WARBURG PINCUS INSTITUTIONAL FUND INC, 485APOS, 1997-02-03

WARBURG PINCUS INSTITUTIONAL FUND INC
485APOS, 1997-02-03

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<PAGE>1

As filed with the U.S. Securities and Exchange Commission
on January 31, 1997

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. 11 [x]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 [x]

Amendment No. 12 [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>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
"1940 Act"), and to the number or amount presently registered is added an
indefinite number or amount of such securities. The Rule 24f-2 Notice for
Registrant's fiscal year ended October 31, 1996 was filed on December 27, 1996.

<PAGE>3

WARBURG, PINCUS INSTITUTIONAL FUND, INC.

FORM N-1A

CROSS REFERENCE SHEET

Part A
Item No. Prospectus Heading
- -------- ------------------
<S> <C> <C>
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.................................................... 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

</TABLE>

<PAGE>4

Part B Heading in Statement of
Item No. Additional Information
- -------- -----------------------
<S> <C> <C>

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;
Miscellaneous 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-"How to
Open an Account in the Fund," "How to
Purchase Shares in the Portfolios,"
"How to Redeem and Exchange Shares in
the Portfolios," "Net Asset Value"

</TABLE>

<PAGE>5

Part B Heading in Statement of
Item No. Additional Information
- -------- -----------------------
<S> <C> <C>
20. Tax Status.................................................... Additional Information Concerning
Taxes; See Prospectus--"Dividend,
Distributions and Taxes"

21. Underwriters.................................................. Investment Policies-- Portfolio
Transactions; See Prospectus--
"Management of the Fund"

22. Calculation of Performance Data............................... Determination of Performance

23. Financial Statements.......................................... Financial Statements

</TABLE>

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>
PROSPECTUS

April 16, 1997

WARBURG PINCUS INSTITUTIONAL FUND, INC.
[*] INTERNATIONAL EQUITY PORTFOLIO
[*] MANAGED EAFE'r' COUNTRIES PORTFOLIO
[*] EMERGING MARKETS PORTFOLIO
[*] SMALL COMPANY GROWTH PORTFOLIO
[*] GLOBAL FIXED INCOME PORTFOLIO
[*] VALUE PORTFOLIO

[Logo]

<PAGE>

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.

<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

SUBJECT TO COMPLETION, DATED JANUARY 29, 1997

PROSPECTUS April 16, 1997

Warburg Pincus Institutional Fund, Inc. (the 'Fund') is an open-end management
investment company that consists of six managed investment funds (the
'Portfolios'):

INTERNATIONAL EQUITY PORTFOLIO seeks long-term capital appreciation by investing
primarily in equity securities of non-United States issuers.

MANAGED EAFE'r' COUNTRIES PORTFOLIO seeks long-term capital appreciation by
investing in equity securities of issuers having their principal business
activities and interests in foreign countries included in the Morgan Stanley
Capital International EAFE'r' Index.

EMERGING MARKETS PORTFOLIO seeks long-term growth of capital by investing
primarily in equity securities of non-United States issuers consisting of
companies in emerging securities markets.

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.

VALUE PORTFOLIO seeks total return by investing primarily in equity securities
of large-sized domestic companies.

International investment entails special risk considerations, including currency
fluctuations, lower liquidity, economic instability, political uncertainty and
differences in accounting methods. Investment in small companies, including
emerging growth companies and companies in 'special situations,' also entails
special risks. See 'Risk Factors and Special Considerations.'

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.' The SEC maintains a Web site (http://www.sec.gov) that
contains the Statement of Additional Information, material incorporated by
reference and other information regarding the Fund. The Statement of Additional
Information is also available upon request and without charge by calling the
Fund at (800) 369-2728. Information regarding the status of shareholder accounts
may also be obtained by calling the Fund at (800) 369-2728. The Statement of
Additional Information, as amended or supplemented from time to time, bears the
same date as this Prospectus and is incorporated by reference in its entirety
into this Prospectus.

SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED OR ENDORSED
BY ANY BANK, AND SHARES ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.

- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------

<PAGE>
THE FUND'S EXPENSES
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Managed
International EAFE'r' Emerging Small Company Global Fixed
Equity Countries Markets Growth Income Value
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
------------- --------- -------- ------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on
Purchases
(as a percentage of
offering price)............ 0 0 0 0 0 0
Annual Portfolio Operating
Expenses
(as a percentage of average net
assets)
Management Fees.............. .63% .63% .28% .24% .15% .20%
12b-1 Fees................... 0 0 0 0 0 0
Other Expenses............... .32% .32% .97% .75% .45% .55%
--- --- --- --- --- ---
Total Portfolio Operating
Expenses (after fee
waivers)`D'................ .95% .95% 1.25% .99% .60% .75%
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 $10 $13 $10 $ 6 $ 8
3 years..................... $ 30 $30 $40 $30 $19 $24
5 years..................... $ 53 n.a. n.a. $55 n.a. n.a.
10 years..................... $117 n.a. n.a. $121 n.a. n.a.
</TABLE>

- --------------------------------------------------------------------------------
`D' Management Fees, Other Expenses and Total Operating Expenses for the
International Equity Portfolio and the Small Company Growth Portfolio are
based on actual expenses for the fiscal year ended October 31, 1996, net of
any fee waivers or expense reimbursements. Without such waivers and/or
reimbursements, Management Fees would have equalled .80% and .90%, Other
Expenses would have equalled .34% and .78% and Total Portfolio Operating
Expenses would have equalled 1.14% and 1.68% for the International Equity
and Small Company Growth Portfolios, respectively. Absent waiver of fees by
the Fund's investment adviser and co-administrator, Management Fees for the
Managed EAFE'r' Countries Portfolio, the Emerging Markets Portfolio, the
Global Fixed Income Portfolio and the Value Portfolio would equal .80%,
1.00%, .65% and .75%, respectively, Other Expenses would equal .34%, 1.02%,
.51% and .58%, respectively, and Total Portfolio Operating Expenses would
equal 1.18%, 2.25%, 1.28% and 1.33%, respectively. Other Expenses for the
Managed EAFE'r' Countries, Emerging Markets, Global Fixed Income and Value
Portfolios are based on annualized estimates of expenses for the fiscal year
ending October 31, 1997, net of any fee waivers or expense reimbursements.
The Fund's investment adviser and co-administrator are under no obligation
to continue these waivers. For the Managed EAFE'r' Countries, Emerging
Markets, Small Company Growth and Value Portfolios, the investment adviser
has undertaken to limit Total Portfolio Operating Expenses through December
31, 1997.

---------------------------

The expense table shows the costs and expenses that an investor will bear
directly or indirectly as a shareholder of a Portfolio. Institutions also may
charge their clients fees in connection with investments in a Portfolio's
shares, which fees are not reflected in the table. 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%.

<PAGE>
FINANCIAL HIGHLIGHTS`D'`D'
- --------------------------------------------------------------------------------

The following information for the four fiscal years or period ended
October 31, 1996 has been audited by Coopers & Lybrand L.L.P., independent
accountants, whose report dated December 18, 1996 is included therein. 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. Further information about the performance of the
International Equity, Small Company Growth and Emerging Markets Portfolios is
contained in the Fund's annual report, dated October 31, 1996, copies of which
may be obtained without charge by calling the Fund at (800) 369-2728.

INTERNATIONAL EQUITY PORTFOLIO

<TABLE>
<CAPTION>
For the Period
September 1, 1992
For the Year Ended October 31, (Commencement of
------------------------------------------------------ Operations) through
1996 1995 1994 1993 October 31, 1992
-------- ------------ -------- -------- -------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD........................ $ 15.10 $ 16.34 $ 13.49 $ 9.62 $ 10.00
-------- ------------ -------- -------- ------
Income from Investment
Operations
Net Investment Income......... .26 .15 .17 .10 .02
Net Gains (Loss) from
Securities and Foreign
Currency Related Items (both
realized and unrealized).... 1.28 (.64) 2.87 3.87 (.40)
-------- ------------ -------- -------- ------
Total from Investment
Operations.................. 1.54 (.49) 3.04 3.97 (.38)
-------- ------------ -------- -------- ------
Less Distributions
Dividends (from net investment
income)..................... (.50) (.18) (.07) (.10) .00
Distributions (from capital
gains)...................... .00 (.57) (.12) .00 .00
-------- ------------ -------- -------- ------
Total Distributions......... (.50) (.75) (.19) (.10) .00
-------- ------------ -------- -------- ------
NET ASSET VALUE, END OF
PERIOD........................ $ 16.14 $ 15.10 $ 16.34 $ 13.49 $ 9.62
-------- ------------ -------- -------- ------
-------- ------------ -------- -------- ------
Total Return................... 10.48% (2.83%) 22.62% 41.61% (3.80%)*
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period
(000s)........................ $937,443 $507,759 $331,297 $109,280 $18,613
Ratios to Average Daily Net
Assets:
Operating expenses............ .95% .95% .95% .95% .95%*
Net investment income......... 1.05% 1.20% .59% .75% 1.22%*
Decrease reflected in above
operating expense ratios due
to waivers/reimbursements... .19% .23% .29% .44% .85%*
Portfolio Turnover Rate........ 29.91% 39.70% 19.34% 19.40% 8.25%`D'
Average Annual Commission
Rate#......................... $ .0154 -- -- -- --
</TABLE>

- --------------------------------------------------------------------------------
`D' Non-Annualized.
* Annualized.
# Calculated by dividing the total amount of commissions paid by the number
of shares purchased and sold during the period for which there was a
commission charge.
`D'`D' No financial highlights have been presented with respect to the Managed
EAFE'r' Countries Portfolio, the Global Fixed Income Portfolio or the
Value Portfolio, which had not commenced operations as of October 31,
1996. The audited statement of assets and liabilities of the Global Fixed
Income Portfolio as of January 23, 1997, together with the report of
Coopers & Lybrand L.L.P., appear in the Statement of Additional
Information. The unaudited statements of assets and liabilities of the
Managed EAFE'r' Countries Portfolio as of April 17, 1996 and that of the
Value Portfolio as of January 31, 1997 also appear in the Statement of
Additional Information.

<PAGE>
EMERGING MARKETS PORTFOLIO

<TABLE>
<CAPTION>
For the Period
September 30, 1996
(Commencement of
Operations) through
October 31, 1996
--------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................................... $ 10.00
------
Income from Investment Operations
Net Investment Income............................................... .01
Net Gains (Losses) on Securities (both realized and unrealized)..... (.15)
------
Total from Investment Operations.................................... (.14)
------
NET ASSET VALUE, END OF PERIOD......................................... $ 9.86
------
------
Total Return........................................................... (1.40%)`D'
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000s)....................................... $ 29,698
Ratios to Average Daily Net Assets:
Operating expenses.................................................. 1.25%*
Net investment income............................................... 1.75%*
Decrease reflected in above operating expense ratio due to
waivers/reimbursements............................................ 2.18%*
Portfolio Turnover Rate............................................. 2.39%`D'
Average Annual Commission Rate#........................................ $ .0120
</TABLE>

SMALL COMPANY GROWTH PORTFOLIO

<TABLE>
<CAPTION>
For the Period
December 29, 1995
(Commencement of
Operations) through
October 31, 1996
--------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD................................... $ 10.00
------
Income from Investment Operations
Net Investment Income............................................... (.01)
Net Gains (Losses) on Securities (both realized and unrealized)..... 2.93
------
Total from Investment Operations.................................... 2.92
------
NET ASSET VALUE, END OF PERIOD......................................... $ 12.92
------
------
Total Return........................................................... 29.20%`D'
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000s)....................................... $ 96,827
Ratios to Average Daily Net Assets:
Operating expenses.................................................. .99%*
Net investment income............................................... (.18%)*
Decrease reflected in above operating expense ratio due to
waivers/reimbursements............................................ .69%*
Portfolio Turnover Rate............................................. 57.38%`D'
Average Annual Commission Rate#........................................ $ .0560
</TABLE>

<PAGE>
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 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 may invest in emerging, as well as developed, markets. The
Portfolio will invest, under normal market conditions, in at least three
countries other than the United States. The Portfolio, which is a diversified
portfolio, intends to hold securities of many corporations located in a number
of foreign countries. 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.
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.
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
Investment Company Act of 1940, as amended (the '1940 Act'), invest in the
securities of closed-end investment companies that invest in foreign securities.
When Warburg, Pincus Counsellors, Inc., the Portfolios' investment adviser
('Warburg'), believes that a conservative or defensive posture is warranted, the
Portfolio may invest temporarily without limit in equity and debt securities of
U.S. issuers and money market obligations (described below).

MANAGED EAFE'r' COUNTRIES PORTFOLIO

The Managed EAFE'r' Countries Portfolio's investment objective is long-term
capital appreciation. The Portfolio pursues its investment objective by
investing, under normal market conditions, at least 65% of its total assets in

<PAGE>
common stocks, warrants and securities convertible into or exchangeable for
common stocks of companies, wherever organized, having their principal business
activities and interests in countries ('EAFE Countries') represented, from time
to time, in the Morgan Stanley Capital International Europe, Australasia and Far
East (EAFE'r') Index (the 'EAFE Index')*. The EAFE Index currently includes the
following 20 European and Pacific Basin countries: Australia, Austria, Belgium,
Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan, Malaysia,
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland and
United Kingdom. The Portfolio currently intends to invest at least 90% of its
assets in companies in EAFE Index-included countries.
Determinations as to whether an issuer has its principal business activities
and interests in an EAFE Country will be made by Warburg based on publicly
available information and inquiries made to the issuers. In making such
determinations, Warburg will consider the following factors: (i) whether the
issuer's principal securities trading market is in an EAFE Country; (ii) whether
the issuer derives at least 50% of its revenues or earnings, either alone or on
a consolidated basis, from goods produced or sold, investments made or services
performed in an EAFE Country, or has at least 50% of its assets situated in one
or more EAFE Countries; or (iii) whether the issuer is organized under the laws
of, and has a principal office in, an EAFE Country.
The Portfolio is not an index fund and will not seek to match the performance
or country or industry weightings of the EAFE Index. The Portfolio will not
invest in U.S. companies except for temporary defensive purposes, in which case
the Portfolio may invest without limit in equity and debt securities of U.S.
issuers and money market obligations (described below).
The Portfolio will invest, under normal circumstances, in at least three
countries other than the United States. The Portfolio, which is a diversified
portfolio, intends to hold securities of many corporations located in a number
of foreign countries, although from time to time a significant portion of the
Portfolio's assets may be invested in a single country, such as Japan. The
Portfolio intends to invest principally in the securities of companies with
opportunities for growth within international economies and markets. Investments
may be made in equity securities of companies of any size, whether traded on or
off a national securities exchange.

EMERGING MARKETS PORTFOLIO

The Emerging Markets Portfolio's investment objective is growth of capital.
The Portfolio is a non-diversified portfolio that pursues its investment

- ------------
*The EAFE Index is the exclusive property of Morgan Stanley & Co. Incorporated
and is a service mark of Morgan Stanley Group Inc. which has been licensed for
use by the Fund on behalf of the Managed EAFE'r' Countries Portfolio. Capital
International S.A., an international investment management company fully owned
by The Capital Group Companies, Inc. of Los Angeles, has full responsibility for
the management and maintenance of the EAFE Index. Morgan Stanley & Co.
Incorporated has no responsibility for, or influence over, the decisions of
inclusion or deletion within the EAFE Index.

<PAGE>
objective by investing primarily in equity securities of non-United States
issuers consisting of companies in emerging securities markets. An investment in
the Portfolio may involve a greater degree of risk than investment in other
mutual funds that seek capital growth by investing in larger, more developed
markets.
Under normal market conditions, the Portfolio will invest at least 65% of its
total assets in equity securities of issuers in Emerging Markets (as defined
below), and the Portfolio intends to acquire securities of many issuers located
in a number of foreign countries. The Portfolio will not necessarily seek to
diversify investments on a geographical basis or on the basis of the level of
economic development of any particular country and the Emerging Markets in which
the Portfolio invests will vary from time to time. However, the Portfolio will
at all times, except during temporary defensive periods, maintain investments in
at least three countries outside the United States. An equity security of an
issuer in an Emerging Market is defined as common stock and preferred stock
(including convertible preferred stock); bonds, notes and debentures convertible
into common or preferred stock; stock purchase warrants and rights; equity
interests in trusts and partnerships; and depositary receipts of an issuer: (i)
the principal securities trading market for which is in an Emerging Market; (ii)
which derives at least 50% of its revenues or earnings, either alone or on a
consolidated basis, from goods produced or sold, investments made or services
performed in an Emerging Market, or which has at least 50% of its assets
situated in one or more Emerging Markets; or (iii) that is organized under the
laws of, and with a principal office in, an Emerging Market. Determinations as
to whether an issuer is an Emerging Markets issuer will be made by Warburg,
based on publicly available information and inquiries made to the issuers.
As used in this Prospectus, an Emerging Market is any country (i) which is
generally considered to be an emerging or developing country by the World Bank
and the International Finance Corporation (the 'IFC') or by the United Nations,
(ii) which is included in the IFC Investable Index or the Morgan Stanley Capital
International Emerging Markets Index, or (iii) which has a gross national
product ('GNP') per capita of $2,000 or less, in each case at the time of the
Portfolio's investment. Among the countries which Warburg currently considers to
be Emerging Markets are the following: Algeria, Angola, Antigua, Argentina,
Armenia, Azerbaijan, Bangladesh, Barbados, Barbuda, Belarus, Belize, Bhutan,
Bolivia, Botswana, Brazil, Bulgaria, Cambodia, Chile, People's Republic of
China, Republic of China (Taiwan), Colombia, Cyprus, Czech Republic, Dominica,
Ecuador, Egypt, Estonia, Georgia, Ghana, Greece, Grenada, Guyana, Hong Kong,
Hungary, India, Indonesia, Israel, Ivory Coast, Jamaica, Jordan, Kazakhstan,
Kenya, Republic of Korea (South Korea), Latvia, Lebanon, Lithuania, Malawi,
Malaysia, Mauritius, Mexico, Moldova, Mongolia, Montserrat, Morocco, Mozambique,
Myanmar (Burma), Namibia, Nepal, Nigeria, Pakistan, Panama, Papua New Guinea,
Paraguay, Peru, Philippines, Poland, Portugal, Romania, Russia,

<PAGE>
Saudi Arabia, Singapore, Slovakia, Slovenia, South Africa, Sri Lanka, St. Kitts
and Nevis, St. Lucia, St. Vincent and the Grenadines, Swaziland, Tanzania,
Thailand, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Uganda, Ukraine,
Uruguay, Uzbekistan, Venezuela, Vietnam, Yugoslavia, Zambia and Zimbabwe. Among
the countries that will not be considered Emerging Markets are: Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy,
Japan, Luxembourg, Netherlands, New Zealand, Norway, Spain, Sweden, Switzerland,
United Kingdom and the United States.
The Portfolio may invest in securities of companies of any size, whether
traded on or off a national securities exchange. Portfolio holdings may include
emerging growth companies, which are small- or medium-sized companies that have
passed their start-up phase and that show positive earnings and prospects for
achieving profit and gain in a relatively short period of time.
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. As a shareholder in a closed-end investment
company, the Portfolio will bear its ratable share of the investment company's
expenses, including management fees, and will remain subject to payment of the
Portfolio's administration fees and other expenses with respect to assets so
invested.

