<PAGE> 1
As filed with the U.S. Securities and Exchange Commission
on April 26, 2000
Securities Act File No. 33-58125
Investment Company Act File No. 811-07261
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 13 [x]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 14 [x]
(Check appropriate box or boxes)
Warburg, Pincus Trust
................................................................................
(Exact Name of Registrant as Specified in Charter)
466 Lexington Avenue
New York, New York 10017-3147
............................................. ...................
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 878-0600
Hal Liebes, Esq.
Warburg, Pincus Trust
466 Lexington Avenue
New York, New York 10017-3147
............................................
(Name and Address of Agent for Service)
Copy to:
Rose F. DiMartino, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099
<PAGE> 2
Approximate Date of Proposed Public Offering: May 1, 2000.
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[x] on May 1, 2000 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(1)
[ ] on [date] pursuant to paragraph (a)(1)
[ ] 75 days after filing pursuant to paragraph (a)(2)
[ ] on [date] pursuant to paragraph (a)(2) of Rule 485.
If appropriate, check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE> 3
[WARBURG PINCUS LOGO] [CREDIT SUISSE ASSET MANAGEMENT LOGO]
PROSPECTUS
May 1, 2000
WARBURG PINCUS TRUST
- EMERGING MARKETS PORTFOLIO
- INTERNATIONAL EQUITY PORTFOLIO
- GLOBAL POST-VENTURE CAPITAL PORTFOLIO
- SMALL COMPANY GROWTH PORTFOLIO
Warburg Pincus Trust shares are not available directly to
individual investors, but may be offered only through
certain insurance products and pension and retirement
plans.
As with all mutual funds, the Securities and Exchange
Commission has not approved these securities, nor has it
passed upon the adequacy or accuracy of this Prospectus.
It is a criminal offense to state otherwise.
The Trust is advised by Credit Suisse Asset Management,
LLC.
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CONTENTS
<TABLE>
<S> <C>
KEY POINTS.................... .................... 4
Goals and Principal Strategies.................. 4
Investor Profile................................ 4
A Word About Risk............................... 5
PERFORMANCE SUMMARY............... ................ 8
Year-by-Year Total Returns...................... 8
Average Annual Total Returns.................... 9
INVESTOR EXPENSES................ ................. 12
Fees and Portfolio Expenses..................... 12
Example......................................... 13
THE PORTFOLIOS IN DETAIL............. ............. 14
The Management Firms............................ 14
Portfolio Information Key....................... 15
EMERGING MARKETS PORTFOLIO............ ............ 16
INTERNATIONAL EQUITY PORTFOLIO.......... .......... 18
GLOBAL POST-VENTURE CAPITAL PORTFOLIO...... ....... 20
SMALL COMPANY GROWTH PORTFOLIO.......... .......... 22
MORE ABOUT RISK................. .................. 26
Introduction.................................... 26
Types of Investment Risk........................ 26
Certain Investment Practices.................... 28
MEET THE MANAGERS................ ................. 32
ABOUT YOUR ACCOUNT................ ................ 36
Share Valuation................................. 36
Distributions................................... 36
Taxes........................................... 36
BUYING AND SELLING SHARES............ ............. 38
FOR MORE INFORMATION............... ............... back cover
</TABLE>
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KEY POINTS
GOALS AND PRINCIPAL STRATEGIES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
PORTFOLIO/RISK GOAL STRATEGIES
FACTORS
- -----------------------------------------------------------------------------------
<S> <C> <C>
EMERGING MARKETS Long-term growth of - Invests in foreign equity
PORTFOLIO capital securities
Risk factors: - Focuses on the world's less
Market risk developed countries
Foreign securities - Analyzes a company's growth
Emerging-markets potential, using a bottom-up
focus investment approach
Non-diversified
status
- -----------------------------------------------------------------------------------
INTERNATIONAL EQUITY Long-term capital - Invests in foreign equity
PORTFOLIO appreciation securities
Risk factors: - Diversifies its investments
Market risk across countries, including
Foreign securities emerging markets
- Favors stocks with discounted
valuations, using a value-based,
bottom-up investment approach
- -----------------------------------------------------------------------------------
GLOBAL POST-VENTURE Long-term growth of - Invests primarily in equity
CAPITAL PORTFOLIO capital securities of U.S. and foreign
Risk factors: companies considered to be in
Market risk their post-venture-capital stage
Foreign securities of development
Start-up and other - May invest in companies of any
small companies size
Special-situation - Takes a growth investment
companies approach to identifying attractive
post-venture-capital investments
- -----------------------------------------------------------------------------------
SMALL COMPANY GROWTH Capital growth - Invests in equity securities of
PORTFOLIO small U.S. companies
Risk factors: - Using a growth investment style,
Market risk may look for either developing or
Start-up and other older companies in a growth
small companies stage or companies providing
Special-situation products or services with a high
companies unit-volume growth rate
Non-diversified status
- -----------------------------------------------------------------------------------
</TABLE>
INVESTOR PROFILE
THESE PORTFOLIOS ARE DESIGNED FOR INVESTORS WHO:
- have longer time horizons
- are willing to assume the risk of losing money in exchange for attractive
potential long-term returns
- are investing for growth or capital appreciation
- for the Emerging Markets, Global Post-Venture Capital and International
Equity portfolios, want to diversify their investments internationally
- for the Global Post-Venture Capital and Small Company Growth portfolios, want
to diversify their investments with more aggressive stock funds
THEY MAY NOT BE APPROPRIATE IF YOU:
- are investing for a shorter time horizon
- are uncomfortable with an investment that has a higher degree of volatility
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<PAGE> 7
- for the Emerging Markets, International Equity and Global Post-Venture
Capital portfolios, want to limit your exposure to foreign securities
- are looking primarily for income
You should base your selection of a portfolio on your own goals, risk
preferences and time horizon.
A WORD ABOUT RISK
All investments involve some level of risk. Simply defined, risk is the
possibility that you will lose money or not make money.
Principal risk factors for the portfolios are discussed below. Before you
invest, please make sure you understand the risks that apply to your portfolio.
As with any mutual fund, you could lose money over any period of time.
Investments in the portfolios are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
MARKET RISK
All portfolios
The market value of a security may move up and down, sometimes rapidly and
unpredictably. These fluctuations, which are often referred to as "volatility,"
may cause a security to be worth less than it was worth at an earlier time.
Market risk may affect a single issuer, industry, sector of the economy, or the
market as a whole. Market risk is common to most investments--including stocks
and bonds, and the mutual funds that invest in them.
FOREIGN SECURITIES
All portfolios (except Small Company Growth Portfolio)
A portfolio that invests outside the U.S. carries additional risks that
include:
- CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Adverse changes in
exchange rates may erode or reverse any gains produced by foreign-currency
denominated investments and may widen any losses. Each of the portfolios may,
but is not required to, seek to reduce currency risk by hedging part or all of
its exposure to various foreign currencies.
- INFORMATION RISK Key information about an issuer, security or market may be
inaccurate or unavailable.
- POLITICAL RISK Foreign governments may expropriate assets, impose capital or
currency controls, impose punitive taxes, or nationalize a company or
industry. Any of these actions could have a severe effect on security prices
and impair a portfolio's ability to bring its capital or income back to the
U.S. Other political risks include economic-policy changes, social and
political instability, military action and war.
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<PAGE> 8
START-UP AND OTHER SMALL COMPANIES
Global Post-Venture Capital Portfolio,
Small Company Growth Portfolio
Start-up and other small companies may have less-experienced management,
limited product lines, unproven track records or inadequate capital reserves.
Their securities may carry increased market, liquidity and other risks. Key
information about the company may be inaccurate or unavailable.
SPECIAL-SITUATION COMPANIES
Global Post-Venture Capital Portfolio,
Small Company Growth Portfolio
"Special situations" are unusual developments that affect a company's market
value. Examples include mergers, acquisitions and reorganizations. Securities of
special-situation companies may decline in value if the anticipated benefits of
the special situation do not materialize.
NON-DIVERSIFIED STATUS
Emerging Markets Portfolio,
Small Company Growth Portfolio
The portfolios are considered non-diversified portfolios under the Investment
Company Act of 1940 and are permitted to invest a greater proportion of their
assets in the securities of a smaller number of issuers. As a result, the
portfolios may be subject to greater volatility with respect to their
investments than a portfolio that is more broadly diversified.
EMERGING-MARKETS FOCUS
Emerging Markets Portfolio
Focusing on emerging (less developed) markets involves higher levels of risk,
including increased currency, information, liquidity, market, political and
valuation risks. Deficiencies in regulatory oversight, market infrastructure,
shareholder protections and company laws could expose the portfolio to
operational and other risks as well. Some countries may have restrictions that
could limit the portfolio's access to attractive opportunities. Additionally,
emerging markets often face serious economic problems (such as high external
debt, inflation and unemployment) that could subject the portfolio to increased
volatility or substantial declines in value.
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PERFORMANCE SUMMARY
The bar chart below and the table on the next page provide an indication of the
risks of investing in these portfolios. The bar chart shows you how each
portfolio's performance has varied from year to year for up to 10 years. The
table compares each portfolio's performance over time to that of a broadly based
securities market index and other indexes, if applicable. The bar chart and
table do not reflect additional charges and expenses which are, or may be,
imposed under the variable contracts or plans; such charges and expenses are
described in the prospectus of the insurance company separate account or in the
plan documents or other informational materials supplied by plan sponsors.
Inclusion of these charges and expenses would reduce the total return for the
periods shown. As with all mutual funds, past performance is not a prediction of
the future.
YEAR-BY-YEAR TOTAL RETURNS
[GRAPH]
<TABLE>
<CAPTION>
YEAR ENDED 12/31: 1996 1997 1998 1999
<S> <C> <C> <C> <C>
EMERGING MARKETS PORTFOLIO
Best quarter: 38.20% (Q4 99)
Worst quarter: -21.41% (Q3 98)
Inception date: 12/31/97 -17.30% 81.40%
INTERNATIONAL EQUITY PORTFOLIO
Best quarter: 32.04% (Q4 99)
Worst quarter: -16.92% (Q3 98)
Inception date: 6/30/95 9.98% -2.26% 5.35% 53.43%
GLOBAL POST-VENTURE
CAPITAL PORTFOLIO
Best quarter: 51.65% (Q4 99)
Worst quarter: -23.40% (Q3 98)
Inception date: 9/30/96 13.34% 6.87% 62.94%
SMALL COMPANY
GROWTH PORTFOLIO
Best quarter: 52.93% (Q4 99)
Worst quarter: -22.70% (Q3 98)
Inception date: 6/30/95 13.91% 15.65% -2.85% 69.08%
</TABLE>
* Effective May 1, 2000, the Global Post-Venture Capital Portfolio changed its
investment strategies and policies to permit the portfolio to invest without
limit in foreign securities and to require the portfolio to invest in at least
three countries, including the U.S. Prior to that date, the portfolio's
investments in foreign securities were limited to 20% of total assets and the
portfolio was not required to invest outside the U.S.
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<PAGE> 11
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS 10 YEARS LIFE OF INCEPTION
PERIOD ENDED 12/31/99: 1999 1995-1999 1990-1999 FUND DATE
<S> <C> <C> <C> <C> <C>
EMERGING MARKETS PORTFOLIO 81.40% NA NA 22.45% 12/31/97
- ----------------------------------------------------------------------------------------
MSCI EMERGING MARKETS FREE
INDEX(1) 66.41% NA NA 11.55%
- ----------------------------------------------------------------------------------------
INTERNATIONAL EQUITY
PORTFOLIO 53.43% NA NA 14.81% 6/30/95
- ----------------------------------------------------------------------------------------
MSCI ALL COUNTRY WORLD
EXCLUDING THE U.S. INDEX(2) 31.80% NA NA 12.04%
- ----------------------------------------------------------------------------------------
GLOBAL POST-VENTURE CAPITAL
PORTFOLIO(3) 62.94% NA NA 22.31% 9/30/96
- ----------------------------------------------------------------------------------------
RUSSELL 2000 GROWTH INDEX(4) 43.10% NA NA 22.57%
- ----------------------------------------------------------------------------------------
RUSSELL 2500 GROWTH INDEX(5) 55.48% NA NA 27.96%
- ----------------------------------------------------------------------------------------
NASDAQ INDUSTRIALS INDEX(6) 71.67% NA NA 28.74%
- ----------------------------------------------------------------------------------------
SMALL COMPANY GROWTH
PORTFOLIO 69.08% NA NA 24.71% 6/30/95
- ----------------------------------------------------------------------------------------
RUSSELL 2000 GROWTH INDEX(4) 43.10% NA NA 21.83%
- ----------------------------------------------------------------------------------------
</TABLE>
(1) 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.
(2) The Morgan Stanley Capital International All Country World Excluding the
U.S. Index is a market-capitalization-weighted index of companies listed on
stock exchanges outside of the U.S.
(3) Effective May 1, 2000, the Global Post-Venture Capital Portfolio changed its
investment strategies and policies to permit the portfolio to invest without
limit in foreign securities and to require the portfolio to invest in at
least three countries, including the U.S. Prior to that date, the
portfolio's investments in foreign securities were limited to 20% of total
assets and the portfolio was not required to invest outside the U.S.
(4) The Russell 2000 Growth Index is an unmanaged index (with no defined
investment objective) of those securities in the Russell 2000 Index with a
greater-than-average growth orientation. The Russell 2000 Growth Index
includes reinvestment of dividends, and is compiled by Frank Russell
Company.
(5) The Russell 2500 Growth Index measures the performance of those companies in
the Russell 2500 Index with higher price-to-book values and higher
forecasted growth rates. The Russell 2500 Index is composed of the 2,500
smallest companies in the Russell 3000 Index, which measures the performance
of the 3,000 largest U.S. companies based on total market capitalization.
The Russell 2500 Index represents approximately 22% of the total market
capitalization of the Russell 3000 Index.
(6) The Nasdaq Industrials Index measures the stock price performance of more
than 3,000 industrial issues included in the Nasdaq OTC Composite Index. The
Nasdaq OTC Composite Index represents 4,500 stocks traded over the counter.
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<PAGE> 12
UNDERSTANDING PERFORMANCE
- TOTAL RETURN tells you how much an investment in a portfolio has changed
in value over a given time period. It assumes that all dividends and
capital gains (if any) were reinvested in additional shares. The change
in value can be stated either as a cumulative return or as an average
annual rate of return.
- A CUMULATIVE TOTAL RETURN is the actual return of an investment for a
specified period. The year-by-year total returns in the bar chart are
examples of one-year cumulative total returns.
- An AVERAGE ANNUAL TOTAL RETURN applies to periods longer than one year.
It smoothes out the variations in year-by-year performance to tell you
what constant annual return would have produced the investment's actual
cumulative return. This gives you an idea of an investment's annual
contribution to your portfolio, assuming you held it for the entire
period.
- Because of compounding, the average annual total returns in the table
cannot be computed by averaging the returns in the bar chart.
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INVESTOR EXPENSES
FEES AND PORTFOLIO EXPENSES
This table describes the fees and expenses you may bear as a shareholder. Annual
portfolio operating expense figures are for the fiscal year ended December 31,
1999. The table does not reflect additional charges and expenses which are, or
may be, imposed under the variable contracts or plans; such charges and expenses
are described in the prospectus of the insurance company separate account or in
the plan documents or other informational materials supplied by plan sponsors.
<TABLE>
<CAPTION>
GLOBAL
POST- SMALL
EMERGING INTERNATIONAL VENTURE COMPANY
MARKETS EQUITY CAPITAL GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C>
SHAREHOLDER FEES
(paid directly from your investment)
Sales charge "load" on purchases NONE NONE NONE NONE
Deferred sales charge "load" NONE NONE NONE NONE
Sales charge "load" on reinvested
distributions NONE NONE NONE NONE
Redemption fees NONE NONE NONE NONE
Exchange fees NONE NONE NONE NONE
ANNUAL PORTFOLIO OPERATING EXPENSES
(deducted from fund assets)
Management fee 1.25% 1.00% 1.25% .90%
Distribution and service (12b-1) fee NONE NONE NONE NONE
Other expenses 1.88% .32% .33% .24%
TOTAL ANNUAL PORTFOLIO OPERATING
EXPENSES 3.13%* 1.32% 1.58%* 1.14%
</TABLE>
* Actual fees and expenses for the fiscal year ended December 31, 1999 are shown
below. Fee waivers and expense reimbursements or credits reduced expenses for
the following portfolios during 1999 but may be discontinued at any time:
<TABLE>
<CAPTION>
GLOBAL
EXPENSES AFTER EMERGING POST-VENTURE
WAIVERS AND MARKETS CAPITAL
REIMBURSEMENTS PORTFOLIO PORTFOLIO
<S> <C> <C>
Management fee .00% 1.07%
Distribution and service (12b-1) fee NONE NONE
Other expenses 1.40% .33%
---- ----
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES 1.40% 1.40%
</TABLE>
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EXAMPLE
This example may help you compare the cost of investing in these portfolios with
the cost of investing in other mutual funds. Because it uses hypothetical
conditions, your actual costs may be higher or lower.
Assume you invest $10,000, each portfolio returns 5% annually, expense ratios
remain as listed in the first table on the opposite page (before fee waivers and
expense reimbursements and credits), and you close your account at the end of
each of the time periods shown. Based on these assumptions, your cost would be:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS 10 YEARS
<S> <C> <C> <C> <C>
EMERGING MARKETS PORTFOLIO $316 $966 $1,640 $3,439
INTERNATIONAL EQUITY PORTFOLIO $134 $418 $723 $1,590
GLOBAL POST-VENTURE CAPITAL PORTFOLIO $161 $499 $860 $1,878
SMALL COMPANY GROWTH PORTFOLIO $116 $362 $628 $1,386
</TABLE>
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THE PORTFOLIOS IN DETAIL
THE MANAGEMENT FIRMS
CREDIT SUISSE ASSET MANAGEMENT, LLC
One Citicorp Center
153 East 53rd Street
New York, NY 10022
- Investment adviser for the portfolios
- Responsible for managing each portfolio's assets according to its goal and
strategies
- A member of Credit Suisse Asset Management, the institutional asset
management and mutual fund arm of Credit Suisse Group (Credit Suisse), one of
the world's leading banks
- Credit Suisse Asset Management companies manage approximately $72 billion in
the U.S. and $203 billion globally as of December 1999
- Credit Suisse Asset Management has offices in 14 countries, including
SEC-registered offices in New York and London; other offices (such as those in
Budapest, Frankfurt, Milan, Moscow, Paris, Prague, Sydney, Tokyo, Warsaw and
Zurich) are not registered with the U.S. Securities and Exchange Commission
For easier reading, Credit Suisse Asset Management, LLC will be referred to
as "CSAM" or "we" throughout this Prospectus.
ABBOTT CAPITAL MANAGEMENT, LLC
50 Rowes Wharf, Suite 240
Boston, MA 02110-3328
- Sub-investment adviser for the Global Post-Venture Capital Portfolio
- Responsible for managing the portfolio's investments in private-equity
portfolios
- A registered investment adviser concentrating on venture-capital, buyout, and
special-situation investments
- Managed approximately $4.2 billion as of December 1999
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PORTFOLIO INFORMATION
KEY
Concise descriptions of each portfolio begin on the next page. Each
description provides the following information:
GOAL AND STRATEGIES
The portfolio's particular investment goal and the strategies it intends to
use in pursuing that goal. Percentages of portfolio assets are based on total
assets unless indicated otherwise.
PORTFOLIO INVESTMENTS
The primary types of securities in which the portfolio invests. Secondary
investments are described in "More About Risk."
RISK FACTORS
The major risk factors associated with the portfolio. Additional risk factors
are included in "More About Risk."
PORTFOLIO MANAGEMENT
The individuals designated by the investment adviser to handle the
portfolio's day-to-day management.
INVESTOR EXPENSES
Actual portfolio expenses for the 1999 fiscal year. Future expenses may be
higher or lower. Additional expenses are, or may be, imposed under the variable
contracts or plans.
- MANAGEMENT FEE The fee paid to the investment adviser for providing
investment advice to the portfolio. Expressed as a percentage of average net
assets after waivers.
- OTHER EXPENSES Fees paid by the portfolio for items such as administration,
transfer agency, custody, auditing, legal and registration fees and
miscellaneous expenses. Expressed as a percentage of average net assets after
waivers, credits and reimbursements.
FINANCIAL HIGHLIGHTS
A table showing the portfolio's audited financial performance for up to five
years.
- TOTAL RETURN How much you would have earned on an investment in the
portfolio, assuming you had reinvested all dividend and capital-gain
distributions.
- PORTFOLIO TURNOVER An indication of trading frequency. The portfolios may
sell securities without regard to the length of time they have been held. A
high turnover rate may increase the portfolio's transaction costs and
negatively affect its performance.
The Annual Report includes the auditor's report, along with the portfolio's
financial statements. It is available free upon request.
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EMERGING MARKETS PORTFOLIO
GOAL AND STRATEGIES
The Emerging Markets Portfolio seeks long-term growth of capital. To pursue
this goal, it invests in equity securities of companies located in or conducting
a majority of their business in emerging markets.
An emerging market is any country:
- generally considered to be an emerging or developing country by the United
Nations, or by the World Bank and the International Finance Corporation (IFC),
or
- included in the IFC Investable Index or the Morgan Stanley Capital
International Emerging Markets Index, or
- having a per-capita gross national product of $2,000 or less
Under this definition, most countries of the world (other than the U.S.,
Canada, Western Europe, Japan, Australia and New Zealand) are considered
emerging markets.
Under normal market conditions, the portfolio will invest at least 65% of
assets in equity securities of issuers from at least three emerging markets. The
portfolio may invest in companies of any size, including emerging-growth
companies--small or medium-size companies that have passed their start-up phase,
show positive earnings, and offer the potential for accelerated earnings growth.
Its non-diversified status allows the portfolio to invest a greater share of
its assets in the securities of fewer companies. However, the portfolio managers
typically have diversified the portfolio's investments.
PORTFOLIO INVESTMENTS
This portfolio invests primarily in equity securities of emerging-markets
issuers. Equity holdings may consist of:
- common and preferred stocks
- debt securities convertible into common or preferred stock
- rights and warrants
- equity interests in trusts and partnerships
- depositary receipts
To a limited extent, the portfolio may also engage in other investment
practices.
RISK FACTORS
This portfolio's principal risk factors are:
- market risk
- foreign securities
- emerging-markets focus
- non-diversified status
The value of your investment generally will fluctuate in response to
stock-market movements. Because the portfolio invests internationally, it
carries additional risks, including currency, information and political risks.
These risks are defined in "More About Risk."
Because the portfolio focuses on emerging markets, you should expect it to be
riskier than a more broadly diversified international equity fund. Investing in
emerging markets involves access,
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operational and other risks not generally encountered in developed countries. In
addition, emerging markets often face serious economic problems that could
subject the portfolio to increased volatility or substantial declines in value.
Non-diversification might cause the portfolio to be more volatile than a
diversified portfolio. "More About Risk" details certain other investment
practices the portfolio may use. Please read that section carefully before you
invest.
PORTFOLIO MANAGEMENT
Richard W. Watt manages the portfolio. Associate Portfolio Managers Emily
Alejos, Robert B. Hrabchak, Federico D. Laffan and Jun Sung Kim assist him. You
can find out more about the portfolio's managers in "Meet the Managers."
INVESTOR EXPENSES
Management fee .00%
All other expenses 1.40%
-------------
Total expenses 1.40%
FINANCIAL HIGHLIGHTS
The figures below have been audited by the portfolio's independent auditors,
PricewaterhouseCoopers LLP.
<TABLE>
<CAPTION>
PERIOD ENDED: 12/99 12/98
<S> <C> <C>
PER-SHARE DATA
- -----------------------------------------------------------------------------------------
Net asset value, beginning of period $8.19 $10.00
- -----------------------------------------------------------------------------------------
Investment activities:
Net investment income 0.05(1) 0.10
Net gains (losses) on investments and foreign currency
related items (both realized and unrealized) 6.56 (1.83)
- -----------------------------------------------------------------------------------------
Total from investment activities 6.61 (1.73)
- -----------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income (0.04) (0.08)
Distributions from net realized capital gains (0.58) 0.00
- -----------------------------------------------------------------------------------------
Total distributions (0.62) (0.08)
- -----------------------------------------------------------------------------------------
Net asset value, end of period $14.18 $8.19
- -----------------------------------------------------------------------------------------
Total return 81.40% (17.30%)
- -----------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------
Net assets, end of year (000s omitted) $16,781 $2,696
Ratio of expenses to average net assets(2) 1.42% 1.40%
Ratio of net income (loss) to average net assets (.19)% 2.09%
Decrease reflected in above operating expense ratios due to
waivers/reimbursements 1.73% 6.81%
Portfolio turnover rate 145% 21%
- -----------------------------------------------------------------------------------------
</TABLE>
(1) Per share information is calculated using the average shares outstanding
method.
(2) Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expense. These arrangements resulted in a reduction to
the portfolio's net expense ratio of .02% and .00% for the years ended
December 31, 1999 and 1998, respectively. The portfolio's operating expense
ratio after reflecting these arrangements was 1.40% for the years ended
December 31, 1999 and 1998.
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INTERNATIONAL EQUITY PORTFOLIO
GOAL AND STRATEGIES
The International Equity Portfolio seeks long-term capital appreciation. To
pursue this goal, it invests in equity securities of companies located or
conducting a majority of their business outside the U.S.
Under normal market conditions, the portfolio will invest at least 65% of
assets in equity securities of issuers from at least three foreign countries.
The portfolio intends to diversify its investments across different countries,
although at times it may invest a significant part of its assets in a single
country. Although the portfolio emphasizes developed countries, it may also
invest in emerging markets.
In choosing equity securities, the portfolio's managers use a bottom-up
investment approach that begins with an analysis of individual companies. The
managers look for companies of any size whose stocks appear to be discounted
relative to earnings, assets or projected growth. The portfolio managers
determine value based upon research and analysis, taking all relevant factors
into account.
PORTFOLIO INVESTMENTS
This portfolio intends to invest substantially all of its assets in the
following types of equity securities:
- common stocks
- securities convertible into or exchangeable for common stocks
To a limited extent, the portfolio may also engage in other investment
practices.
RISK FACTORS
This portfolio's principal risk factors are:
- market risk
- foreign securities
The value of your investment generally will fluctuate in response to
stock-market movements. Because the portfolio invests internationally, it
carries additional risks, including currency, information and political risks.
These risks are defined in "More About Risk."
To the extent that the portfolio invests in emerging markets or focuses on a
single country or region, it takes on additional risks that could hurt its
performance. Investing in emerging markets involves access, operational and
other risks not generally encountered in developed countries. Focusing on a
single country or region may cause the portfolio to be more volatile than a more
geographically diversified equity fund. "More About Risk" details these and
certain other investment practices the portfolio may use. Please read that
section carefully before you invest.
PORTFOLIO MANAGEMENT
P. Nicholas Edwards, Harold W. Ehrlich, Harold E. Sharon and Vincent J.
McBride manage the portfolio. Associate Portfolio Manager Nancy Nierman assists
them. You can find out more about the portfolio's managers in "Meet the
Managers."
18
<PAGE> 21
INVESTOR EXPENSES
Management fee 1.00%
All other expenses .32%
------------
Total expenses 1.32%
FINANCIAL HIGHLIGHTS
The figures below have been audited by the portfolio's independent auditors,
PricewaterhouseCoopers LLP.
<TABLE>
<CAPTION>
PERIOD ENDED: 12/99 12/98 12/97 12/96 12/95(1)
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $10.99 $10.49 $11.48 $10.65 $10.00
Investment activities:
Net investment income 0.08 0.08 0.10 0.00 0.03
Net gains (loss) on investments and
foreign currency related items (both
realized and unrealized) 5.78 0.48 (0.37) 1.06 0.70
Total from investment activities 5.86 0.56 (0.27) 1.06 0.73
Distributions:
Dividends from net investment income (0.08) (0.05) (0.01) (0.06) (0.01)
Distributions in excess of net
investment income (0.07) 0.00 0.00 (0.10) (0.07)
Distributions from net realized gains 0.00 (0.01) 0.00 (0.06) 0.00
Distributions in excess of realized
gains 0.00 0.00 (0.71) (0.01) 0.00
Total distributions (0.15) (0.06) (0.72) (0.23) (0.08)
Net asset value, end of period $16.70 $10.99 $10.49 $11.48 $10.65
Total return 53.43% 5.35% (2.26)% 9.98% 7.30%(2)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s
omitted) $610,547 $360,124 $347,229 $298,218 $64,537
Ratio of expenses to average net
assets 1.33%(3) 1.33%(3) 1.36%(3) 1.36%(3) 1.44%(4)
Ratio of net income to average net
assets .63% .68% .66% .64% .48%(4)
Decrease reflected in above operating
expense ratios due to waivers/
reimbursement .00% .00% .00% .04% .77%(4)
Portfolio turnover rate 145% 105% 79% 31% 8%(2)
</TABLE>
(1) For the period June 30, 1995 (Commencement of Operations) through December
31, 1995.
(2) Not annualized.
(3) Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expense. These arrangements resulted in a reduction to
the portfolio's net expense ratio of .01%, .00%, .01% and .00%, for the
years ended December 31, 1999, 1998, 1997 and 1996, respectively. The
portfolio's operating expense ratio after reflecting these arrangements was
1.32%, 1.33%, 1.35% and 1.36% for the years ended December 31, 1999, 1998,
1997 and 1996, respectively.
(4) Annualized.
19
<PAGE> 22
GLOBAL POST-VENTURE CAPITAL PORTFOLIO
GOAL AND STRATEGIES
The Global Post-Venture Capital Portfolio seeks long-term growth of capital.
To pursue this goal, it invests in equity securities of U.S. and foreign
companies considered to be in their post-venture-capital stage of development.
A post-venture-capital company is one that has received venture-capital
financing either:
- during the early stages of the company's existence or the early stages of the
development of a new product or service, or
- as part of a restructuring or recapitalization of the company
In either case, one or more of the following will have occurred within 10
years prior to the portfolio's purchase of the company's securities:
- the investment of venture-capital financing
- distribution of the company's securities to venture-capital investors
- the initial public offering
Under normal market conditions, the portfolio will invest at least 65% of
assets in equity securities of post-venture-capital companies. The portfolio may
invest in companies of any size. The portfolio may invest without limit in
foreign securities and will invest in at least three countries, including the
U.S.
PORTFOLIO INVESTMENTS
This portfolio invests primarily in equity securities of post-venture-capital
companies. Equity holdings may consist of:
- common and preferred stocks
- warrants
- securities convertible into common stocks
- partnership interests
The portfolio may invest up to 10% of assets in private-equity portfolios
that invest in venture-capital companies.
To a limited extent, the portfolio may also engage in other investment
practices.
RISK FACTORS
This portfolio's principal risk factors are:
- market risk
- foreign securities
- start-up and other small companies
- special-situation companies
The value of your investment generally will fluctuate in response to
stock-market movements. Because the portfolio invests internationally, it
carries additional risks, including currency, information and political risks.
Investing in start-up and other small companies may expose the portfolio to
increased market liquidity and information risks. These risks are defined in
"More About Risk."
Post-venture-capital companies are often involved in "special situations."
Securities of special-situation companies may decline in value and hurt the
portfolio's performance if the anticipated
20
<PAGE> 23
benefits of the special situation do not materialize.
To the extent that it invests in private-equity portfolios, the portfolio
takes on additional liquidity, valuation and other risks. "More About Risk"
details certain other investment practices the portfolio may use. Please read
that section carefully before you invest.
PORTFOLIO MANAGEMENT
Elizabeth B. Dater, Harold E. Sharon, Federico D. Laffan and Jun Sung Kim
manage the portfolio. Calvin E. Chung assists them. Raymond L. Held and Thaddeus
I. Grey manage the portfolio's investments in private-equity portfolios. You can
find out more about the portfolio's managers in "Meet the Managers."
INVESTOR EXPENSES
Management fee 1.07%
All other expenses .33%
------------
Total expenses 1.40%
FINANCIAL HIGHLIGHTS
The figures below have been audited by the portfolio's independent auditors,
PricewaterhouseCoopers LLP.
<TABLE>
<CAPTION>
PERIOD ENDED: 12/99 12/98 12/97 12/96(1)
<S> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $11.82 $11.06 $9.76 $10.00
Investment activities:
Net investment loss (0.08) (0.04) (0.08) 0.00
Net gains (loss) on investments and
foreign currency related items (both
realized and unrealized) 7.52 0.80 1.38 (0.24)
Total from investment activities 7.44 0.76 1.30 (0.24)
Net asset value, end of period $19.26 $11.82 $11.06 $9.76
Total return 62.94% 6.87% 13.34% (2.40%)(2)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s
omitted) $151,784 $62,055 $30,520 $12,400
Ratio of expenses to average net assets 1.41%(4) 1.40%(4) 1.40%(4) 1.41%(3,4)
Ratio of net income (loss) to average
net assets (.87%) (.83%) (.75%) .80%(3)
Decrease reflected in above operating
expense ratio due to
waivers/reimbursements .18% .30% .18% 4.16%(3)
Portfolio turnover rate 44% 73% 238% 7%(2)
</TABLE>
(1) For the period September 30, 1996 (Commencement of Operations) through
December 31, 1996.
(2) Not annualized.
(3) Annualized.
(4) Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expense. These arrangements resulted in a reduction to
the portfolio's net expense ratio of .01%, 0.00%, .00% and .01% for the
years or period ended December 31, 1999, 1998, 1997 and 1996, respectively.
The portfolio's operating expense ratio after reflecting these arrangements
was 1.40%, 1.40%, 1.40% and 1.40% for the years or period ended December 31,
1999, 1998, 1997 and 1996, respectively.
21
<PAGE> 24
SMALL COMPANY GROWTH PORTFOLIO
GOAL AND STRATEGIES
The Small Company Growth Portfolio seeks capital growth. To pursue this goal,
it invests in equity securities of small U.S. growth companies.
In seeking to identify growth companies--companies with attractive
capital-growth potential--the portfolio's managers often look for:
- companies still in the developmental stage
- older companies that appear to be entering a new stage of growth
- companies providing products or services with a high unit-volume growth rate
The portfolio may also invest in emerging-growth companies--small or
medium-size companies that have passed their start-up phase, show positive
earnings, and offer the potential for accelerated earnings growth. Emerging-
growth companies generally stand to benefit from new products or services,
technological developments, changes in management or other factors.
Under normal market conditions, the portfolio will invest at least 65% of
assets in equity securities of small U.S. companies. The portfolio considers a
"small" company to be one whose market capitalization is within the range of
capitalizations of companies in the Russell 2000 Index. As of December 31, 1999,
the Russell 2000 Index included companies with market capitalizations between
$178 million and $1.3 billion.
Some companies may outgrow the definition of a small company after the
portfolio has purchased their securities. These companies continue to be
considered small for purposes of the portfolio's minimum 65% allocation to
small-company equities. In addition, the portfolio may invest in companies of
any size once the 65% policy is met. As a result, the portfolio's average market
capitalization may sometimes exceed that of the largest company in the Russell
2000 Index.
PORTFOLIO INVESTMENTS
This portfolio intends to invest at least 80% of assets in equity securities
of small-capitalization growth companies. Equity holdings may consist of:
- common and preferred stocks
- securities convertible into common stocks
- rights and warrants
The portfolio may invest up to 10% of assets in foreign securities. To a
limited extent, it may also engage in other investment practices.
RISK FACTORS
This portfolio's principal risk factors are:
- market risk
- start-up and other small companies
- special-situation companies
- non-diversified status
The value of your investment generally will fluctuate in response to
stock-market
22
<PAGE> 25
movements. The portfolio's performance will largely depend upon the performance
of growth stocks, which may be more volatile than the overall stock market.
Different types of stocks (such as "growth" vs. "value" stocks) tend to shift
in and out of favor depending on market and economic conditions. Accordingly,
the portfolio's performance may sometimes be lower or higher than that of other
types of funds (such as those emphasizing value stocks).
Investing in start-up and other small companies may expose the portfolio to
increased market, liquidity and information risks. These risks are defined in
"More About Risk."
Small companies and emerging-growth companies are often involved in "special
situations." Securities of special-situation companies may decline in value and
hurt the portfolio's performance if the anticipated benefits of the special
situation do not materialize.
"More About Risk" details certain other investment practices the portfolio
may use. Please read that section carefully before you invest.
PORTFOLIO MANAGEMENT
Stephen J. Lurito and Sammy Oh manage the portfolio. You can find out more
about the portfolio's managers in "Meet the Managers."
INVESTOR EXPENSES
Management fee .90%
All other expenses .24%
-----------
Total expenses 1.14%
23
<PAGE> 26
FINANCIAL HIGHLIGHTS
The figures below have been audited by the portfolio's independent auditors,
PricewaterhouseCoopers LLP.
<TABLE>
<CAPTION>
PERIOD ENDED: 12/99 12/98 12/97 12/96 12/95(1)
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of
period $16.01 $16.48 $14.25 $12.51 $10.00
Investment activities:
Net investment loss (0.12) (0.06) (0.07) (0.06) (0.01)
Net gains (losses) on investments
and foreign currency related
items (both realized and
unrealized) 11.07 (0.41) 2.30 1.80 2.52
Total from investment activities 10.95 (0.47) 2.23 1.74 2.51
Distributions from net realized
gains (0.76) 0.00 0.00 0.00 0.00
Net asset value, end of period $26.20 $16.01 $16.48 $14.25 $12.51
Total return 69.08% (2.85%) 15.65% 13.91% 25.10%(2)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s
omitted) $1,272,542 $734,902 $666,394 $339,398 $97,445
Ratio of expenses to average net
assets 1.15%(4) 1.14%(4) 1.15%(4) 1.16%(4) 1.25%(3)
Ratio of net loss to average net
assets (.72%) (.51%) (.56%) (.66%) (.36%)(3)
Decrease reflected in above
operating expense ratio due to
waivers/reimbursements .00% .00% .00% .01% .25%(3)
Portfolio turnover rate 122% 66% 92% 102% 34%(2)
</TABLE>
(1) For the period June 30, 1995 (Commencement of Operations) through December
31, 1995.
(2) Not annualized.
(3) Annualized.
(4) Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expense. These arrangements resulted in a reduction to
the portfolio's net expense ratio of .01%, .00%, .01% and .00% for the years
ended December 31, 1999, 1998, 1997 and 1996, respectively. The portfolio's
operating expense ratio after reflecting these arrangements was 1.14%,
1.14%, 1.14% and 1.16% for the years ended December 31, 1999, 1998, 1997 and
1996, respectively.
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<PAGE> 27
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25
<PAGE> 28
MORE ABOUT RISK
INTRODUCTION
A portfolio's goal and principal strategies largely determine its risk
profile. You will find a concise description of each portfolio's risk profile in
"Key Points." The preceding discussions of each portfolio contain more detailed
information. This section discusses other risks that may affect the portfolios.
The portfolios may use certain investment practices that have higher risks
associated with them. However, each portfolio has limitations and policies
designed to reduce many of the risks. The "Certain Investment Practices" table
describes these practices and the limitations on their use.
Each portfolio offers its shares to (i) insurance company separate accounts
that fund both variable contracts and variable life insurance contracts and (ii)
tax-qualified pension and retirement plans including participant-directed plans
which elect to make a portfolio an investment option for plan participants. Due
to differences of tax treatment and other considerations, the interests of
various variable contract owners and plan participants participating in a
portfolio may conflict. The Board of Trustees will monitor the portfolios for
any material conflicts that may arise and will determine what action, if any,
should be taken. If a conflict occurs, the Board may require one or more
insurance company separate accounts and/or plans to withdraw its investments in
one or all portfolios, which may cause a portfolio to sell securities at
disadvantageous prices and disrupt orderly portfolio management. The Board also
may refuse to sell shares of a portfolio to any variable contract or plan or may
suspend or terminate the offering of shares of a portfolio if such action is
required by law or regulatory authority or is in the best interests of the
shareholders of the portfolio.
TYPES OF INVESTMENT RISK
The following risks are referred to throughout this Prospectus.
ACCESS RISK Some countries may restrict a portfolio's access to investments
or offer terms that are less advantageous than those for local investors. This
could limit the attractive investment opportunities available to a portfolio.
CORRELATION RISK The risk that changes in the value of a hedging instrument
will not match those of the investment being hedged.
CREDIT RISK The issuer of a security or the counterparty to a contract may
default or otherwise become unable to honor a financial obligation.
CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Adverse changes in
exchange rates may erode or reverse any gains produced by foreign-currency-
denominated investments and may widen any losses.
EXPOSURE RISK The risk associated with investments (such as derivatives) or
practices (such as short selling) that increase the amount of money a portfolio
could gain or lose on an investment.
26
<PAGE> 29
- HEDGED Exposure risk could multiply losses generated by a derivative or
practice used for hedging purposes. Such losses should be substantially
offset by gains on the hedged investment. However, while hedging can reduce
or eliminate losses, it can also reduce or eliminate gains.
- SPECULATIVE To the extent that a derivative or practice is not used as a
hedge, the portfolio is directly exposed to its risks. Gains or losses from
speculative positions in a derivative may be much greater than the
derivative's original cost. For example, potential losses from writing
uncovered call options and from speculative short sales are unlimited.
INFORMATION RISK Key information about an issuer, security or market may be
inaccurate or unavailable.
INTEREST-RATE RISK Changes in interest rates may cause a decline in the
market value of an investment. With bonds and other fixed-income securities, a
rise in interest rates typically causes a fall in values, while a fall in
interest rates typically causes a rise in values.
LIQUIDITY RISK Certain portfolio securities may be difficult or impossible to
sell at the time and the price that the portfolio would like. A portfolio may
have to lower the price, sell other securities instead or forego an investment
opportunity. Any of these could have a negative effect on portfolio management
or performance.
MARKET RISK The market value of a security may move up and down, sometimes
rapidly and unpredictably. These fluctuations, which are often referred to as
"volatility," may cause a security to be worth less than it was worth at an
earlier time. Market risk may affect a single issuer, industry, sector of the
economy, or the market as a whole. Market risk is common to most
investments--including stocks and bonds, and the mutual funds that invest in
them.
OPERATIONAL RISK Some countries have less-developed securities markets (and
related transaction, registration and custody practices) that could subject a
portfolio to losses from fraud, negligence, delay or other actions.
POLITICAL RISK Foreign governments may expropriate assets, impose capital or
currency controls, impose punitive taxes, or nationalize a company or industry.
Any of these actions could have a severe effect on security prices and impair a
portfolio's ability to bring its capital or income back to the U.S. Other
political risks include economic policy changes, social and political
instability, military action and war.
VALUATION RISK The lack of an active trading market may make it difficult to
obtain an accurate price for a portfolio security.
27
<PAGE> 30
CERTAIN INVESTMENT PRACTICES
For each of the following practices, this table shows the applicable investment
limitation. Risks are indicated for each practice.
KEY TO TABLE:
<TABLE>
<S> <C>
[-] Permitted without limitation; does not indicate
actual use
20% Italic type (e.g., 20%) represents an investment
limitation as a percentage of NET portfolio assets;
does not indicate actual use
20% Roman type (e.g., 20%) represents an investment
limitation as a percentage of TOTAL portfolio assets;
does not indicate actual use
[ ] Permitted, but not expected to be used to a
significant extent
- -- Not permitted
</TABLE>
<TABLE>
<CAPTION>
GLOBAL SMALL
EMERGING INTERNATIONAL POST-VENTURE COMPANY
MARKETS EQUITY CAPITAL GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
INVESTMENT PRACTICE LIMIT
<S> <C> <C> <C> <C>
BORROWING The borrowing of money from banks to meet
redemptions or for other temporary or emergency purposes.
Speculative exposure risk. 30% 30% 30% 30%
COUNTRY/REGION FOCUS Investing a significant portion of
portfolio assets in a single country or region. Market
swings in the targeted country or region will be likely to
have a greater effect on portfolio performance than they
would in a more geographically diversified equity portfolio.
Currency, market, political risks. [-] [-] -- --
CURRENCY TRANSACTIONS Instruments, such as options, futures,
forwards or swaps, intended to manage portfolio exposure to
currency risk or to enhance total return. Options, futures
or forwards involve the right or obligation to buy or sell a
given amount of foreign currency at a specified price and
future date. Swaps involve the right or obligation to
receive or make payments based on two different currency
rates. Correlation, credit, currency, hedged exposure,
liquidity, political, speculative exposure, valuation
risks.(1) [-] [-] [ ] [ ]
EMERGING MARKETS Countries generally considered to be
relatively less developed or industrialized. Emerging
markets often face economic problems that could subject a
portfolio to increased volatility or substantial declines in
value. Deficiencies in regulatory oversight, market
infrastructure, shareholder protections and company laws
could expose a portfolio to risks beyond those generally
encountered in developed countries. Access, currency,
information, liquidity, market, operational, political,
valuation risks. [-] [-] -- --
FOREIGN SECURITIES Securities of foreign issuers. May
include depositary receipts. Currency, information,
liquidity, market, political, valuation risks. [-] [-] [-] 10%
FUTURES AND OPTIONS ON FUTURES Exchange-traded contracts
that enable a portfolio to hedge against or speculate on
future changes in currency values, interest rates or stock
indexes. Futures obligate the portfolio (or give it the
right, in the case of options) to receive or make payment at
a specific future time based on those future changes.(1)
Correlation, currency, hedged exposure, interest-rate,
market, speculative exposure risks.(2) [ ] [ ] [ ] [ ]
</TABLE>
28
<PAGE> 31
<TABLE>
<CAPTION>
GLOBAL SMALL
EMERGING INTERNATIONAL POST-VENTURE COMPANY
MARKETS EQUITY CAPITAL GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
INVESTMENT PRACTICE LIMIT
<S> <C> <C> <C> <C>
INVESTMENT-GRADE DEBT SECURITIES Debt securities rated
within the four highest grades (AAA/Aaa through BBB/Baa) by
Standard & Poor's or Moody's rating service, and unrated
securities of comparable quality. Credit, interest-rate,
market risks. 35% 35% 20% 20%
NON-INVESTMENT-GRADE DEBT SECURITIES Debt securities rated
below the fourth-highest grade (BBB/Baa) by Standard &
Poor's or Moody's rating service, and unrated securities of
comparable quality. Commonly referred to as junk bonds.
Credit, information, interest-rate, liquidity, market,
valuation risks. 35% 5% 5% 5%
OPTIONS Instruments that provide a right to buy (call) or
sell (put) a particular security, currency or index of
securities at a fixed price within a certain time period. A
portfolio may purchase or sell (write) both put and call
options for hedging or speculative purposes.(1) Correlation,
credit, hedged exposure, liquidity, market, speculative
exposure, valuation risks. 25% 25% 25% 25%
PRIVATE-EQUITY PORTFOLIOS Private limited partnerships or
other investment funds that themselves invest in equity or
debt securities of:
- -companies in the venture-capital or post-venture-capital
stages of development
- -companies engaged in special situations or changes in
corporate control, including buyouts
Information, liquidity, market, valuation risks. -- -- 10% --
RESTRICTED AND OTHER ILLIQUID SECURITIES Certain securities
with restrictions on trading, or those not actively traded.
May include private placements. Liquidity, market, valuation
risks. 15% 15% 15% 15%
SECURITIES LENDING Lending portfolio securities to financial
institutions; a portfolio receives cash, U.S. government
securities or bank letters of credit as collateral. Credit,
liquidity, market, operational risks. 33 1/3% 33 1/3% 33 1/3% 33 1/3%
SHORT SALES Selling borrowed securities with the intention
of repurchasing them for a profit on the expectation that
the market price will drop. Liquidity, market, speculative
exposure risks. -- -- 10% --
</TABLE>
29
<PAGE> 32
<TABLE>
<CAPTION>
GLOBAL SMALL
EMERGING INTERNATIONAL POST-VENTURE COMPANY
MARKETS EQUITY CAPITAL GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
INVESTMENT PRACTICE LIMIT
<S> <C> <C> <C> <C>
SHORT SALES "AGAINST THE BOX" A short sale when the
portfolio owns enough shares of the security involved to
cover the borrowed securities, if necessary. Liquidity,
market, speculative exposure risks. [ ] [ ] [ ] [ ]
SPECIAL-SITUATION COMPANIES Companies experiencing unusual
developments affecting their market values. Special
situations may include acquisition, consolidation,
reorganization, recapitalization, merger, liquidation,
special distribution, tender or exchange offer, or
potentially favorable litigation. Securities of a
special-situation company could decline in value and hurt a
portfolio's performance if the anticipated benefits of the
special situation do not materialize. Information, market
risks. [ ] [ ] [-] [-]
START-UP AND OTHER SMALL COMPANIES Companies with small
relative market capitalizations, including those with
continuous operations of less than three years. Information,
liquidity, market, valuation risks. [-] [-] [-] [-]
SWAPS A contract between a portfolio and another party in
which the parties agree to exchange streams of payments
based on certain benchmarks, such as market indices or
currency or interest rates. For example, a portfolio may use
swaps to gain access to the performance of a benchmark asset
(such as an index or one or more stocks) where the
portfolio's direct investment is restricted. Credit,
currency, information, interest-rate, liquidity, market,
political, speculative exposure, valuation risks [ ] [ ] -- --
TEMPORARY DEFENSIVE TACTICS Placing some or all of a
portfolio's assets in investments such as money-market
obligations and investment-grade debt securities for
defensive purposes. Although intended to avoid losses in
adverse market, economic, political or other conditions,
defensive tactics might be inconsistent with a portfolio's
principal investment strategies and might prevent a
portfolio from achieving its goal. [ ] [ ] [ ] [ ]
</TABLE>
30
<PAGE> 33
<TABLE>
<CAPTION>
GLOBAL SMALL
EMERGING INTERNATIONAL POST-VENTURE COMPANY
MARKETS EQUITY CAPITAL GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
INVESTMENT PRACTICE LIMIT
<S> <C> <C> <C> <C>
WARRANTS Options issued by a company granting the holder the
right to buy certain securities, generally common stock, at
a specified price and usually for a limited time. Liquidity,
market, speculative exposure risks. 10% 10% 10% 10%
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The purchase
or sale of securities for delivery at a future date; market
value may change before delivery. Liquidity, market,
speculative exposure risks. 20% 20% 20% 20%
</TABLE>
(1) The portfolios are not obligated to pursue any hedging strategy. In
addition, hedging practices may not be available, may be too costly to be
used effectively or may be unable to be used for other reasons.
(2) Each portfolio is limited to 5% of net assets for initial margin and premium
amounts on futures positions considered to be speculative by the Commodity
Futures Trading Commission.
31
<PAGE> 34
MEET THE MANAGERS
[DATER PHOTO]
ELIZABETH B. DATER
Managing Director
- Co-Portfolio Manager, Global Post-Venture Capital Portfolio since inception
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus Asset Management, Inc. (Warburg Pincus)
- With Warburg Pincus since 1978
[EHRLICH PHOTO]
HAROLD W. EHRLICH, CFA, CIC
Managing Director
- Co-Portfolio Manager, International Equity Portfolio since inception
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1995
- Senior vice president, portfolio manager and analyst at Templeton Investment
Counsel Inc., 1987 to 1995
[EDWARDS PHOTO]
P. NICHOLAS EDWARDS
Managing Director
- Co-Portfolio Manager, International Equity Portfolio since July 1999
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1995
- Director at Jardine Fleming Investment Advisers, Tokyo, 1984 to 1995
[LURITO PHOTO]
STEPHEN J. LURITO
Managing Director
- Co-Portfolio Manager, Small Company Growth Portfolio since inception
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1987
Job titles indicate position with the investment adviser.
32
<PAGE> 35
[SHARON PHOTO]
HAROLD E. SHARON
Managing Director
- Co-Portfolio Manager, International Equity Portfolio since 1998
- Co-Portfolio Manager, Global Post-Venture Capital Portfolio since May 2000
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1998
- Executive director and portfolio manager with CIBC Oppenheimer, 1994 to 1998
[ALEJOS PHOTO]
EMILY ALEJOS
Director
- Associate Portfolio Manager, Emerging Markets Portfolio since March 2000
- With CSAM since 1997
- Vice president and emerging-markets portfolio manager with Bankers Trust,
1993 to 1997
[WATT PHOTO]
RICHARD WATT
Managing Director
- Portfolio Manager, Emerging Markets Portfolio since March 2000
- With CSAM since 1995
- Director and head of emerging-markets investments and research at Gartmore
Investment Limited in London, 1992 to 1995
[HRABCHAK PHOTO]
ROBERT B. HRABCHAK
Director
- Associate Portfolio Manager, Emerging Markets Portfolio since March 2000
- With CSAM since 1997
- Senior portfolio manager at Merrill Lynch Asset Management, 1995 to 1997
- Associate at Salomon Brothers, 1993 to 1995
33
<PAGE> 36
[LAFFAN PHOTO]
FEDERICO D. LAFFAN
Director
- Associate Portfolio Manager, Emerging Markets Portfolio since July 1999
- Co-Portfolio Manager, Global Post-Venture Capital Portfolio since May 2000
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1997
- Senior manager and partner with Green Cay Asset Management, 1996 to 1997
- Senior portfolio manager and director with Foreign & Colonial Emerging
Markets, London, 1990 to 1996
[NIERMAN PHOTO]
NANCY NIERMAN
Director
- Associate Portfolio Manager, International Equity Portfolio since 1998
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1996
- Analyst with Fiduciary Trust Company International, 1992 to 1996
[MCBRIDE PHOTO]
VINCENT J. MCBRIDE
Director
- Co-Portfolio Manager, International Equity Portfolio since 1998
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1994
[OH PHOTO]
SAMMY OH
Director
- Co-Portfolio Manager, Small Company Growth Portfolio since March 1999
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1997
- Vice president with Bessemer Trust, 1995 to 1996
- Vice president with Forstmann-Leff, 1993 to 1995
34
<PAGE> 37
[CHUNG PHOTO]
CALVIN E. CHUNG
Vice President
- Associate Portfolio Manager, Global Post-Venture Capital Portfolio since May
2000
- With CSAM since January 2000
- Vice President and senior technology equity analyst at Eagle Asset
Management, 1997 to 1999
- Graduate student at the University of Chicago, 1995 to 1997
[KIM PHOTO]
JUN SUNG KIM
Vice President
- Associate Portfolio Manager, Emerging Markets Portfolio since July 1999
- Co-Portfolio Manager, Global Post-Venture Capital Portfolio since May 2000
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1997
- Investment manager with Asset Korea Ltd., Seoul, 1995 to 1997
- Investment analyst with Baring Securities Ltd., Seoul, 1994 to 1995
SUB-INVESTMENT ADVISER PORTFOLIO MANAGERS
Global Post-Venture Capital Portfolio
RAYMOND L. HELD and THADDEUS I. GRAY manage the Global Post-Venture
Capital Portfolio's investments in private-equity portfolios. Both are
Investment Managers and Managing Directors of Abbott Capital Management
LLC, the portfolio's sub-investment adviser. Mr. Held has been with Abbott
since 1986, while Mr. Gray joined the firm in 1989.
35
<PAGE> 38
ABOUT YOUR ACCOUNT
SHARE VALUATION
The price of your shares is also referred to as their net asset value (NAV).
The NAV is determined at the close of regular trading on the New York Stock
Exchange (NYSE) (usually 4 p.m. Eastern Time) each day the NYSE is open for
business. It is calculated by dividing each portfolio's total assets, less its
liabilities, by the number of shares outstanding in the portfolio.
Each portfolio values its securities based on market quotations when it
calculates its NAV. If market quotations are not readily available, securities
and other assets are valued by another method that the Board of Trustees
believes accurately reflects fair value. Debt obligations that will mature in 60
days or less are valued on the basis of amortized cost, unless the Board
determines that using this method would not reflect an investment's value.
Some portfolio securities may be listed on foreign exchanges that are open on
days (such as U.S. holidays) when the portfolios do not compute their prices.
This could cause the value of a portfolio's investments to be affected by
trading on days when you cannot buy or sell shares.
The Global Post-Venture Capital Portfolio initially values its investments in
private-equity portfolios at cost. After that, the Global Post-Venture Capital
Portfolio values these investments according to reports from the private-equity
portfolios that the sub-investment adviser generally receives on a quarterly
basis. The portfolio's net asset value typically will not reflect interim
changes in the values of its private-equity-portfolio investments.
DISTRIBUTIONS
Investors in a portfolio are entitled to a share of the portfolio's net
income and gains on investments. The portfolio passes these earnings along to
its shareholders as distributions.
Each portfolio earns dividends from stocks and interest from bond, money-
market and other investments. These are passed along as dividend distributions.
A portfolio realizes capital gains whenever it sells securities for a higher
price than it paid for them. These are passed along as capital-gain
distributions.
The portfolios typically distribute dividends and capital gains annually,
usually in December. Distributions will be reinvested automatically in
additional shares of the same portfolio that paid them.
TAXES
For a discussion of the tax status of a variable contract or pension plan,
refer to the prospectus of the sponsoring participating insurance company
separate account or plan documents or other informational materials supplied by
plan sponsors.
Because shares of the portfolios may be purchased only through variable
contracts and plans, income dividends or
36
<PAGE> 39
capital-gain distributions from a portfolio are taxable, if at all, to the
participating insurance companies and plans and will be exempt from current
taxation of the variable-contract owner or plan participant if left to
accumulate within the variable contract or plan.
Each portfolio intends to comply with the diversification requirements
currently imposed by the Internal Revenue Service on separate accounts of
insurance companies as a condition of maintaining the tax-deferred status of
variable contracts.
37
<PAGE> 40
BUYING AND SELLING SHARES
You may not buy or sell shares of a portfolio directly; you may only buy or
sell shares through variable-annuity contracts and variable life insurance
contracts offered by separate accounts of certain insurance companies or through
tax-qualified pension and retirement plans. Certain portfolios may not be
available in connection with a particular contract or plan.
An insurance company's separate accounts buy and sell shares of a portfolio
at NAV, without any sales or other charges. Each insurance company receives
orders from its contract holders to buy or sell shares of a portfolio on any
business day that the portfolio calculates its NAV. If the order is received by
the insurance company prior to the close of regular trading on the NYSE, the
order will be executed at that day's NAV.
