WARBURG PINCUS INSTITUTIONAL FUND INC, 485APOS, 1998-02-04

WARBURG PINCUS INSTITUTIONAL FUND INC
485APOS, 1998-02-04

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<PAGE>

As filed with the U.S. Securities and Exchange Commission
on February 4, 1998

Securities Act File No. 33-47880
Investment Company Act File No. 811-6670

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]

Pre-Effective Amendment No. [ ]

Post-Effective Amendment No. 15 [x]

and/or

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

Amendment No. 16 [x]
(Check appropriate box or boxes)

Warburg, Pincus Institutional Fund, Inc.
.......................................
(Exact Name of Registrant as Specified in Charter)

466 Lexington Avenue
New York, New York 10017-3147
........................................................
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (212) 878-0600

Mr. Eugene P. Grace
Warburg, Pincus Institutional Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3147
......................................
(Name and Address of Agent for Service)

Copy to:
Rose F. DiMartino, Esq.
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677

1
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It is proposed that this filing will become effective (check appropriate box):

[ ] immediately upon filing pursuant to paragraph (b)

[ ] on [date] pursuant to paragraph (b)

[ ] 60 days after filing pursuant to paragraph (a)(1)

[ ] on _________________ pursuant to paragraph (a)(1)

[x] 75 days after filing pursuant to paragraph (a)(2)

[ ] on [date] pursuant to paragraph (a)(2) of Rule 485

If appropriate, check the following box:

[ ] This post-effective amendment designates a new effective date for
a previously filed post-effective amendment.

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

2
<PAGE>

WARBURG, PINCUS INSTITUTIONAL FUND, INC.

FORM N-1A

CROSS REFERENCE SHEET

Part A
Item No. Prospectus Heading
- -------- ------------------

1. Cover Page.................................... Cover Page

2. Synopsis...................................... The Portfolios'
Expenses

3. Condensed Financial Information............... Financial Highlights

4. General Description of
Registrant.................................. Cover Page; Investment
Objectives and Policies;
Special Risk Con-
siderations and Certain
Investment Strategies;
Investment Guidelines;
General Information

5. Management of the Fund........................ Management of the Fund

6. Capital Stock and Other
Securities.................................. General Information

7. Purchase of Securities Being
Offered..................................... How to Open an Account;
How to Purchase Shares;
Management of the Fund;
Net Asset Value

8. Redemption or Repurchase...................... How to Redeem and Exchange
Shares

9. Pending Legal Proceedings..................... Not applicable

10. Cover Page.................................... Cover Page

3
<PAGE>

Part B
Item No.
- --------

11. Table of Contents........................ Contents

12. General Information and History.......... Management of the Fund

13. Investment Objectives
and Policies........................... Investment Objectives;
Investment Policies

14. Management of the Registrant............. Management of the Fund

15. Control Persons and Principal
Holders of Securities.................. Management of the Fund;
Miscellaneous See Prospectus--
"Management of the Fund"

16. Investment Advisory and
Other Services......................... Management of the Fund; See
Prospectus--
"Management of the Fund"

17. Brokerage Allocation
and Other Practices.................... Investment Policies --
Portfolio Transactions
See Prospectus--
"Portfolio Transactions
and Turnover Rate"

18. Capital Stock and Other
Securities............................. Management of the
Fund--Organization of
the Fund; See Prospectus-
"General Information"
19. Purchase, Redemption and Pricing
of Securities Being Offered............ Additional Purchase
and Redemption
Information; See Prospectus-
"How to Open an Account,"
"How to Purchase Shares,"
"How to Redeem and Exchange
Shares," "Net Asset Value"

4
<PAGE>

20. Tax Status.............................. Additional Information
Concerning Taxes; See
Prospectus--"Dividends,
Distributions and Taxes"

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

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

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

Part C
- ------

Information required to be included in Part C is set forth after the appropriate
item, so numbered, in Part C to this Registration Statement.

<PAGE>

PROSPECTUS

February , 1998

WARBURG PINCUS INSTITUTIONAL FUND, INC.

-------------- POST-VENTURE CAPITAL PORTFOLIO

-------------- SMALL COMPANY GROWTH PORTFOLIO

-------------- SMALL COMPANY VALUE PORTFOLIO

-------------- VALUE PORTFOLIO

[WARBURG PINCUS LOGO]

<PAGE>

PROSPECTUS February , 1998

Warburg Pincus Institutional Fund, Inc. (the "Fund") is an open-end management
investment company that consists of eight managed investment funds, four of
which are offered pursuant to this Prospectus (the "Portfolios"):

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. Because of the nature
of the Portfolio's investments and certain strategies it may use, an investment
in the Portfolio involves certain risks and may not be appropriate for all
investors.

SMALL COMPANY GROWTH PORTFOLIO seeks capital growth by investing primarily in
equity securities of small-sized domestic companies.

SMALL COMPANY VALUE PORTFOLIO seeks long-term capital appreciation by investing
primarily in a portfolio of equity securities of small capitalization companies.

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

The Fund is designed for institutional investors although, at its
discretion, the Fund may permit shares to be purchased by individuals, as well
as institutions, who meet the minimum investment requirements.

This Prospectus briefly sets forth certain information about the Fund and
the Portfolios that investors should know before investing. Investors are
encouraged to read this Prospectus carefully and retain it for future reference.
Additional information about the Fund and the Portfolios has been filed with the
Securities and Exchange Commission (the "SEC"). The SEC maintains a Web site
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference and other information regarding the Fund. The
Statement of Additional Information is also available upon request and without
charge by calling the Fund at (800) 369-2728. Information regarding the status
of shareholder accounts may also be obtained by calling the Fund at the same
number. Warburg Pincus Funds maintains a Web site at www.warburg.com. The
Statement of Additional Information relating to the Portfolios, as amended or
supplemented from time to time, bears the same date as this Prospectus and is
incorporated by reference in its entirety into this Prospectus.

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

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

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------

<PAGE>

THE PORTFOLIOS' EXPENSES
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Small Small
Post-Venture Company Company
Capital Growth Value Value
Portfolio Portfolio Portfolio Portfolio
------------ ------- ------- ---------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)......... 0 0 0 0
Annual Portfolio Operating Expenses
(as a percentage of average net assets)
Management Fees+.............................. .64% .70% .56% .43%
12b-1 Fees.................................... 0 0 0 0
Other Expenses+............................... .61% .29% .43% .32%
---- ---- ---- ----
Total Portfolio Operating Expenses (after fee
waivers)+................................... 1.25% .99% .99% .75%
EXAMPLE
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period:
1 year.......................................... $13 $ 10 $10 $ 8
3 years......................................... $40 $ 32 $32 $24
5 years......................................... n.a. $ 55 n.a. n.a.
10 years........................................ n.a. $121 n.a. n.a.
</TABLE>

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

+ Annual Portfolio Operating Expenses for the Small Company Growth
Portfolio are based on actual expenses for the fiscal year ended October 31,
1997, net of any applicable fee waivers or expense reimbursements. Annual
Portfolio Expenses for the Post-Venture Capital, Small Company Value and Value
Portfolios are based on estimated expenses for the fiscal year ending October
31, 1998, net of any applicable fee waivers or expense reimbursements Absent
such waivers and/or reimbursements, Management Fees for the Post-Venture
Capital, Small Company Growth, Small Company Value and Value Portfolios would
have equalled 1.10%, .90%, .90% and .75%, respectively; Other Expenses would
have equalled .71%, .29%, .53% and .42%, respectively; and Total Portfolio
Operating Expenses would have equalled 1.81%, 1.19%, 1.43% and 1.17%,
respectively. The investment adviser and co-administrator are under no
obligation to continue any waivers and/or reimbursements.

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

The expense table shows the costs and expenses that an investor will bear
directly or indirectly as a shareholder of a Portfolio. Institutions also may
charge their clients fees in connection with investments in a Portfolio's
shares, which fees are not reflected in the table. This example should not be
considered a representation of past or future expenses; actual expenses may be
greater or less than those shown. Moreover, while the table assumes a 5% annual
return, a Portfolio's actual performance will vary and may result in an actual
return greater or less than 5%.

<PAGE>

FINANCIAL HIGHLIGHTS++

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

The following information for the fiscal year ended October 31, 1997 and
period ended October 31, 1996 has been audited by Coopers & Lybrand L.L.P.,
independent accountants, whose report dated December 19, 1997 is incorporated by
reference into the Statement of Additional Information. Further information
about the performance of the Small Company Growth and Value Portfolios is
contained in the Fund's annual report dated October 31, 1997, copies of which
may be obtained without charge by calling the Fund at (800) 369-2728.

SMALL COMPANY GROWTH PORTFOLIO

<TABLE>
<CAPTION>
December 29, 1995
(Commencement of
For the Year Operations)
Ended 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...................................... (0.05) (0.01)
Net Gains 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%+
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%+
Average Commission Rate#................................... $0.0526 $0.0560
</TABLE>

VALUE PORTFOLIO

<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.................................................. 0.03
Net unrealized and realized gain on securities......................... 0.61
-----------
Total from Investment Operations....................................... 0.64
-----------
NET ASSET VALUE, END OF PERIOD........................................... $10.64
===========
Total Return............................................................. 6.40%+
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.................................................. 34.81%+
Average Commission Rate#................................................. $0.0599
</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.

+ 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.

++ No financial highlights have been presented with respect to the Post-Venture
Capital and Small Company Value Portfolios, which commenced
operations on October 31, 1997. The audited statements of assets and
liabilities of these Portfolios as of October 31, 1997, together with the
report theron of Coopers & Lybrand L.L.P. dated December 19, 1997, are
incorporated by reference into the Statement of Additional Information.

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES
- --------------------------------------------------------------------------------

Set forth below is a description of the investment objective and policies
of each Portfolio. The investment objective of a Portfolio is a fundamental
policy and may not be changed without the approval of the holders of a majority
of the outstanding voting securities of that Portfolio. Any investment involves
risk and, therefore, there can be no assurance that a Portfolio will achieve its
investment objective. See "Special Risk Considerations and Certain Investment
Strategies" for descriptions of certain types of investments the Portfolios may
make.

POST-VENTURE CAPITAL PORTFOLIO

Because of the nature of the Post-Venture Capital Portfolio's investments
and certain strategies it may use, such as investing in Private Funds (as
defined below), an investment in the Portfolio should be considered only for the
aggressive portion of an investor's portfolio and may not be appropriate for all
investors.

The Post-Venture Capital Portfolio seeks long-term growth of capital. The
Portfolio is a diversified management investment company that pursues an
aggressive investment strategy. The Portfolio pursues its investment objective
by investing primarily in equity securities of companies considered by Warburg
to be in their post-venture capital stage of development. The Portfolio intends
to invest in securities of post-venture capital companies, as defined below,
that are traded on a national securities exchange or in an organized
over-the-counter market.

Although the Portfolio may invest up to 10% of its assets in venture
capital and other investment funds, the Portfolio is not designed primarily to
provide venture capital financing. Rather, under normal market conditions, the
Portfolio will invest at least 65% of its total assets in equity securities of
"post- venture capital companies." A post-venture capital company is a company
that has received venture capital financing either (a) during the early stages
of the company's existence or the early stages of the development of a new
product or service, or (b) as part of a restructuring or recapitalization of the
company. The investment of venture capital financing, distribution of such
company's securities to venture capital investors, or initial public offering
("IPO"), whichever is later, will have been made within ten years prior to the
Portfolio's purchase of the company's securities.

Warburg Pincus Asset Management, Inc. ("Warburg"), the Portfolios'
investment adviser, believes that venture capital participation in a company's
capital structure can lead to revenue/earnings growth rates above those of
older, public companies such as those in the Dow Jones Industrial Average, the
Fortune 500 or the Morgan Stanley Capital International Europe, Australasia, Far
East ("EAFE") Index. Venture capitalists finance start-up companies, companies
in the early stages of developing new products or services and companies
undergoing a restructuring or recapitalization, since these companies may not
have access to conventional forms of financing (such as bank loans or public
issuances of stock). Venture capitalists may hold substantial

<PAGE>

positions in companies that may have been acquired at prices significantly below
the initial public offering price. This may create a potential adverse impact in
the short-term on the market price of a company's stock due to sales in the open
market by a venture capitalist or others who acquired the stock at lower prices
prior to the company's IPO. Warburg will consider the impact of such sales in
selecting post-venture capital investments. Venture capitalists may be
individuals or funds organized by venture capitalists which are typically
offered only to large institutions, such as pension funds and endowments, and
certain accredited investors. Outside of the United States, venture capitalists
may also consist of merchant banks and other banking institutions that provide
venture capital financing in a manner similar to U.S. venture capitalists.
Venture capital participation in a company is often reduced when the company
engages in an IPO of its securities or when it is involved in a merger, tender
offer or acquisition.

Warburg has experience in researching smaller companies, companies in the
early stages of development and venture capital-financed companies. Its team of
analysts, led by Elizabeth Dater and Stephen Lurito, regularly monitors
portfolio companies whose securities are held by over 400 of the larger domestic
venture capital funds. Ms. Dater and Mr. Lurito have managed post-venture equity
securities in separate accounts for institutions since 1989 and currently manage
over $1 billion of such assets for investment companies and other institutions.

PRIVATE FUND INVESTMENTS. Up to 10% of the Portfolio's assets may be
invested in United States or foreign private limited partnerships or other
investment funds ("Private Funds") that themselves invest in equity or debt
securities of (a) companies in the venture capital or post-venture capital
stages of development or (b) companies engaged in special situations or changes
in corporate control, including buyouts. In selecting Private Funds for
investment, Abbott Capital Management, LLC, the Portfolio's sub-investment
adviser with respect to Private Funds ("Abbott"), attempts to invest in a mix of
Private Funds that will provide an above average internal rate of return (i.e.,
the discount rate at which the present value of an investment's future cash
inflows (dividend income and capital gains) are equal to the cost of the
investment). Warburg believes that the Portfolio's investments in Private Funds
offer individual investors a unique opportunity to participate in venture
capital and other private investment funds, providing access to investment
opportunities typically available only to large institutions and accredited
investors. Although the Portfolio's investments in Private Funds are limited to
a maximum of 10% of the Portfolio's assets, these investments are highly
speculative and volatile and may produce gains or losses in the portion of the
Portfolio that exceed those of the Portfolio's other holdings and of more mature
companies generally.

Because Private Funds generally are investment companies for purposes of
the Investment Company Act of 1940, as amended (the "1940 Act"), the Portfolio's
ability to invest in them will be limited. In addition, Portfolio

<PAGE>

shareholders will remain subject to the Portfolio's expenses while also bearing
their pro rata share of the operating expenses of the Private Funds. The ability
of the Portfolio to dispose of interests in Private Funds is very limited and
will involve the risks described under "Special Risk Considerations and Certain
Investment Strategies -- Non-Publicly Traded Securities; Rule 144A Securities."
In valuing the Portfolio's holdings of interests in Private Funds, the Portfolio
will be relying on the most recent reports provided by the Private Funds
themselves prior to calculation of the Portfolio's net asset value. These
reports, which are provided on an infrequent basis, often depend on the
subjective valuations of the managers of the Private Funds and, in addition,
would not generally reflect positive or negative subsequent developments
affecting companies held by the Private Fund. See "Net Asset Value." Debt
securities held by a Private Fund will tend to be rated below investment grade
and may be rated as low as C by Moody's Investors Service, Inc. ("Moody's") or D
by Standard & Poor's Ratings Services ("S&P"). Securities in these rating
categories are in payment default or have extremely poor prospects of attaining
any investment standing. For a discussion of the risks of investing in below
investment grade debt, see "Investment Policies -- Below Investment Grade Debt
Securities" in the Statement of Additional Information. For a discussion of the
possible tax consequences of investing in foreign Private Funds, see "Additional
Information Concerning Taxes -- Investment in Passive Foreign Investment
Companies" in the Statement of Additional Information.

The Portfolio may also hold non-publicly traded equity securities of
companies in the venture and post-venture stages of development, such as those
of closely held companies or private placements of public companies. The portion
of the Portfolio's assets invested in these non-publicly traded securities will
vary over time depending on investment opportunities and other factors. The
Portfolio's illiquid assets, including interests in Private Funds and other
illiquid non-publicly traded securities, may not exceed 15% of the Portfolio's
net assets.

OTHER STRATEGIES. The Portfolio may invest up to 35% of its assets in
exchange-traded and over-the-counter securities that do not meet the definition
of post-venture capital companies without regard to market capitalization. Up to
10% of the Portfolio's assets may be invested, directly or through Private
Funds, in securities of issuers engaged at the time of purchase in "special
situations," such as a restructuring or recapitalization; an acquisition,
consolidation, merger or tender offer; a change in corporate control or
investment by a venture capitalist. To attempt to reduce risk, the Portfolio
will diversify its investments over a broad range of issuers operating in a
variety of industries. The Portfolio may hold securities of companies of any
size, and will not limit capitalization of companies it selects to invest in.
However, due to the nature of the venture capital to post-venture cycle, the
Portfolio anticipates that the average market capitalization of companies in
which it invests will be less than $1 billion at

<PAGE>

the time of investment. Although the Portfolio will invest primarily in U.S.
companies, up to 20% of the Portfolio's assets may be invested in securities of
issuers located in foreign countries. Equity securities in which the Portfolio
will invest are common stock, preferred stock, warrants, securities convertible
into or exchangeable for common stock and partnership interests. The Portfolio
may engage in a variety of strategies to reduce risk or seek to enhance return,
including engaging in short selling (see "Special Risk Considerations and
Certain Investment Strategies").

SMALL COMPANY GROWTH PORTFOLIO

The Small Company Growth Portfolio's investment objective is capital
growth. The Portfolio is a non-diversified portfolio that will pursue its
investment objective by investing primarily in a portfolio of equity securities
of small market capitalization domestic companies. The Portfolio intends to
invest at least 90% of its total assets in common stocks or warrants of small
companies that present attractive opportunities for capital growth and, under
normal market conditions, will invest at least 65% of its total assets in such
securities. The Portfolio considers a "small" company to be one that has a
market capitalization, measured at the time the Portfolio purchases a security
of that company, within the range of capitalizations of companies represented in
the Russell 2000 Index. (As of February 4, 1998, the Russell 2000 Index included
companies with market capitalizations between $22.9 million and $2.5 billion.)
Companies whose capitalization no longer meets this definition after purchase
continue to be considered small companies for purposes of the Portfolio's policy
of investing at least 65% of its assets in small companies. In addition, the
Portfolio has the flexibility to invest in companies with a market
capitalization of any size when the 65% policy is met. As a result of these
policies, the average market capitalization of the Portfolio at any particular
time may exceed $2.5 billion, particularly at times when the market values of
small company stocks are rising. The Portfolio will invest primarily in
companies whose securities are traded on domestic stock exchanges or in the
domestic over-the-counter market, but may invest up to 20% of its assets in
foreign securities. The Portfolio may also invest in convertible debt and
preferred stock. Small companies may still be in the developmental stage, may be
older companies that appear to be entering a new stage of growth progress owing
to factors such as management changes or development of new technology, products
or markets or may be companies providing products or services with a high unit
volume growth rate. The Portfolio's investments will be made on the basis of
their equity characteristics, and securities ratings generally will not be a
factor in the selection process.

The Portfolio may also invest in securities of emerging growth companies,
which can be companies of any size that have passed their start-up phase and
that show positive earnings and prospects of achieving significant profit and
gain in a relatively short period of time. Emerging growth companies gener-

<PAGE>

ally stand to benefit from new products or services, technological developments
or changes in management and other factors.

SMALL COMPANY VALUE PORTFOLIO

The Small Company Value Portfolio seeks long-term capital appreciation. The
Portfolio is a diversified management investment company that pursues its
investment objective by investing primarily in a portfolio of equity securities
of small capitalization companies that Warburg considers to be relatively
undervalued. Current income is a secondary consideration in selecting portfolio
investments. Under normal market conditions the Portfolio will invest at least
65% of its total assets in common stocks, preferred stocks, debt securities
convertible into common stocks, warrants and other rights of small companies.
The Portfolio considers a "small" company to be one that has a market
capitalization, measured at the time the Portfolio purchases a security of that
company, within the range of capitalizations of companies represented in the
Russell 2000 Index. (As of February 4, 1998, the Russell 2000 Index included
companies with market capitalizations between $22.9 million and $2.5 billion.)
Companies whose capitalization no longer meets this definition after purchase
continue to be considered small companies for purposes of the Portfolio's policy
of investing at least 65% of its assets in small companies. In addition, the
Portfolio has the flexibility to invest in companies with a market
capitalization of any size when the 65% policy is met. As a result of these
policies, the average market capitalization of the Portfolio at any particular
time may exceed $2.5 billion, particularly at times when the market values of
small company stocks are rising.

Warburg will determine whether a company is undervalued based on a variety
of measures, including price/earnings ratio, price/book ratio, price/cash flow
ratio, earnings growth and debt/capital ratio. Other relevant factors, including
a company's asset value, franchise value and quality of management, will also be
considered. The Portfolio will invest primarily in companies whose securities
are traded on U.S. stock exchanges or in the U.S. over-the-counter market, but
may invest up to 20% of its assets in foreign securities.

VALUE PORTFOLIO

The Value Portfolio's investment objective is total return. The Portfolio
is a diversified portfolio that pursues its investment objective by investing
primarily in a portfolio of equity securities of large capitalization domestic
companies that Warburg considers to be relatively undervalued. Current income is
a secondary consideration in selecting portfolio investments. The Portfolio
intends to invest at least 80% of its total assets in common stocks, preferred
stocks, warrants and other rights and securities convertible into or
exchangeable for common stocks of large companies (i.e., companies having stock
market capitalizations of $1 billion or greater at the time of initial purchase)
and, under normal market conditions, will invest at least 65% of its total
assets in such securities.

<PAGE>

The Value Portfolio's general investment policy is to invest in equity
securities that, in Warburg's opinion, are available for purchase at prices
below their intrinsic value. Warburg will determine whether a company is
undervalued based upon research and analysis, taking into account, among other
factors, price/earnings ratio, price/book ratio, price/cash flow ratio, earnings
growth, debt/capital ratio and multiples of earnings of comparable securities.
Other relevant factors, including a company's asset value, franchise value and
quality of management, will also be considered. These factors are not applied to
prospective investments in a mechanical way; rather, Warburg analyzes each
security individually, taking all relevant factors into account. The Portfolio
may invest in the securities of companies in any industry sector and will not
concentrate in any one industry. The Portfolio will invest primarily in
companies whose securities are traded on U.S. stock exchanges or in the U.S.
over-the-counter market, but may invest up to 20% of its assets in foreign
securities.

ADDITIONAL INVESTMENTS

MONEY MARKET OBLIGATIONS. Each Portfolio is authorized to invest, under
normal circumstances, up to 20% of its total assets in domestic and foreign
short-term (one year or less remaining to maturity) and medium-term (five years
or less remaining to maturity) money market obligations, although each Portfolio
intends to stay invested in securities satisfying its investment objective to
the extent practical. In addition, on occasion, Warburg may deem it advisable to
adopt a temporary defensive posture by investing without limit in money market
obligations. These instruments consist of obligations of the U.S. government or
foreign governments, their agencies or instrumentalities; obligations of foreign
and U.S. banks; commercial paper; and money market mutual funds that invest in
the foregoing.

Repurchase Agreements. The Portfolios may invest in repurchase agreement
transactions with member banks of the Federal Reserve System and certain
non-bank dealers. Under the terms of a typical repurchase agreement, a Portfolio
would acquire an underlying security for a relatively short period (usually not
more than one week) subject to an obligation of the seller to repurchase, and
the Portfolio to resell, the obligation at an agreed-upon price and time,
thereby determining the yield during the Portfolio's holding period. The value
of the underlying securities will at all times be at least equal to the total
amount of the purchase obligation, including accrued interest. A Portfolio bears
a risk of loss in the event that the other party to a repurchase agreement
defaults on its obligations or becomes bankrupt and the Portfolio is delayed or
prevented from exercising its right to dispose of the collateral securities.

<PAGE>

mutual fund's expenses, including management fees, and will remain subject to
payment of the Portfolio's administration fees and other expenses with respect
to assets so invested.
U.S. GOVERNMENT SECURITIES. The U.S. government securities in which each
Portfolio may invest include: direct obligations of the U.S. Treasury (such as
Treasury bills, notes and bonds) and obligations issued by U.S. government
agencies and instrumentalities, including instruments that are supported by the
full faith and credit of the United States, instruments that are supported by
the right of the issuer to borrow from the U.S. Treasury and instruments that
are supported by the credit of the instrumentality.

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

A security will be deemed to be investment grade if it is rated within the
four highest grades by Moody's or S&P or, if unrated, is determined to be of
comparable quality by Warburg. Securities rated in the fourth highest grade may
have speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade bonds. Subsequent to
its purchase by a Portfolio, an issue of securities may cease to be rated or its
rating may be reduced below the minimum required for purchase by the Portfolio.
Neither event will require sale of such securities, although Warburg will
consider such event in its determination of whether the Portfolio should
continue to hold the securities.
Securities rated below investment grade are regarded as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligations and involve large
uncertainties or major risk exposures to adverse conditions. A Portfolio may
have difficulty disposing of certain lower quality obligations because there may
be a thin trading market for such securities. In addition, the market value of
lower quality securities may be more volatile than that of higher quality
securities.

<PAGE>

When Warburg believes that a defensive posture is warranted, each Portfolio
may invest temporarily without limit in investment grade debt obligations and in
domestic and foreign money market obligations, including repurchase agreements.

WARRANTS. Each Portfolio may invest up to 10% of its total assets in
warrants. Warrants are securities that give the holder the right, but not the
obligation, to purchase equity issues of the company issuing the warrants, or a
related company, at a fixed price either on a date certain or during a set
period.

PORTFOLIO TRANSACTIONS AND TURNOVER RATE
- --------------------------------------------------------------------------------

A Portfolio will attempt to purchase securities with the intent of holding
them for investment but may purchase and sell portfolio securities whenever
Warburg believes it is to be in the best interests of the relevant Portfolio and
will not consider portfolio turnover rate a limiting factor in making investment
decisions consistent with its investment objective and policies. In addition, to
the extent it is consistent with a Portfolio's investment objective, each
Portfolio also may engage in short-term trading. This investment approach and
the use of certain of the investment strategies described below may result in a
high portfolio turnover rate for the Portfolios. It is not possible to predict
the portfolio turnover rates for the Portfolios. However, the Post-Venture
Capital Portfolio's turnover rate should not exceed 150% and the Small Company
Value Portfolio's annual turnover rate should not exceed 100%. High portfolio
turnover rates (100% or more) may result in dealer markups or underwriting
commissions as well as other transaction costs, including correspondingly higher
brokerage commissions. In addition, short-term gains realized from portfolio
turnover may be taxable to shareholders as ordinary income. See "Dividends,
Distributions and Taxes -- Taxes" and "Investment Policies -- Portfolio
Transactions" in the Statement of Additional Information. All orders for
transactions in securities or options on behalf of a Portfolio are placed by
Warburg with broker-dealers that it selects.

SPECIAL RISK CONSIDERATIONS AND
CERTAIN INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------

<PAGE>

these strategies and their related risks is contained in the Statement of
Additional Information.
CONVERTIBLE SECURITIES. Convertible securities in which the Portfolios may
invest, including both convertible debt and convertible preferred stock, may be
converted at either a stated price or stated rate into underlying shares of
common stock. Because of this feature, convertible securities enable an investor
to benefit from increases in the market price of the underlying common stock.
Convertible securities provide higher yields than the underlying equity
securities, but generally offer lower yields than non-convertible securities of
similar quality. The value of convertible securities fluctuates in relation to
changes in interest rates like bonds and, in addition, fluctuates in relation to
the underlying common stock.

FOREIGN SECURITIES. Each Portfolio may invest up to 20% of its total assets
in the securities of foreign issuers. There are certain risks involved in
investing in securities of companies and governments of foreign nations which
are in addition to the usual risks inherent in domestic investments. These risks
include those resulting from fluctuations in currency exchange rates,
revaluation of currencies, future adverse political and economic developments
and the possible imposition of currency exchange blockages or other foreign
governmental laws or restrictions, reduced availability of public information
concerning issuers and the lack of uniform accounting, auditing and financial
reporting standards and other regulatory practices and requirements that are
often generally less rigorous than those applied in the United States. Moreover,
securities of many foreign companies may be less liquid and their prices more
volatile than those of securities of comparable U.S. companies. Certain foreign
countries are known to experience long delays between the trade and settlement
dates of securities purchased or sold. In addition, with respect to certain
foreign countries, there is the possibility of expropriation, nationalization,
confiscatory taxation and limitations on the use or removal of funds or other
assets of a Portfolio, including the withholding of dividends. Foreign
securities may be subject to foreign government taxes that would reduce the net
yield on such securities. Moreover, individual foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as growth of
gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Investment in foreign
securities will also result in higher expenses due to the cost of converting
foreign currency into U.S. dollars, the payment of fixed brokerage commissions
on foreign exchanges, which generally are higher than commissions on

<PAGE>

U.S. exchanges, higher valuation and communications costs and the expense of
maintaining securities with foreign custodians.
DEPOSITARY RECEIPTS. Certain of the above risks may be involved with
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and
International Depositary Receipts ("IDRs"), instruments that evidence ownership
of underlying securities issued by a foreign corporation. ADRs, EDRs and IDRs
may not necessarily be denominated in the same currency as the securities whose
ownership they represent. ADRs are typically issued by a U.S. bank or trust
company. EDRs (sometimes referred to as Continental Depositary Receipts) are
issued in Europe and IDRs (sometimes referred to as Global Depositary Receipts)
are issued outside the United States, each typically by non-U.S. banks and trust
companies. The risks associated with investing in securities of non-U.S. issuers
are generally heightened for investments in securities of issuers in emerging
markets.

REITS. The Value Portfolio may invest up to 15% of its total assets in real
estate investment trusts ("REITs"), which are pooled investment vehicles that
invest primarily in income-producing real estate or real estate related loans or
interests. Like regulated investment companies such as the Fund, REITs are not
taxed on income distributed to shareholders provided they comply with several
requirements of the Internal Revenue Code of 1986, as amended (the "Code"). By
investing in a REIT, the Portfolio will indirectly bear its proportionate share
of any expenses paid by the REIT in addition to the expenses of the Portfolio.

Investing in REITs involves certain risks. A REIT may be affected by
changes in the value of the underlying property owned by such REIT or by the
quality of any credit extended by the REIT. REITs are dependent on management
skills, are not diversified (except to the extent the Code requires), and are
subject to the risks of financing projects. REITs are subject to heavy cash flow
dependency, default by borrowers, self-liquidation, the possibilities of failing
to qualify for the exemption from tax for distributed income under the Code and
failing to maintain their exemptions from the 1940 Act. REITs are also subject
to interest rate risks.

SMALL CAPITALIZATION AND EMERGING GROWTH COMPANIES; UNSEASONED ISSUERS.
Investing in securities of emerging growth and small- and medium-sized companies
and companies with continuous operations of less than three years ("unseasoned
issuers") may involve greater risks than investing in larger, more established
companies since these securities may have limited marketability and, thus, may
be more volatile than securities of larger, more established companies or the
market averages in general. Because these issuers normally have fewer shares
outstanding than larger companies, it may be more difficult for a Portfolio to
buy or sell significant amounts of such shares without an unfavorable impact on
prevailing prices. These issuers may have limited product lines, markets or
financial resources and may lack management depth. In addition, these issuers
are typically subject to a greater degree of changes in earnings and business
prospects than are larger, more estab-

<PAGE>

lished companies. There is typically less publicly available information
concerning these issuers than for larger, more established ones.

The Post-Venture Capital Portfolio may invest in securities of issuers in
"special situations." Securities of issuers in "special situations" also may be
more volatile, since the market value of these securities may decline in value
if the anticipated benefits do not materialize. Companies in "special
situations" include, but are not limited to, companies involved in an
acquisition or consolidation; reorganization; recapitalization; merger,
liquidation or distribution of cash, securities or other assets; a tender or
exchange offer; a breakup or workout of a holding company; litigation which, if
resolved favorably, would improve the value of the companies' securities; or a
change in corporate control.

Although investing in securities of small- and medium-sized and emerging
growth companies, unseasoned issuers or, with respect to the Post-Venture
Capital Portfolio, issuers in "special situations" offers potential for
above-average returns if the companies are successful, the risk exists that the
companies will not succeed and the prices of the companies' shares could
significantly decline in value. Therefore, an investment in a Portfolio may
involve a greater degree of risk than an investment in other mutual funds that
seek growth of capital or capital appreciation by investing in better-known,
larger companies.

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

Securities Options and Stock Index Options. Each Portfolio may write put
and call options on up to 25% of the net asset value of the stock and debt
securities in its portfolio and will realize fees (referred to as "premiums")
for granting the rights evidenced by the options. Each Portfolio may utilize up
to 10% of its assets to purchase options on stocks and debt securities that are
traded on U.S. and foreign exchanges, as well as over-the-counter ("OTC")
options. The purchaser of a put option on a security has the right to compel the
purchase by the writer of the underlying security, while the purchaser of a call
option on a security has the right to purchase the underlying security from the
writer. In

<PAGE>

addition to purchasing and writing options on securities, each Portfolio may
also utilize up to 10% of its total assets to purchase exchange-listed and OTC
put and call options on stock indexes, and may also write such options. A stock
index measures the movement of a certain group of stocks by assigning relative
values to the common stocks included in the index.

The potential loss associated with purchasing an option is limited to the
premium paid, and the premium would partially offset any gains achieved from its
use. However, for an option writer the exposure to adverse price movements in
the underlying security or index is potentially unlimited during the exercise
period. Writing securities options may result in substantial losses to a
Portfolio, force the sale or purchase of portfolio securities at inopportune
times or at less advantageous prices, limit the amount of appreciation the
Portfolio could realize on its investments or require the Portfolio to hold
securities it would otherwise sell.
Futures Contracts and Related Options. Each Portfolio may enter into
foreign currency, interest rate and stock index futures contracts and purchase
and write (sell) related options that are traded on an exchange designated by
the Commodity Futures Trading Commission (the "CFTC") or, if consistent with
CFTC regulations, on foreign exchanges. These futures contracts are standardized
contracts for the future delivery of foreign currency or an interest rate
sensitive security or, in the case of stock index and certain other futures
contracts, are settled in cash with reference to a specified multiplier times
the change in the specified index, exchange rate or interest rate. An option on
a futures contract gives the purchaser the right, in return for the premium
paid, to assume a position in a futures contract. Aggregate initial margin and
premiums required to establish positions other than those considered by the CFTC
to be "bona fide hedging" will not exceed 5% of a Portfolio's net asset value,
after taking into account unrealized profits and unrealized losses on any such
contracts. Although a Portfolio is limited in the amount of assets that may be
invested in futures transactions, there is no overall limit on the percentage of
a Portfolio's assets that may be at risk with respect to futures activities.
Currency Exchange Transactions. Each Portfolio will conduct its currency
exchange transactions either (i) on a spot (i.e., cash) basis at the rate
prevailing in the currency exchange market, (ii) through entering into futures
contracts or options on futures contracts (as described above), (iii) through
entering into forward contracts to purchase or sell currency or (iv) by
purchasing or writing exchange-traded or OTC currency options. A forward
currency contract involves an obligation to purchase or sell a specific currency
at a future date at a price set at the time of the contract. An option on a
foreign currency operates similarly to an option on a security. Risks associated
with currency forward contracts and purchasing currency options are similar to
those described in this Prospectus for futures contracts and securities and
stock index options. In addition, the use of currency transactions could result
in losses from the

<PAGE>

imposition of foreign exchange controls, suspension of settlement or other
governmental actions or unexpected events.

Hedging Considerations. Each Portfolio may engage in options, futures and
currency transactions for, among other reasons, hedging purposes. A hedge is
designed to offset a loss on a portfolio position with a gain in the hedge
position; at the same time, however, a properly correlated hedge will result in
a gain in the portfolio position being offset by a loss in the hedge position.
As a result, the use of options, futures contracts and currency exchange
transactions for hedging purposes could limit any potential gain from an
increase in value of the position hedged. In addition, the movement in the
portfolio position hedged may not be of the same magnitude as movement in the
hedge. Each Portfolio will engage in hedging transactions only when deemed
advisable by Warburg, and successful use of hedging transactions will depend on
Warburg's ability to predict correctly movements in the hedge and the hedged
position and the correlation between them, which could prove to be inaccurate.
Even a well-conceived hedge may be unsuccessful to some degree because of
unexpected market behavior or trends.

Additional Considerations. To the extent that a Portfolio engages in the
strategies described above, the Portfolio may experience losses greater than if
these strategies had not been utilized. In addition to the risks described
above, these instruments may be illiquid and/or subject to trading limits, and
the Portfolio may be unable to close out a position without incurring
substantial losses, if at all. A Portfolio is also subject to the risk of a
default by a counterparty to an off-exchange transaction.

Asset Coverage. Each Portfolio will comply with applicable regulatory
requirements designed to eliminate any potential for leverage with respect to
options written by the Portfolio on securities, indexes and currencies;
currency, interest rate and stock index futures contracts and options on these
futures contracts; and forward currency contracts. The use of these strategies
may require that the Portfolio maintain cash or liquid securities in a
segregated account with its custodian or a designated sub-custodian to the
extent the Portfolio's obligations with respect to these strategies are not
otherwise "covered" through ownership of the underlying security, financial
instrument or currency or by other portfolio positions or by other means
consistent with applicable regulatory policies. Segregated assets cannot be sold
or transferred unless equivalent assets are substituted in their place or it is
no longer necessary to segregate them. As a result, there is a possibility that
segregation of a large percentage of a Portfolio's assets could impede portfolio
management or the Portfolio's ability to meet redemption requests or other
current obligations.

<PAGE>

the Fund's Board of Directors (the "Board") determines on an ongoing basis that
an adequate trading market exists for the security. Non-publicly traded
securities (including interests in Private Funds and Rule 144A Securities) may
be less liquid than publicly traded securities. Although these securities may be
resold in privately negotiated transactions, the prices realized from these
sales could be less than those originally paid by the Portfolio. In addition,
companies whose securities are not publicly traded are not subject to the
disclosure and other investor protection requirements that would be applicable
if their securities were publicly traded. A Portfolio's investment in illiquid
securities is subject to the risk that should the Portfolio desire to sell any
of these securities when a ready buyer is not available at a price that is
deemed to be representative of their value, the value of the Portfolio's net
assets could be adversely affected. WARRANTS. At the time of issue, the cost of
a warrant is substantially less than the cost of the underlying security itself,
and price movements in the underlying security are generally magnified in the
price movements of the warrant. This leveraging effect enables the investor to
gain exposure to the underlying security with a relatively low capital
investment but increases an investor's risk in the event of a decline in the
value of the underlying security and can result in a complete loss of the amount
invested in the warrant. In addition, the price of a warrant tends to be more
volatile than, and may not correlate exactly to, the price of the underlying
security. If the market price of the underlying security is below the exercise
price of the warrant on its expiration date, the warrant will generally expire
without value.

WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS. Each Portfolio
(except the Small Company Value Portfolio) may utilize up to 20% of its total
assets to purchase securities on a when-issued basis and purchase or sell
securities on a delayed-delivery basis. In these transactions, payment for and
delivery of the securities occurs beyond the regular settlement dates. A
Portfolio will not enter into a when-issued or delayed-delivery transaction for
the purpose of leverage, but may sell the right to acquire a when-issued
security prior to its acquisition or dispose of its right to deliver or receive
securities in a delayed-delivery transaction if Warburg deems it advantageous to
do so. The payment obligation and the interest rate that will be received in
when-issued and delayed-delivery transactions are fixed at the time the buyer
enters into the commitment. Due to fluctuations in the value of securities
purchased or sold on a when-issued or delayed-delivery basis, the prices of such
securities may be higher or lower than the prices available in the market on the
dates when the investments are actually delivered to the buyers.

