SEMIANNUAL
REPORT
April 30, 1999
WARBURG PINCUS INSTITUTIONAL FUND, INC.
o INTERNATIONAL EQUITY PORTFOLIO
o EMERGING MARKETS PORTFOLIO
o JAPAN GROWTH PORTFOLIO
More complete information about the portfolios, including charges and expenses,
is provided in the Prospectus, which must precede or accompany this document
and which should be read carefully before investing. You may obtain additional
copies by calling 800-222-8977 or by writing to Warburg Pincus Funds, P.O. Box
9030, Boston, MA 02205-9030.
[WARBURG PINCUS FUNDS GRAPHIC]
<PAGE>
From time to time, the portfolios' investment adviser and co-administrator may
waive some fees and/or reimburse some expenses, without which performance would
be lower. Waivers and/or reimbursements are subject to change.
Returns are historical and include change in share price and reinvestment of
dividends and capital gains. Past performance cannot guarantee future results.
Returns and share price will fluctuate, and redemption value may be more or less
than original cost.
The views of the portfolios' management are as of the date of the letters and
holdings described in this document are as of April 30, 1999; these views and
holdings may have changed subsequent to these dates. Nothing in this document is
a recommendation to purchase or sell securities.
<PAGE>
Warburg Pincus Institutional Fund -- International Equity Portfolio
Semiannual Investment Adviser's Report -- April 30, 1999
- --------------------------------------------------------------------------------
June 15, 1999
Dear Shareholder:
For the six months ended April 30, 1999, Warburg Pincus Institutional Fund --
International Equity Portfolio had a return of 9.40%, vs. a gain of 17.47% for
the Morgan Stanley All Country World Excluding the U.S. Index.* The portfolio's
one-year return through April 30, 1999 was -7.05%. Its five-year and
since-inception (on September 1, 1992) average annual total returns through
April 30, 1999 were 5.32% and 10.94%, respectively. Note: Effective December 24,
1998, Harold E. Sharon serves as a Co-Portfolio Manager of the portfolio.
Richard H. King (formerly Portfolio Manager), P. Nicholas Edwards, Harold W.
Ehrlich and Vincent J. McBride (formerly Associate Portfolio Managers) also
serve as Co-Portfolio Managers.
MANAGER COMMENTARY
The period was almost uniformly positive for foreign stock markets, reflecting
a worldwide easing of monetary policy in the wake of last summer's global
financial-market turmoil. Emerging stock markets were particularly impressive,
reflecting investor optimism that financial crises in Latin America and Asia
were ebbing. Also showing strength was the Japanese stock market, aided by
favorable investor reaction to a wave of corporate-restructuring news. Most
European markets, meanwhile, had solid performance, buoyed by the launch of
European Monetary Union (EMU) on January 1 and by a continued supportive
interest-rate and inflation backdrop.
Against this backdrop, the portfolio had a good return in absolute terms,
though it lagged its benchmark for the six months. Positive contributors to the
portfolio's performance included its increased weighting in Japan, which proved
timely, given that market's significant advance. Weighing on the portfolio was
the surprising weakness in European currencies, particularly the euro, which
declined nearly 10% vs. the U.S. dollar during the period. European stocks
represented the majority of the portfolio's assets through the six months, and
the currency-translation loss (the portfolio's exposure was unhedged) reduced
the local-currency share-price gains generated by the portfolio.
We made a few noteworthy changes to the portfolio during the period in terms
of its regional exposure. Most notably, we lowered our weighting in Europe, from
roughly 70% of the portfolio at the start of the period to about a
1
<PAGE>
Warburg Pincus Institutional Fund -- International Equity Portfolio
Semiannual Investment Adviser's Report -- April 30, 1999 (cont'd)
- --------------------------------------------------------------------------------
55% weighting on April 30. This reflected both stock-specific decisions and
top-down considerations (e.g., because we believe that while European interest
rates have room to fall further, the region's rate environment will provide far
less of a tailwind for stocks going forward). That said, we still to see much to
like about Europe, given the launch of EMU and the prospects for continued
restructuring and merger & acquisition activity.
Regional allocations we raised included, as noted, Japan. While the country's
economy has remained in the doldrums, there are certainly grounds for optimism,
given some recent pro-growth government policies and corporate Japan's apparent
commitment to restructurings. Our specific focus here through the period was on
technology, consumer-finance, telecommunications and banking companies.
Elsewhere, we modestly raised our exposure to emerging markets late in the
period, encouraged by an easing of fears regarding Brazil and by central banks'
efforts to keep global growth in positive territory. In this context, we added
several Asian stocks (mostly from South Korea), including financial companies
focused on local markets as well as more globally oriented technology names. We
had no exposure to Latin America at the end of the period, however, since we
viewed valuations there as relatively expensive from a risk-vs.-reward
perspective. That said, we continue to closely monitor the region for buying
opportunities.
Richard H. King Harold W. Ehrlich
Co-Portfolio Manager Co-Portfolio Manager
P. Nicholas Edwards Vincent J. McBride
Co-Portfolio Manager Co-Portfolio Manager
Harold E. Sharon
Co-Portfolio Manager
* The Morgan Stanley All Country World Excluding the U.S. Index is a
market-capitalization weighted index of companies listed on stock exchanges
outside of the United States.
International investing entails special risk considerations, including
currency fluctuations, economic and political risks, lower liquidity, and
differences in accounting methods.
2
<PAGE>
Warburg Pincus Institutional Fund -- Emerging Markets Portfolio
Semiannual Investment Adviser's Report -- April 30, 1999
- --------------------------------------------------------------------------------
June 15, 1999
Dear Shareholder:
For the six months ended April 30, 1999, Warburg Pincus Institutional Fund --
Emerging Markets Portfolio had a gain of 16.45%, vs. a gain of 34.87% for the
Morgan Stanley Capital International Emerging Markets Free Index.* The
portfolio's one-year return through April 30, 1999 was -22.72%. Its since-
inception (on September 30, 1996) average annual total return through April 30,
1999 was -11.17%.
The period was a strong one for emerging markets, with the vast majority
posting double-digit gains in U.S. dollar terms. Driving the markets were a
general improvement in economic conditions, evident most visibly in the
Asian-Pacific region, and an easing of the broad concerns that had been
triggered by Russia's debt default and currency devaluation last August.
Set against this backdrop, the portfolio had a strong showing in absolute
terms for the period, but trailed its benchmark by a fairly wide margin. Much of
that underperformance can be attributed to the portfolio's Latin American
exposure. The portfolio entered the period with a fairly significant
underweighting in the region. We trimmed that stake substantially further
following Brazil's devaluation of its currency in mid-January, however,
concerned about the devaluation's effects on regional economic growth and, on a
company level, earnings prospects. While that decision was sound on fundamental
grounds, it proved costly in terms of the portfolio's relative performance, as
the region's stock markets subsequently staged a strong recovery in February
and, especially, March, with investors discounting most if not all of the bad
news and instead focusing on the prospects for a recovery. Though we did raise
our exposure to the region late in the period on some better-than-expected
economic data, especially concerning Brazil, the move proved too little, too
late in terms of the portfolio's relative performance.
We made several other noteworthy adjustments to the portfolio's regional and
country allocations over the course of the period. The most significant of these
was an increae in its Asian-Pacific exposure, reflecting our growing level of
comfort with the region from a risk-reward perspective and our ability to find
attractively valued stocks, particularly in specific markets such as South
- ------------------
* The Morgan Stanley Capital International Emerging Markets Free Index is a
market-capitalization-weighted index of emerging-market countries determined
by Morgan Stanley. The index includes only those countries open to non-local
investors.
3
<PAGE>
Warburg Pincus Institutional Fund -- Emerging Markets Portfolio
Semiannual Investment Adviser's Report -- April 30, 1999 (cont'd)
- --------------------------------------------------------------------------------
Korea and Taiwan. We also raised the portfolio's weighting in South Africa, for
similar reasons. Markets to which we trimmed the portfolio's exposure included
Israel and Poland, largely on profit-taking.
