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SEMIANNUAL
REPORT
April 30, 1999
WARBURG PINCUS
JAPAN GROWTH FUND
| |
WARBURG PINCUS
JAPAN SMALL COMPANY FUND
More complete information about the funds, 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-WARBURG (800-927-2874) or by writing to Warburg Pincus
Funds, P.O. Box 9030, Boston, MA 02205-9030.
[logo]
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<PAGE>
From time to time, the funds' 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 funds' management are as of the date of the letters, and
portfolio holdings described in this document are as of April 30, 1999; these
views and portfolio holdings may have changed subsequent to these dates. Nothing
in this document is a recommendation to purchase or sell securities.
<PAGE>
Warburg Pincus Japan Growth Fund
Semiannual Investment Adviser's Report -- April 30, 1999
- --------------------------------------------------------------------------------
June 15, 1999
Dear Shareholder:
For the six months ended April 30, 1999, Warburg Pincus Japan Growth Fund
had a gain of 56.81%, vs. a gain of 26.64% for the U.S.-dollar-denominated Tokyo
Stock Exchange Index ("TOPIX").* The fund's one-year return through April 30,
1999 was 32.58%. Its since-inception (on December 29, 1995) average annual
return through April 30, 1999 was 10.18%.
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 fund generated a robust gain for the period,
aided by the market's broad strength and good stock selection. Particularly
strong performers for the fund were its technology holdings, a number of which
saw their share prices surge during the period. Other noteworthy contributors to
the fund's performance were its financial-services and telecommunications
stocks.
There were few significant changes in the fund during the period in terms
of sector emphasis. The fund's largest area of concentration remained
technology, broadly defined, where we continued to find a large number of
attractive investment opportunities. The fund 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 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
1
<PAGE>
Warburg Pincus Japan Growth Fund
Semiannual Investment Adviser's Report -- April 30, 1999 (cont'd)
- --------------------------------------------------------------------------------
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.
- ----------
* 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.
2
<PAGE>
Warburg Pincus Japan Small Company Fund
Semiannual Investment Adviser's Report -- April 30, 1999
- --------------------------------------------------------------------------------
June 15, 1999
Dear Shareholder:
For the six months ended April 30, 1999, Warburg Pincus Japan Small Company
Fund had a gain of 80.61%, vs. a gain of 34.26% for the Morgan Stanley Capital
International Japan Small Company Index* and gains of 96.03% and 91.38% for the
yen- and dollar-denominated JASDAQ** indexes, respectively. The fund's one-year
return through April 30, 1999 was 63.05%. Its since-inception (on September 30,
1994) average annual return through April 30, 1999 was 1.78%.
The period saw a surge in Japan's small-company stocks. Fueling the advance
were signs of improvement in Japan's economy (many of Japan's publicly traded
small companies are domestically oriented concerns); favorable reaction to
policy initiatives from the Japanese government, in particular its efforts to
stabilize the banking sector; and recognition of the considerable value to be
found in the small-capitalization portion of the market. The group was also
helped, to a lesser extent, by the general economic strengthening of the
Asian-Pacific region and by a further easing of the extreme risk aversion that
had gripped investors globally following Russia's debt default and currency
devaluation last summer.
Set against this backdrop, the fund generated a robust gain for the period,
benefiting from the small-cap market's broad strength and from good stock
selection. The performance far exceeded that of the Morgan Stanley Japan Small
Company Index, which we consider the fund's most representative benchmark. It
fell short of the gain in the JASDAQ, however. This was largely attributable to
the outsized gains displayed by a number of initial public offerings during the
period, several of which were listed on the JASDAQ but were not held by the
portfolio.
There were few significant changes to the fund during the six months in
terms of sector emphasis. The fund's largest area of concentration remained the
technology sector (broadly defined), where we continued to find an abundance of
attractive investment opportunities. We also maintained smaller but
still-meaningful weightings in the manufacturing, telecommunications and
financial-services areas, and selective exposure to the consumer-related sector.
Looking ahead, we remain positive on the prospects for Japan's
small-company stocks, since many of the forces that have powered their recent
rally remain
3
<PAGE>
Warburg Pincus Japan Small Company Fund
Semiannual Investment Adviser's Report -- April 30, 1999 (cont'd)
- --------------------------------------------------------------------------------
June 15, 1999
firmly in place. Sentiment toward Japanese equities broadly, and small-company
stocks in particular, remains favorable, reflected in the stocks' continued
strength since the close of the reporting period. The economic backdrop, while
still far from robust, has begun to show tangible signs of improvement, with
very positive implications for smaller companies' earnings prospects. And there
remains a considerable amount of value among these companies, the group's recent
rally notwithstanding, which should continue to draw investors' attention.
Given this confluence of factors, we remain optimistic, and will continue
to devote our efforts to identifying 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.
- ----------
* The Morgan Stanley Capital International Japan Small Company Index is
composed of small-cap Japanese stocks.
** The JASDAQ Over-the-Counter Composite Index is an unmanaged index (with no
defined investment objective) of stocks traded over the counter in Japan.
