange rate of the
underlying currency and any gains or losses are recorded for financial statement
purposes as unrealized until the contract settlement date. At October 31, 1994,
there were no open foreign forward currency contracts.
5. CAPITAL SHARE TRANSACTIONS
The Fund is authorized to issue up to three billion full and fractional
shares of beneficial interest of separate series having a $.001 par value per
share. Shares of two series have been authorized, which constitute the interest
in the Portfolios.
Transactions in shares of the International Equity Portfolio were as
follows:
<TABLE>
<CAPTION>
For the For the
Year Ended Year Ended
October 31, 1994 October 31, 1993
---------------- ----------------
<S> <C> <C>
Shares sold 12,686,666 6,187,485
Shares issued to shareholders on reinvestment of dividends 85,000 12,933
Shares redeemed (603,362) (35,261)
---------------- ----------------
Net increase in shares outstanding 12,168,304 6,165,157
---------------- ----------------
---------------- ----------------
</TABLE>
6. NET ASSETS
Net assets of the International Equity Portfolio at October 31, 1994,
consisted of the following:
<TABLE>
<S> <C>
Capital contributed, net $280,456,076
Accumulated net investment income 3,219,522
Accumulated net realized gain from security transactions 9,075,199
Net unrealized appreciation from investments and foreign currency related items 38,546,415
------------
Net assets $331,297,212
------------
------------
</TABLE>
14
------------------------------------------------------------------------
<PAGE>94
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
April 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCK (87.1%)
Argentina (2.5%)
Banco De Galicia & Buenos Aires SA 90,505 $ 371,516
Banco De Galicia & Buenos Aires SA ADR 16,525 266,466
Banco Frances del Rio de la Plata SA 107,200 681,538
Banco Frances del Rio de la Plata SA ADR 90,300 1,659,263
Capex SA GDR + 126,900 1,919,363
YPF SA ADR 227,000 4,596,750
------------
9,494,896
------------
Australia (4.6%)
BTR Nylex Ltd. 2,534,425 4,940,689
News Corp., Ltd. 204,028 991,379
Niugini Mining Ltd. + 283,000 895,466
Pasminco Ltd. + 1,012,000 1,089,471
Reinsurance Australia Corp., Ltd. + 1,788,600 3,122,466
United Construction Group Ltd. 300,000 139,661
Woodside Petroleum Ltd. 1,469,500 6,007,298
------------
17,186,430
------------
Austria (3.1%)
Bohler-Uddeholm 47,600 2,843,483
Maculan Holdings AG Vorzuege 9,290 389,996
V.A. Technologie AG + 77,300 8,537,141
------------
11,770,620
------------
Denmark (0.5%)
Copenhagen Airport 18,524 1,195,097
International Service System Class B 20,500 586,356
------------
1,781,453
------------
Finland (1.5%)
Metsa-Serla Class B 127,500 5,557,248
------------
</TABLE>
See Accompanying Notes to Financial Statements.
2
--------------------------------------------------------------------------------
<PAGE>95
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
April 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
COMMON STOCK (CONT'D)
<S> <C> <C>
France (8.2%)
Bouygues 26,555 $ 3,237,953
Cetelem 8,879 1,877,920
Fives-Lille (Compagnie De) 26,740 2,558,331
Lagardere Groupe 237,000 5,321,343
Scor SA 115,296 2,581,692
Societe Nationale Elf Aquitaine SA 4,470 357,327
Societe Nationale Elf Aquitaine SA ADR 178,400 7,091,400
Total Cie Franc Des Petroles Class B 124,825 7,805,850
------------
30,831,816
------------
Hong Kong (2.2%)
Hong Kong Electric 559,000 1,715,610
HSBC Holdings PLC 255,700 2,965,571
HSBC Holdings PLC (UK) 35,000 412,379
Jardine Matheson 404,800 3,218,160
------------
8,311,720
------------
India (1.7%)
Hindalco Industries Ltd. GDR 148,000 3,922,000
Reliance Industries Ltd. GDS 153,000 2,467,125
------------
6,389,125
------------
Indonesia (0.7%)
P.T. Dynaplast Ltd. 340,800 366,616
P.T. Modern Photo Film Co. 280,000 1,173,465
P.T. Tri Polyta Indonesia ADR + 51,600 1,109,400
------------
2,649,481
------------
Israel (0.8%)
Ampal-American Israel Corp. Class A + 233,000 1,485,375
ECI Telecommunications Ltd. 85,000 1,434,375
------------
2,919,750
------------
</TABLE>
See Accompanying Notes to Financial Statements.
3
--------------------------------------------------------------------------------
<PAGE>96
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
April 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
COMMON STOCK (CONT'D)
<S> <C> <C>
Japan (24.5%)
Canon Inc. 360,000 $ 5,957,143
Canon Inc. ADR 25,200 2,101,050
DDI Corp. 972 8,562,857
East Japan Railway Co. 1,813 9,431,917
Fujitsu Ltd. 385,000 3,937,083
Hitachi Ltd. 337,750 3,437,813
Japan Securities Finance Co., Ltd. 208,000 3,268,571
Kao Corp. 510,000 6,192,857
Kirin Beverage 35,000 545,833
Murata Mfg. Co., Ltd. 33,290 1,339,526
NEC Corp. 20,000 221,429
Nippon Communication Systems Corp. 275,300 3,834,536
Nippon Express Co., Ltd. 221,000 2,186,321
Nippon Telegraph & Telephone Corp. 863 7,633,440
Sankyo Co., Ltd. (Gunma) 19,000 1,101,548
Seikisui House Ltd. 282,000 3,726,429
Shin-Etsu Chemical Co., Ltd. 345,600 6,706,286
Sony Corp. 77,200 3,896,762
Sony Corp. ADR 36,900 1,877,288
TDK Corp. 158,000 7,222,857
Toho Co., Ltd. 22,000 3,954,762
Tsuchiya Home Co. 89,180 1,539,417
York-Benimaru Co., Ltd. 81,500 3,221,190
------------
91,896,915
------------
Korea (4.7%)
Daewoo Heavy Industries 83,394 1,028,340
Hana Bank 82,200 1,477,292
Hanil Bank 372,373 4,701,679
Korea Electric Power Corp. 72,300 2,778,471
Korea Europe Fund Ltd. 289 1,029,563
Korea Long Term Credit Bank 42,368 1,289,719
Samsung Electronics Co., Ltd. 10,328 1,792,572
Samsung Electronics Co., Ltd. GDR 18,964 933,957
Samsung Heavy Industries Co., Ltd. 82,010 2,452,877
------------
17,484,470
------------
</TABLE>
See Accompanying Notes to Financial Statements.
4
--------------------------------------------------------------------------------
<PAGE>97
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
April 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
COMMON STOCK (CONT'D)
<S> <C> <C>
Malaysia (0.4%)
Arab-Malaysian Merchant Bank BHD 24,000 $ 237,210
Westmont BHD 322,000 1,395,633
------------
1,632,843
------------
Mexico (1.8%)
Cemex SA de CV ADR 526,062 3,287,887
Grupo Financiero Banamex Accival SA de CV Class B 30,000 50,400
Grupo Financiero Banamex Accival SA de CV Class C 586,500 977,500
Telefonos de Mexico SA de CV ADR 86,400 2,613,600
------------
6,929,387
------------
New Zealand (5.6%)
Brierley Investments Ltd. 6,263,583 4,719,134
Fletcher Challenge Ltd. 2,244,050 6,038,290
Fletcher Forestry 1,497,900 2,095,886
Lion Nathan Ltd. 2,446,700 5,332,700
Wrightson Ltd. 3,271,735 2,641,075
------------
20,827,085
------------
Norway (2.1%)
Norsk Hydro AS ADR 198,144 7,950,528
------------
Pakistan (0.5%)
Pakistan Telecommunications Corp. 345 37,713
Pakistan Telecommunications Corp. GDR + 16,000 1,672,000
------------
1,709,713
------------
Singapore (1.8%)
DBS Land Ltd. 741,500 2,043,755
Development Bank of Singapore Ltd. 176,562 1,888,296
Development Bank of Singapore Ltd. ADR 34,750 1,489,906
IPC Corp., Ltd. + 2,216,000 1,192,937
------------
6,614,894
------------
</TABLE>
See Accompanying Notes to Financial Statements.
5
--------------------------------------------------------------------------------
<PAGE>98
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
April 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
COMMON STOCK (CONT'D)
<S> <C> <C>
South Africa (0.0%)
Anglovaal Ltd. 4,800 $ 164,443
------------
Spain (3.6%)
Banco De Santander 30,300 1,108,657
Banco De Santander ADR 220,300 7,985,875
Repsol SA ADR 133,700 4,278,400
------------
13,372,932
------------
Sweden (3.4%)
Asea AB Series B 42,000 3,536,501
Astra AB Series B 168,750 4,806,039
Celsius Industrier Series B 117,550 1,843,744
Foreningsbanken AB Series A + 1,378,000 2,388,872
------------
12,575,156
------------
Switzerland (2.0%)
BBC Brown Boveri AG 6,594 6,513,375
Danzas Holding AG 1,369 1,123,895
------------
7,637,270
------------
Taiwan (1.2%)
Baring International Taiwan Fund + 100,000 1,000,000
Evergreen Marine Corp., Ltd. + 381,000 795,031
Kwang Hua Growth Fund 346,000 153,935
Tuntex Distinct Corp. 965,945 1,110,500
Tuntex Distinct Corp. GDS + 127,312 1,464,088
------------
4,523,554
------------
Thailand (1.1%)
Industrial Finance Corp. of Thailand 1,535,832 3,288,384
Thai Military Bank Ltd. 244,050 786,295
------------
4,074,679
------------
</TABLE>
See Accompanying Notes to Financial Statements.
6
--------------------------------------------------------------------------------
<PAGE>99
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
April 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
COMMON STOCK (CONT'D)
<S> <C> <C>
United Kingdom (8.6%)
AAF Industries PLC + 208,500 $ 117,380
British Air Authority PLC 661,020 5,039,808
BTR PLC 1,183,400 6,262,511
Govett and Co., Ltd. 606,000 2,797,535
International Cabletel Inc. 5,500 162,250
Queens Moat Houses PLC + 646,700 0
Reckitt & Colman PLC 416,500 4,294,317
Singer and Friedlander Group PLC 2,210,000 2,986,019
Takare PLC 1,182,900 3,786,362
Thorn EMI PLC 339,362 6,206,471
Trio Holdings PLC 1,648,500 437,516
------------
32,090,169
------------
Zimbabwe (0.0%)
Delta Corp., Ltd. 10,500 146,867
------------
TOTAL COMMON STOCK (Cost $311,890,037) 326,523,444
------------
PREFERRED STOCK (1.2%)
Australia (0.4%)
News Corp. 350,825 1,549,006
------------
Austria (0.3%)
Maculan Holdings AG Vorzuege 31,100 1,283,238
------------
Korea (0.3%)
Samsung Electronics Co., Ltd. 12,135 1,092,651
------------
United Kingdom (0.2%)
Queens Moat Houses PLC, 7.50% Convertible + 15,300 0
Singer & Friedlander Group PLC, 8.50% Convertible 348,947 593,555
------------
593,555
------------
TOTAL PREFERRED STOCK (Cost $5,225,258) 4,518,450
------------
STOCK RIGHTS AND WARRANTS (0.2%)
India (0.1%)
Hindalco Industries Ltd. Wts., 11/02/95 + 36,500 419,750
------------
</TABLE>
See Accompanying Notes to Financial Statements.
7
--------------------------------------------------------------------------------
<PAGE>100
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
April 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -----
STOCK RIGHTS AND WARRANTS (CONT'D)
<S> <C> <C>
Israel (0.0%)
Ampal-American Israel Corp. Class A Wts., 01/31/99 + 95,000 $ 50,469
------------
Japan (0.1%)
Bandai Industries Wts., 11/04/97 + 440 220,000
------------
Switzerland (0.0%)
Danzas Holding AG Wts., 08/02/96 + 2,000 1,310
------------
Thailand (0.0%)
Thai Military Bank Rts., 05/08/95 + 48,810 97,540
------------
TOTAL STOCK RIGHTS AND WARRANTS (Cost $876,769) 789,069
------------
OPTIONS (0.4%) CONTRACTS
---------------
Japan (0.3%)
Topix Index, 03/08/96, strike price 1,251.24 + 3,647 497,597
Topix Index, 03/08/96, strike price 1,261.12 + 3,755 486,160
Topix Index, 03/08/96, strike price 1,349.00 + 1,830 139,085
------------
1,122,842
------------
Korea (0.1%)
Korea Composite Index, 09/24/95 + 1,500,000 338,550
------------
Mexico (0.0%)
Mexican Index, 09/95 + 48 1,200
Mexican Inmex, 03/29/96 + 62,434 1,249
------------
2,449
------------
TOTAL OPTIONS (Cost $1,626,261) 1,463,841
------------
CONVERTIBLE BONDS/NOTES (4.3%)
PAR
---
Argentina (0.3%)
Banco De Galicia 7.00%, 08/01/02 $ 1,574,000 1,101,800
------------
Australia (0.2%)
BTR Nylex 9.00%, 11/30/49 (C) 11,200,000 888,010
------------
India (0.1%)
Reliance Industries Ltd. 3.50%, 11/03/99 $ 500,000 505,000
------------
Japan (1.8%)
Matsushita Electric Works Ltd. 2.70%, 05/31/02 (B) 501,000,000 6,650,179
------------
</TABLE>
See Accompanying Notes to Financial Statements.
8
--------------------------------------------------------------------------------
<PAGE>101
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
April 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
PAR VALUE
--- -----
CONVERTIBLE BONDS/NOTES (CONT'D)
<S> <C> <C>
New Zealand (0.2%)
Brierley Investments Ltd. 9.00%, 06/30/98 (A) 1,028,875 $ 705,967
------------
Taiwan (1.7%)
United Microelectronics Corp. 1.25%, 06/08/04 $ 1,790,000 2,814,775
Yang Ming Marine Transport Corp. 2.00%, 10/06/01 3,372,000 3,456,300
------------
6,271,075
------------
TOTAL CONVERTIBLE BONDS/NOTES (Cost $14,556,972) 16,122,031
------------
SHORT-TERM INVESTMENTS (7.2%)
Repurchase agreement with State Street Bank & Trust Co. dated 04/28/95
at 5.87% to be repurchased at $27,144,272 on 05/01/95. (Collateralized
by $27,470,000 U.S. Treasury Note 6.25%, due 08/31/96, with a market
value of $27,676,025.) (Cost $27,131,000) 27,131,000 27,131,000
------------
TOTAL INVESTMENTS AT VALUE (100.4%) (Cost $361,306,297*) 376,547,835
OTHER LIABILITIES IN EXCESS OF ASSETS (0.4%) (1,458,789)
------------
NET ASSETS (100.0%) (applicable to 26,495,950 shares) $375,089,046
------------
------------
NET ASSET VALUE, offering and redemption price per share
($375,089,046[div]26,495,950) $14.16
------
------
</TABLE>
+ Non-income producing security.
* Also cost for Federal income tax purposes.
Unless as otherwise indicated below, all Convertible Bonds/Notes are
denominated in $U.S.
(A) Denominated in New Zealand Dollars.
(B) Denominated in Japanese Yen.
(C) Denominated in Australian Dollars.
See Accompanying Notes to Financial Statements.
9
--------------------------------------------------------------------------------
<PAGE>102
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
For the Six Months Ended April 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $431,424) $ 2,592,602
Interest 1,173,175
------------
Total investment income 3,765,777
------------
EXPENSES:
Investment advisory 1,276,260
Administrative services 343,860
Audit 10,989
Custodian/Sub-custodian 164,491
Directors 3,719
Insurance 4,194
Legal 9,918
Organizational 10,561
Printing 9,518
Registration 66,274
Transfer agent 16,255
Miscellaneous 4,998
------------
1,921,037
Less fees waived (405,478)
------------
Total expenses 1,515,559
------------
Net investment income 2,250,218
------------
NET REALIZED AND UNREALIZED LOSS FROM INVESTMENTS AND
FOREIGN CURRENCY RELATED ITEMS:
Net realized loss from security transactions (6,965,517)
Net realized gain from foreign currency related items 686,529
Net change in unrealized appreciation (depreciation) from investments and
foreign currency related items (23,573,523)
------------
Net realized and unrealized loss from investments and
foreign currency related items (29,852,511)
------------
Net decrease in net assets resulting from operations $(27,602,293)
------------
------------
</TABLE>
See Accompanying Notes to Financial Statements.
10
--------------------------------------------------------------------------------
<PAGE>103
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six
Months Ended For the
April 30, 1995 Year Ended
(Unaudited) October 31, 1994
-------------- ----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 2,250,218 $ 1,276,813
Net realized gain (loss) from security transactions (6,965,517) 11,710,325
Net realized gain (loss) from foreign currency related items 686,529 (456,151)
Net change in unrealized appreciation (depreciation) from investments and
foreign currency related items (23,573,523) 22,452,714
-------------- ----------------
Net increase (decrease) in net assets resulting from operations (27,602,293) 34,983,701
-------------- ----------------
FROM DISTRIBUTIONS:
Dividends from net investment income (3,614,604) (526,855)
Distributions from capital gains (11,710,991) (1,146,187)
-------------- ----------------
Net decrease from distributions (15,325,595) (1,673,042)
-------------- ----------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 99,767,308 196,715,545
Reinvested dividends 13,607,234 1,270,243
Net asset value of shares redeemed (26,654,820) (9,279,255)
-------------- ----------------
Net increase in net assets from capital share
transactions 86,719,722 188,706,533
-------------- ----------------
Net increase in net assets 43,791,834 222,017,192
NET ASSETS:
Beginning of period 331,297,212 109,280,020
-------------- ----------------
End of period $ 375,089,046 $331,297,212
-------------- ----------------
-------------- ----------------
</TABLE>
See Accompanying Notes to Financial Statements.
