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ANNUAL
REPORT
October 31, 1997
WARBURG PINCUS INSTITUTIONAL FUND, INC.
[ ] INTERNATIONAL EQUITY PORTFOLIO
[ ] SMALL COMPANY GROWTH PORTFOLIO
[ ] EMERGING MARKETS PORTFOLIO
[ ] MANAGED EAFE'r' COUNTRIES PORTFOLIO
[ ] VALUE PORTFOLIO
More complete information about the Fund, including charges and expenses
and, where applicable, the special considerations and risks associated
with international investing is provided in the Prospectus, which must
precede or accompany this report and which should be read carefully before
investing. You may obtain additional copies by calling 800-369-2728 or by
writing to Warburg Pincus Funds, P.O. Box 9030, Boston, MA 02205-9030.
[Logo]
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From time to time, the Portfolios' investment adviser and co-administrator may
waive some fees and/or reimburse some expenses, without which performance would
be lower. Waivers and/or reimbursements are subject to change.
Returns are historical and include change in share price and reinvestment of
dividends and capital gains. Past performance cannot guarantee future results.
Returns and share price will fluctuate, and redemption value may be more or less
than original cost.
The views of the Portfolios' management are as of the date of the letters and
holdings described in this annual report are as of October 31, 1997; these views
and holdings may have changed subsequent to these dates. Nothing in this annual
report is a recommendation to purchase or sell securities.
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WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1997
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Dear Shareholder: December 18, 1997
The objective of Warburg Pincus Institutional Fund, Inc. -- International
Equity Portfolio ('the Portfolio') is long-term capital appreciation. The
Portfolio pursues its objective by investing primarily in a broadly diversified
portfolio of equity securities of companies that have their principal business
activities and interests outside the U.S.
For the 12 months ended October 31, 1997, the Portfolio gained 6.20%, vs. a
gain of 4.63% for the Morgan Stanley Europe, Australasia and Far East ('EAFE')
Index.
Foreign stock markets had geographically mixed results for the period. By
region, the most noteworthy performances came from Europe, whose markets rallied
strongly on the combination of low interest rates, increased optimism toward
European Monetary Union, and signs of improving economic growth. Two additional
catalysts for these markets were merger and acquisition activity and, in the
case of specific companies, an announced commitment to improving shareholder
value.
Asian-Pacific markets, conversely, struggled, hurt by mounting economic and
currency concerns. Most of the region's stock markets had losses in dollar terms
for the 12 months, with the sharpest setbacks occurring in East Asia,
particularly Southeast Asia, where several markets suffered losses exceeding
50%. Elsewhere, Latin American markets showed near-universal strength, and the
emerging markets of Europe, the Middle East and Africa also generally rose.
In terms of performance attribution, the Portfolio's European exposure
(approximately 47% of net assets at the end of the period) made a significant
contribution to its return. We found attractive opportunities across the region
through the period, though we were highly selective in terms of stock picking.
This reflected our view that many stocks were trading at relatively expensive
valuations, given a realistic assessment of the underlying companies' earnings
prospects. By country, some of the strongest performances for the Portfolio came
from its holdings in Spain, France, the Netherlands and Germany, and from its
Nordic holdings collectively.
The Portfolio's Asian-Pacific exposure (which, excluding Japan, Australia and
New Zealand, comprised 10.1% of assets at period-end) generally proved a
liability. Fortunately for the Portfolio, we had comparatively little exposure
to the hard-hit Southeast Asian markets through the period, which spared the
Portfolio
1
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WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
ANNUAL INVESTMENT ADVISER'S REPORT (CONT'D)
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the more-sizable losses suffered by funds with larger holdings in that region.
In the end, though, almost any exposure to Asian markets proved harmful, as the
contagion from Southeast Asia swept through the region, and the Portfolio's
weighting took a toll on its performance.
The Portfolio maintained a fairly significant stake in Japan during the 12
months. Though this weighting proved less than timely -- the Japanese market, as
measured by most benchmarks, suffered a loss for the period -- we managed to
significantly outperform the Japanese broad-market averages, a function of good
stock selection. We also hedged much of the Portfolio's yen exposure through the
period. This served the Portfolio well, given the yen's decline in value vs. the
U.S. dollar.
Finally, the Portfolio's Latin American holdings (6.2% of assets at the end
of the period) also contributed positively to its performance. Our exposure was
concentrated primarily in Argentina, Brazil and, to a lesser extent, Mexico, and
these stocks all showed strong gains for the 12 months.
Looking ahead, the near-term environment for international markets appears
likely to remain, at the very least, challenging. Asian markets have yet to
stabilize, and worries over that region's difficulties have impacted markets
globally. For longer-term investors, however -- those with three- to five-year
time horizons who can tolerate near-term volatility -- this has created, and
continues to create, some excellent investment opportunities. In Asia,
specifically, it is increasingly possible to find strong, well-managed companies
with solid cash flows and relatively little debt trading at record-low
valuations. For selective investors who pick the right stocks, the potential
upside would appear to be sizable. With that view, we will continue our efforts
to identify the most promising candidates for long-term growth, and encourage
our investors to maintain a similarly long-term orientation.
Richard H. King
Portfolio Manager
Harold W. Ehrlich
Associate Portfolio Manager
P. Nicholas Edwards
Associate Portfolio Manager
2
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WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
ANNUAL INVESTMENT ADVISER'S REPORT (CONT'D)
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GROWTH OF $10,000 INVESTED IN
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO SINCE
INCEPTION AS OF OCTOBER 31, 1997
The graph below illustrates the hypothetical investment of $10,000 in Warburg
Pincus Institutional Fund, Inc. -- International Equity Portfolio (the
'Portfolio') from September 1, 1992 (inception) to October 31, 1997, compared to
the Morgan Stanley Europe, Australasia and Far East Index ('EAFE')* for the same
time period.
[PERFORMANCE GRAPH]
Average Annual
Total Returns
for periods ended
Portfolio EAFE 10/31/97
- --------- ----
10,000 10,000
9,620 9,288 1 year
13,623 12,768 6.20%
16,705 14,058 5 year
16,232 14,006 14.63%
17,932 15,473 Since Inception
19,044 16,190 (9/01/92)
13.27%
<TABLE>
<CAPTION>
PORTFOLIO
---------
<S> <C>
1 Year Total Return (9/30/96-9/30/97).................................... 18.15%
5 Year Average Annual Total Return (9/30/92-9/30/97)..................... 16.76%
Average Annual Total Return Since Inception (9/01/92-9/30/97)............ 16.14%
</TABLE>
- ------------
* The Morgan Stanley Europe, Australasia and Far East Index is an unmanaged
index (with no defined investment objective) of international equities that
includes reinvestment of dividends, and is the exclusive property of Morgan
Stanley & Co. Incorporated.
3
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WARBURG PINCUS INSTITUTIONAL FUND, INC. -- SMALL COMPANY GROWTH PORTFOLIO
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1997
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Dear Shareholder: December 18, 1997
The objective of Warburg Pincus Institutional Fund, Inc. -- Small Company
Growth Portfolio (the 'Portfolio') is capital growth. The Portfolio pursues its
objective by investing in equity securities of domestic companies with small
market capitalizations (i.e., $1 billion or less at the time of initial
purchase).
For the 12 months ended October 31, the Portfolio had a total return of
22.99%, vs. returns of 21.18% for the Russell 2000 Growth Index and 18.58% for
the Lipper Small Cap Funds Index.
Effective November 7, 1997, the Portfolio has been closed to purchases by new
investors, except under certain conditions. Investors who may continue to
purchase additional Portfolio shares include persons who were both beneficial
and record holders of Portfolio shares as of the closure date. To determine
whether you may still purchase Portfolio shares, please read the Supplement to
the Fund's latest Prospectus.
The Portfolio's solid showing for the 12 months was driven by a broad rebound
in small-cap stocks over the latter half of the period, and by strength in
specific holdings, particularly in the technology, energy, financial-services
and consumer areas. The vastly improved environment for small-cap stocks (many
of which suffered sizable losses over the November-through-April span) was
attributable to several factors. Most significantly, investors began to take
note of small caps' relatively more favorable earnings prospects and
historically compelling valuations vs. those of large-cap stocks. Other factors
contributing to the favorable shift in investor sentiment toward smaller,
higher-growth companies included a reduction in the capital-gains tax.
We held a sizable weighting in the business-services area through the period.
This reflects our view that large, efficiency-minded organizations will continue
to 'outsource' their non-core operations, a trend that stands to benefit
specific small-cap companies. The Portfolio's holdings in this area during the
period included QuickResponse Services, a facilitator of information flow
between manufacturers and retailers.
We also maintained a relatively large weighting in the technology industry,
one we increased as the period progressed. We continued to find innovative
companies that have what we deem to be strong longer-term prospects, such as
Platinum Technology, a developer and marketer of an integrated line of systems
software products. Another position we established during the period was
4
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WARBURG PINCUS INSTITUTIONAL FUND, INC. -- SMALL COMPANY GROWTH PORTFOLIO
ANNUAL INVESTMENT ADVISER'S REPORT (CONT'D)
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Aavid Thermal Technologies, a manufacturer of potentially lucrative heat-
dissipation solutions used in the production of electronic components.
We also had a significant presence in the consumer sector (broadly defined)
during the period. Here, our holdings were concentrated in retail, service and
leisure/entertainment companies, where we generally found the most attractive
stocks on a valuation basis.
Other areas in which we had notable weightings included the energy,
financial-services, health care and pharmaceutical sectors. Of note, our
exposure to that last group rose significantly during the period, as we took
advantage of occasional weakness in the sector to purchase several attractively
priced pharmaceutical stocks with improving earnings prospects.
We remain optimistic regarding the small-cap market, where many stocks
continue to sell at significant discounts to their underlying growth rates.
Additionally, we believe small, rapidly growing companies will continue to be
targeted by larger companies seeking acquisition-fueled growth. In this context,
we will continue to devote our efforts to identifying well-managed, innovative
companies that have what we deem to be the brightest prospects.
<TABLE>
<S> <C>
Elizabeth B. Dater Stephen J. Lurito
Co-Portfolio Manager Co-Portfolio Manager
</TABLE>
5
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WARBURG PINCUS INSTITUTIONAL FUND, INC. -- SMALL COMPANY GROWTH PORTFOLIO
ANNUAL INVESTMENT ADVISER'S REPORT (CONT'D)
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GROWTH OF $10,000 INVESTED IN
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- SMALL COMPANY GROWTH PORTFOLIO SINCE
INCEPTION AS OF OCTOBER 31, 1997
The graph below illustrates the hypothetical investment of $10,000 in Warburg
Pincus Institutional Fund, Inc. -- Small Company Growth Portfolio (the
'Portfolio') from December 29, 1995 (inception) to October 31, 1997, compared to
the Russell 2000 Growth Index ('Russell')* and the Lipper Small Cap Funds Index
('Lipper') for the same time period.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
Average Annual
Lipper Small Co. Total Returns
Growth for period ended
Portfolio Fund Index 10/31/97
------------- ---------------- ----------------
<S> <C> <C> <C> <C>
10,000 10,000 10,000 1 year
Jan-96 9,850.00 9,989.40 9,953.10 22.99%
Feb-96 10,360.00 10,300.67 10,352.82
Mar-96 11,280.00 10,510.29 10,563.50
Apr-96 12,500.00 11,072.27 11,406.36 SINCE INCEPTION
May-96 13,250.00 11,508.63 11,887.14 (12/29/95)
Jun-96 12,820.00 11,036.20 11,408.08 28.55%
Jul-96 11,630.00 10.072.30 10,300.82
Aug-96 12,460.00 10,657.20 10,925.46
Sep-96 13,300.00 11.073.68 11,552.47
Oct-96 12,920.00 10,903.15 11,197.23
Nov-96 12,940.00 11,352.36 11,403.71
Dec-96 13,310.08 11,649.90 11,451.37
Jan-97 13,690.09 11,882.78 11,712.58
Feb-97 12,840.08 11,594.75 11,041.51
Mar-97 11,780.07 11,047.71 10,373.00
Apr-97 11,580.07 11,078.53 10,286.49
May-97 13,150.08 12,311.01 11,574.05
Jun-97 13,730.09 12,838.66 12,142.91
Jul-97 14,370.09 13,436.05 12,843.44
Aug-97 14,799.76 13,743.46 12,990.75
Sep-97 16,519.49 14,749.35 13,994.55
Oct-97 15,890.10 14,101.56 13,289.64
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO
---------
<S> <C>
1 Year Total Return (9/30/96-9/30/97).................................... 24.21%
Average Annual Total Return (12/29/95-9/30/97)........................... 33.03%
</TABLE>
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* The Russell 2000 Growth Index is an unmanaged index (with no defined
investment objective) of those securities in the Russell 2000 Growth Index
with a greater-than-average growth orientation. The Russell 2000 Growth Index
includes reinvestment of dividends, and is compiled by Frank Russell Company.
** The Lipper Small Cap Funds Index is an equal-weighted performance index,
adjusted for capital-gains distributions and income dividends, of the largest
qualifying funds in this investment objective, and is compiled by Lipper
Analytical Services Inc.
6
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WARBURG PINCUS INSTITUTIONAL FUND, INC. -- EMERGING MARKETS PORTFOLIO
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1997
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Dear Shareholder: December 18, 1997
The objective of Warburg Pincus Institutional Fund, Inc. -- Emerging Markets
Portfolio (the 'Portfolio') is growth of capital. The Portfolio pursues its
objective by investing primarily in equity securities of non-U.S. issuers
consisting of companies in emerging securities markets.
For the 12 months ended October 31, 1997, the Portfolio had a loss of 4.43%,
vs. losses of 3.84% for the Lipper Emerging Markets Funds Index and 8.48% for
the Morgan Stanley Emerging Markets Free Index.
Emerging markets had geographically mixed results for the fiscal year. Most
Asian-Pacific markets suffered losses in dollar terms, with the sharpest losses
coming from Southeast Asia, the epicenter of the region's difficulties. Latin
American, European, Middle Eastern and African markets generally rose, though
virtually all were negatively impacted at the end of the period by the troubles
in Asia.
The Portfolio's performance was largely a function of its geographic
exposure. The Portfolio had a fairly sizable concentration in Asian markets,
including a roughly 20% weighting in Southeast Asia, heading into July, when the
region's difficulties began following the July 2 devaluation of the Thai baht,
the country's currency. The subsequent sharp setbacks in Southeast Asian markets
and, ultimately, the weakness throughout much of the rest of Asia took a heavy
toll on the Portfolio's returns.
Mitigating this, to an extent, were positive showings from the Portfolio's
non-Asian holdings. Particularly strong performers for the Portfolio were its
Latin American stocks (22.6% of the Portfolio as of October 31), as these
markets showed near-universal strength for the 12 months. The Portfolio's
largest country weightings here through the period were Brazil, Argentina,
Mexico and Chile.
The Portfolio also saw good performances from its holdings in the Middle East
and Europe. Two specific markets that we emphasized during the period, to good
effect, were Israel, where we found a number of what we deemed to be very
attractive investment opportunities, and Portugal. Both were among the top
performers in the emerging-market universe for the 12 months.
Looking ahead, our near-term outlook on the prospects for emerging markets is
guarded. The macroeconomic environment in many of these countries,
7
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WARBURG PINCUS INSTITUTIONAL FUND, INC. -- EMERGING MARKETS PORTFOLIO
ANNUAL INVESTMENT ADVISER'S REPORT (CONT'D)
- --------------------------------------------------------------------------------
particularly in Asia, remains unsettled, making the stock-selection process
particularly challenging. Additionally, sentiment toward the group, given the
recent substantial volatility, is largely negative, suggesting that these
markets may stay in the doldrums for a time before they can stage a recovery.
(Though when these markets do finally bounce back, we expect their performance
to be potentially quite strong, given the currently depressed level of
valuations and the likelihood of a strong improvement in corporate earnings.)
Given this climate, we are being extremely cautious in terms of country
allocations and stock selection, concentrating our exposure on those companies
that we believe are best-positioned to weather the current unease. We are also
assembling a list of buy candidates, i.e., companies whose shares have been
battered and may yet have further to fall but show strong promise over a three-
to five-year period, since at some point conditions will warrant taking a
more-aggressive stance.
Our intermediate- and longer-term outlook, it goes without saying, remains
positive. The world's developing countries will continue to show substantially
higher economic growth rates than their more-established counterparts,
presenting considerable opportunity from an investment perspective. Investors
who pick their stocks carefully and have a sufficiently long time horizon stand,
we believe, to be more than sufficiently compensated for weathering short-term
bouts of volatility. We would encourage our investors to take a similarly long-
term view, and to view the recent gyrations in these markets accordingly.