4
<PAGE>
Warburg Pincus Japan Growth Fund
Statement of Net Assets -- April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Number of
Shares Value
---------- ----------
COMMON STOCKS (103.2%)
Automobiles (3.3%)
Jac Co., Ltd. 25,000 $ 3,434,948
------------
Banking (4.7%)
Sanwa Bank, Ltd. 195,000 2,189,151
Sumitomo Bank, Ltd. 204,000 2,761,899
------------
4,951,050
------------
Communications & Media (3.5%)
Avex, Inc. 40,000 3,686,286
------------
Computers (7.0%)
Fujitsu Support & Service, Inc. 35,000 4,281,118
Nidec Corp. 23,900 3,103,601
------------
7,384,719
------------
Consumer Durables (3.1%)
Sony Corp. 35,000 3,269,484
------------
Electric Components (11.9%)
Funai Electric Co., Ltd.+ 30,000 4,033,969
Nemic-Lambda K.K 82,900 5,459,004
Tokyo Electronics, Ltd. 52,000 2,962,433
------------
12,455,406
------------
Electronics (12.3%)
Fujitsu, Ltd. 170 000 2,912,585
Megachips Corp. 57,000 3,380,994
Nintendo Co., Ltd. 30,000 2,797,388
Tokyo Seimitsu Co., Ltd. 68,000 3,765,708
------------
12,856,675
------------
Financial Services (10.7%)
Industrial Bank of Japan, Ltd. 240,000 2,000,648
Orix Corp. 45,000 3,623,032
Shohkoh Fund & Co., Ltd. 9,480 5,559,589
------------
11,183,269
------------
Industrial Mfg. & Processing (3.4%)
Sony Precision
Technology, Inc. 75,000 1,281,822
Sumitomo Rubber
Industries, Ltd. 350,000 2,301,834
------------
3,583,656
------------
Number of
Shares Value
---------- ----------
COMMON STOCKS (cont'd)
Leisure & Entertainment (5.7%)
Heiwa Corp. 160,000 $ 2,882,005
Sankyo Co., Ltd., Gunma 90,300 3,132,019
------------
6,014,024
------------
Manufacturing (6.5%)
Noritsu Koki Co., Ltd. 50,100 1,653,752
Takasago Electric
Industry Co., Ltd. 75,000 5,146,139
------------
6,799,891
------------
Medical Equipment (2.6%)
Hoya Corp. 52,000 2,722,825
------------
Publishing (2.9%)
Kadokawa Shoten
Publishing Co., Ltd. 20,000 3,049,564
------------
Retail (8.0%)
Ryohin Keikaku Co., Ltd. 9,900 1,803,976
Shimamura Co., Ltd. 20,000 1,239,933
Softbank Corp. 40,000 5,325,007
------------
8,368,916
------------
Software (6.0%)
Alpha Systems, Inc.+ 40,000 3,518,727
Konami Co., Ltd. 80,000 2,814,982
------------
6,333,709
------------
Telecommunications (11.6%)
Hikari Tsushin, Inc. 18,000 3,770,065
Japan Telecom Co., Ltd. 160 2,265,390
Matsushita Communication
Industrial Co., Ltd. 45,000 3,230,946
NTT Mobile Communications
Network, Inc. 49 2,873,627
------------
12,140,028
------------
TOTAL COMMON STOCKS
(Cost $75,262,003) 108,234,450
------------
See Accompanying Notes to Financial Statements.
5
<PAGE>
Warburg Pincus Japan Growth Fund
Statement of Net Assets (cont'd) -- April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Par
000 Value
------ -------------
SHORT-TERM INVESTMENT (2.0%)
Repurchase agreement with
State Street Bank & Trust Co.
dated 04/30/99 at 4.82%
to be repurchased at $2,090,839
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, 6.00%-8.50%,
07/31/02-02/15/20. Pro rata
market value of collateral is
$2,131,960) (Cost $2,090,000) $2,090 $ 2,090,000
------------
TOTAL INVESTMENTS AT VALUE
(105.2%) (Cost $77,352,003*) 110,324,450
LIABILITIES IN EXCESS OF
OTHER ASSETS (5.2%) (5,489,840)
------------
NET ASSETS (100.0%) (applicable to
7,763,860 Common Class shares and
17,946 Advisor Class shares) $104,834,610
============
NET ASSET VALUE, offering and
redemption price per Common
Class share
($104,593,094 / 7,763,860) $ 13.47
============
NET ASSET VALUE, offering and
redemption price per Advisor
Class share
($241,516 / 17,946) $ 13.46
============
- ---------------------------------------------------------------
+ Non-income producing security.
* Cost for federal income tax purposes is $77,368,726.
See Accompanying Notes to Financial Statements.
6
<PAGE>
Warburg Pincus Japan Small Company Fund
Statement of Net Assets -- April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Number of
Shares Value
---------- ----------
COMMON STOCKS (100.4%)
Automobiles (3.0%)
Jac Co., Ltd. 46,000 $ 6,320,304
-----------
Communications & Media (4.0%)
Avex, Inc. 90,000 8,294,143
-----------
Computers (13.6%)
Drake Beam Morin-Japan, Inc. 29,000 1,895,086
Fujitsu Support & Service, Inc. 40,000 4,892,706
I.O. Data Device, Inc. 112,900 3,688,883
Nidec Corp. 55,000 7,142,179
Softbank Corp. 80,000 10,650,014
-----------
28,268,868
-----------
Consumer Durables (2.7%)
Sony Corp. 61,000 5,698,244
-----------
Distribution (1.2%)
Impact 21 Co., Ltd. 150,000 2,412,842
-----------
Electrical Components (9.0%)
Funai Electric Co., Ltd.+ 55,000 7,395,611
Nemic-Lambda K.K 171,900 11,319,695
-----------
18,715,306
-----------
Electronics (13.3%)
Geomatec Co., Ltd. 200,000 3,837,088
Megachips Corp. 70,000 4,152,098
Nintendo Co., Ltd. 62,000 5,781,269
Tokyo Seimitsu Co., Ltd. 200,000 11,075,613
Towa Corp. 110,000 2,949,029
-----------
27,795,097
-----------
Entertainment (3.0%)
Aruze Corp. 120,000 6,333,709
-----------
Financial Services (7.3%)
Orix Corp. 45,000 3,623,032
Shohkoh Fund & Co., Ltd. 19,910 11,676,310
-----------
15,299,342
-----------
Industrial Mfg. & Processing (2.6%)
Sony Precision
Technology, Inc. 70,000 1,196,367
Sumitomo Rubber
Industries, Ltd. 652,000 4,287,988
-----------
5,484,355
-----------
Number of
Shares Value
---------- ----------
COMMON STOCKS (cont'd)
Leisure & Entertainment (6.1%)
Heiwa Corp. 360,000 $ 6,484,512
Sankyo Co., Ltd., Gunma 180,000 6,243,227
-----------
12,727,739
-----------
Manufacturing (10.0%)
Disco Corp. 100,000 5,060,265
Fujimi, Inc. 60,000 3,116,587
Noritsu Koki Co., Ltd. 106,600 3,518,761
Takasago Electric
Industry Co., Ltd. 130,000 8,919,974
-----------
20,615,587
-----------
Medical Equipment (2.8%)
Hoya Corp. 110,000 5,759,821
-----------
Publishing (2.9%)
Kadokawa Shoten
Publishing Co., Ltd. 40,000 6,099,127
-----------
Retail (2.9%)
Shimamura Co., Ltd. 49,200 3,050,234
Uoriki Co., Ltd. 98,000 3,087,097
-----------
6,137,331
-----------
Scientific Instruments (1.1%)
GL Sciences, Inc. 100,000 2,178,260
-----------
Software (6.4%)
Alpha Systems, Inc.+ 80,000 7,037,455
Konami Co., Ltd. 180,000 6,333,709
-----------
13,371,164
-----------
Telecommunications (8.5%)
Bellsystem 24, Inc. 10,950 4,320,871
Hikari Tsushin, Inc. 45,850 9,603,193
Japan Telecom Co., Ltd. 135 1,911,423
Matsushita Communication
Industrial Co., Ltd. 27,000 1,938,567
-----------
17,774,054
-----------
TOTAL COMMON STOCKS
(Cost $153,972,285) 209,285,293
-----------
See Accompanying Notes to Financial Statements.