11
--------------------------------------------------------------------------------
<PAGE>104
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
(For a Share of the Fund Outstanding Throughout Each Period)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six For the Year Ended September 1, 1992
Months Ended October 31, (Commencement of
April 30, 1995 --------------------- Operations) through
(Unaudited) 1994 1993 October 31, 1992
------------ ------- ---------- -------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $16.34 $ 13.49 $ 9.62 $ 10.00
------------ ------- ---------- -------
Income from Investment Operations:
Net Investment Income .12 .17 .10 .02
Net Gain (Loss) from Securities and Foreign
Currency Related Items (both realized and
unrealized) (1.55) 2.87 3.87 (.40)
------------ ------- ---------- -------
Total From Investment Operations (1.43) 3.04 3.97 (.38)
------------ ------- ---------- -------
Less Distributions:
Dividends from net investment income (.18) (.07) (.10) .00
Distributions from capital gains (.57) (.12) .00 .00
------------ ------- ---------- -------
Total Distributions (.75) (.19) (.10) .00
------------ ------- ---------- -------
NET ASSET VALUE, END OF PERIOD $14.16 $ 16.34 $13.49 $ 9.62
------------ ------- ---------- -------
------------ ------- ---------- -------
Total Return (17.10%)* 22.62% 41.61% (20.69%)*
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $375,089 $331,297 $109,280 $18,613
Ratios to average daily net assets:
Operating expenses .95%* .95% .95% .95%*
Net investment income 1.41%* .59% .75% 1.22%*
Decrease reflected in above expense ratios due
to waivers/reimbursements .25%* .29% .44% .85%*
Portfolio turnover rate 25.43%* 19.34% 19.40% 50.16%
</TABLE>
* Annualized
12
--------------------------------------------------------------------------------
<PAGE>105
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
April 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Warburg Pincus Institutional Fund, Inc. (the 'Fund') is an open-end
management investment company and currently offers two managed investment funds
(the 'Portfolios'): the International Equity Portfolio, which commenced
operations on September 1, 1992, which seeks long-term capital appreciation by
investing in equity securities of principally non-United States issuers; and the
Global Fixed Income Portfolio, which as of April 30, 1995 had not commenced
operations, which seeks to maximize total investment return consistent with
prudent investment management while preserving capital by investing in
investment grade fixed income securities of issuers throughout the world,
including United States issuers.
The net asset values of the Portfolios are determined daily as of the close
of regular trading on the New York Stock Exchange. The Fund's investments are
valued at market value, which is currently determined using the last reported
sales price. If no sales are reported, investments are generally valued at the
last reported bid price. In the absence of market quotations, investments are
generally valued at fair value as determined by or under the direction of the
Fund's Board of Directors. Short-term investments that mature in 60 days or less
are valued on the basis of amortized cost, which attempts to approximate market
value.
The books and records of the Portfolios are maintained in U.S. dollars.
Transactions denominated in foreign currencies are recorded at the current
prevailing exchange rates. All assets and liabilities denominated in foreign
currencies are translated into U.S. dollar amounts at the current exchange rate.
Translation gains or losses resulting from changes in the exchange rate during
the reporting period and realized gains and losses on the settlement of foreign
currency transactions are reported in the results of operations for the current
period. The Fund does not isolate that portion of gains and losses on
investments in equity securities which is due to changes in the foreign exchange
rate from that which is due to changes in market prices of equity securities.
Security transactions are accounted for on trade date. Interest income is
recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
The cost of investments sold is determined by use of the specific
indentification method for both financial reporting and income tax purposes.
Dividends from net investment income are declared and paid annually.
Distributions of net realized capital gains, if any, are declared annually.
However, to the extent that a net realized capital gain can be reduced by a
capital loss carryover, such gain will not be distributed. Income and capital
gain distributions are determined in accordance with Federal income tax
regulations which may differ from generally accepted accounting principles.
The Fund intends to continue to comply with the special provisions of the
Internal Revenue Code available to investment companies and therefore no Federal
income tax provision is required.
Costs incurred by the Portfolios in connection with their organization have
been deferred and are amortized over a period of five years from the date of
each Portfolio's commencement of operations.
13
--------------------------------------------------------------------------------
<PAGE>106
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
April 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
Each Portfolio may enter into repurchase agreement transactions. Under the
terms of a typical repurchase agreement, a Portfolio acquires an underlying
security subject to an obligation of the seller to repurchase. The value of the
underlying security collateral will be maintained at an amount at least equal to
the total amount of the purchase obligation, including interest. The collateral
is in the Portfolio's possession.
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR
Warburg, Pincus Counsellors, Inc. ('Counsellors'), a wholly owned
subsidiary of Warburg, Pincus Counsellors G.P. ('Counsellors G.P.'), serves as
the Portfolios' investment adviser. The International Equity Portfolio pays
Counsellors an investment advisory fee calculated at an annual rate of .80% of
the Portfolio's average daily net assets. For the six months ended April 30,
1995, Counsellors earned $1,276,260 for investment advisory services to the
International Equity Portfolio, of which $352,604 was voluntarily waived. The
Global Fixed Income Portfolio will pay Counsellors an investment advisory fee
calculated at an annual rate of .65% of the Portfolio's average daily net
assets.
Counsellors Funds Service, Inc. ('CFSI'), a wholly owned subsidiary of
Counsellors, and PFPC Inc. ('PFPC'), an indirect, wholly owned subsidiary of PNC
Bank Corp. ('PNC'), serve as the Fund's co-administrators. For its
administrative services, CFSI receives a fee calculated at an annual rate of
.10% of the Fund's average daily net assets. For the six months ended April 30,
1995, CFSI earned $159,533 in administrative services fees. For the six months
ended April 30, 1995, PFPC earned $184,327 and voluntarily waived $52,874 in
administrative services fees.
Counsellors Securities Inc. ('CSI'), also a wholly owned subsidiary of
Counsellors, acts as distributor of the International Equity Portfolio's shares.
No compensation is payable by the International Equity Portfolio to CSI for its
distribution services.
3. INVESTMENTS IN SECURITIES
The International Equity Portfolio's purchases and sales of investment
securities for the six months ended April 30, 1995 (excluding short-term
investments) were $110,048,718 and $37,695,785, respectively.
At April 30, 1995, with respect to the International Equity Portfolio, the
net unrealized appreciation from investments of $15,241,538 was comprised of
appreciation of $39,391,026 for those securities having an excess of value over
cost, and depreciation of $24,149,488 for those securities having an excess of
cost over value (based on cost for Federal income tax purposes).
4. FOREIGN FORWARD CURRENCY CONTRACTS
The Portfolios 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
14
--------------------------------------------------------------------------------
<PAGE>107
--------------------------------------------------------------------------------
WARBURG PINCUS INSTITUTIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
April 30, 1995 (Unaudited)
--------------------------------------------------------------------------------
from the potential inability of counterparties to meet the terms of their
contracts and from unanticipated movements in the value of a foreign currency
relative to the U.S. dollar. The Portfolios may enter into forward contracts for
hedging purposes or to increase income and total return. The forward currency
contracts are adjusted by the daily exchange rate of the underlying currency and
any gains or losses are recorded for financial statement purposes as unrealized
until the contract settlement date.
At April 30, 1995, the Fund had the following open forward foreign currency
contract and had recorded an unrealized loss of $284,063:
<TABLE>
<CAPTION>
SETTLEMENT CURRENCY CURRENCY
DATE BOUGHT SOLD
---------- ---------------------- ------------------------
<S> <C> <C>
06/21/95 9,400,000 U.S. Dollars 807,554,000 Japanese Yen
</TABLE>
5. CAPITAL SHARE TRANSACTIONS
The Fund is authorized to issue up to three billion full and fractional
shares of beneficial interest of separate series having a $.001 par value per
share. Shares of two series have been authorized, which constitute the interest
in the Portfolios.
Transactions in shares of the International Equity Portfolio were as
follows:
<TABLE>
<CAPTION>
For the Six
Months Ended For the
April 30, 1995 Year Ended
(Unaudited) October 31, 1994
-------------- ----------------
<S> <C> <C>
Shares sold 7,119,069 12,686,666
Shares issued to shareholders on reinvestment of dividends 939,078 85,000
Shares redeemed (1,831,230) (603,362)
-------------- ----------------
Net increase in shares outstanding 6,226,917 12,168,304
-------------- ----------------
-------------- ----------------
</TABLE>
6. NET ASSETS
Net assets of the International Equity Portfolio at April 30, 1995,
consisted of the following:
<TABLE>
<S> <C>
Capital contributed, net $367,175,798
Accumulated net investment income 2,541,665
Accumulated net realized loss from security transactions (9,601,309)
Net unrealized appreciation from investments and foreign currency related items 14,972,892
------------
Net assets $375,089,046
------------
------------
</TABLE>
15
--------------------------------------------------------------------------------
<PAGE>108
[LETTERHEAD OF COOPERS & LYBRAND L.L.P.]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
of Warburg, Pincus Institutional Fund, Inc.
We have audited the accompanying Statement of Assets and Liabilities of
Warburg, Pincus Institutional Fund, Inc. - Small Company Growth Portfolio (the
"Fund") as of August 8, 1995. This financial statement is the responsibility
of the Fund's management. Our responsibility is to express an opinion on this
financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of Warburg, Pincus Institutional
Fund, Inc. - Small Company Growth Portfolio as of August 8, 1995 in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
August 11, 1995
<PAGE>109
WARBURG, PINCUS INSTITUTIONAL FUND, INC.
SMALL COMPANY GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
as of August 8, 1995
Assets:
Cash $ 1,000
Deferred Organizational Costs 45,000
Total Assets $46,000
Liabilities:
Accrued Organizational Costs 45,000
Net Assets $1,000
Net Asset Value, Redemption and
Offering Price Per Share (one billion
shares authorized - $.001 per share)
applicable to 100 shares outstanding. $10.00
The accompanying notes are an integral part of this financial statement.
<PAGE>110
WARBURG, PINCUS INSTITUTIONAL FUND, INC.
Small Company Growth Portfolio
Notes to Financial Statements
August 8, 1995
1. Organization:
Warburg, Pincus Institutional Fund, Inc. (the "Fund") was organized on
May 13, 1992 under the laws of the State of Maryland. The Fund is
registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company currently consisting of shares of
three series: International Equity Portfolio, Global Fixed Income
Portfolio, and Small Company Growth Portfolio. The assets of each
portfolio are segregated, and a shareholder's interest is limited to the
portfolio in which shares are held. The Small Company Growth Portfolio
(the "Portfolio") has not commenced operations except those related to
organizational matters and the sale of 100 shares ("Initial Shares") of
common stock to Warburg, Pincus Counsellors, Inc., the Fund's investment
adviser (the "Adviser").
2. Organizational Costs and Transactions with Affiliates:
Organizational costs have been capitalized by the Portfolio and are being
amortized over sixty months commencing with operations. In the event any
of the Initial Shares of the Portfolio are redeemed by any holder thereof
during the period that the Portfolio is amortizing its organizational
costs, the redemption proceeds payable to the holder thereof by the
Portfolio will be reduced by unamortized organizational costs in the same
ratio as the number of Initial Shares outstanding at the time of
redemption.
Certain officers and directors of the Fund are also officers of the
Adviser. Such officers and directors are paid no fees by the Fund for
serving as officers or directors of the Fund.
<PAGE>111
[LETTERHEAD OF COOPERS & LYBRAND L.L.P.]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Board of Directors of
Warburg, Pincus Institutional Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
Warburg, Pincus Institutional Fund, Inc. - Global Fixed Income Portfolio (the
"Fund") as of February 14, 1995. This financial statement is the
responsibility of the Fund's management. Our responsibility is to express an
opinion on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of Warburg, Pincus Institutional
Fund, Inc. - Global Fixed Income Portfolio as of February 14, 1995 in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 14, 1995
<PAGE>112
WARBURG, PINCUS INSTUTIONAL FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
as of February 14, 1995
Global Fixed
Income
Portfolio
Assets:
Cash $ 1,000
Deferred Organizational Costs 25,000
-------
Total Assets $26,000
Liabilities:
Payable to International Equity Portfolio 25,000
-------
Net Assets $ 1,000
--------
--------
Net Asset Value, Redemption and Offering
Price Per Share (1 billion shares
authorized - $.001 par value)
applicable to 100 shares outstanding. $10.00
-------
-------
The accompanying notes are an integral part of the financial statement.
<PAGE>113
WARBURG, PINCUS INSTITUTIONAL FUND, INC.
Global Fixed Income Portfolio
Notes to Financial Statements
February 14, 1995
1. Organization:
Warburg, Pincus Institutional Fund, Inc. (the "Fund") was organized on
May 13, 1992 under the laws of the State of Maryland. The Fund is
registered under the Investment Company Act of 1940, as amended, as an
open-end, management investment company consisting of shares of two
series - International Equity Portfolio and Global Fixed Income
Portfolio. The assets of each portfolio are segregated, and a
shareholder's interest is limited to the portfolio in which shares are
held. The Global Fixed Income Portfolio (the "Portfolio") has not
commenced operations except those related to organizational matters and
the sale of an aggregate of 100 shares ("initial shares") of beneficial
interest to E.M. Warburg, Pincus & Co., Inc. on July 28, 1992.
Subsequent to the sale of shares to E.M. Warburg Pincus & Co., Inc., the
initial shares were transferred to Warburg, Pincus Counsellors, Inc., the
Fund's Investment Adviser (the "Adviser").
2. Organizational Costs and Transactions with Affiliates:
Organizational costs have been capitalized by the Portfolio and will be
amortized over sixty months commencing with operations. In the event any
of the initial shares of the Portfolio are redeemed by any holder thereof
during the period that the Portfolio is amortizing its organizational
costs, the redemption proceeds payable to the holder thereof by the
Portfolio will be reduced by the unamortized organizational costs in the
same ratio as the number of initial shares being redeemed bears to the
number of initial shares outstanding at the time of the redemption.
Certain directors and officers of the Fund are also officers of the
Adviser. Such directors and officers are paid no fees by the Fund for
serving as directors or officers of the Fund.
<PAGE>114
WARBURG, PINCUS INSTITUTIONAL FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
as of July 31, 1995
(Unaudited)
Global Fixed
Income
Portfolio
------------
Assets:
Cash $ 1,000
Deferred Organizational Costs 25,000
--------
Total Assets $ 26,000
Liabilities:
Payable to International Equity Portfolio $ 25,000
-------
Net Assets $ 1,000
------
------
Net Asset Value, Redemption and Offering
Price Per Share (1 billion shares
authorized - $.001 par value)
applicable to 100 shares outstanding. $10.00
------
------
The accompanying notes are an integral part of the financial statement.
<PAGE>115
WARBURG, PINCUS INSTITUTIONAL FUND, INC.
Global Fixed Income Portfolio
Notes to Financial Statements
(Unaudited)
July 31, 1995
1. Organization:
Warburg, Pincus Institutional Fund, Inc. (the "Fund") was organized on
May 13, 1992 under the laws of the State of Maryland. The Fund is
registered under the Investment Company Act of 1940, as amended, as an
open-end, management investment company consisting of shares of three
series - International Equity Portfolio, Small Company Growth Portfolio
and Global Fixed Income Portfolio. The assets of each portfolio are
segregated, and a shareholder's interest is limited to the portfolio in
which shares are held. The Global Fixed Income Portfolio (the
"Portfolio") has not commenced operations except those related to
organizational matters and the sale of an aggregate of 100 shares
("initial shares") of beneficial interest to E.M. Warburg, Pincus & Co.,
Inc. on July 28, 1992. Subsequent to the sale of shares to E.M. Warburg
Pincus & Co., Inc., the initial shares were transferred to Warburg,
Pincus Counsellors, Inc., the Fund's Investment Adviser (the "Adviser").
2. Organizational Costs and Transactions with Affiliates:
Organizational costs have been capitalized by the Portfolio and will be
amortized over sixty months commencing with operations. In the event any
of the initial shares of the Portfolio are redeemed by any holder thereof
during the period that the Portfolio is amortizing its organizational
costs, the redemption proceeds payable to the holder thereof by the
Portfolio will be reduced by the unamortized organizational costs in the
same ratio as the number of initial shares being redeemed bears to the
number of initial shares outstanding at the time of the redemption.
Certain directors and officers of the Fund are also officers of the
Adviser. Such directors and officers are paid no fees by the Fund for
serving as directors or officers of the Fund.
<PAGE>116
PART C
OTHER INFORMATION
Item 24. Financial Statement and Exhibits
(a) Financial Statements -- International Equity Portfolio
(1) Financial Statements included in Part A
(a) Financial Highlights
(2) Audited Financial Statements included in Part B
(a) Report of Coopers & Lybrand L.L.P., Independent Auditors
(b) Statement of Net Assets at October 31, 1994
(c) Statement of Operations for the year ended October 31,
1994
(d) Statement of Changes in Net Assets for the years ended
October 31, 1994 and October 31, 1993
(e) Financial Highlights (for a share of the International
Equity Portfolio outstanding throughout each period) for
the period from September 1, 1992 through October 31, 1992
and for the years ended October 31, 1993 and October 31,
1994
(f) Notes to Financial Statements
(3) Unaudited Financial Statements included in Part B
(a) Statement of Net Assets at April 30, 1995
(b) Statement of Operations for the six months ended April 30,
1995
(c) Statement of Changes in Net Assets for the year ended
October 31, 1994 and the six months ended April 30, 1995
(d) Financial Highlights (for a share of the International
Equity Portfolio outstanding throughout each period) for
the period from September 1, 1992 through October 31,
1992, for the years ended October 31, 1993 and October 31,
1994 and for the six months ended April 30, 1995
(e) Notes to Financial Statements
(b) Financial Statements included in Part B -- Small Company Growth
Portfolio
(1) Report of Coopers & Lybrand L.L.P., Independent Auditors
(2) Statement of Assets and Liabilities as of August 8, 1995
<PAGE>117
(3) Notes to Financial Statements
(c) Financial Statements included in Part B -- Global Fixed Income
Portfolio
(1) Report of Coopers & Lybrand L.L.P., Independent Auditors
(2) Statement of Assets and Liabilities as of February 14, 1995 and
Notes to Financial Statements (audited)
(3) Statement of Assets and Liabilities as of July 31, 1995 and
Notes to Financial Statements (unaudited)
(d) Exhibits:
Exhibit No. Description of Exhibit
----------- ----------------------
1(a) Articles of Incorporation.
(b) Articles of Amendment.
(c) Articles Supplementary
2 By-Laws.
3 Not applicable.
4 Registrant's Forms of Stock Certificates.
5(a) Investment Advisory Agreement--International Equity
Portfolio.
(b) Investment Advisory Agreement--Small Company Growth
Portfolio.
(c) Investment Advisory Agreement--Global Fixed Income
Portfolio.