<TABLE>
<S> <C>
Richard H. King Vincent J. McBride
Co-Portfolio Manager Co-Portfolio Manager
</TABLE>
8
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WARBURG PINCUS INSTITUTIONAL FUND, INC. -- EMERGING MARKETS PORTFOLIO
ANNUAL INVESTMENT ADVISER'S REPORT (CONT'D)
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GROWTH OF $10,000 INVESTED IN
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- EMERGING MARKETS PORTFOLIO
SINCE INCEPTION AS OF OCTOBER 31, 1997
The graph below illustrates the hypothetical investment of $10,000 in Warburg
Pincus Institutional Fund, Inc. -- Emerging Markets Portfolio (the 'Portfolio')
from September 30, 1996 (inception) to October 31, 1997, compared to the Lipper
Emerging Markets Funds Index ('Lipper')* and the Morgan Stanley Emerging Markets
Free Index ('Morgan')** for the same time period.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURNS
FOR PERIODS
ENDED
PORTFOLIO MORGAN STANLEY LIPPER EMERGING MARKET 10/31/97
<S> <C> <C> <C> <C>
10,000 10,000 10,000
10/31/96 9,860.00 9,733.50 9,768.90 1 Year
11/29/96 10,320.00 9,897.02 9,991.63
12/31/96 10,380.01 9,941.56 10,078.56
1/31/97 10,984.09 10,619.57 10,844.13
2/28/97 11,215.65 11,074.52 11,231.26 -4.43%
3/31/97 10,913.61 10,783.59 10,944.53
4/30/97 11,125.04 10,802.78 10,945.62 Since Inception
5/30/97 11,960.67 11,111.85 11,325.11 (9/30/96)
6/30/97 12,484.21 11,706.67 11,880.15
7/31/97 12,594.95 11,881.33 12,288.00 -5.31%
8/29/97 11,125.04 10,369.55 10,883.53
9/30/97 11,376.74 10,657.00 11,277.19
10/31/97 9,423.56 8,908.40 9,393.90
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO
---------
<S> <C>
1 Year Total Return (9/30/96-9/30/97).................................... 13.77%
Average Annual Total Return Since Inception (9/30/96-9/30/97)............ 13.73%
</TABLE>
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* The Lipper Emerging Markets Funds Index is an equal-weighted performance
index, adjusted for capital-gains distributions and income dividends, of the
largest qualifying funds in this investment objective, and is compiled by
Lipper Analytical Services Inc.
** The Morgan Stanley Emerging Markets Free Index is a market-
capitalization-weighted index of emerging-market countries determined by
Morgan Stanley. It includes only those countries open to non-local investors.
9
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WARBURG PINCUS INSTITUTIONAL FUND, INC. -- MANAGED EAFE'r' COUNTRIES PORTFOLIO
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1997
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Dear Shareholder: December 18, 1997
The objective of Warburg Pincus Institutional Fund, Inc. -- Managed EAFE'r'
Countries Portfolio (the 'Portfolio') is long-term capital appreciation. The
Portfolio pursues its objective by investing primarily in common stocks and
securities convertible into common stocks of companies having their principal
activities and interests in countries represented in the Morgan Stanley Europe,
Australasia and Far East (EAFE) Index.
For the seven months ended October 31, 1997 (the Portfolio's inception date
was March 31, 1997), the Portfolio had a total return of 10.60%, vs. a return of
3.56% for the Morgan Stanley EAFE Index.
The Portfolio performed strongly vs. its benchmark over the reporting period,
reflecting good stock selection and timely country allocations. By region, the
best performances for the Portfolio came from its European holdings, which rose
strongly against a favorable backdrop of low interest rates, signs of stronger
economic growth and increasing optimism toward the prospects for European
Monetary Union. We maintained a market-neutral weighting in Europe as a whole
vs. our benchmark through the period, but differed with regard to country
weightings, a function of our ability to find attractively priced stocks.
Markets in which we found particularly good opportunities were France, Sweden,
Finland and Austria, and we overweighted these vs. our benchmark. Markets we
underweighted included Germany and Great Britain, reflecting our view that
valuations in both were generally less compelling.
The Portfolio's exposure to Asian-Pacific markets was more problematic, in
terms of performance, given the generally poor returns for the region's markets.
Here, too, we overweighted or underweighted markets based on an assessment of
value. Noteworthy underweightings for the Portfolio were, in Southeast Asia,
Malaysia (to which we had no exposure), and, in Northeast Asia, Hong Kong. One
market we overweighted through the period was New Zealand, one of the few
markets to escape the region's considerable currency and economic turmoil with
minimal damage. As a rule, our choice of relative weightings in Asian-Pacific
markets worked to the Portfolio's advantage, notwithstanding the region's
difficulties.
Hedging activity also played a role in the Portfolio's performance. We hedged
a portion of the Portfolio's European-currency exposure (principally its
exposure
10
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WARBURG PINCUS INSTITUTIONAL FUND, INC. -- MANAGED EAFE'r' COUNTRIES PORTFOLIO
ANNUAL INVESTMENT ADVISER'S REPORT (CONT'D)
- --------------------------------------------------------------------------------
to the French franc), and much of its Japanese yen exposure (Japan represented
25% of the Portfolio at the end of the period, a slight underweighting vs. the
EAFE Index), through the seven months. This proved advantageous, as these
currencies fell in value against the U.S. dollar.
<TABLE>
<S> <C>
Richard H. King Harold W. Ehrlich
Portfolio Manager Associate Portfolio Manager
</TABLE>
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* The EAFE Index is the exclusive property of Morgan Stanley & Co. Incorporated
and is a service mark of Morgan Stanley Group Inc. which has been licensed for
use by the Fund on behalf of the Managed EAFE'r' Countries Portfolio. Capital
International S.A., an international investment management company fully owned
by The Capital Group Companies, Inc. of Los Angeles, has full responsibility for
the management and maintenance of the EAFE Index. Morgan Stanley & Co.
Incorporated has no responsibility for, or influence over, the decisions of
inclusion or deletion within the EAFE Index.
11
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WARBURG PINCUS INSTITUTIONAL FUND, INC. -- MANAGED EAFE'r' COUNTRIES PORTFOLIO
ANNUAL INVESTMENT ADVISER'S REPORT (CONT'D)
- --------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN
WARBURG PINCUS INSTITUTIONAL FUND, INC. --
MANAGED EAFE'r' COUNTRIES PORTFOLIO
SINCE INCEPTION AS OF OCTOBER 31, 1997
The graph below illustrates the hypothetical investment of $10,000 in Warburg
Pincus Institutional Fund, Inc. -- Managed EAFE'r' Countries Portfolio (the
'Portfolio') from March 31, 1997 (inception) to October 31, 1997, compared to
the Morgan Stanley Europe, Australasia and Far East Index ('EAFE')* for the same
time period.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
AVERAGE ANNUAL
TOTAL RETURNS
FOR PERIODS
PORTFOLIO EAFE ENDED 10/31/97
------ --------------
<S> <C> <C> <C>
10,000 10,000
4/30/97 10,210.00 10,053.00
5/30/97 11,069.68 10,707.25
6/30/97 11,629.81 11,297.75 Since Inception
7/31/97 12,310.15 11,480.55 (3/31/97)
8/29/97 11,539.54 10,623.18 10.60%'D'
9/30/97 12,119.97 11,218.29
10/31/97 11,059.48 10,356.17
</TABLE>
<TABLE>
<CAPTION>
PORTFOLIO
---------
<S> <C>
Average Annual Total Returns (3/31/97-9/30/97)........................ 21.20%'D'
</TABLE>
- ------------
* The Morgan Stanley Europe, Australasia and Far East Index is an unmanaged
index (with no defined investment objective) of international equities that
includes reinvestment of dividends, and is the exclusive property of Morgan
Stanley & Co. Incorporated.
'D' Not annualized.
12
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WARBURG PINCUS INSTITUTIONAL FUND, INC. -- VALUE PORTFOLIO
ANNUAL INVESTMENT ADVISER'S REPORT -- OCTOBER 31, 1997
- --------------------------------------------------------------------------------
Dear Shareholder: December 18, 1997
The objective of Warburg Pincus Institutional Fund, Inc. -- Value Portfolio
(the 'Portfolio') is total return. The Portfolio pursues its objective by
investing primarily in the equity securities of large-capitalization domestic
companies that we deem to be relatively undervalued.
For the four months ended October 31, 1997 (the Portfolio's inception date
was June 30, 1997), the Portfolio had a return of 6.40%, vs. a 3.90% return for
the S&P 500 Index.
Our risk-adjusted total-return approach met with good results over the
admittedly short July-through-October span, a period of considerable market
volatility. In relative terms, the Portfolio's outperformance of its benchmark
for the period is attributable, most notably, to good performances from its
financial-services, telecommunications, energy and retail holdings.
We adhere to a strict bottom-up stock-selection process. Specifically, we
look for stocks that are temporarily depressed for cyclical or other
identifiable reasons, emphasizing factors such as management changes,
restructurings, or new products or services that can potentially improve
earnings and free cash flow. Because of this, many of the Portfolio's holdings
through the period were purchased at P/E multiples significantly below that of
the S&P 500 Index. Examples include the Portfolio's deep-water-drilling stocks,
which, having come under pressure earlier in the year due to fears of declining
oil prices, continued to sell at relatively low multiples at the time of the
Portfolio's inception. In our view, stocks such as Transocean Offshore and Noble
Drilling were oversold, as these companies stood to benefit from a trend of
extended contracts for projects in the Gulf of Mexico and the North Sea. The
Portfolio's deep-water-drilling holdings contributed positively to its return
for the period.
We also identified what we deemed to be good values in a number of other
industries, including the financial and consumer areas. Within the former, we
emphasized asset-management, insurance and mortgage-services companies. In the
consumer area, we maintained a sizable position in retailers, which we judged to
be generally undervalued in part due to overlooked improvements in inventory
management.
Other areas worthy of mention include technology. Although we were
underweighted in the industry during the period, we did find several stocks we
deemed to have good risk-adjusted longer-term prospects, mostly in the
13
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- VALUE PORTFOLIO
ANNUAL INVESTMENT ADVISER'S REPORT (CONT'D)
- --------------------------------------------------------------------------------
computer area. Our focus was on companies with strong balance sheets and good
cash flows, such as IBM and Hewlett-Packard.
Looking ahead, we believe that the relatively high degree of market
volatility witnessed over the past few months will likely persist into 1998, and
thus individual stock selection remains critical. In this context, we will
continue to focus on identifying stocks with the potential to perform relatively
well in both down and up markets, emphasizing companies with strong cash flows
and improving earnings prospects. In terms of sector exposure, we expect to
remain well-diversified, though we are willing to significantly increase our
weightings in specific industries as valuations warrant.
<TABLE>
<S> <C>
Brian S. Posner
Portfolio Manager
</TABLE>
14
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------------- --------------
<S> <C> <C>
COMMON STOCKS (91.7%)
Argentina (3.2%)
Banco de Galicia & Buenos Aires SA 293,416 $ 1,820,270
Banco de Galicia & Buenos Aires SA ADR 58,908 1,427,599
Banco Frances del Rio de la Plata SA 133,584 1,102,730
Banco Frances del Rio de la Plata SA ADR 203,695 5,015,989
Telefonica de Argentina SA ADR 403,100 11,337,187
YPF SA ADR 478,900 15,324,800
--------------
36,028,575
--------------
Australia (5.2%)
Boral, Ltd. 2,801,002 7,367,593
Burns Philp & Co., Ltd. 10,221,301 5,391,481
Foodland Associated, Ltd. 1,363,374 10,163,926
National Australia Bank, Ltd. 1,189,100 16,265,919
Niugini Mining, Ltd. 'D' 306,250 506,156
Oil Search, Ltd. 1,429,035 2,593,004
Orogen Minerals, Ltd. 237,900 518,677
Pasminco, Ltd. 1,171,286 1,449,827
Qantas Airways, Ltd. 3,784,532 6,787,236
Qantas Airways, Ltd. ADR 66,200 1,189,879
Reinsurance Australia Corp., Ltd. 1,269,900 3,286,684
Woolworths, Ltd. 990,400 3,197,157
--------------
58,717,539
--------------
Austria (2.3%)
Boehler-Uddeholm AG 60,409 4,328,967
Maculan Holdings AG Vorzuege 'D' 2,692 0
V.A. Technologie AG 86,868 15,405,198
Vae AG 60,575 5,937,503
--------------
25,671,668
--------------
Brazil (0.8%)
CIA de Saneamento Basico do Estado de Sao Paulo 21,854,000 4,043,733
Telecomunicacoes Brasileiras SA Sponsored ADR 50,200 5,095,300
--------------
9,139,033
--------------
China (0.7%)
Guangshen Railway Co., Ltd. 13,134,053 4,077,052
Guangshen Railway Co., Ltd. ADR 139,121 2,034,645
Qingling Motors Co., Ltd. Series H 3,540,000 2,312,229
--------------
8,423,926
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
15
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------------- --------------
COMMON STOCKS (CONT'D)
<S> <C> <C>
Denmark (1.2%)
International Service System AS Class B 'D' 214,950 $ 6,516,713
SAS Danmark AS 430,000 7,402,611
--------------
13,919,324
--------------
Finland (2.1%)
Huhtamaki OY Class I 279,250 11,487,996
Rauma OY 262,155 4,911,337
Upm-Kymmene Corp. 344,900 7,667,257
--------------
24,066,590
--------------
France (8.0%)
Axa-UAP SA 193,900 13,277,829
Banque Nationale de Paris 58,500 2,586,117
Compagnie de Saint Gobain 45,369 6,512,410
Compagnie Generale des Eaux 20,500 2,391,779
Lagardere Groupe SCA 402,764 11,583,750
Rhone-Poulenc Ltd., Class A 348,100 15,177,288
Societe Generale Paris 73,600 10,079,920
Societe Generale d'Entreprises SA 520,800 13,344,354
Total Cie Franc des Petroles Class B 138,156 15,328,579
--------------
90,282,026
--------------
Germany (4.1%)
Ava Allgemeine 'D' 14,000 3,575,280
Bayerische Motoren Werke AG 10,157 7,360,572
Deutsche Bank AG 93,200 6,154,258
Fresenius Medical Care AG 'D' 114,200 8,242,739
Hoechst AG 469,700 18,040,249
Schmalbach Lubeca AG 14,400 2,675,633
--------------
46,048,731
--------------
Hong Kong (2.3%)
Cheung Kong Infrastructure Holdings, Ltd. 493,000 3,427,375
First Pacific Co., Ltd. 11,167,359 7,041,438
Hong Kong Land Holdings, Ltd. 628,498 1,432,975
HSBC Holdings PLC (UK) 829 20,654
Jardine Matheson Holdings, Ltd. 2,168,699 13,879,674
--------------
25,802,116
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
16
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------------- --------------
COMMON STOCKS (CONT'D)
<S> <C> <C>
India (2.2%)
Bharat Petroleum Corp., Ltd. 100 $ 1,199
Hindalco Industries, Ltd. 124,375 3,245,353