Each Portfolio will establish a segregated account with its custodian
consisting of cash or liquid securities in an amount equal to the amount if its
when-issued and delayed-delivery purchase commitments and will segregate the
securities underlying commitments to sell securities for delayed delivery.

SHORT SELLING. The Post-Venture Capital Portfolio may from time to time
sell securities short. A short sale is a transaction in which the Portfolio
sells

<PAGE>

securities it does not own in anticipation of a decline in the market price of
the securities. The current market value of the securities sold short (excluding
short sales "against the box") will not exceed 10% of the Portfolio's assets.
To deliver the securities to the buyer, the Portfolio must arrange through
a broker to borrow the securities and, in so doing, the Portfolio becomes
obligated to replace the securities borrowed at their market price at the time
of replacement, whatever that price may be. The Portfolio will make a profit or
incur a loss as a result of a short sale depending on whether the price of the
security decreases or increases between the date of the short sale and the date
on which the Portfolio purchases the security to replace the borrowed securities
that have been sold. The amount of any loss would be increased (and any gain
decreased) by any premium or interest the Portfolio is required to pay in
connection with a short sale. The Portfolio's obligation to replace the
securities borrowed in connection with a short sale will be secured by cash or
liquid securities deposited as collateral with the broker. In addition, the
Portfolio will place in a segregated account with its custodian or a qualified
subcustodian an amount of cash or liquid securities equal to the difference, if
any, between (i) the market value of the securities sold at the time they were
sold short and (ii) any cash or liquid securities deposited as collateral with
the broker in connection with the short sale (not including the proceeds of the
sort sale). Until it replaces the borrowed securities, the Portfolio will
maintain the segregated account daily at a level so that (a) the amount
deposited in the account plus the amount deposited with the broker (not
including the proceeds from the short sale) will equal the current market value
of the securities sold short and (b) the amount deposited in the account plus
the amount deposited with the broker (not including the proceeds from the short
sale) will not be less than the market value of the securities at the time they
were sold short. Short Sales Against the Box. Each Portfolio may enter into a
short sale of securities such that when the short position is open the Portfolio
owns an equal amount of the securities sold short or owns preferred stock or
debt securities, convertible or exchangeable without payment of further
consideration, into an equal number of securities sold short. This kind of short
sale, which is referred to as one "against the box," may be entered into by a
Portfolio to, for example, lock in a sale price for a security the Portfolio
does not wish to sell immediately. A Portfolio will deposit, in a segregated
account with its custodian or a qualified subcustodian, the securities sold
short or convertible or exchangeable preferred stocks or debt securities in
connection with short sales against the box. Not more than 10% of a Portfolio's
net assets (taken at current value) may be held as collateral for such sales at
any one time.

BELOW INVESTMENT GRADE SECURITIES. Each of the Post-Venture Capital and
Small Company Value Portfolios may invest up to 20% of its total assets in
investment grade debt securities. The Value Portfolio may invest or hold up to
10% of its net assets in fixed-income securities (including convertible bonds)
rated below investment grade. Up to 5% of the net assets of the Small Company
Growth Portfolio may be held in convertible securities rated below Company Value
Portfolio and up to 10% of the net assets of the Value Portfolio may be invested
in convertible securities rated below investment grade at the time of purchase.
Below investment grade securities may be rated as low as C by Moody's or D
by S&P, or be deemed by Warburg to be of equivalent quality. Securities that are
rated C by Moody's are the lowest rated class and can be regarded as having
extremely poor prospects of ever attaining any real investment standing. A
security rated D by S&P is in default or is expected to default upon maturity or
payment date. Below investment grade securities (commonly referred to as "junk
bonds") (i) will likely have some quality and protective characteristics that,
in the judgment of the rating organizations, are outweighed by large

18
<PAGE>

uncertainties or major risk exposures to adverse conditions and (ii) are
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. The market
values of certain of these securities also tend to be more sensitive to
individual corporate developments and changes in economic conditions than
investment grade securities. In addition, these securities generally present a
higher degree of credit risk. The risk of loss due to default is significantly
greater because these securities generally are unsecured and frequently are
subordinated to the prior payment of senior indebtedness.
The market values of below investment grade securities are more volatile
than those of investment grade securities. In addition, the Portfolio may have
difficulty disposing of certain of these securities because there may be a thin
trading market. The lack of a liquid secondary market for certain securities may
have an adverse impact on the Portfolio's ability to dispose of particular
issues and may make it more difficult for the Portfolio to obtain accurate
market quotations for purposes of valuing the Portfolio and calculating its net
asset value.

NON-DIVERSIFIED STATUS. The Small Company Growth Portfolio is classified as
"nondiversified" under the 1940 Act, which means that the Portfolio is not
limited by the 1940 Act in the proportion of its assets that may be invested in
the securities of a single issuer. The Portfolio, however, intends to comply
with the diversification requirements imposed by the Code, for qualification as
a regulated investment company. As a non-diversified portfolio, the Portfolio
may invest a greater proportion of its assets in the obligations of a smaller
number of issuers and, as a result, may be subject to greater risk with respect
to portfolio securities.

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

Each of the Post-Venture Capital and Value Portfolios may invest up to 15%
of its net assets and each other Portfolio may invest up to 10% of its assets in
securities with contractual or other restrictions on resale and other
instruments that are not readily marketable ("illiquid securities"), including
(i) securities issued as part of a privately negotiated transaction between an
issuer and one or more purchasers; (ii) repurchase agreements with maturities
greater than seven days; (iii) time deposits maturing in more than seven
calendar days; and (iv) certain Rule 144A Securities. A Portfolio may borrow
from banks for temporary or emergency purposes in an amount up to 30% of its
total assets and may pledge its assets to the same extent in connection with
these borrowings. Whenever borrowings (including reverse repurchase agreements)
exceed 5% of the value of a Portfolio's total assets, the Portfolio will not
make any investments (including roll-overs). Except for the limitations on
borrowing, the investment guidelines set forth in this paragraph may be changed
at any time without shareholder consent by vote of the Board, subject to the
limitations contained in the 1940 Act. A complete list of investment
restrictions that a Portfolio has adopted identifying additional restrictions
that

19
<PAGE>

cannot be changed without the approval of the majority of the Portfolio's
outstanding shares is contained in the Statement of Additional Information.

MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------

INVESTMENT ADVISERS. The Fund employs Warburg as investment adviser to each
Portfolio and, with respect to the Post-Venture Capital Portfolio, Abbott as its
sub-investment adviser. Warburg, subject to the control of the Fund's officers
and the Board, manages the investment and reinvestment of the assets of the
Portfolios in accordance with each Portfolio's investment objective and stated
investment policies. Warburg makes investment decisions for each Portfolio and
places orders to purchase or sell securities on behalf of the Portfolio and,
with respect to the Post-Venture Capital Portfolio, supervises the activities of
Abbott. Warburg also employs a support staff of management personnel to provide
services to the Fund and furnishes the Fund with office space, furnishings and
equipment. Abbott, in accordance with the investment objective and policies of
the Post-Venture Capital Portfolio, makes investment decisions for the Portfolio
regarding investments in Private Funds, effects transactions in Private Funds on
behalf of the Portfolio and assists in other administrative functions relating
to investments in Private Funds.

For the services provided by Warburg, the Small Company Growth, Small
Company Value and Value Portfolios pay Warburg a fee calculated at an annual
rate of .90%, .90% and .75%, respectively, of the relevant Portfolio's average
daily net assets. For the services provided by Warburg, the Post-Venture Capital
Portfolio pays Warburg a fee calculated at an annual rate of 1.10% of the
Portfolio's average daily net assets, out of which Warburg pays Abbott for
sub-advisory services. Warburg and the Portfolios' co-administrators may
voluntarily waive a portion of their fees from time to time and temporarily
limit the expenses to be borne by the Portfolios.

Warburg. Warburg is a professional investment advisory firm which provides
investment services to investment companies, employee benefit plans, endowment
funds, foundations and other institutions and individuals. As of January 31,
1998, Warburg managed approximately $ billion of assets, including approximately
$ billion of investment company assets. Incorporated in 1970, Warburg is
indirectly controlled by Warburg, Pincus & Co. ("WP&Co."), which has no business
other than being a holding company of Warburg and its affiliates. Lionel I.
Pincus, the managing partner of WP&Co., may be deemed to control both WP&Co. and
Warburg. Warburg's address is 466 Lexington Avenue, New York, New York
10017-3147.

Abbott. Abbott is an independent specialized investment firm with assets
under management of approximately $1.9 billion. Abbott is a registered
investment adviser which concentrates on venture capital, buyout and special
situations partnership investments. Abbott's management team provides
full-service private equity programs to clients. The predecessor firm to Abbott
was organized in 1986 as a Delaware limited partnership and converted to a
Delaware limited liability company effective July 1, 1997. Abbott's principal

20
<PAGE>

office is located at 50 Rowes Wharf, Suite 240, Boston, Massachusetts
02110-3328.

PORTFOLIO MANAGERS.

Post-Venture Capital Portfolio. Elizabeth B. Dater and Stephen J. Lurito
have been the Co-Portfolio Managers for the Post-Venture Capital Portfolio since
its inception. Ms. Dater is a Managing Director of Warburg and has been a
portfolio manager of Warburg since 1978. Mr. Lurito is a Managing Director of
Warburg and has been with Warburg since 1987.

Robert S. Janis and Christopher M. Nawn are Associate Portfolio Managers
and Research Analysts for the Portfolio. Mr. Janis is a Vice President of
Warburg and has been with Warburg since October 1994, before which time he was a
vice president and senior research analyst at U.S. Trust Company of New York.
Mr. Nawn is also a Vice President of Warburg and has been with Warburg since
September 1994, before which time he was a senior sector analyst and portfolio
manager at the Dreyfus Corporation.

Raymond L. Held and Gary H. Solomon, Investment Managers and Managing
Directors of Abbott, manage the Portfolio's investments in Private Funds. Both
Mr. Held and Mr. Solomon have been associated with Abbott and its predecessor
firm since 1986.

Small Company Growth Portfolio. Ms. Dater and Mr. Lurito, described above,
have also been Co-Portfolio Managers of the Small Company Growth Portfolio since
its inception.

Small Company Value Portfolio. George U. Wyper has been the Portfolio
Manager of the Small Company Value Portfolio since its inception. Mr. Wyper is a
Managing Director of Warburg, which he joined in August 1994, before which time
he was chief investment officer of White River Corporation and president of
Hanover Advisors, Inc. Kyle F. Frey, a Vice President of Warburg, has been
Associate Portfolio Manager and Research Analyst of the Portfolio since its
inception and has been with Warburg since 1989.

Value Portfolio. The Portfolio Manager of the Value Portfolio is Brian S.
Posner, who has been the portfolio manager of the Value Portfolio since its
inception. Mr. Posner, a Managing Director of Warburg since January 1997, was an
employee of Fidelity Investments ("Fidelity") from 1987 until December 1996. He
was the vice president and portfolio manager of the Fidelity Equity-Income II
Fund (1992-December 1996); the portfolio manager of the Fidelity Value Fund
(1990-1992); assistant portfolio manager of the Fidelity Equity-Income Fund
(1989-1990); assistant portfolio manager of the Fidelity Capital Appreciation
Fund (1989); portfolio manager of the Fidelity Select Property-Casualty
Insurance Portfolio (1987-1990) and an equity analyst (1987). Prior to joining
Fidelity, Mr. Posner was a research associate at John Nuveen and Co. and an
analyst at Feldman Securities Corp. in Chicago.

21
<PAGE>

inquiries and providing information on shareholder investments. Counsellors
Service also performs a variety of other services, including furnishing certain
executive and administrative services, acting as liaison between each Portfolio
and its various service providers, furnishing corporate secretarial services,
which include preparing materials for meetings of the Board, preparing proxy
statements and annual and semiannual reports, assisting in the preparation of
tax returns and developing and monitoring compliance procedures for the
Portfolios. As compensation, each Portfolio pays Counsellors Service a fee
calculated at an annual rate of .10% of the Portfolio's average daily net
assets.

The Fund employs PFPC Inc. ("PFPC"), an indirect, wholly owned subsidiary
of PNC Bank Corp., as a co-administrator. As a co-administrator, PFPC calculates
each Portfolio's net asset value, provides all accounting services for the
Portfolios and assists in related aspects of the Portfolios' operations. As
compensation, each Portfolio pays PFPC a fee calculated at an annual rate of
.10% of the Portfolio's first $500 million in average daily net assets, .075% of
the next $1 billion in average daily net assets, and .05% of average daily net
assets over $1.5 billion. PFPC has its principal offices at 400 Bellevue
Parkway, Wilmington, Delaware 19809.

CUSTODIANS. PNC Bank, National Association ("PNC") serves as custodian of
each Portfolio's U.S. assets. Like PFPC, PNC is an indirect wholly owned
subsidiary of PNC Bank Corp., and its principal business address is 1600 Market
Street, Philadelphia, Pennsylvania 19103.

State Street Bank and Trust Company ("State Street") serves as custodian of
each Portfolio's non-U.S assets. State Street's principal business address is
225 Franklin Street, Boston, Massachusetts 02110.

TRANSFER AGENT. State Street also serves as shareholder servicing agent,
transfer agent and dividend disbursing agent for the Fund. It has delegated to
Boston Financial Data Services, Inc. ("BFDS"), a 50% owned subsidiary,
responsibility for most shareholder servicing functions. BFDS's principal
business address is 2 Heritage Drive, North Quincy, Massachusetts 02171.

22
<PAGE>

instances, these incentives may be offered only to certain institutions whose
representatives provide services in connection with the sale or expected sale of
Fund shares.

DIRECTORS AND OFFICERS. The officers of the Fund manage its day-to-day
operations and are directly responsible to the Board. The Board sets broad
policies for the Fund and chooses its officers. A list of the Directors and
officers of the Fund and a brief statement of their present positions and
principal occupations during the past five years is set forth in the Statement
of Additional Information.

HOW TO OPEN AN ACCOUNT

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

In order to invest in a Portfolio, an investor must first complete and sign
an account application. To obtain an account application, an investor may tele-
phone the Fund at (800) 369-2728. An investor may also obtain an account
application by writing to:

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

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

RETIREMENT PLANS. For information about investing in a Portfolio through a
tax-deferred retirement plan, such as an Individual Retirement Account ("IRA")
or a Simplified Employee Pension IRA ("SEP-IRA"), an investor should telephone
Warburg Pincus Funds at (800) 369-2728 or write to the Fund at the address set
forth above. Investors should consult their own tax advisers about the
establishment of retirement plans.
CHANGES TO ACCOUNT. For information on how to make changes to an account,
including changes to account registration, address and/or privileges, an
investor should telephone (800) 369-2728. Shareholders are responsible for
maintaining current account registrations and addresses with the Fund. No
interest will be payable on amounts represented by uncashed distribution or
redemption checks. THE FUND IS DESIGNED FOR INSTITUTIONAL INVESTORS ALTHOUGH, IN
ITS DISCRETION, THE FUND MAY PERMIT SHARES TO BE PURCHASED BY INDIVIDUALS, AS
WELL AS INSTITUTIONS, WHO MEET THE MINIMUM INVESTMENT REQUIREMENTS.

HOW TO PURCHASE SHARES

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

Shares of the Portfolios may be purchased either by mail or, with special
advance instructions, by wire. Shares of the Fund are sold without a sales
charge. The minimum initial investment in each Portfolio is $1,000,000 and there
is no minimum subsequent investment. The minimum initial investment for any
group of related persons is an aggregate of $4,000,000.

The investment minimums may be waived for accounts in which employees of
Warburg or its affiliates have an interest or for investors maintaining advisory

23
<PAGE>

accounts with Warburg or brokerage accounts with Counsellors Securities. The
Fund reserves the right to change the initial investment minimum requirements or
impose a subsequent investment minimum at any time. Existing investors will be
given 15 days' notice by mail of any subsequent investment minimum.

After an investor has made an initial investment, additional shares may be
purchased at any time by mail or by wire in the manner outlined below. Wire
payments for initial and subsequent investments should be preceded by an order
placed with the Fund and should clearly indicate the investor's account number
and the Portfolio in which shares are being purchased. In the interest of
economy and convenience, physical certificates representing shares of a
Portfolio are not normally issued.

BY MAIL. If the investor desires to purchase shares by mail, a check or
money order made payable to Warburg Pincus Institutional Fund, Inc. or Warburg
Pincus Funds (in U.S. currency) should be sent along with the completed account
application to the address set forth above and should indicate the Portfolio in
which shares are to be purchased. Checks payable to the investor and endorsed to
the order of the Fund or Warburg Pincus Funds will not be accepted as payment
and will be returned to the sender. If payment is received in proper form by the
close of regular trading on The New York Stock Exchange, Inc. (the "NYSE")
(currently 4:00 p.m., Eastern time) on a day that the Fund calculates its net
asset value (a "business day"), the purchase will be made at the relevant
Portfolio's net asset value calculated at the end of that day. If payment is
received after the close of the NYSE, the purchase will be effected at the
relevant Portfolio's net asset value determined for the next business day after
payment has been received. Checks or money orders that are not in proper form or
that are not accompanied or preceded by a complete account application will be
returned to the sender. Shares purchased by check or money order are entitled to
receive dividends and distributions beginning on the day after payment has been
received. Checks or money orders in payment for more than one Portfolio or
Warburg Pincus Fund should be accompanied by a breakdown of amounts to be
invested in each Portfolio or fund. If a check used for the purchase does not
clear, the Fund will cancel the purchase and the investor may be liable for
losses or fees incurred. For a description of the manner of calculating each
Portfolio's net asset value, see "Net Asset Value" below.

BY WIRE. Investors may also purchase shares in a Portfolio by wiring funds
from their banks. Telephone orders by wire will not be accepted until a
completed account application in proper form has been received and an account
number has been established. Investors should place an order with the

24
<PAGE>

Fund prior to wiring funds by telephoning (800) 369-2728. Federal funds may be
wired using the following wire address:

State Street Bank and Trust Co.
225 Franklin St.
Boston, MA 02110

ABA #0110 000 28
Attn: Mutual Funds/Custody Dept.
Warburg Pincus Institutional Fund, Inc.:
[Portfolio name]
DDA# 9904-649-2
[Shareowner name]
[Shareowner account number]

If a telephone order is received prior to the close of regular trading on
the NYSE and payment by wire is received on the same day in proper form in
accordance with instructions set forth above, the shares will be priced
according to the net asset value of the relevant Portfolio on that day and are
entitled

to dividends and distributions beginning on that day. If payment by wire is
received in proper form prior to the close of the NYSE without a prior telephone
order, the purchase will be priced according to the net asset value of the
relevant Portfolio on that day and is entitled to dividends and distributions
beginning on that day. However, if a wire in proper form that is not preceded by
a telephone order is received at or after the close of regular trading on the
NYSE, the payment will be held uninvested until the order is effected at the
close of business on the next business day. Payment for orders that are not
received or accepted will be returned to the prospective investor after prompt
inquiry. If a telephone order is placed and payment by wire is not received on
the same day, the Fund will cancel the purchase and the investor may be liable
for losses or fees incurred.

PURCHASES THROUGH INTERMEDIARIES. The Portfolios may be available through
certain broker-dealers, financial institutions and other industry professionals,
(collectively, "Service Organizations"), which may impose certain conditions on
their clients or customers that invest in the Portfolios, which are in addition
to or different than those described in this Prospectus. Certain features of the
Portfolios may be modified or waived by Service Organizations. Service
Organizations may impose transaction or administrative charges or other direct
fees, which charges and fees would not be imposed if Portfolio shares are
purchased directly from the Fund. Therefore, a client or customer should contact
the Service Organization acting on its behalf concerning the fees (if any)
charged in connection with a purchase, exchange or redemption of Portfolio
shares and should read this Prospectus in light of the terms governing its
accounts with the Service Organization. Service Organizations will be
responsible for promptly transmitting client or customer purchase and redemption
orders to the Portfolio in accordance with their agreements with the Portfolio
and with clients or customers.

25
<PAGE>

Service Organizations or, if applicable, their designees may enter
confirmed purchase or redemption orders on behalf of clients and customers, with
payment to follow no later than the Portfolio's pricing on the following
business day. If payment is not received by such time, the Service Organization
could be held liable for resulting fees or losses. A Portfolio may be deemed to
have received a purchase or redemption order when a Service Organization, or, if
applicable, its authorized designee, accepts the order. Orders received by a
Portfolio in proper form may be priced at the Portfolio's net asset value
next computed after they are accepted by the Service Organization or its
authorized designee.
GENERAL. Each Portfolio reserves the right to reject any specific purchase
order, including certain purchases made by exchange. (See "How to Redeem and
Exchange Shares -- Exchange of Shares" below.) Purchase orders may be refused
if, in Warburg's judgment, a Portfolio would be unable to invest the money
effectively in accordance with its investment objective and policies, or would
otherwise potentially be adversely affected. A Portfolio may discontinue sales
of its shares if management believes that a substantial further increase in
assets may adversely affect that Portfolio's ability to achieve its investment
objective. In such event, however, it is anticipated that existing shareholders
would be permitted to continue to authorize investment in such Portfolio and to
reinvest any dividends or capital gains distributions.

HOW TO REDEEM AND EXCHANGE SHARES

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

REDEMPTION OF SHARES. An investor in a Portfolio may redeem (sell) shares
on any day that the Portfolio's net asset value is calculated (see "Net Asset
Value" below).

After receipt of the redemption request by mail or by telephone, the
redemption proceeds will, at the option of the investor, be paid by check and
mailed to the investor of record or be wired to the investor's bank as indicated
in the account application previously filled out by the investor. The Fund
currently does not impose a service charge for effecting wire transfers but it
reserves the right to do so in the future. During periods of significant
economic or market change, telephone redemptions may be difficult to implement.
If an investor is unable to contact Warburg Pincus Funds by telephone, an
investor may deliver the redemption request to Warburg Pincus Funds by

26
<PAGE>

mail at the address shown above under "How to Open an Account." Although the
Fund will redeem shares purchased by check before the check has cleared, payment
of the redemption proceeds will be delayed for up to 10 days from the date of
purchase. Investors should consider purchasing shares using a certified or bank
check or money order if they anticipate an immediate need for redemption
proceeds. If a redemption order is received by a Portfolio or its agent prior to
the close of regular trading on the NYSE, the redemption order will be effected
at the relevant Portfolio's net asset value per share as determined on that day.
If a redemption order is received at or after the close of trading on the NYSE,
the redemption order will be effected at the relevant Portfolio's net asset
value as next determined. Except as noted above, redemption proceeds will
normally be mailed or wired to an investor on the next business day following
the date a redemption order is effected. If, however, in the judgment of
Warburg, immediate payment would adversely affect a Portfolio, the Portfolio
reserves the right to pay the redemption proceeds within seven days after the
redemption order is effected. Furthermore, a Portfolio may suspend the right of
redemption or postpone the date of payment upon redemption (as well as suspend
or postpone the recordation of an exchange of shares) for such periods as are
permitted under the 1940 Act.

The proceeds paid upon redemption may be more or less than the amount
invested depending upon a share's net asset value at the time of redemption. If
an investor redeems all the shares in the account, all dividends and
distributions declared up to and including the date of redemption are paid along
with the proceeds of the redemption.
If, due to redemptions, the value of an investor's account in a Portfolio
drops to less than $250,000, the Fund reserves the right to redeem the shares in
that account at net asset value. Prior to any redemption, the Fund will notify
an investor in writing that the account has a value of less than the minimum.
The investor will then have 60 days to make an additional investment before a
redemption will be processed by the Fund.
EXCHANGE OF SHARES. An investor may exchange shares of one Portfolio for
shares of another Portfolio at their respective net asset values. Exchanges may
be effected by mail or by telephone in the manner described under "Redemption of
Shares" above. If an exchange request is received by Warburg Pincus Funds or its
agent prior to the close of regular trading on the NYSE, the exchange will be
made at each Portfolio's net asset value determined at the end of that business
day. Exchanges will be effected without a sales charge but must satisfy the
minimum dollar amount necessary for new purchases.

Currently, shares of the Portfolios may be exchanged for shares of the
following portfolios of the Fund, which are described in a separate prospectus:

- - EMERGING MARKETS PORTFOLIO -- an equity portfolio seeking long-term growth
of capital by investing primarily in equity securities of non-United States
issuers consisting of companies in emerging securities markets;

27
<PAGE>

- - GLOBAL FIXED INCOME PORTFOLIO -- a bond portfolio seeking to maximize total
investment return consistent with prudent investment management while
preserving capital by investing in investment grade fixed income securities
of issuers throughout the world, including United States issuers; and

- - INTERNATIONAL EQUITY PORTFOLIO -- an equity portfolio seeking long-term
capital appreciation by investing primarily in equity securities of
non-United States issuers;

- - JAPAN GROWTH PORTFOLIO -- an equity portfolio seeking long-term growth of
capital by investing primarily in equity securities of Japanese issuers;

The exchange privilege is available to investors in any state in which the
shares being acquired may be legally sold. When an investor effects an exchange
of shares, the exchange is treated for federal income tax purposes as a
redemption. Therefore, the investor may realize a taxable gain or loss in
connection with the exchange. Investors wishing to exchange shares of a
Portfolio for shares in another portfolio of the Fund should review the
prospectus of the other portfolio prior to making an exchange. For further
information regarding the exchange privilege or to obtain a current prospectus
for another portfolio of the Fund, an investor should contact the Fund at (800)
369-2728.

TELEPHONE TRANSACTIONS. Unless otherwise indicated on the account
application an investor may request exchanges and redemptions by telephone.
Investors should realize that in conducting transactions by telephone they may
be giving up a measure of security that they may have if they were to conduct
such transactions in writing. Neither the Fund nor its agents will be liable for
following instructions communicated by telephone that it reasonably believes to
be genuine. Reasonable procedures will be employed on behalf of the Fund
designed to give reasonable assurance that instructions communicated by
telephone are genuine. Such procedures include providing written confirmation of
telephone transactions, tape recording telephone instructions and requiring
specific personal information prior to acting upon telephone instructions.

28
<PAGE>

DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------

DIVIDENDS AND DISTRIBUTIONS. Each Portfolio calculates its dividends from
net investment income. Net investment income includes interest accrued on the
Portfolio's portfolio securities for the applicable period less applicable
expenses. Each Portfolio declares dividends from its net investment income and
net realized short-term and long-term capital gains annually and pays them in
the calendar year in which they are declared. Net investment income earned on
weekends and when the NYSE is not open will be computed as of the next business
day. Unless an investor instructs the Fund to pay dividends or distributions in
cash, dividends and distributions will automatically be reinvested in additional
shares of the relevant Portfolio at net asset value. The election to receive
dividends in cash may be made on the account application or, subsequently, by
writing to the Fund at the address set forth under "How to Open an Account" or
by calling the Fund at (800) 369-2728.

The Fund may be required to withhold for U.S. federal income taxes 31% of
all distributions payable to shareholders who fail to provide the Fund with
their correct taxpayer identification number or to make required certifications,
or who have been notified by the U.S. Internal Revenue Service that they are
subject to backup withholding.
TAXES. Each Portfolio intends to qualify each year as a "regulated
investment company" within the meaning of the Internal Revenue Code of 1986, as
amended (the "Code"). A Portfolio, if it qualifies as a regulated investment
company, will be subject to a 4% non-deductible excise tax measured with respect
to certain undistributed amounts of ordinary income and capital gain. Each
Portfolio expects to pay such additional dividends and to make such additional
distributions as are necessary to avoid the application of this tax.
Dividends paid from net investment income and distributions derived from
net realized short-term capital gains are taxable to investors as ordinary
income whether received in cash or reinvested in additional Portfolio shares.
Distributions derived from net realized long-term capital gains will be taxable
to investors as long-term capital gains, regardless of how long investors have
held Portfolio shares or whether such distributions are received in cash or
reinvested in Portfolio shares. As a general rule, an investor's gain or loss on
a sale or redemption of Portfolio shares will be a long-term capital gain or
loss if the investor has held the shares for more than one year and will be a
short-term capital gain or loss if the investor has held the shares for one year
or less. However, any loss realized upon the sale or redemption of shares within
six months from the date of their purchase will be treated as a long-term
capital loss to the extent of any amounts treated as distributions of long-term
capital gain during such six-month period with respect to such shares.

29
<PAGE>

for most assets (including long-term capital gains recognized by shareholders on
the sale or redemption of Portfolio shares that were held as capital assets).
This 20% rate applies to sales on or after July 29, 1997 only if the asset was
held for more than 18 months at the time of disposition. Capital gains on the
disposition of assets on or after July 29, 1997 held for more than one year and
up to 18 months at the time of disposition will be taxed as "mid-term gain" at a
maximum rate of 28%. A rate of 18% instead of 20% will apply after December 31,
2000 for assets held for more than five years. However, the 18% rate applies
only to assets acquired after December 31, 2000 unless the taxpayer elects to
treat an asset held prior to such date as sold for fair market value on January
1, 2001. In the case of individuals whose ordinary income is taxed at a 15%
rate, the 20% rate is reduced to 10% and the 10% rate for assets held for more
than five years is reduced to eight percent. Each Portfolio will provide
information relating to that portion of a "capital gain dividend" that may be
treated by investors as eligible for the reduced capital gains rate for capital
assets held for more than 18 months.

Investors may be proportionately liable for taxes on income and gains of
the Portfolios, but investors not subject to tax on their income will not be
required to pay tax on amounts distributed to them. A Portfolio's investment
activities, including short sales of securities, will not result in unrelated
business taxable income to a tax-exempt investor. A Portfolio's dividends may
qualify for the dividends received deduction for corporations to the extent they
are derived from dividends attributable to certain types of stock issued by U.S.
domestic corporations.

Dividends and interest received by each Portfolio may be subject to
withholding and other taxes imposed by foreign countries. However, tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. If a Portfolio qualifies as a regulated investment
company, if certain distribution requirements are satisfied and if more than 50%
of the Portfolio's total assets at the close of its fiscal year consist of stock
or securities of foreign corporations, the Portfolio may elect for U.S. income
tax purposes to treat any foreign income taxes paid by it that can be treated as
income taxes under U.S. income tax principles as paid by its shareholders. A
Portfolio may qualify for and make this election in some, but not necessarily
all, of its taxable years. If a Portfolio were to make an election, shareholders
of the Portfolio would be required to take into account an amount equal to their
pro rata portions of such foreign taxes in computing their taxable income and
then treat an amount equal to those foreign taxes as a U.S. federal income tax
deduction or as a foreign tax credit against their U.S. federal income taxes.
Shortly after any year for which it makes such an election, a Portfolio will
report to its shareholders, in writing, the amount per share of such foreign
income tax that must be included in each shareholder's gross income and the
amount which will be available for the deduction or credit. No deduction for
foreign taxes may be claimed by a shareholder who does not itemize

30
<PAGE>

deductions. Certain limitations will be imposed on the extent to which the
credit (but not the deduction) for foreign taxes may be claimed.

GENERAL. Statements as to the tax status of each investor's dividends and
distributions are mailed annually. Each investor will also receive, if
applicable, various written notices after the close of each Portfolio's prior
taxable year with respect to certain dividends and distributions which were
received from the Portfolio during the Portfolio's prior taxable year. Investors
should consult their tax advisers with specific reference to their own tax
situations, including their state and local tax liabilities.

NET ASSET VALUE
- --------------------------------------------------------------------------------

Each Portfolio's net asset value per share is calculated as of the close of
regular trading on the NYSE (currently 4:00 p.m., Eastern time) on each business
day, Monday through Friday, except on days when the NYSE is closed. The NYSE is
currently scheduled to be closed on New Year's Day, Dr. Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day, and on the preceding Friday or subsequent
Monday when one of these holidays falls on a Saturday or Sunday, respectively.
The net asset value per share of each Portfolio generally changes each day.
The net asset value per share of each Portfolio is computed by dividing the
value of a Portfolio's net assets by the total number of its shares outstanding.
Securities listed on a U.S. securities exchange (including securities
traded through the Nasdaq National Market System) or foreign securities exchange
or traded in an over-the-counter market will be valued at the most recent sale
price when the valuation is made. Debt obligations that mature in 60 days or
less from the valuation date are valued on the basis of amortized cost, unless
the Board determines that using this valuation method would not reflect the
investments' value. Investments in Private Funds will be valued initially at
cost and, thereafter, in accordance with periodic reports received by Abbott
from the Private Funds (generally quarterly). Because the issuers of securities
held by Private Funds are generally not subject to the reporting requirements of
the federal securities laws, interim changes in value of investments in Private
Funds will not generally be reflected in the Post-Venture Capital Portfolio's
net asset value. However, Warburg will report to the Board information about
certain holdings of Private Funds that, in its judgment, could have a material
impact on the valuation of a Private Fund. The Board will take these reports
into account in valuing Private Funds. Securities, options and futures contracts
for which market quotations are not readily available and other assets,
including Private Funds, will be valued at their fair value as determined in
good faith pursuant to consistently applied procedures established by the Board.
Further information regarding valuation policies is contained in the Statement
of Additional Information.

31
<PAGE>

THE PORTFOLIOS' PERFORMANCE
- --------------------------------------------------------------------------------

From time to time, a Portfolio may advertise its average annual total
return over various periods of time. Total return figures show the average
percentage change in value of an investment in a Portfolio from the beginning of
the measurement period to the end of the measurement period. The figures reflect
changes in the price of the Portfolio's shares assuming that any income
dividends and/or capital gain distributions made by the Portfolio during the
period were reinvested in shares of the Portfolio. Total return will be shown
for recent one-, five- and ten-year periods, and may be shown for other periods
as well (such as from commencement of the Portfolio's operations or on a
year-by-year, quarterly or current year-to-date basis).
When considering average total return figures for periods longer than one
year, it is important to note that the annual total return for one year in the
period might have been greater or less than the average for the entire period.
When considering total return figures for periods shorter than one year,
investors should bear in mind that such return may not be representative of any
Portfolio's return over a longer market cycle. A Portfolio may also advertise
aggregate total return figures for various periods, representing the cumulative
change in value of an investment in the relevant Portfolio for the specific
period. Aggregate and average total returns may be shown by means of schedules,
charts or graphs, and may indicate various components of total return (i.e.,
change in value of initial investment, income dividends and capital gain
distributions).
Investors should note that total return figures are based on historical
earnings and are not intended to indicate future performance. The Statement of
Additional Information describes the method used to determine each Portfolio's
total return. Current total return figures may be obtained by calling the Fund
at (800) 369-2728.

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<PAGE>

services and by financial publications such as Barron's, Business Week,
Financial Times, Forbes, Fortune, Inc., Institutional Investor, Investor's
Business Daily, Money, Morningstar, Mutual Fund Magazine, SmartMoney, The Wall
Street Journal and Worth. Morningstar, Inc. rates funds in broad categories
based on risk/reward analyses over various time periods. In addition, each
Portfolio may from time to time compare its expense ratio to that of investment
companies with similar objectives and policies, based on data generated by
Lipper Analytical Services, Inc. or similar investment services that monitor
mutual funds.

In reports or other communications to investors or in advertising, each
Portfolio may also describe the general biography or work experience of the
portfolio managers of the Portfolio and may include quotations attributable to
the portfolio managers describing approaches taken in managing the Portfolio's
investments, research methodology underlying stock selection or the Portfolio's
investment objective. In addition, a Portfolio and its portfolio managers may
render updates of Portfolio activity, which may include a discussion of
significant portfolio holdings; analysis of holdings by industry, country,
credit quality and other characteristics and comparison and analysis of the
Portfolio with respect to relevant market and industry benchmarks. The
Post-Venture Capital Portfolio may discuss characteristics of venture capital
financed companies and the benefits expected to be achieved from investing in
these companies. Each Portfolio may also discuss measures of risk, the continuum
of risk and return relating to different investments and the potential impact of
foreign stocks on a portfolio otherwise composed of domestic securities.

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

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

33
<PAGE>

because he may be deemed to possess or share investment power over shares owned
by clients of Warburg and by companies that WP&Co. may be deemed to control.

SHAREHOLDER COMMUNICATIONS. Each investor will receive a quarterly
statement of the investor's account, as well as a statement after any
transaction that affects the investor's share balance or share registration
(other than reinvestment of dividends or distributions). The Fund will also send
to its investors a semiannual report and an audited annual report, each of which
includes a list of the investment securities held by each Portfolio and a
statement of the performance of the Portfolio. Periodic listings of the
investment securities held by a Portfolio, as well as certain statistical
characteristics of a Portfolio, may be obtained by calling the Fund at (800)
369-2728 or on the Warburg Pincus Funds Web site at www.Warburg.com.

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

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE STATEMENT OF
ADDITIONAL INFORMATION OR THE FUND'S OFFICIAL SALES LITERATURE IN CONNECTION
WITH THE OFFERING OF SHARES OF THE PORTFOLIOS, AND IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF SHARES IN ANY STATE
WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE.

<PAGE>

[THIS PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
The Portfolios' Expenses................................. 2
Financial Highlights..................................... 3
Investment Objectives and Policies....................... 4
Portfolio Transactions and Turnover Rate................. 11
Special Risk Considerations and Certain Investment
Strategies............................................. 11
Investment Guidelines.................................... 19
Management of the Fund................................... 19
How to Open an Account................................... 23
How to Purchase Shares................................... 23
How to Redeem and Exchange Shares........................ 26
Dividends, Distributions and Taxes....................... 29
Net Asset Value.......................................... 31
The Portfolios' Performance.............................. 32
General Information...................................... 33
</TABLE>

[WARBURG PINCUS LOGO]

P.O. BOX 9030, BOSTON, MA 02205-9030

800-369-2728

www.warburg.com

COUNSELLORS SECURITIES INC., DISTRIBUTOR WPINT-1-298

<PAGE>

PROSPECTUS

February , 1998

WARBURG PINCUS INSTITUTIONAL FUND, INC.

-------------- EMERGING MARKETS PORTFOLIO

-------------- GLOBAL FIXED INCOME PORTFOLIO

-------------- INTERNATIONAL EQUITY PORTFOLIO

-------------- JAPAN GROWTH PORTFOLIO

[WARBURG PINCUS LOGO]

<PAGE>

PROSPECTUS February , 1998

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

GLOBAL FIXED INCOME PORTFOLIO seeks to maximize total investment return
consistent with prudent investment management while preserving capital by
investing in investment grade fixed income securities of issuers throughout the
world, including United States issuers.

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

JAPAN GROWTH PORTFOLIO seeks long-term growth of capital by investing primarily
in equity securities of Japanese issuers.

International investment entails special risk considerations, including currency
fluctuations, lower liquidity, economic instability, political uncertainty and
differences in accounting methods. See "Risk Factors and Special
Considerations."

The Fund is designed for institutional investors although, at its discretion,
the Fund may permit shares to be purchased by individuals, as well as
institutions, who meet the minimum investment requirements.

This Prospectus briefly sets forth certain information about the Fund and the
Portfolios that investors should know before investing. Investors are encouraged
to read this Prospectus carefully and retain it for future reference. Additional
information about the Fund and the Portfolios has been filed with the Securities
and Exchange Commission (the "SEC"). The SEC maintains a Web site
(http://www.sec.gov) that contains the Statement of Additional Information,
material incorporated by reference and other information regarding the Fund. The
Statement of Additional Information is also available upon request and without
charge by calling the Fund at (800) 369-2728. Information regarding the status
of shareholder accounts may also be obtained by calling the Fund at the same
number. Warburg Pincus Funds maintains a Web site at www.warburg.com. The
Statement of Additional Information relating to the Portfolios, as amended or
supplemented from time to time, bears the same date as this Prospectus and is
incorporated by reference in its entirety into this Prospectus.