Looking ahead, we see grounds for optimism regarding emerging markets.
Investor sentiment toward the asset class appears to have taken a decided turn
for the better, and with many investors still underweighted in the markets, the
potential for a substantial inflow of liquidity into stocks would appear to be
sizable. Simultaneously, valuations in most emerging markets remain very
attractive relative to those in developed markets, providing additional
incentive for those investors who might be inclined to buy. Added to the mix is
generally encouraging news on the economic and earnings fronts. The
Asian-Pacific region appears to have begun to turn the corner economically,
after nearly two years of weakness. Many of the region's companies have also
begun to take steps to restructure and improve efficiencies, auguring well for a
longer-term, sustainable recovery. Latin America also shows signs that its
problems may prove less severe than many, including ourselves, had originally
feared. Prospects for other emerging markets vary, but in general appear to be
improving relative to where they stood several months ago. We believe that the
combination of better sentiment, attractive valuations and improving
fundamentals argues strongly for emerging markets, and we remain positive in our
outlook.
That said, we would encourage investors to continue to approach the asset
class with realistic expectations. While emerging markets have, we believe, very
attractive long-term growth prospects, they will also undoubtedly continue to
display very high short-term volatility, and investors should be comfortable
with that fact before committing assets. For investors with a sufficiently high
tolerance for risk, though, and a long-term investment horizon, we believe these
markets may be worthy of consideration.
Richard H. King Vincent J. McBride
Co-Portfolio Manager Co-Portfolio Manager
International investing entails special risk considerations, including
currency fluctuations, economic and political risks, lower liquidity, and
differences in accounting methods; these risks are generally heightened for
emerging-market investments.
4
<PAGE>
Warburg Pincus Institutional Fund -- Japan Growth Portfolio
Semiannual Investment Adviser's Report -- April 30, 1999
- --------------------------------------------------------------------------------
June 15, 1999
Dear Shareholder:
For the six months ended April 30, 1999, Warburg Pincus Institutional Fund --
Japan Growth Portfolio had a gain of 68.11%, vs. a gain of 26.64% for the
U.S.-dollar-denominated Tokyo Stock Exchange Index ("TOPIX").* The portfolio's
one-year return through April 30, 1999 was 46.18%. Its since-inception (on
October 31, 1997) average annual return through April 30, 1999 was 33.93%.
The six months saw a strong, broad-based rally in Japan's equity market.
Supporting stocks were a rash of corporate-restructuring announcements and signs
of improvement in Japan's long-stagnant economy. Investors were also heartened
by several promising policy initiatives from the Japanese government, including
announced measures to stabilize the country's ailing banking sector, whose
health is deemed vital for a sustainable economic recovery.
Against this backdrop, the portfolio generated a robust gain for the period,
aided by the market's broad strength and good stock selection. Particularly
strong performers for the portfolio were its technology holdings, a number of
which saw their share prices surge during the period. Other noteworthy
contributors to the portfolio's performance were its financial-services and
telecommunications stocks.
There were few significant changes in the portfolio during the period in terms
of sector emphasis. The portfolio's largest area of concentration remained
technology, broadly defined, where we continued to find a large number of
attractive investment opportunities. The portfolio maintained smaller but
still-meaningful weightings in the telecommunications, financial-services,
manufacturing and consumer-related sectors as well.
Our outlook on the prospects for Japan's equity market remains positive.
Corporate-restructuring announcements, which have been the main driver of the
market's recent gains, continue apace, which should continue to have a
- ------------------
* The TOPIX is an unmanaged capitalization-weighted index (with no defined
investment objective) designed to reflect the general movement of the Japanese
stock market. The index consists of all shares listed on the First Section of
the Tokyo Stock Exchange, which is generally reserved for Japan's larger
companies.
5
<PAGE>
Warburg Pincus Institutional Fund -- Japan Growth Portfolio
Semiannual Investment Adviser's Report -- April 30, 1999 (cont'd)
- --------------------------------------------------------------------------------
favorable impact on investor sentiment. Simultaneously, the Japanese economy
appears to have finally turned the corner and is beginning to show signs of
life, and the Japanese government has demonstrated its commitment to ensuring
that that recovery does not falter. We believe that the combination of ongoing
progress on the company-specific level, positive investor sentiment and an
improved economic backdrop augurs very well for the Japanese stock market.
Accordingly, we remain optimistic, and will continue to strive to identify those
companies with the best prospects for long-term share-price appreciation.
P. Nicholas Edwards
Portfolio Manager
International investing entails special risk considerations, including
currency fluctuations, economic and political risks, lower liquidity, and
differences in accounting methods. There are also risks associated with
investing in Japan, including the risk of investing in a single-country fund.
6
<PAGE>
Warburg Pincus Institutional Fund, Inc. -- International Equity Portfolio
Statement of Net Assets
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Number
of
Shares Value
---------- ------------
COMMON STOCKS (95.9%)
Canada (3.3%)
Rogers Communications, Inc. Class B+ 1,370,000 $ 25,682,032
The Toronto-Dominion Bank 54,300 2,902,716
------------
28,584,748
------------
Denmark (2.2%)
International Service System AS
Class B+ 68,150 4,010,177
Tele Danmark AS
Class B+ 146,300 15,112,280
------------
19,122,457
------------
France (8.5%)
Elf Aquitaine SA 60,800 9,424,473
PSA Peugeot Citroen 59,740 9,922,748
Rhone-Poulenc SA
Class A 244,392 11,635,006
Societe Generale d'Enterprises SA 379,300 16,051,290
Societe Generale Paris 73,000 13,082,880
Suez Lyonnaise des Eaux SA 42,200 7,187,956
Unisor SA 444,000 6,876,875
------------
74,181,228
------------
Germany (6.3%)
BHF Bank AG 228,550 8,668,371
Fresenius Medical Care AG 218,000 11,808,468
Hannover Rueckversicherungs AG 89,500 7,442,394
Mannesmann AG 72,830 9,546,600
Siemens AG 236,300 17,424,631
------------
54,890,464
------------
Greece (1.0%)
Hellenic Telecommunication
Organization SA ADR+ 766,800 9,153,675
------------
Number
of
Shares Value
---------- ------------
Hong Kong (1.0%)
Smartone Telecommunications 2,666,000 $ 9,236,162
------------
India (0.6%)
Bharat Petroleum Corp., Ltd. 100 365
Hindalco Industries, Ltd 100 1,332
Mahanagar Telephone Nigam, Ltd. 1,446,200 5,246,774
Reliance Industries, Ltd 11,097 33,463
State Bank of India, Ltd 1,550 5,623
------------
5,287,557
------------
Ireland (1.4%)
Bank of Ireland 612,700 12,283,558
------------
Israel (2.1%)
ECI Telecommunications Limited Designs 240,950 8,885,031
Orbotech, Ltd.+ 190,100 9,124,800
------------
18,009,831
------------
Italy (13.5%)
Banca Nazionale del Lavoro SpA+ 4,800,000 16,402,531
Olivetti SpA+ 4,718,000 16,471,721
Seat Pagine Gialle SpA 26,547,600 21,879,119
Telecom Italia SpA 4,773,000 50,849,654
Unione Immobilliare SpA 22,477,000 12,888,570
------------
118,491,595
------------
Japan (26.0%)
Advantest Corp. 133,900 10,242,068
Hoya Corp. 178,000 9,320,438
Matsushita Electric Industrial Group 258,000 18,524,088
Mitsui & Co., Ltd. 1,900,000 13,928,295
Nichiei Co., Ltd. 113,600 9,850,426
Nomura Securities Co., Ltd. 882,000 9,517,453
NTT Mobile Communications Network, Inc. 387 22,695,791
See Accompanying Notes to Financial Statements.
