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[Logo]
ANNUAL REPORT
OCTOBER 31, 1995
[ ] WARBURG PINCUS INSTITUTIONAL FUND, INC. --
INTERNATIONAL EQUITY PORTFOLIO
Prospectuses containing more complete information, including management fees and
expenses and, where applicable, the special considerations and risks associated
with international investing, may be obtained by calling 1-800-257-5614 or by
writing to Warburg Pincus Funds, P.O. Box 9030, Boston, MA 02205-9030. Investors
should read the prospectus carefully before investing.
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WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
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December 8, 1995
Dear Shareholder:
The objective of Warburg Pincus Institutional Fund -- International Equity
Portfolio (the 'Portfolio') is long-term capital appreciation. The Portfolio
aims to tap into the strong growth potential of today's world stock markets by
investing primarily in companies whose principal business activities and
interests are outside the United States.
For the 12 months ended October 31, 1995, the Portfolio fell 2.83%, vs.
losses of 0.61% in the Lipper International Fund Index and 0.37% in the Morgan
Stanley Europe, Australia and Far East ('EAFE') Index. Exposure to emerging
markets (the Lipper Emerging Markets Fund Index fell 18.35% during the period)
accounted for much of the Portfolio's underperformance. Shareholders should
note, though, that while the Portfolio underperformed the EAFE Index for the
fiscal year, its longer-term record is superior to that of the Index. From its
inception on September 1, 1992, through October 31, 1995, the Portfolio
generated an average annual return of 16.53%, compared to 11.22% for the EAFE
Index. Also noteworthy is the fact that the Fund managed to outperform its
benchmark with a lower level of volatility.
After a disappointing first half of its fiscal year, the Portfolio showed a
considerable improvement in performance in the second half, aided greatly by a
sharp rebound in its Japanese holdings (27.8% of the Portfolio through October).
Particularly strong gains were recorded by the Portfolio's Japanese technology
issues. We believe that these stocks still hold considerable upside potential,
and that most of the broader Japanese market remains significantly undervalued
based on traditional long-term measures of value (e.g., price relative to book
value, sales and cash flow).
Other Asian countries we remain positive on are South Korea and Taiwan, two
emerging markets that have suffered in 1995. Taiwan has seen its stock market
lose roughly a third of its value since the year began, the result of ongoing
political tensions with China. This has created particularly attractive values
in Taiwan's market, and we have used the opportunity to increase our Taiwanese
stake, adding to positions in well-managed companies in the shipping and
industrial sectors. In general, we feel that emerging markets have been
oversold, given their outstanding long-term attractions.
The Portfolio's European holdings contributed positively to its performance
over the trailing 12 months, supported by falling interest rates. By country,
our largest weightings as of October 31 were in the United Kingdom and France
(8.0% and 6.0%, respectively, of the Portfolio). Our British holdings were
strong performers during the period. French issues generated less impressive
results, hampered by concerns regarding fiscal policies of the Chirac
administration and doubts about the country's ability to meet the criteria for
European economic and monetary union in 1999. But we remain positive on the
outlook for the French companies held in the Portfolio, believing they are
strong, well-managed businesses.
Richard H. King
Portfolio Manager
2
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WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
GROWTH OF $10,000 INVESTED IN
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
SINCE INCEPTION AS OF OCTOBER 31, 1995
The graph below illustrates the hypothetical investment of $10,000 in
Warburg Pincus Institutional Fund, Inc. -- International Equity Portfolio (the
'Portfolio') from September 1, 1992 (inception) to October 31, 1995, assuming
the reinvestment of dividends and capital gains at net asset value, compared to
the Morgan Stanley -- Europe, Australia, and Far East Index ('EAFE')* for the
same time period.