Plan participants may buy shares of a portfolio through their plan by
directing the plan trustee to buy shares for their account in a manner similar
to that described above for variable annuity and variable life insurance
contracts. You should contact your plan sponsor concerning the appropriate
procedure for investing in a portfolio.
Each portfolio reserves the right to:
- refuse any specific purchase or exchange request, including those from any
person or group who, in the portfolio's view, is likely to engage in excessive
trading
- change or discontinue its exchange privilege after 30 days' notice to current
investors, or temporarily suspend this privilege during unusual market
conditions
- make a "redemption in kind"--payment in portfolio securities rather than
cash--for certain large redemption amounts that could hurt portfolio
operations
- suspend redemptions or postpone payment dates as permitted by the Investment
Company Act of 1940 (such as during periods other than weekends or holidays
when the NYSE is closed or trading on the NYSE is restricted, or any other
time that the SEC permits)
- stop offering the portfolio's shares for a period of time (such as when
management believes that a substantial increase in assets could adversely
affect it)
38
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39
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40
<PAGE> 43
FOR MORE INFORMATION
This Prospectus is intended for use in connection with certain insurance
products and pension and retirement plans. Please refer to the prospectus of the
sponsoring participating insurance company separate account or to the plan
documents or other informational materials supplied by plan sponsors for
information regarding distributions and instructions on purchasing or selling a
variable contract and on how to select a portfolio as an investment option for a
variable contract or plan. More information about these portfolios is available
free upon request, including the following:
ANNUAL/SEMIANNUAL REPORTS TO SHAREHOLDERS
Includes financial statements, portfolio investments and detailed performance
information.
The Annual Report also contains a letter from the portfolio manager
discussing market conditions and investment strategies that significantly
affected portfolio performance during its past fiscal year.
OTHER INFORMATION
A current Statement of Additional Information (SAI), which provides more
details about the portfolios, is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference.
You may visit the SEC's Internet Web site (www.sec.gov) to view the SAI,
material incorporated by reference and other information. You can also obtain
copies by visiting the SEC's Public Reference Room in Washington, DC (phone
202-942-8090) or by sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington, DC 20549-6009 or electronically at
[email protected].
Please contact the Trust to obtain, without charge, the SAI and Annual and
Semiannual Reports and to make shareholder inquiries:
BY TELEPHONE:
800-222-8977
BY MAIL:
Warburg Pincus Trust
P.O. Box 9030
Boston, MA 02205-9030
BY OVERNIGHT OR COURIER SERVICE:
Boston Financial
Attn: Warburg Pincus Trust
66 Brooks Drive
Braintree, MA 02184
ON THE INTERNET:
www.warburg.com
SEC FILE NUMBER:
Warburg Pincus Trust 811-07261
[WARBURG PINCUS LOGO]
P.O. BOX 9030, BOSTON, MA 02205-9030
800-222-8977 [-] www.warburg.com
PROVIDENT DISTRIBUTORS, INC., DISTRIBUTOR. TRIUS-1-0500
<PAGE> 44
[Warburg Pincus Logo] [Credit Suisse Logo]
PROSPECTUS
May 1, 2000
WARBURG PINCUS TRUST
-- SMALL COMPANY GROWTH PORTFOLIO
Warburg Pincus Trust shares are not available directly to
individual investors, but may be offered only through certain
insurance products and pension and retirement plans.
As with all mutual funds, the Securities and Exchange Commission
has not approved these securities, nor has it passed upon the
adequacy or accuracy of this Prospectus. It is a criminal
offense to state otherwise.
The Trust is advised by Credit Suisse Asset Management, LLC.
<PAGE> 45
CONTENTS
<TABLE>
<S> <C>
KEY POINTS........................ ......................... 4
Goal and Principal Strategies............................ 4
Investor Profile......................................... 4
A Word About Risk........................................ 5
PERFORMANCE SUMMARY.................... .................... 6
Year-by-Year Total Returns............................... 6
Average Annual Total Returns............................. 7
INVESTOR EXPENSES..................... ..................... 8
Fees and Portfolio Expenses.............................. 8
Example.................................................. 8
THE PORTFOLIO IN DETAIL.................. .................. 9
The Management Firm...................................... 9
Portfolio Information Key................................ 9
Goal and Strategies...................................... 10
Portfolio Investments.................................... 10
Risk Factors............................................. 10
Portfolio Management..................................... 10
Investor Expenses........................................ 10
Financial Highlights..................................... 11
MORE ABOUT RISK...................... ...................... 12
Introduction............................................. 12
Types of Investment Risk................................. 12
Certain Investment Practices............................. 14
MEET THE MANAGERS..................... ..................... 16
ABOUT YOUR ACCOUNT.................... ..................... 17
Share Valuation.......................................... 17
Distributions............................................ 17
Taxes.................................................... 17
BUYING AND SELLING SHARES................. ................. 18
FOR MORE INFORMATION................... .................... back cover
</TABLE>
3
<PAGE> 46
KEY POINTS
GOAL AND PRINCIPAL STRATEGIES
<TABLE>
<CAPTION>
PORTFOLIO/RISK FACTORS GOAL STRATEGIES
<S> <C> <C>
SMALL COMPANY GROWTH PORTFOLIO Capital growth - Invests in equity securities of small
Risk factors: U.S. companies
Market risk - Using a growth investment style, may
Start-up and other small companies look for either developing or older
Special-situation companies companies in a growth stage or companies
Non-diversified status providing products or services with a high
unit-volume growth rate
</TABLE>
INVESTOR PROFILE
THIS PORTFOLIO IS DESIGNED FOR INVESTORS WHO:
- have longer time horizons
- are willing to assume the risk of losing money in exchange for attractive
potential long-term returns
- are investing for growth or capital appreciation
- want to diversify their investments with more aggressive stock funds
IT MAY NOT BE APPROPRIATE IF YOU:
- are investing for a shorter time horizon
- are uncomfortable with an investment that has a higher degree of volatility
- are looking primarily for income
You should base your investment decision on your own goals, risk preferences
and time horizon.
4
<PAGE> 47
A WORD ABOUT RISK
All investments involve some level of risk. Simply defined, risk is the
possibility that you will lose money or not make money.
Principal risk factors for the portfolio are discussed below. Before you
invest, please make sure you understand the risks that apply to the portfolio.
As with any mutual fund, you could lose money over any period of time.
Investments in the portfolio are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
MARKET RISK
The market value of a security may move up and down, sometimes rapidly and
unpredictably. These fluctuations, which are often referred to as "volatility,"
may cause a security to be worth less than it was worth at an earlier time.
Market risk may affect a single issuer, industry, sector of the economy, or the
market as a whole. Market risk is common to most investments--including stocks
and bonds, and the mutual funds that invest in them.
START-UP AND OTHER SMALL COMPANIES
Start-up and other small companies may have less-experienced management,
limited product lines, unproven track records or inadequate capital reserves.
Their securities may carry increased market, liquidity and other risks. Key
information about the company may be inaccurate or unavailable.
SPECIAL-SITUATION COMPANIES
"Special situations" are unusual developments that affect a company's market
value. Examples include mergers, acquisitions and reorganizations. Securities of
special-situation companies may decline in value if the anticipated benefits of
the special situation do not materialize.
NON-DIVERSIFIED STATUS
The portfolio is considered a non-diversified portfolio under the Investment
Company Act of 1940 and is permitted to invest a greater proportion of its
assets in the securities of a smaller number of issuers. As a result, the
portfolio may be subject to greater volatility with respect to its investments
than a portfolio that is more broadly diversified.
5
<PAGE> 48
PERFORMANCE SUMMARY
The bar chart below and the table on the next page provide an indication of the
risks of investing in this portfolio. The bar chart shows you how the
portfolio's performance has varied from year to year for up to 10 years. The
table compares the portfolio's performance over time to that of a broadly based
securities market index. The bar chart and table do not reflect additional
charges and expenses which are, or may be, imposed under the variable contracts
or plans; such charges and expenses are described in the prospectus of the
insurance company separate account or in the plan documents or other
informational materials supplied by plan sponsors. Inclusion of these charges
and expenses would reduce the total return for the periods shown. As with all
mutual funds, past performance is not a prediction of the future.
YEAR-BY-YEAR TOTAL RETURNS
[Total Returns Chart]
SMALL COMPANY GROWTH PORTFOLIO
Best quarter: 52.93% (Q4 99)
Worst quarter: -22.70% (Q3 98)
Inception date: 6/30/95
<TABLE>
<CAPTION>
SMALL COMPANY GROWTH PORTFOLIO
------------------------------
<S> <C>
1996 13.91%
1997 15.65
1998 -2.85
1999 69.08
</TABLE>
6
<PAGE> 49
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS 10 YEARS LIFE OF INCEPTION
PERIOD ENDED 12/31/99: 1999 1995-1999 1990-1999 FUND DATE
<S> <C> <C> <C> <C> <C>
SMALL COMPANY GROWTH PORTFOLIO 69.08% NA NA 24.71% 6/30/95
RUSSELL 2000 GROWTH INDEX* 43.10% NA NA 21.83%
</TABLE>
* The Russell 2000 Growth Index is an unmanaged index (with no defined
investment objective) of those securities in the Russell 2000 Index with a
greater-than-average growth orientation. The Russell 2000 Growth Index
includes reinvestment of dividends, and is compiled by Frank Russell Company.
UNDERSTANDING PERFORMANCE
- TOTAL RETURN tells you how much an investment in the portfolio has
changed in value over a given time period. It assumes that all dividends
and capital gains (if any) were reinvested in additional shares. The
change in value can be stated either as a cumulative return or as an
average annual rate of return.
- A CUMULATIVE TOTAL RETURN is the actual return of an investment for a
specified period. The year-by-year total returns in the bar chart are
examples of one-year cumulative total returns.
- An AVERAGE ANNUAL TOTAL RETURN applies to periods longer than one year.
It smoothes out the variations in year-by-year performance to tell you
what constant annual return would have produced the investment's actual
cumulative return. This gives you an idea of an investment's annual
contribution to your portfolio, assuming you held it for the entire
period.
- Because of compounding, the average annual total returns in the table
cannot be computed by averaging the returns in the bar chart.
7
<PAGE> 50
INVESTOR EXPENSES
FEES AND PORTFOLIO EXPENSES
This table describes the fees and expenses you may bear as a shareholder. Annual
portfolio operating expense figures are for the fiscal year ended December 31,
1999. The table does not reflect additional charges and expenses which are, or
may be, imposed under the variable contracts or plans; such charges and expenses
are described in the prospectus of the insurance company separate account or in
the plan documents or other informational materials supplied by plan sponsors.
<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER FEES
(paid directly from your investment)
Sales charge "load" on purchases NONE
Deferred sales charge "load" NONE
Sales charge "load" on reinvested distributions NONE
Redemption fees NONE
Exchange fees NONE
ANNUAL PORTFOLIO OPERATING EXPENSES
(deducted from fund assets)
Management fee .90%
Distribution and service (12b-1) fee NONE
Other expenses .24%
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES 1.14%
</TABLE>
EXAMPLE
This example may help you compare the cost of investing in the portfolio with
the cost of investing in other mutual funds. Because it uses hypothetical
conditions, your actual costs may be higher or lower.
Assume you invest $10,000, the portfolio returns 5% annually, expense ratios
remain as listed in the table above, and you close your account at the end of
each of the time periods shown. Based on these assumptions, your cost would be:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS 10 YEARS
<S> <C> <C> <C>
$116 $362 $628 $1,386
</TABLE>
8
<PAGE> 51
THE PORTFOLIO IN DETAIL
THE MANAGEMENT FIRM
CREDIT SUISSE ASSET MANAGEMENT, LLC
One Citicorp Center
153 East 53rd Street
New York, NY 10022
- Investment adviser for the portfolio
- Responsible for managing the portfolio's assets according to its goal and
strategies
- A member of Credit Suisse Asset Management, the institutional asset
management and mutual fund arm of Credit Suisse Group (Credit Suisse), one of
the world's leading banks
- Credit Suisse Asset Management companies manage approximately $72 billion in
the U.S. and $203 billion globally as of December 1999
- Credit Suisse Asset Management has offices in 14 countries, including
SEC-registered offices in New York and London; other offices (such as those in
Budapest, Frankfurt, Milan, Moscow, Paris, Prague, Sydney, Tokyo, Warsaw and
Zurich) are not registered with the U.S. Securities and Exchange Commission
For easier reading, Credit Suisse Asset Management, LLC will be referred to
as "CSAM" or "we" throughout this Prospectus.
PORTFOLIO INFORMATION KEY
A concise description of the portfolio begins on the next page. The
description provides the following information:
GOAL AND STRATEGIES
The portfolio's particular investment goal and the strategies it intends to
use in pursuing that goal. Percentages of portfolio assets are based on total
assets unless indicated otherwise.
PORTFOLIO INVESTMENTS
The primary types of securities in which the portfolio invests. Secondary
investments are described in "More About Risk."
RISK FACTORS
The major risk factors associated with the portfolio. Additional risk factors
are included in "More About Risk."
PORTFOLIO MANAGEMENT
The individuals designated by the investment adviser to handle the
portfolio's day-to-day management.
INVESTOR EXPENSES
Actual portfolio expenses for the 1999 fiscal year. Future expenses may be
higher or lower. Additional expenses are, or may be, imposed under the variable
contracts or plans.
- MANAGEMENT FEE The fee paid to the investment adviser for providing
investment advice to the portfolio. Expressed as a percentage of average net
assets after waivers.
- OTHER EXPENSES Fees paid by the portfolio for items such as administration,
transfer agency, custody, auditing, legal and registration fees and
miscellaneous expenses. Expressed as a percentage of average net assets after
waivers, credits and reimbursements.
FINANCIAL HIGHLIGHTS
A table showing the portfolio's audited financial performance for up to five
years.
- TOTAL RETURN How much you would have earned on an investment in the
portfolio, assuming you had reinvested all dividend and capital-gain
distributions.
- PORTFOLIO TURNOVER An indication of trading frequency. The portfolio may sell
securities without regard to the length of time they have been held. A high
turnover rate may increase the portfolio's transaction costs and negatively
affect its performance.
The Annual Report includes the auditor's report, along with the portfolio's
financial statements. It is available free upon request.
9
<PAGE> 52
GOAL AND STRATEGIES
The portfolio seeks capital growth. To pursue this goal, it invests in equity
securities of small U.S. growth companies.
In seeking to identify growth companies--companies with attractive
capital-growth potential--the portfolio's managers often look for:
- companies still in the developmental stage
- older companies that appear to be entering a new stage of growth
- companies providing products or services with a high unit-volume growth rate
The portfolio may also invest in emerging-growth companies--small or
medium-size companies that have passed their start-up phase, show positive
earnings, and offer the potential for accelerated earnings growth.
Emerging-growth companies generally stand to benefit from new products or
services, technological developments, changes in management or other factors.
Under normal market conditions, the portfolio will invest at least 65% of
assets in equity securities of small U.S. companies. The portfolio considers a
"small" company to be one whose market capitalization is within the range of
capitalizations of companies in the Russell 2000 Index. As of December 31, 1999,
the Russell 2000 Index included companies with market capitalizations between
$178 million and $1.3 billion.
Some companies may outgrow the definition of a small company after the
portfolio has purchased their securities. These companies continue to be
considered small for purposes of the portfolio's minimum 65% allocation to
small-company equities. In addition, the portfolio may invest in companies of
any size once the 65% policy is met. As a result, the portfolio's average market
capitalization may sometimes exceed that of the largest company in the Russell
2000 Index.
PORTFOLIO INVESTMENTS
The portfolio intends to invest at least 80% of assets in equity securities
of small-capitalization growth companies. Equity holdings may consist of:
- common and preferred stocks
- securities convertible into common stocks
- rights and warrants
The portfolio may invest up to 10% of assets in foreign securities. To a
limited extent, it may also engage in other investment practices.
RISK FACTORS
The portfolio's principal risk factors are:
- market risk
- start-up and other small companies
- special-situation companies
- non-diversified status
The value of your investment generally will fluctuate in response to
stock-market movements. The portfolio's performance will largely depend upon the
performance of growth stocks, which may be more volatile than the overall stock
market.
Different types of stocks (such as "growth" vs. "value" stocks) tend to shift
in and out of favor depending on market and economic conditions. Accordingly,
the portfolio's performance may sometimes be lower or higher than that of other
types of funds (such as those emphasizing value stocks).
Investing in start-up and other small companies may expose the portfolio to
increased market, liquidity and information risks. These risks are defined in
"More About Risk."
Small companies and emerging-growth companies are often involved in "special
situations." Securities of special-situation companies may decline in value and
hurt the portfolio's performance if the anticipated benefits of the special
situation do not materialize.
"More About Risk" details certain other investment practices the portfolio
may use. Please read that section carefully before you invest.
PORTFOLIO MANAGEMENT
Stephen J. Lurito and Sammy Oh manage the portfolio. You can find out more
about the portfolio's managers in "Meet the Managers."
INVESTOR EXPENSES
Management fee .90%
All other expenses .24%
-----
Total expenses 1.14%
10
<PAGE> 53
FINANCIAL HIGHLIGHTS
The figures below have been audited by the portfolio's independent auditors,
PricewaterhouseCoopers LLP.
<TABLE>
<CAPTION>
PERIOD ENDED: 12/99 12/98 12/97 12/96 12/95(1)
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $16.01 $16.48 $14.25 $12.51 $10.00
Investment activities:
Net investment loss (0.12) (0.06) (0.07) (0.06) (0.01)
Net gains (losses) on investments and foreign currency
related items (both realized and unrealized) 11.07 (0.41) 2.30 1.80 2.52
Total from investment activities 10.95 (0.47) 2.23 1.74 2.51
Distributions from net realized gains (0.76) 0.00 0.00 0.00 0.00
Net asset value, end of period $26.20 $16.01 $16.48 $14.25 $12.51
Total return 69.08% (2.85%) 15.65% 13.91% 25.10%(2)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $1,272,542 $734,902 $666,394 $339,398 $97,445
Ratio of expenses to average net assets 1.15%(4) 1.14%(4) 1.15%(4) 1.16%(4) 1.25%(3)
Ratio of net loss to average net assets (.72%) (.51%) (.56%) (.66%) (.36%)(3)
Decrease reflected in above operating expense ratio due to
waivers/reimbursements .00% .00% .00% .01% .25%(3)
Portfolio turnover rate 122% 66% 92% 102% 34%(2)
</TABLE>
(1) For the period June 30, 1995 (Commencement of Operations) through December
31, 1995.
(2) Not annualized.
(3) Annualized.
(4) Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expense. These arrangements resulted in a reduction to
the portfolio's net expense ratio of .01%, .00%, .01% and .00% for the years
ended December 31, 1999, 1998, 1997 and 1996, respectively. The portfolio's
operating expense ratio after reflecting these arrangements was 1.14%,
1.14%, 1.14% and 1.16% for the years ended December 31, 1999, 1998, 1997 and
1996, respectively.
11
<PAGE> 54
MORE ABOUT RISK
INTRODUCTION
The portfolio's goal and principal strategies largely determine its risk
profile. You will find a concise description of the portfolio's risk profile in
"Key Points." The preceding discussion of the portfolio contains more detailed
information. This section discusses other risks that may affect the portfolio.
The portfolio may use certain investment practices that have higher risks
associated with them. However, the portfolio has limitations and policies
designed to reduce many of the risks. The "Certain Investment Practices" table
describes these practices and the limitations on their use.
The Portfolio offers its shares to (i) insurance company separate accounts
that fund both variable-annuity contracts and variable life insurance contracts
and (ii) tax-qualified pension and retirement plans including
participant-directed plans which elect to make the portfolio an investment
option for plan participants. Due to differences of tax treatment and other
considerations, the interests of various variable-annuity contract owners and
plan participants participating in the portfolio may conflict. The Board of
Trustees will monitor the portfolio for any material conflicts that may arise
and will determine what action, if any, should be taken. If a conflict occurs,
the Board may require one or more insurance company separate accounts and/or
plans to withdraw its investments in the portfolio which may cause the portfolio
to sell securities at disadvantageous prices and disrupt orderly portfolio
management. The Board also may refuse to sell shares of the portfolio to any
variable-annuity contract or plan or may suspend or terminate the offering of
shares of the portfolio if such action is required by law or regulatory
authority or is in the best interests of the shareholders of the portfolio.
TYPES OF INVESTMENT RISK
The following risks are referred to throughout this Prospectus.
CORRELATION RISK The risk that changes in the value of a hedging instrument
will not match those of the investment being hedged.
CREDIT RISK The issuer of a security or the counterparty to a contract may
default or otherwise become unable to honor a financial obligation.
CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Adverse changes in
exchange rates may erode or reverse any gains produced by foreign-
currency-denominated investments and may widen any losses.
EXPOSURE RISK The risk associated with investments (such as derivatives) or
practices (such as short selling) that increase the amount of money the
portfolio could gain or lose on an investment.
- HEDGED Exposure risk could multiply losses generated by a derivative or
practice used for hedging purposes. Such losses should be substantially
offset by gains on the hedged investment. However, while hedging can reduce
or eliminate losses, it can also reduce or eliminate gains.
- SPECULATIVE To the extent that a derivative or practice is not used as a
hedge, the portfolio is directly exposed to its risks. Gains or losses from
speculative positions in a derivative may be much greater than the
derivative's original cost. For example, potential losses from writing
uncovered call options and from speculative short sales are unlimited.
INFORMATION RISK Key information about an issuer, security or market may be
inaccurate or unavailable.
INTEREST-RATE RISK Changes in interest rates may cause a decline in the
market value of an investment. With bonds and other fixed-income securities, a
rise in interest rates typically causes a fall in values, while a fall in
interest rates typically causes a rise in values.
LIQUIDITY RISK Certain portfolio securities may be difficult or impossible to
sell at the time and the price that the portfolio would like. The portfolio may
have to lower the price, sell other securities instead or forego an investment
opportunity. Any of these could have a negative effect on portfolio management
or performance.
MARKET RISK The market value of a security may move up and down, sometimes
rapidly and unpredictably. These fluctuations, which are often referred to as
"volatility," may cause a security to be worth less than it was worth at an
earlier time. Market risk may affect a single issuer, industry, sector of the
economy, or the market as a whole.
12
<PAGE> 55
Market risk is common to most investments--including stocks and bonds, and the
mutual funds that invest in them.
OPERATIONAL RISK Some countries have less-developed securities markets (and
related transaction, registration and custody practices) that could subject the
portfolio to losses from fraud, negligence, delay or other actions.
POLITICAL RISK Foreign governments may expropriate assets, impose capital or
currency controls, impose punitive taxes, or nationalize a company or industry.
Any of these actions could have a severe effect on security prices and impair
the portfolio's ability to bring its capital or income back to the U.S. Other
political risks include economic policy changes, social and political
instability, military action and war.
VALUATION RISK The lack of an active trading market may make it difficult to
obtain an accurate price for a portfolio security.
13
<PAGE> 56
CERTAIN INVESTMENT PRACTICES
For each of the following practices, this table shows the applicable investment
limitation. Risks are indicated for each practice.
KEY TO TABLE:
<TABLE>
<S> <C>
[-] Permitted without limitation; does not indicate actual use
20% Italic type (e.g., 20%) represents an investment limitation as a percentage of NET portfolio assets; does not indicate
actual use
20% Roman type (e.g., 20%) represents an investment limitation as a percentage of TOTAL portfolio assets; does not
indicate actual use
[ ] Permitted, but not expected to be used to a significant extent
- -- Not permitted
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT PRACTICE LIMIT
<S> <C>
BORROWING The borrowing of money from banks to meet
redemptions or for other temporary or emergency purposes.
Speculative exposure risk. 30%
- ----------------------------------------------------------------------
CURRENCY TRANSACTIONS Instruments, such as options, futures,
forwards or swaps, intended to manage portfolio exposure to
currency risk or to enhance total return. Options, futures
or forwards involve the right or obligation to buy or sell a
given amount of foreign currency at a specified price and
future date. Swaps involve the right or obligation to
receive or make payments based on two different currency
rates. Correlation, credit, currency, hedged exposure,
liquidity, political, speculative exposure, valuation
risks.(1) [ ]
- ----------------------------------------------------------------------
FOREIGN SECURITIES Securities of foreign issuers. May
include depositary receipts. Currency, information,
liquidity, market, political, valuation risks. 10%
- ----------------------------------------------------------------------
FUTURES AND OPTIONS ON FUTURES Exchange-traded contracts
that enable the portfolio to hedge against or speculate on
future changes in currency values, interest rates or stock
indexes. Futures obligate the portfolio (or give it the
right, in the case of options) to receive or make payment at
a specific future time based on those future changes.(1)
Correlation, currency, hedged exposure, interest-rate,
market, speculative exposure risks.(2) [ ]
- ----------------------------------------------------------------------
INVESTMENT-GRADE DEBT SECURITIES Debt securities rated
within the four highest grades (AAA/Aaa through BBB/Baa) by
Standard & Poor's or Moody's rating service, and unrated
securities of comparable quality. Credit, interest-rate,
market risks. 20%
- ----------------------------------------------------------------------
NON-INVESTMENT-GRADE DEBT SECURITIES Debt securities rated
below the fourth-highest grade (BBB/Baa) by Standard &
Poor's or Moody's rating service, and unrated securities of
comparable quality. Commonly referred to as junk bonds.
Credit, information, interest-rate, liquidity, market,
valuation risks. 5%
- ----------------------------------------------------------------------
OPTIONS Instruments that provide a right to buy (call) or
sell (put) a particular security, currency or index of
securities at a fixed price within a certain time period.
The portfolio may purchase or sell (write) both put and call
options for hedging or speculative purposes.(1) Correlation,
credit, hedged exposure, liquidity, market, speculative
exposure, valuation risks. 25%
- ----------------------------------------------------------------------
</TABLE>
14
<PAGE> 57
<TABLE>
<CAPTION>
INVESTMENT PRACTICE LIMIT
<S> <C>
RESTRICTED AND OTHER ILLIQUID SECURITIES Certain securities
with restrictions on trading, or those not actively traded.
May include private placements. Liquidity, market, valuation
risks. 15%
- ----------------------------------------------------------------------
SECURITIES LENDING Lending portfolio securities to financial
institutions; the portfolio receives cash, U.S. government
securities or bank letters of credit as collateral. Credit,
liquidity, market, operational risks. 33 1/3%
- ----------------------------------------------------------------------
SHORT SALES "AGAINST THE BOX" A short sale when the
portfolio owns enough shares of the security involved to
cover the borrowed securities, if necessary. Liquidity,
market, speculative exposure risks. [ ]
- ----------------------------------------------------------------------
SPECIAL-SITUATION COMPANIES Companies experiencing unusual
developments affecting their market values. Special
situations may include acquisition, consolidation,
reorganization, recapitalization, merger, liquidation,
special distribution, tender or exchange offer, or
potentially favorable litigation. Securities of a
special-situation company could decline in value and hurt
the portfolio's performance if the anticipated benefits of
the special situation do not materialize. Information,
market risks. [-]
- ----------------------------------------------------------------------
START-UP AND OTHER SMALL COMPANIES Companies with small
relative market capitalizations, including those with
continuous operations of less than three years. Information,
liquidity, market, valuation risks. [-]
- ----------------------------------------------------------------------
TEMPORARY DEFENSIVE TACTICS Placing some or all of the
portfolio's assets in investments such as money-market
obligations and investment-grade debt securities for
defensive purposes. Although intended to avoid losses in
adverse market, economic, political or other conditions,
defensive tactics might be inconsistent with the portfolio's
principal investment strategies and might prevent the
portfolio from achieving its goal. [ ]
- ----------------------------------------------------------------------
WARRANTS Options issued by a company granting the holder the
right to buy certain securities, generally common stock, at
a specified price and usually for a limited time. Liquidity,
market, speculative exposure risks. 10%
- ----------------------------------------------------------------------
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The purchase
or sale of securities for delivery at a future date; market
value may change before delivery. Liquidity, market,
speculative exposure risks. 20%
- ----------------------------------------------------------------------
</TABLE>
(1) The portfolio is not obligated to pursue any hedging strategy. In addition,
hedging practices may not be available, may be too costly to be used
effectively or may be unable to be used for other reasons.
(2) The portfolio is limited to 5% of net assets for initial margin and premium
amounts on futures positions considered to be speculative by the Commodity
Futures Trading Commission.
15
<PAGE> 58
MEET THE MANAGERS
[STEPHEN J. LURITO PHOTO]
STEPHEN J. LURITO
Managing Director
- Co-Portfolio Manager, Small Company Growth Portfolio since inception
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus Asset Management, Inc. (Warburg Pincus)
- With Warburg Pincus since 1987
[OH PHOTO]
SAMMY OH
Director
- Co-Portfolio Manager, Small Company Growth Portfolio since March 1999
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1997
- Vice president with Bessemer Trust, 1995 to 1996
- Vice president with Forstmann-Leff, 1993 to 1995
Job titles indicate position with the investment adviser.
16
<PAGE> 59
ABOUT YOUR ACCOUNT
SHARE VALUATION
The price of your shares is also referred to as their net asset value (NAV).
The NAV is determined at the close of regular trading on the New York Stock
Exchange (NYSE) (usually 4 p.m. Eastern Time) each day the NYSE is open for
business. It is calculated by dividing the portfolio's total assets, less its
liabilities, by the number of shares outstanding.
The portfolio values its securities based on market quotations when it
calculates its NAV. If market quotations are not readily available, securities
and other assets are valued by another method that the Board of Trustees
believes accurately reflects fair value. Debt obligations that will mature in 60
days or less are valued on the basis of amortized cost, unless the Board
determines that using this method would not reflect an investment's value.
Some portfolio securities may be listed on foreign exchanges that are open on
days (such as U.S. holidays) when the portfolio does not compute its price. This
could cause the value of the portfolio's investments to be affected by trading
on days when you cannot buy or sell shares.
DISTRIBUTIONS
Investors in the portfolio are entitled to a share of the portfolio's net
income and gains on investments. The portfolio passes these earnings along to
its shareholders as distributions.
The portfolio earns dividends from stocks and interest from bond,
money-market and other investments. These are passed along as dividend
distributions. The portfolio realizes capital gains whenever it sells securities
for a higher price than it paid for them. These are passed along as capital-gain
distributions.
The portfolio typically distributes dividends and capital gains annually,
usually in December. Distributions will be reinvested automatically in
additional shares of the portfolio.
TAXES
For a discussion of the tax status of a variable contract or pension plan,
refer to the prospectus of the sponsoring participating insurance company
separate account or plan documents or other informational materials supplied by
plan sponsors.
Because shares of the portfolio may be purchased only through variable
contracts and plans, income dividends or capital-gain distributions from the
portfolio are taxable, if at all, to the participating insurance companies and
plans and will be exempt from current taxation of the variable-contract owner or
plan participant if left to accumulate within the variable contract or plan.
The portfolio intends to comply with the diversification requirements
currently imposed by the Internal Revenue Service on separate accounts of
insurance companies as a condition of maintaining the tax-deferred status of
variable contracts.
17
<PAGE> 60
BUYING AND SELLING SHARES
You may not buy or sell shares of the portfolio directly; you may only buy or
sell shares through variable-annuity contracts and variable life insurance
contracts offered by separate accounts of certain insurance companies or through
tax-qualified pension and retirement plans. The portfolio may not be available
in connection with a particular contract or plan.
An insurance company's separate accounts buy and sell shares of the portfolio
at NAV, without any sales or other charges. Each insurance company receives
orders from its contract holders to buy or sell shares of the portfolio on any
business day that the portfolio calculates its NAV. If the order is received by
the insurance company prior to the close of regular trading on the NYSE, the
order will be executed at that day's NAV.
Plan participants may buy shares of the portfolio through their plan by
directing the plan trustee to buy shares for their account in a manner similar
to that described above for variable annuity and variable life insurance
contracts. You should contact your plan sponsor concerning the appropriate
procedure for investing in the portfolio.
The portfolio reserves the right to:
- refuse any specific purchase or exchange request, including those from any
person or group who, in the portfolio's view, is likely to engage in excessive
trading
- change or discontinue its exchange privilege after 30 days' notice to current
investors, or temporarily suspend this privilege during unusual market
conditions
- make a "redemption in kind"--payment in portfolio securities rather than
cash--for certain large redemption amounts that could hurt portfolio
operations
- suspend redemptions or postpone payment dates as permitted by the Investment
Company Act of 1940 (such as during periods other than weekends or holidays
when the NYSE is closed or trading on the NYSE is restricted, or any other
time that the SEC permits)
- stop offering the portfolio's shares for a period of time (such as when
management believes that a substantial increase in assets could adversely
affect it)
18
<PAGE> 61
This page intentionally left blank
<PAGE> 62
FOR MORE INFORMATION
This Prospectus is intended for use in connection with certain insurance
products and pension and retirement plans. Please refer to the prospectus of the
sponsoring participating insurance company separate account or to the plan
documents or other informational materials supplied by plan sponsors for
information regarding distributions and instructions on purchasing or selling a
variable contract and on how to select a portfolio as an investment option for a
variable contract or plan. More information about the portfolio is available
free upon request, including the following:
ANNUAL/SEMIANNUAL REPORTS TO SHAREHOLDERS
Includes financial statements, portfolio investments and detailed performance
information.
The Annual Report also contains a letter from the portfolio manager
discussing market conditions and investment strategies that significantly
affected portfolio performance during its past fiscal year.
OTHER INFORMATION
A current Statement of Additional Information (SAI), which provides more
details about the portfolio, is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference.
You may visit the SEC's Internet Web site (www.sec.gov) to view the SAI,
material incorporated by reference and other information. You can also obtain
copies by visiting the SEC's Public Reference Room in Washington, DC (phone
202-942-8090) or by sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington, DC 20549-6009 or electronically at
[email protected].
Please contact the Trust to obtain, without charge, the SAI and Annual and
Semiannual Reports and to make shareholder inquiries:
BY TELEPHONE:
800-222-8977
BY MAIL:
Warburg Pincus Trust
P.O. Box 9030
Boston, MA 02205-9030
BY OVERNIGHT OR COURIER SERVICE:
Boston Financial
Attn: Warburg Pincus Trust
66 Brooks Drive
Braintree, MA 02184
ON THE INTERNET:
www.warburg.com
SEC FILE NUMBER:
Warburg Pincus Trust 811-07261
[WARBURG PINCUS FUNDS LOGO]
P.O. BOX 9030, BOSTON, MA 02205-9030
800-222-8977 [-] www.warburg.com
PROVIDENT DISTRIBUTORS, INC., DISTRIBUTOR. TRSCG-1-0500
<PAGE> 63
[WARBURG PINCUS LOGO] [CREDIT SUISSE LOGO]
PROSPECTUS
May 1, 2000
WARBURG PINCUS TRUST
- INTERNATIONAL EQUITY PORTFOLIO
Warburg Pincus Trust shares are not available directly to
individual investors, but may be offered only through certain
insurance products and pension and retirement plans.
As with all mutual funds, the Securities and Exchange Commission
has not approved these securities, nor has it passed upon the
adequacy or accuracy of this Prospectus. It is a criminal
offense to state otherwise.
The Trust is advised by Credit Suisse Asset Management, LLC.
<PAGE> 64
CONTENTS
<TABLE>
<S> <C>
KEY POINTS........................ ......................... 4
Goal and Principal Strategies............................ 4
Investor Profile......................................... 4
A Word About Risk........................................ 5
PERFORMANCE SUMMARY.................... .................... 6
Year-by-Year Total Returns............................... 6
Average Annual Total Returns............................. 7
INVESTOR EXPENSES..................... ..................... 8
Fees and Portfolio Expenses.............................. 8
Example.................................................. 8
THE PORTFOLIO IN DETAIL.................. .................. 9
The Management Firm...................................... 9
Portfolio Information Key................................ 9
Goal and Strategies...................................... 10
Portfolio Investments.................................... 10
Risk Factors............................................. 10
Portfolio Management..................................... 10
Investor Expenses........................................ 10
Financial Highlights..................................... 11
MORE ABOUT RISK...................... ...................... 12
Introduction............................................. 12
Types of Investment Risk................................. 12
Certain Investment Practices............................. 14
MEET THE MANAGERS..................... ..................... 16
ABOUT YOUR ACCOUNT.................... ..................... 17
Share Valuation.......................................... 17
Distributions............................................ 17
Taxes.................................................... 17
BUYING AND SELLING SHARES................. ................. 18
FOR MORE INFORMATION................... .................... back cover
</TABLE>
3
<PAGE> 65
KEY POINTS
GOAL AND PRINCIPAL STRATEGIES
<TABLE>
<CAPTION>
PORTFOLIO/RISK FACTORS GOAL STRATEGIES
<S> <C> <C>
INTERNATIONAL EQUITY PORTFOLIO Long-term capital appreciation - Invests in foreign equity securities
Risk factors: - Diversifies its investments across
Market risk countries, including emerging markets
Foreign securities - Favors stocks with discounted
valuations, using a value-based, bottom-up
investment approach
</TABLE>
INVESTOR PROFILE
THIS PORTFOLIO IS DESIGNED FOR INVESTORS WHO:
- have longer time horizons
- are willing to assume the risk of losing money in exchange for attractive
potential long-term returns
- are investing for growth or capital appreciation
- want to diversify their investments internationally
IT MAY NOT BE APPROPRIATE IF YOU:
- are investing for a shorter time horizon
- are uncomfortable with an investment that has a higher degree of volatility
- want to limit your exposure to foreign securities
- are looking primarily for income
You should base your investment decision on your own goals, risk preferences
and time horizon.
4
<PAGE> 66
A WORD ABOUT RISK
All investments involve some level of risk. Simply defined, risk is the
possibility that you will lose money or not make money.
Principal risk factors for the portfolio are discussed below. Before you
invest, please make sure you understand the risks that apply to the portfolio.
As with any mutual fund, you could lose money over any period of time.
Investments in the portfolio are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
MARKET RISK
The market value of a security may move up and down, sometimes rapidly and
unpredictably. These fluctuations, which are often referred to as "volatility,"
may cause a security to be worth less than it was worth at an earlier time.
Market risk may affect a single issuer, industry, sector of the economy, or the
market as a whole. Market risk is common to most investments--including stocks
and bonds, and the mutual funds that invest in them.
FOREIGN SECURITIES
A portfolio that invests outside the U.S. carries additional risks that
include:
- CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Adverse changes in
exchange rates may erode or reverse any gains produced by foreign-currency
denominated investments and may widen any losses. The portfolio may, but is
not required to, seek to reduce currency risk by hedging part or all of its
exposure to various foreign currencies.
- INFORMATION RISK Key information about an issuer, security or market may be
inaccurate or unavailable.
- POLITICAL RISK Foreign governments may expropriate assets, impose capital or
currency controls, impose punitive taxes, or nationalize a company or
industry. Any of these actions could have a severe effect on security prices
and impair the portfolio's ability to bring its capital or income back to the
U.S. Other political risks include economic-policy changes, social and
political instability, military action and war.
5
<PAGE> 67
PERFORMANCE SUMMARY
The bar chart below and the table on the next page provide an indication of the
risks of investing in this portfolio. The bar chart shows you how the
portfolio's performance has varied from year to year for up to 10 years. The
table compares the portfolio's performance over time to that of a broadly based
securities market index. The bar chart and table do not reflect additional
charges and expenses which are, or may be, imposed under the variable contracts
or plans; such charges and expenses are described in the prospectus of the
insurance company separate account or in the plan documents or other
informational materials supplied by plan sponsors. Inclusion of these charges
and expenses would reduce the total return for the periods shown. As with all
mutual funds, past performance is not a prediction of the future.
YEAR-BY-YEAR TOTAL RETURNS
.
<TABLE>
<CAPTION>
YEAR ENDED 12/31: 1996 1997 1998 1999
<S> <C> <C> <C> <C>
INTERNATIONAL EQUITY PORTFOLIO
Best quarter: 32.04% (Q4 99) 9.98% -2.26% 5.35% 53.43%
Worst quarter: -16.92% (Q3 98)
Inception date: 6/30/95
</TABLE>
6
<PAGE> 68
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS 10 YEARS LIFE OF INCEPTION
PERIOD ENDED 12/31/99: 1999 1995-1999 1990-1999 FUND DATE
<S> <C> <C> <C> <C> <C>
INTERNATIONAL EQUITY PORTFOLIO 53.43% NA NA 14.81% 6/30/95
MSCI ALL COUNTRY WORLD EXCLUDING THE U.S. INDEX* 31.80% NA NA 12.04%
</TABLE>
* The Morgan Stanley Capital International All Country World Excluding the U.S.
Index is a market-capitalization-weighted index of companies listed on stock
exchanges outside of the U.S.
UNDERSTANDING PERFORMANCE
- TOTAL RETURN tells you how much an investment in the portfolio has
changed in value over a given time period. It assumes that all dividends
and capital gains (if any) were reinvested in additional shares. The
change in value can be stated either as a cumulative return or as an
average annual rate of return.
- A CUMULATIVE TOTAL RETURN is the actual return of an investment for a
specified period. The year-by-year total returns in the bar chart are
examples of one-year cumulative total returns.
- An AVERAGE ANNUAL TOTAL RETURN applies to periods longer than one year.
It smoothes out the variations in year-by-year performance to tell you
what constant annual return would have produced the investment's actual
cumulative return. This gives you an idea of an investment's annual
contribution to your portfolio, assuming you held it for the entire
period.
- Because of compounding, the average annual total returns in the table
cannot be computed by averaging the returns in the bar chart.
7
<PAGE> 69
INVESTOR EXPENSES
FEES AND PORTFOLIO EXPENSES
This table describes the fees and expenses you may bear as a shareholder. Annual
portfolio operating expense figures are for the fiscal year ended December 31,
1999. The table does not reflect additional charges and expenses which are, or
may be, imposed under the variable contracts or plans; such charges and expenses
are described in the prospectus of the insurance company separate account or in
the plan documents or other informational materials supplied by plan sponsors.
<TABLE>
<S> <C>
SHAREHOLDER FEES
(paid directly from your investment)
Sales charge "load" on purchases NONE
Deferred sales charge "load" NONE
Sales charge "load" on reinvested distributions NONE
Redemption fees NONE
Exchange fees NONE
ANNUAL PORTFOLIO OPERATING EXPENSES
(deducted from fund assets)
Management fee 1.00%
Distribution and service (12b-1) fee NONE
Other expenses .32%
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES 1.32%
</TABLE>
EXAMPLE
This example may help you compare the cost of investing in the portfolio with
the cost of investing in other mutual funds. Because it uses hypothetical
conditions, your actual costs may be higher or lower.
Assume you invest $10,000, the portfolio returns 5% annually, expense ratios
remain as listed in the table above, and you close your account at the end of
each of the time periods shown. Based on these assumptions, your cost would be:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS 10 YEARS
<S> <C> <C> <C>
$134 $418 $723 $1,590
</TABLE>
8
<PAGE> 70
THE PORTFOLIO IN DETAIL
THE MANAGEMENT FIRM
CREDIT SUISSE ASSET MANAGEMENT, LLC
One Citicorp Center
153 East 53rd Street
New York, NY 10022
- Investment adviser for the portfolio
- Responsible for managing the portfolio's assets according to its goal and
strategies
- A member of Credit Suisse Asset Management, the institutional asset
management and mutual fund arm of Credit Suisse Group (Credit Suisse), one of
the world's leading banks
- Credit Suisse Asset Management companies manage approximately $72 billion in
the U.S. and $203 billion globally as of December 1999
- Credit Suisse Asset Management has offices in 14 countries, including
SEC-registered offices in New York and London; other offices (such as those in
Budapest, Frankfurt, Milan, Moscow, Paris, Prague, Sydney, Tokyo, Warsaw and
Zurich) are not registered with the U.S. Securities and Exchange Commission
For easier reading, Credit Suisse Asset Management, LLC will be referred to
as "CSAM" or "we" throughout this Prospectus.
PORTFOLIO INFORMATION KEY
A concise description of the portfolio begins on the next page. The
description provides the following information:
GOAL AND STRATEGIES
The portfolio's particular investment goal and the strategies it intends to
use in pursuing that goal. Percentages of portfolio assets are based on total
assets unless indicated otherwise.
PORTFOLIO INVESTMENTS
The primary types of securities in which the portfolio invests. Secondary
investments are described in "More About Risk."
RISK FACTORS
The major risk factors associated with the portfolio. Additional risk factors
are included in "More About Risk."
PORTFOLIO MANAGEMENT
The individuals designated by the investment adviser to handle the
portfolio's day-to-day management.
INVESTOR EXPENSES
Actual portfolio expenses for the 1999 fiscal year. Future expenses may be
higher or lower. Additional expenses are, or may be, imposed under the variable
contracts or plans.
- MANAGEMENT FEE The fee paid to the investment adviser for providing
investment advice to the portfolio. Expressed as a percentage of average net
assets after waivers.
- OTHER EXPENSES Fees paid by the portfolio for items such as administration,
transfer agency, custody, auditing, legal and registration fees and
miscellaneous expenses. Expressed as a percentage of average net assets after
waivers, credits and reimbursements.
FINANCIAL HIGHLIGHTS
A table showing the portfolio's audited financial performance for up to five
years.
- TOTAL RETURN How much you would have earned on an investment in the
portfolio, assuming you had reinvested all dividend and capital-gain
distributions.
- PORTFOLIO TURNOVER An indication of trading frequency. The portfolio may sell
securities without regard to the length of time they have been held. A high
turnover rate may increase the portfolio's transaction costs and negatively
affect its performance.
The Annual Report includes the auditor's report, along with the portfolio's
financial statements. It is available free upon request.
9
<PAGE> 71
GOAL AND STRATEGIES
The portfolio seeks long-term capital appreciation. To pursue this goal, it
invests in equity securities of companies located or conducting a majority of
their business outside the U.S.
Under normal market conditions, the portfolio will invest at least 65% of
assets in equity securities of issuers from at least three foreign countries.
The portfolio intends to diversify its investments across different countries,
although at times it may invest a significant part of its assets in a single
country. Although the portfolio emphasizes developed countries, it may also
invest in emerging markets.
In choosing equity securities, the portfolio's managers use a bottom-up
investment approach that begins with an analysis of individual companies. The
managers look for companies of any size whose stocks appear to be discounted
relative to earnings, assets or projected growth. The portfolio managers
determine value based upon research and analysis, taking all relevant factors
into account.
PORTFOLIO INVESTMENTS
This portfolio intends to invest substantially all of its assets in the
following types of equity securities:
- common stocks
- securities convertible into or exchangeable for common stocks
To a limited extent, the portfolio may also engage in other investment
practices.
RISK FACTORS
This portfolio's principal risk factors are:
- market risk
- foreign securities
The value of your investment generally will fluctuate in response to
stock-market movements. Because the portfolio invests internationally, it
carries additional risks, including currency, information and political risks.
These risks are defined in "More About Risk."
To the extent that the portfolio invests in emerging markets or focuses on a
single country or region, it takes on additional risks that could hurt its
performance. Investing in emerging markets involves access, operational and
other risks not generally encountered in developed countries. Focusing on a
single country or region may cause the portfolio to be more volatile than a more
geographically diversified equity fund. "More About Risk" details these and
certain other investment practices the portfolio may use. Please read that
section carefully before you invest.
PORTFOLIO MANAGEMENT
P. Nicholas Edwards, Harold W. Ehrlich, Harold E. Sharon and Vincent J.
McBride manage the portfolio. Associate Portfolio Manager Nancy Nierman assists
them. You can find out more about the portfolio's managers in "Meet the
Managers."
INVESTOR EXPENSES
Management fee 1.00%
All other expenses .32%
------------
Total expenses 1.32%
10
<PAGE> 72
FINANCIAL HIGHLIGHTS
The figures below have been audited by the portfolio's independent auditors,
PricewaterhouseCoopers LLP.
<TABLE>
<CAPTION>
PERIOD ENDED: 12/99 12/98 12/97 12/96 12/95(1)
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $10.99 $10.49 $11.48 $10.65 $10.00
Investment activities:
Net investment income 0.08 0.08 0.10 0.00 0.03
Net gains (loss) on investments and foreign currency related
items (both realized and unrealized) 5.78 0.48 (0.37) 1.06 0.70
Total from investment activities 5.86 0.56 (0.27) 1.06 0.73
Distributions:
Dividends from net investment income (0.08) (0.05) (0.01) (0.06) (0.01)
Distributions in excess of net investment income (0.07) 0.00 0.00 (0.10) (0.07)
Distributions from net realized gains 0.00 (0.01) 0.00 (0.06) 0.00
Distributions in excess of realized gains 0.00 0.00 (0.71) (0.01) 0.00
Total distributions (0.15) (0.06) (0.72) (0.23) (0.08)
Net asset value, end of period $16.70 $10.99 $10.49 $11.48 $10.65
Total return 53.43% 5.35% (2.26)% 9.98% 7.30%(2)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $610,547 $360,124 $347,229 $298,218 $64,537
Ratio of expenses to average net assets 1.33%(3) 1.33%(3) 1.36%(3) 1.36%(3) 1.44%(4)
Ratio of net income to average net assets .63% .68% .66% .64% 0.48%(4)
Decrease reflected in above operating expense ratios due to
waivers/reimbursement .00% .00% .00% .04% .77%(4)
Portfolio turnover rate 145% 105% 79% 31% 8%(2)
</TABLE>
(1) For the period June 30, 1995 (Commencement of Operations) through December
31, 1995.
(2) Not annualized.
(3) Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expense. These arrangements resulted in a reduction to
the portfolio's net expense ratio of .01%, .00%, .01% and .00%, for the
years ended December 31, 1999, 1998, 1997 and 1996, respectively. The
portfolio's operating expense ratio after reflecting these arrangements was
1.32%, 1.33%, 1.35% and 1.36% for the years ended December 31, 1999, 1998,
1997 and 1996, respectively.
(4) Annualized.
11
<PAGE> 73
MORE ABOUT RISK
INTRODUCTION
The portfolio's goal and principal strategies largely determine its risk
profile. You will find a concise description of the portfolio's risk profile in
"Key Points." The preceding discussion of the portfolio contains more detailed
information. This section discusses other risks that may affect the portfolio.
The portfolio may use certain investment practices that have higher risks
associated with them. However, the portfolio has limitations and policies
designed to reduce many of the risks. The "Certain Investment Practices" table
describes these practices and the limitations on their use.
The portfolio offers its shares to (i) insurance company separate accounts
that fund both variable contracts and variable life insurance contracts and (ii)
tax-qualified pension and retirement plans including participant-directed plans
which elect to make the portfolio an investment option for plan participants.
Due to differences of tax treatment and other considerations, the interests of
various variable contract owners and plan participants participating in the
portfolio may conflict. The Board of Trustees will monitor the portfolio for any
material conflicts that may arise and will determine what action, if any, should
be taken. If a conflict occurs, the Board may require one or more insurance
company separate accounts and/or plans to withdraw its investments in the
portfolio, which may cause the portfolio to sell securities at disadvantageous
prices and disrupt orderly portfolio management. The Board also may refuse to
sell shares of the portfolio to any variable contract or plan or may suspend or
terminate the offering of shares of the portfolio if such action is required by
law or regulatory authority or is in the best interests of the shareholders of
the portfolio.
TYPES OF INVESTMENT RISK
The following risks are referred to throughout this Prospectus.
ACCESS RISK Some countries may restrict the portfolio's access to investments
or offer terms that are less advantageous than those for local investors. This
could limit the attractive investment opportunities available to the portfolio.
CORRELATION RISK The risk that changes in the value of a hedging instrument
will not match those of the investment being hedged.
CREDIT RISK The issuer of a security or the counterparty to a contract may
default or otherwise become unable to honor a financial obligation.
CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Adverse changes in
exchange rates may erode or reverse any gains produced by foreign-
currency-denominated investments and may widen any losses.
EXPOSURE RISK The risk associated with investments (such as derivatives) or
practices (such as short selling) that increase the amount of money the
portfolio could gain or lose on an investment.
- HEDGED Exposure risk could multiply losses generated by a derivative or
practice used for hedging purposes. Such losses should be substantially
offset by gains on the hedged investment. However, while hedging can reduce
or eliminate losses, it can also reduce or eliminate gains.
- SPECULATIVE To the extent that a derivative or practice is not used as a
hedge, the portfolio is directly exposed to its risks. Gains or losses from
speculative positions in a derivative may be much greater than the
derivative's original cost. For example, potential losses from writing
uncovered call options and from speculative short sales are unlimited.
INFORMATION RISK Key information about an issuer, security or market may be
inaccurate or unavailable.
INTEREST-RATE RISK Changes in interest rates may cause a decline in the
market value of an investment. With bonds and other fixed-income securities, a
rise in interest rates typically causes a fall in values, while a fall in
interest rates typically causes a rise in values.
LIQUIDITY RISK Certain portfolio securities may be difficult or impossible to
sell at the time and the price that the portfolio would like. The portfolio may
have to lower the price, sell other securities instead or forego an investment
opportunity. Any of these could have a negative effect on portfolio management
or performance.
MARKET RISK The market value of a security may move up and down, sometimes
rapidly and unpredictably. These fluctuations, which are often referred to as
"volatility," may cause a security to be worth less than it was worth at an
earlier time. Market risk may affect a single issuer, industry, sector of the
economy, or the market as a whole. Market risk is common to most
investments--including stocks and bonds, and the mutual funds that invest in
them.
OPERATIONAL RISK Some countries have less-developed securities markets (and
related transaction, registration and
12
<PAGE> 74
custody practices) that could subject the portfolio to losses from fraud,
negligence, delay or other actions.
POLITICAL RISK Foreign governments may expropriate assets, impose capital or
currency controls, impose punitive taxes, or nationalize a company or industry.
Any of these actions could have a severe effect on security prices and impair
the portfolio's ability to bring its capital or income back to the U.S. Other
political risks include economic policy changes, social and political
instability, military action and war.
VALUATION RISK The lack of an active trading market may make it difficult to
obtain an accurate price for a portfolio security.
13
<PAGE> 75
CERTAIN INVESTMENT PRACTICES
For each of the following practices, this table shows the applicable investment
limitation. Risks are indicated for each practice.
KEY TO TABLE:
<TABLE>
<S> <C>
[-] Permitted without limitation; does not indicate actual use
20% Italic type (e.g., 20%) represents an investment limitation as a percentage of NET portfolio assets; does not
indicate actual use
20% Roman type (e.g., 20%) represents an investment limitation as a percentage of TOTAL portfolio assets; does not
indicate actual use
[-] Permitted, but not expected to be used to a significant extent
[--] Not permitted
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT PRACTICE LIMIT
<S> <C>
BORROWING The borrowing of money from banks to meet
redemptions or for other temporary or emergency purposes.
Speculative exposure risk. 30%
- -------------------------------------------------------------------------
COUNTRY/REGION FOCUS Investing a significant portion of
portfolio assets in a single country or region. Market
swings in the targeted country or region will be likely to
have a greater effect on portfolio performance than they
would in a more geographically diversified equity portfolio.
Currency, market, political risks. [-]
- -------------------------------------------------------------------------
CURRENCY TRANSACTIONS Instruments, such as options, futures,
forwards or swaps, intended to manage portfolio exposure to
currency risk or to enhance total return. Options, futures
or forwards involve the right or obligation to buy or sell a
given amount of foreign currency at a specified price and
future date. Swaps involve the right or obligation to
receive or make payments based on two different currency
rates. Correlation, credit, currency, hedged exposure,
liquidity, political, speculative exposure, valuation
risks.(1) [-]
- -------------------------------------------------------------------------
EMERGING MARKETS Countries generally considered to be
relatively less developed or industrialized. Emerging
markets often face economic problems that could subject the
portfolio to increased volatility or substantial declines in
value. Deficiencies in regulatory oversight, market
infrastructure, shareholder protections and company laws
could expose the portfolio to risks beyond those generally
encountered in developed countries. Access, currency,
information, liquidity, market, operational, political,
valuation risks. [-]
- -------------------------------------------------------------------------
FOREIGN SECURITIES Securities of foreign issuers. May
include depositary receipts. Currency, information,
liquidity, market, political, valuation risks. [-]
- -------------------------------------------------------------------------
FUTURES AND OPTIONS ON FUTURES Exchange-traded contracts
that enable the portfolio to hedge against or speculate on
future changes in currency values, interest rates or stock
indexes. Futures obligate the portfolio (or give it the
right, in the case of options) to receive or make payment at
a specific future time based on those future changes.(1)
Correlation, currency, hedged exposure, interest-rate,
market, speculative exposure risks.(2) [ ]
- -------------------------------------------------------------------------
INVESTMENT-GRADE DEBT SECURITIES Debt securities rated
within the four highest grades (AAA/Aaa through BBB/Baa) by
Standard & Poor's or Moody's rating service, and unrated
securities of comparable quality. Credit, interest-rate,
market risks. 35%
- -------------------------------------------------------------------------
NON-INVESTMENT-GRADE DEBT SECURITIES Debt securities rated
below the fourth-highest grade (BBB/Baa) by Standard &
Poor's or Moody's rating service, and unrated securities of
comparable quality. Commonly referred to as junk bonds.
Credit, information, interest-rate, liquidity, market,
valuation risks. 5%
- -------------------------------------------------------------------------
OPTIONS Instruments that provide a right to buy (call) or
sell (put) a particular security, currency or index of
securities at a fixed price within a certain time period.
The portfolio may purchase or sell (write) both put and call
options for hedging or speculative purposes.(1) Correlation,
credit, hedged exposure, liquidity, market, speculative
exposure, valuation risks. 25%
- -------------------------------------------------------------------------
RESTRICTED AND OTHER ILLIQUID SECURITIES Certain securities
with restrictions on trading, or those not actively traded.