7
<PAGE>
Warburg Pincus Institutional Fund, Inc. -- International Equity Portfolio
Statement of Net Assets (cont'd)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Number
of
Shares Value
---------- ------------
COMMON STOCKS (cont'd)
Japan (cont'd)
Orix Corp. 260,700 $ 20,989,434
Rohm Co., Ltd. 159,000 19,182,090
Sanwa Bank, Ltd. 728,000 8,172,831
Shohkoh Fund & Co., Ltd 52,400 30,730,218
Softbank Corp. 49,700 6,616,322
Sony Corp. 109,400 10,219,473
Sumitomo Bank, Ltd. 684,000 9,260,486
Sumitomo Rubber Industries, Ltd. 791,000 5,202,145
Tokyo Electron, Ltd. 90,000 5,127,288
Toshiba Corp. 2,672,000 17,908,646
------------
227,487,492
------------
Mexico (0.1%)
Gruma SA de CV Class B 289,702 555,591
------------
Netherlands (2.9%)
Koninklijke Hoogovens NV 180,738 7,256,519
Laurus NV 124,839 2,687,706
Vedior NV 192,800 4,344,639
Vendex NV 436,563 10,876,895
------------
25,165,759
------------
Portugal (2.3%)
Banco Pinto & Sollo Mayor SA 226,000 4,220,076
Portugal Telecom SA 382,200 15,951,620
------------
20,171,696
------------
Singapore (1.3%)
DBS Land, Ltd. 2,725,000 5,052,554
National Steel Electronics Co. 843,000 2,837,378
Venture Manufacturing 576,000 3,163,153
------------
11,053,085
------------
South Africa (0.6%)
Sappi, Ltd. 716,600 5,165,243
------------
Number
of
Shares Value
---------- ------------
South Korea (3.2%)
Daewoo Securities Co. 265,800 $ 6,564,132
Hyundai Industrial Development & Construction 158,100 2,088,554
Korea Electric Power Corp. 169,400 4,874,766
Samsung Corp.+ 238,000 3,344,319
Samsung Electronics Co., Ltd. 147,700 11,359,022
------------
28,230,793
------------
Spain (1.1%)
Banco Santander Central Hispanoamericano SA 208,700 4,539,548
Endesa SA 248,400 5,529,227
------------
10,068,775
------------
Sweden (1.8%)
Biora AB ADR+ 37,100 466,069
Electrolux AB Series B 444,143 9,029,894
Kinnevik AB Class B 216,500 4,762,043
Kungsleden AB+ 145,000 1,103,346
------------
15,361,352
------------
Switzerland (2.3%)
Roche Holding AG 797 9,391,560
United Bank of Switzerland SA 31,900 10,853,690
------------
20,245,250
------------
Taiwan (1.7%)
Taiwan Semiconductor Manufacturing Co.+ 4,510,000 15,240,671
------------
Turkey (0.8%)
Eregli Dernir ve Celik Fabrikalari TAS+ 75,120,000 1,381,278
Haci Omer Sabanci Holding AS 100,000,000 2,745,373
Yapi ve Kredi Bankasi AB 122,000,000 2,928,739
------------
7,055,390
------------
See Accompanying Notes to Financial Statements.
8
<PAGE>
Warburg Pincus Institutional Fund, Inc. -- International Equity Portfolio
Statement of Net Assets (cont'd)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Number
of
Shares Value
---------- ------------
COMMON STOCKS (cont'd)
United Kingdom (11.9%)
AstraZeneca Group PLC 258,100 $ 10,110,741
Barclays PLC 362,800 11,531,008
British Aerospace PLC 1,427,400 10,686,894
British Airport Authority PLC 737,712 7,720,636
British Energy PLC 1,852,300 15,761,922
British Steel PLC 3,137,400 7,463,632
Orange PLC+ 843,800 11,493,776
Reed International PLC 1,047,800 9,540,340
Royal & Sun Alliance Insurance Group PLC 516,905 4,460,960
Williams PLC 2,277,023 15,654,822
------------
104,424,731
------------
TOTAL COMMON STOCKS
(Cost $706,481,763) 839,467,103
------------
PREFERRED STOCK (0.2%)
Thailand (0.2%)
Siam Commercial Bank Public Co., Ltd.
(Cost $1,420,859)+ 2,020,000 1,415,103
------------
WARRANTS (0.0%)
Thailand (0.0%)
Siam Commercial Bank Public Co., Ltd. 05/10/02
(Cost $0)+ 2,020,000 0
------------
Par
(000) Value
---------- ------------
REPURCHASE AGREEMENTS (2.3%)
Repurchase agreement with State Street Bank &
Trust Co. dated 04/30/99 at 4.82% to be
repurchased at $20,274,140 on 05/03/99.
(Collateralized by a pro rata amount of
U.S. Treasury Notes ranging in par values
from $26,210,000 to $50,000,000,
6.000%-8.500%, 07/31/02-02/15/20. Pro rata
market value of collateral is $20,673,346)
(Cost $20,266,000) 20,266 $ 20,266,000
------------
TOTAL INVESTMENTS (98.4%)
(Cost $728,168,622*) 861,148,206
OTHER ASSETS IN EXCESS OF LIABILITIES (1.6%) 14,013,021
------------
NET ASSETS (100.0%)
(applicable to 56,024,355 shares outstanding) $875,161,227
============
NET ASSET VALUE, offering and redemption
price per share ($875,161,227 divided by 56,024,355) $ 15.62
============
INVESTMENT ABBREVIATIONS
ADR = American Depository Receipt
- --------------------------------------------------------------------------------
+ Non-income producing security.
* Cost for federal income tax purposes is $729,565,258.
See Accompanying Notes to Financial Statements.
9
<PAGE>
Warburg Pincus Institutional Fund, Inc. -- Emerging Markets Portfolio
Schedule of Investments
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Number
of
Shares Value
---------- ------------
COMMON STOCKS (87.2%)
Argentina (3.3%)
Banco de Galicia & Buenos Aires SA de CV ADR 1,600 $ 36,900
Telefonica de Argentina SA ADR 800 29,900
------------
66,800
------------
Australia (2.7%)
Novus Petroleum, Ltd. 20,500 23,505
Oil Search, Ltd. 23,700 30,944
------------
54,449
------------
Brazil (4.2%)
Companhia Paranaense de Energia ADR 4,200 34,387
Embarfel Participacoes SA ADR 3,100 50,375
------------
84,762
------------
China (0.7%)
China Telecom, Ltd.+ 6,000 13,703
------------
Croatia (2.6%)
Pliva DD GDR 3,400 52,745
------------
Greece (3.0%)
Hellenic Telecommunication Organization SA ADR+ 5,000 59,687
------------
Hong Kong (5.7%)
Cosco Pacific, Ltd. 19,000 12,871
New World Development Co., Ltd. 100 248
Shaw Brothers, Ltd. 29,000 19,832
SmarTone Telecommunications Holdings, Ltd. 10,359 35,888
Wing Hang Bank, Ltd. 15,100 46,176
------------
115,015
------------
Hungary (1.2%)
Mol Magyar Olajes Gazipari RT 500 11,147
OTP Bank RT 300 12,667
------------
23,814
------------
Number
of
Shares Value
---------- ------------
India (6.3%)
Mahanagar Telephone Nigam, Ltd. GDR 8,200 $ 85,485
State Bank of India, Ltd. GDR+ 4,600 41,055
------------
126,540
------------
Israel (4.9%)
Blue Square Israel Co., Ltd. ADR 3,000 41,625
ECI Telecommunications Ltd 900 33,188
Orbotech, Ltd. 500 24,000
------------
98,813
------------
Mexico (7.0%)
Fomento Economico Mexicano SA de CV ADR+ 1,500 54,563
Grupo Industrial Saltillo SA de CV 12,900 47,469
Telefonos de Mexico SA ADR 500 37,875
------------
139,907
------------
Philippines (2.3%)
Philippine Long Distance Telephone Co. 1,440 46,581
------------
Poland (2.5%)
Bank Slaski SA 310 14,041
Elektrim Spolka Akcyjna SA 3,100 36,869
------------
50,910
------------
Singapore (2.0%)
Allgreen Properties, Ltd.+ 67,000 40,750
------------
South Africa (8.2%)
Amalgamated Banks of South Africa, Ltd. 7,000 36,695
Billiton, PLC 8,000 26,997
Sanlam, Ltd.+ 30,740 30,063
Sappi, Ltd. 3,400 24,507
South African Breweries, Ltd. 5,600 46,786
------------
165,048
------------
See Accompanying Notes to Financial Statements.