[PERFORMANCE GRAPH]
Average Annual
Total Returns
for periods ending
10/31/95
Portfolio EAFE (Common Shares)
--------- ---- ---------------
9/1/92......................... 10000.0 10000.0 1 year
10/31/92........................ 9620.00 9288.00 -2.83%
10/31/93........................ 13623.0 12767.0 Since Inception*
10/31/94........................ 16705.0 14057.0 (09/01/92)
10/31/95........................ 16232.0 14005.0 16.53%
<TABLE>
<CAPTION>
FUND
-----
<S> <C>
1 Year Total Return (9/30/94-9/30/95).............................................. -0.16%
Average Annual Total Return Since Inception (9/01/92-9/30/95)...................... 17.87%
</TABLE>
All figures cited here represent past performance and do not guarantee
future results. Investment return and principal value of an investment will
fluctuate so that an investor's shares upon redemption may be worth more or less
than original cost. Without waivers or reimbursement of Portfolio expenses,
average annual total returns for the periods ending 9/30/95 and 10/31/95
respectively, would have been -0.36% and -3.01% for 1 year and 17.59% and 16.26%
since inception.
- ------------
* EAFE is an unmanaged index of international equities with no defined
investment objective that is compiled by Morgan Stanley Capital International.
3
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[THIS PAGE INTENTIONALLY LEFT BLANK]
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WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS
October 31, 1995
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<TABLE>
<CAPTION>
SHARES VALUE
--------------- ------------
<S> <C> <C>
COMMON STOCK (90.3%)
Argentina (3.0%)
Banco de Galicia & Buenos Aires SA 90,505 $ 427,697
Banco de Galicia & Buenos Aires SA ADR 9,325 178,341
Banco Frances del Rio de la Plata SA 112,200 816,675
Banco Frances del Rio de la Plata SA ADR 162,700 3,559,063
Capex SA GDR + 95,400 1,156,725
Telefonica de Argentina SA ADR 170,100 3,529,575
YPF SA ADR 311,000 5,325,875
------------
14,993,951
------------
Australia (2.5%)
BTR Nylex Ltd. 1,040,575 2,828,860
Niugini Mining Ltd. 283,000 588,328
Pasminco Ltd. 911,000 1,005,903
Reinsurance Australia Corp., Ltd. 1,788,600 3,405,047
Woodside Petroleum Ltd. 991,500 4,749,121
------------
12,577,259
------------
Austria (3.1%)
Boehler-Uddeholm AG + 70,250 4,953,480
Maculan Holdings AG Vorzuege 9,290 174,557
V.A. Technologie AG 92,300 10,704,152
------------
15,832,189
------------
Brazil (0.5%)
Panamerican Beverages, Inc. Class A 100,500 2,751,189
------------
Denmark (0.9%)
International Service System A/S Class B 215,150 4,412,929
------------
Finland (1.7%)
Metra Oy Class B 29,250 1,268,801
Metsa-Serla Class B 127,500 4,749,164
Valmet Corp. Class A 92,500 2,573,200
------------
8,591,165
------------
</TABLE>
See Accompanying Notes to Financial Statements.
5
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WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1995
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<TABLE>
<CAPTION>
SHARES VALUE
--------------- ------------
COMMON STOCK (CONT'D)
<S> <C> <C>
France (5.9%)
Bouygues SA 78,533 $ 8,366,556
Cetelem 13,458 2,150,633
Fives-Lille (Compagnie De) 26,740 2,163,962
Lagardere Groupe 294,800 5,514,288
Scor SA 97,251 2,904,978
Total Cie Franc Des Petroles Class B 143,347 8,875,121
------------
29,975,538
------------
Germany (2.7%)
Deutsche Bank AG 169,300 7,642,933
SGL Carbon AG + 94,000 6,168,207
------------
13,811,140
------------
Hong Kong (3.4%)
Citic Pacific Ltd. 513,000 1,602,461
HSBC Holdings PLC 390,125 5,676,876
HSBC Holdings PLC (UK) 35,935 534,410
Jardine Matheson Holdings Ltd. ADR 1,116,915 6,813,182
Jilin Chemical Industrial Co., Ltd. 5,656,000 1,185,161
Jilin Chemical Industrial Co., Ltd. ADR + 75,500 1,557,188
------------
17,369,278
------------
India (2.2%)
Hindalco Industries Ltd. GDR 184,500 5,904,000
Reliance Industries Ltd. GDS 263,100 4,109,622
The India Fund, Inc. 144,000 1,206,000
------------
11,219,622
------------
Indonesia (1.6%)
P.T. Bank International Indonesia 314,500 1,102,900
P.T. Dynaplast Ltd. 334,800 295,368
P.T. Mulia Industrindo 1,088,000 3,215,527
P.T. Semen Gresik 497,500 1,294,773
P.T. Tri Polyta Indonesia ADR + 136,500 2,115,750
------------
8,024,318
------------
</TABLE>
See Accompanying Notes to Financial Statements.