Reliance Industries, Ltd. 990,800 5,135,231
Reliance Industries, Ltd. GDS 103,700 2,177,700
State Bank of India, Ltd. 701,350 5,490,159
State Bank of India, Ltd. GDR 89,700 1,650,480
Tata Engineering & Locomotive Co., Ltd. 800,800 7,012,876
Tata Engineering & Locomotive Co., Ltd. GDR 70,960 737,984
--------------
25,450,982
--------------
Indonesia (0.8%)
P.T. Bank International Indonesia 505,734 108,722
P.T. Indosat 1,812,500 4,085,038
P.T. Lippo Securities 41,364,600 4,302,836
P.T. Semen Gresik 664,500 645,146
P.T. Sinar Mas Multiartha 129,300 27,797
--------------
9,169,539
--------------
Ireland (0.1%)
Kerry Group PLC Class A 133,000 1,609,615
--------------
Israel (1.2%)
ECI Telecommunications Limited Designs 420,050 11,603,881
Orbotech, Ltd. 'D' 48,000 2,052,000
--------------
13,655,881
--------------
Italy (3.2%)
Assicurazioni Generali SPA 335,500 7,498,479
Ente Nazionale Idrocarburi SPA 2,302,100 12,941,241
Parmalat Finanziaria SPA 4,319,500 5,993,992
Telecom Italia SPA 1,489,000 9,328,781
--------------
35,762,493
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
17
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------------- --------------
COMMON STOCKS (CONT'D)
<S> <C> <C>
Japan (19.4%)
Aiwa Co., Ltd. 51,000 $ 1,139,736
Canon, Inc. ADR 200 24,525
Daibiru Corp. 156,000 1,671,845
Daimaru, Inc. 297,000 1,157,207
DDI Corp. 1,092 3,646,955
Fuji Bank, Ltd. 1,178,000 10,177,951
Fujitsu, Ltd. 1,400,000 15,352,663
Hankyu Realty Co., Ltd. 561,000 3,639,952
Isuzu Motors, Ltd. 1,631,000 3,821,068
Jusco Co., Ltd. 346,000 7,732,325
KAO Corp. 797,500 11,130,680
Kawasaki Heavy Industries 2,923,600 6,800,764
Keyence Corp. 22,500 3,364,626
Kirin Beverage Corp. 3,000 49,846
Matsushita Electric Works 844,000 7,642,768
Mitsubishi Estate Co., Ltd. 412,000 5,202,625
Murata Manufacturing Co., Ltd. 290 11,757
Mycal Corp. 420,500 4,017,405
NEC Corp. 1,354,000 14,848,218
Nichiei Co., Ltd. 55,200 6,053,336
Nikko Securities Co., Ltd. 500 1,807
Nippon Communication Systems Corp. 233,300 2,829,758
Orix Corp. 297,200 20,295,622
Rohm Co., Ltd. 168,000 16,608,790
Sankyo Co., Ltd. 109,000 3,594,999
Shohkoh Fund & Co., Ltd. 20,000 6,480,020
Sony Corp. 174,500 14,482,471
Sony Corp. ADR 36,900 3,113,437
Sumitomo Bank, Ltd. 1,166,000 12,399,103
Toho Co., Ltd. 28,435 3,732,433
Toray Industries, Inc. 1,809,000 10,069,203
Tsuchiya Home Co. 79,398 428,751
Uny Co., Ltd. 262,500 4,252,513
Yamanouchi Pharmaceutical Co., Ltd. 548,000 13,475,783
Yokogawa Electric 198,000 1,258,370
--------------
220,509,312
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
18
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------------- --------------
COMMON STOCKS (CONT'D)
<S> <C> <C>
Mexico (2.2%)
Alfa SA Series A 1,293,962 $ 9,501,930
Gruma SA de CV Class B 851,904 3,336,412
Panamerican Beverages, Inc. Class A 374,008 11,594,248
--------------
24,432,590
--------------
Netherlands (4.1%)
ASM Lithography Holding NV 'D' 34,500 2,501,285
ASM Lithography Holding NV ADR 'D' 155,830 11,414,547
Philips Electronics NV 416,700 32,568,079
--------------
46,483,911
--------------
New Zealand (3.8%)
Brierley Investments, Ltd. 16,119,083 12,446,318
Fletcher Challenge Building 2,952,212 8,915,961
Fletcher Challenge Forestry 13,221,381 12,761,078
Fletcher Challenge Paper 2,494,725 4,101,148
Sky City, Ltd. 716,675 2,610,700
Wrightson, Ltd. 3,271,735 1,752,086
--------------
42,587,291
--------------
Norway (1.3%)
SAS Norge ASA Class B 445,900 7,497,108
Smedvig ASA Class B 211,600 6,210,937
Smedvig ASA Class B ADR 30,625 888,125
--------------
14,596,170
--------------
Philippines (0.2%)
Millicom International Cellular SA 'D' 61,000 2,562,000
--------------
Portugal (2.0%)
Cimpor Cimentos de Portugal SA 469,100 11,870,884
Portugal Telecom SA 118,900 4,878,382
Portugal Telecom SA ADR 130,700 5,391,375
--------------
22,140,641
--------------
Singapore (2.0%)
DBS Land, Ltd. 3,119,300 5,307,761
Development Bank of Singapore, Ltd. 1,718,262 16,037,112
Development Bank of Singapore, Ltd. ADR 34,750 1,298,955
--------------
22,643,828
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
19
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------------- --------------
COMMON STOCKS (CONT'D)
<S> <C> <C>
South Africa (0.6%)
De Beers Centenary AG 285,500 $ 6,806,230
--------------
South Korea (1.1%)
Hana Bank 90,094 550,834
Kookmin Bank 625 5,052
Korea Europe Fund, Ltd. 'D' 289 350,413
Korea Long Term Credit Bank 102,060 820,710
L.G. Construction Co., Ltd. 59,600 524,974
Samsung Electronics Co., Ltd. 23,649 928,805
Ssangyong Investment & Securities Co., Ltd. 'D' 111,120 616,054
Yukong Co., Ltd. 627,560 8,454,176
--------------
12,251,018
--------------
Spain (0.6%)
Banco de Santander ADR 253,100 6,881,156
--------------
Sweden (2.8%)
ABB AB Series B 687,000 7,922,132
Electrolux AB Series B 285,800 23,622,354
--------------
31,544,486
--------------
Switzerland (3.0%)
Julius Baer Holding AG 'D' 8,830 13,167,820
Oerlikon-Buehrle Holding AG 'D' 98,800 12,618,766
Tag Heuer International SA 'D' 67,304 7,683,653
Tag Heuer International SA ADR 'D' 85,700 985,550
--------------
34,455,789
--------------
Taiwan (0.4%)
China Steel Corp. 5,144,100 3,939,101
Wan Hai Lines Co., Ltd. 570,000 837,964
--------------
4,777,065
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
20
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF VALUE
SHARES -
----------------
COMMON STOCKS (CONT'D)
<S> <C> <C>
Thailand (0.4%)
Bangkok Bank Public Co., Ltd. 104,200 $ 361,537
Industrial Finance Corp. of Thailand 1,944,133 1,638,179
Siam Cement Co., Ltd. 117,000 991,673
Thai Military Bank Public Co., Ltd. 437,360 176,136
Thai Telephone & Communication Public Co., Ltd.'D' 8,452,700 1,885,361
--------------
5,052,886
--------------
United Kingdom (10.4%)
Biocompatibles International PLC 'D' 148,100 1,403,841
British Airport Authority PLC 1,037,712 9,575,332
Care First Group PLC 1,222,900 2,954,389
Cookson Group PLC 3,517,657 14,104,760
Hanson PLC 1,576,325 8,105,700
Imperial Chemical Industries PLC 792,500 11,700,280
London Pacific Group, Ltd. 606,000 2,119,791
Medeva PLC 2,523,600 8,700,549
Norwich Union PLC 'D' 1,500,000 8,556,270
Orange PLC 'D' 3,171,300 12,117,416
Pilkington PLC 3,198,800 8,103,606
Rolls-Royce PLC 2,606,000 9,356,264
Singer & Friedlander Group PLC 1,768,000 4,004,334
Thistle Hotels PLC 2,385,052 6,142,152
Williams Holdings PLC 1,878,121 11,280,306
--------------
118,224,990
--------------
TOTAL COMMON STOCK (Cost $1,040,683,273) 1,039,697,401
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
21
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------------- --------------
PREFERRED STOCK (0.1%)
<S> <C> <C>
South Korea (0.0%)
Samsung Electronics Co., Ltd. 6,931 $ 123,322
--------------
United Kingdom (0.1%)
Singer & Friedlander Group PLC 8.50% (Convertible) 348,947 907,414
--------------
TOTAL PREFERRED STOCK (Cost $848,746) 1,030,736
--------------
STOCK WARRANTS (0.1%)
France (0.1%)
Compagnie Generale Des Eaux, 05/02/01 'D' 87,800 46,424
Rhone-Poulenc Class A, 11/05/01 'D' 235,000 763,873
--------------
810,297
--------------
Indonesia (0.0%)
P.T. Bank International Indonesia, 01/17/00 'D' 188,832 10,686
P.T. Sinar Mas Multiartha, 11/28/01 'D' 20,865 521
--------------
11,207
--------------
Israel (0.0%)
Ampal-American Israel Corp. Class A, 01/31/99 'D' 95,000 5,938
--------------
TOTAL STOCK WARRANTS (Cost $801,961) 827,442
--------------
CALL OPTIONS (0.0%)
New Zealand (0.0%)
Air New Zealand, Ltd., 05/01/98 (Strike Price
$2.4615) 'D' 3,750,000 638
Air New Zealand, Ltd., 05/01/98 (Strike Price
$2.5895) 'D' 3,750,000 225
--------------
863
--------------
Singapore (0.0%)
DBS 50 Index, 01/22/98 (Strike Price $402.7127) 'D' 12,969 0
DBS 50 Index, 01/23/98 (Strike Price $406.912) 'D' 12,596 0
DBS 50 Index, 01/26/98 (Strike Price $407.3930652)
'D' 12,408 0
DBS 50 Index, 02/26/98 (Strike Price $404.0032) 'D' 2,502 1
--------------
1
--------------
TOTAL CALL OPTIONS (Cost $2,375,275) 864
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
22
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
SCHEDULE OF INVESTMENTS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR VALUE
---------------- --------------
CONVERTIBLE BONDS/NOTES (1.0%)
<S> <C> <C>
China (0.1%)
Qingling Motors, Ltd. 3.50%, 01/22/02 $ 820,000 $ 922,172
--------------
Japan (0.4%)
Matsushita Electric Works, Ltd. 2.43%, 05/31/02 (A) 521,000,000 5,297,865
--------------
New Zealand (0.1%)
Brierley Investments, Ltd. 9.00%, 06/30/98 (B) 1,028,875 794,444
--------------
Thailand (0.4%)
Bangkok Bank Public Co., Ltd. 3.25%, 03/03/04 $ 9,168,000 4,427,227
--------------
TOTAL CONVERTIBLE BONDS/NOTES (Cost $16,328,551) 11,441,708
--------------
REPURCHASE AGREEMENT (7.1%)
Repurchase agreement with Goldman, Sachs & Co. dated
10/31/97 at 5.65% to be repurchased at $80,818,034
on 11/03/97. (Collateralized by a pro rata amount of
U.S. Treasury Notes ranging in par values from
$830,000-$50,000,000, 5.125%-8.50%,
01/15/98-11/15/04. Market value of collateral is
$82,446,791.) (Cost $80,780,000) 80,780,000 80,780,000
--------------
TOTAL INVESTMENTS 100.0% (Cost $1,141,817,806*) $1,133,778,151
--------------
--------------
</TABLE>
INVESTMENT ABBREVIATIONS
ADR = American Depository Receipt
GDR = Global Depository Receipt
GDS = Global Depository Share
- --------------------------------------------------------------------------------
'D' Non-income producing security.
* Cost for federal income tax purposes is $1,142,694,064.
(A) Denominated in Japanese Yen.
(B) Denominated in New Zealand Dollars.
See Accompanying Notes to Financial Statements.
23
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND INC. -- SMALL COMPANY GROWTH PORTFOLIO
STATEMENT OF NET ASSETS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------- ------------
<S> <C> <C>
COMMON STOCK (95.0%)
Aerospace & Defense (0.8%)
Doncasters PLC ADR 'D' 63,600 $ 1,713,225
------------
1,713,225
------------
Banks & Savings & Loans (1.7%)
HUBCO, Inc. 57,211 1,991,658
Silicon Valley Bancshares 'D' 33,100 1,808,087
------------
3,799,745
------------
Building & Building Materials (0.8%)
Nobility Homes, Inc. 'D' 10,000 123,750
Service Experts, Inc. 'D' 61,800 1,545,000
------------
1,668,750
------------
Business Services (9.2%)
Corporate Express, Inc. 'D' 110,000 1,615,625
Getty Communications PLC ADR 'D' 114,000 1,681,500
ICTS International NV 'D' 164,000 1,742,500
Norrell Corp. 52,412 1,526,499
Pegasus Systems, Inc. 'D' 14,900 230,950
Prepaid Legal Services, Inc. 'D' 70,100 2,120,525
QuickResponse Services, Inc. 'D' 52,033 1,691,072
Sitel Corp. 'D' 153,700 1,364,087
Strayer Education, Inc. 40,000 1,910,000
Technology Solutions Co. 'D' 67,950 2,140,425
Universal Outdoor Holdings, Inc. 'D' 50,000 2,112,500
Wilmar Industries, Inc. 'D' 71,300 1,871,625
------------
20,007,308
------------
Capital Equipment (1.0%)
JLK Direct Distribution, Inc. Class A 'D' 77,000 2,300,375
------------
Communications & Media (3.6%)
Central European Media Enterprises, Ltd. Class A 'D' 90,147 2,636,800
Heftel Broadcasting Corp. Class A 'D' 28,700 1,908,550
Metro Networks, Inc. 'D' 8,800 272,800
Network Event Theater, Inc. 253,968 1,301,586
Young Broadcasting, Inc. Class A 'D' 45,900 1,663,875
------------
7,783,611
------------
</TABLE>
See Accompanying Notes to Financial Statements.
24
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND INC. -- SMALL COMPANY GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------- ------------
COMMON STOCK (CONT'D)
<S> <C> <C>
Computers (7.1%)
Data Works Corp. 'D' 130,000 $ 2,575,625
Hyperion Software Corp. 'D' 55,000 2,096,875
JDA Software Group, Inc. 'D' 33,300 1,040,625
Learning Tree International, Inc. 'D' 26,000 903,500
National Instruments Corp. 'D' 54,255 2,468,602
PLATINUM Technology, Inc. 'D' 100,000 2,425,000
QAD, Inc. 'D' 105,600 1,491,600
Tecnomatix Technologies, Ltd. 'D' 79,700 2,460,737
------------
15,462,564
------------
Consumer Non-Durables (2.6%)
Central Garden & Pet Co. 'D' 87,400 2,294,250
dELiA*s, Inc. 'D' 95,200 1,975,400
Home Products International, Inc. 'D' 89,200 1,064,825
Interface, Inc. 16,700 482,212
------------
5,816,687
------------
Consumer Services (3.3%)
Avis Rent A Car, Inc. 'D' 66,600 1,827,337
Budget Group, Inc. Class A 'D' 55,100 1,928,500
DeVRY, Inc. 'D' 71,052 1,873,996
ITT Educational Services, Inc. 'D' 66,000 1,592,250
------------
7,222,083
------------
Electronics (8.5%)
Aavid Thermal Technologies, Inc. 'D' 60,600 1,802,850
ADE Corp. 'D' 74,500 2,020,812
Avant! Corp. 'D' 30,000 787,500
Burr-Brown Corp. 'D' 67,334 2,036,853
Cerprobe Corp. 'D' 40,100 726,813
Etec Systems, Inc. 'D' 42,900 1,914,413
KLA-Tencor Corp. 'D' 33,500 1,471,906
Microchip Technology, Inc. 'D' 61,400 2,448,325
SpeedFam International, Inc. 'D' 44,500 1,652,063
Structural Dynamics Research Corp. 'D' 82,600 1,579,725
Technology Modeling Associates, Inc. 'D' 144,600 2,024,400
Uniphase Corp. 'D' 200 13,425
------------
18,479,085
------------
</TABLE>
See Accompanying Notes to Financial Statements.
25
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND INC. -- SMALL COMPANY GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------- ------------
COMMON STOCK (CONT'D)
<S> <C> <C>
Energy (4.2%)
Brown (Tom), Inc. 'D' 65,689 $ 1,625,803
Chieftain International, Inc. 'D' 92,700 2,271,150
KCS Energy, Inc. 96,800 2,547,050
Southern Mineral Corp. 58,875 412,125
Stone Energy Corp. 'D' 67,900 2,266,163
------------
9,122,291
------------
Environmental Services (1.2%)
Casella Waste Systems, Inc. 'D' 23,400 517,725
Allied Waste Industries, Inc. 'D' 99,897 2,035,401
------------
2,553,126
------------
Financial Services (6.2%)
City National Corp. 61,300 1,842,831
PMT Services, Inc. 'D' 150,000 2,418,750
Terra Nova Bermuda Holdings, Ltd. 42,200 1,091,925
Transactions Systems Architects, Inc. Class A 'D' 89,400 3,497,775
Triad Guaranty, Inc. 'D' 80,600 2,377,700
Vesta Insurance Group, Inc. 38,100 2,214,563
------------
13,443,544
------------
Food, Beverages & Tobacco (2.4%)
Consolidated Cigar Holdings, Inc. 'D' 77,400 3,037,950
Suiza Foods Corp. 'D' 42,200 2,125,825
------------
5,163,775
------------
Healthcare (7.1%)
Core, Inc. 'D' 160,800 1,969,800
FPA Medical Management, Inc. 'D' 52,400 1,264,150
Gulf South Medical Supply, Inc. 'D' 57,900 1,910,700
InControl, Inc. 'D' 209,520 1,623,780
Mid Atlantic Medical Services, Inc. 'D' 145,200 2,114,475
Minimed, Inc. 'D' 50,300 1,961,700
Nitinol Medical Technologies, Inc. 'D' 91,800 1,285,200
NovaCare, Inc. 'D' 140,900 1,840,506
Schein (Henry) Inc. 'D' 48,400 1,591,150
------------
15,561,461
------------
Industrial Mfg. & Processing (2.0%)
Compass Plastics & Technologies, Inc. 'D' 70,000 603,750
Elbit Vision Systems, Inc. 'D' 96,800 1,197,900
Total Control Products, Inc. 'D' 200,000 2,525,000
------------
4,326,650
------------
</TABLE>
See Accompanying Notes to Financial Statements.