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

<PAGE>

THE PORTFOLIOS' EXPENSES

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

<TABLE>
<CAPTION>
Global
Emerging Fixed International Japan
Markets Income Equity Growth
Portfolio Portfolio Portfolio Portfolio
-------- --------- ------------- ---------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a
percentage of offering price)................... 0 0 0 0
Annual Portfolio Operating Expenses (as a percentage
of average net assets)
Management Fees+.................................. .72% .15% .66% .40%
12b-1 Fees........................................ 0 0 0 0
Other Expenses+................................... .53% .45% .29% .85%
---- ----- ----- -----
Total Portfolio Operating Expenses (after fee
waivers)+....................................... 1.25% .60% .95% 1.25%
EXAMPLE
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period:
1 year............................................. $ 13 $ 6 $ 10 $ 13
3 years............................................ $ 40 $19 $ 30 $ 40
5 years............................................ $ 69 n.a. $ 53 n.a.
10 years............................................ $151 n.a. $ 117 n.a.
</TABLE>

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

+ Annual Portfolio Operating Expenses for the Emerging Markets and
International Equity Portfolios are based on actual expenses for the fiscal
year ended October 31, 1997, net of any applicable fee waivers or expense
reimbursements. Annual Portfolio Expenses for the Global Fixed Income and
Japan Growth Portfolios are based on estimated expenses for the fiscal year
ending October 31, 1998, net of any applicable fee waivers or expense
reinbursements. Absent such waivers and/or reimbursements, Management Fees for
the Emerging Markets, Global Fixed Income, International Equity and Japan
Growth Portfolios would have equalled 1.00%, .65%, .80% and 1.10%,
respectively; Other Expenses would have equalled .65%, .50%, .29% and .97%,
respectively; and Total Portfolio Operating Expenses would have equalled
1.65%, 1.15%, 1.09% and 2.07%, respectively. The investment adviser and
co-administrator are under no obligation to continue any waivers and/or
reimbursements.

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

<PAGE>

FINANCIAL HIGHLIGHTS++
- --------------------------------------------------------------------------------

The following information for the five fiscal years ended October 31, 1997 has
been audited by Coopers & Lybrand L.L.P., independent accountants, whose report
dated December 19, 1997 is incorporated by reference into the Statement of
Additional Information. Further information about the performance of the
Emerging Markets and International Equity Portfolios is contained in the Fund's
annual report dated October 31, 1997, copies of each of which may be obtained
without charge by calling the Fund at (800) 369-2728.

<TABLE>
<CAPTION>
September 30, 1996
(Commencement of
Operations)
through
For the Year October 31, 1996
Ended ------------------
EMERGING MARKETS PORTFOLIO October 31, 1997
----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD....................... $9.86 $10.00
-------- ---------
Income from Investment Operations
Net Investment Income.................................... 0.10 (0.01)
Net Gain/(Loss) from Securities and Foreign Currency
Related Items (both realized and unrealized)........... (0.53) (0.15)
-------- ---------
Total from Investment Operations......................... (0.43) (0.14)
-------- ---------
Less Distributions
Dividends (from net investment income)................... (0.02) 0.00
Distributions (from net realized gains).................. (0.05) 0.00
-------- ---------
Total Distributions.................................... (0.07) 0.00
-------- ---------
NET ASSET VALUE, END OF PERIOD............................. $9.36 $9.86
======== =========
Total Return............................................... (4.43%) (1.40%)+
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%+
Average Commission Rate#................................... $0.0042 $0.0120
</TABLE>

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

@ Interest earned on uninvested cash balances is used to offset portions of the
transfer agent expense. These arrangements had no affect on the Portfolio's
expense ratio.

+ Non-Annualized.

* Annualized.

++ No financial highlights have been presented with respect to the Global Fixed
Income Portfolio which had not commenced operations as of
October 31, 1997. The audited statement of assets and liabilities of the
Global Fixed Income Portfolio as of October 15, 1997, together with the
report of Coopers & Lybrand L.L.P., appears in the Statement of Additional
Information. In addition, no financial highlights have been presented with
respect to the Japan Growth Portfolio, which commenced operations on October
31, 1997. The audited statement of assets and liabilities of the Japan
Growth Portfolio as of October 31, 1997, together with the report theron of
Coopers & Lybrand L.L.P. dated December 19, 1997, is incorporated by
reference into the Statement of Additional Information.

<PAGE>

<TABLE>
<CAPTION>
INTERNATIONAL EQUITY PORTFOLIO
For the Period
September 1, 1992
(Commencement of
For the Year Ended October 31, Operations) through
------------------------------------------------------ October 31,
1997 1996 1995 1994 1993 1992
---------- -------- -------- -------- -------- -------------------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD... $16.14 $15.10 $16.34 $13.49 $ 9.62 $10.00
----- ----- ----- ----- ----- -----------
Income from Investment Operations
Net Investment
Income.............. 0.20 0.26 0.15 0.17 0.10 0.02
Net Gain/(Loss) from
Securities and
Foreign Currency
Related Items (both
realized and
unrealized)......... 0.78 1.28 (0.64) 2.87 3.87 (0.40)
----- ----- ----- ----- ----- -----------
Total from Investment
Operations.......... 0.98 1.54 (0.49) 3.04 3.97 (0.38)
----- ----- ----- ----- ----- -----------
Less Distributions
Dividends from net
investment
income............. (0.13) (0.50) (0.18) (0.07) (0.10) 0.00
Distributions from net
realized gains...... (0.48) 0.00 (0.57) (0.12) 0.00 0.00
----- ----- ----- ----- ----- -----------
Total
Distributions..... (0.61) (0.50) (0.75) (0.19) (0.10) 0.00
----- ----- ----- ----- ----- -----------
NET ASSET VALUE, END OF
PERIOD................ $16.51 $16.14 $15.10 $16.34 $13.49 $ 9.62
===== ===== ===== ===== ===== ===========
Total Return............ 6.20% 10.48% (2.83%) 22.62% 41.61% (3.80%)*
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of
Period (000s)......... $1,169,817.. $937,443 $507,759 $331,297 $109,280 $18,613
Ratios to Average Daily
Net Assets:
Operating expenses.... .95%@ .96%@ .95% .95% .95% .95%*
Net investment
income.............. .98% 1.05% 1.20% .59% .75% 1.22%*
Decrease reflected in
above operating
expense ratios due
to waivers/
reimbursements...... .14% .18% .23% .29% .44% .85%*
Portfolio Turnover
Rate.................. 69.99% 29.91% 39.70% 19.34% 19.40% 8.25%+
Average
Commission Rate#...... $0.0169 $0.0154 -- -- -- --
</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.

+ Non-annualized.

* Annualized.

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

- --------------------------------------------------------------------------------
Set forth below is a description of the investment objective and policies of
each Portfolio. The investment objective of a Portfolio is a fundamental policy
and may not be changed without the approval of the holders of a majority of the
outstanding voting securities of that Portfolio. Any investment involves risk
and, therefore, there can be no assurance that a Portfolio will achieve its
investment objective. See "Special Risk Considerations and Certain Investment
Strategies" for descriptions of certain types of investments the Portfolios may
make.

EMERGING MARKETS PORTFOLIO

The Emerging Markets Portfolio's investment objective is growth of capital.
The Portfolio is a non-diversified portfolio that pursues its investment
objective by investing primarily in equity securities of non-United States
issuers consisting of companies in emerging securities markets. An investment in
the Portfolio may involve a greater degree of risk than investment in other
mutual funds that seek capital growth by investing in larger, more developed
markets.

Under normal market conditions, the Portfolio will invest at least 65% of its
total assets in equity securities of issuers in Emerging Markets (as defined
below), and the Portfolio intends to acquire securities of many issuers located
in a number of foreign countries. The Portfolio will not necessarily seek to
diversify investments on a geographical basis or on the basis of the level of
economic development of any particular country and the Emerging Markets in which
the Portfolio invests will vary from time to time. However, the Portfolio will
at all times, except during temporary defensive periods, maintain investments in
at least three countries outside the United States. An equity security of an
issuer in an Emerging Market is defined as common stock and preferred stock
(including convertible preferred stock); bonds, notes and debentures convertible
into common or preferred stock; stock purchase warrants and rights; equity
interests in trusts and partnerships; and depositary receipts of an issuer: (i)
the principal securities trading market for which is in an Emerging Market; (ii)
which derives at least 50% of its revenues or earnings, either alone or on a
consolidated basis, from goods produced or sold, investments made or services
performed in an Emerging Market, or which has at least 50% of its assets
situated in one or more Emerging Markets; or (iii) that is organized under the
laws of, and with a principal office in, an Emerging Market. Determinations as
to whether an issuer is an Emerging Markets issuer will be made by Warburg
Pincus Asset Management, Inc. ("Warburg"), the Portfolios' investment adviser,
based on publicly available information and inquiries made to the issuers.

As used in this Prospectus, an Emerging Market is any country (i) which is
generally considered to be an emerging or developing country by the World Bank
and the International Finance Corporation (the "IFC") or by the United Nations,
(ii) which is included in the IFC Investable Index or the Morgan

<PAGE>

Stanley Capital International Emerging Markets Index, or (iii) which has a gross
national product ("GNP") per capita of $2,000 or less, in each case at the time
of the Portfolio's investment. Among the countries which Warburg currently
considers to be Emerging Markets are the following: Algeria, Angola, Antigua,
Argentina, Armenia, Azerbaijan, Bangladesh, Barbados, Barbuda, Belarus, Belize,
Bhutan, Bolivia, Botswana, Brazil, Bulgaria, Cambodia, Chile, People's Republic
of China, Republic of China (Taiwan), Colombia, Cyprus, Czech Republic,
Dominica, Ecuador, Egypt, Estonia, Georgia, Ghana, Greece, Grenada, Guyana, Hong
Kong, Hungary, India, Indonesia, Israel, Ivory Coast, Jamaica, Jordan,
Kazakhstan, Kenya, Republic of Korea (South Korea), Latvia, Lebanon, Lithuania,
Malawi, Malaysia, Mauritius, Mexico, Moldova, Mongolia, Montserrat, Morocco,
Mozambique, Myanmar (Burma), Namibia, Nepal, Nigeria, Pakistan, Panama, Papua
New Guinea, Paraguay, Peru, Philippines, Poland, Portugal, Romania, Russia,
Saudi Arabia, Singapore, Slovakia, Slovenia, South Africa, Sri Lanka, St. Kitts
and Nevis, St. Lucia, St. Vincent and the Grenadines, Swaziland, Tanzania,
Thailand, Trinidad and Tobago, Tunisia, Turkey, Turkmenistan, Uganda, Ukraine,
Uruguay, Uzbekistan, Venezuela, Vietnam, Yugoslavia, Zambia and Zimbabwe. Among
the countries that will not be considered Emerging Markets are: Australia,
Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy,
Japan, Luxembourg, the Netherlands, New Zealand, Norway, Spain, Sweden,
Switzerland, the United Kingdom and the United States.

The Portfolio may invest in securities of companies of any size, whether
traded on or off a national securities exchange. Portfolio holdings may include
emerging growth companies, which are small- or medium-sized companies that have
passed their start-up phase and that show positive earnings and prospects for
achieving profit and gain in a relatively short period of time.

In appropriate circumstances, such as when a direct investment by the
Portfolio in the securities of a particular country cannot be made or when the
securities of an investment company are more liquid than the underlying
portfolio securities, the Portfolio may, consistent with the provisions of the
Investment Company Act of 1940, as amended (the "1940 Act"), invest in the
securities of closed-end investment companies that invest in foreign securities.
As a shareholder in a closed-end investment company, the Portfolio will bear its
ratable share of the investment company's expenses, including management fees,
and will remain subject to payment of the Portfolio's administration fees and
other expenses with respect to assets so invested.

GLOBAL FIXED INCOME PORTFOLIO

The Global Fixed Income Portfolio's investment objective is to maximize total
investment return consistent with prudent investment management while preserving
capital. The Portfolio is a non-diversified portfolio that will seek to achieve
its objective by investing, under normal market conditions, substantially all of
its assets -- but no less than 65% of its total assets -- in bonds, debentures
and notes of United States and foreign issuers, denomi-

<PAGE>

nated in U.S. dollars or in other currencies or multi-currency units such as
European Currency Units ("ECUs"). These debt obligations include obligations
issued or guaranteed by the United States government or a foreign government,
its agencies or instrumentalities, securities of supranational entities,
Eurobonds and corporate bonds. Up to 5% of the Portfolio's net assets may be
rated below investment grade at the time of the investment but not lower than
"B" by Standard & Poor's Ratings Services ("S&P") or Moody's Investors Service,
Inc. ("Moody's").
Warburg's approach to multicurrency fixed-income management is strategic and
value-based. Warburg's assessment of the bond markets and currencies is based on
an analysis of real interest rates. Current nominal yields of securities are
adjusted for inflation prevailing in each currency sector using an analysis of
past and projected inflation rates. The Portfolio's aim is to invest in bond
markets that offer attractive real returns relative to inflation.
Warburg invests largely in medium-term securities (i.e., those with a
remaining maturity of between three and five years) and responds to changing
interest rate levels by shortening or lengthening portfolio maturity through
investment in longer- or shorter-term instruments. For example, Warburg responds
to high levels of real interest rates through a lengthening in portfolio
maturity. Accordingly, while the bulk of the Portfolio is expected to be
invested in medium-term securities, Warburg is not restricted to any maximum or
minimum time to maturity in purchasing portfolio securities. Current and
historical yield spreads among the three main market segments -- the Government,
Foreign and Euro markets -- guide Warburg's selection of markets and particular
securities within those markets. The analysis of currencies is made independent
of the analysis of markets. Value in foreign exchange is determined by relative
purchasing power parity of a given currency. The Portfolio seeks to invest in
currencies currently undervalued based on purchasing power parity. Warburg
analyzes current account and capital account performance and real interest rates
to adjust for shorter-term currency flows.
The Portfolio will not invest 25% or more of its total assets in the
securities issued by any one foreign government, its agencies, instrumentalities
or political subdivisions and, under normal market conditions, will invest in at
least three countries, including the United States. When Warburg believes that a
conservative or defensive posture is warranted, the Portfolio may invest
temporarily without limit in securities denominated in U.S. dollars and
securities of U.S. issuers.

INTERNATIONAL EQUITY PORTFOLIO

The International Equity Portfolio's investment objective is long-term capital
appreciation. The Portfolio pursues its investment objective by investing, under
normal market conditions, substantially all of its assets -- but no less than
65% of its total assets -- in common stocks and securities convertible into or
exchangeable for common stocks of non-United States issuers.

<PAGE>

The Portfolio may invest in emerging, as well as developed, markets. The
Portfolio will invest, under normal market conditions, in at least three
countries other than the United States. The Portfolio, which is a diversified
portfolio, intends to hold securities of many corporations located in a number
of foreign countries. The Portfolio may from time to time invest a significant
portion of its assets in a single country, such as Japan, which may involve
special risks.

The Portfolio intends to invest principally in the securities of financially
strong companies with opportunities for growth within international economies
and markets through increased earning power and improved utilization or
recognition of assets. Investments may be made in equity securities of companies
of any size, whether traded on or off a national securities exchange.

In appropriate circumstances, such as when a direct investment by the
Portfolio in the securities of a particular country cannot be made or when the
securities of an investment company are more liquid than the underlying
portfolio securities, the Portfolio may, consistent with the provisions of the
1940 Act, invest in the securities of closed-end investment companies that
invest in foreign securities. When Warburg believes that a conservative or
defensive posture is warranted, the Portfolio may invest temporarily without
limit in equity and debt securities of U.S. issuers and money market obligations
(described below).

JAPAN GROWTH PORTFOLIO

The Japan Growth Portfolio seeks long-term growth of capital. The Portfolio is
a non-diversified management investment company that pursues its objective by
investing primarily in equity securities of Japanese issuers that present
attractive opportunities for growth. Under current market conditions the
Portfolio intends to invest at least 80% of its total assets -- but will invest
no less than 65% of its assets under normal market conditions -- in common and
preferred stocks, warrants and other rights, securities convertible into or
exchangeable for common stocks and American Depositary Receipts ("ADRs") of
Japanese issuers.

Warburg believes that Japanese industry is in the process of deregulation and
restructuring. The Portfolio is designed to provide an opportunity to
participate in the dynamic structural changes in the Japanese industrial system
through investment in higher growth companies that can be expected to benefit
from these changes. The Portfolio will seek to identify and invest in Japanese
issuers that are showing or are expected to show a rapid or high rate of growth,
based on comparisons with Japanese or non-Japanese companies in the same
industry or other considerations. The Portfolio will also invest in Japanese
companies that Warburg believes are undervalued based on price/earnings ratios,
comparisons with Japanese or non-Japanese companies or other factors.

The Portfolio may invest in companies of any size, whether traded on an
exchange or over-the-counter. Currently, there are eight exchanges in Japan --

<PAGE>

the Tokyo, Osaka, Nagoya, Kyoto, Hiroshima, Fukuoka, Niigata and Sapporo
exchanges -- and two over-the-counter markets -- JASDAQ and the Japanese Second
Section OTC Market (the "Frontier Market"). The Portfolio considers Japanese
issuers to be (i) companies (A) organized under the laws of Japan, or (B) whose
principal business activities are conducted in Japan and which derive at least
50% of their revenues or profits from goods produced or sold, investments made,
or services performed in Japan, or have at least 50% of their assets in Japan,
or (C) which have issued securities which are traded principally in Japan, and
(ii) Japanese governmental entities or political subdivisions. Determinations as
to the eligibility of issuers under the foregoing definition will be made by
Warburg based on publicly available information and inquiries made to the
companies. The portion of the Portfolio's assets not invested in Japanese
issuers may be invested in securities of other Asian issuers. The Portfolio does
not, except during temporary defensive periods, intend to invest in securities
of non-Asian issuers. From time to time, the Portfolio may hedge part or all of
its exposure to the Japanese yen, thereby reducing or substantially eliminating
any favorable or unfavorable impact of changes in the value of the yen in
relation to the U.S. dollar.

ADDITIONAL INVESTMENTS

MONEY MARKET OBLIGATIONS. Each Portfolio is authorized to invest, under normal
circumstances, in domestic and foreign short-term (one year or less remaining to
maturity) and medium-term (five years or less remaining to maturity) money
market obligations, although each Portfolio intends to stay invested in
securities satisfying its investment objective to the extent practical. In
addition, on occasion, Warburg may deem it advisable to adopt a temporary
defensive posture by investing without limit in money market obligations. These
instruments consist of obligations of the U.S. government or foreign
governments, their agencies or instrumentalities; obligations of foreign and
U.S. banks; commercial paper; and money market mutual funds that invest in the
foregoing.

<PAGE>

Money Market Mutual Funds. Where Warburg believes that it would be beneficial
to a Portfolio and appropriate considering the factors of return and liquidity,
the Portfolio may invest up to 5% of its assets in securities of money market
mutual funds that are unaffiliated with the Fund or Warburg. As a shareholder in
any mutual fund, the Portfolio will bear its ratable share of the mutual fund's
expenses, including management fees, and will remain subject to payment of the
Portfolio's administration fees and other expenses with respect to assets so
invested.

U.S. GOVERNMENT SECURITIES. The U.S. government securities in which each
Portfolio may invest include: direct obligations of the U.S. Treasury (such as
Treasury bills, notes and bonds) and obligations issued by U.S. government
agencies and instrumentalities.

ZERO COUPON SECURITIES. Each of the Emerging Markets, Global Fixed Income and
Japan Growth Portfolios may invest in "zero coupon securities." Zero coupon
securities pay no cash income to their holders until they mature and are issued
at substantial discounts from their value at maturity. When held to maturity,
their entire return comes from the difference between their purchase price and
their maturity value. The values of zero coupon securities may be highly
volatile as interest rates rise or fall.

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

A security will be deemed to be investment grade if it is rated within the
four highest grades by Moody's or S&P or, if unrated, is determined to be of
comparable quality by Warburg. Securities rated in the fourth highest grade may
have speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade bonds. Subsequent to
its purchase by a Portfolio, an issue of securities may cease to be rated or its
rating may be reduced. Neither event will require sale of such securities,
although Warburg will consider such event in its determination of whether the
Portfolio should continue to hold the securities.
Securities rated below investment grade are regarded as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligations and involve large
uncertainties or major risk exposures to adverse conditions. A Portfolio may
have difficulty disposing of certain lower quality obligations because there

<PAGE>

may be a thin trading market for such securities. In addition, the market value
of lower quality securities may be more volatile than that of higher quality
securities.

Emerging Markets and Japan Growth Portfolios. Among the types of debt
securities in which the Emerging Markets Portfolio may invest are Brady Bonds,
loan participations and assignments, asset-backed securities and mortgage-backed
securities. Within the 35% limitation investments in debt securities, the Japan
Growth Portfolio may invest up to 5% of its net assets in asset-backed and
mortgage-backed securities.

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

<PAGE>

tion providing credit enhancement). Because market experience in these
securities is limited, the market's ability to sustain liquidity through all
phases of the market cycle has not been tested. In addition, there is no
assurance that the security interest in the collateral can be realized. The
Emerging Markets and Japan Growth Portfolios may purchase asset-backed
securities that are unrated.

Mortgage-backed securities are collateralized by mortgages or interests in
mortgages and may be issued by government or non-government entities.
Non-government issued mortgage-backed securities may offer higher yields than
those issued by government entities, but may be subject to greater price
fluctuations and may be less marketable than other securities. The value of
mortgage-backed securities may change due to shifts in the market's perceptions
of issuers, and regulatory or tax changes may adversely affect the mortgage
securities market as a whole. Prepayment, which occurs when unscheduled or early
payments are made on the underlying mortgages, may shorten the effective
maturities of these securities and may lower their returns. In addition,
collateralized mortgage obligations may be less marketable than other
securities.

WARRANTS. Each Portfolio may invest up to 10% of its total assets in warrants.
Warrants are securities that give the holder the right, but not the obligation,
to purchase equity issues of the company issuing the warrants, or a related
company, at a fixed price either on a date certain or during a set period.

PORTFOLIO TRANSACTIONS AND TURNOVER RATE
- --------------------------------------------------------------------------------

A Portfolio will attempt to purchase securities with the intent of holding
them for investment but may purchase and sell portfolio securities whenever
Warburg believes it is to be in the best interests of the relevant Portfolio and
will not consider portfolio turnover rate a limiting factor in making investment
decisions consistent with its investment objective and policies. In addition, to
the extent it is consistent with a Portfolio's investment objective, each
Portfolio also may engage in short-term trading. This investment approach and
the use of certain of the investment strategies described below may result in a
high portfolio turnover rate for the Portfolios. It is not possible to predict
the portfolio turnover rates for the Global Fixed Income and Japan Growth
Portfolios. However, the Global Fixed Income Portfolio may experience portfolio
turnover as high as 150% to 200% and the Japan Growth Portfolio's annual
turnover rate should not exceed 100%. High portfolio turnover rates (100% or
more) may result in dealer markups or underwriting commissions as well as other
transaction costs, including correspondingly higher brokerage commissions. In
addition, short-term gains realized from portfolio turnover may be taxable to
shareholders as ordinary income. See "Dividends, Distributions and
Taxes -- Taxes" and "Investment Policies -- Portfolio Transactions" in the
Statement of Additional Information. All orders for transactions in

<PAGE>

securities or options on behalf of a Portfolio are placed by Warburg with
broker-dealers that it selects.

SPECIAL RISK CONSIDERATIONS AND CERTAIN INVESTMENT STRATEGIES
- --------------------------------------------------------------------------------

In attempting to achieve its investment objective, a Portfolio may engage in
one or more of the strategies set forth below. Although there is no intention of
doing so during the coming year, the Japan Growth Portfolio is authorized to
purchase securities on a when-issued basis and purchase or sell securities for
delayed delivery and each Portfolio is authorized to engage in the following
investment strategies: (i) lending portfolio securities and (ii) entering into
reverse repurchase agreements and dollar rolls. The Japan Growth Portfolio may
also invest in zero coupon securities, although the Portfolio currently
anticipates that during the coming year zero coupon securities will not exceed
5% of net assets. Detailed information concerning these strategies and their
related risks is contained in the Statement of Additional Information.

CONVERTIBLE SECURITIES. Convertible securities in which the Portfolios may
invest, including both convertible debt and convertible preferred stock, may be
converted at either a stated price or stated rate into underlying shares of
common stock. Because of this feature, convertible securities enable an investor
to benefit from increases in the market price of the underlying common stock.
Convertible securities provide higher yields than the underlying equity
securities, but generally offer lower yields than non-convertible securities of
similar quality. The value of convertible securities fluctuates in relation to
changes in interest rates like bonds and, in addition, fluctuates in relation to
the underlying common stock. The Global Fixed Income Portfolio does not intend
to retain in its portfolio the common stock received upon conversion of a
convertible security and will sell it as promptly as it can and in a manner
which it believes will reduce the risk to the Portfolio of loss in connection
with the sale.

FOREIGN SECURITIES. The Portfolios will invest substantially in foreign
securities. There are certain risks involved in investing in securities of
companies and governments of foreign nations which are in addition to the usual
risks inherent in domestic investments. These risks include those resulting from
fluctuations in currency exchange rates, revaluation of currencies, future
adverse political and economic developments and the possible imposition of
currency exchange blockages or other foreign governmental laws or restrictions,
reduced availability of public information concerning issuers and the lack of
uniform accounting, auditing and financial reporting standards and other
regulatory practices and requirements that are often generally less rigorous
than those applied in the United States. Moreover, securities of many
foreign companies may be less liquid and their prices more volatile than those
of securities of comparable U.S. companies. Certain foreign coun-

<PAGE>

tries are known to experience long delays between the trade and settlement dates
of securities purchased or sold. In addition, with respect to certain foreign
countries, there is the possibility of expropriation, nationalization,
confiscatory taxation and limitations on the use or removal of funds or other
assets of a Portfolio, including the withholding of dividends. Foreign
securities may be subject to foreign government taxes that would reduce the net
yield on such securities. Moreover, individual foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as growth of
gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Investment in foreign
securities will also result in higher expenses due to the cost of converting
foreign currency into U.S. dollars, the payment of fixed brokerage commissions
on foreign exchanges, which generally are higher than commissions on U.S.
exchanges, higher valuation and communications costs and the expense of
maintaining securities with foreign custodians.

DEPOSITARY RECEIPTS. Certain of the above risks may be involved with ADRs,
European Depositary Receipts ("EDRs") and International Depositary Receipts
("IDRs"), instruments that evidence ownership of underlying securities issued by
a foreign corporation. ADRs, EDRs and IDRs may not necessarily be denominated in
the same currency as the securities whose ownership they represent. ADRs are
typically issued by a U.S. bank or trust company. EDRs (sometimes referred to as
Continental Depositary Receipts) are issued in Europe and IDRs (sometimes
referred to as Global Depositary Receipts) are issued outside the United States,
each typically by non-U.S. banks and trust companies. The risks associated with
investing in securities of non-U.S. issuers are generally heightened for
investments in securities of issuers in emerging markets.

JAPANESE INVESTMENTS. Investing in Japanese securities may involve the risks
described above associated with investing in foreign securities generally. In
addition, because the International Equity Portfolio may from time to time have
large positions in Japanese securities and the Japan Growth Portfolio invests
primarily in Japan, they will be subject to general economic and political
conditions in Japan. The Japan Growth Portfolio should be considered a vehicle
for diversification, but the Portfolio itself is not diversified.

Securities in Japan are denominated and quoted in "yen." Yen are fully
convertible and transferable based on floating exchange rates into all
currencies, without administrative or legal restrictions for both non-residents
and residents of Japan. In determining the net asset value of shares of the
Japan Growth Portfolio, assets or liabilities initially expressed in terms of
Japanese yen will be translated into U.S. dollars at the current selling rate of
Japanese yen against U.S. dollars. As a result, in the absence of a successful
currency hedge, the value of the Portfolio's assets as measured in U.S. dollars
may be affected favorably or unfavorably by fluctuations in the value of
Japanese yen relative to the U.S. dollar.

The Japan Growth Portfolio's assets may be invested in securities traded
through JASDAQ. JASDAQ traded securities can be volatile, which may result in
the Portfolio's net asset value fluctuating in response.

<PAGE>

The decline in the Japanese securities markets since 1989 has contributed to a
weakness in the Japanese economy, and the impact of a further decline cannot be
ascertained. The common stocks of many Japanese companies continue to trade at
high price-earnings ratios in comparison with those in the United States, even
after the recent market decline. Differences in accounting methods make it
difficult to compare the earnings of Japanese companies with those of companies
in other countries, especially the United States.

Japan is largely dependent upon foreign economies for raw materials.
International trade is important to Japan's economy, as exports provide the
means to pay for many of the raw materials it must import. Because of the
concentration of Japanese exports in highly visible products such as
automobiles, machine tools and semiconductors, and the large trade surpluses
ensuing therefrom, Japan has entered a difficult phase in its relations with its
trading partners, particularly with respect to the United States, with whom the
trade imbalance is the greatest.

Japan has a parliamentary form of government. In 1993, a coalition government
was formed which, for the first time since 1955, did not include the Liberal
Democratic Party. Since mid-1993, there have been several changes in leadership
in Japan. What, if any, effect the current political situation will have on
prospective regulatory reforms in the Japanese economy cannot be predicted.
Recent and future developments in Japan and neighboring Asian countries may lead
to changes in policy that might adversely affect a Portfolio investing there.
For additional information, see "Investment Policies -- Japanese Investments" in
the Statement of Additional Information.
EMERGING MARKETS. One or more Portfolios with authority to invest outside of
the United States may invest in securities of issuers located in less developed
countries considered to be "emerging markets." Investing in securities of
issuers located in emerging markets involves not only the risks described above
with respect to investing in foreign securities, but also other risks, including
exposure to economic structures that are generally less diverse and mature than,
and to political systems that can be expected to have less stability than, those
of developed countries. Other characteristics of emerging markets that may
affect investment there include certain national policies that may restrict
investment by foreigners in issuers or industries deemed sensitive to relevant
national interests and the absence of developed legal structures governing
private and foreign investments and private property. The typically small size
of the markets for securities of issuers located in emerging markets and the
possibility of a low or nonexistent volume of trading in those securities may
also result in a lack of liquidity and in price volatility of those securities.
SMALL CAPITALIZATION AND EMERGING GROWTH COMPANIES; UNSEASONED
ISSUERS. Investing in securities of emerging growth and small- and medium-sized
companies and companies with continuous operations of less than three years
("unseasoned issuers"), which may include JASDAQ and Frontier Market securities,
may involve greater risks than investing in larger, more estab-

<PAGE>

lished companies since these securities may have limited marketability and,
thus, may be more volatile than securities of larger, more established companies
or the market averages in general. Because these issuers normally have fewer
shares outstanding than larger companies, it may be more difficult for a
Portfolio to buy or sell significant amounts of such shares without an
unfavorable impact on prevailing prices. These issuers may have limited product
lines, markets or financial resources and may lack management depth. In
addition, these issuers are typically subject to a greater degree of changes in
earnings and business prospects than are larger, more established companies.
There is typically less publicly available information concerning these issuers
than for larger, more established ones.

The Emerging Markets Portfolio may invest in securities of issuers in "special
situations." Securities of issuers in "special situations" also may be more
volitile, since the market value of these securities may decline in value if the
anticipated benefits do not materialize. Companies in "special situations"
include, but are not limited to, companies involved in an acquisition or
consolidation; reorganization; recapitalization; merger, liquidation, or
distribution of cash, securities or other assets; a tender or exchange offer; a
breakup or workout of a holding company; litigation which, if resolved
favorably, would improve the value of the companies' securities; or a change in
corporate control.
Although investing in securities of small- and medium-sized and emerging
growth companies, unseasoned issuers or, with respect to the Emerging Markets
Portfolio, issuers in "special situations" offers potential for above-average
returns if the companies are successful, the risk exists that the companies will
not succeed and the prices of the companies' shares could significantly decline
in value. Therefore, an investment in a Portfolio may involve a greater degree
of risk than an investment in other mutual funds that seek growth of capital or
capital appreciation by investing in better-known, larger companies.
STRATEGIC AND OTHER TRANSACTIONS. At the discretion of Warburg, each Portfolio
may, but is not required to, engage in a number of strategies involving options,
futures, forward currency contracts and, in the case of the Emerging Markets,
International Equity and Japan Growth Portfolios, swaps. These strategies,
commonly referred to as "derivatives," may be used (i) for the purpose of
hedging against a decline in value of a Portfolio's current or anticipated
portfolio holdings, (ii) as a substitute for purchasing or selling portfolio
securities or (iii) to seek to generate income to offset expenses or increase
return. TRANSACTIONS THAT ARE NOT CONSIDERED HEDGING SHOULD BE CONSIDERED
SPECULATIVE AND MAY SERVE TO INCREASE A PORTFOLIO'S INVESTMENT RISK. Transaction
costs and any premiums associated with these strategies, and any losses
incurred, will affect a Portfolio's net asset value and performance. Therefore,
an investment in a Portfolio may involve a greater risk than an investment in
other mutual funds that do not utilize these strategies. A Portfolio's use of
these strategies may be limited by position and exercise limits

16
<PAGE>

established by securities and commodities exchanges and the National Associa-
tion of Securities Dealers, Inc.

Securities Options and Stock Index Options. Each Portfolio (other than the
Emerging Markets Portfolio) may write put and call options on stock and debt
securities and will realize fees (referred to as "premiums") for granting the
rights evidenced by the options. Each Portfolio may purchase options on stocks
and debt securities that are traded on U.S. and foreign exchanges, as well as
over-the-counter ("OTC") options. The purchaser of a put option on a security
has the right to compel the purchase by the writer of the underlying security,
while the purchaser of a call option on a security has the right to purchase the
underlying security from the writer. In addition to purchasing and writing
options on securities, each Portfolio may purchase and write exchange-listed and
OTC put and call options on stock indexes. A stock index measures the movement
of a certain group of stocks by assigning relative values to the common stocks
included in the index.
The potential loss associated with purchasing an option is limited to the
premium paid, and the premium would partially offset any gains achieved from its
use. However, for an option writer the exposure to adverse price movements in
the underlying security or index is potentially unlimited during
the exercise period. Writing securities options may result in substantial losses
to a Portfolio, force the sale or purchase of portfolio securities at
inopportune times or at less advantageous prices, limit the amount of
appreciation the Portfolio could realize on its investments or require the
Portfolio to hold securities it would otherwise sell.
Futures Contracts and Commodity Options. Each Portfolio may enter into futures
contracts and purchase and write (sell) commodity options (options on futures
contracts and on physical commodities), including, but not limited to, foreign
currency, interest rate and stock index futures contracts and put and call
options on these contracts. These contracts and options will be traded on an
exchange designated by the Commodity Futures Trading Commission (the "CFTC") or,
if consistent with CFTC regulations, on foreign exchanges. These futures
contracts are standardized contracts for the future delivery of foreign currency
or an interest rate sensitive security or, in the case of stock index and
certain other futures contracts, are settled in cash with reference to a
specified multiplier times the change in the specified index, exchange rate or
interest rate. An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract.
Aggregate initial margin and premiums required to establish positions other
than those considered by the CFTC to be "bona fide hedging" will not exceed 5%
of a Portfolio's net asset value, after taking into account unrealized profits
and unrealized losses on any such contracts. Although a Portfolio is limited in
the amount of assets that may be invested in futures transactions, there is no
overall limit on the percentage of a Portfolio's assets that may be at risk with
respect to futures activities.

17
<PAGE>

Investments in commodity options involve a relatively high degree of risk.
Prices of commodities can be influenced by a variety of global economic,
financial and political factors and may fluctuate markedly over short periods of
time. Among other things, commodities can be affected by changes in inflation,
investment speculation, changes in industrial, commercial and governmental
demand and supply and any governmental restrictions on ownership. In addition,
investments in options on physical commodities may involve higher custodial
expenses.
Currency Exchange Transactions. Each Portfolio will conduct its currency
exchange transactions either (i) on a spot (i.e., cash) basis at the rate
prevailing in the currency exchange market, (ii) through entering into futures
contracts or options on futures contracts (as described above), (iii) through
entering into forward contracts to purchase or sell currency or (iv) by
purchasing or writing exchange-traded or OTC currency options. A forward
currency contract involves an obligation to purchase or sell a specific currency
at a future date at a price set at the time of the contract. An option on a
foreign currency operates similarly to an option on a security. Risks associated
with currency forward contracts and purchasing currency options are similar to
those described in this Prospectus for futures contracts and securities and
stock index options. In addition, the use of currency transactions could result
in losses from the imposition of foreign exchange controls, suspension of
settlement or other governmental actions or unexpected events.

SWAPS. The Emerging Markets, International Equity and Japan Growth Portfolios
may each enter into swaps relating to indexes, currencies and equity interests
of foreign issuers. A swap transaction is an agreement between a Portfolio and a
counterparty to act in accordance with the terms of the swap contract. Index
swaps involve the exchange by the Portfolio with another party of the respective
amounts payable with respect to a notional principal amount related to one or
more indexes. Currency swaps involve the exchange of cash flows on a notional
amount of two or more currencies based on their relative future values. An
equity swap is an agreement to exchange streams of payments computed by
reference to a notional amount based on the performance of a stock index, a
basket of stocks or a single stock. A Portfolio may enter into these
transactions to preserve a return or spread on a particular investment or
portion of its assets, to protect against currency fluctuations, as a duration
management technique or to protect against any increase in the price of
securities the Portfolio anticipates purchasing at a later date. The Portfolios
may also use these transactions for speculative purposes, such as to obtain the
price performance of a security without actually purchasing the security in
circumstances where, for example, the subject security is illiquid, is
unavailable for direct investment or available only on less attractive terms.
Swaps have risks associated with them including possible default by the
counterparty to the transaction, illiquidity and, where swaps are used as
hedges, the risk that the use of a swap could result in losses greater than if
the swap had not been employed.

18
<PAGE>

A Portfolio will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the agreement, with the Portfolio receiving or paying, as the case
may be, only the net amount of the two payments. Swaps do not involve the
delivery of securities, other underlying assets or principal. Accordingly, the
risk of loss with respect to swaps is limited to the net amount of payments that
the Portfolio is contractually obligated to make. If the counterparty to a swap
defaults, the Portfolio's risk of loss consists of the net amount of payments
that the Portfolio is contractually entitled to receive. Where swaps are entered
into for good faith hedging purposes, Warburg believes such obligations do not
constitute senior securities under the 1940 Act and, accordingly, will not treat
them as being subject to a Portfolio's borrowing restrictions. Where swaps are
entered into for other than hedging purposes, a Portfolio will segregate an
amount of cash or liquid securities having a value equal to the accrued excess
of its obligations over its entitlements with respect to each swap on a daily
basis.
Hedging Considerations. Each Portfolio may engage in options, futures,
currency transactions, and with respect to the Emerging Markets, International
Equity and Japan Growth Portfolios, swaps for, among other reasons, hedging
purposes. A hedge is designed to offset a loss on a portfolio position with a
gain in the hedge position; at the same time, however, a properly correlated
hedge will result in a gain in the portfolio position being offset by a loss in
the hedge position. As a result, the use of options, futures contracts, currency
exchange transactions, and with respect to the Emerging Markets, International
Equity and Japan Growth Portfolios, swaps for hedging purposes could limit any
potential gain from an increase in value of the position hedged. In addition,
the movement in the portfolio position hedged may not be of the same magnitude
as movement in the hedge. Each Portfolio will engage in hedging transactions
only when deemed advisable by Warburg, and successful use of hedging
transactions will depend on Warburg's ability to predict correctly movements in
the hedge and the hedged position and the correlation between them, which could
prove to be inaccurate. Even a well-conceived hedge may be unsuccessful to some
degree because of unexpected market behavior or trends.