May include private placements. Liquidity, market, valuation
risks. 15%
- -------------------------------------------------------------------------
</TABLE>
14
<PAGE> 76
<TABLE>
<CAPTION>
INVESTMENT PRACTICE LIMIT
<S> <C>
SECURITIES LENDING Lending portfolio securities to financial
institutions; the portfolio receives cash, U.S. government
securities or bank letters of credit as collateral. Credit,
liquidity, market, operational risks. 33 1/3%
- -------------------------------------------------------------------------
SHORT SALES "AGAINST THE BOX" A short sale when the
portfolio owns enough shares of the security involved to
cover the borrowed securities, if necessary. Liquidity,
market, speculative exposure risks. [ ]
- -------------------------------------------------------------------------
SPECIAL-SITUATION COMPANIES Companies experiencing unusual
developments affecting their market values. Special
situations may include acquisition, consolidation,
reorganization, recapitalization, merger, liquidation,
special distribution, tender or exchange offer, or
potentially favorable litigation. Securities of a
special-situation company could decline in value and hurt
the portfolio's performance if the anticipated benefits of
the special situation do not materialize. Information,
market risks. [ ]
- -------------------------------------------------------------------------
START-UP AND OTHER SMALL COMPANIES Companies with small
relative market capitalizations, including those with
continuous operations of less than three years. Information,
liquidity, market, valuation risks. [-]
- -------------------------------------------------------------------------
SWAPS A contract between the portfolio and another party in
which the parties agree to exchange streams of payments
based on certain benchmarks, such as market indices or
currency or interest rates. For example, the portfolio may
use swaps to gain access to the performance of a benchmark
asset (such as an index or one or more stocks) where the
portfolio's direct investment is restricted. Credit,
currency, information, interest-rate, liquidity, market,
political, speculative exposure, valuation risks [ ]
- -------------------------------------------------------------------------
TEMPORARY DEFENSIVE TACTICS Placing some or all of the
portfolio's assets in investments such as money-market
obligations and investment-grade debt securities for
defensive purposes. Although intended to avoid losses in
adverse market, economic, political or other conditions,
defensive tactics might be inconsistent with the portfolio's
principal investment strategies and might prevent the
portfolio from achieving its goal. [ ]
- -------------------------------------------------------------------------
WARRANTS Options issued by a company granting the holder the
right to buy certain securities, generally common stock, at
a specified price and usually for a limited time. Liquidity,
market, speculative exposure risks. 10%
- -------------------------------------------------------------------------
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The purchase
or sale of securities for delivery at a future date; market
value may change before delivery. Liquidity, market,
speculative exposure risks. 20%
- -------------------------------------------------------------------------
</TABLE>
(1) The portfolio is not obligated to pursue any hedging strategy. In addition,
hedging practices may not be available, may be too costly to be used
effectively or may be unable to be used for other reasons.
(2) The portfolio is limited to 5% of net assets for initial margin and premium
amounts on futures positions considered to be speculative by the Commodity
Futures Trading Commission.
15
<PAGE> 77
MEET THE MANAGERS
[EDWARDS PHOTO]
P. NICHOLAS EDWARDS
Managing Director
- Co-Portfolio Manager, International Equity Portfolio since July 1999
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus Asset Management, Inc. (Warburg Pincus)
- With Warburg Pincus since 1995
- Director at Jardine Fleming Investment Advisers, Tokyo, 1984 to 1995
[ERLICH PHOTO]
HAROLD W. EHRLICH, CFA, CIC
Managing Director
- Co-Portfolio Manager, International Equity Portfolio since inception
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1995
- Senior vice president, portfolio manager and analyst at Templeton Investment
Counsel Inc., 1987 to 1995
[SHARON PHOTO]
HAROLD E. SHARON
Managing Director
- Co-Portfolio Manager, International Equity Portfolio
since 1998
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1998
- Executive director and portfolio manager with CIBC Oppenheimer, 1994 to 1998
[MCBRIDE PHOTO]
VINCENT J. MCBRIDE
Director
- Co-Portfolio Manager, International Equity Portfolio since 1998
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1994
[NIERMAN PHOTO]
NANCY NIERMAN
Director
- Associate Portfolio Manager, International Equity Portfolio since 1998
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1996
- Analyst with Fiduciary Trust Company International, 1992 to 1996
Job titles indicate position with the investment adviser.
16
<PAGE> 78
ABOUT YOUR ACCOUNT
SHARE VALUATION
The price of your shares is also referred to as their net asset value (NAV).
The NAV is determined at the close of regular trading on the New York Stock
Exchange (NYSE) (usually 4 p.m. Eastern Time) each day the NYSE is open for
business. It is calculated by dividing the portfolio's total assets, less its
liabilities, by the number of shares outstanding.
The portfolio values its securities based on market quotations when it
calculates its NAV. If market quotations are not readily available, securities
and other assets are valued by another method that the Board of Trustees
believes accurately reflects fair value. Debt obligations that will mature in 60
days or less are valued on the basis of amortized cost, unless the Board
determines that using this method would not reflect an investment's value.
Some portfolio securities may be listed on foreign exchanges that are open on
days (such as U.S. holidays) when the portfolio does not compute its price. This
could cause the value of the portfolio's investments to be affected by trading
on days when you cannot buy or sell shares.
DISTRIBUTIONS
Investors in the portfolio are entitled to a share of the portfolio's net
income and gains on investments. The portfolio passes these earnings along to
its shareholders as distributions.
The portfolio earns dividends from stocks and interest from bond,
money-market and other investments. These are passed along as dividend
distributions. The portfolio realizes capital gains whenever it sells securities
for a higher price than it paid for them. These are passed along as capital-gain
distributions.
The portfolio typically distributes dividends and capital gains annually,
usually in December. Distributions will be reinvested automatically in
additional shares of the portfolio.
TAXES
For a discussion of the tax status of a variable contract or pension plan,
refer to the prospectus of the sponsoring participating insurance company
separate account or plan documents or other informational materials supplied by
plan sponsors.
Because shares of the portfolio may be purchased only through variable
contracts and plans, income dividends or capital-gain distributions from the
portfolio are taxable, if at all, to the participating insurance companies and
plans and will be exempt from current taxation of the variable-contract owner or
plan participant if left to accumulate within the variable contract or plan.
The portfolio intends to comply with the diversification requirements
currently imposed by the Internal Revenue Service on separate accounts of
insurance companies as a condition of maintaining the tax-deferred status of
variable contracts.
17
<PAGE> 79
BUYING AND SELLING SHARES
You may not buy or sell shares of the portfolio directly; you may only buy or
sell shares through variable-annuity contracts and variable life insurance
contracts offered by separate accounts of certain insurance companies or through
tax-qualified pension and retirement plans. The portfolio may not be available
in connection with a particular contract or plan.
An insurance company's separate accounts buy and sell shares of the portfolio
at NAV, without any sales or other charges. Each insurance company receives
orders from its contract holders to buy or sell shares of the portfolio on any
business day that the portfolio calculates its NAV. If the order is received by
the insurance company prior to the close of regular trading on the NYSE, the
order will be executed at that day's NAV.
Plan participants may buy shares of the portfolio through their plan by
directing the plan trustee to buy shares for their account in a manner similar
to that described above for variable annuity and variable life insurance
contracts. You should contact your plan sponsor concerning the appropriate
procedure for investing in the portfolio.
The portfolio reserves the right to:
- refuse any specific purchase or exchange request, including those from any
person or group who, in the portfolio's view, is likely to engage in excessive
trading
- change or discontinue its exchange privilege after 30 days' notice to current
investors, or temporarily suspend this privilege during unusual market
conditions
- make a "redemption in kind"--payment in portfolio securities rather than
cash--for certain large redemption amounts that could hurt portfolio
operations
- suspend redemptions or postpone payment dates as permitted by the Investment
Company Act of 1940 (such as during periods other than weekends or holidays
when the NYSE is closed or trading on the NYSE is restricted, or any other
time that the SEC permits)
- stop offering the portfolio's shares for a period of time (such as when
management believes that a substantial increase in assets could adversely
affect it)
18
<PAGE> 80
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<PAGE> 81
This Prospectus is intended for use in connection with certain insurance
products and pension and retirement plans. Please refer to the prospectus of the
sponsoring participating insurance company separate account or to the plan
documents or other informational materials supplied by plan sponsors for
information regarding distributions and instructions on purchasing or selling a
variable contract and on how to select a portfolio as an investment option for a
variable contract or plan. More information about the portfolio is available
free upon request, including the following:
ANNUAL/SEMIANNUAL REPORTS TO SHAREHOLDERS
Includes financial statements, portfolio investments and detailed performance
information.
The Annual Report also contains a letter from the portfolio manager
discussing market conditions and investment strategies that significantly
affected portfolio performance during its past fiscal year.
OTHER INFORMATION
A current Statement of Additional Information (SAI), which provides more
details about the portfolio, is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference.
You may visit the SEC's Internet Web site (www.sec.gov) to view the SAI,
material incorporated by reference and other information. You can also obtain
copies by visiting the SEC's Public Reference Room in Washington, DC (phone
202-942-8090) or by sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington, DC 20549-6009 or electronically at
[email protected].
Please contact the Trust to obtain, without charge, the SAI and Annual and
Semiannual Reports and to make shareholder inquiries:
BY TELEPHONE:
800-222-8977
BY MAIL:
Warburg Pincus Trust
P.O. Box 9030
Boston, MA 02205-9030
BY OVERNIGHT OR COURIER SERVICE:
Boston Financial
Attn: Warburg Pincus Trust
66 Brooks Drive
Braintree, MA 02184
ON THE INTERNET:
www.warburg.com
SEC FILE NUMBER:
Warburg Pincus Trust 811-07261
FOR MORE INFORMATION
[WARBURG PINCUS FUNDS LOGO]
P.O. BOX 9030, BOSTON, MA 02205-9030
800-222-8977 [-] www.warburg.com
PROVIDENT DISTRIBUTORS, INC., DISTRIBUTOR. TRIEQ-1-0500
<PAGE> 82
[WARBURG PINCUS LOGO] [CREDIT SUISSE LOGO]
PROSPECTUS
May 1, 2000
WARBURG PINCUS TRUST
-INTERNATIONAL EQUITY PORTFOLIO
-SMALL COMPANY GROWTH PORTFOLIO
Warburg Pincus Trust shares are not available directly to
individual investors, but may be offered only through certain
insurance products and pension and retirement plans.
As with all mutual funds, the Securities and Exchange Commission
has not approved these securities, nor has it passed upon the
adequacy or accuracy of this Prospectus. It is a criminal
offense to state otherwise.
The Trust is advised by Credit Suisse Asset Management, LLC.
<PAGE> 83
CONTENTS
<TABLE>
<S> <C>
KEY POINTS........................ ......................... 4
Goals and Principal Strategies........................... 4
Investor Profile......................................... 4
A Word About Risk........................................ 5
PERFORMANCE SUMMARY.................... .................... 6
Year-by-Year Total Returns............................... 6
Average Annual Total Returns............................. 7
INVESTOR EXPENSES..................... ..................... 8
Fees and Portfolio Expenses.............................. 8
Example.................................................. 8
THE PORTFOLIOS IN DETAIL................. .................. 9
The Management Firm...................................... 9
Portfolio Information Key................................ 9
INTERNATIONAL EQUITY PORTFOLIO.............. ............... 10
SMALL COMPANY GROWTH PORTFOLIO.............. ............... 12
MORE ABOUT RISK...................... ...................... 14
Introduction............................................. 14
Types of Investment Risk................................. 14
Certain Investment Practices............................. 16
MEET THE MANAGERS..................... ..................... 18
ABOUT YOUR ACCOUNT.................... ..................... 20
Share Valuation.......................................... 20
Distributions............................................ 20
Taxes.................................................... 20
BUYING AND SELLING SHARES................. ................. 21
FOR MORE INFORMATION................... .................... back cover
</TABLE>
3
<PAGE> 84
KEY POINTS
GOALS AND PRINCIPAL STRATEGIES
<TABLE>
<CAPTION>
PORTFOLIO/RISK FACTORS GOAL STRATEGIES
<S> <C> <C>
INTERNATIONAL EQUITY PORTFOLIO Long-term capital appreciation - Invests in foreign equity securities
Risk factors: - Diversifies its investments across
Market risk countries, including emerging markets
Foreign securities - Favors stocks with discounted
valuations, using a value-based, bottom-up
investment approach
SMALL COMPANY GROWTH PORTFOLIO Capital growth - Invests in equity securities of small
Risk factors: U.S. companies
Market risk - Using a growth investment style, may
Start-up and other small companies look for either developing or older
Special-situation companies companies in a growth stage or companies
Non-diversified status providing products or services with a high
unit-volume growth rate
</TABLE>
INVESTOR PROFILE
THESE PORTFOLIOS ARE DESIGNED FOR INVESTORS WHO:
- have longer time horizons
- are willing to assume the risk of losing money in exchange for attractive
potential long-term returns
- are investing for growth or capital appreciation
- for the International Equity portfolio, want to diversify their investments
internationally
- for the Small Company Growth portfolio, want to diversify their investments
with more aggressive stock funds
THEY MAY NOT BE APPROPRIATE IF YOU:
- are investing for a shorter time horizon
- are uncomfortable with an investment that has a higher degree of volatility
- for the International Equity portfolio, want to limit your exposure to
foreign securities
- are looking primarily for income
You should base your selection of a portfolio on your own goals, risk
preferences and time horizon.
4
<PAGE> 85
A WORD ABOUT RISK
All investments involve some level of risk. Simply defined, risk is the
possibility that you will lose money or not make money.
Principal risk factors for the portfolios are discussed below. Before you
invest, please make sure you understand the risks that apply to your portfolio.
As with any mutual fund, you could lose money over any period of time.
Investments in the portfolios are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
MARKET RISK
Both portfolios
The market value of a security may move up and down, sometimes rapidly and
unpredictably. These fluctuations, which are often referred to as "volatility,"
may cause a security to be worth less than it was worth at an earlier time.
Market risk may affect a single issuer, industry, sector of the economy, or the
market as a whole. Market risk is common to most investments--including stocks
and bonds, and the mutual funds that invest in them.
FOREIGN SECURITIES
International Equity Portfolio
A portfolio that invests outside the U.S. carries additional risks that
include:
CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar and
foreign currencies may negatively
affect an investment. Adverse changes in exchange rates may erode or reverse any
gains produced by foreign-currency denominated investments and may widen any
losses. Each of the portfolios may, but is not required to, seek to reduce
currency risk by hedging part or all of its exposure to various foreign
currencies.
INFORMATION RISK Key information about an issuer, security or market may be
inaccurate or unavailable.
POLITICAL RISK Foreign governments may expropriate assets, impose capital or
currency controls, impose punitive taxes, or nationalize a company or industry.
Any of these actions could have a severe effect on security prices and impair a
portfolio's ability to bring its capital or income back to the U.S. Other
political risks include economic-policy changes, social and political
instability, military action and war.
START-UP AND OTHER SMALL COMPANIES
Small Company Growth Portfolio
Start-up and other small companies may have less-experienced management,
limited product lines, unproven track records or inadequate capital reserves.
Their securities may carry increased market, liquidity and other risks. Key
information about the company may be inaccurate or unavailable.
SPECIAL-SITUATION COMPANIES
Small Company Growth Portfolio
"Special situations" are unusual developments that affect a company's market
value. Examples include mergers, acquisitions and reorganizations. Securities of
special-situation companies may decline in value if the anticipated benefits of
the special situation do not materialize.
NON-DIVERSIFIED STATUS
Small Company Growth Portfolio
The portfolio is considered a non-diversified portfolio under the Investment
Company Act of 1940 and is permitted to invest a greater proportion of its
assets in the securities of a smaller number of issuers. As a result, the
portfolio may be subject to greater volatility with respect to its investments
than a portfolio that is more broadly diversified.
5
<PAGE> 86
PERFORMANCE SUMMARY
The bar chart below and the table on the next page provide an indication of the
risks of investing in these portfolios. The bar chart shows you how each
portfolio's performance has varied from year to year for up to 10 years. The
table compares each portfolio's performance over time to that of a broadly based
securities market index. The bar chart and table do not reflect additional
charges and expenses which are, or may be, imposed under the variable contracts
or plans; such charges and expenses are described in the prospectus of the
insurance company separate account or in the plan documents or other
informational materials supplied by plan sponsors. Inclusion of these charges
and expenses would reduce the total return for the periods shown. As with all
mutual funds, past performance is not a prediction of the future.
YEAR-BY-YEAR TOTAL RETURNS
<TABLE>
<CAPTION>
YEAR ENDED 12/31: 1996 1997 1998 1999
<S> <C> <C> <C> <C>
INTERNATIONAL EQUITY PORTFOLIO
Best quarter: 32.04% (Q4 98) 9.98% -2.26% 5.35% 53.43%
Worst quarter: -16.92% (Q3 98)
Inception date: 6/30/95
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED 12/31: 1996 1997 1998 1999
<S> <C> <C> <C> <C>
SMALL COMPANY GROWTH PORTFOLIO
Best quarter: 52.93% (Q4 98) 13.91% 15.65% -2.85% 69.08%
Worst quarter: -22.70% (Q3 98)
Inception date: 6/30/95
</TABLE>
6
<PAGE> 87
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS 10 YEARS LIFE OF INCEPTION
PERIOD ENDED 12/31/99: 1999 1995-1999 1990-1999 FUND DATE
<S> <C> <C> <C> <C> <C>
INTERNATIONAL EQUITY PORTFOLIO 53.43% NA NA 14.81% 6/30/95
MSCI ALL COUNTRY WORLD EXCLUDING THE U.S. INDEX(1) 31.80% NA NA 12.04%
SMALL COMPANY GROWTH PORTFOLIO 69.08% NA NA 24.71% 6/30/95
RUSSELL 2000 GROWTH INDEX(2) 43.10% NA NA 21.83%
</TABLE>
(1) The Morgan Stanley Capital International All Country World Excluding the
U.S. Index is a market-capitalization-weighted index of companies listed on
stock exchanges outside of the U.S.
(2) The Russell 2000 Growth Index is an unmanaged index (with no defined
investment objective) of those securities in the Russell 2000 Index with a
greater-than-average growth orientation. The Russell 2000 Growth Index
includes reinvestment of dividends, and is compiled by Frank Russell
Company.
UNDERSTANDING PERFORMANCE
- TOTAL RETURN tells you how much an investment in a portfolio has changed
in value over a given time period. It assumes that all dividends and
capital gains (if any) were reinvested in additional shares. The change
in value can be stated either as a cumulative return or as an average
annual rate of return.
- A CUMULATIVE TOTAL RETURN is the actual return of an investment for a
specified period. The year-by-year total returns in the bar chart are
examples of one-year cumulative total returns.
- An AVERAGE ANNUAL TOTAL RETURN applies to periods longer than one year.
It smoothes out the variations in year-by-year performance to tell you
what constant annual return would have produced the investment's actual
cumulative return. This gives you an idea of an investment's annual
contribution to your portfolio, assuming you held it for the entire
period.
- Because of compounding, the average annual total returns in the table
cannot be computed by averaging the returns in the bar chart.
7
<PAGE> 88
INVESTOR EXPENSES
FEES AND PORTFOLIO EXPENSES
This table describes the fees and expenses you may bear as a shareholder. Annual
portfolio operating expense figures are for the fiscal year ended December 31,
1999. The table does not reflect additional charges and expenses which are, or
may be, imposed under the variable contracts or plans; such charges and expenses
are described in the prospectus of the insurance company separate account or in
the plan documents or other informational materials supplied by plan sponsors.
<TABLE>
<CAPTION>
SMALL
INTERNATIONAL COMPANY
EQUITY GROWTH
PORTFOLIO PORTFOLIO
<S> <C> <C>
SHAREHOLDER FEES
(paid directly from your investment)
Sales charge "load" on purchases NONE NONE
Deferred sales charge "load" NONE NONE
Sales charge "load" on reinvested distributions NONE NONE
Redemption fees NONE NONE
Exchange fees NONE NONE
ANNUAL PORTFOLIO OPERATING EXPENSES
(deducted from fund assets)
Management fee 1.00% .90%
Distribution and service (12b-1) fee NONE NONE
Other expenses .32% .24%
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES 1.32% 1.14%
</TABLE>
EXAMPLE
This example may help you compare the cost of investing in these portfolios with
the cost of investing in other mutual funds. Because it uses hypothetical
conditions, your actual costs may be higher or lower.
Assume you invest $10,000, each portfolio returns 5% annually, expense ratios
remain as listed in the table above, and you close your account at the end of
each of the time periods shown. Based on these assumptions, your cost would be:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS 10 YEARS
<S> <C> <C> <C> <C>
INTERNATIONAL EQUITY PORTFOLIO $134 $418 $723 $1,590
SMALL COMPANY GROWTH PORTFOLIO $116 $362 $628 $1,386
</TABLE>
8
<PAGE> 89
THE PORTFOLIOS IN DETAIL
THE MANAGEMENT FIRM
CREDIT SUISSE ASSET MANAGEMENT, LLC
One Citicorp Center
153 East 53rd Street
New York, NY 10022
- Investment adviser for the portfolios
- Responsible for managing each portfolio's assets according to its goal and
strategies
- A member of Credit Suisse Asset Management, the institutional asset
management and mutual fund arm of Credit Suisse Group (Credit Suisse), one of
the world's leading banks
- Credit Suisse Asset Management companies manage approximately $72 billion in
the U.S. and $203 billion globally as of December 1999
- Credit Suisse Asset Management has offices in 14 countries, including
SEC-registered offices in New York and London; other offices (such as those in
Budapest, Frankfurt, Milan, Moscow, Paris, Prague, Sydney, Tokyo, Warsaw and
Zurich) are not registered with the U.S. Securities and Exchange Commission
For easier reading, Credit Suisse Asset Management, LLC will be referred to
as "CSAM" or "we" throughout this Prospectus.
PORTFOLIO INFORMATION KEY
Concise descriptions of each portfolio begin on the next page. Each
description provides the following information:
GOAL AND STRATEGIES
The portfolio's particular investment goal and the strategies it intends to
use in pursuing that goal. Percentages of portfolio assets are based on total
assets unless indicated otherwise.
PORTFOLIO INVESTMENTS
The primary types of securities in which the portfolio invests. Secondary
investments are described in "More About Risk."
RISK FACTORS
The major risk factors associated with the portfolio. Additional risk factors
are included in "More About Risk."
PORTFOLIO MANAGEMENT
The individuals designated by the investment adviser to handle the
portfolio's day-to-day management.
INVESTOR EXPENSES
Actual portfolio expenses for the 1999 fiscal year. Future expenses may be
higher or lower. Additional expenses are, or may be, imposed under the variable
contracts or plans.
- MANAGEMENT FEE The fee paid to the investment adviser for providing
investment advice to the portfolio. Expressed as a percentage of average net
assets after waivers.
- OTHER EXPENSES Fees paid by the portfolio for items such as administration,
transfer agency, custody, auditing, legal and registration fees and
miscellaneous expenses. Expressed as a percentage of average net assets after
waivers, credits and reimbursements.
FINANCIAL HIGHLIGHTS
A table showing the portfolio's audited financial performance for up to five
years.
- TOTAL RETURN How much you would have earned on an investment in the
portfolio, assuming you had reinvested all dividend and capital-gain
distributions.
- PORTFOLIO TURNOVER An indication of trading frequency. The portfolios may
sell securities without regard to the length of time they have been held. A
high turnover rate may increase the portfolio's transaction costs and
negatively affect its performance.
The Annual Report includes the auditor's report, along with the portfolio's
financial statements. It is available free upon request.
9
<PAGE> 90
INTERNATIONAL EQUITY PORTFOLIO
GOAL AND STRATEGIES
The International Equity Portfolio seeks long-term capital appreciation. To
pursue this goal, it invests in equity securities of companies located or
conducting a majority of their business outside the U.S.
Under normal market conditions, the portfolio will invest at least 65% of
assets in equity securities of issuers from at least three foreign countries.
The portfolio intends to diversify its investments across different countries,
although at times it may invest a significant part of its assets in a single
country. Although the portfolio emphasizes developed countries, it may also
invest in emerging markets.
In choosing equity securities, the portfolio's managers use a bottom-up
investment approach that begins with an analysis of individual companies. The
managers look for companies of any size whose stocks appear to be discounted
relative to earnings, assets or projected growth. The portfolio managers
determine value based upon research and analysis, taking all relevant factors
into account.
PORTFOLIO INVESTMENTS
This portfolio intends to invest substantially all of its assets in the
following types of equity securities:
- common stocks
- securities convertible into or exchangeable for common stocks
To a limited extent, the portfolio may also engage in other investment
practices.
RISK FACTORS
This portfolio's principal risk factors are:
- market risk
- foreign securities
The value of your investment generally will fluctuate in response to
stock-market movements. Because the portfolio invests internationally, it
carries additional risks, including currency, information and political risks.
These risks are defined in "More About Risk."
To the extent that the portfolio invests in emerging markets or focuses on a
single country or region, it takes on additional risks that could hurt its
performance. Investing in emerging markets involves access, operational and
other risks not generally encountered in developed countries. Focusing on a
single country or region may cause the portfolio to be more volatile than a more
geographically diversified equity fund. "More About Risk" details these and
certain other investment practices the portfolio may use. Please read that
section carefully before you invest.
PORTFOLIO MANAGEMENT
P. Nicholas Edwards, Harold W. Ehrlich, Harold E. Sharon and Vincent J.
McBride manage the portfolio. Associate Portfolio Manager Nancy Nierman assists
them. You can find out more about the portfolio's managers in "Meet the
Managers."
INVESTOR EXPENSES
Management fee 1.00%
All other expenses .32%
------------
Total expenses 1.32%
10
<PAGE> 91
FINANCIAL HIGHLIGHTS
The figures below have been audited by the portfolio's independent auditors,
PricewaterhouseCoopers LLP.
<TABLE>
<CAPTION>
PERIOD ENDED: 12/99 12/98 12/97 12/96 12/95(1)
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $10.99 $10.49 $11.48 $10.65 $10.00
Investment activities:
Net investment income 0.08 0.08 0.10 0.00 0.03
Net gains (loss) on investments and foreign currency related
items (both realized and unrealized) 5.78 0.48 (0.37) 1.06 0.70
Total from investment activities 5.86 0.56 (0.27) 1.06 0.73
Distributions:
Dividends from net investment income (0.08) (0.05) (0.01) (0.06) (0.01)
Distributions in excess of net investment income (0.07) 0.00 0.00 (0.10) (0.07)
Distributions from net realized gains 0.00 (0.01) 0.00 (0.06) 0.00
Distributions in excess of realized gains 0.00 0.00 (0.71) (0.01) 0.00
Total distributions (0.15) (0.06) (0.72) (0.23) (0.08)
Net asset value, end of period $16.70 $10.99 $10.49 $11.48 $10.65
Total return 53.43% 5.35% (2.26)% 9.98% 7.30%(2)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $610,547 $360,124 $347,229 $298,218 $64,537
Ratio of expenses to average net assets 1.33%(3) 1.33%(3) 1.36%(3) 1.36%(3) 1.44%(4)
Ratio of net income to average net assets .63% .68% .66% .64% .48%(4)
Decrease reflected in above operating expense ratios due to
waivers/reimbursement .00% .00% .00% .04% .77%(4)
Portfolio turnover rate 145% 105% 79% 31% 8%(2)
</TABLE>
(1) For the period June 30, 1995 (Commencement of Operations) through December
31, 1995.
(2) Not annualized.
(3) Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expense. These arrangements resulted in a reduction to
the portfolio's net expense ratio of .01%, .00%, .01% and .00%, for the
years ended December 31, 1999, 1998, 1997 and 1996, respectively. The
portfolio's operating expense ratio after reflecting these arrangements was
1.32%, 1.33%, 1.35% and 1.36% for the years ended December 31, 1999, 1998,
1997 and 1996, respectively.
(4) Annualized.
11
<PAGE> 92
SMALL COMPANY GROWTH PORTFOLIO
GOAL AND STRATEGIES
The Small Company Growth Portfolio seeks capital growth. To pursue this goal,
it invests in equity securities of small U.S. growth companies.
In seeking to identify growth companies--companies with attractive
capital-growth potential--the portfolio's managers often look for:
- companies still in the developmental stage
- older companies that appear to be entering a new stage of growth
- companies providing products or services with a high unit-volume growth rate
The portfolio may also invest in emerging-growth companies--small or
medium-size companies that have passed their start-up phase, show positive
earnings, and offer the potential for accelerated earnings growth.
Emerging-growth companies generally stand to benefit from new products or
services, technological developments, changes in management or other factors.
Under normal market conditions, the portfolio will invest at least 65% of
assets in equity securities of small U.S. companies. The portfolio considers a
"small" company to be one whose market capitalization is within the range of
capitalizations of companies in the Russell 2000 Index. As of December 31, 1999,
the Russell 2000 Index included companies with market capitalizations between
$178 million and $1.3 billion.
Some companies may outgrow the definition of a small company after the
portfolio has purchased their securities. These companies continue to be
considered small for purposes of the portfolio's minimum 65% allocation to
small-company equities. In addition, the portfolio may invest in companies of
any size once the 65% policy is met. As a result, the portfolio's average market
capitalization may sometimes exceed that of the largest company in the Russell
2000 Index.
PORTFOLIO INVESTMENTS
This portfolio intends to invest at least 80% of assets in equity securities
of small-capitalization growth companies. Equity holdings may consist of:
- common and preferred stocks
- securities convertible into common stocks
- rights and warrants
The portfolio may invest up to 10% of assets in foreign securities. To a
limited extent, it may also engage in other investment practices.
RISK FACTORS
This portfolio's principal risk factors are:
- market risk
- start-up and other small companies
- special-situation companies
- non-diversified status
The value of your investment generally will fluctuate in response to
stock-market movements. The portfolio's performance will largely depend upon the
performance of growth stocks, which may be more volatile than the overall stock
market.
Different types of stocks (such as "growth" vs. "value" stocks) tend to shift
in and out of favor depending on market and economic conditions. Accordingly,
the portfolio's performance may sometimes be lower or higher than that of other
types of funds (such as those emphasizing value stocks).
Investing in start-up and other small companies may expose the portfolio to
increased market, liquidity and information risks. These risks are defined in
"More About Risk."
Small companies and emerging-growth companies are often involved in "special
situations." Securities of special-situation companies may decline in value and
hurt the portfolio's performance if the anticipated benefits of the special
situation do not materialize.
"More About Risk" details certain other investment practices the portfolio
may use. Please read that section carefully before you invest.
PORTFOLIO MANAGEMENT
Stephen J. Lurito and Sammy Oh manage the portfolio. You can find out more
about the portfolio's managers in "Meet the Managers."
INVESTOR EXPENSES
Management fee .90%
All other expenses .24%
-----------
Total expenses 1.14%
12
<PAGE> 93
FINANCIAL HIGHLIGHTS
The figures below have been audited by the portfolio's independent auditors,
PricewaterhouseCoopers LLP.
<TABLE>
<CAPTION>
PERIOD ENDED: 12/99 12/98 12/97 12/96 12/95(1)
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $16.01 $16.48 $14.25 $12.51 $10.00
Investment activities:
Net investment loss (0.12) (0.06) (0.07) (0.06) (0.01)
Net gains (losses) on investments and foreign currency
related items (both realized and unrealized) 11.07 (0.41) 2.30 1.80 2.52
Total from investment activities 10.95 (0.47) 2.23 1.74 2.51
Distributions from net realized gains (0.76) 0.00 0.00 0.00 0.00
Net asset value, end of period $26.20 $16.01 $16.48 $14.25 $12.51
Total return 69.08% (2.85%) 15.65% 13.91% 25.10%(2)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $1,272,542 $734,902 $666,394 $339,398 $97,445
Ratio of expenses to average net assets 1.15%(4) 1.14%(4) 1.15%(4) 1.16%(4) 1.25%(3)
Ratio of net loss to average net assets (.72%) (.51%) (.56%) (.66%) (.36%)(3)
Decrease reflected in above operating expense ratio due
to waivers/reimbursements .00% .00% .00% .01% .25%(3)
Portfolio turnover rate 122% 66% 92% 102% 34%(2)
</TABLE>
(1) For the period June 30, 1995 (Commencement of Operations) through December
31, 1995.
(2) Not annualized.
(3) Annualized.
(4) Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expense. These arrangements resulted in a reduction to
the portfolio's net expense ratio of .01%, 0.00%, .01% and .00% for the
years ended December 31, 1999, 1998, 1997 and 1996, respectively. The
portfolio's operating expense ratio after reflecting these arrangements was
1.14%, 1.14%, 1.14% and 1.16% for the years ended December 31, 1999, 1998,
1997 and 1996, respectively.
13
<PAGE> 94
MORE ABOUT RISK
INTRODUCTION
A portfolio's goal and principal strategies largely determine its risk
profile. You will find a concise description of each portfolio's risk profile in
"Key Points." The preceding discussions of each portfolio contain more detailed
information. This section discusses other risks that may affect the portfolios.
The portfolios may use certain investment practices that have higher risks
associated with them. However, each portfolio has limitations and policies
designed to reduce many of the risks. The "Certain Investment Practices" table
describes these practices and the limitations on their use.
Each portfolio offers its shares to (i) insurance company separate accounts
that fund both variable contracts and variable life insurance contracts and (ii)
tax-qualified pension and retirement plans including participant-directed plans
which elect to make a portfolio an investment option for plan participants. Due
to differences of tax treatment and other considerations, the interests of
various variable contract owners and plan participants participating in a
portfolio may conflict. The Board of Trustees will monitor the portfolios for
any material conflicts that may arise and will determine what action, if any,
should be taken. If a conflict occurs, the Board may require one or more
insurance company separate accounts and/or plans to withdraw its investments in
one or all portfolios, which may cause a portfolio to sell securities at
disadvantageous prices and disrupt orderly portfolio management. The Board also
may refuse to sell shares of a portfolio to any variable contract or plan or may
suspend or terminate the offering of shares of a portfolio if such action is
required by law or regulatory authority or is in the best interests of the
shareholders of the portfolio.
TYPES OF INVESTMENT RISK
The following risks are referred to throughout this Prospectus.
ACCESS RISK Some countries may restrict a portfolio's access to investments
or offer terms that are less advantageous than those for local investors. This
could limit the attractive investment opportunities available to a portfolio.
CORRELATION RISK The risk that changes in the value of a hedging instrument
will not match those of the investment being hedged.
CREDIT RISK The issuer of a security or the counterparty to a contract may
default or otherwise become unable to honor a financial obligation.
CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Adverse changes in
exchange rates may erode or reverse any gains produced by foreign-
currency-denominated investments and may widen any losses.
EXPOSURE RISK The risk associated with investments (such as derivatives) or
practices (such as short selling) that increase the amount of money a portfolio
could gain or lose on an investment.
- HEDGED Exposure risk could multiply losses generated by a derivative or
practice used for hedging purposes. Such losses should be substantially
offset by gains on the hedged investment. However, while hedging can reduce
or eliminate losses, it can also reduce or eliminate gains.
- SPECULATIVE To the extent that a derivative or practice is not used as a
hedge, the portfolio is directly exposed to its risks. Gains or losses from
speculative positions in a derivative may be much greater than the
derivative's original cost. For example, potential losses from writing
uncovered call options and from speculative short sales are unlimited.
INFORMATION RISK Key information about an issuer, security or market may be
inaccurate or unavailable.
INTEREST-RATE RISK Changes in interest rates may cause a decline in the
market value of an investment. With bonds and other fixed-income securities, a
rise in interest rates typically causes a fall in values, while a fall in
interest rates typically causes a rise in values.
LIQUIDITY RISK Certain portfolio securities may be difficult or impossible to
sell at the time and the price that the portfolio would like. A portfolio may
have to lower the price, sell other securities instead or forego an investment
opportunity. Any of these could have a negative effect on portfolio management
or performance.
MARKET RISK The market value of a security may move up and down, sometimes
rapidly and unpredictably. These fluctuations, which are often referred to as
"volatility," may cause a security to be worth less than it was worth at an
earlier time. Market risk may affect a single issuer, industry, sector of the
economy, or the market as a whole. Market risk is common to most
investments--including stocks and bonds, and the mutual funds that invest in
them.
14
<PAGE> 95
OPERATIONAL RISK Some countries have less-developed securities markets (and
related transaction, registration and custody practices) that could subject a
portfolio to losses from fraud, negligence, delay or other actions.
POLITICAL RISK Foreign governments may expropriate assets, impose capital or
currency controls, impose punitive taxes, or nationalize a company or industry.
Any of these actions could have a severe effect on security prices and impair a
portfolio's ability to bring its capital or income back to the U.S. Other
political risks include economic policy changes, social and political
instability, military action and war.
VALUATION RISK The lack of an active trading market may make it difficult to
obtain an accurate price for a portfolio security.
15
<PAGE> 96
CERTAIN INVESTMENT PRACTICES
For each of the following practices, this table shows the applicable investment
limitation. Risks are indicated for each practice.
KEY TO TABLE:
<TABLE>
<S> <C>
[-] Permitted without limitation; does not indicate actual use
20% Italic type (e.g., 20%) represents an investment limitation as a percentage of NET
portfolio assets; does not indicate actual use
20% Roman type (e.g., 20%) represents an investment limitation as a percentage of TOTAL
portfolio assets; does not indicate actual use
[ ] Permitted, but not expected to be used to a significant extent
- -- Not permitted
</TABLE>
<TABLE>
<CAPTION>
SMALL
INTERNATIONAL COMPANY
EQUITY GROWTH
PORTFOLIO PORTFOLIO
INVESTMENT PRACTICE LIMIT
<S> <C> <C>
BORROWING The borrowing of money from banks to meet
redemptions or for other temporary or emergency purposes.
Speculative exposure risk. 30% 30%
- ------------------------------------------------------------------------------------------------------------
COUNTRY/REGION FOCUS Investing a significant portion of
portfolio assets in a single country or region. Market
swings in the targeted country or region will be likely to
have a greater effect on portfolio performance than they
would in a more geographically diversified equity portfolio.
Currency, market, political risks. [-] --
- ------------------------------------------------------------------------------------------------------------
CURRENCY TRANSACTIONS Instruments, such as options, futures,
forwards or swaps, intended to manage portfolio exposure to
currency risk or to enhance total return. Options, futures
or forwards involve the right or obligation to buy or sell a
given amount of foreign currency at a specified price and
future date. Swaps involve the right or obligation to
receive or make payments based on two different currency
rates. Correlation, credit, currency, hedged exposure,
liquidity, political, speculative exposure valuation
risks.(1) [-] [ ]
- ------------------------------------------------------------------------------------------------------------
EMERGING MARKETS Countries generally considered to be
relatively less developed or industrialized. Emerging
markets often face economic problems that could subject a
portfolio to increased volatility or substantial declines in
value. Deficiencies in regulatory oversight, market
infrastructure, shareholder protections and company laws
could expose a portfolio to risks beyond those generally
encountered in developed countries. Access, currency,
information, liquidity, market, operational, political,
valuation risks. [-] --
- ------------------------------------------------------------------------------------------------------------
FOREIGN SECURITIES Securities of foreign issuers. May
include depositary receipts. Currency, information,
liquidity, market, political, valuation risks. [-] 10%
- ------------------------------------------------------------------------------------------------------------
FUTURES AND OPTIONS ON FUTURES Exchange-traded contracts
that enable a portfolio to hedge against or speculate on
future changes in currency values, interest rates or stock
indexes. Futures obligate the portfolio (or give it the
right, in the case of options) to receive or make payment at
a specific future time based on those future changes.(1)
Correlation, currency, hedged exposure, interest-rate,
market, speculative exposure risks.(2) [ ] [ ]
- ------------------------------------------------------------------------------------------------------------
INVESTMENT-GRADE DEBT SECURITIES Debt securities rated
within the four highest grades (AAA/Aaa through BBB/Baa) by
Standard & Poor's or Moody's rating service, and unrated
securities of comparable quality. Credit, interest-rate,
market risks. 35% 20%
- ------------------------------------------------------------------------------------------------------------
NON-INVESTMENT-GRADE DEBT SECURITIES Debt securities rated
below the fourth-highest grade (BBB/Baa) by Standard &
Poor's or Moody's rating service, and unrated securities of
comparable quality. Commonly referred to as junk bonds.
Credit, information, interest-rate, liquidity, market,
valuation risks. 5% 5%
- ------------------------------------------------------------------------------------------------------------
OPTIONS Instruments that provide a right to buy (call) or
sell (put) a particular security, currency or index of
securities at a fixed price within a certain time period. A
portfolio may purchase or sell (write) both put and call
options for hedging or speculative purposes.(1) Correlation,
credit, hedged exposure, liquidity, market, speculative
exposure, valuation risks. 25% 25%
- ------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 97
<TABLE>
<CAPTION>
SMALL
INTERNATIONAL COMPANY
EQUITY GROWTH
PORTFOLIO PORTFOLIO
INVESTMENT PRACTICE LIMIT
<S> <C> <C>
RESTRICTED AND OTHER ILLIQUID SECURITIES Certain securities
with restrictions on trading, or those not actively traded.
May include private placements. Liquidity, market, valuation
risks. 15% 15%
- -------------------------------------------------------------------------------------------------
SECURITIES LENDING Lending portfolio securities to financial
institutions; a portfolio receives cash, U.S. government
securities or bank letters of credit as collateral. Credit,
liquidity, market, operational risks. 33 1/ 3 33 1/3
- -------------------------------------------------------------------------------------------------
SHORT SALES "AGAINST THE BOX" A short sale when the
portfolio owns enough shares of the security involved to
cover the borrowed securities, if necessary. Liquidity,
market, speculative exposure risks. [ ] [ ]
- -------------------------------------------------------------------------------------------------
SPECIAL-SITUATION COMPANIES Companies experiencing unusual
developments affecting their market values. Special
situations may include acquisition, consolidation,
reorganization, recapitalization, merger, liquidation,
special distribution, tender or exchange offer, or
potentially favorable litigation. Securities of a
special-situation company could decline in value and hurt a
portfolio's performance if the anticipated benefits of the
special situation do not materialize. Information, market
risks. [ ] [-]
- -------------------------------------------------------------------------------------------------
START-UP AND OTHER SMALL COMPANIES Companies with small
relative market capitalizations, including those with
continuous operations of less than three years. Information,
liquidity, market, valuation risks. [-] [-]
- -------------------------------------------------------------------------------------------------
SWAPS A contract between a portfolio and another party in
which the parties agree to exchange streams of payments
based on certain benchmarks, such as market indices or
currency or interest rates. For example, a portfolio may use
swaps to gain access to the performance of a benchmark asset
(such as an index or one or more stocks) where the
portfolio's direct investment is restricted. Credit,
currency, information, interest-rate, liquidity, market,
political, speculative exposure, valuation risks [ ] --
- -------------------------------------------------------------------------------------------------
TEMPORARY DEFENSIVE TACTICS Placing some or all of a
portfolio's assets in investments such as money-market
obligations and investment-grade debt securities for
defensive purposes. Although intended to avoid losses in
adverse market, economic, political or other conditions,
defensive tactics might be inconsistent with a portfolio's
principal investment strategies and might prevent a
portfolio from achieving its goal. [ ] [ ]
- -------------------------------------------------------------------------------------------------
WARRANTS Options issued by a company granting the holder the
right to buy certain securities, generally common stock, at
a specified price and usually for a limited time. Liquidity,
market, speculative exposure risks. 10% 10%
- -------------------------------------------------------------------------------------------------
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The purchase
or sale of securities for delivery at a future date; market
value may change before delivery. Liquidity, market,
speculative exposure risks. 20% 20%
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) The portfolios are not obligated to pursue any hedging strategy. In
addition, hedging practices may not be available, may be too costly to be
used effectively or may be unable to be used for other reasons.
(2) Each portfolio is limited to 5% of net assets for initial margin and premium
amounts on futures positions considered to be speculative by the Commodity
Futures Trading Commission.
17
<PAGE> 98
MEET THE MANAGERS
[EDWARDS PHOTO]
P. NICHOLAS EDWARDS
Managing Director
- Co-Portfolio Manager, International Equity Portfolio since July 1999
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus Asset Management, Inc. (Warburg Pincus)
- With Warburg Pincus since 1995
- Director at Jardine Fleming Investment Advisers, Tokyo, 1984 to 1995
[EHRLICH PHOTO]
HAROLD W. EHRLICH, CFA, CIC
Managing Director
- Co-Portfolio Manager, International Equity Portfolio since inception
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1995
- Senior vice president, portfolio manager and analyst at Templeton Investment
Counsel Inc., 1987 to 1995
[STEPHEN J. LURITO PHOTO]
STEPHEN J. LURITO
Managing Director
- Co-Portfolio Manager, Small Company Growth Portfolio since inception
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1987
[SHARON PHOTO]
HAROLD E. SHARON
Managing Director
- Co-Portfolio Manager, International Equity Portfolio
since 1998
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1998
- Executive director and portfolio manager with CIBC Oppenheimer, 1994 to 1998
[MCBRIDE PHOTO]
VINCENT J. MCBRIDE
Director
- Co-Portfolio Manager, International Equity Portfolio since 1998
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1994
[NIERMAN PHOTO]
NANCY NIERMAN
Director
- Associate Portfolio Manager, International Equity Portfolio since 1998
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1996
- Analyst with Fiduciary Trust Company International, 1992 to 1996
Job titles indicate position with the investment adviser.
18
<PAGE> 99
[OH PHOTO]
SAMMY OH
Director
- Co-Portfolio Manager, Small Company Growth Portfolio since March 1999
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1997
- Vice president with Bessemer Trust, 1995 to 1996
- Vice president with Forstmann-Leff, 1993 to 1995
19
<PAGE> 100
ABOUT YOUR ACCOUNT
SHARE VALUATION
The price of your shares is also referred to as their net asset value (NAV).
The NAV is determined at the close of regular trading on the New York Stock
Exchange (NYSE) (usually 4 p.m. Eastern Time) each day the NYSE is open for
business. It is calculated by dividing each portfolio's total assets, less its
liabilities, by the number of shares outstanding in the portfolio.
Each portfolio values its securities based on market quotations when it
calculates its NAV. If market quotations are not readily available, securities
and other assets are valued by another method that the Board of Trustees
believes accurately reflects fair value. Debt obligations that will mature in 60
days or less are valued on the basis of amortized cost, unless the Board
determines that using this method would not reflect an investment's value.
Some portfolio securities may be listed on foreign exchanges that are open on
days (such as U.S. holidays) when the portfolios do not compute their prices.
This could cause the value of a portfolio's investments to be affected by
trading on days when you cannot buy or sell shares.
DISTRIBUTIONS
Investors in a portfolio are entitled to a share of the portfolio's net
income and gains on investments. The portfolio passes these earnings along to
its shareholders as distributions.
Each portfolio earns dividends from stocks and interest from bond,
money-market and other investments. These are passed along as dividend
distributions. A portfolio realizes capital gains whenever it sells securities
for a higher price than it paid for them. These are passed along as capital-gain
distributions.
The portfolios typically distribute dividends and capital gains annually,
usually in December. Distributions will be reinvested automatically in
additional shares of the same portfolio that paid them.
TAXES
For a discussion of the tax status of a variable contract or pension plan,
refer to the prospectus of the sponsoring participating insurance company
separate account or plan documents or other informational materials supplied by
plan sponsors.
Because shares of the portfolios may be purchased only through variable
contracts and plans, income dividends or capital-gain distributions from a
portfolio are taxable, if at all, to the participating insurance companies and
plans and will be exempt from current taxation of the variable-contract owner or
plan participant if left to accumulate within the variable contract or plan.
Each portfolio intends to comply with the diversification requirements
currently imposed by the Internal Revenue Service on separate accounts of
insurance companies as a condition of maintaining the tax-deferred status of
variable contracts.
20
<PAGE> 101
BUYING AND SELLING SHARES
You may not buy or sell shares of a portfolio directly; you may only buy or
sell shares through variable-annuity contracts and variable life insurance
contracts offered by separate accounts of certain insurance companies or through
tax-qualified pension and retirement plans. Certain portfolios may not be
available in connection with a particular contract or plan.
An insurance company's separate accounts buy and sell shares of a portfolio
at NAV, without any sales or other charges. Each insurance company receives
orders from its contract holders to buy or sell shares of a portfolio on any
business day that the portfolio calculates its NAV. If the order is received by
the insurance company prior to the close of regular trading on the NYSE, the
order will be executed at that day's NAV.
Plan participants may buy shares of a portfolio through their plan by
directing the plan trustee to buy shares for their account in a manner similar
to that described above for variable annuity and variable life insurance
contracts. You should contact your plan sponsor concerning the appropriate
procedure for investing in a portfolio.
Each portfolio reserves the right to:
- refuse any specific purchase or exchange request, including those from any
person or group who, in the portfolio's view, is likely to engage in excessive
trading
- change or discontinue its exchange privilege after 30 days' notice to current
investors, or temporarily suspend this privilege during unusual market
conditions
- make a "redemption in kind"--payment in portfolio securities rather than
cash--for certain large redemption amounts that could hurt portfolio
operations
- suspend redemptions or postpone payment dates as permitted by the Investment
Company Act of 1940 (such as during periods other than weekends or holidays
when the NYSE is closed or trading on the NYSE is restricted, or any other
time that the SEC permits)
- stop offering the portfolio's shares for a period of time (such as when
management believes that a substantial increase in assets could adversely
affect it)
21
<PAGE> 102
FOR MORE INFORMATION
This Prospectus is intended for use in connection with certain insurance
products and pension and retirement plans. Please refer to the prospectus of the
sponsoring participating insurance company separate account or to the plan
documents or other informational materials supplied by plan sponsors for
information regarding distributions and instructions on purchasing or selling a
variable contract and on how to select a portfolio as an investment option for a
variable contract or plan. More information about these portfolios is available
free upon request, including the following:
ANNUAL/SEMIANNUAL REPORTS TO SHAREHOLDERS
Includes financial statements, portfolio investments and detailed performance
information.
The Annual Report also contains a letter from the portfolio manager
discussing market conditions and investment strategies that significantly
affected portfolio performance during its past fiscal year.
OTHER INFORMATION
A current Statement of Additional Information (SAI), which provides more
details about the portfolios, is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference.
You may visit the SEC's Internet Web site (www.sec.gov) to view the SAI,
material incorporated by reference and other information. You can also obtain
copies by visiting the SEC's Public Reference Room in Washington, DC (phone
202-942-8090) or by sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington, DC 20549-6009 or electronically at
[email protected].
Please contact the Trust to obtain, without charge, the SAI and Annual and
Semiannual Reports and to make shareholder inquiries:
BY TELEPHONE:
800-222-8977
BY MAIL:
Warburg Pincus Trust
P.O. Box 9030
Boston, MA 02205-9030
BY OVERNIGHT OR COURIER SERVICE:
Boston Financial
Attn: Warburg Pincus Trust
66 Brooks Drive
Braintree, MA 02184
ON THE INTERNET:
www.warburg.com
SEC FILE NUMBER:
Warburg Pincus Trust 811-07261
[WARBURG PINCUS FUNDS LOGO]
P.O. BOX 9030, BOSTON, MA 02205-9030
800-222-8977 [-] www.warburg.com
PROVIDENT DISTRIBUTORS, INC., DISTRIBUTOR. TRIAS-1-0500
<PAGE> 103
[WARBURG PINCUS LOGO] [CREDIT SUISSE LOGO]
PROSPECTUS
May 1, 2000
WARBURG PINCUS TRUST
- INTERNATIONAL EQUITY PORTFOLIO
- GLOBAL POST-VENTURE CAPITAL PORTFOLIO
Warburg Pincus Trust shares are not available directly to
individual investors, but may be offered only through certain
insurance products and pension and retirement plans.
As with all mutual funds, the Securities and Exchange Commission
has not approved these securities, nor has it passed upon the
adequacy or accuracy of this Prospectus. It is a criminal
offense to state otherwise.
The Trust is advised by Credit Suisse Asset Management, LLC.
<PAGE> 104
CONTENTS
<TABLE>
<S> <C>
KEY POINTS.................................................. 4
Goals and Principal Strategies........................... 4
Investor Profile......................................... 4
A Word About Risk........................................ 5
PERFORMANCE SUMMARY......................................... 6
Year-by-Year Total Returns............................... 6
Average Annual Total Returns............................. 7
INVESTOR EXPENSES........................................... 8
Fees and Portfolio Expenses.............................. 8
Example.................................................. 8
THE PORTFOLIOS IN DETAIL.................................... 9
The Management Firms..................................... 9
Portfolio Information Key................................ 10
INTERNATIONAL EQUITY PORTFOLIO.............................. 12
GLOBAL POST-VENTURE CAPITAL PORTFOLIO....................... 14
MORE ABOUT RISK............................................. 16
Introduction............................................. 16
Types of Investment Risk................................. 16
Certain Investment Practices............................. 18
MEET THE MANAGERS........................................... 20
ABOUT YOUR ACCOUNT.......................................... 22
Share Valuation.......................................... 22
Distributions............................................ 22
Taxes.................................................... 22
BUYING AND SELLING SHARES................................... 23
FOR MORE INFORMATION........................................ back cover
</TABLE>
3
<PAGE> 105
KEY POINTS
GOALS AND PRINCIPAL STRATEGIES
<TABLE>
<CAPTION>
PORTFOLIO/RISK FACTORS GOAL STRATEGIES
<S> <C> <C>
INTERNATIONAL EQUITY PORTFOLIO Long-term capital appreciation - Invests in foreign equity securities
Risk factors: - Diversifies its investments across
Market risk countries, including emerging markets
Foreign securities - Favors stocks with discounted
valuations, using a value-based, bottom-up
investment approach
GLOBAL POST-VENTURE CAPITAL PORTFOLIO Long-term growth of capital - Invests primarily in equity securities
Risk factors: of U.S. and foreign companies considered
Market risk to be in their post-venture-capital
Foreign securities stage of development
Start-up and other small companies - May invest in companies of any size
Special-situation companies - Takes a growth investment approach to
identifying attractive
post-venture-capital investments
</TABLE>
INVESTOR PROFILE
THESE PORTFOLIOS ARE DESIGNED FOR INVESTORS WHO:
- have longer time horizons
- are willing to assume the risk of losing money in exchange for attractive
potential long-term returns
- are investing for growth or capital appreciation
- want to diversify their investments internationally
- for the Global Post-Venture Capital portfolio, want to diversify their
investments with more aggressive stock funds
THEY MAY NOT BE APPROPRIATE IF YOU:
- are investing for a shorter time horizon
- are uncomfortable with an investment that has a higher degree of volatility
- want to limit your exposure to foreign securities
- are looking for income
You should base your selection of a portfolio on your own goals, risk
preferences and time horizon.
4
<PAGE> 106
A WORD ABOUT RISK
All investments involve some level of risk. Simply defined, risk is the
possibility that you will lose money or not make money.
Principal risk factors for the portfolios are discussed below. Before you
invest, please make sure you understand the risks that apply to your portfolio.
As with any mutual fund, you could lose money over any period of time.
Investments in the portfolios are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
MARKET RISK
Both portfolios
The market value of a security may move up and down, sometimes rapidly and
unpredictably. These fluctuations, which are often referred to as "volatility,"
may cause a security to be worth less than it was worth at an earlier time.
Market risk may affect a single issuer, industry, sector of the economy, or the
market as a whole. Market risk is common to most investments--including stocks
and bonds, and the mutual funds that invest in them.
FOREIGN SECURITIES
Both portfolios
A portfolio that invests outside the U.S. carries additional risks that
include:
- CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Adverse changes in
exchange rates may erode or reverse any gains produced by foreign-currency
denominated investments and may widen any losses. Each of the portfolios may,
but is not required to, seek to reduce currency risk by hedging part or all
of its exposure to various foreign currencies.
- INFORMATION RISK Key information about an issuer, security or market may be
inaccurate or unavailable.
- POLITICAL RISK Foreign governments may expropriate assets, impose capital or
currency controls, impose punitive taxes, or nationalize a company or
industry. Any of these actions could have a severe effect on security prices
and impair a portfolio's ability to bring its capital or income back to the
U.S. Other political risks include economic-policy changes, social and
political instability, military action and war.
START-UP AND OTHER SMALL COMPANIES
Global Post-Venture Capital Portfolio
Start-up and other small companies may have less-experienced management,
limited product lines, unproven track records or inadequate capital reserves.
Their securities may carry increased market, liquidity and other risks. Key
information about the company may be inaccurate or unavailable.
SPECIAL-SITUATION COMPANIES
Global Post-Venture Capital Portfolio
"Special situations" are unusual developments that affect a company's market
value. Examples include mergers, acquisitions and reorganizations. Securities of
special-situation companies may decline in value if the anticipated benefits of
the special situation do not materialize.
5
<PAGE> 107
PERFORMANCE SUMMARY
The bar chart below and the table on the next page provide an indication of the
risks of investing in these portfolios. The bar chart shows you how each
portfolio's performance has varied from year to year for up to 10 years. The
table compares each portfolio's performance over time to that of a broadly based
securities market index and other indexes, if applicable. The bar chart and
table do not reflect additional charges and expenses which are, or may be,
imposed under the variable contracts or plans; such charges and expenses are
described in the prospectus of the insurance company separate account or in the
plan documents or other informational materials supplied by plan sponsors.
Inclusion of these charges and expenses would reduce the total return for the
periods shown. As with all mutual funds, past performance is not a prediction of
the future.
YEAR-BY-YEAR TOTAL RETURNS
<TABLE>
<CAPTION>
YEAR ENDED 12/31: 1996 1997 1998 1999
<S> <C> <C> <C> <C>
INTERNATIONAL EQUITY PORTFOLIO 9.98% -2.26% 5.35% 53.43%
Best quarter: 32.04% (Q4 99)
Worst quarter: -16.92% (Q3 98)
Inception date: 6/30/95
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED 12/31: 1996 1997 1998 1999
<S> <C> <C> <C> <C>
GLOBAL POST-VENTURE
CAPITAL PORTFOLIO* 13.34% 6.87% 62.94%
Best quarter: 51.65% (Q4 99)
Worst quarter: -23.40% (Q3 98)
Inception date: 9/30/96
</TABLE>
* Effective May 1, 2000, the Global Post-Venture Capital Portfolio changed its
investment strategies and policies to permit the portfolio to invest without
limit in foreign securities and to require the portfolio to invest in at least
three countries, including the U.S. Prior to that date, the portfolio's
investments in foreign securities were limited to 20% of total assets and the
portfolio was not required to invest outside the U.S.