26
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND INC. -- SMALL COMPANY GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------- ------------
COMMON STOCK (CONT'D)
<S> <C> <C>
Leisure & Entertainment (3.8%)
Family Golf Centers, Inc. 'D' 71,900 $ 1,923,325
N2K, Inc. # 'D' 41,666 877,080
Premier Parks, Inc. 'D' 71,000 2,840,000
Vistana, Inc. 'D' 114,700 2,623,763
------------
8,264,168
------------
Lodging & Restaurants (1.5%)
Doubletree Corp. 'D' 42,824 1,782,549
Bob Evans Farms, Inc. 85,200 1,613,475
------------
3,396,024
------------
Oil Services (4.6%)
Global Industries, Ltd. 'D' 108,000 2,173,500
Petroleum Geo Services ADR 'D' 56,431 3,907,847
Pride International, Inc. 'D' 120,200 3,966,600
------------
10,047,947
------------
Pharmaceuticals (7.0%)
ChiRex, Inc. 'D' 106,500 2,169,938
Columbia Laboratories, Inc. 'D' 137,900 2,206,400
Gilead Sciences, Inc. 'D' 45,635 1,557,294
Owens & Minor, Inc. Holding Co. 128,400 1,797,600
SangStat Medical Corp. 'D' 70,800 2,203,650
Sepracor, Inc. 'D' 56,700 2,034,113
Serologicals Corp. 'D' 102,550 2,358,650
ViroPharma, Inc. 'D' 46,300 1,018,600
------------
15,346,245
------------
Real Estate (3.4%)
Fairfield Communities, Inc. 77,400 3,400,763
LaSalle Partners, Inc. 'D' 29,100 1,063,969
U.S. Home & Garden, Inc. 'D' 589,500 2,800,125
U.S. Restaurant Properties, Inc. 3,000 73,688
------------
7,338,545
------------
Retail (3.5%)
Abercrombie & Fitch Co. Class A 'D' 83,800 2,178,800
Borders Group, Inc. 'D' 126,700 3,286,281
Whole Foods Market, Inc. 'D' 56,000 2,198,000
------------
7,663,081
------------
</TABLE>
See Accompanying Notes to Financial Statements.
27
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND INC. -- SMALL COMPANY GROWTH PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
----------- ------------
COMMON STOCK (CONT'D)
<S> <C> <C>
Telecommunications & Equipment (4.5%)
Arch Communications Group, Inc. 'D' 124,900 $ 952,363
General Communication, Inc. 'D' 154,500 1,158,750
Intermedia Communications of Florida, Inc. 'D' 51,600 2,341,350
McLeodUSA , Inc. Class A 'D' 79,500 2,951,438
Metromedia Fiber Network, Inc. Class A 'D' 21,800 523,200
Stanford Communications, Inc. 'D' 79,300 1,923,025
------------
9,850,126
------------
Transportation (5.0%)
Coach USA, Inc. 'D' 60,500 1,799,875
Heartland Express, Inc. 'D' 71,350 1,962,125
M.S. Carriers, Inc. 'D' 45,000 1,140,469
Mark VII, Inc. 'D' 49,431 1,526,182
Simon Transportation Services, Inc. 'D' 79,400 1,766,650
Swift Transportation Co., Inc. 'D' 78,500 2,512,000
------------
10,707,301
------------
TOTAL COMMON STOCK (Cost $161,517,058) 207,037,717
------------
<CAPTION>
PAR
(000)
-----------
REPURCHASE AGREEMENT (6.3%)
Repurchase agreement with Goldman, Sachs & Co. dated
10/31/97 at 5.65% to be repurchased at $13,637,418 on
11/03/97. (Collateralized by a pro rata amount of U.S.
Treasury Notes ranging in par values from
$830,000-$50,000,000, 5.125%-8.50%, 01/15/98-11/15/04.
Market value of collateral is $13,912,258.)
(Cost $13,631,000) $ 13,631 13,631,000
------------
TOTAL INVESTMENTS (101.3%) (Cost $175,148,058) 220,668,717
LIABILITES IN EXCESS OF OTHER ASSETS (1.3%) (2,807,710)
------------
NET ASSETS (100.0%) (applicable to 13,713,658 shares
outstanding) $217,861,007
------------
------------
NET ASSET VALUE, Offering and redemption price per share
($217,861,007[div]13,713,658) $15.89
</TABLE>
INVESTMENT ABBREVIATIONS
ADR = American Depository Receipt
- --------------------------------------------------------------------------------
'D' Non-income producing security.
* Cost for federal income tax purposes is $175,150,891.
# Restricted security.
See Accompanying Notes to Financial Statements.
28
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- EMERGING MARKETS PORTFOLIO
STATEMENT OF NET ASSETS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------- -----------
<S> <C> <C>
COMMON STOCK (88.4%)
Argentina (5.1%)
Banco de Galicia & Buenos Aires SA de CV ADR 23,400 $ 567,084
Telefonica de Argentina SA ADR 7,300 205,312
YPF SA Sponsored ADR 35,000 1,120,000
-----------
1,892,396
-----------
Australia (2.9%)
Accor Asia Pacific Co., Ltd. 981,200 345,039
Cue Energy Resources NL 'D' 1,989,363 251,841
Oil Search, Ltd. 117,600 213,387
Orogen Minerals, Ltd. ADR 12,300 268,767
-----------
1,079,034
-----------
Brazil (6.0%)
CIA de Saneamento Basico do Estado de Sao Paulo 4,731,500 875,488
Companhia de Eletricidade Da Bahia 'D' 7,591,000 413,116
Light Participacoes SA 'D' 897,000 229,437
Petroleo Brasileiro SA 1,784,500 331,812
Telecomunicacoes Brasileiras SA Sponsored ADR 3,900 395,850
-----------
2,245,703
-----------
Chile (5.6%)
Banco de A. Edwards ADR 36,000 625,500
Santa Isabel SA ADR 49,200 910,200
Supermercados Unimarc SA ADR 'D' 37,200 558,000
-----------
2,093,700
-----------
China (5.4%)
China Hong Kong Photo Products Holdings, Ltd. 569,400 143,611
China Southern Airlines Co., Ltd. Class H 'D' 1,418,000 628,164
China Telecom, Ltd. 'D' 656,000 1,047,869
Guangshen Railway Co., Ltd. 134,000 41,596
Qingling Motors Co., Ltd. Series H 251,300 164,142
-----------
2,025,382
-----------
Finland (3.2%)
Hartwall OY AB 14,700 1,206,640
-----------
France (3.4%)
Bouygues Offshore SA ADR 52,450 1,271,912
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
29
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- EMERGING MARKETS PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------- -----------
COMMON STOCK (CONT'D)
<S> <C> <C>
Hong Kong (5.8%)
First Pacific Co., Ltd. 949,435 $ 598,654
Guangshen Railway Co., Ltd. ADR 'D' 37,400 546,975
Hong Kong Land Holdings, Ltd. 35,025 79,857
Jardine Matheson Holdings, Ltd. 67,883 434,451
Wing Hang Bank, Ltd. 194,100 499,591
-----------
2,159,528
-----------
India (7.7%)
Hindalco Industries, Ltd. GDR 16,700 482,630
Indo Rama Synthetics GDR 10,000 57,340
Reliance Industries, Ltd. GDS 29,700 623,700
State Bank of India, Ltd. GDR 33,600 618,240
Tata Engineering & Locomotive Co., Ltd. GDR 103,300 1,074,320
-----------
2,856,230
-----------
Indonesia (4.4%)
P.T. Bank NISP 539,200 134,613
P.T. Hanjaya Mandala Sampoerna 344,500 599,650
P.T. Semen Gresik 942,400 914,951
-----------
1,649,214
-----------
Israel (6.4%)
Blue Square Israel Co., Ltd. ADR 'D' 55,800 648,675
ECI Telecommunications Limited Designs 47,200 1,303,900
Teva Pharmaceutical Industries, Ltd. ADR 9,200 430,100
-----------
2,382,675
-----------
Mexico (9.9%)
Alfa SA de CV Series A 100,700 739,469
Apasco SA de CV 63,000 383,642
Cintra SA 'D' 705,400 667,077
Consorcio Hogar SA de CV Series B 'D' 421,000 779,164
Fomento Economico Mexicano SA de CV 20,000 140,418
Gruma SA de CV Class B 'D' 45,300 177,414
Grupo Industrial Saltillo SA de CV 'D' 121,000 390,090
Panamerican Beverages, Inc. Class A 13,700 424,700
-----------
3,701,974
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
30
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- EMERGING MARKETS PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------- -----------
COMMON STOCK (CONT'D)
<S> <C> <C>
Philippines (2.2%)
Hi Cement Corp. 500,000 $ 45,134
Millicom International Cellular SA ADR 'D' 15,100 634,200
Solid Group, Inc. 2,155,237 132,536
-----------
811,870
-----------
Poland (1.1%)
Bank Slaski SA 7,400 431,047
-----------
Portugal (4.4%)
Mota e Companhia SA 57,000 956,213
Portugal Telecom SA 16,600 681,086
-----------
1,637,299
-----------
Russia (1.3%)
The Russian Prosperity Fund A 'D' 15,244 476,985
-----------
Singapore (6.3%)
DBS Land, Ltd. 397,000 675,530
Development Bank of Singapore, Ltd. 125,000 1,166,667
Keppel Bank 307,200 501,272
-----------
2,343,469
-----------
South Africa (1.4%)
De Beers Centenary AG 22,062 525,951
-----------
South Korea (2.7%)
Korea Housing & Commercial Bank 'D' 14,560 162,333
L.G. Construction Co., Ltd. 6,500 57,254
Pohang Iron & Steel Co., Ltd. 2,580 114,223
Samsung Electronics Co., Ltd. 2,600 102,114
Yukong Co., Ltd. 42,200 568,497
-----------
1,004,421
-----------
Taiwan (0.2%)
Wan Hai Lines Co., Ltd. 42,465 62,428
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
31
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- EMERGING MARKETS PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------- -----------
COMMON STOCK (CONT'D)
<S> <C> <C>
Thailand (3.0%)
Hana Microelectronics Public Co., Ltd. 109,600 $ 198,285
Industrial Finance Corp. of Thailand 400,600 337,556
Jasmine International Public Co., Ltd. 19,000 10,595
Land and House Public Co., Ltd. 204 177
Precious Shipping Public Co., Ltd. 75,032 59,040
Ruam Pattana Fund II 1,342,851 256,257
Siam Cement Co., Ltd. 16,900 143,242
Thai Military Bank Public Co., Ltd. 108,500 43,696
Thai Telephone & Communication Public Co., Ltd. 'D' 280,000 62,454
-----------
1,111,302
-----------
TOTAL COMMON STOCK (Cost $39,200,986) 32,969,160
-----------
CALL OPTIONS (0.0%)
Singapore (0.0%)
DBS 50 Index, 01/22/98 (Strike Price $402.7127) 'D' 412 0
DBS 50 Index, 01/23/98 (Strike Price $406.912) 'D' 400 0
DBS 50 Index, 01/26/98 (Strike Price $407.3930652) 'D' 394 0
DBS 50 Index, 02/26/98 (Strike Price $407.3930652) 'D' 79 0
-----------
0
-----------
TOTAL CALL OPTIONS (Cost $56,000) 0
-----------
STOCK RIGHTS (0.5%)
Thailand (0.5%)
Hana Microelectronics Public Co., Ltd., 12/02/97 'D'
(Cost $234,665) 109,600 171,123
-----------
PAR
(000)
CONVERTIBLE BONDS/NOTES (2.1%)
China (1.0%)
Qingling Motors, Ltd. 3.50%, 01/22/02 $ 323 363,246
-----------
South Korea (1.0%)
Samsung Electronics Co., Ltd. 0.25%, 12/31/06 390 370,500
-----------
Thailand (0.1%)
Bangkok Bank Public Co., Ltd. 3.25%, 03/03/04 123 59,397
-----------
TOTAL CONVERTIBLE BONDS/NOTES (Cost $878,614) 793,143
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
32
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- EMERGING MARKETS PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR
(000) VALUE
REPURCHASE AGREEMENT (6.2%)
<S> <C> <C>
Repurchase agreement with Goldman, Sachs & Co. dated
10/31/97 at 5.65% to be repurchased at $2,303,084 on
11/03/97. (Collateralized by a pro rata amount of U.S.
Treasury Notes ranging in par values from
$830,000-$50,000,000, 5.125%-8.50%, 01/15/98-11/15/04.
Market value of collateral is $2,349,499.) (Cost
$2,302,000) $ 2,302 $ 2,302,000
-----------
TOTAL INVESTMENTS (97.2%) (Cost $42,672,265*) 36,235,426
OTHER ASSETS IN EXCESS OF LIABILITIES (2.8%) 1,045,877
-----------
NET ASSETS (100.0%) (applicable to 3,983,726 shares outstanding) $37,281,303
-----------
-----------
NET ASSET VALUE, offering and redemption price per share
($37,281,303[div]3,983,726) $9.36
</TABLE>
INVESTMENT ABBREVIATIONS
ADR = American Depository Receipt
GDR = Global Depository Receipt
GDS = Global Depository Share
- --------------------------------------------------------------------------------
'D' Non-income producing security.
* Cost for federal income tax purposes is $42,765,422.
See Accompanying Notes to Financial Statements.
33
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- MANAGED EAFE COUNTRIES PORTFOLIO
STATEMENT OF NET ASSETS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ----------
<S> <C> <C>
COMMON STOCKS (92.9%)
Australia (2.1%)
Burns, Philp & Co., Ltd. 151,092 $ 79,697
National Australia Bank, Ltd. 1,400 19,151
----------
98,848
----------
Austria (2.3%)
Boehler-Uddeholm AG 220 15,765
Radex-Heraklith Industries 1,100 42,675
V.A. Technologie AG 287 50,897
----------
109,337
----------
Denmark (1.0%)
SAS Danmark AS 2,855 49,150
----------
Finland (3.7%)
Huhtamaki OY Class I 1,500 61,708
Rauma OY 4,785 89,645
Upm-Kymmene Corp. 1,300 28,900
----------
180,253
----------
France (12.0%)
Axa-UAP SA 2,300 157,499
Banque Nationale de Paris 2,000 88,414
Bouygues Offshore SA ADR 3,700 89,725
Compagnie de Saint Gobain 713 102,346
Compagnie Generale des Eaux 100 11,667
Rhone-Poulenc Ltd., Class A 1,600 69,761
Societe Generale d'Entreprises SA 2,100 53,808
----------
573,220
----------
Germany (6.2%)
Deutsche Bank AG 300 19,810
Fresenius Medical Care AG 'D' 1,400 101,049
Hoechst AG 3,566 136,963
Schmalbach Lubeca AG 200 37,162
----------
294,984
----------
Hong Kong (1.5%)
First Pacific Co., Ltd. 48,391 30,512
Wing Hang Bank, Ltd. 16,500 42,469
----------
72,981
----------
Ireland (2.6%)
Kerry Group PLC Class A 10,400 125,865
----------
</TABLE>
See Accompanying Notes to Financial Statements.
34
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- MANAGED EAFE COUNTRIES PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ----------
COMMON STOCKS (CONT'D)
<S> <C> <C>
Italy (3.9%)
Assicurazioni Generali SPA 600 $ 13,410
Ente Nazionale Idrocarburi SPA 10,629 59,751
Parmalat Finanziaria SPA 40,900 56,755
Telecom Italia SPA 9,000 56,386
----------
186,302
----------
Japan (25.1%)
Advantest Corp. 800 66,129
DDI Corp. 6 20,038
Fuji Bank, Ltd. 7,000 60,480
Fujikura, Ltd. 10,000 68,539
Fujitsu, Ltd. 7,000 76,763
KAO Corp. 5,000 69,785
Matsushita Electric Works, Ltd. 5,000 45,277
NEC Corp. 7,000 76,763
Nichiei Co., Ltd. 600 65,797
Nidec Corp. 1,000 39,046
Orix Corp. 1,000 68,289
Rohm Co., Ltd. 1,000 98,862
Sankyo Co., Ltd. 2,000 65,963
Shohkoh Fund & Co., Ltd. 300 97,200
Sony Corp. 1,000 82,994
Sumitomo Bank, Ltd. 5,000 53,169
Tokyo Electron, Ltd. 2,000 99,693
Yamanouchi Pharmaceutical Co., Ltd. 2,000 49,182
----------
1,203,969
----------
Netherlands (2.8%)
ASM Lithography Holding NV ADR 'D' 570 41,753
Philips Electronics NV 1,205 94,179
----------
135,932
----------
New Zealand (2.6%)
Brierley Investments, Ltd. 114,800 88,643
Fletcher Challenge Forestry 35,400 34,168
----------
122,811
----------
Norway (1.4%)
SAS Norge ASA Series B 700 11,769
Smedvig ASA ADR Class B 1,900 55,100
----------
66,869
----------
</TABLE>
See Accompanying Notes to Financial Statements.