SMALL COMPANY GROWTH PORTFOLIO

The Small Company Growth Portfolio's investment objective is capital growth.
The Portfolio is a non-diversified portfolio that 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 companies 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

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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 companies 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.
Although there is no intention of doing so during the coming year, the
Portfolio is authorized to engage in reverse repurchase agreements and dollar
rolls.

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 is a non-diversified portfolio that 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 Services ('S&P') or Moody's Investors Service, Inc. ('Moody's').

Warburg's approach to multicurrency fixed-income management is strategic and
value-based. Warburg's 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.
Warburg 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, Warburg responds
to high levels of real interest rates through a lengthening in portfolio
maturity. Accordingly, while the bulk of the Portfolio is expected to be
invested in medium-term securities, Warburg 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 Warburg's selection of markets and particular
securities within those markets. The

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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. Warburg 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 Warburg 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.

VALUE PORTFOLIO

The Value Portfolio's investment objective is total return. The Portfolio is
a diversified portfolio that pursues its investment objective by investing
primarily in a portfolio of equity securities of large capitalization domestic
companies that Warburg considers to be relatively undervalued. Current income is
a secondary consideration in selecting portfolio investments. The Portfolio
intends to invest at least 80% of its total assets in common stocks, preferred
stocks, warrants and other rights and securities convertible into or
exchangeable for common stocks of large companies (i.e., companies having stock
market capitalizations of $1 billion or greater at the time of initial purchase
and, under normal market conditions, will invest at least 65% of its total
assets in such securities).
The Value Portfolio's general investment policy is to invest in equity
securities that, in Warburg's opinion, are available for purchase at prices
below their intrinsic value. Warburg will determine whether a company is
undervalued based upon research and analysis, taking into account, among other
factors, price/earnings ratio, price/book ratio, price/cash flow ratio, earnings
growth, debt/capital ratio and multiples of earnings of comparable securities.
Other relevant factors, including a company's asset value, franchise value and
quality of management, will also be considered. These factors are not applied to
prospective investments in a mechanical way; rather, Warburg analyzes each
security individually, taking all relevant factors into account. The Portfolio
may invest in the securities of companies in any industry sector and will not
concentrate in any one industry. The Portfolio will invest primarily in
companies whose securities are traded on U.S. stock exchanges or in the U.S.
over-the-counter market, but may invest up to 20% of its assets in foreign
securities.

ADDITIONAL INVESTMENTS

MONEY MARKET OBLIGATIONS. Each Portfolio is authorized to invest, under
normal circumstances, in domestic and foreign short-term (one year or less
remaining to maturity) and medium-term (five years or less remaining to

<PAGE>
maturity) money market obligations, although each Portfolio intends to stay
invested in securities satisfying its investment objective to the extent
practical. In addition, on occasion, Warburg may deem it advisable to adopt a
temporary defensive posture by investing without limit in money market
obligations. These instruments consist of obligations of the U.S. government or
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 administration fees
and other expenses 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.
ZERO COUPON SECURITIES. The Global Fixed Income Portfolio and the Emerging
Markets 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.

DEBT SECURITIES. Each Portfolio may invest in debt securities. The interest
income to be derived may be considered as one factor in selecting debt
securities for investment by Warburg. Because the market value of debt
obligations can be expected to vary inversely to changes in prevailing interest
rates, investing in debt obligations may provide an opportunity for capital
growth when interest rates are expected to decline. The success of such a
strategy is dependent upon Warburg's ability to accurately forecast changes in
interest rates. The market value of debt obligations may also be expected to
vary depending upon, among other factors, the ability of the issuer to repay
principal and interest, any change in investment rating and general economic
conditions.

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A security will be deemed to be investment grade if it is rated within the
four highest grades by Moody's or S&P or, if unrated, is determined to be of
comparable quality by Warburg. Bonds rated in the fourth highest grade may have
speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade bonds. Subsequent to
its purchase by the Emerging Markets 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, although
Warburg will consider such event in its determination of whether the Portfolio
should continue to hold the securities.

Emerging Markets and Value Portfolios. The Emerging Markets Portfolio and the
Value Portfolio may each invest or hold up to 35% and 10%, respectively, of its
net assets in fixed-income securities (including convertible bonds) rated below
investment grade (commonly referred to as 'junk bonds') and as low as C by
Moody's or D by S&P, or in unrated securities considered to be of equivalent
quality. Securities that are rated C by Moody's are the lowest rated class and
can be regarded as having extremely poor prospects of ever attaining any real
investment standing. Debt rated D by S&P is in default or is expected to default
upon maturity or payment date.

Among the types of debt securities in which the Emerging Markets Portfolio
may invest are Brady Bonds, loan participations and assignments, asset-backed
securities and mortgage-backed securities:
Brady Bonds are collateralized or uncollateralized securities created through
the exchange of existing commercial bank loans to public and private Latin
American entities for new bonds in connection with certain debt restructurings.
Brady Bonds have been issued only recently and therefore do not have a long
payment history. However, in light of the history of commercial bank loan
defaults by Latin American public and private entities, investments in Brady
Bonds may be viewed as speculative.
Loan Participations and Assignments of fixed and floating rate loans arranged
through private negotiations between a foreign government as borrower and one or
more financial institutions as lenders will typically result in the Emerging
Markets Portfolio having a contractual relationship only with the lender, in the
case of a participation, or the borrower, in the case of an assignment. The
Portfolio may not directly benefit from any collateral supporting a
participation, and in the event of the insolvency of a lender will be treated as
a general creditor of the lender. As a result, the Portfolio assumes the risk of
both the borrower and the lender of a participation. The Portfolio's rights and
obligations as the purchaser of an assignment may differ from, and be more
limited than, those held by the assigning lender. The lack of a liquid secondary
market for both participations and assignments will have an adverse impact on
the value of such securities and on the Portfolio's ability to dispose of
participations or assignments.

<PAGE>
Asset-backed securities are collateralized by interests in pools of consumer
loans, with interest and principal payments ultimately depending on payments in
respect of the underlying loans by individuals (or a financial institution
providing credit enhancement). Because market experience in these securities is
limited, the market's ability to sustain liquidity through all phases of the
market cycle had not been tested. In addition, there is no assurance that the
security interest in the collateral can be realized. The Portfolio may purchase
asset-backed securities that are unrated.
Mortgage-backed securities are collateralized by mortgages or interests in
mortgages and may be issued by government or non-government entities.
Non-government issued mortgage-backed securities may offer higher yields than
those issued by government entities, but may be subject to greater price
fluctuations. The value of mortgage-backed securities may change due to shifts
in the market's perceptions of issuers, and regulatory or tax changes may
adversely affect the mortgage securities market as a whole. Prepayment, which
occurs when unscheduled or early payments are made on the underlying mortgages,
may shorten the effective maturities of these securities and may lower their
returns.

SWAPS. The International Equity and Emerging Markets Portfolios may each
enter into swaps relating to indexes, currencies and equity interests of foreign
issuers. Index swaps involve the exchange by the Portfolio with another party of
the respective amounts payable with respect to a notional principal amount at
interest rates equal to two specified indexes. A currency swap is an agreement
to exchange cash flows on a notional amount of two or more currencies based on
the relative value differential among them. An equity swap is an agreement to
exchange streams of payments computed by reference to a notional amount based on
the performance of a stock index, a basket of stocks or a single stock. A
Portfolio may enter into these transactions to preserve a return or spread on a
particular investment or portion of its assets, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities the Portfolio anticipates purchasing at a
later date. The Portfolios may also use these transactions for speculative
purposes, such as to obtain the price performance of a security without actually
purchasing the security in circumstances where, for example, the subject
security is illiquid, or is unavailable for direct investment. Swaps have risks
associated with them including possible default by the other party to the
transaction, illiquidity and, where swaps are used as hedges, the risk that the
use of a swap could result in losses greater than if the swap had not been
employed.
A Portfolio will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the instrument, with the Portfolio receiving or paying, as the case
may be, only the net amount of the two payments. Index swaps do not involve the
delivery of securities, other underlying assets or principal. Accordingly, the
risk of loss with respect to index swaps is limited to the net

<PAGE>
amount of interest payments that the Portfolio is contractually obligated to
make. If the other party to an index swap defaults, the Portfolio's risk of loss
consists of the net amount of interest payments that the Portfolio is
contractually entitled to receive. Where swaps are entered into for good faith
hedging purposes, Warburg believes such obligations do not constitute senior
securities under the 1940 Act and, accordingly, will not treat them as being
subject to a Portfolio's borrowing restrictions. A Portfolio will accrue the net
amount of the excess, if any, of its obligations over its entitlements with
respect to each swap on a daily basis and will segregate an amount of cash or
liquid securities having a value equal to the accrued excess.
WARRANTS. Each Portfolio may invest up to 10% of its total assets in
warrants. Warrants are securities that give the holder the right, but not the
obligation, to purchase newly created equity issues of the company issuing the
warrants, or a related company, at a fixed price either on a date certain or
during a set period.

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
Warburg 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 Managed EAFE'r' Countries Portfolio, the
Global Fixed Income Portfolio and the Value Portfolio. However, the Managed
EAFE'r' Countries Portfolio's annual turnover rate should not exceed 75%, the
Global Fixed Income Portfolio may experience portfolio turnover as high as 150%
to 200% and the Value Portfolio's annual turnover rate should not exceed 150%.
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 Taxes -- Taxes' and 'Investment
Policies -- Portfolio Transactions' in the Statement of Additional Information.
All orders for transactions in securities or options on behalf of a Portfolio
are placed by Warburg with broker-dealers that it selects.

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

<PAGE>
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.

Up to 5% of each of the International Equity, Managed EAFE'r' Countries,
Emerging Markets and Small Company Growth Portfolios' net assets may be held in
convertible securities rated below investment grade. Up to 5% of the Global
Fixed Income Portfolio's net assets and up to 10% of the Value Portfolio's net
assets may be invested in convertible securities rated below investment grade at
the time of purchase. A security will be deemed to be investment grade if it is
rated within the four highest grades by Moody's or S&P or, if unrated, is
determined to be of comparable quality by Warburg. Securities rated in the
fourth highest grade have speculative characteristics and changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher grade
securities. 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. Warburg will consider such event in its determination of whether the
Portfolio should continue to hold the securities. Securities rated below
investment grade 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. A Portfolio 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.
FOREIGN SECURITIES. The International Equity Portfolio, Managed EAFE'r'
Countries Portfolio, Emerging Markets Portfolio and the Global Fixed Income
Portfolio will invest substantially in foreign securities, and each of the Small
Company Growth and Value Portfolios 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 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

<PAGE>
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.
The risks associated with investing in securities of non-U.S. issuers are
generally heightened for investments in securities of issuers in emerging
markets.

REITS. The Value Portfolio may invest up to 15% of its total assets in real
estate investment trusts ('REITs'), which are pooled investment vehicles that
invest primarily in income-producing real estate or real estate related loans or
interests. Like regulated investment companies such as the Fund, REITs are not
taxed on income distributed to shareholders provided they comply with several
requirements of the Internal Revenue Code of 1986, as amended (the 'Code'). By
investing in a REIT, the Portfolio will indirectly bear its proportionate share
of any expenses paid by the REIT in addition to the expenses of the Portfolio.
Investing in REITs involves certain risks. A REIT may be affected by changes
in the value of the underlying property owned by such REIT or by the quality of
any credit extended by the REIT. REITs are dependent on management skills, are
not diversified (except to the extent the Code requires), and are subject to the
risks of financing projects. REITs are subject to heavy cash flow dependency,
default by borrowers, self-liquidation, the possibilities of failing to qualify
for the exemption from tax for distributed income under the Code and failing to
maintain their exemptions from the 1940 Act. REITs are also subject to interest
rate risks.

JAPANESE INVESTMENTS. Because the International Equity and Managed EAFE'r'
Countries Portfolios may from time to time have large positions in Japanese
securities, they may be subject to general economic and political conditions in
Japan.

<PAGE>
Securities in Japan are denominated and quoted in 'yen.' Yen are fully
convertible and transferable based on floating exchange rates. In determining
the net asset value of shares of a Portfolio, assets or liabilities initially
expressed in terms of Japanese yen will be translated into U.S. dollars at the
current selling rate of Japanese yen against U.S. dollars. As a result, the
value of a Portfolio's assets as measured in U.S. dollars may be affected
favorably or unfavorably by fluctuations in the value of Japanese yen relative
to the U.S. dollar.
The decline in the Japanese securities markets since 1989 has contributed to
a weakness in the Japanese economy, and the impact of a further decline cannot
be ascertained. The common stocks of many Japanese companies continue to trade
at high price-earnings ratios in comparison with those in the United States.
Differences in accounting methods make it difficult to compare the earnings of
Japanese companies with those of companies in other countries, especially the
United States.
Japan is largely dependent upon foreign economies for raw materials.
International trade is important to Japan's economy, as exports provide the
means to pay for many of the raw materials it must import. Because of large
trade surpluses, 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.
Since mid-1993, there have been several changes in leadership in Japan. What,
if any, effect the current political situation will have on prospective
regulatory reforms on the economy in Japan cannot be predicted. Recent and
future developments in Japan and neighboring Asian countries may lead to changes
in policy that might adversely affect a Portfolio investing there. For
additional information, see 'Investment Policies -- Japanese Investments'
beginning at page 13 of the Statement of Additional Information.
EMERGING MARKETS. One or more Portfolios with authority to invest outside of
the United States may invest in securities of issuers located in less developed
countries considered to be 'emerging markets.' Investing in securities of
issuers located in emerging markets involves not only the risks described below
with respect to investing in foreign securities, but also other risks, including
exposure to economic structures that are generally less diverse and mature than,
and to political systems that can be expected to have less stability than, those
of developed countries. Other characteristics of emerging markets that may
affect investment there include certain national policies that may restrict
investment by foreigners in issuers or industries deemed sensitive to relevant
national interests and the absence of developed legal structures governing
private and foreign investments and private property. The typically small size
of the markets for securities of issuers located in emerging markets and the
possibility of a low or nonexistent volume of trading in those securities may
also result in a lack of liquidity and in price volatility of those securities.

<PAGE>
OPTIONS, FUTURES AND CURRENCY TRANSACTIONS. At the discretion of Warburg,
each Portfolio may, but is not required to, engage in a number of strategies
involving options, futures and forward currency contracts. These strategies,
commonly referred to as 'derivatives,' may be used (i) for the purpose of
hedging against a decline in value of a Portfolio's current or anticipated
portfolio holdings, (ii) as a substitute for purchasing or selling portfolio
securities or (iii) to seek to generate income to offset expenses or increase
return. TRANSACTIONS THAT ARE NOT CONSIDERED HEDGING SHOULD BE CONSIDERED
SPECULATIVE AND MAY SERVE TO INCREASE A PORTFOLIO'S INVESTMENT RISK. Transaction
costs and any premiums associated with these strategies, and any losses
incurred, will affect a Portfolio's net asset value and performance. Therefore,
an investment in a Portfolio may involve a greater risk than an investment in
other mutual funds that do not utilize these strategies. A Portfolio's use of
these strategies may be limited by position and exercise limits established by
securities and commodities exchanges and the National Association of Securities
Dealers, Inc. and by the Code.

Stock Index Options. Each Portfolio (other than the Emerging Markets
Portfolio) may write put and call options on stock and debt securities and will
realize fees (referred to as 'premiums') for granting the rights evidenced by
the options. Each Portfolio may purchase options on stocks and debt securities
that are traded on U.S. and foreign exchanges, as well as over-the-counter
('OTC') options. The purchaser of a put option on a security has the right to
compel the purchase by the writer of the underlying security, while the
purchaser of a call option has the right to purchase the underlying security
from the writer. In addition to purchasing and writing options on securities,
each Portfolio may purchase and write exchange-listed and OTC put and call
options on stock indexes. A stock index measures the movement of a certain group
of stocks by assigning relative values to the common stocks included in the
index.

The potential loss associated with purchasing an option is limited to the
premium paid, and the premium would partially offset any gains achieved from its
use. However, for an option writer the exposure to adverse price movements in
the underlying security or index is potentially unlimited during the exercise
period. Writing securities options may result in substantial losses to a
Portfolio, force the sale or purchase of portfolio securities at inopportune
times or at less advantageous prices, limit the amount of appreciation the
Portfolio could realize on its investments or require the Portfolio to hold
securities it would otherwise sell.
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 contracts. These contracts and options will be traded on
an exchange designated by the Commodity Futures Trading Commission (the 'CFTC')
or, if consistent with CFTC regulations, on foreign exchanges.