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WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1995
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<TABLE>
<CAPTION>
SHARES VALUE
--------------- ------------
COMMON STOCK (CONT'D)
<S> <C> <C>
Israel (1.4%)
Ampal-American Israel Corp. Class A + 233,000 $ 1,310,625
ECI Telecommunications Limited Designs 299,850 5,697,150
------------
7,007,775
------------
Japan (26.1%)
Canon Inc. 470,000 8,047,158
Canon Inc. ADR 25,200 2,148,300
Daimaru Inc. 90,000 572,351
DDI Corp. 972 7,883,651
East Japan Railway Co. 413 1,951,658
Fujitsu Ltd. 522,000 6,230,701
Hitachi Ltd. 552,750 5,678,383
Kao Corp. 500 6,066
Keyence Corp. 30,000 3,698,268
Kirin Beverage Corp. 144,000 2,183,739
Kyocera Corp. 66,000 5,411,212
Murata Mfg. Co., Ltd. 70,290 2,468,849
NEC Corp. 496,000 6,551,218
Nikon Corp. 664,000 9,484,786
Nippon Communication Systems Corp. 405,300 4,282,595
Nippon Telegraph & Telephone Corp. 1,437 11,795,087
NTT Data Communications Systems Co. 314 7,864,593
Orix Corp. 109,600 3,860,288
Rohm Co. 106,000 6,440,270
Shin-Etsu Chemical Co., Ltd. 118,600 2,425,144
Sony Corp. 98,900 4,451,032
Sony Corp. ADR 36,900 1,688,175
TDK Corp. 169,000 8,713,727
Toho Co., Ltd. 25,850 3,641,914
Tokyo Electron Ltd. 166,000 7,211,036
Tsuchiya Home Co. 78,180 1,109,099
Uny Co., Ltd. 205,500 3,538,597
York-Benimaru Co., Ltd. 107,400 3,404,520
------------
132,742,417
------------
</TABLE>
See Accompanying Notes to Financial Statements.
7
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WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1995
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<TABLE>
<CAPTION>
SHARES VALUE
--------------- ------------
COMMON STOCK (CONT'D)
<S> <C> <C>
Malaysia (0.2%)
Westmont BHD 353,000 $ 1,222,751
------------
Mexico (0.6%)
Gruma SA de CV Class B + 982,000 2,896,348
------------
New Zealand (5.6%)
Brierley Investments Ltd. 8,145,083 6,339,546
Fletcher Challenge Ltd. 1,985,050 5,250,449
Fletcher Forestry 3,506,251 4,833,591
Lion Nathan Ltd. 2,549,700 5,785,330
Sky City Ltd. 175,615 3,648,823
Wrightson Ltd. 3,271,735 2,632,804
------------
28,490,543
------------
Norway (1.6%)
Norsk Hydro AS ADR 198,144 7,925,760
------------
Pakistan (0.3%)
Pakistan Telecommunications Corp. + 345 33,678
Pakistan Telecommunications Corp. GDR + 16,000 1,528,000
------------
1,561,678
------------
Singapore (1.4%)
DBS Land Ltd. 741,500 2,194,315
Development Bank of Singapore Ltd. 176,562 2,024,994
Development Bank of Singapore Ltd. ADR 34,750 1,598,500
IPC Corp., Ltd. 2,216,000 1,513,940
------------
7,331,749
------------
</TABLE>
See Accompanying Notes to Financial Statements.
