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[Logo]
SEMIANNUAL
REPORT
APRIL 30, 1995
[ ] WARBURG PINCUS EMERGING MARKETS FUND
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WARBURG PINCUS EMERGING MARKETS FUND
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June 15, 1995
Dear Shareholder:
The objective of Warburg Pincus Emerging Markets Fund (the 'Fund') is
growth of capital. The Fund is a non-diversified management company that invests
primarily in equity securities of companies in emerging securities markets
around the world.
For the four months ended April 30, 1995 (the Fund was launched December
30, 1994), the Fund gained 5.80%, vs. a loss of 8.44% in the Lipper Emerging
Markets Fund Index.
The Fund's inception date came amid a particularly difficult time for
emerging markets. Virtually all were punished following Mexico's peso
devaluation last December, as investors fled en masse to the perceived safety of
more established markets. Yet many developing markets share few, if any, of
Mexico's structural problems (particularly its heavy reliance on foreign capital
inflows), and arguably were beaten down to levels unjustified by their
fundamentals. We have taken advantage of this situation, buying shares of strong
companies at attractive valuations.
The Fund's largest allocation through April was in Hong Kong and China (16%
of the portfolio). The Hong Kong market has rebounded sharply thus far this year
after dropping over 30% (as measured by Morgan Stanley Capital International) in
1994. Our largest investments here are Jardine Matheson Holdings, parent company
of the international business/trading group Jardine Matheson, and HSBC Holdings,
the largest banking company in Hong Kong and one with a strong global presence.
We also have significant stakes in Korean and Taiwanese securities, which
combined accounted for nearly a quarter of the Fund's assets at the end of
April. Both markets suffered unduly in the wake of the Mexican crisis, but we
believe the respective countries' strong growth in GDP and relatively tame
inflation make them particularly attractive candidates for investment.
Another large concentration in the portfolio is Argentina (11% of the
Fund's assets). This country and its Latin American counterparts suffered
perhaps the worst fallout from the Mexican peso devaluation, yet we believe that
the Argentine economy is soundly based and that a number of companies trading on
its market represent particularly good value at their current levels. We are
less sanguine on Mexico's near-term prospects, hence it is underweighted in the
portfolio.
Looking ahead, we remain positive in our outlook for many emerging markets,
and will continue to search for strong, growing companies selling at attractive
prices.
<TABLE>
<S> <C>
Richard H. King Nicholas P.W. Horsley
Co-Portfolio Manager Co-Portfolio Manager
</TABLE>
1
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WARBURG PINCUS EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS
April 30, 1995 (Unaudited)
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<TABLE>
<CAPTION>
SHARES VALUE
-------- ----------
<S> <C> <C>
COMMON STOCK (68.8%)
Argentina (7.0%)
Banco Frances del Rio de la Plata SA ADR 2,800 $ 51,450
YPF SA ADR 4,000 81,000
----------
132,450
----------
Australia (4.0%)
BTR Nylex Ltd. 38,400 74,858
----------
Austria (4.8%)
V.A. Technologie AG + 819 90,452
----------
Hong Kong (15.9%)
Guanghou Shipyard 46,000 18,130
Hong Kong Electric 16,000 49,105
HSBC Holdings PLC 8,400 97,422
Jardine Matheson Holdings 13,500 107,325
Shanghai Haixing + 150,000 27,912
----------
299,894
----------
India (4.4%)
Hindalco Industries Ltd. GDR 300 7,950
Reliance Industries Ltd. GDS 4,685 74,960
----------
82,910
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Indonesia (3.5%)
PT Dynaplast Ltd. 23,000 24,742
PT Semen Gresik 9,000 41,148
----------
65,890
----------
Israel (6.1%)
Ampal-American Israel Corp. Class A + 4,200 26,775
Clal Electronics + 581 62,112
ECI Telecommunications Ltd. 1,600 27,000
----------
115,887
----------
</TABLE>
See Accompanying Notes to Financial Statements.