35
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- MANAGED EAFE COUNTRIES PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
--------- ----------
COMMON STOCKS (CONT'D)
<S> <C> <C>
Singapore (1.1%)
Development Bank of Singapore, Ltd. 5,400 $ 50,400
----------
Sweden (4.9%)
ABB AB Series B 3,300 38,054
Biora AB ADR 'D' 4,800 94,200
Electrolux AB Series B 1,270 104,970
----------
237,224
----------
Switzerland (7.2%)
Julius Baer Holding AG 'D' 65 96,932
Oerlikon-Buehrle Holding AG 'D' 1,454 185,705
Tag Heuer International SA ADR 'D' 5,600 64,400
----------
347,037
----------
United Kingdom (12.5%)
Biocompatibles International PLC 'D' 2,880 27,300
British-Borneo Petroleum Syndicate PLC 9,900 79,060
Cookson Group PLC 13,800 55,334
Hanson PLC 6,300 32,396
Imperial Chemical Industries PLC 3,000 44,291
Medeva PLC 16,050 55,335
Orange PLC 'D' 25,000 95,524
Pilkington PLC 23,900 60,547
Rolls-Royce PLC 11,700 42,006
Williams Holdings PLC 17,647 105,991
----------
597,784
----------
TOTAL COMMON STOCK (Cost $4,613,629) 4,452,966
----------
STOCK WARRANTS (0.0%)
Rhone-Poulenc SA Class A, 11/05/01 'D'
(Cost $2,393) 900 2,926
----------
</TABLE>
See Accompanying Notes to Financial Statements.
36
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- MANAGED EAFE COUNTRIES PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAR
(000) VALUE
--------- ----------
REPURCHASE AGREEMENT (5.6%)
<S> <C> <C>
Repurchase agreement with Goldman, Sachs & Co. dated
10/31/97 at 5.65% to be repurchased at $268,126 on
11/03/97. (Collateralized by a pro rata amount of U.S.
Treasury Notes ranging in par values from
$830,000-$50,000,000, 5.125%-8.50%, 01/15/98-11/15/04.
Market value of collateral is $273,530.) (Cost $268,000) $ 268 $ 268,000
----------
TOTAL INVESTMENTS (98.5%) (Cost $4,884,022*) 4,723,892
OTHER ASSETS IN EXCESS OF LIABILITIES (1.5%) 71,961
----------
NET ASSETS (100.0%) (applicable to 433,621 shares outstanding) $4,795,853
----------
----------
NET ASSET VALUE, offering and redemption price per
share ($4,795,853[div]433,621) $11.06
----------
----------
</TABLE>
INVESTMENT ABBREVIATIONS
ADR = American Depository Receipt
GDR = Global Depositary Receipt
GDS = Global Depositary Share
- --------------------------------------------------------------------------------
'D' Non-income producing security.
* Cost for federal income tax purposes is $4,884,999.
See Accompanying Notes to Financial Statements.
37
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- VALUE PORTFOLIO
STATEMENT OF NET ASSETS
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------- -----------
<S> <C> <C>
COMMON STOCK (85.4%)
Aerospace & Defense (4.8%)
Gulfstream Aerospace Corp. 'D' 6,900 $ 200,100
Litton Industries, Inc. 'D' 3,100 157,325
Lockheed Martin Corp. 1,900 180,619
Raytheon Co. 3,900 211,575
-----------
749,619
-----------
Banks & Savings & Loans (2.9%)
Bank of New York Co., Inc. 2,400 112,950
Citicorp 2,700 337,669
-----------
450,619
-----------
Building & Building Materials (1.7%)
USG Corp. 'D' 5,700 268,969
-----------
Business Services (0.7%)
Deluxe Corp. 1,700 55,675
H & R Block, Inc. 1,500 55,500
-----------
111,175
-----------
Capital Equipment (5.6%)
AlliedSignal, Inc. 4,000 144,000
American Standard Co, Inc. 'D' 3,700 132,275
Cummins Engine Co., Inc. 2,000 121,875
Dresser Industries, Inc. 1,400 58,975
Emerson Electric Co. 2,100 110,119
Ingersoll-Rand Co. 2,850 110,972
ITT Industries, Inc. 6,300 198,844
-----------
877,060
-----------
Chemicals (3.6%)
Ferro Corp. 2,100 78,619
Olin Corp. 3,700 168,119
Rhone-Poulenc SA Series A ADR 1,900 80,275
Union Carbide Corp. 5,000 228,437
-----------
555,450
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
38
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- VALUE PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------- -----------
COMMON STOCK (CONT'D)
<S> <C> <C>
Computers (6.6%)
Automatic Data Processing, Inc. 5,600 $ 286,300
Hewlett-Packard Co. 2,500 154,219
International Business Machines Corp. 3,500 343,219
Seagate Technology, Inc. 'D' 5,600 151,900
Sun Microsystems, Inc. 'D' 2,500 85,625
-----------
1,021,263
-----------
Conglomerates (2.4%)
Harsco Corp. 3,500 145,250
United Technologies Corp. 3,200 224,000
-----------
369,250
-----------
Consumer Durables (5.3%)
Chrysler Corp. 12,400 437,099
Ford Motor Co. 4,700 205,331
Maytag Corp. 2,400 80,100
Volvo AB Class B ADR 4,100 106,600
-----------
829,130
-----------
Consumer Non-Durables (2.2%)
Newell Co. 1,800 69,075
Premark International, Inc. 1,000 27,000
RJR Nabisco Holdings Corp. 3,600 114,075
Unilever NV 2,600 138,775
-----------
348,925
-----------
Electronics (0.6%)
Western Digital Corp. 2,900 86,819
-----------
Energy (7.5%)
British Petroleum Co. PLC ADR 5,100 447,525
Exxon Corp. 4,900 301,044
Mobil Corp. 1,600 116,500
Pioneer Natural Resources Co. 2,500 100,156
Total SA ADR 3,600 199,800
-----------
1,165,025
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
39
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- VALUE PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------- -----------
COMMON STOCK (CONT'D)
<S> <C> <C>
Financial Services (7.0%)
American Express Co. 750 $ 58,500
Fannie Mae 3,500 169,531
Freddie Mac 3,000 113,625
General Re Corp. 300 59,156
Household International, Inc. 900 101,925
Lehman Brothers Holdings, Inc. 2,000 94,125
MBIA, Inc. 2,500 149,375
Provident Companies, Inc. 3,400 113,475
Terra Nova Bermuda Holdings, Ltd. Class A 2,800 72,450
USF&G Corp. 3,100 62,775
W. R. Berkley Corp. 2,400 98,700
-----------
1,093,637
-----------
Food, Beverages & Tobacco (5.8%)
Anheuser-Busch Companies, Inc. 5,700 227,644
PepsiCo, Inc. 3,400 125,162
Philip Morris Co., Inc. 7,300 289,262
Ralston Purina Group 1,000 89,750
Sara Lee Corp. 2,000 102,250
Swedish Match Co. AB ADR 'D' 2,300 71,875
-----------
905,943
-----------
Healthcare (3.2%)
Baxter International, Inc. 3,400 157,250
Foundation Health Systems, Inc. Class A 'D' 2,100 60,375
Tenet Healthcare Corp. 'D' 3,800 116,137
Trigon Healthcare, Inc. 'D' 2,300 56,206
Wellpoint Health Networks, Inc. 'D' 2,500 114,375
-----------
504,343
-----------
Industrial Mfg. & Processing (0.4%)
Eaton Corp. 700 67,637
-----------
Leisure & Entertainment (0.8%)
Polaroid Corp. 2,600 116,837
-----------
Lodging & Restaurants (1.3%)
La Quinta Inns, Inc. 11,000 196,625
-----------
Metals & Mining (2.1%)
Alumax, Inc. 'D' 6,300 204,750
Aluminum Company of America 1,600 116,800
-----------
321,550
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
40
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- VALUE PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------- -----------
COMMON STOCK (CONT'D)
<S> <C> <C>
Office Equipment & Supplies (0.7%)
Pitney Bowes, Inc. 1,400 $ 111,037
-----------
Oil Services (4.1%)
Noble Drilling Corp. 'D' 6,000 213,375
Reading & Bates Corp. 'D' 2,500 105,937
Transocean Offshore, Inc. 3,200 172,800
Western Atlas, Inc. 'D' 1,600 137,900
-----------
630,012
-----------
Pharmaceuticals (2.8%)
American Home Products Corp. 2,700 200,137
Merck & Co., Inc. 2,700 240,975
-----------
441,112
-----------
Retail (5.9%)
Carson Pirie Scott & Co. 'D' 2,200 106,012
Federated Department Stores, Inc. 'D' 5,900 259,600
May Department Stores Co. 2,100 113,138
Neiman-Marcus Group, Inc. 'D' 2,500 82,969
Payless ShoeSource, Inc. 'D' 2,700 150,525
Rite Aid Corp. 600 35,625
Wal-Mart Stores, Inc. 4,900 172,113
-----------
919,982
-----------
Telecommunications & Equipment (4.3%)
ALLTEL Corp. 1,900 67,213
Ameritech Corp. 2,100 136,500
Bell Atlantic Corp. 3,359 268,300
SBC Communications, Inc. 3,200 203,600
-----------
675,613
-----------
Transportation (1.4%)
Burlington Northern Santa Fe Corp. 1,000 95,000
CSX Corp. 2,200 120,313
-----------
215,313
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
41
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- VALUE PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NUMBER OF
SHARES VALUE
---------- -----------
COMMON STOCK (CONT'D)
<S> <C> <C>
Utilities-Electric (1.7%)
Allegheny Energy, Inc. 1,900 $ 53,675
American Electric Power Co., Inc. 2,000 94,500
DQE, Inc. 600 18,563
Entergy Corp. 2,200 53,763
Illinova Corp. 2,000 44,500
-----------
265,001
-----------
TOTAL COMMON STOCK (Cost $13,551,263) 13,297,946
-----------
CONVERTIBLE PREFERRED STOCK (3.8%)
Communications & Media (0.6%)
AirTouch Communications, Inc. Series B (Callable 08/16/99
@ $35.96) 2,800 97,825
-----------
Financial Services (1.8%)
Allstate Corp. Exchangable Notes (Callable 04/15/98 @
$41.50) 5,600 278,950
-----------
Pharmaceuticals (0.5%)
Merrill Lynch Series IGL 6.25% (Callable 07/01/01 @
$46.28) 2,200 79,475
-----------
Real Estate (0.9%)
Equity Residential Properties 7.25% 5,400 135,338
-----------
TOTAL CONVERTIBLE PREFERRED STOCK (Cost $587,882) 591,588
-----------
RIGHTS AND WARRANTS (0.0%)
Chemicals (0.0%)
Rhone-Poulenc SA ADR Wts., 11/05/01 (Cost $1,541) 700 2,100
-----------
PAR
CONVERTIBLE BONDS (1.0%) (000)
Costco Companies, Inc. 0.00%, 08/19/17 (Callable 08/19/02
at $59.425) (Putable 08/19/02 at $59.425) $ 100 53,625
Rite Aid Corp. 5.25%, 9/15/02 (Callable 09/15/00 at
$102.10) 100 107,750
-----------
TOTAL CONVERTIBLE BONDS (Cost $162,292) 161,375
-----------
REPURCHASE AGREEMENT (11.0%)
Repurchase agreement with Goldman, Sachs & Co. dated
10/31/97 at 5.65% to be repurchased at $1,706,803 on
11/03/97. (Collateralized by a pro rata amount of U.S.
Treasury Notes ranging in par values from
$830,000-$50,000,000, 5.125%-8.50%, 01/15/98-11/15/04.
Market value of collateral is $1,741,201.) (Cost
$1,706,000) 1,706 1,706,000
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
42
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- VALUE PORTFOLIO
STATEMENT OF NET ASSETS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
VALUE
TOTAL INVESTMENTS (101.2%) (Cost $16,008,978) $15,759,009
LIABILITIES IN EXCESS OF OTHER ASSETS (1.2%) (194,131)
-----------
NET ASSETS (100.0%) (applicable to 1,463,512 shares outstanding) $15,564,878
NET ASSET VALUE, offering and redemption price per share
($15,564,878[div]1,463,512) $10.64
-----------
-----------
</TABLE>
INVESTMENT ABBREVIATIONS
ADR = American Depository Receipt
- --------------------------------------------------------------------------------
'D' Non-income producing security.
* Cost for federal income tax purposes is $16,019,109.
See Accompanying Notes to Financial Statements.
43
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at value (Cost $1,141,817,806) $1,133,778,151
Receivable for investments sold (Cost $55,355,779) 55,376,739
Receivable for unrealized gains on forward contracts 6,586,212
Dividends, interest, and reclaims receivable (Cost $4,653,739) 4,629,461
Receivable for fund shares sold 589,599
Foreign currency (Cost $483,681) 482,536
Other assets 8,848
--------------
TOTAL ASSETS 1,201,451,546
--------------
LIABILITIES
Payable for investments purchased (Cost $23,782,780) 23,955,238
Payable for realized loss on Korean equity swap 3,109,678
Payable for realized loss on forward contracts 1,382,857
Accrued expenses payable 1,343,763
Other liabilities 1,059,080
Payable for unrealized loss on Korean equity swap 666,131
Payable for fund shares redeemed 117,995
--------------
TOTAL LIABILITIES 31,634,742
--------------
NET ASSETS, applicable to 70,860,673 shares outstanding $1,169,816,804
--------------
--------------
NET ASSET VALUE, offering and redemption price per share
($1,169,816,804[div]70,860,673) $16.51
-------
-------
</TABLE>
See Accompanying Notes to Financial Statements.
44
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC.
STATEMENT OF OPERATIONS
For the Year or Period Ended October 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY SMALL COMPANY EMERGING MARKETS MANAGED EAFE'r' VALUE
PORTFOLIO GROWTH PORTFOLIO PORTFOLIO COUNTRIES PORTFOLIO(1) PORTFOLIO(2)
-------------------- -------------------- ---------------- ---------------------- ------------------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 21,343,980 $ 169,981 $ 606,274 $ 21,437 $ 49,086
Interest 3,651,524 550,271 277,856 14,585 20,704
Foreign taxes
withheld (2,224,024) 0 (67,555) (2,328) 0
-------- -------- -------- ------- -------
Total investment
income 22,771,480 720,252 816,575 33,694 69,790
-------- -------- -------- ------- -------
EXPENSES:
Investment advisory 9,423,008 1,405,403 376,368 12,662 22,250
Administrative
services 2,141,814 312,312 82,801 3,482 5,933
Custodian/Sub-Custodian 870,021 44,132 52,577 14,446 12,570
Directors 4,000 2,271 667 938 500
Insurance 19,608 1,807 393 11 500
Interest 10,348 1,328 125 8 0
Offering/Organizational
Costs 19,480 16,463 67,291 58,193 13,480
Professional
Services 119,053 23,426 12,003 14,132 4,513
Registration 119,475 43,790 20,518 7,024 6,038
Transfer Agent 6,785 614 34 146 209
Miscellaneous 115,660 15,065 8,278 9,873 5,668
-------- -------- -------- ------- -------
12,849,252 1,866,611 621,055 120,915 71,661
Less: fees waived,
expenses
reimbursed and
transfer agent
offsets (1,659,430) (320,667) (150,594) (105,879) (49,411)
-------- -------- -------- ------- -------
Total expenses 11,189,822 1,545,944 470,461 15,036 22,250
-------- -------- -------- ------- -------
Net investment
income (loss) 11,581,658 (825,692) 346,114 18,658 47,540
-------- -------- -------- ------- -------
NET REALIZED AND
UNREALIZED GAIN (LOSS)
FROM INVESTMENTS AND
FOREIGN CURRENCY
RELATED ITEMS:
Net realized gain
(loss) from
security and other
related
transactions 58,513,022 (1,525,965) 2,515,798 91,300 69,262
Net realized gain
(loss) from
foreign currency
related items 23,820,080 0 (144,915) (1,829) 0
Net change in
unrealized
appreciation
(depreciation)
from investments
and foreign
currency related
items (39,639,490) 42,310,135 (6,041,288) (144,276) (249,969)
-------- -------- -------- ------- -------
Net realized and
unrealized gain
(loss) from
investments and
foreign currency
related items 42,693,612 40,784,170 (3,670,405) (54,805) (180,707)
-------- -------- -------- ------- -------
Net increase
(decrease) in net
assets resulting
from operations $ 54,275,270 $ 39,958,478 $ (3,324,291) $ (36,147) $ (133,167)
-------- -------- -------- ------- -------
-------- -------- -------- ------- -------
</TABLE>
- --------------------------------------------------------------------------------
(1) For the period March 31, 1997 (Commencement of Operations) through October
31, 1997.