8
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WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1995
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<TABLE>
<CAPTION>
SHARES VALUE
--------------- ------------
COMMON STOCK (CONT'D)
<S> <C> <C>
South Korea (5.5%)
Daewoo Electronics Co., Ltd. + 244,650 $ 3,261,574
Daewoo Electronics Co., Ltd. New + 4,120 52,503
Daewoo Heavy Industries 78,194 1,016,900
Hana Bank 206,780 4,497,215
Hanil Bank 390,013 5,064,919
Korea Europe Fund Ltd. 289 1,336,625
Korea Long Term Credit Bank 42,858 1,386,513
Mando Machinery Corp. + 6,000 398,066
Samsung Electronics Co., Ltd. 28,222 6,320,902
Samsung Electronics Co., Ltd. GDR 6,226 410,916
Samsung Electronics Co., Ltd. GDR New 53 6,360
Samsung Electronics Co., Ltd. New 1,705 383,007
Samsung Electronics Co., Ltd. Second Series 520 114,385
Samsung Heavy Industries Co., Ltd. 112,453 3,424,591
------------
27,674,476
------------
Spain (3.5%)
Banco de Santander 30,300 1,322,254
Banco de Santander ADR 220,300 9,500,438
Repsol SA ADR 243,500 7,213,688
------------
18,036,380
------------
Sweden (2.7%)
Asea AB Series B 56,700 5,597,531
Astra AB Series B 220,800 7,986,978
------------
13,584,509
------------
Switzerland (1.8%)
BBC Brown Boveri AG 6,824 7,915,455
Danzas Holding AG 1,369 1,205,742
------------
9,121,197
------------
</TABLE>
See Accompanying Notes to Financial Statements.
9
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WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1995
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<TABLE>
<CAPTION>
SHARES VALUE
--------------- ------------
COMMON STOCK (CONT'D)
<S> <C> <C>
Taiwan (3.0%)
China Steel Corp. + 1,043,000 $ 823,268
Evergreen Marine Corp., Ltd. 419,100 628,999
Kwang Hua Growth Fund 346,000 119,885
Taiwan Semiconductor Mfg. Co. + 1,543,000 4,803,113
Ton Yi Industrial Corp. + 2,898,000 3,844,669
Tuntex Distinct Corp. + 1,238,334 784,714
Tuntex Distinct Corp. GDS + 152,774 954,840
Yang Ming Marine Transport Corp. 3,159,000 3,476,832
------------
15,436,320
------------
Thailand (1.2%)
Industrial Finance Corp. of Thailand 1,535,832 5,050,065
Thai Military Bank Ltd. 248,560 980,767
------------
6,030,832
------------
United Kingdom (7.9%)
AAF Industries PLC + 208,500 85,673
British Air Authority PLC 643,834 5,006,175
BTR PLC 473,457 2,514,125
Cookson Group PLC 750,200 3,473,855
Govett & Co., Ltd. 606,000 2,327,265
Grand Metropolitan PLC 1,209,000 8,368,882
Prudential Corp. PLC 903,200 5,652,572
Reckitt & Coleman PLC 437,285 4,651,003
Singer & Freidlander Group PLC 2,210,000 3,702,245
Takare PLC 1,182,900 3,832,383
Trio Holdings PLC 1,648,500 312,635
------------
39,926,813
------------
Zimbabwe
Delta Corp., Ltd. 105,000 165,547
------------
TOTAL COMMON STOCK (Cost $435,130,761) 458,713,673
------------
</TABLE>
See Accompanying Notes to Financial Statements.