<PAGE>
These futures contracts are standardized contracts for the future delivery of
foreign currency or an interest rate sensitive security or, in the case of stock
index and certain other futures contracts, are settled in cash with reference to
a specified multiplier times the change in the specified index, exchange rate or
interest rate. An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract.
Aggregate initial margin and premiums required to establish positions other
than those considered by the CFTC to be 'bona fide hedging' will not exceed 5%
of a Portfolio's net asset value, after taking into account unrealized profits
and unrealized losses on any such contracts. Although a Portfolio is limited in
the amount of assets that may be invested in futures transactions, there is no
overall limit on the percentage of a Portfolio's assets that may be at risk with
respect to futures activities.
Investments in commodity options involve a relatively high degree of risk.
Prices of commodities can be influenced by a variety of global economic,
financial and political factors and may fluctuate markedly over short periods of
time. Among other things, commodities can be affected by changes in inflation,
investment speculation, changes in industrial, commercial and governmental
demand and supply and any governmental restrictions on ownership. In addition,
investments in options on physical commodities may involve higher custodial
expenses.
Currency Exchange Transactions. Each Portfolio will conduct its currency
exchange transactions either (i) on a spot (i.e., cash) basis at the rate
prevailing in the currency exchange market, (ii) through entering into futures
contracts or options on futures contracts (as described above), (iii) through
entering into forward contracts to purchase or sell currency or (iv) by
purchasing or writing exchange-traded or OTC currency options. A forward
currency contract involves an obligation to purchase or sell a specific currency
at a future date at a price set at the time of the contract. An option on a
foreign currency operates similarly to an option on a security. Risks associated
with currency forward contracts and purchasing currency options are similar to
those described in this Prospectus for futures contracts and securities and
stock index options. In addition, the use of currency transactions could result
in losses from the imposition of foreign exchange controls, suspension of
settlement or other governmental actions or unexpected events.
Hedging Considerations. Each Portfolio may engage in options, futures and
currency transactions for, among other reasons, hedging purposes. A hedge is
designed to offset a loss on a portfolio position with a gain in the hedge
position; at the same time, however, a properly correlated hedge will result in
a gain in the portfolio position being offset by a loss in the hedge position.
As a result, the use of options, futures contracts and currency exchange
transactions for hedging purposes could limit any potential gain from an
increase in value of the position hedged. In addition, the movement in the
portfolio position hedged may not be of the same magnitude as movement in

<PAGE>
the hedge. Each Portfolio will engage in hedging transactions only when deemed
advisable by Warburg, and successful use of hedging transactions will depend on
Warburg's ability to correctly predict movements in the hedge and the hedged
position and the correlation between them, which could prove to be inaccurate.
Even a well-conceived hedge may be unsuccessful to some degree because of
unexpected market behavior or trends.
Additional Considerations. To the extent that a Portfolio engages in the
strategies described above, the Portfolio may experience losses greater than if
these strategies had not been utilized. In addition to the risks described
above, these instruments may be illiquid and/or subject to trading limits, and
the Portfolio may be unable to close out an option or futures position without
incurring substantial losses, if at all. A Portfolio is also subject to the risk
of a default by a counterparty to an off-exchange transaction.

Asset Coverage. Each Portfolio will comply with applicable regulatory
requirements designed to eliminate any potential for leverage with respect to
options written by the Portfolio on securities, indexes and currencies;
currency, interest rate and stock index futures contracts and options on these
futures contracts; and forward currency contracts. The use of these strategies
may require that the Portfolio maintain cash or liquid 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 or by other portfolio positions or by other means
consistent with applicable regulatory policies. Segregated assets cannot be sold
or transferred unless equivalent assets are substituted in their place or it is
no longer necessary to segregate them. As a result, there is a possibility that
segregation of a large percentage of 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 'Securities Act'),
but that can be sold to 'qualified institutional buyers' in accordance with Rule
144A under the Securities Act ('Rule 144A Securities'). A Rule 144A Security
will be considered illiquid and therefore subject to the Portfolio's 10% (15% in
the case of each of the Emerging Markets Portfolio and the Value Portfolio)
limitation 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

<PAGE>
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.
WARRANTS. At the time of issue, the cost of a warrant is substantially
less than the cost of the underlying security itself, and price movements
in the underlying security are generally magnified in the price movements
of the warrant. This leveraging effect enables the investor to gain
exposure to the underlying security with a relatively low capital investment,
but increases an investor's risk in the event of a decline in the value of the
underlying security and can result in a complete loss of the amount invested in
the warrant. In addition, the price of a warrant tends to be more volatile
than, and may not correlate exactly to, the price of the underlying security.
If the market price of the underlying security is below the exercise price of
the warrant on its expiration date, the warrant will generally expire without
value.
SHORT SALES AGAINST THE BOX. Each Portfolio may enter into a short sale of
securities such that when the short position is open the Portfolio owns an equal
amount of the securities sold short or owns preferred stock or debt securities,
convertible or exchangeable without payment of further consideration, into an
equal number of securities sold short. This kind of short sale, which is
referred to as one 'against the box,' will be entered into by a Portfolio to
lock in a sale price for a security the Portfolio does not wish to sell
immediately or to postpone a gain or loss for federal income tax purposes and
satisfy certain tests applicable to regulated investment companies under the
Code. The Portfolio will deposit, in a segregated account with its custodian or
a qualified subcustodian, the securities sold short or convertible or
exchangeable preferred stocks or debt securities in connection with short sales
against the 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, except that the
Emerging Markets Portfolio will not be subject to such limitation.

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 Warburg 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

<PAGE>
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.

LOWER-RATED SECURITIES. The Emerging Markets and the Value Portfolios may
invest or hold lower-rated and comparable unrated securities (commonly referred
to as 'junk bonds') which (i) will likely have some quality and protective
characteristics that, in the judgment of the rating organizations, are
outweighed by large uncertainties or major risk exposures to adverse conditions
and (ii) are predominantly speculative with respect to the issuer's capacity to
pay interest and repay principal in accordance with the terms of the obligation.
The market values of certain of these securities also tend to be more sensitive
to individual corporate developments and changes in economic conditions than
higher-quality securities. In addition, medium- and lower-rated securities and
comparable unrated securities generally present a higher degree of credit risk.
The risk of loss due to default by such issuers is significantly greater because
medium- and lower-rated securities and unrated securities generally are
unsecured and frequently are subordinated to the prior payment of senior
indebtedness.
The market value of securities in lower rating categories is more volatile
than that of higher quality securities. In addition, a Portfolio may have
difficulty disposing of certain of these securities because there may be a thin
trading market. The lack of liquid secondary market for certain securities may
have an adverse impact on a Portfolio's ability to dispose of particular issues
and may make it more difficult for the Portfolio to obtain accurate market
quotations for purposes of valuing the Portfolio and calculating its net asset
value.

<PAGE>
SPECIAL SITUATION COMPANIES. The Emerging Markets 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 Warburg analyzes
'special situation companies' carefully and invests in the securities of these
companies at the appropriate time, the Portfolio may achieve growth of capital.
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.

NON-DIVERSIFIED STATUS. The Emerging Markets, Small Company Growth and Global
Fixed Income Portfolios are classified as 'non-diversified' 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. Each
Portfolio, however, intends to comply with the diversification requirements
imposed by the Code, for qualification as a regulated investment company. As a
non-diversified portfolio, each 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.

INVESTMENT GUIDELINES
- --------------------------------------------------------------------------------

The Emerging Markets and Value Portfolios may each invest up to 15% of its
net assets and each other Portfolio may invest up to 10% of its net assets in
securities with contractual or other restrictions on resale and other
instruments that are not readily marketable ('illiquid securities'), 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; (iii) time deposits maturing in more than seven
calendar days; and (iv) certain Rule 144A Securities. 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 (including reverse repurchase agreements)
exceed 5% of the value of a Portfolio's total assets, the Portfolio will not
make any investments (including roll-overs). Up to 5% of the Emerging Markets
Portfolio's total assets may be invested in stand-by commitments. 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 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

<PAGE>
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 Warburg as investment adviser to each
Portfolio. Warburg, 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. Warburg makes investment decisions for each Portfolio and places
orders to purchase or sell securities on behalf of each such Portfolio. Warburg
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 Warburg, the Fund pays Warburg a fee calculated
at an annual rate equal to percentages of the relevant Portfolio's average daily
net assets, as follows: International Equity Portfolio -- .80%, Managed EAFE'r'
Countries Portfolio -- .80%, Emerging Markets Portfolio -- 1.00%, Small Company
Growth Portfolio -- .90%, Global Fixed Income Portfolio -- .65% and Value
Portfolio -- .75%. Warburg 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.
Warburg 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 December 31,
1996, Warburg managed approximately $19.6 billion of assets, including
approximately $10.6 billion of investment company assets. Incorporated in 1970,
Warburg is a wholly owned subsidiary of Warburg, Pincus Counsellors G.P.
('Warburg G.P.'), a New York general partnership, which itself is controlled by
Warburg, Pincus & Co. ('WP&Co.'), also a New York general partnership. Lionel I.
Pincus, the managing partner of WP&Co., may be deemed to control both WP&Co. and
Warburg. Warburg G.P. has no business other than being a holding company of
Warburg and its subsidiaries. Warburg's address is 466 Lexington Avenue, New
York, New York 10017-3147.
PORTFOLIO MANAGERS.
International Equity and Managed EAFE'r' Portfolios. The portfolio manager of
the International Equity and Managed EAFE'r' Countries Portfolios is Richard H.
King, who has been portfolio manager of the Portfolios since inception. Mr.
King, a senior managing director of Warburg, has been with Warburg 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. Horsley, P. Nicholas
Edwards, Harold W. Ehrlich and Vincent J. McBride have been associate portfolio
managers of the International Equity Portfolio since joining Warburg and of the
Managed EAFE'r' Countries Portfolio since its inception.

<PAGE>
Mr. Horsley is a senior vice president of Warburg and has been with Warburg
since 1993, before which time he was a director, portfolio manager and analyst
at Barclays deZoete Wedd in New York City. Mr. Edwards is a managing director
and has been with Warburg since August 1995, before which time he was a director
at Jardine Fleming Investment Advisers, Tokyo. Mr. Ehrlich is a managing
director of Warburg and has been with Warburg since February 1995, before which
time he was a senior vice president, portfolio manager and analyst at Templeton
Investment Counsel Inc. Mr. McBride, a senior vice president of Warburg, has
been with Warburg since 1994. Prior to joining Warburg, 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.
Emerging Markets Portfolio. Mr. King and Mr. Horsley have been co-portfolio
managers of the Emerging Markets Portfolio since its inception. Mr. Ehrlich and
Mr. McBride have been associate portfolio managers of the Emerging Markets
Portfolio since inception.
Small Company Growth Portfolio. The co-portfolio managers of the Small
Company Growth Portfolio are Elizabeth B. Dater and Stephen J. Lurito. Ms. Dater
is a senior managing director of Warburg and has been a portfolio manager of
Warburg since 1978. Mr. Lurito is a managing director of Warburg and has been
with Warburg since 1987.
Global Fixed Income Portfolio. The portfolio manager of the Global Fixed
Income Portfolio is Dale C. Christensen. Mr. Christensen is a managing director
of Warburg and has been associated with Warburg since 1989.
Value Portfolio. The portfolio manager of the Value Portfolio is Brian S.
Posner, who has been the portfolio manager of the Value Portfolio since its
inception. Mr. Posner, a managing director of Warburg since January 1997, was an
employee of Fidelity Investments ('Fidelity') from 1987 until December 1996. He
was the vice president and portfolio manager of the Fidelity Equity-Income II
Fund (1992-December 1996); the portfolio manager of the Fidelity Value Fund
(1990-1992); assistant portfolio manager of the Fidelity Equity-Income Fund
(1989-1990); assistant portfolio manager of the Fidelity Capital Appreciation
Fund (1989); portfolio manager of the Fidelity Select Property-Casualty
Insurance Portfolio (1987-1990) and an equity analyst (1987). Prior to joining
Fidelity, Mr. Posner was a research associate at John Nuveen and Co. and an
analyst at Feldman Securities Corp. in Chicago.
CO-ADMINISTRATORS. The Fund employs Counsellors Funds Service, Inc.
('Counsellors Service'), a wholly owned subsidiary of Warburg, 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

<PAGE>
statements and annual, semiannual and quarterly reports, assisting in the
preparation of tax returns 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.
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, the Managed EAFE'r' Countries
Portfolio, the Emerging Markets Portfolio and the Global Fixed Income 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 each of the
Small Company Growth and Value Portfolios will pay PFPC a fee calculated at an
annual rate of .10% of the Portfolio's first $500 million in average daily net
assets, .075% of the next $1 billion in average daily net assets, and .05% of
average daily net assets over $1.5 billion. PFPC has its principal offices at
400 Bellevue Parkway, Wilmington, Delaware 19809.
CUSTODIANS. Fiduciary Trust Company International ('Fiduciary') and PNC Bank,
National Association ('PNC') serve as custodians of the International Equity,
Managed EAFE'r' Countries, Global Fixed Income and Value 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 also
serves as custodian of the Emerging Markets Portfolio'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. 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 Warburg and is located at 466
Lexington Avenue, New York, New York 10017-3147. No

<PAGE>
compensation is payable by the Fund to Counsellors Securities for distribution
services.
Warburg or its affiliates may, at their own expense, provide promotional
incentives to parties who support the sale of shares of the Fund, consisting of
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.
DIRECTORS AND OFFICERS. The officers of the Fund manage its day-to-day
operations and are directly responsible to the Board. The Board sets broad
policies for the Fund and chooses its officers. A list of the Directors and
officers of the Fund and a brief statement of their present positions and
principal occupations during the past five years is set forth in the Statement
of Additional Information.

HOW TO 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 the Fund at (800) 369-2728. An investor may also obtain an account
application by writing to:

Warburg Pincus Funds
Attention: Institutional Funds
335 Madison Avenue, 15th Floor
New York, New York 10017

Completed and signed account applications should be mailed to Warburg Pincus
Funds at the above address.

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. Shares of the Fund are sold without a sales
charge. The minimum initial investment in each Portfolio is as follows:

<TABLE>
<CAPTION>
Minimum Initial Minimum Subsequent
Portfolio Investment* Investment**
- ---------------------------------------- ------------------- -----------------------
<S> <C> <C>
International Equity $ 3,000,000 $50,000
Managed EAFE'r' Countries 3,000,000 50,000
Emerging Markets 2,000,000 50,000
Small Company Growth 1,000,000 None
Global Fixed Income 3,000,000 50,000
Value 1,000,000 None
</TABLE>

- ------------
* The minimum investment for any group of related persons is an aggregate of
$4,000,000.
** Certain retirement plans for which recordkeeping is performed on an omnibus
basis for multiple participants are not subject to a subsequent investment
minimum.

<PAGE>
The investment minimums may be waived for investors maintaining advisory
accounts with Warburg 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 investment minimum requirements.
After an investor has made an initial investment, additional shares may be
purchased at any time by mail or by wire in the manner outlined below. 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.

BY MAIL. If the investor desires to purchase shares by mail, a check or money
order made 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

<PAGE>
the Fund prior to wiring funds by telephoning (800) 369-2728. 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.:
[Portfolio 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.

GENERAL. Each Portfolio reserves the right to reject any specific purchase
order. Purchase orders may be refused if, in Warburg's opinion, they are of a
size that would disrupt the management of a Portfolio. A Portfolio may
discontinue sales of its shares if management believes that a substantial
further increase in assets may adversely affect that Portfolio's ability to
achieve its investment objective. In such event, however, it is anticipated that
existing shareholders would be permitted to continue to authorize investment in
such Portfolio and to reinvest any dividends or capital gains distributions.

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

<PAGE>

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 the Fund at (800)
369-2728 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 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
currently does not 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 for 10 days from the date of
purchase. Investors should consider purchasing shares using a certified or bank
check or money order if they anticipate an immediate need for redemption
proceeds.

If a redemption order is received by a Portfolio or its agent 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. Except as noted above, 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 Warburg, 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

<PAGE>
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 telephone in the manner described under 'Redemption of
Shares' above. If an exchange request is received by Warburg Pincus Funds or its
agent 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. When an investor effects an exchange
of shares, the exchange is treated for federal income tax purposes as a
redemption. Therefore, the investor may realize a taxable gain or loss in
connection with the exchange. For further information regarding the exchange
privilege an investor should contact the Fund at (800) 369-2728.

<PAGE>
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 the Fund at the address set forth under 'How to
Open an Account in the Fund' or by calling the Fund at (800) 369-2728.

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. Each 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 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. A Portfolio's investment

<PAGE>

activities, including short sales of securities, will not result in unrelated
business taxable income to a tax-exempt investor. A portion of the Portfolios'
dividends may 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.
Certain provisions of the Code may require that a gain recognized by a
Portfolio upon the closing of a short sale be treated as a short-term capital
gain, and that a loss recognized by the Portfolio upon the closing of a short
sale be treated as a long-term capital loss, regardless of the amount of time
that the Portfolio held the securities used to close the short sale. A
Portfolio's use of short sales may also affect the holding periods of certain
securities held by the Portfolio if such securities are 'substantially
identical' to securities used by the Portfolio to close the short sale. The
Portfolio's short selling activities will not result in unrelated business
taxable income to a tax-exempt investor.
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

<PAGE>
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.
Securities listed on a U.S. securities exchange (including securities traded
through the Nasdaq National Market System) or foreign securities exchange or
traded in an over-the-counter market will be valued at the most recent sale
price when the valuation is made. Debt obligations that mature in 60 days or
less from the valuation date are valued on the basis of amortized cost, unless
the Board determines that using this valuation method would not reflect the
investments' value. Securities, options and futures contracts for which market
quotations are not readily available and other assets will be valued at their
fair value as determined in good faith pursuant to consistently applied
procedures established by the Board. 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

<PAGE>
periods as well (such as from commencement of the Portfolio's operations or on a
year-by-year, quarterly or current year-to-date basis).
When considering average total return figures for periods longer than one
year, it is important to note that the annual total return for one year in the
period might have been greater or less than the average for the entire period.
When considering total return figures for periods shorter than one year,
investors should bear in mind that 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 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 the Fund at (800) 369-2728.
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 and Managed EAFE'r' Countries Portfolios, the 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 Index; in the case of the Emerging Markets
Portfolio, with the IFC Emerging Market Free Index, the IFC Investible Index and
the Morgan Stanley Capital International Emerging Markets Index; in the case of
the Small Company Growth Portfolio, with the Russell 2000 Small Stock Index and
the S&P 500 Index; in the case of the Global Fixed Income Portfolio, with the
J.P. Morgan Traded Index (an index of non-U.S. dollar bonds of ten countries
with active bond markets), the Salomon Brothers World Government Bond Index (a
hedged, market-capitalization weighted index designed to track major government
debt markets) and the Lipper General World Income Average (an average of funds
that invest primarily in non-U.S. dollar and U.S. dollar debt instruments); and
in the case of the Value Portfolio, with the S&P 500 Index or (iii) other
appropriate indexes of investment securities or with data developed by
Warburg 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
Barron's, Business Week, Financial Times, Forbes, Fortune, Inc.,

<PAGE>
Institutional Investor, Investor's Business Daily, Money, Morningstar, Inc.,
Mutual Fund Magazine, SmartMoney and The Wall Street Journal.