7
<PAGE>
Warburg Pincus Japan Small Company Fund
Statement of Net Assets -- April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
SHORT-TERM INVESTMENT (8.0%)
Repurchase agreement with
State Street Bank & Trust Co.
dated 04/30/99 at 4.82% to be
repurchased at $16,618,672
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, 6.00%-8.50%,
07/31/02-02/15/20. Pro rata
market value of collateral is
$16,945,509)
(Cost $16,612,000) $16,612 $ 16,612,000
------------
TOTAL INVESTMENTS AT VALUE
(108.4%) (Cost $170,584,285*) 225,897,293
LIABILITIES IN EXCESS OF
OTHER ASSETS (8.4%) (17,561,952)
--------------
NET ASSETS (100.0%) (applicable
to 20,699,936 Common Class shares
and 4,717 Advisor Class shares) $208,335,341
============
NET ASSET VALUE, offering and
redemption price per Common
Class share
($208,287,670 / 20,699,936) $ 10.06
============
NET ASSET VALUE, offering and
redemption price per Advisor
Class share ($47,671 / 4,717) $ 10.11
============
- ---------------------------------------------------------------
+ Non-income producing security.
* Also cost for federal income tax purposes.
See Accompanying Notes to Financial Statements.
8
<PAGE>
Warburg Pincus Japan Funds
Statements of Operations
For the Six Months Ended April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Japan Growth Japan Small
Fund Company Fund
------------ ------------
<S> <C> <C>
Investment Income:
Dividends $ 157,179 $ 403,706
Interest 66,711 134,819
Foreign taxes withheld (23,577) (60,556)
------------ ------------
Total investment income 200,313 477,969
------------ ------------
Expenses:
Investment advisory 406,211 596,902
Administrative services 75,521 107,883
Audit 5,696 6,494
Custodian/Sub-custodian 11,407 10,663
Directors 6,038 6,214
Interest 54,007 64,172
Legal 6,063 39,241
Offering/Organizational costs 4,690 19,613
Registration 25,555 30,005
Shareholder servicing/distribution 81,302 119,385
Transfer agent 29,328 46,030
Miscellaneous 4,506 18,850
------------ ------------
710,324 1,065,452
Less: fees waived, expenses reimbursed and transfer agent offsets (141,568) (229,785)
------------ ------------
Total expenses 568,756 835,667
------------ ------------
Net investment loss (368,443) (357,698)
------------ ------------
Net Realized and Unrealized Gain from Investments and
Foreign Currency Related Items:
Net realized gain from security transactions 487,094 8,358,032
Net realized loss from foreign currency related items (3,226,943) (2,954,402)
Net change in unrealized appreciation (depreciation)
from investments and foreign currency related items 35,316,842 60,967,896
------------ ------------
Net realized and unrealized gain from investments and
foreign currency related items 32,576,993 66,371,526
------------ ------------
Net increase in net assets resulting from operations $ 32,208,550 $ 66,013,828
============ ============
</TABLE>
See Accompanying Notes to Financial Statements.
9
<PAGE>
Warburg Pincus Japan Funds
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Japan Growth Fund Japan Small Company Fund
------------------------------- ------------------------------
For the For the
Six Months Six Months
Ended For the 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 loss $ (368,443) $ (264,779) $ (357,698) $ (353,141)
Net realized gain (loss) from security and
other related transactions 487,094 (7,102,916) 8,358,032 (12,646,910)
Net realized gain (loss) from foreign
currency related items (3,226,943) 5,755,149 (2,954,402) 6,159,309
Net change in unrealized appreciation
(depreciation) from investments and
foreign currency related items 35,316,842 (1,826,387) 60,967,896 3,170,952
------------- ------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations 32,208,550 (3,438,933) 66,013,828 (3,669,790)
------------- ------------- ------------- -------------
From Distributions:
Distributions from realized gains
Common Shares 0 0 0 (510,478)
Advisor Shares 0 0 0 (38)
Return of Capital
Common Shares 0 0 0 (316,158)
Advisor Shares 0 0 0 (23)
------------- ------------- ------------- -------------
Net decrease in net assets from
distributions 0 0 0 (826,697)
------------- ------------- ------------- -------------
From Capital Share Transactions:
Proceeds from sale of shares 235,882,461 112,575,483 347,508,837 104,180,700
Reinvested dividends 0 0 0 764,550
Net asset value of shares redeemed (203,796,594) (93,568,000) (242,487,013) (104,779,714)
------------- ------------- ------------- ---------
Net increase in net assets from
capital share transactions 32,085,867 19,007,483 105,021,824 165,536
------------- ------------- ------------- -------------
Net increase (decrease) in net assets 64,294,417 15,568,550 171,035,652 (4,330,951)
Net Assets:
Beginning of period 40,540,193 24,971,643 37,299,689 41,630,640
------------- ------------- ------------- -------------
End of period $ 104,834,610 $ 40,540,193 $ 208,335,341 $ 37,299,689
============= ============= ============= =============
</TABLE>
See Accompanying Notes to Financial Statements.