19
<PAGE>

liquid securities in a segregated account with its custodian or a designated
sub-custodian to the extent the Portfolio's obligations with respect to these
strategies are not otherwise "covered" through ownership of the underlying
security, financial instrument or currency or by other portfolio positions or by
other means consistent with applicable regulatory policies. Segregated assets
cannot be sold or transferred unless equivalent assets are substituted in their
place or it is no longer necessary to segregate them. As a result, there is a
possibility that segregation of a large percentage of a Portfolio's assets could
impede portfolio management or the Portfolio's ability to meet redemption
requests or other current obligations.

NON-PUBLICLY TRADED SECURITIES; RULE 144A SECURITIES. A Portfolio may purchase
securities that are not registered under the Securities Act of 1933, as amended
(the "Securities Act"), but that can be sold to "qualified institutional buyers"
in accordance with Rule 144A under the Securities Act ("Rule 144A Securities").
A Rule 144A Security will be considered illiquid and therefore subject to the
Portfolio's 10% (15% in the case of the Emerging Markets Portfolio) limitation
on the purchase of illiquid securities unless the Fund's Board of Directors (the
"Board") determines on an ongoing basis that an adequate trading market exists
for the security. Non-publicly traded securities (including Rule 144A
Securities) may be less liquid than publicly traded securities. Although these
securities may be resold in privately negotiated transac- tions, the prices
realized from these sales could be less than those originally paid by the
Portfolio. In addition, companies whose securities are not publicly traded are
not subject to the disclosure and other investor protection requirements that
would be applicable if their securities were publicly traded. A Portfolio's
investment in illiquid securities is subject to the risk that should the
Portfolio desire to sell any of these securities when a ready buyer is not
available at a price that is deemed to be representative of their value, the
value of the Portfolio's net assets could be adversely affected.

WARRANTS. At the time of issue, the cost of a warrant is substantially less
than the cost of the underlying security itself, and price movements in the
underlying security are generally magnified in the price movements of the
warrant. This leveraging effect enables the investor to gain exposure to the
underlying security with a relatively low capital investment but increases an
investor's risk in the event of a decline in the value of the underlying secu-
rity and can result in a complete loss of the amount invested in the warrant.
In addition, the price of a warrant tends to be more volatile than, and may not
correlate exactly to, the price of the underlying security. If the market price
of the underlying security is below the exercise price of the warrant on its
expiration date, the warrant will generally expire without value.
SHORT SALES AGAINST THE BOX. Each Portfolio may enter into a short sale of
securities such that when the short position is open the Portfolio owns an
equal amount of the securities sold short or owns preferred stock or debt
securities, convertible or exchangeable without payment of further considera-
tion, into an equal number of securities sold short. This kind of short sale,

20
<PAGE>

which is referred to as one "against the box," may be entered into by a
Portfolio to, for example, lock in a sale price for a security the Portfolio
does not wish to sell immediately. A Portfolio will deposit, in a segregated
account with its custodian or a qualified subcustodian, the securities sold
short or convertible or exchangeable preferred stocks or debt securities in
connection with short sales against the box. Not more than 10% of a Portfolio's
net assets (taken at current value) may be held as collateral for such sales at
any one time, except that the Emerging Markets Portfolio will not be subject to
such limitation.

WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS. Each Portfolio
(except) the Japan Growth Portfolio) may utilize up to 20% of its total assets
to purchase securities on a when-issued basis and purchase or sell securities on
a delayed-delivery basis. In these transactions, payment for and delivery of the
securities occurs beyond the regular settlement dates. A Portfolio will not
enter into a when-issued or delayed-delivery transaction for the purpose of
leverage, but may sell the right to acquire a when-issued security prior to its
acquisition or dispose of its right to deliver or receive securities in a
delayed-delivery transaction if Warburg deems it advantageous to do so. The
payment obligation and the interest rate that will be received in when-issued
and delayed-delivery transactions are fixed at the time the buyer enters into
the commitment. Due to fluctuations in the value of securities purchased or sold
on a when-issued or delayed-delivery basis, the prices of such securities may be
higher or lower than the prices available in the market on the dates when the
investments are actually delivered to the buyers. A Portfolio will establish a
segregated account with its custodian consisting of cash or liquid securities in
an amount equal to the amount of its when-issued and delayed-delivery purchase
commitments, and will segregate the securities underlying commitments to sell
securities for delayed delivery.

LENDING PORTFOLIO SECURITIES. Each Portfolio is authorized to lend securities
it holds to brokers, dealers and other financial organizations. Loans of a
Portfolio's securities may not exceed 33 1/3% of the Portfolio's net assets. A
Portfolio's loans of securities will be collateralized by cash, letters of
credit or U.S. government securities which are maintained at all times in an
amount at least equal to the current market value of the loaned securities. From
time to time, a Portfolio may pay a part of the interest earned from the
investment collateral received for securities loaned to the borrower and/or a
third party that is unaffiliated with the Portfolio and that is acting as a
"finder." The risks associated with loans of portfolio securities are
substantially similar to those associated with repurchase agreements. As with
any extensions of credit, there are risks of delay in recovery and in some cases
even loss of rights in the collateral should the borrower of the securities fail
financially.

BELOW INVESTMENT GRADE SECURITIES. The Emerging Markets Portfolio may invest
or hold up to 35% of its net assets in fixed-income securities (including
convertible bonds) rated below investment grade and in unrated securities of
equivalent quality. Although it does not currently intend to do so, the Japan
Growth Portfolio may invest or hold up to 5% of its net assets in securities
rated below investment grade and in unrated securities of equivalent quality,
including convertible and non-convertible debt securities downgraded below
investment grade subsequent to purchase by the Portfolio. Up to 5% of each of
the Emerging Markets and International Equity Portfolios' net assets may be held
in convertible securities rated below investment grade. Up to 5% of the Global
Fixed Income Portfolio's net assets may be invested in convertible securities
rated below investment grade at the time of purchase (but not lower than B by
S&P or Moody's) or deemed by Warburg to be of equivalent quality.
Below investment grade securities may be rated as low as C by Moody's or D by
S&P, or be deemed by Warburg to be of equivalent quality. Securities that are
rated C by Moody's are the lowest rated class and can be regarded as having
extremely poor prospects of ever attaining any real investment standing. A
security rated D by S&P is in default or is expected to default upon maturity or
payment date.

<PAGE>

Below investment grade securities (commonly referred to as "junk bonds")
(i) will likely have some quality and protective characteristics that, in the
judgment of the rating organizations, are outweighed by large uncertainties or
major risk exposures to adverse conditions and (ii) are predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation. The market values of
certain of these securities also tend to be more sensitive to individual
corporate developments and changes in economic conditions than investment grade
securities. In addition, these securities generally present a higher degree of
credit risk. The risk of loss due to default is significantly greater because
these securities generally are unsecured and frequently are subordinated to the
prior payment of senior indebtedness.

The market values of below investment grade securities are more volatile than
those of investment grade securities. In addition, a Portfolio may have
difficulty disposing of certain of these securities because there may be a thin
trading market. The lack of a liquid secondary market for certain securities may
have an adverse impact on a Portfolio's ability to dispose of particular issues
and may make it more difficult for the Portfolio to obtain accurate market
quotations for purposes of valuing the Portfolio and calculating its net asset
value.

NON-DIVERSIFIED STATUS. The Emerging Markets, Global Fixed Income and Japan
Growth Portfolios are classified as "non-diversified" under the 1940 Act, which
means that the Portfolio is not limited by the 1940 Act in the proportion of its
assets that may be invested in the securities of a single issuer. Each
Portfolio, however, intends to comply with the diversification requirements
imposed by the Internal Revenue Code of 1986, as amended (the "Code"), for
qualification as a regulated investment company. As a non-diversified portfolio,
each Portfolio may invest a greater proportion of its assets in the obligations
of a smaller number of issuers and, as a result, may be subject to greater risk
with respect to portfolio securities.

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

The Emerging Markets Portfolio may invest up to 15% of its net assets and each
other Portfolio may invest up to 10% of its assets in securities with
contractual or other restrictions on resale and other instruments that are not
readily marketable ("illiquid securities"), including (i) securities issued as
part of a privately negotiated transaction between an issuer and one or more
purchasers; (ii) repurchase agreements with maturities greater than seven days;
(iii) time deposits maturing in more than seven calendar days; and (iv) certain
Rule 144A Securities. A Portfolio may borrow from banks for temporary or
emergency purposes in an amount up to 30% of its total assets and may pledge its
assets to the same extent in connection with these borrowings. Whenever
borrowings (including reverse repurchase agreements) exceed

22
<PAGE>

5% of the value of a Portfolio's total assets, the Portfolio will not make any
investments (including roll-overs). Up to 5% of the Emerging Markets Portfolio's
total assets may be invested in stand-by commitments. Except for the limitations
on borrowing, the investment guidelines set forth in this paragraph may be
changed at any time without shareholder consent by vote of the Board, subject to
the limitations contained in the 1940 Act. A complete list of investment
restrictions that a Portfolio has adopted identifying additional restrictions
that cannot be changed without the approval of the majority of the Portfolio's
outstanding shares is contained in the Statement of Additional Information.

MANAGEMENT OF THE FUND
- --------------------------------------------------------------------------------
INVESTMENT ADVISER. The Fund employs Warburg as investment adviser to each
Portfolio. Warburg, subject to the control of the Fund's officers and the Board,
manages the investment and reinvestment of the assets of the Portfolios in
accordance with each Portfolio's investment objective and stated investment
policies. Warburg makes investment decisions for each Portfolio and places
orders to purchase or sell securities on behalf of each such Portfolio. Warburg
also employs a support staff of management personnel to provide services to the
Fund and furnishes the Fund with office space, furnishings and equipment.

For the services provided by Warburg, the Fund pays Warburg a fee calculated
at an annual rate equal to percentages of the relevant Portfolio's average daily
net assets, as follows: Emerging Markets Portfolio -- 1.00%, Global Fixed Income
Portfolio -- .65%, International Equity Portfolio -- .80%, and Japan Growth
Portfolio -- 1.10%. Warburg and the Portfolios' co-administrators may
voluntarily waive a portion of their fees from time to time and temporarily
limit the expenses to be borne by the Portfolios.

Warburg is a professional investment advisory firm which provides investment
services to investment companies, employee benefit plans, endowment funds,
foundations and other institutions and individuals. As of , 1998,
Warburg managed approximately $ billion of assets, including approximately
$ billion of investment company assets. Incorporated in 1970, Warburg is
indirectly controlled by Warburg, Pincus & Co. ("WP&Co."), which has no business
other than being a holding company of Warburg and its affiliates. Warburg's
address is 466 Lexington Avenue, New York, New York 10017-3147.

PORTFOLIO MANAGERS.

Emerging Markets Portfolio. Richard H. King has been Co-Portfolio Manager of
the Emerging Markets Portfolio since its inception and Vincent J. McBride has
been Co-Portfolio Manager of the Portfolio since September 1997. Mr. King, a
Managing Director of Warburg, has been with Warburg since 1989. Mr. McBride is a
Vice President of Warburg and has been with Warburg since 1994. Prior to joining
Warburg, Mr. McBride was an international equity analyst at Smith Barney Inc.

23
<PAGE>

Global Fixed Income Portfolio. The Co-Portfolio Managers of the Global Fixed
Income Portfolio are Dale C. Christensen and Laxmi C. Bhandari. Mr. Christensen
is a Managing Director of Warburg and has been with Warburg since 1989. Mr.
Bhandari, a Vice President of Warburg, has been with Warburg since 1993.

International Equity Portfolio. Mr. King, described above, has been Portfolio
Manager of the International Equity Portfolio since its inception. P. Nicholas
Edwards, Harold W. Ehrlich and Mr. McBride, described above, have been Associate
Portfolio Managers of the International Equity Portfolio since joining Warburg.

Mr. Edwards is a Managing Director and has been with Warburg since August
1995, before which time he was a director at Jardine Fleming Investment
Advisers, Tokyo. Mr. Ehrlich is a Managing Director of Warburg and has been with
Warburg since February 1995, before which time he was a senior vice president,
portfolio manager and analyst at Templeton Investment Counsel Inc.

Japan Growth Portfolio. Mr. Edwards, described above, has been the Portfolio
Manager for the Japan Growth Portfolio since its inception.

CO-ADMINISTRATORS. The Fund employs Counsellors Funds Service, Inc.
("Counsellors Service"), a wholly owned subsidiary of Warburg, as a co-
administrator. As co-administrator, Counsellors Service provides shareholder
liaison services to the Portfolios, including responding to shareholder
inquiries and providing information on shareholder investments. Counsellors
Service also performs a variety of other services, including furnishing certain
executive and administrative services, acting as liaison between each Portfolio
and its various service providers, furnishing corporate secretarial services,
which include preparing materials for meetings of the Board, preparing proxy
statements and annual and semiannual reports, assisting in the preparation of
tax returns and developing and monitoring compliance procedures for the
Portfolios. As compensation, each Portfolio pays Counsellors Service a fee
calculated at an annual rate of .10% of the Portfolio's average daily net
assets.

The Fund employs PFPC Inc., an indirect, wholly owned subsidiary of PNC Bank
Corp. ("PFPC"), as a co-administrator. As a co-administrator, PFPC calculates
each Portfolio's net asset value, provides all accounting services for the
Portfolios and assists in related aspects of the Portfolios' operations. As
compensation, the Emerging Markets, International Equity and Japan Growth
Portfolios each pays PFPC a fee calculated at an annual rate of .12% of the
Portfolio's first $250 million in average daily net assets, .10% of the next
$250 million in average daily net assets, .08% of the next $250 million in
average daily net assets, and .05% of average daily net assets over $750
million, and the Global Fixed Income Portfolio pays PFPC a fee calculated at an
annual rate of .05% of the Portfolio's average daily net assets. PFPC has its
principal offices at 400 Bellevue Parkway, Wilmington, Delaware 19809.

CUSTODIANS. PNC Bank, National Association ("PNC") serves as custodian of each
Portfolio's U.S. assets. Like PFPC, PNC is an indirect wholly owned

24
<PAGE>

subsidiary of PNC Bank Corp., and its principal business address is 1600 Market
Street, Philadelphia, Pennsylvania 19103.

State Street Bank and Trust Company ("State Street") serves as custodian of
each Portfolio's non-U.S assets. State Street's principal business address
is 225 Franklin Street, Boston, Massachusetts 02110.

TRANSFER AGENT. State Street also serves as shareholder servicing agent,
transfer agent and dividend disbursing agent for the Fund. It has delegated to
Boston Financial Data Services, Inc., a 50% owned subsidiary ("BFDS"), re-
sponsibility for most shareholder servicing functions. BFDS's principal business
address is 2 Heritage Drive, North Quincy, Massachusetts 02171.

DISTRIBUTOR. Counsellors Securities Inc. ("Counsellors Securities") serves
without compensation as distributor of the shares of each Portfolio. Counsellors
Securities is a wholly owned subsidiary of Warburg and is located at 466
Lexington Avenue, New York, New York 10017-3147. No compensation is payable by
the Fund to Counsellors Securities for distribution services.
Warburg or its affiliates may, at their own expense, provide promotional
incentives for qualified recipients who support the sale of shares of the Fund,
consisting of securities dealers who have sold Fund shares or others, including
banks and other financial institutions, under special arrangements. Incentives
may include opportunities to attend business meetings, conferences, sales or
training programs for recipients' employees or clients and other programs or
events and may also include opportunities to participate in advertising or sales
campaigns and/or shareholder services and programs regarding one or more Warburg
Pincus Funds. Warburg or its affiliates may pay for travel, meals and lodging in
connection with these promotional activities. In some instances, these
incentives may be offered only to certain institutions whose representatives
provide services in connection with the sale or expected sale of Fund shares.
DIRECTORS AND OFFICERS. The officers of the Fund manage its day-to-day
operations and are directly responsible to the Board. The Board sets broad
policies for the Fund and chooses its officers. A list of the Directors and
officers of the Fund and a brief statement of their present positions and
principal occupations during the past five years is set forth in the Statement
of Additional Information.

HOW TO OPEN AN ACCOUNT

- --------------------------------------------------------------------------------
In order to invest in a Portfolio, an investor must first complete and sign an
account application. To obtain an account application, an investor may telephone
the Fund at (800) 369-2728. An investor may also obtain an account application
by writing to:
Warburg Pincus Funds
335 Madison Avenue, 15th Floor
New York, New York 10017
Attention: Institutional Services

25
<PAGE>

Completed and signed account applications should be mailed to Warburg Pincus
Funds at the above address.
RETIREMENT PLANS. For information about investing in a Portfolio through a
tax-deferred retirement plan, such as an Individual Retirement Account ("IRA")
or a Simplified Employee Pension IRA ("SEP-IRA"), an investor should telephone
Warburg Pincus Funds at (800) 369-2728 or write to the Fund at the address set
forth above. Investors should consult their own tax advisers about the
establishment of retirement plans.

CHANGES TO ACCOUNT. For information on how to make changes to an account,
including changes to account registration, address and/or privileges, an inves-
tor should telephone (800) 369-2728. Shareholders are responsible for maintain-
ing current account registrations and addresses with the Fund. No interest will
be payable on amounts represented by uncashed distribution or redemption checks.
THE FUND IS DESIGNED FOR INSTITUTIONAL INVESTORS ALTHOUGH, IN ITS DISCRETION,
THE FUND MAY PERMIT SHARES TO BE PURCHASED BY INDIVIDUALS, AS WELL AS
INSTITUTIONS, WHO MEET THE MINIMUM INVESTMENT REQUIREMENTS.

HOW TO PURCHASE SHARES

- --------------------------------------------------------------------------------
Shares of the Portfolios may be purchased either by mail or, with special
advance instructions, by wire. Shares of the Fund are sold without a sales
charge. The minimum initial investment in each Portfolio is as follows:

<TABLE>
<CAPTION>
Minimum Initial Minimum Subsequent
Portfolio Investment* Investment**
---------------------------------------------------- --------------- ------------------
<S> <C> <C>
Emerging Markets $ 2,000,000 $ 50,000
Global Fixed Income 3,000,000 50,000
International Equity 3,000,000 50,000
Japan Growth 1,000,000 None
</TABLE>

- --------------------------------------------------------------------------------
* The minimum investment for any group of related persons is an aggregate of
$4,000,000.
** Certain retirement plans for which recordkeeping is performed on an omnibus
basis for multiple participants are not subject to a subsequent investment
minimum.
The investment minimums may be waived for accounts in which employees of
Warburg or its affiliates have an interest or for investors maintaining advisory
accounts with Warburg or brokerage accounts with Counsellors Securities. The
Fund reserves the right to change the initial and subsequent investment minimum
requirements or impose a subsequent investment minimum at any time. Existing
investors will be given 15 days' notice by mail of any increase in investment
minimum requirements or the imposition of any subsequent investment minimum.
After an investor has made an initial investment, additional shares may be
purchased at any time by mail or by wire in the manner outlined below. Wire
payments for initial and subsequent investments should be preceded by an order
placed with the Fund and should clearly indicate the investor's account number
and the Portfolio in which shares are being purchased. In the interest of
economy and convenience, physical certificates representing shares of a
Portfolio are not normally issued.

26
<PAGE>

BY MAIL. If the investor desires to purchase shares by mail, a check or money
order made payable to Warburg Pincus Institutional Fund, Inc. or Warburg Pincus
Funds (in U.S. currency) should be sent along with the completed account
application to the address set forth above and should indicate the Portfolio in
which shares are to be purchased. Checks payable to the investor and endorsed to
the order of the Fund or Warburg Pincus Funds will not be accepted as payment
and will be returned to the sender. If payment is received in proper form by the
close of regular trading on The New York Stock Exchange, Inc. (the "NYSE")
(currently 4:00 p.m., Eastern time) on a day that the Fund calculates its net
asset value (a "business day"), the purchase will be made at the relevant
Portfolio's net asset value calculated at the end of that day. If payment is
received after the close of the NYSE the purchase will be effected at the
relevant Portfolio's net asset value determined for the next business day after
payment has been received. Checks or money orders that are not in proper form or
that are not accompanied or preceded by a complete account application will be
returned to the sender. Shares purchased by check or money order are entitled to
receive dividends and distributions beginning on the day after payment has been
received. Checks or money orders in payment for more than one Portfolio or
Warburg Pincus Fund should be accompanied by a breakdown of amounts to be
invested in each Portfolio or fund. If a check used for the purchase does not
clear, the Fund will cancel the purchase and the investor may be liable for
losses or fees incurred. For a description of the manner of calculating each
Portfolio's net asset value, see "Net Asset Value" below. BY WIRE. Investors may
also purchase shares in a Portfolio by wiring funds from their banks. Telephone
orders by wire will not be accepted until a completed account application in
proper form has been received and an account number has been established.
Investors should place an order with the Fund prior to wiring funds by
telephoning (800) 369-2728. Federal funds may be wired using the following wire
address: State Street Bank and Trust Co. 225 Franklin St.

Boston, MA 02110
ABA #0110 000 28
Attn: Mutual Funds/Custody Dept.
Warburg Pincus Institutional Fund, Inc.:
[Portfolio name]
DDA# 9904-649-2
[Shareowner name]
[Shareowner account number]

If a telephone order is received prior to the close of regular trading on the
NYSE and payment by wire is received on the same day in proper form in
accordance with instructions set forth above, the shares will be priced
according to the net asset value of the relevant Portfolio on that day and are
entitled to dividends and distributions beginning on that day. If payment by
wire is

27
<PAGE>

received in proper form prior to the close of the NYSE without a prior
telephone order, the purchase will be priced according to the net asset value of
the relevant Portfolio on that day and is entitled to dividends and
distributions beginning on that day. However, if a wire in proper form that is
not preceded by a telephone order is received at or after the close of regular
trading on the NYSE, the payment will be held uninvested until the order is
effected at the close of business on the next business day. Payment for orders
that are not received or accepted will be returned to the prospective investor
after prompt inquiry. If a telephone order is placed and payment by wire is not
received on the same day, the Fund will cancel the purchase and the investor may
be liable for losses or fees incurred.
PURCHASES THROUGH INTERMEDIARIES. The Portfolios may be available through
certain broker-dealers, financial institutions and other industry professionals,
collectively, "Service Organizations", which may impose certain conditions on
their clients or customers that invest in the Portfolios, which are in addition
to or different than those described in this Prospectus. Certain features of the
Portfolios may be modified or waived by Service Organizations. Service
Organizations may impose transaction or administrative charges or other direct
fees, which charges and fees would not be imposed if Portfolio shares are
purchased directly from the Portfolio. Therefore, a client or customer should
contact the Service Organization acting on its behalf concerning the fees (if
any) charged in connection with a purchase, exchange or redemption of Portfolio
shares and should read this Prospectus in light of the terms governing its
accounts with the Service Organization. Service Organizations will be
responsible for promptly transmitting client or customer purchase and redemption
orders to the Portfolio in accordance with their agreements with the Portfolio
and with clients or customers.
Service Organizations or, if applicable, their designees may enter confirmed
purchase or redemption orders on behalf of clients and customers, with payment
to follow no later than the Portfolio's pricing on the following business day.
If payment is not received by such time, the Service Organization could be held
liable for resulting fees or losses. A Portfolio may be deemed to have received
a purchase or redemption order when a Service Organization, or, if applicable,
its authorized designee, accepts the order. Orders received by a Portfolio in
proper form may be priced at the Portfolio's net asset value next computed
after they are accepted by the Service Organization or its authorized designee.
GENERAL. Each Portfolio reserves the right to reject any specific purchase
order, including certain purchases made by exchange. (See "How to Redeem and
Exchange Shares -- Exchange of Shares" below.) Purchase orders may be refused
if, in Warburg's judgment, a Portfolio would be unable to invest the money
effectively in accordance with its investment objective and policies, or would
otherwise potentially be adversely affected. A Portfolio may discontinue sales
of its shares if management believes that a substantial further increase in
assets may adversely affect that Portfolio's ability to achieve its investment
objective. In such event, however, it is anticipated that existing shareholders
would be permitted to continue to authorize investment in such Portfolio and to
reinvest any dividends or capital gains distributions.

28
<PAGE>

HOW TO REDEEM AND EXCHANGE SHARES

- --------------------------------------------------------------------------------
REDEMPTION OF SHARES. An investor in a Portfolio may redeem (sell) shares on
any day that the Portfolio's net asset value is calculated (see "Net Asset
Value" below).

Shares of a Portfolio may either be redeemed by mail or by telephone. If an
investor desires to redeem shares by mail, a written request for redemption
should be sent to Warburg Pincus Funds at the address indicated above under "How
to Open an Account in the Fund." An investor should be sure that the redemption
request identifies the relevant Portfolio, the number of shares to be redeemed
and the investor's account number. Payment of redemption proceeds may be
delayed in connection with account changes. Each mail redemption request must be
signed by the registered owner(s) (or legal representative(s)) exactly as the
shares are registered. If an investor has applied for the telephone redemption
feature on the account application, the investor may redeem the shares by
telephone by calling the Fund at (800) 369-2728. An investor making a telephone
withdrawal should state (i) the name of the relevant Portfolio, (ii) the account
number of the Portfolio, (iii) the name of the investor(s) appearing on the
Portfolio's records, (iv) the amount to be withdrawn and (v) the name of the
person requesting the redemption.
After receipt of the redemption request by mail or by telephone, the
redemption proceeds will, at the option of the investor, be paid by check and
mailed to the investor of record or be wired to the investor's bank as indicated
in the account application previously filled out by the investor. The Fund
currently does not impose a service charge for effecting wire transfers but it
reserves the right to do so in the future. During periods of significant
economic or market change, telephone redemptions may be difficult to implement.
If an investor is unable to contact Warburg Pincus Funds by telephone, an
investor may deliver the redemption request to Warburg Pincus Funds by mail at
the address shown above under "How to Open an Account." Although the Fund will
redeem shares purchased by check before the check has cleared, payment of the
redemption proceeds will be delayed for up to 10 days from the date of purchase.
Investors should consider purchasing shares using a certified or bank check or
money order if they anticipate an immediate need for redemption proceeds.
If a redemption order is received by a Portfolio or its agent prior to the
close of regular trading on the NYSE, the redemption order will be effected at
the relevant Portfolio's net asset value per share as determined on that day. If
a redemption order is received at or after the close of trading on the NYSE, the
redemption order will be effected at the relevant Portfolio's net asset value as
next determined. Except as noted above, redemption proceeds will normally be
mailed or wired to an investor on the next business day following the date

29
<PAGE>

a redemption order is effected. If, however, in the judgment of Warburg,
immediate payment would adversely affect a Portfolio, the Portfolio reserves the
right to pay the redemption proceeds within seven days after the redemption
order is effected. Furthermore, a Portfolio may suspend the right of redemption
or postpone the date of payment upon redemption (as well as suspend or postpone
the recordation of an exchange of shares) for such periods as are permitted
under the 1940 Act.

EXCHANGE OF SHARES. An investor may exchange shares of one Portfolio for
shares of another Portfolio at their respective net asset values. Exchanges may
be effected by mail or by telephone in the manner described under "Redemption of
Shares" above. If an exchange request is received by Warburg Pincus Funds or its
agent prior to the close of regular trading on the NYSE, the exchange will be
made at each Portfolio's net asset value determined at the end of that business
day. Exchanges will be effected without a sales charge but must satisfy the
minimum dollar amount necessary for new purchases. Currently, shares of the
Portfolios may be exchanged for shares of the following portfolios of the Fund,
which are described in a separate prospectus:
- POST-VENTURE CAPITAL PORTFOLIO -- an equity portfolio seeking long-term
growth of capital by investing primarily in equity securities of issuers in
their post-venture capital stage of development;
- SMALL COMPANY GROWTH PORTFOLIO -- an equity portfolio seeking capital growth
by investing primarily in equity securities of small-sized domestic
companies;
- SMALL COMPANY VALUE PORTFOLIO -- an equity portfolio seeking long-term
capital appreciation by investing primarily in equity securities of small
capitalization companies; and
- VALUE PORTFOLIO -- an equity portfolio seeking total return by investing
primarily in equity securities of large-sized domestic companies.

30
<PAGE>

prospectus of the other portfolio prior to making an exchange. For further
information regarding the exchange privilege or to obtain a current prospectus
for another portfolio of the Fund, an investor should contact the Fund at (800)
369-2728.

Each Portfolio reserves the right to refuse exchange purchases by any person
or group if, in Warburg's judgment, a Portfolio would be unable to invest the
money effectively in accordance with its investment objective and policies, or
would otherwise potentially be adversely affected. Examples of when an exchange
purchase could be refused are when a Portfolio receives or anticipates receiving
large exchange orders at or about the same time and/or when a pattern of
exchanges within a short period of time (often associated with a "market timing"
strategy) is discerned. The Portfolio may refuse exchange purchases at any time
without prior notice. The Portfolios reserve the right to terminate or modify
the exchange privilege at any time upon 30 days' notice to shareholders.
TELEPHONE TRANSACTIONS. Unless otherwise indicated on the account application,
an investor may request exchanges and redemptions by telephone. Investors should
realize that in conducting transactions by telephone they may be giving up a
measure of security that they may have if they were to conduct such transactions
in writing. Neither a Portfolio nor its agents will be liable for following
instructions communicated by telephone that it reasonably believes to be
genuine. Reasonable procedures will be employed on behalf of the Fund designed
to give reasonable assurance that instructions communicated by telephone are
genuine. Such procedures include providing written confirmation of telephone
transactions and tape recording telephone instructions.

DIVIDENDS, DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------

DIVIDENDS AND DISTRIBUTIONS. Each Portfolio calculates its dividends from net
investment income. Net investment income includes interest accrued on the
Portfolio's portfolio securities for the applicable period less applicable
expenses. Each Portfolio declares dividends from its net investment income and
net realized short-term and long-term capital gains annually and pays them in
the calendar year in which they are declared. Net investment income earned on
weekends and when the NYSE is not open will be computed as of the next business
day. Unless an investor instructs the Fund to pay dividends or distributions in
cash, dividends and distributions will automatically be reinvested in additional
shares of the relevant Portfolio at net asset value. The election to receive
dividends in cash may be made on the account application or, subsequently, by
writing to the Fund at the address set forth under "How to Open an Account" or
by calling the Fund at (800) 369-2728.

31
<PAGE>

regulated investment company, will be subject to a 4% non-deductible excise tax
measured with respect to certain undistributed amounts of ordinary income and
capital gain. Each Portfolio expects to pay such additional dividends and to
make such additional distributions as are necessary to avoid the application of
this tax.
Dividends paid from net investment income and distributions derived from net
realized short-term capital gains are taxable to investors as ordinary income
whether received in cash or reinvested in additional Portfolio shares.
Distributions derived from net realized long-term capital gains will be taxable
to investors as long-term capital gains, regardless of how long investors have
held Portfolio shares or whether such distributions are received in cash or
reinvested in Portfolio shares. As a general rule, an investor's gain or loss on
a sale or redemption of Portfolio shares will be a long-term capital gain or
loss if the investor has held the shares for more than one year and will be a
short-term capital gain or loss if the investor has held the shares for one year
or less. However, any loss realized upon the sale or redemption of shares
within six months from the date of their purchase will be treated as a long-term
capital loss to the extent of any amounts treated as distributions of long-term
capital gain during such six-month period with respect to such shares.

The Taxpayer Relief Act of 1997 made certain changes to the Code with respect
to taxation of long-term capital gains earned by taxpayers other than a
corporation. In general, for sales made after May 6, 1997, the maximum tax rate
for individual taxpayers on net long-term capital gains is lowered to 20% for
most assets (including long-term capital gains recognized by shareholders on the
sale or redemption of Portfolio shares that were held as capital assets). This
20% rate applies to sales on or after July 29, 1997 only if the asset was held
for more than 18 months at the time of disposition. Capital gains on the
disposition of assets on or after July 29, 1997 held for more than one year and
up to 18 months at the time of disposition will be taxed as "mid-term gain" at a
maximum rate of 28%. A rate of 18% instead of 20% will apply after December 31,
2000 for assets held for more than five years. However, the 18% rate applies
only to assets acquired after December 31, 2000 unless the taxpayer elects to
treat an asset held prior to such date as sold for fair market value on January
1, 2001. In the case of individuals whose ordinary income is taxed at a 15%
rate, the 20% rate is reduced to 10% and the 10% rate for assets held for more
than five years is reduced to eight percent. Each Portfolio will provide
information relating to that portion of a "capital gain dividend" that may be
treated by investors as eligible for the reduced capital gains rate for capital
assets held for more than 18 months.

Investors may be proportionately liable for taxes on income and gains of the
Portfolios, but investors not subject to tax on their income will not be
required to pay tax on amounts distributed to them. A Portfolio's investment
activities, including short sales of securities, will not result in unrelated
business taxable income to a tax-exempt investor. A Portfolio's dividends may
qualify for the dividends received deduction for corporations to the extent they
are derived

32
<PAGE>

from dividends attributable to certain types of stock issued by U.S. domestic
corporations.
Dividends and interest received by each Portfolio may be subject to
withholding and other taxes imposed by foreign countries. However, tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. If a Portfolio qualifies as a regulated investment
company, if certain distribution requirements are satisfied and if more than 50%
of the Portfolio's total assets at the close of its fiscal year consist of stock
or securities of foreign corporations, the Portfolio may elect for U.S. income
tax purposes to treat any foreign income taxes paid by it that can be treated as
income taxes under U.S. income tax principles as paid by its shareholders. A
Portfolio may qualify for and make this election in some, but not necessarily
all, of its taxable years. If a Portfolio were to make an election, shareholders
of the Portfolio would be required to take into account an amount equal to their
pro rata portions of such foreign taxes in computing their taxable income and
then treatan amount equal to those foreign taxes as a U.S. federal income tax
deduction or as a foreign tax credit against their U.S. federal income taxes.
Shortly after any year for which it makes such an election, a Portfolio will
report to its shareholders, in writing, the amount per share of such foreign
income tax that must be included in each shareholder's gross income and the
amount which will be available for the deduction or credit. No deduction for
foreign taxes may be claimed by a shareholder who does not itemize deductions.
Certain limitations wll be imposed on the extent to which the credit (but not
the deduction) for foreign taxes may be claimed.

GLOBAL FIXED INCOME PORTFOLIO. Zero coupon securities do not make interest
payments, although a portion of the difference between a zero coupon security's
maturity value and its purchase price is imputed as income to the Portfolio each
year even though the Portfolio receives no cash distribution until maturity.
Under the U.S. federal tax laws, the Portfolio will not be subject to tax on
this income if it pays dividends to its shareholders substantially equal to all
the income received from, or imputed with respect to, its investments during the
year, including its zero coupon securities. These dividends ordinarily will
constitute taxable income to the shareholders of the Portfolio.

JAPAN GROWTH PORTFOLIO. In the opinion of the Japanese counsel for the Japan
Growth Portfolio, the operations of the Portfolio will not subject the Portfolio
to any Japanese income, capital gains or other taxes except for withholding
taxes on interest and dividends paid to the Portfolio by Japanese corporations
and securities transaction taxes payable in the event of sales of portfolio
securities in Japan. In the opinion of such counsel, under the tax convention
between the United States and Japan (the "Convention") as currently in force, a
Japanese withholding tax at a rate of 15% is, with certain exceptions, imposed
upon dividends paid by Japanese corporations to the Portfolio. Pursuant to the
present terms of the Convention, interest received by the Portfolio from sources
within Japan is subject to a Japanese withholding tax at a rate of 10%.

33
<PAGE>

NET ASSET VALUE
- --------------------------------------------------------------------------------
Each Portfolio's net asset value per share is calculated as of the close of
regular trading on the NYSE (currently 4:00 p.m., Eastern time) on each business
day, Monday through Friday, except on days when the NYSE is closed. The NYSE is
currently scheduled to be closed on New Year's Day, Dr. Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day, and on the preceding Friday or subsequent
Monday when one of these holidays falls on a Saturday or Sunday, respectively.
The net asset value per share of each Portfolio generally changes each day.
The net asset value per share of each Portfolio is computed by dividing the
value of a Portfolio's net assets by the total number of its shares outstanding.
Securities listed on a U.S. securities exchange (including securities traded
through the Nasdaq National Market System) or foreign securities exchange or
traded in an over-the-counter market will be valued at the most recent sale
price when the valuation is made. Debt obligations that mature in 60 days or
less from the valuation date are valued on the basis of amortized cost, unless
the Board determines that using this valuation method would not reflect the
investments' value. Securities, options and futures contracts for which market
quotations are not readily available and other assets will be valued at their
fair value as determined in good faith pursuant to consistently applied
procedures established by the Board. Further information regarding valuation
policies is contained in the Statement of Additional Information.

THE PORTFOLIOS' PERFORMANCE
- --------------------------------------------------------------------------------
From time to time, a Portfolio may advertise its yield or average annual total
return over various periods of time. The yield of a Portfolio refers to net
investment income generated by the Portfolio over a specified 30-day period,
which is then annualized (based on SEC guidelines). Total return figures show
the average percentage change in value of an investment in a Portfolio from the
beginning of the measurement period to the end of the measurement period. The
figures reflect changes in the price of the Portfolio's shares assuming that any
income dividends and/or capital gain distributions made by the Portfolio during
the period were reinvested in shares of the Portfolio. Total return will be
shown for recent one-, five- and ten-year periods, and may be shown for other
periods as well (such as from commencement of the Portfolio's operations or on a
year-by-year, quarterly or current year-to-date basis).

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<PAGE>

When considering average total return figures for periods longer than one
year, it is important to note that the annual total return for one year in the
period might have been greater or less than the average for the entire period.
When considering total return figures for periods shorter than one year,
investors should bear in mind that such return may not be representative of any
Portfolio's return over a longer market cycle. A Portfolio may also advertise
aggregate total return figures for various periods, representing the cumulative
change in value of an investment in the relevant Portfolio for the specific
period. Aggregate and average total returns may be shown by means of schedules,
charts or graphs, and may indicate various components of total return (i.e.,
change in value of initial investment, income dividends and capital gain
distributions).
Investors should note that yield and total return figures are based on
historical earnings and are not intended to indicate future performance. The
Statement of Additional Information describes the method used to determine each
Portfolio's yield and total return. Current yield and total return figures may
be obtained by calling the Fund at (800) 369-2728.