2
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WARBURG PINCUS EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS (CONT'D)
April 30, 1995 (Unaudited)
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<TABLE>
<CAPTION>
SHARES VALUE
-------- ----------
COMMON STOCK (CONT'D)
<S> <C> <C>
Korea (10.0%)
Daewoo Heavy Industries 1,640 $ 20,223
Hana Bank 1,000 17,972
Hanil Bank 8,030 101,389
Korea Long Term Credit Bank 1,600 48,705
----------
188,289
----------
Malaysia (3.1%)
Arab-Malaysian Merchant Bank BHD 2,000 19,768
Westmont BHD 9,000 39,008
----------
58,776
----------
Mexico (1.3%)
Cemex SA de CV ADR 4,000 25,000
----------
Norway (3.1%)
Helikopter Service 5,000 57,713
----------
Taiwan (2.1%)
Tuntex Distinct Corp. GDS + 3,500 40,250
----------
Thailand (3.5%)
Industrial Finance Corp. of Thailand 31,100 66,588
----------
TOTAL COMMON STOCK (Cost $1,243,391) 1,298,957
----------
PREFERRED STOCK (3.8%)
Korea (3.8%)
Keyang Electric + 3,500 56,933
Samsung Electronics Co., Ltd. 155 13,957
----------
TOTAL PREFERRED STOCK (Cost $66,766) 70,890
----------
OPTIONS (0.0%) CONTRACTS
--------
Mexico (0.0%)
Mexican Index, 09/95 +
(Cost $2,010) 4 100
----------
</TABLE>
See Accompanying Notes to Financial Statements.
3
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WARBURG PINCUS EMERGING MARKETS FUND
SCHEDULE OF INVESTMENTS (CONT'D)
April 30, 1995 (Unaudited)
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<TABLE>
<CAPTION>
BONDS (11.0%) PAR VALUE
-------- ----------
<S> <C> <C>
Argentina (3.7%)
Banco De Galicia 7.00%, 08/01/02 $101,000 $ 70,700
----------
Taiwan (7.3%)
United Microelectronics Corp. 1.25%, 06/08/04 48,000 75,480
Yang Ming Marine Transport Corp. 2.00%, 10/06/01 61,000 62,525
----------
138,005
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TOTAL BONDS (Cost $203,475) 208,705
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SHORT-TERM INVESTMENTS (16.4%)
Repurchase agreement with State Street Bank & Trust Co. dated 04/28/95 at 5.87%
to be repurchased at $310,152 on 05/01/95.
(Collateralized by $315,000 U.S. Treasury Note 6.50%, due 09/30/96, with a
market value of $311,733.) (Cost $310,000) 310,000 310,000
----------
TOTAL INVESTMENTS AT VALUE (100.0%) (Cost $1,825,642*) $1,888,652
----------
----------
</TABLE>
+ Non-income producing security.
* Also cost for Federal income tax purposes.
See Accompanying Notes to Financial Statements.
4
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WARBURG PINCUS EMERGING MARKETS FUND
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1995 (Unaudited)
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<TABLE>
<S> <C>
ASSETS
Investments at value (Cost $1,825,642) $1,888,652
Deferred organizational costs 122,953
Dividends and interest receivable (Cost $10,984) 10,984
Other assets 9,093
----------
Total assets 2,031,682
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LIABILITIES
Payable for investments purchased (Cost $203,718) 202,789
Deferred organizational costs payable 64,741
Accrued expenses 21,386
----------
Total liabilities 288,916
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NET ASSETS applicable to 164,613 Common Shares outstanding and
100 Series 2 Shares outstanding $1,742,766
----------
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NET ASSET VALUE, offering and redemption price per Common Share ($1,741,709[div]164,613) $10.58
------
------
NET ASSET VALUE, offering and redemption price per Series 2 Share
($1,057[div]100) $10.57
------
------
</TABLE>
See Accompanying Notes to Financial Statements.
5
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WARBURG PINCUS EMERGING MARKETS FUND
STATEMENT OF OPERATIONS
For the Period December 30, 1994 through April 30, 1995 (Unaudited)
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<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes withheld of $94) $ 7,959
Interest 10,160
--------
Total investment income 18,119
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EXPENSES:
Investment advisory 4,143
Administrative services 729
Audit 7,966
Custodian 8,382
Directors 3,377
Distribution 829
Insurance 1,657
Legal 7,226
Organizational 8,463
Printing 4,271
Registration 14,145
Transfer agent 10,182
Miscellaneous 3,162
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74,532
Less fees waived and expenses reimbursed (71,216)
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Total expenses 3,316
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Net investment income 14,803
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NET REALIZED AND UNREALIZED GAIN FROM INVESTMENTS AND
FOREIGN CURRENCY RELATED ITEMS:
Net realized loss from security transactions (1,223)
Net realized loss from foreign currency related items (943)
Net change in unrealized appreciation from investments
and foreign currency related items 63,939
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Net realized and unrealized gain from investments and
foreign currency related items 61,773
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Net increase in net assets resulting from operations $ 76,576
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--------
</TABLE>
See Accompanying Notes to Financial Statements.
