<PAGE>
MANAGED EAFE(R) COUNTRIES PORTFOLIO
OF
WARBURG, PINCUS INSTITUTIONAL FUND, INC.
Your Vote is Important
Dear Shareholder:
The Board of Directors of Warburg, Pincus Institutional Fund, Inc. (the
"Company") has recently reviewed and unanimously endorsed a proposal for the
reorganization of one of its investment series -- the Managed EAFE(R) Countries
Portfolio (the "Existing Fund"). Under the terms of the proposal, a newly-formed
investment company -- Warburg, Pincus Managed EAFE(R) Countries Fund, Inc. (the
"New Fund" and, together with the Existing Fund, the "Funds") -- would acquire
all or substantially all of the assets and liabilities of the Existing Fund. We
are pleased to invite you to attend a special meeting (the "Meeting") of the
shareholders of the Existing Fund to consider the approval of a Plan of
Reorganization (the "Plan") pursuant to which the reorganization of that Fund
(the "Reorganization") would be effected.
Your Board of Directors and Warburg Pincus Asset Management, Inc. ("Warburg"),
each Fund's investment adviser, believe that the Reorganization is in the best
interests of the Existing Fund and its shareholders. If the Fund's size were to
remain small ($4.6 million as of December 1, 1997), it would not be economically
viable in the long term. Warburg and the Company's Board believe that converting
the Existing Fund to a retail-oriented fund will enable it to be sold through a
greater number of distribution channels, providing greater opportunities to
increase the Fund's asset size.
The Reorganization will not result in any changes to the investment philosophy
or operations of your Fund, since the New Fund has the same investment objective
and virtually identical investment policies as the Existing Fund. The New Fund
will have the same investment adviser, co-administrators, distributor,
custodian, transfer agent and accountants as the Existing Fund. In addition, the
Fund's net annual expense ratio will be capped at .95% of assets, the same
expense limitation currently in effect for the Existing Fund.
If shareholders of the Existing Fund approve the Plan, upon consummation of the
Reorganization of the Fund, the Existing Fund will be liquidated. You will
become a shareholder of the New Fund, having received shares with an aggregate
value equal to the aggregate net asset value of your investment in the Existing
Fund at the time of the transaction. No sales charge will be imposed in the
transaction. The transaction will, in the opinion of counsel, be free from
federal income taxes to you, the Existing Fund and the New Fund. Warburg or its
affiliates will bear all expenses incurred in connection with the
Reorganization.
<PAGE>
The Meeting will be held on December 16, 1997 to consider the Reorganization. We
strongly invite your participation by asking you to review, complete and return
your proxy promptly. A proxy card is enclosed.
Detailed information about the proposed reorganization is described in the
attached combined prospectus/proxy statement. YOUR BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED THE REORGANIZATION OF THE EXISTING FUND AND RECOMMENDS THAT
YOU VOTE TO APPROVE THE PLAN. On behalf of the Board of Directors, I thank you
for your participation as a shareholder and urge you to please exercise your
right to vote by completing, dating and signing the enclosed proxy card. A
self-addressed, postage-paid envelope has been enclosed for your convenience; if
you prefer, you can fax the proxy card to Warburg Pincus Asset Management c/o
Janna Manes at (212) 878-9555.
If you have any questions regarding the proposed reorganization, please call
(212) 878-9548, where an individual will be pleased to assist you.
IT IS VERY IMPORTANT THAT YOUR VOTING INSTRUCTIONS BE RECEIVED PROMPTLY.
Sincerely,
John L. Furth
Chairman of the Board
December 5, 1997
<PAGE>
Managed EAFE(R) Countries Portfolio
of
Warburg, Pincus Institutional Fund, Inc.
466 Lexington Avenue
New York, New York 10017
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on December 16, 1997
Notice is hereby given that a Special Meeting of Shareholders
(the "Meeting") of the Managed EAFE(R) Countries Portfolio, a series of Warburg,
Pincus Institutional Fund, Inc. (the "Company"), will be held at the offices of
the Company, 466 Lexington Avenue, New York, New York 10017-3147 on December 16,
1997 commencing at 3:00 p.m. for the following purposes:
1. To approve the Plan of Reorganization dated as of
December 3, 1997 (the "Plan") providing (i) that the Managed
EAFE(R) Countries Portfolio (the "Existing Fund") would be
reorganized from a series of the Company into Warburg, Pincus
Managed EAFE(R) Countries Fund, Inc. (the "New Fund"), (ii)
the Existing Fund would transfer to the New Fund all or
substantially all of its assets in exchange for shares of the
New Fund and the assumption of liabilities, and (iii) the
distribution of such shares of the New Fund to shareholders of
the Existing Fund in liquidation of the Existing Fund.
2. To transact such other business as may properly
come before the Meeting or any adjournment or adjournments
thereof.
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS OF THE EXISTING FUND VOTE TO APPROVE THE PLAN.
The Board of Directors of the Company has fixed the close of
business on December 1, 1997 as the record date (the "Record Date") for the
determination of shareholders of the Existing Fund entitled to notice of and to
vote at the Meeting and any adjournment or adjournments thereof.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE SPECIAL MEETING
ARE URGED TO (A) SIGN AND RETURN WITHOUT DELAY THE ENCLOSED PROXY CARD IN THE
ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES, OR
(B) FAX THE ENCLOSED
<PAGE>
PROXY CARD TO WARBURG PINCUS ASSET MANAGEMENT c/o JANNA MANES AT (212) 878-9555,
SO THAT THEIR SHARES MAY BE REPRESENTED AT THE MEETING. INSTRUCTIONS FOR THE
PROPER EXECUTION OF PROXY CARDS ARE SET FORTH ON THE FOLLOWING PAGE. PROXIES MAY
BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED BY THE SUBSEQUENT EXECUTION AND
SUBMISSION OF A REVISED PROXY, BY GIVING WRITTEN NOTICE OF REVOCATION TO THE
COMPANY AT ANY TIME BEFORE THE PROXY IS EXERCISED OR BY VOTING IN PERSON AT THE
MEETING.
By Order of the Board of Directors
EUGENE P. GRACE
Secretary
December 5, 1997
YOUR PROMPT ATTENTION TO THE ENCLOSED PROXY WILL HELP TO AVOID
THE EXPENSE OF FURTHER SOLICITATION.
<PAGE>
INSTRUCTIONS FOR SIGNING PROXY CARDS
The following general rules for signing proxy cards may be of
assistance to you and avoid the time and expense involved in validating your
vote if you fail to sign your proxy card properly.
1. Individual Accounts: Sign your name exactly as it appears
in the registration on the proxy card.
2. Joint Accounts: Either party may sign, but the name of the
party signing should conform exactly to the name shown in the
registration on the proxy card.
3. All Other Accounts: The capacity of the individual signing the
proxy card should be indicated unless it is reflected in the
form of registration. For example:
Registration Valid Signatures
- ------------ ----------------
Corporate Accounts
(1) ABC Corp....................... ABC Corp.
(2) ABC Corp....................... John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer John Doe
(4) ABC Corp. Profit Sharing Plan.. John Doe, Trustee
Trust Accounts
(1) ABC Trust...................... Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee
u/t/d 12/28/78................ Jane B. Doe
Custodial or Estate Accounts
(1) John B. Smith, Cust.
f/b/o John B. Smith, Jr. UGMA John B. Smith
(2) John B. Smith.................. John B. Smith, Jr., Executor
<PAGE>
COMBINED PROSPECTUS/PROXY STATEMENT DATED
December 5, 1997
Acquisition Of The Assets Of
THE MANAGED EAFE(R) COUNTRIES PORTFOLIO,
a separate investment portfolio of
WARBURG, PINCUS INSTITUTIONAL FUND, INC.
466 Lexington Avenue
New York, New York 10017
1-800-369-2728
By And In Exchange For Shares Of
WARBURG, PINCUS MANAGED EAFE(R) COUNTRIES FUND, INC.
466 Lexington Avenue
New York, New York 10017
1-800-WARBURG (800-927-2874)
This Combined Prospectus/Proxy Statement is being furnished to
shareholders of the Managed EAFE(R) Countries Portfolio (the "Existing Fund"), a
separate series of Warburg, Pincus Institutional Fund, Inc. (the "Company"), in
connection with the proposed plan of reorganization (the "Plan") to be submitted
to shareholders of the Existing Fund for consideration at a Special Meeting of
Shareholders to be held on December 16, 1997 at 3:00 p.m. (the "Meeting"), at
the offices of Warburg, Pincus Institutional Fund, Inc. located at 466 Lexington
Avenue, New York, New York 10017, or any adjournment or adjournments thereof.
Warburg, Pincus Managed EAFE(R) Countries Fund, Inc. (the "New
Fund")(1) is a newly organized registered investment company. The proposed
reorganization pursuant to the Plan will not result in any change in the
investment philosophy or operations of the Existing Fund. The investment
objective and policies of the New Fund are the same as those of the Existing
Fund except for minor investment policy differences described under "Comparison
of Investment Objective and Policies" in this Combined Prospectus/Proxy
Statement. The investment adviser, co- administrators, custodian, transfer agent
and accountant for the New Fund are the same as those of the Existing Fund.
- ----------------------
(1) The Morgan Stanley EAFE(R) Index is the exclusive property of Morgan
Stanley. Morgan Stanley EAFE(R) Index is a service mark of Morgan
Stanley, Dean Witter, Discover & Co. and has been licensed for use by
the Company on behalf of the Existing Fund. 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 Morgan Stanley EAFE(R)
Index. Morgan Stanley has no responsibility for, or influence over, the
decisions of inclusion or deletion within the Morgan Stanley EAFE(R)
Index. The New Fund will enter into a similar arrangement with Morgan
Stanley & Co. Incorporated with respect to use of the Service Mark by
the New Fund.
<PAGE>
The Plan provides for all or substantially all of the assets
of the Existing Fund to be acquired by the New Fund in exchange for shares of
the New Fund and the assumption by the New Fund of liabilities of the Existing
Fund (hereinafter referred to as the "Reorganization"). (The New Fund and the
Existing Fund are sometimes referred to hereinafter as the "Funds" and
individually as a "Fund.") Shares of the New Fund would be distributed to
shareholders of the Existing Fund in liquidation of the Existing Fund and
thereafter the Existing Fund would be terminated. As a result of the proposed
Reorganization, each shareholder of the Existing Fund will receive that number
of shares of the New Fund having an aggregate net asset value equal to the
aggregate value of such shareholder's shares of the Existing Fund immediately
prior to the Reorganization. All expenses of the Reorganization will be borne by
Warburg Pincus Asset Management, Inc. ("Warburg" or the "Adviser"), the
investment adviser of the Funds. No sales charge will be imposed on the shares
of the New Fund received by the shareholders of the Existing Fund. This
transaction is structured to be tax-free for federal income tax purposes to
shareholders of the Existing Fund and to both the New Fund and the Existing
Fund.
This Combined Prospectus/Proxy Statement, which should be
retained for future reference, sets forth concisely the information about the
New Fund that a prospective investor should know before voting. This Combined
Prospectus/Proxy Statement is expected to first be sent to shareholders on or
about December 5, 1997. A Statement of Additional Information dated December 5,
1997 relating to this Combined Prospectus/Proxy Statement and the
Reorganization, has been filed with the Securities and Exchange Commission (the
"SEC") and is incorporated by reference into this Combined Prospectus/Proxy
Statement. A copy of such Statement of Additional Information accompanies this
Prospectus.