6(a) Form of Distribution Agreement.*
------------------------
* Incorporated by reference; material provisions of this exhibit
substantially similar to those of this exhibit in Post-Effective
Amendment No. 12 to the Registration Statement on Form N-1A of
Counsellors Cash Reserve Fund, Inc. filed on June 28, 1995 (Securities
Act File No. 2-94840)
<PAGE>118
(b) Form of Distribution Agreement pertaining to the Small
Company Growth Portfolio.
7 Not applicable.
8(a) Custodian Agreement with PNC Bank, National Association
incorporated by reference to Pre-Effective Amendment No. 1
to Registrant's Registration Statement on Form N-1A, filed
with the Securities and Exchange Commission on August 26,
1992 ("Amendment No. 1").
(b) Custody Agreement with Fiduciary Trust Company
International ("Fiduciary")-- International Equity
Portfolio incorporated by reference to Amendment No. 1.
(c) Amendment to Custody Agreement with
Fiduciary--International Equity Portfolio incorporated by
reference to Amendment No. 1.
(d) Custody Agreement with Fiduciary--Global Fixed Income
Portfolio incorporated by reference to Amendment No. 1.
(e) Amendment to Custody Agreement with Fiduciary--Global
Fixed Income Portfolio incorporated by reference to
Amendment No. 1.
(f) Form of Custodian Contract with State Street Bank and Trust
Company ("State Street")--Small Company Growth Portfolio.**
9(a) Form of Transfer Agency Agreement.**
(b) Form of Transfer Agency Agreement pertaining to the Small
Company Growth Prtfolio.
------------------------
** Incorporated by reference; material provisions of this exhibit
substantially similar to those of this exhibit in Pre-Effective Amendment
No. 1 to the Registration Statement on Form N-1A of Warburg, Pincus Trust
filed on June 14, 1995 (Securities Act File No. 33-58125)
<PAGE>119
(c) Form of Co-Administration Agreements with Counsellors
Funds Service, Inc.**
(d) Form of Co-Administration Agreements with PFPC Inc.**
10(a) Opinion of Willkie Farr & Gallagher, counsel to the Fund,
with respect to shares of the International Equity and
Global Fixed Income Portfolios, incorporated by reference
to Opinion of Willkie Farr & Gallagher filed with
Registrant's Rule 24f-2 Notice filed on December 29, 1994.
(b) Consent of Willkie Farr & Gallagher, counsel to the Fund,
and Opinion of Willkie Farr & Gallagher relating to
establishment of the Small Company Growth Portfolio.
11(a) Consent of Coopers & Lybrand L.L.P., Independent Auditors.
(b) Consent of Ernst & Young LLP, Independent Auditors.
12 Not applicable.
13(a) Purchase Agreement pertaining to the International Equity
Portfolio and Global Fixed Income Portfolio.
13(b) Form of Purchase Agreement pertaining to the Small Company
Growth Portfolio.
14 Retirement Plans incorporated by reference to
Post-Effective Amendment No. 1 to the Registration
Statement on Form N-1A of Warburg, Pincus Managed Bond
Trust, filed on February 28, 1995 (Securities Act File No.
33-73672).
------------------------
** Incorporated by reference; material provisions of this exhibit
substantially similar to those of this exhibit in Pre-Effective Amendment
No. 1 to the Registration Statement on Form N-1A of Warburg, Pincus Trust
filed on June 14, 1995 (Securities Act File No. 33-58125)
<PAGE>120
15 Not applicable.
16 Schedule for Computation of Total Return Performance
Quotation for the International Equity Portfolio.
17 Financial Data Schedule.
Item 25. Persons Controlled by or Under Common Control
with Registrant
Warburg, Pincus Counsellors, Inc. ("Counsellors"), Registrant's
investment adviser, may be deemed a controlling person of Registrant because
it possesses or shares investment or voting power with respect to more than
25% of the outstanding securities of Registrant. E.M. Warburg, Pincus & Co.,
Inc. controls Counsellors through its ownership of a class of voting preferred
stock of Counsellors. John L. Furth, director of the Fund, and Lionel
I. Pincus may be deemed to be controlling persons of the Fund because they may
be deemed to possess or share investment power over shares owned by clients of
Counsellors and certain other entities.
Item 26. Number of Holders of Securities
Number of Record Holders
Title of Class as of July 31, 1995
-------------- ------------------------
International Equity Portfolio- 284
shares of common stock
par value $.001 per share
Small Company Growth Portfolio- 1
shares of common stock
par value $.001 per share
Global Fixed Income Portfolio- 1
shares of common stock
par value $.001 per share
Item 27. Indemnification
Registrant, officers and directors or trustees of Counsellors, of
Counsellors Securities Inc. ("Counsellors Securities") and of Registrant are
covered by insurance policies indemnifying them for liability incurred in
connection with the operation of Registrant. Discussion of this coverage is
incorporated by reference to Item 27 of Part C of the
<PAGE>121
Registration Statement of Warburg, Pincus Trust (Securities Act File No. 33-
58125), filed on March 17, 1995.
Item 28. Business and Other Connections of
Investment Adviser
Counsellors, a wholly owned subsidiary of Warburg, Pincus
Counsellors G.P., acts as investment adviser to Registrant. Counsellors
renders investment advice to a wide variety of individual and institutional
clients. The list required by this Item 28 of officers and directors of
Counsellors, together with information as to their other business, profession,
vocation or employment of a substantial nature during the past two years, is
incorporated by reference to Schedules A and D of Form ADV filed by
Counsellors (SEC File No. 801-07321).
Item 29. Principal Underwriter
(a) Counsellors Securities will act as distributor for Registrant.
Counsellors Securities currently acts as distributor for Warburg, Pincus
Balanced Fund; Warburg, Pincus Capital Appreciation Fund; Warburg, Pincus Cash
Reserve Fund; Warburg, Pincus Emerging Growth Fund; Warburg, Pincus Emerging
Markets Fund; Warburg, Pincus Fixed Income Fund; Warburg, Pincus Global Fixed
Income Fund; Warburg, Pincus Growth & Income Fund; Warburg, Pincus
Institutional Fund, Inc.; Warburg, Pincus Intermediate Maturity Government
Fund; Warburg, Pincus International Equity Fund; Warburg, Pincus Japan OTC
Fund; Warburg, Pincus New York Intermediate Municipal Fund; Warburg, Pincus
New York Tax Exempt Fund; Warburg, Pincus Short-Term Tax-Advantaged Bond Fund;
Warburg, Pincus Tax-Free Fund and Warburg, Pincus Trust.
(b) For information relating to each director, officer or partner
of Counsellors Securities, reference is made to Form BD (SEC File No. 8-32482)
filed by Counsellors Securities under the Securities Exchange Act of 1934, as
amended.
(c) None.
Item 30. Location of Accounts and Records
(1) Warburg, Pincus Institutional Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(Fund's Articles of Incorporation, by-laws and minute books)
<PAGE>122
(2) Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as investment adviser)
(3) PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
(records relating to its functions as co-administrator)
(4) Counsellors Funds Service, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as co-administrator)
(5) Fiduciary Trust Company International
Two World Trade Center
New York, New York 10048
(records relating to its functions as custodian)
(6) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
(records relating to its functions as custodian, transfer agent
and dividend disbursing agent)
(7) PNC Bank, National Association
Broad and Chestnut Streets
Philadelphia, Pennsylvania 19101
(records relating to its functions as custodian)
(8) Counsellors Securities Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as distributor)
Item 31. Management Services
Not applicable.
<PAGE>123
Item 32. Undertakings.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE>124
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the Registrant
has duly caused this Amendment to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of New
York and the State of New York, on the 18th day of August, 1995.
WARBURG, PINCUS
INSTITUTIONAL FUND, INC.
By:/s/ John L. Furth
John L. Furth
President
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment has been signed below by the following persons in the
capacities and on the date indicated:
Signature Title Date
/s/ John L. Furth Chairman of the Board
John L. Furth and President August 18, 1995
/s/ Stephen Distler Vice President and August 18, 1995
Stephen Distler Chief Financial
Officer
/s/ Howard Conroy Vice President, August 18, 1995
Howard Conroy Treasurer and Chief
Accounting Officer
/s/ Richard N. Cooper Director August 18, 1995
Richard N. Cooper
/s/ Donald J. Donahue Director August 18, 1995
Donald J. Donahue
/s/ Jack W. Fritz Director August 18, 1995
Jack W. Fritz
/s/ Thomas A. Melfe Director August 18, 1995
Thomas A. Melfe
/s/ Alexander B. Trowbridge Director August 18, 1995
Alexander B. Trowbridge
<PAGE>125
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
----------- ----------------------
1(a) Articles of Incorporation.
(b) Articles of Amendment.
(c) Articles Supplementary
2 By-Laws.
3 Not applicable.
4 Registrant's Forms of Stock Certificates.
5(a) Investment Advisory Agreement--International Equity
Portfolio.
(b) Investment Advisory Agreement--Small Company Growth
Portfolio.
(c) Investment Advisory Agreement--Global Fixed Income
Portfolio.
6(a) Form of Distribution Agreement.*
(b) Form of Distribution Agreement pertaining to the Small
Company Growth Portfolio.
7 Not applicable.
------------------------
* Incorporated by reference; material provisions of this exhibit
substantially similar to those of this exhibit in Post-Effective
Amendment No. 12 to the Registration Statement on Form N-1A of
Counsellors Cash Reserve Fund, Inc. filed on June 28, 1995 (Securities
Act File No. 2-94840)
<PAGE>126
Exhibit No. Description of Exhibit
----------- ----------------------
8(a) Custodian Agreement with PNC Bank, National Association
incorporated by reference to Pre-Effective Amendment No. 1
toRegistrant's Registration Statement on Form N-1A, filed with
the Securities and Exchange Commission on August 26, 1992
("Amendment No. 1").
(b) Custody Agreement with Fiduciary Trust Company International
("Fiduciary")--International Equity Portfolio incorporated by
reference to Amendment No. 1.
(c) Amendment to Custody Agreement with Fiduciary--International
Equity Portfolio incorporated by reference to Amendment No. 1.
(d) Custody Agreement with Fiduciary --Global Fixed Income
Portfolio incorporated by reference to Amendment No. 1.
(e) Amendment to Custody Agreement with Fiduciary--Global Fixed
Income Portfolio incorporated by reference to Amendment No. 1.
(f) Form of Custodian Contract with State Street Bank and Trust
Company ("State Street")--Small Company Growth Portfolio.**
9(a) Form of Transfer Agency Agreement.**
------------------------
** Incorporated by reference; material provisions of this exhibit
substantially similar to those of this exhibit in Pre-Effective Amendment
No. 1 to the Registration Statement on Form N-1A of Warburg, Pincus Trust
filed on June 14, 1995 (Securities Act File No. 33-58125)
<PAGE>127
Exhibit No. Description of Exhibit
----------- ----------------------
(b) Form of Transfer Agency Agreement pertaining to the Small
Company Growth Portfolio.
(c) Form of Co-Administration Agreements with Counsellors Funds
Service, Inc.**
(d) Form of Co-Administration Agreements with PFPC Inc.**
10(a) Opinion of Willkie Farr & Gallagher, counsel to the Fund, with
respect to shares of the International Equity and Global Fixed
Income Portfolios, incorporated by reference to Opinion of
Willkie Farr & Gallagher filed with Registrant's Rule 24f-2
Notice filed on December 29, 1994.
(b) Consent of Willkie Farr & Gallagher, counsel to the Fund, and
opinion of Willkie Farr & Gallagher relating to establishment
of the Small Company Growth Portfolio.
11(a) Consent of Coopers & Lybrand L.L.P., Independent Auditors.
(b) Consent of Ernst & Young LLP, Independent Auditors.
------------------------
** Incorporated by reference; material provisions of this exhibit
substantially similar to those of this exhibit in Pre-Effective Amendment
No. 1 to the Registration Statement on Form N-1A of Warburg, Pincus Trust
filed on June 14, 1995 (Securities Act File No. 33-58125)
<PAGE>128
Exhibit No. Description of Exhibit
----------- ----------------------
12 Not applicable.
13(a) Purchase Agreement pertaining to the International Equity
Portfolio and Global Fixed Income Portfolio.
13(b) Form of Purchase Agreement pertaining to the Small Company
Growth Portfolio.
14 Retirement Plans incorporated by reference to Post-Effective
Amendment No. 1 to the Registration Statement on Form N-1A of
Warburg, Pincus Managed Bond Trust, filed on February 28, 1995
(Securities Act File No. 33-73672).
15 Not applicable.
16 Schedule for Computation of Total Return Performance Quotation
for the International Equity Portfolio.
17 Financial Data Schedule.
<PAGE>1
ARTICLES OF INCORPORATION
OF
WARBURG, PINCUS INSTITUTIONAL FUND, INC.
ARTICLE I
THE UNDERSIGNED, Nancy R. Lewis, whose post office address is c/o
Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York,
New York 10022, being at least eighteen years of age, does hereby act as an
incorporator and forms a corporation, under and by virtue of the Maryland
General Corporation Law.
ARTICLE II
NAME
The name of the Corporation is Warburg, Pincus Institutional Fund,
Inc. (hereinafter called the "Corporation").
ARTICLE III
PURPOSES AND POWERS
The Corporation is formed for the following purposes:
(1) To conduct and carry on the business of an investment company.
(2) To hold, invest and reinvest its assets in securities and other
investments or to hold part or all of its assets in cash.
(3) To issue and sell shares of its capital stock in such amounts
and on such terms and conditions and for such purposes and for such amount or
kind of consideration as may now or hereafter be permitted by law.
(4) To redeem, purchase or acquire in any other manner, hold,
dispose of, resell, transfer, reissue or cancel (all without the vote or
consent of the stockholders of the Corporation) shares of its capital stock,
in any manner and to the extent now or hereafter permitted by law and by these
Articles of Incorporation.
(5) To do any and all additional acts and to exercise any and all
additional powers or rights as may be necessary, incidental, appropriate or
desirable for the accomplishment of all or any of the foregoing purposes.
<PAGE>2
The Corporation shall be authorized to exercise and enjoy all of the
powers, rights and privileges granted to, or conferred upon, corporations by
the Maryland General Corporation Law now or hereafter in force, and the
enumeration of the foregoing shall not be deemed to exclude any powers, rights
or privileges so granted or conferred.
ARTICLE IV
PRINCIPAL OFFICE AND RESIDENT AGENT
The post office address of the principal office of the Corporation
in the State of Maryland is c/o The Corporation Trust Incorporated, 32 South
Street, Baltimore, Maryland 21202. The name of the resident agent of the
Corporation in the State of Maryland is The Corporation Trust Incorporated, a
Maryland Corporation. The post office address of the resident agent is 32
South Street, Baltimore, Maryland 21202.
ARTICLE V
CAPITAL STOCK
(1) The total number of shares of capital stock that the
Corporation shall have authority to issue is three billion (3,000,000,000)
shares, of the par value of one tenth of one cent ($.001) per share (the
"Shares") and of the aggregate par value of three million dollars
($3,000,000), all of which three billion (3,000,000,000) shares are designated
Common Stock.
(2) The Board of Directors of the Corporation is authorized, from
time to time, to classify or to reclassify, as the case may be, any unissued
Shares of the Corporation, whether now or hereafter authorized, in separate
series ("Series"). The Shares of said Series of stock shall have such
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption as shall be fixed and determined from time to time by the Board of
Directors. The Board of Directors is authorized to increase or decrease the
number of Shares of any Series, but the number of Shares of any Series shall
not be decreased by the Board of Directors below the number of Shares thereof
then outstanding. The Corporation may hold as treasury Shares, reissue for
such consideration and on such terms as the Board of Directors may determine,
or cancel, at their discretion from time to time, any Shares reacquired by the
Corporation.
<PAGE>3
(3) The Board of Directors may redesignate a class or Series of
shares of capital stock whether or not shares of such class or Series are
issued and outstanding, provided that such redesignation does not affect the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or conditions of
redemption of such shares of stock.
(4) There is hereby established and classified, (a) a Series of
stock comprised of one billion (1,000,000,000) Shares to be known as the
"International Equity Fund" and (b) a Series of stock comprised of one billion
(1,000,000,000) Shares to be known as the "Global Fixed Income Fund". Without
limiting the authority of the Board of Directors set forth herein to establish
and designate any further Series, and to classify and reclassify any unissued
Shares, Shares of each Series, now authorized and hereafter authorized, shall
be subject to the following provisions:
(a) The assets attributable to each class or Series may be invested
in a common investment portfolio. As more fully set forth hereafter, the
assets and liabilities and the income and expenses of each Series shall
be determined separately and, accordingly, the net asset value, the
dividends payable to holders, and the amounts distributable in the event
of dissolution of the Corporation to holders of Shares of the
Corporation's stock may vary from Series to Series. Except for these
differences and certain other differences hereafter set forth, each
Series shall have the same preferences, conversion and other rights,
voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of and rights to require redemptions.
(b) All consideration received by the Corporation for the issue or
sale of Shares of a particular Series, together with all assets in which
such consideration is invested or reinvested, all income, earnings,
profits, and proceeds thereof, including all proceeds derived from the
sale, exchange or liquidation thereof, and any funds or payments derived
from any reinvestment of such proceeds in whatever form the same may be,
shall irrevocably belong to that Series for all purposes, subject only to
the rights of creditors and shall be referred to as "assets belonging to"
that Series. The assets belonging to a particular Series shall be so
recorded upon the books of the Corporation.
(c) The assets belonging to each particular Series shall be charged
with the liabilities of the Corporation
<PAGE>4
with respect to that Series, all expenses, costs, charges and reserves
attributable to that Series and that Series' share of the liabilities,
expenses, costs, charges or reserves of the Corporation not attributable to
any particular Series, in the latter case in the proportion that the net asset
value of that Series (determined without regard to such liabilities) bears to
the net asset value of all Series (determined without regard to such
liabilities) as determined in accordance with Article VIII of these Articles
of Incorporation. The determination of the Board of Directors shall be
conclusive as to the allocation of liabilities, including accrued expenses and
reserves, and assets to a particular Series or Series.
(d) Each holder of Shares of the Corporation, upon request to the
Corporation (accompanied by surrender of the appropriate stock
certificate or certificates in proper form for transfer, if any
certificates have been issued to represent such shares) shall be entitled
to require the Corporation to redeem, to the extent that the Corporation
may lawfully effect such redemption under the laws of the State of
Maryland, all or any part of the Shares of capital stock of the
Corporation standing in the name of the holder on the books of the
Corporation at a price per Share equal to the net asset value per Share
computed in accordance with Article VIII hereof.