6
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WARBURG PINCUS EMERGING MARKETS FUND
STATEMENT OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
December 30, 1994
Through
April 30, 1995
(Unaudited)
-----------------
<S> <C>
FROM OPERATIONS:
Net investment income $ 14,803
Net realized loss from security transactions (1,223)
Net realized loss from foreign currency related items (943)
Net change in unrealized appreciation from investments and foreign currency related items 63,939
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Net increase in net assets resulting from operations 76,576
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FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 1,617,465
Net asset value of shares redeemed (52,275)
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Net increase in net assets from capital share transactions 1,565,190
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Net increase in net assets 1,641,766
NET ASSETS:
Beginning of period 101,000
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End of period $ 1,742,766
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-----------------
</TABLE>
See Accompanying Notes to Financial Statements.
7
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WARBURG PINCUS EMERGING MARKETS FUND
FINANCIAL HIGHLIGHTS
(For a Share of the Fund Outstanding Throughout Each Period)
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<TABLE>
<CAPTION>
Common Shares Series 2 Shares
----------------- -----------------
December 30, 1994 December 30, 1994
through through
April 30, 1995 April 30, 1995
(Unaudited) (Unaudited)
----------------- -----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00 $ 10.00
------- -------
Income from Investment Operations:
Net Investment Income .09 .13
Net Gain from Securities and Foreign Currency Related Items (both
realized and unrealized) .49 .44
------- -------
Total From Investment Operations .58 .57
------- -------
NET ASSET VALUE, END OF PERIOD $ 10.58 $ 10.57
------- -------
------- -------
Total Return 18.37%* 18.04%*
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $ 1,742 $ 1
Ratios to average daily net assets:
Operating expenses 1.00%* 1.25%*
Net investment income 4.37%* 3.61%*
Decrease reflected in above expense ratios due to
waivers/reimbursements 21.13%* 21.13%*
Portfolio turnover rate 15.10%* 15.10%*
</TABLE>
* Annualized
See Accompanying Notes to Financial Statements.
8
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WARBURG PINCUS EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS
April 30, 1995 (Unaudited)
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1. SIGNIFICANT ACCOUNTING POLICIES
Warburg Pincus Emerging Markets Fund (the 'Fund') is registered under the
Investment Company Act of 1940, as amended, as a non-diversified, open-end
management investment company. The Fund seeks growth of capital by investing
primarily in equity securities of companies in emerging securities markets.
The net asset value of the Fund is determined daily as of the close of
regular trading on the New York Stock Exchange. The Fund's investments are
valued at market value, which is currently determined using the last reported
sales price. If no sales are reported, investments are generally valued at the
last reported bid price. In the absence of market quotations, investments are
generally valued at fair value as determined by or under the direction of the
Fund's Board of Directors. Short-term investments that mature in 60 days or less
are valued on the basis of amortized cost, which attempts to approximate market
value.
The books and records of the Fund 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.
Translation gains or losses resulting from changes in the exchange rate during
the reporting period and realized gains and losses on the settlement of foreign
currency transactions are reported in the results of operations for the current
period. The Fund does not isolate that portion of 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.
Security transactions are accounted for on trade date. Interest income is
recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
Income, expenses (excluding class-specific expenses) and realized/unrealized
gains/losses are allocated proportionately to each class of shares based upon
the relative net asset value of outstanding shares. The cost of investments sold
is determined by use of the specific indentification method for both financial
reporting and income tax purposes.
Dividends from net investment income are declared and paid semiannually.
Distributions of net realized capital gains, if any, are declared 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.
The Fund intends to comply with the special provisions of the Internal
Revenue Code available to investment companies and therefore no Federal income
tax provision is required.
Costs incurred by the Fund in connection with its organization have been
deferred and are being amortized over a period of five years from the date the
Fund commenced its operations.
9
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WARBURG PINCUS EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
April 30, 1995 (Unaudited)
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The Fund may enter into repurchase agreement transactions. Under the terms
of a typical repurchase agreement, the Fund acquires an underlying security
subject to an obligation of the seller to repurchase. The value of the
underlying security collateral will be maintained at an amount at least equal to
the total amount of the purchase obligation, including interest. The collateral
is in the Fund's possession.
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR
Warburg, Pincus Counsellors, Inc. ('Counsellors'), a wholly owned
subsidiary of Warburg, Pincus Counsellors G.P. ('Counsellors G.P.'), serves as
the Fund's investment adviser. The Fund pays Counsellors an investment advisory
fee calculated at an annual rate of 1.25% of the Fund's average daily net
assets. For the period ended April 30, 1995, Counsellors earned $4,143 in
investment advisory fees of which $4,143 was voluntarily waived. Counsellors
also voluntarily reimbursed the Fund for $66,675 in expenses.