6
<PAGE> 108
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS 10 YEARS LIFE OF INCEPTION
PERIOD ENDED 12/31/99: 1999 1995-1999 1990-1999 FUND DATE
<S> <C> <C> <C> <C> <C>
INTERNATIONAL EQUITY PORTFOLIO 53.43% NA NA 14.81% 6/30/95
MSCI ALL COUNTRY WORLD EXCLUDING THE U.S. INDEX(1) 31.80% NA NA 12.04%
GLOBAL POST-VENTURE CAPITAL PORTFOLIO(2) 62.94% NA NA 22.31% 9/30/96
RUSSELL 2000 GROWTH INDEX(3) 43.10% NA NA 22.57%
RUSSELL 2500 GROWTH INDEX(4) 55.48% NA NA 27.96%
NASDAQ INDUSTRIALS INDEX(5) 71.67% NA NA 28.74%
</TABLE>
(1) The Morgan Stanley Capital International All Country World Excluding the
U.S. Index is a market-capitalization-weighted index of companies listed on
stock exchanges outside of the U.S.
(2) Effective May 1, 2000, the Global Post-Venture Capital Portfolio changed its
investment strategies and policies to permit the portfolio to invest without
limit in foreign securities and to require the portfolio to invest in at
least three countries, including the U.S. Prior to that date, the
portfolio's investments in foreign securities were limited to 20% of total
assets and the portfolio was not required to invest outside the U.S.
(3) The Russell 2000 Growth Index is an unmanaged index (with no defined
investment objective) of those securities in the Russell 2000 Index with a
greater-than-average growth orientation. The Russell 2000 Growth Index
includes reinvestment of dividends, and is compiled by Frank Russell
Company.
(4) The Russell 2500 Growth Index measures the performance of those companies in
the Russell 2500 Index with higher price-to-book values and higher
forecasted growth rates. The Russell 2500 Index is composed of the 2,500
smallest companies in the Russell 3000 Index, which measures the performance
of the 3,000 largest U.S. companies based on total market capitalization.
The Russell 2500 Index represents approximately 22% of the total market
capitalization of the Russell 3000 Index.
(5) The Nasdaq Industrials Index measures the stock price performance of more
than 3,000 industrial issues included in the Nasdaq OTC Composite Index. The
Nasdaq OTC Composite Index represents 4,500 stocks traded over the counter.
UNDERSTANDING PERFORMANCE
- TOTAL RETURN tells you how much an investment in a portfolio has changed
in value over a given time period. It assumes that all dividends and
capital gains (if any) were reinvested in additional shares. The change
in value can be stated either as a cumulative return or as an average
annual rate of return.
- A CUMULATIVE TOTAL RETURN is the actual return of an investment for a
specified period. The year-by-year total returns in the bar chart are
examples of one-year cumulative total returns.
- An AVERAGE ANNUAL TOTAL RETURN applies to periods longer than one year.
It smoothes out the variations in year-by-year performance to tell you
what constant annual return would have produced the investment's actual
cumulative return. This gives you an idea of an investment's annual
contribution to your portfolio, assuming you held it for the entire
period.
- Because of compounding, the average annual total returns in the table
cannot be computed by averaging the returns in the bar chart.
7
<PAGE> 109
INVESTOR EXPENSES
FEES AND PORTFOLIO EXPENSES
This table describes the fees and expenses you may bear as a shareholder. Annual
portfolio operating expense figures are for the fiscal year ended December 31,
1999. The table does not reflect additional charges and expenses which are, or
may be, imposed under the variable contracts or plans; such charges and expenses
are described in the prospectus of the insurance company separate account or in
the plan documents or other informational materials supplied by plan sponsors.
<TABLE>
<CAPTION>
GLOBAL POST-
INTERNATIONAL VENTURE
EQUITY CAPITAL
PORTFOLIO PORTFOLIO
<S> <C> <C>
SHAREHOLDER FEES
(paid directly from your investment)
- ----------------------------------------------------------------------------------------------
Sales charge "load" on purchases NONE NONE
- ----------------------------------------------------------------------------------------------
Deferred sales charge "load" NONE NONE
- ----------------------------------------------------------------------------------------------
Sales charge "load" on reinvested distributions NONE NONE
- ----------------------------------------------------------------------------------------------
Redemption fees NONE NONE
- ----------------------------------------------------------------------------------------------
Exchange fees NONE NONE
- ----------------------------------------------------------------------------------------------
ANNUAL PORTFOLIO OPERATING EXPENSES
(deducted from fund assets)
- ----------------------------------------------------------------------------------------------
Management fee 1.00% 1.25%
- ----------------------------------------------------------------------------------------------
Distribution and service (12b-1) fee NONE NONE
- ----------------------------------------------------------------------------------------------
Other expenses .32% .33%
- ----------------------------------------------------------------------------------------------
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES 1.32% 1.58%*
- ----------------------------------------------------------------------------------------------
</TABLE>
* Actual fees and expenses for the fiscal year ended December 31, 1999 are shown
below. Fee waivers and expense reimbursements or credits reduced expenses for
the following portfolio during 1999 but may be discontinued at any time:
<TABLE>
<CAPTION>
EXPENSES AFTER GLOBAL POST-VENTURE
WAIVERS AND CAPITAL
REIMBURSEMENTS PORTFOLIO
<S> <C>
Management fee 1.07%
Distribution and service (12b-1) fee NONE
Other expenses .33%
----
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES 1.40%
</TABLE>
EXAMPLE
This example may help you compare the cost of investing in these portfolios with
the cost of investing in other mutual funds. Because it uses hypothetical
conditions, your actual costs may be higher or lower.
Assume you invest $10,000, each portfolio returns 5% annually, expense ratios
remain as listed in the first table above (before fee waivers and expense
reimbursements and credits), and you close your account at the end of each of
the time periods shown. Based on these assumptions, your cost would be:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS 10 YEARS
<S> <C> <C> <C> <C>
INTERNATIONAL EQUITY PORTFOLIO $134 $418 $723 $1,590
GLOBAL POST-VENTURE CAPITAL PORTFOLIO $161 $499 $860 $1,878
</TABLE>
8
<PAGE> 110
THE PORTFOLIOS IN DETAIL
THE MANAGEMENT FIRMS
CREDIT SUISSE ASSET MANAGEMENT, LLC
One Citicorp Center
153 East 53rd Street
New York, NY 10022
- Investment adviser for the portfolios
- Responsible for managing each portfolio's assets according to its goal and
strategies
- A member of Credit Suisse Asset Management, the institutional asset
management and mutual fund arm of Credit Suisse Group (Credit Suisse), one of
the world's leading banks
- Credit Suisse Asset Management companies manage approximately $72 billion in
the U.S. and $203 billion globally as of December 1999
- Credit Suisse Asset Management has offices in 14 countries, including
SEC-registered offices in New York and London; other offices (such as those in
Budapest, Frankfurt, Milan, Moscow, Paris, Prague, Sydney, Tokyo, Warsaw and
Zurich) are not registered with the U.S. Securities and Exchange Commission
For easier reading, Credit Suisse Asset Management, LLC will be referred to
as "CSAM" or "we" throughout this Prospectus.
ABBOTT CAPITAL MANAGEMENT, LLC
50 Rowes Wharf, Suite 240
Boston, MA 02110-3328
- Sub-investment adviser for the Global Post-Venture Capital Portfolio
- Responsible for managing the portfolio's investments in private-equity
portfolios
- A registered investment adviser concentrating on venture-capital, buyout, and
special-situation investments
- Managed approximately $4.2 billion as of December 1999
9
<PAGE> 111
PORTFOLIO INFORMATION KEY
Concise descriptions of each portfolio begin on the next page. Each
description provides the following information:
GOAL AND STRATEGIES
The portfolio's particular investment goal and the strategies it intends to
use in pursuing that goal. Percentages of portfolio assets are based on total
assets unless indicated otherwise.
PORTFOLIO INVESTMENTS
The primary types of securities in which the portfolio invests. Secondary
investments are described in "More About Risk."
RISK FACTORS
The major risk factors associated with the portfolio. Additional risk factors
are included in "More About Risk."
PORTFOLIO MANAGEMENT
The individuals designated by the investment adviser to handle the
portfolio's day-to-day management.
INVESTOR EXPENSES
Actual portfolio expenses for the 1999 fiscal year. Future expenses may be
higher or lower. Additional expenses are, or may be, imposed under the variable
contracts or plans.
- MANAGEMENT FEE The fee paid to the investment adviser for providing
investment advice to the portfolio. Expressed as a percentage of average net
assets after waivers.
- OTHER EXPENSES Fees paid by the portfolio for items such as administration,
transfer agency, custody, auditing, legal and registration fees and
miscellaneous expenses. Expressed as a percentage of average net assets after
waivers, credits and reimbursements.
FINANCIAL HIGHLIGHTS
A table showing the portfolio's audited financial performance for up to five
years.
- TOTAL RETURN How much you would have earned on an investment in the
portfolio, assuming you had reinvested all dividend and capital-gain
distributions.
- PORTFOLIO TURNOVER An indication of trading frequency. The portfolios may
sell securities without regard to the length of time they have been held. A
high turnover rate may increase the portfolio's transaction costs and
negatively affect its performance.
The Annual Report includes the auditor's report, along with the portfolio's
financial statements. It is available free upon request.
10
<PAGE> 112
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11
<PAGE> 113
INTERNATIONAL EQUITY PORTFOLIO
GOAL AND STRATEGIES
The International Equity Portfolio seeks long-term capital appreciation. To
pursue this goal, it invests in equity securities of companies located or
conducting a majority of their business outside the U.S.
Under normal market conditions, the portfolio will invest at least 65% of
assets in equity securities of issuers from at least three foreign countries.
The portfolio intends to diversify its investments across different countries,
although at times it may invest a significant part of its assets in a single
country. Although the portfolio emphasizes developed countries, it may also
invest in emerging markets.
In choosing equity securities, the portfolio's managers use a bottom-up
investment approach that begins with an analysis of individual companies. The
managers look for companies of any size whose stocks appear to be discounted
relative to earnings, assets or projected growth. The portfolio managers
determine value based upon research and analysis, taking all relevant factors
into account.
PORTFOLIO INVESTMENTS
This portfolio intends to invest substantially all of its assets in the
following types of equity securities:
- common stocks
- securities convertible into or exchangeable for common stocks
To a limited extent, the portfolio may also engage in other investment
practices.
RISK FACTORS
This portfolio's principal risk factors are:
- market risk
- foreign securities
The value of your investment generally will fluctuate in response to
stock-market movements. Because the portfolio invests internationally, it
carries additional risks, including currency, information and political risks.
These risks are defined in "More About Risk."
To the extent that the portfolio invests in emerging markets or focuses on a
single country or region, it takes on additional risks that could hurt its
performance. Investing in emerging markets involves access, operational and
other risks not generally encountered in developed countries. Focusing on a
single country or region may cause the portfolio to be more volatile than a more
geographically diversified equity fund. "More About Risk" details these and
certain other investment practices the portfolio may use. Please read that
section carefully before you invest.
PORTFOLIO MANAGEMENT
P. Nicholas Edwards, Harold W. Ehrlich, Harold E. Sharon and Vincent J.
McBride manage the portfolio. Associate Portfolio Manager Nancy Nierman assists
them. You can find out more about the portfolio's managers in "Meet the
Managers."
INVESTOR EXPENSES
Management fee 1.00%
All other expenses .32%
----
Total expenses 1.32%
12
<PAGE> 114
FINANCIAL HIGHLIGHTS
The figures below have been audited by the portfolio's independent auditors,
PricewaterhouseCoopers LLP.
<TABLE>
<CAPTION>
PERIOD ENDED: 12/99 12/98 12/97 12/96 12/95(1)
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $10.99 $10.49 $11.48 $10.65 $10.00
Investment activities:
Net investment income 0.08 0.08 0.10 0.00 0.03
Net gains (loss) on investments and foreign currency
related items (both realized and unrealized) 5.78 0.48 (0.37) 1.06 0.70
Total from investment activities 5.86 0.56 (0.27) 1.06 0.73
Distributions:
Dividends from net investment income (0.08) (0.05) (0.01) (0.06) (0.01)
Distributions in excess of net investment income (0.07) 0.00 0.00 (0.10) (0.07)
Distributions from net realized gains 0.00 (0.01) 0.00 (0.06) 0.00
Distributions in excess of realized gains 0.00 0.00 (0.71) (0.01) 0.00
Total distributions (0.15) (0.06) (0.72) (0.23) (0.08)
Net asset value, end of period $16.70 $10.99 $10.49 $11.48 $10.65
Total return 53.43% 5.35% (2.26)% 9.98% 7.30%(2)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $610,547 $360,124 $347,229 $298,218 $64,537
Ratio of expenses to average net assets 1.33%(3) 1.33%(3) 1.36%(3) 1.36%(3) 1.44%(4)
Ratio of net income to average net assets .63% .68% .66% .64% .48%(4)
Decrease reflected in above operating expense ratios due
to waivers/reimbursement .00% .00% .00% .04% .77%(4)
Portfolio turnover rate 145% 105% 79% 31% 8%(2)
</TABLE>
(1) For the period June 30, 1995 (Commencement of Operations) through December
31, 1995.
(2) Not annualized.
(3) Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expense. These arrangements resulted in a reduction to
the portfolio's net expense ratio of .01%, .00%, .01% and .00%, for the
years ended December 31, 1999, 1998, 1997 and 1996, respectively. The
portfolio's operating expense ratio after reflecting these arrangements was
1.32%, 1.33%, 1.35% and 1.36% for the years ended December 31, 1999, 1998,
1997 and 1996, respectively.
(4) Annualized.
13
<PAGE> 115
GLOBAL POST-VENTURE CAPITAL PORTFOLIO
GOAL AND STRATEGIES
The Global Post-Venture Capital Portfolio seeks long-term growth of capital.
To pursue this goal, it invests in equity securities of U.S. and foreign
companies considered to be in their post-venture-capital stage of development.
A post-venture-capital company is one that has received venture-capital
financing either:
- during the early stages of the company's existence or the early stages of the
development of a new product or service, or
- as part of a restructuring or recapitalization of the company
In either case, one or more of the following will have occurred within 10
years prior to the portfolio's purchase of the company's securities:
- the investment of venture-capital financing
- distribution of the company's securities to venture-capital investors
- the initial public offering
Under normal market conditions, the portfolio will invest at least 65% of
assets in equity securities of post-venture-capital companies. The portfolio may
invest in companies of any size. The portfolio may invest without limit in
foreign securities and will invest in at least three countries, including the
U.S.
PORTFOLIO INVESTMENTS
This portfolio invests primarily in equity securities of post-venture-capital
companies. Equity holdings may consist of:
- common and preferred stocks
- warrants
- securities convertible into common stocks
- partnership interests
The portfolio may invest up to 10% of assets in private-equity portfolios
that invest in venture-capital companies.
To a limited extent, the portfolio may also engage in other investment
practices.
RISK FACTORS
This portfolio's principal risk factors are:
- market risk
- foreign securities
- start-up and other small companies
- special-situation companies
The value of your investment generally will fluctuate in response to
stock-market movements. Because the portfolio invests internationally, it
carries additional risks, including currency, information and political risks.
Investing in start-up and other small companies may expose the portfolio to
increased market liquidity and information risks. These risks are defined in
"More About Risk."
Post-venture-capital companies are often involved in "special situations."
Securities of special-situation companies may decline in value and hurt the
portfolio's performance if the anticipated benefits of the special situation do
not materialize.
To the extent that it invests in private-equity portfolios, the portfolio
takes on additional liquidity, valuation and other risks. "More About Risk"
details certain other investment practices the portfolio may use. Please read
that section carefully before you invest.
PORTFOLIO MANAGEMENT
Elizabeth B. Dater, Harold E. Sharon, Federico D. Laffan and Jun Sung Kim
manage the portfolio. Calvin E. Chung assists them. Raymond L. Held and Thaddeus
I. Grey manage the portfolio's investments in private-equity portfolios. You can
find out more about the portfolio's managers in "Meet the Managers."
INVESTOR EXPENSES
Management fee 1.07%
All other expenses .33%
-----
Total expenses 1.40%
14
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FINANCIAL HIGHLIGHTS
The figures below have been audited by the portfolio's independent auditors,
PricewaterhouseCoopers LLP.
<TABLE>
<CAPTION>
PERIOD ENDED: 12/99 12/98 12/97 12/96(1)
<S> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $11.82 $11.06 $9.76 $10.00
Investment activities:
Net investment loss (0.08) (0.04) (0.08) 0.00
Net gains (loss) on investments and foreign currency related
items (both realized and unrealized) 7.52 0.80 1.38 (0.24)
Total from investment activities 7.44 0.76 1.30 (0.24)
Net asset value, end of period $19.26 $11.82 $11.06 $9.76
Total return 62.94% 6.87% 13.34% (2.40%)(2)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $151,784 $62,055 $30,520 $12,400
Ratio of expenses to average net assets 1.41%(4) 1.40%(4) 1.40%(4) 1.41%(3,4)
Ratio of net income (loss) to average net assets (.87%) (.83%) (.75%) .80%(3)
Decrease reflected in above operating expense ratio due to
waivers/reimbursements .18% .30% .18% 4.16%(3)
Portfolio turnover rate 45% 73% 238% 7%(2)
</TABLE>
(1) For the period September 30, 1996 (Commencement of Operations) through
December 31, 1996.
(2) Not annualized.
(3) Annualized.
(4) Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expense. These arrangements resulted in a reduction to
the portfolio's net expense ratio of .01%, .00%, .00% and .01% for the years
or period ended December 31, 1999, 1998, 1997 and 1996, respectively. The
portfolio's operating expense ratio after reflecting these arrangements was
1.40%, 1.40%, 1.40% and 1.40% for the years or period ended December 31,
1999, 1998, 1997 and 1996, respectively.
15
<PAGE> 117
MORE ABOUT RISK
INTRODUCTION
A portfolio's goal and principal strategies largely determine its risk
profile. You will find a concise description of each portfolio's risk profile in
"Key Points." The preceding discussions of each portfolio contain more detailed
information. This section discusses other risks that may affect the portfolios.
The portfolios may use certain investment practices that have higher risks
associated with them. However, each portfolio has limitations and policies
designed to reduce many of the risks. The "Certain Investment Practices" table
describes these practices and the limitations on their use.
Each portfolio offers its shares to (i) insurance company separate accounts
that fund both variable contracts and variable life insurance contracts and (ii)
tax-qualified pension and retirement plans including participant-directed plans
which elect to make a portfolio an investment option for plan participants. Due
to differences of tax treatment and other considerations, the interests of
various variable contract owners and plan participants participating in a
portfolio may conflict. The Board of Trustees will monitor the portfolios for
any material conflicts that may arise and will determine what action, if any,
should be taken. If a conflict occurs, the Board may require one or more
insurance company separate accounts and/or plans to withdraw its investments in
one or all portfolios, which may cause a portfolio to sell securities at
disadvantageous prices and disrupt orderly portfolio management. The Board also
may refuse to sell shares of a portfolio to any variable contract or plan or may
suspend or terminate the offering of shares of a portfolio if such action is
required by law or regulatory authority or is in the best interests of the
shareholders of the portfolio.
TYPES OF INVESTMENT RISK
The following risks are referred to throughout this Prospectus.
ACCESS RISK Some countries may restrict a portfolio's access to investments
or offer terms that are less advantageous than those for local investors. This
could limit the attractive investment opportunities available to a portfolio.
CORRELATION RISK The risk that changes in the value of a hedging instrument
will not match those of the investment being hedged.
CREDIT RISK The issuer of a security or the counterparty to a contract may
default or otherwise become unable to honor a financial obligation.
CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Adverse changes in
exchange rates may erode or reverse any gains produced by foreign-
currency-denominated investments and may widen any losses.
EXPOSURE RISK The risk associated with investments (such as derivatives) or
practices (such as short selling) that increase the amount of money a portfolio
could gain or lose on an investment.
- HEDGED Exposure risk could multiply losses generated by a derivative or
practice used for hedging purposes. Such losses should be substantially
offset by gains on the hedged investment. However, while hedging can reduce
or eliminate losses, it can also reduce or eliminate gains.
- SPECULATIVE To the extent that a derivative or practice is not used as a
hedge, the portfolio is directly exposed to its risks. Gains or losses from
speculative positions in a derivative may be much greater than the
derivative's original cost. For example, potential losses from writing
uncovered call options and from speculative short sales are unlimited.
INFORMATION RISK Key information about an issuer, security or market may be
inaccurate or unavailable.
INTEREST-RATE RISK Changes in interest rates may cause a decline in the
market value of an investment. With bonds and other fixed-income securities, a
rise in interest rates typically causes a fall in values, while a fall in
interest rates typically causes a rise in values.
LIQUIDITY RISK Certain portfolio securities may be difficult or impossible to
sell at the time and the price that the portfolio would like. A portfolio may
have to lower the price, sell other securities instead or forego an investment
opportunity. Any of these could have a negative effect on portfolio management
or performance.
MARKET RISK The market value of a security may move up and down, sometimes
rapidly and unpredictably. These fluctuations, which are often referred to as
"volatility," may cause a security to be worth less than it was worth at an
earlier time. Market risk may affect a single issuer, industry, sector of the
economy, or the market as a whole. Market risk is common to most
investments--including stocks and bonds, and the mutual funds that invest in
them.
OPERATIONAL RISK Some countries have less-developed securities markets (and
related transaction, registration and custody practices) that could subject a
portfolio to losses from fraud, negligence, delay or other actions.
POLITICAL RISK Foreign governments may expropriate assets, impose capital or
currency controls, impose punitive taxes, or nationalize a company or industry.
Any of these actions could have a severe effect on security prices and impair a
portfolio's ability to bring its capital or income back to the U.S. Other
political risks include economic policy changes, social and political
instability, military action and war.
VALUATION RISK The lack of an active trading market may make it difficult to
obtain an accurate price for a portfolio security.
16
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17
<PAGE> 119
CERTAIN INVESTMENT PRACTICES
For each of the following practices, this table shows the applicable investment
limitation. Risks are indicated for each practice.
KEY TO TABLE:
<TABLE>
<S> <C>
[-] Permitted without limitation; does not indicate actual use
20% Italic type (e.g., 20%) represents an investment limitation as a percentage of NET
portfolio assets; does not indicate actual use
20% Roman type (e.g., 20%) represents an investment limitation as a percentage of TOTAL
portfolio assets; does not indicate actual use
[ ] Permitted, but not expected to be used to a significant extent
- -- Not permitted
</TABLE>
<TABLE>
<CAPTION>
GLOBAL
INTERNATIONAL POST-VENTURE
EQUITY CAPITAL
PORTFOLIO PORTFOLIO
INVESTMENT PRACTICE LIMIT
<S> <C> <C>
BORROWING The borrowing of money from banks to meet
redemptions or for other temporary or emergency purposes.
Speculative exposure risk. 30% 30%
- ------------------------------------------------------------------------------------------
COUNTRY/REGION FOCUS Investing a significant portion of
portfolio assets in a single country or region. Market
swings in the targeted country or region will be likely to
have a greater effect on portfolio performance than they
would in a more geographically diversified equity portfolio.
Currency, market, political risks. [-] --
- ------------------------------------------------------------------------------------------
CURRENCY TRANSACTIONS Instruments, such as options, futures,
forwards or swaps, intended to manage portfolio exposure to
currency risk or to enhance total return. Options, futures
or forwards involve the right or obligation to buy or sell a
given amount of foreign currency at a specified price and
future date. Swaps involve the right or obligation to
receive or make payments based on two different currency
rates. Correlation, credit, currency, hedged exposure,
liquidity, political, speculative exposure, valuation
risks.(1) [-] [ ]
- ------------------------------------------------------------------------------------------
EMERGING MARKETS Countries generally considered to be
relatively less developed or industrialized. Emerging
markets often face economic problems that could subject a
portfolio to increased volatility or substantial declines in
value. Deficiencies in regulatory oversight, market
infrastructure, shareholder protections and company laws
could expose a portfolio to risks beyond those generally
encountered in developed countries. Access, currency,
information, liquidity, market, operational, political,
valuation risks. [-] --
- ------------------------------------------------------------------------------------------
FOREIGN SECURITIES Securities of foreign issuers. May
include depositary receipts. Currency, information,
liquidity, market, political, valuation risks. [-] [-]
- ------------------------------------------------------------------------------------------
FUTURES AND OPTIONS ON FUTURES Exchange-traded contracts
that enable a portfolio to hedge against or speculate on
future changes in currency values, interest rates or stock
indexes. Futures obligate the portfolio (or give it the
right, in the case of options) to receive or make payment at
a specific future time based on those future changes.(1)
Correlation, currency, hedged exposure, interest-rate,
market, speculative exposure risks.(2) [ ] [ ]
- ------------------------------------------------------------------------------------------
INVESTMENT-GRADE DEBT SECURITIES Debt securities rated
within the four highest grades (AAA/Aaa through BBB/Baa) by
Standard & Poor's or Moody's rating service, and unrated
securities of comparable quality. Credit, interest-rate,
market risks. 35% 20%
- ------------------------------------------------------------------------------------------
NON-INVESTMENT-GRADE DEBT SECURITIES Debt securities rated
below the fourth-highest grade (BBB/Baa) by Standard &
Poor's or Moody's rating service, and unrated securities of
comparable quality. Commonly referred to as junk bonds.
Credit, information, interest-rate, liquidity, market,
valuation risks. 5% 5%
- ------------------------------------------------------------------------------------------
OPTIONS Instruments that provide a right to buy (call) or
sell (put) a particular security, currency or index of
securities at a fixed price within a certain time period. A
portfolio may purchase or sell (write) both put and call
options for hedging or speculative purposes.(1) Correlation,
credit, hedged exposure, liquidity, market, speculative
exposure, valuation risks. 25% 25%
- ------------------------------------------------------------------------------------------
PRIVATE-EQUITY PORTFOLIOS Private limited partnerships or
other investment funds that themselves invest in equity or
debt securities of:
- -companies in the venture-capital or post-venture-capital
stages of development
- -companies engaged in special situations or changes in
corporate control, including buyouts
Information, liquidity, market, valuation risks. -- 10%
- ------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 121
<TABLE>
<CAPTION>
GLOBAL
INTERNATIONAL POST-VENTURE
EQUITY CAPITAL
PORTFOLIO PORTFOLIO
INVESTMENT PRACTICE LIMIT
<S> <C> <C>
RESTRICTED AND OTHER ILLIQUID SECURITIES Certain securities
with restrictions on trading, or those not actively traded.
May include private placements. Liquidity, market, valuation
risks. 15% 15%
- -------------------------------------------------------------------------------------------------
SECURITIES LENDING Lending portfolio securities to financial
institutions; a portfolio receives cash, U.S. government
securities or bank letters of credit as collateral. Credit,
liquidity, market, operational risks. 33 1/3% 33 1/3%
- -------------------------------------------------------------------------------------------------
SHORT SALES Selling borrowed securities with the intention
of repurchasing them for a profit on the expectation that
the market price will drop. Liquidity, market, speculative
exposure risks. -- 10%
- -------------------------------------------------------------------------------------------------
SHORT SALES "AGAINST THE BOX" A short sale when the
portfolio owns enough shares of the security involved to
cover the borrowed securities, if necessary. Liquidity,
market, speculative exposure risks. [ ] [ ]
- -------------------------------------------------------------------------------------------------
SPECIAL-SITUATION COMPANIES Companies experiencing unusual
developments affecting their market values. Special
situations may include acquisition, consolidation,
reorganization, recapitalization, merger, liquidation,
special distribution, tender or exchange offer, or
potentially favorable litigation. Securities of a
special-situation company could decline in value and hurt a
portfolio's performance if the anticipated benefits of the
special situation do not materialize. Information, market
risks. [ ] [-]
- -------------------------------------------------------------------------------------------------
START-UP AND OTHER SMALL COMPANIES Companies with small
relative market capitalizations, including those with
continuous operations of less than three years. Information,
liquidity, market, valuation risks. [-] [-]
- --------------------------------------------------------------------------------------------------
SWAPS A contract between a portfolio and another party in
which the parties agree to exchange streams of payments
based on certain benchmarks, such as market indices or
currency or interest rates. For example, a portfolio may use
swaps to gain access to the performance of a benchmark asset
(such as an index or one or more stocks) where the
portfolio's direct investment is restricted. Credit,
currency, information, interest-rate, liquidity, market,
political, speculative exposure, valuation risks [ ] --
- -------------------------------------------------------------------------------------------------
TEMPORARY DEFENSIVE TACTICS Placing some or all of a
portfolio's assets in investments such as money-market
obligations and investment-grade debt securities for
defensive purposes. Although intended to avoid losses in
adverse market, economic, political or other conditions,
defensive tactics might be inconsistent with a portfolio's
principal investment strategies and might prevent a
portfolio from achieving its goal. [ ] [ ]
- --------------------------------------------------------------------------------------------------
WARRANTS Options issued by a company granting the holder the
right to buy certain securities, generally common stock, at
a specified price and usually for a limited time. Liquidity,
market, speculative exposure risks. 10% 10%
- --------------------------------------------------------------------------------------------------
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The purchase
or sale of securities for delivery at a future date; market
value may change before delivery. Liquidity, market,
speculative exposure risks. 20% 20%
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) The portfolios are not obligated to pursue any hedging strategy. In
addition, hedging practices may not be available, may be too costly to be
used effectively or may be unable to be used for other reasons.
(2) Each portfolio is limited to 5% of net assets for initial margin and premium
amounts on futures positions considered to be speculative by the Commodity
Futures Trading Commission.
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<PAGE> 122
MEET THE MANAGERS
[ELIZABETH DATER PHOTO]
ELIZABETH B. DATER
Managing Director
- Co-Portfolio Manager, Global Post-Venture Capital Portfolio since inception
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus Asset Management, Inc. (Warburg Pincus)
- With Warburg Pincus since 1978
[EDWARDS PHOTO]
P. NICHOLAS EDWARDS
Managing Director
- Co-Portfolio Manager, International Equity Portfolio since July 1999
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1995
- Director at Jardine Fleming Investment Advisers, Tokyo, 1984 to 1995
[EHRLICH PHOTO]
HAROLD W. EHRLICH, CFA, CIC
Managing Director
- Co-Portfolio Manager, International Equity Portfolio since inception
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1995
- Senior vice president, portfolio manager and analyst at Templeton Investment
Counsel Inc., 1987 to 1995
[SHARON PHOTO]
HAROLD E. SHARON
Managing Director
- Co-Portfolio Manager, International Equity Portfolio
since 1998
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1998
- Executive director and portfolio manager with CIBC Oppenheimer, 1994 to 1998
[LAFFAN PHOTO]
FEDERICO D. LAFFAN
Director
- Co-Portfolio Manager, Global Post-Venture Capital Portfolio since May 2000
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1997
- Senior manager and partner with Green Cay Asset Management, 1996 to 1997
- Senior portfolio manager and director with Foreign & Colonial Emerging
Markets, London, 1990 to 1996
[McBRIDE PHOTO]
VINCENT J. McBRIDE
Director
- Co-Portfolio Manager, International Equity Portfolio since April 1998
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1994
Job titles indicate position with the investment adviser.
20
<PAGE> 123
[NIERMAN PHOTO]
NANCY NIERMAN
Director
- Associate Portfolio Manager, International Equity Portfolio since 1998
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1996
- Analyst with Fiduciary Trust Company International, 1992 to 1996
[CHUNG PHOTO]
CALVIN E. CHUNG
Vice President
- Associate Portfolio Manager, Global Post-Venture Capital Portfolio since May
2000
- With CSAM since January 2000
- Vice President and senior technology equity analyst at Eagle Asset
Management, 1997 to 1999
- Graduate student at the University of Chicago, 1995 to 1997
[KIM PHOTO]
JUN SUNG KIM
Vice President
- Co-Portfolio Manager, Global Post-Venture Capital Portfolio since May 2000
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1997
- Investment manager with Asset Korea Ltd., Seoul, 1995 to 1997
- Investment analyst with Baring Securities Ltd., Seoul, 1994 to 1995
SUB-INVESTMENT ADVISER PORTFOLIO MANAGERS
Global Post-Venture Capital Portfolio
RAYMOND L. HELD and THADDEUS I. GRAY manage the Global Post-Venture
Capital Portfolio's investments in private-equity portfolios. Both are
Investment Managers and Managing Directors of Abbott Capital Management
LLC, the portfolio's sub-investment adviser. Mr. Held has been with Abbott
since 1986, while Mr. Gray joined the firm in 1989.
21
<PAGE> 124
ABOUT YOUR ACCOUNT
SHARE VALUATION
The price of your shares is also referred to as their net asset value (NAV).
The NAV is determined at the close of regular trading on the New York Stock
Exchange (NYSE) (usually 4 p.m. Eastern Time) each day the NYSE is open for
business. It is calculated by dividing each portfolio's total assets, less its
liabilities, by the number of shares outstanding in the portfolio.
Each portfolio values its securities based on market quotations when it
calculates its NAV. If market quotations are not readily available, securities
and other assets are valued by another method that the Board of Trustees
believes accurately reflects fair value. Debt obligations that will mature in 60
days or less are valued on the basis of amortized cost, unless the Board
determines that using this method would not reflect an investment's value.
Some portfolio securities may be listed on foreign exchanges that are open on
days (such as U.S. holidays) when the portfolios do not compute their prices.
This could cause the value of a portfolio's investments to be affected by
trading on days when you cannot buy or sell shares.
The Global Post-Venture Capital Portfolio initially values its investments in
private-equity portfolios at cost. After that, the Global Post-Venture Capital
Portfolio values these investments according to reports from the private-equity
portfolios that the sub-investment adviser generally receives on a quarterly
basis. The portfolio's net asset value typically will not reflect interim
changes in the values of its private-equity-portfolio investments.
DISTRIBUTIONS
Investors in a portfolio are entitled to a share of the portfolio's net
income and gains on investments. The portfolio passes these earnings along to
its shareholders as distributions.
Each portfolio earns dividends from stocks and interest from bond,
money-market and other investments. These are passed along as dividend
distributions. A portfolio realizes capital gains whenever it sells securities
for a higher price than it paid for them. These are passed along as capital-gain
distributions.
The portfolios typically distribute dividends and capital gains annually,
usually in December. Distributions will be reinvested automatically in
additional shares of the same portfolio that paid them.
TAXES
For a discussion of the tax status of a variable contract or pension plan,
refer to the prospectus of the sponsoring participating insurance company
separate account or plan documents or other informational materials supplied by
plan sponsors.
Because shares of the portfolios may be purchased only through variable
contracts and plans, income dividends or capital-gain distributions from a
portfolio are taxable, if at all, to the participating insurance companies and
plans and will be exempt from current taxation of the variable-contract owner or
plan participant if left to accumulate within the variable contract or plan.
Each portfolio intends to comply with the diversification requirements
currently imposed by the Internal Revenue Service on separate accounts of
insurance companies as a condition of maintaining the tax-deferred status of
variable contracts.
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<PAGE> 125
BUYING AND SELLING SHARES
You may not buy or sell shares of a portfolio directly; you may only buy or
sell shares through variable-annuity contracts and variable life insurance
contracts offered by separate accounts of certain insurance companies or through
tax-qualified pension and retirement plans. Certain portfolios may not be
available in connection with a particular contract or plan.
An insurance company's separate accounts buy and sell shares of a portfolio
at NAV, without any sales or other charges. Each insurance company receives
orders from its contract holders to buy or sell shares of a portfolio on any
business day that the portfolio calculates its NAV. If the order is received by
the insurance company prior to the close of regular trading on the NYSE, the
order will be executed at that day's NAV.
Plan participants may buy shares of a portfolio through their plan by
directing the plan trustee to buy shares for their account in a manner similar
to that described above for variable annuity and variable life insurance
contracts. You should contact your plan sponsor concerning the appropriate
procedure for investing in a portfolio.
Each portfolio reserves the right to:
- refuse any specific purchase or exchange request, including those from any
person or group who, in the portfolio's view, is likely to engage in excessive
trading
- change or discontinue its exchange privilege after 30 days' notice to current
investors, or temporarily suspend this privilege during unusual market
conditions
- make a "redemption in kind"--payment in portfolio securities rather than
cash--for certain large redemption amounts that could hurt portfolio
operations
- suspend redemptions or postpone payment dates as permitted by the Investment
Company Act of 1940 (such as during periods other than weekends or holidays
when the NYSE is closed or trading on the NYSE is restricted, or any other
time that the SEC permits)
- stop offering the portfolio's shares for a period of time (such as when
management believes that a substantial increase in assets could adversely
affect it)
23
<PAGE> 126
FOR MORE INFORMATION
This Prospectus is intended for use in connection with certain insurance
products and pension and retirement plans. Please refer to the prospectus of the
sponsoring participating insurance company separate account or to the plan
documents or other informational materials supplied by plan sponsors for
information regarding distributions and instructions on purchasing or selling a
variable contract and on how to select a portfolio as an investment option for a
variable contract or plan. More information about these portfolios is available
free upon request, including the following:
ANNUAL/SEMIANNUAL REPORTS TO SHAREHOLDERS
Includes financial statements, portfolio investments and detailed performance
information.
The Annual Report also contains a letter from the portfolio manager
discussing market conditions and investment strategies that significantly
affected portfolio performance during its past fiscal year.
OTHER INFORMATION
A current Statement of Additional Information (SAI), which provides more
details about the portfolios, is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference.
You may visit the SEC's Internet Web site (www.sec.gov) to view the SAI,
material incorporated by reference and other information. You can also obtain
copies by visiting the SEC's Public Reference Room in Washington, DC (phone
202-942-8090) or by sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington, DC 20549-6009 or electronically at
[email protected].
Please contact the Trust to obtain, without charge, the SAI and Annual and
Semiannual Reports and to make shareholder inquiries:
BY TELEPHONE:
800-222-8977
BY MAIL:
Warburg Pincus Trust
P.O. Box 9030
Boston, MA 02205-9030
BY OVERNIGHT OR COURIER SERVICE:
Boston Financial
Attn: Warburg Pincus Trust
66 Brooks Drive
Braintree, MA 02184
ON THE INTERNET:
www.warburg.com
SEC FILE NUMBER:
Warburg Pincus Trust 811-07261
[Warburg Pincus LOGO]
P.O. BOX 9030, BOSTON, MA 02205-9030
800-222-8977 [-] www.warburg.com
PROVIDENT DISTRIBUTORS, INC., DISTRIBUTOR. TRIAP-1-0500
<PAGE> 127
[WARBURG PINCUS LOGO] [CREDIT SUISSE PINCUS LOGO]
PROSPECTUS
May 1, 2000
WARBURG PINCUS TRUST
- INTERNATIONAL EQUITY PORTFOLIO
- GLOBAL POST-VENTURE CAPITAL PORTFOLIO
- SMALL COMPANY GROWTH PORTFOLIO
Warburg Pincus Trust shares are not available directly to
individual investors, but may be offered only through certain
insurance products and pension and retirement plans.
As with all mutual funds, the Securities and Exchange Commission
has not approved these securities, nor has it passed upon the
adequacy or accuracy of this Prospectus. It is a criminal
offense to state otherwise.
The Trust is advised by Credit Suisse Asset Management, LLC.
<PAGE> 128
CONTENTS
<TABLE>
<S> <C>
KEY POINTS........................ ......................... 4
Goals and Principal Strategies........................... 4
Investor Profile......................................... 4
A Word About Risk........................................ 5
PERFORMANCE SUMMARY.................... .................... 6
Year-by-Year Total Returns............................... 6
Average Annual Total Returns............................. 7
INVESTOR EXPENSES..................... ..................... 8
Fees and Portfolio Expenses.............................. 8
Example.................................................. 8
THE PORTFOLIOS IN DETAIL................. .................. 9
The Management Firms..................................... 9
Portfolio Information Key................................ 10
INTERNATIONAL EQUITY PORTFOLIO.............. ............... 12
GLOBAL POST-VENTURE CAPITAL PORTFOLIO........... ........... 14
SMALL COMPANY GROWTH PORTFOLIO.............. ............... 16
MORE ABOUT RISK...................... ...................... 18
Introduction............................................. 18
Types of Investment Risk................................. 18
Certain Investment Practices............................. 20
MEET THE MANAGERS..................... ..................... 22
ABOUT YOUR ACCOUNT.................... ..................... 24
Share Valuation.......................................... 24
Distributions............................................ 24
Taxes.................................................... 24
BUYING AND SELLING SHARES................. ................. 25
FOR MORE INFORMATION................... .................... back cover
</TABLE>
3
<PAGE> 129
KEY POINTS
GOALS AND PRINCIPAL STRATEGIES
<TABLE>
<CAPTION>
PORTFOLIO/RISK FACTORS GOAL STRATEGIES
<S> <C> <C>
INTERNATIONAL EQUITY PORTFOLIO Long-term capital appreciation - Invests in foreign equity securities
Risk factors: - Diversifies its investments across
Market risk countries, including emerging markets
Foreign securities - Favors stocks with discounted
valuations, using a value-based, bottom-up
investment approach
GLOBAL POST-VENTURE CAPITAL PORTFOLIO Long-term growth of capital - Invests primarily in equity securities
Risk factors: of U.S. and foreign companies considered
Market risk to be in their post-venture-capital
Foreign securities stage of development
Start-up and other small companies - May invest in companies of any size
Special-situation companies - Takes a growth investment approach to
identifying attractive
post-venture-capital investments
SMALL COMPANY GROWTH PORTFOLIO Capital growth - Invests in equity securities of small
Risk factors: U.S. companies
Market risk - Using a growth investment style, may
Start-up and other small companies look for either developing or older
Special-situation companies companies in a growth stage or companies
Non-diversified status providing products or services with a high
unit-volume growth rate
</TABLE>
INVESTOR PROFILE
THESE PORTFOLIOS ARE DESIGNED FOR INVESTORS WHO:
- have longer time horizons
- are willing to assume the risk of losing money in exchange for attractive
potential long-term returns
- are investing for growth or capital appreciation
- for the International Equity and Global Post-Venture Capital portfolios, want
to diversify their investments internationally
- for the Global Post-Venture Capital and Small Company Growth portfolios, want
to diversify their investments with more aggressive stock funds
THEY MAY NOT BE APPROPRIATE IF YOU:
- are investing for a shorter time horizon
- are uncomfortable with an investment that has a higher degree of volatility
- for the International Equity and Global Post-Venture Capital portfolios, want
to limit your exposure to foreign securities
- are looking primarily for income
You should base your selection of a portfolio on your own goals, risk
preferences and time horizon.
4
<PAGE> 130
A WORD ABOUT RISK
All investments involve some level of risk. Simply defined, risk is the
possibility that you will lose money or not make money.
Principal risk factors for the portfolios are discussed below. Before you
invest, please make sure you understand the risks that apply to your portfolio.
As with any mutual fund, you could lose money over any period of time.
Investments in the portfolios are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
MARKET RISK
All portfolios
The market value of a security may move up and down, sometimes rapidly and
unpredictably. These fluctuations, which are often referred to as "volatility,"
may cause a security to be worth less than it was worth at an earlier time.
Market risk may affect a single issuer, industry, sector of the economy, or the
market as a whole. Market risk is common to most investments--including stocks
and bonds, and the mutual funds that invest in them.
FOREIGN SECURITIES
All portfolios (except Small Company Growth Portfolio)
A portfolio that invests outside the U.S. carries additional risks that
include:
- CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Adverse changes in
exchange rates may erode or reverse any gains produced by foreign-currency
denominated investments and may widen any losses. Each of the portfolios may,
but is not required to, seek to reduce currency risk by hedging part or all
of its exposure to various foreign currencies.
- INFORMATION RISK Key information about an issuer, security or market may be
inaccurate or unavailable.
- POLITICAL RISK Foreign governments may expropriate assets, impose capital or
currency controls, impose punitive taxes, or nationalize a company or
industry. Any of these actions could have a severe effect on security prices
and impair a portfolio's ability to bring its capital or income back to the
U.S. Other political risks include economic-policy changes, social and
political instability, military action and war.
START-UP AND OTHER SMALL COMPANIES
Global Post-Venture Capital Portfolio,
Small Company Growth Portfolio
Start-up and other small companies may have less-experienced management,
limited product lines, unproven track records or inadequate capital reserves.
Their securities may carry increased market, liquidity and other risks. Key
information about the company may be inaccurate or unavailable.
SPECIAL-SITUATION COMPANIES
Global Post-Venture Capital Portfolio,
Small Company Growth Portfolio
"Special situations" are unusual developments that affect a company's market
value. Examples include mergers, acquisitions and reorganizations. Securities of
special-situation companies may decline in value if the anticipated benefits of
the special situation do not materialize.
NON-DIVERSIFIED STATUS
Small Company Growth Portfolio
The portfolio is considered a non-diversified portfolio under the Investment
Company Act of 1940 and is permitted to invest a greater proportion of its
assets in the securities of a smaller number of issuers. As a result, the
portfolio may be subject to greater volatility with respect to its investments
than a portfolio that is more broadly diversified.
5
<PAGE> 131
PERFORMANCE SUMMARY
The bar chart below and the table on the next page provide an indication of the
risks of investing in these portfolios. The bar chart shows you how each
portfolio's performance has varied from year to year for up to 10 years. The
table compares each portfolio's performance over time to that of a broadly based
securities market index and other indexes, if applicable. The bar chart and
table do not reflect additional charges and expenses which are, or may be,
imposed under the variable contracts or plans; such charges and expenses are
described in the prospectus of the insurance company separate account or in the
plan documents or other informational materials supplied by plan sponsors.
Inclusion of these charges and expenses would reduce the total return for the
periods shown. As with all mutual funds, past performance is not a prediction of
the future.
YEAR-BY-YEAR TOTAL RETURNS
[Year End Bar Graphs]
<TABLE>
<CAPTION>
YEAR ENDED 12/31: 1996 1997 1998 1999
<S> <C> <C> <C> <C>
INTERNATIONAL EQUITY PORTFOLIO
Best quarter: 32.04% (Q4 99) 9.98% -2.26% 5.35% 53.43%
Worst quarter: -16.92% (Q3 98)
Inception date: 6/30/95
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED 12/31: 1996 1997 1998 1999
<S> <C> <C> <C> <C>
GLOBAL POST-VENTURE
CAPITAL PORTFOLIO*
Best quarter: 51.65% (Q4 99) 13.34% 6.87% 62.94%
Worst quarter: -23.40% (Q3 98)
Inception date: 9/30/96
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED 12/31: 1996 1997 1998 1999
<S> <C> <C> <C> <C>
SMALL COMPANY
GROWTH PORTFOLIO
Best quarter: 52.93% (Q4 99) 13.91% 15.65% -2.85% 69.08%
Worst quarter: -22.70% (Q3 98)
Inception date: 6/30/95
</TABLE>
* Effective May 1, 2000, the Global Post-Venture Capital Portfolio changed its
investment strategies and policies to permit the portfolio to invest without
limit in foreign securities and to require the portfolio to invest in at least
three countries, including the U.S. Prior to that date, the portfolio's
investments in foreign securities were limited to 20% of total assets and the
portfolio was not required to invest outside the U.S.
6
<PAGE> 132
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS 10 YEARS LIFE OF INCEPTION
PERIOD ENDED 12/31/99: 1999 1995-1999 1990-1999 FUND DATE
<S> <C> <C> <C> <C> <C>
INTERNATIONAL EQUITY PORTFOLIO 53.43% NA NA 14.81% 6/30/95
MSCI ALL COUNTRY WORLD EXCLUDING THE U.S. INDEX(1) 31.80% NA NA 12.04%
GLOBAL POST-VENTURE CAPITAL PORTFOLIO(2) 62.94% NA NA 22.31% 9/30/96
RUSSELL 2000 GROWTH INDEX(3) 43.10% NA NA 22.57%
RUSSELL 2500 GROWTH INDEX(4) 55.48% NA NA 27.96%
NASDAQ INDUSTRIALS INDEX(5) 71.67% NA NA 28.74%
SMALL COMPANY GROWTH PORTFOLIO 69.08% NA NA 24.71% 6/30/95
RUSSELL 2000 GROWTH INDEX(3) 43.10% NA NA 21.83%
</TABLE>
(1) The Morgan Stanley Capital International All Country World Excluding the
U.S. Index is a market-capitalization-weighted index of companies listed on
stock exchanges outside of the U.S.
(2) Effective May 1, 2000, the Global Post-Venture Capital Portfolio changed its
investment strategies and policies to permit the portfolio to invest without
limit in foreign securities and to require the portfolio to invest in at
least three countries, including the U.S. Prior to that date, the
portfolio's investments in foreign securities were limited to 20% of total
assets and the portfolio was not required to invest outside the U.S.
(3) The Russell 2000 Growth Index is an unmanaged index (with no defined
investment objective) of those securities in the Russell 2000 Index with a
greater-than-average growth orientation. The Russell 2000 Growth Index
includes reinvestment of dividends, and is compiled by Frank Russell
Company.
(4) The Russell 2500 Growth Index measures the performance of those companies in
the Russell 2500 Index with higher price-to-book values and higher
forecasted growth rates. The Russell 2500 Index is composed of the 2,500
smallest companies in the Russell 3000 Index, which measures the performance
of the 3,000 largest U.S. companies based on total market capitalization.
The Russell 2500 Index represents approximately 22% of the total market
capitalization of the Russell 3000 Index.
(5) The Nasdaq Industrials Index measures the stock price performance of more
than 3,000 industrial issues included in the Nasdaq OTC Composite Index. The
Nasdaq OTC Composite Index represents 4,500 stocks traded over the counter.
UNDERSTANDING PERFORMANCE
- TOTAL RETURN tells you how much an investment in a portfolio has changed
in value over a given time period. It assumes that all dividends and
capital gains (if any) were reinvested in additional shares. The change
in value can be stated either as a cumulative return or as an average
annual rate of return.
- A CUMULATIVE TOTAL RETURN is the actual return of an investment for a
specified period. The year-by-year total returns in the bar chart are
examples of one-year cumulative total returns.
- An AVERAGE ANNUAL TOTAL RETURN applies to periods longer than one year.
It smoothes out the variations in year-by-year performance to tell you
what constant annual return would have produced the investment's actual
cumulative return. This gives you an idea of an investment's annual
contribution to your portfolio, assuming you held it for the entire
period.
- Because of compounding, the average annual total returns in the table
cannot be computed by averaging the returns in the bar chart.
7
<PAGE> 133
INVESTOR EXPENSES
FEES AND PORTFOLIO EXPENSES
This table describes the fees and expenses you may bear as a shareholder. Annual
portfolio operating expense figures are for the fiscal year ended December 31,
1999. The table does not reflect additional charges and expenses which are, or
may be, imposed under the variable contracts or plans; such charges and expenses
are described in the prospectus of the insurance company separate account or in
the plan documents or other informational materials supplied by plan sponsors.
<TABLE>
<CAPTION>
GLOBAL SMALL
INTERNATIONAL POST-VENTURE COMPANY
EQUITY CAPITAL GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
SHAREHOLDER FEES
(paid directly from your investment)
Sales charge "load" on purchases NONE NONE NONE
Deferred sales charge "load" NONE NONE NONE
Sales charge "load" on reinvested distributions NONE NONE NONE
Redemption fees NONE NONE NONE
Exchange fees NONE NONE NONE
ANNUAL PORTFOLIO OPERATING EXPENSES
(deducted from fund assets)
Management fee 1.00% 1.25% .90%
Distribution and service (12b-1) fee NONE NONE NONE
Other expenses .32% .33% .24%
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES 1.32% 1.58%* 1.14%
</TABLE>
* Actual fees and expenses for the fiscal year ended December 31, 1999 are shown
below. Fee waivers and expense reimbursements or credits reduced expenses for
the following portfolio during 1999 but may be discontinued at any time:
<TABLE>
<CAPTION>
GLOBAL
EXPENSES AFTER POST-VENTURE
WAIVERS AND CAPITAL
REIMBURSEMENTS PORTFOLIO
<S> <C>
Management fee 1.07%
Distribution and service (12b-1) fee NONE
Other expenses .33%
----
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES 1.40%
</TABLE>
EXAMPLE
This example may help you compare the cost of investing in these portfolios with
the cost of investing in other mutual funds. Because it uses hypothetical
conditions, your actual costs may be higher or lower.
Assume you invest $10,000, each portfolio returns 5% annually, expense ratios
remain as listed in the first table above (before fee waivers and expense
reimbursements and credits), and you close your account at the end of each of
the time periods shown. Based on these assumptions, your cost would be:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS 10 YEARS
<S> <C> <C> <C> <C>
INTERNATIONAL EQUITY PORTFOLIO $134 $418 $723 $1,590
GLOBAL POST-VENTURE CAPITAL PORTFOLIO $161 $499 $860 $1,878
SMALL COMPANY GROWTH PORTFOLIO $116 $362 $628 $1,386
</TABLE>
8
<PAGE> 134
THE PORTFOLIOS IN DETAIL
THE MANAGEMENT FIRMS
CREDIT SUISSE ASSET MANAGEMENT, LLC
One Citicorp Center
153 East 53rd Street
New York, NY 10022
- Investment adviser for the portfolios
- Responsible for managing each portfolio's assets according to its goal and
strategies
- A member of Credit Suisse Asset Management, the institutional asset
management and mutual fund arm of Credit Suisse Group (Credit Suisse), one of
the world's leading banks
- Credit Suisse Asset Management companies manage approximately $72 billion in
the U.S. and $203 billion globally as of December 1999
- Credit Suisse Asset Management has offices in 14 countries, including
SEC-registered offices in New York and London; other offices (such as those in
Budapest, Frankfurt, Milan, Moscow, Paris, Prague, Sydney, Tokyo, Warsaw and
Zurich) are not registered with the U.S. Securities and Exchange Commission
For easier reading, Credit Suisse Asset Management, LLC will be referred to
as "CSAM" or "we" throughout this Prospectus.
ABBOTT CAPITAL MANAGEMENT, LLC
50 Rowes Wharf, Suite 240
Boston, MA 02110-3328
- Sub-investment adviser for the Global Post-Venture Capital Portfolio
- Responsible for managing the portfolio's investments in private-equity
portfolios
- A registered investment adviser concentrating on venture-capital, buyout, and
special-situation investments
- Managed approximately $4.2 billion as of December 1999
9
<PAGE> 135
PORTFOLIO INFORMATION KEY
Concise descriptions of each portfolio begin on the next page. Each
description provides the following information:
GOAL AND STRATEGIES
The portfolio's particular investment goal and the strategies it intends to
use in pursuing that goal. Percentages of portfolio assets are based on total
assets unless indicated otherwise.
PORTFOLIO INVESTMENTS
The primary types of securities in which the portfolio invests. Secondary
investments are described in "More About Risk."
RISK FACTORS
The major risk factors associated with the portfolio. Additional risk factors
are included in "More About Risk."
PORTFOLIO MANAGEMENT
The individuals designated by the investment adviser to handle the
portfolio's day-to-day management.
INVESTOR EXPENSES
Actual portfolio expenses for the 1999 fiscal year. Future expenses may be
higher or lower. Additional expenses are, or may be, imposed under the variable
contracts or plans.
- MANAGEMENT FEE The fee paid to the investment adviser for providing
investment advice to the portfolio. Expressed as a percentage of average net
assets after waivers.
- OTHER EXPENSES Fees paid by the portfolio for items such as administration,
transfer agency, custody, auditing, legal and registration fees and
miscellaneous expenses. Expressed as a percentage of average net assets after
waivers, credits and reimbursements.
FINANCIAL HIGHLIGHTS
A table showing the portfolio's audited financial performance for up to five
years.
- TOTAL RETURN How much you would have earned on an investment in the
portfolio, assuming you had reinvested all dividend and capital-gain
distributions.
- PORTFOLIO TURNOVER An indication of trading frequency. The portfolios may
sell securities without regard to the length of time they have been held. A
high turnover rate may increase the portfolio's transaction costs and
negatively affect its performance.
The Annual Report includes the auditor's report, along with the portfolio's
financial statements. It is available free upon request.
10
<PAGE> 136
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11
<PAGE> 137
INTERNATIONAL EQUITY PORTFOLIO
GOAL AND STRATEGIES
The International Equity Portfolio seeks long-term capital appreciation. To
pursue this goal, it invests in equity securities of companies located or
conducting a majority of their business outside the U.S.
Under normal market conditions, the portfolio will invest at least 65% of
assets in equity securities of issuers from at least three foreign countries.
The portfolio intends to diversify its investments across different countries,
although at times it may invest a significant part of its assets in a single
country. Although the portfolio emphasizes developed countries, it may also
invest in emerging markets.
In choosing equity securities, the portfolio's managers use a bottom-up
investment approach that begins with an analysis of individual companies. The
managers look for companies of any size whose stocks appear to be discounted
relative to earnings, assets or projected growth. The portfolio managers
determine value based upon research and analysis, taking all relevant factors
into account.
PORTFOLIO INVESTMENTS
This portfolio intends to invest substantially all of its assets in the
following types of equity securities:
- common stocks
- securities convertible into or exchangeable for common stocks
To a limited extent, the portfolio may also engage in other investment
practices.
RISK FACTORS
This portfolio's principal risk factors are:
- market risk
- foreign securities
The value of your investment generally will fluctuate in response to
stock-market movements. Because the portfolio invests internationally, it
carries additional risks, including currency, information and political risks.
These risks are defined in "More About Risk."
To the extent that the portfolio invests in emerging markets or focuses on a
single country or region, it takes on additional risks that could hurt its
performance. Investing in emerging markets involves access, operational and
other risks not generally encountered in developed countries. Focusing on a
single country or region may cause the portfolio to be more volatile than a more
geographically diversified equity fund. "More About Risk" details these and
certain other investment practices the portfolio may use. Please read that
section carefully before you invest.
PORTFOLIO MANAGEMENT
P. Nicholas Edwards, Harold W. Ehrlich, Harold E. Sharon and Vincent J.
McBride manage the portfolio. Associate Portfolio Manager Nancy Nierman assists
them. You can find out more about the portfolio's managers in "Meet the
Managers."
INVESTOR EXPENSES
Management fee 1.00%
All other expenses .32%
------------
Total expenses 1.32%
12
<PAGE> 138
FINANCIAL HIGHLIGHTS
The figures below have been audited by the portfolio's independent auditors,
PricewaterhouseCoopers LLP.