The following documents, which have been filed with the SEC,
are incorporated herein in their entirety by reference.
1. The Prospectus of the Common class of shares
offered by the New Fund, dated December 3, 1997. The New Fund
Common Share Prospectus accompanies this Combined
Prospectus/Proxy Statement.
2. The current Prospectus of the Company on behalf
the Existing Fund, dated October 21, 1997. This may be
obtained without charge by writing to the address on the cover
page of this Combined Prospectus/Proxy Statement or by calling
1-800-369-2728.
3. The Semiannual Report of the Existing Fund for the
period from March 31, 1997 (commencement of operations) to
April 30, 1997 (unaudited).
Accompanying this Combined Prospectus/Proxy Statement as
Exhibit A is a copy of the Agreement and Plan of Reorganization (the "Plan") for
the proposed Reorganization.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY
2
<PAGE>
STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO
MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED
PROSPECTUS/PROXY STATEMENT AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY
REFERENCE AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS.
3
<PAGE>
SUMMARY
THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
ADDITIONAL INFORMATION CONTAINED ELSEWHERE IN THIS COMBINED PROSPECTUS/PROXY
STATEMENT, THE PLAN, A COPY OF WHICH IS ATTACHED TO THIS COMBINED
PROSPECTUS/PROXY STATEMENT AS EXHIBIT A, THE PROSPECTUS OF THE EXISTING FUND
DATED OCTOBER 21, 1997, THE STATEMENT OF ADDITIONAL INFORMATION OF THE EXISTING
FUND DATED OCTOBER 21, 1997, THE PROSPECTUS OF THE NEW FUND DATED DECEMBER 3,
1997 AND THE STATEMENT OF ADDITIONAL INFORMATION OF THE NEW FUND DATED DECEMBER
3, 1997.
PROPOSED REORGANIZATION. The Plan provides for the transfer of
all or substantially all of the assets and liabilities of the Existing Fund to
the New Fund in exchange for Common Shares of the New Fund. The Plan also calls
for the distribution of Common Shares of the New Fund to the Existing Fund's
shareholders in liquidation of the Existing Fund. (The foregoing proposed
transactions are referred to in this Combined Prospectus/Proxy Statement as the
"Reorganization"). As a result of the Reorganization, each shareholder of the
Existing Fund will become the owner of that number of full and fractional shares
of the Common Shares of the New Fund having an aggregate net asset value equal
to the aggregate value of the shareholder's shares of the Existing Fund as of
the close of business on the date that the Existing Fund's assets are exchanged
for shares of the New Fund. Holders of shares of the Existing Fund will become
holders of Common Shares of the New Fund. See "Information About the
Reorganization -- Plan of Reorganization."
For the reasons set forth below under "Reasons for the
Reorganization," the Board of Directors of the Company, including the Directors
of the Company who are not "interested persons" (the "Independent Directors"),
as that term is defined in the Investment Company Act of 1940, as amended (the
"1940 Act"), has unanimously concluded that the Reorganization would be in the
best interests of the shareholders of the Existing Fund and that the interests
of the Existing Fund's existing shareholders will not be diluted as a result of
the transactions contemplated by the Reorganization. The Board therefore has
submitted the Plan for approval by the Existing Fund's shareholders. The Board
of Directors of the New Fund has reached similar conclusions with respect to the
New Fund and has also approved the Reorganization with respect to the New Fund.
Approval of the Reorganization of the Existing Fund will
require the affirmative vote of the holders of a majority of the Existing Fund's
outstanding shares. See "Voting Information."
TAX CONSEQUENCES. Prior to completion of the Reorganization,
the Existing Fund and the New Fund will have received an opinion of counsel
that, upon the closing of the Reorganization and the transfer of the assets of
the Existing Fund, no gain or loss will be recognized by the Existing Fund or
its shareholders for federal income tax purposes. The holding period and
aggregate tax basis of the New Fund's shares received by
4
<PAGE>
the Existing Fund shareholder will be the same as the holding period and
aggregate tax basis of the shares of the Existing Fund previously held by such
shareholder. In addition, the holding period and tax basis of the assets of the
Existing Fund in the hands of the New Fund as a result of the Reorganization
will be the same as in the hands of the Existing Fund immediately prior to the
Reorganization.
INVESTMENT OBJECTIVE AND POLICIES. The New Fund was organized
for the purpose of acquiring the assets of the Existing Fund and the New Fund
will have the same investment objective, and, except as noted below under
"Comparison of Investment Objective and Policies", virtually identical
investment policies and limitations as the Existing Fund.
FEES. For the services provided by Warburg, the Existing Fund
pays Warburg a fee calculated at an annual rate equal to .80% of the Fund's
average daily net assets. Currently, the Existing Fund's total operating
expenses are capped at .95% of the Fund's average daily net assets. In addition,
no compensation is payable is payable by the Fund to the Fund's distributor,
Counsellors Securities Inc. ("CSI"), for distribution services.
By contrast, the New Fund will pay a management fee of 1.00%
of the Fund's average daily net assets to Warburg and, with respect to the New
Fund's Common Shares, an annual fee of .25% of the Fund's average daily net
assets to CSI for distribution services pursuant to a shareholder servicing and
distribution plan adopted by the Fund pursuant to Rule 12b-1 under the 1940 Act
(a "12b-1 fee"). However, Warburg and the New Fund's co-administrators have
undertaken to limit the New Fund's total operating expenses to .95% of the
Fund's average daily net assets through February 28, 1999.
PURCHASE AND REDEMPTION PROCEDURES. The Existing Fund is
designed for institutional investors although, in the discretion of the Company,
individuals, as well as institutions, who meet the Company's minimum investment
requirements may purchase shares in the Existing Fund. The minimum initial
investment in the Existing Fund is $3,000,000 and the minimum subsequent
investment is $50,000. Purchases of shares of the Existing Fund may be made
through CSI, by mail and by wire. Purchases of shares of the Existing Fund may
also be made through certain broker-dealers, financial institutions and other
industry professionals. Shares of the Existing Fund are sold at net asset value
per share and without a sales charge or any 12b-1 fee.
The New Fund is a retail investment vehicle. The New Fund's
minimum initial investment is $2,500, except that subsequent minimum investments
can be as low as $50 under the Fund's Automatic Monthly Investment Plan. For
retirement plans and Uniform Transfers to Minors Act and Uniform Gifts to Minors
Act accounts, the minimum initial investment is $500. Purchases of shares of the
New Fund may be made by mail, or with advance arrangements, by wire through CSI.
Shares of the New Fund are sold at net asset value per share and without a sales
charge. Common Shares of the New Fund are subject to a 12b-1 fee of .25% per
annum.
5
<PAGE>
EXCHANGE PRIVILEGES. With respect to both Funds, exchanges may
be effected by mail or by telephone. 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, each 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 30 days' notice to shareholders.
Shareholders of the Existing Fund may exchange at net asset
value all or a portion of their shares only for shares of any of the other eight
investment series offered by the Company. Shareholders of the New Fund may
exchange at net asset value all or a portion of their shares for shares of the
same class of certain other mutual funds advised by Warburg at their respective
net asset values. However, shareholders may not effect exchanges between Common
Shares and any other class of the New Fund's shares that may be offered in the
future.
The exchange privilege is available to shareholders residing
in any state in which the Fund's shares being acquired may legally be 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. No initial sales charge is
imposed on the shares being acquired in an exchange. See "How to Redeem and
Exchange Shares" in the accompanying Prospectus of the New Fund.
DIVIDENDS. Each of the New Fund and the Existing Fund will
distribute substantially all of the net investment income and net realized
capital gains, if any, of the Fund to the Fund's shareholders. All distributions
are reinvested in the form of additional full and fractional shares unless a
shareholder elects otherwise. Each of the Funds declares and pays dividends, if
any, from net investment income annually. Net realized capital gains (including
net short-term capital gains), if any, of the New Fund, like the Existing Fund,
will also be distributed at least annually. See "Dividends, Distributions and
Taxes" in the accompanying Prospectus of the New Fund.
SHAREHOLDER VOTING RIGHTS. The New Fund is registered with the
Securities and Exchange Commission as an open-end management investment company.
The Existing Fund is a separate series of Company, which is also registered as
an open-end management investment company. The Company and the New Fund are
Maryland corporations, each having a Board of Directors. Shareholders of both
the New Fund and the Existing Fund have similar voting rights. Neither the New
Fund nor the Company on behalf of the Existing Fund holds a meeting of
shareholders annually, except as required by the 1940 Act or other applicable
law. The New Fund's By-Laws provide that shareholders collectively owning at
least ten percent of the outstanding shares of all classes of stock of the Fund
have the right to call for a meeting of shareholders to consider the removal of
one or more directors. To the extent required by law, the New Fund will assist
in shareholder communication in such matters.
6
<PAGE>
In addition, under the laws of the State of Maryland,
shareholders of the New Fund and the Existing Fund do not have appraisal rights
in connection with a combination or acquisition of the assets of the Fund by
another entity. Shareholders of the Existing Fund may, however, redeem their
shares at net asset value prior to the date of the Reorganization. See
"Information on Shareholders' Rights -- Voting Rights."
RISK FACTORS
Due to the fact that the investment objective and policies of
the New Fund are virtually identical to those of the Existing Fund, the
investment risks are substantially similar. See the accompanying Prospectus of
the New Fund for a complete discussion of the risks of investing in that Fund.
REASONS FOR THE REORGANIZATION
The Board of Directors of the Company has determined that it
is in the best interest of the Existing Fund and its shareholders to effect the
Reorganization. In reaching this conclusion, the Board considered a number of
factors, including the following:
1. the terms and conditions of the Reorganization;
2. the identical investment objective and virtually identical
policies and restrictions of the New Fund as the Existing Fund;
3. that the investment adviser, co-administrators,
distributor, custodian, transfer agent and accountants for the New
Fund are the same as those of the Existing Fund;
4. the federal tax consequences of the Reorganization to the
Existing Fund, the New Fund and the shareholders of each, and that a
legal opinion will be rendered that no recognition of income, gain or
loss for federal income tax purposes will occur as a result of the
Reorganization to any of them;
5. that the interests of shareholders of the Existing
Fund will not be diluted as a result of the Reorganization;
6. that service providers to the New Fund have agreed to waive
fees and reimburse expenses until February 28, 1999 to the extent
necessary to maintain the net expense ratio of the New Fund at .95% of
average daily net assets, the same level as the current expense limit
for the Existing Fund;
7. that the expenses incurred in connection with the
Reorganization will be borne by Warburg;
7
<PAGE>
8. that no sales charge will be imposed in connection with the
Reorganization;
9. that the Existing Fund's current size is not economically
viable in the long term; and
10. that converting the Existing Fund to a retail-oriented
fund with lower investment minimums would enable it to be sold through
a greater number of distribution channels, which would provide greater
opportunities to increase the Fund's asset size to a level that would
be economically viable over the long term.
In light of the foregoing, the Board of Directors of the
Company, including the Independent Directors, has unanimously determined that it
is in the best interest of the Existing Fund and its shareholders to effect the
Reorganization. The Board of Directors has also determined that the
Reorganization of the Existing Fund into the New Fund would not result in a
dilution of the interests of the Existing Fund's shareholders.