(e) Without limiting the generality of the foregoing, the
Corporation shall, to the extent permitted by applicable law, have the
right at any time to redeem the Shares owned by any holder of capital
stock of the Corporation if the redemption is, in the opinion of the
Board of Directors of the Corporation, desirable in order to prevent the
Corporation from being deemed a "personal holding company" within the
meaning of the Internal Revenue Code of 1986.
(f) Payment by the Corporation for Shares surrendered to it for
redemption shall be made in cash by the Corporation within seven business
days after such surrender out of funds legally available therefor,
provided that the Corporation may suspend the right of redemption or
postpone the date of payment of the redemption price when permitted or
required to do so by applicable statutes or regulations and, with respect
to the postponement of the date of payment, until all checks used to
purchase the Shares being redeemed have been collected. Payment of the
aggregate price of shares surrendered for redemption may be made in cash,
or, at the option of the Corporation, wholly or partly by securities or
other property included in the assets
<PAGE>5
belonging or allocable to the Series of the shares redemption of which is
being sought.
(g) The right of any holder of stock of the Corporation redeemed by
the Corporation as provided in subsections (d) or (e) of this section (3)
to receive dividends thereon and all other rights of such holder with
respect to such Shares shall terminate at the time as of which the
purchase or redemption price of such Shares is determined, except the
right of such holder to receive (i) the redemption price of such Shares
from the Corporation or its designated agent and (ii) any dividend or
distribution to which such holder has previously become entitled as the
record holder of such Shares on the record date for such dividend or
distribution. If Shares of stock are redeemed by the Corporation
pursuant to subsection (e) of this section (3) and certificates
representing the redeemed shares have been issued, the redemption price
need not be paid by the Corporation until the certificates have been
received by the Corporation or its agent duly endorsed for transfer.
(h) The Corporation shall be entitled to purchase shares of its
stock, to the extent that the Corporation may lawfully effect such
purchase under the laws of the State of Maryland, upon such terms and
conditions and for such consideration as the Board of Directors shall
deem advisable, by agreement with the stockholder at a price not
exceeding the net asset value per Share computed in accordance with
Article VIII hereof.
(i) In the absence of any specification as to the purpose for which
Shares of stock of the Corporation are redeemed or purchased by it, all
Shares so redeemed or purchased shall be deemed to be retired in the
sense contemplated by the laws of the State of Maryland and the number of
the authorized Shares of stock of the Corporation shall not be reduced by
the number of any shares redeemed or purchased by it. Until their
classification is changed in accordance with section (2) of this Article
V, all Shares so redeemed or purchased shall continue to belong to the
same Series to which they belonged at the time of their redemption or
purchase.
(j) Shares of each Series shall be entitled to such dividends and
distributions, in Shares or in cash or both, as may be declared from time
to time by the Board of Directors, acting in its sole discretion, with
respect to such Series, provided that dividends and distributions shall
<PAGE>6
be paid on shares of a Series only out of lawfully available assets belonging
to that Series. Dividends may be declared daily or otherwise pursuant to a
standing resolution or resolutions adopted only once or with such frequency as
the Board of Directors may determine. Any such dividend or distribution paid
in Shares will be paid at the current net asset value thereof as defined in
Article VIII.
(k) The Board of Directors shall have the power, in its sole
discretion, to distribute in any fiscal year as dividends (including
dividends designated in whole or in part as capital gain distributions)
an amount sufficient, in the opinion of the Board of Directors, to enable
each Series of the Corporation to qualify as a regulated investment
company under the Internal Revenue Code of 1986, as from time to time
amended, or any successor or comparable statute thereto, and regulations
promulgated thereunder, and to avoid liability of each Series of the
Corporation for federal income and excise taxes in respect of that year.
However, nothing in the foregoing shall limit the authority of the Board
of Directors to make distributions greater than or less than the amount
necessary to qualify as a regulated investment company and to avoid
liability of any Series of the Corporation for such taxes.
(l) In the event of the liquidation or dissolution of the
Corporation, the stockholders of a Series shall be entitled to receive,
as a class, out of the assets of the Corporation available for
distribution to stockholders, the assets belonging to that Series. The
assets so distributable to the stockholders of a Series shall be
distributed among such stockholders in proportion to the number of shares
of that Series held by them and recorded on the books of the Corporation.
In the event that there are any assets available for distribution that
are not attributable to any particular Series, such assets shall be
allocated to all Series in proportion to the net assets of the respective
Series and then distributed to the holders of stock of each Series in
proportion to the number of Shares of that Series held by the respective
holders.
(m) All holders of shares of stock shall vote as a single class or
Series except (i) with respect to any matter which affects only one or
more classes or Series of stock, in which case only the holders of shares
of the classes or Series affected shall be entitled to vote, or (ii) as
otherwise may be required by the Investment Company Act of 1990, as
amended.
<PAGE>7
(n) The presence in person or by proxy of the holders of a majority
of the Shares of capital stock of the Corporation outstanding and
entitled to vote thereat shall constitute a quorum for the transaction of
business at a stockholders' meeting, except that where any provision of
law or of these Articles of Incorporation permit or require that holders
of any Series shall vote as a Series, then a majority of the aggregate
number of Shares of capital stock of that Series outstanding and entitled
to vote shall constitute a quorum for the transaction of business by that
Series.
(o) The Corporation may issue Shares in fractional denominations to
the same extent as its whole Shares, and any fractional Share shall carry
proportionately the rights of a whole Share including, without
limitation, the right to vote, the right to receive dividends and
distributions and the right to participate upon liquidation of the
Corporation. A fractional Share shall not, however, have the right to
receive a certificate evidencing it.
(5) No holder of stock of the Corporation by virtue of being such a
holder shall have any right to purchase, subscribe for, or otherwise acquire
any Shares of the Corporation that the Corporation may issue or sell (whether
out of the number of Shares authorized by these Articles of Incorporation or
out of any Shares of the Corporation's capital stock that the Corporation may
acquire) other than a right that the Board of Directors in its discretion may
determine to grant.
(6) Notwithstanding any provision of the Maryland General
Corporation Law requiring any action to be taken or authorized by the
affirmative vote of a greater proportion than a majority of the votes of all
classes or of any class of stock of the Corporation, such action shall be
effective and valid if taken or authorized by the affirmative vote of a
majority of the total number of votes entitled to be cast thereon, except as
otherwise provided in these Articles of Incorporation.
(7) All persons who shall acquire stock in the Corporation shall
acquire the same subject to the provisions of these Articles of Incorporation
and the By-Laws of the Corporation, as from time to time amended.
<PAGE>8
ARTICLE VI
BOARD OF DIRECTORS
(1) The number of directors constituting the Board of Directors
shall be one (1). This number may be changed pursuant to the By-Laws of the
Corporation, but shall at no time be less than the minimum number required
under the Maryland General Corporation Law. The name of the director who
shall act until the first annual meeting of shareholders or until her
successor is duly chosen and qualified is:
Jamie Stockel Paley
(2) In furtherance, and not in limitation, of the powers conferred
by the laws of the State of Maryland, the Board of Directors is expressly
authorized:
(i) To make, alter or repeal the By-Laws of the Corporation, except
where such power is reserved by the By-Laws to the stockholders, and except as
otherwise required by the Investment Company Act of 1940, as amended.
(ii) From time to time to determine whether and to what extent and
at what times and places and under what conditions and regulations the books
and accounts of the Corporation, or any of them other than the stock ledger,
shall be open to the inspection of the stockholders. No stockholder shall
have any right to inspect any account or book or document of the Corporation,
except as conferred by law or authorized by resolution of the Board of
Directors or of the stockholders.
(iii) Without the assent or vote of the stockholders, to approve
the issuance from time to time of Shares of the stock of any Series, whether
now or hereafter authorized, and securities convertible into Shares of stock
of the Corporation of any Series, whether now or hereafter authorized, for
such consideration as the Board of Directors may deem advisable.
(iv) Notwithstanding anything in these Articles of Incorporation to
the contrary, to establish in its absolute discretion the basis or method for
determining the value of the assets belonging to any Series, the amount of the
liabilities belonging to any Series, and the net asset value of each Share of
any Series of the Corporation's stock for purposes of sales, redemptions,
repurchases of Shares or otherwise.
(v) In addition to the powers and authorities granted herein and by
statute expressly conferred upon it, the Board of
<PAGE>9
Directors is authorized to exercise all powers and do all acts that may be
exercised or done by the Corporation pursuant to the provisions of the laws of
the State of Maryland, these Articles of Incorporation and the By-Laws of the
Corporation.
(3) Any determination made in good faith, and in accordance with
generally accepted accounting principles and practices, if applicable, by or
pursuant to the direction of the Board of Directors, with respect to the
amount of assets, obligations or liabilities of the Corporation, as to the
amount of net income of the Corporation from dividends and interest for any
period or amounts at any time legally available for the payment of dividends,
as to the amount of any reserves or charges set up and the propriety thereof,
as to the time of or purpose for creating reserves or as to the use,
alteration or cancellation of any reserves or charges (whether or not any
obligation or liability for which the reserves or charges have been created
has been paid or discharged or is then or thereafter required to be paid or
discharged), as to the value of any security owned by the Corporation, the
determination of the net asset value of Shares of any class of the
Corporation's capital stock, or as to any other matters relating to the
issuance, sale, redemption or other acquisition or disposition of securities
or Shares of capital stock of the Corporation, and any reasonable
determination made in good faith by the Board of Directors whether any
transaction constitutes a purchase of securities on "margin," a sale of
securities "short," or an underwriting of the sale of, or a participation in
any underwriting or selling group in connection with the public distribution
of, any securities, shall be final and conclusive, and shall be binding upon
the Corporation and all holders of its capital stock, past, present and
future, and Shares of the capital stock of the Corporation are issued and sold
on the condition and understanding, evidenced by the purchase of Shares of
capital stock or acceptance of share certificates, that any and all such
determinations shall be binding as aforesaid. No provision of these Articles
of Incorporation of the Corporation shall be effective to (i) require a waiver
of compliance with any provision of the Securities Act of 1933, as amended, or
the Investment Company Act of 1940, as amended, or of any valid rule,
regulation or order of the Securities and Exchange Commission under those Acts
or (ii) protect or purport to protect any director or officer of the
Corporation against any liability to the Corporation or its security holders
to which he would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office.
<PAGE>10
ARTICLE VII
INDEMNIFICATION
(1) To the fullest extent that limitations on the liability of
directors and officers are permitted by the Maryland General Corporation Law,
no director or officer of the Corporation shall have any liability to the
Corporation or its stockholders for damages. This limitation on liability
applies to events occurring at the time a person serves as a director or
officer of the Corporation whether or not such person is a director or officer
at the time of any proceeding in which liability is asserted.
(2) The Corporation shall indemnify and advance expenses to its
currently acting and its former directors to the fullest extent that
indemnification of directors is permitted by the Maryland General Corporation
Law. The Corporation shall indemnify and advance expenses to its officers to
the same extent as its directors and may do so to such further extent as is
consistent with law. The Board of Directors may by By-Law, resolution or
agreement make further provision for indemnification of directors, officers,
employees and agents to the fullest extent permitted by the Maryland General
Corporation Law.
(3) No provision of this Article shall be effective to protect or
purport to protect any director or officer of the Corporation against any
liability to the Corporation or its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
(4) References to the Maryland General Corporation Law in this
Article are to that law as from time to time amended. No amendment to the
charter of the Corporation shall affect any right of any person under this
Article based on any event, omission or proceeding prior to the amendment.
ARTICLE VIII
NET ASSET VALUE
The net asset value of each Share of each Series as at the time of a
particular determination shall be the quotient obtained by dividing the amount
at such time of the net assets of the Series (being the amount of the assets
belonging to the Series less its actual and accrued liabilities exclusive of
capital stock and surplus) by the total number of Shares of the Series
outstanding at that time. The Board of Directors shall
<PAGE>11
have the power and duty to determine from time to time the net asset value per
Share at such times and by such methods as it shall determine subject to any
restrictions or requirements under the Investment Company Act of 1940, as
amended, and the rules, regulations and interpretations thereof promulgated or
issued by the Securities and Exchange Commission or insofar as permitted by
any order of the Securities and Exchange Commission applicable to the
Corporation. The Board of Directors may delegate such power and duty to the
Corporation, to the Corporation's investment manager, to the investment
adviser(s) of particular series, to the custodian or depository of the
Corporation's assets, to the Corporation's transfer agent, or to another agent
of the Corporation.
ARTICLE IX
AMENDMENTS
The Corporation reserves the right from time to time to make any
amendment to these Articles of Incorporation, now or hereafter authorized by
law, including any amendment that alters the contract rights, as expressly set
forth in these Articles of Incorporation, of any outstanding stock.
IN WITNESS WHEREOF, I have adopted and signed these Articles of
Incorporation and do hereby acknowledge that the adoption and signing are my
act.
Dated the 13th day of May, 1992
By: /s/ Jamie Stockel Paley
Incorporator
<PAGE>1
WARBURG, PINCUS INSTITUTIONAL FUND, INC.
ARTICLES OF AMENDMENT
Warburg, Pincus Institutional Fund, Inc. a Maryland corporation
having its principal office in the City of Baltimore, State of Maryland,
(hereinafter called the "Corporation"), hereby certifies to the State
Department of Assessments and Taxation of Maryland, that:
FIRST: The Charter of the Corporation is hereby amended by
striking out the first sentence of Section (4) of Article V and inserting in
lieu thereof the following:
There is hereby established and classified, (a) a series of stock
comprised of one billion (1,000,000,000) Shares to be known as the
"International Equity Portfolio" and (b) a Series of stock comprised of
one billion (1,000,000,000) Shares to be known as the "Global Fixed
Income Portfolio."
SECOND: The foregoing amendment to the Charter of the Corporation
has been approved by the entire Board of Directors of the Corporation and no
stock entitled to be voted on this matter is outstanding or subscribed for.
The undersigned President acknowledges this Articles of Amendment to
be the corporate act of the Corporation, and states that to the best of his
knowledge information and belief that the matters and facts set forth in these
Articles of Amendment with respect to authorization and approval are true in
all material respects and that this statement is made under penalties of
perjury.
IN WITNESS WHEREOF, Warburg, Pincus Institutional Fund, Inc. has
caused this Articles of Amendment to be signed in its name by its President
and witnessed by its Assistant Secretary, this 27th day of July 1992.
WARBURG, PINCUS INTERNATIONAL
FUND, INC.
/s/ Jamie Stockel Paley
Jamie Stockel Paley
President
WITNESS:
/s/ Steven Distler
Steven Distler
Assistant Secretary
<PAGE>1
ARTICLES SUPPLEMENTARY
OF
WARBURG, PINCUS INSTITUTIONAL FUND, INC.
WARBURG, PINCUS INSTITUTIONAL FUND, INC. (the "Fund"), a Maryland
corporation with its principal corporate offices in the State of Maryland in
Baltimore, Maryland, DOES HEREBY CERTIFY:
1. There is hereby classified a Series of stock comprised of one
billion (1,000,000,000) Shares (as those terms are defined in the Fund's
Articles of Incorporation, as amended from time to time, the "Articles") of
the authorized but unclassified and unissued Shares of the Fund, to be known
as the "Small Company Growth Portfolio."
2. The Shares of the Small Company Growth Portfolio classified
hereby shall have the preferences, conversion and other rights, voting powers,
restrictions, limitations as to dividends, qualifications, and terms and
conditions of redemption as set forth in Article V, Section 4 of the Articles
and shall be subject to all provisions of the Articles relating to Shares
generally.
3. The Shares of the Small Company Growth Portfolio have been
classified by the Fund's Board of Directors under the authority contained in
Article V, Sections 2 and 3 of the Articles.
IN WITNESS WHEREOF, the undersigned have executed these Articles
Supplementary on behalf of Warburg, Pincus Institutional Fund, Inc. and
acknowledge that it is the act and deed of the Fund and state, under penalty
of perjury, to the best of the knowledge, information and belief of each of
them, that the matters contained herein with respect to the approval thereof
are true in all material respects.
Dated: August 16, 1995 WARBURG, PINCUS INSTITUTIONAL
FUND, INC.
By: /s/ Howard Conroy
Name: Howard Conroy
Title: Vice President
ATTEST:
/s/ Eugene P. Grace
Name: Eugene P. Grace
Title: Secretary
<PAGE>1
BY-LAWS
OF
WARBURG, PINCUS INSTITUTIONAL FUND, INC.
A Maryland Corporation
ARTICLE I
STOCKHOLDERS
SECTION 1. Annual Meetings. No annual meeting of the stockholders
of the Corporation shall be held in any year in which the election or
directors is not required to be acted upon under the Investment Company Act of
1940, as amended, unless otherwise determined by the Board of Directors. An
annual meeting may be held at any place within the United States as may be
determined by the Board of Directors and as shall be designated in the notice
of the meeting, and at the time specified by the Board of Directors. Any
business of the Corporation may be transacted at an annual meeting without
being specifically designated in the notice unless otherwise provided by
statute, the Corporation's Articles of Incorporation or these By-Laws.
SECTION 2. Special Meetings. Special meetings of the stockholders
for any purpose or purposes, unless otherwise prescribed by statute or by the
Corporation's Articles of Incorporation, may be held at any place within the
United States, and may be called at any time by the Board of Directors or by
the President, and shall be called by the President or Secretary at the
request in writing of a majority of the Board of Directors or at the request
in writing of stockholders entitled to cast at least 10 (ten) percent of the
votes entitled to be cast at the meeting upon payment by such stockholders to
the Corporation of the reasonably estimated cost of preparing and mailing a
notice of the meeting (which estimated cost shall be provided to such
stockholders by the Secretary of the Corporation). Notwithstanding the
foregoing, unless requested by stockholders entitled to cast a majority of
the votes entitled to be cast at the meeting, a special meeting of the
stockholders need not be called at the request of stockholders to consider any
matter which is substantially the same as a matter voted on at any special
meeting of the stockholders held during the preceding 12 (twelve) months. A
written request shall state the purpose or purposes of the proposed meeting.