<TABLE>
<CAPTION>
PERIOD ENDED: 12/99 12/98 12/97 12/96 12/95(1)
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $10.99 $10.49 $11.48 $10.65 $10.00
Investment activities:
Net investment income 0.08 0.08 0.10 0.00 0.03
Net gains (loss) on investments and foreign currency related
items (both realized and unrealized) 5.78 0.48 (0.37) 1.06 0.70
Total from investment activities 5.86 0.56 (0.27) 1.06 0.73
Distributions:
Dividends from net investment income (0.08) (0.05) (0.01) (0.06) (0.01)
Distributions in excess of net investment income (0.07) 0.00 0.00 (0.10) (0.07)
Distributions from net realized gains 0.00 (0.01) 0.00 (0.06) 0.00
Distributions in excess of realized gains 0.00 0.00 (0.71) (0.01) 0.00
Total distributions (0.15) (0.06) (0.72) (0.23) (0.08)
Net asset value, end of period $16.70 $10.99 $10.49 $11.48 $10.65
Total return 53.43% 5.35% (2.26)% 9.98% 7.30%(2)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $610,547 $360,124 $347,229 $298,218 $64,537
Ratio of expenses to average net assets 1.33%(3) 1.33%(3) 1.36%(3) 1.36%(3) 1.44%(4)
Ratio of net income to average net assets .63% .68% .66% .64% .48%(4)
Decrease reflected in above operating expense ratios due to
waivers/reimbursement .00% .00% .00% .04% .77%(4)
Portfolio turnover rate 145% 105% 79% 31% 8%(2)
</TABLE>
(1) For the period June 30, 1995 (Commencement of Operations) through December
31, 1995.
(2) Not annualized.
(3) Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expense. These arrangements resulted in a reduction to
the portfolio's net expense ratio of .01%, .00%, .01% and .00%, for the
years ended December 31, 1999, 1998, 1997 and 1996, respectively. The
portfolio's operating expense ratio after reflecting these arrangements was
1.32%, 1.33%, 1.35% and 1.36% for the years ended December 31, 1999, 1998,
1997 and 1996, respectively.
(4) Annualized.
13
<PAGE> 139
GLOBAL POST-VENTURE CAPITAL PORTFOLIO
GOAL AND STRATEGIES
The Global Post-Venture Capital Portfolio seeks long-term growth of capital.
To pursue this goal, it invests in equity securities of U.S. and foreign
companies considered to be in their post-venture-capital stage of development.
A post-venture-capital company is one that has received venture-capital
financing either:
- during the early stages of the company's existence or the early stages of the
development of a new product or service, or
- as part of a restructuring or recapitalization of the company
In either case, one or more of the following will have occurred within 10
years prior to the portfolio's purchase of the company's securities:
- the investment of venture-capital financing
- distribution of the company's securities to venture-capital investors
- the initial public offering
Under normal market conditions, the portfolio will invest at least 65% of
assets in equity securities of post-venture-capital companies. The portfolio may
invest in companies of any size. The portfolio may invest without limit in
foreign securities and will invest in at least three countries, including the
U.S.
PORTFOLIO INVESTMENTS
This portfolio invests primarily in equity securities of post-venture-capital
companies. Equity holdings may consist of:
- common and preferred stocks
- warrants
- securities convertible into common stocks
- partnership interests
The portfolio may invest up to 10% of assets in private-equity portfolios
that invest in venture-capital companies.
To a limited extent, the portfolio may also engage in other investment
practices.
RISK FACTORS
This portfolio's principal risk factors are:
- market risk
- foreign securities
- start-up and other small companies
- special-situation companies
The value of your investment generally will fluctuate in response to
stock-market movements. Because the portfolio invests internationally, it
carries additional risks, including currency, information and political risks.
Investing in start-up and other small companies may expose the portfolio to
increased market liquidity and information risks. These risks are defined in
"More About Risk."
Post-venture-capital companies are often involved in "special situations."
Securities of special-situation companies may decline in value and hurt the
portfolio's performance if the anticipated benefits of the special situation do
not materialize.
To the extent that it invests in private-equity portfolios, the portfolio
takes on additional liquidity, valuation and other risks. "More About Risk"
details certain other investment practices the portfolio may use. Please read
that section carefully before you invest.
PORTFOLIO MANAGEMENT
Elizabeth B. Dater, Harold E. Sharon, Federico D. Laffan and Jun Sung Kim
manage the portfolio. Calvin E. Chung assists them. Raymond L. Held and Thaddeus
I. Grey manage the portfolio's investments in private-equity portfolios. You can
find out more about the portfolio's managers in "Meet the Managers."
INVESTOR EXPENSES
Management fee 1.07%
All other expenses .33%
------------
Total expenses 1.40%
14
<PAGE> 140
FINANCIAL HIGHLIGHTS
The figures below have been audited by the portfolio's independent auditors,
PricewaterhouseCoopers LLP.
<TABLE>
<CAPTION>
PERIOD ENDED: 12/99 12/98 12/97 12/96(1)
<S> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $11.82 $11.06 $9.76 $10.00
Investment activities:
Net investment loss (0.08) (0.04) (0.08) 0.00
Net gains (loss) on investments and foreign currency related
items (both realized and unrealized) 7.52 0.80 1.38 (0.24)
Total from investment activities 7.44 0.76 1.30 (0.24)
Net asset value, end of period $19.26 $11.82 $11.06 $9.76
Total return 62.94% 6.87% 13.34% (2.40%)(2)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $151,784 $62,055 $30,520 $12,400
Ratio of expenses to average net assets 1.41%(4) 1.40%(4) 1.40%(4) 1.41%(3,4)
Ratio of net income (loss) to average net assets (.87%) (.83%) (.75%) .80%(3)
Decrease reflected in above operating expense ratio due to
waivers/reimbursements .18% .30% .18% 4.16%(3)
Portfolio turnover rate 44% 73% 238% 7%(2)
</TABLE>
(1) For the period September 30, 1996 (Commencement of Operations) through
December 31, 1996.
(2) Not annualized.
(3) Annualized.
(4) Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expense. These arrangements resulted in a reduction to
the portfolio's net expense ratio of .01%, 0.00%, .00% and .01% for the
years or period ended December 31, 1999, 1998, 1997 and 1996, respectively.
The portfolio's operating expense ratio after reflecting these arrangements
was 1.40%, 1.40%, 1.40% and 1.40% for the years or period ended December 31,
1999, 1998, 1997 and 1996, respectively.
15
<PAGE> 141
SMALL COMPANY GROWTH PORTFOLIO
GOAL AND STRATEGIES
The Small Company Growth Portfolio seeks capital growth. To pursue this goal,
it invests in equity securities of small U.S. growth companies.
In seeking to identify growth companies--companies with attractive
capital-growth potential--the portfolio's managers often look for:
- companies still in the developmental stage
- older companies that appear to be entering a new stage of growth
- companies providing products or services with a high unit-volume growth rate
The portfolio may also invest in emerging-growth companies--small or
medium-size companies that have passed their start-up phase, show positive
earnings, and offer the potential for accelerated earnings growth.
Emerging-growth companies generally stand to benefit from new products or
services, technological developments, changes in management or other factors.
Under normal market conditions, the portfolio will invest at least 65% of
assets in equity securities of small U.S. companies. The portfolio considers a
"small" company to be one whose market capitalization is within the range of
capitalizations of companies in the Russell 2000 Index. As of December 31, 1999,
the Russell 2000 Index included companies with market capitalizations between
$178 million and $1.3 billion.
Some companies may outgrow the definition of a small company after the
portfolio has purchased their securities. These companies continue to be
considered small for purposes of the portfolio's minimum 65% allocation to
small-company equities. In addition, the portfolio may invest in companies of
any size once the 65% policy is met. As a result, the portfolio's average market
capitalization may sometimes exceed that of the largest company in the Russell
2000 Index.
PORTFOLIO INVESTMENTS
This portfolio intends to invest at least 80% of assets in equity securities
of small-capitalization growth companies. Equity holdings may consist of:
- common and preferred stocks
- securities convertible into common stocks
- rights and warrants
The portfolio may invest up to 10% of assets in foreign securities. To a
limited extent, it may also engage in other investment practices.
RISK FACTORS
This portfolio's principal risk factors are:
- market risk
- start-up and other small companies
- special-situation companies
- non-diversified status
The value of your investment generally will fluctuate in response to
stock-market movements. The portfolio's performance will largely depend upon the
performance of growth stocks, which may be more volatile than the overall stock
market.
Different types of stocks (such as "growth" vs. "value" stocks) tend to shift
in and out of favor depending on market and economic conditions. Accordingly,
the portfolio's performance may sometimes be lower or higher than that of other
types of funds (such as those emphasizing value stocks).
Investing in start-up and other small companies may expose the portfolio to
increased market, liquidity and information risks. These risks are defined in
"More About Risk."
Small companies and emerging-growth companies are often involved in "special
situations." Securities of special-situation companies may decline in value and
hurt the portfolio's performance if the anticipated benefits of the special
situation do not materialize.
"More About Risk" details certain other investment practices the portfolio
may use. Please read that section carefully before you invest.
PORTFOLIO MANAGEMENT
Stephen J. Lurito and Sammy Oh manage the portfolio. You can find out more
about the portfolio's managers in "Meet the Managers."
INVESTOR EXPENSES
Management fee .90%
All other expenses .24%
-----------
Total expenses 1.14%
16
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FINANCIAL HIGHLIGHTS
The figures below have been audited by the portfolio's independent auditors,
PricewaterhouseCoopers LLP.
<TABLE>
<CAPTION>
PERIOD ENDED: 12/99 12/98 12/97 12/96 12/95(1)
<S> <C> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $16.01 $16.48 $14.25 $12.51 $10.00
Investment activities:
Net investment loss (0.12) (0.06) (0.07) (0.06) (0.01)
Net gains (losses) on investments and foreign currency
related items (both realized and unrealized) 11.07 (0.41) 2.30 1.80 2.52
Total from investment activities 10.95 (0.47) 2.23 1.74 2.51
Distributions from net realized gains (0.76) 0.00 0.00 0.00 0.00
Net asset value, end of period $26.20 $16.01 $16.48 $14.25 $12.51
Total return 69.08% (2.85%) 15.65% 13.91% 25.10%(2)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $1,272,542 $734,902 $666,394 $339,398 $97,445
Ratio of expenses to average net assets 1.15%(4) 1.14%(4) 1.15%(4) 1.16%(4) 1.25%(3)
Ratio of net loss to average net assets (.72%) (.51%) (.56%) (.66%) (.36%)(3)
Decrease reflected in above operating expense ratio due
to waivers/reimbursements .00% .00% .00% .01% .25%(3)
Portfolio turnover rate 122% 66% 92% 102% 34%(2)
</TABLE>
(1) For the period June 30, 1995 (Commencement of Operations) through December
31, 1995.
(2) Not annualized.
(3) Annualized.
(4) Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expense. These arrangements resulted in a reduction to
the portfolio's net expense ratio of .01%, 0.00%, .01% and .00% for the
years ended December 31, 1999, 1998, 1997 and 1996, respectively. The
portfolio's operating expense ratio after reflecting these arrangements was
1.14%, 1.14%, 1.14% and 1.16% for the years ended December 31, 1999, 1998,
1997 and 1996, respectively.
17
<PAGE> 143
MORE ABOUT RISK
INTRODUCTION
A portfolio's goal and principal strategies largely determine its risk
profile. You will find a concise description of each portfolio's risk profile in
"Key Points." The preceding discussions of each portfolio contain more detailed
information. This section discusses other risks that may affect the portfolios.
The portfolios may use certain investment practices that have higher risks
associated with them. However, each portfolio has limitations and policies
designed to reduce many of the risks. The "Certain Investment Practices" table
describes these practices and the limitations on their use.
Each Portfolio offers its shares to (i) insurance company separate accounts
that fund both variable contracts and variable life insurance contracts and (ii)
tax-qualified pension and retirement plans including participant-directed plans
which elect to make a portfolio an investment option for plan participants. Due
to differences of tax treatment and other considerations, the interests of
various variable contract owners and plan participants participating in a
portfolio may conflict. The Board of Trustees will monitor the portfolios for
any material conflicts that may arise and will determine what action, if any,
should be taken. If a conflict occurs, the Board may require one or more
insurance company separate accounts and/or plans to withdraw its investments in
one or all portfolios, which may cause a portfolio to sell securities at
disadvantageous prices and disrupt orderly portfolio management. The Board also
may refuse to sell shares of a portfolio to any variable contract or plan or may
suspend or terminate the offering of shares of a portfolio if such action is
required by law or regulatory authority or is in the best interests of the
shareholders of the portfolio.
TYPES OF INVESTMENT RISK
The following risks are referred to throughout this Prospectus.
ACCESS RISK Some countries may restrict a portfolio's access to investments
or offer terms that are less advantageous than those for local investors. This
could limit the attractive investment opportunities available to a portfolio.
CORRELATION RISK The risk that changes in the value of a hedging instrument
will not match those of the investment being hedged.
CREDIT RISK The issuer of a security or the counterparty to a contract may
default or otherwise become unable to honor a financial obligation.
CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Adverse changes in
exchange rates may erode or reverse any gains produced by foreign-
currency-denominated investments and may widen any losses.
EXPOSURE RISK The risk associated with investments (such as derivatives) or
practices (such as short selling) that increase the amount of money a portfolio
could gain or lose on an investment.
- HEDGED Exposure risk could multiply losses generated by a derivative or
practice used for hedging purposes. Such losses should be substantially
offset by gains on the hedged investment. However, while hedging can reduce
or eliminate losses, it can also reduce or eliminate gains.
- SPECULATIVE To the extent that a derivative or practice is not used as a
hedge, the portfolio is directly exposed to its risks. Gains or losses from
speculative positions in a derivative may be much greater than the
derivative's original cost. For example, potential losses from writing
uncovered call options and from speculative short sales are unlimited.
INFORMATION RISK Key information about an issuer, security or market may be
inaccurate or unavailable.
INTEREST-RATE RISK Changes in interest rates may cause a decline in the
market value of an investment. With bonds and other fixed-income securities, a
rise in interest rates typically causes a fall in values, while a fall in
interest rates typically causes a rise in values.
LIQUIDITY RISK Certain portfolio securities may be difficult or impossible to
sell at the time and the price that the portfolio would like. A portfolio may
have to lower the price, sell other securities instead or forego an investment
opportunity. Any of these could have a negative effect on portfolio management
or performance.
MARKET RISK The market value of a security may move up and down, sometimes
rapidly and unpredictably. These fluctuations, which are often referred to as
"volatility," may cause a security to be worth less than it was worth at an
earlier time. Market risk may affect a single issuer, industry, sector of the
economy, or the market as a whole. Market risk is common to most
investments--including stocks and bonds, and the mutual funds that invest in
them.
OPERATIONAL RISK Some countries have less-developed securities markets (and
related transaction, registration and custody practices) that could subject a
portfolio to losses from fraud, negligence, delay or other actions.
POLITICAL RISK Foreign governments may expropriate assets, impose capital or
currency controls, impose punitive taxes, or nationalize a company or industry.
Any of these actions could have a severe effect on security prices and impair a
portfolio's ability to bring its capital or income back to the U.S. Other
political risks include economic policy changes, social and political
instability, military action and war.
VALUATION RISK The lack of an active trading market may make it difficult to
obtain an accurate price for a portfolio security.
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CERTAIN INVESTMENT PRACTICES
For each of the following practices, this table shows the applicable investment
limitation. Risks are indicated for each practice.
KEY TO TABLE:
<TABLE>
<S> <C>
[-] Permitted without limitation; does not indicate actual use
20% Italic type (e.g., 20%) represents an investment limitation as a percentage of NET
portfolio assets; does not indicate actual use
20% Roman type (e.g., 20%) represents an investment limitation as a percentage of TOTAL
portfolio assets; does not indicate actual use
[ ] Permitted, but not expected to be used to a significant extent
- -- Not permitted
</TABLE>
<TABLE>
<CAPTION>
GLOBAL SMALL
INTERNATIONAL POST-VENTURE COMPANY
EQUITY CAPITAL GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
INVESTMENT PRACTICE LIMIT
<S> <C> <C> <C>
BORROWING The borrowing of money from banks to meet
redemptions or for other temporary or emergency purposes.
Speculative exposure risk. 30% 30% 30%
- ---------------------------------------------------------------------------------------------------------------------
COUNTRY/REGION FOCUS Investing a significant portion of
portfolio assets in a single country or region. Market
swings in the targeted country or region will be likely to
have a greater effect on portfolio performance than they
would in a more geographically diversified equity portfolio.
Currency, market, political risks. [-] -- --
- ---------------------------------------------------------------------------------------------------------------------
CURRENCY TRANSACTIONS Instruments, such as options, futures,
forwards or swaps, intended to manage portfolio exposure to
currency risk or to enhance total return. Options, futures
or forwards involve the right or obligation to buy or sell a
given amount of foreign currency at a specified price and
future date. Swaps involve the right or obligation to
receive or make payments based on two different currency
rates. Correlation, credit, currency, hedged exposure,
liquidity, political, speculative exposure, valuation
risks.(1) [-] [ ] [ ]
- ---------------------------------------------------------------------------------------------------------------------
EMERGING MARKETS Countries generally considered to be
relatively less developed or industrialized. Emerging
markets often face economic problems that could subject a
portfolio to increased volatility or substantial declines in
value. Deficiencies in regulatory oversight, market
infrastructure, shareholder protections and company laws
could expose a portfolio to risks beyond those generally
encountered in developed countries. Access, currency,
information, liquidity, market, operational, political,
valuation risks. [-] -- --
- ---------------------------------------------------------------------------------------------------------------------
FOREIGN SECURITIES Securities of foreign issuers. May
include depositary receipts. Currency, information,
liquidity, market, political, valuation risks. [-] [-] 10%
- ---------------------------------------------------------------------------------------------------------------------
FUTURES AND OPTIONS ON FUTURES Exchange-traded contracts
that enable a portfolio to hedge against or speculate on
future changes in currency values, interest rates or stock
indexes. Futures obligate the portfolio (or give it the
right, in the case of options) to receive or make payment at
a specific future time based on those future changes.(1)
Correlation, currency, hedged exposure, interest-rate,
market, speculative exposure risks.(2) [ ] [ ] [ ]
- ---------------------------------------------------------------------------------------------------------------------
INVESTMENT-GRADE DEBT SECURITIES Debt securities rated
within the four highest grades (AAA/Aaa through BBB/Baa) by
Standard & Poor's or Moody's rating service, and unrated
securities of comparable quality. Credit, interest-rate,
market risks. 35% 20% 20%
- ---------------------------------------------------------------------------------------------------------------------
NON-INVESTMENT-GRADE DEBT SECURITIES Debt securities rated
below the fourth-highest grade (BBB/Baa) by Standard &
Poor's or Moody's rating service, and unrated securities of
comparable quality. Commonly referred to as junk bonds.
Credit, information, interest-rate, liquidity, market,
valuation risks. 5% 5% 5%
- ---------------------------------------------------------------------------------------------------------------------
OPTIONS Instruments that provide a right to buy (call) or
sell (put) a particular security, currency or index of
securities at a fixed price within a certain time period. A
portfolio may purchase or sell (write) both put and call
options for hedging or speculative purposes.(1) Correlation,
credit, hedged exposure, liquidity, market, speculative
exposure, valuation risks. 25% 25% 25%
- ---------------------------------------------------------------------------------------------------------------------
PRIVATE-EQUITY PORTFOLIOS Private limited partnerships or
other investment funds that themselves invest in equity or
debt securities of:
- -companies in the venture-capital or post-venture-capital
stages of development
- -companies engaged in special situations or changes in
corporate control, including buyouts
Information, liquidity, market, valuation risks. -- 10% --
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
20
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<TABLE>
<CAPTION>
GLOBAL SMALL
INTERNATIONAL POST-VENTURE COMPANY
EQUITY CAPITAL GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
INVESTMENT PRACTICE LIMIT
<S> <C> <C> <C>
RESTRICTED AND OTHER ILLIQUID SECURITIES Certain securities
with restrictions on trading, or those not actively traded.
May include private placements. Liquidity, market, valuation
risks. 15% 15% 15%
- -----------------------------------------------------------------------------------------------------------------------
SECURITIES LENDING Lending portfolio securities to financial
institutions; a portfolio receives cash, U.S. government
securities or bank letters of credit as collateral. Credit,
liquidity, market, operational risks. 33 1/3 33 1/3 33 1/3
- ------------------------------------------------------------------------------------------------------------------------
SHORT SALES Selling borrowed securities with the intention
of repurchasing them for a profit on the expectation that
the market price will drop. Liquidity, market, speculative
exposure risks. -- 10% --
- ------------------------------------------------------------------------------------------------------------------------
SHORT SALES "AGAINST THE BOX" A short sale when the
portfolio owns enough shares of the security involved to
cover the borrowed securities, if necessary. Liquidity,
market, speculative exposure risks. [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------
SPECIAL-SITUATION COMPANIES Companies experiencing unusual
developments affecting their market values. Special
situations may include acquisition, consolidation,
reorganization, recapitalization, merger, liquidation,
special distribution, tender or exchange offer, or
potentially favorable litigation. Securities of a
special-situation company could decline in value and hurt a
portfolio's performance if the anticipated benefits of the
special situation do not materialize. Information, market
risks. [ ] [-] [-]
- ------------------------------------------------------------------------------------------------------------------------
START-UP AND OTHER SMALL COMPANIES Companies with small
relative market capitalizations, including those with
continuous operations of less than three years. Information,
liquidity, market, valuation risks. [-] [-] [-]
- ------------------------------------------------------------------------------------------------------------------------
SWAPS A contract between a portfolio and another party in
which the parties agree to exchange streams of payments
based on certain benchmarks, such as market indices or
currency or interest rates. For example, a portfolio may use
swaps to gain access to the performance of a benchmark asset
(such as an index or one or more stocks) where the
portfolio's direct investment is restricted. Credit,
currency, information, interest-rate, liquidity, market,
political, speculative exposure, valuation risks [ ] -- --
- ------------------------------------------------------------------------------------------------------------------------
TEMPORARY DEFENSIVE TACTICS Placing some or all of a
portfolio's assets in investments such as money-market
obligations and investment-grade debt securities for
defensive purposes. Although intended to avoid losses in
adverse market, economic, political or other conditions,
defensive tactics might be inconsistent with a portfolio's
principal investment strategies and might prevent a
portfolio from achieving its goal. [ ] [ ] [ ]
- ------------------------------------------------------------------------------------------------------------------------
WARRANTS Options issued by a company granting the holder the
right to buy certain securities, generally common stock, at
a specified price and usually for a limited time. Liquidity,
market, speculative exposure risks. 10% 10% 10%
- ------------------------------------------------------------------------------------------------------------------------
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The purchase
or sale of securities for delivery at a future date; market
value may change before delivery. Liquidity, market,
speculative exposure risks. 20% 20% 20%
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The portfolios are not obligated to pursue any hedging strategy. In
addition, hedging practices may not be available, may be too costly to be
used effectively or may be unable to be used for other reasons.
(2) Each portfolio is limited to 5% of net assets for initial margin and premium
amounts on futures positions considered to be speculative by the Commodity
Futures Trading Commission.
21
<PAGE> 147
MEET THE MANAGERS
[LIZ DATER PHOTO]
ELIZABETH B. DATER
Managing Director
- Co-Portfolio Manager, Global Post-Venture Capital Portfolio since inception
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus Asset Management, Inc. (Warburg Pincus)
- With Warburg Pincus since 1978
[EDWARDS PHOTO]
P. NICHOLAS EDWARDS
Managing Director
- Co-Portfolio Manager, International Equity Portfolio since July 1999
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1995
- Director at Jardine Fleming Investment Advisers, Tokyo, 1984 to 1995
[EHRLICH PHOTO]
HAROLD W. EHRLICH, CFA, CIC
Managing Director
- Co-Portfolio Manager, International Equity Portfolio since inception
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1995
- Senior vice president, portfolio manager and analyst at Templeton Investment
Counsel Inc., 1987 to 1995
[STEPHEN J. LURITO PHOTO]
STEPHEN J. LURITO
Managing Director
- Co-Portfolio Manager, Small Company Growth Portfolio since inception
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1987
[SHARON PHOTO]
HAROLD E. SHARON
Managing Director
- Co-Portfolio Manager, International Equity Portfolio
since 1998
- Co-Portfolio Manager, Global Post-Venture Capital Portfolio since May 2000
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1998
- Executive director and portfolio manager with CIBC Oppenheimer, 1994 to 1998
[MCBRIDE PHOTO]
VINCENT J. MCBRIDE
Director
- Co-Portfolio Manager, International Equity Portfolio since 1998
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1994
Job titles indicate position with the investment adviser.
22
<PAGE> 148
[NIERMAN PHOTO]
NANCY NIERMAN
Director
- Associate Portfolio Manager, International Equity Portfolio since 1998
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1996
- Analyst with Fiduciary Trust Company International, 1992 to 1996
[OH PHOTO]
SAMMY OH
Director
- Co-Portfolio Manager, Small Company Growth Portfolio since March 1999
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1997
- Vice president with Bessemer Trust, 1995 to 1996
- Vice president with Forstmann-Leff, 1993 to 1995
[CHUNG PHOTO]
CALVIN E. CHUNG
Vice President
- Associate Portfolio Manager Global Post-Venture Capital Portfolio since May
2000
- With CSAM since January 2000
- Vice President and senior technology equity analyst at Eagle Asset
Management, 1997 to 1999
- Graduate student at the University of Chicago, 1995 to 1997
SUB-INVESTMENT ADVISER PORTFOLIO MANAGERS
Global Post-Venture Capital Portfolio
RAYMOND L. HELD and THADDEUS I. GRAY manage the Global Post-Venture
Capital Portfolio's investments in private-equity portfolios. Both are
Investment Managers and Managing Directors of Abbott Capital Management
LLC, the portfolio's sub-investment adviser. Mr. Held has been with Abbott
since 1986, while Mr. Gray joined the firm in 1989.
23
<PAGE> 149
ABOUT YOUR ACCOUNT
SHARE VALUATION
The price of your shares is also referred to as their net asset value (NAV).
The NAV is determined at the close of regular trading on the New York Stock
Exchange (NYSE) (usually 4 p.m. Eastern Time) each day the NYSE is open for
business. It is calculated by dividing each portfolio's total assets, less its
liabilities, by the number of shares outstanding in the portfolio.
Each portfolio values its securities based on market quotations when it
calculates its NAV. If market quotations are not readily available, securities
and other assets are valued by another method that the Board of Trustees
believes accurately reflects fair value. Debt obligations that will mature in 60
days or less are valued on the basis of amortized cost, unless the Board
determines that using this method would not reflect an investment's value.
Some portfolio securities may be listed on foreign exchanges that are open on
days (such as U.S. holidays) when the portfolios do not compute their prices.
This could cause the value of a portfolio's investments to be affected by
trading on days when you cannot buy or sell shares.
The Global Post-Venture Capital Portfolio initially values its investments in
private-equity portfolios at cost. After that, the Global Post-Venture Capital
Portfolio values these investments according to reports from the private-equity
portfolios that the sub-investment adviser generally receives on a quarterly
basis. The portfolio's net asset value typically will not reflect interim
changes in the values of its private-equity-portfolio investments.
DISTRIBUTIONS
Investors in a portfolio are entitled to a share of the portfolio's net
income and gains on investments. The portfolio passes these earnings along to
its shareholders as distributions.
Each portfolio earns dividends from stocks and interest from bond,
money-market and other investments. These are passed along as dividend
distributions. A portfolio realizes capital gains whenever it sells securities
for a higher price than it paid for them. These are passed along as capital-gain
distributions.
The portfolios typically distribute dividends and capital gains annually,
usually in December. Distributions will be reinvested automatically in
additional shares of the same portfolio that paid them.
TAXES
Investors in a portfolio are entitled to a share of the portfolio's net
income and gains on investments. The portfolio passes these earnings along to
its shareholders as distributions.
For a discussion of the tax status of a variable contract or pension plan,
refer to the prospectus of the sponsoring participating insurance company
separate account or plan documents or other informational materials supplied by
plan sponsors.
Because shares of the portfolios may be purchased only through variable
contracts and plans, income dividends or capital-gain distributions from a
portfolio are taxable, if at all, to the participating insurance companies and
plans and will be exempt from current taxation of the variable-contract owner or
plan participant if left to accumulate within the variable contract or plan.
Each portfolio intends to comply with the diversification requirements
currently imposed by the Internal Revenue Service on separate accounts of
insurance companies as a condition of maintaining the tax-deferred status of
variable contracts.
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<PAGE> 150
BUYING AND SELLING SHARES
You may not buy or sell shares of a portfolio directly; you may only buy or
sell shares through variable-annuity contracts and variable life insurance
contracts offered by separate accounts of certain insurance companies or through
tax-qualified pension and retirement plans. Certain portfolios may not be
available in connection with a particular contract or plan.
An insurance company's separate accounts buy and sell shares of a portfolio
at NAV, without any sales or other charges. Each insurance company receives
orders from its contract holders to buy or sell shares of a portfolio on any
business day that the portfolio calculates its NAV. If the order is received by
the insurance company prior to the close of regular trading on the NYSE, the
order will be executed at that day's NAV.
Plan participants may buy shares of a portfolio through their plan by
directing the plan trustee to buy shares for their account in a manner similar
to that described above for variable annuity and variable life insurance
contracts. You should contact your plan sponsor concerning the appropriate
procedure for investing in a portfolio.
Each portfolio reserves the right to:
- refuse any specific purchase or exchange request, including those from any
person or group who, in the portfolio's view, is likely to engage in excessive
trading
- change or discontinue its exchange privilege after 30 days' notice to current
investors, or temporarily suspend this privilege during unusual market
conditions
- make a "redemption in kind"--payment in portfolio securities rather than
cash--for certain large redemption amounts that could hurt portfolio
operations
- suspend redemptions or postpone payment dates as permitted by the Investment
Company Act of 1940 (such as during periods other than weekends or holidays
when the NYSE is closed or trading on the NYSE is restricted, or any other
time that the SEC permits)
- stop offering the portfolio's shares for a period of time (such as when
management believes that a substantial increase in assets could adversely
affect it)
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FOR MORE INFORMATION
This Prospectus is intended for use in connection with certain insurance
products and pension and retirement plans. Please refer to the prospectus of the
sponsoring participating insurance company separate account or to the plan
documents or other informational materials supplied by plan sponsors for
information regarding distributions and instructions on purchasing or selling a
variable contract and on how to select a portfolio as an investment option for a
variable contract or plan. More information about these portfolios is available
free upon request, including the following:
ANNUAL/SEMIANNUAL REPORTS TO SHAREHOLDERS
Includes financial statements, portfolio investments and detailed performance
information.
The Annual Report also contains a letter from the portfolio manager
discussing market conditions and investment strategies that significantly
affected portfolio performance during its past fiscal year.
OTHER INFORMATION
A current Statement of Additional Information (SAI), which provides more
details about the portfolios, is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference.
You may visit the SEC's Internet Web site (www.sec.gov) to view the SAI,
material incorporated by reference and other information. You can also obtain
copies by visiting the SEC's Public Reference Room in Washington, DC (phone
202-942-8090) or by sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington, DC 20549-6009 or electronically at
[email protected].
Please contact the Trust to obtain, without charge, the SAI and Annual and
Semiannual Reports and to make shareholder inquiries:
BY TELEPHONE:
800-222-8977
BY MAIL:
Warburg Pincus Trust
P.O. Box 9030
Boston, MA 02205-9030
BY OVERNIGHT OR COURIER SERVICE:
Boston Financial
Attn: Warburg Pincus Trust
66 Brooks Drive
Braintree, MA 02184
ON THE INTERNET:
www.warburg.com
SEC FILE NUMBER:
Warburg Pincus Trust 811-07261
[Warburg Pincus Funds Logo]
P.O. BOX 9030, BOSTON, MA 02205-9030
800-222-8977 [-] www.warburg.com
PROVIDENT DISTRIBUTORS, INC., DISTRIBUTOR. TRIPS-1-0500
<PAGE> 155
[WARBURG PINCUS LOGO] [CREDIT SUISSE LOGO]
PROSPECTUS
May 1, 2000
WARBURG PINCUS TRUST
GLOBAL POST-VENTURE CAPITAL PORTFOLIO
Warburg Pincus Trust shares are not available directly to
individual investors, but may be offered only through certain
insurance products and pension and retirement plans.
As with all mutual funds, the Securities and Exchange Commission
has not approved these securities, nor has it passed upon the
adequacy or accuracy of this Prospectus. It is a criminal
offense to state otherwise.
The Trust is advised by Credit Suisse Asset Management, LLC.
<PAGE> 156
CONTENTS
<TABLE>
<S> <C>
KEY POINTS........................ ......................... 4
Goal and Principal Strategies............................ 4
Investor Profile......................................... 4
A Word About Risk........................................ 5
PERFORMANCE SUMMARY.................... .................... 6
Year-by-Year Total Returns............................... 6
Average Annual Total Returns............................. 7
INVESTOR EXPENSES..................... ..................... 8
Fees and Portfolio Expenses.............................. 8
Example.................................................. 8
THE PORTFOLIO IN DETAIL.................. .................. 9
The Management Firms..................................... 9
Portfolio Information Key................................ 10
Goal and Strategies...................................... 12
Portfolio Investments.................................... 12
Risk Factors............................................. 12
Portfolio Management..................................... 12
Investor Expenses........................................ 12
Financial Highlights..................................... 13
MORE ABOUT RISK...................... ...................... 14
Introduction............................................. 14
Types of Investment Risk................................. 14
Certain Investment Practices............................. 15
MEET THE MANAGERS..................... ..................... 16
ABOUT YOUR ACCOUNT.................... ..................... 17
Share Valuation.......................................... 17
Distributions............................................ 17
Taxes.................................................... 17
BUYING AND SELLING SHARES................. ................. 18
FOR MORE INFORMATION................... .................... back cover
</TABLE>
3
<PAGE> 157
KEY POINTS
GOAL AND PRINCIPAL STRATEGIES
<TABLE>
<CAPTION>
PORTFOLIO/RISK FACTORS GOAL STRATEGIES
<S> <C> <C>
GLOBAL POST-VENTURE CAPITAL PORTFOLIO Long-term growth of capital - Invests primarily in equity securities
Risk factors: of U.S. and foreign companies considered
Market risk to be in their post-venture-capital
Foreign securities stage of development
Start-up and other small companies - May invest in companies of any size
Special-situation companies - Takes a growth investment approach to
identifying attractive
post-venture-capital investments
</TABLE>
INVESTOR PROFILE
THIS PORTFOLIO IS DESIGNED FOR INVESTORS WHO:
- have longer time horizons
- are willing to assume the risk of losing money in exchange for attractive
potential long-term returns
- are investing for growth or capital appreciation
- want to diversify their investments with more aggressive stock funds
IT MAY NOT BE APPROPRIATE IF YOU:
- are investing for a shorter time horizon
- are uncomfortable with an investment that has a higher degree of volatility
- are looking primarily for income
You should base your investment decision on your own goals, risk preferences
and time horizon.
4
<PAGE> 158
A WORD ABOUT RISK
All investments involve some level of risk. Simply defined, risk is the
possibility that you will lose money or not make money.
Principal risk factors for the portfolio are discussed below. Before you
invest, please make sure you understand the risks that apply to the portfolio.
As with any mutual fund, you could lose money over any period of time.
Investments in the portfolio are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
MARKET RISK
The market value of a security may move up and down, sometimes rapidly and
unpredictably. These fluctuations, which are often referred to as "volatility,"
may cause a security to be worth less than it was worth at an earlier time.
Market risk may affect a single issuer, industry, sector of the economy, or the
market as a whole. Market risk is common to most investments--including stocks
and bonds, and the mutual funds that invest in them.
FOREIGN SECURITIES
A portfolio that invests outside the U.S. carries additional risks that
include:
- CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Adverse changes in
exchange rates may erode or reverse any gains produced by foreign-currency
denominated investments and may widen any losses. The portfolio may, but is
not required to, seek to reduce currency risk by hedging part or all of its
exposure to various foreign currencies.
- INFORMATION RISK Key information about an issuer, security or market may be
inaccurate or unavailable.
- POLITICAL RISK Foreign governments may expropriate assets, impose capital or
currency controls, impose punitive taxes, or nationalize a company or
industry. Any of these actions could have a severe effect on security prices
and impair the portfolio's ability to bring its capital or income back to the
U.S. Other political risks include economic-policy changes, social and
political instability, military action and war.
START-UP AND OTHER SMALL COMPANIES
Start-up and other small companies may have less-experienced management,
limited product lines, unproven track records or inadequate capital reserves.
Their securities may carry increased market, liquidity and other risks. Key
information about the company may be inaccurate or unavailable.
SPECIAL-SITUATION COMPANIES
"Special situations" are unusual developments that affect a company's market
value. Examples include mergers, acquisitions and reorganizations. Securities of
special-situation companies may decline in value if the anticipated benefits of
the special situation do not materialize.
5
<PAGE> 159
PERFORMANCE SUMMARY
The bar chart below and the table on the next page provide an indication of the
risks of investing in this portfolio. The bar chart shows you how the
portfolio's performance has varied from year to year for up to 10 years. The
table compares the portfolio's performance over time to that of a broadly based
securities market index and other indexes. The bar chart and table do not
reflect additional charges and expenses which are, or may be, imposed under the
variable contracts or plans; such charges and expenses are described in the
prospectus of the insurance company separate account or in the plan documents or
other informational materials supplied by plan sponsors. Inclusion of these
charges and expenses would reduce the total return for the periods shown. As
with all mutual funds, past performance is not a prediction of the future.
YEAR-BY-YEAR TOTAL RETURNS
<TABLE>
<CAPTION>
YEAR ENDED 12/31: 1997 1998 1999
<S> <C> <C> <C>
GLOBAL POST VENTURE
CAPITAL PORTFOLIO*
Best quarter: 51.65%(Q4 99) 13.34% 6.87% 62.94%
Worst quarter: -23.40%(Q3 98)
Inception date: 9/30/96
</TABLE>
* Effective May 1, 2000, the
Global Post-Venture Capital
Portfolio changed its
investment strategies and
policies to permit the
portfolio to invest without
limit in foreign securities
and to require the portfolio
to invest in at least three
countries, including the
U.S. Prior to that date, the
portfolio's investments in
foreign securities were
limited to 20% of total
assets and the portfolio was
not required to invest
outside the U.S.
6
<PAGE> 160
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS 10 YEARS LIFE OF INCEPTION
PERIOD ENDED 12/31/99: 1999 1995-1999 1990-1999 FUND DATE
<S> <C> <C> <C> <C> <C>
GLOBAL POST-VENTURE CAPITAL PORTFOLIO(1) 62.94% NA NA 22.31% 9/30/96
RUSSELL 2000 GROWTH INDEX(2) 43.10% NA NA 22.57%
RUSSELL 2500 GROWTH INDEX(3) 55.98% NA NA 27.96%
NASDAQ INDUSTRIALS INDEX(4) 71.67% NA NA 28.74%
</TABLE>
(1) Effective May 1, 2000, the Global Post-Venture Capital Portfolio changed its
investment strategies and policies to permit the portfolio to invest without
limit in foreign securities and to require the portfolio to invest in at
least three countries, including the U.S. Prior to that date, the
portfolio's investments in foreign securities were limited to 20% of total
assets and the portfolio was not required to invest outside the U.S.
(2) The Russell 2000 Growth Index is an unmanaged index (with no defined
investment objective) of those securities in the Russell 2000 Index with a
greater-than-average growth orientation. The Russell 2000 Growth Index
includes reinvestment of dividends, and is compiled by Frank Russell
Company.
(3) The Russell 2500 Growth Index measures the performance of those companies in
the Russell 2500 Index with higher price-to-book values and higher
forecasted growth rates. The Russell 2500 Index is composed of the 2,500
smallest companies in the Russell 3000 Index, which measures the performance
of the 3,000 largest U.S. companies based on total market capitalization.
The Russell 2500 Index represents approximately 22% of the total market
capitalization of the Russell 3000 Index.
(4) The Nasdaq Industrials Index measures the stock price performance of more
than 3,000 industrial issues included in the Nasdaq OTC Composite Index. The
Nasdaq OTC Composite Index represents 4,500 stocks traded over the counter.
UNDERSTANDING PERFORMANCE
- TOTAL RETURN tells you how much an investment in the portfolio has
changed in value over a given time period. It assumes that all dividends
and capital gains (if any) were reinvested in additional shares. The
change in value can be stated either as a cumulative return or as an
average annual rate of return.
- A CUMULATIVE TOTAL RETURN is the actual return of an investment for a
specified period. The year-by-year total returns in the bar chart are
examples of one-year cumulative total returns.
- An AVERAGE ANNUAL TOTAL RETURN applies to periods longer than one year.
It smoothes out the variations in year-by-year performance to tell you
what constant annual return would have produced the investment's actual
cumulative return. This gives you an idea of an investment's annual
contribution to your portfolio, assuming you held it for the entire
period.
- Because of compounding, the average annual total returns in the table
cannot be computed by averaging the returns in the bar chart.
7
<PAGE> 161
INVESTOR EXPENSES
FEES AND PORTFOLIO EXPENSES
This table describes the fees and expenses you may bear as a shareholder. Annual
portfolio operating expense figures are for the fiscal year ended December 31,
1999. The table does not reflect additional charges and expenses which are, or
may be, imposed under the variable contracts or plans; such charges and expenses
are described in the prospectus of the insurance company separate account or in
the plan documents or other informational materials supplied by plan sponsors.
<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER FEES
(paid directly from your investment)
Sales charge "load" on purchases NONE
Deferred sales charge "load" NONE
Sales charge "load" on reinvested distributions NONE
Redemption fees NONE
Exchange fees NONE
ANNUAL PORTFOLIO OPERATING EXPENSES
(deducted from fund assets)
Management fee 1.25%
Distribution and service (12b-1) fee NONE
Other expenses .33%
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES* 1.58%
</TABLE>
* Actual fees and expenses for the fiscal year ended December 31, 1999 are shown
below. Fee waivers and expense reimbursements or credits reduced expenses for
the portfolio during 1999 but may be discontinued at any time:
<TABLE>
<CAPTION>
EXPENSES AFTER
WAIVERS AND
REIMBURSEMENTS
<S> <C>
Management fee 1.07%
Distribution and service (12b-1) fee NONE
Other expenses .33%
----
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES 1.40%
</TABLE>
EXAMPLE
This example may help you compare the cost of investing in the portfolio with
the cost of investing in other mutual funds. Because it uses hypothetical
conditions, your actual costs may be higher or lower.
Assume you invest $10,000, the portfolio returns 5% annually, expense ratios
remain as listed in the first table above (before fee waivers and expense
reimbursements and credits), and you close your account at the end of each of
the time periods shown. Based on these assumptions, your cost would be:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS 10 YEARS
<S> <C> <C> <C> <C>
GLOBAL POST-VENTURE CAPITAL PORTFOLIO $161 $499 $860 $1,878
</TABLE>
8
<PAGE> 162
THE PORTFOLIO IN DETAIL
THE MANAGEMENT FIRMS
CREDIT SUISSE ASSET MANAGEMENT, LLC
One Citicorp Center
153 East 53rd Street
New York, NY 10022
- Investment adviser for the portfolio
- Responsible for managing the portfolio's assets according to its goal and
strategies
- A member of Credit Suisse Asset Management, the institutional asset
management and mutual fund arm of Credit Suisse Group (Credit Suisse), one of
the world's leading banks
- Credit Suisse Asset Management companies manage approximately $72 billion in
the U.S. and $203 billion globally as of December 1999
- Credit Suisse Asset Management has offices in 14 countries, including
SEC-registered offices in New York and London; other offices (such as those
in Budapest, Frankfurt, Milan, Moscow, Paris, Prague, Sydney, Tokyo, Warsaw
and Zurich) are not registered with the U.S. Securities and Exchange
Commission
For easier reading, Credit Suisse Asset Management, LLC will be referred to
as "CSAM" or "we" throughout this Prospectus.
ABBOTT CAPITAL MANAGEMENT, LLC
50 Rowes Wharf, Suite 240
Boston, MA 02110-3328
- Sub-investment adviser for the portfolio
- Responsible for managing the portfolio's investments in private-equity
portfolios
- A registered investment adviser concentrating on venture-capital, buyout, and
special-situation investments
- Managed approximately $4.2 billion as of December 1999
9
<PAGE> 163
PORTFOLIO INFORMATION KEY
A concise description of the portfolio begins on the next page. The
description provides the following information:
GOAL AND STRATEGIES
The portfolio's particular investment goal and the strategies it intends to
use in pursuing that goal. Percentages of portfolio assets are based on total
assets unless indicated otherwise.
PORTFOLIO INVESTMENTS
The primary types of securities in which the portfolio invests. Secondary
investments are described in "More About Risk."
RISK FACTORS
The major risk factors associated with the portfolio. Additional risk factors
are included in "More About Risk."
PORTFOLIO MANAGEMENT
The individuals designated by the investment adviser to handle the
portfolio's day-to-day management.
INVESTOR EXPENSES
Actual portfolio expenses for the 1999 fiscal year. Future expenses may be
higher or lower. Additional expenses are, or may be, imposed under the variable
contracts or plans.
- MANAGEMENT FEE The fee paid to the investment adviser for providing
investment advice to the portfolio. Expressed as a percentage of average net
assets after waivers.
- OTHER EXPENSES Fees paid by the portfolio for items such as administration,
transfer agency, custody, auditing, legal and registration fees and
miscellaneous expenses. Expressed as a percentage of average net assets after
waivers, credits and reimbursements.
FINANCIAL HIGHLIGHTS
A table showing the portfolio's audited financial performance for up to five
years.
- TOTAL RETURN How much you would have earned on an investment in the
portfolio, assuming you had reinvested all dividend and capital-gain
distributions.
- PORTFOLIO TURNOVER An indication of trading frequency. The portfolio may sell
securities without regard to the length of time they have been held. A high
turnover rate may increase the portfolio's transaction costs and negatively
affect its performance.
The Annual Report includes the auditor's report, along with the portfolio's
financial statements. It is available free upon request.
10
<PAGE> 164
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11
<PAGE> 165
GOAL AND STRATEGIES
The portfolio seeks long-term growth of capital. To pursue this goal, it
invests in equity securities of U.S. and foreign companies considered to be in
their post-venture-capital stage of development.
A post-venture-capital company is one that has received venture-capital
financing either:
- during the early stages of the company's existence or the early stages of the
development of a new product or service, or
- as part of a restructuring or recapitalization of the company
In either case, one or more of the following will have occurred within 10
years prior to the portfolio's purchase of the company's securities:
- the investment of venture-capital financing
- distribution of the company's securities to venture-capital investors
- the initial public offering
Under normal market conditions, the portfolio will invest at least 65% of
assets in equity securities of post-venture-capital companies. The portfolio may
invest in companies of any size. The portfolio may invest without limit in
foreign securities and will invest in at least three countries, including the
U.S.
PORTFOLIO INVESTMENTS
The portfolio invests primarily in equity securities of post-venture-capital
companies. Equity holdings may consist of:
- common and preferred stocks
- warrants
- securities convertible into common stocks
- partnership interests
The portfolio may invest up to 10% of assets in private-equity portfolios
that invest in venture-capital companies.
To a limited extent, the portfolio may also engage in other investment
practices.
RISK FACTORS
The portfolio's principal risk factors are:
- market risk
- foreign securities
- start-up and other small companies
- special-situation companies
The value of your investment generally will fluctuate in response to
stock-market movements. Because the portfolio invests internationally, it
carries additional risks, including currency, information and political risks.
Investing in start-up and other small companies may expose the portfolio to
increased market liquidity and information risks. These risks are defined in
"More About Risk."
Post-venture-capital companies are often involved in "special situations."
Securities of special-situation companies may decline in value and hurt the
portfolio's performance if the anticipated benefits of the special situation do
not materialize.
To the extent that it invests in private-equity portfolios, the portfolio
takes on additional liquidity, valuation and other risks. "More About Risk"
details certain other investment practices the portfolio may use. Please read
that section carefully before you invest.
PORTFOLIO MANAGEMENT
Elizabeth B. Dater, Harold E. Sharon, Federico D. Laffan and Jun Sung Kim
manage the portfolio. Calvin E. Chung assists them. Raymond L. Held and Thaddeus
I. Grey manage the portfolio's investments in private-equity portfolios. You can
find out more about the portfolio's managers in "Meet the Managers."
INVESTOR EXPENSES
Management fee 1.07%
All other expenses .33%
------------
Total expenses 1.40%
12
<PAGE> 166
FINANCIAL HIGHLIGHTS
The figures below have been audited by the portfolio's independent auditors,
PricewaterhouseCoopers LLP.
<TABLE>
<CAPTION>
PERIOD ENDED: 12/99 12/98 12/97 12/96(1)
<S> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $11.82 $11.06 $9.76 $10.00
Investment activities:
Net investment loss (0.08) (0.04) (0.08) 0.00
Net gains (loss) on investments and foreign currency related
items (both realized and unrealized) 7.52 0.80 1.38 (0.24)
Total from investment activities 7.44 0.76 1.30 (0.24)
Net asset value, end of period $19.26 $11.82 $11.06 $9.76
Total return 62.94% 6.87% 13.34% (2.40%)(2)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $151,784 $62,055 $30,520 $12,400
Ratio of expenses to average net assets 1.41%(4) 1.40%(4) 1.40%(4) 1.41%(3,4)
Ratio of net income (loss) to average net assets (.87%) (.83%) (.75%) .80%(3)
Decrease reflected in above operating expense ratio due to
waivers/reimbursements .18% .30% .18% 4.16%(3)
Portfolio turnover rate 44% 73% 238% 7%(2)
</TABLE>
(1) For the period September 30, 1996 (Commencement of Operations) through
December 31, 1996.
(2) Not annualized.
(3) Annualized.
(4) Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expense. These arrangements resulted in a reduction to
the portfolio's net expense ratio of .01%, 0.00%, .00% and .01% for the
years or period ended December 31, 1999, 1998, 1997 and 1996, respectively.
The portfolio's operating expense ratio after reflecting these arrangements
was 1.40%, 1.40%, 1.40% and 1.40% for the years or period ended December 31,
1999, 1998, 1997 and 1996, respectively.
13
<PAGE> 167
MORE ABOUT RISK
INTRODUCTION
The portfolio's goal and principal strategies largely determine its risk
profile. You will find a concise description of the portfolio's risk profile in
"Key Points." The preceding discussion of the portfolio contains more detailed
information. This section discusses other risks that may affect the portfolio.
The portfolio may use certain investment practices that have higher risks
associated with them. However, the portfolio has limitations and policies
designed to reduce many of the risks. The "Certain Investment Practices" table
describes these practices and the limitations on their use.
The Portfolio offers its shares to (i) insurance company separate accounts
that fund both variable-annuity contracts and variable life insurance contracts
and (ii) tax-qualified pension and retirement plans including
participant-directed plans which elect to make the portfolio an investment
option for plan participants. Due to differences of tax treatment and other
considerations, the interests of various variable-annuity contract owners and
plan participants participating in the portfolio may conflict. The Board of
Trustees will monitor the portfolio for any material conflicts that may arise
and will determine what action, if any, should be taken. If a conflict occurs,
the Board may require one or more insurance company separate accounts and/or
plans to withdraw its investments in the portfolio which may cause the portfolio
to sell securities at disadvantageous prices and disrupt orderly portfolio
management. The Board also may refuse to sell shares of the portfolio to any
variable-annuity contract or plan or may suspend or terminate the offering of
shares of the portfolio if such action is required by law or regulatory
authority or is in the best interests of the shareholders of the portfolio.
TYPES OF INVESTMENT RISK
The following risks are referred to throughout this Prospectus.
CORRELATION RISK The risk that changes in the value of a hedging instrument
will not match those of the investment being hedged.
CREDIT RISK The issuer of a security or the counterparty to a contract may
default or otherwise become unable to honor a financial obligation.
CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Adverse changes in
exchange rates may erode or reverse any gains produced by foreign-currency-
denominated investments and may widen any losses.
EXPOSURE RISK The risk associated with investments (such as derivatives) or
practices (such as short selling) that increase the amount of money the
portfolio could gain or lose on an investment.
- HEDGED Exposure risk could multiply losses generated by a derivative or
practice used for hedging purposes. Such losses should be substantially
offset by gains on the hedged investment. However, while hedging can reduce
or eliminate losses, it can also reduce or eliminate gains.
- SPECULATIVE To the extent that a derivative or practice is not used as a
hedge, the portfolio is directly exposed to its risks. Gains or losses from
speculative positions in a derivative may be much greater than the
derivative's original cost. For example, potential losses from writing
uncovered call options and from speculative short sales are unlimited.
INFORMATION RISK Key information about an issuer, security or market may be
inaccurate or unavailable.
INTEREST-RATE RISK Changes in interest rates may cause a decline in the
market value of an investment. With bonds and other fixed-income securities, a
rise in interest rates typically causes a fall in values, while a fall in
interest rates typically causes a rise in values.
LIQUIDITY RISK Certain portfolio securities may be difficult or impossible to
sell at the time and the price that the portfolio would like. The portfolio may
have to lower the price, sell other securities instead or forego an investment
opportunity. Any of these could have a negative effect on portfolio management
or performance.
MARKET RISK The market value of a security may move up and down, sometimes
rapidly and unpredictably. These fluctuations, which are often referred to as
"volatility," may cause a security to be worth less than it was worth at an
earlier time. Market risk may affect a single issuer, industry, sector of the
economy, or the market as a whole. Market risk is common to most
investments--including stocks and bonds, and the mutual funds that invest in
them.
OPERATIONAL RISK Some countries have less-developed securities markets (and
related transaction, registration and custody practices) that could subject the
portfolio to losses from fraud, negligence, delay or other actions.
POLITICAL RISK Foreign governments may expropriate assets, impose capital or
currency controls, impose punitive taxes, or nationalize a company or industry.
Any of these actions could have a severe effect on security prices and impair
the portfolio's ability to bring its capital or income back to the U.S. Other
political risks include economic policy changes, social and political
instability, military action and war.
VALUATION RISK The lack of an active trading market may make it difficult to
obtain an accurate price for a portfolio security.
14
<PAGE> 168
CERTAIN INVESTMENT PRACTICES
For each of the following practices, this table shows the applicable investment
limitation. Risks are indicated for each practice.
KEY TO TABLE:
<TABLE>
<S> <C>
[-] Permitted without limitation; does not indicate actual use
20% Italic type (e.g., 20%) represents an investment limitation as a percentage of NET
portfolio assets; does not indicate actual use
20% Roman type (e.g., 20%) represents an investment limitation as a percentage of TOTAL
portfolio assets; does not indicate actual use
[ ] Permitted, but not expected to be used to a significant extent
- -- Not permitted
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT PRACTICE LIMIT
<S> <C>
BORROWING The borrowing of money from banks to meet
redemptions or for other temporary or emergency purposes.
Speculative exposure risk. 30%
- --------------------------------------------------------------------------
CURRENCY TRANSACTIONS Instruments, such as options, futures,
forwards or swaps, intended to manage portfolio exposure to
currency risk or to enhance total return. Options, futures
or forwards involve the right or obligation to buy or sell a
given amount of foreign currency at a specified price and
future date. Swaps involve the right or obligation to
receive or make payments based on two different currency
rates. Correlation, credit, currency, hedged exposure,
liquidity, political, speculative exposure, valuation
risks.(1) [ ]
- --------------------------------------------------------------------------
FOREIGN SECURITIES Securities of foreign issuers. May
include depositary receipts. Currency, information,
liquidity, market, political, valuation risks. [-]
- --------------------------------------------------------------------------
FUTURES AND OPTIONS ON FUTURES Exchange-traded contracts
that enable the portfolio to hedge against or speculate on
future changes in currency values, interest rates or stock
indexes. Futures obligate the portfolio (or give it the
right, in the case of options) to receive or make payment at
a specific future time based on those future changes.(1)
Correlation, currency, hedged exposure, interest-rate,
market, speculative exposure risks.(2) [ ]
- --------------------------------------------------------------------------
INVESTMENT-GRADE DEBT SECURITIES Debt securities rated
within the four highest grades (AAA/Aaa through BBB/Baa) by
Standard & Poor's or Moody's rating service, and unrated
securities of comparable quality. Credit, interest-rate,
market risks. 20%
- --------------------------------------------------------------------------
NON-INVESTMENT-GRADE DEBT SECURITIES Debt securities rated
below the fourth-highest grade (BBB/Baa) by Standard &
Poor's or Moody's rating service, and unrated securities of
comparable quality. Commonly referred to as junk bonds.
Credit, information, interest-rate, liquidity, market,
valuation risks. 5%
- --------------------------------------------------------------------------
OPTIONS Instruments that provide a right to buy (call) or
sell (put) a particular security, currency or index of
securities at a fixed price within a certain time period.
The portfolio may purchase or sell (write) both put and call
options for hedging or speculative purposes.(1) Correlation,
credit, hedged exposure, liquidity, market, speculative
exposure, valuation risks. 25%
- --------------------------------------------------------------------------
RESTRICTED AND OTHER ILLIQUID SECURITIES Certain securities
with restrictions on trading, or those not actively traded.