10
<PAGE>
Warburg Pincus Institutional Fund, Inc. -- Emerging Markets Portfolio
Schedule of Investments (cont'd)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Number
of
Shares Value
---------- ------------
COMMON STOCKS (cont'd)
South Korea (13.0%)
Cheil Jedang Corp. 300 $ 15,903
Daewoo Securities Co.+ 500 12,348
Hankuk Electric Glass Co., Ltd.+ 1,700 56,358
Korea Telecom Corp.+ 500 23,518
Samsung Corp. 4,420 62,109
Samsung Display Devices Co. 300 15,398
Samsung Electronics Co., Ltd. 609 46,836
Shinhan Bank 2,700 29,761
------------
262,231
------------
Taiwan (10.1%)
Far Eastern Textile 30,000 40,276
Phoenixtec Power Co., Ltd.+ 19,000 33,992
Taiwan Semiconductor Manufacturing Co.+ 26,000 87,862
United Microelectronics Co., Ltd.+ 19,000 29,634
Windbond Electronics Corp. GDR+ 1,100 11,440
------------
203,204
------------
Thailand (2.6%)
Hana Microelectronics Public Co., Ltd. 9,200 17,352
Siam Commercial Bank Public Co., Ltd. 26,200 34,591
------------
51,943
------------
Turkey (4.9%)
Akbank TAS 1,138,200 36,335
Akcansa Cimento AS 861,600 22,004
Yapi Ve Kredi Bankasi AS 1,722,450 41,349
------------
99,688
------------
TOTAL COMMON STOCKS
(Cost $1,332,723) 1,756,590
------------
Number
of
Shares Value
---------- ------------
PREFERRED STOCK (11.4%)
Brazil (5.8%)
Petroleo Brasileiro SA 295,200 $ 47,866
Tele Norte Leste Participacoes SA 2,331,500 40,756
Telecomunicacoes de Sao Paulo SA 231,100 28,836
------------
117,458
------------
Thailand (5.6%)
Siam Commercial Bank Public Co., Ltd. 161,000 112,788
------------
TOTAL PREFERRED STOCK
(Cost $202,812) 230,246
------------
Par
(000)
-----
CORPORATE BOND (1.4%)
Philippines (1.4%)
Piltel International Holding Corp. 1.750%,
01/17/02 (Cost $45,070) 66 27,885
------------
Number
of
Shares
----------
RIGHTS & WARRANTS (0.0%)
Brazil (0.0%)
Telecomunicaoes de Sao Paulo SA Rts.+ 2,258 0
------------
Thailand (0.0%)
Siam Commercial Bank Public Co., Ltd. Wts.
5/10/02+ 161,000 0
------------
TOTAL RIGHTS & WARRANTS
(Cost $0) 0
------------
TOTAL INVESTMENTS AT VALUE (100.0%)
(Cost $1,580,605*) $ 2,014,721
============
INVESTMENT ABBREVIATIONS
ADR = American Depository Receipt
GDR = Global Depository Receipt
- --------------------------------------------------------------------------------
+ Non-income producing security.
* Cost for federal income tax purposes is $1,804,939.
See Accompanying Notes to Financial Statements.
11
<PAGE>
Warburg Pincus Institutional Fund, Inc. -- Japan Growth Portfolio
Statement of Net Assets
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Number
of
Shares Value
---------- ------------
COMMON STOCKS (99.4%)
Automobiles (2.7%)
Jac Co., Ltd. 1,000 $ 137,398
------------
Banking (9.8%)
Sakura Bank, Ltd. 40,000 154,489
Sanwa Bank, Ltd. 18,000 202,075
Sumitomo Bank, Ltd. 10,000 135,387
------------
491,951
------------
Computers (10.4%)
Fujitsu Support & Service, Inc. 2,000 244,635
Nidec Corp. 1,000 129,858
TDK Corp. 2,000 151,305
------------
525,798
------------
Consumer Durables (8.4%)
Sankyo Co., Ltd. 6,800 235,855
Sony Corp. 2,000 186,828
------------
422,683
------------
Electric Components (14.8%)
Nemic-Lambda K.K 4,000 263,402
Rohm Co., Ltd. 1,000 120,642
Tokyo Electronics, Ltd 4,000 227,880
Toshiba Corp. 20,000 134,047
------------
745,971
------------
Electronics (13.8%)
Advantest Corp. 2,200 168,279
Megachips Corp. 2,000 118,631
Nintendo Co., Ltd. 2,000 186,493
Tokyo Seimitsu Co., Ltd 4,000 221,512
------------
694,915
------------
Financial Services (13.2%)
Nomura Securities Co., Ltd. 14,000 151,071
Orix Corp. 2,000 161,024
Number
of
Shares Value
---------- ------------
Financial Services (cont'd)
Shohkoh Fund & Co., Ltd 600 $ 351,873
------------
663,968
------------
Medical Equipment (4.2%)
Hoya Corp. 4,000 209,448
------------
Publishing (1.8%)
Kadokawa Shoten Publishing Co., Ltd 600 91,487
------------
Retail (7.7%)
Shimamura Co. 2,000 123,993
Softbank Corp. 2,000 266,250
------------
390,243
------------
Telecommunications (12.6%)
Hikari Tsushin, Inc. 1,000 209,448
Matsushita Communication Industrial Co., Ltd 4,000 287,195
NTT Data Corp. 170 134,591
------------
631,234
------------
TOTAL INVESTMENTS (99.4%)
(Cost $3,811,790*) 5,005,096
OTHER ASSETS IN EXCESS OF LIABILITIES (0.6%) 30,436
------------
NET ASSETS (100.0%)
(applicable to 331,037 shares outstanding) $ 5,035,532
============
NET ASSET VALUE,
offering and redemption price per share
($5,035,532 divided by 331,037) $ 15.21
============
- --------------------------------------------------------------------------------
* Also cost for federal income tax purposes.
See Accompanying Notes to Financial Statements.
12
<PAGE>
Warburg Pincus Institutional Fund, Inc. -- Emerging Markets Portfolio
Statement of Assets and Liabilities
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS
Investments at value (Cost $1,580,605) $2,014,721
Receivable for investment sold (Cost $220,613) 220,509
Foreign currency (Cost $144,373) 144,809
Cash 136,624
Singapore Swap Baskets (Cost $54,400) 67,728
Dividends and interest receivable (Cost $41,865) 34,138
Receivable from advisor 7,626
Prepaid insurance 550
----------
Total Assets 2,626,705
----------
LIABILITIES
Payable for investments purchased (Cost $181,395) 181,500
Accrued expenses payable 40,772
----------
Total Liabilities 222,272
----------
NET ASSETS, applicable to 364,885 shares outstanding $2,404,433
==========
NET ASSET VALUE, offering and redemption price per share
($2,404,433 divided by 364,885) $ 6.59
==========
See Accompanying Notes to Financial Statements.
13
<PAGE>
Warburg Pincus Institutional Fund, Inc.