The Board of Directors of the New Fund has also determined
that it is advantageous to the New Fund to effect the Reorganization. The Board
of Directors also considered the terms and conditions of the Reorganization and
representations that the Reorganization would be effected as a tax-free
reorganization. Accordingly, the Board of Directors of the New Fund, including
the Independent Directors, has unanimously determined that the Reorganization is
in the best interests of the New Fund's shareholders and that the interests of
the New Fund's shareholders would not be diluted as a result of the
Reorganization.
8
<PAGE>
FEE TABLE
The following table shows the current costs and expenses of
the Existing Fund and the costs and expenses expected to be incurred by the New
Fund after giving effect to the Reorganization. The table does not reflect
charges that institutions and financial intermediaries may impose on their
customers.
<TABLE>
<CAPTION>
Existing New
Warburg Fund Warburg Fund*
------------ -------------
<S> <C> <C>
None None
Annual Operating Expenses (after fee waivers and
expense reimbursements)
Management fees .30% .30%
12b-1 fees** 0% .25%
Other expenses .65% .40%
Total Operating Expenses (after waivers
and expense reimbursements) .95% .95%
</TABLE>
* Warburg and PFPC Inc. (or their affiliates) have agreed to waive fees and
reimburse expenses of the New Fund until February 28, 1999 so that the
expense ratio of the New Fund's Common Shares will be no higher than .95%
of net assets.
** Common Shares of the New Fund impose a 12b-1 fee of .25% per annum, which
is the economic equivalent of a sales charge. Long-term shareholders of the
Fund may pay more than the economic equivalent of the maximum front-end
sales charges permitted by the National Association of Securities Dealers,
Inc.
The expense figures for the Existing Fund are based on expenses for the
fiscal year ending October 31, 1997. In addition, the Fee Table reflects a
voluntary assumption of some of the additional expenses of the Existing Fund by
Warburg and PFPC, Inc. Absent such expense reimbursements, Management Fees for
the Existing Fund would have equaled .80%, Other Expenses would have equaled
6.15% and Total Operating Expenses would have equaled 6.95%.
The expense figures for the New Fund are based on annualized estimates
of expenses for the fiscal year ending October 31, 1998. In addition, the Fee
Table reflects a voluntary assumption of some of the additional expenses of the
New Fund by the Fund's service providers. Absent such expense reimbursements,
Management Fees for the New Fund would equal 1.00%, Other Expenses would equal
5.90% and Total Operating Expenses would equal 7.15%.
9
<PAGE>
Example
The following example is intended to assist an investor in
understanding the various costs that an investor in the New Fund will bear
directly or indirectly. The example assumes payment of operating expenses at the
levels set forth in the table above.
<TABLE>
<CAPTION>
1 Year 3 Years
<S> <C> <C>
An investor would pay the following expenses on a $1,000
investment, assuming (1) 5.00% annual return and (2) redemption
at the end of each time period:
Existing Fund...................................... $10 $30
New Fund........................................... $10 $30
</TABLE>
The example assumes that all dividends and distributions are
reinvested.
The examples provide a means for the investor to compare expense levels
of funds with different fee structures over varying investment periods. To
facilitate such comparison, all funds are required to utilize a 5.00% annual
return assumption. However, the Fund's actual return will vary and may be
greater or less than 5.00%. The example should not be considered a
representation of past or future expenses and actual expenses may be greater or
lesser than those shown.
INFORMATION ABOUT THE REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION. The following summary of
the Plan is qualified in its entirety by reference to the Plan (Exhibit A
hereto). The Plan provides that the New Fund will acquire all or substantially
all of the assets of the Existing Fund in exchange for Common Shares of the New
Fund and the assumption by the New Fund of the liabilities of the Existing Fund
on December 22, 1997, or such date as may be agreed upon by the parties to the
Reorganization (the "Closing Date").
Prior to the Closing Date, the Company on behalf of the
Existing Fund will endeavor to discharge all of its known liabilities and
obligations. The New Fund shall assume all liabilities, expenses, costs, charges
and reserves reflected on an unaudited statement of assets and liabilities of
the Existing Fund prepared by PFPC as of the close of regular trading on the New
York Stock Exchange, Inc., currently 4:00 p.m. New York City time, on the
Closing Date, in accordance with generally accepted accounting principles
consistently applied from the prior audited period. The New Fund shall also
assume any liabilities of the Existing Fund arising from the operations and/or
transactions of the Existing Fund prior to and including the Closing Date. The
net asset value per share of each Fund will be determined by adding the value of
the Fund's securities, cash and other assets, deducting the value of the actual
and accrued liabilities, and dividing the result by the total number of
outstanding shares. Each of the Existing Fund and the New Fund will utilize the
procedures set forth in its
10
<PAGE>
respective current Prospectus or Statement of Additional Information to
determine the value of its respective portfolio securities and to determine the
aggregate value of each Fund's portfolio.
At or prior to the Closing Date, the Company on behalf of the
Existing Fund will declare a dividend or dividends which, together with all
previous such dividends, will have the effect of distributing to the Existing
Fund's shareholders all of the Fund's investment company taxable income for all
taxable periods through and including the Closing Date (computed without regard
to any deduction for dividends paid). In addition, the Existing Fund's dividend
will include its net capital gains realized in all taxable periods through and
including the Closing Date (after reductions for any capital loss carryforward).
As soon after the Closing Date as conveniently practicable,
the Existing Fund will liquidate and distribute pro rata to shareholders of
record as of the close of business on the Closing Date the Common Shares of the
New Fund received by the Existing Fund. Such liquidation and distribution will
be accomplished by the establishment of accounts in the names of the Existing
Fund's shareholders on the share records of the New Fund's transfer agent. Each
account will represent the respective pro rata number of shares of the New Fund
due to each Existing Fund shareholder. After such distribution and the winding
up of its affairs, the Existing Fund will be terminated as a series of the
Company.
The consummation of the Reorganization is subject to the
conditions set forth in the Plan. Notwithstanding approval by the shareholders
of the Existing Fund, the Plan may be terminated at any time at or prior to the
Closing Date: (i) by mutual agreement of the Company, on behalf of the Existing
Fund, and the New Fund; (ii) by the Company, on behalf of the Existing Fund, in
the event the New Fund shall, or the New Fund, in the event the Company or the
Existing Fund shall, materially breach any representation, warranty or agreement
contained in the Plan to be performed at or prior to the Closing Date; or (iii)
if a condition to the Plan expressed to be precedent to the obligations of the
terminating party has not been met and it reasonably appears that it will not or
cannot be met.
Approval of the Plan with respect to the Existing Fund will
require the affirmative vote of a majority of the Existing Fund's outstanding
shares in the aggregate, in person or by proxy, if a quorum is present. The
approval of shareholders of any other series of the Company or of shareholders
of the New Fund is not required. Shareholders of the Existing Fund are entitled
to one vote for each share. If the Reorganization is not approved by
shareholders of the Existing Fund, the Board of Directors of the Company on
behalf of the Existing Fund will consider other possible courses of action
available to it, including resubmitting the Reorganization proposal to
shareholders.
DESCRIPTION OF THE NEW FUND'S SHARES. Common Shares of the New
Fund will be issued to the Existing Fund in accordance with the procedures
detailed in the Plan and as described in the New Fund's Prospectus. In the
interest of economy and convenience, physical certificates representing shares
in the New Fund will not normally be issued unless specifically requested by a
shareholder of the New Fund. See "Information on
11
<PAGE>
Shareholders' Rights" and the Prospectus of the New Fund for additional
information with respect to the shares of the New Fund.
FEDERAL INCOME TAX CONSEQUENCES. The exchange of assets of the
Existing Fund for shares of the New Fund is intended to qualify for federal
income tax purposes as a tax-free reorganization under Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"). As a condition to the
closing of the Reorganization, the New Fund and the Company on behalf of the
Existing Fund will receive an opinion from Willkie Farr & Gallagher, counsel to
the Funds, to the effect that, on the basis of the existing provisions of the
Code, U.S. Treasury regulations issued thereunder, current administrative rules,
pronouncements and court decisions, for federal income tax purposes, upon
consummation of the Reorganization:
(1) the transfer of all or substantially all of the
Existing Fund's assets in exchange for the New Fund's shares and the
assumption by the New Fund of liabilities of the Existing Fund will
constitute a "reorganization" within the meaning of Section 368(a) of
the Code, and the New Fund and the Existing Fund are each a "party to a
reorganization" within the meaning of Section 368(b) of the Code;
(2) no gain or loss will be recognized by the New
Fund upon the receipt of the assets of the Existing Fund solely in
exchange for the New Fund's shares and the assumption by the New Fund
of liabilities of the Existing Fund;
(3) no gain or loss will be recognized by the
Existing Fund upon the transfer of the Existing Fund's assets to the
New Fund in exchange for the New Fund's shares and the assumption by
the New Fund of liabilities of the Existing Fund or upon the
distribution (whether actual or constructive) of the New Fund's shares
to the Existing Fund's shareholders;
(4) no gain or loss will be recognized by
shareholders of the Existing Fund upon the exchange of their shares for
shares of the New Fund and the assumption by the New Fund of
liabilities of the Existing Fund;
(5) the aggregate tax basis of the shares of the New
Fund received by each shareholder of the Existing Fund pursuant to the
Reorganization will be the same as the aggregate tax basis of shares of
the Existing Fund held by such shareholder immediately prior to the
Reorganization, and the holding period of shares of the New Fund to be
received by each shareholder of the Existing Fund will include the
period during which shares of the Existing Fund exchanged therefor were
held by such shareholder (provided shares of the Existing Fund were
held as capital assets on the date of the Reorganization); and
(6) the tax basis of the Existing Fund's assets
acquired by the New Fund will be the same as the tax basis of such
assets to the Existing Fund immediately prior to the Reorganization,
and the holding period of the assets of the Existing Fund in the hands
of the New Fund will include the period during which those assets were
held by the Existing Fund.
12
<PAGE>
Shareholders of the Existing Fund should consult their tax
advisors regarding the effect, if any, of the proposed Reorganization in light
of their individual circumstances. Since the foregoing discussion only relates
to the federal income tax consequences of the Reorganization, shareholders of
the Existing Fund should also consult their tax advisors as to state and local
tax consequences, if any, of the Reorganization.
CAPITALIZATION. The following table shows the capitalization
of each Fund as of the close of business on December 1, 1997 and the combined
pro forma capitalization as if the Reorganization had occurred as of the close
of business on that date.
<TABLE>
<CAPTION>
Existing Fund New Fund Pro Forma
(Unaudited) (Unaudited) Combined
------------- ----------- ---------
<S> <C> <C> <C>
Net assets................................... $4,638,259 0 $4,638,259
Net asset value per share.................... $10.70 0 $10.70
Shares outstanding........................... 433,621 0 433,621
</TABLE>
The New Fund will not commence operations until consummation
of the Reorganization and, accordingly, as of December 1, 1997 there were no
outstanding shares of the New Fund.
As of December 1, 1997, the officers and Directors of the
Company beneficially owned as a group less than 1% of the outstanding shares of
the Existing Fund. To the best knowledge of the Company, as of December 1, 1997,
no shareholder or "group" (as that term is used in Section 13(d) of the
Securities Exchange Act of 1934 (the "Exchange Act")), except as set forth in
the table below, owned beneficially or of record more than 5% of the outstanding
shares of a class of the Existing Fund.