May include private placements. Liquidity, market, valuation
risks. 15%
- --------------------------------------------------------------------------
SECURITIES LENDING Lending portfolio securities to financial
institutions; the portfolio receives cash, U.S. government
securities or bank letters of credit as collateral. Credit,
liquidity, market, operational risks. 33 1/3%
- --------------------------------------------------------------------------
SHORT SALES Selling borrowed securities with the intention
of repurchasing them for a profit on the expectation that
the market price will drop. Liquidity, market, speculative
exposure risks. 10%
- --------------------------------------------------------------------------
SHORT SALES "AGAINST THE BOX" A short sale when the
portfolio owns enough shares of the security involved to
cover the borrowed securities, if necessary. Liquidity,
market, speculative exposure risks. [ ]
- --------------------------------------------------------------------------
SPECIAL-SITUATION COMPANIES Companies experiencing unusual
developments affecting their market values. Special
situations may include acquisition, consolidation,
reorganization, recapitalization, merger, liquidation,
special distribution, tender or exchange offer, or
potentially favorable litigation. Securities of a
special-situation company could decline in value and hurt
the portfolio's performance if the anticipated benefits of
the special situation do not materialize. Information,
market risks. [-]
- --------------------------------------------------------------------------
START-UP AND OTHER SMALL COMPANIES Companies with small
relative market capitalizations, including those with
continuous operations of less than three years. Information,
liquidity, market, valuation risks. [-]
- --------------------------------------------------------------------------
TEMPORARY DEFENSIVE TACTICS Placing some or all of the
portfolio's assets in investments such as money-market
obligations and investment-grade debt securities for
defensive purposes. Although intended to avoid losses in
adverse market, economic, political or other conditions,
defensive tactics might be inconsistent with the portfolio's
principal investment strategies and might prevent the
portfolio from achieving its goal. [ ]
- --------------------------------------------------------------------------
WARRANTS Options issued by a company granting the holder the
right to buy certain securities, generally common stock, at
a specified price and usually for a limited time. Liquidity,
market, speculative exposure risks. 10%
- --------------------------------------------------------------------------
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The purchase
or sale of securities for delivery at a future date; market
value may change before delivery. Liquidity, market,
speculative exposure risks. 20%
- --------------------------------------------------------------------------
</TABLE>
(1) The portfolio is not obligated to pursue any hedging strategy. In addition,
hedging practices may not be available, may be too costly to be used
effectively or may be unable to be used for other reasons.
(2) The portfolio is limited to 5% of net assets for initial margin and premium
amounts on futures positions considered to be speculative by the Commodity
Futures Trading Commission.
15
<PAGE> 169
MEET THE MANAGERS
[LIZ DATER PHOTO]
ELIZABETH B. DATER
Managing Director
- Co-Portfolio Manager, Global Post-Venture Capital Portfolio since inception
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus Asset Management, Inc. (Warburg Pincus)
- With Warburg Pincus since 1978
[SHARON PHOTO]
HAROLD E. SHARON
Managing Director
- Co-Portfolio Manager, Global Post-Venture Capital Portfolio since May 2000
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1998
- Executive director and portfolio manager with CIBC Oppenheimer, 1994 to 1998
[LAFFAN PHOTO]
FEDERICO D. LAFFAN
Director
- Co-Portfolio Manager, Global Post-Venture Capital Portfolio since May 2000
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1997
- Senior manager and partner with Green Cay Asset Management, 1996 to 1997
- Senior portfolio manager and director with Foreign & Colonial Emerging
Markets, London, 1990 to 1996
[CHUNG PHOTO]
CALVIN E. CHUNG
Vice President
- Associate Portfolio Manager, Global Post-Venture Capital Portfolio since May
2000
- With CSAM since January 2000
- Vice President and senior technology equity analyst at Eagle Asset
Management, 1997 to 1999
- Graduate student at the University of Chicago, 1995 to 1997
[KIM PHOTO]
JUN SUNG KIM
Vice President
- Co-Portfolio Manager, Global Post-Venture Capital Portfolio since May 2000
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1997
- Investment manager with Asset Korea Ltd., Seoul, 1995 to 1997
- Investment analyst with Baring Securities Ltd., Seoul, 1994 to 1995
SUB-INVESTMENT ADVISER PORTFOLIO MANAGERS
Global Post-Venture Capital Portfolio
RAYMOND L. HELD and THADDEUS I. GRAY manage the Global Post-Venture
Capital Portfolio's investments in private-equity portfolios. Both are
Investment Managers and Managing Directors of Abbott Capital Management
LLC, the portfolio's sub-investment adviser. Mr. Held has been with Abbott
since 1986, while Mr. Gray joined the firm in 1989.
Job titles indicate position with the investment adviser.
16
<PAGE> 170
ABOUT YOUR ACCOUNT
SHARE VALUATION
The price of your shares is also referred to as their net asset value (NAV).
The NAV is determined at the close of regular trading on the New York Stock
Exchange (NYSE) (usually 4 p.m. Eastern Time) each day the NYSE is open for
business. It is calculated by dividing the portfolio's total assets, less its
liabilities, by the number of shares outstanding.
The portfolio values its securities based on market quotations when it
calculates its NAV. If market quotations are not readily available, securities
and other assets are valued by another method that the Board of Trustees
believes accurately reflects fair value. Debt obligations that will mature in 60
days or less are valued on the basis of amortized cost, unless the Board
determines that using this method would not reflect an investment's value.
Some portfolio securities may be listed on foreign exchanges that are open on
days (such as U.S. holidays) when the portfolio does not compute its price. This
could cause the value of the portfolio's investments to be affected by trading
on days when you cannot buy or sell shares.
The portfolio initially values its investments in private-equity portfolios
at cost. After that, the portfolio values these investments according to reports
from the private-equity portfolios that the sub-investment adviser generally
receives on a quarterly basis. The portfolio's net asset value typically will
not reflect interim changes in the values of its private-equity-portfolio
investments.
DISTRIBUTIONS
Investors in the portfolio are entitled to a share of the portfolio's net
income and gains on investments. The portfolio passes these earnings along to
its shareholders as distributions.
The portfolio earns dividends from stocks and interest from bond,
money-market and other investments. These are passed along as dividend
distributions. The portfolio realizes capital gains whenever it sells securities
for a higher price than it paid for them. These are passed along as capital-gain
distributions.
The portfolio typically distributes dividends and capital gains annually,
usually in December. Distributions will be reinvested automatically in
additional shares of the portfolio.
TAXES
For a discussion of the tax status of a variable contract or pension plan,
refer to the prospectus of the sponsoring participating insurance company
separate account or plan documents or other informational materials supplied by
plan sponsors.
Because shares of the portfolio may be purchased only through variable
contracts and plans, income dividends or capital-gain distributions from the
portfolio are taxable, if at all, to the participating insurance companies and
plans and will be exempt from current taxation of the variable-contract owner or
plan participant if left to accumulate within the variable contract or plan.
The portfolio intends to comply with the diversification requirements
currently imposed by the Internal Revenue Service on separate accounts of
insurance companies as a condition of maintaining the tax-deferred status of
variable contracts.
17
<PAGE> 171
BUYING AND SELLING SHARES
You may not buy or sell shares of the portfolio directly; you may only buy or
sell shares through variable-annuity contracts and variable life insurance
contracts offered by separate accounts of certain insurance companies or through
tax-qualified pension and retirement plans. The portfolio may not be available
in connection with a particular contract or plan.
An insurance company's separate accounts buy and sell shares of the portfolio
at NAV, without any sales or other charges. Each insurance company receives
orders from its contract holders to buy or sell shares of the portfolio on any
business day that the portfolio calculates its NAV. If the order is received by
the insurance company prior to the close of regular trading on the NYSE, the
order will be executed at that day's NAV.
Plan participants may buy shares of the portfolio through their plan by
directing the plan trustee to buy shares for their account in a manner similar
to that described above for variable annuity and variable life insurance
contracts. You should contact your plan sponsor concerning the appropriate
procedure for investing in the portfolio.
The portfolio reserves the right to:
- refuse any specific purchase or exchange request, including those from any
person or group who, in the portfolio's view, is likely to engage in excessive
trading
- change or discontinue its exchange privilege after 30 days' notice to current
investors, or temporarily suspend this privilege during unusual market
conditions
- make a "redemption in kind"--payment in portfolio securities rather than
cash--for certain large redemption amounts that could hurt portfolio
operations
- suspend redemptions or postpone payment dates as permitted by the Investment
Company Act of 1940 (such as during periods other than weekends or holidays
when the NYSE is closed or trading on the NYSE is restricted, or any other
time that the SEC permits)
- stop offering the portfolio's shares for a period of time (such as when
management believes that a substantial increase in assets could adversely
affect it)
18
<PAGE> 172
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<PAGE> 173
FOR MORE INFORMATION
This Prospectus is intended for use in connection with certain insurance
products and pension and retirement plans. Please refer to the prospectus of the
sponsoring participating insurance company separate account or to the plan
documents or other informational materials supplied by plan sponsors for
information regarding distributions and instructions on purchasing or selling a
variable contract and on how to select a portfolio as an investment option for a
variable contract or plan. More information about the portfolio is available
free upon request, including the following:
ANNUAL/SEMIANNUAL REPORTS TO SHAREHOLDERS
Includes financial statements, portfolio investments and detailed performance
information.
The Annual Report also contains a letter from the portfolio manager
discussing market conditions and investment strategies that significantly
affected portfolio performance during its past fiscal year.
OTHER INFORMATION
A current Statement of Additional Information (SAI), which provides more
details about the portfolio, is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference.
You may visit the SEC's Internet Web site (www.sec.gov) to view the SAI,
material incorporated by reference and other information. You can also obtain
copies by visiting the SEC's Public Reference Room in Washington, DC (phone
202-942-8090) or by sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington, DC 20549-6009 or electronically at
[email protected].
Please contact the Trust to obtain, without charge, the SAI and Annual and
Semiannual Reports and to make shareholder inquiries:
BY TELEPHONE:
800-222-8977
BY MAIL:
Warburg Pincus Trust
P.O. Box 9030
Boston, MA 02205-9030
BY OVERNIGHT OR COURIER SERVICE:
Boston Financial
Attn: Warburg Pincus Trust
66 Brooks Drive
Braintree, MA 02184
ON THE INTERNET:
www.warburg.com
SEC FILE NUMBER:
Warburg Pincus Trust 811-07261
[WARBURG PINCUS FUNDS LOGO]
P.O. BOX 9030, BOSTON, MA 02205-9030
800-222-8977 - www.warburg.com
PROVIDENT DISTRIBUTORS, INC., DISTRIBUTOR. TRPVC-1-0500
<PAGE> 174
[Warburg Pincus Logo] [Credit Suisse Logo]
PROSPECTUS
May 1, 2000
WARBURG PINCUS TRUST
----------------------- EMERGING MARKETS PORTFOLIO
Warburg Pincus Trust shares are not available directly to
individual investors, but may be offered only through certain
insurance products and pension and retirement plans.
As with all mutual funds, the Securities and Exchange Commission
has not approved these securities, nor has it passed upon the
adequacy or accuracy of this Prospectus. It is a criminal
offense to state otherwise.
The Trust is advised by Credit Suisse Asset Management, LLC.
<PAGE> 175
CONTENTS
<TABLE>
<S> <C>
KEY POINTS........................ ......................... 4
Goal and Principal Strategies............................ 4
Investor Profile......................................... 4
A Word About Risk........................................ 5
PERFORMANCE SUMMARY.................... .................... 6
Year-by-Year Total Returns............................... 6
Average Annual Total Returns............................. 7
INVESTOR EXPENSES..................... ..................... 8
Fees and Portfolio Expenses.............................. 8
Example.................................................. 8
THE PORTFOLIO IN DETAIL.................. .................. 9
The Management Firm...................................... 9
Portfolio Information Key................................ 9
Goal and Strategies...................................... 10
Portfolio Investments.................................... 10
Risk Factors............................................. 10
Portfolio Management..................................... 10
Investor Expenses........................................ 10
Financial Highlights..................................... 11
MORE ABOUT RISK...................... ...................... 12
Introduction............................................. 12
Types of Investment Risk................................. 12
Certain Investment Practices............................. 14
MEET THE MANAGERS..................... ..................... 16
ABOUT YOUR ACCOUNT.................... ..................... 17
Share Valuation.......................................... 17
Distributions............................................ 17
Taxes.................................................... 17
BUYING AND SELLING SHARES................. ................. 18
FOR MORE INFORMATION................... .................... back cover
</TABLE>
3
<PAGE> 176
KEY POINTS
GOAL AND PRINCIPAL STRATEGIES
<TABLE>
<CAPTION>
PORTFOLIO/RISK FACTORS GOAL STRATEGIES
<S> <C> <C>
EMERGING MARKETS PORTFOLIO Long-term growth of capital - Invests in foreign equity securities
Risk factors: - Focuses on the world's less developed
Market risk countries
Foreign securities - Analyzes a company's growth potential,
Emerging-markets focus using a bottom-up investment approach
Non-diversified status
</TABLE>
INVESTOR PROFILE
THIS PORTFOLIO IS DESIGNED FOR INVESTORS WHO:
- have longer time horizons
- are willing to assume the risk of losing money in exchange for attractive
potential long-term returns
- are investing for growth or capital appreciation
- want to diversify their investments internationally
IT MAY NOT BE APPROPRIATE IF YOU:
- are investing for a shorter time horizon
- are uncomfortable with an investment that has a higher degree of volatility
- want to limit your exposure to foreign securities
- are looking for income
You should base your investment decision on your own goals, risk preferences
and time horizon.
4
<PAGE> 177
A WORD ABOUT RISK
All investments involve some level of risk. Simply defined, risk is the
possibility that you will lose money or not make money.
Principal risk factors for the portfolio are discussed below. Before you
invest, please make sure you understand the risks that apply to the portfolio.
As with any mutual fund, you could lose money over any period of time.
Investments in the portfolio are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
MARKET RISK
The market value of a security may move up and down, sometimes rapidly and
unpredictably. These fluctuations, which are often referred to as "volatility,"
may cause a security to be worth less than it was worth at an earlier time.
Market risk may affect a single issuer, industry, sector of the economy, or the
market as a whole. Market risk is common to most investments--including stocks
and bonds, and the mutual funds that invest in them.
FOREIGN SECURITIES
A portfolio that invests outside the U.S. carries additional risks that
include:
- CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Adverse changes in
exchange rates may erode or reverse any gains produced by foreign-currency
denominated investments and may widen any losses. The portfolio may, but is
not required to, seek to reduce currency risk by hedging part or all of its
exposure to various foreign currencies.
- INFORMATION RISK Key information about an issuer, security or market may be
inaccurate or unavailable.
- POLITICAL RISK Foreign governments may expropriate assets, impose capital or
currency controls, impose punitive taxes, or nationalize a company or
industry. Any of these actions could have a severe effect on security prices
and impair the portfolio's ability to bring its capital or income back to the
U.S. Other political risks include economic-policy changes, social and
political instability, military action and war.
NON-DIVERSIFIED STATUS
The portfolio is considered a non-diversified portfolio under the Investment
Company Act of 1940 and is permitted to invest a greater proportion of its
assets in the securities of a smaller number of issuers. As a result, the
portfolio may be subject to greater volatility with respect to its investments
than a portfolio that is more broadly diversified.
EMERGING-MARKETS FOCUS
Focusing on emerging (less developed) markets involves higher levels of risk,
including increased currency, information, liquidity, market, political and
valuation risks. Deficiencies in regulatory oversight, market infrastructure,
shareholder protections and company laws could expose the portfolio to
operational and other risks as well. Some countries may have restrictions that
could limit the portfolio's access to attractive opportunities. Additionally,
emerging markets often face serious economic problems (such as high external
debt, inflation and unemployment) that could subject the portfolio to increased
volatility or substantial declines in value.
5
<PAGE> 178
PERFORMANCE SUMMARY
The bar chart below and the table on the next page provide an indication of the
risks of investing in this portfolio. The bar chart shows you how the
portfolio's performance has varied from year to year for up to 10 years. The
table compares the portfolio's performance over time to that of a broadly based
securities market index. The bar chart and table do not reflect additional
charges and expenses which are, or may be, imposed under the variable contracts
or plans; such charges and expenses are described in the prospectus of the
insurance company separate account or in the plan documents or other
informational materials supplied by plan sponsors. Inclusion of these charges
and expenses would reduce the total return for the periods shown. As with all
mutual funds, past performance is not a prediction of the future.
YEAR-BY-YEAR TOTAL RETURNS
.
<TABLE>
<CAPTION>
YEAR ENDED 12/31: 1998 1999
<S> <C> <C>
EMERGING MARKETS PORTFOLIO
Best quarter: 38.20% (Q4 99)
Worst quarter: -21.41% (Q3 98)
Inception date: 12/31/97 -17.30% 81.40%
</TABLE>
6
<PAGE> 179
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS 10 YEARS LIFE OF INCEPTION
PERIOD ENDED 12/31/99: 1999 1995-1999 1990-1999 FUND DATE
<S> <C> <C> <C> <C> <C>
EMERGING MARKETS PORTFOLIO 81.40% NA NA 22.45% 12/31/97
MSCI EMERGING MARKETS FREE INDEX* 66.41% NA NA 11.55%
</TABLE>
* 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.
UNDERSTANDING PERFORMANCE
- TOTAL RETURN tells you how much an investment in the portfolio has
changed in value over a given time period. It assumes that all dividends
and capital gains (if any) were reinvested in additional shares. The
change in value can be stated either as a cumulative return or as an
average annual rate of return.
- A CUMULATIVE TOTAL RETURN is the actual return of an investment for a
specified period. The year-by-year total returns in the bar chart are
examples of one-year cumulative total returns.
- An AVERAGE ANNUAL TOTAL RETURN applies to periods longer than one year.
It smoothes out the variations in year-by-year performance to tell you
what constant annual return would have produced the investment's actual
cumulative return. This gives you an idea of an investment's annual
contribution to your portfolio, assuming you held it for the entire
period.
- Because of compounding, the average annual total returns in the table
cannot be computed by averaging the returns in the bar chart.
7
<PAGE> 180
INVESTOR EXPENSES
FEES AND PORTFOLIO EXPENSES
This table describes the fees and expenses you may bear as a shareholder. Annual
portfolio operating expense figures are for the fiscal year ended December 31,
1999. The table does not reflect additional charges and expenses which are, or
may be, imposed under the variable contracts or plans; such charges and expenses
are described in the prospectus of the insurance company separate account or in
the plan documents or other informational materials supplied by plan sponsors.
<TABLE>
<S> <C>
SHAREHOLDER FEES
(paid directly from your investment)
Sales charge "load" on purchases NONE
Deferred sales charge "load" NONE
Sales charge "load" on reinvested distributions NONE
Redemption fees NONE
Exchange fees NONE
ANNUAL PORTFOLIO OPERATING EXPENSES
(deducted from fund assets)
Management fee 1.25%
Distribution and service (12b-1) fee NONE
Other expenses 1.88%
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES* 3.13%
</TABLE>
* Actual fees and expenses for the fiscal year ended December 31, 1999 are shown
below. Fee waivers and expense reimbursements or credits reduced expenses for
the portfolio during 1999 but may be discontinued at any time:
<TABLE>
<CAPTION>
EXPENSES AFTER
WAIVERS AND
REIMBURSEMENTS
<S> <C>
Management fee .00%
Distribution and service (12b-1) fee NONE
Other expenses 1.40%
----
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES 1.40%
</TABLE>
EXAMPLE
This example may help you compare the cost of investing in the portfolio with
the cost of investing in other mutual funds. Because it uses hypothetical
conditions, your actual costs may be higher or lower.
Assume you invest $10,000, the portfolio returns 5% annually, expense ratios
remain as listed in the first table above (before fee waivers and expense
reimbursements and credits), and you close your account at the end of each of
the time periods shown. Based on these assumptions, your cost would be:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS 10 YEARS
<S> <C> <C> <C>
$316 $966 $1,640 $3,439
</TABLE>
8
<PAGE> 181
THE PORTFOLIO IN DETAIL
THE MANAGEMENT FIRM
CREDIT SUISSE ASSET MANAGEMENT, LLC
One Citicorp Center
153 East 53rd Street
New York, NY 10022
- Investment adviser for the portfolio
- Responsible for managing the portfolio's assets according to its goal and
strategies
- A member of Credit Suisse Asset Management, the institutional asset
management and mutual fund arm of Credit Suisse Group (Credit Suisse), one of
the world's leading banks
- Credit Suisse Asset Management companies manage approximately $72 billion in
the U.S. and $203 billion globally as of December 1999
- Credit Suisse Asset Management has offices in 14 countries, including
SEC-registered offices in New York and London; other offices (such as those in
Budapest, Frankfurt, Milan, Moscow, Paris, Prague, Sydney, Tokyo, Warsaw and
Zurich) are not registered with the U.S. Securities and Exchange Commission
For easier reading, Credit Suisse Asset Management, LLC will be referred to
as "CSAM" or "we" throughout this Prospectus.
PORTFOLIO INFORMATION KEY
A concise description of the portfolio begins on the next page. The
description provides the following information:
GOAL AND STRATEGIES
The portfolio's particular investment goal and the strategies it intends to
use in pursuing that goal. Percentages of portfolio assets are based on total
assets unless indicated otherwise.
PORTFOLIO INVESTMENTS
The primary types of securities in which the portfolio invests. Secondary
investments are described in "More About Risk."
RISK FACTORS
The major risk factors associated with the portfolio. Additional risk factors
are included in "More About Risk."
PORTFOLIO MANAGEMENT
The individuals designated by the investment adviser to handle the
portfolio's day-to-day management.
INVESTOR EXPENSES
Actual portfolio expenses for the 1999 fiscal year. Future expenses may be
higher or lower. Additional expenses are, or may be, imposed under the variable
contracts or plans.
- MANAGEMENT FEE The fee paid to the investment adviser for providing
investment advice to the portfolio. Expressed as a percentage of average net
assets after waivers.
- OTHER EXPENSES Fees paid by the portfolio for items such as administration,
transfer agency, custody, auditing, legal and registration fees and
miscellaneous expenses. Expressed as a percentage of average net assets after
waivers, credits and reimbursements.
FINANCIAL HIGHLIGHTS
A table showing the portfolio's audited financial performance for up to five
years.
- TOTAL RETURN How much you would have earned on an investment in the
portfolio, assuming you had reinvested all dividend and capital-gain
distributions.
- PORTFOLIO TURNOVER An indication of trading frequency. The portfolio may sell
securities without regard to the length of time they have been held. A high
turnover rate may increase the portfolio's transaction costs and negatively
affect its performance.
The Annual Report includes the auditor's report, along with the portfolio's
financial statements. It is available free upon request.
9
<PAGE> 182
GOAL AND STRATEGIES
The portfolio seeks long-term growth of capital. To pursue this goal, it
invests in equity securities of companies located in or conducting a majority of
their business in emerging markets.
An emerging market is any country:
- generally considered to be an emerging or developing country by the United
Nations, or by the World Bank and the International Finance Corporation (IFC),
or
- included in the IFC Investable Index or the Morgan Stanley Capital
International Emerging Markets Index, or
- having a per-capita gross national product of $2,000 or less
Under this definition, most countries of the world (other than the U.S.,
Canada, Western Europe, Japan, Australia and New Zealand) are considered
emerging markets.
Under normal market conditions, the portfolio will invest at least 65% of
assets in equity securities of issuers from at least three emerging markets. The
portfolio may invest in companies of any size, including emerging-growth
companies--small or medium-size companies that have passed their start-up phase,
show positive earnings, and offer the potential for accelerated earnings growth.
Its non-diversified status allows the portfolio to invest a greater share of
its assets in the securities of fewer companies. However, the portfolio managers
typically have diversified the portfolio's investments.
PORTFOLIO INVESTMENTS
This portfolio invests primarily in equity securities of emerging-markets
issuers. Equity holdings may consist of:
- common and preferred stocks
- debt securities convertible into common or preferred stock
- rights and warrants
- equity interests in trusts and partnerships
- depositary receipts
To a limited extent, the portfolio may also engage in other investment
practices.
RISK FACTORS
The portfolio's principal risk factors are:
- market risk
- foreign securities
- emerging-markets focus
- non-diversified status
The value of your investment generally will fluctuate in response to
stock-market movements. Because the portfolio invests internationally, it
carries additional risks, including currency, information and political risks.
These risks are defined in "More About Risk."
Because the portfolio focuses on emerging markets, you should expect it to be
riskier than a more broadly diversified international equity fund. Investing in
emerging markets involves access, operational and other risks not generally
encountered in developed countries. In addition, emerging markets often face
serious economic problems that could subject the portfolio to increased
volatility or substantial declines in value.
Non-diversification might cause the portfolio to be more volatile than a
diversified portfolio. "More About Risk" details certain other investment
practices the portfolio may use. Please read that section carefully before you
invest.
PORTFOLIO MANAGEMENT
Richard W. Watt manages the portfolio. Associate Portfolio Managers Emily
Alejos, Robert B. Hrabchak, Federico D. Laffan and Jun Sung Kim assist him. You
can find out more about the portfolio's managers in "Meet the Managers."
INVESTOR EXPENSES
Management fee .00%
All other expenses 1.40%
-----
Total expenses 1.40%
10
<PAGE> 183
FINANCIAL HIGHLIGHTS
The figures below have been audited by the portfolio's independent auditors,
PricewaterhouseCoopers LLP.
<TABLE>
<CAPTION>
PERIOD ENDED: 12/99 12/98
<S> <C> <C>
PER-SHARE DATA
- ---------------------------------------------------------------------------------------
Net asset value, beginning of period $8.19 $10.00
- ---------------------------------------------------------------------------------------
Investment activities:
Net investment income 0.05(1) 0.10
Net gains (losses) on investments and foreign currency
related items (both realized and unrealized) 6.56 (1.83)
- ---------------------------------------------------------------------------------------
Total from investment activities 6.61 (1.73)
- ---------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income (0.04) (0.08)
Distributions from net realized capital gains (0.58) 0.00
- ---------------------------------------------------------------------------------------
Total distributions (0.62) (0.08)
- ---------------------------------------------------------------------------------------
Net asset value, end of period $14.18 $8.19
- ---------------------------------------------------------------------------------------
Total return 81.40% (17.30%)
- ---------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $16,781 $2,696
Ratio of expenses to average net assets 1.42%(2) 1.40%(2)
Ratio of net income (loss) to average net assets (.19%) 2.09%
Decrease reflected in above operating expense ratios due to
waivers/reimbursements 1.73% 6.81%
Portfolio turnover rate 145% 21%
- ---------------------------------------------------------------------------------------
</TABLE>
(1) Per share information is calculated using the average shares outstanding
method.
(2) Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expense. These arrangements resulted in a reduction to
the portfolio's net expense ratio by .02% and .00% for the years ended
December 31, 1999 and 1998, respectively. The portfolio's operating expense
ratio after reflecting these arrangements was 1.40% for the years ended
December 31, 1999 and 1998.
11
<PAGE> 184
MORE ABOUT RISK
INTRODUCTION
The portfolio's goal and principal strategies largely determine its risk
profile. You will find a concise description of the portfolio's risk profile in
"Key Points." The preceding discussion of the portfolio contains more detailed
information. This section discusses other risks that may affect the portfolio.
The portfolio may use certain investment practices that have higher risks
associated with them. However, the portfolio has limitations and policies
designed to reduce many of the risks. The "Certain Investment Practices" table
describes these practices and the limitations on their use.
The portfolio offers its shares to (i) insurance company separate accounts
that fund both variable contracts and variable life insurance contracts and (ii)
tax-qualified pension and retirement plans including participant-directed plans
which elect to make the portfolio an investment option for plan participants.
Due to differences of tax treatment and other considerations, the interests of
various variable contract owners and plan participants participating in the
portfolio may conflict. The Board of Trustees will monitor the portfolio for any
material conflicts that may arise and will determine what action, if any, should
be taken. If a conflict occurs, the Board may require one or more insurance
company separate accounts and/or plans to withdraw its investments in the
portfolio, which may cause the portfolio to sell securities at disadvantageous
prices and disrupt orderly portfolio management. The Board also may refuse to
sell shares of the portfolio to any variable contract or plan or may suspend or
terminate the offering of shares of the portfolio if such action is required by
law or regulatory authority or is in the best interests of the shareholders of
the portfolio.
TYPES OF INVESTMENT RISK
The following risks are referred to throughout this Prospectus.
ACCESS RISK Some countries may restrict the portfolio's access to investments
or offer terms that are less advantageous than those for local investors. This
could limit the attractive investment opportunities available to the portfolio.
CORRELATION RISK The risk that changes in the value of a hedging instrument
will not match those of the investment being hedged.
CREDIT RISK The issuer of a security or the counterparty to a contract may
default or otherwise become unable to honor a financial obligation.
CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Adverse changes in
exchange rates may erode or reverse any gains produced by foreign-
currency-denominated investments and may widen any losses.
EXPOSURE RISK The risk associated with investments (such as derivatives) or
practices (such as short selling) that increase the amount of money the
portfolio could gain or lose on an investment.
- HEDGED Exposure risk could multiply losses generated by a derivative or
practice used for hedging purposes. Such losses should be substantially
offset by gains on the hedged investment. However, while hedging can reduce
or eliminate losses, it can also reduce or eliminate gains.
- SPECULATIVE To the extent that a derivative or practice is not used as a
hedge, the portfolio is directly exposed to its risks. Gains or losses from
speculative positions in a derivative may be much greater than the
derivative's original cost. For example, potential losses from writing
uncovered call options and from speculative short sales are unlimited.
INFORMATION RISK Key information about an issuer, security or market may be
inaccurate or unavailable.
INTEREST-RATE RISK Changes in interest rates may cause a decline in the
market value of an investment. With bonds and other fixed-income securities, a
rise in interest rates typically causes a fall in values, while a fall in
interest rates typically causes a rise in values.
LIQUIDITY RISK Certain portfolio securities may be difficult or impossible to
sell at the time and the price that the portfolio would like. The portfolio may
have to lower the price, sell other securities instead or forego an investment
opportunity. Any of these could have a negative effect on portfolio management
or performance.
MARKET RISK The market value of a security may move up and down, sometimes
rapidly and unpredictably. These fluctuations, which are often referred to as
"volatility," may cause a security to be worth less than it was worth at an
earlier time. Market risk may affect a single issuer, industry, sector of the
economy, or the market as a whole. Market risk is common to most
investments--including stocks and bonds, and the mutual funds that invest in
them.
OPERATIONAL RISK Some countries have less-developed securities markets (and
related transaction, registration and custody practices) that could subject the
portfolio to losses from fraud, negligence, delay or other actions.
POLITICAL RISK Foreign governments may expropriate assets, impose capital or
currency controls, impose punitive taxes, or nationalize a company or industry.
Any of these actions could have a severe effect on security prices and impair
the portfolio's ability to bring its capital or income back to the U.S. Other
political risks include economic policy changes, social and political
instability, military action and war.
VALUATION RISK The lack of an active trading market may make it difficult to
obtain an accurate price for a portfolio security.
12
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13
<PAGE> 186
CERTAIN INVESTMENT PRACTICES
For each of the following practices, this table shows the applicable investment
limitation. Risks are indicated for each practice.
KEY TO TABLE:
<TABLE>
<S> <C>
[-] Permitted without limitation; does not indicate actual use
20% Italic type (e.g., 20%) represents an investment limitation as a percentage of NET
portfolio assets; does not indicate actual use
20% Roman type (e.g., 20%) represents an investment limitation as a percentage of TOTAL
portfolio assets; does not indicate actual use
[ ] Permitted, but not expected to be used to a significant extent
- -- Not permitted
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT PRACTICE LIMIT
<S> <C>
BORROWING The borrowing of money from banks to meet
redemptions or for other temporary or emergency purposes.
Speculative exposure risk. 30%
- --------------------------------------------------------------------
COUNTRY/REGION FOCUS Investing a significant portion of
portfolio assets in a single country or region. Market
swings in the targeted country or region will be likely to
have a greater effect on portfolio performance than they
would in a more geographically diversified equity portfolio.
Currency, market, political risks. [-]
- --------------------------------------------------------------------
CURRENCY TRANSACTIONS Instruments, such as options, futures,
forwards or swaps, intended to manage portfolio exposure to
currency risk or to enhance total return. Options, futures
or forwards involve the right or obligation to buy or sell a
given amount of foreign currency at a specified price and
future date. Swaps involve the right or obligation to
receive or make payments based on two different currency
rates. Correlation, credit, currency, hedged exposure,
liquidity, political, speculative exposure, valuation
risks.(1) [-]
- --------------------------------------------------------------------
EMERGING MARKETS Countries generally considered to be
relatively less developed or industrialized. Emerging
markets often face economic problems that could subject the
portfolio to increased volatility or substantial declines in
value. Deficiencies in regulatory oversight, market
infrastructure, shareholder protections and company laws
could expose the portfolio to risks beyond those generally
encountered in developed countries. Access, currency,
information, liquidity, market, operational, political,
valuation risks. [-]
- --------------------------------------------------------------------
FOREIGN SECURITIES Securities of foreign issuers. May
include depositary receipts. Currency, information,
liquidity, market, political, valuation risks. [-]
- --------------------------------------------------------------------
FUTURES AND OPTIONS ON FUTURES Exchange-traded contracts
that enable the portfolio to hedge against or speculate on
future changes in currency values, interest rates or stock
indexes. Futures obligate the portfolio (or give it the
right, in the case of options) to receive or make payment at
a specific future time based on those future changes.(1)
Correlation, currency, hedged exposure, interest-rate,
market, speculative exposure risks.(2) [ ]
- --------------------------------------------------------------------
INVESTMENT-GRADE DEBT SECURITIES Debt securities rated
within the four highest grades (AAA/Aaa through BBB/Baa) by
Standard & Poor's or Moody's rating service, and unrated
securities of comparable quality. Credit, interest-rate,
market risks. 35%
- --------------------------------------------------------------------
NON-INVESTMENT-GRADE DEBT SECURITIES Debt securities rated
below the fourth-highest grade (BBB/Baa) by Standard &
Poor's or Moody's rating service, and unrated securities of
comparable quality. Commonly referred to as junk bonds.
Credit, information, interest-rate, liquidity, market,
valuation risks. 35%
- --------------------------------------------------------------------
OPTIONS Instruments that provide a right to buy (call) or
sell (put) a particular security, currency or index of
securities at a fixed price within a certain time period.
The portfolio may purchase or sell (write) both put and call
options for hedging or speculative purposes.(1) Correlation,
credit, hedged exposure, liquidity, market, speculative
exposure, valuation risks. 25%
- --------------------------------------------------------------------
</TABLE>
14
<PAGE> 187
<TABLE>
<CAPTION>
INVESTMENT PRACTICE LIMIT
<S> <C>
RESTRICTED AND OTHER ILLIQUID SECURITIES Certain securities
with restrictions on trading, or those not actively traded.
May include private placements. Liquidity, market, valuation
risks. 15%
- --------------------------------------------------------------------
SECURITIES LENDING Lending portfolio securities to financial
institutions; the portfolio receives cash, U.S. government
securities or bank letters of credit as collateral. Credit,
liquidity, market, operational risks. 33 1/3%
- --------------------------------------------------------------------
SHORT SALES "AGAINST THE BOX" A short sale when the
portfolio owns enough shares of the security involved to
cover the borrowed securities, if necessary. Liquidity,
market, speculative exposure risks. [ ]
- --------------------------------------------------------------------
SPECIAL-SITUATION COMPANIES Companies experiencing unusual
developments affecting their market values. Special
situations may include acquisition, consolidation,
reorganization, recapitalization, merger, liquidation,
special distribution, tender or exchange offer, or
potentially favorable litigation. Securities of a
special-situation company could decline in value and hurt
the portfolio's performance if the anticipated benefits of
the special situation do not materialize. Information,
market risks. [ ]
- --------------------------------------------------------------------
START-UP AND OTHER SMALL COMPANIES Companies with small
relative market capitalizations, including those with
continuous operations of less than three years. Information,
liquidity, market, valuation risks. [-]
- --------------------------------------------------------------------
SWAPS A contract between the portfolio and another party in
which the parties agree to exchange streams of payments
based on certain benchmarks, such as market indices or
currency or interest rates. For example, the portfolio may
use swaps to gain access to the performance of a benchmark
asset (such as an index or one or more stocks) where the
portfolio's direct investment is restricted. Credit,
currency, information, interest-rate, liquidity, market,
political, speculative exposure, valuation risks [ ]
- --------------------------------------------------------------------
TEMPORARY DEFENSIVE TACTICS Placing some or all of the
portfolio's assets in investments such as money-market
obligations and investment-grade debt securities for
defensive purposes. Although intended to avoid losses in
adverse market, economic, political or other conditions,
defensive tactics might be inconsistent with the portfolio's
principal investment strategies and might prevent the
portfolio from achieving its goal. [ ]
- --------------------------------------------------------------------
WARRANTS Options issued by a company granting the holder the
right to buy certain securities, generally common stock, at
a specified price and usually for a limited time. Liquidity,
market, speculative exposure risks. 10%
- --------------------------------------------------------------------
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The purchase
or sale of securities for delivery at a future date; market
value may change before delivery. Liquidity, market,
speculative exposure risks. 20%
- --------------------------------------------------------------------
</TABLE>
(1) The portfolio is not obligated to pursue any hedging strategy. In addition,
hedging practices may not be available, may be too costly to be used
effectively or may be unable to be used for other reasons.
(2) The portfolio is limited to 5% of net assets for initial margin and premium
amounts on futures positions considered to be speculative by the Commodity
Futures Trading Commission.
15
<PAGE> 188
MEET THE MANAGERS
[WATT PHOTO]
RICHARD WATT
Managing Director
- Portfolio Manager, Emerging Markets Portfolio since March 2000
- With CSAM since 1995
- Director and head of emerging-markets investments and research at Gartmore
Investment Limited in London, 1992 to 1995
[LAFFAN PHOTO]
FEDERICO D. LAFFAN
Director
- Associate Portfolio Manager, Emerging Markets Portfolio since July 1999
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus Asset Management, Inc. (Warburg Pincus)
- With Warburg Pincus since 1997
- Senior manager and partner with Green Cay Asset Management, 1996 to 1997
- Senior portfolio manager and director with Foreign & Colonial Emerging
Markets, London, 1990 to 1996
[ALEJOS PHOTO]
EMILY ALEJOS
Director
- Associate Portfolio Manager, Emerging Markets Portfolio since March 2000
- With CSAM since 1997
- Vice president and emerging-markets portfolio manager with Bankers Trust,
1993 to 1997
[KIM PHOTO]
JUN SUNG KIM
Vice President
- Associate Portfolio Manager, Emerging Markets Portfolio since July 1999
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1997
- Investment manager with Asset Korea Ltd., Seoul, 1995 to 1997
- Investment analyst with Baring Securities Ltd., Seoul, 1994 to 1995
[HRABCHAK PHOTO]
ROBERT B. HRABCHAK
Director
- Associate Portfolio Manager, Emerging Markets Portfolio since March 2000
- With CSAM since 1997
- Senior portfolio manager at Merrill Lynch Asset Management, 1995 to 1997
- Associate at Salomon Brothers, 1993 to 1995
16
<PAGE> 189
ABOUT YOUR ACCOUNT
SHARE VALUATION
The price of your shares is also referred to as their net asset value (NAV).
The NAV is determined at the close of regular trading on the New York Stock
Exchange (NYSE) (usually 4 p.m. Eastern Time) each day the NYSE is open for
business. It is calculated by dividing the portfolio's total assets, less its
liabilities, by the number of shares outstanding.
The portfolio values its securities based on market quotations when it
calculates its NAV. If market quotations are not readily available, securities
and other assets are valued by another method that the Board of Trustees
believes accurately reflects fair value. Debt obligations that will mature in 60
days or less are valued on the basis of amortized cost, unless the Board
determines that using this method would not reflect an investment's value.
Some portfolio securities may be listed on foreign exchanges that are open on
days (such as U.S. holidays) when the portfolio does not compute its price. This
could cause the value of the portfolio's investments to be affected by trading
on days when you cannot buy or sell shares.
DISTRIBUTIONS
Investors in the portfolio are entitled to a share of the portfolio's net
income and gains on investments. The portfolio passes these earnings along to
its shareholders as distributions.
The portfolio earns dividends from stocks and interest from bond,
money-market and other investments. These are passed along as dividend
distributions. The portfolio realizes capital gains whenever it sells securities
for a higher price than it paid for them. These are passed along as capital-gain
distributions.
The portfolio typically distributes dividends and capital gains annually,
usually in December. Distributions will be reinvested automatically in
additional shares of the portfolio.
TAXES
For a discussion of the tax status of a variable contract or pension plan,
refer to the prospectus of the sponsoring participating insurance company
separate account or plan documents or other informational materials supplied by
plan sponsors.
Because shares of the portfolio may be purchased only through variable
contracts and plans, income dividends or capital-gain distributions from the
portfolio are taxable, if at all, to the participating insurance companies and
plans and will be exempt from current taxation of the variable-contract owner or
plan participant if left to accumulate within the variable contract or plan.
The portfolio intends to comply with the diversification requirements
currently imposed by the Internal Revenue Service on separate accounts of
insurance companies as a condition of maintaining the tax-deferred status of
variable contracts.
17
<PAGE> 190
BUYING AND SELLING SHARES
You may not buy or sell shares of the portfolio directly; you may only buy or
sell shares through variable-annuity contracts and variable life insurance
contracts offered by separate accounts of certain insurance companies or through
tax-qualified pension and retirement plans. The portfolio may not be available
in connection with a particular contract or plan.
An insurance company's separate accounts buy and sell shares of the portfolio
at NAV, without any sales or other charges. Each insurance company receives
orders from its contract holders to buy or sell shares of the portfolio on any
business day that the portfolio calculates its NAV. If the order is received by
the insurance company prior to the close of regular trading on the NYSE, the
order will be executed at that day's NAV.
Plan participants may buy shares of the portfolio through their plan by
directing the plan trustee to buy shares for their account in a manner similar
to that described above for variable annuity and variable life insurance
contracts. You should contact your plan sponsor concerning the appropriate
procedure for investing in the portfolio.
The portfolio reserves the right to:
- refuse any specific purchase or exchange request, including those from any
person or group who, in the portfolio's view, is likely to engage in excessive
trading
- change or discontinue its exchange privilege after 30 days' notice to current
investors, or temporarily suspend this privilege during unusual market
conditions
- make a "redemption in kind"--payment in portfolio securities rather than
cash--for certain large redemption amounts that could hurt portfolio
operations
- suspend redemptions or postpone payment dates as permitted by the Investment
Company Act of 1940 (such as during periods other than weekends or holidays
when the NYSE is closed or trading on the NYSE is restricted, or any other
time that the SEC permits)
- stop offering the portfolio's shares for a period of time (such as when
management believes that a substantial increase in assets could adversely
affect it)
18
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19
<PAGE> 192
FOR MORE INFORMATION
This Prospectus is intended for use in connection with certain insurance
products and pension and retirement plans. Please refer to the prospectus of the
sponsoring participating insurance company separate account or to the plan
documents or other informational materials supplied by plan sponsors for
information regarding distributions and instructions on purchasing or selling a
variable contract and on how to select a portfolio as an investment option for a
variable contract or plan. More information about the portfolio is available
free upon request, including the following:
ANNUAL/SEMIANNUAL REPORTS TO SHAREHOLDERS
Includes financial statements, portfolio investments and detailed performance
information.
The Annual Report also contains a letter from the portfolio manager
discussing market conditions and investment strategies that significantly
affected portfolio performance during its past fiscal year.
OTHER INFORMATION
A current Statement of Additional Information (SAI), which provides more
details about the portfolio, is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference.
You may visit the SEC's Internet Web site (www.sec.gov) to view the SAI,
material incorporated by reference and other information. You can also obtain
copies by visiting the SEC's Public Reference Room in Washington, DC (phone
202-942-8090) or by sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington, DC 20549-6009 or electronically at
[email protected].
Please contact the Trust to obtain, without charge, the SAI and Annual and
Semiannual Reports and to make shareholder inquiries:
BY TELEPHONE:
800-222-8977
BY MAIL:
Warburg Pincus Trust
P.O. Box 9030
Boston, MA 02205-9030
BY OVERNIGHT OR COURIER SERVICE:
Boston Financial
Attn: Warburg Pincus Trust
66 Brooks Drive
Braintree, MA 02184
ON THE INTERNET:
www.warburg.com
SEC FILE NUMBER:
Warburg Pincus Trust 811-07261
[WARBURG PINCUS FUNDS LOGO]
P.O. BOX 9030, BOSTON, MA 02205-9030
800-222-8977 [-] www.warburg.com
PROVIDENT DISTRIBUTORS, INC., DISTRIBUTOR. TREMK-1-0500
<PAGE> 193
[WARBURG PINCUS LOGO] [CREDIT SUISSE ASSET MANAGEMENT LOGO]
PROSPECTUS
May 1, 2000
WARBURG PINCUS TRUST
- EMERGING MARKETS PORTFOLIO
- GLOBAL POST-VENTURE CAPITAL PORTFOLIO
Warburg Pincus Trust shares are not available directly to
individual investors, but may be offered only through certain
insurance products and pension and retirement plans.
As with all mutual funds, the Securities and Exchange Commission
has not approved these securities, nor has it passed upon the
adequacy or accuracy of this Prospectus. It is a criminal
offense to state otherwise.
The Trust is advised by Credit Suisse Asset Management, LLC.
<PAGE> 194
CONTENTS
<TABLE>
<S> <C>
KEY POINTS........................ ......................... 4
Goals and Principal Strategies........................... 4
Investor Profile......................................... 4
A Word About Risk........................................ 5
PERFORMANCE SUMMARY.................... .................... 6
Year-by-Year Total Returns............................... 6
Average Annual Total Returns............................. 7
INVESTOR EXPENSES..................... ..................... 8
Fees and Portfolio Expenses.............................. 8
Example.................................................. 8
THE PORTFOLIOS IN DETAIL................. .................. 9
The Management Firms..................................... 9
Portfolio Information Key................................ 10
EMERGING MARKETS PORTFOLIO................ ................. 12
GLOBAL POST-VENTURE CAPITAL PORTFOLIO........... ........... 14
MORE ABOUT RISK...................... ...................... 16
Introduction............................................. 16
Types of Investment Risk................................. 16
Certain Investment Practices............................. 18
MEET THE MANAGERS..................... ..................... 20
ABOUT YOUR ACCOUNT.................... ..................... 22
Share Valuation.......................................... 22
Distributions............................................ 22
Taxes.................................................... 22
BUYING AND SELLING SHARES................. ................. 23
FOR MORE INFORMATION................... .................... back cover
</TABLE>
3
<PAGE> 195
KEY POINTS
GOALS AND PRINCIPAL STRATEGIES
<TABLE>
<CAPTION>
PORTFOLIO/RISK FACTORS GOAL STRATEGIES
<S> <C> <C>
EMERGING MARKETS PORTFOLIO Long-term growth of capital - Invests in foreign equity securities
Risk factors: - Focuses on the world's less developed
Market risk countries
Foreign securities - Analyzes a company's growth potential,
Emerging-markets focus using a bottom-up investment approach
Non-diversified status
GLOBAL POST-VENTURE CAPITAL PORTFOLIO Long-term growth of capital - Invests primarily in equity securities
Risk factors: of U.S. and foreign companies considered
Market risk to be in their post-venture-capital
Foreign securities stage of development
Start-up and other small companies - May invest in companies of any size
Special-situation companies - Takes a growth investment approach to
identifying attractive
post-venture-capital investments
</TABLE>
INVESTOR PROFILE
THESE PORTFOLIOS ARE DESIGNED FOR INVESTORS WHO:
- have longer time horizons
- are willing to assume the risk of losing money in exchange for attractive
potential long-term returns
- are investing for growth or capital appreciation
- want to diversify their investments internationally
- for the Global Post-Venture Capital portfolio, want to diversify their
investments with more aggressive stock funds
THEY MAY NOT BE APPROPRIATE IF YOU:
- are investing for a shorter time horizon
- are uncomfortable with an investment that has a higher degree of volatility
- want to limit your exposure to foreign securities
- are looking primarily for income
You should base your selection of a portfolio on your own goals, risk
preferences and time horizon.
4
<PAGE> 196
A WORD ABOUT RISK
All investments involve some level of risk. Simply defined, risk is the
possibility that you will lose money or not make money.
Principal risk factors for the portfolios are discussed below. Before you
invest, please make sure you understand the risks that apply to your portfolio.
As with any mutual fund, you could lose money over any period of time.
Investments in the portfolios are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
MARKET RISK
Both portfolios
The market value of a security may move up and down, sometimes rapidly and
unpredictably. These fluctuations, which are often referred to as "volatility,"
may cause a security to be worth less than it was worth at an earlier time.
Market risk may affect a single issuer, industry, sector of the economy, or the
market as a whole. Market risk is common to most investments--including stocks
and bonds, and the mutual funds that invest in them.
FOREIGN SECURITIES
Both portfolios
A portfolio that invests outside the U.S. carries additional risks that
include:
- CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar and
foreign currencies may negatively
affect an investment. Adverse changes in exchange rates may erode or reverse
any gains produced by foreign-currency denominated investments and may widen
any losses. Each of the portfolios may, but is not required to, seek to reduce
currency risk by hedging part or all of its exposure to various foreign
currencies.
- INFORMATION RISK Key information about an issuer, security or market may be
inaccurate or unavailable.
- POLITICAL RISK Foreign governments may expropriate assets, impose capital or
currency controls, impose punitive taxes, or nationalize a company or
industry. Any of these actions could have a severe effect on security prices
and impair a portfolio's ability to bring its capital or income back to the
U.S. Other political risks include economic-policy changes, social and
political instability, military action and war.
START-UP AND OTHER SMALL COMPANIES
Global Post-Venture Capital Portfolio
Start-up and other small companies may have less-experienced management,
limited product lines, unproven track records or inadequate capital reserves.
Their securities may carry increased market, liquidity and other risks. Key
information about the company may be inaccurate or unavailable.
SPECIAL-SITUATION COMPANIES
Global Post-Venture Capital Portfolio
"Special situations" are unusual developments that affect a company's market
value. Examples include mergers, acquisitions and reorganizations. Securities of
special-situation companies may decline in value if the anticipated benefits of
the special situation do not materialize.
NON-DIVERSIFIED STATUS
Emerging Markets Portfolio
The portfolio is considered a non-diversified portfolio under the Investment
Company Act of 1940 and is permitted to invest a greater proportion of its
assets in the securities of a smaller number of issuers. As a result, the
portfolio may be subject to greater volatility with respect to its investments
than a portfolio that is more broadly diversified.
EMERGING-MARKETS FOCUS
Emerging Markets Portfolio
Focusing on emerging (less developed) markets involves higher levels of risk,
including increased currency, information, liquidity, market, political and
valuation risks. Deficiencies in regulatory oversight, market infrastructure,
shareholder protections and company laws could expose the portfolio to
operational and other risks as well. Some countries may have restrictions that
could limit the portfolio's access to attractive opportunities. Additionally,
emerging markets often face serious economic problems (such as high external
debt, inflation and unemployment) that could subject the portfolio to increased
volatility or substantial declines in value.
5
<PAGE> 197
PERFORMANCE SUMMARY
The bar chart below and the table on the next page provide an indication of the
risks of investing in these portfolios. The bar chart shows you how each
portfolio's performance has varied from year to year for up to 10 years. The
table compares each portfolio's performance over time to that of a broadly based
securities market index and other indexes, if applicable. The bar chart and
table do not reflect additional charges and expenses which are, or may be,
imposed under the variable contracts or plans; such charges and expenses are
described in the prospectus of the insurance company separate account or in the
plan documents or other informational materials supplied by plan sponsors.
Inclusion of these charges and expenses would reduce the total return for the
periods shown. As with all mutual funds, past performance is not a prediction of
the future.
YEAR-BY-YEAR TOTAL RETURNS
LOGO
<TABLE>
<CAPTION>
YEAR ENDED 12/31: 1996 1997 1998 1999
<S> <C> <C> <C> <C>
EMERGING MARKETS PORTFOLIO
Best quarter: 38.20% (Q4 99)
Worst quarter: -21.41% (Q3 98)
Inception date: 12/31/97 -17.30% 81.40
GLOBAL POST-VENTURE
CAPITAL PORTFOLIO*
Best quarter: 51.65% (Q4 99) 13.34%
Worst quarter: -23.40% (Q3 98) 6.87% 62.94%
Inception date: 9/30/96
</TABLE>
* Effective May 1, 2000, the Global Post-Venture Capital Portfolio changed its
investment strategies and policies to permit the portfolio to invest without
limit in foreign securities and to require the portfolio to invest in at least
three countries, including the U.S. Prior to that date, the portfolio's
investments in foreign securities were limited to 20% of total assets and the
portfolio was not required to invest outside the U.S.
6
<PAGE> 198
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS 10 YEARS LIFE OF INCEPTION
PERIOD ENDED 12/31/99: 1999 1995-1999 1990-1999 FUND DATE
<S> <C> <C> <C> <C> <C>
EMERGING MARKETS PORTFOLIO 81.40% NA NA 22.45% 12/31/97
MSCI EMERGING MARKETS FREE INDEX(1) 66.41% NA NA 11.55%
GLOBAL POST-VENTURE CAPITAL PORTFOLIO(2) 62.94% NA NA 22.31% 9/30/96
RUSSELL 2000 GROWTH INDEX(3) 43.10% NA NA 22.57%
RUSSELL 2500 GROWTH INDEX(4) 55.48% NA NA 27.96%
NASDAQ INDUSTRIALS INDEX(5) 71.67% NA NA 28.74%
</TABLE>
(1) 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.
(2) Effective May 1, 2000, the Global Post-Venture Capital Portfolio changed its
investment strategies and policies to permit the portfolio to invest without
limit in foreign securities and to require the portfolio to invest in at
least three countries, including the U.S. Prior to that date, the
portfolio's investments in foreign securities were limited to 20% of total
assets and the portfolio was not required to invest outside the U.S.
(3) The Russell 2000 Growth Index is an unmanaged index (with no defined
investment objective) of those securities in the Russell 2000 Index with a
greater-than-average growth orientation. The Russell 2000 Growth Index
includes reinvestment of dividends, and is compiled by Frank Russell
Company.
(4) The Russell 2500 Growth Index measures the performance of those companies in
the Russell 2500 Index with higher price-to-book values and higher
forecasted growth rates. The Russell 2500 Index is composed of the 2,500
smallest companies in the Russell 3000 Index, which measures the performance
of the 3,000 largest U.S. companies based on total market capitalization.
The Russell 2500 Index represents approximately 22% of the total market
capitalization of the Russell 3000 Index.
(5) The Nasdaq Industrials Index measures the stock price performance of more
than 3,000 industrial issues included in the Nasdaq OTC Composite Index. The
Nasdaq OTC Composite Index represents 4,500 stocks traded over the counter.
UNDERSTANDING PERFORMANCE
- TOTAL RETURN tells you how much an investment in a portfolio has changed
in value over a given time period. It assumes that all dividends and
capital gains (if any) were reinvested in additional shares. The change
in value can be stated either as a cumulative return or as an average
annual rate of return.
- A CUMULATIVE TOTAL RETURN is the actual return of an investment for a
specified period. The year-by-year total returns in the bar chart are
examples of one-year cumulative total returns.
- An AVERAGE ANNUAL TOTAL RETURN applies to periods longer than one year.
It smoothes out the variations in year-by-year performance to tell you
what constant annual return would have produced the investment's actual
cumulative return. This gives you an idea of an investment's annual
contribution to your portfolio, assuming you held it for the entire
period.
- Because of compounding, the average annual total returns in the table
cannot be computed by averaging the returns in the bar chart.
7
<PAGE> 199
INVESTOR EXPENSES
FEES AND PORTFOLIO EXPENSES
This table describes the fees and expenses you may bear as a shareholder. Annual
portfolio operating expense figures are for the fiscal year ended December 31,
1999. The table does not reflect additional charges and expenses which are, or
may be, imposed under the variable contracts or plans; such charges and expenses
are described in the prospectus of the insurance company separate account or in
the plan documents or other informational materials supplied by plan sponsors.
<TABLE>
<CAPTION>
<S> <C> <C>
GLOBAL
EMERGING POST-VENTURE
MARKETS CAPITAL
PORTFOLIO PORTFOLIO
SHAREHOLDER FEES
(paid directly from your investment)
Sales charge "load" on purchases NONE NONE
Deferred sales charge "load" NONE NONE
Sales charge "load" on reinvested distributions NONE NONE
Redemption fees NONE NONE
Exchange fees NONE NONE
ANNUAL PORTFOLIO OPERATING EXPENSES
(deducted from fund assets)
Management fee 1.25% 1.25%
Distribution and service (12b-1) fee NONE NONE
Other expenses 1.88% .33%
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES* 3.13% 1.58%
</TABLE>
* Actual fees and expenses for the fiscal year ended December 31, 1999 are shown
below. Fee waivers and expense reimbursements or credits reduced expenses for
the portfolios during 1999 but may be discontinued at any time:
<TABLE>
<CAPTION>
GLOBAL
EXPENSES AFTER EMERGING POST-VENTURE
WAIVERS AND MARKETS CAPITAL
REIMBURSEMENTS PORTFOLIO PORTFOLIO
<S> <C> <C>
Management fee .00% 1.07%
Distribution and service (12b-1) fee NONE NONE
Other expenses 1.40% .33%
---- ----
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES 1.40% 1.40%
</TABLE>
EXAMPLE
This example may help you compare the cost of investing in these portfolios with
the cost of investing in other mutual funds. Because it uses hypothetical
conditions, your actual costs may be higher or lower.
Assume you invest $10,000, each portfolio returns 5% annually, expense ratios
remain as listed in the first table above (before fee waivers and expense
reimbursements and credits), and you close your account at the end of each of
the time periods shown. Based on these assumptions, your cost would be:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS 10 YEARS
<S> <C> <C> <C> <C>
EMERGING MARKETS PORTFOLIO $316 $966 $1,640 $3,439
GLOBAL POST-VENTURE CAPITAL PORTFOLIO $161 $499 $860 $1,878
</TABLE>
8
<PAGE> 200
THE PORTFOLIOS IN DETAIL
THE MANAGEMENT FIRMS
CREDIT SUISSE ASSET MANAGEMENT, LLC
One Citicorp Center
153 East 53rd Street
New York, NY 10022
- Investment adviser for the portfolios
- Responsible for managing each portfolio's assets according to its goal and
strategies
- A member of Credit Suisse Asset Management, the institutional asset
management and mutual fund arm of Credit Suisse Group (Credit Suisse), one of
the world's leading banks
- Credit Suisse Asset Management companies manage approximately $72 billion in
the U.S. and $203 billion globally as of December 1999
- Credit Suisse Asset Management has offices in 14 countries, including
SEC-registered offices in New York and London; other offices (such as those in
Budapest, Frankfurt, Milan, Moscow, Paris, Prague, Sydney, Tokyo, Warsaw and
Zurich) are not registered with the U.S. Securities and Exchange Commission
For easier reading, Credit Suisse Asset Management, LLC will be referred to
as "CSAM" or "we" throughout this Prospectus.