A Portfolio may compare its performance with (i) that of other mutual funds
with similar investment objectives and policies, which may be based on the
rankings prepared by Lipper Analytical Services, Inc. or similar investment
services that monitor the performance of mutual funds; (ii) in the case of the
Emerging Markets Portfolio, with the IFC Emerging Market Free Index, the IFC
Investible Index and the Morgan Stanley Capital International Emerging Markets
Index; in the case of the Global Fixed Income Portfolio, with the J.P. Morgan
Traded Index (an index of non-U.S. dollar bonds of ten countries with active
bond markets), the Salomon Brothers World Government Bond Index (a hedged,
market-capitalization weighted index designed to track major government debt
markets) and the Lipper General World Income Average (an average of funds that
invest primarily in non-U.S. dollar and U.S. dollar debt instruments); in the
case of the International Equity Portfolio, the Morgan Stanley Capital
International Europe, Australasia, Far East ("EAFE") Index, the Salomon Russell
Global Equity Index, the FT-Actuaries World Indices (jointly compiled by The
Financial Times, Ltd., Goldman, Sachs & Co. and NatWest Securities Ltd.) and the
S&P 500 Index; and in the case of the Japan Growth Portfolio, the EAFE Index,
the Salomon Russell Global Equity Index, the FT-Actuaries World Indices, the S&P
500 Index, the Nikkei over-the-counter average, the JASDAQ Index, the Nikkei 225
and 300 Stock Indexes and the Topix Index, which are unmanaged indexes of common
stocks; or (iii) other appropriate indexes of investment securities or with data
developed by Warburg derived from such indexes. A Portfolio may also include
evaluations of the Portfolio published by nationally recognized ranking services
and by financial publications that are nationally recognized, such as Barron's,
Business Week, Financial Times, Forbes, Fortune, Inc., Institutional Investor,
Investor's Business Daily, Money, Morningstar, Mutual Fund Magazine, SmartMoney,
The Wall Street Journal and Worth. Morningstar, Inc. rates funds in broad
categories

35
<PAGE>

based on risk/reward analyses over various time periods. In addition, each
Portfolio may from time to time compare its expense ratio to that of investment
companies with similar objectives and policies, based on data generated by
Lipper Analytical Services, Inc. or similar investment services that monitor
mutual funds.

In reports or other communications to investors or in advertising, each
Portfolio may also describe the general biography or work experience of the
portfolio managers of the Portfolio and may include quotations attributable to
the portfolio managers describing approaches taken in managing the Portfolio's
investments, research methodology underlying stock selection or the Portfolio's
investment objective. In addition, a Portfolio and its portfolio managers may
render periodic updates of Portfolio activity, which may include a discussion of
significant portfolio holdings; analysis of holdings by industry, country,
credit quality and other characteristics and comparison and analysis of the
Portfolio with respect to relevant market and industry benchmarks. Each
Portfolio may also discuss measures of risk, the continuum of risk and return
relating to different investments, and the potential impact of foreign stocks on
a portfolio otherwise composed of domestic securities.

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

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

VOTING RIGHTS. Investors in each Portfolio are entitled to one vote for each
full share owned and fractional votes for fractional shares held. Shareholders
of each Portfolio vote in the aggregate on all matters except where otherwise
required by law. There will normally be no meetings of shareholders for the
purpose of electing members of the Board unless and until such time as less than
a majority of the members holding office have been elected by shareholders. Any
Director may be removed from office upon the vote of shareholders holding at
least a majority of the Fund's outstanding shares at a meeting called for that
purpose. A meeting will be called for any purpose at the written request of
holders of 10% of the Fund's outstanding shares. Wake Forest University Trust
may be deemed to be a controlling person of the Emerging Markets Portfolio
because its beneficial ownership of the Emerging Markets Portfolio exceeds 25%
of that Portfolio's voting securities. In addition, Lionel I. Pincus, the
managing partner of WP&Co., may be deemed to be a controlling person of the
Japan Growth Portfolio because he may be deemed to possess or share investment
power over shares owned by clients of Warburg and by companies that WP&Co. may
be deemed to control.
SHAREHOLDER COMMUNICATIONS. Each investor will receive a quarterly statement
of the investor's account, as well as a statement after any transaction that

36
<PAGE>

affects the investor's share balance or share registration (other than
reinvestment of dividends or distributions). The Fund will also send to its
investors a semiannual report and an audited annual report, each of which
includes a list of the investment securities held by each Portfolio and a
statement of the performance of the Portfolio. Periodic listings of the
investment securities held by a Portfolio, as well as certain statistical
characteristics of a Portfolio, may be obtained by calling the Fund at (800)
369-2728 or on the Warburg Pincus Funds Web site at www.warburg.com.

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

<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
The Portfolios' Expenses................................. 2
Financial Highlights..................................... 3
Investment Objectives and Policies....................... 5
Portfolio Transactions and Turnover Rate................. 12
Special Risk Considerations and Certain Investment
Strategies............................................. 13
Investment Guidelines.................................... 22
Management of the Fund................................... 23
How to Open an Account................................... 25
How to Purchase Shares................................... 26
How to Redeem and Exchange Shares........................ 29
Dividends, Distributions and Taxes....................... 31
Net Asset Value.......................................... 34
The Portfolios' Performance.............................. 34
General Information...................................... 36
</TABLE>

LOGO

P.O. BOX 9030, BOSTON, MA 02205-9030

800-369-2728

www.warburg.com

COUNSELLORS SECURITIES INC., DISTRIBUTOR. WPINS-1-0298

<PAGE>

STATEMENT OF ADDITIONAL INFORMATION

February ___, 1998

WARBURG PINCUS INSTITUTIONAL FUND, INC.

Post-Venture Capital Portfolio
Small Company Growth Portfolio
Small Company Value Portfolio
Value Portfolio
Emerging Markets Portfolio
Global Fixed Income Portfolio
International Equity Portfolio
Japan Growth Portfolio

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

Contents

Page
----

Investment Objectives.......................................................2
Investment Policies.........................................................2
Management Of The Fund.....................................................43
Additional Purchase And Redemption Information.............................55
Exchange Privilege.........................................................56
Additional Information Concerning Taxes....................................56
Determination Of Performance...............................................61
Independent Accountants And Counsel........................................65
Miscellaneous..............................................................65
Financial Statements.......................................................67
Appendix -- Description of Ratings........................................A-1
Statements of Assets and Liabilities......................................F-1

This Statement of Additional Information is meant to be read in conjunction with
the Prospectus of Warburg Pincus Institutional Fund, Inc. (the "Fund") dated
February ___, 1998, relating to the Post-Venture Capital, Small Company Growth,
Small Company Value and Value Portfolios (the "U.S. Portfolios") and the Fund's
Prospectus dated February ___, 1998, relating to the Emerging Markets, Global
Fixed Income, International Equity and Japan Growth Portfolios (the
"International Portfolios" and together with the U.S. Portfolios the
"Portfolios") as amended or supplemented from time to time (the "Prospectuses"),
and is incorporated by reference in its entirety into those Prospectuses.
Because this Statement of Additional Information is not itself a prospectus, no
investment in shares of the Portfolios should be made solely upon the
information contained herein. Copies of the Fund's Prospectuses and information
regarding each Portfolio's current performance may be obtained

<PAGE>

by calling the Fund at (800) 369-2728. Information regarding the status of
shareholder accounts may also be obtained by calling the Fund at the same number
or by writing to the Fund, P.O. Box 9030, Boston, Massachusetts 02205-9030.

INVESTMENT OBJECTIVES

The investment objective of the Small Company Value, Value and
International Equity Portfolios is long-term capital appreciation. The
investment objective of the Small Company Growth and Emerging Markets Portfolios
is capital growth. The investment objective of each of the Post-Venture Capital
and Japan Growth Portfolios is long-term growth of capital. The investment
objective of the Global Fixed Income Portfolio is to maximize total investment
return consistent with prudent investment management while preserving capital.

INVESTMENT POLICIES

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

Options, Futures and Currency Exchange Transactions
- ---------------------------------------------------

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

A Portfolio realizes fees (referred to as "premiums") for granting the
rights evidenced by the options it has written. A put option embodies the right
of its purchaser to compel the writer of the option to purchase from the option
holder an underlying security at a specified price for a specified time period
or at a specified time. In contrast, a call option embodies the right of its
purchaser to compel the writer of the option to sell to the option holder an
underlying security at a specified price for a specified time period or at a
specified time.

The principal reason for writing covered options on a security is to
attempt to realize, through the receipt of premiums, a greater return than would
be realized on the securities alone. In return for a premium, a Portfolio as the
writer of a covered call option forfeits the right to any appreciation in the
value of the underlying security above the strike price for the life of the
option (or until a closing purchase transaction can be effected). Nevertheless,
the Portfolio as a put or call writer retains the risk of a decline in the price
of the underlying security. The size of the premiums that the Portfolio may
receive may be adversely affected as new or existing institutions, including
other investment companies, engage in or increase their option-writing
activities.

If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it received. If
security prices remain the same over time, it is likely that the writer will
also profit, because it should be able to close

2
<PAGE>

out the option at a lower price. If security prices fall, the put writer would
expect to suffer a loss. This loss should be less than the loss from purchasing
the underlying instrument directly, however, because the premium received for
writing the option should mitigate the effects of the decline.

In the case of options written by a Portfolio that are deemed covered by
virtue of the Portfolio's holding convertible or exchangeable preferred stock or
debt securities, the time required to convert or exchange and obtain physical
delivery of the underlying common stock with respect to which the Portfolio has
written options may exceed the time within which the Portfolio must make
delivery in accordance with an exercise notice. In these instances, the
Portfolio may purchase or temporarily borrow the underlying securities for
purposes of physical delivery. By so doing, the Portfolio will not bear any
market risk, since the Portfolio will have the absolute right to receive from
the issuer of the underlying security an equal number of shares to replace the
borrowed securities, but the Portfolio may incur additional transaction costs or
interest expenses in connection with any such purchase or borrowing.

Additional risks exist with respect to certain of the securities for which
the relevant Portfolios may write covered call options. For example, if a
Portfolio writes covered call options on mortgage-backed securities, the
mortgage-backed securities that it holds as cover may, because of scheduled
amortization or unscheduled prepayments, cease to be sufficient cover. If this
occurs, the Portfolio will compensate for the decline in the value of the cover
by purchasing an appropriate additional amount of mortgage-backed securities.

Options written by a Portfolio will normally have expiration dates between
one and nine months from the date written. The exercise price of the options may
be below, equal to or above the market values of the underlying securities at
the times the options are written. In the case of call options, these exercise
prices are referred to as "in-the-money," "at-the-money" and "out-of-the-money,"
respectively. The Portfolios (other than the Emerging Markets Portfolio) may
write (i) in-the-money call options when Warburg Pincus Asset Management, Inc.,
the Portfolios' investment adviser ("Warburg"), expects that the price of the
underlying security will remain flat or decline moderately during the option
period, (ii) at-the-money call options when Warburg expects that the price of
the underlying security will remain flat or advance moderately during the option
period and (iii) out-of-the-money call options when Warburg expects that the
premiums received from writing the call option plus the appreciation in market
price of the underlying security up to the exercise price will be greater than
the appreciation in the price of the underlying security alone. In any of the
preceding situations, if the market price of the underlying security declines
and the security is sold at this lower price, the amount of any realized loss
will be offset wholly or in part by the premium received. Out-of-the-money,
at-the-money and in-the-money put options (the reverse of call options as to the
relation of exercise price to market price) may be used in the same market
environments that such call options are used in equivalent transactions. To
secure its obligation to deliver the underlying security when it writes a call
option, a Portfolio will be required to deposit in escrow the underlying
security or other assets in accordance with the rules of the Options Clearing
Corporation (the "Clearing Corporation") and of the securities exchange on which
the option is written.

3
<PAGE>

Prior to their expirations, put and call options may be sold in closing
sale or purchase transactions (sales or purchases by the Portfolio prior to the
exercise of options that it has purchased or written, respectively, of options
of the same series) in which the Portfolio may realize a profit or loss from the
sale. An option position may be closed out only where there exists a secondary
market for an option of the same series on a recognized securities exchange or
in the over-the-counter market. When the Portfolio has purchased an option and
engages in a closing sale transaction, whether the Portfolio realizes a profit
or loss will depend upon whether the amount received in the closing sale
transaction is more or less than the premium the Portfolio initially paid for
the original option plus the related transaction costs. Similarly, in cases
where the Portfolio has written an option, it will realize a profit if the cost
of the closing purchase transaction is less than the premium received upon
writing the original option and will incur a loss if the cost of the closing
purchase transaction exceeds the premium received upon writing the original
option. The Portfolio may engage in a closing purchase transaction to realize a
profit, to prevent an underlying security with respect to which it has written
an option from being called or put or, in the case of a call option, to unfreeze
an underlying security (thereby permitting its sale or the writing of a new
option on the security prior to the outstanding option's expiration). The
obligation of the Portfolio under an option it has written would be terminated
by a closing purchase transaction, but the Portfolio would not be deemed to own
an option as a result of the transaction. So long as the obligation of the
Portfolio as the writer of an option continues, the Portfolio may be assigned an
exercise notice by the broker-dealer through which the option was sold,
requiring the Portfolio to deliver the underlying security against payment of
the exercise price. This obligation terminates when the option expires or the
Portfolio effects a closing purchase transaction. The Portfolio can no longer
effect a closing purchase transaction with respect to an option once it has been
assigned an exercise notice.

There is no assurance that sufficient trading interest will exist to create
a liquid secondary market on a securities exchange for any particular option or
at any particular time, and for some options no such secondary market may exist.
A liquid secondary market in an option may cease to exist for a variety of
reasons. In the past, for example, higher than anticipated trading activity or
order flow or other unforeseen events have at times rendered certain of the
facilities of the Clearing Corporation and various securities exchanges
inadequate and resulted in the institution of special procedures, such as
trading rotations, restrictions on certain types of orders or trading halts or
suspensions in one or more options. There can be no assurance that similar
events, or events that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such event, it might not be possible to
effect closing transactions in particular options. Moreover, a Portfolio's
ability to terminate options positions established in the over-the-counter
market may be more limited than for exchange-traded options and may also involve
the risk that securities dealers participating in over-the-counter transactions
would fail to meet their obligations to the Portfolio. The Portfolio, however,
intends to purchase over-the-counter options only from dealers whose debt
securities, as determined by Warburg, are considered to be investment grade. If,
as a covered call option writer, the Portfolio is unable to effect a closing
purchase transaction in a secondary market, it will not be able to sell the
underlying security until the option expires or it delivers the underlying
security upon exercise. In either case, the Portfolio would continue

4
<PAGE>

to be at market risk on the security and could face higher transaction costs,
including brokerage commissions.

Securities exchanges generally have established limitations governing the
maximum number of calls and puts of each class which may be held or written, or
exercised within certain time periods by an investor or group of investors
acting in concert (regardless of whether the options are written on the same or
different securities exchanges or are held, written or exercised in one or more
accounts or through one or more brokers). It is possible that the Fund or a
Portfolio and other clients of Warburg and certain of its affiliates may be
considered to be such a group. A securities exchange may order the liquidation
of positions found to be in violation of these limits and it may impose certain
other sanctions. These limits may restrict the number of options a Portfolio
will be able to purchase on a particular security.

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

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

OTC Options. The Portfolios may purchase OTC or dealer options or sell
covered OTC options. Unlike exchange-listed options where an intermediary or
clearing corporation, such as the Clearing Corporation, assures that all
transactions in such options are properly executed, the responsibility for
performing all transactions with respect to OTC options rests solely with the
writer and the holder of those options. A listed call option writer, for
example, is obligated to deliver the underlying stock to the clearing
organization if the option is exercised, and the clearing organization is then
obligated to pay the writer the exercise price of the option. If a Portfolio
were to purchase a dealer option, however, it would rely on the dealer from whom
it purchased the option to perform if the option were

5
<PAGE>

exercised. If the dealer fails to honor the exercise of the option by the
Portfolio, the Portfolio would lose the premium it paid for the option and the
expected benefit of the transaction.

Listed options generally have a continuous liquid market while dealer
options have none. Consequently, the Portfolio will generally be able to realize
the value of a dealer option it has purchased only by exercising it or reselling
it to the dealer who issued it. Similarly, when the Portfolio writes a dealer
option, it generally will be able to close out the option prior to its
expiration only by entering into a closing purchase transaction with the dealer
to which the Portfolio originally wrote the option. Although the Portfolios will
seek to enter into dealer options only with dealers who will agree to and that
are expected to be capable of entering into closing transactions with the
Portfolios, there can be no assurance that the Portfolio will be able to
liquidate a dealer option at a favorable price at any time prior to expiration.
The inability to enter into a closing transaction may result in material losses
to a Portfolio. Until the Portfolio, as a covered OTC call option writer, is
able to effect a closing purchase transaction, it will not be able to liquidate
securities (or other assets) used to cover the written option until the option
expires or is exercised. This requirement may impair the Portfolio's ability to
sell portfolio securities or, with respect to currency options, currencies at a
time when such sale might be advantageous. In the event of insolvency of the
other party, the Portfolio may be unable to liquidate a dealer option.

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

A Portfolio will not enter into futures contracts and related options for
which the aggregate initial margin and premiums (discussed below) required to
establish positions other than those considered to be "bona fide hedging" by the
CFTC exceed 5% of the Portfolio's net asset value after taking into account
unrealized profits and unrealized losses on any such contracts it has entered
into. The Portfolios reserve the right to engage in transactions involving
futures contracts and options on futures contracts to the extent allowed by CFTC
regulations in effect from time to time and in accordance with a Portfolio's
policies. Although each Portfolio is limited in the amount of assets it may
invest in futures transactions (as described above and in the Prospectuses),
there is no overall limit on the percentage of Portfolio assets that may be at
risk with respect to futures activities.

Futures Contracts. A foreign currency futures contract provides for the
future sale by one party and the purchase by the other party of a certain amount
of a specified non-U.S. currency at a specified price, date, time and place. An
interest rate futures contract provides for the future sale by one party and the
purchase by the other party of a certain amount of a specific interest rate
sensitive financial instrument (debt security) at a specified

6
<PAGE>

price, date, time and place. Stock indexes are capitalization weighted indexes
which reflect the market value of the stock listed on the indexes. A stock index
futures contract is an agreement to be settled by delivery of an amount of cash
equal to a specified multiplier times the difference between the value of the
index at the close of the last trading day on the contract and the price at
which the agreement is made.

No consideration is paid or received by a Portfolio upon entering into a
futures contract. Instead, the Portfolio is required to deposit in a segregated
account with its custodian an amount of cash or cash equivalents, such as U.S.
government securities or other liquid high-grade debt obligations, equal to
approximately 1% to 10% of the contract amount (this amount is subject to change
by the exchange on which the contract is traded, and brokers may charge a higher
amount). This amount is known as "initial margin" and is in the nature of a
performance bond or good faith deposit on the contract which is returned to the
Portfolio upon termination of the futures contract, assuming all contractual
obligations have been satisfied. The broker will have access to amounts in the
margin account if the Portfolio fails to meet its contractual obligations.
Subsequent payments, known as "variation margin," to and from the broker, will
be made daily as the currency, financial instrument or stock index underlying
the futures contract fluctuates, making the long and short positions in the
futures contract more or less valuable, a process known as "marking-to-market."
The Portfolios will also incur brokerage costs in connection with entering into
futures transactions.

At any time prior to the expiration of a futures contract, a Portfolio may
elect to close the position by taking an opposite position, which will operate
to terminate the Portfolio's existing position in the contract. Positions in
futures contracts and options on futures contracts (described below) may be
closed out only on the exchange on which they were entered into (or through a
linked exchange). No secondary market for such contracts exists. Although the
Portfolios intend to enter into futures contracts only if there is an active
market for such contracts, there is no assurance that an active market will
exist at any particular time. Most futures exchanges limit the amount of
fluctuation permitted in futures contract prices during a single trading day.
Once the daily limit has been reached in a particular contract, no trades may be
made that day at a price beyond that limit or trading may be suspended for
specified periods during the day. It is possible that futures contract prices
could move to the daily limit for several consecutive trading days with little
or no trading, thereby preventing prompt liquidation of futures positions at an
advantageous price and subjecting a Portfolio to substantial losses. In such
event, and in the event of adverse price movements, the Portfolio would be
required to make daily cash payments of variation margin. In such situations, if
the Portfolio had insufficient cash, it might have to sell securities to meet
daily variation margin requirements at a time when it would be disadvantageous
to do so. In addition, if the transaction is entered into for hedging purposes,
in such circumstances the Portfolio may realize a loss on a futures contract or
option that is not offset by an increase in the value of the hedged position.
Losses incurred in futures transactions and the costs of these transactions will
affect the Portfolio's performance.

Options on Futures Contracts. Each Portfolio may purchase and write put and
call options on foreign currency, interest rate and stock index futures
contracts and may enter

7
<PAGE>

into closing transactions with respect to such options to terminate existing
positions. There is no guarantee that such closing transactions can be effected;
the ability to establish and close out positions on such options will be subject
to the existence of a liquid market.

An option on a currency, interest rate or stock index futures contract, as
contrasted with the direct investment in such a contract, gives the purchaser
the right, in return for the premium paid, to assume a position in a futures
contract at a specified exercise price at any time prior to the expiration date
of the option. The writer of the option is required upon exercise to assume an
offsetting futures position (a short position if the option is a call and a long
position if the option is a put). Upon exercise of an option, the delivery of
the futures position by the writer of the option to the holder of the option
will be accompanied by delivery of the accumulated balance in the writer's
futures margin account, which represents the amount by which the market price of
the futures contract exceeds, in the case of a call, or is less than, in the
case of a put, the exercise price of the option on the futures contract. The
potential loss related to the purchase of an option on futures contracts is
limited to the premium paid for the option (plus transaction costs). Because the
value of the option is fixed at the point of sale, there are no daily cash
payments by the purchaser to reflect changes in the value of the underlying
contract; however, the value of the option does change daily and that change
would be reflected in the net asset value of the Portfolio.

Currency Exchange Transactions. The value in U.S. dollars of the assets of
a Portfolio that are invested in foreign securities may be affected favorably or
unfavorably by changes in exchange control regulations, and the Portfolio may
incur costs in connection with conversion between various currencies. Currency
exchange transactions may be from any non-U.S. currency into U.S. dollars or
into other appropriate currencies. Each Portfolio will conduct its currency
exchange transactions (i) on a spot (i.e., cash) basis at the rate prevailing in
the currency exchange market, (ii) through entering into futures contracts or
options on such contracts (as described above), (iii) through entering into
forward contracts to purchase or sell currency or (iv) by purchasing
exchange-traded currency options.

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

At or before the maturity of a forward contract, the Portfolio may either
sell a portfolio security and make delivery of the currency, or retain the
security and fully or partially offset its contractual obligation to deliver the
currency by negotiating with its trading partner to purchase a second,
offsetting contract. If the Portfolio retains the portfolio security and engages
in an offsetting transaction, the Portfolio, at the time of execution of the
offsetting transaction, will incur a gain or a loss to the extent that movement
has occurred in forward

8
<PAGE>

contract prices.

Currency Options. The Portfolios may purchase exchange-traded put and call
options on foreign currencies. Put options convey the right to sell the
underlying currency at a price which is anticipated to be higher than the spot
price of the currency at the time the option is exercised. Call options convey
the right to buy the underlying currency at a price which is expected to be
lower than the spot price of the currency at the time the option is exercised.

Currency Hedging. The Portfolios' currency hedging will be limited to
hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of forward currency with respect to
specific receivables or payables of a Portfolio generally accruing in connection
with the purchase or sale of its portfolio securities. Position hedging is the
sale of forward currency with respect to portfolio security positions. A
Portfolio may not position hedge to an extent greater than the aggregate market
value (at the time of entering into the hedge) of the hedged securities.

A decline in the U.S. dollar value of a foreign currency in which the
Portfolio's securities are denominated will reduce the U.S. dollar value of the
securities, even if their value in the foreign currency remains constant. The
use of currency hedges does not eliminate fluctuations in the underlying prices
of the securities, but it does establish a rate of exchange that can be achieved
in the future. For example, in order to protect against diminutions in the U.S.
dollar value of securities it holds, a Portfolio may purchase currency put
options. If the value of the currency does decline, the Portfolio will have the
right to sell the currency for a fixed amount in dollars and will thereby
offset, in whole or in part, the adverse effect on the U.S. dollar value of its
securities that otherwise would have resulted. Conversely, if a rise in the U.S.
dollar value of a currency in which securities to be acquired are denominated is
projected, thereby potentially increasing the cost of the securities, the
Portfolio may purchase call options on the particular currency. The purchase of
these options could offset, at least partially, the effects of the adverse
movements in exchange rates. The benefit to the Portfolio derived from purchases
of currency options, like the benefit derived from other types of options, will
be reduced by premiums and other transaction costs. Because transactions in
currency exchange are generally conducted on a principal basis, no fees or
commissions are generally involved. Currency hedging involves some of the same
risks and considerations as other transactions with similar instruments.
Although currency hedges limit the risk of loss due to a decline in the value of
a hedged currency, at the same time, they also limit any potential gain that
might result should the value of the currency increase. If a devaluation is
generally anticipated, the Portfolio may not be able to contract to sell a
currency at a price above the devaluation level it anticipates.

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

9
<PAGE>

price decline if the issuer's creditworthiness deteriorates.

Hedging. In addition to entering into options and futures transactions for
other purposes, including generating current income to offset expenses or
increase return, each Portfolio may enter into these transactions as hedges to
reduce investment risk, generally by making an investment expected to move in
the opposite direction of a portfolio position. A hedge is designed to offset a
loss in a portfolio position with a gain in the hedged position; at the same
time, however, a properly correlated hedge will result in a gain in the
portfolio position being offset by a loss in the hedged position. As a result,
the use of options and futures transactions for hedging purposes could limit any
potential gain from an increase in the value of the position hedged. In
addition, the movement in the portfolio position hedged may not be of the same
magnitude as movement in the hedge. With respect to futures contracts, since the
value of portfolio securities will far exceed the value of the futures contracts
sold by the Portfolio, an increase in the value of the futures contracts could
only mitigate, but not totally offset, the decline in the value of the
Portfolio's assets.

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

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

10
<PAGE>

Even a well-conceived hedge may be unsuccessful to some degree because of
unexpected market behavior or trends. Losses incurred in hedging transactions
and the costs of these transactions will affect the Portfolio's performance.

Asset Coverage for Forward Contracts, Options, Futures and Options on
Futures. As described in the Prospectuses, each Portfolio will comply with
guidelines established by the U.S. Securities and Exchange Commission (the
"SEC") with respect to coverage of forward currency contracts; options written
by the Portfolio on currencies, securities and indexes; and currency, interest
rate and index futures contracts and options on these futures contracts. These
guidelines may, in certain instances, require segregation by the Portfolio of
cash or liquid securities.

For example, a call option written by the Portfolio on securities may
require the Portfolio to hold the securities subject to the call (or securities
convertible into the securities without additional consideration) or to
segregate assets (as described above) sufficient to purchase and deliver the
securities if the call is exercised. A call option written by the Portfolio on
an index may require the Portfolio to own portfolio securities that correlate
with the index or to segregate assets (as described above) equal to the excess
of the index value over the exercise price on a current basis. A put option
written by the Portfolio may require the Portfolio to segregate assets (as
described above) equal to the exercise price. The Portfolio could purchase a put
option if the strike price of that option is the same or higher than the strike
price of a put option sold by the Portfolio. If the Portfolio holds a futures or
forward contract, the Portfolio could purchase a put option on the same futures
or forward contract with a strike price as high or higher than the price of the
contract held. The Portfolio may enter into fully or partially offsetting
transactions so that its net position, coupled with any segregated assets (equal
to any remaining obligation), equals its net obligation. Asset coverage may be
achieved by other means when consistent with applicable regulatory policies.

Additional Information on Other Investment Practices
- ----------------------------------------------------

Foreign Investments. Investors should recognize that investing in foreign
companies involves certain risks, including those discussed below, which are not
typically associated with investing in U.S. issuers.

Foreign Currency Exchange. Since the International Portfolios will, and the
U.S. Portfolios may, be investing in securities denominated in currencies other
than the U.S. dollar, and since a Portfolio may temporarily hold funds in bank
deposits or other money market investments denominated in foreign currencies,
each Portfolio may be affected favorably or unfavorably by exchange control
regulations or changes in the exchange rate between such currencies and the
dollar. A change in the value of a foreign currency relative to the U.S. dollar
will result in a corresponding change in the dollar value of a Portfolio's
assets denominated in that foreign currency. Changes in foreign currency
exchange rates may also affect the value of dividends and interest earned, gains
and losses realized on the sale of securities and net investment income and
gains, if any, to be distributed to shareholders by a Portfolio with respect to
its foreign investments. The rate of exchange between the U.S.

11
<PAGE>

dollar and other currencies is determined by the forces of supply and demand in
the foreign exchange markets. Changes in the exchange rate may result over time
from the interaction of many factors directly or indirectly affecting economic
and political conditions in the United States and a particular foreign country,
including economic and political developments in other countries. Of particular
importance are rates of inflation, interest rate levels, the balance of payments
and the extent of government surpluses or deficits in the United States and the
particular foreign country, all of which are in turn sensitive to the monetary,
fiscal and trade policies pursued by the governments of the United States and
foreign countries important to international trade and finance. Governmental
intervention may also play a significant role. National governments rarely
voluntarily allow their currencies to float freely in response to economic
forces. Sovereign governments use a variety of techniques, such as intervention
by a country's central bank or imposition of regulatory controls or taxes, to
affect the exchange rates of their currencies. A Portfolio may use hedging
techniques with the objective of protecting against loss through the fluctuation
of the value of foreign currencies against the U.S. dollar, particularly the
forward market in foreign exchange, currency options and currency futures. See
"Currency Transactions" and "Futures Activities" above.

Information. The majority of the foreign securities held by a Portfolio
will not be registered with, nor the issuers thereof be subject to reporting
requirements of, the SEC. Accordingly, there may be less publicly available
information about the securities and about the foreign company or government
issuing them than is available about a domestic company or government entity.
Foreign companies are generally not subject to uniform financial reporting
standards, practices and requirements comparable to those applicable to U.S.
companies.

Political Instability. With respect to some foreign countries, there is the
possibility of expropriation or confiscatory taxation, limitations on the
removal of funds or other assets of the Portfolio, political or social
instability, or domestic developments which could affect U.S. investments in
those and neighboring countries.

Delays. Securities of some foreign companies are less liquid and their
prices are more volatile than securities of comparable U.S. companies. Certain
foreign countries are known to experience long delays between the trade and
settlement dates of securities purchased or sold. Due to the increased exposure
of a Portfolio to market and foreign exchange fluctuations brought about by such
delays, and due to the corresponding negative impact on a Portfolio's liquidity,
the Portfolios will avoid investing in countries which are known to experience
settlement delays which may expose the Portfolios to unreasonable risk of loss.

Foreign Taxes and Increased Expenses. The operating expenses of the
International Portfolios, to the extent they invest in foreign securities, can
be expected to be higher than that of an investment company investing
exclusively in U.S. securities, since the expenses of the Portfolios associated
with foreign investing, such as custodial costs, valuation costs and
communication costs, as well as, in the case of the International Portfolios,
the rate of the investment advisory fees, though similar to such expenses of
some other funds investing

12
<PAGE>
internationally, are higher than those costs incurred by other investment
companies.

Dollar-Denominated Debt Securities of Foreign Issuers. The returns on
foreign debt securities reflect interest rates and other market conditions
prevailing in those countries. The relative performance of various countries'
fixed income markets historically has reflected wide variations relating to the
unique characteristics of each country's economy. Year-to-year fluctuations in
certain markets have been significant, and negative returns have been
experienced in various markets from time to time.

General. In general, individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payments positions. A Portfolio may invest in securities of foreign
governments (or agencies or instrumentalities thereof), and many, if not all, of
the foregoing considerations apply to such investments as well.

JAPAN AND ITS SECURITIES MARKETS

The Japan Growth Portfolio (as well as the other International Portfolios,
each of which may invest a significant portion of its assets in Japanese
securities), will be subject to general economic and political conditions in
Japan. In addition to the considerations discussed above, these include future
political and economic developments, the possible imposition of, or changes in,
exchange controls or other Japanese governmental laws or restrictions applicable
to such investments, diplomatic developments, political or social unrest and
natural disasters.

The information set forth in this section has been extracted from various
governmental publications and other sources. The Fund makes no representation as
to the accuracy of the information, nor has the Fund attempted to verify it.
Furthermore, no representation is made that any correlation exists between Japan
or its economy in general and the performance of any Portfolio.

Domestic Politics
- -----------------

Japan has a parliamentary form of government. The legislative power is
vested in the Japanese Diet, which consists of a House of Representatives (lower
house) and a House of Councillors (upper house). Various political parties are
represented in the Diet, including the conservative Liberal Democratic Party
("LDP"), which until August 1993, had been in power nationally since its
formation in 1955. The LDP ceased to have a majority of the lower house in June
1993, when certain members of the lower house left the LDP and formed two new
political parties. After an election for the lower house was held on July 18,
1993 and the LDP failed to secure a majority, seven parties formed a coalition
to control the lower house and chose Morihiro Hosokawa, the Representative of
the Japan New Party, to head their coalition. In April 1994, amid accusations of
financial improprieties, Prime Minister Hosokawa announced that he would resign.
Tsutomu Hata succeeded Mr. Hosokawa as prime minister and formed a new cabinet
as a minority coalition government. In June 1994, Mr. Hata yielded to political
pressure from opposition parties and resigned. He was succeeded by

13
<PAGE>
Social Democratic Party ("SDP") leader Tomiichi Murayama, Japan's first
Socialist prime minister since 1948, who was chosen by a new and unstable
alliance between left-wing and conservative parties, including the LDP. On
September 18, 1994, 187 opposition politicians founded a new party, the Reform
Party, led by Ichiro Ozawa, to oppose the government of Prime Minister Murayama
in the next elections. Political realignment continued in 1995, as the Social
Democrats incurred significant losses in the July elections. In August 1995, the
LDP elected Ryutaro Hashimoto, the minister for international trade and
industry, as its new leader, and in January 1996, he became prime minister. Mr.
Hashimoto dissolved the Diet and called a general election in October 1996, in
which the LDP won 239 of the 500 lower-house seats. As a result, LDP members
filled all the new cabinet seats for the first time in three years. The LDP,
along with its former coalition partners (the SDP and Shinto Sakigake) agreed to
continue to work together, but only in loose alliance. Meanwhile, many
dissatisfied Diet members from the main opposition party have left the party to
join the LDP. By September 1997, enough Diet members from the main opposition
party and other parties had defected to the LDP for the LDP to regain its simple
majority in the lower house. Japan's continuing political instability may hamper
its ability to establish and maintain effective economic and fiscal policies,
and recent and future political developments may lead to changes in policy that
might adversely affect a Portfolio's investments.

Economic Background
- -------------------

Generally. Since the end of World War II, Japan has experienced significant
economic development. During the era of high economic growth in the 1960's and
early 1970's, the expansion was based on the development of heavy industries
such as steel and shipbuilding. In the 1970's Japan moved into assembly
industries which employ high levels of technology and consume relatively low
quantities of resources, and since then has become a major producer of
electrical and electronic products and automobiles. Since the mid-1980's, Japan
has become a major creditor nation. With the exception of the periods associated
with the oil crises of the 1970's, Japan has generally experienced very low
levels of inflation. There is no guarantee, however, that these favorable trends
will continue.

The Japanese government has called for a transformation of the economy away
from its high dependency on export-led growth towards greater stimulation of the
domestic economy. In addition, there has been a move toward more economic
liberalization and discounting in the consumer sector. These shifts have already
begun to take place and may cause disruption in the Japanese economy.

Strains in the system have also been one of the major causes of Japan's
economic weakness. The non-performing loans of financial institutions have
hampered their ability to take on risk, thus obstructing the flow of funds into
capital outlays as well as equities. At the end of 1997, Japan's financial
institutions were estimated by the government to have at least ___ trillion yen
(approximately U.S.$___ billion as of January ___, 1998) in outstanding loans,
including uncollectible loans estimated at approximately ___ trillion yen
(approximately U.S.$___ billion as of January ___, 1998). The large commercial
banks are having to bear a heavy burden of the bad-debt problem (e.g., in
accepting write-offs of loans they have

14
<PAGE>
extended to distressed smaller institutions, in recapitalizing failed
institutions and in stepping up contributions to the Deposit Insurance
Corporation, an organization jointly established in 1971 by the government and
private financial institutions to protect depositors). While the banking system
appears to be making some progress in its attempt to deal with non-performing
assets, it is extremely difficult to gauge the true extent of the bad-debt
problem which could lead to a crisis in the banking system.

Japan's economy is a market economy in which industry and commerce are
predominantly privately owned and operated. However, the Japanese government is
involved in establishing and meeting objectives for developing the economy and
improving the standard of living of the Japanese people.

Japan is largely dependent upon foreign economies for raw materials. For
instance, almost all of its oil is imported, the majority from the Middle East.
In the past, oil prices have had a major impact on the domestic economy, but
more recently Japan has worked to reduce its dependence on oil by encouraging
energy conservation and use of alternative fuels. In addition, a restructuring
of industry, with emphasis shifting from basic industries to processing and
assembly-type industries, has contributed to the reduction of oil consumption.
However, there is no guarantee this favorable trend will continue.

Economic Trends. The following tables set forth Japan's gross domestic
product and certain other economic indicators for the years shown.

<TABLE>
<CAPTION>
GROSS DOMESTIC PRODUCT (GDP)
(yen in billions)

1997* 1996 1995 1994 1993 1992 1991 1990
----- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Consumption
Expenditures
Private............ (Y)298,786 (Y)289,045 (Y)277,676.8 (Y)270,919.4 (Y)264,824.1 (Y)255,084.2 (Y)243,628.1
Government......... 49,106 46,824 46,108.0 44,666.4 43,257.9 41,232.0 38,806.6
Capital Formation
(incl.inventories)
Private............ N/A 70,758 93,111.4 99,180.1 108,727.6 116,638.0 110,871.9
Government......... N/A 41,461 42,227.3 40,295.8 35,110.1 30,062.3 28,182.6
Exports of Goods
and Services....... 48,773 45,408 44,449.2 44,243.8 47,409.4 46,809.7 45,919.9
Imports of Goods
and Services....... 46,127 38,227 34,424.0 33,333.1 36,183.8 38,529.3 42,871.8
GDP (Expenditures).. 499,667 480,693 469,148.7 465,972.4 463,145.3 451,296.9 24,537.2
Change in GDP from
Preceding Year
Nominal terms..... 3.9% 0.3% 0.7% 0.6% 2.6% 6.3% 7.2%
Real Terms........ N/A 0.9% 0.5% -0.2% 1.1% 4.3% 4.8%

Source: Economic Planning Agency, Japan
- ------------------

* Average of the first, second and third quarters of 1997.

</TABLE>

15
<PAGE>

WHOLESALE PRICE INDEX
(Base Year: 1990)

All Change from
Year Commodities Preceding Year
---- ----------- --------------
1990 100.0 2.0
1991 99.4 (0.6)
1992 97.8 (1.6)
1993 95.0 (2.9)
1994 93.0 (2.1)
1995 92.2 (0.9)
1996 92.8 0.7
1997
Source: Bank of Japan

CONSUMER PRICE INDEX
(1990-91 Base Year: 1990; 1992-97
Base Year: 1995)

Change from
Year General Preceding Year
---- ------- --------------
1990 100.0 3.1
1991 103.3 3.3
1992 98.2 1.8
1993 99.4 1.2
1994 100.1 0.7
1995 100.0 (0.1)
1996 100.1 0.1
1997

Source: Bureau of Statistics Management
and Coordination Agency

Currency Fluctuation. Investments by a Portfolio in Japanese securities
will be denominated in yen and most income received by these Portfolios from
such investments will be in yen. However, the Portfolios' net asset value will
be reported, and distributions will be made, in U.S. dollars. Therefore, a
decline in the value of the yen relative to the U.S. dollar could have an
adverse effect on the value of a Portfolio's Japanese investments. The following
table presents the average exchange rates of Japanese yen for U.S. dollars for
the years shown:

CURRENCY EXCHANGE RATES

Year Yen Per U.S. Dollar
---- -------------------
1990 145.00
1991 134.59
1992 126.62
1993 111.18
1994 102.22
1995 94.07
1996 108.78
1997

Source: Nikkei (Calendar Year, Closing Average,
Inter-Bank Rates in Tokyo, Spot)

16
<PAGE>

Securities Markets
- ------------------

The Exchange Market. The Japanese exchange market is a highly systemized,
government regulated market currently consisting of eight stock exchanges. The
three main Japanese Exchanges (Tokyo, Osaka and Nagoya) are comprised of First
and Second Sections. The First Sections have more stringent listing standards
with respect to a company's number of years in existence, number of outstanding
shares and trading volume and, accordingly, list larger, more established
companies than the Second Sections. The Tokyo Stock Exchange ("TSE") is the
largest exchange and, as of December 31, 1997, listed _____ companies with
market capitalization in excess of ______ yen (approximately U.S.$___ trillion
as of January 30, 1998) and average monthly trading volume in excess of _____
yen (approximately U.S.$____ billion. The Second Sections of the main Japanese
Exchanges generally list smaller, less capitalized companies than those traded
on the First Sections. As of December 31, 1997, the Second Section of the TSE
listed approximately ___ companies with market capitalization in excess of _____
yen (approximately U.S.$___ billion as of January 30, 1998) and average monthly
trading volume of approximately U.S.$____ billion as of January 30, 1998).