<TABLE>
<CAPTION>
PERCENT OWNED AS
NAME AND ADDRESS OF DECEMBER 1, 1997
<S> <C> <C>
Warburg Pincus Asset Management, Inc. 466 Lexington Avenue 46.1%
New York, New York 10017-3147
Christian Children's Fund, Inc. C/O Wayne Ball 53.9%
PO Box 26484
2400 Emerywood Parkway
Richmond, Virginia 23261-6484
</TABLE>
13
<PAGE>
Warburg intends to vote its shares of the Existing Fund in proportion to the
votes actually received from the other shareholders of the Existing Fund.
COMPARISON OF INVESTMENT OBJECTIVE AND POLICIES
The following discussion is based upon and qualified in its
entirety by the disclosures in the Prospectus and Statements of Additional
Information of the New Fund and the Existing Fund.
INVESTMENT OBJECTIVE. As stated above the Existing Fund and
the New Fund have the same investment objective. There can be no assurance that
any Fund will achieve its investment objective. The investment objective of the
New Fund, like that of the Existing Fund, may not be amended without first
obtaining the approval of a majority of the outstanding shares of the Fund (as
defined in the 1940 Act).
PRIMARY INVESTMENTS. The New Fund was organized for the
purpose of acquiring the assets of the Existing Fund. The New Fund will be
managed by the four individuals currently responsible for managing the Existing
Fund, with the addition of two more associate portfolio managers. See
"Management of the Fund" below. In addition, the investment policies and
investment restrictions of the New Fund were developed so that they would be
identical to those of the Existing Fund, except that (i) the New Fund may invest
up to 15% of its 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 prices or quotations, while the Existing Fund may only invest
up to 10% of its net assets in such securities; (ii) the New Fund may invest
without limit in the securities of companies (including predecessors) that have
been in continuous operation for fewer than three years whereas the Existing
Fund can only invest up to 5% of its total assets in such companies; and (iii)
the limitation on the New Fund's investment in other investment companies is
classified as nonfundamental whereas the corresponding restriction for the
Existing Fund is fundamental. Warburg has no current intention of recommending
any change to any non-fundamental investment policy of the New Fund.
While the New Fund has the same investment restrictions as the
Existing Fund (except as previously stated), the New Fund's restrictions have
been modified to conform to policies currently employed by more recently
established Warburg Pincus Funds as follows:
(a) Borrowing. The New Fund may enter into reverse repurchase
agreements; provided that reverse repurchase agreements and
dollar rolls that are accounted for as financings and any
other transactions constituting borrowing may not exceed 30%
of the Fund's assets. In addition, short sales, currency
transactions, options, futures, options on futures, forward
commitments and dollar rolls that are not accounted for as
financings (and the segregation of assets related to the
foregoing) will not constitute borrowing.
(b) Lending. The New Fund's investment in loan participations,
assignments and structured securities will not constitute
lending.
14
<PAGE>
(c) Underwriting. The New Fund's sale of securities in accordance
with its investment objective, policies and limitations will
not be deemed to be underwriting.
(d) Commodities. The New Fund may invest in futures, including
those relating to securities, currencies and indexes; options
on futures, securities, currencies or indexes; forward or
delayed delivery currency transactions; and stand-by
commitments.
(e) Margin. The New Fund's deposit or payment of initial or
variation margin in connection with currency and options
transactions will not be deemed to be purchases of securities
on margin.
MANAGEMENT OF THE FUND
Warburg will provide investment advisory services to the New
Fund under an advisory agreement substantially identical to the advisory
agreement currently in effect between Warburg and the Company relating to the
Existing Fund, except that the advisory fee payable to Warburg would increase
from .80% to 1.00% of average daily net assets. In addition to Richard H. King,
P. Nicholas Edwards, Harold W. Ehrlich and Vincent J. McBride, who are currently
responsible for the day-to-day management of the Existing Fund and will continue
in that role after the Reorganization, Nancy Nierman and J.H. Cullum Clark, CFA
have been named Associate Portfolio Managers of the New Fund. Messrs. King,
Nicholas and Edwards will act as Co-Portfolio Managers of the New Fund and Mr.
McBride will act as Associate Portfolio Manager of the New Fund. In addition,
PFPC Inc. and Counsellors Funds Services Inc. would continue to provide
accounting and co-administrative services, as applicable, and CSI would continue
to provide distribution services, each under new agreements substantially
identical to those now in effect for the Existing Fund, except that CSI will be
paid an annual distribution fee equal to .25% of the average net assets of the
New Fund's Common Shares. The co-administration fees payable under the related
agreements would not be changed as a result of the Reorganization.
State Street Bank and Trust Company will continue its role as
shareholder servicing agent, transfer agent and dividend disbursing agent after
the Reorganization. PNC Bank will continue to serve as custodian for U.S. assets
and State Street Bank as custodian for foreign securities. The fees payable for
transfer agency and custodial services will be no higher after the
Reorganization than before. Coopers & Lybrand L.L.P., the independent
accountants for the Existing Fund, will also serve in that capacity for the New
Fund.
INTEREST OF WARBURG IN THE REORGANIZATION
Warburg may be deemed to have an interest in the Plan and the
Reorganization because it provides investment advisory services to the Existing
Fund. Warburg receives compensation from the Existing Fund for services it
provides pursuant to an advisory agreement. The terms and provisions of this
arrangement are described in the New Fund Prospectus under "Management of the
Fund -- Investment Adviser." Future growth of assets of the New Fund, if any,
15
<PAGE>
can be expected to increase the total amount of fees payable to Warburg and its
affiliates and to reduce the amount of fees and expenses required to be waived
to maintain total fees and expenses of the New Fund at agreed upon levels.
Warburg may also be deemed to have an interest in the Plan and the
Reorganization because, as of December 1, 1997, it owned 46.1% of the
outstanding shares of the Existing Fund. See "Voting Information."
INFORMATION ON SHAREHOLDERS' RIGHTS
GENERAL. The Company and the New Fund are open-end diversified
management investment companies registered under the 1940 Act, which
continuously offer to sell shares at their current net asset values. The
Existing Fund is a series of the Company, which is a Maryland corporation that
was incorporated on May 13, 1992 and is governed by its Charter, By-Laws and
Board of Directors. The New Fund is a Maryland corporation organized on October
24, 1997 which was incorporated under the name "Warburg, Pincus Managed EAFE
Countries Fund, Inc." and is governed by its Charter, By-Laws and Board of
Directors. Each Fund is also governed by applicable state and federal law. The
Company has an authorized capital of thirty billion shares of common stock with
a par value of $.001 per share. The New Fund has an authorized capital of three
billion shares of common stock with a par value of $.001 per share. The Board of
Directors of the Company has authorized the issuance of nine series of shares,
each representing shares in one of nine separate portfolios, and may authorize
the issuance of additional series of shares in the future. The assets of each
portfolio are segregated and separately managed and a shareholder's interest is
in the assets of the portfolio in which he or she holds shares. In the New Fund
and the Existing Fund, shares represent interests in the assets of the relevant
Fund and have identical voting, dividend, liquidation and other rights on the
same terms and conditions, except that expenses related to the distribution of
each class of shares of the New Fund are borne solely by such class and each
class of shares has exclusive voting rights with respect to provisions of such
Fund's Rule 12b-1 distribution plan pertaining to a particular class.
MULTI-CLASS STRUCTURE. The Existing Fund has issued only one
class of shares. The New Fund has authorized two classes of shares: Common
Shares and Advisor Shares. The New Fund currently intends to offer only Common
Shares. Advisor Shares would be available to individual investors only through
institutional shareholders of record, broker-dealers, financial institutions,
depository institutions and other financial intermediaries ("Institutions").
The New Fund is authorized to offer Advisor Shares exclusively
to Institutions whose clients or customers (or participants in the case of
retirement plans) ("Customers") are beneficial owners of Advisor Shares. Either
those Institutions or companies providing certain services to them (together,
"Service Organizations") will enter into service agreements ("Agreements")
related to the sale of the Advisor Shares with CSI pursuant to a Distribution
Plan. Pursuant to the terms of an Agreement, the Service Organization agrees to
perform certain distribution, shareholder servicing, administrative and/or
accounting services for its Customers. Distribution services would be marketing
or other services in connection with the promotion and sale of Advisor Shares.
16
<PAGE>
Shareholder services that may be provided include responding to Customer
inquiries, providing information on Customer investments and providing other
shareholder liaison services.
DIRECTORS. The By-Laws of the Company and of the New Fund
provide that the term of office of each Director shall be from the time of his
or her election and qualification until his or her successor shall have been
elected and shall have qualified. Any Director of the Company or the New Fund
may be removed by the vote of at least a majority of the shares of capital stock
then entitled to be cast for the election of Directors. Vacancies on the Boards
of the Company or the New Fund may be filled by the Directors remaining in
office. A meeting of shareholders will be required for the purpose of electing
additional Directors whenever fewer than a majority of the Directors then in
office were elected by shareholders.
VOTING RIGHTS. Neither the Company nor the New Fund holds a
meeting of shareholders annually, and there normally is no meeting of
shareholders for the purpose of electing Directors unless and until such time as
less than a majority of the Directors holding office have been elected by
shareholders.
LIQUIDATION OR TERMINATION. In the event of the liquidation or
termination of any of the investment funds of the Company or of the New Fund,
the shareholders of the Fund are entitled to receive, when and as declared by
the Directors, the excess of the assets over the liabilities belonging to the
Fund. In either case, the assets so distributed to shareholders will be
distributed among the shareholders in proportion to the number of shares of each
class held by them and recorded on the books of the fund.
LIABILITY OF DIRECTORS. The Articles of Incorporation of the
Company and of the New Fund provide that the Directors and officers shall not be
liable for monetary damages for breach of fiduciary duty as a Director or
officer, except to the extent such exemption is not permitted by law. The
Articles of Incorporation further provide that the Company and the New Fund
shall indemnify each Director and officer and provide advances for the payment
of expenses relating to the matter for which indemnification is sought, each to
the fullest extent permitted by Maryland General Corporation Law and other
applicable law.
RIGHTS OF INSPECTION. Maryland law permits any shareholder of
the Company and of the New Fund or any agent of such shareholder to inspect and
copy, during usual business hours, the By-Laws, minutes of shareholder
proceedings, annual statements of the affairs and voting trust agreements of the
Company and the New Fund on file at its principal offices.
SHAREHOLDER LIABILITY. Under Maryland law, shareholders of the
Company and of the New Fund do not have personal liability for corporate acts
and obligations. Shares of the New Fund issued to the shareholders of the
Existing Fund in the Reorganization will be fully paid and nonassessable when
issued, transferable without restrictions and will have no preemptive rights.
17
<PAGE>
The foregoing is only a summary of certain characteristics of
the operations of the New Fund and the Company on behalf of the Existing Fund.
The foregoing is not a complete description of the documents cited. Shareholders
should refer to the provisions of the corporate documents and state laws
governing each Fund for a more thorough description.
ADDITIONAL INFORMATION
Both the Company and the New Fund are subject to the
informational requirements of the Exchange Act and the 1940 Act and in
accordance therewith file reports and other information including proxy
material, reports and charter documents, with the SEC. These materials can be
inspected and copies obtained at the Public Reference Facilities maintained by
the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the New York
Regional Office of the SEC at 7 World Trade Center, Suite 1300, New York, New
York 10048. Copies of such material can also be obtained from the Public
Reference Branch, Office of Consumer Affairs and Information Services, SEC,
Washington, D.C. 20549 at prescribed rates. In addition, the SEC maintains a Web
site (http://www.sec.gov) that contains each Fund's Statement of Additional
Information, material incorporated by reference and other information regarding
the Funds.