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. In addition, a Portfolio and its portfolio managers may
render periodic updates of Portfolio activity, which may include a discussion of
significant portfolio holdings and analysis of holdings by industry, country,
credit quality and other characteristics. Each Portfolio may also discuss
measures of risk, 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. Morningstar, Inc. rates funds in broad
categories based on risk/reward analyses over various time periods. 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.

GENERAL INFORMATION
- --------------------------------------------------------------------------------

ORGANIZATION. The Fund was incorporated on May 13, 1992 under the laws of the
State of Maryland under the name 'Warburg, Pincus Institutional Fund, Inc.' The
Fund's charter authorizes the Board to issue thirteen billion full and
fractional shares of capital stock, par value $.001 per share. Shares of six
series have been classified, which constitute the interests in the Portfolios.

VOTING RIGHTS. Investors in each Portfolio are entitled to one vote for each
full share owned and fractional votes for fractional shares held. Shareholders
of each Portfolio 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 members of the Board 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.
SHAREHOLDER COMMUNICATIONS. 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. Periodic listings of the

<PAGE>

investment securities held by a Portfolio, as well as certain statistical
characteristics of a Portfolio, may be obtained by calling (800) 369-2728.

---------------------------

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.

<PAGE>
TABLE OF CONTENTS

<TABLE>
<S> <C>
The Fund's Expenses..................................................... 2
Financial Highlights.................................................... 3
Investment Objectives and Policies...................................... 5
Portfolio Transactions and Turnover Rate................................ 14
Special Risk Considerations and Certain Investment Strategies........... 14
Investment Guidelines................................................... 23
Management of the Fund.................................................. 24
How to Open an Account in the Fund...................................... 27
How to Purchase Shares in the Portfolios................................ 27
How to Redeem and Exchange Shares in the Portfolios..................... 29
Dividends, Distributions and Taxes...................................... 32
Net Asset Value......................................................... 34
The Portfolios' Performance............................................. 34
General Information..................................................... 36
</TABLE>

[Logo]

P.O. BOX 9030, BOSTON, MA 02205-9030
800-369-2728

COUNSELLORS SECURITIES INC., DISTRIBUTOR WPINS-1-0297

STATEMENT OF DIFFERENCES
------------------------

The registered trademark symbol shall be expressed as 'r'
The dagger symbol shall be expressed as `D'

<PAGE>

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE A
PROSPECTUS.

<PAGE>

Subject to Completion, Dated January 29, 1997

STATEMENT OF ADDITIONAL INFORMATION

April 16, 1997

WARBURG PINCUS INSTITUTIONAL FUND, INC.

P.O. Box 9030, Boston, Massachusetts 02205-9030
For information, call (800) 369-2728

Contents

Page

Investment Objectives.........................................................2
Investment Policies...........................................................2
Management Of The Fund.......................................................36
Additional Purchase And Redemption Information...............................44
Exchange Privilege...........................................................44
Additional Information Concerning Taxes......................................45
Determination Of Performance.................................................48
Independent Accountants And Counsel..........................................50
Miscellaneous................................................................51
Financial Statements.........................................................52
Appendix -- Description of Ratings..........................................A-1
Statements of Assets and Liabilities........................................A-5

This Statement of Additional Information is meant to be read in
conjunction with the Prospectus of Warburg Pincus Institutional Fund, Inc. (the
"Fund") dated April 16, 1997, as amended or supplemented from time to time, and
is incorporated by reference in its entirety into that Prospectus. The Fund
consists of six managed investment funds, four of which are currently being
offered. Because this Statement of Additional Information is not itself a
prospectus, no investment in shares of the International Equity Portfolio, the
Managed EAFE(R) Countries Portfolio, the Emerging Markets Portfolio, the Small
Company Growth Portfolio, the Global Fixed Income Portfolio or the Value
Portfolio (the "Portfolios") should be made solely upon the information
contained herein. Copies of the Fund's Prospectus and information regarding each
Portfolio's current performance may be obtained by calling the Fund at (800)
369-2728. Information regarding the status of shareholder accounts may also be
obtained by calling the Fund at the same number or by writing to the Fund, P.O.
Box 9030, Boston, Massachusetts 02205-9030.

<PAGE>

INVESTMENT OBJECTIVES

The investment objective of the International Equity Portfolio, the
Managed EAFE(R) Countries Portfolio and the Value Portfolio is long-term capital
appreciation. The investment objective of the Emerging Markets Portfolio and the
Small Company Growth Portfolio is capital growth. The investment objective of
the Global Fixed Income Portfolio is to maximize total investment return
consistent with prudent investment management while preserving capital.

INVESTMENT POLICIES

The following policies supplement the descriptions of each Portfolio's
investment objective and policies in the Prospectus.

Options, Futures and Currency Exchange Transactions

Securities Options. Each Portfolio (other than the Emerging Markets
Portfolio) may write covered put and call options on stock and debt securities
and each Portfolio may purchase such options that are traded on foreign and U.S.
exchanges, as well as over-the-counter ("OTC").

A Portfolio realizes fees (referred to as "premiums") for granting the
rights evidenced by the 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 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 a put or 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.

If security prices rise, a put writer would generally expect to
profit, although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that the
writer will also profit, because it should be able to close out the option at a
lower price. If security prices fall, the put writer would expect to suffer a
loss. This loss should be less than the loss from purchasing the underlying
instrument directly, however, because the premium received for writing the
option should mitigate the effects of the decline.

2
<PAGE>

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 securities, 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 relevant Portfolios may write covered call options. For example, 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.

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 Portfolios (other than the Emerging
Markets Portfolio) may write (i) in-the-money call options when Warburg, Pincus
Counsellors, Inc., the Portfolios' investment adviser ("Warburg"), 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 Warburg 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 Warburg
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.
Out-of-the-money, at-the-money and in-the-money put options (the reverse of call
options as to the relation of exercise price to market price) may be used in the
same market environments that such call options are used in equivalent
transactions. To secure its obligation to deliver the underlying security when
it writes a call option, a Portfolio will be required to deposit in escrow the
underlying security or other assets in accordance with the rules of the Options
Clearing Corporation (the "Clearing Corporation") and of the securities exchange
on which the option is written.

Prior to their expirations, put and call options may be sold in
closing sale or purchase transactions (sales or purchases by the Portfolio prior
to the exercise of options that it has purchased or written, respectively, 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

3
<PAGE>

exchange or in the over-the-counter market. 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. Similarly, 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. The Portfolio may engage in a closing purchase transaction to realize a
profit, to prevent an underlying security with respect to which it has written
an option from being called or put or, in the case of a call option, to unfreeze
an underlying security (thereby permitting its sale or the writing of a new
option on the security prior to the outstanding option's expiration). The
obligation of the Portfolio under an option it has written would be terminated
by a closing purchase transaction, but the Portfolio would not be deemed to own
an option as a result of the transaction. So long as the obligation of the
Portfolio as the writer of an option 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.

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, 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 Portfolio, however,
intends to purchase over-the-counter options only from dealers whose debt
securities, as determined by Warburg, are considered to be investment grade. If,
as a covered call option writer, the 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.

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

4
<PAGE>

of whether the options are written on the same or different securities exchanges
or are held, written or exercised in one or more accounts or through one or more
brokers). It is possible that the Fund or a Portfolio and other clients of
Warburg 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.

Stock Index Options. Each Portfolio may purchase and each portfolio
(other than the Emerging Markets Portfolio) may write exchange-listed and OTC
put and call options on stock indexes. A stock index measures the movement of a
certain group of stocks by assigning relative values to the common stocks
included in the index, 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 NYSE Composite Index, or a narrower market index such
as the Standard & Poor's 100. Indexes may also be based on a particular industry
or market segment.

Options on stock indexes are similar to options on stock except that
(i) the expiration cycles of stock index options are monthly, while those of
stock options are currently quarterly, and (ii) the delivery requirements are
different. Instead of giving the right to take or make delivery of stock at a
specified price, an option on a stock index gives the holder the right to
receive a cash "exercise settlement amount" equal to (a) the amount, if any, by
which the fixed exercise price of the option exceeds (in the case of a put) or
is less than (in the case of a call) the closing value of the underlying index
on the date of exercise, multiplied by (b) a fixed "index multiplier." Receipt
of this cash amount will depend upon the closing level of the stock index upon
which the option is based being greater than, in the case of a call, or less
than, in the case of a put, the exercise price of the index and the exercise
price of the option times a specified multiple. The writer of the option is
obligated, in return for the premium received, to make delivery of this amount.
Stock index options may be offset by entering into closing transactions as
described above for securities options.

OTC Options. The Portfolios may purchase OTC or dealer options or sell
covered OTC options. Unlike exchange-listed options where an intermediary or
clearing corporation, such as the Clearing Corporation, assures that all
transactions in such options are properly executed, the responsibility for
performing all transactions with respect to OTC options rests solely with the
writer and the holder of those options. A listed call option writer, for
example, is obligated to deliver the underlying stock to the clearing
organization if the option is exercised, and the clearing organization 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, the 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

5
<PAGE>

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 Portfolios 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 Portfolios, 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 a Portfolio. Until the Portfolio, as a covered OTC 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.

Futures Activities. Each Portfolio may enter into foreign currency,
interest rate and stock index futures contracts and purchase and write (sell)
related options traded on exchanges designated by the Commodity Futures Trading
Commission (the "CFTC") or consistent with CFTC regulations on foreign
exchanges. These transactions may be entered into for "bona fide hedging"
purposes as defined in CFTC regulations and other permissible purposes including
hedging against changes in the value of portfolio securities due to anticipated
changes in currency values, interest rates and/or market conditions and
increasing return.

A Portfolio will not enter into futures contracts and related options
for which the aggregate initial margin and premiums (discussed below) 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. The Portfolios reserve the right to engage in transactions involving
futures contracts and options on futures contracts to the extent allowed by CFTC
regulations in effect from time to time and in accordance with a Portfolio's
policies. Although each Portfolio is limited in the amount of assets it may
invest in futures transactions (as described above and in the Prospectus), there
is no overall limit on the percentage of Portfolio assets that may be at risk
with respect to futures activities. The ability of the Portfolio to trade in
futures contracts and options on futures contracts may be limited by the
requirements of the Internal Revenue Code of 1986, as amended (the "Code"),
applicable to a regulated investment company.

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. 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
interest rate sensitive 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 stock listed on the indexes. A stock index
futures contract is an agreement to be settled by delivery of an amount of cash
equal to a specified multiplier times the difference between the value of the
index at the close of the last trading day on the contract and the price at
which the agreement is made.

6
<PAGE>

No consideration is paid or received by a Portfolio upon entering into
a futures contract. Instead, the Portfolio is 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." The Portfolios will also incur brokerage costs in
connection with entering into futures transactions.

At any time prior to the expiration of a futures contract, a 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 (described
below) may be closed out only on the exchange on which they were entered into
(or through a linked exchange). No secondary market for such contracts exists.
Although the Portfolios intend 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 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 or trading may be suspended for
specified periods during the day. It is possible that futures contract prices
could move to the daily limit for several consecutive trading days with little
or no trading, thereby preventing prompt liquidation of futures positions at an
advantageous price and subjecting a 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 situations, if
the Portfolio had insufficient cash, it might have to sell securities to meet
daily variation margin requirements at a time when it would be disadvantageous
to do so. In addition, if the transaction is entered into for hedging purposes,
in such circumstances the Portfolio may realize a loss on a futures contract or
option that is not offset by an increase in the value of the hedged position.
Losses incurred in futures transactions and the costs of these transactions will
affect the Portfolio's performance.

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; the ability to establish and close out positions
on such options will be subject to the existence of a liquid market.

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
futures contract at a specified exercise

7
<PAGE>

price at any time prior to the expiration date of the option. The writer of the
option is required upon exercise to assume an offsetting futures position (a
short position if the option is a call and a long position if the option is a
put). 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.

Currency Exchange 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. Currency exchange transactions may be from any non-U.S. currency
into U.S. dollars or into other appropriate currencies. 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
futures contracts or options on such contracts (as described above), (iii)
through entering into forward contracts to purchase or sell currency or (iv) by
purchasing exchange-traded currency options.

Forward Currency Contracts. A forward currency contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract as agreed upon by the
parties, at a price set at the time of the contract. These contracts are entered
into in the interbank market conducted directly between currency traders
(usually large commercial banks and brokers) and their customers. Forward
currency contracts are similar to currency futures contracts, except that
futures contracts are traded on commodities exchanges and are standardized as to
contract size and delivery date.

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. The Portfolios may purchase exchange-traded put and
call options on foreign currencies. 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.

8
<PAGE>

Currency Hedging. The Portfolios' 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 a 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. A
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 U.S. dollar value of a foreign currency in which the
Portfolio's securities are denominated will reduce the U.S. 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 diminutions in the U.S.
dollar value of securities it holds, a Portfolio may purchase currency put
options. 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 the U.S. dollar value of its
securities that otherwise would have resulted. Conversely, if a rise in the U.S.
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. The benefit to the Portfolio derived from purchases
of currency options, like the benefit derived from other types of options, will
be reduced by premiums and other transaction costs. Because transactions in
currency exchange are generally conducted on a principal basis, no fees or
commissions are generally involved. Currency hedging involves some of the same
risks and considerations as other transactions with similar instruments.
Although currency hedges limit the risk of loss due to a decline in the value of
a hedged currency, at the same time, they also limit any potential gain that
might result should the value of the currency increase. If a devaluation is
generally anticipated, the Portfolio may not be able to contract to sell a
currency at a price above the devaluation level it anticipates.

While the values of currency futures and options on futures, forward
currency contracts and currency options may be expected to correlate with
exchange rates, they will not reflect other factors that may affect the value of
the Portfolio's investments and a currency hedge may not be entirely successful
in mitigating changes in the value of the Portfolio's investments denominated in
that currency. A currency hedge, for example, should protect a Yen-denominated
bond against a decline in the Yen, but will not protect the Portfolio against a
price decline if the issuer's creditworthiness deteriorates.

Hedging. In addition to entering into options and futures transactions
for other purposes, including generating current income to offset expenses or
increase return, each Portfolio may enter into these 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 in a portfolio position with a gain in the hedged position; at the same
time, however, a properly correlated hedge will result in a gain in the
portfolio position being offset by a loss in the hedged position. As a result,
the use of options and

9
<PAGE>

futures transactions for hedging purposes could limit any potential gain from an
increase in the value of the position hedged. In addition, the movement in the
portfolio position hedged may not be of the same magnitude as movement in the
hedge. With respect to futures contracts, 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.

In hedging transactions based on an index, 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. The risk of imperfect
correlation increases as the composition of the Portfolio's portfolio varies
from the composition of the index. In an effort to compensate for imperfect
correlation of relative movements in the hedged position and the hedge, the
Portfolio's hedge positions may be in a greater or lesser dollar amount than the
dollar amount of the hedged position. Such "over hedging" or "under hedging" may
adversely affect the Portfolio's net investment results if market movements are
not as anticipated when the hedge is established. Stock index futures
transactions may be subject to additional correlation risks. First, all
participants in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
would distort the normal relationship between the stock index and futures
markets. Secondly, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin requirements in
the securities market. Therefore, increased participation by speculators in the
futures market also may cause temporary price distortions. Because of the
possibility of price distortions in the futures market and the imperfect
correlation between movements in the stock index and movements in the price of
stock index futures, a correct forecast of general market trends by Warburg
still may not result in a successful hedging transaction.

A Portfolio will engage in hedging transactions only when deemed
advisable by Warburg, and successful use by the Portfolio of hedging
transactions will be subject to Warburg's ability to predict trends in currency,
interest rate or securities markets, as the case may be, and to correctly
predict movements in the directions of the hedge and the hedged position and the
correlation between them, which predictions could prove to be inaccurate. This
requires different skills and techniques than predicting changes in the price of
individual securities, and there can be no assurance that the use of these
strategies will be successful. Even a well-conceived hedge may be unsuccessful
to some degree because of unexpected market behavior or trends. Losses incurred
in hedging transactions and the costs of these transactions will affect the
Portfolio's performance.

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 U.S. Securities and Exchange Commission (the
"SEC") with respect to coverage of forward currency contracts; options written
by the Portfolio on currencies, securities and indexes; and currency, interest
rate and index futures contracts and options on

10
<PAGE>

these futures contracts. These guidelines may, in certain instances, require
segregation by the Portfolio of cash or liquid securities.

For example, a call option written by the 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 assets (as described above) 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 assets (as described above) 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 assets (as
described above) equal to the exercise price. 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 the 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. The 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. Asset coverage may be
achieved by other means when consistent with applicable regulatory policies.

Additional Information on Other 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.

Foreign Currency Exchange. Since the International Equity, Managed
EAFE(R) Countries, Emerging Markets and Global Fixed Income Portfolios will, and
the Small Company Growth and Value Portfolios 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 particular importance are rates of inflation, interest
rate levels, the balance of payments and the extent of government surpluses or
deficits in the United States and the particular foreign country, all of which
are in turn sensitive to the monetary, fiscal and trade policies pursued by the
governments of the United States and foreign countries important to
international trade and finance. Governmental intervention may

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<PAGE>

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. A Portfolio may use hedging techniques with
the objective of protecting against loss through the fluctuation of the value of
foreign currencies against the U.S. dollar, particularly the forward market in
foreign exchange, currency options and currency futures. See "Currency
Transactions" and "Futures Activities" above.

Information. The majority of the foreign securities held by a
Portfolio will not be registered with, nor the issuers thereof be subject to
reporting requirements of, 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.

Political Instability. 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 and neighboring countries.

Delays. 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.

Foreign Taxes and Increased Expenses. The operating expenses of the
International Equity, Managed EAFE(R) Countries, Emerging Markets and Global
Fixed Income 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, Managed EAFE(R) Countries,
Emerging Markets and Global Fixed Income Portfolios, the rate of the investment
advisory fees, though similar to such expenses of some other funds investing
internationally, are higher than those costs incurred by other investment
companies.