10
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WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1995
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<TABLE>
<CAPTION>
SHARES VALUE
--------------- ------------
PREFERRED STOCK (0.5%)
<S> <C> <C>
Austria (0.1%)
Maculan Holdings AG Vorzuege 31,100 $ 565,512
------------
South Korea (0.3%)
Samsung Electronics Co., Ltd. 10,130 1,257,306
Samsung Electronics Co., Ltd. New 2,004 244,990
------------
1,502,296
------------
United Kingdom (0.1%)
Singer & Friedlander Group PLC 8.50% Convertible 348,947 714,161
------------
TOTAL PREFERRED STOCK (Cost $3,961,744) 2,781,969
------------
STOCK WARRANTS (0.1%)
Australia
Niugini Mining Ltd., 12/08/95 + 70,750 37,713
------------
Hong Kong
Jardine Strategic Holdings Ltd., 05/02/98 + 384,600 13,183
------------
Israel
Ampal-American Israel Corp. Class A, 01/31/99 + 95,000 38,594
------------
Japan
Bandai Industries, 11/04/97 + 440 429,000
------------
Switzerland
Danzas Holding AG, 08/02/96 + 2,000 793
------------
TOTAL STOCK WARRANTS (Cost $846,880) 519,283
------------
CALL OPTIONS (0.5%) CONTRACTS
---------------
Japan
Topix Index, 03/08/96, (Strike price $1,251.24) + 3,647 646,723
Topix Index, 03/08/96, (Strike price $1,261.12) + 3,755 634,933
Topix Index, 03/08/96, (Strike price $1,349.00) + 1,830 188,687
Topix Index, 05/10/96, (Strike price $1,323.64) + 3,126 372,932
Topix Index, 06/14/96, (Strike price $1,275.00) + 3,141 520,966
------------
2,364,241
------------
Mexico
Mexican Inmex, 03/29/96, (Strike price $56.60) + 62,434 1,249
------------
TOTAL CALL OPTIONS (Cost $1,992,096) 2,365,490
------------
</TABLE>
See Accompanying Notes to Financial Statements.
11
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WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1995
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<TABLE>
<CAPTION>
PAR= VALUE
--------------- ------------
CONVERTIBLE BONDS/NOTES (2.7%)
<S> <C> <C>
Argentina (0.3%)
Banco de Galicia & Buenos Aires SA 7.00%, 08/01/02 $ 1,574,000 $ 1,267,070
------------
Australia (0.3%)
BTR Nylex Ltd. 9.00%, 11/29/49 (A) 11,200,000 1,274,203
------------
India (0.1%)
Reliance Industries Ltd. 3.50%, 11/03/99 $ 500,000 511,250
------------
Japan (1.1%)
Matsushita Electric Works Ltd. 2.70%, 05/31/02 (B) 521,000,000 5,821,172
------------
New Zealand (0.1%)
Brierley Investments Ltd. 9.00%, 06/30/98 (C) 1,028,875 732,938
------------
Taiwan (0.8%)
Yang Ming Marine Transport Corp. 2.00%, 10/06/01 $ 3,952,000 4,218,760
------------
TOTAL CONVERTIBLE BONDS/NOTES (Cost $13,605,553) 13,825,393
------------
SHORT-TERM INVESTMENTS (2.7%)
Repurchase agreement with State Street Bank & Trust Co. dated 10/31/95
at 5.83% to be repurchased at $13,533,191 on 11/01/95. (Collateralized
by $13,650,000 U.S. Treasury Note 6.875%, due 10/31/96, with a market
value of $13,820,625.) (Cost $13,531,000) 13,531,000 13,531,000
------------
TOTAL INVESTMENTS AT VALUE (96.8%) (Cost $469,068,034*) 491,736,808
OTHER ASSETS IN EXCESS OF LIABILITIES (3.2%) 16,022,083
------------
NET ASSETS (100.0%) (applicable to 33,636,024 shares) $507,758,891
------------
------------
NET ASSET VALUE, offering and redemption price per share
($507,758,891[div]33,636,024 shares) $15.10
------
------
</TABLE>
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
ADR = American Depository Receipt
GDR = Global Depository Receipt
GDS = Global Depository Share
</TABLE>
+ Non-income producing security.
* Cost for Federal income tax purposes is $469,247,283.
= Unless otherwise indicated below, all bonds are denominated in U.S. Dollars.
(A) Denominated in Australian Dollars.
(B) Denominated in Japanese Yen.
(C) Denominated in New Zealand Dollars.
See Accompanying Notes to Financial Statements.