Counsellors Funds Service, Inc. ('CFSI'), a wholly owned subsidiary of
Counsellors, and PFPC Inc. ('PFPC'), an indirect, wholly owned subsidiary of PNC
Bank Corp. ('PNC'), serve as the Fund's co-administrators. For its
administrative services, CFSI receives a fee calculated at an annual rate of
.10% of the Fund's average daily net assets. For the period ended April 30,
1995, CFSI earned $331 in administrative services fees. For the period ended
April 30, 1995, PFPC earned and waived $398 in administrative services fees.
Counsellors Securities Inc. ('CSI'), also a wholly owned subsidiary of
Counsellors, serves as the Fund's distributor. For distribution services with
respect to the Common Shares, CSI receives a fee at the annual rate of .25% of
the Fund's average daily net assets attributable to the Common Shares; no
compensation is payable to CSI with respect to the Fund's Series 2 Shares. For
the period ended April 30, 1995, CSI earned $829 in distribution fees.
3. INVESTMENTS IN SECURITIES
The Fund's purchases and sales of investment securities for the period
ended April 30, 1995 (excluding short-term investments) were $1,542,093 and
$24,972, respectively.
At April 30, 1995, the net unrealized appreciation from investments of
$63,010 was comprised of appreciation of $95,026 for those securities having an
excess of value over cost, and depreciation of $32,016 for those securities
having an excess of cost over value (based on cost for Federal income tax
purposes).
4. FOREIGN FORWARD CURRENCY CONTRACTS
The 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 upon entering into these contracts from the
10
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WARBURG PINCUS EMERGING MARKETS FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
April 30, 1995 (Unaudited)
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potential inability of counterparties to meet the terms of their contracts and
from unanticipated movements in the value of a foreign currency relative to the
U.S. dollar. The Fund may enter into forward contracts for hedging purposes or
to increase income and total return. The forward currency contracts are adjusted
by the daily exchange rate of the underlying currency and any gains or losses
are recorded for financial statement purposes as unrealized until the contract
settlement date. At April 30, 1995, there were no open foreign forward currency
contracts.
5. SERIES 2 SHARES; CAPITAL SHARE TRANSACTIONS
The Fund is authorized to issue three billion full and fractional shares of
capital stock, $.001 par value per share, of which one billion shares are
designated Series 2 Shares. Series 2 Shares are identical to Common Shares in
all respects except that Series 2 Shares are sold to institutions ('Service
Organizations') that perform certain distribution, shareholder servicing,
accounting and/or administrative services for their customers who are beneficial
owners of Series 2 Shares. Series 2 Shares bear the fees paid pursuant to a
distribution plan adopted by the Fund in an amount not to exceed .75% (on an
annualized basis) of the average daily net asset value of the shares held by the
Service Organizations for the benefit of their customers and enjoy certain
exclusive voting rights on matters relating to those fees.
Transactions in shares of the Fund were as follows:
<TABLE>
<CAPTION>
For the Period December 30, 1994
Through April 30, 1995
--------------------------------------
Common Shares Series 2 Shares
------------------ ------------------
<S> <C> <C>
Shares sold 159,583 0
Shares issued to shareholders on reinvestment of dividends 0 0
Shares redeemed (4,970) 0
---------- ----------
Net increase in shares outstanding 154,613 0
---------- ----------
---------- ----------
</TABLE>
6. NET ASSETS
Net assets at April 30, 1995, consisted of the following:
<TABLE>
<CAPTION>
Common Shares Series 2 Shares Total
------------- --------------- ----------
<S> <C> <C> <C>?
Capital contributed, net $ 1,665,190 $ 1,000 $1,666,190
Accumulated net investment income 13,848 12 13,860
Accumulated net realized loss from security
transactions (1,222) (1) (1,223)
Net unrealized appreciation from investments and
foreign currency related items 63,893 46 63,939
------------- ------- ----------
Net assets $ 1,741,709 $ 1,057 $1,742,766
------------- ------- ----------
------------- ------- ----------
</TABLE>
11
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FURTHER INFORMATION IS CONTAINED IN THE
PROSPECTUS, WHICH MUST PRECEDE OR
ACCOMPANY THIS REPORT.
WARBURG PINCUS FUNDS
P.O. BOX 9030
BOSTON, MASSACHUSETTS 02205-9030
SHAREHOLDER SERVICES
1-800-888-6878
PROSPECTUSES
1-800-257-5614
[LOGO]
SEMIANNUAL
REPORT
APRIL 30, 1995
[ ] WARBURG PINCUS
EMERGING MARKETS FUND
COUNSELLORS SECURITIES INC., DISTRIBUTOR
WPEMK-3-0495