The OTC Market. The Japanese OTC market ("JASDAQ") is less systemized than
the stock exchanges. Trading of equity securities through the JASDAQ market is
conducted by securities firms in Japan, primarily through an organization which
acts as a "matching agent," as opposed to a recognized stock exchange.
Consequently, securities traded through JASDAQ may, from time to time, and
especially in falling markets, become illiquid and experience short-term price
volatility and wide spreads between bid and offer prices. This combination of
limited liquidity and price volatility may have an adverse effect on the
investment performance of a Portfolio. In periods of rapid price increases, the
limited liquidity of JASDAQ restricts a Portfolio's ability to adjust its
portfolio quickly in order to take full advantage of a significant market
increase, and conversely, during periods of rapid price declines, it restricts
the ability of a Portfolio to dispose of securities quickly in order to realize
gains previously made or to limit losses on securities held in its portfolio. In
addition, although JASDAQ has generally experienced sustained growth in
aggregate market capitalization and trading volume, there have been periods in
which aggregate market capitalization and trading volume have declined. The
Frontier Market is expected to present greater liquidity and volatility
considerations than JASDAQ.

At December 31, 1997, 831 issues were traded through JASDAQ, having an
aggregate market capitalization in excess of 9 trillion yen (approximately U.S.$
_______ billion as of such date). The entry requirements for JASDAQ generally
require a minimum of two million shares outstanding at the time of registration,
a minimum of 200 shareholders (if less than 20 million shares outstanding on the
day of registration) or 400 shareholders (if 20 million or more shares
outstanding on the day of registration), minimum pre-tax profits of 10 yen per
share (approximately U.S.$ _______ per share as of January 30, 1998) for the
prior fiscal year, and net assets of 200 million yen (approximately $____
million as of January 30, 1998) at the end of the prior fiscal year. JASDAQ has
generally attracted small growth companies or companies whose major shareholders
wish to sell only a small portion of the company's equity.

The Frontier Market is a second over-the-counter market and is under the
jurisdiction of JASDAQ, which is overseen by the Japanese Securities and
Exchange Commission. The Frontier Market has less stringent entry requirements
than those described above for JASDAQ and is designed to enable early stage
companies access to capital markets.

17
<PAGE>
Frontier Market companies need not have a history of earnings, provided their
spending on research and development equals at least 3% of net sales. In
addition, companies traded through the Frontier Market are not required to have
two million shares outstanding at the time of registration. As a result,
investments in companies traded through the Frontier Market may involve a
greater degree of risk than investments in companies traded through JASDAQ. The
Frontier Market was created in July 1995, and as of the date of this Statement
of Additional Information, a limited number of issues were traded through this
market.

Market Risks. Although the market for Japanese equities traded on the First
Section of the TSE is substantial in terms of trading volume and liquidity, the
TSE has nonetheless exhibited significant market volatility in the past several
years. With respect to the OTC market, trades of certain stocks may not be
effected on days when the matching of buy and sell orders for such stocks does
not occur. The liquidity of the Japanese OTC market, as well as that of the
Second Sections of the exchanges, although increasing in recent years, is
limited by the small number of publicly held shares which trade on a regular
basis. Overall, Japanese securities markets have declined significantly since
1989 which has contributed to a weakness in the Japanese economy and the impact
of a further decline cannot be ascertained.

Other Factors
- -------------

The islands of Japan lie in the western Pacific Ocean, off the eastern
coast of the continent of Asia. Japan has in the past experienced earthquakes
and tidal waves of varying degrees of severity, and the risks of such phenomena,
and the damage resulting therefrom, continue to exist. The long-term economic
effects of such geological factors on the Japanese economy as a whole, and on a
Portfolio's investments, cannot be predicted. In addition, Japan has one of the
world's highest population densities. A significant percentage of the total
population of Japan is concentrated in the metropolitan areas of Tokyo,
Yokohama, Osaka and Nagoya.

U.S. Government Securities. Each Portfolio may invest in debt obligations
of varying maturities issued or guaranteed by the United States government, its
agencies or instrumentalities ("U.S. Government Securities"). Direct obligations
of the U.S. Treasury include a variety of securities that differ in their
interest rates, maturities and dates of issuance. U.S. Government Securities
also include securities issued or guaranteed by the Federal Housing
Administration, Farmers Home Loan Administration, Export-Import Bank of the
United States, Small Business Administration, Government National Mortgage
Association, General Services Administration, Central Bank for Cooperatives,
Federal Farm Credit Banks, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation, Federal Intermediate Credit Banks, Federal Land Banks, Federal
National Mortgage Association, Maritime Administration, Tennessee Valley
Authority, District of Columbia Armory Board and Student Loan Marketing
Association. Each Portfolio may also invest in instruments that are supported by
the right of the issuer to borrow from the U.S. Treasury and instruments that
are supported by the credit of the instrumentality. Because the U.S. government
is not obligated by law to provide support to an instrumentality it sponsors, a
Portfolio will invest in obligations issued by such an instrumentality only if
Warburg determines that the credit risk

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with respect to the instrumentality does not make its securities unsuitable for
investment by the Portfolio.

Below Investment Grade Securities. While the market values of below
investment grade securities tend to react less to fluctuations in interest rate
levels than do those of investment grade securities, the market values of
certain of these securities also tend to be more sensitive to individual
corporate developments and changes in economic conditions than investment grade
securities. In addition, below investment grade securities generally present a
higher degree of credit risk. Issuers of below investment grade securities are
often highly leveraged and may not have more traditional methods of financing
available to them so that their ability to service their obligations during an
economic downturn or during sustained periods of rising interest rates may be
impaired. The risk of loss due to default by such issuers is significantly
greater because below investment grade securities generally are unsecured and
frequently are subordinated to the prior payment of senior indebtedness.

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

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

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

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Securities of Other Investment Companies. Each Portfolio may invest in
securities of other investment companies to the extent permitted under the
Investment Company Act of 1940, as amended (the "1940 Act"). Presently, under
the 1940 Act, a Portfolio may hold securities of another investment company in
amounts which (i) do not exceed 3% of the total outstanding voting stock of such
company, (ii) do not exceed 5% of the value of the Portfolio's total assets and
(iii) when added to all other investment company securities held by the
Portfolio, do not exceed 10% of the value of the Portfolio's total assets.

Lending of Portfolio Securities. A Portfolio may lend portfolio securities
to brokers, dealers and other financial organizations that meet capital and
other credit requirements or other criteria established by the Fund's Board of
Directors (the "Board"). These loans, if and when made, may not exceed 33-1/3%
of a Portfolio's net assets taken at value (20% in the case of the Post-Venture
Capital, Small Company Value and Japan Growth Portfolios). A Portfolio will not
lend portfolio securities to affiliates of Warburg unless it has applied for and
received specific authority to do so from the SEC. Loans of portfolio securities
will be collateralized by cash, letters of credit or U.S. Government Securities,
which are maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. Any gain or loss in the market
price of the securities loaned that might occur during the term of the loan
would be for the account of the Portfolio involved. From time to time, a
Portfolio may return a part of the interest earned from the investment of
collateral received for securities loaned to the borrower and/or a third party
that is unaffiliated with the Portfolio and that is acting as a "finder."

By lending its securities, the Portfolio can increase its income by
continuing to receive interest and any dividends on the loaned securities as
well as by either investing the collateral received for securities loaned in
short-term instruments or obtaining yield in the form of interest paid by the
borrower when U.S. Government Securities are used as collateral. Income received
could be used to pay a Portfolio's expenses and would increase its total return.
Each Portfolio will adhere to the following conditions whenever its portfolio
securities are loaned: (i) the Portfolio must receive at least 100% cash
collateral or equivalent securities of the type discussed in the preceding
paragraph from the borrower; (ii) the borrower must increase such collateral
whenever the market value of the securities rises above the level of such
collateral; (iii) the Portfolio must be able to terminate the loan at any time;
(iv) the Portfolio must receive reasonable interest on the loan, as well as any
dividends, interest or other distributions on the loaned securities and any
increase in market value; (v) the Portfolio may pay only reasonable custodian
fees in connection with the loan; and (vi) voting rights on the loaned
securities may pass to the borrower, provided, however, that if a material event
adversely affecting the investment occurs, the Board must terminate the loan and
regain the right to vote the securities. Loan agreements involve certain risks
in the event of default or insolvency of the other party including possible
delays or restrictions upon the Portfolio's ability to recover the loaned
securities or dispose of the collateral for the loan.

When-Issued Securities and Delayed-Delivery Transactions. When a Portfolio
agrees to purchase when-issued or delayed-delivery securities, its custodian
will set aside cash or liquid securities equal to the amount of the commitment
in a segregated account. Normally,

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<PAGE>
the custodian will set aside portfolio securities to satisfy a purchase
commitment, and in such a case a Portfolio may be required subsequently to place
additional assets in the segregated account in order to ensure that the value of
the account remains equal to the amount of the Portfolio's commitment. It may be
expected that a Portfolio's net assets will fluctuate to a greater degree when
it sets aside portfolio securities to cover such purchase commitments than when
it sets aside cash. When a Portfolio engages in when-issued or delayed-delivery
transactions, it relies on the other party to consummate the trade. Failure of
the seller to do so may result in the Portfolio's incurring a loss or missing an
opportunity to obtain a price considered to be advantageous.

Short Sales. The Post-Venture Capital Portfolio may engage in "short sales"
that do not meet the definition of short sales "against the box." In a short
sale, the investor sells a borrowed security and has a corresponding obligation
to the lender to return the identical security. The seller does not immediately
deliver the securities sold and is said to have a short position in those
securities until delivery occurs. If the Portfolio engages in a short sale, the
collateral for the short position will be maintained by the Portfolio's
custodian or qualified sub-custodian. While the short sale is open, the
Portfolio will maintain in a segregated account an amount of securities equal in
kind and amount to the securities sold short or securities convertible into or
exchangeable for such equivalent securities.

Short Sales Against the Box. Each Portfolio may enter into short sales
"against the box." While a short sale is made by selling a security a Portfolio
does not own, a short sale is "against the box" to the extent that the Portfolio
contemporaneously owns or has the right to obtain, at no added cost, securities
identical to those sold short. No Portfolio, other than the Small Company Value
Portfolio, intends to engage in short sales against the box for investment
purposes. A Portfolio may, however, make a short sale as a hedge, when it
believes that the price of a security may decline, causing a decline in the
value of a security owned by the Portfolio (or a security convertible or
exchangeable for such security). In such case, any future losses in the
Portfolio's long position should be offset by a gain in the short position and,
conversely, any gain in the long position should be reduced by a loss in the
short position. The extent to which such gains or losses are reduced will depend
upon the amount of the security sold short relative to the amount the Portfolio
owns. There will be certain additional transaction costs associated with short
sales against the box, but the Portfolio will endeavor to offset these costs
with the income from the investment of the cash proceeds of short sales.

If a Portfolio effects a short sale of securities at a time when it has an
unrealized gain on the securities, it may be required to recognize that gain as
if it had actually sold the securities (as a "constructive sale") on the date it
effects the short sale. However, such constructive sale treatment may not apply
if the Portfolio closes out the short sale with securities other than the
appreciated securities held at the time of the short sale and if certain other
conditions are satisfied. Uncertainty regarding the tax consequences of
effecting short sales may limit the extent to which a Portfolio may effect short
sales.

Depositary Receipts. The assets of a Portfolio may be invested in the
securities

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<PAGE>
of foreign issuers in the form of American Depositary Receipts ("ADRs"),
European Depositary Receipts ("EDRs") and International Depositary Receipts
("IDRs"). These securities may not necessarily be denominated in the same
currency as the securities into which they may be converted. ADRs are receipts
typically issued by a U.S. bank or trust company which evidence ownership of
underlying securities issued by a foreign corporation. EDRs, which are sometimes
referred to as Continental Depositary Receipts, are receipts issued in Europe,
and IDRs, which are sometimes referred to as Global Depositary Receipts, are
receipts issued outside the United States. EDRs and IDRs are typically issued by
non-U.S. banks and trust companies and evidence ownership of either foreign or
domestic securities. Generally, ADRs in registered form are designed for use in
U.S. securities markets and EDRs and IDRs in bearer form are designed for use in
European and non-U.S. securities markets, respectively.

Convertible Securities. Convertible securities in which a Portfolio may
invest, including both convertible debt and convertible preferred stock, may be
converted at either a stated price or stated rate into underlying shares of
common stock. Because of this feature, convertible securities enable an investor
to benefit from increases in the market price of the underlying common stock.
Convertible securities provide higher yields than the underlying equity
securities, but generally offer lower yields than non-convertible securities of
similar quality. Like bonds, the value of convertible securities fluctuates in
relation to changes in interest rates and, in addition, also fluctuates in
relation to the underlying common stock.

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

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

Non-Publicly Traded and Illiquid Securities. Each Portfolio (other than the
Post-Venture Capital, Value and Emerging Markets Portfolios) may not invest more
than 10% of its net assets in illiquid securities, including securities that are
illiquid by virtue of the absence of a readily available market, repurchase
agreements which have a maturity of longer than seven days, certain Rule 144A
Securities (as defined below), time deposits maturing in more than seven days
and, with respect to the Post-Venture Capital Portfolio, Private Funds (as
defined in the Prospectus). The Post-Venture Capital, Value and Emerging Markets
Portfolios may invest up to 15% of its net assets in such securities. Securities
that have legal or contractual restrictions on resale but have a readily
available market are not considered illiquid for purposes of this limitation.
Repurchase agreements subject to demand are deemed

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<PAGE>
to have a maturity equal to the notice period.

Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Limitations on resale may have an adverse effect on the
marketability of portfolio securities and a mutual fund might be unable to
dispose of restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemptions within
seven days without borrowing. A mutual fund might also have to register such
restricted securities in order to dispose of them resulting in additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.

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

Rule 144A Securities. Rule 144A under the Securities Act adopted by the SEC
allows for a broader institutional trading market for securities otherwise
subject to restriction on resale to the general public. Rule 144A establishes a
"safe harbor" from the registration requirements of the Securities Act for
resales of certain securities to qualified institutional buyers. Warburg
anticipates that the market for certain restricted securities such as
institutional commercial paper will expand further as a result of this
regulation and use of automated systems for the trading, clearance and
settlement of unregistered securities of domestic and foreign issuers, such as
the PORTAL System sponsored by the National Association of Securities Dealers,
Inc.

An investment in Rule 144A Securities will be considered illiquid and
therefore subject to a Portfolio's limit on the purchase of illiquid securities
unless the Board or its delegates determines that the Rule 144A Securities are
liquid. Warburg will monitor the liquidity of restricted securities in a
Portfolio under the supervision of the Board. In reaching liquidity decisions,
Warburg may consider, inter alia, the following factors: (i) the unregistered
nature of the security; (ii) the frequency of trades and quotes for the
security; (iii) the number of dealers wishing to purchase or sell the security
and the number of other potential purchasers; (iv) dealer undertakings to make a
market in the security and (v) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of the transfer).

Private Funds (Post-Venture Capital Portfolio). Although investments in

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<PAGE>
Private Funds offer the opportunity for significant capital gains, these
investments involve a high degree of business and financial risk that can result
in substantial losses in the portion of the Post-Venture Capital Portfolio's
assets invested in these investments. Among these are the risks associated with
investment in companies in an early stage of development or with little or no
operating history, companies operating at a loss or with substantial variation
in operation results from period to period, companies with the need for
substantial additional capital to support expansion or to maintain a competitive
position, or companies with significant financial leverage. Such companies may
also face intense competition from others including those with greater financial
resources or more extensive development, manufacturing, distribution or other
attributes, over which the Portfolio will have no control.

Interests in the Private Funds in which the Post-Venture Capital Portfolio
may invest will be subject to substantial restrictions on transfer and, in some
instances, may be non-transferable for a period of years. Private Funds may
participate in only a limited number of investments and, as a consequence, the
return of a particular Private Fund may be substantially adversely affected by
the unfavorable performance of even a single investment. Certain of the Private
Funds in which the Portfolio may invest may pay their investment managers a fee
based on the performance of the Portfolio, which may create an incentive for the
manager to make investments that are riskier or more speculative than would be
the case if the manager was paid a fixed fee. Private Funds are not registered
under the 1940 Act and, consequently, are not subject to the restrictions on
affiliated transactions and other protections applicable to regulated investment
companies. The valuation of companies held by Private Funds, the securities of
which are generally unlisted and illiquid, may be very difficult and will often
depend on the subjective valuation of the managers of the Private Funds, which
may prove to be inaccurate. Inaccurate valuations of a Private Fund's portfolio
holdings may affect the Portfolio's net asset value calculations. Private Funds
in which the Portfolio invests will not borrow to increase the amount of assets
available for investment or otherwise engage in leverage.

Borrowing. Each Portfolio may borrow up to 30% of its total assets for
temporary or emergency purposes, including to meet portfolio redemption requests
so as to permit the orderly disposition of portfolio securities or to facilitate
settlement transactions on portfolio securities. Investments (including
roll-overs) will not be made when borrowings exceed 5% of the Portfolio's net
assets. Although the principal of such borrowings will be fixed, the Portfolio's
assets may change in value during the time the borrowing is outstanding. Each
Portfolio expects that some of its borrowings may be made on a secured basis. In
such situations, either the custodian will segregate the pledged assets for the
benefit of the lender or arrangements will be made with a suitable subcustodian,
which may include the lender.

Reverse Repurchase Agreements and Dollar Rolls. Each of the Portfolios may
enter into reverse repurchase agreements with the same parties with whom it may
enter into repurchase agreements. Reverse repurchase agreements involve the sale
of securities held by the Portfolio pursuant to its agreement to repurchase them
at a mutually agreed upon date, price and rate of interest. At the time the
Portfolio enters into a reverse repurchase agreement, it will establish and
maintain a segregated account with an approved custodian

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<PAGE>
containing cash or liquid securities having a value not less than the repurchase
price (including accrued interest). The assets contained in the segregated
account will be marked-to-market daily and additional assets will be placed in
such account on any day in which the assets fall below the repurchase price
(plus accrued interest). The Portfolio's liquidity and ability to manage its
assets might be affected when it sets aside cash or portfolio securities to
cover such commitments. Reverse repurchase agreements involve the risk that the
market value of the securities retained in lieu of sale may decline below the
price of the securities the Portfolio has sold but is obligated to repurchase.
In the event the buyer of securities under a reverse repurchase agreement files
for bankruptcy or becomes insolvent, such buyer or its trustee or receiver may
receive an extension of time to determine whether to enforce the Portfolio's
obligation to repurchase the securities, and the Portfolio's use of the proceeds
of the reverse repurchase agreement may effectively be restricted pending such
decision.

The Portfolios also may enter into "dollar rolls," in which the Portfolio
sells fixed-income securities for delivery in the current month and
simultaneously contracts to repurchase similar but not identical (same type,
coupon and maturity) securities on a specified future date. During the roll
period, the Portfolio would forego principal and interest paid on such
securities. The Portfolio would be compensated by the difference between the
current sales price and the forward price for the future purchase, as well as by
the interest earned on the cash proceeds of the initial sale. At the time the
Portfolio enters into a dollar roll transaction, it will place in a segregated
account maintained with an approved custodian cash or liquid securities having a
value not less than the repurchase price (including accrued interest) and will
subsequently monitor the account to ensure that its value is maintained. Reverse
repurchase agreements and dollar rolls that are accounted for as financings are
considered to be borrowings under the 1940 Act.

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

The foreign debt securities in which the Emerging Markets Portfolio may
invest generally consist of obligations issued or backed by national, state or
provincial governments or similar political subdivisions or central banks in
foreign countries. Foreign debt securities also include debt obligations of
supranational entities, which include international organizations designated or
backed by governmental entities to promote economic reconstruction or
development, international banking institutions and related government agencies.
Examples include the International Bank for Reconstruction and Development (the
"World Bank"), the European Coal and Steel Community, the Asian Development Bank
and the InterAmerican Development Bank.

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

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

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

Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average life assumption. The average life of pass-through pools
varies with the maturities of the underlying mortgage loans. A pool's term may
be shortened by unscheduled or early payments of principal on the underlying
mortgages. The occurrence of mortgage prepayments is affected by various
factors, including the level of interest rates, general economic conditions, the
location, scheduled maturity and age of the mortgage and other social and

26
<PAGE>
demographic conditions. Because prepayment rates of individual pools vary
widely, it is not possible to predict accurately the average life of a
particular pool. For pools of fixed-rate 30-year mortgages, a common industry
practice in the U.S. has been to assume that prepayments will result in a
12-year average life. At present, pools, particularly those with loans with
other maturities or different characteristics, are priced on an assumption of
average life determined for each pool. In periods of falling interest rates, the
rate of prepayment tends to increase, thereby shortening the actual average life
of a pool of mortgage-related securities. Conversely, in periods of rising rates
the rate of prepayment tends to decrease, thereby lengthening the actual average
life of the pool. However, these effects may not be present, or may differ in
degree, if the mortgage loans in the pools have adjustable interest rates or
other special payment terms, such as a prepayment charge. Actual prepayment
experience may cause the yield of mortgage-backed securities to differ from the
assumed average life yield. Reinvestment of prepayments may occur at higher or
lower interest rates than the original investment, thus affecting the
Portfolio's yield.

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

Non-Diversified Status (Small Company Growth, Emerging Markets, Global
Fixed Income and Japan Growth Portfolios). These Portfolios are classified as
non-diversified within the meaning of the 1940 Act, which means that each
Portfolio is not limited by such Act in the proportion of its assets that it may
invest in securities of a single issuer. Each Portfolio's investments will be
limited, however, in order to qualify as a "regulated investment company" for
purposes of the Internal Revenue Code of 1986, as amended (the "Code"). See
"Additional Information Concerning Taxes." To qualify, the Portfolio will comply
with certain requirements, including limiting its investments so that at the
close of each quarter of the taxable year (i) not more than 25% of the market
value of its total assets will be invested in the securities of a single issuer,
and (ii) with respect to 50% of the market value of its total assets, not more
than 5% of the market value of its total assets will be invested in the
securities of a single issuer and the Portfolio will not own more than 10% of
the outstanding voting securities of a single issuer.

Zero Coupon Securities. (Emerging Markets, Global Fixed Income and Japan
Growth Portfolios) These Portfolios may invest in "zero coupon" U.S. Treasury,
foreign government and U.S. and foreign corporate convertible and nonconvertible
debt securities, which are bills, notes and bonds that have been stripped of
their unmatured interest coupons and custodial receipts or certificates of
participation representing interests in such stripped debt obligations and
coupons. A zero coupon security pays no interest to its holder prior to

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<PAGE>

maturity. Accordingly, such securities usually trade at a deep discount from
their face or par value and will be subject to greater fluctuations of market
value in response to changing interest rates than debt obligations of comparable
maturities that make current distributions of interest. The Portfolio
anticipates that it will not normally hold zero coupon securities to maturity.
Federal tax law requires that a holder of a zero coupon security accrue a
portion of the discount at which the security was purchased as income each year,
even though the holder receives no interest payment on the security during the
year. Such accrued discount will be includible in determining the amount of
dividends the Portfolio must pay each year and, in order to generate cash
necessary to pay such dividends, the Portfolio may liquidate portfolio
securities at a time when it would not otherwise have done so.

Small Capitalization and Emerging Growth Companies; Unseasoned Issuers.
Investments in small- and medium- sized and emerging growth companies, as well
as companies with continuous operations of less than three years ("unseasoned
issuers") involve considerations that are not applicable to investing in
securities of established, larger-capitalization issuers, including reduced and
less reliable information about issuers and markets, less stringent financial
disclosure requirements, illiquidity of securities and markets, higher brokerage
commissions and fees and greater market risk in general. In addition, securities
of small- and medium-sized and emerging growth companies and unseasoned issuers
may involve greater risks since these securities may have limited marketability
and, thus, may be more volatile.

Special Situation Companies. The Post-Venture Capital and Emerging Markets
Portfolios may invest in the securities of "special situation companies"
involved in an actual or prospective acquisition or consolidation;
reorganization; recapitalization; merger, liquidation or distribution of cash,
securities or other assets; a tender or exchange offer; a breakup or workout of
a holding company; or litigation which, if resolved favorably, would improve the
value of the company's stock. If the actual or prospective situation does not
materialize as anticipated, the market price of the securities of a "special
situation company" may decline significantly. The Portfolio believes, however,
that if Warburg analyzes "special situation companies" carefully and invests in
the securities of these companies at the appropriate time, the Portfolio may
achieve capital growth. There can be no assurance, however, that a special
situation that exists at the time the Portfolio makes its investment will be
consummated under the terms and within the time period contemplated.

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

Asset-backed securities present certain risks that are not presented by
other

28
<PAGE>

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

Ratings as Investment Criteria (Global Fixed Income Portfolio). Up to 5% of
the Portfolio's net assets may be invested in securities rated below investment
grade at the time of the investment, but not lower than "B" by Standard & Poor's
Ratings Services or Moody's Investors Service, Inc. Subsequent to its purchase
by a Portfolio, an issue of securities may cease to be rated or its rating may
be reduced below the minimum required for purchase by the Portfolio. Neither
event will require sale of such securities by a Portfolio, but Warburg will
consider such event in its determination of whether the Portfolio should
continue to hold the securities.

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

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

29
<PAGE>
determined by Warburg to be creditworthy.

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

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

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

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

The amount payable to the Portfolio upon its exercise of a stand-by
commitment is normally (i) the Portfolio's acquisition cost of the securities
(excluding any accrued interest which the Portfolio paid on their acquisition),
less any amortized market premium or plus any amortized market or original issue
discount during the period the Portfolio owned the securities, plus (ii) all
interest accrued on the securities since the last interest payment date during
that period.

The Portfolio expects that stand-by commitments will generally be available
without the payment of any direct or indirect consideration. However, if
necessary or advisable, the Portfolio may pay for a stand-by commitment either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to the commitment

30
<PAGE>
(thus reducing the yield to maturity otherwise available for the same
securities). The total amount paid in either manner for outstanding stand-by
commitments held in the Portfolio's portfolio will not exceed 1/2 of 1% of the
value of the Portfolio's total assets calculated immediately after each stand-by
commitment is acquired.

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

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

General. Certain investment limitations may not be changed without the
affirmative vote of the holders of a majority of the Portfolio's outstanding
shares ("Fundamental Restrictions"). Such majority is defined as the lesser of
(i) 67% or more of the shares present at the meeting, if the holders of more
than 50% of the outstanding shares of the Portfolio are present or represented
by proxy, or (ii) more than 50% of the outstanding shares. If a percentage
restriction (other than the percentage limitations set forth in each No. 1 below
and the percentage limitation set forth in No. 12 below with respect to the
Value and Emerging Markets Portfolios) is adhered to at the time of an
investment, a later increase or decrease in the percentage of assets resulting
from a change in the values of portfolio securities or in the amount of the
Portfolio's assets will not constitute a violation of such restriction.

Global Fixed Income and International Equity Portfolios. The following
investment limitations numbered 1 through 12 are Fundamental Restrictions.
Investment limitations 13 through 14 may be changed by a vote of the Board at
any time.

Each of the Global Fixed Income and International Equity Portfolios may
not:

1. Borrow money or issue senior securities except that the Portfolio may
(a) borrow from banks for temporary or emergency purposes, and not for
leveraging, and then in amounts not in excess of 30% of the value of the
Portfolio's total assets at the time of such borrowing and (b) enter into
futures contracts; or mortgage, pledge or hypothecate any assets except in
connection with any bank borrowing and in amounts not in excess of the lesser of
the dollar amounts borrowed. Whenever borrowings described in (a) exceed 5% of
the value of the Portfolio's total assets, the Portfolio will not make any
investments (including roll-overs). For purposes of this restriction, (a) the
deposit of assets in escrow in connection with certain of the Portfolio's
investment strategies and (b) collateral arrangements with respect to initial or
variation margin for futures contracts will not be deemed to be pledges of the
Portfolio's assets.

31
<PAGE>

2. Purchase any securities which would cause 25% or more of the value of
the Portfolio's total assets at the time of purchase to be invested in the
securities of issuers conducting their principal business activities in the same
industry; provided that there shall be no limit on the purchase of U.S.
Government Securities.

3. Make loans, except that the Portfolio may purchase or hold publicly
distributed fixed income securities, lend portfolio securities and enter into
repurchase agreements.

4. Underwrite any issue of securities except to the extent that the
investment in restricted securities and the purchase of fixed income securities
directly from the issuer thereof in accordance with the Portfolio's investment
objective, policies and limitations may be deemed to be underwriting.

5. Purchase or sell real estate, real estate investment trust securities,
commodities or commodity contracts, or invest in real estate limited
partnerships, oil, gas or mineral exploration or development programs or oil,
gas and mineral leases, except that the Portfolio may invest in (a) securities
secured by real estate, mortgages or interests therein, (b) securities of
companies that invest in or sponsor oil, gas or mineral exploration or
development programs and (c) futures contracts and related options and commodity
options. The entry into forward foreign currency exchange contracts is not and
shall not be deemed to involve investing in commodities.

6. Make short sales of securities or maintain a short position, except that
a Portfolio may maintain short positions in forward currency contracts, options
and futures contracts and make short sales "against the box."

7. Purchase, write or sell puts, calls, straddles, spreads or combinations
thereof, except that the Portfolio may (a) purchase put and call options on
securities and foreign currencies, (b) write covered call options on securities
and (c) purchase or write options on futures contracts.

8. Purchase securities of other investment companies except in connection
with a merger, consolidation, acquisition, reorganization or offer of exchange,
or as otherwise permitted under the 1940 Act.

9. Purchase securities on margin, except that the Portfolio may obtain any
short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of initial
or variation margin in connection with futures contracts or related options will
not be deemed to be a purchase of securities on margin.

10. With respect to the International Equity Portfolio only, purchase the
securities of any issuer if as a result more than 5% of the value of the
Portfolio's total assets would be invested in the securities of such issuer,
except that this 5% limitation does not apply to U.S. Government Securities and
except that up to 25% of the value of the Portfolio's total

32
<PAGE>

assets may be invested without regard to this 5% limitation.

11. Purchase any security if as a result the Portfolio would then have more
than 5% of its total assets invested in securities of companies (including
predecessors) that have been in continuous operation for fewer than three years.

12. With respect to the International Equity Portfolio only, purchase more
than 10% of the voting securities of any one issuer; provided that this
limitation shall not apply to investments in U.S. Government Securities.

13. Invest more than 10% of the value of the Portfolio's net assets in
securities which may be illiquid because of legal or contractual restrictions on
resale or securities for which there are no readily available market quotations.
For purposes of this limitation, (a) repurchase agreements with maturities
greater than seven days and (b) time deposits maturing in more than seven
calendar days shall be considered illiquid securities.

14. Invest in oil, gas or mineral leases.

Small Company Growth, Value and Emerging Markets Portfolios. The following
investment limitations numbered 1 through 9 are Fundamental Restrictions.
Investment limitations 10 through 13 may be changed by a vote of the Board at
any time.

Each of the Small Company Growth, Value and Emerging Markets Portfolios may
not:

1. Borrow money except that the Portfolios may (a) borrow from banks for
temporary or emergency purposes and (b) enter into reverse repurchase
agreements; provided that reverse repurchase agreements, dollar roll
transactions that are accounted for as financings and any other transactions
constituting borrowing by the Portfolios may not exceed 30% of the value of the
Portfolios' total assets at the time of such borrowing. For purposes of this
restriction, short sales, the entry into currency transactions, options, futures
contracts, options on futures contracts, forward commitment transactions and
dollar roll transactions that are not accounted for as financings (and the
segregation of assets in connection with any of the foregoing) shall not
constitute borrowing.

2. Purchase any securities which would cause 25% or more of the value of
the Portfolios' total assets at the time of purchase to be invested in the
securities of issuers conducting their principal business activities in the same
industry; provided that there shall be no limit on the purchase of U.S.
Government Securities.

3. Make loans, except that the Portfolios may purchase or hold fixed-income
securities, including loan participations, assignments and structured
securities, lend portfolio securities and enter into repurchase agreements.

4. Underwrite any securities issued by others except to the extent that the
investment in restricted securities and the sale of securities in accordance
with the Portfolios'

33
<PAGE>

investment objective, policies and limitations may be deemed to be underwriting.

5. Purchase or sell real estate or invest in oil, gas or mineral
exploration or development programs, except that the Portfolios may invest in
(a) securities secured by real estate, mortgages or interests therein and (b)
securities of companies that invest in or sponsor oil, gas or mineral
exploration or development programs.

6. Make short sales of securities or maintain a short position, except that
the Portfolios may maintain short positions in forward currency contracts,
options, futures contracts and options on futures contracts and make short sales
"against the box".

7. Purchase securities on margin, except that the Portfolios may obtain any
short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of initial
or variation margin in connection with transactions in currencies, options,
futures contracts or related options will not be deemed to be a purchase of
securities on margin.

8. Invest in commodities, except that the Portfolios may purchase and sell
futures contracts, including those relating to securities, currencies and
indexes, and options on futures contracts, securities, currencies or indexes,
and purchase and sell currencies on a forward commitment or delayed-delivery
basis and, with respect to the Emerging Markets Portfolio, enter into stand-by
commitments.

9. Issue any senior security except as permitted in the Portfolios'
investment limitations.

10. Purchase securities of other investment companies except in connection
with a merger, consolidation, acquisition, reorganization or offer of exchange,
or as otherwise permitted under the 1940 Act.

11. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
deposit of assets in escrow and in connection with the purchase of securities on
a forward commitment or delayed-delivery basis and collateral and initial or
variation margin arrangements with respect to currency transactions, options,
futures contracts, and options on futures contracts and, with respect to the
Small Company Growth Portfolio and Value Portfolio, writing covered put and call
options.

12. Invest more than 15% of each of the Value Portfolio's and the Emerging
Markets Portfolio's net assets and 10% of the Small Company Growth Portfolio's
net assets in securities which may be illiquid because of legal or contractual
restrictions on resale or securities for which there are no readily available
market quotations. For purposes of this limitation, repurchase agreements with
maturities greater than seven days shall be considered illiquid securities.

13. Make additional investments (including roll-overs) if the Portfolios'

34
<PAGE>

borrowings exceed 5% of its net assets.

Post-Venture Capital, Small Company Value and Japan Growth Portfolios. The
following investment limitations numbered 1 through 10 are Fundamental
Restrictions. Investment limitations 11 through 15 may be changed by a vote of
the Board at any time.

Each of the Post-Venture Capital, Small Company Value and Japan Growth
Portfolios may not:

4. Underwrite any securities issued by others except to the extent that the
investment in restricted securities and the sale of securities in accordance
with the Portfolios' investment objective, policies and limitations may be
deemed to be underwriting.

6. With respect to the Small Company Value and Japan Growth Portfolios
only, make short sales of securities or maintain a short position, except that
each Portfolio may maintain short positions in forward currency contracts,
options, futures contracts and options on futures contracts and make short sales
"against the box."

35
<PAGE>
to be a purchase of securities on margin.

9. Issue any senior security except as permitted in the Portfolios'
investment limitations.

10. With respect to the Post-Venture Capital and Small Company Value
Portfolios only, purchase the securities of any issuer if as a result more than
5% of the value of the Portfolio's total assets would be invested in the
securities of such issuer, except that this 5% limitation does not apply to U.S.
Government Securities and except that up to 25% of the value of the Portfolio's
total assets may be invested without regard to this 5% limitation.

11. Purchase securities of other investment companies except in connection
with a merger, consolidation, acquisition, reorganization or offer of exchange,
or as otherwise permitted under the 1940 Act.

12. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
deposit of assets in escrow and in connection with the purchase of securities on
a forward commitment or delayed-delivery basis and collateral and initial or
variation margin arrangements with respect to currency transactions, options,
futures contracts, and options on futures contracts.

13. Invest more than 15% of each Portfolio's net assets in securities which
may be illiquid because of legal or contractual restrictions on resale or
securities for which there are no readily available market quotations. For
purposes of this limitation, repurchase agreements with maturities greater than
seven days shall be considered illiquid securities.

14. Make additional investments (including roll-overs) if each Portfolio's
borrowings exceed 5% of its net assets.

15. Invest in warrants (other than warrants acquired by the Portfolio as
part of a unit or attached to securities at the time of purchase) if, as a
result, the investments (valued at the lower of cost or market) would exceed 10%
of the value of the Portfolio's net assets.

Portfolio Valuation
- -------------------

The Prospectuses discuss the time at which the net asset value of each
Portfolio is determined for purposes of sales and redemptions. The following is
a description of the procedures used by each Portfolio in valuing its assets.

Securities listed on a U.S. securities exchange (including securities
traded

36
<PAGE>
through the Nasdaq National Market System) or foreign securities exchange or
traded in an over-the-counter market will be valued at the most recent sale as
of the time the valuation is made or, in the absence of sales, at the mean
between the bid and asked quotations. If there are no such quotations, the value
of the securities will be taken to be the highest bid quotation on the exchange
or market. Options or futures contracts will be valued similarly. A security
which is listed or traded on more than one exchange is valued at the quotation
on the exchange determined to be the primary market for such security.
Short-term obligations with maturities of 60 days or less are valued at
amortized cost, which constitutes fair value as determined by the Board.
Amortized cost involves valuing a portfolio instrument at its initial cost and
thereafter assuming a constant amortization to maturity of any discount or
premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. The amortized cost method of valuation may also be used
with respect to debt obligations with 60 days or less remaining to maturity. In
determining the market value of portfolio investments, the Portfolio may employ
outside organizations (a "Pricing Service") which may use a matrix formula or
other objective method that takes into consideration market indexes, matrices,
yield curves and other specific adjustments. The procedures of Pricing Services
are reviewed periodically by the officers of the Fund under the general
supervision and responsibility of the Board, which may replace a Pricing Service
at any time. Securities, options and futures contracts for which market
quotations are not available and certain other assets of the Portfolio will be
valued at their fair value as determined in good faith pursuant to consistently
applied procedures established by the Board. In addition, the Board or its
delegates may value a security at fair value if it determines that such
security's value determined by the methodology set forth above does not reflect
its fair value.