VOTING INFORMATION
This Combined Prospectus/Proxy Statement is furnished in
connection with a solicitation of proxies by the Board of Directors of the
Company to be used at the Special Meeting of Shareholders of the Existing Fund
to be held at 3:00 p.m. on December 16, 1997, at the offices of the Fund, 466
Lexington Avenue, New York, New York 10017-3147 and at any adjournment or
adjournments thereof. This Combined Prospectus/Proxy Statement, along with a
Notice of the Meeting and proxy card(s), is first being mailed to shareholders
of the Existing Fund on or about December 5, 1997. Only shareholders of record
as of the close of business on the Record Date will be entitled to notice of,
and to vote at, the Meeting or any adjournment thereof. As of the Record Date,
the Existing Fund had the following shares outstanding and entitled to vote:
433,621. The holders of a majority of the shares of the Existing Fund
outstanding at the close of business on the Record Date present in person or
represented by proxy will constitute a quorum for the Meeting of that Fund. For
purposes of determining a quorum for transacting business at the Meeting,
abstentions and broker "non-votes" (that is, proxies from brokers or nominees
indicating that such persons have not received instructions from the beneficial
owner or other persons entitled to vote shares on a particular matter with
respect to which the brokers or nominees do not have discretionary power) will
be treated as shares that are present but which have not been voted. For this
reason, abstentions and broker non-votes will have the effect of a "no" vote for
purposes of obtaining the requisite approval of the Plan. If the enclosed proxy
is properly executed and returned in time to be voted at the Meeting, the
proxies named therein will vote the shares represented by the proxy in
accordance with the instructions marked thereon. Unmarked proxies will be voted
FOR approval of the Plan and FOR approval of any other matters deemed
appropriate. A proxy may be revoked at any time on or before the Meeting by
written notice to the Secretary of Warburg Pincus Institutional Fund, Inc., 466
Lexington Avenue, New York, New York, 10017-3147.
18
<PAGE>
Approval of the Plan with respect to the Existing Fund will
require the affirmative vote of a majority of the Existing Fund's outstanding
shares, in person or by proxy, if a quorum is present. The approval of
shareholders of any other investment series of the Company is not required.
Shareholders of the Existing Fund are entitled to one vote for each share.
Proxy solicitations will be made primarily by mail, but proxy
solicitations also may be made by telephone, telegraph or personal interviews
conducted by officers and employees of Warburg and/or by PFPC or their
respective affiliates. All expenses of the Reorganization, including the costs
of the proxy solicitation and the preparation of enclosures to the Combined
Prospectus/Proxy Statement, reimbursement of expenses of forwarding solicitation
material to beneficial owners of shares of the Existing Fund and expenses
incurred in connection with the preparation of this Combined Prospectus/Proxy
Statement will be borne by Warburg or its affiliates (excluding extraordinary
expenses not normally associated with transactions of this type).
In the event that a quorum necessary for a shareholders'
meeting is not present or sufficient votes to approve the Reorganization of the
Existing Fund are not received by December 16, 1997, the persons named as
proxies may propose one or more adjournments of the Meeting to permit further
solicitation of proxies. In determining whether to adjourn the Meeting, the
following factors may be considered: the percentage of votes actually cast, the
percentage of negative votes actually cast, the nature of any further
solicitation and the information to be provided to shareholders with respect to
the reasons for the solicitation. Any such adjournment will require an
affirmative vote by the holders of a majority of the shares of the Existing Fund
present in person or by proxy and entitled to vote at the Meeting. The persons
named as proxies will vote upon a decision to adjourn the Meeting with respect
to the Existing Fund after consideration of the best interests of all
shareholders of that Fund.
OTHER BUSINESS
The Company's Board of Directors knows of no other business to
be brought before the Meeting. However, if any other matters come before the
Meeting, proxies that do not contain specific restrictions to the contrary will
be voted on such matters in accordance with the judgment of the persons named in
the enclosed Proxy Card.
The approval of shareholders of the New Fund is not required
in order to affect the Reorganization and, accordingly, the votes of the
shareholders of the New Fund are not being solicited by this Combined
Prospectus/Proxy Statement.
FINANCIAL STATEMENTS
The unaudited statement of assets and liabilities of the
Existing Fund, including the schedule of portfolio investments, as of April 30,
1997, the related statements of operations for the period from March 31, 1997
(commencement of operations) to April 30, 1997, the statement of changes in net
assets for the same period and the financial highlights for the same period,
19
<PAGE>
have been incorporated by reference into this Combined Prospectus/Proxy
Statement. There is no financial information available at this time for the New
Fund, which has not yet commenced operations.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of the
New Fund will be passed upon by Willkie Farr & Gallagher, One Citicorp Center,
153 East 53rd Street, New York, New York 10022-4677, counsel to the Fund. In
rendering such opinion, Willkie Farr & Gallagher may rely on an opinion of
Venable, Baetjer and Howard, LLP as to certain matters under Maryland law.
20
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this 3rd day of December, 1997, between and among Warburg, Pincus Managed
EAFE(R) Countries Fund, Inc., a Maryland corporation (the "New Fund"), and
Warburg, Pincus Institutional Fund, Inc., a Maryland corporation (the
"Institutional Fund"), on behalf of the Managed EAFE(R) Countries Portfolio, a
series of shares of the Institutional Fund (the "Existing Fund").
This Agreement is intended to be and is adopted as a plan of
reorganization and liquidation within the meaning of Section 368 (a) of the
United States Internal Revenue Code of 1986, as amended (the "Code"). The
reorganization of the Existing Fund (collectively, the "Reorganization") will
consist of the transfer of substantially all of the assets of the Existing Fund
in exchange solely for Common Shares (collectively, the "Shares") of the New
Fund and the assumption by the New Fund of liabilities of the Existing Fund and
the distribution, after the Closing Date hereinafter referred to, of New Fund
Shares to the shareholders of the Existing Fund in liquidation of the Existing
Fund as provided herein, all upon the terms and conditions hereinafter set forth
in this Agreement.
WHEREAS, the Board of Directors of the Institutional Fund on behalf of
the Existing Fund, has determined that the exchange of all of the assets and the
liabilities of the Existing Fund for New Fund Shares and the assumption of such
liabilities by the New Fund is in the best interests of the Institutional Fund
and the Existing Fund and that the interests of the existing shareholders of the
Institutional Fund and the Existing Fund would not be diluted as a result of
this transaction; and
WHEREAS, the Board of Directors of the New Fund has determined that the
exchange of all of the assets of the Existing Fund for New Fund Shares is in the
best interests of the New Fund's shareholders and that the interests of the
existing shareholders of the New Fund would not be diluted as a result of this
transaction.
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree as
follows:
<PAGE>
1. TRANSFER OF ASSETS OF THE EXISTING FUND IN EXCHANGE FOR NEW FUND
SHARES AND ASSUMPTION OF THE EXISTING FUND'S LIABILITIES AND
LIQUIDATION OF THE EXISTING FUND
1.1. Subject to the terms and conditions herein set forth and on the
basis of the representations and warranties contained herein, the Institutional
Fund agrees to transfer the Existing Fund's assets as set forth in paragraph 1.2
to the New Fund, and the New Fund agrees in exchange therefor: (i) to deliver to
the Institutional Fund the number of New Fund Shares, including fractional New
Fund Shares, determined by dividing the value of the Existing Fund's net assets,
computed in the manner and as of the time and date set forth in paragraph 2.1,
by the net asset value of one New Fund Share of the same class, computed in the
manner and as of the time and date set forth in paragraph 2.2; and (ii) to
assume the liabilities of the Existing Fund, as set forth in paragraph 1.3. Such
transactions shall take place at the closing provided for in paragraph 3.1 (the
"Closing").
1.2. (a) The assets of the Existing Fund to be acquired by the New Fund
shall consist of all property including, without limitation, all cash,
securities and dividend or interest receivables which are owned by the Existing
Fund and any deferred or prepaid expenses shown as an asset on the books of the
Existing Fund on the closing date provided in paragraph 3.1 (the "Closing
Date").
(b) In the event that the Existing Fund holds any investments
which do not conform to the New Fund's investment objectives, policies and
restrictions, the Existing Fund will dispose of such securities prior to the
Closing Date. In addition, if it is determined that the portfolios of the
Existing Fund and the New Fund, when aggregated, would contain investments
exceeding certain percentage limitations imposed upon the New Fund with respect
to such investments, the Existing Fund, if requested by the New Fund, will
dispose of and/or reinvest a sufficient amount of such investments as may be
necessary to avoid violating such limitations as of the Closing Date.
1.3. The Institutional Fund, on behalf of the Existing Fund, will
endeavor to discharge all the Existing Funds' known liabilities and obligations
prior to the Closing Date, other than those liabilities and obligations which
would otherwise be discharged at a later date in the ordinary course of
business. The New Fund shall assume all liabilities, expenses, costs, charges
and reserves, including those liabilities reflected on an unaudited statement of
assets and liabilities of the Existing Fund prepared by PFPC Inc., as of the
Valuation Date (as defined in paragraph 2.1), in accordance with generally
accepted accounting principles. The New Fund shall also assume any liabilities,
expenses, costs or charges incurred by or on behalf of the Existing Fund
specifically arising from or relating to the operations and/or transactions of
the Existing Fund prior to and including the Closing Date but which are not
reflected on the above-mentioned statement of assets and liabilities, including
any liabilities, expenses, costs or charges arising under paragraph 5.10 hereof.
1.4. As provided in paragraph 3.4, as soon after the Closing Date as is
conveniently practicable (the "Liquidation Date"), the Existing Fund will
liquidate and distribute pro rata to the Existing Fund's shareholders of record
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determined as of the close of business on the Closing Date (the "Existing Fund
Shareholders") the New Fund Shares it receives pursuant to paragraph 1.1. Such
liquidation and distribution will be accomplished by the transfer of the New
Fund Shares then credited to the account of the Existing Fund on the books of
the New Fund to open accounts on the share records of the New Fund in the name
of the Existing Fund's shareholders representing the respective pro rata number
of the New Fund Shares of the particular class due such shareholders. All issued
and outstanding shares of the Existing Fund will simultaneously be canceled on
the books of the Institutional Fund, although share certificates representing
interests in the Existing Fund will represent a number of New Fund Shares after
the Closing Date as determined in accordance with Section 2.3. The New Fund
shall not issue certificates representing the New Fund Shares in connection with
such exchange.
1.5. Ownership of New Fund Shares will be shown on the books of the New
Fund's transfer agent. Shares of the New Fund will be issued in the manner
described in the New Fund's current prospectus and statement of additional
information.
1.6. Any transfer taxes payable upon issuance of the New Fund Shares in
a name other than the registered holder of the Existing Fund Shares on the books
of the Existing Fund as of that time shall, as a condition of such issuance and
transfer, be paid by the person to whom such New Fund shares are to be issued
and transferred.
1.7. Any reporting responsibility of the Existing Fund is and shall
remain the responsibility of the Institutional Fund up to and including the
Closing Date and such later dates on which the Existing Fund is terminated.
2. VALUATION
2.1. The value of the Existing Fund's assets to be acquired hereunder
shall be the value of such assets computed as of the close of regular trading on
the New York Stock Exchange, Inc. (the "NYSE") on the Closing Date (such time
and date being hereinafter called the "Valuation Date"), using the valuation
procedures set forth in the Existing Fund's then current prospectus or statement
of additional information.