(2) For the period June 30, 1997 (Commencement of Operations) through October
31, 1997.
See Accompanying Notes to Financial Statements.
45
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO
-----------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
OCTOBER 31, 1997 OCTOBER 31, 1996
---------------- ----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ 11,581,658 $ 7,382,576
Net realized gain (loss) from security and other related
transactions 58,513,022 19,372,193
Net realized gain (loss) from foreign currency related items 23,820,080 21,564,400
Net change in unrealized appreciation (depreciation) from
investments
and foreign currency related items (39,639,490) 4,818,352
---------------- ----------------
Net increase (decrease) in net assets resulting from
operations 54,275,270 53,137,521
---------------- ----------------
FROM DISTRIBUTIONS:
Dividends from net investment income (7,904,857) (17,882,333)
Distributions from realized gains (29,169,050) 0
---------------- ----------------
Net decrease in net assets from distributions (37,073,907) (17,882,333)
---------------- ----------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 383,795,316 430,798,265
Reinvested dividends 32,747,095 13,380,860
Net asset value of shares redeemed (201,370,170) (49,750,004)
---------------- ----------------
Net increase in net assets from capital share
transactions 215,172,241 394,429,121
---------------- ----------------
Net increase in net assets 232,373,604 429,684,309
NET ASSETS:
Beginning of period 937,443,200 507,758,891
---------------- ----------------
End of period $1,169,816,804 $937,443,200
---------------- ----------------
---------------- ----------------
UNDISTRIBUTED NET INVESTMENT INCOME: $ 14,484,339 $ 18,518,234
---------------- ----------------
---------------- ----------------
</TABLE>
See Accompanying Notes to Financial Statements.
46
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MANAGED EAFE'r'
SMALL COMPANY GROWTH PORTFOLIO EMERGING MARKETS PORTFOLIO COUNTRIES PORTFOLIO
--------------------------------------- -------------------------------------- ---------------------
FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD
DECEMBER 29, 1995 SEPTEMBER 30, 1996 MARCH 31, 1997
FOR THE (COMMENCEMENT OF FOR THE (COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OPERATIONS) THROUGH YEAR ENDED OPERATIONS) THROUGH OPERATIONS) THROUGH
OCTOBER 31, 1997 OCTOBER 31, 1996 OCTOBER 31, 1997 OCTOBER 31, 1996 OCTOBER 31, 1997
---------------- --------------------- ---------------- -------------------- ---------------------
<S> <C> <C> <C> <C> <C>
$ (825,692) $ (53,997) $ 346,114 $ 37,630 $ 18,658
(1,525,965) (783,063) 2,515,798 (5,175) 91,300
0 0 (144,915) 5,335 (1,829)
42,310,135 3,210,524 (6,041,288) (439,668) (144,276)
---------------- ---------- ---------------- ---------- --------
39,958,478 2,373,464 (3,324,291) (401,878) (36,147)
---------------- ---------- ---------------- ---------- --------
0 0 (208,151) 0 0
0 0 (5,335) 0 0
---------------- ---------- ---------------- ---------- --------
0 0 (213,486) 0 0
---------------- ---------- ---------------- ---------- --------
109,080,019 94,452,619 14,718,591 30,000,000 4,832,000
0 0 213,486 0 0
(28,004,573) 0 (3,811,119) 0 0
---------------- ---------- ---------------- ---------- --------
81,075,446 94,452,619 11,120,958 30,000,000 4,832,000
---------------- ---------- ---------------- ---------- --------
121,033,924 96,826,083 7,583,181 29,598,122 4,795,853
96,827,083 1,000 29,698,122 100,000 0
---------------- ---------- ---------------- ---------- --------
$217,861,007 $96,827,083 $ 37,281,303 $ 29,698,122 $ 4,795,853
---------------- ---------- ---------------- ---------- --------
---------------- ---------- ---------------- ---------- --------
$ 0 $ 0 $ (218,637) $ 42,965 $ 62,604
---------------- ---------- ---------------- ---------- --------
---------------- ---------- ---------------- ---------- --------
<CAPTION>
VALUE
PORTFOLIO
---------------------
FOR THE PERIOD
JUNE 30, 1997
(COMMENCEMENT OF
OPERATIONS) THROUGH
OCTOBER 31, 1997
---------------------
<S> <C>
$ 47,540
69,262
0
(249,969)
----------
(133,167)
----------
0
0
----------
0
----------
16,031,704
0
(333,659)
----------
15,698,045
----------
15,564,878
0
----------
$15,564,878
----------
----------
$ 60,177
----------
----------
</TABLE>
47
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
(For a Share of the Portfolio Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
OCTOBER 31,
--------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $16.14 $15.10 $16.34 $13.49 $ 9.62
------ ------ ------ ------ ------
Income from Investment Operations:
Net Investment Income .20 .26 .15 .17 .10
Net Gain/(Loss) from Securities and Foreign
Currency Related Items (both realized and
unrealized) .78 1.28 (.64) 2.87 3.87
------ ------ ------ ------ ------
Total from Investment Operations .98 1.54 (.49) 3.04 3.97
------ ------ ------ ------ ------
Less Distributions:
Dividends from net investment income (.13) (.50) (.18) (.07) (.10)
Distributions from net realized gains (.48) .00 (.57) (.12) .00
------ ------ ------ ------ ------
Total Distributions (.61) (.50) (.75) (.19) (.10)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD $16.51 $16.14 $15.10 $16.34 $13.49
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Total Return 6.20% 10.48% (2.83%) 22.62% 41.61%
RATIOS /SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $1,169,817 $937,443 $507,759 $331,297 $109,280
Ratios to average daily net assets:
Operating expenses .95%@ .96%@ .95% .95% .95%
Net investment income .98% 1.05% 1.20% .59% .75%
Decrease reflected in above operating expense
ratios due to waivers/reimbursements. .14% .18% .23% .29% .44%
Portfolio Turnover Rate 69.99% 29.91% 39.70% 19.34% 19.40%
Average Commission Rate # $.0169 $.0154 -- -- --
</TABLE>
- --------------------------------------------------------------------------------
@ Interest earned on uninvested cash balances is used to offset portions of the
transfer agent expense. These arrangements resulted in a reduction to the
Portfolio's expenses by .00% and .01% for the years ended October 31, 1997 and
1996, respectively. The operating expense ratio after reflecting these
arrangements were .95% and .95% for the years ended October 31, 1997 and 1996,
respectively.
'D' Non-annualized.
* Annualized.
# Calculated by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission charge. The average commission rate is not required for fiscal
years beginning before September 1, 1995.
See Accompanying Notes to Financial Statements.
TAX STATUS OF 1997 DIVIDENDS (Unaudited)
Taxable dividends paid by the Portfolio on a per share basis were as follows:
Ordinary income $.45
Long-term capital gain .16
Because the Portfolio's fiscal year is not the calendar year, amounts to be used
by calendar year taxpayers on their Federal return will be reflected on Form
1099-DIV and will be mailed in January 1998.
48
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- SMALL COMPANY GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
(For a Share of the Portfolio Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 29, 1995
FOR THE YEAR (COMMENCEMENT OF
ENDED OPERATIONS) THROUGH
OCTOBER 31, 1997 OCTOBER 31, 1996
---------------- -------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $12.92 $ 10.00
----- -----
Income from Investment Operations:
Net Investment Loss (.05) (.01)
Net Gain on Securities
(both realized and unrealized) 3.02 2.93
----- -----
Total from Investment Operations 2.97 2.92
----- -----
NET ASSET VALUE, END OF PERIOD $15.89 $ 12.92
----- -----
----- -----
Total Return 22.99% 29.20%'D'
RATIOS /SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $217,861 $96,827
Ratios to average daily net assets:
Operating expenses .99%@ .99%@*
Net investment loss (.53)% (.18%)*
Decrease reflected in above operating expense
ratios due to
waivers/reimbursements .20% .69%*
Portfolio Turnover Rate 91.59% 57.38%'D'
Average Commission Rate # $.0526 $.0560
</TABLE>
- --------------------------------------------------------------------------------
@ Interest earned on uninvested cash balances is used to offset portions of the
transfer agent expense. These arrangements had no effect on the Portfolio's
expense ratio.
'D' Non-annualized.
* Annualized.
# Calculated by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission charge. The average commission rate is not required for fiscal
years beginning before September 1, 1995.
See Accompanying Notes to Financial Statements.
49
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- EMERGING MARKETS PORTFOLIO
FINANCIAL HIGHLIGHTS
(For a Share of the Portfolio Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
(COMMENCEMENT OF
FOR THE YEAR OPERATIONS)
ENDED THROUGH
OCTOBER 31, 1997 OCTOBER 31, 1996
---------------- ------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.86 $10.00
----- -----
Income from Investment Operations:
Net Investment Income .10 0.01
Net Gain/(Loss) from Securities and Foreign
Currency Related Items
(both realized and unrealized) (.53) (0.15)
----- -----
Total from Investment Operations (.43) (0.14)
----- -----
Less Distributions:
Dividends from net investment income (.02) .00
Distributions from net realized gain (.05) .00
----- -----
Total Distributions (.07) .00
----- -----
NET ASSET VALUE, END OF PERIOD $ 9.36 $ 9.86
----- -----
----- -----
Total Return (4.43%) (1.40%)'D'
RATIOS /SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $37,281 $29,698
Ratios to average daily net assets:
Operating expenses 1.25%@ 1.25%@*
Net investment income .92% 1.75%*
Decrease reflected in above operating expense
ratios due to waivers/reimbursements .40% 2.18%*
Portfolio Turnover Rate 107.21% 2.39%'D'
Average Commission Rate # $.0042 $.0120
</TABLE>
- --------------------------------------------------------------------------------
@ Interest earned on uninvested cash balances is used to offset portions of the
transfer agent expense. These arrangements had no effect on the Portfolio's
expense ratio.
'D' Non-annualized.
* Annualized.
# Calculated by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission charge. The average commission rate is not required for fiscal
years beginning before September 1, 1995.
See Accompanying Notes to Financial Statements.
TAX STATUS OF 1997 DIVIDENDS (Unaudited)
Taxable dividends paid by the Portfolio on a per share basis were as follows:
Ordinary income $.07
Because the Portfolio's fiscal year is not the calendar year, amounts to be used
by calendar year taxpayers on their Federal return will be reflected on Form
1099-DIV and will be mailed in January 1998.
50
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- MANAGED EAFE'r' COUNTRIES PORTFOLIO
FINANCIAL HIGHLIGHTS
(For a Share of the Portfolio Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MARCH 31, 1997
(COMMENCEMENT OF
OPERATIONS) THROUGH
OCTOBER 31, 1997
-------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-----
Income from Investment Operations:
Net Investment Income .08
Net Gain from Securities and Foreign Currency Related Items (both
realized and unrealized) .98
-----
Total from Investment Operations 1.06
-----
NET ASSET VALUE, END OF PERIOD $ 11.06
-----
-----
Total Return 10.60%'D'
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $ 4,796
Ratios to average daily net assets:
Operating expenses .95%@*
Net investment income 1.18*
Decrease reflected in above operating expense ratios due to
waivers/reimbursements 6.69%*
Portfolio Turnover Rate 30.29%'D'
Average Commission Rate # $.0251
</TABLE>
- --------------------------------------------------------------------------------
@ Interest earned on uninvested cash balances is used to offset portions of the
transfer agent expense. These arrangements had no effect on the Portfolio's
expense ratio.
'D' Non-annualized.
* Annualized.
# Calculated by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission charge. The average commission rate is not required for fiscal
years beginning before September 1, 1995.
See Accompanying Notes to Financial Statements.
51
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC. -- VALUE PORTFOLIO
FINANCIAL HIGHLIGHTS
(For a Share of the Fund Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 30, 1997
(COMMENCEMENT OF
OPERATIONS) THROUGH
OCTOBER 31, 1997
-------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-----
Net investment income .03
Net unrealized and realized gain on securities .61
-----
Total from Investment Operations .64
-----
NET ASSET VALUE, END OF PERIOD $ 10.64
-----
-----
Total Return 6.40%'D'
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $15,565
Ratios to average daily net assets:
Operating expenses .75%*
Net investment income/(loss) 1.60%*
Decrease reflected in above operating expense ratios due to
waivers/reimbursements 1.67%*
Portfolio Turnover Rate (Annualized) 34.81%'D'
Average Commission Rate # $.0599
</TABLE>
- --------------------------------------------------------------------------------
'D' Non-annualized.
* Annualized.
# Calculated by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there was a
commission charge. The average commission rate is not required for fiscal
years beginning before September 1, 1995.
See Accompanying Notes to Financial Statements.
52
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Warburg Pincus Institutional Fund, Inc. (the 'Fund') is an open-end
management investment company and currently offers nine managed investment funds
(the 'Portfolios'): International Equity Portfolio, which commenced operations
on September 1, 1992, seeks long-term capital appreciation by investing in
common stocks and securities convertible into or exchangeable for common stocks
of non-United States issuers; Small Company Growth Portfolio, which commenced
operations on December 29, 1995, seeks capital growth by investing primarily in
equity securities of small-sized domestic companies; Global Fixed Income
Portfolio, which as of October 31, 1997, had not commenced operations, seeks to
maximize total investment return consistent with prudent investment management
while preserving capital by investing in bonds, debentures and notes of United
States and foreign issuers; Emerging Markets Portfolio, which commenced
operations on September 30, 1996, seeks growth of capital by investing primarily
in equity securities of companies in emerging securities markets; Managed
EAFE'r' Countries Portfolio which commenced operations on March 31, 1997, seeks
long-term capital appreciation by investing in common stocks, warrants and
securities convertible into or exchangeable for common stocks of issuers having
their principal business activities and interests in foreign countries included
in the Morgan Stanley Capital International EAFE'r' Index; and Value Portfolio,
which commenced operations on June 30, 1997, seeks total return by investing
primarily in equity securities of large-sized domestic companies. The Japan
Growth, Post-Venture Capital and Small Company Value Portfolios, which commenced
operations on October 31, 1997, are contained in a separate Annual Report.
The net asset values of the Portfolios are determined daily as of the close
of regular trading on the New York Stock Exchange. The Portfolio's investments
are valued at market value, which is generally determined using the last
reported sales price. If no sales are reported, investments are generally valued
at the mean between the last reported bid and asked prices. In the absence of
market quotations, investments are generally valued at fair value as determined
by or under the direction of the Fund's Board. Short-term investments that
mature in 60 days or less are valued on the basis of amortized cost, which
approximates market value.
When a Portfolio writes or purchases a call or a put option, an amount equal
to the premium received or paid by the Portfolio is recorded as a liability or
asset, the value of which is marked-to-market daily to reflect the current
market value of the option. When the option expires, the Portfolio realizes a
gain or loss equal to the amount of the premium received or paid. When the
Portfolio exercises an option or enters into a closing transaction by purchasing
or selling an offsetting
53
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
option, it realizes a gain or loss without regard to any unrealized gain or loss
on the underlying security. The potential loss associated with purchasing an
option is limited to the premium paid, and the premium would partially offset
any gains achieved from its use.
The books and records of the Portfolios are maintained in U.S. dollars.
Transactions denominated in foreign currencies are recorded at the current
prevailing exchange rates. All assets and liabilities denominated in foreign
currencies are translated into U.S. dollar amounts at the current exchange rate
at the end of the period. Translation gains or losses resulting from changes in
the exchange rate during the reporting period and realized gains and losses on
the settlement of foreign currency transactions are reported in the results of
operations for the current period. The Portfolios do not isolate that portion of
realized gains and losses on investments in equity securities which are due to
changes in the foreign exchange rate from that which are due to changes in
market prices of equity securities. The Portfolios isolate that portion of
realized gains and losses on investments in debt securities which are due to
changes in the foreign exchange rate from that which are due to changes in
market prices of debt securities.