General. In general, 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. A Portfolio 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.

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<PAGE>

Japanese Investments (International Equity and Managed EAFE(R)
Countries Portfolios). From time to time depending on current market conditions,
these Portfolios may invest a significant portion of their assets in Japanese
securities. Like any investor in Japan, a 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 government
has announced a $5.9 billion plan to repair the port and estimated that damage
to the region equals $120 billion. However, the long-term economic effects of
the earthquake on the Japanese economy as a whole and on the Portfolio's
investments 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 sizable 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. In 1995,
however, the trade surplus has decreased due to a drop in exports. The reduced
exports are due primarily to the strength of the yen and the impact of
threatened U.S. trade sanctions. Because of the concentration of Japanese
exports in highly visible products such as automobiles, machine tools and
semiconductors, and the large trade surpluses resulting therefrom, Japan has
entered a difficult

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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. On June 28, 1995, the United States agreed not to impose
trade sanctions in return for a modest commitment by Japan to buy more American
cars and auto parts. Any trade sanctions imposed upon Japan by the United States
as a result of the current friction or otherwise could adversely impact Japan
and the Portfolio's investments there.

The following table sets forth the composition of Japan's trade
balance, as well as other components of its current account, for the years
shown.

CURRENT ACCOUNT
Trade

Trade Current
Year Exports Imports Balance Balance
---- ------- ------- ------- --------
(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
1995 429,482 297,795 131,689 110,798

Source: Bank 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)

1995 1994 1993 1992 1991 1990 1989
---- ---- ---- ---- ---- ---- ----
GDP (yen billions) 480,693 469,149 465,972 463,145 451,297 424,537 396,197
(Expenditures)
Change in GDP from
Preceding Year
Nominal terms 0.3% 0.7% 0.6% 2.6% 6.3% 7.2% 6.7%
Real Terms 0.9% 0.5% -0.2% 1.1% 4.3% 4.8% 4.7%

Source: Economic Planning Agency, Japan

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WHOLESALE PRICE INDEX
Change from
All Preceding
Year Commodities Year
---- ----------- ------------

(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)
1995 95.2 (0.9)

Source: Bank of Japan

CONSUMER PRICE INDEX

Change from
Year General Preceding Year
---- -------- --------------

(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
1995 107.0 (0.1)

Source: Bureau of Statistics, Management and Coordination Agency.

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.

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<PAGE>

The following table sets forth the number of Japanese
companies listed on the three major Japanese stock exchanges as of the end of
1996.

NUMBER OF LISTED DOMESTIC COMPANIES
Tokyo Osaka Nagoya

1st 2nd 1st 2nd 1st 2nd
Sec. Sec. Sec Sec. Sec. Sec.
---- ---- ---- ---- ----- -----
1,253 461 857 356 434 138

Source: Tokyo Stock Exchange, Fact Book 1995
Osaka Stock Exchange, Fact Book 1996
Nagoya Stock Exchange Fact Book 1996

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)

Year Volume Value
------ ---------- -----------

1989......... 256,296 (Y)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
---------------
1995......... 120,142 115,839

Source: Tokyo Stock Exchange, Fact Book 1996; Tokyo Stock Exchange New York

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.

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The following table sets forth the high, low and year-end TOPIX for
the years shown.

TOPIX

(January 4, 1968=100)

Year Year-end High Low
---- -------- ---- ---
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
1995 1,577.70 1,585.87 1,193.16

Source: Tokyo Stock Exchange, Fact Book 1996

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 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
Warburg determines that the credit risk with respect to the instrumentality does
not make its securities unsuitable for investment by the Portfolio.

Below Investment Grade Securities. Each Portfolio may invest in fixed
income securities rated below investment grade and it is not required to dispose
of securities downgraded below investment grade subsequent to acquisition by the
Portfolio (subject to the Emerging Market Portfolio's limit on holding below
investment grade fixed-income securities). While the market values of medium-
and lower-rated securities and unrated securities of comparable quality tend to
react less to fluctuations in interest rate levels than do those of higher-rated
securities, the market values of certain of these securities also tend to be
more sensitive to individual corporate developments and changes in economic
conditions than higher-quality securities. In addition, medium- and lower-rated
securities and comparable

17
<PAGE>

unrated securities generally present a higher degree of credit risk. Issuers of
medium- and lower-rated securities and unrated securities are often highly
leveraged and may not have more traditional methods of financing available to
them so that their ability to service their obligations during an economic
downturn or during sustained periods of rising interest rates may be impaired.
The risk of loss due to default by such issuers is significantly greater because
medium- and lower-rated securities and unrated securities generally are
unsecured and frequently are subordinated to the prior payment of senior
indebtedness.

The market for medium- and lower-rated and unrated securities is
relatively new and has not weathered a major economic recession. Any such
recession could disrupt severely the market for such securities and may
adversely affect the value of such securities and the ability of the issuers of
such securities to repay principal and pay interest thereon.

A Portfolio may have difficulty disposing of certain of these
securities because there may be a thin trading market. Because there is no
established retail secondary market for many of these securities, the Portfolios
anticipate that these securities could be sold only to a limited number of
dealers or institutional investors. To the extent a secondary trading market for
these securities does exist, it generally is not as liquid as the secondary
market for higher-rated securities. The lack of a liquid secondary market, as
well as adverse publicity and investor perception with respect to these
securities, may have an adverse impact on market price and a Portfolio's ability
to dispose of particular issues when necessary to meet the Portfolio's liquidity
needs or in response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. The lack of a liquid secondary market for
certain securities also may make it more difficult for a Portfolio to obtain
accurate market quotations for purposes of valuing the Portfolio and calculating
its net asset value.

The market value of securities in medium- and lower-rated categories
is more volatile than that of higher quality securities. Factors adversely
impacting the market value of these securities will adversely impact the
Portfolio's net asset value. The Fund will rely on the judgment, analysis and
experience of Warburg in evaluating the creditworthiness of an issuer. In this
evaluation, Warburg will take into consideration, among other things, the
issuer's financial resources, its sensitivity to economic conditions and trends,
its operating history, the quality of the issuer's management and regulatory
matters. Normally, medium- and lower-rated and comparable unrated securities are
not intended for short-term investment. A Portfolio may incur additional
expenses to the extent it is required to seek recovery upon a default in the
payment of principal or interest on its portfolio holdings of such securities.
Recent adverse publicity regarding lower-rated securities may have depressed the
prices for such securities to some extent. Whether investor perceptions will
continue to have a negative effect on the price of such securities is uncertain.

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

18
<PAGE>

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.

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 net assets taken at value. A Portfolio will not
lend portfolio securities to affiliates of Warburg unless it has applied for and
received specific authority to do so from the SEC. Loans of portfolio securities
will be collateralized by cash, letters of credit or U.S. Government Securities,
which are maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. Any gain or loss in the market
price of the securities loaned that might occur during the term of the loan
would be for the account of the 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 Warburg 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

19
<PAGE>

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 or liquid securities 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 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.

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. 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, except that the Emerging
Markets Portfolio will not be subject to such limitation.

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.

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

20
<PAGE>

be converted. ADRs are receipts typically issued by a U.S. bank or trust company
which evidence ownership of underlying securities issued by a foreign
corporation. EDRs, which are sometimes referred to as Continental Depositary
Receipts ("CDRs"), are receipts issued in Europe typically by non-U.S. banks and
trust companies that evidence ownership of either foreign or domestic
securities. Generally, ADRs in registered form are designed for use in U.S.
securities markets and EDRs and CDRs in bearer form are designed for use in
European securities markets.

Convertible Securities. Convertible securities in which 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 purchase warrants issued by domestic and
foreign companies to purchase newly created equity securities consisting of
common and preferred stock. The equity security underlying a warrant is
outstanding at the time the warrant is issued or is issued together with the
warrant.

Investing in warrants can provide a greater potential for profit or
loss than an equivalent investment in the underlying security, and, thus, can be
a speculative investment. The value of a warrant may decline because of a
decline in the value of the underlying security, the passage of time, changes in
interest rates or in the dividend or other policies of the company whose equity
underlies the warrant or a change in the perception as to the future price of
the underlying security, or any combination thereof. Warrants generally pay no
dividends and confer no voting or other rights other than to purchase the
underlying security.

Illiquid Securities. Each Portfolio (other than the Emerging Markets
and Value Portfolios) may not invest more than 10% 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. The Emerging
Markets and Value Portfolios may each invest up to 15% of its net assets in such
securities. 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.

21
<PAGE>

Mutual funds do not typically hold a significant amount of these restricted or
other illiquid securities because of the potential for delays on resale and
uncertainty in valuation. Limitations on resale may have an adverse effect on
the marketability of portfolio securities and a mutual fund might be unable to
dispose of restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemptions within
seven days. A mutual fund might also have to register such restricted securities
in order to dispose of them resulting in additional expense and delay. Adverse
market conditions could impede such a public offering of securities.

In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities Act
including repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.

Rule 144A Securities. Rule 144A under the Securities Act 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. Warburg
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.

Warburg will monitor the liquidity of restricted securities in a
Portfolio under the supervision of the Board. In reaching liquidity decisions,
Warburg 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 net
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.

22
<PAGE>

Non-Diversified Status (Small Company Growth Portfolio, Emerging
Markets 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.

Zero Coupon Securities. (Emerging Markets Portfolio and Global Fixed
Income Portfolio) The Emerging Markets Portfolio and the Global Fixed Income
Portfolio may invest in "zero coupon" U.S. Treasury, foreign government and U.S.
and foreign corporate convertible and nonconvertible debt securities, which are
bills, notes and bonds that have been stripped of their unmatured interest
coupons and custodial receipts or certificates of participation representing
interests in such stripped debt obligations and coupons. A zero coupon security
pays no interest to its holder prior to maturity. Accordingly, such securities
usually trade at a deep discount from their face or par value and will be
subject to greater fluctuations of market value in response to changing interest
rates than debt obligations of comparable maturities that make current
distributions of interest. The Portfolio anticipates that it will not normally
hold zero coupon securities to maturity. Federal tax law requires that a holder
of a zero coupon security accrue a portion of the discount at which the security
was purchased as income each year, even though the holder receives no interest
payment on the security during the year. Such accrued discount will be
includible in determining the amount of dividends the Portfolio must pay each
year and, in order to generate cash necessary to pay such dividends, the
Portfolio may liquidate portfolio securities at a time when it would not
otherwise have done so.

Foreign Debt Securities. (Emerging Markets Portfolio and Global Fixed
Income Portfolio) The returns on foreign debt securities reflect interest rates
and other market conditions prevailing in those countries and the effect of
gains and losses in the denominated currencies against the U.S. dollar, which
have had a substantial impact on investment in foreign fixed income securities.
The relative performance of various countries' fixed income markets historically
has reflected wide variations relating to the unique characteristics of each
country's economy. Year-to-Year fluctuations in certain markets have been
significant, and negative returns have been experienced in various markets from
time to time.

The foreign debt securities in which the Emerging Markets Portfolio
may invest generally consist of obligations issued or backed by national, state
or provincial governments or similar political subdivisions or central banks in
foreign countries. Foreign debt securities also include debt obligations of
supranational entities, which include international organizations designated or
backed by governmental entities to promote economic reconstruction or
development, international banking institutions and related government

23
<PAGE>

agencies. Examples include the International Bank for Reconstruction and
Development (the "World Bank"), the European Coal and Steel Community, the Asian
Development Bank and the InterAmerican Development Bank.

Foreign debt securities also include debt securities of
"quasi-government agencies" and debt securities denominated in multinational
currency units of an issuer (including supranational issuers). Debt securities
of quasi-governmental agencies are issued by entities owned by either a
national, state or equivalent government or are obligations of a political unit
that is not backed by the national government's full faith and credit and
general taxing powers. An example of a multinational currency unit is the
European Currency Unit ("ECU"). An ECU represents specified amounts of the
currencies of certain member states of the European Economic Community. The
specific amounts of currencies comprising the ECU may be adjusted by the Council
of Ministers of the European Community to reflect changes in relative values of
the underlying currencies.

Brady Bonds. (Emerging Markets Portfolio) The Emerging Markets
Portfolio may invest in so-called "Brady Bonds," which have been issued by Costa
Rica, Mexico, Uruguay and Venezuela and which may be issued by other Latin
American countries. Brady Bonds are issued as part of a debt restructuring in
which the bonds are issued in exchange for cash and certain of the country's
outstanding commercial bank loans. Investors should recognize that Brady Bonds
do not have a long payment history. Brady Bonds may be collateralized or
uncollateralized, are issued in various currencies (primarily the U.S. dollar)
and are actively traded in the over-the-counter ("OTC") secondary market for
debt of Latin American issuers.

Securities of Smaller Companies; Special Situation Companies (Small
Company Growth Portfolio). The Portfolio's investments involves considerations
that are not applicable to investing in securities of established,
larger-capitalization issuers, including reduced and less reliable information
about issuers and markets, less stringent accounting standards, illiquidity of
securities and markets, higher brokerage commissions and fees and greater market
risk in general.

The 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 Warburg 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

24
<PAGE>

investment grade at the time of the investment, but not lower than "B" by
Standard & Poor's Ratings Services 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 Warburg will consider such event in its determination of whether the
Portfolio should continue to hold the securities.

Investment Policies of the Emerging Markets Portfolio Only
- ----------------------------------------------------------

Loan Participations and Assignments. The Emerging Market Portfolio may
invest in fixed and floating rate loans ("Loans") arranged through private
negotiations between a foreign government (a "Borrower") and one or more
financial institutions ("Lenders"). The majority of the Emerging Markets
Portfolio's investments in Loans are expected to be in the form of
participations in Loans ("Participations") and assignments of portions of Loans
from third parties ("Assignments"). Participations typically will result in the
Portfolio having a contractual relationship only with the Lender, not with the
Borrower. The Portfolio will have the right to receive payments of principal,
interest and any fees to which it is entitled only from the Lender selling the
Participation and only upon receipt by the Lender of the payments from the
Borrower. In connection with purchasing Participations, the Emerging Markets
Portfolio generally will have no right to enforce compliance by the Borrower
with the terms of the loan agreement relating to the Loan, nor any rights of
set-off against the Borrower, and the Portfolio may not directly benefit from
any collateral supporting the Loan in which it has purchased the Participation.
As a result, the Portfolio will assume the credit risk of both the Borrower and
the Lender that is selling the Participation. In the event of the insolvency of
the Under selling a Participation, the Portfolio may be treated as a general
creditor of the Lender and may not benefit from any set-off between the Lender
and the Borrower. The Emerging Markets Portfolio will acquire Participations
only if the Lender interpositioned between the Portfolio and the Borrower is
determined by Warburg to be creditworthy.

When the Portfolio purchases Assignments from Lenders, the Portfolio
will acquire direct rights against the Borrower on the Loan. However, since
Assignments are generally arranged through private negotiations between
potential assignees and potential assignors, the rights and obligations acquired
by the Portfolio as the purchaser of an Assignment may differ from, and be more
limited than, those held by the assigning Lender.

There are risks involved in investing in Participations and
Assignments. The Portfolio may have difficulty disposing of them because there
is no liquid market for such securities. The lack of a liquid secondary market
will have an adverse impact on the value of such securities and on the
Portfolio's ability to dispose of particular Participations or Assignments when
necessary to meet the Portfolio's liquidity needs or in response to a specific
economic event, such as a deterioration in the creditworthiness of the Borrower.
The lack of a liquid market for Participations and Assignments also may make it
more difficult for the Portfolio to assign a value to these securities for
purposes of valuing the Portfolio's portfolio and calculating its net asset
value.

25
<PAGE>

Mortgage-Backed Securities. The Emerging Markets Portfolio may invest
in mortgage-backed securities, such as those issued by the Government National
Mortgage Association ("GNMA"), the Federal National Mortgage Association
("FNMA"), the Federal Home Loan Mortgage Corporation ("FHLMC") or certain
foreign issuers. Mortgage-backed securities represent direct or indirect
participations in, or are secured by and payable from, mortgage loans secured by
real property. The mortgages backing these securities include, among other
mortgage instruments, conventional 30-year fixed-rate mortgages, 15-year fixed
rate mortgages, graduated payment mortgages and adjustable rate mortgages. The
government or the issuing agency typically guarantees the payment of interest
and principal of these securities. However, the guarantees do not extend to the
securities' yield or value, which are likely to vary inversely with fluctuations
in interest rates, nor do the guarantees extend to the yield or value of the
Portfolio's shares. These securities generally are "pass-through" instruments,
through which the holders receive a share of all interest and principal payments
from the mortgages underlying the securities, net of certain fees.

Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average life assumption. The average life of pass-through pools
varies with the maturities of the underlying mortgage loans. A pool's term may
be shortened by unscheduled or early payments of principal on the underlying
mortgages. The occurrence of mortgage prepayments is affected by various
factors, including the level of interest rates, general economic conditions, the
location, scheduled maturity and age of the mortgage and other social and
demographic conditions. Because prepayment rates of individual pools vary
widely, it is not possible to predict accurately the average life of a
particular pool. For pools of fixed-rate 30-year mortgages, a common industry
practice in the U.S. has been to assume that prepayments will result in a
12-year average life. At present, pools, particularly those with loans with
other maturities or different characteristics, are priced on an assumption of
average life determined for each pool. In periods of falling interest rates, the
rate of prepayment tends to increase, thereby shortening the actual average life
of a pool of mortgage-related securities. Conversely, in periods of rising rates
the rate of prepayment tends to decrease, thereby lengthening the actual average
life of the pool. However, these effects may not be present, or may differ in
degree, if the mortgage loans in the pools have adjustable interest rates or
other special payment terms, such as a prepayment charge. Actual prepayment
experience may cause the yield of mortgage-backed securities to differ from the
assumed average life yield. Reinvestment of prepayments may occur at higher or
lower interest rates than the original investment, thus affecting the
Portfolio's yield.

The rate of interest on mortgage-backed securities is lower than the
interest rates paid on the mortgages included in the underlying pool due to the
annual fees paid to the servicer of the mortgage pool for passing through
monthly payments to certificate holders and to any guarantor, such as GNMA, and
due to any yield retained by the issuer. Actual yield to the holder may vary
from the coupon rate, even if adjustable, if the mortgage-backed securities are
purchased or traded in the secondary market at a premium or discount. In
addition, there is normally some delay between the time the issuer receives
mortgage payments from the servicer and the time the issuer makes the payments
on the mortgage-backed securities, and this delay reduces the effective yield to
the holder of such securities.