10
<PAGE>
Warburg Pincus Japan Growth Fund
Financial Highlights
(For a Common Class Share of the Fund Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six
Months Ended For the Year Ended October 31,
April 30, 1999 ------------------------------------------------
PERIOD ENDED: (Unaudited) 1998 1997 1996**
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Per-share data
Net asset value, beginning of period $ 8.59 $ 9.74 $ 9.85 $ 10.00
----------- ---------- ---------- ----------
Investment activities:
Net investment income (loss) 0.04 (0.07)(a) (0.07) (0.06)
Net gains or losses on investments and foreign
currency related items (both realized and unrealized) 4.84 (1.08) 0.21 (0.09)
----------- ---------- ---------- ----------
Total from investment activities 4.88 (1.15) 0.14 (0.15)
----------- ---------- ---------- ----------
Distributions:
From net investment income 0.00 0.00 (0.20) 0.00
From realized capital gains 0.00 0.00 (0.05) 0.00
----------- ---------- ---------- ----------
Total distributions 0.00 0.00 (0.25) 0.00
----------- ---------- ---------- ----------
Net asset value, end of period $ 13.47 $ 8.59 $ 9.74 $ 9.85
=========== ========== ========== ==========
Total return 56.81%+ (11.81)% 1.47 (1.50)%+
Ratios and supplemental data
Net assets, end of period (000s omitted) $ 104,593 $ 40,519 $ 24,954 $ 20,157
Ratio of expenses to average net assets 1.75%*@ 1.75%@ 1.75%@ 1.76%*@
Ratio of net loss to average net assets (1.13)%* (.76) (1.03)% (1.03)%*
Decrease reflected in above operating expense ratios
due to waivers/reimbursements .43%* .53% .81% 1.79%*
Portfolio turnover rate 113.57%+ 75.82% 93.84% 51.72%+
</TABLE>
- --------------------------------------------------------------------------------
** For the period December 29, 1995 (commencement of operations) through
October 31, 1996.
(a) Per share information is calculated using the average shares outstanding
method.
@ 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 .00%, .00%, .00% and .01%, for the six months ended
April 30, 1999 and for the years ended October 31, 1998, 1997 and for the
ten months ended October 31, 1996, respectively. The operating expense
ratios after reflecting these arrangements were 1.75%, 1.75%, 1.75% and
1.75%, for the six months ended April 30, 1999 and for the years ended
October 31, 1998, 1997 and for the ten months ended October 31, 1996,
respectively.
+ Non annualized.
* Annualized.
See Accompanying Notes to Financial Statements.
11
<PAGE>
Warburg Pincus Japan Small Company Fund
Financial Highlights
(For a Common Class Share of the Fund Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Six
Months Ended For the Year Ended October 31,
April 30, 1999 ----------------------------------------------------------------
(Unaudited) 1998 1997 1996 1995 1994**
----------- ----------- ----------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERIOD ENDED:
Per-share data
Net asset value,
beginning of period $ 5.57 $ 6.37 $ 8.47 $ 9.09 $ 9.85 $10.00
----------- ----------- ----------- ---------- ------ ------
Investment activities:
Net investment income (loss) 1.31 (0.01) (1.22) (0.23) 0.00 0.00
Net gains or losses from
investments and foreign
currency related items (both
realized and unrealized) 3.18 (0.67) (0.79) (0.01) (0.76) (0.15)
----------- ----------- ----------- ---------- ------ ------
Total from investment
activities 4.49 (0.68) (2.01) (0.24) (0.76) (0.15)
----------- ----------- ----------- ---------- ------ ------
Distributions:
From net investment income 0.00 0.00 0.00 (0.38) 0.00 0.00
From realized capital gains 0.00 (0.07) (0.09) 0.00 0.00 0.00
Return of capital 0.00 (0.05) 0.00 0.00 0.00 0.00
----------- ----------- ----------- ---------- ------ ------
Total distributions 0.00 (0.12) (0.09) (0.38) 0.00 0.00
----------- ----------- ----------- ---------- ------ ------
Net asset value, end of period $ 10.06 $ 5.57 $ 6.37 $ 8.47 $ 9.09 $ 9.85
=========== =========== =========== ========== ====== ======
Total return 80.61%+ (10.61)% (23.98)% (2.79)% (7.72)% (1.50)%+
Ratios and supplemental data
Net assets, end of period
(000s omitted) $ 208,288 $ 37,299 $ 41,627 $154,460 $178,568 $19,878
Ratio of expenses to
average net assets 1.76%*@ 1.75%@ 1.76%@ 1.76%@ 1.41% 1.00%*
Ratio of net income or loss
to average net assets (.75)%* (.84)% (1.10)% (1.22)% (.15)% .49%*
Decrease reflected in above
operating expense ratios
due to waivers/
reimbursements .47%* .81% .51% .29% 1.35% 4.96%*
Portfolio turnover rate 107.74%+ 112.68% 100.60% 95.23% 82.98% .00%
</TABLE>
- -------------------------------------------------------------------------------
** For the period September 30, 1994 (commencement of operations) through
October 31, 1994.
@ 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%, .00%, .01% and .01% for the six months ended April 30,
1999 and for the years ended October 31, 1998, 1997 and 1996, respectively.
The operating expense ratios after reflecting these arrangements were 1.75%,
1.75%, 1.75% and 1.75% for the six months ended April 30, 1999 and for the
years ended October 31, 1998, 1997 and 1996, respectively.
+ Non annualized.
* Annualized.
See Accompanying Notes to Financial Statements.
12
<PAGE>
Warburg Pincus Japan Funds
Notes to Financial Statements
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies
The Warburg Pincus Japan Growth Fund and the Warburg Pincus Japan Small
Company Fund are registered under the Investment Company Act of 1940, as amended
(the 1940 Act), as non-diversified, open-end management investment companies.
Investment objectives for each fund are as follows: the Japan Growth Fund
seeks long-term growth of capital and the Japan Small Company Fund seeks
long-term capital appreciation.