Trading in securities in certain foreign countries is completed at various
times prior to the close of business on each business day in New York (i.e., a
day on which The New York Stock Exchange, Inc. (the "NYSE") is open for
trading). In addition, securities trading in a particular country or countries
may not take place on all business days in New York. Furthermore, trading takes
place in various foreign markets on days which are not business days in New York
and days on which a Portfolio's net asset value is not calculated. As a result,
calculation of the Portfolio's net asset value may not take place
contemporaneously with the determination of the prices of certain portfolio
securities used in such calculation. All assets and liabilities initially
expressed in foreign currency values will be converted into U.S. dollar values
at the prevailing rate as quoted by a Pricing Service. If such quotations are
not available, the rate of exchange will be determined in good faith pursuant to
consistently applied procedures established by the Board.

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

Warburg is responsible for establishing, reviewing and, where necessary,
modifying each Portfolio's investment program to achieve its investment
objective. Purchases and sales of newly issued portfolio securities are usually
principal transactions without brokerage commissions effected directly with the
issuer or with an underwriter acting as principal. Other purchases and sales may
be effected on a securities exchange or over-the-counter, depending on where it
appears that the best price or execution will be

37
<PAGE>
obtained. The purchase price paid by a Portfolio to underwriters of newly issued
securities usually includes a concession paid by the issuer to the underwriter,
and purchases of securities from dealers, acting as either principals or agents
in the after market, are normally executed at a price between the bid and asked
price, which includes a dealer's mark-up or mark-down. Transactions on U.S.
stock exchanges and some foreign stock exchanges involve the payment of
negotiated brokerage commissions. On exchanges on which commissions are
negotiated, the cost of transactions may vary among different brokers. On most
foreign exchanges, commissions are generally fixed. Purchases of Private Funds
by the Post-Venture Capital Portfolio through a broker or placement agent may
also involve a commission or other fee. There is generally no stated commission
in the case of securities traded in domestic or foreign over-the-counter
markets, but the price of securities traded in over-the-counter markets includes
an undisclosed commission or mark-up. U.S. Government Securities are generally
purchased from underwriters or dealers, although certain newly issued U.S.
Government Securities may be purchased directly from the U.S. Treasury or from
the issuing agency or instrumentality.

Except for Private Funds investments managed by Abbott Capital Management,
LLC, the Post-Venture Capital Portfolio's sub-investment adviser with respect to
Private Funds ("Abbott"), Warburg will select specific portfolio investments and
effect transactions for each Portfolio and in doing so seeks to obtain the
overall best execution of portfolio transactions. In evaluating prices and
executions, Warburg will consider the factors it deems relevant, which may
include the breadth of the market in the security, the price of the security,
the financial condition and execution capability of a broker or dealer and the
reasonableness of the commission, if any, for the specific transaction and on a
continuing basis. Warburg may, in its discretion, effect transactions in
portfolio securities with dealers who provide brokerage and research services
(as those terms are defined in Section 28(e) of the Securities Exchange Act of
1934) to a Portfolio and/or other accounts over which Warburg exercises
investment discretion. Warburg may place portfolio transactions with a broker or
dealer with whom it has negotiated a commission that is in excess of the
commission another broker or dealer would have charged for effecting the
transaction if Warburg determines in good faith that such amount of commission
was reasonable in relation to the value of such brokerage and research services
provided by such broker or dealer viewed in terms of either that particular
transaction or of the overall responsibilities of Warburg. Research and other
services received may be useful to Warburg in serving both the Portfolios and
its other clients and, conversely, research or other services obtained by the
placement of business of other clients may be useful to Warburg in carrying out
its obligations to the Portfolios. Research may include furnishing advice,
either directly or through publications or writings, as to the value of
securities, the advisability of purchasing or selling specific securities and
the availability of securities or purchasers or sellers of securities;
furnishing seminars, information, analyses and reports concerning issuers,
industries, securities, trading markets and methods, legislative developments,
changes in accounting practices, economic factors and trends and portfolio
strategy; access to research analysts, corporate management personnel, industry
experts, economists and government officials; comparative performance evaluation
and technical measurement services and quotation services; and products and
other services (such as third party publications, reports and analyses, and
computer and electronic access, equipment,

38
<PAGE>

software, information and accessories that deliver, process or otherwise utilize
information, including the research described above) that assist Warburg in
carrying out its responsibilities. For the fiscal year ended October 31, 1997,
$15,457, $14,871, $25,395 and $486,802 was paid by the Small Company Growth,
Value, Emerging Markets and International Equity Portfolios, respectively, to
brokers and dealers who provided such research and other services. Research
received from brokers or dealers is supplemental to Warburg's own research
program. The fee to Warburg under its agreement with the Fund is not reduced by
reason of its receiving any brokerage and research services.

The Fund paid the following commissions to broker-dealers for execution of
portfolio transactions on behalf of the indicated Portfolios for the indicated
fiscal years ended October 31. Since the Global Fixed Income Portfolio had not
commenced operations as of October 31, 1997, it paid no brokerage commissions.

1997 1996 1995

Value $ 22,297 N/A N/A
Small Company Value 0 N/A N/A
Small Company Growth $ 251,682 $69,950 N/A
Post-Venture Capital 0 N/A N/A
International Equity $4,321,534 $1,273,733 $612,312
Emerging Markets $ 289,393 $90,762 N/A
Japan Growth 0 N/A N/A

The table below shows the amount of outstanding repurchase agreements that
each of the following Portfolios had, as of October 31, 1997, with Goldman,
Sachs & Co., one of the regular broker-dealers of the Fund.

----------------------------------------------
Emerging Markets $2,302,000
----------------------------------------------
Small Company Growth $13,631,000
----------------------------------------------
Value $1,706,000
----------------------------------------------
International Equity $80,780,000
----------------------------------------------

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

39
<PAGE>
relevant. Such other investment clients may invest in the same securities as a
Portfolio. When purchases or sales of the same security are made at
substantially the same time on behalf of such other clients, transactions are
averaged as to price and available investments allocated as to amount, in a
manner which Warburg or Abbott, as the case may be, believes to be equitable to
each client, including the Portfolios. In some instances, this investment
procedure may adversely affect the price paid or received by a Portfolio or the
size of the position obtained or sold for a Portfolio. To the extent permitted
by law, securities may be aggregated with those to be sold or purchased for a
Portfolio with those to be sold or purchased for such other investment clients
in order to obtain best execution.

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

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

Each Portfolio may participate, if and when practicable, in bidding for the
purchase of securities for the Portfolio's portfolio directly from an issuer in
order to take advantage of the lower purchase price available to members of such
a group. A Portfolio will engage in this practice, however, only when Warburg,
in its sole discretion, believes such practice to be otherwise in the
Portfolio's interest.

Portfolio Turnover
- ------------------

The Portfolios do not intend to seek profits through short-term trading,
but the rate of turnover will not be a limiting factor when a Portfolio deems it
desirable to sell or purchase securities. A Portfolio's portfolio turnover rate
is calculated by dividing the lesser of purchases or sales of its portfolio
securities for the year by the monthly average value of the portfolio
securities. Securities with remaining maturities of one year or less at the date
of acquisition are excluded from the calculation.

Certain practices that may be employed by a Portfolio could result in high
portfolio turnover. For example, options on securities may be sold in
anticipation of a decline in the price of the underlying security (market
decline) or purchased in anticipation of a rise in the price of the underlying
security (market rise) and later sold. The Small Company Growth Portfolio's
investment in special situation companies could result in high portfolio
turnover. To the extent that its portfolio is traded for the short-term, the
Portfolio will be engaged

40
<PAGE>
essentially in trading activities based on short-term considerations affecting
the value of an issuer's stock instead of long-term investments based on
fundamental valuation of securities. Because of this policy, portfolio
securities may be sold without regard to the length of time for which they have
been held. Consequently, the annual portfolio turnover rate of the Small Company
Growth Portfolio may be higher than mutual funds having a similar objective that
do not invest in special situation companies.

MANAGEMENT OF THE FUND

Officers and Board of Directors
- -------------------------------

The names (and ages) of the Fund's Directors and officers, their addresses,
present positions and principal occupations during the past five years and other
affiliations are set forth below.

Richard N. Cooper* (63) Director
Harvard University Professor at Harvard University; National
1737 Cambridge Street Intelligence Council from June 1995
Cambridge, Massachusetts 02138 until January 1997; Director or Trustee of
CircuitCity Stores, Inc. (retail
electronics and appliances) and Phoenix
Home Mutual Life Insurance Company.

Jack W. Fritz (70) Director
2425 North Fish Creek Road Private investor; Consultant and
P.O. Box 483 Director of Fritz Broadcasting, Inc. and
Wilson, Wyoming 83014 Fritz Communications (developers and
operators of radio stations); Director of
Advo, Inc. (direct mail advertising).

John L. Furth* (67) Chairman of the Board
466 Lexington Avenue Vice Chairman and Director of Warburg;
New York, New York 10017-3147 Associated with Warburg since 1970;
Director of Counsellors Securities.
Chairman of the Board and officer of other
investment companies advised by Warburg.

Jeffrey E. Garten (51) Director
Yale School of Management Dean of Yale School of Management and William
Box 208200 S. Beinecke Professor in the Practice of
New Haven, Connecticut 06520-8200 International Trade and Finance;
Undersecretary of Commerce for
International Trade from November 1993 to
October 1995; Professor at Columbia
University from September 1992 to October
1993.

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

41
<PAGE>

Thomas A. Melfe (66) Director
30 Rockefeller Plaza Partner in the law firm of Donovan
New York, New York 10112 Leisure Newton & Irvine; Chairman of the
Board of Municipal Fund for New York
Investors, Inc.

Arnold M. Reichman* (49) Director
466 Lexington Avenue Managing Director, Chief Operating
New York, New York 10017-3147 Officer and Assistant Secretary of Warburg;
Associated with Warburg since 1984; Officer
of Counsellors Securities; Director of The
RBB Fund, Inc.; Director/Trustee of other
investment companies advised by Warburg.

Alexander B. Trowbridge (68) Director
1317 F Street, N.W., 5th Floor President of Trowbridge Partners,
Washington, DC 20004 Inc. (business consulting) from January
1990-November 1996; Director or Trustee of
New England Mutual Life Insurance Co., ICOS
Corporation (biopharmaceuticals), WMX
Technologies Inc. (solid and hazardous
waste collection and disposal), The Rouse
Company (real estate development), Harris
Corp. (electronics and communications
equipment), The Gillette Co. (personal care
products) and Sun Company Inc. (petroleum
refining and marketing).

Eugene L. Podsiadlo (41) President
466 Lexington Avenue Managing Director of Warburg;
New York, New York 10017-3147 Associated with Warburg since 1991; Officer
of Counsellors Securities and other
investment companies advised by Warburg.

Stephen Distler (44) Vice President
466 Lexington Avenue Managing Director of Warburg; Associated with
New York, New York 10017-3147 Warburg since 1984; Officer of Counsellors
Securities and other investment companies
advised by Warburg.

Eugene P. Grace (46) Vice President and Secretary
466 Lexington Avenue Vice President of Warburg; Associated with
New York, New York 10017-3147 Warburg since April 1994; Attorney-at-law
from September 1989-April 1994; life
insurance agent, New York Life Insurance
Company from 1993-1994; Officer of
Counsellors Securities and other investment
companies advised by Warburg.

42
<PAGE>
Howard Conroy, CPA (43) Vice President and Chief Financial Officer
466 Lexington Avenue Vice President of Warburg; Associated
New York, New York 10017-3147 with Warburg since 1992; New York,
Officer of other investment companies
advised by Warburg.

Daniel S. Madden, CPA (32) Treasurer and Chief Accounting Officer
466 Lexington Avenue Vice President of Warburg; Associated with
New York, New York 10017-3147 Warburg since 1995; Associated with
BlackRock Financial Management, Inc. from
September 1994 to October 1996; Associated
with BEA Associates from April 1993 to
September 1994; Officer of other investment
companies advised by Warburg.

Janna Manes, Esq. (30) Assistant Secretary
466 Lexington Avenue Vice President of Warburg; Associated with
New York, New York 10017-3147 Warburg since 1996; Associated with the law
firm of Willkie Farr & Gallagher from
1993-1996; Officer of other investment
companies advised by Warburg.

No employee of Warburg or PFPC Inc., the Fund's co-administrator ("PFPC"),
or any of their affiliates receives any compensation from the Fund for acting as
an officer or Director of the Fund. Each Director who is not a director,
trustee, officer or employee of Warburg, PFPC or any of their affiliates
receives an annual fee of $500 and $250 for each meeting of the Board attended
by him for his services as Director and is reimbursed for expenses incurred in
connection with his attendance at Board meetings.

Directors' Compensation
- -----------------------
(for the fiscal year ended October 31, 1997)

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

John L. Furth None** None**
Arnold M. Reichman None** None**
Richard N. Cooper $1,500 $44,500
Donald J. Donahue*** $1,500 $44,500
Jack W. Fritz $1,500 $44,500
Jeffrey E. Garten*** N/A N/A
Thomas A. Melfe $1,500 $44,500
Alexander B. Trowbridge $1,500 $44,500

- ------------------------
43
<PAGE>
* Each Director also serves as a Director or Trustee of 24 investment
companies advised by Warburg.

** Mr. Furth and Mr. Reichman receive compensation as affiliates of Warburg,
and, accordingly, receive no compensation from the Fund or any other
investment company managed by Warburg.

*** Mr. Donahue resigned as a Director of the Fund effective February 6, 1998.

**** Mr. Garten became a Director of the Fund effective February 6, 1998 and,
accordingly, received no compensation from the Fund for the fiscal year
ended October 31, 1997.

As of January 30, 1998, the Directors and officers of the Fund as a group
owned less than 1% of the outstanding shares of each Portfolio.

Post-Venture Capital Portfolio. Ms. Elizabeth B. Dater is Co-Portfolio
Manager of the Post-Venture Capital Portfolio and manages other Warburg Pincus
Funds. Prior to joining Warburg in 1978, she was a vice president of Research at
Fiduciary Trust Company of New York and an institutional sales assistant at
Lehman Brothers. Ms. Dater has been a regular panelist on Maryland Public
Television's Wall Street Week with Louis Rukeyser since 1976. Ms. Dater earned a
B.A. degree from Boston University in Massachusetts.

Mr. Stephen J. Lurito is Co-Portfolio Manager of the Post-Venture Capital
Portfolio and manages other Warburg Pincus Funds. Mr. Lurito has been with
Warburg since 1987. Prior to that he was a research analyst at Sanford C.
Bernstein & Company, Inc. Mr. Lurito earned a B.A. degree from the University of
Virginia and a M.B.A. from the University of Pennsylvania.

Mr. Robert S. Janis and Christopher M. Nawn are Associate Portfolio
Managers and Research Analysts of the Post-Venture Portfolio and of other
Warburg Pincus Funds. Prior to joining Warburg in October 1994, Mr. Janis was a
vice president and senior research analyst at U.S. Trust Company of New York. He
earned B.A. and M.B.A. degrees from the University of Pennsylvania. Prior to
joining Warburg in September 1994, Mr. Nawn was a senior sector analyst and
portfolio manager at the Dreyfus Corporation. He earned a B.A. degree from the
Colorado College and an M.B.A. degree from the University of Texas.

Raymond L. Held and Gary H. Solomon, Investment Managers and Managing
Directors of Abbott, manage the Post-Venture Capital Portfolio's investments in
Private Funds. Abbott also acts as sub-investment adviser for other Warburg
Pincus Funds. Prior to co-founding a predecessor of Abbott in 1986, Mr. Held had
been an investment analyst and portfolio manager at Manufacturers Hanover
Investment Corporation since 1970, before which time he had been a security
analyst with Weis, Voisin, Cannon, Inc., L.M. Rosenthal & Co., Shearson, Hammill
& Co. and Standard & Poor's Corporation. Mr. Held earned an M.B.A. from New York
University, an M.A. from Columbia University and a B.A. from Queens College.

Prior to joining a predecessor of Abbott in 1986, Mr. Solomon served as
vice president of the Venture Capital Group at Manufacturers Hanover Investment
Corporation, before which time he was an investment officer at CIGNA Corporation
and credit account manager at E.I. du Pont de Nemours & Company. Mr. Solomon
earned an M.B.A. from Pennsylvania State University and a B.A. from Franklin &
Marshall College.

44
<PAGE>
Small Company Growth Portfolio. Ms. Dater and Mr. Lurito are also
Co-Portfolio Managers of the Small Company Growth Portfolio.

Small Company Value Portfolio. Mr. George U. Wyper is Portfolio Manager of
the Small Company Value Portfolio and manages other Warburg Pincus Funds. From
1987 until 1990 Mr. Wyper was the director of fixed income investments at
Fireman's Fund Insurance Company, and from 1990 until 1993 he was chief
investment officer of Fund American Enterprises, Inc. Mr. Wyper was chief
investment officer of White River Corporation and president of Hanover Advisers,
Inc. from 1993 until he joined Warburg in August 1994 as a managing director of
Warburg. Mr. Wyper earned a B.S. degree in economics from the Wharton School of
Business of the University of Pennsylvania and a Masters of Management from Yale
University.

Mr. Kyle F. Frey, Associate Portfolio Manager and Research Analyst of the
Small Company Value Portfolio, serves in similar positions with other Warburg
Pincus Funds. Mr. Frey, a Vice President of Warburg, is also a Research Analyst
and Assistant Portfolio Manager for small-cap growth equity and distribution
management products. Prior to joining Warburg in 1989, Mr. Frey was with
Goldman, Sachs & Co. in the institutional sales division. Mr. Frey earned a B.S.
degree from the University of New Hampshire and an M.B.A. from New York
University.

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

Emerging Markets, International Equity and Japan Growth Portfolios. Mr.
Richard H. King is Co-Portfolio Manager of the Emerging Markets Portfolio and
Portfolio Manager of the International Equity Portfolio and manages other
Warburg Pincus Funds. From 1968 to 1982, he worked at Carr Sons & Company
(Overseas), a leading international brokerage firm. He resided in the Far East
as an investment analyst from 1970 to 1977, became director, and later relocated
to the U.S. where he became founder and president of W.I. Carr (America), based
in New York. From 1982 to 1984 Mr. King was a director in charge of the Far East
equity investments at N.M. Rothschild International Asset Management, a London
merchant bank. In 1984 Mr. King became chief investment officer and director for
all international investment strategy with Fiduciary Trust Company International
S.A., in London. He managed an EAFE mutual fund (FTIT) 1985-1986 which grew from
$3 million to over $100 million during this two-year period. Mr. King earned a
B.A. degree from Durham University in England.

Mr. P. Nicholas Edwards is Portfolio Manager of the Japan Growth Portfolio
and Associate Portfolio Manager and Research Analyst of the International Equity
Portfolio and serves in similar positions with other Warburg Pincus Funds. Prior
to joining Warburg in August 1995, Mr. Edwards was a director at Jardine Fleming
Investment Advisers, Tokyo.

45
<PAGE>
He was a vice president of Robert Fleming Inc. in New York City from 1988 to
1991. Mr. Edwards earned M.A. degrees from Oxford University and Hiroshima
University in Japan.

Mr. Harold W. Ehrlich is Associate Portfolio Manager and Research Analyst
of the Emerging Markets and International Equity Portfolios and serves in
similar positions with other Warburg Pincus Funds. Prior to joining Warburg, Mr.
Ehrlich was a senior vice president, portfolio manager and analyst at Templeton
Investment Counsel Inc. from 1987 to 1995. He was a research analyst and
assistant portfolio manager at Fundamental Management Corporation from 1985 to
1986 and a research analyst at First Equity Corporation of Florida from 1983 to
1985. Mr. Ehrlich earned a B.S.B.A. degree from University of Florida and earned
his Chartered Financial Analyst designation in 1990.

Mr. Vincent J. McBride is Co-Portfolio Manager of the Emerging Markets
Portfolio and Associate Portfolio Manager and Research Analyst of the
International Equity Portfolio and serves in similar positions with other
Warburg Pincus Funds. Prior to joining Warburg in 1994, Mr. McBride was an
international equity analyst at Smith Barney Inc. from 1993 to 1994 and at
General Electric Investment Corporation from 1992 to 1993. He was also a
portfolio manager/analyst at United Jersey Bank from 1989 to 1992 and a
portfolio manager at First Fidelity Bank from 1987 to 1989. Mr. McBride earned a
B.S. degree from the University of Delaware and an M.B.A. degree from Rutgers
University.

Global Fixed Income Portfolio. Mr. Dale C. Christensen is Co-Portfolio
Manager of the Global Fixed Income Portfolio and manages other Warburg Pincus
Funds. He also directs the Fixed Income Group at Warburg, which he joined in
1989, providing portfolio management for Warburg Pincus Funds and institutional
clients around the world. Mr. Christensen was a vice president in the
International Private Banking division and the domestic pension fund management
division at Citicorp, N.A. from 1985 to 1989. Prior to that, Mr. Christensen was
a fixed income portfolio manager at CIC Asset Management from 1982 to 1984. Mr.
Christensen earned a B.S. in Agriculture from the University of Alberta and a
B.Ed. in Mathematics from the University of Calgary, both located in Canada.

Laxmi C. Bhandari, Co-Portfolio Manager of the Global Fixed Income
Portfolio, earned a Ph.D in Finance and a M.B.A. from the University of Chicago,
his P.G.D.M. degree (M.B.A. equivalent) from the Indian Institute of Management,
Ahmedabad, India and B.Com. degree from Rajasthan University, India. He has also
managed other Warburg Funds since joining Warburg in 1993, specializing in
derivative-based products. Mr. Bhandari was a vice president in charge of
Arbitrage Trading at the Paribas Corporation from 1991 to 1993. Prior to that,
Mr. Bhandari was a vice president of Asset Liability Management at Chemical Bank
from 1987 to 1991 and an assistant professor of Advanced Portfolio Management
and Advanced Corporate Finance at the University of Alberta from 1982 to 1987.

Investment Advisers and Co-Administrators
- -----------------------------------------

Warburg serves as investment adviser to each Portfolio, Abbott serves as
sub-investment adviser to the Post-Venture Capital Portfolio, Counsellors Funds
Service, Inc.

46
<PAGE>
("Counsellors Service") and PFPC serve as co-administrators to the Fund pursuant
to separate written agreements (the "Advisory Agreements," the "Counsellors
Service Co-Administration Agreements" and the "PFPC Co-Administration
Agreements," respectively). The services provided by, and the fees payable by
the Fund to, Warburg under the Advisory Agreements, Counsellors Service under
the Counsellors Service Co-Administration Agreements and PFPC under the PFPC
Co-Administration Agreements are described in the Prospectuses. These fees are
calculated at an annual rate based on a percentage of a Portfolio's average
daily net assets. See the Prospectuses, "Management of the Fund." Prior to March
1, 1994, PFPC served as administrator to the Fund and Counsellors Service served
as administrative services agent to the Fund pursuant to separate written
agreements.

Warburg earned the following investment advisory fees with respect to the
Portfolios shown for the indicated fiscal years ended October 31 and voluntarily
waived the amounts shown.

<TABLE>

1997 Waiver 1996 Waiver 1995 Waiver
- ------------------ ------------- ------------ ------------ ------------- --------------- -------------
<S> <C> <C> <C> <C> <C> <C>

Small Company $1,405,403 $314,893 $268,768 $122,453 N/A N/A
Growth
- ------------------ ------------- ------------ ------------ ------------- ------------- --------------
Value+ $22,250 $22,250 N/A N/A N/A N/A
- ------------------ ------------- ------------ ------------ ------------- ------------- --------------
Emerging Markets $376,368 $103,632 $21,487 $21,487 N/A N/A
- ------------------ ------------- ------------ ------------ ------------- ------------- --------------
International $9,423,008 $1,627,352 $5,644,429 $1,182,795 $3,095,950 $778,770
Equity
- ------------------ ------------- ------------ ------------ ------------- ------------- --------------
</TABLE>

+ Warburg reimbursed expenses in the amount of $24,195 to the Value Portfolio.

Counsellors Service earned the following administration fees with respect
to the Portfolios shown for the indicated fiscal years ended October 31.

1997 1996 1995
------------ ------------- -------------

Small Company Growth $156,156 $29,863 N/A
- -------------------------------------- ------------- -------------
Value $2,967 N/A N/A
- -------------------------------------- ------------- -------------
Emerging Markets $37,637 $2,149 N/A
- -------------------------------------- ------------- -------------
International Equity $1,177,876 $705,554 $386,993
- -------------------------------------- ------------- -------------

PFPC earned the following administration fees with respect to the
Portfolios shown for the indicated fiscal years ended October 31 and voluntarily
waived the amounts shown.
47
<PAGE>

<TABLE>

1997 Waiver 1996 Waiver 1995 Waiver
------------ ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C>

Small Company $156,156 0 $29,863 $9,901 N/A N/A
Growth
- ------------------ ------------ ------------ ----------- ------------ ----------- ------------
Value $2,966 $2,966 N/A N/A N/A N/A
- ------------------ ------------ ------------ ----------- ------------ ----------- ------------
Emerging Markets $45,164 $45,164 $2,578 $2,578 N/A N/A
- ------------------ ------------ ------------ ----------- ------------ ----------- ------------
International $963,938 0 $702,540 $119,850 $436,710 $110,078
Equity
- ------------------ ------------ ------------ ----------- ------------ ----------- ------------
</TABLE>

Since the Post-Venture Capital, Small Company Value and Japan Growth
Portfolios commenced investment operations on October 31, 1997, and the Global
Fixed Income Portfolio had not commenced operations as of October 31, 1997, no
fees were paid to Warburg, PFPC or Counsellors Service by those Portfolios in
that fiscal year.

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

Pursuant to separate custodian agreements (the "Custodian Agreements"), PNC
Bank, National Association ("PNC") and State Street Bank and Trust Company
("State Street") serve as custodians of the each Portfolio's U.S. and non-U.S.
assets, respectively. Under the Custodian Agreements, PNC and State Street each
(i) maintains a separate account or accounts in the name of the Portfolio, (ii)
holds and transfers portfolio securities for the account of the Portfolio, (iii)
makes receipts and disbursements of money on behalf of the Portfolio, (iv)
collects and receives all income and other payments and distributions on account
of the Portfolio's portfolio securities held by it and (v) makes periodic
reports to the Board concerning the Portfolio's custodial arrangements. PNC may
delegate its duties under its Custodian Agreement with the Fund to a wholly
owned direct or indirect subsidiary of PNC or PNC Bank Corp. upon notice to the
Fund and upon the satisfaction of certain other conditions. State Street is
authorized to select one or more foreign banking institutions and foreign
securities depositaries as sub-custodian on behalf of the Portfolios. PNC is an
indirect, wholly owned subsidiary of PNC Bank Corp., and its principal business
address is 1600 Market Street, Philadelphia, Pennsylvania 19103. The principal
business address of State Street is 225 Franklin Street, Boston, Massachusetts
02110.

PNC also provides certain custodial services generally in connection with
purchases and sales of the International Equity and Global Fixed Income
Portfolios' shares.

State Street also serves as the shareholder servicing, transfer and
dividend disbursing agent of the Fund pursuant to a Transfer Agency and Service
Agreement, under which State Street (i) issues and redeems shares of each
Portfolio, (ii) addresses and mails all communications by the Fund to record
owners of Portfolio shares, including reports to shareholders, dividend and
distribution notices and proxy material for its meetings of

48
<PAGE>
shareholders, (iii) maintains shareholder accounts and, if requested,
sub-accounts and (iv) makes periodic reports to the Board concerning the
transfer agent's operations with respect to the Fund. State Street has delegated
to Boston Financial Data Services, Inc., a 50% owned subsidiary ("BFDS"),
responsibility for most shareholder servicing functions. BFDS's principal
business address is 2 Heritage Drive, Boston, Massachusetts 02171.

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

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

All shareholders of a Portfolio, upon liquidation, will participate ratably
in the Portfolio's net assets. Shares do not have cumulative voting rights,
which means that holders of more than 50% of the shares voting for the election
of Directors can elect all Directors. Shares are transferable but have no
preemptive, conversion or subscription rights.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

The offering price of each Portfolio's shares is equal to its per share net
asset value. Additional information on how to purchase and redeem a Portfolio's
shares and how such shares are priced is included in the Prospectuses under "Net
Asset Value."

Under the 1940 Act, a Portfolio may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed, other than customary weekend and holiday closings, or during
which trading on the NYSE is restricted, or during which (as determined by the
SEC) an emergency exists as a result of which disposal or fair valuation of
portfolio securities is not reasonably practicable, or for such other periods as
the SEC may permit. (A Portfolio may also suspend or postpone the recordation of
an exchange of its shares upon the occurrence of any of the foregoing
conditions.)

If the Board determines that conditions exist which make payment of
redemption proceeds wholly in cash unwise or undesirable, a Portfolio may make
payment wholly or partly in securities or other investment instruments which may
not constitute securities as such term is defined in the applicable securities
laws. If a redemption is paid wholly or partly in securities or other property,
a shareholder would incur transaction costs in disposing of the redemption
proceeds. The Fund intends to comply with Rule 18f-1 promulgated under the 1940
Act with respect to redemptions in kind.

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

49
<PAGE>

EXCHANGE PRIVILEGE

Shareholders of a Portfolio may exchange all or part of their shares for
shares of another Portfolio or other portfolios of the Fund organized by Warburg
in the future on the basis of their relative net asset values per share at the
time of exchange.

The exchange privilege enables shareholders to acquire shares in a
Portfolio with a different investment objective when they believe that a shift
between Portfolios is an appropriate investment decision. This privilege is
available to shareholders residing in any state in which the Portfolio's shares
being acquired may legally be sold.

Upon receipt of proper instructions and all necessary supporting documents,
shares submitted for exchange are redeemed at the then-current net asset value
of the Portfolio and the proceeds are invested on the same day, at a price as
described above, in shares of the Portfolio being acquired. The exchange
privilege may be modified or terminated at any time upon 30 days' notice to
shareholders.

ADDITIONAL INFORMATION CONCERNING TAXES

The following is a summary of the material United States federal income tax
considerations regarding the purchase, ownership and disposition of shares in
the Portfolios. Each prospective shareholder is urged to consult his own tax
adviser with respect to the specific federal, state, local and foreign tax
consequences of investing in the Portfolio. The summary is based on the laws in
effect on the date of this Statement of Additional Information, which are
subject to change.

The Portfolios and Their Investments
- ------------------------------------

The Portfolios and Their Investments. Each Portfolio intends to continue to
qualify to be treated as a regulated investment company each taxable year under
the Code. To so qualify, a Portfolio must, among other things: (a) derive at
least 90% of its gross income in each taxable year from dividends, interest,
payments with respect to securities, loans and gains from the sale or other
disposition of stock or securities or foreign currencies, or other income
(including, but not limited to, gains from options, futures or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies; and (b) diversify its holdings so that, at the end of
each quarter of the Portfolio's taxable year, (i) at least 50% of the market
value of the Portfolio's assets is represented by cash, securities of other
regulated investment companies, United States government securities and other
securities, with such other securities limited, in respect of any one issuer, to
an amount not greater than 5% of the Portfolio's assets and not greater than 10%
of the outstanding voting securities of such issuer and (ii) not more than 25%
of the value of its assets is invested in the securities (other than United
States government securities or securities of other regulated investment
companies) of any one issuer or any two or more issuers that the Portfolio
controls and are determined to be engaged in the same or similar trades or
businesses or related trades or businesses. Each Portfolio expects that all of
its foreign currency gains will be directly related to its principal

50
<PAGE>
business of investing in stocks and securities.

As a regulated investment company, a Portfolio will not be subject to
United States federal income tax on its net investment income (i.e., income
other than its net realized long- and short-term capital gains) and its net
realized long- and short-term capital gains, if any, that it distributes to its
shareholders, provided that an amount equal to at least 90% of the sum of its
investment company taxable income (i.e., 90% of its taxable income minus the
excess, if any, of its net realized long-term capital gains over its net
realized short-term capital losses (including any capital loss carryovers), plus
or minus certain other adjustments as specified in the Code) and its net
tax-exempt income for the taxable year is distributed, but will be subject to
tax at regular corporate rates on any taxable income or gains that it does not
distribute. Furthermore, a Portfolio will be subject to a United States
corporate income tax with respect to such distributed amounts in any year that
it fails to qualify as a regulated investment company or fails to meet this
distribution requirement. Any dividend declared by a Portfolio in October,
November or December of any calendar year and payable to shareholders of record
on a specified date in such a month shall be deemed to have been received by
each shareholder on December 31 of such calendar year and to have been paid by
the Portfolio not later than such December 31, provided that such dividend is
actually paid by the Portfolio during January of the following calendar year.

Each Portfolio intends to distribute annually to its shareholders
substantially all of its investment company taxable income. The Board will
determine annually whether to distribute any net realized long-term capital
gains in excess of net realized short-term capital losses (including any capital
loss carryovers). Each Portfolio currently expects to distribute any excess
annually to its shareholders. However, if a Portfolio retains for investment an
amount equal to all or a portion of its net long-term capital gains in excess of
its net short-term capital losses and capital loss carryovers, it will be
subject to a corporate tax (currently at a rate of 35%) on the amount retained.
In that event, the Portfolio will designate such retained amounts as
undistributed capital gains in a notice to its shareholders who (a) will be
required to include in income for United Stares federal income tax purposes, as
long-term capital gains, their proportionate shares of the undistributed amount,
(b) will be entitled to credit their proportionate shares of the 35% tax paid by
the Portfolio on the undistributed amount against their United States federal
income tax liabilities, if any, and to claim refunds to the extent their credits
exceed their liabilities, if any, and (c) will be entitled to increase their tax
basis, for United States federal income tax purposes, in their shares by an
amount equal to 65% of the amount of undistributed capital gains included in the
shareholder's income. Organizations or persons not subject to federal income tax
on such capital gains will be entitled to a refund of their pro rata share of
such taxes paid by the Portfolio upon filing appropriate returns or claims for
refund with the Internal Revenue Service (the "IRS").

The Code imposes a 4% nondeductible excise tax on each Portfolio to the
extent the Portfolio does not distribute by the end of any calendar year at
least 98% of its net investment income for that year and 98% of the net amount
of its capital gains (both long-and short-term) for the one-year period ending,
as a general rule, on October 31 of that year. For this purpose, however, any
income or gain retained by the Portfolio that is subject to corporate

51
<PAGE>
income tax will be considered to have been distributed by year-end. In addition,
the minimum amounts that must be distributed in any year to avoid the excise tax
will be increased or decreased to reflect any underdistribution or
overdistribution, as the case may be, from the previous year. Each Portfolio
anticipates that it will pay such dividends and will make such distributions as
are necessary in order to avoid the application of this tax.

With regard to a Portfolio's investments in foreign securities, exchange
control regulations may restrict repatriations of investment income and capital
or the proceeds of securities sales by foreign investors such as a Portfolio and
may limit the Portfolio's ability to pay sufficient dividends and to make
sufficient distributions to satisfy the 90% and excise tax distribution
requirements.

If, in any taxable year, a Portfolio fails to qualify as a regulated
investment company under the Code, it would be taxed in the same manner as an
ordinary corporation and distributions to its shareholders would not be
deductible by the Portfolio in computing its taxable income. In addition, in the
event of a failure to qualify, the Portfolio's distributions, to the extent
derived from the Portfolio's current or accumulated earnings and profits would
constitute dividends (eligible for the corporate dividends-received deduction)
which are taxable to shareholders as ordinary income, even though those
distributions might otherwise (at least in part) have been treated in the
shareholders' hands as long-term capital gains. If a Portfolio fails to qualify
as a regulated investment company in any year, it must pay out its earnings and
profits accumulated in that year in order to qualify again as a regulated
investment company. In addition, if a Portfolio failed to qualify as a regulated
investment company for a period greater than one taxable year, the Portfolio may
be required to recognize any net built-in gains (the excess of the aggregate
gains, including items of income, over aggregate losses that would have been
realized if it had been liquidated) in order to qualify as a regulated
investment company in a subsequent year.

A Portfolio's short sales against the box, if any, and transactions in
foreign currencies, forward contracts, options and futures contracts (including
options and futures contracts on foreign currencies) will be subject to special
provisions of the Code that, among other things, may affect the character of
gains and losses realized by the Portfolio (i.e., may affect whether gains or
losses are ordinary or capital), accelerate recognition of income to the
Portfolio and defer Portfolio losses. These rules could therefore affect the
character, amount and timing of distributions to shareholders. These provisions
also (a) will require the Portfolio to mark-to-market certain types of the
positions in its portfolio (i.e., treat them as if they were closed out) and (b)
may cause the Portfolio to recognize income without receiving cash with which to
pay dividends or make distributions in amounts necessary to satisfy the
distribution requirements for avoiding income and excise taxes. Each Portfolio
will monitor its transactions, will make the appropriate tax elections and will
make the appropriate entries in its books and records when it acquires any
foreign currency, forward contract, option, futures contract or hedged
investment in order to mitigate the effect of these rules and prevent
disqualification of the Portfolio as a regulated investment company.

A Portfolio's investments in zero coupon securities may create special tax
52
<PAGE>
consequences. Zero coupon securities do not make interest payments, although a
portion of the difference between zero coupon security's face value and its
purchase price is imputed as income to the Portfolio each year even though the
Portfolio receives no cash distribution until maturity. Under the U.S. federal
tax laws, the Portfolio will not be subject to tax on this income if it pays
dividends to its shareholders substantially equal to all the income received
from, or imputed with respect to, its investments during the year, including its
zero coupon securities. These dividends ordinarily will constitute taxable
income to the shareholders of the Portfolio.

Passive Foreign Investment Companies. If a Portfolio purchases shares in
certain foreign investment entities, called "passive foreign investment
companies" (a "PFIC"), it may be subject to United States federal income tax on
a portion of any "excess distribution" or gain from the disposition of such
shares even if such income is distributed as a taxable dividend by the Portfolio
to its shareholders. Additional charges in the nature of interest may be imposed
on the Portfolio in respect of deferred taxes arising from such distributions or
gains. If a Portfolio were to invest in a PFIC and elected to treat the PFIC as
a "qualified electing fund" under the Code, in lieu of the foregoing
requirements, the Portfolio might be required to include in income each year a
portion of the ordinary earnings and net capital gains of the qualified election
fund, even if not distributed to the Portfolio, and such amounts would be
subject to the 90% and excise tax distribution requirements described above. In
order to make this election, the Portfolio would be required to obtain certain
annual information from the passive foreign investment companies in which it
invests, which may be difficult or not possible to obtain. If a Portfolio were
able to make the election described in this paragraph, the Portfolio would not
be able to treat any portion of the long-term capital gains included in income
pursuant to the election as eligible for the 20% maximum capital gains rate. On
October 9, 1997, the Ways and Means Committee of the U.S. Congress approved
technical corrections legislation that would treat PFICs as pass-through
entities for purposes of applying the 20% rate to the portion of a PFIC's
long-term gain attributable to assets held more than 18 months.

Recently, legislation was enacted that provides a mark-to-market election
for regulated investment companies effective for taxable years beginning after
December 31, 1997. This election would result in a Portfolio being treated as if
it had sold and repurchased all of the PFIC stock at the end of each year. In
this case, the Portfolio would report gains as ordinary income and would deduct
losses as ordinary losses to the extent of previously recognized gains. The
election, once made, would be effective for all subsequent taxable years of the
Portfolio, unless revoked with the consent of the IRS. By making the election,
the Portfolio could potentially ameliorate the adverse tax consequences with
respect to its ownership of shares in a PFIC, but in any particular year may be
required to recognize income in excess of the distributions it receives from
PFICs and its proceeds from dispositions of PFIC company stock. A Portfolio may
have to distribute this "phantom" income and gain to satisfy its distribution
requirement and to avoid imposition of the 4% excise tax. The Portfolio will
make the appropriate tax elections, if possible, and take any additional steps
that are necessary to mitigate the effect of these rules.