Statement of Operations
For the Six Months Ended April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY EMERGING MARKETS JAPAN GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
-------------------- ---------------- ------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $11,963,753 $ 74,664 $ 10,122
Interest 705,036 55,422 1,811
Foreign taxes withheld (892,818) (8,859) (1,518)
----------- ----------- ----------
Total investment income 11,775,971 121,227 10,415
----------- ----------- ----------
EXPENSES:
Investment advisory 3,977,140 46,635 13,108
Administrative services 942,052 13,274 4,630
Audit 19,766 5,502 5,793
Custodian/Sub-Custodian 373,499 14,640 396
Directors 1,604 1,032 1,068
Insurance 9,136 268 6
Interest 17,324 930 0
Legal 60,292 1,167 51
Printing 21,492 1,002 160
Registration Fees 13,239 15,278 13,271
Transfer agent 24,044 188 192
Miscellaneous 8,802 604 396
----------- ----------- ----------
5,468,390 100,520 39,071
Less: fees waived, expenses reimbursed and
transfer agent offsets (745,536) (42,227) (24,175)
----------- ----------- ----------
Total expenses 4,722,854 58,293 14,896
----------- ----------- ----------
Net investment income (loss) 7,053,117 62,934 (4,481)
----------- ----------- ----------
NET REALIZED AND UNREALIZED GAIN FROM
INVESTMENTS AND FOREIGN CURRENCY RELATED ITEMS:
Net realized gain (loss) from security and
other related transactions 2,802,480 (3,259,982) 55,271
Net realized loss from foreign currency
related items (17,750,472) (77,568) (93,416)
Net change in unrealized appreciation from
investments and foreign currency related
items 97,498,236 3,649,559 1,426,221
----------- ----------- ----------
Net realized and unrealized gain from
investments and foreign currency related
items 82,550,244 312,009 1,388,076
----------- ----------- ----------
Net increase in net assets resulting from
operations $89,603,361 $ 374,943 $1,383,595
=========== =========== ==========
</TABLE>
See Accompanying Notes to Financial Statements.
14
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
15
<PAGE>
<TABLE>
<CAPTION>
Warburg Pincus Institutional Fund, Inc.
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
------------------------------------
FOR THE
SIX MONTHS ENDED FOR THE
APRIL 30, 1999 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1998
---------------- ----------------
<S> <C> <C>
FROM OPERATIONS:
Net investment income $ 7,053,117 $ 14,438,626
Net realized gain (loss) from security and other related
transactions 2,802,480 (124,396,419)
Net realized gain (loss) from foreign currency related
items (17,750,472) 23,724,747
Net change in unrealized appreciation (depreciation) from
investments and foreign currency related items 97,498,236 40,102,209
-------------- --------------
Net increase (decrease) in net assets resulting from
operations 89,603,361 (46,130,837)
-------------- --------------
FROM DISTRIBUTIONS:
Dividends from net investment income (9,397,386) (12,756,660)
Distributions from realized gains 0 (86,608,655)
-------------- --------------
Net decrease in net assets from distributions (9,397,386) (99,365,315)
-------------- --------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 106,687,391 172,832,170
Reinvested dividends 8,012,862 89,134,715
Net asset value of shares redeemed (338,986,761) (267,045,777)
-------------- --------------
Net increase (decrease) in net assets from capital
share transactions (224,286,508) (5,078,892)
-------------- --------------
Net increase (decrease) in net assets (144,080,533) (150,575,044)
NET ASSETS:
Beginning of period 1,019,241,760 1,169,816,804
-------------- --------------
End of period $ 875,161,227 $1,019,241,760
============== ==============
UNDISTRIBUTED NET INVESTMENT INCOME: $ 6,220,541 $ 9,394,503
============== ==============
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO JAPAN GROWTH PORTFOLIO
---------------------------------- ----------------------------------
FOR THE FOR THE
SIX MONTHS ENDED FOR THE SIX MONTHS ENDED FOR THE
APRIL 30, 1999 YEAR ENDED APRIL 30, 1999 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1998 (UNAUDITED) OCTOBER 31, 1998
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income $ 62,934 $ 483,012 $ (4,481) $ 5,466
Net realized gain (loss) from security and other related
transactions (3,259,982) (15,625,081) 55,271 (27,825)
Net realized gain (loss) from foreign currency related
items (77,568) (70,413) (93,416) 96,058
Net change in unrealized appreciation (depreciation) from
investments and foreign currency related items 3,649,559 3,271,341 1,426,221 (223,874)
------------ ------------ ---------- ----------
Net increase (decrease) in net assets resulting from
operations 374,943 (11,941,141) 1,383,595 (150,175)
------------ ------------ ---------- ----------
FROM DISTRIBUTIONS:
Dividends from net investment income (250,526) (240,803) (14,953) (8,999)
Distributions from realized gains 0 (2,746,087) 0 0
------------ ------------ ---------- ----------
Net decrease in net assets from distributions (250,526) (2,986,890) (14,953) (8,999)
------------ ------------ ---------- ----------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 1,356 1,259,833 2,190,000 1,629,019
Reinvested dividends 250,526 2,985,126 1,090 8,999
Net asset value of shares redeemed (21,398,388) (3,171,709) 0 (4,044)
------------ ------------ ---------- ----------
Net increase (decrease) in net assets from capital
share transactions (21,146,506) 1,073,250 2,191,090 1,633,974
------------ ------------ ---------- ----------
Net increase (decrease) in net assets (21,022,089) (13,854,781) 3,559,732 1,474,800
NET ASSETS:
Beginning of period 23,426,522 37,281,303 1,475,800 1,000
------------ ------------ ---------- ----------
End of period $ 2,404,433 $ 23,426,522 $5,035,532 $1,475,800
============ ============ ========== ==========
UNDISTRIBUTED NET INVESTMENT INCOME: $ 0 $ 239,298 $ 14,529 $ 14,953
============ ============ ========== ==========
</TABLE>
17
<PAGE>
Warburg Pincus Institutional Fund, Inc. -- International Equity Portfolio
Financial Highlights
(For a Share of the Portfolio Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
APRIL 30, 1999
(UNAUDITED) 1998 1997 1996 1995 1994
PERIOD ENDED: -------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning
of period $ 14.41 $ 16.51 $ 16.14 $ 15.10 $ 16.34 $ 13.49
-------- ---------- ---------- -------- -------- --------
INVESTMENT ACTIVITIES:
Net investment income 0.01 0.21 0.20 0.26 0.15 0.17
Net gains (losses) on
investments and foreign
currency related items
(both realized and
unrealized) 1.34 (0.91) 0.78 1.28 (0.64) 2.87
-------- ---------- ---------- -------- -------- --------
Total from investment
activities 1.35 (0.70) 0.98 1.54 (0.49) 3.04
-------- ---------- ---------- -------- -------- --------
DISTRIBUTIONS:
From net investment
income (0.14) (0.18) (0.13) (0.50) (0.18) (0.07)
From realized capital
gains 0.00 (1.22) (0.48) 0.00 (0.57) (0.12)
-------- ---------- ---------- -------- -------- --------
Total distributions (0.14) (1.40) (0.61) (0.50) (0.75) (0.19)
-------- ---------- ---------- -------- -------- --------
Net asset value, end of
period $ 15.62 $ 14.41 $ 16.51 $ 16.14 $ 15.10 $ 16.34
======== ========== ========== ======== ======== ========
Total return 9.40%+ (4.11)% 6.20% 10.48% (2.83)% 22.62%
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
(000s omitted) $875,161 $1,019,242 $1,169,817 $937,443 $507,759 $331,297
Ratio of expenses to
average net assets .96%*@ .95%@ .95%@ .96%@ .95% .95%
Ratio of net income to
average net assets 1.42%* 1.21% .98% 1.05% 1.20% .59%
Decrease reflected in
above operating expense
ratios due to
waivers/reimbursements .14%* .13% .14% .18% .23% .29%
Portfolio turnover rate 63.30%+ 113.58% 69.99% 29.91% 39.70% 19.34%
</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 net
expense ratio by .01% for the six months ended April 30, 1999 and .00%, .00%
and .01% for the years ended October 31, 1998, 1997 and 1996, respectively.
The operating expense ratio after reflecting these arrangements was .95% for
the six months ended April 30, 1997 and .95%, .95% and .95% for the years
ended October 31, 1998, 1997 and 1996, respectively.
+ Non annualized.
* Annualized
See Accompanying Notes to Financial Statements.