<PAGE>2
SECTION 3. Notice of Meetings. Written or printed notice of the
purpose or purposes and of the time and place of every meeting of the
stockholders shall be given by the Secretary of the Corporation to each
stockholder of record entitled to vote at the meeting, by placing the notice
in the mail at least 10 (ten) days, but not more than 90 (ninety) days, prior
to the date designated for the meeting addressed to each stockholder at his
address appearing on the books of the Corporation or supplied by the
stockholder to the Corporation for the purpose of notice. The notice of any
meeting of stockholders may be accompanied by a form of proxy approved by the
Board of Directors in favor of the actions or persons as the Board of
Directors may select. Notice of any meeting of stockholders shall be deemed
waived by any stockholder who attends the meeting in person or by proxy, or
who before or after the meeting submits a signed waiver of notice that is
filed with the records of the meeting.
SECTION 4. Quorum. Except as otherwise provided by statute or by
the Corporation's Articles of Incorporation, the presence in person or by
proxy of stockholders of the Corporation entitled to cast at least a majority
of the votes to be cast shall constitute a quorum at each meeting of the
stockholders except that where any provision of law or the Articles of
Incorporation permit or require that stockholders of any series of capital
stock of the corporation shall vote as a series, stockholders of a majority of
the aggregate number of shares of capital stock of that series outstanding and
entitled to vote shall constitute a quorum at such meeting and all questions
shall be decided by a majority of the shares so represented in person or by
proxy at the meeting and entitled to vote. In the absence of a quorum, the
stockholders present in person or by proxy, by majority vote and without
notice other than by announcement, may adjourn the meeting from time to time
as provided in Section 5 of this Article I until a quorum shall attend. The
stockholders present at any duly organized meeting may continue to do business
until adjournment, notwithstanding the withdrawal of enough stockholders to
leave less than a quorum. The absence from any meeting in person or by proxy
of holders of the number of shares of stock of the Corporation in excess of a
majority that may be required by the laws of the State of Maryland, the
Investment Company Act of 1940, as amended, or other applicable statute, the
Corporation's Articles of Incorporation or these By-Laws, for action upon any
given matter shall not prevent action at the meeting on any other matter or
matters that may properly come before the meeting, so long as there are
present, in person or by proxy, holders of the number of shares of stock of
the Corporation required for action upon the other matter or matters.
<PAGE>3
SECTION 5. Adjournment. Any meeting of the stockholders may be
adjourned from time to time, without notice other than by announcement at the
meeting at which the adjournment is taken. At any adjourned meeting at which
a quorum shall be present any action may be taken that could have been taken
at the meeting originally called. A meeting of the stockholders may not be
adjourned to a date more than 120 (one hundred twenty) days after the original
record date.
SECTION 6. Organization. At every meeting of the stockholders, the
Chairman of the Board, or in his absence or inability to act, the President,
or in his absence or inability to act, a Vice President, or in the absence or
inability to act of the Chairman of the Board, the President and all the Vice
Presidents, a chairman chosen by the stockholders, shall act as Chairman of
the meeting. The Secretary, or in his absence or inability to act, a person
appointed by the chairman of the meeting, shall act as secretary of the
meeting and keep the minutes of the meeting.
SECTION 7. Order of Business. The order of business at all
meetings of the stockholders shall be as determined by the chairman of the
meeting.
SECTION 8. Voting. Except as otherwise provided by statute or the
Corporation's Articles of Incorporation, each holder of record of shares of
stock of the Corporation having voting power shall be entitled at each meeting
of the stockholders to one vote for every share of stock standing in his name
on the records of the Corporation as of the record date determined pursuant to
Section 9 of this Article I; provided, however, that when required by the
Investment Company Act of 1940, as amended, or the laws of the State of
Maryland or when the Board of Directors has determined that the matter affects
only the interest of one series of stock, matters may be submitted only to a
vote of the stockholders of that particular series, and each stockholder
thereof shall be entitled to votes equal to the shares of stock of that series
registered in his name on the books of the Corporation.
Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him by written proxy signed by
the stockholder or his attorney-in-fact. No proxy shall be valid after the
expiration of eleven months from the date thereof, unless otherwise provided
in the proxy. Every proxy shall be revocable at the pleasure of the
stockholder executing it, except in those cases in which the proxy states
that it is irrevocable and in which an irrevocable proxy is permitted by law.
<PAGE>4
If a vote shall be taken on any question other than the election of
directors, which shall be by written ballot, then unless required by statute
or these By-Laws, or determined by the chairman of the meeting to be
advisable, any such vote need not be by ballot. On a vote by ballot, each
ballot shall be signed by the stockholder voting, or by his proxy, and shall
state the number of shares voted.
SECTION 9. Fixing of Record Date. The Board of Directors may set a
record date for the purpose of determining stockholders entitled to vote at
any meeting of the stockholders. The record date for a particular meeting
shall be not more than 90 (ninety) nor fewer than 10 (ten) days before the
date of the meeting. All persons who were holders of record of shares as of
the record date of a meeting, and no others, shall be entitled to vote at such
meeting and any adjournment thereof.
SECTION 10. Inspectors. The Board of Directors may, in advance of
any meeting of stockholders, appoint one or more inspectors to act at the
meeting or at any adjournment of the meeting. If the inspectors shall not be
so appointed or if any of them shall fail to appear or act, the chairman of
the meeting may, and on the request of any stockholder entitled to vote at the
meeting shall, appoint inspectors. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath to execute faithfully the
duties of inspector at the meeting with strict impartiality and according to
the best of his ability. The inspectors shall determine the number of shares
outstanding and the voting power of each share, the number of shares
represented at the meeting, the existence of a quorum and the validity and
effect of proxies, and shall receive votes, ballots or consents, hear and
determine all challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots or consents, determine the
result, and do those acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the chairman of the meeting or
any stockholder entitled to vote at the meeting, the inspectors shall make a
report in writing of any challenge, request or matter determined by them and
shall execute a certificate of any fact found by them. No director or
candidate for the office of director shall act as inspector of an election of
directors. Inspectors need not be stockholders of the Corporation.
SECTION 11. Consent of Stockholders in Lieu of Meeting. Except as
otherwise provided by statute or the Corporation's Articles of Incorporation,
any action required to be taken at any meeting of stockholders, or any action
that may be taken at any meeting of the stockholders, may be taken
<PAGE>5
without a meeting, without prior notice and without a vote, if the following
are filed with the records of stockholders' meetings: (i) a unanimous written
consent that sets forth the action and is signed by each stockholder entitled
to vote on the matter and (ii) a written waiver of any right to dissent signed
by each stockholder entitled to notice of the meeting but not entitled to vote
at the meeting.
SECTION 12. Notice of Stockholder Business.
(a) At any Annual or Special Meeting of the Stockholders, only such
business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an Annual or Special Meeting business
must be (A) (i) specified in the notice of meeting (or any supplement thereto)
given by or at the direction of the Board of Directors, (ii) otherwise
properly brought before the meeting by or at the direction of the Board of
Directors, or (iii) subject to the provisions of Section 13 of this Article I,
otherwise properly brought before the meeting by a Stockholder and (B) a
proper subject under applicable law for Stockholder action.
(b) For business to be properly brought before an Annual or Special
Meeting by a Stockholder, the Stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, any
such notice must be delivered to or mailed and received at the principal
executive offices of the Corporation not later than 60 days prior to the date
of the meeting; provided, however, that if less than 70 days' notice or prior
public disclosure of the date of the meeting is given or made to Stockholders,
any such notice by a Stockholder to be timely must be so received not later
than the close of business on the 10th day following the day on which notice
of the date of the Annual or Special Meeting was given or such public
disclosure was made.
(c) Any such notice by a Stockholder shall set forth as to each
matter the Stockholder proposes to bring before the Annual or Special Meeting
(i) a brief description of the business desired to be brought before the
Annual or Special Meeting and the reasons for conducting such business at the
Annual or Special Meeting, (ii) the name and address, as they appear on the
Corporation's books, of the Stockholder proposing such business, (iii) the
class and number of shares of the capital stock of the Corporation which are
beneficially owned by the Stockholder, and (iv) any material interest of the
Stockholder in such business.
(d) Notwithstanding anything in the By-Laws to the contrary, no
business shall be conducted at any Annual or Special
<PAGE>6
Meeting except in accordance with the procedures set forth in this Section 12.
The Chairman of the Annual or Special Meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting and in accordance with the provisions of this Section 12,
and if he should so determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be considered or
transacted.
SECTION 13. Stockholder Business not Eligible for Consideration.
(a) Notwithstanding anything in these By-Laws to the contrary, any
proposal that is otherwise properly brought before an Annual or Special
Meeting by a Stockholder will not be eligible for consideration by the
Stockholders at such Annual or Special Meeting if such proposal is
substantially the same as a matter properly brought before such Annual or
Special Meeting by or at the direction of the Board of Directors of the
Corporation. The Chairman of such Annual or Special Meeting shall, if the
facts warrant, determine and declare that a Stockholder proposal is
substantially the same as a matter properly brought before the meeting by or
at the direction of the Board of Directors, and, if he should so determine, he
shall so declare to the meeting and any such Stockholder proposal shall not be
considered at the meeting.
(b) This Section 13 shall not be construed or applied to make
ineligible for consideration by the Stockholders at any Annual or Special
Meeting any Stockholder proposal required to be included in the Corporation's
proxy statement relating to such meeting pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934, or any successor rule thereto.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. General Powers. Except as otherwise provided in the
Corporation's Articles of Incorporation, the business and affairs of the
Corporation shall be managed under the direction of the Board of Directors.
All powers of the Corporation may be exercised by or under authority of the
Board of Directors except as conferred on or reserved to the stockholders by
law, by the Corporation's Articles of Incorporation or by these By-Laws.
<PAGE>7
SECTION 2. Number of Directors. The number of directors shall he
fixed from time to time by resolution of the Board of Directors adopted by a
majority of the Directors then in office; provided, however, that the number
of directors shall in no event be fewer than the number permitted under the
laws of the State of Maryland nor more than fifteen. Any vacancy created by
an increase in Directors may be filled in accordance with Section 6 of this
Article II. No reduction in the number of directors shall have the effect of
removing any director from office prior to the expiration of his term unless
the director is specifically removed pursuant to Section 5 of this Article II
at the time of the decrease. A director need not be a stockholder of the
Corporation, a citizen of the United States or a resident of the State of
Maryland.
SECTION 3. Election and Term of Directors. The term of office of
each director shall be from the time of his election and qualification until
his successor shall have been elected and shall have qualified, or until his
death, or until he shall have resigned or have been removed as provided in
these By-laws, or as otherwise provided by statute or the Corporation's
Articles of Incorporation.
SECTION 3.1 Director Nominations.
(a) Only persons who are nominated in accordance with the
procedures set forth in this Section 3.1 shall be eligible for election or
re-election as Directors. Nominations of persons for election or re-election
to the Board of Directors of the Corporation may be made at a meeting of
Stockholders by or at the direction of the Board of Directors or by any
Stockholder of the Corporation who is entitled to vote for the election of
such nominee at the meeting and who complies with the notice procedures set
forth in this Section 3.1.
(b) Such nominations, other than those made by or at the direction
of the Board of Directors, shall be made pursuant to timely notice delivered
in writing to the Secretary of the Corporation. To be timely, any such notice
by a Stockholder must be delivered to or mailed and received at the principal
executive offices of the Corporation not later than 60 days prior to the
meeting; provided, however, that if less than 70 days' notice or prior public
disclosure of the date of the meeting is given or made to Stockholders, any
such notice by a Stockholder to be timely must be so received not later than
the close of business on the 10th day following the day on which notice of the
date of the meeting was given or such public disclosure was made.
<PAGE>8
(c) Any such notice by a Stockholder shall set forth (i) as to each
person whom the Stockholder proposes to nominate for election or re-election
as a Director, (A) the name, age, business address and residence address of
such person, (B) the principal occupation or employment of such person, (C)
the class and number of shares of the capital stock of the Corporation which
are beneficially owned by such person and (D) any other information relating
to such person that is required to be disclosed in solicitations of proxies
for the election of Directors pursuant to Regulation 14A under the Securities
Exchange Act of 1934 or any successor regulation thereto (including without
limitation such persons' written consent to being named in the proxy statement
as a nominee and to serving as a Director if elected and whether any person
intends to seek reimbursement from the Corporation of the expenses of any
solicitation of proxies should such person be elected a Director of the
Corporation); and (ii) as to the Stockholder giving the notice (A) the name
and address, as they appear on the Corporation's books, of such Stockholder
and (B) the class and number of shares of the capital stock of the Corporation
which are beneficially owned by such Stockholder. At the request of the Board
of Directors any person nominated by the Board of Directors for election as a
Director shall furnish to the Secretary of the Corporation that information
required to be set forth in a Stockholder's notice of nomination which
pertains to the nominee.
(d) If a notice by a Stockholder is required to be given pursuant
to this Section 3.1, no person shall be entitled to receive reimbursement from
the Corporation of the expenses of a solicitation of proxies for the election
as a Director of a person named in such notice unless such notice states that
such reimbursement will be sought from the Corporation. No person shall be
eligible for election as a Director of the Corporation unless nominated in
accordance with the procedures set forth in this Section 3.1. The Chairman of
the meeting shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the procedures prescribed by
the By-Laws, and if he should so determine, he shall so declare to the meeting
and the defective nomination shall be disregarded for all purposes.
SECTION 4. Resignation. A director of the Corporation may resign
at any time by giving written notice of his resignation to the Board of
Directors or the Chairman of the Board or to the President or the Secretary of
the Corporation. Any resignation shall take effect at the time specified in
it or, should the time when it is to become effective not be specified in it,
immediately upon its receipt. Acceptance of a resignation
<PAGE>9
shall not be necessary to make it effective unless the resignation states
otherwise.
SECTION 5. Removal of Directors. Any director of the Corporation
may be removed by the stockholders with or without cause at any time by a vote
of a majority of the votes entitled to be cast for the election of directors.
SECTION 6. Vacancies. Subject to the provisions of the Investment
Company Act of 1940, as amended, any vacancies in the Board of Directors,
whether arising from death, resignation, removal or an increase in the number
of directors, shall be filled by a vote of the majority of the Board of
Directors then in office even though that majority is less than a quorum,
provided that no vacancy or vacancies shall be filled by action of the
remaining directors if, after the filling of the vacancy or vacancies, fewer
than two-thirds of the directors then holding office shall have been elected
by the stockholders of the Corporation. In the event that at any time a
vacancy exists in any office of a director that may not be filled by the
remaining directors, a special meeting of the stockholders shall be held as
promptly as possible and in any event within 60 (sixty) days, for the purpose
of filling the vacancy or vacancies. Any director elected or appointed to
fill a vacancy shall hold office until a successor has been chosen and
qualifies or until his earlier resignation or removal.
SECTION 7. Place of Meetings. Meetings of the Board may be held at
any place that the Board of Directors may from time to time determine or that
is specified in the notice of the meeting.
SECTION 8. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at the time and place determined by the
Board of Directors.
SECTION 9. Special Meetings. Special meetings of the Board of
Directors may be called by two or more directors of the Corporation or by the
Chairman of the Board or the President.
SECTION 10. Notice of Special Meetings. Notice of each special
meeting of the Board of Directors shall be given by the Secretary as
hereinafter provided. Each notice shall state the time and place of the
meeting and shall be delivered to each director, either personally or by
telephone or other standard form of telecommunication, at least 24
(twenty-four) hours before the time at which the meeting is to be held, or by
first-class mail, postage prepaid, addressed to the director at his residence
<PAGE>10
or usual place of business, and mailed at least 3 (three) days before the day
on which the meeting is to be held.
SECTION 11. Waiver of Notice of Meetings. Notice of any special
meeting need not be given to any director who shall, either before or after
the meeting, sign a written waiver of notice that is filed with the records of
the meeting or who shall attend the meeting.
SECTION 12. Quorum and Voting. One-third (but not fewer than the
number permitted by the laws of the State of Maryland) of the members of the
entire Board of Directors shall be present in person at any meeting of the
Board in order to constitute a quorum for the transaction of business at the
meeting, and except as otherwise expressly required by statute, the
Corporation's Articles of Incorporation, these By-Laws, the Investment Company
Act of 1940, as amended, or any other applicable statute, the act of a
majority of the directors present at any meeting at which a quorum is present
shall be the act of the Board. In the absence of a quorum at any meeting of
the Board, a majority of the directors present may adjourn the meeting to
another time and place until a quorum shall be present. Notice of the time
and place of any adjourned meeting shall be given to the directors who were
not present at the time of the adjournment and, unless the time and place were
announced at the meeting at which the adjournment was taken, to the other
directors. At any adjourned meeting at which a quorum is present, any
business may be transacted that might have been transacted at the meeting as
originally called.
SECTION 13. Organization. The Board of Directors may, by
resolution adopted by a majority of the entire Board, designate a Chairman of
the Board, who shall preside at each meeting of the Board. In the absence or
inability of the Chairman of the Board to act, the President, or, in his
absence or inability to act, another director chosen by a majority of the
directors present, shall act as chairman of the meeting and preside at the
meeting. The Secretary, or, in his absence or inability to act, any person
appointed by the chairman, shall act as secretary of the meeting and keep the
minutes thereof.
SECTION 14. Committees. The Board of Directors may designate one
or more committees of the Board of Directors, each consisting of 2 (two) or
more directors. To the extent provided in the resolution, and permitted by
law, the committee or committees shall have and may exercise the powers of the
Board of Directors in the management of the business and affairs of the
Corporation and may authorize the seal of the Corporation to be affixed to all
papers that may require it. Any committee or
<PAGE>11
committees shall have the name or names determined from time to time by
resolution adopted by the Board of Directors. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required. The members of a committee present at any meeting, whether or
not they constitute a quorum, may appoint a director to act in the place of an
absent member.
SECTION 15. Written Consent of Directors in Lieu of a Meeting.
Subject to the provisions of the Investment Company Act of 1940, as amended,
any action required or permitted to be taken at any meeting of the Board of
Directors or of any committee of the Board may be taken without a meeting if
all members of the Board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of the
proceedings of the Board or committee.
SECTION 16. Telephone Conference. Members of the Board of
Directors or any committee of the Board may participate in any Board or
committee meeting by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other at the same time. Participation by such means shall constitute
presence in person at the meeting.
SECTION 17. Compensation. Each director shall be entitled to
receive compensation, if any, as may from time to time be fixed by the Board
of Directors, including a fee for each meeting of the Board or any committee
thereof, regular or special, he attends. Directors may also be reimbursed by
the Corporation for all reasonable expenses incurred in traveling to and from
the place of a Board or committee meeting.