2.2. The net asset value of New Fund Shares shall be the net asset
value per share computed as of the Valuation Date, using the valuation
procedures set forth in the New Fund's then current prospectus or statement of
additional information.
2.3. The number of Shares of the New Fund to be issued (including
fractional shares, if any) in exchange for the Existing Fund's net assets shall
be determined by dividing the value of the net assets of the Existing Fund
Shares determined using the same valuation procedures referred to in paragraph
2.1 by the net asset value per Share of the New Fund determined in accordance
with paragraph 2.2.
2.4. All computations of value shall be made by PFPC Inc. in accordance
with its regular practice as pricing agent for the Existing Fund and New Fund,
respectively.
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3. CLOSING AND CLOSING DATE
3.1. The Closing Date for the Reorganization shall be December 22,
1997, or such other date as the parties to such Reorganization may agree to in
writing. All acts taking place at the Closing shall be deemed to take place
simultaneously as of the close of business on the Closing Date unless otherwise
provided. The Closing shall be held as of 5:00 p.m., at the offices of Willkie
Farr & Gallagher, 153 East 53rd Street, New York, New York, 10022-4677, or at
such other time and/or place as the parties may agree.
3.2. At the Closing, a certificate of an authorized officer of the New
Fund shall be delivered stating that: (a) the Existing Fund's portfolio
securities, cash and any other assets shall have been delivered in proper form
to the New Fund prior to or on the Closing Date and (b) all necessary taxes,
including all applicable federal and state stock transfer stamps, if any, shall
have been paid, or provision for payment shall have been made, in conjunction
with the delivery of portfolio securities.
3.3. In the event that on the Valuation Date (a) the NYSE or another
primary trading market for portfolio securities of the New Fund or the Existing
Fund shall be closed to trading or trading thereon shall be restricted or (b)
trading or the reporting of trading on the NYSE or elsewhere shall be disrupted
so that accurate appraisal of the value of the net assets of the New Fund or the
Existing Fund is impracticable, the Closing Date shall be postponed until the
first business day after the day when trading shall have been fully resumed and
reporting shall have been restored.
3.4. The Institutional Fund, on behalf of the Existing Fund, shall
provide to the New Fund's transfer agent a list of the names and addresses of
the Existing Fund's shareholders and the number and class of outstanding Shares
owned by each such shareholder immediately prior to the Closing. The New Fund
shall issue and deliver a confirmation evidencing the New Fund Shares to be
credited to the Existing Fund's account on the Closing Date to the Secretary of
the Institutional Fund or provide evidence satisfactory to the Institutional
Fund that such New Fund Shares have been credited to the Existing Fund's account
on the books of the New Fund. At the Closing, each party shall deliver to the
relevant other parties such bills of sale, checks, assignments, share
certificates, if any, receipts or other documents as such other party or its
counsel may reasonably request.
4. REPRESENTATIONS AND WARRANTIES
4.1. The Institutional Fund, on behalf of the Existing Fund, represents
and warrants to the New Fund as follows:
(a) The Institutional Fund is a Maryland corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland and the Existing Fund is a validly existing series of shares of the
Institutional Fund representing interests in the Existing Fund under the laws of
the State of Maryland;
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(b) The Institutional Fund is a registered investment company
classified as a management company of the open-end type and its registration
with the Securities and Exchange Commission (the "Commission") as an investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
is in full force and effect;
(c) The Institutional Fund is not, and the execution, delivery
and performance of this Agreement will not result, in a violation of its Charter
or By-Laws or any material agreement, indenture, instrument, contract, lease or
other undertaking to which the Institutional Fund or any Existing Fund is a
party or by which either of them or their property is bound;
(d) The Existing Fund has no contracts or other commitments
(other than this Agreement) which will be terminated with liability to the
Existing Fund prior to the Closing Date;
(e) Except as previously disclosed in writing to and accepted
by the New Fund, no litigation or administrative proceeding or investigation of
or before any court or governmental body is presently pending or to its
knowledge threatened against the Existing Fund or any of its properties or
assets which, if adversely determined, would materially and adversely affect its
financial condition or the conduct of its business. The Institutional Fund knows
of no facts which might form the basis for the institution of such proceedings
and is not party to or subject to the provisions of any order, decree or
judgment of any court or governmental body which materially and adversely
affects its business or the business of the Existing Fund or its ability to
consummate the transactions herein contemplated;
(f) The financial statements of the Existing Fund for the
period from March 31, 1997 (commencement of the Existing Fund's operations) and
ending October 31, 1997 have been audited by Coopers & Lybrand L.L.P., certified
public accountants, and are in accordance with generally accepted accounting
principles consistently applied, and such statements (copies of which have been
furnished to the New Fund) fairly reflect the financial condition of the
Existing Fund as of such dates, and there are no known contingent liabilities of
the Existing Fund as of such dates not disclosed therein;
(g) Since October 31, 1997, there has not been any material
adverse change in the Existing Fund's financial condition, assets, liabilities
or business other than changes occurring in the ordinary course of business, or
any incurrence by the Existing Fund of indebtedness maturing more than one year
from the date that such indebtedness was incurred, except as otherwise disclosed
to and accepted by the New Fund. For the purposes of this subparagraph (g), a
decline in net asset value per share or the total assets of the Existing Fund in
the ordinary course of business shall not constitute a material adverse change;
(h) At the Closing Date, all federal and other tax returns and
reports of the Existing Fund required by law to have been filed by such dates
shall have been filed, and all federal and other taxes shall have been paid so
far as due, or provision shall have been made for the payment thereof and, to
the best of the Institutional Fund's knowledge, no such return is currently
under audit and no assessment has been asserted with respect to such returns;
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(i) For the most recent fiscal year of its operation, the
Existing Fund has met the requirements of Subchapter M of the Code for
qualification and treatment as a regulated investment company; all of the
Existing Fund's issued and outstanding shares have been offered and sold in
compliance in all material respects with applicable federal and state securities
laws;
(j) All issued and outstanding shares of the Existing Fund
are, and at the Closing Date will be, duly and validly issued and outstanding,
fully paid and non-assessable. All of the issued and outstanding shares of the
Existing Fund will, at the time of Closing, be held by the persons and the
amounts set forth in the records of the transfer agent as provided in paragraph
3.4. The Existing Fund does not have outstanding any options, warrants or other
rights to subscribe for or purchase any of the Existing Fund's shares, nor is
there outstanding any security convertible into any of the Existing Fund's
shares;
(k) At the Closing Date, the Institutional Fund will have good
and marketable title to the Existing Fund's assets to be transferred to the New
Fund pursuant to paragraph 1.2 and full right, power and authority to sell,
assign, transfer and deliver such assets hereunder and, upon delivery and
payment for such assets, the New Fund will acquire good and marketable title
thereto, subject to no restrictions on the full transfer thereof, including such
restrictions as might arise under the Securities Act of 1933, as amended (the
"Securities Act"), other than as disclosed to the New Fund.
(l) The execution, delivery and performance of this Agreement
has been duly authorized by all necessary actions on the part of the
Institutional Fund's Board of Directors, and, subject to the approval of the
Existing Fund's shareholders, this Agreement will constitute a valid and binding
obligation of the Institutional Fund, enforceable in accordance with its terms,
subject to the effect of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other laws relating to or affecting creditors'
rights and to general equity principles;
(m) The information to be furnished by the Institutional Fund
for use in no-action letters, applications for exemptive orders, registration
statements, proxy materials and other documents which may be necessary in
connection with the transactions contemplated hereby shall be accurate and
complete in all material respects and shall comply in all material respects with
federal securities and other laws and regulations thereunder applicable thereto;
and
(n) The proxy statement of the Existing Fund (the "Proxy
Statement") to be included in the Registration Statement referred to in
paragraph 5.7 (other than information therein that relates to the New Fund)
will, on the effective date of the Registration Statement and on the Closing
Date, not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which such statements were made,
not materially misleading.
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4.2. The New Fund represents and warrants to the Existing Fund as
follows:
(a) The New Fund is a Maryland corporation, duly organized,
validly existing and in good standing under the laws of the State of Maryland;
(b) The New Fund is a registered investment company classified
as a management company of the open-end type and its registration with the
Commission as an investment company under the 1940 Act is in full force and
effect;
(c) The current prospectus and statement of additional
information filed as part of the New Fund registration statement on Form N-1A
(the "New Fund Registration Statement") conform in all material respects to the
applicable requirements of the Securities Act and the 1940 Act and the rules and
regulations of the Commission thereunder and do not include any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not materially misleading;
(d) At the Closing Date, the New Fund will have good and
marketable title to its assets;
(e) The New Fund is not, and the execution, delivery and
performance of this Agreement will not result, in a violation of its Charter or
By-Laws or any material agreement, indenture, instrument, contract, lease or
other undertaking to which the New Fund is a party or by which it is bound;
(f) Except as previously disclosed in writing to and accepted
by the Institutional Fund, no litigation or administrative proceeding or
investigation of or before any court or governmental body is presently pending
or to its knowledge threatened against the New Fund or any of its properties or
assets which, if adversely determined, would materially and adversely affect its
financial condition or the conduct of its business. The New Fund knows of no
facts which might form the basis for the institution of such proceedings and is
not a party to or subject to the provisions of any order, decree or judgment of
any court or governmental body which materially and adversely affects its
business or its ability to consummate the transactions contemplated herein;
(g) Since the inception of the New Fund there has not been any
material adverse change with respect to the New Fund's financial condition,
assets, liabilities or business other than changes occurring in the ordinary
course of business, or any incurrence by the New Fund of indebtedness maturing
more than one year from the date that such indebtedness was incurred. For the
purposes of this subparagraph (g), a decline in net asset value per share or the
total assets of the New Fund in the ordinary course of business shall not
constitute a material adverse change;
(h) At the Closing Date, all federal and other tax returns and
reports of the New Fund required by law then to be filed shall have been filed,
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and all federal and other taxes shown as due on said returns and reports shall
have been paid or provision shall have been made for the payment thereof;
(i) The New Fund intends to meet the requirements of
Subchapter M of the Code for qualification and treatment as a regulated
investment company in the future;
(j) At the date hereof, all issued and outstanding New Fund
Shares are, and at the Closing Date will be, duly and validly issued and
outstanding, fully paid and non-assessable, with no personal liability attaching
to the ownership thereof. The New Fund does not have outstanding any options,
warrants or other rights to subscribe for or purchase any New Fund Shares, nor
is there outstanding any security convertible into any New Fund Shares;
(k) The execution, delivery and performance of this Agreement
shall have been duly authorized prior to the Closing Date by all necessary
actions, if any, on the part of the New Fund's Board of Directors and the New
Fund's shareholders, and this Agreement will constitute a valid and binding
obligation of the New Fund enforceable in accordance with its terms, subject to
the effect of bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other laws relating to or affecting creditors' rights and to
general equity principles;
(l) The New Fund Shares to be issued and delivered to the
Existing Fund, for the account of the Existing Fund's shareholders, pursuant to
the terms of this Agreement, will at the Closing Date have been duly authorized
and, when so issued and delivered, will be duly and validly issued New Fund
Shares, and will be fully paid and non-assessable with no personal liability
attaching to the ownership thereof;
(m) The information to be furnished by the New Fund for use in
no-action letters, applications for exemptive orders, registration statements,
proxy materials and other documents which may be necessary in connection with
the transactions contemplated hereby shall be accurate and complete in all
material respects and shall comply in all material respects with federal
securities and other laws and regulations applicable thereto;
(n) The Proxy Statement to be included in the Registration
Statement referred to in paragraph 5.7 (only insofar as it relates to the New
Fund) will, on the effective date of the Registration Statement and on the
Closing Date, not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which such statements
were made, not materially misleading; and
(o) The New Fund agrees to use all reasonable efforts to
obtain the approvals and authorizations required by the Securities Act, the 1940
Act and such of the state Blue Sky or securities laws as it may deem appropriate
in order to continue its operations after the Closing Date.