18
<PAGE>
Warburg Pincus Institutional Fund, Inc. -- Emerging Markets Portfolio
Financial Highlights
(For a Share of the Portfolio Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
APRIL 30, 1999
(UNAUDITED) 1998 1997 1996**
PERIOD ENDED: -------------- ------- ------- -------
<S> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $ 5.72 $ 9.36 $ 9.86 $ 10.00
------- ------- ------- -------
INVESTMENT ACTIVITIES:
Net investment income (loss) (0.10) 0.11(a) 0.10 0.01
Net gains (losses) on investments and foreign
currency related items (both realized and
unrealized) 1.03 (2.99) (0.53) (0.15)
------- ------- ------- -------
Total from investment activities 0.93 (2.88) (0.43) (0.14)
------- ------- ------- -------
DISTRIBUTIONS:
From net investment income (0.06) (0.01) (0.02) 0.00
From realized capital gains 0.00 (0.75) (0.05) 0.00
------- ------- ------- -------
Total distributions (0.06) (0.76) (0.07) 0.00
------- ------- ------- -------
Net asset value, end of period $ 6.59 $ 5.72 $ 9.36 $ 9.86
======= ======= ======= =======
Total return 16.45%+ (32.90)% (4.43)% (1.40)%+
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $ 2,404 $23,427 $37,281 $29,698
Ratio of expenses to average net assets 1.25%*@ 1.25%@ 1.25%@ 1.25%*@
Ratio of net income to average net assets 1.35%* 1.54% .92% 1.75%*
Decrease reflected in above operating expense
ratios due to waivers/reimbursements .90%* .16% .40% 2.18%*
Portfolio turnover rate 74.53%+ 152.57% 107.21% 2.39%+
</TABLE>
- --------------------------------------------------------------------------------
** For the period September 30, 1996 (commencement of operations) through
October 31, 1996.
(a) Per share information is calculated using the average share outstanding
method.
@ 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.
See Accompanying Notes to Financial Statements.
19
<PAGE>
Warburg Pincus Institutional Fund, Inc. -- Japan Growth Portfolio
Financial Highlights
(For a Share of the Portfolio Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
APRIL 30, 1999
(UNAUDITED) 1998
PERIOD ENDED: -------------- ----
<S> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $ 9.13 $10.00
------ ------
INVESTMENT ACTIVITIES:
Net investment income 0.04 0.07
Net gains or losses on investments and foreign currency
related items (both realized and unrealized) 6.13 (0.85)
------ ------
Total from investment activities 6.17 (0.78)
------ ------
DISTRIBUTIONS:
From net investment income (0.09) (0.09)
------ ------
Net asset value, end of period $15.21 $ 9.13
====== ======
Total return 68.11%+ (7.84)%
RATIOS AND SUPPLMENTAL DATA
Net assets, end of period (000s omitted) $5,036 $1,476
Ratio of expenses to average net assets 1.26%*@ 1.25%@
Ratio of net income (loss) to average net assets (.38)%* .39%
Decrease reflected in above operating expense ratios due
to waivers/reimbursements 2.02%* 4.52%
Portfolio turnover rate 36.90%+ 39.88%
</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 net
expense ratio by .01% for the six months ended April 30, 1999 and .00% for the
year ended October 31, 1998. The operating expense ratio after reflecting
these arrangements was 1.25% for the six months ended April 30, 1999 and 1.25%
for the year ended October 31, 1998.
+ Non annualized.
* Annualized.
See Accompanying Notes to Financial Statements.
20
<PAGE>
Warburg Pincus Institutional Fund, Inc.
Notes to Financial Statements
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
Warburg Pincus Institutional Fund, Inc. is an open-end management investment
company registered under the Investment Company Act of 1940, as amended, (the
1940 Act) and currently offers seven managed investment funds (Portfolios) of
which three are contained in this report. The International Equity Portfolio is
classified as diversified, and the Emerging Markets Portfolio and the Japan
Growth Portfolio are classified as non-diversified.
Investment objectives for each portfolio are as follows: International Equity
Portfolio seeks long-term capital appreciation; Emerging Markets Portfolio seeks
growth of capital; and Japan Growth Portfolio seeks long-term growth of capital.
The net asset value of each portfolio is determined daily as of the close of
regular trading on the New York Stock Exchange. Each portfolio's investments are
valued at market value, which is generally determined using the last reported
sales price. If no sales are reported, investments are generally valued at the
mean between the last reported bid and asked prices. If market quotations are
not readily available, securities and other assets are valued by another method
that the Board of Directors believes accurately reflects fair value. Debt that
will mature in 60 days or less is valued on the basis of amortized cost, which
approximates market value, unless the Board determines that using this method
would not reflect an investment's value.
When a portfolio writes or purchases a call or a put option, an amount equal
to the premium received or paid by the portfolio is recorded as a liability or
asset, the value of which is marked-to-market daily to reflect the current
market value of the option. When the option expires, the portfolio realizes a
gain or loss equal to the amount of the premium received or paid. When the
Portfolio exercises an option or enters into a closing transaction by purchasing
or selling an offsetting option, it realizes a gain or loss without regard to
any unrealized gain or loss on the underlying security. The potential loss
associated with purchasing an option is limited to the premium paid, and the
premium would partially offset any gains achieved from its use.
The books and records of the portfolios are maintained in U.S. dollars.
Transactions denominated in foreign currencies are recorded at the current
prevailing exchange rates. All assets and liabilities denominated in foreign
currencies are translated into U.S. dollar amounts at the current exchange rate
at the end of the period. Translation gains or losses resulting from changes in
the exchange rate during the reporting period and realized gains and losses on
the settlement of foreign currency transactions are reported in the results of
21
<PAGE>
Warburg Pincus Institutional Fund, Inc.
Notes to Financial Statements (cont'd)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES -- (CONT'D)
operations for the current period. The portfolios do not isolate that portion of
realized gains and losses on investments in equity securities which are due to
changes in the foreign exchange rate from that which are due to changes in
market prices of equity securities. The portfolios isolate that portion of
realized gains and losses on investments in debt securities which are due to
changes in the foreign exchange rate from that which are due to changes in
market prices of debt securities.
The portfolios may invest in securities of foreign countries and governments
which involve certain risks in addition to those inherent in domestic
investments. Such risks generally include, among others, currency risk,
(fluctuations in currency exchange rates), information risk (key information may
be inaccurate or unavailable) and political risk (expropriation, nationalization
or the imposition of capital or currency controls or punitive taxes). Other
risks of investing in foreign securities include liquidity and valuation risks.
In addition, focusing investment in a single country, such as Japan, involves
increased risks.
The International Equity and Emerging Markets Portfolios' investments in
securities of issuers located in less developed countries considered to be
"emerging markets" involve risks in addition to those generally applicable to
foreign securities. Investments in the securities of issuers located in emerging
markets expose the fund to economic structures that are generally less diverse
and mature than, and to political systems that can be expected to have less
stability than, those of developed countries. The typically small size of the
markets for securities of issuers located in emerging markets may also result in
a lack of liquidity and greater price volatility.
Security transactions are accounted for on a trade date basis. Interest income
is recorded on the accrual basis. Dividends are recorded on the ex-dividend
date. The cost of investments sold is determined by use of the specific
identification method for both financial reporting and income tax purposes.
Dividends from net investment income and distributions of net realized capital
gains, if any, are declared and paid annually. However, to the extent that a net
realized capital gain can be reduced by a capital loss carryover, such gain will
not be distributed. Income and capital gain distributions are determined in
accordance with federal income tax regulations which may differ from generally
accepted accounting principles.
22
<PAGE>
Warburg Pincus Institutional Fund, Inc.
Notes to Financial Statements (cont'd)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES -- (CONT'D)
No provision is made for federal taxes as it is the fund's intention to have
each Portfolio continue to qualify for and elect the tax treatment applicable to
regulated investment companies under the Internal Revenue Code and make the
requisite distributions to its shareholders which will be sufficient to relieve
it from federal income and excise taxes.