ABBOTT CAPITAL MANAGEMENT, LLC
50 Rowes Wharf, Suite 240
Boston, MA 02110-3328
- Sub-investment adviser for the Global Post-Venture Capital Portfolio
- Responsible for managing the portfolio's investments in private-equity
portfolios
- A registered investment adviser concentrating on venture-capital, buyout, and
special-situation investments
- Managed approximately $4.2 billion as of December 1999
9
<PAGE> 201
PORTFOLIO INFORMATION KEY
Concise descriptions of each portfolio begin on the next page. Each
description provides the following information:
GOAL AND STRATEGIES
The portfolio's particular investment goal and the strategies it intends to
use in pursuing that goal. Percentages of portfolio assets are based on total
assets unless indicated otherwise.
PORTFOLIO INVESTMENTS
The primary types of securities in which the portfolio invests. Secondary
investments are described in "More About Risk."
RISK FACTORS
The major risk factors associated with the portfolio. Additional risk factors
are included in "More About Risk."
PORTFOLIO MANAGEMENT
The individuals designated by the investment adviser to handle the
portfolio's day-to-day management.
INVESTOR EXPENSES
Actual portfolio expenses for the 1999 fiscal year. Future expenses may be
higher or lower. Additional expenses are, or may be, imposed under the variable
contracts or plans.
- MANAGEMENT FEE The fee paid to the investment adviser for providing
investment advice to the portfolio. Expressed as a percentage of average net
assets after waivers.
- OTHER EXPENSES Fees paid by the portfolio for items such as administration,
transfer agency, custody, auditing, legal and registration fees and
miscellaneous expenses. Expressed as a percentage of average net assets after
waivers, credits and reimbursements.
FINANCIAL HIGHLIGHTS
A table showing the portfolio's audited financial performance for up to five
years.
- TOTAL RETURN How much you would have earned on an investment in the
portfolio, assuming you had reinvested all dividend and capital-gain
distributions.
- PORTFOLIO TURNOVER An indication of trading frequency. The portfolios may
sell securities without regard to the length of time they have been held. A
high turnover rate may increase the portfolio's transaction costs and
negatively affect its performance.
The Annual Report includes the auditor's report, along with the portfolio's
financial statements. It is available free upon request.
10
<PAGE> 202
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11
<PAGE> 203
EMERGING MARKETS PORTFOLIO
GOAL AND STRATEGIES
The Emerging Markets Portfolio seeks long-term growth of capital. To pursue
this goal, it invests in equity securities of companies located in or conducting
a majority of their business in emerging markets.
An emerging market is any country:
- generally considered to be an emerging or developing country by the United
Nations, or by the World Bank and the International Finance Corporation (IFC),
or
- included in the IFC Investable Index or the Morgan Stanley Capital
International Emerging Markets Index, or
- having a per-capita gross national product of $2,000 or less
Under this definition, most countries of the world (other than the U.S.,
Canada, Western Europe, Japan, Australia and New Zealand) are considered
emerging markets.
Under normal market conditions, the portfolio will invest at least 65% of
assets in equity securities of issuers from at least three emerging markets. The
portfolio may invest in companies of any size, including emerging-growth
companies--small or medium-size companies that have passed their start-up phase,
show positive earnings, and offer the potential for accelerated earnings growth.
Its non-diversified status allows the portfolio to invest a greater share of
its assets in the securities of fewer companies. However, the portfolio managers
typically have diversified the portfolio's investments.
PORTFOLIO INVESTMENTS
This portfolio invests primarily in equity securities of emerging-markets
issuers. Equity holdings may consist of:
- common and preferred stocks
- debt securities convertible into common or preferred stock
- rights and warrants
- equity interests in trusts and partnerships
- depositary receipts
To a limited extent, the portfolio may also engage in other investment
practices.
RISK FACTORS
This portfolio's principal risk factors are:
- market risk
- foreign securities
- emerging-markets focus
- non-diversified status
The value of your investment generally will fluctuate in response to
stock-market movements. Because the portfolio invests internationally, it
carries additional risks, including currency, information and political risks.
These risks are defined in "More About Risk."
Because the portfolio focuses on emerging markets, you should expect it to be
riskier than a more broadly diversified international equity fund. Investing in
emerging markets involves access, operational and other risks not generally
encountered in developed countries. In addition, emerging markets often face
serious economic problems that could subject the portfolio to increased
volatility or substantial declines in value.
Non-diversification might cause the portfolio to be more volatile than a
diversified portfolio. "More About Risk" details certain other investment
practices the portfolio may use. Please read that section carefully before you
invest.
PORTFOLIO MANAGEMENT
Richard W. Watt manages the portfolio. Associate Portfolio Managers Emily
Alejos, Robert B. Hrabchak, Federico D. Laffan and Jun Sung Kim assist him. You
can find out more about the portfolio's managers in "Meet the Managers."
INVESTOR EXPENSES
Management fee .00%
All other expenses 1.40%
-------------
Total expenses 1.40%
12
<PAGE> 204
FINANCIAL HIGHLIGHTS
The figures below have been audited by the portfolio's independent auditors,
PricewaterhouseCoopers LLP.
<TABLE>
<CAPTION>
PERIOD ENDED: 12/99 12/98
<S> <C> <C>
PER-SHARE DATA
- -------------------------------------------------------------------------------------
Net asset value, beginning of period $8.19 $10.00
- -------------------------------------------------------------------------------------
Investment activities:
Net investment income 0.05(1) 0.10
Net gains (losses) on investments and foreign currency
related items (both realized and unrealized) 6.56 (1.83)
- -------------------------------------------------------------------------------------
Total from investment activities 6.61 (1.73)
- -------------------------------------------------------------------------------------
Distributions:
Dividends from net investment income (0.04) (0.08)
Distributions from net realized capital gains (0.58) 0.00
- -------------------------------------------------------------------------------------
Total distributions (0.62) (0.08)
- -------------------------------------------------------------------------------------
Net asset value, end of period $14.18 $8.19
- -------------------------------------------------------------------------------------
Total return 81.40% (17.30%)
- -------------------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- -------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $16,781 $2,696
Ratio of expenses to average net assets 1.42%(2) 1.40%(2)
Ratio of net income (loss) to average net assets (.19)% 2.09%
Decrease reflected in above operating expense ratios due to
waivers/reimbursements 1.73% 6.81%
Portfolio turnover rate 145% 21%
- -------------------------------------------------------------------------------------
</TABLE>
(1) Per share information is calculated using the average shares outstanding
method.
(2) Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expense. These arrangements resulted in a reduction to
the portfolio's net expense ratio by .02% and .00% for the years ended
December 31, 1999 and 1998, respectively. The Portfolio's operating expense
ratio after reflecting these arrangements was 1.40% for the years ended
December 31, 1999 and 1998.
13
<PAGE> 205
GLOBAL POST-VENTURE CAPITAL PORTFOLIO
GOAL AND STRATEGIES
The Global Post-Venture Capital Portfolio seeks long-term growth of capital.
To pursue this goal, it invests in equity securities of U.S. and foreign
companies considered to be in their post-venture-capital stage of development.
A post-venture-capital company is one that has received venture-capital
financing either:
- during the early stages of the company's existence or the early stages of the
development of a new product or service, or
- as part of a restructuring or recapitalization of the company
In either case, one or more of the following will have occurred within 10
years prior to the portfolio's purchase of the company's securities:
- the investment of venture-capital financing
- distribution of the company's securities to venture-capital investors
- the initial public offering
Under normal market conditions, the portfolio will invest at least 65% of
assets in equity securities of post-venture-capital companies. The portfolio may
invest in companies of any size. The portfolio may invest without limit in
foreign securities and will invest in at least three countries, including the
U.S.
PORTFOLIO INVESTMENTS
This portfolio invests primarily in equity securities of post-venture-capital
companies. Equity holdings may consist of:
- common and preferred stocks
- warrants
- securities convertible into common stocks
- partnership interests
The portfolio may invest up to 10% of assets in private-equity portfolios
that invest in venture-capital companies.
To a limited extent, the portfolio may also engage in other investment
practices.
RISK FACTORS
This portfolio's principal risk factors are:
- market risk
- foreign securities
- start-up and other small companies
- special-situation companies
The value of your investment generally will fluctuate in response to
stock-market movements. Because the portfolio invests internationally, it
carries additional risks, including currency, information and political risks.
Investing in start-up and other small companies may expose the portfolio to
increased market liquidity and information risks. These risks are defined in
"More About Risk."
Post-venture-capital companies are often involved in "special situations."
Securities of special-situation companies may decline in value and hurt the
portfolio's performance if the anticipated benefits of the special situation do
not materialize.
To the extent that it invests in private-equity portfolios, the portfolio
takes on additional liquidity, valuation and other risks. "More About Risk"
details certain other investment practices the portfolio may use. Please read
that section carefully before you invest.
PORTFOLIO MANAGEMENT
Elizabeth B. Dater, Harold E. Sharon, Federico D. Laffan and Jun Sung Kim
manage the portfolio. Calvin E. Chung assists them. Raymond L. Held and Thaddeus
I. Grey manage the portfolio's investments in private-equity portfolios. You can
find out more about the portfolio's managers in "Meet the Managers."
INVESTOR EXPENSES
Management fee 1.07%
All other expenses .33%
------------
Total expenses 1.40%
14
<PAGE> 206
FINANCIAL HIGHLIGHTS
The figures below have been audited by the portfolio's independent auditors,
PricewaterhouseCoopers LLP.
<TABLE>
<CAPTION>
PERIOD ENDED: 12/99 12/98 12/97 12/96(1)
<S> <C> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $11.82 $11.06 $9.76 $10.00
Investment activities:
Net investment loss (0.08) (0.04) (0.08) 0.00
Net gains (loss) on investments and foreign currency related
items (both realized and unrealized) 7.52 0.80 1.38 (0.24)
Total from investment activities 7.44 0.76 1.30 (0.24)
Net asset value, end of period $19.26 $11.82 $11.06 $9.76
Total return 62.94% 6.87% 13.34% (2.40%)(2)
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period (000s omitted) $151,784 $62,055 $30,520 $12,400
Ratio of expenses to average net assets 1.41%(4) 1.40%(4) 1.40%(4) 1.41%(3,4)
Ratio of net income (loss) to average net assets (.87%) (.83%) (.75%) .80%(3)
Decrease reflected in above operating expense ratio due to
waivers/reimbursements .18% .30% .18% 4.16%(3)
Portfolio turnover rate 44% 73% 238% 7%(2)
</TABLE>
(1) For the period September 30, 1996 (Commencement of Operations) through
December 31, 1996.
(2) Not annualized.
(3) Annualized.
(4) Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expense. These arrangements resulted in a reduction to
the portfolio's net expense ratio of .01%, 0.00%, .00% and .01% for the
years or period ended December 31, 1999, 1998, 1997 and 1996, respectively.
The portfolio's operating expense ratio after reflecting these arrangements
was 1.40%, 1.40%, 1.40% and 1.40% for the years or period ended December 31,
1999, 1998, 1997 and 1996, respectively.
15
<PAGE> 207
MORE ABOUT RISK
INTRODUCTION
A portfolio's goal and principal strategies largely determine its risk
profile. You will find a concise description of each portfolio's risk profile in
"Key Points." The preceding discussions of each portfolio contain more detailed
information. This section discusses other risks that may affect the portfolios.
The portfolios may use certain investment practices that have higher risks
associated with them. However, each portfolio has limitations and policies
designed to reduce many of the risks. The "Certain Investment Practices" table
describes these practices and the limitations on their use.
Each portfolio offers its shares to (i) insurance company separate accounts
that fund both variable contracts and variable life insurance contracts and (ii)
tax-qualified pension and retirement plans including participant-directed plans
which elect to make a portfolio an investment option for plan participants. Due
to differences of tax treatment and other considerations, the interests of
various variable contract owners and plan participants participating in a
portfolio may conflict. The Board of Trustees will monitor the portfolios for
any material conflicts that may arise and will determine what action, if any,
should be taken. If a conflict occurs, the Board may require one or more
insurance company separate accounts and/or plans to withdraw its investments in
one or all portfolios, which may cause a portfolio to sell securities at
disadvantageous prices and disrupt orderly portfolio management. The Board also
may refuse to sell shares of a portfolio to any variable contract or plan or may
suspend or terminate the offering of shares of a portfolio if such action is
required by law or regulatory authority or is in the best interests of the
shareholders of the portfolio.
TYPES OF INVESTMENT RISK
The following risks are referred to throughout this Prospectus.
ACCESS RISK Some countries may restrict a portfolio's access to investments
or offer terms that are less advantageous than those for local investors. This
could limit the attractive investment opportunities available to a portfolio.
CORRELATION RISK The risk that changes in the value of a hedging instrument
will not match those of the investment being hedged.
CREDIT RISK The issuer of a security or the counterparty to a contract may
default or otherwise become unable to honor a financial obligation.
CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Adverse changes in
exchange rates may erode or reverse any gains produced by foreign-
currency-denominated investments and may widen any losses.
EXPOSURE RISK The risk associated with investments (such as derivatives) or
practices (such as short selling) that increase the amount of money a portfolio
could gain or lose on an investment.
- HEDGED Exposure risk could multiply losses generated by a derivative or
practice used for hedging purposes. Such losses should be substantially
offset by gains on the hedged investment. However, while hedging can reduce
or eliminate losses, it can also reduce or eliminate gains.
- SPECULATIVE To the extent that a derivative or practice is not used as a
hedge, the portfolio is directly exposed to its risks. Gains or losses from
speculative positions in a derivative may be much greater than the
derivative's original cost. For example, potential losses from writing
uncovered call options and from speculative short sales are unlimited.
INFORMATION RISK Key information about an issuer, security or market may be
inaccurate or unavailable.
INTEREST-RATE RISK Changes in interest rates may cause a decline in the
market value of an investment. With bonds and other fixed-income securities, a
rise in interest rates typically causes a fall in values, while a fall in
interest rates typically causes a rise in values.
LIQUIDITY RISK Certain portfolio securities may be difficult or impossible to
sell at the time and the price that the portfolio would like. A portfolio may
have to lower the price, sell other securities instead or forego an investment
opportunity. Any of these could have a negative effect on portfolio management
or performance.
MARKET RISK The market value of a security may move up and down, sometimes
rapidly and unpredictably. These fluctuations, which are often referred to as
"volatility," may cause a security to be worth less than it was worth at an
earlier time. Market risk may affect a single issuer, industry, sector of the
economy, or the market as a whole. Market risk is common to most
investments--including stocks and bonds, and the mutual funds that invest in
them.
16
<PAGE> 208
OPERATIONAL RISK Some countries have less-developed securities markets (and
related transaction, registration and custody practices) that could subject a
portfolio to losses from fraud, negligence, delay or other actions.
POLITICAL RISK Foreign governments may expropriate assets, impose capital or
currency controls, impose punitive taxes, or nationalize a company or industry.
Any of these actions could have a severe effect on security prices and impair a
portfolio's ability to bring its capital or income back to the U.S. Other
political risks include economic policy changes, social and political
instability, military action and war.
VALUATION RISK The lack of an active trading market may make it difficult to
obtain an accurate price for a portfolio security.
17
<PAGE> 209
CERTAIN INVESTMENT PRACTICES
For each of the following practices, this table shows the applicable investment
limitation. Risks are indicated for each practice.
KEY TO TABLE:
<TABLE>
<S> <C>
[-] Permitted without limitation; does not indicate actual use
20% Italic type (e.g., 20%) represents an investment limitation as a percentage of NET
portfolio assets; does not indicate actual use
20% Roman type (e.g., 20%) represents an investment limitation as a percentage of TOTAL
portfolio assets; does not indicate actual use
[ ] Permitted, but not expected to be used to a significant extent
- -- Not permitted
</TABLE>
<TABLE>
<CAPTION>
GLOBAL
EMERGING POST-VENTURE
MARKETS CAPITAL
PORTFOLIO PORTFOLIO
INVESTMENT PRACTICE LIMIT
<S> <C> <C>
BORROWING The borrowing of money from banks to meet
redemptions or for other temporary or emergency purposes.
Speculative exposure risk. 30% 30%
- -----------------------------------------------------------------------------
COUNTRY/REGION FOCUS Investing a significant portion of
portfolio assets in a single country or region. Market
swings in the targeted country or region will be likely to
have a greater effect on portfolio performance than they
would in a more geographically diversified equity portfolio.
Currency, market, political risks. [-] --
- -----------------------------------------------------------------------------
CURRENCY TRANSACTIONS Instruments, such as options, futures,
forwards or swaps, intended to manage portfolio exposure to
currency risk or to enhance total return. Options, futures
or forwards involve the right or obligation to buy or sell a
given amount of foreign currency at a specified price and
future date. Swaps involve the right or obligation to
receive or make payments based on two different currency
rates. Correlation, credit, currency, hedged exposure,
liquidity, political, speculative exposure, valuation
risks.(1) [-] [ ]
- -----------------------------------------------------------------------------
EMERGING MARKETS Countries generally considered to be
relatively less developed or industrialized. Emerging
markets often face economic problems that could subject a
portfolio to increased volatility or substantial declines in
value. Deficiencies in regulatory oversight, market
infrastructure, shareholder protections and company laws
could expose a portfolio to risks beyond those generally
encountered in developed countries. Access, currency,
information, liquidity, market, operational, political,
valuation risks. [-] --
- -----------------------------------------------------------------------------
FOREIGN SECURITIES Securities of foreign issuers. May
include depositary receipts. Currency, information,
liquidity, market, political, valuation risks. [-] [-]
- -----------------------------------------------------------------------------
FUTURES AND OPTIONS ON FUTURES Exchange-traded contracts
that enable a portfolio to hedge against or speculate on
future changes in currency values, interest rates or stock
indexes. Futures obligate the portfolio (or give it the
right, in the case of options) to receive or make payment at
a specific future time based on those future changes.(1)
Correlation, currency, hedged exposure, interest-rate,
market, speculative exposure risks.(2) [ ] [ ]
- -----------------------------------------------------------------------------
INVESTMENT-GRADE DEBT SECURITIES Debt securities rated
within the four highest grades (AAA/Aaa through BBB/Baa) by
Standard & Poor's or Moody's rating service, and unrated
securities of comparable quality. Credit, interest-rate,
market risks. 35% 20%
- -----------------------------------------------------------------------------
NON-INVESTMENT-GRADE DEBT SECURITIES Debt securities rated
below the fourth-highest grade (BBB/Baa) by Standard &
Poor's or Moody's rating service, and unrated securities of
comparable quality. Commonly referred to as junk bonds.
Credit, information, interest-rate, liquidity, market,
valuation risks. 35% 5%
- -----------------------------------------------------------------------------
OPTIONS Instruments that provide a right to buy (call) or
sell (put) a particular security, currency or index of
securities at a fixed price within a certain time period. A
portfolio may purchase or sell (write) both put and call
options for hedging or speculative purposes.(1) Correlation,
credit, hedged exposure, liquidity, market, speculative
exposure, valuation risks. 25% 25%
- -----------------------------------------------------------------------------
PRIVATE-EQUITY PORTFOLIOS Private limited partnerships or
other investment funds that themselves invest in equity or
debt securities of:
- -companies in the venture-capital or post-venture-capital
stages of development
- -companies engaged in special situations or changes in
corporate control, including buyouts
Information, liquidity, market, valuation risks. -- 10%
- -----------------------------------------------------------------------------
</TABLE>
18
<PAGE> 210
<TABLE>
<CAPTION>
GLOBAL
EMERGING POST-VENTURE
MARKETS CAPITAL
PORTFOLIO PORTFOLIO
INVESTMENT PRACTICE LIMIT
<S> <C> <C>
RESTRICTED AND OTHER ILLIQUID SECURITIES Certain securities
with restrictions on trading, or those not actively traded.
May include private placements. Liquidity, market, valuation
risks. 15% 15%
- -----------------------------------------------------------------------------
SECURITIES LENDING Lending portfolio securities to financial
institutions; a portfolio receives cash, U.S. government
securities or bank letters of credit as collateral. Credit,
liquidity, market, operational risks. 33 1/3% 33 1/3
- -----------------------------------------------------------------------------
SHORT SALES Selling borrowed securities with the intention
of repurchasing them for a profit on the expectation that
the market price will drop. Liquidity, market, speculative
exposure risks. -- 10%
- -----------------------------------------------------------------------------
SHORT SALES "AGAINST THE BOX" A short sale when the
portfolio owns enough shares of the security involved to
cover the borrowed securities, if necessary. Liquidity,
market, speculative exposure risks. [ ] [ ]
- -----------------------------------------------------------------------------
SPECIAL-SITUATION COMPANIES Companies experiencing unusual
developments affecting their market values. Special
situations may include acquisition, consolidation,
reorganization, recapitalization, merger, liquidation,
special distribution, tender or exchange offer, or
potentially favorable litigation. Securities of a
special-situation company could decline in value and hurt a
portfolio's performance if the anticipated benefits of the
special situation do not materialize. Information, market
risks. [ ] [-]
- -----------------------------------------------------------------------------
START-UP AND OTHER SMALL COMPANIES Companies with small
relative market capitalizations, including those with
continuous operations of less than three years. Information,
liquidity, market, valuation risks. [-] [-]
- -----------------------------------------------------------------------------
SWAPS A contract between a portfolio and another party in
which the parties agree to exchange streams of payments
based on certain benchmarks, such as market indices or
currency or interest rates. For example, a portfolio may use
swaps to gain access to the performance of a benchmark asset
(such as an index or one or more stocks) where the
portfolio's direct investment is restricted. Credit,
currency, information, interest-rate, liquidity, market,
political, speculative exposure, valuation risks [ ] --
- -----------------------------------------------------------------------------
TEMPORARY DEFENSIVE TACTICS Placing some or all of a
portfolio's assets in investments such as money-market
obligations and investment-grade debt securities for
defensive purposes. Although intended to avoid losses in
adverse market, economic, political or other conditions,
defensive tactics might be inconsistent with a portfolio's
principal investment strategies and might prevent a
portfolio from achieving its goal. [ ] [ ]
- -----------------------------------------------------------------------------
WARRANTS Options issued by a company granting the holder the
right to buy certain securities, generally common stock, at
a specified price and usually for a limited time. Liquidity,
market, speculative exposure risks. 10% 10%
- -----------------------------------------------------------------------------
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The purchase
or sale of securities for delivery at a future date; market
value may change before delivery. Liquidity, market,
speculative exposure risks. 20% 20%
- -----------------------------------------------------------------------------
</TABLE>
(1) The portfolios are not obligated to pursue any hedging strategy. In
addition, hedging practices may not be available, may be too costly to be
used effectively or may be unable to be used for other reasons.
(2) Each portfolio is limited to 5% of net assets for initial margin and premium
amounts on futures positions considered to be speculative by the Commodity
Futures Trading Commission.
19
<PAGE> 211
MEET THE MANAGERS
[LIZ DATER PHOTO]
ELIZABETH B. DATER
Managing Director
- Co-Portfolio Manager, Global Post-Venture Capital Portfolio since inception
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus Asset Management, Inc. (Warburg Pincus)
- Co-Portfolio Manager, Small Company Growth Portfolio since inception
- With Warburg Pincus since 1978
[ALEJOS PHOTO]
EMILY ALEJOS
Director
- Associate Portfolio Manager, Emerging Markets Portfolio since March 2000
- With CSAM since 1997
- Vice president and emerging-markets portfolio manager with Bankers Trust,
1993 to 1997
[SHARON PHOTO]
HAROLD E. SHARON
Managing Director
- Co-Portfolio Manager, Global Post-Venture Capital Portfolio since May 2000
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1998
- Executive director and portfolio manager with CIBC Oppenheimer, 1994 to 1998
[HRABCHAK PHOTO]
ROBERT B. HRABCHAK
Director
- Associate Portfolio Manager, Emerging Markets Portfolio since March 2000
- With CSAM since 1997
- Senior portfolio manager at Merrill Lynch Asset Management, 1995 to 1997
- Associate at Salomon Brothers, 1993 to 1995
[WATT PHOTO]
RICHARD WATT
Managing Director
- Portfolio Manager, Emerging Markets Portfolio since March 2000
- With CSAM since 1995
- Director and head of emerging-markets investments and research at Gartmore
Investment Limited in London, 1992 to 1995
[LAFFAN PHOTO]
FEDERICO D. LAFFAN
Director
- Associate Portfolio Manager, Emerging Markets Portfolio since July 1999
- Co-Portfolio Manager, Global Post-Venture Capital Portfolio since May 2000
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1997
- Senior manager and partner with Green Cay Asset Management, 1996 to 1997
- Senior portfolio manager and director with Foreign & Colonial Emerging
Markets, London, 1990 to 1996
20
<PAGE> 212
[CHUNG PHOTO]
CALVIN E. CHUNG
Vice President
- Associate Portfolio Manager, Global Post-Venture Capital Portfolio since May
2000
- With CSAM since January 2000
- Vice President and senior technology equity analyst at Eagle Asset
Management, 1997 to 1999
- Graduate student at the University of Chicago, 1995 to 1997
[KIM PHOTO]
JUN SUNG KIM
Vice President
- Associate Portfolio Manager, Emerging Markets Portfolio since July 1999
- Co-Portfolio Manager, Global Post-Venture Capital Portfolio since May 2000
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1997
- Investment manager with Asset Korea Ltd., Seoul, 1995 to 1997
- Investment analyst with Baring Securities Ltd., Seoul, 1994 to 1995
SUB-INVESTMENT ADVISER PORTFOLIO MANAGERS
Global Post-Venture Capital Portfolio
RAYMOND L. HELD and THADDEUS I. GRAY manage the Global Post-Venture
Capital Portfolio's investments in private-equity portfolios. Both are
Investment Managers and Managing Directors of Abbott Capital Management
LLC, the portfolio's sub-investment adviser. Mr. Held has been with Abbott
since 1986, while Mr. Gray joined the firm in 1989.
Job titles indicate position with the investment adviser.
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ABOUT YOUR ACCOUNT
SHARE VALUATION
The price of your shares is also referred to as their net asset value (NAV).
The NAV is determined at the close of regular trading on the New York Stock
Exchange (NYSE) (usually 4 p.m. Eastern Time) each day the NYSE is open for
business. It is calculated by dividing each portfolio's total assets, less its
liabilities, by the number of shares outstanding in the portfolio.
Each portfolio values its securities based on market quotations when it
calculates its NAV. If market quotations are not readily available, securities
and other assets are valued by another method that the Board of Trustees
believes accurately reflects fair value. Debt obligations that will mature in 60
days or less are valued on the basis of amortized cost, unless the Board
determines that using this method would not reflect an investment's value.
Some portfolio securities may be listed on foreign exchanges that are open on
days (such as U.S. holidays) when the portfolios do not compute their prices.
This could cause the value of a portfolio's investments to be affected by
trading on days when you cannot buy or sell shares.
The Global Post-Venture Capital Portfolio initially values its investments in
private-equity portfolios at cost. After that, the Global Post-Venture Capital
Portfolio values these investments according to reports from the private-equity
portfolios that the sub-investment adviser generally receives on a quarterly
basis. The portfolio's net asset value typically will not reflect interim
changes in the values of its private-equity-portfolio investments.
DISTRIBUTIONS
Investors in a portfolio are entitled to a share of the portfolio's net
income and gains on investments. The portfolio passes these earnings along to
its shareholders as distributions.
Each portfolio earns dividends from stocks and interest from bond,
money-market and other investments. These are passed along as dividend
distributions. A portfolio realizes capital gains whenever it sells securities
for a higher price than it paid for them. These are passed along as capital-gain
distributions.
The portfolios typically distribute dividends and capital gains annually,
usually in December. Distributions will be reinvested automatically in
additional shares of the same portfolio that paid them.
TAXES
For a discussion of the tax status of a variable contract or pension plan,
refer to the prospectus of the sponsoring participating insurance company
separate account or plan documents or other informational materials supplied by
plan sponsors.
Because shares of the portfolios may be purchased only through variable
contracts and plans, income dividends or capital-gain distributions from a
portfolio are taxable, if at all, to the participating insurance companies and
plans and will be exempt from current taxation of the variable-contract owner or
plan participant if left to accumulate within the variable contract or plan.
Each portfolio intends to comply with the diversification requirements
currently imposed by the Internal Revenue Service on separate accounts of
insurance companies as a condition of maintaining the tax-deferred status of
variable contracts.
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BUYING AND SELLING SHARES
You may not buy or sell shares of a portfolio directly; you may only buy or
sell shares through variable-annuity contracts and variable life insurance
contracts offered by separate accounts of certain insurance companies or through
tax-qualified pension and retirement plans. Certain portfolios may not be
available in connection with a particular contract or plan.
An insurance company's separate accounts buy and sell shares of a portfolio
at NAV, without any sales or other charges. Each insurance company receives
orders from its contract holders to buy or sell shares of a portfolio on any
business day that the portfolio calculates its NAV. If the order is received by
the insurance company prior to the close of regular trading on the NYSE, the
order will be executed at that day's NAV.
Plan participants may buy shares of a portfolio through their plan by
directing the plan trustee to buy shares for their account in a manner similar
to that described above for variable annuity and variable life insurance
contracts. You should contact your plan sponsor concerning the appropriate
procedure for investing in a portfolio.
Each portfolio reserves the right to:
- refuse any specific purchase or exchange request, including those from any
person or group who, in the portfolio's view, is likely to engage in excessive
trading
- change or discontinue its exchange privilege after 30 days' notice to current
investors, or temporarily suspend this privilege during unusual market
conditions
- make a "redemption in kind"--payment in portfolio securities rather than
cash--for certain large redemption amounts that could hurt portfolio
operations
- suspend redemptions or postpone payment dates as permitted by the Investment
Company Act of 1940 (such as during periods other than weekends or holidays
when the NYSE is closed or trading on the NYSE is restricted, or any other
time that the SEC permits)
- stop offering the portfolio's shares for a period of time (such as when
management believes that a substantial increase in assets could adversely
affect it)
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FOR MORE INFORMATION
This Prospectus is intended for use in connection with certain insurance
products and pension and retirement plans. Please refer to the prospectus of the
sponsoring participating insurance company separate account or to the plan
documents or other informational materials supplied by plan sponsors for
information regarding distributions and instructions on purchasing or selling a
variable contract and on how to select a portfolio as an investment option for a
variable contract or plan. More information about these portfolios is available
free upon request, including the following:
ANNUAL/SEMIANNUAL REPORTS TO SHAREHOLDERS
Includes financial statements, portfolio investments and detailed performance
information.
The Annual Report also contains a letter from the portfolio manager
discussing market conditions and investment strategies that significantly
affected portfolio performance during its past fiscal year.
OTHER INFORMATION
A current Statement of Additional Information (SAI), which provides more
details about the portfolios, is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference.
You may visit the SEC's Internet Web site (www.sec.gov) to view the SAI,
material incorporated by reference and other information. You can also obtain
copies by visiting the SEC's Public Reference Room in Washington, DC (phone
202-942-8090) or by sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington, DC 20549-6009 or electronically at
[email protected].
Please contact the Trust to obtain, without charge, the SAI and Annual and
Semiannual Reports and to make shareholder inquiries:
BY TELEPHONE:
800-222-8977
BY MAIL:
Warburg Pincus Trust
P.O. Box 9030
Boston, MA 02205-9030
BY OVERNIGHT OR COURIER SERVICE:
Boston Financial
Attn: Warburg Pincus Trust
66 Brooks Drive
Braintree, MA 02184
ON THE INTERNET:
www.warburg.com
SEC FILE NUMBER:
Warburg Pincus Trust 811-07261
[Warburg Pincus Funds Logo]
P.O. BOX 9030, BOSTON, MA 02205-9030
800-222-8977 [-] www.warburg.com
PROVIDENT DISTRIBUTORS, INC., DISTRIBUTOR. TREPX-1-0500
<PAGE> 216
[Warburg Pincus Logo] [Credit Suisse Logo]
PROSPECTUS
May 1, 2000
WARBURG PINCUS TRUST
- VALUE PORTFOLIO
Warburg Pincus Trust shares are not available directly to
individual investors, but may be offered only through
certain insurance products and pension and retirement
plans.
As with all mutual funds, the Securities and Exchange
Commission has not approved these securities, nor has it
passed upon the adequacy or accuracy of this Prospectus.
It is a criminal offense to state otherwise.
The Trust is advised by Credit Suisse Asset Management,
LLC.
<PAGE> 217
CONTENTS
<TABLE>
<S> <C>
KEY POINTS......................................... 4
Goal and Principal Strategies................... 4
Investor Profile................................ 4
A Word About Risk............................... 4
PERFORMANCE SUMMARY................................ 5
Year-by-Year Total Returns...................... 5
Average Annual Total Returns.................... 5
INVESTOR EXPENSES.................................. 6
Fees and Portfolio Expenses..................... 6
Example......................................... 6
THE PORTFOLIO IN DETAIL............................ 7
The Management Firm............................. 7
Portfolio Information Key....................... 7
Goal and Strategies............................. 10
Portfolio Investments........................... 10
Risk Factors.................................... 10
Portfolio Management............................ 11
Investor Expenses............................... 11
Financial Highlights............................ 11
MORE ABOUT RISK.................................... 12
Introduction.................................... 12
Types of Investment Risk........................ 12
Certain Investment Practices.................... 14
MEET THE MANAGERS.................................. 16
ABOUT YOUR ACCOUNT................................. 17
Share Valuation................................. 17
Distributions................................... 17
Taxes........................................... 17
BUYING AND SELLING SHARES.......................... 18
FOR MORE INFORMATION............................... back cover
</TABLE>
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KEY POINTS
GOAL AND PRINCIPAL STRATEGIES
<TABLE>
<CAPTION>
PORTFOLIO/RISK FACTORS GOAL STRATEGIES
<S> <C> <C>
VALUE PORTFOLIO Long-term growth of - Invests primarily in equity
Risk factors: capital and income securities
Market risk - Focuses on large U.S. companies
- Analyzes such factors as
price-to-earnings and
price-to-book ratios, using a
value investment style
</TABLE>
INVESTOR PROFILE
THIS PORTFOLIO IS DESIGNED FOR INVESTORS WHO:
- have longer time horizons
- are willing to assume the risk of losing money in exchange for attractive
potential long-term returns
- are investing for growth and income
- want to diversify their investments into common stocks
IT MAY NOT BE APPROPRIATE IF YOU:
- are investing for a shorter time horizon
- are uncomfortable with an investment that will fluctuate in value
- are looking primarily for income
You should base your investment decision on your own goals, risk preferences
and time horizon.
A WORD ABOUT RISK
All investments involve some level of risk. Simply defined, risk is the
possibility that you will lose money or not make money.
Principal risk factors for the portfolio are discussed below. Before you
invest, please make sure you understand the risks that apply to your portfolio.
As with any mutual fund, you could lose money over any period of time.
Investments in the portfolio are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
MARKET RISK
The market value of a security may move up and down, sometimes rapidly and
unpredictably. These fluctuations, which are often referred to as "volatility,"
may cause a security to be worth less than it was worth at an earlier time.
Market risk may affect a single issuer, industry, sector of the economy, or the
market as a whole. Market risk is common to most investments--including stocks
and bonds, and the mutual funds that invest in them.
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PERFORMANCE SUMMARY
The bar chart and the table below provide an indication of the risks of
investing in the portfolio. The bar chart shows you how the portfolio's
performance has varied from year to year for up to 10 years. The table compares
the portfolio's performance over time to that of a broadly based securities
market index. The bar chart and table do not reflect additional charges and
expenses which are, or may be, imposed under the variable contracts or plans;
such charges and expenses are described in the prospectus of the insurance
company separate account or in the plan documents or other informational
materials supplied by plan sponsors. Inclusion of these charges and expenses
would reduce the total return for the periods shown. As with all mutual funds,
past performance is not a prediction of the future.
YEAR-BY-YEAR TOTAL RETURNS
.
<TABLE>
<CAPTION>
YEAR ENDED 12/31: 1998 1999
<S> <C> <C>
VALUE PORTFOLIO
Best quarter: 16.06% (Q4 98) 12.13% 6.24%
Worst quarter: -14.04% (Q3 98)
Inception date: 10/31/97
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
ONE YEAR FIVE YEARS 10 YEARS LIFE OF INCEPTION
PERIOD ENDED 12/31/99: 1999 1995-1999 1990-1999 FUND DATE
<S> <C> <C> <C> <C> <C>
VALUE PORTFOLIO 6.24% NA NA 10.33% 10/31/97
S&P 500 INDEX* 21.02% NA NA 20.47%
</TABLE>
* The S&P 500 Index is an unmanaged index (with no defined investment objective)
of common stocks, includes reinvestment of dividends, and is a registered
trademark of McGraw-Hill Co., Inc.
UNDERSTANDING PERFORMANCE
- TOTAL RETURN tells you how much an investment in the portfolio has
changed in value over a given time period. It assumes that all dividends
and capital gains (if any) were reinvested in additional shares. The
change in value can be stated either as a cumulative return or as an
average annual rate of return.
- A CUMULATIVE TOTAL RETURN is the actual return of an investment for a
specified period. The year-by-year total returns in the bar chart are
examples of one-year cumulative total returns.
- An AVERAGE ANNUAL TOTAL RETURN applies to periods longer than one year.
It smoothes out the variations in year-by-year performance to tell you
what constant annual return would have produced the investment's actual
cumulative return. This gives you an idea of an investment's annual
contribution to your portfolio, assuming you held it for the entire
period.
- Because of compounding, the average annual total returns in the table
cannot be computed by averaging the returns in the bar chart.
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INVESTOR EXPENSES
FEES AND PORTFOLIO EXPENSES
This table describes the fees and expenses you may bear as a shareholder. Annual
portfolio operating expense figures are for the fiscal year ended December 31,
1999. The table does not reflect additional charges and expenses which are, or
may be, imposed under the variable contracts or plans; such charges and expenses
are described in the prospectus of the insurance company separate account or in
the plan documents or other informational materials supplied by plan sponsors.
<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER FEES
(paid directly from your investment)
Sales charge "load" on purchases NONE
Deferred sales charge "load" NONE
Sales charge "load" on reinvested distributions NONE
Redemption fees NONE
Exchange fees NONE
ANNUAL PORTFOLIO OPERATING EXPENSES
(deducted from portfolio assets)
Management fee .75%
Distribution and service (12b-1) fee NONE
Other expenses .59%
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES* 1.34%
</TABLE>
* Actual fees and expenses for the fiscal year ended December 31, 1999 are shown
below. Fee waivers and expense reimbursements or credits reduced some expenses
during 1999 but may be discontinued at any time:
<TABLE>
<CAPTION>
EXPENSES AFTER
WAIVERS AND
REIMBURSEMENTS
<S> <C>
Management fee .56%
Distribution and service (12b-1)
fee NONE
Other expenses .44%
----
TOTAL ANNUAL PORTFOLIO OPERATING
EXPENSES 1.00%
</TABLE>
EXAMPLE
This example may help you compare the cost of investing in the portfolio with
the cost of investing in other mutual funds. Because it uses hypothetical
conditions, your actual costs may be higher or lower.
Assume you invest $10,000, the portfolio returns 5% annually, expense ratios
remain as listed in the first table above (before fee waivers and expense
reimbursements and credits), and you close your account at the end of each of
the time periods shown. Based on these assumptions, your cost would be:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS 10 YEARS
<S> <C> <C> <C>
$136 $425 $734 $1,613
</TABLE>
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THE PORTFOLIO IN DETAIL
THE MANAGEMENT FIRM
CREDIT SUISSE ASSET MANAGEMENT, LLC
One Citicorp Center
153 East 53rd Street
New York, NY 10022
- Investment adviser for the portfolio
- Responsible for managing the portfolio's assets according to its goal and
strategies
- A member of Credit Suisse Asset Management, the institutional asset
management and mutual fund arm of Credit Suisse Group (Credit Suisse), one of
the world's leading banks
- Credit Suisse Asset Management companies manage approximately $72 billion in
the U.S. and $203 billion globally as of December 1999
- Credit Suisse Asset Management has offices in 14 countries, including
SEC-registered offices in New York and London; other offices (such as those in
Budapest, Frankfurt, Milan, Moscow, Paris, Prague, Sydney, Tokyo, Warsaw and
Zurich) are not registered with the U.S. Securities and Exchange Commission
For easier reading, Credit Suisse Asset Management, LLC will be referred to
as "CSAM" or "we" throughout this Prospectus.
PORTFOLIO
INFORMATION KEY
A concise description of the portfolio begins on the next page. The
description provides the following information:
GOAL AND STRATEGIES
The portfolio's particular investment goal and the strategies it intends to
use in pursuing that goal. Percentages of portfolio assets are based on total
assets unless indicated otherwise.
PORTFOLIO INVESTMENTS
The primary types of securities in which the portfolio invests. Secondary
investments are described in "More About Risk."
RISK FACTORS
The major risk factors associated with the portfolio. Additional risk factors
are included in "More About Risk."
PORTFOLIO MANAGEMENT
The individuals designated by the investment adviser to handle the
portfolio's day-to-day management.
INVESTOR EXPENSES
Actual portfolio expenses for the 1999 fiscal year. Future expenses may be
higher or lower. Additional expenses are, or may be, imposed under the variable
contracts or plans.
- MANAGEMENT FEE The fee paid to the investment adviser for providing
investment advice to the portfolio. Expressed as a percentage of average net
assets after waivers.
- OTHER EXPENSES Fees paid by the portfolio for items such as administration,
transfer agency, custody, auditing, legal and
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<PAGE> 222
registration fees and miscellaneous expenses. Expressed as a percentage of
average net assets after waivers, credits and reimbursements.
FINANCIAL HIGHLIGHTS
A table showing the portfolio's audited financial performance for up to five
years.
- TOTAL RETURN How much you would have earned on an investment in the
portfolio, assuming you had reinvested all dividend and capital-gain
distributions.
- PORTFOLIO TURNOVER An indication of trading frequency. The portfolio may sell
securities without regard to the length of time they have been held. A high
turnover rate may increase the portfolio's transaction costs and negatively
affect its performance.
The Annual Report includes the auditor's report, along with the portfolio's
financial statements. It is available free upon request.
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GOAL AND STRATEGIES
This portfolio seeks long-term growth of capital and income. To pursue this
goal, it invests primarily in equity securities of value companies.
Value companies are companies whose earnings power or asset value does not
appear to be reflected in the current stock price. As a result, value companies
look underpriced according to financial measurements of their intrinsic worth or
business prospects. These measurements include price-to-earnings, price-to-book
and debt-to-equity ratios. The portfolio manager determines value based upon
research and analysis, taking all relevant factors into account.
The portfolio expects to focus on large U.S. companies with market
capitalizations of $1 billion or more, although it may invest in companies of
any size.
PORTFOLIO INVESTMENTS
Normally the portfolio invests substantially all of its assets in equity
securities, including:
- common stocks
- securities convertible into common stocks
- securities such as rights and warrants, whose values are based on common
stocks
It may also invest in preferred stocks and non-convertible debt securities
such as bonds, debentures and notes.
The portfolio may invest up to:
- 10% of assets in debt securities rated from BB/Ba to C (junk bonds)
- 15% of assets in real-estate investment trusts (REITs)
- 20% of assets in foreign securities
To a limited extent, the portfolio may also engage in other investment
practices.
RISK FACTORS
This portfolio's principal risk factor is:
- market risk
The value of your investment generally will fluctuate in response to
stock-market movements. The amount of income you receive from the portfolio also
will fluctuate.
The portfolio's emphasis on large-company value stocks may reduce its
volatility and downside risk. Of course, this is not guaranteed. Value stocks in
theory are already underpriced, and large-company stocks tend to be less
volatile than small-company stocks. However, a value stock may never reach what
the manager believes is its full value, or may even go down in price. In the
long run, the portfolio may produce more modest returns than riskier stock funds
as a trade-off for this potentially lower risk.
Different types of stocks (such as "growth" vs. "value" stocks) tend to shift
in and out of favor depending on market and economic conditions. Accordingly,
the portfolio's performance may sometimes be lower or higher than that of other
types of funds (such as those emphasizing growth stocks).
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"More About Risk" details certain other investment practices the portfolio
may use. Please read that section carefully before you invest.
PORTFOLIO MANAGEMENT
Scott T. Lewis and Robert F. Rescoe manage the portfolio. You can find out
more about the portfolio's managers in "Meet the Managers."
INVESTOR EXPENSES
Management fee .56%
All other expenses .44%
----
Total expenses 1.00%
FINANCIAL HIGHLIGHTS
The figures below have been audited by the portfolio's independent auditors,
PricewaterhouseCoopers LLP.
<TABLE>
<CAPTION>
PERIOD ENDED: 12/99 12/98 12/97(1)
<S> <C> <C> <C>
PER-SHARE DATA
Net asset value, beginning of period $11.48 $10.33 $10.00
Investment activities:
Net investment income 0.33 0.09 0.04
Net gains on investments and foreign currency related items
(both realized and unrealized) 0.38 1.16 0.35
Total from investment activities 0.71 1.25 0.39
Distributions:
Dividends from net investment income (0.11) (0.10) (0.03)
Return of capital 0.00 0.00 (0.03)
Distributions from net realized gains (0.19) 0.00 0.00
Total distributions (0.30) (0.10) (0.06)
Net asset value, end of period $11.89 $11.48 $10.33
Total return 6.24% 12.13% 3.89%(2)
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) 20,153 $14,381 $1,993
Ratio of expenses to average net assets 1.01%(4) 1.00%(4) 1.00%(3,4)
Ratio of net income to average net assets .91% 1.11% 2.08%(3)
Decrease reflected in above operating expense ratios due to
waivers/reimbursements .34% 1.22% 9.37%(3)
Portfolio turnover rate 102% 58% 64%(2)
</TABLE>
(1) For the period October 31, 1997 (Commencement of Operations) through
December 31, 1997.
(2) Non-annualized.
(3) Annualized.
(4)Interest earned on uninvested cash balances is used to offset portions of the
transfer agent expense. These arrangements resulted in a reduction to the
portfolio's net expense ratio by .01%, .00% and .00% for the years or period
ended December 31, 1999, 1998 and 1997, respectively. The portfolio's
operating expense ratio after reflecting these arrangements was 1.00% for
each year or period ended December 31, 1999, 1998 and 1997.
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MORE ABOUT RISK
INTRODUCTION
The portfolio's goal and principal strategies largely determine its risk
profile. You will find a concise description of the portfolio's risk profile in
"Key Points." The preceding discussion of the portfolio contains more detailed
information. This section discusses other risks that may affect the portfolio.
The portfolio may use certain investment practices that have higher risks
associated with them. However, the portfolio has limitations and policies
designed to reduce many of the risks. The "Certain Investment Practices" table
describes these practices and the limitations on their use.
The portfolio offers its shares to (i) insurance company separate accounts
that fund both variable contracts and variable life insurance contracts and (ii)
tax-qualified pension and retirement plans including participant-directed plans
which elect to make the portfolio an investment option for plan participants.
Due to differences of tax treatment and other considerations, the interests of
various variable contract owners and plan participants participating in the
portfolio may conflict. The Board of Trustees will monitor the portfolio for any
material conflicts that may arise and will determine what action, if any, should
be taken. If a conflict occurs, the Board may require one or more insurance
company separate accounts and/or plans to withdraw its investments in the
portfolio, which may cause the portfolio to sell securities at disadvantageous
prices and disrupt orderly portfolio management. The Board also may refuse to
sell shares of the portfolio to any variable contract or plan or may suspend or
terminate the offering of shares of the portfolio if such action is required by
law or regulatory authority or is in the best interests of the shareholders of
the portfolio.
TYPES OF INVESTMENT RISK
The following risks are referred to throughout this Prospectus.
CORRELATION RISK The risk that changes in the value of a hedging instrument
will not match those of the investment being hedged.
CREDIT RISK The issuer of a security or the counterparty to a contract may
default or otherwise become unable to honor a financial obligation.
CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Adverse changes in
exchange rates may erode or reverse any gains produced by foreign-currency-
denominated investments and may widen any losses.
EXPOSURE RISK The risk associated with investments (such as derivatives) or
practices (such as short selling) that increase the amount of money the
portfolio could gain or lose on an investment.
- HEDGED Exposure risk could multiply losses generated by a derivative or
practice used for hedging purposes. Such losses should be substantially
offset by
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gains on the hedged investment. However, while hedging can reduce or
eliminate losses, it can also reduce or eliminate gains.
- SPECULATIVE To the extent that a derivative or practice is not used as a
hedge, the portfolio is directly exposed to its risks. Gains or losses from
speculative positions in a derivative may be much greater than the
derivative's original cost. For example, potential losses from writing
uncovered call options and from speculative short sales are unlimited.
EXTENSION RISK An unexpected rise in interest rates may extend the life of a
mortgage-backed security beyond the expected prepayment time, typically reducing
the security's value.
INFORMATION RISK Key information about an issuer, security or market may be
inaccurate or unavailable.
INTEREST-RATE RISK Changes in interest rates may cause a decline in the
market value of an investment. With bonds and other fixed-income securities, a
rise in interest rates typically causes a fall in values, while a fall in
interest rates typically causes a rise in values.
LIQUIDITY RISK Certain portfolio securities may be difficult or impossible to
sell at the time and the price that the portfolio would like. The portfolio may
have to lower the price, sell other securities instead or forego an investment
opportunity. Any of these could have a negative effect on portfolio management
or performance.
MARKET RISK The market value of a security may move up and down, sometimes
rapidly and unpredictably. These fluctuations, which are often referred to as
"volatility," may cause a security to be worth less than it was worth at an
earlier time. Market risk may affect a single issuer, industry, sector of the
economy, or the market as a whole. Market risk is common to most
investments--including stocks and bonds, and the mutual funds that invest in
them.
OPERATIONAL RISK Some countries have less-developed securities markets (and
related transaction, registration and custody practices) that could subject the
portfolio to losses from fraud, negligence, delay or other actions.
POLITICAL RISK Foreign governments may expropriate assets, impose capital or
currency controls, impose punitive taxes, or nationalize a company or industry.
Any of these actions could have a severe effect on security prices and impair
the portfolio's ability to bring its capital or income back to the U.S. Other
political risks include economic policy changes, social and political
instability, military action and war.
PREPAYMENT RISK Securities with high stated interest rates may be prepaid
prior to maturity. During periods of falling interest rates, the portfolio would
generally have to reinvest the proceeds at lower rates.
VALUATION RISK The lack of an active trading market may make it difficult to
obtain an accurate price for the portfolio security.
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CERTAIN INVESTMENT PRACTICES
For each of the following practices, this table shows the applicable investment
limitation. Risks are indicated for each practice.
KEY TO TABLE:
<TABLE>
<S> <C>
[-] Permitted without limitation; does not indicate actual use
20% Italic type (e.g., 20%) represents an investment limitation
as a percentage of NET portfolio assets; does not indicate
actual use
20% Roman type (e.g., 20%) represents an investment limitation
as a percentage of TOTAL portfolio assets; does not indicate
actual use
[ ] Permitted, but not expected to be used to a significant
extent
- -- Not permitted
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT PRACTICE LIMIT
<S> <C>
BORROWING The borrowing of money from banks to meet
redemptions or for other temporary or emergency purposes.
Speculative exposure risk. 30%
- --------------------------------------------------------------------
CURRENCY TRANSACTIONS Instruments, such as options, futures,
forwards or swaps, intended to manage portfolio exposure to
currency risk or to enhance total return. Options, futures
or forwards involve the right or obligation to buy or sell a
given amount of foreign currency at a specified price and
future date. Swaps involve the right or obligation to
receive or make payments based on two different currency
rates. Correlation, credit, currency, hedged exposure,
liquidity, political, speculative exposure, valuation
risks.(1) [ ]
- --------------------------------------------------------------------
FOREIGN SECURITIES Securities of foreign issuers. May
include depositary receipts. Currency, information,
liquidity, market, operational, political, valuation risks. 20%
- --------------------------------------------------------------------
FUTURES AND OPTIONS ON FUTURES Exchange-traded contracts
that enable the portfolio to hedge against or speculate on
future changes in currency values, interest rates or stock
indexes. Futures obligate the portfolio (or give it the
right, in the case of options) to receive or make payment at
a specific future time based on those future changes.(1)
Correlation, currency, hedged exposure, interest-rate,
market, speculative exposure risks.(2) [ ]
- --------------------------------------------------------------------
INVESTMENT-GRADE DEBT SECURITIES Debt securities rated
within the four highest grades (AAA/Aaa through BBB/Baa) by
Standard & Poor's or Moody's Rating Service, and unrated
securities of comparable quality. Credit, interest-rate,
market risks. 20%
- --------------------------------------------------------------------
MORTGAGE-BACKED AND ASSET-BACKED SECURITIES Debt securities
backed by pools of mortgages, including passthrough
certificates and other senior classes of collateralized
mortgage obligations (CMOs), or other receivables. Credit,
extension, interest-rate, liquidity, prepayment risks. [ ]
- --------------------------------------------------------------------
NON-INVESTMENT-GRADE DEBT SECURITIES Debt securities and
convertible securities rated below the fourth-highest grade
(BBB/Baa) by Standard & Poor's or Moody's rating service,
and unrated securities of comparable quality. Commonly
referred to as junk bonds. Credit, information, interest-
rate, liquidity, market, valuation risks. 10%
- --------------------------------------------------------------------
OPTIONS Instruments that provide a right to buy (call) or
sell (put) a particular security, currency or an index of
securities at a fixed price within a certain time period.
The portfolio may purchase or sell (write) both put and call
options for hedging or speculative purposes.(1) Correlation,
credit, hedged exposure, liquidity, market, speculative
exposure, valuation risks. 25%
- --------------------------------------------------------------------
</TABLE>
14
<PAGE> 229
<TABLE>
<CAPTION>
INVESTMENT PRACTICE LIMIT
<S> <C>
REAL-ESTATE INVESTMENT TRUSTS (REITS) Pooled investment
vehicles that invest primarily in income-producing real
estate or real-estate related loans or interests. Credit,
interest-rate, market risks. [ ]
- --------------------------------------------------------------------
RESTRICTED AND OTHER ILLIQUID SECURITIES Certain securities
with restrictions on trading, or those not actively traded.
May include private placements. Liquidity, market, valuation
risks. 15%
- --------------------------------------------------------------------
SECURITIES LENDING Lending portfolio securities to financial
institutions; the portfolio receives cash, U.S. government
securities or bank letters of credit as collateral. Credit,
liquidity, market, operational risks. 33 1/3%
- --------------------------------------------------------------------
SHORT SALES "AGAINST THE BOX" A short sale when the
portfolio owns enough shares of the security involved to
cover the borrowed securities, if necessary. Liquidity,
market, speculative exposure risks. [ ]
- --------------------------------------------------------------------
SPECIAL-SITUATION COMPANIES Companies experiencing unusual
developments affecting their market values. Special
situations may include acquisition, consolidation,
reorganization, recapitalization, merger, liquidation,
special distribution, tender or exchange offer, or
potentially favorable litigation. Securities of a
special-situation company could decline in value and hurt
the portfolio's performance if the anticipated benefits of
the special situation do not materialize. Information,
market risks. [ ]
- --------------------------------------------------------------------
START-UP AND OTHER SMALL COMPANIES Companies with small
relative market capitalizations, including those with
continuous operations of less than three years. Information,
liquidity, market, valuation risks. [ ]
- --------------------------------------------------------------------
TEMPORARY DEFENSIVE TACTICS Placing some or all of the
portfolio's assets in investments such as money-market
obligations and investment-grade debt securities for
defensive purposes. Although intended to avoid losses in
adverse market, economic, political or other conditions,
defensive tactics might be inconsistent with the portfolio's
principal investment strategies and might prevent the
portfolio from achieving its goal. [ ]
- --------------------------------------------------------------------
WARRANTS Options issued by a company granting the holder the
right to buy certain securities, generally common stock, at
a specified price and usually for a limited time. Liquidity,
market, speculative exposure risks. 15%
- --------------------------------------------------------------------
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The purchase
or sale of securities for delivery at a future date; market
value may change before delivery. Liquidity, market,
speculative exposure risks. 20%
- --------------------------------------------------------------------
</TABLE>
(1) The portfolio is not obligated to pursue any hedging strategy. In addition,
hedging practices may not be available, may be too costly to be used
effectively or may be unable to be used for other reasons.
(2) The portfolio is limited to 5% of net assets for initial margin and premium
amounts on futures positions considered to be speculative by the Commodity
Futures Trading Commission.
15
<PAGE> 230
MEET THE MANAGERS
[SCOTT T. LEWIS PHOTO]
SCOTT T. LEWIS
Managing Director
- Co-Portfolio Manager, Value Portfolio since December 1999
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus Asset Management, Inc. (Warburg Pincus)
- With Warburg Pincus since 1986
[RESCOE PHOTO]
ROBERT E. RESCOE
Director
- Co-Portfolio Manager, Value Portfolio since March 2000
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1993
Job titles indicate position with the investment adviser.
16
<PAGE> 231
ABOUT YOUR ACCOUNT
SHARE VALUATION
The price of your shares is also referred to as their net asset value (NAV).
The NAV is determined at the close of regular trading on the New York Stock
Exchange (NYSE) (usually 4 p.m. Eastern Time) each day the NYSE is open for
business. It is calculated by dividing the portfolio's total assets, less its
liabilities, by the number of shares outstanding.
The portfolio values its securities based on market quotations when it
calculates its NAV. If market quotations are not readily available, securities
and other assets are valued by another method that the Board of Trustees
believes accurately reflects fair value. Debt obligations that will mature in 60
days or less are valued on the basis of amortized cost, unless the Board
determines that using this method would not reflect an investment's value.
Some portfolio securities may be listed on foreign exchanges that are open on
days (such as U.S. holidays) when the portfolio does not compute its prices.
This could cause the value of the portfolio's investments to be affected by
trading on days when you cannot buy or sell shares.
DISTRIBUTIONS
Investors in the portfolio are entitled to a share of the portfolio's net
income and gains on investments. The portfolio passes these earnings along to
its shareholders as distributions.