Both funds offer two classes of shares, one class being referred to as the
Common Class and one class being referred to as the Advisor Class. Common and
Advisor Class shares in each fund represent an equal pro rata interest in such
fund, except that they bear different expenses which reflect the difference in
the range of services provided to them. Common Class shares for both funds bear
expenses paid pursuant to a shareholder servicing and distribution plan adopted
by each fund at an annual rate of .25% of the average daily net asset value of
each fund's outstanding Common Class. Advisor Class shares for each fund bear
expenses paid pursuant to a distribution plan adopted by each fund at an annual
rate not to exceed .75% of the average daily net asset value of each fund's
Advisor Class. Advisor Class shares are currently bearing expenses of .50% of
average daily net assets.
The net asset value of each fund is determined daily as of the close of
regular trading on the New York Stock Exchange. Each fund'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 price. 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.
The books and records of the funds 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
13
<PAGE>
Warburg Pincus Japan Funds
Notes to Financial Statements (cont'd)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies -- (cont'd)
the results of operations for the current period. The funds do not isolate that
portion of realized gains and losses on investments in equity securities which
is due to changes in the foreign exchange rate from that which is due to changes
in market prices of equity securities. The funds isolate that portion of
realized gains and losses on investments in debt securities which is due to
changes in the foreign exchange rate from that which is due to changes in market
prices of debt securities.
The funds 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 investments in a single country, such as Japan, involves
increased risks.
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. Income, expenses (excluding class-specific expenses,
principally distribution and shareholder servicing fees) and realized/unrealized
gains/losses are allocated proportionately to each class of shares based upon
the relative net asset value of outstanding shares of that class. 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 for both funds. However,
to the extent that a net realized capital gain can be reduced by a capital loss
carryover, such gain will not be distributed. Income and capital gain
distributions are determined in accordance with federal income tax regulations
which may differ from generally accepted accounting principles.
No provision is made for federal taxes, as it is each fund's intention to
continue to qualify for and elect the tax treatment applicable to regulated
investment companies under the Internal Revenue Code of 1986, as amended, and
make the requisite distributions to its shareholders which will be sufficient to
relieve it from federal income and excise taxes.
14
<PAGE>
Warburg Pincus Japan Funds
Notes to Financial Statements (cont'd)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
1. Significant Accounting Policies -- (cont'd)
Costs incurred in connection with organization of shares have been deferred
and are being amortized over a period of five years, from the date each fund
commenced its operations.
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, each fund, along with other funds advised by Warburg Pincus Asset
Management, Inc., the funds' 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 funds' 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 statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these estimates.
The funds have an arrangement with their transfer agent whereby interest
earned on uninvested cash balances was used to offset a portion of their
transfer agent expense.
For the six months ended April 30, 1999, the funds received credits or
reimbursements under this arrangement as follows:
Fund Amount
---- --------
Japan Growth $1,409
Japan Small Company 2,612
2. Investment Adviser, Co-Administrator and Distributor
Warburg, which is indirectly controlled by Warburg, Pincus & Co., serves as
each fund'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 immediate changes are
planned to Warburg investment portfolio managers and investment professionals.
The Warburg Pincus funds' Board of Directors and shareholders have approved the
"assignment" of each fund's current investment advisory agreement with Warburg.
The transaction is expected to
15
<PAGE>
Warburg Pincus Japan Funds
Notes to Financial Statements (cont'd)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
2. Investment Adviser, Co-Administrators and Distributor -- (cont'd)
be completed in mid-1999. For its investment advisory services, Warburg receives
the following fees based on each fund's average daily net assets:
Fund Annual Rate
---- ---------------------------------
Japan Growth 1.25% of average daily net assets
Japan Small Company 1.25% of average daily net assets
For the six months ended April 30, 1999, investment advisory fees, voluntary
waivers and reimbursements were as follows:
<TABLE>
<CAPTION>
Gross Net Expense
Fund Advisory Fee Waiver Advisory Fee Reimbursements
---- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Japan Growth $ 406,211 $ (119,284) $ 286,927 $ 0
Japan Small Company 596,902 (212,430) 384,472 0
</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 fund's co-administrators. For its administrative services,
CFSI currently receives a fee calculated at an annual rate of .10% of each
fund's average daily net assets.
For the six months ended April 30, 1999, administrative services fees earned
by CFSI were as follows:
Fund Co-Administration Fee
---- ---------------------
Japan Growth $32,497
Japan Small Company 47,752
For administrative services, PFPC currently receives a fee calculated at an
annual rate of .12% on each fund's first $250 million in average daily net
assets, .10% on the next $250 million in average daily net assets, .08% on the
next $250 million in average daily net assets and .05% of the average daily net
assets over $750 million.
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
Fund Co-Administration Fee Waiver Co-Administration Fee
---- ----------------- ----------- ---------------------
<S> <C> <C> <C>
Japan Growth $ 43,024 $ (20,875) $22,149
Japan Small Company 60,131 (14,743) $45,388
</TABLE>
16
<PAGE>
Warburg Pincus Japan Funds
Notes to Financial Statements (cont'd)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
2. Investment Adviser, Co-Administrators and Distributor -- (cont'd)
Counsellors Securities Inc. (CSI), also a wholly-owned subsidiary of Warburg,
serves as each fund's distributor. For its shareholder servicing and
distribution services, CSI receives a fee at an annual rate of .25% of the
average daily net assets of each fund's Common Class pursuant to a shareholder
servicing and distribution plan adopted by each fund pursuant to Rule 12b-1
under the 1940 Act. For its shareholder servicing and distribution services, CSI
receives a fee at an annual rate of .50% of the average daily net assets of each
fund's Advisor Class pursuant to a distribution plan adopted by each fund
pursuant to Rule 12b-1 under the 1940 Act. CSI pays all of the Advisor Class
fees to institutional and financial service firms that offer the Advisor Class.