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5. COVENANTS OF THE INSTITUTIONAL FUND, THE NEW FUND AND THE EXISTING FUND
5.1. The New Fund and the Existing Fund each will operate its business
in the ordinary course between the date hereof and the Closing Date. It is
understood that such ordinary course of business will include the declaration
and payment of customary dividends and distributions.
5.2. The Institutional Fund, on behalf of the Existing Fund, will call
a meeting of its shareholders to consider and act upon this Agreement and to
take all other actions in co-ordination with the Existing Fund necessary to
obtain approval of the transactions
contemplated herein.
5.3. The Institutional Fund, on behalf of the Existing Fund, will call
a meeting of its shareholders to consider and act upon this Agreement and to
take all other actions in co-ordination with the Existing Fund necessary to
obtain approval of the transactions contemplated herein.
5.4. The Institutional Fund, on behalf of the Existing Fund, will
assist the New Fund in obtaining such information as the New Fund reasonably
requests concerning the beneficial ownership of the Existing Fund's Shares.
5.5. Subject to the provisions of this Agreement, the New Fund and the
Institutional Fund each will take, or cause to be taken, all action, and do or
cause to be done, all things reasonably necessary, proper or advisable to
consummate and make effective the transactions contemplated by this Agreement.
5.6. As promptly as practicable, but in any case within sixty days
after the Closing Date, the Institutional Fund shall furnish the New Fund, in
such form as is reasonably satisfactory to the New Fund, a statement of the
earnings and profits of the Existing Fund for federal income tax purposes which
will be carried over to the New Fund as a result of Section 381 of the Code.
5.7. The Institutional Fund, on behalf of the Existing Fund, will
provide the New Fund with information reasonably necessary for the preparation
of a prospectus (the "Prospectus") which will include the Proxy Statement
referred to in paragraph 4.1(n), all to be included in a registration statement
on Form N-14 of the New Fund (the "Registration Statement"), in compliance with
the Securities Act, the Securities Exchange Act of 1934 (the "Exchange Act") and
the 1940 Act in connection with the meeting of the Institutional Fund's
shareholders to consider approval of this Agreement and the transactions
contemplated herein.
5.8. The Institutional Fund, on behalf of the Existing Fund, will
provide the New Fund with information reasonably necessary for the preparation
of the New Fund Registration Statement.
5.9. As promptly as practicable, but in any case within thirty days of
the Closing Date, the Institutional Fund shall furnish the New Fund with a
statement containing information required for purposes of complying with Rule
24f-2 under the 1940 Act. A notice pursuant to Rule 24f-2 will be filed by the
New Fund offsetting redemptions by the Existing Fund during the fiscal year
ending on or after the Closing Date against sales of New Fund Shares and the
Institutional Fund agrees that it will not net redemptions during such period by
the Existing Fund against sales of shares of any other series of the
Institutional Fund.
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5.10. The New Fund agrees to indemnify and advance expenses to each
person who at the time of the execution of this Agreement serves as a Director
or Officer ("Indemnified Person") of the Institutional Fund, against money
damages actually and reasonably incurred by such Indemnified Person in
connection with any claim that is asserted against such Indemnified Person
arising out of such person's service as a director or officer of the
Institutional Fund with respect to matters specifically relating to the Existing
Fund, provided that such indemnification and advancement of expenses shall be
permitted to the fullest extent that is available under the Maryland General
Corporation law and other applicable law. This paragraph 5.10 shall not protect
any such Indemnified Person against any liability to the Existing Fund, the New
Fund or their shareholders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or from reckless disregard of
the duties involved in the conduct of his office. An Indemnified Person seeking
indemnification shall be entitled to advances from the New Fund for payment of
the reasonable expenses incurred by him in connection with the matter as to
which he is seeking indemnification in the manner and to the fullest extent
permissible under the Maryland General Corporation law and other applicable law.
Such Indemnified Person shall provide to the New Fund a written affirmation of
his good faith belief that the standard of conduct necessary for indemnification
by the New Fund has been met and a written undertaking to repay any advance if
it should ultimately be determined that the standard of conduct has not been
met. In addition, at least one of the following additional conditions shall be
met: (a) the Indemnified Person shall provide security in form and amount
acceptable to the New Fund for its undertaking; (b) the New Fund is insured
against losses arising by reason of the advance; or (c) either a majority of a
quorum of disinterested non-party directors of the New Fund (collectively, the
"Disinterested Directors"), or independent legal counsel selected by the New
Fund, in a written opinion, shall have determined, based on a review of facts
readily available to the New Fund at the time the advance is proposed to be
made, that there is reason to believe that the Director will ultimately be found
to be entitled to indemnification.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE EXISTING FUND
The obligations of the Institutional Fund to consummate the
transactions provided for herein with respect to the Existing Fund shall be
subject, at its election, to the performance by the New Fund of all of the
obligations to be performed by it hereunder on or before the Closing Date and,
in addition thereto, the following further conditions:
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6.1. All representations and warranties of the New Fund contained in
this Agreement shall be true and correct in all material respects as of the date
hereof and, except as they may be affected by the actions contemplated by this
Agreement, as of the Closing Date with the same force and effect as if made on
and as of the Closing Date;
6.2. The New Fund shall have delivered to the Institutional Fund a
certificate executed in its name by its President or Vice President and its
Secretary, Treasurer or Assistant Treasurer, in a form reasonably satisfactory
to the Institutional Fund and dated as of the Closing Date, to the effect that
the representations and warranties of the New Fund made in this Agreement are
true and correct at and as of the Closing Date, except as they may be affected
by the transactions contemplated by this Agreement and as to such other matters
as the Existing Fund shall reasonably request;
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE NEW FUND.
The obligations of the New Fund to complete the transactions provided
for herein shall be subject, at its election, to the performance by the Existing
Fund of all the obligations to be performed by it hereunder on or before the
Closing Date and, in addition thereto, the following conditions:
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7.1. All representations and warranties of the Institutional Fund
contained in this Agreement shall be true and correct in all material respects
as of the date hereof and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date with the same force and
effect as if made on and as of the Closing Date;
7.2. The Institutional Fund shall have delivered to the New Fund a
statement of the Existing Fund's assets and liabilities, together with a list of
the Existing Fund's portfolio securities showing the tax costs of such
securities by lot and the holding periods of such securities, as of the Closing
Date;
7.3. The Institutional Fund shall have delivered to the New Fund,
pursuant to paragraph 4.1(f), copies of financial statements of the Existing
Fund as of and for its most recently completed fiscal year.
7.4. The New Fund shall have received from Coopers & Lybrand L.L.P. a
letter addressed to the New Fund and dated as of the Closing Date stating that
as of a date no more than three (3) business days prior to the Closing Date,
Coopers & Lybrand L.L.P. performed limited procedures in connection with the
Institutional Fund's most recent unaudited financial statements and that (a)
nothing came to their attention in performing such limited procedures or
otherwise that led them to believe that there had been any changes in the
assets, liabilities, net assets, net investment income, net increase (decrease)
in net assets from operations or net increase (decrease) in net assets as
compared with amounts as of the Existing Fund's most recent audited fiscal year
end or the corresponding period in the Existing Fund's most recent audited
fiscal year, other than changes occurring in the ordinary course of business,
and (b) based on such limited procedures, there is no change in their report on
the most recent audited financial statements of such Existing Fund.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE NEW FUND AND THE EXISTING
FUND.
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the New Fund, the Institutional Fund on behalf of
the Existing Fund shall, and if any of such conditions do not exist on or before
the Closing Date with respect to the Existing Fund, the New Fund shall, at their
respective option, not be required to consummate the transactions contemplated
by this Agreement:
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8.1. The Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the outstanding Shares of
the Existing Fund in accordance with the provisions of the Institutional Fund's
Charter and applicable law and certified copies of the votes evidencing such
approval shall have been delivered to the New Fund.
8.2. On the Closing Date no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with, this
Agreement or the transactions contemplated herein.
8.3. All consents of other parties and all other consents, orders and
permits of federal, state and local regulatory authorities (including those of
the Commission and of state blue sky and securities authorities, including
"no-action" positions of and exemptive orders from such federal and state
authorities) deemed necessary by the New Fund or the Institutional Fund to
permit consummation, in all material respects, of the transactions contemplated
hereby shall have been obtained, except where failure to obtain any such
consent, order or permit would not involve a risk of a material adverse effect
on the assets or properties of the New Fund or the Existing Fund, provided that
either party hereto may for itself waive any of such conditions.
8.4. The Registration Statement and the New Fund Registration Statement
shall each have become effective under the Securities Act and no stop orders
suspending the effectiveness thereof shall have been issued and, to the best
knowledge of the parties hereto, no investigation or proceeding for that purpose
shall have been instituted or be pending, threatened or contemplated under the
Securities Act.
8.5. The parties shall have received a favorable opinion of Willkie
Farr & Gallagher, addressed to, and in form and substance satisfactory to, the
Institutional Fund, on behalf of the Existing Fund, and the New Fund,
substantially to the effect that for federal income tax purposes:
(a) The transfer of all or substantially all of the Existing
Fund's assets in exchange for the New Fund Shares and the assumption by the New
Fund of liabilities of the Existing Fund will constitute a "reorganization"
within the meaning of Section 368(a) of the Code and the New Fund and the
Existing Fund are each a "party to a reorganization" within the meaning of
Section 368(b) of the Code; (b) no gain or loss will be recognized by the New
Fund upon the receipt of the assets of the Existing Fund solely in exchange for
the New Fund Shares and the assumption by the New Fund of liabilities of the
Existing Fund; (c) no gain or loss will be recognized by the Existing Fund upon
the transfer of the Existing Fund's assets to the New Fund in exchange for the
New Fund Shares and the assumption by the New Fund of liabilities of the
Existing Fund or upon the distribution (whether actual or constructive) of the
New Fund Shares to the Existing Fund's shareholders in exchange for their shares
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of the Existing Fund; (d) no gain or loss will be recognized by shareholders of
the Existing Fund upon the exchange of their Existing Fund shares for the New
Fund Shares and the assumption by the New Fund of liabilities of the Existing
Fund; (e) the aggregate tax basis for the New Fund Shares received by each of
the Existing Fund's shareholders pursuant to the Reorganization will be the same
as the aggregate tax basis of the Existing Fund Shares held by such shareholder
immediately prior to the Reorganization, and the holding period of the New Fund
Shares to be received by each Existing Fund shareholder will include the period
during which the Existing Fund Shares exchanged therefor were held by such
shareholder (provided that the Existing Fund Shares were held as capital assets
on the date of the Reorganization); and (f) the tax basis of the Existing Fund's
assets acquired by the New Fund will be the same as the tax basis of such assets
to the Existing Fund immediately prior to the Reorganization, and the holding
period of the assets of the Existing Fund in the hands of the New Fund will
include the period during which those assets were held by the Existing Fund.