12
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WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
For the Year Ended October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $839,844) $ 6,755,792
Interest 1,580,534
-----------
Total investment income 8,336,326
-----------
EXPENSES:
Investment advisory 3,095,950
Administrative services 823,703
Audit 24,460
Custodian/Sub-custodian 358,800
Directors 9,000
Insurance 13,869
Legal 34,103
Organizational 21,349
Printing 17,811
Registration 104,903
Miscellaneous 61,340
-----------
4,565,288
Less fees waived (888,848)
-----------
Total expenses 3,676,440
-----------
Net investment income 4,659,886
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) FROM
INVESTMENTS AND FOREIGN CURRENCY RELATED
ITEMS:
Net realized loss from security transactions (1,094,116)
Net realized gain from foreign currency related items 3,076,737
Net change in unrealized appreciation from investments and
foreign currency related items (6,017,482)
-----------
Net realized and unrealized loss from investments and
foreign currency related items (4,034,861)
-----------
Net increase in net assets resulting from operations $ 625,025
-----------
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
13
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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, 1995 October 31, 1994
---------------- ----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 4,659,886 $ 1,276,813
Net realized gain (loss) from security transactions (1,094,116) 11,710,325
Net realized gain (loss) from foreign currency related items 3,076,737 (456,151)
Net change in unrealized appreciation from investments and foreign
currency related items (6,017,482) 22,452,714
---------------- ----------------
Net increase in net assets resulting
from operations 625,025 34,983,701
---------------- ----------------
FROM DISTRIBUTIONS:
Dividends from net investment income (3,614,605) (526,855)
Distributions from capital gains (11,710,991) (1,146,187)
---------------- ----------------
Net decrease from distributions (15,325,596) (1,673,042)
---------------- ----------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 253,425,787 196,715,545
Reinvested dividends 13,607,235 1,270,243
Net asset value of shares redeemed (75,870,772) (9,279,255)
---------------- ----------------
Net increase in net assets from capital share transactions 191,162,250 188,706,533
---------------- ----------------
Net increase in net assets 176,461,679 222,017,192
NET ASSETS:
Beginning of year 331,297,212 109,280,020
---------------- ----------------
End of year $507,758,891 $331,297,212
---------------- ----------------
---------------- ----------------
</TABLE>
See Accompanying Notes to Financial Statements.
14
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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,
--------------------------------------------------------------
1995 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 .15 .17 .10
Net Gain (Loss) from Securities and Foreign Currency
Related Items (both realized and unrealized) (.64) 2.87 3.87
------- ------- -------
Total from Investment Operations (.49) 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 $15.10 $16.34 $13.49
------- ------- -------
------- ------- -------
Total Return (2.83%) 22.62% 41.61%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $507,759 $331,297 $109,280
Ratios to average daily net assets:
Operating expenses .95% .95% .95%
Net investment income 1.20% .59% .75%
Decrease reflected in above expense ratios due to
waivers/reimbursements .23% .29% .44%
Portfolio Turnover Rate 39.70% 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 1995 DIVIDENDS (Unaudited)
Dividends paid by the Portfolio taxable as ordinary income amounted to $.54 per
share.
Long-term capital gains dividends paid by the Portfolio amounted to $.21 per
share.
Because the Portfolio's fiscal year is not the calendar year, amounts to be used
by calendar year taxpayers on their Federal return will be reflected on Form
1099-DIV and will be mailed in January 1996.
15
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<PAGE>
<PAGE>
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WARBURG PINCUS INSTITUTIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
October 31, 1995
- --------------------------------------------------------------------------------
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, 1995, 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 Portfolio'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 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 are due to changes in
the foreign exchange rate from that which are due to changes in market prices of
equity securities. The Fund isolates that portion of gains and losses on
investments in debt securities which are due to changes in the foreign exchange
rate from that which are due to changes in market prices of debt securities.
Security transactions are accounted for on trade date. Interest income is
recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
The cost of investments sold is determined by use of the specific identification
method for both financial reporting and income tax purposes.
Dividends from net investment income and distributions of net realized
capital gains, if any, are declared and paid annually. However, to the extent
that a net realized capital gain can be reduced by a capital loss carryover,
such gain will not be distributed. Income and capital gain distributions are
determined in accordance with Federal income tax regulations which may differ
from generally accepted accounting principles.
No provision is made for Federal taxes as it is the Fund's intention to
have each portfolio continue to qualify for and elect the tax treatment
applicable to regulated investment companies under the Internal Revenue Code and
make the requisite distributions to its shareholders which will be sufficient to
relieve it from Federal income and excise taxes.
16
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<PAGE>
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WARBURG PINCUS INSTITUTIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
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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, 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. At October 31, 1995 the International Equity
Portfolio had $13,531,000 invested in repurchase agreements.