ARTICLE III
OFFICERS, AGENTS AND EMPLOYEES
SECTION 1. Number and Qualifications. The officers of the
Corporation shall be a President, a Secretary and a Treasurer, each of whom
shall be elected by the Board of Directors. The Board of Directors may elect
or appoint one or more Vice Presidents and may also appoint any other
officers, agents and employees it deems necessary or proper. Any two or more
offices may be held by the same person, except the offices of President and
Vice President, but no officer shall execute, acknowledge or verify any
instrument in more than one capacity. Officers shall be elected to hold
office and until their successor shall have been duly elected and shall have
qualified,
<PAGE>12
or until his death, or until he shall have resigned or have been removed, as
provided in these By-Laws. The Board of Directors may from time to time
elect, or designate to the President the power to appoint, such officers
(including one or more Assistant Vice Presidents, one or more Assistant
Treasurers and one or more Assistant Secretaries) and such agents as may be
necessary or desirable for the business of the Corporation. Such other
officers and agents shall have such duties and shall hold their offices for
such terms as may be prescribed by the Board or by the appointing authority.
SECTION 2. Resignations. Any officer of the Corporation may resign
at any time by giving written notice of his resignation to the Board of
Directors, the Chairman of the Board, the President or the Secretary. Any
resignation shall take effect at the time specified therein or, if the time
when it shall become effective is not specified therein, immediately upon its
receipt. Acceptance of a resignation shall not be necessary to make it
effective unless the resignation states otherwise.
SECTION 3. Removal of Officer, Agent or Employee. Any officer,
agent or employee of the Corporation may be removed by the Board of Directors
with or without cause at any time, and the Board may delegate the power of
removal as to agents and employees not elected or appointed by the Board of
Directors. Removal shall be without prejudice to the person's contract
rights, if any, but the appointment of any person as an officer, agent or
employee of the Corporation shall not of itself create contract rights.
SECTION 4. Vacancies. A vacancy in any office whether arising from
death, resignation, removal or any other cause, may be filled for the
unexpired portion of the term of the office that shall be vacant, in the
manner prescribed in these By-Laws for the regular election or appointment to
the office.
SECTION 5. Compensation. The compensation of the officers of the
Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any officer with respect to other officers under his control.
SECTION 6. Bonds or Other Security. If required by the Board, any
officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his duties, in an amount and with any
surety or sureties as the Board may require.
SECTION 7. President. The President shall be the chief executive
officer of the Corporation. In the absence or
<PAGE>13
inability of the Chairman of the Board (or if there is none) to act, the
President shall preside at all meetings of the stockholders and of the Board
of Directors. The President shall have, subject to the control of the Board
of Directors, general charge of the business and affairs of the Corporation,
and may employ and discharge employees and agents of the Corporation, except
those elected or appointed by the Board, and he may delegate these powers.
SECTION 8. Vice President. Each Vice President shall have the
powers and perform the duties that the Board of Directors or the President may
from time to time prescribe.
SECTION 9. Treasurer. Subject to the provisions of any contract
that may be entered into with any custodian pursuant to authority granted by
the Board of Directors, the Treasurer shall have charge of all receipts and
disbursements of the Corporation and shall have or provide for the custody of
the Corporation's funds and securities; he shall have full authority to
receive and give receipts for all money due and payable to the Corporation,
and to endorse checks, drafts and warrants, in its name and on its behalf and
to give full discharge for the same; he shall deposit all funds of the
Corporation, except those that may be required for current use, in such banks
or other places of deposit as the Board of Directors may from time to time
designate; and, in general, he shall perform all duties incident to the office
of Treasurer and such other duties as may from time to time be assigned to him
by the Board of Directors or the President.
SECTION 10. Secretary. The Secretary shall
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board of Directors, the committees
of the Board and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all stock certificates of the Corporation (unless
the seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents to
be executed on behalf of the Corporation under its seal;
<PAGE>14
(d) see that the books, reports, statements, certificates and
other documents and records required by law to be kept and filed are properly
kept and filed; and
(e) in general, perform all the duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him by
the Board of Directors or the President.
SECTION 11. Delegation of Duties. In case of the absence of any
officer of the Corporation, or for any other reason that the Board of
Directors may deem sufficient, the Board may confer for the time being the
powers or duties, or any of them, of such officer upon any other officer or
upon any director.
ARTICLE IV
STOCK
SECTION 1. Stock Certificates. Each holder of stock of the
Corporation shall be entitled upon specific written request to such person as
may be designated by the Corporation to have a certificate or certificates, in
a form approved by the Board, representing the number of shares the particular
series of stock of the Corporation owned by him; provided, however, that
certificates for fractional shares will not be delivered in any case. The
certificates representing shares of stock shall be signed by or in the name of
the Corporation by the Chairman, President or a Vice President and by the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer
and sealed with the seal of the Corporation. Any or all of the signatures or
the seal on the certificate may be facsimiles. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent or
registrar before such certificate shall be issued, it may be issued by the
Corporation with the same effect as if such officer, transfer agent or
registrar were still in office at the date of issue.
SECTION 2. Books of Account and Record of Stockholders. There
shall be kept at the principal executive office of the Corporation correct and
complete books and records of account of all the business and transactions of
the Corporation.
SECTION 3. Transfers of Shares. Transfers of shares of a
particular series of stock of the Corporation shall be made
<PAGE>15
on the stock records of the Corporation only by the registered holder thereof,
or by his attorney thereunto authorized by power of attorney duly executed and
filed with the Secretary or with a transfer agent or transfer clerk, and on
surrender of the certificate or certificates, if issued, for a like number of
shares of the same series, properly endorsed or accompanied by a duly executed
stock transfer power and the payment of all taxes thereon. Except as
otherwise provided by law, the Corporation shall be entitled to recognize the
exclusive right of a person in whose name any share or shares stand on the
record of stockholders as the owner of the share or shares for all purposes,
including, without limitation, the rights to receive dividends or other
distributions and to vote as the owner, and the Corporation shall not be bound
to recognize any equitable or legal claim to or interest in any such share or
shares on the part of any other person.
SECTION 4. Regulations. The Board of Directors may make any
additional rules and regulations, not inconsistent with these By-Laws, as it
may deem expedient concerning the issue, transfer and registration of
certificates for shares of a particular series of stock of the Corporation.
It may appoint, or authorize any officer or officers to appoint, one or more
transfer agents or one or more transfer clerks and one or more registrars and
may require all certificates for shares of stock to bear the signature or
signatures of any of them.
SECTION 5. Stolen, Lost, Destroyed or Mutilated Certificates. The
holder of any certificate representing shares of stock of the Corporation
shall immediately notify the Corporation of its theft, loss, destruction or
mutilation and the Corporation may issue a new certificate of stock in the
place of any certificate issued by it that has been alleged to have been
stolen, lost or destroyed or that shall have been mutilated. The Board may,
in its discretion, require the owner (or his legal representative) of a
stolen, lost, destroyed or mutilated certificate: to give to the Corporation
a bond in a sum, limited or unlimited, and in a form and with any surety or
sureties, as the Board in its absolute discretion shall determine, to
indemnify the Corporation against any claim that may be made against it on
account of the alleged theft, loss or destruction of any such certificate, or
issuance of a new certificate. Anything herein to the contrary
notwithstanding, the Board of Directors, in its absolute discretion, may
refuse to issue any such new certificate, except pursuant to legal proceedings
under the laws of the State of Maryland.
SECTION 6. Fixing of Record Date for Dividends, Distributions, etc.
The Board may fix, in advance, a date not
<PAGE>16
more than 90 (ninety) days preceding the date fixed for the payment of any
dividend or the making of any distribution or the allotment of rights to
subscribe for securities of the Corporation, or for the delivery of evidences
of rights or evidences of interests arising out of any change, conversion or
exchange of common stock or other securities, as the record date for the
determination of the stockholders entitled to receive any such dividend,
distribution, allotment, rights or interests, and in such case only the
stockholders of record at the time so fixed shall be entitled to receive such
dividend, distribution, allotment, rights or interests.
SECTION 7. Information to Stockholders and Others. Any stockholder
of the Corporation or his agent may inspect and copy during the Corporation's
usual business hours the Corporation's By-Laws, minutes of the proceedings of
its stockholders, annual statements of its affairs and voting trust agreements
on file at its principal office.
ARTICLE V
INDEMNIFICATION AND INSURANCE
SECTION 1. Indemnification of Directors and Officers. Any person
who was or is a party or is threatened to be made a party in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person is a
current or former director or officer of the Corporation, or is or was serving
while a director or officer of the Corporation at the request of the
Corporation as a director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust,
enterprise or employee benefit plan, shall be indemnified by the Corporation
against judgments, penalties, fines, excise taxes, settlements and reasonable
expenses (including attorneys' fees) actually incurred by such person in
connection with such action, suit or proceeding to the full extent permissible
under the Maryland General Corporation Law, the Securities Act of 1933 and the
Investment Company Act of 1940, as such statutes are now or hereinafter in
force, except that such indemnity shall not protect any such person against
any liability to the Corporation or any stockholder thereof to which such
person would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct
of his office ("disabling conduct").
<PAGE>17
SECTION 2. Advances. Any current or former director or officer of
the Corporation claiming indemnification within the scope of this Article V
shall be entitled to advances from the Corporation for payment of the
reasonable expenses incurred by him in connection with proceedings to which he
is a party in the manner and to the full extent permissible under the Maryland
General Corporation Law, the Securities Act of 1933 and the Investment Company
Act of 1940, as such statutes are now or hereafter in force; provided however,
that the person seeking indemnification shall provide to the Corporation a
written affirmation of his good faith belief that the standard of conduct
necessary for indemnification by the Corporation has been met and a written
undertaking to repay any such advance unless it is ultimately determined that
he is entitled to indemnification, and provided further that at least one of
the following additional conditions is met: (1) the person seeking
indemnification shall provide a security in form and amount acceptable to the
Corporation for his undertaking; (2) the Corporation is insured against losses
arising by reason of the advance; or (3) a majority of a quorum of directors
of the Corporation who are neither "interested persons" as defined in Section
2(a)(19) of the Investment Company Act of 1940, as amended, nor parties to the
proceeding ("disinterested non-party directors"), or independent legal
counsel, in a written opinion, shall determine, based on a review of facts
readily available to the Corporation at the time the advance is proposed to be
made, that there is reason to believe that the person seeking indemnification
will ultimately be found to be entitled to indemnification.
SECTION 3. Procedure. At the request of any current or former
director or officer, or any employee or agent whom the Corporation proposes to
indemnify, the Board of Directors shall determine, or cause to be determined,
in a manner consistent with the Maryland General Corporation Law, the
Securities Act of 1933 and the Investment Company Act of 1940, as such
statutes are now or hereafter in force, whether the standards required by this
Article V have been met; provided, however, that indemnification shall be made
only following: (1) a final decision on the merits by a court or other body
before whom the proceeding was brought that the person to be indemnified was
not liable by reason of disabling conduct or (2) in the absence of such a
decision, a reasonable determination, based upon a review of the facts, that
the person to be indemnified was not liable by reason of disabling conduct, by
(a) the vote of a majority of a quorum of disinterested non-party directors or
(b) an independent legal counsel in a written opinion.
<PAGE>18
SECTION 4. Indemnification of Employees and Agents. Employees and
agents who are not officers or directors of the Corporation may be
indemnified, and reasonable expenses may be advanced to such employees or
agents, in accordance with the procedures set forth in this Article V to the
extent permissible under the Investment Company Act of 1940, the Securities
Act of 1933 and the Maryland General Corporation Law, as such statutes are now
or hereafter in force, and to such further extent, consistent with the
foregoing, as may be provided by action of the Board of Directors or by
contract.
SECTION 5. Other Rights. The indemnification provided by this
Article V shall not be deemed exclusive of any other right, in respect of
indemification or otherwise, to which those seeking such indemnification may
be entitled under any insurance or other agreement, vote of stockholders or
disinterested directors or otherwise, both as to action by a director or
officer of the Corporation in his official capacity and as to action by such
person in another capacity while holding such office or position, and shall
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
SECTION 6. Insurance. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or who, while a
director, officer, employee or agent of the Corporation, is or was serving at
the request of the Corporation as a director, officer, partner, trustee,
employee, agent or fiduciary of another corporation, partnership, joint
venture, trust, enterprise or employee benefit plan, against any liability
asserted against and incurred by him in any such capacity, or arising out of
his status as such, provided that no insurance may be obtained by the
Corporation for liabilities against which it would not have the power to
indemnify him under this Article V or applicable law.
SECTION 7. Constituent, Resulting or Surviving Corporations. For
the purposes of this Article V, references to the "Corporation" shall include
all constituent corporations absorbed in a consolidation or merger as well the
resulting or surviving corporation so that any person who is or was a
director, officer, employee or agent of a constituent corporation or is or was
serving at the request of a constituent corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise shall stand in the same position under this Article V with
respect to the resulting or surviving corporation as he would if he had served
the resulting or surviving corporation in the same capacity.
<PAGE>19
ARTICLE VI
SEAL
The seal of the Corporation shall be circular in form and shall bear
the name of the Corporation, the year of its incorporation, the words
"Corporate Seal" and "Maryland" and any emblem or device approved by the Board
of Directors. The seal may be used by causing it or a facsimile to be
impressed or affixed or in any other manner reproduced, or by placing the word
"(seal)" adjacent to the signature of the authorized officer of the
Corporation.
ARTICLE VII
FISCAL YEAR
The Corporation's fiscal year shall be fixed by the Board of
Directors.
ARTICLE VIII
AMENDMENTS
These By-Laws may be amended or repealed by the affirmative vote of
a majority of the Board of Directors at any regular or special meeting of the
Board of Directors, subject to the requirements of the Investment Company Act
of 1940, as amended.
As adopted, May 13, 1992
<PAGE>1
NUMBER SHARES
_________ _______
Incorporated under the laws of the State of Maryland
WARBURG, PINCUS INSTITUTIONAL FUND, INC.--
International Equity Portfolio
THIS CERTIFIES that is the owner of
fully paid and non-assessable Shares of the above Corporation transferable
only on the books of the Corporation by the holder hereof in person or by duly
authorized Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and to be sealed with the Seal of the
Corporation.
Dated
Assistant Secretary President
<PAGE>2
The Corporation is authorized to issue two or more classes and/or series of
stock. The Corporation will furnish to any stockholder on request and without
charge a full statement of the designations and any preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the stock of each
class or series which the Corporation is authorized to issue and, if the
Corporation is authorized to issue any preferred or special class in series,
of the differences in the relative rights and preferences between the shares
of each series to the extent they have been set and the authority of the Board
of Directors to set the relative rights and preferences of subsequent series.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations. Additional abbreviations may
also be used though not in the list.
TEN COM as tenants in common
TEN ENT as tenants by the entireties
JT TEN as joint tenants with right of survivorship and not
as tenants in common
UNIF GIFT MIN ACT Custodian
(Minor)
under Uniform Gifts to Minors Act (State)
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
For value received, the undersigned hereby sells, assigns
and transfers unto
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
Shares
represented by the within Certificate, and hereby irrevocably constitutes and
appoints
Attorney to transfer the said
shares on the books of the within-named Corporation with full power of
substitution in the premises.
Dated,
In presence of
NOTICE: The signature to the assignment must correspond with the name as
wriitten upon the face of the certificate in every particular without
alteration or enlargement, or any change whatever.
<PAGE>3
NUMBER SHARES
_________ _______
Incorporated under the laws of the State of Maryland
WARBURG, PINCUS INSTITUTIONAL FUND, INC.--
Global Fixed Income Portfolio
THIS CERTIFIES that is the owner of
fully paid and non-assessable Shares of the above Corporation transferable
only on the books of the Corporation by the holder hereof in person or by duly
authorized Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and to be sealed with the Seal of the
Corporation.
Dated
Assistant Secretary President
<PAGE>4
The Corporation is authorized to issue two or more classes and/or series of
stock. The Corporation will furnish to any stockholder on request and without
charge a full statement of the designations and any preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the stock of each
class or series which the Corporation is authorized to issue and, if the
Corporation is authorized to issue any preferred or special class in series,
of the differences in the relative rights and preferences between the shares
of each series to the extent they have been set and the authority of the Board
of Directors to set the relative rights and preferences of subsequent series.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations. Additional abbreviations may
also be used though not in the list.
TEN COM as tenants in common
TEN ENT as tenants by the entireties
JT TEN as joint tenants with right of survivorship and not
as tenants in common
UNIF GIFT MIN ACT Custodian
(Minor)
under Uniform Gifts to Minors Act (State)
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
For value received, the undersigned hereby sells, assigns
and transfers unto
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
Shares
represented by the within Certificate, and hereby irrevocably constitutes and
appoints
Attorney to transfer the said
shares on the books of the within-named Corporation with full power of
substitution in the premises.
Dated,
In presence of
NOTICE: The signature to the assignment must correspond with the name as
wriitten upon the face of the certificate in every particular without
alteration or enlargement, or any change whatever.
<PAGE>5
NUMBER SHARES
_________ _______
Incorporated under the laws of the State of Maryland
WARBURG, PINCUS INSTITUTIONAL FUND, INC.--
Small Company Growth Portfolio
THIS CERTIFIES that is the owner of
fully paid and non-assessable Shares of the above Corporation transferable
only on the books of the Corporation by the holder hereof in person or by duly
authorized Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and to be sealed with the Seal of the
Corporation.
Dated
Assistant Secretary President
<PAGE>6
The Corporation is authorized to issue two or more classes and/or series of
stock. The Corporation will furnish to any stockholder on request and without
charge a full statement of the designations and any preferences, conversion
and other rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the stock of each
class or series which the Corporation is authorized to issue and, if the
Corporation is authorized to issue any preferred or special class in series,
of the differences in the relative rights and preferences between the shares
of each series to the extent they have been set and the authority of the Board
of Directors to set the relative rights and preferences of subsequent series.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations. Additional abbreviations may
also be used though not in the list.
TEN COM as tenants in common
TEN ENT as tenants by the entireties
JT TEN as joint tenants with right of survivorship and not
as tenants in common
UNIF GIFT MIN ACT Custodian
(Minor)
under Uniform Gifts to Minors Act (State)
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
For value received, the undersigned hereby sells, assigns
and transfers unto
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE
Shares
represented by the within Certificate, and hereby irrevocably constitutes and
appoints
Attorney to transfer the said
shares on the books of the within-named Corporation with full power of
substitution in the premises.