For the six months ended April 30, 1999, shareholder servicing and distribution
fees paid to CSI were as follows:
Shareholder Servicing/
Fund Distribution Fee
---- ----------------------
Japan Growth
Common Class $ 81,182
Advisor Class 120
--------
$ 81,302
========
Japan Small Company
Common Class $119,375
Advisor Class 10
========
$119,385
========
3. Line of Credit
The funds, 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 fund 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
17
<PAGE>
Warburg Pincus Japan Funds
Notes to Financial Statements (cont'd)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
3. Line of Credit -- (cont'd)
fixed income securities (an International Fund) and twenty-five percent (25%) of
the assets of any fund that is an International Fund or (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 following funds had
borrowings under the lines of credit agreement:
<TABLE>
<CAPTION>
Average Maximum Loan
Average Daily Interest Daily Loan Outstanding
Fund Loan Balance Rate % Outstanding at 4/30/99
---- ------------- --------- ----------- ---------------
<S> <C> <C> <C> <C>
Japan Growth $ 988,337 5.387% $19,426,000 $0
Japan Small Company 1,186,362 5.269% 59,536,000 0
</TABLE>
4. Investments in Securities
For the six months ended April 30, 1999, purchases and sales of investment
securities (excluding short-term investments) were as follows:
Fund Purchases Sales
---- ------------- ------------
Japan Growth $115,726,398 $ 78,016,881
Japan Small Company 209,801,243 106,878,415
At April 30, 1999, the net unrealized appreciation from investments for those
securities having an excess of value over cost and net unrealized depreciation
from investments for those securities having an excess of cost over value (based
on cost for federal income tax purposes) was as follows:
<TABLE>
<CAPTION>
Net Unrealized
Unrealized Unrealized Appreciation
Fund Appreciation Depreciation (Depreciation)
---- -------------- ------------ ---------------
<S> <C> <C> <C>
Japan Growth $33,648,892 $ (693,168) $32,955,724
Japan Small Company 57,611,501 (2,298,493) 55,313,008
</TABLE>
18
<PAGE>
Warburg Pincus Japan Funds
Notes to Financial Statements (cont'd)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
5. Forward Foreign Currency Contracts
Each fund 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
fund 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 or an offsetting position is
entered into.
At April 30, 1999, the Japan Growth Fund and the Japan Small Company Fund had
the following open forward foreign currency contracts:
<TABLE>
<CAPTION>
Japan Growth Fund
----------------------------------------------------------------------------------------------------------------------
Unrealized
Foreign
Expiration Foreign Currency Contract Exchange
Forward Currency Contract Date To Be Sold Amount Contract Value Gain/(Loss)
----------------------- ---------- ----------------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Japanese Yen 08/31/99 580,100,000 $ 4,895,359 $ 4,943,193 $ (47,834)
Japanese Yen 08/31/99 185,000,000 1,563,821 1,576,436 (12,615)
Japanese Yen 08/31/99 1,166,000,000 9,863,593 9,935,809 (72,216)
Japanese Yen 08/31/99 288,000,000 2,456,499 2,454,128 2,371
Japanese Yen 08/31/99 312,000,000 2,600,217 2,658,638 (58,421)
Japanese Yen 08/31/99 393,000,000 3,301,966 3,348,862 (46,896)
Japanese Yen 08/31/99 158,000,000 1,331,311 1,346,362 (15,051)
Japanese Yen 08/31/99 548,500,000 4,705,327 4,673,921 31,406
Japanese Yen 08/31/99 929,500,000 8,072,781 7,920,527 152,254
Japanese Yen 08/31/99 525,000,000 4,531,526 4,473,671 57,855
Japanese Yen 08/31/99 446,500,000 3,889,085 3,804,750 84,335
Japanese Yen 08/31/99 363,000,000 3,153,094 3,093,224 59,870
Japanese Yen 08/31/99 442,000,000 3,820,720 3,766,405 54,315
Japanese Yen 08/31/99 885,000,000 7,595,263 7,541,330 53,933
Japanese Yen 08/31/99 487,000,000 4,153,518 4,149,862 3,656
Japanese Yen 08/31/99 197,000,000 1,648,950 1,678,692 (29,742)
Japanese Yen 08/31/99 388,500,000 3,277,154 3,310,516 (33,362)
Japanese Yen 08/31/99 309,500,000 2,602,065 2,637,335 (35,270)
Japanese Yen 08/31/99 770,500,000 6,509,251 6,565,644 (56,393)
Japanese Yen 08/31/99 1,052,000,000 8,866,414 8,964,384 (97,970)
Japanese Yen 08/31/99 239,000,000 2,023,709 2,036,585 (12,876)
Japanese Yen 08/31/99 496,000,000 4,256,049 4,226,553 29,496
Japanese Yen 08/31/99 411,000,000 3,503,597 3,502,245 1,352
Japanese Yen 08/31/99 353,500,000 2,985,642 3,012,272 (26,630)
Japanese Yen 08/31/99 412,000,000 3,515,358 3,510,766 4,592
------------ ------------ ----------
$105,122,269 $105,132,110 $ (9,841)
============ ============ ===========
</TABLE>
19
<PAGE>
Warburg Pincus Japan Funds
Notes to Financial Statements (cont'd)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
5. Forward Foreign Currency Contracts (cont'd)
<TABLE>
<CAPTION>
Japan Small Company Fund
----------------------------------------------------------------------------------------------------------------------
Unrealized
Foreign
Expiration Foreign Currency Contract Exchange
Forward Currency Contract Date To Be Sold Amount Contract Value Gain/(Loss)
----------------------- ---------- ----------------- ------------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Japanese Yen 08/31/99 1,032,400,000 $ 8,733,425 $ 8,797,367 $ (63,942)