26
<PAGE>

Asset-Backed Securities. The Emerging Markets Portfolio may invest in
asset-backed securities, which represent participations in, or are secured by
and payable from, assets such as motor vehicle installment sales, installment
loan contracts, leases of various types of real and personal property and
receivables from revolving credit (credit card) agreements. Such assets are
securitized through the use of trusts and special purpose corporations. Payments
or distributions of principal and interest may be guaranteed up to certain
amounts and for a certain time period by a letter of credit or a pool insurance
policy issued by a financial institution unaffiliated with the trust or
corporation.

Asset-backed securities present certain risks that are not presented
by other securities in which the Portfolio may invest. Automobile receivables
generally are secured by automobiles. Most issuers of automobile receivables
permit the loan servicers to retain possession of the underlying obligations. If
the servicer were to sell these obligations to another party, there is a risk
that the purchaser would acquire an interest superior to that of the holders of
the asset-backed securities. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile receivables may not have a
proper security interest in the underlying automobiles. Therefore, there is the
possibility that recoveries on repossessed collateral may not, in some cases, be
available to support payments on these securities. Credit card receivables are
generally unsecured, and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. Because asset-backed securities are relatively new, the market
experience in these securities is limited, and the market's ability to sustain
liquidity through all phases of the market cycle has not been tested.

Stand-By Commitments. The Emerging Markets Portfolio may acquire
"stand-by commitments" with respect to securities held in its portfolio. Under a
stand-by commitment, a dealer agrees to purchase at the Portfolio's option
specified securities at a specified price. The Portfolio's right to exercise
stand-by commitments is unconditional and unqualified. Stand-by commitments
acquired by the Portfolio may also be referred to as "put" options. A stand-by
commitment is not transferable by the Portfolio, although the Portfolio can sell
the underlying securities to a third party at any time.

The principal risk of stand-by commitments is that the writer of a
commitment may default on its obligation to repurchase the securities acquired
with it. The Portfolio intends to enter into stand-by commitments only with
brokers, dealers and banks that, in the opinion of Warburg, present minimal
credit risks. In evaluating the creditworthiness of the issuer of a stand-by
commitment, Warburg will periodically review relevant financial information
concerning the issuer's assets, liabilities and contingent claims. The Portfolio
will acquire stand-by commitments only in order to facilitate portfolio
liquidity and does not intend to exercise its rights under stand-by commitments
for trading purposes.

The amount payable to the Portfolio upon its exercise of a stand-by
commitment is normally (i) the Portfolio's acquisition cost of the securities
(excluding any accrued interest which the Portfolio paid on their acquisition),
less any amortized market premium or plus any

27
<PAGE>

amortized market or original issue discount during the period the Portfolio
owned the securities, plus (ii) all interest accrued on the securities since the
last interest payment date during that period.

The Portfolio expects that stand-by commitments will generally be
available without the payment of any direct or indirect consideration. However,
if necessary or advisable, the Portfolio may pay for a stand-by commitment
either separately in cash or by paying a higher price for portfolio securities
which are acquired subject to the commitment (thus reducing the yield to
maturity otherwise available for the same securities). The total amount paid in
either manner for outstanding stand-by commitments held in the Portfolio's
portfolio will not exceed 1/2 of 1 % of the value of the Portfolio's total
assets calculated immediately after each stand-by commitment is acquired.

The Portfolio would acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The acquisition of a stand-by commitment would not affect the
valuation or assumed maturity of the underlying securities. Stand-by commitments
acquired by the Portfolio would be valued at zero in determining net asset
value. Where the Portfolio paid any consideration directly or indirectly for a
stand-by commitment, its cost would be reflected as unrealized depreciation for
the period during which the commitment was held by the Portfolio. Stand-by
commitments would not affect the average weighted maturity of the Portfolio's
portfolio. The Portfolio currently anticipates that it will not invest more than
5% of its net assets in stand-by commitments.

Other Investment Limitations
- ----------------------------

International Equity Portfolio, Managed EAFE(R) Countries 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. Investment limitations 13 through 14, as applied to a
Portfolio, may be changed by a vote of the Board at any time.

The International Equity Portfolio, the Managed EAFE(R) Countries
Portfolio and 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

28
<PAGE>

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."

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.

29
<PAGE>

10. With respect to the International Equity Portfolio and the Managed
EAFE(R) Countries 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 and the Managed
EAFE(R) Countries 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. Invest in oil, gas or mineral leases.

Emerging Markets Portfolio, Small Company Growth Portfolio and Value
Portfolio. The investment limitations numbered 1 through 9 may not be changed
without the affirmative vote of the holders of a majority of the Portfolios'
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 13
may be changed by a vote of the Board at any time.

The Emerging Markets Portfolio, Small Company Growth Portfolio and
Value Portfolio may not:

1. Borrow money except that the Portfolios 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 Portfolios may not exceed 30% of the value of the
Portfolios' 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 Portfolios' total assets at the time of purchase to be invested in the
securities of issuers

30
<PAGE>

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 Portfolios 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 Portfolios' 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 Portfolios 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 Portfolios may maintain short positions in forward currency contracts,
options, futures contracts and options on futures contracts and make short sales
"against the box".

7. Purchase securities on margin, except that the Portfolios 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 Portfolios 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 and, with respect to the Emerging Markets Portfolio, enter into stand-by
commitments.

9. Issue any senior security except as permitted in the Portfolios'
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 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 and, with respect to the
Small Company Growth Portfolio and Value Portfolio, writing covered put and call
options.

31
<PAGE>

12. Invest more than 15% of each of the Emerging Markets Portfolio's
and the Value Portfolio's net assets and 10% of the Small Company Growth
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. Make additional investments (including roll-overs) if the
Portfolios' borrowings exceed 5% of its net assets.

General. If a percentage restriction (other than the percentage
limitations set forth in each No. 1 above and the percentage limitation set
forth in No. 12 above with respect to the Emerging Markets Portfolio) 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 foreign securities exchange
or traded in an over-the-counter market will be valued at the most recent sale
as of the time the valuation is made or, in the absence of sales, at the mean
between the bid and asked quotations. If there are no such quotations, the value
of the securities will be taken to be the highest bid quotation on the exchange
or market. Options or futures contracts will be valued similarly. 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.
Short-term obligations with maturities of 60 days or less are valued at
amortized cost, which constitutes fair value as determined by the Board.
Amortized cost involves valuing a portfolio instrument at its initial cost 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 amortized cost method of valuation may also be used
with respect to debt obligations with 60 days or less remaining to maturity. In
determining the market value of portfolio investments, the Portfolio may employ
outside organizations (a "Pricing Service") which may use a matrix formula or
other objective 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 a Pricing Service
at any time. Securities, options and futures contracts for which market
quotations are not available and certain 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

32
<PAGE>

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.

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 New York Stock Exchange (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. 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 Portfolios'
calculation of net asset value, in which case an adjustment may be made by the
Board or its delegates. 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.

Portfolio Transactions
- ----------------------

Warburg 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.

Warburg will select specific portfolio investments and effect
transactions for each Portfolio and in doing so seeks to obtain the overall best
execution of portfolio transactions. In evaluating prices and executions,
Warburg 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

33
<PAGE>

reasonableness of the commission, if any, for the specific transaction and on a
continuing basis. Warburg 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) to a Portfolio and/or other accounts over which Warburg exercises
investment discretion. Warburg may place portfolio transactions with a broker or
dealer with whom it has negotiated a commission that is in excess of the
commission another broker or dealer would have charged for effecting the
transaction if Warburg determines in good faith that such amount of commission
was reasonable in relation to the value of such brokerage and research services
provided by such broker or dealer viewed in terms of either that particular
transaction or of the overall responsibilities of Warburg. Research and other
services received may be useful to Warburg 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 Warburg in carrying out
its obligations to the Portfolios. Research may include furnishing advice,
either directly or through publications or writings, as to the value of
securities, the advisability of purchasing or selling specific securities and
the availability of securities or purchasers or sellers of securities;
furnishing seminars, information, analyses and reports concerning issuers,
industries, securities, trading markets and methods, legislative developments,
changes in accounting practices, economic factors and trends and portfolio
strategy; access to research analysts, corporate management personnel, industry
experts, economists and government officials; comparative performance evaluation
and technical measurement services and quotation services; and products and
other services (such as third party publications, reports and analyses, and
computer and electronic access, equipment, software, information and accessories
that deliver, process or otherwise utilize information, including the research
described above) that assist Warburg in carrying out its responsibilities.
Research received from brokers or dealers is supplemental to Warburg's own
research program. The fees to Warburg under its advisory agreements with the
Fund are not reduced by reason of its receiving any brokerage and research
services.

During the fiscal years ended October 31, 1994, October 31, 1995 and
October 31, 1996, the Fund, on behalf of the International Equity Portfolio,
paid an aggregate of approximately $612,312, $1,273,733 and $2,347,203,
respectively, in commissions to broker-dealers for execution of portfolio
transactions. The fiscal 1995 commission increases were a result of sharp
increases in the volume of share-related activity as the Portfolio received
large inflows of capital.

During the fiscal year ended October 31, 1996, the Fund, on behalf of
the Small Company Growth Portfolio and the Emerging Markets Portfolio, paid an
aggregate of approximately $69,950 and $90,762, respectively in commissions to
broker-dealers for execution of portfolio transactions. Since the Managed
EAFE(R) Countries Portfolio, the Global Fixed Income Portfolio and the Value
Portfolio had not commenced operations as of October 31, 1996, no brokerage
commissions were paid by them.

Investment decisions for each Portfolio concerning specific portfolio
securities are made independently from those for other clients advised by
Warburg. 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,

34
<PAGE>

transactions are averaged as to price and available investments allocated as to
amount, in a manner which Warburg 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,
Warburg 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.

In no instance will portfolio securities be purchased from or sold to
Warburg or Counsellors Securities Inc., the Fund's distributor ("Counsellors
Securities"), or any affiliated person of such companies.

Transactions for the Portfolios may be effected on foreign securities
exchanges. In transactions for securities not actively traded on a foreign
securities exchange, the Fund will deal directly with the dealers who make a
market in the securities involved, except in those circumstances where better
prices and execution are available elsewhere. Such dealers usually are acting as
principal for their own account. On occasion, securities may be purchased
directly from the issuer. Such portfolio securities are generally traded on a
net basis and do not normally involve brokerage commissions. Securities firms
may receive brokerage commissions on certain portfolio transactions, including
options, futures and options on futures transactions and the purchase and sale
of underlying securities upon exercise of options.

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 Warburg, 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
of acquisition are excluded from the calculation.

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.

35
<PAGE>

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 (62)................... Director
Harvard University Professor at Harvard University;
1737 Cambridge Street National Intelligence Council from
Cambridge, Massachusetts 02138 June 1995 until January 1997;
Director or Trustee of CircuitCity
Stores, Inc. (retail electronics
and appliances) and Phoenix Home
Mutual Life Insurance Company.

Donald J. Donahue (72)................... Director
27 Signal Road Chairman of Magma Copper Company
Stamford, Connecticut 06902 from December 1987 until December
1995; Director of Chase Brass
Industries, Inc. since December
1994; Director of Pioneer
Companies, Inc. (chlor-alkali
chemicals) and predecessor
companies since 1990 and Vice
Chairman since December 1995.

Jack W. Fritz (69)...................... Director
2425 North Fish Creek Road Private investor; Consultant and
P.O. Box 483 Director of Fritz Broadcasting,
Wilson, Wyoming 83014 Inc. and Fritz Communications
(developers and operators of radio
stations); Director of Advo, Inc.
(direct mail advertising).

John L. Furth* (66)..................... Chairman of the Board and President
466 Lexington Avenue Vice Chairman and Director of
New York, New York 10017-3147 Warburg; Associated with Warburg
since 1970; Officer of other
investment companies advised by
Warburg.

___________________________
* Indicates a Director who is an "interested person" of the Fund as defined
in the 1940 Act.

36
<PAGE>

Thomas A. Melfe (65).................... Director
30 Rockefeller Plaza Partner in the law firm of Donovan
New York, New York 10112 Leisure Newton & Irvine; Chairman
of the Board of Municipal Fund for
New York Investors, Inc.

Arnold M. Reichman* (48)................ Director and Executive Vice President
466 Lexington Avenue Managing Director and Assistant
New York, New York 10017-3147 Secretary of Warburg; Associated
with Warburg since 1984; Senior
Vice President, Secretary and Chief
Operating Officer of Counsellors
Securities; Officer of other
investment companies advised by
Warburg.

Alexander B. Trowbridge (67)............ Director
1317 F Street, N.W., 5th Floor President of Trowbridge Partners,
Washington, DC 20004 Inc. (business consulting) from
January 1990-November 1996;
President of the National
Association of Manufacturers from
1980-1990; Director or Trustee of
New England Mutual Life Insurance
Co., ICOS Corporation
(biopharmaceuticals), WMX
Technologies Inc. (solid and
hazardous waste collection and
disposal), The Rouse Company (real
estate development), Harris Corp.
(electronics and communications
equipment), The Gillette Co.
(personal care products) and Sun
Company Inc. (petroleum refining
and marketing).

Dale C. Christensen (49)................. Vice President of the Fund and
466 Lexington Avenue Portfolio Manager of Global Fixed
New York, New York 10017-3147 Income Portfolio Portfolio Manager
or Co-Portfolio Manager of other
Warburg Pincus Funds; Managing
Director of Warburg; Associated
with Warburg since 1989; Vice
President at Citibank, N.A. from
1985-1989; Vice President of
Counsellors Securities; President
of other investment companies
advised by Warburg.

_____________________________
* Indicates a Director who is an "interested person" of the Fund as defined
in the 1940 Act.

37
<PAGE>

Richard H. King (52).................... Vice President of the Fund and
466 Lexington Avenue Portfolio Manager of International
New York, New York 10017-3147 Equity, Managed EAFE(R) and
Emerging Markets Portfolios
Portfolio Manager or Co-Portfolio
Manager of other Warburg Pincus
Funds; Managing Director of Warburg
since 1989; Associated with Warburg
since 1989; President of other
investment companies advised by
Warburg.

Eugene L. Podsiadlo (39)................ President
466 Lexington Avenue Managing Director of Warburg;
New York, New York 10017-3147 Associated with Warburg since 1991;
Vice President of Citibank, N.A.
from 1987-1991; Senior Vice
President of Counsellors Securities
and officer of other investment
companies advised by Warburg.

Stephen Distler (43).................... Vice President
466 Lexington Avenue Managing Director, Controller and
New York, New York 10017-3147 Assistant Secretary of Warburg;
Associated with Warburg since 1984;
Treasurer of Counsellors
Securities; Vice President of other
investment companies advised by
Warburg.

Eugene P. Grace (45).................... Vice President and Secretary
466 Lexington Avenue Associated with Warburg since April
New York, New York 10017-3147 1994; 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, Chief Compliance
Officer and Assistant Secretary of
Counsellors Securities; Vice
President and Secretary of other
investment companies advised by
Warburg.

Howard Conroy (42)...................... Vice President and Chief Financial
466 Lexington Avenue Officer Associated with Warburg
New York, New York 10017-3147 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 and
Chief Financial Officer of other
investment companies advised by
Warburg.

38
<PAGE>

Daniel S. Madden, CPA (31).............. Treasurer and Chief Accounting
466 Lexington Avenue Officer Associated with Warburg
New York, New York 10017-3147 since 1995; Associated with
BlackRock Financial Management,
Inc. from September 1994 to October
1996; Associated with BEA
Associates from April 1993 to
September 1994; Associated with
Ernst & Young LLP from 1990 to
1993. Treasurer and Chief
Accounting Officer of other
investment companies advised by
Warburg.

Janna Manes, Esq. (29).................. Assistant Secretary
466 Lexington Avenue Associated with Warburg since 1996;
New York, New York 10017-3147 Associated with the law firm of
Willkie Farr & Gallagher from
1993-1996; Assistant Secretary of
other investment companies advised
by Warburg.

No employee of Warburg 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 Warburg, 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.

Directors' Compensation
(for the fiscal year ended October 31, 1996)

Total Total Compensation from
Name of Director Compensation from all Investment Companies
Fund Managed by Warburg*
------------------- --------------------- --------------------------

John L. Furth None** None**
Arnold M. Reichman None** None**
Richard N. Cooper $1,750 $48,000
Donald J. Donahue $2,000 $48,000
Jack W. Fritz $1,250 $48,000
Thomas A. Melfe $2,000 $48,000
Alexander B. Trowbridge $2,000 $48,000

- -----------------------

* Each Director also serves as a Director or Trustee of 23 other investment
companies advised by Warburg.

** Messrs. Furth and Reichman are considered to be interested persons of the
Fund and Warburg, as defined under Section 2(a)(19) of the 1940 Act, and,
accordingly, receive no compensation from the Fund or any other investment
company managed by Warburg.

39
<PAGE>

As of January 17, 1997, the Directors and officers of the Fund as a
group owned less than 1% of the outstanding shares of each Portfolio.

International Equity, Managed EAFE(R) Countries and Emerging Markets
Portfolios. Mr. Richard H. King, vice president of the Fund and portfolio
manager of the International Equity and Managed EAFE(R) Countries Portfolios and
co-portfolio manager of the Emerging Markets Portfolio, earned a B.A. degree
from Durham University in England. Mr. King 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, the Emerging Markets Portfolio of Warburg Pincus Trust and Warburg
Pincus Japan OTC Fund. From 1968 to 1982, he worked at 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.

Mr. Nicholas P.W. Horsley, co-portfolio manager of the Emerging
Markets Portfolio and associate portfolio manager and research analyst of the
International Equity and Managed EAFE(R) Countries Portfolios, is also a
co-portfolio manager of Warburg Pincus Emerging Markets Fund, the Emerging
Markets Portfolio of Warburg Pincus Trust and Warburg Pincus Japan OTC Fund and
an associate portfolio manager and research analyst of Warburg Pincus
International Equity Fund and the International Equity Portfolio of Warburg
Pincus Trust. From 1981 to 1984 Mr. Horsley was a securities analyst at Barclays
Merchant Bank in London, UK and Johannesburg, RSA. From 1984 to 1986 he was a
senior analyst with BZW Investment Management in London. From 1986 to 1993 he
was a director, portfolio manager and analyst at Barclays deZoete Wedd in New
York City. Mr. Horsley earned B.A. and M.A. degrees with honors from University
College, Oxford.