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR
Warburg, Pincus Counsellors, Inc. ('Warburg'), a wholly owned subsidiary of
Warburg, Pincus Counsellors G.P. ('Counsellors G.P.'), serves as the Portfolios'
investment adviser. The International Equity Portfolio pays Warburg 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, 1995, Warburg earned
$3,095,950 for investment advisory services to the International Equity
Portfolio, of which $778,770 was voluntarily waived.
Counsellors Funds Service, Inc. ('CFSI'), a wholly owned subsidiary of
Warburg, and PFPC Inc. ('PFPC'), an indirect, wholly owned subsidiary of PNC
Bank Corp. ('PNC'), serve as the Portfolios' co-administrators. For its
administrative services, CFSI receives a fee calculated at an annual rate of
.10% of the Portfolios' average daily net assets. For the year ended October 31,
1995, CFSI earned $386,993 in administrative services fees. For its
administrative services, PFPC receives a fee based on the following fee
structure:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS ANNUAL RATE
- ------------------------------------------------------- ---------------------------------
<S> <C>
First $250 million..................................... .12% of average daily net assets
Second $250 million.................................... .10% of average daily net assets
Third $250 million..................................... .08% of average daily net assets
Over $750 million...................................... .05% of average daily net assets
</TABLE>
For the year ended October 31, 1995, PFPC earned $436,710 for
administrative services to the International Equity Portfolio, of which $110,078
was voluntarily waived.
Counsellors Securities Inc. ('CSI'), also a wholly owned subsidiary of
Warburg, 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, 1995 (excluding short-term
investments) were $331,790,859 and $143,495,150, respectively.
At October 31, 1995, the International Equity Portfolio had net unrealized
appreciation from investments of $22,489,525 which was comprised of appreciation
of $55,824,134 for those securities
17
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<PAGE>
<PAGE>
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WARBURG PINCUS INSTITUTIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
having an excess of value over cost, and depreciation of $33,334,609 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 from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar. Each
Portfolio will enter into forward contracts primarily for hedging purposes. The
forward currency contracts are adjusted by the daily exchange rate of the
underlying currency and any gains or losses are recorded for financial statement
purposes as unrealized until the contract settlement date.
At October 31, 1995, the International Equity Portfolio had the following
open forward foreign currency contracts:
<TABLE>
<CAPTION>
FOREIGN UNREALIZED
FORWARD CURRENCY EXPIRATION CURRENCY CONTRACT CONTRACT FOREIGN EXCHANGE
CONTRACT DATE TO BE SOLD AMOUNT VALUE GAIN/(LOSS)
- ------------------------------------ ---------- --------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
French Francs 11/15/95 40,000,000 $ 8,026,165 $ 8,192,860 $ (166,695)
French Francs 11/16/95 19,483,750 3,993,611 3,990,691 2,920
German Marks 11/16/95 17,000,000 12,096,631 12,095,340 1,291
German Marks 05/17/96 12,252,420 8,600,000 8,794,444 (194,444)
Japanese Yen 03/21/96 1,362,480,000 14,000,000 13,625,563 374,437
Japanese Yen 03/21/96 941,409,750 9,345,873 9,414,625 (68,752)
Japanese Yen 03/21/96 941,409,740 9,341,468 9,414,625 (73,157)
Japanese Yen 03/21/96 259,280,500 2,575,370 2,592,950 (17,580)
Japanese Yen 05/13/96 1,281,760,000 16,000,000 12,918,637 3,081,363
Japanese Yen 05/16/96 2,774,310,000 33,000,000 27,974,026 5,025,974
Japanese Yen 05/16/96 711,908,000 8,600,000 7,178,337 1,421,663
Japanese Yen 09/18/96 932,000,000 10,000,000 9,572,179 427,821
------------ ------------ ----------
$135,579,118 $125,764,277 $9,814,841
------------ ------------ ----------
------------ ------------ ----------
</TABLE>
<TABLE>
<CAPTION>
FOREIGN UNREALIZED
FORWARD CURRENCY EXPIRATION CURRENCY CONTRACT CONTRACT FOREIGN EXCHANGE
CONTRACT DATE TO BE PURCHASED AMOUNT VALUE GAIN/(LOSS)
- ------------------------------------ ---------- --------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