Japanese Yen 08/31/99 487,500,000 4,158,137 4,154,123 4,014
Japanese Yen 08/31/99 737,000,000 6,357,833 6,280,181 77,652
Japanese Yen 08/31/99 528,000,000 4,400,367 4,499,234 (98,867)
Japanese Yen 08/31/99 650,000,000 5,527,211 5,538,830 (11,619)
Japanese Yen 08/31/99 934,500,000 8,007,026 7,963,134 43,892
Japanese Yen 08/31/99 679,000,000 5,824,826 5,785,947 38,879
Japanese Yen 08/31/99 379,500,000 3,291,414 3,233,825 57,589
Japanese Yen 08/31/99 415,500,000 3,586,380 3,540,591 45,789
Japanese Yen 08/31/99 1,200,000,000 10,388,711 10,225,533 163,178
Japanese Yen 08/31/99 679,500,000 5,918,551 5,790,208 128,343
Japanese Yen 08/31/99 353,000,000 3,053,699 3,008,011 45,688
Japanese Yen 08/31/99 1,072,000,000 9,311,618 9,134,809 176,809
Japanese Yen 08/31/99 483,000,000 4,175,131 4,115,777 59,354
Japanese Yen 08/31/99 1,792,000,000 15,207,060 15,270,129 (63,069)
Japanese Yen 08/31/99 1,052,000,000 9,028,493 8,964,384 64,109
Japanese Yen 08/31/99 935,000,000 7,974,414 7,967,394 7,020
Japanese Yen 08/31/99 530,000,000 4,436,260 4,516,276 (80,016)
Japanese Yen 08/31/99 1,139,000,000 9,607,922 9,705,734 (97,812)
Japanese Yen 08/31/99 1,422,000,000 11,955,206 12,117,256 (162,050)
Japanese Yen 08/31/99 1,638,000,000 13,837,966 13,957,852 (119,886)
Japanese Yen 08/31/99 2,157,000,000 18,179,519 18,380,395 (200,876)
Japanese Yen 08/31/99 714,000,000 6,045,724 6,084,192 (38,468)
Japanese Yen 08/31/99 848,000,000 7,276,471 7,226,043 50,428
Japanese Yen 08/31/99 1,975,000,000 16,851,536 16,829,522 22,014
------------ ------------ -----------
$203,134,900 $203,086,747 $ 48,153
============ ============ ==========
</TABLE>
6. Capital Share Transactions
Both funds are authorized to issue three billion full and fractional shares
of capital stock, $.001 par value per share, of which two billion shares of each
fund are classified as the Advisor Class.
20
<PAGE>
Warburg Pincus Japan Funds
Notes to Financial Statements (cont'd)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
6. Capital Share Transactions (cont'd)
Transactions in classes of each fund were as follows:
<TABLE>
<CAPTION>
JAPAN GROWTH FUND
Common Class Advisor Class
----------------------------- ------------------------
For the For the
Six Months For the Six Months For the
Ended Year Ended Ended Year Ended
April 30, 1999 October 31, April 30, 1999 October 31,
(Unaudited) 1998 (Unaudited) 1998
------------ ------------- -------------- -----------
<S> <C> <C> <C> <C>
Shares sold 21,906,444 11,622,806 20,148 2,099
Shares issued to shareholders on reinvestment
of dividends 0 0 0 0
Shares redeemed (18,857,732) (9,470,866) (4,673) (1,363)
------------- ------------- --------- --------
Net increase in shares outstanding 3,048,712 2,151,940 15,475 736
============= ============= ========= ========
Proceeds from sale of shares $ 235,632,071 $ 112,554,751 $ 250,390 $ 20,732
Reinvested dividends 0 0 0 0
Net asset value of shares redeemed (203,748,896) (93,554,214) (47,698) (13,786)
------------- ------------- --------- --------
Net increase from capital share transactions $ 31,883,175 $ 19,000,537 $202,692 $ 6,946
============= ============= ========= ========
</TABLE>
<TABLE>
<CAPTION>
JAPAN SMALL COMPANY FUND
Common Class Advisor Class
----------------------------- ------------------------
For the For the
Six Months For the Six Months For the
Ended Year Ended Ended Year Ended
April 30, 1999 October 31, April 30, 1999 October 31,
(Unaudited) 1998 (Unaudited) 1998
------------ ------------- -------------- -----------
<S> <C> <C> <C> <C>
Shares sold 43,496,003 17,082,160 4,613 8
Shares issued to shareholders on reinvestment
of dividends 0 136,273 0 11
Shares redeemed (29,497,590) ( 17,056,009) (17) (395)
------------- ------------- --------- --------
Net increase (decrease) in shares outstanding 13,998,413 162,424 4,596 (376)
============= ============= ========= ========
Proceeds from sale of shares $ 347,464,878 $ 104,180,652 $ 43,959 $ 48
Reinvested dividends 0 764,489 0 61
Net asset value of shares redeemed (242,486,895) (104,777,285) (118) (2,429)
------------- ------------- --------- --------
Net increase (decrease) from capital share
transactions $ 104,977,983 $ 167,856 $ 43,841 $ (2,320)
============= ============= ========= ========
</TABLE>
7. Liabilities
At April 30, 1999, each fund had the following affiliated and investment
related liabilities:
Japan Small
Japan Growth Company
Fund Fund
------------ --------------
Payable for securities purchased (at value) $5,164,620 $17,694,377
Administration services fee payable 8,961 18,459
Investment advisory fee payable 84,446 156,244
Payable for fund shares redeemed 0 47,913
Forward contract payable 615,141 936,151
21
<PAGE>
Warburg Pincus Japan Funds
Notes to Financial Statements (cont'd)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
8. Net Assets
At April 30, 1999, capital contributions, undistributed net investment
income, accumulated net realized gain (loss) from security transactions and
current period distribution have been adjusted for current period permanent
book/tax differences which arose principally from differing book/tax treatments
of foreign currency. The Japan Growth Fund and the Japan Small Company Fund
reclassified $134,693 and $230,398, respectively, from accumulated net realized
loss on foreign currency related items to undistributed net investment income.