The Portfolios may invest in securities of foreign countries and governments
which involve certain risks in addition to those inherent in domestic
investments. Such risks generally include, among other things, fluctuations in
currency exchange rates, revaluation of currencies, future adverse political and
economic developments and the imposition of other foreign laws and restrictions.
Securities of foreign issuers are often subject to less rigorous regulatory
practices and requirements than those applied in the United States and may also
be less liquid (and their prices more volatile) than securities of comparable
U.S. companies. Moreover, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in many respects.
A Portfolio's investments in securities of issuers located in less developed
countries considered to be 'emerging markets' involve risks in addition to those
generally applicable to foreign securities. Investments in the securities of
issuers located in emerging markets expose the Portfolio to economic structures
that are generally less diverse and mature than, and to political systems that
can be expected to have less stability than, those of developed countries. The
typically small size of the markets for securities of issuers located in
emerging markets may also result in a lack of liquidity and greater price
volatility.
Security transactions are accounted for on a trade date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date. The cost of investments sold is determined by use of the
specific identification method for both financial reporting and income tax
purposes.
54
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
Dividends from net investment income and distributions of net realized
capital gains, if any, are declared and paid annually. However, to the extent
that a net realized capital gain can be reduced by a capital loss carryover,
such gain will not be distributed. Income and capital gain distributions are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles.
No provision is made for federal taxes as it is the Fund's intention to have
each portfolio continue to qualify for and elect the tax treatment applicable to
regulated investment companies under the Internal Revenue Code and make the
requisite distributions to its shareholders which will be sufficient to relieve
it from Federal income and excise taxes.
Costs incurred in connection with organization and offering of shares have
been deferred and are being amortized over a period of five years and one year,
respectively, from the date each Portfolio commenced its operations.
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, each Portfolio, along with other funds advised by Warburg Pincus
Asset Management, Inc., the Portfolios' investment adviser ('Warburg')
(collectively the 'Warburg Funds'), transfers uninvested cash balances to a
Pooled Cash Account, which is invested in repurchase agreements secured by U.S.
government securities. Securities pledged as collateral for repurchase
agreements are held by the Portfolios' custodian bank until the agreements
mature. Each agreement requires that the market value of the collateral be
sufficient to cover payments of interest and principal; however, in the event of
default or bankruptcy by the other party to the agreement, retention of the
collateral may be subject to legal proceedings.
The Warburg Funds have established committed and uncommitted lines of credit
facilities with certain banks for temporary or emergency purposes primarily
relating to fund share redemptions and funding payments of dividend or capital
gain distributions. Under the terms of the committed line of credit, the Warburg
Funds with access to the facility pay a commitment fee at a rate of .10% per
annum on the amount of the line of credit. In addition, under the terms of both
the committed and uncommitted facilities, the Warburg Funds will pay interest on
borrowings at the banks base rate plus .55%. Aggregate borrowings for each fund
under these credit facilities may not exceed the lower of (a) the maximum amount
permitted by such fund's investment policies and restrictions or (b) thirty
three and one-third percent (33 1/3%) of such fund's total assets. At October
31, 1997, there were no outstanding balances under these line of credit
facilities for any of the Portfolios.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial
55
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES (CONT'D)
statement and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from these estimates.
The Portfolios have an arrangement with their transfer agent whereby interest
earned on uninvested cash balances was used to offset a portion of the transfer
agent expense. For the period ended October 31, 1997, the Portfolios received
credits or reimbursements under this arrangement as follows:
<TABLE>
<CAPTION>
FUND AMOUNT
- ---------------------------------- --------------
<S> <C>
International Equity $ 32,078
Small Company Growth 5,774
Emerging Markets 1,798
Managed EAFE'r' 11
Value 0
</TABLE>
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR
Warburg, which is indirectly controlled by Warburg, Pincus & Co., serves as
each Portfolio's investment adviser. For its investment advisory services,
Warburg is entitled to receive the following fees computed daily and payable
monthly based on each Portfolio's average daily net assets:
<TABLE>
<CAPTION>
PORTFOLIO ANNUAL RATE
- ------------------------------------------------ ----------------------------------
<S> <C>
International Equity .80% of average daily net assets
Small Company Growth .90% of average daily net assets
Emerging Markets 1.00% of average daily net assets
Managed EAFE'r' Countries .80% of average daily net assets
Value .75% of average daily net assets
</TABLE>
For the year or period ended October 31, 1997, investment advisory fees,
waivers and reimbursements were as follows:
<TABLE>
<CAPTION>
GROSS NET EXPENSE
PORTFOLIO ADVISORY FEE WAIVER ADVISORY FEE REIMBURSEMENTS
- ----------------------- ------------ ----------- ------------ --------------
<S> <C> <C> <C> <C>
International Equity $9,423,008 $(1,627,352) $7,795,656 $ 0
Small Company Growth 1,405,403 (314,893) 1,090,510 0
Emerging Markets 376,368 (103,632) 272,736 0
Managed EAFE'r'
Countries 12,662 (12,662) 0 (91,307)
Value 22,250 (22,250) 0 (24,195)
</TABLE>
Counsellors Funds Service, Inc. ('CFSI'), a wholly owned subsidiary of
Warburg, and PFPC Inc. ('PFPC'), an indirect, wholly owned subsidiary of PNC
Bank Corp. ('PNC'), serve as each Portfolio's co-administrators. For its
administrative services, CFSI receives a fee calculated at an annual rate of
.10% of
56
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
the Portfolios' average daily net assets. For the year or period ended October
31, 1997, administrative services fees earned by CFSI were as follows:
<TABLE>
<CAPTION>
PORTFOLIO CO-ADMINISTRATION FEE
- ------------------------------------------------------ ---------------------
<S> <C>
International Equity $ 1,177,876
Small Company Growth 156,156
Emerging Markets 37,637
Managed EAFE'r' Countries 1,583
Value 2,967
</TABLE>
For its administrative services for the Small Company Growth Portfolio and
the Value Portfolio, PFPC currently receives a fee calculated at an annual rate
of .10% on each Fund's first $500 million in average daily net assets, .075% on
the next $1 billion in average daily net assets and .05% of average daily net
assets in excess of $1.5 billion. For the International Equity Portfolio, the
Emerging Markets Portfolio and the Managed EAFE'r' Countries Portfolio, PFPC
receives a fee based on the following fee structure:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS ANNUAL RATE
- ------------------------------------------------- ---------------------------------
<S> <C>
First $250 million .12% of average daily net assets
Second $250 million .10% of average daily net assets
Third $250 million .08% of average daily net assets
Over $750 million .05% of average daily net assets
</TABLE>
For the year or period ended October 31, 1997, administrative service fees
earned and waived by PFPC were as follows:
<TABLE>
<CAPTION>
NET
PORTFOLIO CO-ADMINISTRATION FEE WAIVER CO-ADMINISTRATION FEE
- -------------------------- --------------------- --------- ---------------------
<S> <C> <C> <C>
International Equity $ 963,938 $ 0 $ 963,938
Small Company Growth 156,156 0 156,156
Emerging Markets 45,164 (45,164) 0
Managed EAFE'r' Countries 1,899 (1,899) 0
Value 2,966 (2,966) 0
</TABLE>
Counsellors Securities Inc. ('CSI'), also a wholly owned subsidiary of
Warburg, acts as distributor of each Portfolio's shares. No compensation is
payable by the Portfolios to CSI for its distribution services.
3. INVESTMENTS IN SECURITIES
Purchases and sales of investment securities for the year or period ended
October 31, 1997 (excluding short-term investments) were as follows:
<TABLE>
<CAPTION>
PORTFOLIO PURCHASES SALES
- ------------------------------------------------ ------------ ------------
<S> <C> <C>
International Equity $896,759,221 $759,460,078
Small Company Growth 208,117,866 134,645,174
Emerging Markets 45,539,886 36,871,107
Managed EAFE'r' Countries 5,191,865 668,200
Value 16,625,767 2,392,156
</TABLE>
At October 31, 1997, the net unrealized appreciation from investments for
those securities having an excess of value over cost and net depreciation from
57
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
3. INVESTMENTS IN SECURITIES (CONT'D)
investments for those securities having an excess of cost over value (based on
cost for Federal income tax purposes) was as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
PORTFOLIO APPRECIATION DEPRECIATION (DEPRECIATION)
- ----------------------------------- ------------ ------------- --------------
<S> <C> <C> <C>
International Equity $128,837,344 $(137,753,257) $ (8,915,913)
Small Company Growth 48,246,293 (2,728,467) 45,517,826
Emerging Markets 2,146,869 (8,676,865) (6,529,996)
Managed EAFE'r' Countries 236,837 (397,944) (161,107)
Value 403,733 (663,833) (260,100)
</TABLE>
4. FORWARD FOREIGN CURRENCY CONTRACTS
The Portfolios may enter into forward currency contracts for the purchase or
sale of a specific foreign currency at a fixed price on a future date. Risks may
arise upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar. Each
Portfolio will enter into forward contracts primarily for hedging purposes.
Forward currency contracts are adjusted by the daily exchange rate of the
underlying currency and any gains or losses are recorded for financial statement
purposes as unrealized until the contract settlement date.
At October 31, 1997, the International Equity Portfolio had the following
open forward foreign currency contracts:
<TABLE>
<CAPTION>
FORWARD FOREIGN UNREALIZED
CURRENCY EXPIRATION CURRENCY CONTRACT CONTRACT FOREIGN EXCHANGE
CONTRACT DATE TO BE SOLD AMOUNT VALUE GAIN (LOSS)
- ------------- ---------- -------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
Japanese Yen 11/28/97 10,875,796,500 $ 93,756,866 $ 90,728,263 $3,028,603
Japanese Yen 11/28/97 10,000,000,000 86,393,835 83,422,178 2,971,657
Japanese Yen 11/28/97 2,170,000,000 18,439,053 18,102,613 336,440
Japanese Yen 11/28/97 871,750,000 7,413,723 7,272,328 141,395
Japanese Yen 11/28/97 630,020,000 5,363,881 5,255,764 108,117
------------ ------------ --------
$211,367,358 $204,781,146 $6,586,212
------------ ------------ --------
------------ ------------ --------
</TABLE>
At October 31, 1997, the Managed EAFE'r' Portfolio had the following open
forward foreign currency contracts:
<TABLE>
<CAPTION>
FORWARD FOREIGN UNREALIZED
CURRENCY EXPIRATION CURRENCY CONTRACT CONTRACT FOREIGN EXCHANGE
CONTRACT DATE TO BE SOLD AMOUNT VALUE GAIN (LOSS)
- ------------- ---------- ---------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Japanese Yen 11/28/97 55,950,000 $483,161 $466,747 $ 16,414
Japanese Yen 11/28/97 48,184,000 400,000 401,961 (1,961)
Japanese Yen 11/28/97 7,480,000 63,613 62,400 1,213
Japanese Yen 11/28/97 4,250,000 36,113 35,455 658
-------- -------- ------
$982,887 $966,563 $ 16,324
-------- -------- ------
-------- -------- ------
</TABLE>
5. EQUITY SWAP TRANSACTIONS
The International Equity Portfolio and the Emerging Markets Portfolio entered
into a Korean equity swap agreement (which represents approximately
58
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
0.9% and 1.9%, respectively, of the Portfolio's net assets at October 31, 1997)
dated March 21, 1997, where each Portfolio receives a quarterly payment,
representing the total return (defined as market appreciation and dividend
income) on a basket of Korean common stocks ('Common Stocks'). In return, the
International Equity Portfolio and the Emerging Markets Portfolio pay quarterly
the LIBOR rate (London Interbank Offered Rate), plus, 1.97% and 2.00%,
respectively, per annum (5.76% on October 31, 1997) on the market value of the
Common Stocks ('Notional Amount') which is currently $11,014,500 and $734,300,
respectively. The Notional Amount is marked-to-market on each quarterly reset
date. In the event that the Common Stocks decline in value, the Portfolios will
be required to pay quarterly, the amount of any depreciation in value from the
Notional Amount on March 21, 1997. The equity swap agreement will terminate on
April 3, 2000.
During the term of the equity swap transaction, changes in the value of the
Common Stocks as compared to the Notional Amount and the difference between the
accrued interest expense and dividend income are recognized as unrealized gain
or loss. At the quarterly reset date, the change in value of the common stock,
adjusted for accrued interest expense and dividend income, is recognized as
realized gain or loss. At October 31, 1997, each Portfolio realized a loss of
$4,701,858 and $313,646, respectively, on the equity swap transaction which is
included in the net realized gain (loss) from security and other related
transactions. At October 31, 1997, each Portfolio has recorded unrealized losses
of $666,131 and $44,389, respectively, on the equity swap transaction.
6. CAPITAL SHARE TRANSACTIONS
The Fund is authorized to issue up to thirteen billion full and fractional
shares of common stock of separate series having a $.001 par value per share.
Shares of nine series have been authorized, which constitute the interest in the
Portfolios.
59
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
6. CAPITAL SHARE TRANSACTIONS (CONT'D)
Transactions in shares of each Portfolio were as follows:
<TABLE>
<CAPTION>
SMALL COMPANY GROWTH
PORTFOLIO
INTERNATIONAL EQUITY --------------------------------------
PORTFOLIO FOR THE PERIOD
----------------------------------- DECEMBER 29, 1995
FOR THE FOR THE FOR THE (COMMENCEMENT OF
YEAR ENDED YEAR ENDED YEAR ENDED OPERATIONS) THROUGH
OCTOBER 31, 1997 OCTOBER 31, 1996 OCTOBER 31, 1997 OCTOBER 31, 1996
---------------- ---------------- ---------------- -------------------
<S> <C> <C> <C> <C>
Shares sold 22,310,155 26,659,175 8,212,874 7,493,539
Shares issued to shareholders on
reinvestment of dividends 2,054,397 898,044 0 0
Shares redeemed (11,573,856) (3,123,266) (1,992,855) 0
---------------- -------- -------- -------
Net increase in shares outstanding 12,790,696 24,433,953 6,220,019 7,493,539
---------------- -------- -------- -------
---------------- -------- -------- -------
</TABLE>
<TABLE>
<CAPTION>
EMERGING MARKETS
PORTFOLIO
----------------------------------
FOR THE PERIOD
SEPTEMBER 30, MANAGED EAFE'r' VALUE
1996 COUNTRIES PORTFOLIO PORTFOLIO
(COMMENCEMENT ------------------- -------------------
OF FOR THE PERIOD FOR THE PERIOD
OPERATIONS) MARCH 31, 1997 JUNE 30, 1997
FOR THE THROUGH (COMMENCEMENT OF (COMMENCEMENT OF
YEAR ENDED OCTOBER 31, OPERATIONS) THROUGH OPERATIONS) THROUGH
OCTOBER 31, 1997 1996 OCTOBER 31, 1997 OCTOBER 31, 1997
---------------- --------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Shares sold 1,322,864 3,002,008 433,621 1,494,737
Shares issued to shareholders
on reinvestment of dividends 21,478 0 0 0
Shares redeemed (372,624) 0 0 (31,225)
------- ------- ------- -------
Net increase in shares
outstanding 971,718 3,002,008 433,621 1,463,512
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
7. LIABILITIES
At October 31, 1997, the Portfolios had the following affiliated and
investment related liabilities:
<TABLE>
<CAPTION>
INTERNATIONAL SMALL COMPANY
EQUITY GROWTH EMERGING MARKETS MANAGED EAFE'r' VALUE
PORTFOLIO PORTFOLIO PORTFOLIO COUNTRIES PORTFOLIO PORTFOLIO
------------- ------------- ---------------- ------------------------- ---------
<S> <C> <C> <C> <C> <C>
Payable for securities purchased
(at value) $23,955,238 $ 4,435,769 $364,388 $ 111,628 $ 609,187
Administration services fee
payable 108,743 19,001 3,762 429 1,327
Investment advisory fee payable 855,290 145,055 58,034 0 2,433
Payable for fund shares redeemed 117,995 13 5,163 0 300,681
Swap contract payable 3,109,678 0 207,530 0 0
Forward contract payable 1,382,857 0 0 0 0
</TABLE>
8. NET ASSETS
At October 31, 1997, capital contributions, undistributed net investment
income, accumulated net realized gain/(loss) from security transactions and
current period distributions have been adjusted for current period permanent
book/tax differences which arose principally from differing book/tax treatments
of foreign currency and equity swap transactions. The International Equity
Portfolio, the Emerging Markets Portfolio and the Managed EAFE'r' Countries
Portfolio reclassified $5,102,935, $(458,561) and $(1,829), respectively, from
accumulated net realized gain/(loss) from foreign currency related items to
undistributed net investment income. The Small Company Growth Portfolio and the
Emerging Markets Portfolio reclassified $825,692 and $64,331, respectively, from
accumulated net investment income (loss) to capital contributions. In addition,
the International Equity Portfolio and the Emerging Markets Portfolio
reclassified $12,813,631 and $5,335, respectively, of book distributions of
realized
60
<PAGE>
<PAGE>
WARBURG PINCUS INSTITUTIONAL FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1997
- --------------------------------------------------------------------------------
gains to distributions of net investment income. Net investment income, net
realized gain/(loss) on investments and net assets were not affected by this
reclassification.