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, each portfolio, along with the other funds advised by Warburg Pincus
Asset Management, Inc., the portfolios' investment adviser (Warburg)
(collectively the Warburg Funds), transfers uninvested cash balances to a pooled
cash account, which is invested in repurchase agreements secured by U.S.
government securities. Securities pledged as collateral for repurchase
agreements are held by the portfolios' custodian bank until the agreements
mature. Each agreement requires that the market value of the collateral be
sufficient to cover payments of interest and principal; however, in the event of
default or bankruptcy by the other party to the agreement, retention of the
collateral may be subject to legal proceedings.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statement and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
The portfolios have an arrangement with their transfer agent whereby interest
earned on uninvested cash balances was used to offset a portion of the transfer
agent expense.
For the six months ended April 30, 1999, the portfolios received credits or
reimbursements under this arrangement as follows:
PORTFOLIO AMOUNT
- --------- -------
International Equity $32,824
Emerging Markets 108
Japan Growth 83
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR
Warburg, which is indirectly controlled by Warburg, Pincus & Co., serves as
each portfolio's investment adviser. On February 15, 1999, Warburg, Pincus & Co.
and Credit Suisse Group announced that they reached an agreement for Credit
Suisse to acquire Warburg. Under the terms of the arrangement, no
23
<PAGE>
Warburg Pincus Institutional Fund, Inc.
Notes to Financial Statements (cont'd)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR -- (CONT'D)
immediate changes are planned to investment portfolio managers and investment
professionals. The Warburg Pincus funds' Board of Directors/Trustees and
shareholders have approved the "assignment" of each Fund's current investment
advisory agreement with Warburg. The transaction is expected to be completed in
mid-1999. For its investment advisory services, Warburg is entitled to receive
the following fees computed daily and payable monthly based on each portfolio's
average daily net assets:
PORTFOLIO ANNUAL RATE
- --------- ---------------------------------
International Equity .80% of average daily net assets
Emerging Markets 1.00% of average daily net assets
Japan Growth 1.10% of average daily net assets
For the six months ended April 30, 1999, investment advisory fees, waivers and
reimbursements were as follows:
<TABLE>
<CAPTION>
GROSS NET EXPENSE
PORTFOLIO ADVISORY FEE WAIVER ADVISORY FEE REIMBURSEMENTS
- --------- ------------ ----------- ------------ --------------
<S> <C> <C> <C> <C>
International Equity $3,977,140 $ (712,712) $3,264,428 $ 0
Emerging Markets 46,635 (36,523) 10,112 0
Japan Growth 13,108 (13,108) 0 (9,554)
</TABLE>
Counsellors Funds Service, Inc. (CFSI), a wholly-owned subsidiary of Warburg,
and PFPC Inc. (PFPC), an indirect, wholly-owned subsidiary of PNC Bank Corp.
(PNC), serve as each portfolio's co-administrators. For administrative services,
CFSI receives a fee calculated at an annual rate of .10% of each portfolios'
average daily net assets.
For the six months ended April 30, 1999, administrative services fees earned
by CFSI were as follows:
PORTFOLIO CO-ADMINISTRATION FEE
- --------- ---------------------
International Equity $497,142
Emerging Markets 4,663
Japan Growth 1,192
For administrative services, PFPC currently receives a fee based on the
following fee structure:
AVERAGE DAILY NET ASSETS ANNUAL RATE
- ------------------------ --------------------------------
First $250 million .12% of average daily net assets
Second $250 million .10% of average daily net assets
Third $250 million .08% of average daily net assets
Over $750 million .05% of average daily net assets
24
<PAGE>
Warburg Pincus Institutional Fund, Inc.
Notes to Financial Statements (cont'd)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR -- (CONT'D)
For the six months ended April 30, 1999, administrative service fees earned
and voluntarily waived by PFPC (including out-of-pocket expenses) were as
follows:
<TABLE>
<CAPTION>
NET
PORTFOLIO CO-ADMINISTRATION FEE WAIVER CO-ADMINISTRATION FEE
- --------- --------------------- -------- ---------------------
<S> <C> <C> <C>
International Equity $444,910 $ 0 $444,910
Emerging Markets 8,611 (5,596) 3,015
Japan Growth 3,438 (1,430) 2,008
</TABLE>
Counsellors Securities Inc. (CSI), also a wholly-owned subsidiary of Warburg,
serves as distributor of each portfolio's shares without compensation.
3. LINE OF CREDIT
The portfolios, together with certain other Warburg funds, have established
committed and uncommitted lines of credit facilities with PNC for temporary or
emergency purposes primarily relating to unanticipated share redemptions. Under
the terms of the committed line of credit, the Warburg funds with access to the
facility pay a commitment fee at a rate of .07% per annum on the average daily
balance of the line of credit, which is undisbursed and uncanceled during the
preceding quarter. In addition, the Warburg funds will pay interest on
borrowings at the bank's base rate plus .45%. Under the terms of the uncommitted
lines of credit, the Warburg funds will pay interest on borrowings at the bank's
base rate plus .55%. Aggregate borrowings for each fund under the committed and
uncommitted lines of credit with PNC may not exceed the lowest of (a)
thirty-three and one-third percent (33 1/3%) of the assets of such fund, for any
fund that does not invest at least sixty-five percent (65%) of its assets in
international equity or fixed income securities (an International Fund) and
twenty-five percent (25%) of the assets of any fund that is an International
fund: (b) the maximum amount permitted by such fund's investment policies and
restrictions. At April 30, 1999 and during the six months ended April 30, 1999,
the portfolios had the following borrowings under the line of credit agreement:
<TABLE>
<CAPTION>
AVERAGE MAXIMUM LOAN
AVERAGE DAILY INTEREST DAILY LOAN OUTSTANDING
PORTFOLIO LOAN BALANCE RATE % OUTSTANDING AT 04/30/99
- --------- ------------- -------- ----------- -----------
<S> <C> <C> <C> <C>
International Equity $482,505 5.58% $11,529,000 $0
Emerging Markets 32,572 5.28% 1,197,000 0
</TABLE>
25
<PAGE>
Warburg Pincus Institutional Fund, Inc.
Notes to Financial Statements (cont'd)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
4. INVESTMENTS IN SECURITIES
For the six months ended April 31, 1999, purchases and sales of investment
securities (excluding short-term investments) were as follows:
PORTFOLIO PURCHASES SALES
- --------- -------------- --------------
International Equity $ 605,993,806 $ 772,187,816
Emerging Markets 6,607,723 25,864,910
Japan Growth 3,055,394 989,393
At April 30, 1999, the net unrealized appreciation from investments for those
securities having an excess of value over cost and net depreciation from
investments for those securities having an excess of cost over value (based on
cost for federal income tax purposes) was as follows:
NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
PORTFOLIO APPRECIATION DEPRECIATION (DEPRECIATION)
- --------- ------------ ------------ --------------
International Equity $157,525,869 $(25,942,921) $131,582,948
Emerging Markets 429,005 (219,223) 209,782
Japan Growth 1,238,537 (45,231) 1,193,306
5. FORWARD FOREIGN CURRENCY CONTRACTS
Each portfolio may enter into forward currency contracts for the purchase or
sale of a specific foreign currency at a fixed price on a future date. Risks may
arise from movements in the value of a foreign currency relative to the U.S.
dollar and from the potential default of counterparties to the contracts. Each
Portfolio will enter into forward contracts primarily for hedging purposes.
Forward currency contracts are adjusted by the daily exchange rate of the
underlying currency and any gains or losses are recorded for financial statement
purposes as unrealized until the contract settlement date.
26
<PAGE>
Warburg Pincus Institutional Fund, Inc.