The Japan Growth Fund and the Japan Small Company Fund reclassified $503,136 and
$588,096, respectively, from accumulated net investment 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>
Japan Small
Japan Growth Company
Fund Fund
------------- ------------
<S> <C> <C>
Capital contributed, net $ 77,379,144 $178,188,847
Accumulated net realized loss from security transactions (5,516,026) (25,246,593)
Net unrealized appreciation (depreciation) from investments and foreign currency
related items 32,971,492 55,393,087
------------- ------------
Net assets $ 104,834,610 $208,335,341
============= ============
</TABLE>
9. Capital Loss Carryover
At April 30, 1999, capital loss carryovers available to offset possible future
capital gains of each fund were as follows:
<TABLE>
<CAPTION>
Capital Loss Carryover Capital Loss Carryover Total Capital Loss
Fund Expiring in 2005 Expiring in 2006 Carryforward
--- ---------------------- ---------------------- ------------------
<S> <C> <C> <C>
Japan Growth $ 623,934 $ 6,800,283 $ 7,424,217
Japan Small Company 24,405,400 11,601,282 36,006,682
</TABLE>
22
<PAGE>
Warburg Pincus Japan Funds
Notes to Financial Statements (cont'd)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
10. Other Financial Highlights
Each fund currently offers one other class of shares, the Advisor Class,
representing equal pro rata interests in each fund. The financial highlights for
an Advisor Class share of each fund are as follows:
<TABLE>
<CAPTION>
Japan Growth Fund
------------------------------------------------------
Advisor Class
------------------------------------------------------
For the Six
Months Ended For the Year Ended October 31,
April 30, 1999 --------------------------------------
(Unaudited) 1998 1997 1996**
------- ------ ------ ------
<S> <C> <C> <C> <C>
PERIOD ENDED:
Per-share data
Net asset value, beginning of period $ 8.71 $ 9.89 $ 9.83 $10.00
------- ------ ------ ------
Investment activities:
Net investment income or loss 0.10 (0.11)(a) 0.05 (0.09)
Net gains or losses on investments and foreign
currency related items (both realized and unrealized) 4.65 (1.07) 0.01 (0.08)
------- ------ ------ ------
Total from investment activities 4.75 (1.18) 0.06 (0.17)
------- ------ ------ ------
Net asset value, end of period: $ 13.46 $ 8.71 $ 9.89 $ 9.83
======= ====== ====== ======
Total return 54.54%+ (11.93)% 0.61% (1.70)%+
Ratios/supplemental data:
Net assets, end of period (000s omitted) $ 242 $ 22 $ 17 $ 1
Ratio of expenses to average net assets 2.01%*@ 2.00%@ 2.00%@ 2.00%*@
Ratio of net loss to average net assets (1.74)%* (1.11)% (1.42) (1.08)%*
Decrease reflected in above operating expense ratios
due to waivers/reimbursements .45%* .58% 7.25% 3.43%*
Portfolio turnover rate 113.57%+ 75.82% 93.84% 51.72%+
</TABLE>
- --------------------------------------------------------------------------------
** For the period December 29, 1995 (commencement of operations) through
October 31, 1996.
(a) Per share information is calculated using the average shares outstanding
method.
@ 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%, .00%, .00% and .00%, for the six months ended
April 30, 1999 and for the years ended October 31, 1998, 1997 and for the
ten months ended October 31, 1996, respectively. The operating expense
ratios after reflecting these arrangements were 2.00%, 2.00%, 2.00% and
2.00%, for the six months ended April 30, 1999 and for the years ended
October 31, 1998, 1997 and for the ten months ended October 31, 1996,
respectively.
+ Non annualized.
* Annualized.
23
<PAGE>
Warburg Pincus Japan Funds
Notes to Financial Statements (cont'd)
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
10. Other Financial Highlights -- (cont'd)
<TABLE>
<CAPTION>
Japan Small Company Fund
------------------------------------------------------
Advisor Class
------------------------------------------------------
For the Six
Months Ended For the Year Ended October 31,
April 30, 1999 --------------------------------------------------------
(Unaudited) 1998 1997 1996 1995 1994**
----------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
PERIOD ENDED:
Per-share data
Net asset value, beginning of period $ 5.57 $ 6.37 $ 8.45 $ 9.08 $ 9.85 $10.00
------- ------- ------- ------ ------ ------
Investment activities:
Net investment income or loss 1.24 (0.62) 0.35 (0.13) (0.02) 0.00
Net gains or losses on investments
and foreign currency related items
(both realized and unrealized) 3.30 (0.06) (2.43) (0.14) (0.75) (0.15)
------- ------- ------- ------ ------ ------
Total from investment activities 4.54 (0.68) (2.08) (0.27) (0.77) (0.15)
------- ------- ------- ------ ------ ------
Distributions:
From net investment income 0.00 0.00 0.00 (0.36) 0.00 0.00
From realized capital gains 0.00 (0.07) 0.00 0.00 0.00 0.00
Return of capital 0.00 (0.05) 0.00 0.00 0.00 0.00
------- ------- ------- ------ ------ ------
0.00 (0.12) 0.00 (0.36) 0.00 0.00
------- ------- ------- ------ ------ ------
Net asset value, end of period: $ 10.11 $ 5.57 $ 6.37 $ 8.45 $ 9.08 $ 9.85
======= ======= ======= ====== ====== ======
Total return 81.51%+ (10.63)% (24.62)% (3.17)% (7.82)% (1.50)%+
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $ 48 $ 1 $ 3 $ 1 $ 1 $ 1
Ratio of expenses to average
net assets 1.95%*@ 2.01%@ 2.00%@ 2.01%@ 1.31% 1.18%*
Ratio of net investment income
or (loss) to average net assets (1.58)%* (1.18)% (1.10)% (1.57)% (.19)% .12%*
Decrease reflected in above
operating expense ratios
due to waivers/
reimbursements .52%* 22.81% 6.69% .28% 1.83% 4.74%*
Portfolio turnover rate 107.74%+ 112.68% 100.60% 95.23% 82.98% .00%
</TABLE>
- --------------------------------------------------------------------------------
** For the period September 30, 1994 (commencement of operations) through
October 31, 1994.
@ 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%, .01%, .00% and .01% for the six months ended April 30,
1999 and for the years ended October 31, 1998, 1997 and 1996, respectively.
Theoperating expense ratios after reflecting these arrangements were 1.94%,
2.00%, 2.00% and 2.00% for the six months ended April 30, 1999 and for the
years ended October 31, 1998, 1997 and 1996, respectively.
+ Non annualized.
* Annualized.
24
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