Net assets at October 31, 1997, consisted of the following:
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY SMALL COMPANY GROWTH EMERGING MARKETS MANAGED EAFE'r' VALUE
PORTFOLIO PORTFOLIO PORTFOLIO COUNTRIES PORTFOLIO PORTFOLIO
-------------------- -------------------- ---------------- ------------------- ---------------
<S> <C> <C> <C> <C> <C>
Capital
contributed, net $1,081,216,151 $174,649,376 $ 41,156,627 $ 4,776,174 $15,685,408
Undistributed net
investment income 14,484,339 0 (218,637) 62,604 60,177
Accumulated net
realized gain
(loss) from
security
transactions 76,408,520 (2,309,028) 2,824,269 101,351 69,262
Net unrealized
appreciation
(depreciation)
from investments
and foreign
currency related
items (2,292,206) 45,520,659 (6,480,956) (144,276) (249,969)
-------------------- ----------- ---------------- -------- ---------------
Net assets $1,169,816,804 $217,861,007 $ 37,281,303 $ 4,795,853 $15,564,878
-------------------- ----------- ---------------- -------- ---------------
-------------------- ----------- ---------------- -------- ---------------
</TABLE>
9. CAPITAL CAPITAL LOSS CARRYOVER
At October 31, 1997, the Small Company Growth Portfolio had capital loss
carryovers of $773,601 and $1,532,594 expiring in 2004 and 2005, respectively.
10. REORGANIZATION
On October 28, 1997, the Board of Directors approved a Plan of Reorganization
(the 'Plan') of the Managed EAFE'r' Countries Portfolio (the 'Existing Fund').
Under the terms of the Plan, Warburg Pincus Managed EAFE'r' Countries Fund, Inc.
(the 'New Fund') would acquire all or substantially all of the assets and
liabilities of the Existing Fund. A formal vote by the Existing Fund's
shareholders was approved on December 16, 1997.
61
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Board of Directors and Shareholders of
WARBURG PINCUS INSTITUTIONAL FUND, INC.:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments of Warburg Pincus Institutional Fund,
Inc. -- International Equity Portfolio, and the statements of net assets of
Warburg Pincus Institutional Fund, Inc. -- Small Company Growth Portfolio,
Emerging Markets Portfolio, Managed EAFE'r' Countries Portfolio and Value
Portfolio (all portfolios collectively referred to as the 'Warburg Pincus
Institutional Fund'), as of October 31, 1997, and the related statements of
operations for the year (or period) then ended, the related statements of
changes in net assets for each of the two years (or periods) in the period then
ended, and the financial highlights for each of the years (or periods)
presented. These financial statements and financial highlights are the
responsibility of the Warburg Pincus Institutional Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1997 by correspondence with the custodians and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
portfolio of the Warburg Pincus Institutional Fund as of October 31, 1997, the
results of their operations for the year (or period) then ended, the changes in
their net assets for each of the two years (or periods) in the period then
ended, and their financial highlights for each of the years or periods
presented, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
December 19, 1997
62
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800-369-2728
WWW.WARBURG.COM
COUNSELLORS SECURITIES INC., DISTRIBUTOR. WPINS-2-1097
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ANNUAL
REPORT
October 31, 1997
WARBURG PINCUS INSTITUTIONAL FUND, INC.
JAPAN GROWTH PORTFOLIO
POST-VENTURE CAPITAL PORTFOLIO
SMALL COMPANY VALUE PORTFOLIO
More complete information about the Fund, including charges and expenses and,
where applicable, the special considerations and risks associated with
international investing is provided in the Prospectus, which must precede or
accompany this report and which should be read carefully before investing. You
may obtain additional copies by calling 800-369-2728 or by writing to Warburg
Pincus Funds, P.O. Box 9030, Boston, MA 02205-9030.
[Logo]
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Warburg Pincus Institutional Fund, Inc. - Japan Growth Portfolio
Statement of Assets and Liabilities
October 31, 1997
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<TABLE>
ASSETS
<S> <C>
Cash $1,000
------
Total Assets 1,000
------
NET ASSETS, applicable to Shares outstanding $1,000
======
NET ASSET VALUE, offering and redemption price per Share
($1,000 / 100) $10.00
======
</TABLE>
See Accompanying Notes to Financial Statements.
1
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Warburg Pincus Institutional Fund, Inc. - Post-Venture Capital Portfolio
Statement of Assets and Liabilities
October 31, 1997
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<TABLE>
ASSETS
<S> <C>
Cash $1,000
------
Total Assets 1,000
------
NET ASSETS, applicable to Shares outstanding $1,000
======
NET ASSET VALUE, offering and redemption price per Share
($1,000 / 100) $10.00
======
</TABLE>
See Accompanying Notes to Financial Statements.
2
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Warburg Pincus Institutional Fund, Inc. - Small Company Value Portfolio
Statement of Assets and Liabilities
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October 31, 1997
ASSETS
<TABLE>
<S> <C>
Cash $1,000
------
Total Assets 1,000
------
NET ASSETS, applicable to Shares outstanding $1,000
======
NET ASSET VALUE, offering and redemption price per Share
($1,000 / 100) $10.00
======
</TABLE>
See Accompanying Notes to Financial Statements.
3
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Warburg Pincus Institutional Fund, Inc.
Notes to Financial Statements
October 31, 1997
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1. Significant Accounting Policies
Warburg Pincus Institutional Fund, Inc. (the "Fund") is an open-end
management investment company and currently offers nine managed investment funds
(the "Portfolios"), three of which commenced operations on October 31, 1997 and
are contained in this annual report: Japan Growth Portfolio seeks long-term
growth of capital by investing primarily in equity securities of Japanese
issuers; Post-Venture Capital Portfolio seeks long-term growth of capital by
investing primarily in equity securities of issuers in their post-venture
capital stage of development and pursues an aggressive investment strategy; and
Small Company Value Portfolio seeks long-term capital appreciation by investing
primarily in a portfolio of equity securities of small capitalization companies.
The net asset values of the Portfolios are determined daily as of the close
of regular trading on the New York Stock Exchange. The Portfolio's investments
are valued at market value, which is currently determined using the last
reported sales price. If no sales are reported, investments are generally valued
at the mean between the last reported bid and asked prices. In the absence of
market quotations, investments are generally valued at fair value as determined
by or under the direction of the Fund's Board. Short-term investments that
mature in 60 days or less are valued on the basis of amortized cost, which
approximates market value.
When a Portfolio writes or purchases a call or a put option, an amount
equal to the premium received or paid by the Portfolio is recorded as a
liability or asset, the value of which is marked-to-market daily to reflect the
current market value of the option. When the option expires, the Portfolio
realizes a gain or loss equal to the amount of the premium received or paid.
When the Portfolio exercises an option or enters into a closing transaction by
purchasing or selling an offsetting option, it realizes a gain or loss without
regard to any unrealized gain or loss on the underlying security. The potential
loss associated with purchasing an option is limited to the premium paid, and
the premium would partially offset any gains achieved from its use.
The books and records of the Portfolios are maintained in U.S. Dollars.
Transactions denominated in foreign currencies are recorded at the current
prevailing exchange rates. All assets and liabilities denominated in foreign
currencies are translated into U.S. dollar amounts at the current exchange rate
at the end of the period. Translation gains or losses resulting from changes in
the exchange rate during the reporting period and realized gains and losses on
the settlement of foreign currency transactions are reported in the results of
operations for the current period. The Portfolios do not isolate that portion of
realized gains and losses on investments in equity securities which are due to
changes in the foreign exchange rate from that which are due to changes in
market prices of equity securities. The Portfolios isolate that portion of
realized gains and losses on investments in debt securities which are due to
changes in the foreign exchange rate from that which are due to changes in
market prices of debt securities.
4
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Warburg Pincus Institutional Fund, Inc.
Notes to Financial Statements (cont'd)
October 31, 1997
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1. Significant Accounting Policies (cont'd)
Security transactions are accounted for on a trade date basis. Interest
income is recorded on the accrual basis. Dividends are recorded on the
ex-dividend date. The cost of investments sold is determined by use of the
specific identification method for both financial reporting and income tax
purposes.
Dividends from net investment income and distributions of net realized
capital gains, if any, are declared and paid annually. However, to the extent
that a net realized capital gain can be reduced by a capital loss carryover,
such gain will not be distributed. Income and capital gain distributions are
determined in accordance with federal income tax regulations which may differ
from generally accepted accounting principles.
No provision is made for federal taxes as it is the Fund's intention to
have each Portfolio qualify for and elect the tax treatment applicable to
regulated investment companies under the Internal Revenue Code and make the
requisite distributions to its shareholders which will be sufficient to relieve
it from federal income and excise taxes.
Pursuant to an Exemptive Order issued by the Securities and Exchange
Commission, each Portfolio, along with other funds advised by Warburg Pincus
Asset Management, Inc., the Portfolios' investment adviser ("Warburg")
(collectively the "Warburg Funds"), transfers uninvested cash balances to a
Pooled Cash Account, which is invested in repurchase agreements secured by U.S.
government securities. Securities pledged as collateral for repurchase
agreements are held by the Portfolios' custodian bank until the agreements
mature. Each agreement requires that the market value of the collateral be
sufficient to cover payments of interest and principal; however, in the event of
default or bankruptcy by the other party to the agreement, retention of the
collateral may be subject to legal proceedings.
The Warburg Funds have established committed and uncommitted lines of
credit facilities with certain banks for temporary or emergency purposes
primarily relating to fund share redemptions and funding payments of dividend or
capital gain distributions. Under the terms of the committed line of credit, the
Warburg Funds with access to the facility pay a commitment fee at a rate of .10%
per annum of the amount of the line of credit. In addition, under the terms of
both the committed and uncommitted facilities, the Warburg Funds will pay
interest on borrowings at the banks base rate plus .55%. Aggregate borrowings
for each fund under these credit facilities may not exceed the lower of (a) the
maximum amount permitted by such fund's investment policies and restrictions or
(b) thirty three and one-third percent (33 1/3%) of such fund's total assets. At
October 31, 1997, there were no outstanding balances under these line of credit
facilities for any of the Portfolios.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets and liabilities at the date of the
financial statement and the reported amounts of
5
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Warburg Pincus Institutional Fund, Inc.
Notes to Financial Statements (cont'd)
October 31, 1997
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1. Significant Accounting Policies (cont'd)
revenues and expenses during the reporting period. Actual results could differ
from these estimates.
The Portfolios have an arrangement with their transfer agent whereby interest
earned on uninvested cash balances is used to offset a portion of the transfer
agent expense. At October 31, 1997, the Portfolios had no credits or
reimbursements under this arrangement.
2. Investment Adviser, Co-Administrators and Distributor
Warburg, which is indirectly controlled by Warburg, Pincus & Co., serves as each
Portfolio's investment adviser. For its investment advisory services, Warburg
receives the following fees based on each Portfolio's average daily net assets:
<TABLE>
<CAPTION>
Portfolio Annual Rate
---------- ------------
<S> <C>
Japan Growth 1.10% of average daily net assets
Post-Venture Capital 1.10% of average daily net assets
Small Company Value .90% of average daily net assets
</TABLE>
Counsellors Fund Services, Inc. ("CFSI"), a wholly owned subsidiary of
Warburg, and PFPC, Inc. ("PFPC"), an indirect, wholly owned subsidiary of PNC
Bank Corp. ("PNC"), serve as each Portfolio's co-administrator. For its
administrative services, CFSI receives a fee calculated at an annual rate of
.10% of the Portfolios' average daily net assets. For its administrative
services for the Post-Venture Capital Portfolio and the Small Company Value
Portfolio, PFPC receives a fee based on the following fee structure:
<TABLE>
<CAPTION>
Average Daily Net Assets Annual Rate
------------------------ -----------
<S> <C>
First $500 million .10% of average daily net assets
Next $1 billion .075% of average daily net assets
Over $1.5 billion .05% of average daily net assets
</TABLE>
For its administrative services for the Japan Growth Portfolio, PFPC
receives a fee based on the following fee structure:
<TABLE>
<CAPTION>
Average Daily Net Assets Annual Rate
------------------------ -----------
<S> <C>
First $250 million .12% of average daily net assets
Second $250 million .10% of average daily net assets
Third $250 million .08% of average daily net assets
Over $750 million .05% of average daily net assets
</TABLE>
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Warburg Pincus Institutional Fund, Inc.
Notes to Financial Statements (cont'd)
October 31, 1997
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2. Investment Adviser, Co-Administrators and Distributor (cont'd)
As of October 31, 1997, there were no advisory or co-administrator fees
accrued.
Counsellors Securities Inc. ("CSI"), also a wholly owned subsidiary of
Warburg, acts as distributor of each Portfolio's shares. No compensation is
payable by the Portfolios to CSI for its distribution services.
3. Forward Foreign Currency Contracts
The Portfolios may enter into forward currency contracts for the purchase
or sale of a specific currency at a fixed price on a future date. Risks may
arise upon entering into these contracts from the potential inability of
counterparties to meet the terms of their contracts and from unanticipated
movements in the value of a foreign currency relative to the U.S. dollar. Each
Portfolio will enter into forward contracts primarily for hedging purposes.
Forward currency contracts are adjusted by the daily exchange rate of the
underlying currency and any gains or losses are recorded for financial statement
purposes as unrealized until the contract settlement date. At October 31, 1997,
the Portfolios had no open forward currency contracts.
4. Capital Share Transactions
The Fund is authorized to issue up to thirteen billion full and fractional
shares of common stock of separate series having a $.001 par value per share.
Shares of nine series have been authorized, which constitute the interest in
the Portfolios. Transactions in shares of each Portfolio were as follows:
<TABLE>
<CAPTION>
Japan Growth Post-Venture Small Company
Portfolio Capital Portfolio Value Portfolio
------------ ----------------- ---------------
<S> <C> <C> <C>
Shares sold 100 100 100
Shares issued to shareholders
on reinvestment of dividends 0 0 0
Shares redeemed 0 0 0
--- --- ---
Net increase in shares outstanding 100 100 100
=== === ===
</TABLE>
7
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Warburg Pincus Institutional Fund, Inc.
Notes to Financial Statements (cont'd)
October 31, 1997
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5. Net Assets
Net assets at October 31, 1997, consisted of the following:
<TABLE>
<CAPTION>
Japan Growth Post-Venture Small Company
Portfolio Capital Portfolio Value Portfolio
--------- ----------------- ---------------
<S> <C> <C>
Capital contributed, net $1,000 $1,000 $1,000
Undistributed net
investment income 0 0 0
Accumulated net realized
gain (loss) from security
transactions 0 0 0
Net unrealized appreciation
(depreciation) from
investments and foreign
currency related items 0 0 0
------ ------ ------
Net assets $1,000 $1,000 $1,000
====== ====== ======
</TABLE>
8
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Report of Independent Accountants
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To the Board of Directors and Shareholders of
WARBURG PINCUS INSTITUTIONAL FUND, INC:
We have audited the accompanying statements of assets and liabilities of
Warburg Pincus Institutional Fund, Inc. - Japan Growth Portfolio,
Post-Venture Capital Portfolio and Small Company Value Portfolio (all
portfolios collectively referred to as the "Warburg Pincus Institutional Fund"),
as of October 31, 1997. These financial statements are the responsibility of
the Warburg Pincus Institutional Fund's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of each portfolio of
the Warburg Pincus Institutional Fund as of October 31, 1997, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
December 19, 1997
9
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[Logo WARBURG PINCUS
ASSET MANAGEMENT]
P.O. Box 9030, Boston, MA 02205-9030
800-369-2728
WWW.WARBURG.COM
COUNSELLORS SECURITIES INC., DISTRIBUTOR.
STATEMENT OF DIFFERENCES
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The registered trademark symbol shall be expressed as........ 'r'
The dagger symbol shall be expressed as...................... 'D'
The division sign shall be expressed as...................... [div]