Dated,
In presence of
NOTICE: The signature to the assignment must correspond with the name as
wriitten upon the face of the certificate in every particular without
alteration or enlargement, or any change whatever.
<PAGE>1
INVESTMENT ADVISORY AGREEMENT
August 26, 1992
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue
New York, New York 10017-3147
Dear Sirs:
Warburg, Pincus Institutional Fund, Inc. (the "Fund"), a corporation
organized under the laws of the State of Maryland, is a mutual fund that
currently offers two managed investment portfolios, one of which is the
International Equity Portfolio (the "Portfolio"). The Fund on behalf of the
Portfolio herewith confirms its agreement with Warburg, Pincus Counsellors,
Inc. (the "Adviser") as follows:
1. Investment Description; Appointment
The Portfolio desires to employ its capital by investing and
reinvesting in investments of the kind and in accordance with the limitations
specified in the Fund's Articles of Incorporation, as may be amended from time
to time, and in the Fund's Prospectus and Statement of Additional Information
as from time to time in effect, and in such manner and to such extent as may
from time to time be approved by the Board of Directors of the Fund. Copies
of the Fund's Prospectus, Statement of Additional Information and Articles of
Incorporation, as may be amended from time to time, have been or will be
submitted to the Adviser. The Fund desires to employ and hereby appoints the
Adviser to act as investment adviser with respect to the Portfolio. The
Adviser accepts the appointment and agrees to furnish the services for the
compensation set forth below.
2. Services as Investment Adviser
Subject to the supervision and direction of the Board of Directors of
the Fund, the Adviser will (a) act in strict conformity with the Fund's
Articles of Incorporation, the Investment Company Act of 1940 and the
Investment Advisers Act of 1940, as the same may from time to time be amended,
(b) manage the Portfolio in accordance with the Portfolio's investment
objective and policies as stated in the Fund's Prospectus and Statement of
Additional Information as from time to time in effect, (c) make investment
decisions for the Portfolio and (d) place purchase and sale orders for
securities on behalf of the
<PAGE>2
Portfolio. In providing those services, the Adviser will provide investment
research and supervision of the Portfolio's investments and conduct a
continual program of investment, evaluation and, if appropriate, sale and
reinvestment of the Portfolio's assets. In addition, the Adviser will furnish
the Portfolio with whatever statistical information the Portfolio may
reasonably request with respect to the securities that the Portfolio may hold
or contemplate purchasing.
3. Brokerage
In executing transactions for the Portfolio and selecting brokers or
dealers, the Adviser will use its best efforts to seek the best overall terms
available. In assessing the best overall terms available for any portfolio
transaction, the Adviser will consider all factors it deems relevant
including, but not limited to, breadth of the market in the security, the
price of the security, the financial condition and execution capability of the
broker or dealer and the reasonableness of any commission for the specific
transaction and for transactions executed through the broker or dealer in the
aggregate. In selecting brokers or dealers to execute a particular
transaction and in evaluating the best overall terms available, the Adviser
may consider the brokerage and research services (as those terms are defined
in Section 28(e) of the Securities Exchange Act of 1934) provided to the
Portfolio and/or other accounts over which the Adviser or an affiliate
exercises investment discretion.
4. Information Provided to the Fund
The Adviser will keep the Fund informed of developments materially
affecting the Portfolio, and will, on its own initiative, furnish the Fund
from time to time with whatever information the Adviser believes is
appropriate for this purpose.
5. Standard of Care
The Adviser shall exercise its best judgment in rendering the services
listed in paragraphs 2, 3 and 4 above. The Adviser shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the
Portfolio in connection with the matters to which this Agreement relates,
provided that nothing herein shall be deemed to protect or purport to protect
the Adviser against any liability to the Fund or to shareholders of the
Portfolio to which the Adviser would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of
its duties or by reason of the Adviser's reckless disregard of its obligations
and duties under this Agreement.
<PAGE>3
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
the Portfolio will pay the Adviser a monthly fee calculated at an annual rate
of .80% of the Portfolio's average daily net assets. The fee for the period
from the date the Fund's initial registration statement is declared effective
by the Securities and Exchange Commission to the end of the month during which
the initial registration statement is declared effective shall be prorated
according to the proportion that such period bears to the full monthly period.
Upon any termination of this Agreement before the end of a month, the fee for
such part of that month shall be prorated according to the proportion that
such period bears to the full monthly period and shall be payable upon the
date of termination of this Agreement. For the purpose of determining fees
payable to the Adviser, the value of the Portfolio's net assets shall be
computed at the times and in the manner specified in the Fund's Prospectus or
Statement of Additional Information as from time to time in effect.
7. Expenses
The Adviser will bear all expenses in connection with the performance
of its services under this Agreement. The Portfolio will bear its
proportionate share of certain other expenses to be incurred in its operation,
including: investment advisory and administration fees; taxes, interest,
brokerage fees and commissions, if any; fees of Directors of the Fund who are
not officers, directors, or employees of the Adviser, Provident National Bank
or any of their affiliates; fees of any pricing service employed to value
shares of the Portfolio; Securities and Exchange Commission fees and state
Blue Sky qualification fees; charges of custodians and transfer and dividend
disbursing agents; insurance premiums; outside auditing and legal expenses;
costs of maintenance of the Fund's existence; costs attributable to investor
services, including, without limitation, telephone and personnel expenses;
costs of preparing and printing prospectuses and statements of additional
information for regulatory purposes and for distribution to existing
shareholders; costs of shareholders' reports and meetings of the shareholders
of the Fund and of the officers or Board of Directors of the Fund; and any
extraordinary expenses.
The Portfolio will be responsible for nonrecurring expenses which may
arise, including costs of litigation to which the Portfolio is a party and of
indemnifying officers and Directors of the Fund with respect to such
litigation and other expenses as determined by the Directors.
<PAGE>4
8. Reimbursement to the Fund
If in any fiscal year the aggregate expenses of the Portfolio
(including fees pursuant to this Agreement and the Portfolio's administration
agreement, but excluding interest, taxes, brokerage and, if permitted by state
securities commissions, extraordinary expenses) exceed the expense limitation
of any state having jurisdiction over the Portfolio, the Adviser will
reimburse the Portfolio for such excess expense. The Adviser's expense
reimbursement obligation will be limited to the amount of its fees received
pursuant to this Agreement. Such expense reimbursement, if any, will be
estimated, reconciled and paid on a monthly basis.
9. Services to Other Companies or Accounts
The Fund understands that the Adviser now acts, will continue to act
and may act in the future as investment adviser to fiduciary and other managed
accounts and to one or more other investment companies or series of investment
companies, and the Fund has no objection to the Adviser so acting, provided
that whenever the Portfolio and one or more other accounts or investment
companies or portfolios advised by the Adviser have available funds for
investment, investments suitable and appropriate for each will be allocated in
accordance with a formula believed to be equitable to each entity. The Fund
recognizes that in some cases this procedure may adversely affect the size of
the position obtainable for the Portfolio. In addition, the Fund understands
that the persons employed by the Adviser to assist in the performance of the
Adviser's duties hereunder will not devote their full time to such service and
nothing contained herein shall be deemed to limit or restrict the right of the
Adviser or any affiliate of the Adviser to engage in and devote time and
attention to other businesses or to render services of whatever kind or
nature.
10. Term of Agreement
This Agreement shall continue until April 17, 1994 and thereafter shall
continue automatically for successive annual periods, provided such
continuance is specifically approved at least annually by (a) the Board of
Directors of the Fund or (b) a vote of a "majority" (as defined in the
Investment Company Act of 1940) of the Portfolio's outstanding voting
securities, provided that in either event the continuance is also approved by
a majority of the Board of Directors who are not "interested persons" (as
defined in said Act) of any party to this Agreement, by vote cast in person at
a meeting called for the purpose of voting on such approval. This Agreement
is terminable, without
<PAGE>5
penalty, on 60 days' written notice, by the Board of Directors of the Fund or
by vote of holders of a majority of the Portfolio's shares, or upon 90 days'
written notice, by the Adviser. This Agreement will also terminate
automatically in the event of its assignment (as defined in said Act).
11. Representation by the Fund
The Fund represents that a copy of its Articles of Incorporation, filed
on May 13, 1992, together with all amendments thereto, is on file in the
Department of Assessments and Taxation of the State of Maryland.
12. Miscellaneous
The Fund recognizes that directors, officers and employees of the
Adviser may from time to time serve as directors, trustees, officers and
employees of corporations and business trusts (including other investment
companies) and that such other corporations and trusts may include the name
"Warburg, Pincus" as part of their names, and that the Adviser or its
affiliates may enter into advisory or other agreements with such other
corporations and trusts. If the Adviser ceases to act as the investment
adviser of the Portfolio's shares, the Fund agrees that, at the Adviser's
request, the Fund's license to use the words "Warburg, Pincus" or any
variation thereof will terminate and that the Fund will take all necessary
action to change the name of the Fund to a name not including the words
"Warburg, Pincus" or any variation thereof.
Please confirm that the foregoing is in accordance with your
understanding by indicating your acceptance hereof at the place below
indicated, whereupon it shall become a binding agreement between us.
Very truly yours,
WARBURG, PINCUS INSTITUTIONAL
FUND, INC.
By: /s/ Arnold M. Reichman
President
Accepted:
WARBURG, PINCUS COUNSELLORS, INC.
By: /s/ Jamie Stockel Paley
Authorized Officer
<PAGE>1
INVESTMENT ADVISORY AGREEMENT
, 1995
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue
New York, New York 10017-3147
Dear Sirs:
Warburg, Pincus Institutional Fund, Inc., a corporation organized
under the laws of the State of Maryland (the "Fund"), is an open-end,
management investment company that currently offers three portfolios, one of
which is the Small Company Growth Portfolio (the "Portfolio"). The Fund on
behalf of the Portfolio herewith confirms its agreement with Warburg, Pincus
Counsellors, Inc. (the "Adviser") as follows:
1. Investment Description; Appointment
The Fund desires to employ the capital of the Portfolio by investing
and reinvesting in investments of the kind and in accordance with the
limitations specified in its Articles of Incorporation, as may be amended from
time to time, and in its Prospectus and Statement of Additional Information
relating to the Portfolio as from time to time in effect, and in such manner
and to such extent as may from time to time be approved by the Board of
Directors of the Fund. Copies of the Fund's Prospectus and Statement of
Additional Information relating to the Portfolio and Articles of
Incorporation, as each may be amended from time to time, have been or will be
submitted to the Adviser. The Fund desires to employ and hereby appoints the
Adviser to act as investment adviser to the Portfolio. The Adviser accepts
the appointment and agrees to furnish the services for the compensation set
forth below.
2. Services as Investment Adviser
Subject to the supervision and direction of the Board of Directors
of the Fund, the Adviser will (a) act in strict conformity with the Fund's
Articles of Incorporation, the Investment Company Act of 1940 and the
Investment Advisers Act of 1940, as the same may from time to time be amended,
(b) manage the Portfolio in accordance with the Portfolio's investment
objective and policies as stated in the Fund's Prospectus and Statement of
Additional Information relating to the Portfolio as from time to time in
effect, (c) make investment decisions for the Portfolio and (d) place purchase
and sale orders for securities on behalf of the Portfolio. In providing those
services, the Adviser will provide investment research and supervision of the
Portfolio's investments and conduct a
<PAGE>2
continual program of investment, evaluation and, if appropriate, sale and
reinvestment of the Portfolio's assets. In addition, the Adviser will furnish
the Fund with whatever statistical information the Fund may reasonably request
with respect to the securities that the Portfolio may hold or contemplate
purchasing.
3. Brokerage
In executing transactions for the Portfolio and selecting brokers or
dealers, the Adviser will use its best efforts to seek the best overall terms
available. In assessing the best overall terms available for any portfolio
transaction, the Adviser will consider all factors it deems relevant
including, but not limited to, breadth of the market in the security, the
price of the security, the financial condition and execution capability of the
broker or dealer and the reasonableness of any commission for the specific
transaction and for transactions executed through the broker or dealer in the
aggregate. In selecting brokers or dealers to execute a particular
transaction and in evaluating the best overall terms available, the Adviser
may consider the brokerage and research services (as those terms are defined
in Section 28(e) of the Securities Exchange Act of 1934, as the same may from
time to time be amended) provided to the Portfolio and/or other accounts over
which the Adviser or an affiliate exercises investment discretion.
4. Information Provided to the Fund
The Adviser will keep the Fund informed of developments materially
affecting the Portfolio, and will, on its own initiative, furnish the Fund
from time to time with whatever information the Adviser believes is
appropriate for this purpose.
5. Standard of Care
The Adviser shall exercise its best judgment in rendering the
services listed in paragraphs 2, 3 and 4 above. The Adviser shall not be
liable for any error of judgment or mistake of law or for any loss suffered by
the Fund or the Portfolio in connection with the matters to which this
Agreement relates, provided that nothing herein shall be deemed to protect or
purport to protect the Adviser against any liability to the Fund or the
Portfolio or to shareholders of the Fund or the Portfolio to which the Adviser
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence on its part in the performance of its duties or by reason of
the Adviser's reckless disregard of its obligations and duties under this
Agreement.
<PAGE>3
6. Compensation
In consideration of the services rendered pursuant to this
Agreement, the Portfolio will pay the Adviser an annual fee calculated at an
annual rate of .90% of the Portfolio's average daily net assets. The fee for
the period from the date the Fund's registration statement amendment relating
to the Portfolio becomes effective by the Securities and Exchange Commission
to the end of the year during which such registration statement amendment
becomes effective shall be prorated according to the proportion that such
period bears to the full yearly period. Upon any termination of this
Agreement before the end of a year, the fee for such part of that year shall
be prorated according to the proportion that such period bears to the full
yearly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to the Adviser, the
value of the Portfolio's net assets shall be computed at the times and in the
manner specified in the Fund's Prospectus or Statement of Additional
Information relating to the Portfolio as from time to time in effect.
7. Expenses
The Adviser will bear all expenses in connection with the
performance of its services under this Agreement. The Portfolio will bear its
proportionate share of certain other expenses to be incurred in its operation,
including: investment advisory and administration fees; taxes, interest,
brokerage fees and commissions, if any; fees of Directors of the Fund who are
not officers, directors, or employees of the Adviser or any of its affiliates;
fees of any pricing service employed to value shares of the Portfolio;
Securities and Exchange Commission fees and state blue sky qualification fees;
charges of custodians and transfer and dividend disbursing agents; the
Portfolio's proportionate share of insurance premiums; outside auditing and
legal expenses; costs of maintenance of the Portfolio's existence; costs
attributable to investor services, including, without limitation, telephone
and personnel expenses; costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders; costs of shareholders' reports and
meetings of the shareholders of the Portfolio and of the officers or Board of
Directors of the Fund; and any extraordinary expenses.
The Portfolio will be responsible for nonrecurring expenses which
may arise, including costs of litigation to which the Portfolio is a party and
of indemnifying officers and Directors of the Fund with respect to such
litigation and other expenses as determined by the Directors.
<PAGE>4
8. Reimbursement to the Fund
If in any fiscal year the aggregate expenses of the Portfolio
(including fees pursuant to this Agreement and the Portfolio's administration
agreements, but excluding interest, taxes, brokerage and, if permitted by
state securities commissions, extraordinary expenses) exceed the expense
limitation of any state having jurisdiction over the Portfolio, the Adviser
will reimburse the Portfolio for such excess expense. The Adviser's expense
reimbursement obligation will be limited to the amount of its fees received
pursuant to this Agreement. Such expense reimbursement, if any, will be
estimated, reconciled and paid on a monthly basis.
9. Services to Other Companies or Accounts
The Fund understands that the Adviser now acts, will continue to act
and may act in the future as investment adviser to fiduciary and other managed
accounts and to one or more other investment companies or series of investment
companies, and the Fund has no objection to the Adviser so acting, provided
that whenever the Portfolio and one or more other accounts or investment
companies or portfolios advised by the Adviser have available funds for
investment, investments suitable and appropriate for each will be allocated in
accordance with a formula believed to be equitable to each entity. The Fund
recognizes that in some cases this procedure may adversely affect the size of
the position obtainable for the Portfolio. In addition, the Fund understands
that the persons employed by the Adviser to assist in the performance of the
Adviser's duties hereunder will not devote their full time to such service and
nothing contained herein shall be deemed to limit or restrict the right of the
Adviser or any affiliate of the Adviser to engage in and devote time and
attention to other businesses or to render services of whatever kind or
nature.
10. Term of Agreement
This Agreement shall continue until April 17, 1996 and thereafter
shall continue automatically for successive annual periods, provided such
continuance is specifically approved at least annually by (a) the Board of
Directors of the Fund or (b) a vote of a "majority" (as defined in the
Investment Company Act of 1940) of the Portfolio's outstanding voting
securities, provided that in either event the continuance is also approved by
a majority of the Board of Directors who are not "interested persons" (as
defined in said Act) of any party to this Agreement, by vote cast in person at
a meeting called for the purpose of voting on such approval. This Agreement
is terminable, without penalty, on 60 days' written notice, by the Board of
Directors of the Fund or by vote of holders of a majority of the Portfolio's
shares, or upon 90 days' written notice, by the Adviser. This
<PAGE>5
Agreement will also terminate automatically in the event of its assignment (as
defined in said Act).
11. Representation by the Fund
The Fund represents that a copy of its Articles of Incorporation
filed on May 13, 1992, together with all amendments thereto, is on file in the
Department of Assessments and Taxation of the State of Maryland.
12. Miscellaneous
The Fund recognizes that directors, officers and employees of the
Adviser may from time to time serve as directors, trustees, officers and
employees of corporations and business trusts (including other investment
companies) and that such other corporations and trusts may include the name
"Warburg, Pincus" as part of their names, and that the Adviser or its
affiliates may enter into advisory or other agreements with such other
corporations and trusts. If the Adviser ceases to act as the investment
adviser of the Portfolio's shares, the Fund agrees that, at the Adviser's
request, the Fund's license to use the words "Warburg, Pincus" will terminate
and that the Fund will take all necessary action to change the name of the
Fund and the Portfolio to names not including the words "Warburg, Pincus."
Please confirm that the foregoing is in accordance with your
understanding by indicating your acceptance hereof at the place below
indicated, whereupon it shall become a binding agreement between us.
Very truly yours,
WARBURG, PINCUS INSTITUTIONAL
FUND, INC.