53
<PAGE>
Dividends and Distributions. Dividends of net investment income and
distributions of net realized short-term capital gains are taxable to a United
States shareholder as ordinary income, whether paid in cash or in shares.
Distributions of net-long-term capital gains, if any, that the Portfolio
designates as capital gains dividends are taxable as long-term capital gains,
whether paid in cash or in shares and regardless of how long a shareholder has
held shares of the Portfolio. Dividends and distributions paid by the Portfolio
(except for the portion thereof, if any, attributable to dividends on stock of
U.S. corporations received by the Portfolio) will not qualify for the deduction
for dividends received by corporations. Distributions in excess of the
Portfolio's current and accumulated earnings and profits will, as to each
shareholder, be treated as a tax-free return of capital, to the extent of a
shareholder's basis in his shares of the Portfolio, and as a capital gain
thereafter (if the shareholder holds his shares of the Portfolio as capital
assets).

Shareholders receiving dividends or distributions in the form of additional
shares should be treated for United States federal income tax purposes as
receiving a distribution in the amount equal to the amount of money that the
shareholders receiving cash dividends or distributions will receive, and should
have a cost basis in the shares received equal to such amount.

Investors considering buying shares just prior to a dividend or capital
gain distribution should be aware that, although the price of shares just
purchased at that time may reflect the amount of the forthcoming distribution,
such dividend or distribution may nevertheless be taxable to them.

If a Portfolio is the holder of record of any stock on the record date for
any dividends payable with respect to such stock, such dividends are included in
the Portfolio's gross income not as of the date received but as of the later of
(a) the date such stock became ex-dividend with respect to such dividends (i.e.,
the date on which a buyer of the stock would not be entitled to receive the
declared, but unpaid, dividends) or (b) the date the Portfolio acquired such
stock. Accordingly, in order to satisfy its income distribution requirements,
the Portfolio may be required to pay dividends based on anticipated earnings,
and shareholders may receive dividends in an earlier year than would otherwise
be the case.

Sales of Shares. Upon the sale or exchange of his shares, a shareholder
will realize a taxable gain or loss equal to the difference between the amount
realized and his basis in his shares. Such gain or loss will be treated as
capital gain or loss, if the shares are capital assets in the shareholder's
hands, and will be long-term capital gain or loss if the shares are held for
more than one year and short-term capital gain or loss if the shares are held
for one year or less. Any loss realized on a sale or exchange will be disallowed
to the extent the shares disposed of are replaced, including replacement through
the reinvesting of dividends and capital gains distributions in a Portfolio,
within a 61-day period beginning 30 days before and ending 30 days after the
disposition of the shares. In such a case, the basis of the shares acquired will
be increased to reflect the disallowed loss. Any loss realized by a shareholder
on the sale of a Portfolio share held by the shareholder for six months or less
will be treated for United States federal income tax purposes as a long-term
capital loss to the extent of any

54
<PAGE>
distributions or deemed distributions of long-term capital gains received by the
shareholder with respect to such share.

Backup Withholding. A Portfolio may be required to withhold, for United
States federal income tax purposes, 31% of the dividends and distributions
payable to shareholders who fail to provide the Portfolio with their correct
taxpayer identification number or to make required certifications, or who have
been notified by the IRS that they are subject to backup withholding. Certain
shareholders are exempt from backup withholding. Backup withholding is not an
additional tax and any amount withheld may be credited against a shareholder's
United States federal income tax liabilities.

Notices. Shareholders will be notified annually by the relevant Portfolio
as to the United States federal income tax status of the dividends,
distributions and deemed distributions attributable to undistributed capital
gains (discussed above in "The Portfolios and Their Investments") made by the
Portfolio to its shareholders. Furthermore, shareholders will also receive, if
appropriate, various written notices after the close of the Portfolio's taxable
year regarding the United States federal income tax status of certain dividends,
distributions and deemed distributions that were paid (or that are treated as
having been paid) by the Portfolio to its shareholders during the preceding
taxable year.

Other Taxation
- --------------

Distributions also may be subject to additional state, local and foreign
taxes depending on each shareholder's particular situation.

THE FOREGOING IS ONLY A SUMMARY OF CERTAIN MATERIAL TAX CONSEQUENCES AFFECTING
THE PORTFOLIOS AND THEIR SHAREHOLDERS. SHAREHOLDERS ARE ADVISED TO CONSULT THEIR
OWN TAX ADVISERS WITH RESPECT TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF AN
INVESTMENT IN THE PORTFOLIOS.

DETERMINATION OF PERFORMANCE

From time to time, a Portfolio may quote its total return and, in the case
of the Global Fixed Income Portfolio, yield in advertisements or in reports and
other communications to shareholders. The total return of each Portfolio listed
below for the fiscal year or period ended October 31, 1997 shown were as follows
(total return without fee waivers and expenses reimbursements is indicated in
parentheses):

Total Return (Without Waivers)
------------ -----------------

Small Company Growth 22.99% 22.76%
Value+ 6.40% 6.00%
Emerging Markets (4.43%) (4.86%)

55
<PAGE>
International Equity 6.20%% 6.05%

+ Non-annualized, the Value Portfolio commenced operations June 30, 1997.

A Portfolio's average annualized total return is calculated by finding the
average annual compounded rates of return for the one-, five- and ten- (or such
shorter period as the Portfolio has been offered) year periods that would equate
the initial amount invested to the ending redeemable value according to the
following formula: P (1 + T)n = ERV. For purposes of this formula, "P" is a
hypothetical investment of $1,000; "T" is average annual total return; "n" is
number of years; and "ERV" is the ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the one-, five- or ten-year periods (or
fractional portion thereof). Total return or "T" is computed by finding the
average annual change in the value of an initial $1,000 investment over the
period and assumes that all dividends and distributions are reinvested during
the period.

A Portfolio may advertise, from time to time, comparisons of its
performance with that of one or more other mutual funds with similar investment
objectives. A Portfolio may advertise average annual calendar-year-to-date and
calendar quarter returns, which are calculated according to the formula set
forth in the preceding paragraph except that the relevant measuring period would
be the number of months that have elapsed in the current calendar year or most
recent three months, as the case may be. Investors should note that this
performance may not be representative of the Portfolio's total return in longer
market cycles.

Yield is calculated by annualizing the net investment income generated by
the Portfolio over a specified thirty-day period according to the following
formula:

YIELD = 2 [( a-b ) +1)6-1]
---
cd

For purposes of this formula: "a" is dividends and interest earned during the
period; "b" is expenses accrued for the period (net of reimbursements); "c" is
the average daily number of shares outstanding during the period that were
entitled to receive dividends; and "d" is the maximum offering price per share
on the last day of the period.

A Portfolio's performance will vary from time to time depending upon market
conditions, the composition of its portfolio and operating expenses allocable to
it. As described above, total return and yield are based on historical earnings
and is not intended to indicate future performance. Consequently, any given
performance quotation should not be considered as representative of performance
for any specified period in the future. Performance information may be useful as
a basis for comparison with other investment alternatives. However, a
Portfolio's performance will fluctuate, unlike certain bank deposits or other
investments which pay a fixed yield for a stated period of time.

Warburg believes that a diversified portfolio of international equity
securities, when combined with a similarly diversified portfolio of domestic
equity securities, tends to have a lower volatility than a portfolio composed
entirely of domestic securities.

56
<PAGE>
Furthermore, international equities have been shown to reduce volatility in
single asset portfolios regardless of whether the investments are in all
domestic equities or all domestic fixed-income instruments, and research
indicates that volatility can be significantly decreased when international
equities are added.

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

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

Year EAFE Index S&P 500 Index
---- ---------- -------------
1972* 33.28 15.63
1973* -16.82 -17.37
1974* -25.60 -29.72
1975* 31.21 31.55
1976 -.36 19.15
1977* 14.61 -11.50
1978* 28.91 1.06
1979 1.82 12.31
1980 19.01 25.77
1981* -4.85 -9.73
1982 -4.63 14.76
1983* 20.91 17.27
1984* 5.02 1.40
1985* 52.97 26.33
1986* 66.80 14.62
1987* 23.18 2.03
1989 9.22 27.25
1990 -24.71 -6.56
1991 10.19 26.31
1992 -13.89 4.46
1993* 30.49 7.06
1994* 6.24 -1.54
1995 9.42 20.26
1996 4.40 34.11
1997

- -------------------------
+ Without reinvestment of dividends.
* The EAFE Index has outperformed the S&P 500 Index [14] out of the
last [25] years.
Source: Morgan Stanley Capital International; Bloomberg Financial Markets

57
<PAGE>

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

INDEPENDENT ACCOUNTANTS AND COUNSEL

Coopers & Lybrand L.L.P. ("Coopers & Lybrand"), with principal offices at
2400 Eleven Penn Center, Philadelphia, Pennsylvania 19103, serves as independent
accountants for the Fund. The financial statements for the Post-Venture Capital,
Small Company Growth, Small Company Value, Value, Emerging Markets,
International Equity and Japan Growth Portfolios that are incorporated by
reference in this Statement of Additional Information have been audited by
Coopers & Lybrand, and have been included herein by reference in reliance upon
the report of such firm of independent accountants given upon their authority as
experts in accounting and auditing. The statement of assets and liabilities for
the Global Fixed Income Portfolio that accompanies this Statement of Additional
Information has also been audited by Coopers & Lybrand, and has been included
herein in reliance upon the report of such firm of independent accountants given
upon their authority as experts in accounting and auditing.

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

MISCELLANEOUS

As of January 30, 1998, the names, addresses and percentage ownership of
each person that owned 5% or more of the outstanding shares of a Portfolio are
as follows:

Percentage
Portfolio Name and Address Owned
--------- ---------------- ----------

Post-Venture Capital Warburg Pincus Asset Management, Inc. 55.43%
Attn: Stephen Distler
466 Lexington Avenue, 10th Floor
New York, NY 10017-3140

Guarantee & Trust Co. TTEE 6.91%
Stuart Goode IRA R/O
70 E 77th St. Apt. 9A
New York, NY 10021-1811

Small Company Growth Employee Benefit Plan Group 12.92%
Trust of George A. Buck
Consulting Act I
U/A DTD 5/3/1983
C/O John McGuinness
3 Chase MetroTech Ctr. Fl. 5
Brooklyn, NY 11245-0002

58
<PAGE>
Trustees of Amherst College 11.93%
Amherst College, Ms. Sharon Siegel
Treasurer Office
Box 2203 P.O. Box 5000
Amherst, MA 01002-5000

Northern Trust Co TTE 6.49%
FBO Southern California
Rock Products C/O Mutual Funds
P.O. Box 92956
Chicago, IL 60675

Charles Schwab & Co. Inc. 5.56%
Attn: Mutual Funds Dept.
101 Montgomery St.
San Francisco, CA 94104-4122

MAC & Co 5.23%
FBO Oberlin College
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198

Educational Testing Service 5.02%
Michael Bockisch
42 Rosedale RD #Z
Princeton, NJ 08540-6702

Small Company Value Retirement Plan Non-Legal Employees of 6.96%
Simpson Thacher & Bartlett
Ellen Rosen Attn Coordinator
425 Lexington Avenue
New York, NY 10017-3903

Pakula Productions P/S/P 5.83%
Mr. Alan J. Pakula
160 E 72nd St., 6th Floor
New York, NY 10021-4364

Delaware Charter 5.55%
Guarantee & Trust Co.
FBO Benefit Martin Lipton
PO Box 8963
Wilmington, DE 19899-8963

59
<PAGE>
Value National Financial Services Corp. 99.88%
FBO Customers
P.O. Box 3908
Church Street Station
New York, NY 10008-3908

Emerging Markets Louis R. Morrell/Irene A. Comito 74.80%
Co-Trustees
Wake Forest University Trust
U/A DTD 6/25/41
P.O. Box 7354
Winston-Salem, NC 27109-7354

The Juilliard School 7.35%
60 Lincoln Center Plaza
New York, NY 10023-6588

Japan Growth Warburg Pincus Asset Management, Inc. 98.41%
Attn: Stephen Distler
466 Lexington Avenue, 10th Floor
New York, NY 10017-3140

As of January 30, 1998, Mr. Lionel I. Pincus, the managing partner of
Warburg Pincus & Co., may be deemed to have beneficially owned 85.43%, 8.7%,
82%, .12%, 6.1% 5.7% and 98.81% of the outstanding shares of the Post-Venture
Capital, Small Company Growth, Small Company Value, Value, Emerging Markets,
International Equity and Japan Growth Portfolios, respectively, including shares
owned by clients for which Warburg has investment discretion and by companies
that Warburg Pincus & Co. may be deemed to control. Mr. Pincus disclaims
ownership of these shares and does not intend to exercise voting rights with
respect to these shares.

FINANCIAL STATEMENTS

The Fund's audited annual report dated October 31, 1997, which either
accompanies this Statement of Additional Information or has previously been
provided to the investor to whom this Statement of Additional Information is
being sent, is incorporated herein by reference with respect to all information
regarding the Post-Venture Capital, Small Company Growth, Small Company Value,
Value, Emerging Markets, International Equity and Japan Growth Portfolios
included therein. The Fund will furnish without charge a copy of the annual
report upon request by calling the Fund at (800) 369-2728.

The audited statement of assets and liabilities for the Global Fixed Income
Portfolio dated as of October 15, 1997 and the Report of Independent Accountants
related thereto accompany this Statement of Additional Information.

60
<PAGE>

APPENDIX

DESCRIPTION OF RATINGS

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

Commercial paper rated A-1 by Standard and Poor's Ratings Services ("S&P")
indicates that the degree of safety regarding timely payment is strong. Those
issues determined to possess extremely strong safety characteristics are denoted
a plus sign designation. Capacity for timely payment on commercial paper rated
A-2 is satisfactory, but the relative degree of safety is not as high as for
issues designated A-1.

The rating Prime-1 is the highest commercial paper rating assigned by
Moody's Investors Service, Inc. ("Moody's"). Issuers rated Prime-1 (or related
supporting institutions) are considered to have a superior capacity for
repayment of short-term promissory obligations. Issuers rated Prime-2 (or
related supporting institutions) are considered to have a strong capacity for
repayment of short-term promissory obligations. This will normally be evidenced
by many of the characteristics of issuers rated Prime-1 but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternative liquidity is maintained.

Corporate Bond Ratings
- ----------------------

The following summarizes the ratings used by S&P for corporate bonds:

AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.

AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in small degree.

A - Debt rated A has a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.

BBB - This is the lowest investment grade. Debt rated BBB has an adequate
capacity to pay interest and repay principal. Although they normally exhibit
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for bonds in this category than for bonds in higher rated
categories.

BB, B, CCC, CC and C - Debt rated BB and B is regarded, on balance, as
predominately speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. BB represents a lower
degree of speculation than B, and CCC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk

A-1
<PAGE>
exposures to adverse conditions.

BB - Debt rated BB has less near-term vulnerability to default than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions, which could lead to
inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.

B - Debt rated B has a greater vulnerability to default but currently has
the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The B rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
BB or BBB rating.

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

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

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

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

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

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

The following summarizes the ratings used by Moody's for corporate bonds:

Aaa - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or exceptionally stable
margin and principal is secure.

A-2
<PAGE>
While the various protective elements are likely to change, such changes as can
be visualized are most unlikely to impair the fundamentally strong position of
such issues.

Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.

A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.

Baa - Bonds which are rated Baa are considered as medium-grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.

B - Bonds which are rated B generally lack characteristics of the desirable
investments. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Moody's applies numerical modifiers (1, 2 and 3) with respect to the bonds
rated "Aa" through "B". The modifier 1 indicates that the bond being rated ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the bond ranks in the lower
end of its generic rating category.

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

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

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

A-3
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and Board of Directors
of Warburg, Pincus Institutional Fund, Inc. - Global Fixed Income Portfolio

We have audited the accompanying Statement of Assets and Liabilities of Warburg,
Pincus Institutional Fund, Inc. - Global Fixed Income Portfolio (the "Fund") as
of October 15, 1997. This financial statement is the responsibility of the
Fund's management. Our responsibility is to express an opinion on this financial
statement based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of Warburg, Pincus Institutional
Fund, Inc. - Global Fixed Income Portfolio as of October 15, 1997 in conformity
with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
October 16, 1997

<PAGE>

WARBURG, PINCUS INSTITUTIONAL FUND, INC.
GLOBAL FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
as of October 15, 1997

Assets:
Cash $1,000
Total Assets $1,000

Net Assets $1,000
======

Net Asset Value, Redemption and Offering Price
Per Share (one billion shares authorized
- $.001 par value applicable to 100 shares
outstanding.) $10.00

The accompanying notes are an integral part of this
financial statement.

F-2
<PAGE>

WARBURG, PINCUS INSTITUTIONAL FUND, INC.
GLOBAL FIXED INCOME PORTFOLIO
Notes to Financial Statement
October 15, 1997

1. Organization:

Warburg, Pincus Institutional Fund, Inc. (the "Fund") was incorporated on
May 13, 1992 under the laws of the State of Maryland. The Fund is
registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company consisting of nine portfolios -
International Equity Portfolio, Small Company Growth Portfolio, Emerging
Markets Portfolio, Global Fixed Income Portfolio, Japan Growth Portfolio,
Post-Venture Capital Portfolio, Small Company Value Portfolio, Value
Portfolio and Managed EAFE(R) Countries Portfolio. The assets of each
portfolio are segregated, and a shareholder's interest is limited to the
portfolio in which shares are held. The Global Fixed Income Portfolio has
not commenced operations except those related to organizational matters and
the sale of and aggregate 100 shares ("Initial Shares") of common stock to
E.M. Warburg, Pincus & Co., Inc. ("EMW") on July 28, 1992. Subsequent to
the sale of shares to EMW, the Initial Shares were transferred to Warburg,
Pincus Counsellors, Inc., the Fund's investment adviser (the ("Adviser").
Effective as of October 15, 1997 the Adviser changed its name to Warburg
Pincus Asset Management, Inc.

2. Transactions with Affiliates:

Certain officers and a director of the Fund are also officers and a director
of the Adviser. These officers and director are paid no fees by the Fund for
serving as an officer or director of the Fund.

F-3

<PAGE>

PART C

OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements --Small Company Growth,
Value, Emerging Markets and International
Equity Portfolios

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

(2) Financial Statements included in Part B
(incorporated by reference to the Fund's
annual report dated October 31, 1997)
(a) Report of Coopers & Lybrand L.L.P.,
Independent Accountants
(b) Statement of Net Assets
(c) Statement of Operations
(d) Statement of Changes in Net Assets
(e) Financial Highlights
(f) Notes to Financial Statements

(b) Financial Statements --Post-Venture Capital, Small Company
Value and Japan Growth Portfolios

(1) Financial Statements included in Part B (incorporated
by reference to the Fund's annual report dated
October 31, 1997)
(a) Report of Coopers & Lybrand L.L.P., Independent
Accountants
(b) Statement of Assets and Liabilities
(c) Notes to Financial Statements

(1) Financial Statements included in Part B:
(a) Report of Coopers & Lybrand L.L.P.,
Independent Accountants
(b) Statement of Assets and Liabilities
(c) Notes to Financial Statements

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

1(a) Articles of Incorporation.(2)

_____________________

(1) Incorporated by reference to Post-Effective Amendment No.13 to Registrant's
Registration Statement on Form N-1A, filed with the Commission on August 12,
1997.

C-1
<PAGE>

(b) Articles of Amendment establishing the
International Equity Portfolio.(2)

(d) Articles Supplementary designating the Small
Company Growth Portfolio.(2)

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

(f) Articles Supplementary designating Emerging
Markets Portfolio.(3)

(g) Articles of Amendment changing the name of
Managed EAFE Portfolio to Managed EAFE(R)
Countries Portfolio.(4)

(h) Articles Supplementary designating Value
Portfolio. (5)

(i) Articles Supplementary designating Japan
Growth Portfolio, the Small Company
Value Portfolio and the Post-Venture Capital
Portfolio.(1)

2(a) By-Laws. (6)

2(b) Amendment to By-Laws. (7)

_____________________________________________________________________________

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

(3) Incorporated by reference to Post-Effective Amendment No. 9 to Registrant's
Registration Statement on Form N-1A, filed with the Commission on August
20, 1996.

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

(5) Incorporated by reference to Post-Effective Amendment No. 11 to
Registrant's Registration Statement on Form N-1A, filed with the Commission
on January 31, 1997.

(6) Incorporated by reference to Post-Effective Amendment No. 7 to Registrant's
Registration Statement on Form N-1A, filed with the Commission on April 19,
1996.

C-2
<PAGE>

3 Not applicable.

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

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

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

(d) Investment Advisory Agreement--Emerging
Markets Portfolio. (3)

(e) Investment Advisory Agreement -- Value
Portfolio. (5)

(f) Investment Advisory Agreement -- Japan
Growth Portfolio.(1)

(g) Investment Advisory Agreement -- Small
Company Value Portfolio.(1)

(h) Investment Advisory Agreement--Post-Venture
Capital Portfolio.(1)

(i) Sub-Investment Advisory Agreement between
Abbott Capital Management, LLC and the
Post-Venture Capital Portfolio.(1)

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

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

(d) Form of Distribution Agreement pertaining to
the Small Company Value Portfolio.(1)

(e) Form of Distribution Agreement pertaining to
the Post-Venture Capital Portfolio.(1)

7 Not applicable.

____________________________________________________________________________

(7) Incorporated by reference to Post-Effective Amendment No. 8 to Registrant's
Registration Statement on Form N-1A, filed with the Commission on July 2,
1996.

C-3
<PAGE>

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

(b) Form of Custodian Contract with State Street
Bank and Trust Company ("State Street")--
Small Company Growth Portfolio and Emerging
Markets Portfolio.(8)

(c) Form of Custody Agreement with PNC Bank --
Japan Growth Portfolio, Small Company Value
Portfolio and Post-Venture Capital
Portfolio.(1)

(d) Form of Custody Agreement with State Street
Bank & Trust Company -- Japan Growth
Portfolio, Post-Venture Capital Portfolio
and Small Company Value Portfolio.(1)

(e) Form of Custody Agreement with State Street
Bank & Trust Company --International Equity,
Global Fixed Income and Value Portfolios.(9)

9(a) Form of Transfer Agency Agreement.(8)

(b)(1) Form of Letter Agreement between Registrant
and State Street pertaining to inclusion
of the Small Company Growth Portfolio
under the Transfer Agency Agreement.(2)

(b)(2) Form of Letter Agreement between Registrant
and State Street pertaining to inclusion of
the Japan Growth Portfolio under the
Transfer Agency and Service Agreement.(1)

(b)(3) Form of Letter Agreement between Registrant
and State Street pertaining to inclusion of
the Small Company Value Portfolio under the
Transfer Agency and Service Agreement.(1)

_____________________________

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

(9) Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit to the
Registration Statement on Form N-14 of Warburg, Pincus Managed EAFE(R)
Countries Fund, Inc. on November 5, 1997 (Securities Act File No.
333-39611).

C-4
<PAGE>

(b)(4) Form of Letter Agreement between Registrant
and State Street pertaining to inclusion of
the Post-Venture Capital Portfolio under the
Transfer Agency and Service Agreement.(1)

(c)(1) Form of Co-Administration Agreements with
Counsellors Funds Service, Inc.(9)

(c)(2) Form of Co-Administration Agreement with
Counsellors Funds Service, Inc. with
respect to Japan Growth Portfolio.(1)

(c)(3) Form of Co-Administration Agreement with
Counsellors Funds Service, Inc. with respect
to Small Company Value Portfolio.(1)

(c)(4) Form of Co-Administration Agreement with
Counsellors Funds Service, Inc. with respect
to Post-Venture Capital Portfolio.(1)

(d)(1) Form of Co-Administration Agreements with
PFPC Inc.(9)

(d)(2) Form of Letter Agreement with PFPC, Inc.
relating to the Emerging Markets
Portfolio.(3)

(d)(3) Form of Letter Agreement with PFPC Inc.
relating to the Value Portfolio. (5)

(d)(4) Form of Co-Administration Agreement with
PFPC Inc. relating to the Japan Growth
Portfolio.(1)

(d)(5) Form of Co-Administration Agreement with
PFPC Inc. relating to the Small Company
Value Portfolio.(1)

(d)(6) Form of Co-Administration Agreement with
PFPC Inc. relating to the Post-Venture
Capital Portfolio.(1)

(e) Form of Services Agreement.(1)

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

(b) Consent of Willkie Farr & Gallagher, counsel
to the Fund and Opinion of Willkie Farr &
Gallagher relating to the establishment of
the Japan Growth Portfolio, Small Company
Value Portfolio and Post-Venture Capital
Portfolio.(1)

C-5
<PAGE>

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

12 Not applicable.

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

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

(d) Purchase Agreement pertaining to the Value
Portfolio. (5)

(e) Purchase Agreement pertaining to the Japan
Growth Portfolio.(1)

(f) Purchase Agreement pertaining to the Small
Company Value Portfolio.(1)

(g) Purchase Agreement pertaining to the
Post-Venture Capital Portfolio.(1)

14 Retirement Plans.(2)

15 Not applicable.

16 Schedules of Computation of Performance
Quotations.

17 Financial Data Schedules.

C-6
<PAGE>

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

Not applicable.

Item 26. Number of Holders of Securities
-------------------------------

Title of Class Number of Record
(shares of common stock Holders as of
par value $.001 per share) December 31, 1997
-------------------------- ----------------

Post-Venture Capital 43
Small Company Growth 80
Small Company Value 319
Value 6
Emerging Markets 64
Global Fixed Income 0
International Equity 438
Japan Growth 6

Item 27. Indemnification

Registrant, officers and directors of Warburg Pincus Asset Management,
Inc. ("Warburg"), of Counsellors Securities Inc. ("Counsellors Securities") and
of Registrant are covered by insurance policies indemnifying them for liability
incurred in connection with the operation of Registrant. Discussion of this
coverage is incorporated by reference to Item 27 of Part C of the Registration
Statement of Warburg, Pincus Post-Venture Capital Fund, Inc., filed on June 21,
1995.

Item 28. Business and Other Connections of
Investment Adviser
---------------------------------

Warburg, a wholly owned subsidiary of Warburg Pincus Asset Management
Holdings, Inc. acts as investment adviser to each Portfolio. Warburg renders
investment advice to a wide variety of individual and institutional clients. The
list required by this Item 28 of officers and directors of Warburg, together
with information as to their other business, profession, vocation or employment
of a substantial nature during the past two years, is incorporated by reference
to Schedules A and D of Form ADV filed by Warburg (SEC File No. 801-07321).

C-7
<PAGE>

Abbott Capital Management, LLC ("Abbott") acts as
sub-investment adviser for the Registrant's Post-Venture Capital Portfolio.
Abbott renders investment advice and provides full-service private equity
programs to clients. The list required by this Item 28 of Officers and Directors
of Abbott, together with information as to their other business, profession,
vocation, or employment of a substantial nature during the past two years, is
incorporated by reference to Schedules A and D of Form ADV filed by Abbott (SEC
File No.
801-27914).

Item 29. Principal Underwriter
---------------------

(a) Counsellors Securities will act as distributor for Registrant.
Counsellors Securities currently acts as distributor for The RBB Fund, Inc.,
Warburg Pincus Balanced Fund; Warburg Pincus Capital Appreciation Fund; Warburg
Pincus Cash Reserve Fund; Warburg Pincus Emerging Growth Fund; Warburg Pincus
Emerging Markets Fund; Warburg Pincus Fixed Income Fund; Warburg Pincus Global
Fixed Income Fund; Warburg Pincus Global Post-Venture Capital Fund; Warburg
Pincus Growth & Income Fund; Warburg Pincus Health Sciences Fund; Warburg Pincus
Institutional Fund, Inc.; Warburg Pincus Intermediate Maturity Government Fund;
Warburg Pincus International Equity Fund; Warburg Pincus Japan Growth Fund;
Warburg Pincus Japan OTC Fund; Warburg Pincus Managed EAFE(R) Countries Fund;
Warburg Pincus New York Intermediate Municipal Fund; Warburg Pincus New York Tax
Exempt Fund; Warburg Pincus Post-Venture Capital Fund; Warburg, Pincus Small
Company Growth Fund; Warburg Pincus Small Company Value Fund; Warburg Pincus
Strategic Value Fund; Warburg Pincus Trust and Warburg Pincus Trust II.

(b) For information relating to each director, officer or partner of
Counsellors Securities, reference is made to Form BD (SEC File No. 8-32482)
filed by Counsellors Securities under the Securities Exchange Act of 1934.

C-8
<PAGE>

Item 30. Location of Accounts and Records
--------------------------------

(1) Warburg, Pincus Institutional Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(Fund's Articles of Incorporation, By-Laws and
minute books)

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

(3) PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
(records relating to its functions as co-
administrator)

(4) Counsellors Funds Service, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as co-
administrator)

(5) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
(records relating to its functions as custodian,
shareholder servicing agent, transfer agent and
dividend disbursing agent)

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

(7) PNC Bank, National Association
1600 Broad Street
Philadelphia, Pennsylvania 19103
(records relating to its functions as custodian)

(8) Counsellors Securities Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as distributor)

Item 31. Management Services
-------------------

Not applicable.

C-9
<PAGE>

Item 32. Undertakings.

(a) Registrant hereby undertakes to file a post-effective amendment
with financial statements of the Post-Venture Capital Portfolio, the Small
Company Value Portfolio, the Global Fixed Income Portfolio and the Japan Growth
Portfolio which need not be certified, within four to six months from the date
the relevant Portfolio commences operations.

(b) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the latest annual report to shareholders
for the relevant Portfolio, upon request and without charge.

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

C-10
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended
(the "Securities Act"), and the Investment Company Act of 1940, as amended, the
Registrant has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of New York and the State of New York, on the 3rd day of February, 1998.

WARBURG, PINCUS INSTITUTIONAL FUND, INC.

By:/s/Eugene L. Podsiadlo
Eugene L. Podsiadlo
President

Pursuant to the requirements of the Securities Act, this Amendment has
been signed below by the following persons in the capacities and on the date
indicated:

Signature Title Date
- --------- ----- ----

/s/John L. Furth Chairman of the February 3, 1998
- ------------------------- Board of Directors
John L. Furth

/s/Eugene L. Podsiadlo President February 3, 1998
Eugene L. Podsiadlo

/s/Howard Conroy Vice President February 3, 1998
Howard Conroy and Chief Financial
Officer

/s/Daniel S. Madden Treasurer and February 3, 1998
Daniel S. Madden Chief Accounting
Officer

/s/Richard N. Cooper Director February 3, 1998
Richard N. Cooper

/s/Donald J. Donahue Director February 3, 1998
Donald J. Donahue

/s/Jack W. Fritz Director February 3, 1998
Jack W. Fritz

/s/Thomas A. Melfe Director February 3, 1998
Thomas A. Melfe

/s/Arnold M. Reichman Director February 3, 1998
Arnold M. Reichman

/s/Alexander B. Trowbridge Director February 3, 1998
Alexander B. Trowbridge

C-11
<PAGE>

INDEX TO EXHIBITS

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

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

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

16 Schedules of Computation of
Performance Quotations.

17 Financial Data Schedules.

<PAGE>

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

February 4, 1998

Warburg, Pincus Institutional Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3147

Re: Post-Effective Amendment No. 15 to Registration Statement
(Securities Act File No. 33-47880; Investment Company Act
File No. 811-6670) (the "Registration Statement")

Ladies and Gentlemen:

You have requested us, as counsel to Warburg, Pincus Institutional Fund, Inc.
(the "Fund"), a corporation organized under the laws of the State of Maryland,
to furnish you with this opinion in connection with the Fund's filing of
Post-Effective Amendment No. 15 to its Registration Statement on Form N-1A (the
"Amendment").

We have examined copies of the Fund's Articles of Incorporation, as amended or
supplemented (the "Articles"), the Fund's By-Laws, as amended (the "By-Laws")
and the Amendment. We have also examined such other records, documents, papers,
statutes and authorities as we have deemed necessary to form a basis for the
opinion hereinafter expressed.

In our examination of material, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity to original documents of all copies submitted to us. As to
various questions of fact material to our opinion, we have relied upon
statements and certificates of officers and representatives of the Fund and
others.

Based upon the foregoing, we are of the opinion that the shares of common stock
of the Fund, par value $.001 per share (the "Shares"), when duly sold, issued
and paid for in accordance with the laws of applicable jurisdictions and the
terms of the Articles, the By-Laws and the Prospectus and Statement of
Additional Information ("SAI") included as part of the Amendment, and assuming
that at the time of sale such Shares will be sold at a sales price in each case
in excess of the par value, will be valid, legally issued, fully paid and
non-assessable.

We hereby consent to the filing of this opinion as an exhibit to the Amendment,
to the reference to our name under the heading "Independent Accountants and
Counsel" in the

<PAGE>

SAI included as part of the Amendment, and to the filing of this opinion as an
exhibit to any application made by or on behalf of the Fund or any distributor
or dealer in connection with the registration or qualification of the Fund or
the Shares under the securities laws of any state or other jurisdiction.

We are members of the Bar of the State of New York only and do not opine as to
the laws of any jurisdiction other than the laws of the State of New York and
the laws of the United States, and the opinions set forth above are,
accordingly, limited to the laws of those jurisdictions.

Very truly yours,

/s/ Willkie Farr & Gallagher

<PAGE>

THE LAW FIRM OF

HAMADA & MATSUMOTO

KASUMIGASEKI BUILDING, 25th floor
2-5, KASUMIGASEKI 3-CHOME
CHIYODA-KU, TOKYO 100, JAPAN
TEL: 03-3580-3377

February 4, 1998

Warburg, Pincus Institutional Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3147

Ladies and Gentlemen:

We have acted as legal counsel to the Japan Growth Portfolio of Warburg, Pincus
Institutional Fund, Inc. (the "Fund"), a corporation organized under the laws of
the State of Maryland, as to matters of Japanese law.

We hereby confirm that the information set forth under the caption "Japan Growth
Portfolio" in the section entitled "Dividends, Distributions and Taxes" in the
Prospectus contained in the Fund's Registration Statement on Form N-1A, as
amended (the "Registration Statement"), has been reviewed by us and in our
opinion is correct. In addition, we hereby consent to the reference to us in the
Prospectus and to the filing of this opinion with the U.S. Securities and
Exchange Commission as an exhibit to the Registration Statement.

Very truly yours,

HAMADA & MATSUMOTO

By: /s/ Yogo Kimura
Yogo Kimura

<PAGE>

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the following with respect to Post-Effective Amendment No. 15
pursuant to the Securities Act of 1933, as amended, to the Registration
Statement on Form N-1A of Warburg, Pincus Institutional Fund, Inc.
(File No. 33-47880).

1. The incorporation by reference of our report dated December
19, 1997 on our audit of the financial statements and
financial highlights of Warburg, Pincus Institutional Fund,
Inc. - Post-Venture Capital Portfolio, Small Company Growth
Portfolio, Small Company Value Portfolio, Value Portfolio,
Emerging Markets Portfolio, International Equity Portfolio and
Japan Growth Portfolio, which report is included in the Annual
Report to Shareholders for the year ended October 31, 1997.

2. The inclusion of our report dated October 16, 1997 on our
audit of the Statement of Assets and Liabilities of Warburg,
Pincus Institutional Fund, Inc. - Global Fixed Income
Portfolio.

3. The reference to our Firm under the captions "Financial
Highlights" in the Prospectuses and "Independent Accounts and
Counsel" in the Statement of Additional Information.

COOPERS & LYBRAND

2400 Eleven Penn Center
Philadelphia, Pennsylvania
February 4, 1998

Warburg Pincus Institutional Fund
Schedule 16 Calculations

International Equity Portfolio

For the Year Ended October 31, 1997

Return With Waivers:

((10,620-10,000)/10,000) = 6.20%

Return Without Waivers:

((10,605-10,000)/10,000) = 6.05%

For the Five Years Ended October 31, 1997

Return With Waivers:

((19,796/10,000)1/5* -1) = 14.63%

Return Without Waivers:

((19,616/10,000)1/5* -1) = 14.43%

For Inception (09/01/92) thru October 31, 1997

Return With Waivers:

((19,044/10,000)1/5.16986** -1) = 13.27%

Return Without Waivers:

((18,852/10,000)1/5.16986** -1) = 13.05%

- --------------------------
* As used here, 1/5 is an exponent.

** As used here, 1/5.16986 is an exponent.

<PAGE>

Emerging Markets Portfolio

For the Year Ended October 31, 1997

Return With Waivers:

((9,557-10,000)/10,000) = -4.43%

Return Without Waivers:

((9,514-10,000)/10,000) = -4.86%

For Inception (09/30/96) thru October 31, 1997

Return With Waivers:

((9,424/10,000)1/1.08767* -1) = -5.31%

Return Without Waivers:

((9,367/10,000)1/1.08767* -1) = -5.83%

- -----------------------
* As used here, 1/1.08767 is an exponent.

<PAGE>

Small Company Growth Portfolio

For the Year Ended October 31, 1997

Return With Waivers:

((12,299-10,000)/10,000) = 22.99%

Return Without Waivers:

((12,276-10,000)/10,000) = 22.76%

For Inception (12/29/95) thru October 31, 1997

Return With Waivers:

((15,890/10,000)1/1.84384* -1) = 28.55%

Return Without Waivers:

((15,850/10,000)1/1.84384* -1) = 28.38%

Value Portfolio

For Inception (06/30/97) thru October 31, 1997

Return With Waivers:

((10,640-10,000)/10,000) = 6.40%

Return Without Waivers:

((10,600-10,000)/10,000) = 6.00%

- -----------------------
** As used here, 1/1.84384 is an exponent.

<ARTICLE> 6
<CIK> 0000887589
<NAME> WARBURG PINCUS INSTITUTIONAL FUND, INC.
<SERIES>
<NUMBER> 01
<NAME> INTERNATIONAL EQUITY PORTFOLIO

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<TOTAL-LIABILITIES> 31634742
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<DIVIDEND-INCOME> 14471164
<INTEREST-INCOME> 3598458
<OTHER-INCOME> 0
<EXPENSES-NET> 11189822
<NET-INVESTMENT-INCOME> 6879800
<REALIZED-GAINS-CURRENT> 87034960
<APPREC-INCREASE-CURRENT> (39639490)
<NET-CHANGE-FROM-OPS> 54275270
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (20718488)
<DISTRIBUTIONS-OF-GAINS> (16355419)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 383795316
<NUMBER-OF-SHARES-REDEEMED> (201370170)
<SHARES-REINVESTED> 32747095
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<ACCUMULATED-NII-PRIOR> 18518234
<ACCUMULATED-GAINS-PRIOR> 15533772
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 9423008
<INTEREST-EXPENSE> 10348
<GROSS-EXPENSE> 12817174
<AVERAGE-NET-ASSETS> 1177875992
<PER-SHARE-NAV-BEGIN> 16.14
<PER-SHARE-NII> .17
<PER-SHARE-GAIN-APPREC> .81
<PER-SHARE-DIVIDEND> (.34)
<PER-SHARE-DISTRIBUTIONS> (.27)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.51
<EXPENSE-RATIO> .95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000887589
<NAME> WARBURG PINCUS INSTITUTIONAL FUND, INC.
<SERIES>
<NUMBER> 02
<NAME> SMALL COMPANY GROWTH PORTFOLIO

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> OCT-31-1997
<INVESTMENTS-AT-COST> 175148058
<INVESTMENTS-AT-VALUE> 220668717
<RECEIVABLES> 1888700
<ASSETS-OTHER> 14469
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<NAME> WARBURG PINCUS INSTITUTIONAL FUND, INC.
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