Notwithstanding anything herein to the contrary, neither the New Fund
nor the Institutional Fund may waive the conditions set forth in this paragraph
8.5.
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9. BROKERAGE FEES AND EXPENSES; OTHER AGREEMENTS
9.1. The New Fund represents and warrants to the Existing Fund, and the
Institutional Fund on behalf of the Existing Fund represents and warrants to the
New Fund, that there are no brokers or finders or other entities to receive any
payments in connection with the transactions provided for herein.
9.2. Warburg Pincus Asset Management, Inc. ("Warburg") or its
affiliates agrees to bear the expenses incurred in connection with the
transactions contemplated by this Agreement, whether or not consummated
(excluding extraordinary expenses such as litigation expenses, damages and other
expenses not normally associated with transactions of the type contemplated by
this Agreement). These expenses consist of: (i) expenses associated with
preparing this Agreement; (ii) preparing and filing the New Fund Registration
Statement covering the Shares to be issued in the Reorganization; (iii)
registration or qualification fees and expenses of preparing and filing such
forms, if any, necessary under applicable state securities laws to qualify the
New Fund Shares to be issued in connection with the Reorganization; (iv)
postage; printing; accounting fees; and legal fees incurred in connection with
the transactions contemplated by this Agreement; (v) solicitation costs incurred
in connection with the shareholders meeting referred to in clause (i) above and
paragraph 5.2 hereof; and (vi) any other Reorganization expenses.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1. The New Fund and the Institutional Fund, itself and on behalf of
the Existing Fund, agree that neither party has made any representation,
warranty or covenant not set forth herein and that this Agreement constitutes
the entire agreement among the parties.
10.2. The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection herewith
shall survive the consummation of the transactions contemplated hereunder.
11. TERMINATION
11.1. This Agreement may be terminated at any time at or prior to the
Closing Date by: (1) mutual agreement of the Institutional Fund, on behalf of
the Existing Fund, and the New Fund; (2) the Institutional Fund, on behalf of
the Existing Fund, in the event the New Fund shall, or the New Fund in the event
the Institutional Fund or the Existing Fund shall, materially breach any
representation, warranty or agreement contained herein to be performed at or
prior to the Closing Date; or (3) the Institutional Fund, on behalf of the
Existing Fund, or the New Fund, or the New Fund in the event a condition herein
expressed to be precedent to the obligations of the terminating party or parties
has not been met and it reasonably appears that it will not or cannot be met.
11.2. In the event of any such termination, there shall be no liability
for damages on the part of either the New Fund or the Institutional Fund, or
their respective directors or officers, to the other party or parties.
A-15
<PAGE>
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in writing in
such manner as may be mutually agreed upon by the authorized officers of the New
Fund and the Institutional Fund; provided, however, that following the meeting
of the Existing Fund's shareholders called by the Institutional Fund pursuant to
paragraph 5.2 of this Agreement no such amendment may have the effect of
changing the provisions for determining the number of the New Fund Shares to be
issued to the Existing Fund's Shareholders under this Agreement to the detriment
of such shareholders without their further approval.
13. NOTICES
13.1. Any notice, report, statement or demand required or permitted by
any provisions of this Agreement shall be in writing and shall be given by
prepaid telegraph, telecopy or certified mail addressed to the Institutional
Fund and/or the Existing Fund at:
466 Lexington Avenue
New York, NY 10017
Attention: Eugene P. Grace
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF
LIABILITY; USE OF TRADEMARK
14.1. The article and paragraph headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
14.2. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
14.3. This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
14.4. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no assignment or
transfer hereof or of any rights or obligations hereunder shall be made by any
party without the written consent of the other party. Nothing herein expressed
or implied is intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
14.5. The parties to this Agreement agree that the legend attached
hereto as Appendix A shall constitute part of the original agreement and shall
A-16
<PAGE>
have the full force and effect and be binding upon the parties as if it were
originally included therein.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by a duly authorized officer.
WARBURG, PINCUS MANAGED EAFE(R) COUNTRIES FUND, INC.
By: /s/ Eugene P. Grace
Eugene P. Grace
Vice President and Secretary
WARBURG, PINCUS INSTITUTIONAL FUND, INC., for itself and
on behalf of the Managed EAFE(R) Countries Portfolio
By: /s/ Eugene P. Grace
Eugene P. Grace
Vice President and Secretary
A-17
<PAGE>
APPENDIX A
Warburg, Pincus Managed EAFE(R) Countries Fund, Inc. (the
"Fund") 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 Fund or any member of the public regarding the advisability of investing
in securities generally or in the Fund particularly or the ability of the Morgan
Stanley EAFE(R) 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(R) Index. Morgan Stanley has no
obligation to take the needs of the issuer of the Fund or the owners of the Fund
into consideration in determining, composing or calculating the Morgan Stanley
EAFE(R) Index. Morgan Stanley is not responsible for and has not participated in
the determination of the timing of, prices at, or quantities of the Fund to be
issued or in the determination or calculation of the equation by which the Fund
is redeemable for cash. Morgan Stanley has no obligation or liability to owners
of the Fund in connection with the administration, marketing or trading of the
Fund.
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.
<PAGE>
TABLE OF CONTENTS
PAGE
SUMMARY................................................................. 4
RISK FACTORS.............................................................7
REASONS FOR THE REORGANIZATION...........................................7
FEE TABLE................................................................9
INFORMATION ABOUT THE REORGANIZATION....................................10
COMPARISON OF INVESTMENT OBJECTIVE AND POLICIES.........................14
MANAGEMENT OF THE FUND..................................................15
INFORMATION ON SHAREHOLDERS' RIGHTS.....................................16
ADDITIONAL INFORMATION..................................................18
VOTING INFORMATION......................................................18
FINANCIAL STATEMENTS....................................................20
LEGAL MATTERS...........................................................20
EXHIBIT A: AGREEMENT AND PLAN OF REORGANIZATION.........................A-1
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
DATED DECEMBER 5, 1997
Acquisition Of The Assets Of
THE MANAGED EAFE(R) COUNTRIES PORTFOLIO
a separate investment portfolio of
WARBURG, PINCUS INSTITUTIONAL FUND, INC.
466 Lexington Avenue
New York, New York 10017-3147
1-800-369-2728
By And In Exchange For Shares Of
WARBURG, PINCUS MANAGED EAFE(R) COUNTRIES FUND, INC.
466 Lexington Avenue
New York, New York 10017-3147
1-800-WARBURG
This Statement of Additional Information, relating
specifically to the proposed transfer of all or substantially all of the assets
of the Managed EAFE(R) Countries Portfolio (the "Existing Fund") of Warburg
Pincus Institutional Fund, Inc. to Warburg, Pincus Managed EAFE(R) Countries
Fund, Inc. (the "New Fund") in exchange for shares of the New Fund and the
assumption by the New Fund of liabilities of the Existing Fund, consists of this
cover page and the following described documents, each of which accompanies this
Statement of Additional Information and is incorporated herein by reference.
1. Statement of Additional Information of the New
Fund dated December 3, 1997.
2. Semiannual Report of the Existing Fund for the
period from March 31, 1997 (commencement of operations) to
April 30, 1997 (unaudited).
This Statement of Additional Information is not a prospectus.
A Combined Prospectus/Proxy Statement, dated December 5, 1997, relating to the
above-referenced matter may be obtained without charge by calling or writing the
New Fund at the telephone number or address set forth above. This Statement of
Additional Information should be read in conjunction with the Combined
Prospectus/Proxy Statement.
* * * *
Neither the Existing Fund nor the New Fund is sponsored,
endorsed, sold or promoted by Morgan Stanley. Morgan Stanley makes no
representation or warranty, express or implied, to the owners of the Funds or
any member of the public regarding the advisability of investing in securities
generally or in the Funds particularly or the ability of the Morgan
<PAGE>
Stanley EAFE(R) 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(R) Index. Morgan Stanley has no
obligation to take the needs of the issuer of the Funds or the owners of the
Funds into consideration in determining, composing or calculating the Morgan
Stanley EAFE(R) Index. Morgan Stanley is not responsible for and has not
participated in the determination of the timing of, prices at, or quantities of
the Funds to be issued or in the determination or calculation of the equation by
which the Funds are redeemable for cash. Morgan Stanley has no obligation or
liability to owners of the Funds in connection with the administration,
marketing or trading of the Funds.
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.
<PAGE>
VOTE THIS VOTING INSTRUCTION CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
WARBURG PINCUS INSTITUTIONAL FUND, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned holder of shares of the Managed EAFE(R) Countries Portfolio (the
"Portfolio"), a series of Warburg Pincus Institutional Fund, Inc. (the
"Company"), hereby appoints Eugene L. Podsiadlo and Janna Manes, two attorneys
and proxies for the undersigned with full powers of substitution and revocation,
to represent the undersigned and to vote on behalf of the undersigned all shares
of the Portfolio that the undersigned is entitled to vote at the Special Meeting
of Shareholders of the Portfolio to be held at the offices of the Company at 466
Lexington Avenue, New York, New York, 10017-3147, on December 16, 1997 at 3:00
p.m., and any adjournment or adjournments thereof. The undersigned hereby
acknowledges receipt of the Notice of Special Meeting and Combined
Prospectus/Proxy Statement dated December 5, 1997 and hereby instructs said
attorneys and proxies to vote said shares as indicated herein. In their
discretion, the proxies are authorized to vote upon such other business as may
properly come before the Meeting. A majority of the proxies present and acting
at the Meeting in person or by substitute (or, if only one shall be so present,
then that one) shall have and may exercise all of the power and authority of
said proxies hereunder. The undersigned hereby revokes any proxy previously
given.
PLEASE SIGN, DATE AND RETURN
PROMPTLY IN THE ENCLOSED ENVELOPE
Note: Please sign exactly as your name
appears on this Proxy. If joint owners, EITHER may sign this
Proxy. When signing as attorney, executor, administrator,
trustee, guardian or corporate officer, please give your full
title.
Date: ______________________
__________________________________
Signature(s) (Title(s), if applicable)
<PAGE>
VOTE THIS VOTING INSTRUCTION CARD TODAY!
YOUR PROMPT RESPONSE WILL SAVE
THE EXPENSE OF ADDITIONAL MAILINGS
Please indicate your vote by an "X" in the appropriate box below. This proxy, if
properly executed, will be voted in the manner directed by the undersigned
shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" APPROVAL OF
THE PROPOSALS. The Board of Directors unanimously recommends a vote "FOR"
approval of the proposals.
1. To approve the Agreement and
Plan of Reorganization FOR|_| AGAINST|_| ABSTAIN|_|
To approve the Agreement and Plan of Reorganization dated as of December 3,
1997 (the "Plan") providing (i) that the Managed EAFE(R) Countries
Portfolio (the "Existing Fund"), be reorganized from a series of Warburg
Pincus Institutional Fund, Inc. into Warburg, Pincus Managed EAFE(R)
Countries Fund, Inc. (the "New Fund"), (ii) the Existing Fund would
transfer to the New Fund all or substantially all of its assets in exchange
for shares of the New Fund and the assumption of the Existing Fund's
liabilities, and (iii) the distribution of such shares of the New Fund to
shareholders of the Existing Fund in liquidation of the Existing Fund.
2. To transact such other business as may properly come before the Meeting or
any adjournment or adjournments thereof.
FOR|_| AGAINST|_| ABSTAIN|_|
................................................................................