Notes to Financial Statements (cont'd)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
5. FORWARD FOREIGN CURRENCY CONTRACTS -- (CONT'D)
At April 30, 1999, the Japan Growth Portfolio had the following open forward
foreign currency contracts:
<TABLE>
<CAPTION>
FOREIGN UNREALIZED
EXPIRATION CURRENCY CONTRACT CONTRACT FOREIGN EXCHANGE
FORWARD CURRENCY CONTRACT DATE TO BE SOLD AMOUNT VALUE GAIN (LOSS)
- ------------------------- ---------- ------------- ----------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
Japanese Yen 08/31/99 71,332,000 $ 600,337 $ 607,840 $ (7,503)
Japanese Yen 08/31/99 40,045,000 338,504 341,235 (2,731)
Japanese Yen 08/31/99 33,780,000 285,063 287,849 (2,786)
Japanese Yen 08/31/99 10,600,000 89,603 90,326 (723)
Japanese Yen 08/31/99 17,000,000 143,809 144,862 (1,053)
Japanese Yen 08/31/99 12,000,000 100,008 102,255 (2,247)
Japanese Yen 08/31/99 12,000,000 102,819 102,255 564
Japanese Yen 08/31/99 9,000,000 77,683 76,691 992
Japanese Yen 08/31/99 14,000,000 121,942 119,298 2,644
Japanese Yen 08/31/99 231,000,000 1,998,313 1,968,415 29,898
Japanese Yen 08/31/99 15,000,000 127,201 127,819 (618)
Japanese Yen 08/31/99 14,000,000 119,403 119,298 105
Japanese Yen 08/31/99 10,000,000 83,703 85,213 (1,510)
Japanese Yen 08/31/99 11,500,000 96,684 97,995 (1,311)
Japanese Yen 08/31/99 23,000,000 193,847 195,989 (2,142)
Japanese Yen 08/31/99 18,000,000 153,442 153,383 59
Japanese Yen 08/31/99 35,000,000 295,608 298,245 (2,637)
----------- ----------- ------------
$ 4,927,969 $ 4,918,968 $ 9,001
=========== =========== ============
</TABLE>
6. EQUITY SWAP TRANSACTIONS
The International Equity Portfolio and the Emerging Markets Portfolio each
entered into equity swap agreements dated January 7, 1999, January 8, 1999 and
January 11, 1999. Each portfolio paid a notional amount plus a 1.25% upfront fee
for a basket of Singapore local common stocks. The initial notional amount
represented the then-current market value of the common stock. The notional
amount is marked-to-market daily. The swap agreements expire on January 8, 2001,
but are terminable by either party on one business day's notice. The final
notional amount at termination will be the average execution price of unwinding
the counterparty's hedge for the swap (the sale of the common stocks) at
termination. Each portfolio will receive the final notional amount, less a 1.25%
fee, five business days after termination date.
During the term of the equity swap agreements, each portfolio is entitled to
dividends on the stock less a dividend withholding tax of 26% and a 1%
processing fee (not to exceed $1,000). Each portfolio will recognize the net
dividend amount received as dividend income on the dividend ex-date and receive
each dividend five business days after the payment date. In addition, a
portfolio may instruct the counterparty regarding participation in any rights
27
<PAGE>
Warburg Pincus Institutional Fund, Inc.
Notes to Financial Statements (cont'd)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
6. EQUITY SWAP TRANSACTIONS -- (cont'd)
offerings of the common stock, in exchange for the subscription price plus a
0.75% fee to the counterparty.
At April 30, 1999, the International Equity Portfolio had the following open
equity swap agreements:
MARKET NOTIONAL UNREALIZED
VALUE AMOUNT APPRECIATION
----------- ----------- ------------
Basket 1 $ 6,075,965 $ 4,527,990 $1,547,975
Basket 2 1,557,741 1,239,378 318,363
Basket 3 4,943,554 4,332,909 610,645
----------- ----------- ----------
$12,577,260 $10,100,277 $2,476,983
=========== =========== ==========
At April 30, 1999, the Emerging Markets Portfolio had the following open
equity swap agreements:
MARKET NOTIONAL UNREALIZED
VALUE AMOUNT APPRECIATION
------- -------- ------------
Basket 1 $32,775 $24,425 $ 8,350
Basket 2 8,416 6,695 1,721
Basket 3 26,537 23,280 3,257
------- ------- -------
$67,728 $54,400 $13,328
======= ======= =======
7. CAPITAL SHARE TRANSACTIONS
The fund is authorized to issue up to thirteen billion full and fractional
shares of common stock of separate series having a $.001 par value per share.
Shares of nine series have been classified, seven of which constitute the
interests in the portfolios.
Transactions in shares of each portfolio were as follows:
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY EMERGING MARKETS JAPAN GROWTH
--------------------------------- --------------------------------- ---------------------------------
FOR THE SIX FOR THE SIX FOR THE SIX
MONTHS ENDED FOR THE MONTHS ENDED FOR THE MONTHS ENDED FOR THE
APRIL 30, 1999 YEAR ENDED APRIL 30, 1999 YEAR ENDED APRIL 30, 1999 YEAR ENDED
(UNAUDITED) OCTOBER 31, 1998 (UNAUDITED) OCTOBER 31, 1998 (UNAUDITED) OCTOBER 31, 1998
-------------- ---------------- -------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 7,044,044 11,088,063 222 149,483 169,274 160,988
Shares issued to
shareholders on
reinvestment of
dividends 541,044 6,263,859 44,185 388,183 107 964
Shares redeemed (22,287,549) (17,485,779) (3,773,761) (427,153) 0 (396)
----------- ----------- ---------- -------- ---------- --------
Net increase (decrease)
in shares outstanding (14,702,461) (133,857) (3,729,354) 110,513 169,381 161,556
=========== =========== ========== ======== ========== ========
</TABLE>
28
<PAGE>
Warburg Pincus Institutional Fund, Inc.
Notes to Financial Statements (cont'd)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
8. LIABILITIES
At April 30, 1999, the portfolio had the following affiliated and investment
related liabilities:
<TABLE>
<CAPTION>
INTERNATIONAL EMERGING JAPAN
EQUITY MARKETS GROWTH
FUND PORTFOLIO FUND
------------- --------- ---------
<S> <C> <C> <C>
Payable for securities purchased (at value) $ 6,829,642 $181,500 $ 0
Administration services fee payable 77,165 252 395
Investment advisory fee payable 510,962 0 329
Payable for fund shares redeemed 0 0 0
</TABLE>
9. NET ASSETS
At April 30, 1999, capital contributions, undistributed net investment income,
accumulated net realized gain/(loss) from security transactions and current
period distributions have been adjusted for current period permanent book/tax
differences which arose principally from differing book/tax treatments of
foreign currency and equity swap transactions. The International Equity
Portfolio, the Emerging Markets Portfolio and the Japan Growth Portfolio
reclassified $(829,693), $(77,568) and $19,010, respectively, from accumulated
net realized gain/(loss) from security transactions and foreign currency related
items to undistributed net investment income. In addition, the Emerging Markets
Portfolio reclassified $(25,862) from accumulated net investment income/(loss)
to capital contributions. Net investment income, net realized gain/(loss) on
investments and net assets were not affected by this reclassification.
Net assets at April 30, 1999, consisted of the following:
<TABLE>
<CAPTION>
INTERNATIONAL EMERGING JAPAN
EQUITY PORTFOLIO MARKETS PORTFOLIO GROWTH PORTFOLIO
---------------- ----------------- ----------------
<S> <C> <C> <C>
Capital contributed, net $851,848,905 $ 21,096,130 $3,805,063
Undistributed net investment income 6,220,541 0 14,529
Accumulated net realized gain (loss) from security
transactions (118,216,458) (19,131,641) 13,593
Net unrealized appreciation from investments and
foreign currency related items 135,308,239 439,944 1,202,347
------------ ------------ ----------
Net assets $875,161,227 $ 2,404,433 $5,035,532
============ ============ ==========
</TABLE>
10. CAPITAL LOSS CARRYOVER
At April 30, 1999, the International Equity Portfolio, the Emerging Markets
Portfolio and the Japan Growth Portfolio had capital loss carryovers of
$115,152,416, $15,647,325 and $141,441, respectively, expiring in 2006.
29
<PAGE>
[WARBURG PINCUS FUNDS GRAPHIC]
P.O. BOX 9030, BOSTON, MA 02205-9030
800-222-8977 o www.warburg.com
COUNSELLORS SECURITIES INC., DISTRIBUTOR. WPINI-3-0499