Mr. P. Nicholas Edwards, associate portfolio manager and research
analyst of the International Equity and Managed EAFE(R) Countries Portfolios, is
also portfolio manager of Warburg Pincus Japan Growth Fund and a co-portfolio
manager and research analyst of Warburg Pincus International Equity Fund and an
associate portfolio manager and research analyst of the International Equity
Portfolio of Warburg Pincus Trust. Prior to joining Warburg in August 1995, Mr.
Edwards was a director at Jardine Fleming Investment Advisers, Tokyo. He was a
vice president of Robert Fleming Inc. in New York City from 1988 to 1991. Mr.
Edwards earned M.A. degrees from Oxford University and Hiroshima University in
Japan.

Mr. Harold W. Ehrlich, associate portfolio manager and research
analyst of the International Equity, Managed EAFE(R) Countries and Emerging
Markets Portfolios, is also an associate portfolio manager and research analyst
of Warburg Pincus International Equity Fund, Warburg Pincus Emerging Markets
Fund and the International Equity and Emerging

40
<PAGE>

Markets Portfolios of Warburg Pincus Trust. Prior to joining Warburg, 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.

Mr. Vincent J. McBride, associate portfolio manager and research
analyst of the International Equity, Managed EAFE(R) Countries and Emerging
Markets Portfolios, is also an associate portfolio manager and research analyst
of Warburg Pincus International Equity Fund, Warburg Pincus Emerging Markets
Fund and the International Equity and Emerging Markets Portfolios of Warburg
Pincus Trust. Prior to joining Warburg 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.

Small Company Growth Portfolio. Ms. Elizabeth B. Dater, co-portfolio
manager of the Small Company Growth Portfolio, is also co-portfolio manager of
Warburg Pincus Emerging Growth Fund, Warburg Pincus Post-Venture Capital Fund
and the Post-Venture Capital Portfolio of Warburg Pincus Trust. She is the
former director of research for Warburg's investment management activities.
Prior to joining Warburg 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. Mr. Stephen J. Lurito, co-portfolio manager
of the Small Company Growth Portfolio, is also co-portfolio manager of Warburg
Pincus Emerging Growth Fund, Warburg Pincus Post-Venture Capital Fund and the
Post-Venture Capital Portfolio of Warburg Pincus Trust and the portfolio manager
of Warburg Pincus Small Company Growth Fund. Mr. Lurito, also the research
coordinator and a portfolio manager for micro-cap equity and post-venture
products, has been with Warburg 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.

Global Fixed Income Portfolio. Mr. 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 Warburg, which he joined in 1989, 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.

41
<PAGE>

Value Portfolio. Mr. Brian S. Posner has 9 years of investment
experience. Prior to joining Warburg, Mr. Posner was employed from 1987 to 1996
by Fidelity Investments, where, most recently, he was the vice president and
portfolio manager of the Fidelity Equity-Income II Fund. Mr. Posner received an
undergraduate degree from Northwestern University and his M.B.A. in Finance from
the University of Chicago.

Investment Adviser and Co-Administrators
- ----------------------------------------

Warburg serves as investment adviser to each Portfolio, Counsellors
Funds Service, Inc. ("Counsellors Service") and PFPC serve as co-administrators
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, Warburg 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. See
the Prospectus, "Management of the Fund." 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.

With respect to the International Equity Portfolio, during the fiscal
years ended October 31, 1994, October 31, 1995 and October 31, 1996, Warburg
earned $1,736,864, $3,095,950 and $5,644,429, respectively, and voluntarily
waived $542,549, $778,770 and $1,182,795, respectively, in investment advisory
fees; Counsellors Service earned $188,503, $386,993 and $705,554, respectively;
and PFPC received $259,290, $436,710 and $702,540, respectively, in
administration fees and voluntarily waived $81,358, $110,078 and $119,850 of
such fees.

With respect to the Small Company Growth Portfolio and the Emerging
Markets Portfolio, during the fiscal year ended October 31, 1996, Warburg earned
$268,768 and $21,487, respectively, and voluntarily waived $122,453 and $21,487,
respectively, in investment advisory fees; Counsellors Service earned $29,863
and $2,149, respectively; and PFPC received $29,863 and $2,578, respectively, in
administration fees and voluntarily waived $9,901 and $2,578 of such fees.

Since the Managed EAFE(R) Countries Portfolio, the Global Fixed Income
Portfolio and the Value Portfolio had not commenced investment operations as of
October 31, 1996, no fees were paid to Warburg, PFPC or Counsellors Service by
them.

Custodians and Transfer Agent
- -----------------------------

Fiduciary Trust Company International ("Fiduciary") serves as
custodian of each of the International Equity, Managed EAFE(R) Countries, 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

42
<PAGE>

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 custodial
arrangements. Fiduciary is authorized to select one or more foreign or domestic
banks or trust companies and securities depositories to serve as sub-custodian
on behalf of the Portfolios. The principal business address of Fiduciary is Two
World Trade Center, New York, New York 10048.

Pursuant to separate custodian agreements (the "Custodian
Agreements"), 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, and State Street serves as
custodian of the Emerging Markets Portfolio's assets. 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.
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, Managed EAFE(R) Countries,
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. State Street has delegated to Boston Financial Data
Services, Inc., a 50% owned subsidiary ("BFDS"), responsibility for most
shareholder servicing functions. BFDS's principal business address is 2 Heritage
Drive, Boston, Massachusetts 02171.

Organization of the Fund
- ------------------------

The Fund was incorporated on May 13, 1992 under the laws of the State
of Maryland under the name "Warburg, Pincus Institutional Fund, Inc." Shares of
six series have been authorized, which constitute the interests in the
Portfolios.

43
<PAGE>

All shareholders of a Portfolio, upon liquidation, will 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.

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.)

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 investment instruments which may
not constitute securities as such term is defined in the applicable securities
laws. 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.

A Portfolio may, in certain circumstances and in its discretion,
accept securities as payment for the purchase of the Portfolio's shares from an
investor who has received such securities as redemption proceeds from another
Warburg Pincus Fund.

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
Warburg 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. Warburg
reserves the right to reject more than three exchange

44
<PAGE>

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.

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.

Each 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 the sum of 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) plus at least 90%
of its net tax exempt interest income; (ii) derive at least 90% of its gross
income from dividends, interest, payments with respect to loans of securities,
gains from the sale or other disposition of securities or foreign currencies, or
other income (including, but not limited to, gains from options, futures, and
forward contracts) derived with respect to its business of investing in such
securities or currencies; (iii) derive less than 30% of its annual gross income
from the sale or other disposition of securities, options, futures, forward
contracts or certain other assets 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.

45
<PAGE>

A Portfolio's transactions, if any, in foreign currencies, forward
contracts, options and futures contracts (including options, futures contracts
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.

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.

A Portfolio's investments in zero coupon securities may create special
tax consequences. Zero coupon securities do not make interest payments, although
a portion of the difference between zero coupon security's face 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.

Investors considering buying shares just prior to a dividend or
capital gain distribution should be aware that, although the price of shares
purchased at that time may reflect the amount of the forthcoming distribution,
those who purchase just prior to a distribution will receive a distribution that
will nevertheless be taxable to them. Upon the sale or exchange of shares, a
shareholder will realize a taxable gain or loss depending on the amount realized
and the basis in the shares. Such gain or loss will be treated as capital gain
or loss if the shares are capital assets in the shareholder's hands, and, as
described in the

46
<PAGE>

Prospectus, will be long-term or short-term depending on the shareholder's
holding period for the shares. Any loss realized on a sale or exchange will be
disallowed to the extent the shares disposed of are replaced, including
replacement through the reinvestment of dividends and capital gains
distributions in 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.

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

47
<PAGE>

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 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 annual total return of the
International Equity Portfolio for the fiscal year ended October 31, 1996 was
10.48% (10.30% without waivers), and for the period beginning September 1, 1992
(inception) to October 31, 1996 was 15.03% (14.79% without waivers). The
aggregate total return of the Small Company Growth Portfolio for the period
beginning December 29, 1995 (inception) to October 31, 1996 was 29.20% (28.90%
without waivers). The average aggregate total return of the Emerging Markets
Portfolio for the period beginning September 30, 1996 (inception) to October 31,
1996 was (1.40)% ((1.60)% 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 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. 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:

- ----------------------
* As used here, "n" is an exponent.

48
<PAGE>

YIELD = 2[( a-b +1)6*-1]
---
cd
- ----------------
* As used here, the number "6" is an exponent.

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.

Warburg believes that a diversified portfolio of international equity
securities, when combined with a similarly diversified portfolio of domestic
equity securities, tends to have a lower volatility than a portfolio composed
entirely of domestic securities. Furthermore, international equities have been
shown to reduce volatility in single asset portfolios regardless of whether the
investments are in all domestic equities or all domestic fixed-income
instruments, and research indicates that volatility can be significantly
decreased when international equities are added.

To illustrate this point, the performance of international equity
securities, as measured by the Morgan Stanley Capital International Europe,
Australasia and Far East (EAFE(R)) Index (the "EAFE Index"), has equaled or
exceeded that of domestic equity securities, as measured by the Standard &
Poor's 500 Composite Stock Index (the "S & P 500 Index") in 14 of the last 25
years. The following table compares annual total returns of the EAFE Index and
the S & P 500 Index for the calendar years shown.

EAFE Index vs. S&P 500 Index
1972-1996
Annual Total Return+
Year EAFE Index S&P 500 Index
---- ---------- -------------

1972* 33.28 15.63
1973* -16.82 -17.37
1974* -25.60 -29.72
1975* 31.21 31.55
1976 -.36 19.15
1977* 14.61 -11.50
1978* 28.91 1.06
1979 1.82 12.31
1980 19.01 25.77

49
<PAGE>

EAFE Index vs. S&P 500 Index
1972-1996
Annual Total Return+
Year EAFE Index S&P 500 Index
---- ---------- -------------
1981* -4.85 -9.73
1982 -4.63 14.76
1983* 20.91 17.27
1984* 5.02 1.40
1985* 52.97 26.33
1986* 66.80 14.62
1987* 23.18 2.03
1988* 26.66 12.40
1989 9.22 27.25
1990 -24.71 -6.56
1991 10.19 26.31
1992 -13.89 4.46
1993* 30.49 7.06
1994* 6.24 -1.54
1995 9.42 20.26
1996 4.40 34.11
- -------------------------
+ Without reinvestment of dividends.
* The EAFE Index has outperformed the S&P 500 Index 14 out of the last
25 years.
Source: Morgan Stanley Capital International; Bloomberg Financial Markets

The quoted performance information shown above is not intended to
indicate the future performance of the International Equity, Managed EAFE(R)
Countries or Emerging Markets Portfolios. Advertising or supplemental sales
literature relating to a Portfolio may describe the percentage decline from
all-time high levels for certain foreign stock markets. It may also describe how
the Portfolio differs from the EAFE Index in composition.

INDEPENDENT ACCOUNTANTS AND COUNSEL

Coopers & Lybrand L.L.P. ("Coopers & Lybrand"), with principal offices
at 2400 Eleven Penn Center, Philadelphia, Pennsylvania 19103, serves as
independent accountants for the Fund. The annual report for the International
Equity Portfolio, the Small Company Growth Portfolio and the Emerging Markets
Portfolio and the statement of assets and liabilities for the Global Fixed
Income Portfolio have been audited by Coopers & Lybrand, whose reports thereon
are either incorporated herein by reference or appear elsewhere herein and have
been included in reliance upon the report of such firm of independent
accountants given upon their authority as experts in accounting and auditing.

The financial statements of the International Equity Portfolio for the
period beginning with commencement of the Portfolio through October 31, 1992
have been audited by Ernst & Young LLP ("Ernst & Young"), independent
accountants, as set forth in their report, and have been incorporated by
reference in reliance on such report and upon the

50
<PAGE>

authority of such firm as experts in accounting and auditing. Ernst & Young's
address is 787 7th Avenue, New York, New York 10019.

The statements of assets and liabilities for the Managed EAFE(R)
Countries and Value Portfolios that appear in this Statement of Additional
Information are unaudited.

Willkie Farr & Gallagher serves as counsel for the Fund as well as
counsel to Warburg, Counsellors Service and Counsellors Securities.

MISCELLANEOUS

As of December 31, 1996, the names, addresses and percentage ownership
of each person that owned 5% or more of the outstanding shares of a Portfolio
are as follows:

Percentage Owned as
of
Portfolio Name and Address December 31, 1996
--------- ---------------- --------------------

Small Company Growth Employee Benefit Plan Group Trust of 18.02%
Portfolio George A. Buck Consulting Act Inc.
3 Chase MetroTech Ctr. Fl. 5
Brooklyn, NY 11245-0002

Employee Benefit Plan Group Trust of 7.47%
George A. Buck Consulting Act Inc.
3 Chase MetroTech Ctr. Fl. 5
Brooklyn, NY 11245-0002

Trustees of Amherst College 18.56%
Amherst College
Ms. Sharon Siegel
Treasurer Office
Box 2203 P.O. Box 5000
Amherst, MA 01002-5000

Interra Financial Pension Plan 13.78%
National City Bank
Attn. Mutual Funds
4100 W. 150th Street, Fl 3
Cleveland, OH 44135-1304

51
<PAGE>

Percentage Owned as
of
Portfolio Name and Address December 31, 1996
--------- ---------------- --------------------

Small Company Growth Oberlin College 8.14%
Portfolio Attn: Bernard Gordon
Director of the Investment Office
173 W. Lorain St.
Oberlin, OH 44074-1057

Depauw University 6.37%
313 South Locust St.
Greencastle, IN 46135-1736

Emerging Markets Louis R. Morrell/Irene A. Comito 94.92%
Portfolio Co-Trustees
Wake Forest University Trust
P.O. Box 7354
Winston-Salem, NC. 27109-7354

Mr. Lionel I. Pincus, the managing partner of Warburg Pincus & Co.,
may be deemed to have beneficially owned 8.32% of the International Equity
Portfolio's shares outstanding, and 7.87% of the Small Company Growth
Portfolio's Shares outstanding, as of December 31, 1996, including shares owned
by clients for which Warburg has investment discretion and by companies that
Warburg Pincus & Co. 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 Fund's audited annual report dated October 31, 1996, which either
accompanies this Statement of Additional Information or has previously been
provided to the investor to whom this Statement of Additional Information is
being sent, is incorporated herein by reference with respect to all information
regarding the International Equity Portfolio, the Small Company Growth Portfolio
and the Emerging Markets Portfolio included therein. The Fund will furnish
without charge a copy of the annual report upon request by calling the Fund at
(800) 369-2728.

The audited statement of assets and liabilities for the Global Fixed
Income Portfolio, dated as of January 23, 1997 and the Reports of Independent
Accountants related thereto and the unaudited statement of assets and
liabilities for the Managed EAFE(R) Countries Portfolio and the Value Portfolio
dated as of April 17, 1996 and January 31, 1997, respectively, accompany this
Statement of Additional Information.

52
<PAGE>

* * * *

The Managed EAFE(R) Countries Portfolio is not sponsored, endorsed,
sold or promoted by Morgan Stanley. Morgan Stanley makes no representation or
warranty, express or implied, to the owners of the Managed EAFE(R) Countries
Portfolio or any member of the public regarding the advisability of investing in
securities generally or in the Managed EAFE(R) Countries Portfolio particularly
or the ability of the Morgan Stanley EAFE Index to track general stock market
performance. Morgan Stanley is the licensor of certain trademarks, service marks
and trade names of Morgan Stanley and of the Morgan Stanley EAFE Index. Morgan
Stanley has no obligation to take the needs of the issuer of the Managed EAFE(R)
Countries Portfolio or the owners of the Managed EAFE(R) Countries Portfolio
into consideration in determining, composing or calculating the Morgan Stanley
EAFE Index. Morgan Stanley is not responsible for and has not participated in
the determination of the timing of, prices at, or quantities of the Managed
EAFE(R) Countries Portfolio to be issued or in the determination or calculation
of the equation by which the Managed EAFE(R) Countries Portfolio is redeemable
for cash. Morgan Stanley has no obligation or liability to owners of the Managed
EAFE(R) Countries Portfolio in connection with the administration, marketing or
trading of the Managed EAFE(R) Countries Portfolio.

MORGAN STANLEY MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY
DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
WITH RESPECT TO THE EAFE INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING
ANY OF THE FOREGOING, IN NO EVENT SHALL MORGAN STANLEY HAVE ANY LIABILITY FOR
ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES
(INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

53
<PAGE>

APPENDIX

DESCRIPTION OF RATINGS

Commercial Paper Ratings
- ------------------------

Commercial paper rated A-1 by Standard and Poor's Ratings Services
("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 Service, 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, B, CCC, CC and C - Debt rated BB and B is regarded, on balance, as
predominately speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB represents a lower
degree of speculation than B, and CCC the highest degree of speculation. While
such bonds will likely have some quality

A-1
<PAGE>

and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.

BB - Debt rated BB has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions, which could
lead to inadequate capacity to meet 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 - Debt rated B has a greater vulnerability to default but currently
has 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.

CCC - Debt rated CCC has a currently identifiable vulnerability to
default and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. The CCC rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.

CC - This rating is typically applied to debt subordinated to senior
debt that is assigned an actual or implied CCC rating.

C - This rating is typically applied to debt subordinated to senior
debt which is assigned an actual or implied CCC- debt rating. The C rating may
be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.

Additionally, the rating CI is reserved for income bonds on which no
interest is being paid. Such debt is rated between debt rated C and debt rated
D.

To provide more detailed indications of credit quality, the ratings
may be modified by the addition of a plus or minus sign to show relative
standing within this major rating category.

D - Debt rated D is in payment default. The D rating category is used
when interest payments or principal payments are not made on the date due even
if the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period. The D rating also will be used
upon the filing of a bankruptcy petition if debt service payments are
jeopardized.

A-2
<PAGE>

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.

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.

Caa - Bonds that are rated Caa are of poor standing. These issues may
be in default or present elements of danger may exist with respect to principal
or interest.

Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.