By:
Name:
Title:
Accepted:
WARBURG, PINCUS COUNSELLORS, INC.
By:
Name:
Title:
<PAGE>1
INVESTMENT ADVISORY AGREEMENT
August 26, 1992
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue
New York, New York 10017-3147
Dear Sirs:
Warburg, Pincus Institutional Fund, Inc. (the "Fund"), a corporation
organized under the laws of the State of Maryland, is a mutual fund that
currently offers two managed investment portfolios, one of which is the Global
Fixed Income Portfolio (the "Portfolio"). The Fund on behalf of the Portfolio
herewith confirms its agreement with Warburg, Pincus Counsellors, Inc. (the
"Adviser") as follows:
1. Investment Description; Appointment
The Portfolio desires to employ its capital by investing and
reinvesting in investments of the kind and in accordance with the limitations
specified in the Fund's Articles of Incorporation, as may be amended from time
to time, and in the Fund's Prospectus and Statement of Additional Information
as from time to time in effect, and in such manner and to such extent as may
from time to time be approved by the Board of Directors of the Fund. Copies
of the Fund's Prospectus, Statement of Additional Information and Articles of
Incorporation, as may be amended from time to time, have been or will be
submitted to the Adviser. The Fund desires to employ and hereby appoints the
Adviser to act as investment adviser with respect to the Portfolio. The
Adviser accepts the appointment and agrees to furnish the services for the
compensation set forth below.
2. Services as Investment Adviser
Subject to the supervision and direction of the Board of Directors of
the Fund, the Adviser will (a) act in strict conformity with the Fund's
Articles of Incorporation, the Investment Company Act of 1940 and the
Investment Advisers Act of 1940, as the same may from time to time be amended,
(b) manage the Portfolio in accordance with the Portfolio's investment
objective and policies as stated in the Fund's Prospectus and Statement of
Additional Information as from time to time in effect, (c) make investment
decisions for the Portfolio and (d) place purchase and sale orders for
securities on behalf of the Portfolio. In providing those services, the
Adviser will provide
<PAGE>2
investment research and supervision of the Portfolio's investments and conduct
a continual program of investment, evaluation and, if appropriate, sale and
reinvestment of the Portfolio's assets. In addition, the Adviser will furnish
the Portfolio with whatever statistical information the Portfolio may
reasonably request with respect to the securities that the Portfolio may hold
or contemplate purchasing.
3. Brokerage
In executing transactions for the Portfolio and selecting brokers or
dealers, the Adviser will use its best efforts to seek the best overall terms
available. In assessing the best overall terms available for any portfolio
transaction, the Adviser will consider all factors it deems relevant
including, but not limited to, breadth of the market in the security, the
price of the security, the financial condition and execution capability of the
broker or dealer and the reasonableness of any commission for the specific
transaction and for transactions executed through the broker or dealer in the
aggregate. In selecting brokers or dealers to execute a particular
transaction and in evaluating the best overall terms available, the Adviser
may consider the brokerage and research services (as those terms are defined
in Section 28(e) of the Securities Exchange Act of 1934) provided to the
Portfolio and/or other accounts over which the Adviser or an affiliate
exercises investment discretion.
4. Information Provided to the Fund
The Adviser will keep the Fund informed of developments materially
affecting the Portfolio, and will, on its own initiative, furnish the Fund
from time to time with whatever information the Adviser believes is
appropriate for this purpose.
5. Standard of Care
The Adviser shall exercise its best judgment in rendering the services
listed in paragraphs 2, 3 and 4 above. The Adviser shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the
Portfolio in connection with the matters to which this Agreement relates,
provided that nothing herein shall be deemed to protect or purport to protect
the Adviser against any liability to the Fund or to shareholders of the
Portfolio to which the Adviser would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of the Adviser's reckless disregard of
its obligations and duties under this Agreement.
<PAGE>3
6. Compensation
In consideration of the services rendered pursuant to this Agreement,
the Portfolio will pay the Adviser a monthly fee calculated at an annual rate
of .65% of the Portfolio's average daily net assets. The fee for the period
from the date the Fund's initial registration statement is declared effective
by the Securities and Exchange Commission to the end of the month during which
the initial registration statement is declared effective shall be prorated
according to the proportion that such period bears to the full monthly period.
Upon any termination of this Agreement before the end of a month, the fee for
such part of that month shall be prorated according to the proportion that
such period bears to the full monthly period and shall be payable upon the
date of termination of this Agreement. For the purpose of determining fees
payable to the Adviser, the value of the Portfolio's net assets shall be
computed at the times and in the manner specified in the Fund's Prospectus or
Statement of Additional Information as from time to time in effect.
7. Expenses
The Adviser will bear all expenses in connection with the performance
of its services under this Agreement. The Portfolio will bear its
proportionate share of certain other expenses to be incurred in its operation,
including: investment advisory and administration fees; taxes, interest,
brokerage fees and commissions, if any; fees of Directors of the Fund who are
not officers, directors, or employees of the Adviser, Provident National Bank
or any of their affiliates; fees of any pricing service employed to value
shares of the Portfolio; Securities and Exchange Commission fees and state
Blue Sky qualification fees; charges of custodians and transfer and dividend
disbursing agents; insurance premiums; outside auditing and legal expenses;
costs of maintenance of the Fund's existence; costs attributable to investor
services, including, without limitation, telephone and personnel expenses;
costs of preparing and printing prospectuses and statements of additional
information for regulatory purposes and for distribution to existing
shareholders; costs of shareholders' reports and meetings of the shareholders
of the Fund and of the officers or Board of Directors of the Fund; and any
extraordinary expenses.
The Portfolio will be responsible for nonrecurring expenses which may
arise, including costs of litigation to which the Portfolio is a party and of
indemnifying officers and Directors of the Fund with respect to such
litigation and other expenses as determined by the Directors.
<PAGE>4
8. Reimbursement to the Fund
If in any fiscal year the aggregate expenses of the Portfolio
(including fees pursuant to this Agreement and the Portfolio's administration
agreement, but excluding interest, taxes, brokerage and, if permitted by state
securities commissions, extraordinary expenses) exceed the expense limitation
of any state having jurisdiction over the Portfolio, the Adviser will
reimburse the Portfolio for such excess expense. The Adviser's expense
reimbursement obligation will be limited to the amount of its fees received
pursuant to this Agreement. Such expense reimbursement, if any, will be
estimated, reconciled and paid on a monthly basis.
9. Services to Other Companies or Accounts
The Fund understands that the Adviser now acts, will continue to act
and may act in the future as investment adviser to fiduciary and other managed
accounts and to one or more other investment companies or series of investment
companies, and the Fund has no objection to the Adviser so acting, provided
that whenever the Portfolio and one or more other accounts or investment
companies or portfolios advised by the Adviser have available funds for
investment, investments suitable and appropriate for each will be allocated in
accordance with a formula believed to be equitable to each entity. The Fund
recognizes that in some cases this procedure may adversely affect the size of
the position obtainable for the Portfolio. In addition, the Fund understands
that the persons employed by the Adviser to assist in the performance of the
Adviser's duties hereunder will not devote their full time to such service and
nothing contained herein shall be deemed to limit or restrict the right of the
Adviser or any affiliate of the Adviser to engage in and devote time and
attention to other businesses or to render services of whatever kind or
nature.
10. Term of Agreement
This Agreement shall continue until April 17, 1994 and thereafter shall
continue automatically for successive annual periods, provided such
continuance is specifically approved at least annually by (a) the Board of
Directors of the Fund or (b) a vote of a "majority" (as defined in the
Investment Company Act of 1940) of the Portfolio's outstanding voting
securities, provided that in either event the continuance is also approved by
a majority of the Board of Directors who are not "interested persons" (as
defined in said Act) of any party to this Agreement, by vote cast in person at
a meeting called for the purpose of voting on such approval. This Agreement
is terminable, without penalty, on 60 days' written notice, by the Board of
Directors of
<PAGE>5
the Fund or by vote of holders of a majority of the Portfolio's shares, or
upon 90 days' written notice, by the Adviser. This Agreement will also
terminate automatically in the event of its assignment (as defined in said
Act).
11. Representation by the Fund
The Fund represents that a copy of its Articles of Incorporation, filed
on May 13, 1992, together with all amendments thereto, is on file in the
Department of Assessments and Taxation of the State of Maryland.
12. Miscellaneous
The Fund recognizes that directors, officers and employees of the
Adviser may from time to time serve as directors, trustees, officers and
employees of corporations and business trusts (including other investment
companies) and that such other corporations and trusts may include the name
"Warburg, Pincus" as part of their names, and that the Adviser or its
affiliates may enter into advisory or other agreements with such other
corporations and trusts. If the Adviser ceases to act as the investment
adviser of the Portfolio's shares, the Fund agrees that, at the Adviser's
request, the Fund's license to use the words "Warburg, Pincus" or any
variation thereof will terminate and that the Fund will take all necessary
action to change the name of the Fund to a name not including the words
"Warburg, Pincus" or any variation thereof.
Please confirm that the foregoing is in accordance with your
understanding by indicating your acceptance hereof at the place below
indicated, whereupon it shall become a binding agreement between us.
Very truly yours,
WARBURG, PINCUS INSTITUTIONAL
FUND, INC.
By: /s/ Arnold M. Reichman
President
Accepted:
WARBURG, PINCUS COUNSELLORS, INC.
By: /s/ Jamie Stockel Paley
Authorized Officer
<PAGE>1
<PAGE>1
DISTRIBUTION AGREEMENT
, 1995
Counsellors Securities Inc.
466 Lexington Avenue
New York, New York 10017-3147
Dear Sirs :
This is to confirm that Counsellors Securities Inc. shall be the
distributor of shares of common stock, par value $.001 per share, issued by
the Small Company Growth Portfolio of Warburg, Pincus Institutional Fund, Inc.
(the "Fund") under terms of the Distribution Agreement between the Fund and
Counsellors Securities Inc., dated , 1992.
Please confirm that the foregoing is in accordance with your
understanding by indicating your acceptance hereof at the place below
indicated, whereupon it shall become a binding agreement between us.
Very truly yours,
WARBURG, PINCUS INSTITUTIONAL
FUND, INC.
By:
Name:
Title:
Accepted:
COUNSELLORS SECURITIES INC.
By:
Name:
Title:
<PAGE>1
TRANSFER AGENCY AND SERVICE AGREEMENT
, 1995
State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
Dear Sirs :
In accordance with Article 10, 10.01 of the Transfer Agency and
Service Agreement, dated October 8, 1993 (the "Agreement"), between Warburg,
Pincus Institutional Fund, Inc. (the "Fund") and State Street Bank and Trust
Company (the "Bank"), the Fund hereby notifies the Bank of the Fund's desire
to have the Bank render services as transfer agent under the terms of the
Agreement with respect to the Small Company Growth Portfolio, a series of
Shares of the Fund.
Please confirm that the foregoing is in accordance with your
understanding by indicating your acceptance hereof at the place below
indicated, whereupon it shall become a binding agreement between us.
Very truly yours,
WARBURG, PINCUS INSTITUTIONAL
FUND, INC.
By:
Name:
Title:
Accepted:
STATE STREET BANK AND TRUST COMPANY
By:
Name:
Title:
<PAGE>1
[LETTERHEAD OF WILLKIE FARR & GALLAGHER]
August 17, 1995
Warburg, Pincus Institutional Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3147
Ladies and Gentlemen:
We have acted as counsel to Warburg, Pincus Institutional Fund, Inc. (the
"Fund"), a corporation organized under the laws of the State of Maryland, in
connection with the Fund's establishment of a new series, the Small Company
Growth Portfolio (the "Portfolio").
We have examined copies of the Articles of Incorporation, as amended or
supplemented (the "Articles"), and By-laws of the Fund, the Fund's prospectus
and statement of additional information (the "Statement of Additional
Information") included in its Registration Statement, as amended, on Form N-
1A, Securities Act File No. 33-47880 and Investment Company Act File No. 811-
6670 (the "Registration Statement"), all resolutions adopted by the Fund's
Board of Directors (the "Board") at the Portfolio's organizational meeting
held on July 25, 1995, consents of the Board and other records, documents and
papers that we have deemed necessary for the purpose of this opinion. We have
also examined such other statutes and authorities as we have deemed necessary
to form a basis for the opinion hereinafter expressed.
In our examination of material, we have assumed the genuineness of all
signatures and the conformity to original documents of all copies submitted to
us. As to various questions of fact material to our opinion, we have relied
upon statements and certificates of officers and representatives of the Fund
and others.
Based upon the foregoing, we are of the opinion that the shares of the
Portfolio, when issued, sold and paid for as contemplated by the Fund's
Articles and By-laws and the
<PAGE>2
Registration Statement, will be validly and legally issued and will be fully
paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, to the reference to us in the Statement of Additional
Information and to the filing of this opinion as an exhibit to any application
made by or on behalf of the Fund or any distributor or dealer in connection
with the registration or qualification of the Fund or the shares of the
Portfolio under the securities laws of any state or other jurisdiction.
We are members of the Bar of the State of New York only and do not opine as to
the laws of any jurisdiction other than the laws of the State of New York and
the laws of the United States, and the opinions set forth above are,
accordingly, limited to the laws of those jurisdictions.
Very truly yours,
/s/ WILLKIE FARR & GALLAGHER
60530181
<PAGE>1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the following with respect to Post-Effective Amendment No. 4
pursuant to the Securities Act of 1933, as amended, to the Registration
Statement on Form N-1A of Warburg, Pincus Institutional Fund, Inc. (File No.
33-47880):
1. The inclusion of our report dated August 11, 1995 on our audit
of the Statement of Assets and Liabilities of Warburg, Pincus
Institutional Fund, Inc. - Small Company Growth Portfolio as of
August 8, 1995.
2. The inclusion of our report dated February 14, 1995 on our
audit of the Statement of Assets and Liabilities of Warburg,
Pincus Institutional Fund, Inc. - Global Fixed Income
Portfolio.
3. The inclusion of our report dated December 12, 1994 on our
audit of the financial statements and financial highlights of
Warburg, Pincus Institutional Fund, Inc. - International Equity
Portfolio.
4. The reference to our Firm under the captions "Financial
Highlights" and "Auditors and Counsel" in this filing.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
August 17, 1995
<PAGE>1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" in the Prospectus and "Auditors and Counsel" in the Statement of
Additional Information and to the incorporation by reference of our report
dated December 15, 1992, in this Registration Statement (Form N-1A No.
33-47880) of Warburg Pincus Institutional Fund, Inc.
ERNST & YOUNG LLP
New York, New York
August 17, 1995
<PAGE>1
PURCHASE AGREEMENT
Warburg, Pincus Institutional Fund, Inc. (the "Fund"), a corporation
organized under the laws of the State of Maryland, and E.M. Warburg, Pincus &
Co., Inc. ("EMW") hereby agree as follows:
1. The Fund offers EMW and EMW hereby purchases 9,900 shares of its
International Equity Portfolio having a par value $.001 per share and 100
shares of its Global Fixed Income Portfolio having a par value of $.001 per
share (the "Shares") at a price of $10.00 per Share (the "Initial Shares").
EMW hereby acknowledges receipt of one certificate representing 9,900 Initial
Shares of the International Equity Portfolio and one certificate representing
500 Initial Shares of the Global Fixed Income Portfolio and the Fund hereby
acknowledges receipt from EMW of $100,000.00 in full payment for the Initial
Shares.
2. EMW represents and warrants to the Fund that the Initial Shares are
being acquired for investment purposes and not for the purpose of distributing
them.
3. EMW agrees that if any holder of the Initial Shares redeems any
Initial Share in either Portfolio before five years after the date upon which
such Portfolio commences its investment activities, the redemption proceeds
will be reduced by the amount of unamortized organizational expenses, in the
same proportion as the number of Initial Shares being redeemed bears to the
number
<PAGE>2
of Initial Shares outstanding at the time of redemption. The parties hereby
acknowledge that any Shares acquired by EMW other than the Initial Shares have
not been acquired to fulfill the requirements of Section 14 of the Investment
Company Act of 1940 and, if redeemed, their redemption proceeds will not be
subject to reduction based on the unamortized organizational expenses of the
respective Portfolio.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the 28th day of July, 1992.
WARBURG, PINCUS INSTITUTIONAL
FUND, INC.
By: /s/ Jamie Stockel Paley
ATTEST:
/s/ Karen Amato
E.M. WARBURG, PINCUS & CO., INC.
By: /s/ Arnold M. Reichman
ATTEST:
/s/ Karen Amato
<PAGE>1
PURCHASE AGREEMENT
Warburg, Pincus Institutional Fund, Inc. (the "Fund"), a corporation
organized under the laws of the State of Maryland, with respect to the Small
Company Growth Portfolio (the "Portfolio") and Warburg, Pincus Counsellors,
Inc. ("Counsellors") hereby agree as follows:
1. The Fund offers Counsellors and Counsellors hereby purchases
100 shares of common stock of the Portfolio, having a par value of $.001 per
share, at a price of $10.00 per Share (the "Initial Shares"). Counsellors
hereby acknowledges receipt of a certificate representing the Initial Shares,
and the Fund hereby acknowledges receipt from Counsellors of $1,000.00 in full
payment for the Initial Shares.
2. Counsellors represents and warrants to the Fund that the
Initial Shares are being acquired for investment purposes and not for the
purpose of distribution.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day of , 1995.
WARBURG, PINCUS INSTITUTIONAL
FUND, INC.
By:
Name:
Title:
ATTEST:
<PAGE>2
WARBURG, PINCUS COUNSELLORS, INC.
By:
Name:
Title:
ATTEST:
<PAGE>1
Schedule 16 Calculations
International Equity Portfolio For the Period January 1, 1995 to April 30,
1995
Aggregate Total Return With Waivers:
(9,106 - 10,000)
- - - - - - - -- = -8.94%
10,000
Aggregate Total Return Without Waivers:
(9,100 - 10,000)
- - - - - - - -- = -9.01%
10,000
Total return calculations appearing in the statement of additional information
for other periods are incorporated by reference to Post-Effective Amendment
No. 3 to Registrant's Registration Statement on Form N-1A, filed with the
Securities and Exchange Commission on February 28, 1995.
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<NAME> WARBURG PINCUS INSTITUTIONAL FUND, INC.
<S> <C>
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<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> APR-30-1995
<INVESTMENTS-AT-COST> 361306297
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<GROSS-EXPENSE> 1921037
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