German Marks 11/16/95 5,500,000 $3,993,610 $3,913,198 $(80,412)
----------- ---------- --------
----------- ---------- --------
</TABLE>
5. EQUITY SWAP TRANSACTIONS
The International Equity Portfolio (the 'Portfolio') entered into a
Taiwanese equity swap agreement (which represents approximately .006% of the
Portfolio's net assets at October 31, 1995) dated August 11, 1995, where the
Portfolio receives a quarterly payment, representing the total return (defined
as market appreciation and dividend income) on a basket of three Taiwanese
common stocks ('Common Stocks'). In return, the Portfolio pays quarterly the
Libor rate (London Interbank Offered Rate), plus 1.25% per annum (7.125% on
October 31, 1995) on the initial stock purchase amount
18
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WARBURG PINCUS INSTITUTIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
('Notional amount') of $2,949,474. The Notional amount is marked to market on
each quarterly reset date. In the event that the Common Stocks decline in value,
the Portfolio will be required to pay quarterly, the amount of any depreciation
in value from the notional amount. The equity swap agreement will terminate on
August 11, 1996.
During the term of the equity swap transaction, changes in the value of the
Common Stocks as compared to the Notional amount is recognized as unrealized
gain or loss. Dividend income for the Common Stocks are recorded on the
ex-dividend date. Interest expense is accrued daily. At October 31, 1995, the
Portfolio has recorded an unrealized gain of $123,391 and interest payable of
$47,284 on the equity swap transaction.
6. CAPITAL SHARE TRANSACTIONS
The Fund is authorized to issue up to three billion full and fractional
shares of common stock 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, 1995 October 31, 1994
---------------- ----------------
<S> <C> <C>
Shares sold 17,573,932 12,686,666
Shares issued to shareholders on reinvestment of dividends 939,078 85,000
Shares redeemed (5,146,019) (603,362)
---------- ----------
Net increase in shares outstanding 13,366,991 12,168,304
---------- ----------
---------- ----------
</TABLE>
7. NET ASSETS
Net assets of the International Equity Portfolio at October 31, 1995,
consisted of the following:
<TABLE>
<S> <C>
Capital contributed, net $471,618,325
Accumulated net investment income 7,450,054
Accumulated net realized loss from security transactions (3,838,421)
Net unrealized appreciation from investments and foreign currency related items 32,528,933
------------
Net assets $507,758,891
------------
------------
</TABLE>
8. CAPITAL LOSS CARRYOVER
At October 31, 1995, the International Equity Portfolio had a capital loss
carryover of $3,020,261 expiring in 2003 to offset possible future capital
gains.
19
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WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
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,
1995, and the related statement of operations for the year then ended, and the
statements of changes in net assets for each of the two years, and the financial
highlights for each of the three years in the period then ended. These financial
statements and financial highlights are the responsibility of the 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, 1995, 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, 1995, and the results of its operations for the year then ended, and
the changes in its net assets for each of the two years and its financial
highlights for each of the three years in the period then ended, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
December 14, 1995
20
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INVESTMENT ADVISER TRANSFER AGENT
Warburg, Pincus Counsellors, Inc. State Street Bank and Trust Company
466 Lexington Avenue 225 Franklin Street
New York, New York 10017-3147 Boston, Massachusetts 02110
DISTRIBUTOR
Counsellors Securities Inc.
466 Lexington Avenue
New York, New York 10017-3147
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
WARBURG PINCUS FUNDS
P.O. BOX 9030
BOSTON, MASSACHUSETTS 02205-9030
SHAREHOLDER SERVICES
1-800-888-6878
PROSPECTUSES
1-800-257-5614
[LOGO]
ANNUAL REPORT
OCTOBER 31, 1995
[ ] WARBURG PINCUS
INSTITUTIONAL FUND, INC. --
INTERNATIONAL EQUITY PORTFOLIO
WPINS-2-1095
STATEMENT OF DIFFERENCES
------------------------
The division sign shall be expressed as [div]