A-3
<PAGE>

C - Bonds which are rated C comprise the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

A-4

<PAGE>

WARBURG, PINCUS INSTITUTIONAL FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
as of January 31, 1997

Value
Portfolio
---------
Assets:

Cash 0
Deferred Organizational Costs 0
-
Total Assets 0

Liabilities: 0
-
Net Assets 0
=
Net Asset Value, Redemption and Offering:

Price Per Share (10 billion shares authorized $10.00
for the Fund; 1 billion shares classified ======
for the Value Portfolio - $.001 par value)
applicable to 1 share outstanding.

<PAGE>C-1

PART C

OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements -- International Equity Portfolio (1)

(1) Financial Statements included in Part A
(a) Financial Highlights

(2) Financial Statements included in Part B
(incorporated by reference to the Fund's annual
report dated October 31, 1996)

(a) Report of Coopers & Lybrand L.L.P.,
Independent Accountants
(b) Statement of Net Assets
(c) Statement of Operations
(d) Statement of Changes in Net Assets
(e) Financial Highlights
(f) Notes to Financial Statements

(b) Financial Statements -- Small Company Growth Portfolio (1)

(1) Financial Statements included in Part A

(a) Financial Highlights

(2) Financial Statements included in Part B
(incorporated by reference to the Fund's
annual report dated October 31, 1996)

(1) Report of Coopers & Lybrand L.L.P., Independent
Accountants

(2) Statement of Assets and Liabilities

(3) Notes to Financial Statements

(d) Financial Statements included in Part B
-- Managed EAFE(R) Countries Portfolio (1)

(1) Statement of Assets and Liabilities (Unaudited)

(e) Financial Statements -- Emerging Markets Portfolio (1)

- -------------------
(1) Incorporated by reference to Post-Effective Amendment No. 10 to
Registrant's Registration Statement on Form N-1A, filed with the
Securities and Exchange Commission (the "Commission") on January 28,
1997.

<PAGE>C-2

(1) Financial Statements included in Part A
(a) Financial Highlights

(2) Financial Statements included in Part B
(incorporated by reference to the Fund's
annual report dated October 31, 1996)

(f) Financial Statements included in Part B -- Value Portfolio

(1) Statement of Assets and Liabilities (Unaudited)

(g) Exhibits:

Exhibit No. Description of Exhibit
- ----------- ----------------------

1(a) Articles of Incorporation.(2)

(b) Articles of Amendment.(2)

(d) Articles Supplementary.(2)

(e) Articles Supplementary increasing the number of authorized
shares (2)

- --------
(2) Incorporated by reference to Post-Effective Amendment No. 4 to
Registrant's Registration Statement on Form N-1A, filed on August 18,
1995.

<PAGE>C-3

(f) Articles Supplementary designating Emerging Markets
Portfolio.(5)

(g) Articles of Amendment (1)

(h) Articles Supplementary designating Value Portfolio

2(a) By-Laws.(3)

2(b) Amendment to By-Laws. (4)

3 Not applicable.

4 Registrant's Forms of Stock Certificates.(2)

5(a) Investment Advisory Agreement--International Equity
Portfolio.(2)

(b) Investment Advisory Agreement--Small Company Growth
Portfolio.(2)

(d) Investment Advisory Agreement -- Managed EAFE(R) Countries
Portfolio (formerly known as Foreign Developed Markets
Portfolio). (2)

(e) Investment Advisory Agreement--Emerging Markets Portfolio.
(5)

(f) Investment Advisory Agreement -- Value Portfolio

6(a) Form of Distribution Agreement.(2)

- -----------------------
3 Incorporated by reference to Post-Effective Amendment No. 7 to
Registrant's Registration Statement on Form N-1A, filed
on April 19, 1996.

4 Incorporated by reference to Post-Effective Amendment No. 8 to
Registrant's Registration Statement on Form N-1A, filed on July 2,
1996.

5 Incorporated by reference to Post-Effective Amendment No. 9 to
Registrant's Registration Statement on Form N-1A, filed on August 20,
1996.

<PAGE>C-4

(b) Form of Distribution Agreement pertaining to the Small
Company Growth Portfolio.(2)

7 Not applicable.

8(a) Form of Custodian Agreement with PNC Bank, National
Association.(2)

(b) Form of Custody Agreement with Fiduciary Trust Company
International--International Equity Portfolio.(2)

(d) Form of Custodian Contract with State Street Bank and Trust
Company ("State Street")--Small Company Growth Portfolio
and Emerging Markets Portfolio.(7)

(e) Form of Custody Agreement with Fiduciary Trust Company
International--Managed EAFE(R) Countries Portfolio
(formerly known as Foreign Developed Markets Portfolio).(6)

(f) Form of Custody Agreement with Fiduciary Trust Company
International--Value Portfolio.(6)

9(a) Form of Transfer Agency Agreement.(7)

(b) Form of Letter Agreement between Registrant and State
Street pertaining to inclusion of the Small Company Growth
Portfolio under the Transfer Agency Agreement.(2)

- -----------------------
6 Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit in
Post-Effective Amendment No. 10 to the Registration Statement on Form
N-1A of Warburg, Pincus International Equity Fund, filed on September
25, 1995 (Securities Act File No. 33-27031).

7 Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit in
Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-1A of Warburg, Pincus Japan Growth Fund, Inc. filed on December 18,
1995 (Securities Act File No. 33-63655).

<PAGE>C-5

(d)(1) Form of Co-Administration Agreements with PFPC Inc.(7)

(2) Form of Letter Agreement with PFPC Inc. relating to the
Managed EAFE(R) Countries Portfolio (formerly known as
Foreign Developed Markets Portfolio).(3)

(3) Form of Letter Agreement with PFPC, Inc. relating to the
Emerging Markets Portfolio.(5)

(4) Form of Letter Agreement with PFPC Inc. relating to the
Value Portfolio

(e) Form of Services Agreement.(2)

10(a) Opinion of Willkie Farr & Gallagher, counsel to the
Fund.(8)

(b) Consent of Willkie Farr & Gallagher, counsel to the Fund
and Opinion of Willkie Farr & Gallagher relating to the
establishment of the Value Portfolio.

11(a) Consent of Coopers & Lybrand L.L.P., Independent
Accountants.

(b) Opinion of Coopers & Lybrand L.L.P., Independent
Accountants, regarding the Global Fixed Income Portfolio
(1)

(c) Opinion of Coopers & Lybrand L.L.P., Independent
Accountants, regarding the International Equity
Portfolio, the Small Company Growth Portfolio and the
Emerging Growth Portfolio.(9)

12 Not applicable.

13(a) Purchase Agreement pertaining to the International Equity
Portfolio and Global Fixed Income Portfolio.(2)

- ------------------------
8 Incorporated by reference to Registrant's Form 24F-2 filed on December
27, 1996.

9 Incorporated by reference to Registrant's Annual Report dated October
31, 1996.

<PAGE>C-6

(b) Form of Purchase Agreement pertaining to the Small
Company Growth Portfolio.(2)

(c) Form of Purchase Agreement pertaining to the Managed
EAFE(R) Countries Portfolio (formerly known as Foreign
Developed Markets Portfolio).(3)

(d) Form of Purchase Agreement pertaining to the Emerging
Market Portfolio.(5)

(e) Purchase Agreement pertaining to the Value Portfolio.

14 Retirement Plans.(2)

15 Not applicable.

16(a) Schedule for Computation of Total Return Performance
Quotation for the International Equity Portfolio. (1)

(b) Schedule for Computation of Total Return Performance
Quotation for the Small Company Growth Portfolio. (1)

17 Financial Data Schedules. (1)

<PAGE>C-7

Item 25. Persons Controlled by or Under Common Control
with Registrant

Not applicable.

Item 26. Number of Holders of Securities

Number of Record Holders
Title of Class as of December 31, 1996
-------------- -----------------------

International Equity Portfolio- 388
shares of common stock
par value $.001 per share

Small Company Growth Portfolio- 30
shares of common stock
par value $.001 per share

Global Fixed Income Portfolio- 0
shares of common stock
par value $.001 per share

Managed EAFE(R)Countries Portfolio 0
(formerly known as Foreign
Developed Markets) Portfolio
shares of common stock par
value $.001 per share

Emerging Markets Portfolio shares 3
of common stock par value $.001
per share

Item 27. Indemnification

Registrant, officers and directors or trustees of Warburg, 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 Registration Statement of
Warburg, Pincus Post-Venture Capital Fund, Inc., filed on June 21, 1995.

<PAGE>C-8

Item 28. Business and Other Connections of
Investment Adviser

Warburg, a wholly owned subsidiary of Warburg, Pincus
Counsellors G.P., acts as investment adviser to each Portfolio. Warburg renders
investment advice to a wide variety of individual and institutional clients.
The list required by this Item 28 of officers and directors of Warburg,
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 Warburg (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 The RBB
Fund, Inc., 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 Global Post-Venture Capital
Fund; Warburg Pincus Growth & Income Fund, Inc.; Warburg Pincus Health Sciences
Fund, Inc.; Warburg Pincus Institutional Fund, Inc.; Warburg Pincus
Intermediate Maturity Government Fund; Warburg Pincus International Equity
Fund; Warburg Pincus Japan Growth Fund; Warburg Pincus Japan OTC Fund; Warburg
Pincus New York Intermediate Municipal Fund; Warburg Pincus New York Tax Exempt
Fund; Warburg Pincus Post-Venture Capital Fund; Warburg, Pincus Small Company
Growth Fund; Warburg Pincus Small Company Value Fund; Warburg Pincus Strategic
Value Fund; Warburg Pincus Tax Free Fund; Warburg Pincus Trust; and Warburg
Pincus Trust II.

(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.

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)

(2) Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as investment
adviser)

<PAGE>C-9

(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) Boston Financial Data Services, Inc.
2 Heritage Drive
North Quincy, Massachusetts 02171
(records relating to its functions as transfer agent
and dividend disbursing agent)

(8) PNC Bank, National Association
Broad and Chestnut Streets
Philadelphia, Pennsylvania 19101
(records relating to its functions as custodian)

(9) 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.

Item 32. Undertakings.

(a) Registrant hereby undertakes to file a post-effective amendment,
with financial statements of the Managed EAFE(R) Countries Portfolio, the Global
Fixed Income Portfolio and the Value Portfolio, which need not be certified,
within four to six months from the date the relevant Portfolio commences
operations.

(b) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the latest annual

<PAGE>C-10

report to shareholders for the relevant Portfolio, upon request and without
charge.

(c) Registrant hereby undertakes to call a meeting of its shareholders
for the purpose of voting upon the question of removal of a director or
directors of Registrant when requested in writing to do so by the holders of at
least 10% of Registrant's outstanding shares. Registrant undertakes further, in
connection with the meeting, to comply with the provisions of Section 16(c) of
the 1940 Act relating to communications with the shareholders of certain
common-law trusts.

<PAGE>C-11

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the Registrant
certifies that it meets all of the requirements for effectiveness of this
Amendment to the Registration Statement pursuant to Rule 485(a) under the
Securities Act of 1933, as amended, and 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 31st
day of January, 1997.

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> <C> <C>
/s/ John L. Furth Chairman of the Board of Directors January 31, 1997
John L. Furth and President

/s/ Howard Conroy Vice President and Chief Financial January 31, 1997
Howard Conroy Officer

/s/ Daniel S. Madden Treasurer and Chief Accounting Officer January 31, 1997
Daniel S. Madden

/s/ Richard N. Cooper Director January 31, 1997
Richard N. Cooper

/s/ Donald J. Donahue Director January 31, 1997
Donald J. Donahue

/s/ Jack W. Fritz Director January 31, 1997
Jack W. Fritz

/s/ Thomas A. Melfe Director January 31, 1997
Thomas A. Melfe

/s/ Alexander B. Trowbridge Director January 31, 1997
Alexander B. Trowbridge

/s/ Arnold M. Reichman Director January 31, 1997
Arnold M. Reichman

</TABLE>

<PAGE>

INDEX TO EXHIBITS

Exhibit No. Description of Exhibit
- ----------- ----------------------

1(h) Articles Supplementary designating the Value Portfolio

5(f) Investment Advisory Agreement -- Value Portfolio

9(d)(4) Form of Letter Agreement with PFPC Inc. relating to the
Value Portfolio

10(b) Consent of Willkie Farr & Gallagher, Counsel to the Fund
and opinion of Willkie Farr & Gallagher relating to the
establishment of the Value Portfolio.

11(a) Consent of Coopers & Lybrand L.L.P., Independent
Accountants

13(e) Purchase Agreement pertaining to the Value Portfolio

<PAGE>

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 "Value
Portfolio."

2. The Shares of the Value 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 Value 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: January 29, 1997 WARBURG, PINCUS INSTITUTIONAL
FUND, INC.

By: /s/ Eugene P. Grace
Name: Eugene P. Grace
Title: Vice President and Secretary
ATTEST:

/s/ Janna Manes
Name: Janna Manes
Title: Assistant Secretary

<PAGE>

INVESTMENT ADVISORY AGREEMENT

January 15, 1997

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 six portfolios, one of which is the
Value 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

<PAGE>

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 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.

2
<PAGE>

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
.75% 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.

3
<PAGE>

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, 1998 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

4
<PAGE>

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" 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: /s/ Eugene P. Grace
Name: Eugene P. Grace
Title: Vice President and Secretary

Accepted:

WARBURG, PINCUS COUNSELLORS, INC.

By: /s/ Eugene P. Grace
Name: Eugene P. Grace
Title: Senior Vice President

<PAGE>

________ __, 1997

Warburg, Pincus Institutional Fund, Inc.
466 Lexington Avenue
New York, New York 10017

RE: CO-ADMINISTRATION SERVICE FEES

Ladies and Gentlemen:

This letter constitutes our agreement with respect to compensation to be
paid to PFPC Inc. ("PFPC") under the terms of a Co-Administration Agreement
dated _________ ___, 1997 between you (the "Fund"), on behalf of the Value
Portfolio (the "Portfolio"), and PFPC. Pursuant to Paragraph 11 of that
Agreement, and in consideration of the services to be provided to you, you will
pay PFPC an annual co-administration fee, to be calculated daily and paid
monthly. You will also reimburse PFPC for its out-of-pocket expenses incurred on
behalf of the Portfolio, including, but not limited to: postage and handling,
telephone, telex, FedEx and outside pricing service charges.

The annual administration and accounting fee with respect to the Value
Portfolio shall be .10% of the Portfolio's first $500 million in average daily
net assets, .075% of the next $1 billion in average daily net assets and .05% of
average daily net assets over $1.5 billion.

In each month the Portfolio shall pay to PFPC the asset based fee as
calculated above. The fee for the period from the day of the year this agreement
is entered into until the end of that year shall be pro-rated according to the
proportion which such period bears to the full annual period.

If the foregoing accurately sets forth our agreement, and you intend to be
legally bound thereby, please execute a copy of this letter and return it to us.

Very truly yours,

PFPC INC.
By:________________________
Name:
Title:
Accepted:

WARBURG, PINCUS INSTITUTIONAL
FUND, INC.

By:___________________________
Name:
Title:

<PAGE>1

Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677

January 31, 1997

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 Value Portfolio
(the "Portfolio").

We have examined copies of the Fund's Articles of Incorporation, as amended or
supplemented (the "Articles"), the Fund's By-Laws, as amended (the "By-Laws"),
the Fund's 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"), and all resolutions adopted by the Fund's Board of
Directors at the Portfolio's organizational meeting on January 15, 1997. We
have also examined such other records, documents, papers, 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 common stock
of the Portfolio, par value $.001 per share (collectively, the "Shares') when
duly sold, issued and paid for in accordance with the terms of the Articles,
the By-Laws and the Registrations Statement, will be validly issued and will be
fully paid and non-assessable shares of common stock of the Fund.

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 included as part of the Registration Statement 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 under the securities laws of any state
or other jurisdiction.

<PAGE>2

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

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the following with respect to Post-Effective Amendment No. 11
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 incorporation by reference of our report dated
December 18, 1996 on our audit of the financial
statements and financial highlights of Warburg, Pincus
Institutional Fund, Inc. - International Equity
Portfolio, the Small Company Growth Portfolio, and the
Emerging Markets Portfolio.

2. The inclusion of our report dated January 27, 1997 on
our audit of the Statement of Assets and Liabilities
of Warburg, Pincus Institutional Fund, Inc. - Global
Fixed Income Portfolio.

3. The reference to our Firm under the caption
"Financial Highlights" in the Prospectus and
"Independent Accountants and Counsel" in the Statement
of Additional Information.

/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.

2400 Eleven Penn Center
Philadelphia, Pennsylvania
January 31, 1997

<PAGE>

PURCHASE AGREEMENT
------------------

Warburg, Pincus Institutional Fund, Inc. (the "Fund"), a corporation
organized under the laws of the State of Maryland, with respect to the Value
Portfolio (the "Portfolio") and Warburg, Pincus Counsellors, Inc. ("Warburg")
hereby agree as follows:

1. The Fund offers Warburg and Warburg hereby purchases one share of common
stock of the Portfolio, having a par value of $.001 per share, at a price of
$10.00 per Share (the "Initial Share"). Warburg hereby acknowledges receipt of a
certificate representing the Initial Share, and the Fund hereby acknowledges
receipt from Warburg of $10.00 in full payment for the Initial Share.

2. Warburg represents and warrants to the Fund that the Initial Share is
being acquired for investment purposes and not for the purpose of distribution.

3. Warburg agrees that if the holder of the Initial Share redeems the
Initial Share in the Portfolio before five years after the date upon which the
Portfolio commences its investment activities, the redemption proceeds will be
reduced by the amount of unamortized organizational expenses. The parties hereby
acknowledge that any shares acquired by Warburg other than the Initial Share
have not been acquired to fulfill the requirements of Section 14 of the
Investment Company Act of 1940, as amended, and, if redeemed, their redemption
proceeds will not be subject to reduction based on the unamortized
organizational expenses of the Portfolio.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the 29th day of January, 1997.

WARBURG, PINCUS INSTITUTIONAL
FUND, INC.

By: /s/ Eugene P. Grace
Name: Eugene P. Grace
Title: Vice President and Secretary
ATTEST:

/s/ Janna Manes
WARBURG, PINCUS COUNSELLORS,
INC.

By: /s/ Eugene P. Grace
Name: Eugene P. Grace
Title: Senior Vice President