The portfolio earns dividends from stocks and interest from bond, money-
market and other investments. These are passed along as dividend distributions.
The portfolio realizes capital gains whenever it sells securities for a higher
price than it paid for them. These are passed along as capital-gain
distributions.
The portfolio typically distributes dividends and capital gains annually,
usually in December. Distributions will be reinvested automatically in
additional shares of the portfolio.
TAXES
For a discussion of the tax status of a variable contract or pension plan,
refer to the prospectus of the sponsoring participating insurance company
separate account or plan documents or other informational materials supplied by
plan sponsors.
Because shares of the portfolio may be purchased only through variable
contracts and plans, income dividends or capital-gain distributions from the
portfolio are taxable, if at all, to the participating insurance companies and
plans and will be exempt from current taxation of the variable-contract owner or
plan participant if left to accumulate within the variable contract or plan.
The portfolio intends to comply with the diversification requirements
currently imposed by the Internal Revenue Service on separate accounts of
insurance companies as a condition of maintaining the tax-deferred status of
variable contracts.
17
<PAGE> 232
BUYING AND SELLING SHARES
You may not buy or sell shares of the portfolio directly; you may only buy or
sell shares through variable-annuity contracts and variable life insurance
contracts offered by separate accounts of certain insurance companies or through
tax-qualified pension and retirement plans. Certain portfolios may not be
available in connection with a particular contract or plan.
An insurance company's separate accounts buy and sell shares of the portfolio
at NAV, without any sales or other charges. Each insurance company receives
orders from its contract holders to buy or sell shares of the portfolio on any
business day that the portfolio calculates its NAV. If the order is received by
the insurance company prior to the close of regular trading on the NYSE, the
order will be executed at that day's NAV.
Plan participants may buy shares of the portfolio through their plan by
directing the plan trustee to buy shares for their account in a manner similar
to that described above for variable annuity and variable life insurance
contracts. You should contact your plan sponsor concerning the appropriate
procedure for investing in the portfolio.
The portfolio reserves the right to:
- refuse any specific purchase or exchange request, including those from any
person or group who, in the portfolio's view, is likely to engage in excessive
trading
- change or discontinue its exchange privilege after 30 days' notice to current
investors, or temporarily suspend this privilege during unusual market
conditions
- make a "redemption in kind"--payment in portfolio securities rather than
cash--for certain large redemption amounts that could hurt portfolio
operations
- suspend redemptions or postpone payment dates as permitted by the Investment
Company Act of 1940 (such as during periods other than weekends or holidays
when the NYSE is closed or trading on the NYSE is restricted, or any other
time that the SEC permits)
- stop offering the portfolio's shares for a period of time (such as when
management believes that a substantial increase in assets could adversely
affect it)
18
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19
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20
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22
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FOR MORE INFORMATION
This Prospectus is intended for use in connection with certain insurance
products and pension and retirement plans. Please refer to the prospectus of the
sponsoring participating insurance company separate account or to the plan
documents or other informational materials supplied by plan sponsors for
information regarding distributions and instructions on purchasing or selling a
variable contract and on how to select a portfolio as an investment option for a
variable contract or plan. More information about the portfolio is available
free upon request, including the following:
ANNUAL/SEMIANNUAL REPORTS TO SHAREHOLDERS
Includes financial statements, portfolio investments and detailed performance
information.
The Annual Report also contains a letter from the portfolio manager
discussing market conditions and investment strategies that significantly
affected portfolio performance during its past fiscal year.
OTHER INFORMATION
A current Statement of Additional Information (SAI), which contains more
details about the portfolio, is on file with
the Securities and Exchange Commission (SEC) and is incorporated by reference.
You may visit the SEC's Internet Web site (www.sec.gov) to view the SAI,
material incorporated by reference and other information. You can also obtain
copies by visiting the SEC's Public Reference Room in Washington, DC (phone
202-942-8090) or by sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington, DC 20549-6009 or electronically at
[email protected].
Please contact the Trust to obtain, without charge, the SAI and Annual and
Semiannual Reports and to make shareholder inquiries:
BY TELEPHONE:
800-222-8977
BY MAIL:
Warburg Pincus Trust
P.O. Box 9030
Boston, MA 02205-9030
BY OVERNIGHT OR COURIER SERVICE:
Boston Financial
Attn: Warburg Pincus Trust
66 Brooks Drive
Braintree, MA 02184
ON THE INTERNET:
www.warburg.com
SEC FILE NUMBER:
Warburg Pincus Trust 811-07261
[Warburg Pincus Funds Logo]
P.O. BOX 9030, BOSTON, MA 02205-9030
800-222-8977 - www.warburg.com
PROVIDENT DISTRIBUTORS, INC., DISTRIBUTOR. TRGRI-1-0500
<PAGE> 238
[Warburg Pincus Logo] [Credit Suisse Logo]
PROSPECTUS
May 1, 2000
WARBURG PINCUS TRUST
- EMERGING GROWTH PORTFOLIO
Warburg Pincus Trust shares are not available directly to
individual investors, but may be offered only through certain
insurance products and pension and retirement plans.
As with all mutual funds, the Securities and Exchange Commission
has not approved these securities, nor has it passed upon the
adequacy or accuracy of this Prospectus. It is a criminal
offense to state otherwise.
The Trust is advised by Credit Suisse Asset Management, LLC.
<PAGE> 239
CONTENTS
<TABLE>
<S> <C>
KEY POINTS........................ ......................... 4
Goal and Principal Strategies............................ 4
Investor Profile......................................... 4
A Word About Risk........................................ 5
PERFORMANCE SUMMARY.................... .................... 6
INVESTOR EXPENSES..................... ..................... 6
Fees and Portfolio Expenses.............................. 6
Example.................................................. 6
THE PORTFOLIO IN DETAIL.................. .................. 7
The Management Firm...................................... 7
Portfolio Information Key................................ 7
Goal and Strategies...................................... 8
Portfolio Investments.................................... 8
Risk Factors............................................. 8
Portfolio Management..................................... 8
Investor Expenses........................................ 8
Financial Highlights..................................... 9
MORE ABOUT RISK...................... ...................... 10
Introduction............................................. 10
Types of Investment Risk................................. 10
Certain Investment Practices............................. 11
MEET THE MANAGERS..................... ..................... 12
ABOUT YOUR ACCOUNT.................... ..................... 13
Share Valuation.......................................... 13
Distributions............................................ 13
Taxes.................................................... 13
BUYING AND SELLING SHARES................. ................. 14
FOR MORE INFORMATION................... .................... back cover
</TABLE>
3
<PAGE> 240
KEY POINTS
GOAL AND PRINCIPAL STRATEGIES
<TABLE>
<CAPTION>
FUND/RISK FACTORS GOAL STRATEGIES
<S> <C> <C>
EMERGING GROWTH PORTFOLIO Maximum capital appreciation - Invests in U.S. equity securities
Risk factors: - Focuses on emerging-growth companies
Market risk - Looks for growth characteristics such as
Start-up and other small companies positive earnings and potential for
Special-situation companies accelerated growth
Non-diversified status
</TABLE>
INVESTOR PROFILE
THIS PORTFOLIO IS DESIGNED FOR INVESTORS WHO:
- have longer time horizons
- are willing to assume the risk of losing money in exchange for attractive
potential long-term returns
- are investing for capital appreciation
- want to diversify their portfolios with more aggressive stock funds
IT MAY NOT BE APPROPRIATE IF YOU:
- are investing for a shorter time horizon
- are uncomfortable with an investment that will fluctuate in value
- are looking primarily for income
You should base your investment decision on your own goals, risk preferences
and time horizon.
4
<PAGE> 241
A WORD ABOUT RISK
All investments involve some level of risk. Simply defined, risk is the
possibility that you will lose money or not make money.
Principal risk factors for the portfolio are discussed below. Before you
invest, please make sure you understand the risks that apply to the portfolio.
As with any mutual fund, you could lose money over any period of time.
Investments in the portfolio are not bank deposits and are not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
MARKET RISK
The market value of a security may move up and down, sometimes rapidly and
unpredictably. These fluctuations, which are often referred to as "volatility,"
may cause a security to be worth less than it was worth at an earlier time.
Market risk may affect a single issuer, industry, sector of the economy, or the
market as a whole. Market risk is common to most investments--including stocks
and bonds, and the mutual funds that invest in them.
START-UP AND OTHER SMALL COMPANIES
Start-up and other small companies may have less-experienced management,
limited product lines, unproven track records or inadequate capital reserves.
Their securities may carry increased market, liquidity and other risks. Key
information about the company may be inaccurate or unavailable.
SPECIAL-SITUATION COMPANIES
"Special situations" are unusual developments that affect a company's market
value. Examples include mergers, acquisitions and reorganizations. Securities of
special-situation companies may decline in value if the anticipated benefits of
the special situation do not materialize.
NON-DIVERSIFIED STATUS
The portfolio is considered a non-diversified portfolio under the Investment
Company Act of 1940 and is permitted to invest a greater proportion of its
assets in the securities of a smaller number of issuers. As a result, the
portfolio may be subject to greater volatility with respect to its investments
than a portfolio that is more broadly diversified.
5
<PAGE> 242
PERFORMANCE SUMMARY
Performance information is not included because, as of the date of this
Prospectus, the portfolio did not have a full calendar year of operations.
INVESTOR EXPENSES
FEES AND PORTFOLIO EXPENSES
This table describes the fees and expenses you may bear as a shareholder. Annual
portfolio operating expense figures are based on estimated expenses (before fee
waivers and expense reimbursements) for the fiscal year ending December 31,
2000. The table does not reflect additional charges and expenses which are, or
may be, imposed under the variable contracts or plans; such charges and expenses
are described in the prospectus of the insurance company separate account or in
the plan documents or other informational materials supplied by plan sponsors.
<TABLE>
<CAPTION>
<S> <C>
SHAREHOLDER FEES
(paid directly from your investment)
Sales charge "load" on purchases NONE
Deferred sales charge "load" NONE
Sales charge "load" on reinvested distributions NONE
Redemption fees NONE
Exchange fees NONE
ANNUAL PORTFOLIO OPERATING EXPENSES
(deducted from fund assets)
Management fee .90%
Distribution and service (12b-1) fee NONE
Other expenses .63%
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES* 1.53%
</TABLE>
* Estimated fees and expenses (after fee waivers and expense reimbursements) for
the fiscal year ending December 31, 2000 are shown below. Fee waivers and
expense reimbursements or credits are expected to reduce expenses for the
portfolio during 2000 but may be discontinued at any time:
<TABLE>
<CAPTION>
EXPENSES AFTER
WAIVERS AND
REIMBURSEMENTS
<S> <C>
Management fee .72%
Distribution and service (12b-1) fee NONE
Other expenses .53%
----
TOTAL ANNUAL PORTFOLIO OPERATING EXPENSES 1.25%
</TABLE>
EXAMPLE
This example may help you compare the cost of investing in the portfolio with
the cost of investing in other mutual funds. Because it uses hypothetical
conditions, your actual costs may be higher or lower.
Assume you invest $10,000, the portfolio returns 5% annually, expense ratios
remain as listed in the first table above (before fee waivers and expense
reimbursements and credits), and you close your account at the end of each of
the time periods shown. Based on these assumptions, your cost would be:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS
<S> <C>
$156 $483
</TABLE>
6
<PAGE> 243
THE PORTFOLIO IN DETAIL
THE MANAGEMENT FIRM
CREDIT SUISSE ASSET MANAGEMENT, LLC
One Citicorp Center
153 East 53rd Street
New York, NY 10022
- Investment adviser for the portfolio
- Responsible for managing the portfolio's assets according to its goal and
strategies
- A member of Credit Suisse Asset Management, the institutional asset
management and mutual fund arm of Credit Suisse Group (Credit Suisse), one of
the world's leading banks
- Credit Suisse Asset Management companies manage approximately $72 billion in
the U.S. and $203 billion globally as of December 1999
- Credit Suisse Asset Management has offices in 14 countries, including
SEC-registered offices in New York and London; other offices (such as those
in Budapest, Frankfurt, Milan, Moscow, Paris, Prague, Sydney, Tokyo, Warsaw
and Zurich) are not registered with the U.S. Securities and Exchange
Commission
For easier reading, Credit Suisse Asset Management, LLC will be referred to
as "CSAM" or "we" throughout this Prospectus.
PORTFOLIO INFORMATION KEY
A concise description of the portfolio begins on the next page. The
description provides the following information:
GOAL AND STRATEGIES
The portfolio's particular investment goal and the strategies it intends to
use in pursuing that goal. Percentages of portfolio assets are based on total
assets unless indicated otherwise.
PORTFOLIO INVESTMENTS
The primary types of securities in which the portfolio invests. Secondary
investments are described in "More About Risk."
RISK FACTORS
The major risk factors associated with the portfolio. Additional risk factors
are included in "More About Risk."
PORTFOLIO MANAGEMENT
The individuals designated by the investment adviser to handle the
portfolio's day-to-day management.
INVESTOR EXPENSES
Expected expenses (after fee waivers and reimbursements) for the 2000 fiscal
year. Actual expenses may be higher or lower. Additional expenses are, or may
be, imposed under the variable contracts or plans.
- MANAGEMENT FEE The fee paid to the investment adviser for providing
investment advice to the portfolio. Expressed as a percentage of average net
assets after waivers.
- OTHER EXPENSES Fees paid by the portfolio for items such as administration,
transfer agency, custody, auditing, legal and registration fees and
miscellaneous expenses. Expressed as a percentage of average net assets after
waivers, credits and reimbursements.
FINANCIAL HIGHLIGHTS
A table showing the portfolio's audited financial performance for up to five
years.
- TOTAL RETURN How much you would have earned on an investment in the
portfolio, assuming you had reinvested all dividend and capital-gain
distributions.
- PORTFOLIO TURNOVER An indication of trading frequency. The portfolio may sell
securities without regard to the length of time they have been held. A high
turnover rate may increase the portfolio's transaction costs and negatively
affect its performance.
The Annual Report includes the auditor's report, along with the portfolio's
financial statements. It is available free upon request.
7
<PAGE> 244
GOAL AND STRATEGIES
The portfolio seeks maximum capital appreciation. To pursue this goal, it
invests in equity securities of emerging-growth companies.
Emerging-growth companies are small or medium-size companies that:
- have passed their start-up phase
- show positive earnings
- offer the potential for accelerated earnings growth
Emerging-growth companies generally stand to benefit from new products or
services, technological developments, management changes or other factors. They
include "special-situation companies"-- companies experiencing unusual
developments affecting their market value.
Under normal market conditions, the portfolio will invest at least 65% of
assets in equity securities of emerging-growth companies that represent
attractive capital-appreciation opportunities.
Its non-diversified status allows the portfolio to invest a greater share of
its assets in the securities of fewer companies. However, the portfolio managers
typically have diversified the portfolio's investments.
PORTFOLIO INVESTMENTS
This portfolio invests primarily in U.S. equity securities consisting of:
- common and preferred stocks
- securities convertible into common stocks
- rights and warrants
The portfolio may invest up to 10% of assets in foreign securities. To a
limited extent, it may also engage in other investment practices.
RISK FACTORS
This portfolio's principal risk factors are:
- market risk
- start-up and other small companies
- special-situation companies
- non-diversified status
The value of your investment generally will fluctuate in response to
stock-market movements. The portfolio's performance will largely depend upon the
performance of growth stocks, which may be more volatile than the overall stock
market.
Different types of stocks (such as "growth" vs. "value" stocks) tend to shift
in and out of favor depending on market and economic conditions. Accordingly,
the portfolio's performance may sometimes be lower or higher than that of other
types of funds (such as those emphasizing value stocks).
Investing in start-up and other small companies may expose the portfolio to
increased market, liquidity and information risks. These risks are defined in
"More About Risk."
Securities of companies in special situations may decline in value and hurt
the portfolio's performance if the anticipated benefits of the special situation
do not materialize. Non-diversification might cause the portfolio to be more
volatile than a diversified portfolio.
"More About Risk" details certain other investment practices the portfolio
may use. Please read that section carefully before you invest.
PORTFOLIO MANAGEMENT
Elizabeth B. Dater and Stephen J. Lurito manage the portfolio. You can find
out more about them in "Meet the Managers."
INVESTOR EXPENSES
Expected expenses (after fee waivers and reimbursements) for the 2000 fiscal
year:
Management fee .72%
All other expenses .53%
-----
Total expenses 1.25%
8
<PAGE> 245
FINANCIAL HIGHLIGHTS
The figures below have been audited by the portfolio's independent auditors,
PricewaterhouseCoopers LLP.
<TABLE>
<CAPTION>
PERIOD ENDED: 12/99(1)
<S> <C>
PER-SHARE DATA
- ------------------------------------------------------------------------
Net asset value, beginning of period $10.00
- ------------------------------------------------------------------------
Investment activities:
Net investment income 0.04
Net gains or losses on investments and foreign currency
related items (both realized and unrealized) 3.14
- ------------------------------------------------------------------------
Total from investment activities 3.18
- ------------------------------------------------------------------------
Distributions:
From net investment income (0.11)
- ------------------------------------------------------------------------
Total distributions (0.11)
- ------------------------------------------------------------------------
Net asset value, end of period $13.07
- ------------------------------------------------------------------------
Total return 31.95%(2)
- ------------------------------------------------------------------------
RATIOS AND SUPPLEMENTAL DATA
- ------------------------------------------------------------------------
Net assets, end of period (000s omitted) $6,624
Ratio of expenses to average net assets 1.25%(3,4)
Ratio of net income to average net assets .01%(3)
Decrease reflected in above operating expense ratios due to
waivers/reimbursements 9.91%(3)
Portfolio turnover rate 31%(2)
- ------------------------------------------------------------------------
</TABLE>
(1) For the period September 13, 1999 (commencement of operations) through
December 31, 1999.
(2) Non-annualized.
(3) Annualized.
(4) Interest earned on uninvested cash balances is used to offset portions of
the transfer agent expenses. These arrangements had no effect on the
portfolio's expense ratio.
9
<PAGE> 246
MORE ABOUT RISK
INTRODUCTION
The portfolio's goal and principal strategies largely determine its risk
profile. You will find a concise description of the portfolio's risk profile in
"Key Points." The preceding discussion of the portfolio contains more detailed
information. This section discusses other risks that may affect the portfolio.
The portfolio may use certain investment practices that have higher risks
associated with them. However, the portfolio has limitations and policies
designed to reduce many of the risks. The "Certain Investment Practices" table
describes these practices and the limitations on their use.
The portfolio offers its shares to (i) insurance company separate accounts
that fund both variable contracts and variable life insurance contracts and (ii)
tax-qualified pension and retirement plans including participant-directed plans
which elect to make the portfolio an investment option for plan participants.
Due to differences of tax treatment and other considerations, the interests of
various variable contract owners and plan participants participating in the
portfolio may conflict. The Board of Trustees will monitor the portfolio for any
material conflicts that may arise and will determine what action, if any, should
be taken. If a conflict occurs, the Board may require one or more insurance
company separate accounts and/or plans to withdraw its investments in the
portfolio, which may cause the portfolio to sell securities at disadvantageous
prices and disrupt orderly portfolio management. The Board also may refuse to
sell shares of the portfolio to any variable contract or plan or may suspend or
terminate the offering of shares of the portfolio if such action is required by
law or regulatory authority or is in the best interests of the shareholders of
the portfolio.
TYPES OF INVESTMENT RISK
The following risks are referred to throughout this Prospectus.
CORRELATION RISK The risk that changes in the value of a hedging instrument
will not match those of the investment being hedged.
CREDIT RISK The issuer of a security or the counterparty to a contract may
default or otherwise become unable to honor a financial obligation.
CURRENCY RISK Fluctuations in exchange rates between the U.S. dollar and
foreign currencies may negatively affect an investment. Adverse changes in
exchange rates may erode or reverse any gains produced by foreign-
currency-denominated investments and may widen any losses.
EXPOSURE RISK The risk associated with investments (such as derivatives) or
practices (such as short selling) that increase the amount of money the
portfolio could gain or lose on an investment.
- HEDGED Exposure risk could multiply losses generated by a derivative or
practice used for hedging purposes. Such losses should be substantially
offset by gains on the hedged investment. However, while hedging can reduce
or eliminate losses, it can also reduce or eliminate gains.
- SPECULATIVE To the extent that a derivative or practice is not used as a
hedge, the portfolio is directly exposed to its risks. Gains or losses from
speculative positions in a derivative may be much greater than the
derivative's original cost. For example, potential losses from writing
uncovered call options and from speculative short sales are unlimited.
INFORMATION RISK Key information about an issuer, security or market may be
inaccurate or unavailable.
INTEREST-RATE RISK Changes in interest rates may cause a decline in the
market value of an investment. With bonds and other fixed-income securities, a
rise in interest rates typically causes a fall in values, while a fall in
interest rates typically causes a rise in values.
LIQUIDITY RISK Certain portfolio securities may be difficult or impossible to
sell at the time and the price that the portfolio would like. The portfolio may
have to lower the price, sell other securities instead or forego an investment
opportunity. Any of these could have a negative effect on portfolio management
or performance.
MARKET RISK The market value of a security may move up and down, sometimes
rapidly and unpredictably. These fluctuations, which are often referred to as
"volatility," may cause a security to be worth less than it was worth at an
earlier time. Market risk may affect a single issuer, industry, sector of the
economy, or the market as a whole. Market risk is common to most
investments--including stocks and bonds, and the mutual funds that invest in
them.
OPERATIONAL RISK Some countries have less-developed securities markets (and
related transaction, registration and custody practices) that could subject the
portfolio to losses from fraud, negligence, delay or other actions.
POLITICAL RISK Foreign governments may expropriate assets, impose capital or
currency controls, impose punitive taxes, or nationalize a company or industry.
Any of these actions could have a severe effect on security prices and impair
the portfolio's ability to bring its capital or income back to the U.S. Other
political risks include economic policy changes, social and political
instability, military action and war.
VALUATION RISK The lack of an active trading market may make it difficult to
obtain an accurate price for a portfolio security.
10
<PAGE> 247
CERTAIN INVESTMENT PRACTICES
For each of the following practices, this table shows the applicable investment
limitation. Risks are indicated for each practice.
KEY TO TABLE:
<TABLE>
<S> <C>
[-] Permitted without limitation; does not indicate actual use
20% Italic type (e.g., 20%) represents an investment limitation as a percentage of NET
portfolio assets; does not indicate actual use
20% Roman type (e.g., 20%) represents an investment limitation as a percentage of TOTAL
portfolio assets; does not indicate actual use
[ ] Permitted, but not expected to be used to a significant extent
- -- Not permitted
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT PRACTICE LIMIT
<S> <C>
BORROWING The borrowing of money from banks to meet
redemptions or for other temporary or emergency purposes.
Speculative exposure risk. 10%
- --------------------------------------------------------------------
FOREIGN SECURITIES Securities of foreign issuers. May
include depositary receipts. Currency, information,
liquidity, market, political, valuation risks. 10%
- --------------------------------------------------------------------
FUTURES AND OPTIONS ON FUTURES Exchange-traded contracts
that enable the portfolio to hedge against or speculate on
future changes in currency values, interest rates or stock
indexes. Futures obligate the portfolio (or give it the
right, in the case of options) to receive or make payment at
a specific future time based on those future changes.(1)
Correlation, currency, hedged exposure, interest-rate,
market, speculative exposure risks.(2) [ ]
- --------------------------------------------------------------------
INVESTMENT-GRADE DEBT SECURITIES Debt securities rated
within the four highest grades (AAA/Aaa through BBB/Baa) by
Standard & Poor's or Moody's rating service, and unrated
securities of comparable quality. Credit, interest-rate,
market risks. 20%
- --------------------------------------------------------------------
NON-INVESTMENT-GRADE DEBT SECURITIES Debt securities rated
below the fourth-highest grade (BBB/Baa) by Standard &
Poor's or Moody's rating service, and unrated securities of
comparable quality. Commonly referred to as junk bonds.
Credit, information, interest-rate, liquidity, market,
valuation risks. 5%
- --------------------------------------------------------------------
OPTIONS Instruments that provide a right to buy (call) or
sell (put) a particular security, currency or index of
securities at a fixed price within a certain time period.
The portfolio may purchase or sell (write) both put and call
options for hedging or speculative purposes.(1) Correlation,
credit, hedged exposure, liquidity, market, speculative
exposure, valuation risks. 25%
- --------------------------------------------------------------------
RESTRICTED AND OTHER ILLIQUID SECURITIES Certain securities
with restrictions on trading, or those not actively traded.
May include private placements. Liquidity, market, valuation
risks. 10%
- --------------------------------------------------------------------
SECURITIES LENDING Lending portfolio securities to financial
institutions; the portfolio receives cash, U.S. government
securities or bank letters of credit as collateral. Credit,
liquidity, market, operational risks. 33 1/3%
- --------------------------------------------------------------------
SHORT-TERM TRADING Selling a security shortly after
purchase. A fund engaging in short-term trading will have
higher turnover and transaction expenses. Increased
short-term capital gains distributions could raise
shareholders' income tax liability. [-]
- --------------------------------------------------------------------
SPECIAL-SITUATION COMPANIES Companies experiencing unusual
developments affecting their market values. Special
situations may include acquisition, consolidation,
reorganization, recapitalization, merger, liquidation,
special distribution, tender or exchange offer, or
potentially favorable litigation. Securities of a
special-situation company could decline in value and hurt
the portfolio's performance if the anticipated benefits of
the special situation do not materialize. Information,
market risks. [-]
- --------------------------------------------------------------------
START-UP AND OTHER SMALL COMPANIES Companies with small
relative market capitalizations, including those with
continuous operations of less than three years. Information,
liquidity, market, valuation risks. [-]
- --------------------------------------------------------------------
TEMPORARY DEFENSIVE TACTICS Placing some or all of the
portfolio's assets in investments such as money-market
obligations and investment-grade debt securities for
defensive purposes. Although intended to avoid losses in
adverse market, economic, political or other conditions,
defensive tactics might be inconsistent with the portfolio's
principal investment strategies and might prevent the
portfolio from achieving its goal. [ ]
- --------------------------------------------------------------------
WARRANTS Options issued by a company granting the holder the
right to buy certain securities, generally common stock, at
a specified price and usually for a limited time. Liquidity,
market, speculative exposure risks. 10%
- --------------------------------------------------------------------
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS The purchase
or sale of securities for delivery at a future date; market
value may change before delivery. Liquidity, market,
speculative exposure risks. 20%
- --------------------------------------------------------------------
</TABLE>
(1) The portfolio is not obligated to pursue any hedging strategy. In addition,
hedging practices may not be available, may be too costly to be used
effectively or may be unable to be used for other reasons.
(2) The portfolio is limited to 5% of net assets for initial margin and premium
amounts on futures positions considered to be speculative by the Commodity
Futures Trading Commission.
11
<PAGE> 248
MEET THE MANAGERS
[Liz Dater Photo]
ELIZABETH B. DATER
Managing Director
- Co-Portfolio Manager, Emerging Growth Portfolio since inception
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus Asset Management, Inc. (Warburg Pincus)
- With Warburg Pincus since 1978
[Stephen J. Lurito Photo]
STEPHEN J. LURITO
Managing Director
- Co-Portfolio Manager, Emerging Growth Portfolio since inception
- With CSAM since 1999 as a result of Credit Suisse's acquisition of Warburg
Pincus
- With Warburg Pincus since 1987
Job titles indicate position with the investment adviser.
12
<PAGE> 249
ABOUT YOUR ACCOUNT
SHARE VALUATION
The price of your shares is also referred to as their net asset value (NAV).
The NAV is determined at the close of regular trading on the New York Stock
Exchange (NYSE) (usually 4 p.m. Eastern Time) each day the NYSE is open for
business. It is calculated by dividing the portfolio's total assets, less its
liabilities, by the number of shares outstanding.
The portfolio values its securities based on market quotations when it
calculates its NAV. If market quotations are not readily available, securities
and other assets are valued by another method that the Board of Trustees
believes accurately reflects fair value. Debt obligations that will mature in 60
days or less are valued on the basis of amortized cost, unless the Board
determines that using this method would not reflect an investment's value.
Some portfolio securities may be listed on foreign exchanges that are open on
days (such as U.S. holidays) when the portfolio does not compute its price. This
could cause the value of the portfolio's investments to be affected by trading
on days when you cannot buy or sell shares.
DISTRIBUTIONS
Investors in the portfolio are entitled to a share of the portfolio's net
income and gains on investments. The portfolio passes these earnings along to
its shareholders as distributions.
The portfolio earns dividends from stocks and interest from bond,
money-market and other investments. These are passed along as dividend
distributions. The portfolio realizes capital gains whenever it sells securities
for a higher price than it paid for them. These are passed along as capital-gain
distributions.
The portfolio typically distributes dividends and capital gains annually,
usually in December. Distributions will be reinvested automatically in
additional shares of the portfolio.
TAXES
For a discussion of the tax status of a variable contract or pension plan,
refer to the prospectus of the sponsoring participating insurance company
separate account or plan documents or other informational materials supplied by
plan sponsors.
Because shares of the portfolio may be purchased only through variable
contracts and plans, income dividends or capital-gain distributions from the
portfolio are taxable, if at all, to the participating insurance companies and
plans and will be exempt from current taxation of the variable-contract owner or
plan participant if left to accumulate within the variable contract or plan.
The portfolio intends to comply with the diversification requirements
currently imposed by the Internal Revenue Service on separate accounts of
insurance companies as a condition of maintaining the tax-deferred status of
variable contracts.
13
<PAGE> 250
BUYING AND SELLING SHARES
You may not buy or sell shares of the portfolio directly; you may only buy or
sell shares through variable-annuity contracts and variable life insurance
contracts offered by separate accounts of certain insurance companies or through
tax-qualified pension and retirement plans. The portfolio may not be available
in connection with a particular contract or plan.
An insurance company's separate accounts buy and sell shares of the portfolio
at NAV, without any sales or other charges. Each insurance company receives
orders from its contract holders to buy or sell shares of the portfolio on any
business day that the portfolio calculates its NAV. If the order is received by
the insurance company prior to the close of regular trading on the NYSE, the
order will be executed at that day's NAV.
Plan participants may buy shares of the portfolio through their plan by
directing the plan trustee to buy shares for their account in a manner similar
to that described above for variable annuity and variable life insurance
contracts. You should contact your plan sponsor concerning the appropriate
procedure for investing in the portfolio.
The portfolio reserves the right to:
- refuse any specific purchase or exchange request, including those from any
person or group who, in the portfolio's view, is likely to engage in excessive
trading
- change or discontinue its exchange privilege after 30 days' notice to current
investors, or temporarily suspend this privilege during unusual market
conditions
- make a "redemption in kind"--payment in portfolio securities rather than
cash--for certain large redemption amounts that could hurt portfolio
operations
- suspend redemptions or postpone payment dates as permitted by the Investment
Company Act of 1940 (such as during periods other than weekends or holidays
when the NYSE is closed or trading on the NYSE is restricted, or any other
time that the SEC permits)
- stop offering the portfolio's shares for a period of time (such as when
management believes that a substantial increase in assets could adversely
affect it)
14
<PAGE> 251
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<PAGE> 252
FOR MORE INFORMATION
This Prospectus is intended for use in connection with certain insurance
products and pension and retirement plans. Please refer to the prospectus of the
sponsoring participating insurance company separate account or to the plan
documents or other informational materials supplied by plan sponsors for
information regarding distributions and instructions on purchasing or selling a
variable contract and on how to select a portfolio as an investment option for a
variable contract or plan. More information about the portfolio is available
free upon request, including the following:
ANNUAL/SEMIANNUAL REPORTS TO SHAREHOLDERS
Includes financial statements, portfolio investments and detailed performance
information.
The Annual Report also contains a letter from the portfolio manager
discussing market conditions and investment strategies that significantly
affected portfolio performance during its past fiscal year.
OTHER INFORMATION
A current Statement of Additional Information (SAI), which provides more
details about the portfolio, is on file with the Securities and Exchange
Commission (SEC) and is incorporated by reference.
You may visit the SEC's Internet Web site (www.sec.gov) to view the SAI,
material incorporated by reference and other information. You can also obtain
copies by visiting the SEC's Public Reference Room in Washington, DC (phone
202-942-8090) or by sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington, DC 20549-6009 or electronically at
[email protected].
Please contact the Trust to obtain, without charge, the SAI and Annual and
Semiannual Reports and to make shareholder inquiries:
BY TELEPHONE:
800-222-8977
BY MAIL:
Warburg Pincus Trust
P.O. Box 9030
Boston, MA 02205-9030
BY OVERNIGHT OR COURIER SERVICE:
Boston Financial
Attn: Warburg Pincus Trust
66 Brooks Drive
Braintree, MA 02184
ON THE INTERNET:
www.warburg.com
SEC FILE NUMBER:
Warburg Pincus Trust 811-07261
[Warburg Pincus Funds Logo]
P.O. BOX 9030, BOSTON, MA 02205-9030
800-222-8977 [-] www.warburg.com
PROVIDENT DISTRIBUTORS, INC., DISTRIBUTOR. TREMG-1-0500
<PAGE> 253
STATEMENT OF ADDITIONAL INFORMATION
May 1, 2000
------------------------------
WARBURG PINCUS TRUST
EMERGING MARKETS PORTFOLIO
VALUE PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
GLOBAL POST-VENTURE CAPITAL PORTFOLIO
SMALL COMPANY GROWTH PORTFOLIO
EMERGING GROWTH PORTFOLIO
This Statement of Additional Information provides information about Warburg
Pincus Trust (the "Trust"), relating to the Emerging Markets, Value,
International Equity, Global Post-Venture Capital, Small Company Growth and
Emerging Growth Portfolios (each a "Portfolio," and together, the "Portfolios")
that supplements information contained in the Prospectus or Prospectuses for the
relevant Portfolio (collectively, the "Prospectuses"), each dated May 1, 2000.
The Trust's audited Annual Report dated December 31, 1999, which either
accompanies this Statement of Additional Information or have previously been
provided to the investor to whom this Statement of Additional Information is
being sent, is incorporated herein by reference.
This Statement of Additional Information is not itself a Prospectus, no
investment in shares of the Portfolios should be made solely upon the
information contained herein. Copies of the Trust's Prospectuses, Annual Report
and information regarding each Portfolio's current performance may be obtained
by writing or telephoning:
Warburg Pincus
P.O. Box 9030
Boston, MA 02205-9030
1-800-222-8977
<PAGE> 254
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INVESTMENT OBJECTIVES AND POLICIES...................................................................1
OPTIONS ON SECURITIES AND SECURITIES INDICES AND CURRENCY EXCHANGE TRANSACTIONS......................1
SECURITIES OPTIONS...............................................................................1
SECURITIES INDEX OPTIONS.........................................................................4
OTC OPTIONS......................................................................................5
CURRENCY EXCHANGE TRANSACTIONS...................................................................5
FUTURES ACTIVITIES...............................................................................7
HEDGING GENERALLY................................................................................9
SWAPS...........................................................................................10
ASSET COVERAGE FOR FORWARD CONTRACTS, OPTIONS, FUTURES AND OPTIONS ON FUTURES AND SWAPS.........11
FOREIGN INVESTMENTS.................................................................................11
U.S. GOVERNMENT SECURITIES..........................................................................15
MONEY MARKET OBLIGATIONS............................................................................15
DEBT SECURITIES.....................................................................................16
BELOW INVESTMENT GRADE SECURITIES...............................................................17
CONVERTIBLE SECURITIES..............................................................................18
STRUCTURED SECURITIES...........................................................................18
TEMPORARY DEFENSIVE STRATEGIES......................................................................22
SECURITIES OF OTHER INVESTMENT COMPANIES............................................................22
LENDING OF PORTFOLIO SECURITIES.....................................................................22
WHEN-ISSUED SECURITIES AND DELAYED-DELIVERY TRANSACTIONS............................................23
SHORT SALES (GLOBAL POST-VENTURE CAPITAL PORTFOLIO).................................................23
SHORT SALES "AGAINST THE BOX".......................................................................24
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS......................................................25
WARRANTS............................................................................................25
NON-PUBLICLY TRADED AND ILLIQUID SECURITIES.........................................................26
RULE 144A SECURITIES............................................................................26
BORROWING...........................................................................................27
SMALL CAPITALIZATION AND EMERGING GROWTH COMPANIES; UNSEASONED ISSUERS..............................27
"SPECIAL SITUATION" COMPANIES.......................................................................27
GENERAL.........................................................................................28
PRIVATE FUNDS (GLOBAL POST-VENTURE CAPITAL PORTFOLIO)...............................................28
REITS...............................................................................................29
NON-DIVERSIFIED STATUS..............................................................................30
INVESTMENT RESTRICTIONS.............................................................................30
PORTFOLIO VALUATION.................................................................................32
PRIVATE FUNDS (GLOBAL POST-VENTURE CAPITAL PORTFOLIO)...............................................33
PORTFOLIO TRANSACTIONS..............................................................................34
</TABLE>
i
<PAGE> 255
<TABLE>
<S> <C>
Portfolio Turnover.................................................................................36
MANAGEMENT OF THE TRUST............................................................................37
OFFICERS AND BOARD OF TRUSTEES.....................................................................37
TRUSTEES' COMPENSATION.............................................................................41
PORTFOLIO MANAGERS.................................................................................42
CODE OF ETHICS.....................................................................................45
INVESTMENT ADVISERS AND CO-ADMINISTRATORS..........................................................45
CUSTODIAN AND TRANSFER AGENT.......................................................................49
DISTRIBUTION AND SHAREHOLDER SERVICING.............................................................50
DISTRIBUTOR........................................................................................50
SHAREHOLDER SERVICING..............................................................................50
ORGANIZATION OF THE TRUST..........................................................................50
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION.....................................................51
ADDITIONAL INFORMATION CONCERNING TAXES............................................................52
DETERMINATION OF PERFORMANCE.......................................................................55
INDEPENDENT ACCOUNTANTS AND COUNSEL................................................................58
FINANCIAL STATEMENTS...............................................................................59
MISCELLANEOUS......................................................................................59
APPENDIX..........................................................................................A-1
</TABLE>
ii
<PAGE> 256
INVESTMENT OBJECTIVES AND POLICIES
The following information supplements the descriptions of each
Portfolio's investment objective and policies in the Prospectuses. There are no
assurances that the Portfolios will achieve their investment objectives.
The investment objective of each of the Emerging Markets Portfolio and
the Global Post-Venture Capital Portfolio is long-term growth of capital.
The investment objectives of the Value Portfolio are long-term growth of
capital and income.
The investment objective of the International Equity Portfolio is
long-term capital appreciation.
The investment objective of the Small Company Growth Portfolio is capital
growth.
The investment objective of the Emerging Growth Portfolio is maximum
capital appreciation.
Unless otherwise indicated, all of the Portfolios are permitted, but not
obligated, to engage in the following investment strategies, subject to any
percentage limitations set forth below.
The Portfolios are not obligated to pursue any of the following
strategies and do not represent that these techniques are available now or will
be available at any time in the future.
Options on Securities and Securities Indices and Currency Exchange
Transactions.
Each Portfolio may purchase and write (sell) options on securities,
securities indices and currencies for hedging purposes or to increase total
return. Up to 25% of a Portfolio's total assets may be at risk in connection
with investing in options on securities, securities indices and, if applicable,
currencies. The amount of assets considered to be "at risk" in these
transactions is, in the case of purchasing options, the amount of the premium
paid, and, in the case of writing options, the value of the underlying
obligation.
Securities Options. Each Portfolio may write covered put and call options
on stock and debt securities and each Portfolio may purchase such options that
are traded on foreign and U.S. exchanges, as well as OTC Options.
Each Portfolio that may write options realizes fees (referred to as
"premiums") for granting the rights evidenced by the options it has written. A
put option embodies the right of its purchaser to compel the writer of the
option to purchase from the option holder an underlying security at a specified
price for a specified time period or at a specified time. In contrast, a call
option embodies the right of its purchaser to compel the writer of the option to
<PAGE> 257
sell to the option holder an underlying security at a specified price for a
specified time period or at a specified time.
The potential loss associated with purchasing an option is limited to the
premium paid, and the premium would partially offset any gains achieved from its
use. However, for an option writer the exposure to adverse price movements in
the underlying security or index is potentially unlimited during the exercise
period. Writing securities options may result in substantial losses to a
Portfolio, force the sale or purchase of portfolio securities at inopportune
times or at less advantageous prices, limit the amount of appreciation the
Portfolio could realize on its investments or require the Portfolio to hold
securities it would otherwise sell.
The principal reason for writing covered options on a security is to
attempt to realize, through the receipt of premiums, a greater return than would
be realized on the securities alone. In return for a premium, a Portfolio as the
writer of a covered call option forfeits the right to any appreciation in the
value of the underlying security above the strike price for the life of the
option (or until a closing purchase transaction can be effected). A Portfolio
that writes call options retains the risk of an increase in the price of the
underlying security. The size of the premiums that the Portfolio may receive may
be adversely affected as new or existing institutions, including other
investment companies, engage in or increase their option-writing activities.
If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it received. If
security prices remain the same over time, it is likely that the writer will
also profit, because it should be able to close out the option at a lower price.
If security prices decline, the put writer would expect to suffer a loss. This
loss may be less than the loss from purchasing the underlying instrument
directly to the extent that the premium received offsets the effects of the
decline.
In the case of options written by a Portfolio that are deemed covered by
virtue of the Portfolio's holding convertible or exchangeable preferred stock or
debt securities, the time required to convert or exchange and obtain physical
delivery of the underlying common stock with respect to which the Portfolio has
written options may exceed the time within which the Portfolio must make
delivery in accordance with an exercise notice. In these instances, the
Portfolio may purchase or temporarily borrow the underlying securities for
purposes of physical delivery. By so doing, the Portfolio will not bear any
market risk, since the Portfolio will have the absolute right to receive from
the issuer of the underlying security an equal number of shares to replace the
borrowed securities, but the Portfolio may incur additional transaction costs or
interest expenses in connection with any such purchase or borrowing.
Additional risks exist with respect to certain of the securities for
which a Portfolio may write covered call options. For example, if a Portfolio
writes covered call options on mortgage-backed securities, the mortgage-backed
securities that it holds as cover may, because of scheduled amortization or
unscheduled prepayments, cease to be sufficient cover. If this occurs, the
Portfolio will compensate for the decline in the value of the cover by
purchasing an appropriate additional amount of mortgage-backed securities.
2
<PAGE> 258
Options written by a Portfolio will normally have expiration dates
between one and nine months from the date written. The exercise price of the
options may be below, equal to or above the market values of the underlying
securities at the times the options are written. In the case of call options,
these exercise prices are referred to as "in-the-money," "at-the-money" and
"out-of-the-money," respectively. The Portfolios, other than the Emerging
Markets Portfolio, may write (i) in-the-money call options when Credit Suisse
Asset Management, LLC, the Portfolios' investment adviser ("CSAM"), expects that
the price of the underlying security will remain flat or decline moderately
during the option period, (ii) at-the-money call options when CSAM expects that
the price of the underlying security will remain flat or advance moderately
during the option period and (iii) out-of-the-money call options when CSAM
expects that the premiums received from writing the call option plus the
appreciation in market price of the underlying security up to the exercise price
will be greater than the appreciation in the price of the underlying security
alone. In any of the preceding situations, if the market price of the underlying
security declines and the security is sold at this lower price, the amount of
any realized loss will be offset wholly or in part by the premium received.
Out-of-the-money, at-the-money and in-the-money put options (the reverse of call
options as to the relation of exercise price to market price) may be used in the
same market environments that such call options are used in equivalent
transactions. To secure its obligation to deliver the underlying security when
it writes a call option, a Portfolio will be required to deposit in escrow the
underlying security or other assets in accordance with the rules of the Options
Clearing Corporation (the "Clearing Corporation") and of the securities exchange
on which the option is written.
Prior to their expirations, put and call options may be sold in closing
sale or purchase transactions (sales or purchases by the Portfolio prior to the
exercise of options that it has purchased or, if permissible, written,
respectively, of options of the same series) in which the Portfolio may realize
a profit or loss from the sale. An option position may be closed out only where
there exists a secondary market for an option of the same series on a recognized
securities exchange or in the OTC market. When the Portfolio has purchased an
option and engages in a closing sale transaction, whether the Portfolio realizes
a profit or loss will depend upon whether the amount received in the closing
sale transaction is more or less than the premium the Portfolio initially paid
for the original option plus the related transaction costs. Similarly, in cases
where the Portfolio has written an option, it will realize a profit if the cost
of the closing purchase transaction is less than the premium received upon
writing the original option and will incur a loss if the cost of the closing
purchase transaction exceeds the premium received upon writing the original
option. The Portfolio may engage in a closing purchase transaction to realize a
profit, to prevent an underlying security with respect to which it has written
an option from being called or put or, in the case of a call option, to unfreeze
an underlying security (thereby permitting its sale or the writing of a new
option on the security prior to the outstanding option's expiration). The
obligation of the Portfolio under an option it has written would be terminated
by a closing purchase transaction, but the Portfolio would not be deemed to own
an option as a result of the transaction. So long as the obligation of the
Portfolio as the writer of an option continues, the Portfolio may be assigned an
exercise notice by the broker-dealer through which the option was sold,
requiring the Portfolio to deliver the underlying security against payment of
the exercise price. This obligation terminates when the option expires or the
Portfolio effects a closing purchase transaction. A Portfolio cannot effect
3
<PAGE> 259
a closing purchase transaction with respect to an option once it has been
assigned an exercise notice.
There is no assurance that sufficient trading interest will exist to
create a liquid secondary market on a securities exchange for any particular
option or at any particular time, and for some options no such secondary market
may exist. A liquid secondary market in an option may cease to exist for a
variety of reasons. In the past, for example, higher than anticipated trading
activity or order flow or other unforeseen events have at times rendered certain
of the facilities of the Clearing Corporation and various securities exchanges
inadequate and resulted in the institution of special procedures, such as
trading rotations, restrictions on certain types of orders or trading halts or
suspensions in one or more options. There can be no assurance that similar
events, or events that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such event, it might not be possible to
effect closing transactions in particular options. Moreover, a Portfolio's
ability to terminate options positions established in the OTC market may be more
limited than for exchange-traded options and may also involve the risk that
securities dealers participating in OTC transactions would fail to meet their
obligations to the Portfolio. The Portfolio, however, intends to purchase OTC
options only from dealers whose debt securities, as determined by CSAM, are
considered to be investment grade. If, as a covered call option writer, the
Portfolio is unable to effect a closing purchase transaction in a secondary
market, it will not be able to sell the underlying security and would continue
to be at market risk on the security.
Securities exchanges generally have established limitations governing the
maximum number of calls and puts of each class which may be held or written, or
exercised within certain time periods by an investor or group of investors
acting in concert (regardless of whether the options are written on the same or
different securities exchanges or are held, written or exercised in one or more
accounts or through one or more brokers). It is possible that the Trust or a
Portfolio and other clients of CSAM and certain of its affiliates may be
considered to be such a group. A securities exchange may order the liquidation
of positions found to be in violation of these limits and it may impose certain
other sanctions. These limits may restrict the number of options a Portfolio
will be able to purchase on a particular security.
Securities Index Options. Each Portfolio may purchase and write
exchange-listed and OTC put and call options on securities indexes. A securities
index measures the movement of a certain group of securities by assigning
relative values to the securities included in the index, fluctuating with
changes in the market values of the securities included in the index. Some
securities index options are based on a broad market index, such as the NYSE
Composite Index, or a narrower market index such as the Standard & Poor's 100.
Indexes may also be based on a particular industry or market segment.
Options on securities indexes are similar to options on securities except
that (i) the expiration cycles of securities index options are monthly, while
those of securities options are currently quarterly, and (ii) the delivery
requirements are different. Instead of giving the right to take or make delivery
of securities at a specified price, an option on a securities index gives the
holder the right to receive a cash "exercise settlement amount" equal to (a) the
amount, if any, by which the fixed exercise price of the option exceeds (in the
case of a put) or is less than (in the case of a call) the closing value of the
underlying index on the date of exercise, multiplied by (b) a fixed "index
multiplier." Receipt of this cash amount will depend
4
<PAGE> 260
upon the closing level of the securities index upon which the option is based
being greater than, in the case of a call, or less than, in the case of a put,
the exercise price of the index and the exercise price of the option times a
specified multiple. The writer of the option is obligated, in return for the
premium received, to make delivery of this amount. Securities index options may
be offset by entering into closing transactions as described above for
securities options.
OTC Options. The Portfolios may purchase OTC or dealer options or sell
covered OTC options. Unlike exchange-listed options where an intermediary or
clearing corporation, such as the Clearing Corporation, assures that all
transactions in such options are properly executed, the responsibility for
performing all transactions with respect to OTC options rests solely with the
writer and the holder of those options. A listed call option writer, for
example, is obligated to deliver the underlying securities to the clearing
organization if the option is exercised, and the clearing organization is then
obligated to pay the writer the exercise price of the option. If a Portfolio
were to purchase a dealer option, however, it would rely on the dealer from whom
it purchased the option to perform if the option were exercised. If the dealer
fails to honor the exercise of the option by the Portfolio, the Portfolio would
lose the premium it paid for the option and the expected benefit of the
transaction.
Exchange traded options generally have a continuous liquid market while
OTC or dealer options do not. Consequently, the Portfolio will generally be able
to realize the value of a dealer option it has purchased only by exercising it
or reselling it to the dealer who issued it. Similarly, when the Portfolio
writes a dealer option, it generally will be able to close out the option prior
to its expiration only by entering into a closing purchase transaction with the
dealer to which the Portfolio originally wrote the option. Although the
Portfolios will seek to enter into dealer options only with dealers who will
agree to and that are expected to be capable of entering into closing
transactions with the Portfolios, there can be no assurance that the Portfolio
will be able to liquidate a dealer option at a favorable price at any time prior
to expiration. The inability to enter into a closing transaction may result in
material losses to a Portfolio. Until the Portfolio, as a covered OTC call
option writer, is able to effect a closing purchase transaction, it will not be
able to liquidate securities (or other assets) used to cover the written option
until the option expires or is exercised. This requirement may impair the
Portfolio's ability to sell portfolio securities or, with respect to currency
options, currencies at a time when such sale might be advantageous.
Currency Exchange Transactions. The value in U.S. dollars of the assets
of a Portfolio that are invested in foreign securities may be affected favorably
or unfavorably by changes in a variety of factors not applicable to investment
in U.S. securities, and the Portfolio may incur costs in connection with
conversion between various currencies. Currency exchange transactions may be
from any non-U.S. currency into U.S. dollars or into other appropriate
currencies. Each Portfolio will conduct its currency exchange transactions (i)
on a spot (i.e., cash) basis at the rate prevailing in the currency exchange
market, (ii) through entering into futures contracts or options on such
contracts (as described above), (iii) through entering into forward contracts to
purchase or sell currency or (iv) by purchasing exchange-traded currency
options. Risks associated with currency forward contracts and purchasing
currency options are similar to those described herein for futures contracts and
securities and stock index options. In addition, the use of currency
transactions could result in losses from the imposition of foreign exchange
controls, suspension of settlement or other governmental
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actions or unexpected events. Each Portfolio may engage in currency exchange
transactions for both hedging purposes and to increase total return.
Forward Currency Contracts. A forward currency contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract as agreed upon by the
parties, at a price set at the time of the contract. These contracts are entered
into in the interbank market conducted directly between currency traders
(usually large commercial banks and brokers) and their customers. Forward
currency contracts are similar to currency futures contracts, except that
futures contracts are traded on commodities exchanges and are standardized as to
contract size and delivery date.
At or before the maturity of a forward contract, the Portfolio may either
sell a portfolio security and make delivery of the currency, or retain the
security and fully or partially offset its contractual obligation to deliver the
currency by negotiating with its trading partner to enter into an offsetting
transaction. If the Portfolio retains the portfolio security and engages in an
offsetting transaction, the Portfolio, at the time of execution of the
offsetting transaction, will incur a gain or a loss to the extent that movement
has occurred in forward contract prices.
Currency Options. The Portfolios may purchase exchange-traded put and
call options on foreign currencies. Put options convey the right to sell the
underlying currency at a price which is anticipated to be higher than the spot
price of the currency at the time the option is exercised. Call options convey
the right to buy the underlying currency at a price which is expected to be
lower than the spot price of the currency at the time the option is exercised.
Currency Hedging. The Portfolios' currency hedging will be limited to
hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of forward currency with respect to
specific receivables or payables of a Portfolio generally accruing in connection
with the purchase or sale of its portfolio securities. Position hedging is the
sale of forward currency with respect to portfolio security positions. A
Portfolio may not position hedge to an extent greater than the aggregate market
value (at the time of entering into the hedge) of the hedged securities.
A decline in the U.S. dollar value of a foreign currency in which the
Portfolio's securities are denominated will reduce the U.S. dollar value of the
securities, even if their value in the foreign currency remains constant. The
use of currency hedges does not eliminate fluctuations in the underlying prices
of the securities, but it does establish a rate of exchange that can be achieved
in the future. For example, in order to protect against diminutions in the U.S.
dollar value of non-dollar denominated securities it holds, a Portfolio may
purchase foreign currency put options. If the value of the foreign currency does
decline, the Portfolio will have the right to sell the foreign currency for a
fixed amount in dollars and will thereby offset, in whole or in part, the
adverse effect on the U.S. dollar value of its securities that otherwise would
have resulted. Conversely, if a rise in the U.S. dollar value of a currency in
which securities to be acquired are denominated is projected, thereby
potentially increasing the cost of the securities, the Portfolio may purchase
call options on the particular currency. The purchase of these options could
offset, at least partially, the effects of the adverse movements in exchange
rates. The benefit to the Portfolio derived from purchases of currency options,
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like the benefit derived from other types of options, will be reduced by
premiums and other transaction costs. Because transactions in currency exchange
are generally conducted on a principal basis, no fees or commissions are
generally involved. Currency hedging involves some of the same risks and
considerations as other transactions with similar instruments. Although currency
hedges limit the risk of loss due to a decline in the value of a hedged
currency, at the same time, they also limit any potential gain that might result
should the value of the currency increase. If a devaluation is generally
anticipated, the Portfolio may not be able to contract to sell a currency at a
price above the devaluation level it anticipates.
While the values of currency futures and options on futures, forward
currency contracts and currency options may be expected to correlate with
exchange rates, they will not reflect other factors that may affect the value of
the Portfolio's investments and a currency hedge may not be entirely successful
in mitigating changes in the value of the Portfolio's investments denominated in
that currency. A currency hedge, for example, should protect a Yen-denominated
bond against a decline in the Yen, but will not protect the Portfolio against a
price decline if the issuer's creditworthiness deteriorates.
Futures Activities. Each Portfolio may enter into foreign currency,
interest rate and securities index futures contracts and purchase and write
(sell) related options traded on exchanges designated by the Commodity Futures
Trading Commission (the "CFTC") or consistent with CFTC regulations on foreign
exchanges. These futures contracts are standardized contracts for the future
delivery of foreign currency or an interest rate sensitive security or, in the
case of stock index and certain other futures contracts, a cash settlement with
reference to a specified multiplier times the change in the specified index,
exchange rate or interest rate. An option on a futures contract gives the
purchaser the right, in return for the premium paid, to assume a position in a
futures contract. These transactions may be entered into for "bona fide hedging"
purposes as defined in CFTC regulations and other permissible purposes including
hedging against changes in the value of portfolio securities due to anticipated
changes in currency values, interest rates and/or market conditions and
increasing return. Aggregate initial margin and premiums (discussed below)
required to establish positions other than those considered to be "bona fide
hedging" by the CFTC will not exceed 5% of the Portfolio's net asset value after
taking into account unrealized profits and unrealized losses on any such
contracts it has entered into. The Portfolios reserve the right to engage in
transactions involving futures contracts and options on futures contracts to the
extent allowed by CFTC regulations in effect from time to time and in accordance
with a Portfolio's policies. There is no overall limit on the percentage of
Portfolio assets that may be at risk with respect to futures activities.
Futures Contracts. A foreign currency futures contract provides for the
future sale by one party and the purchase by the other party of a certain amount
of a specified non-U.S. currency at a specified price, date, time and place. An
interest rate futures contract provides for the future sale by one party and the
purchase by the other party of a certain amount of a specific interest rate
sensitive financial instrument (debt security) at a specified price, date, time
and place. Securities indexes are capitalization weighted indexes which reflect
the market value of the securities represented in the indexes. A securities
index futures contract is an agreement to be settled by delivery of an amount of
cash equal to a specified multiplier times the difference between the value of
the index at the close of the last trading day on the contract and the price at
which the agreement is made.
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No consideration is paid or received by a Portfolio upon entering into a
futures contract. Instead, the Portfolio is required to segregate with its
custodian an amount of cash or securities acceptable to the broker, such as U.S.
government securities or other liquid high-grade debt obligations, equal to
approximately 1% to 10% of the contract amount (this amount is subject to change
by the exchange on which the contract is traded, and brokers may charge a higher
amount). This amount is known as "initial margin" and is in the nature of a
performance bond or good faith deposit on the contract which is returned to the
Portfolio upon termination of the futures contract, assuming all contractual
obligations have been satisfied. The broker will have access to amounts in the
margin account if the Portfolio fails to meet its contractual obligations.
Subsequent payments, known as "variation margin," to and from the broker, will
be made daily as the currency, financial instrument or securities index
underlying the futures contract fluctuates, making the long and short positions
in the futures contract more or less valuable, a process known as
"marking-to-market." The Portfolios will also incur brokerage costs in
connection with entering into futures transactions.
At any time prior to the expiration of a futures contract, a Portfolio
may elect to close the position by taking an opposite position, which will
operate to terminate the Portfolio's existing position in the contract.
Positions in futures contracts and options on futures contracts (described
below) may be closed out only on the exchange on which they were entered into
(or through a linked exchange). No secondary market for such contracts exists.
Although the Portfolios may enter into futures contracts only if there is an
active market for such contracts, there is no assurance that an active market
will exist at any particular time. Most futures exchanges limit the amount of
fluctuation permitted in futures contract prices during a single trading day.
Once the daily limit has been reached in a particular contract, no trades may be
made that day at a price beyond that limit or trading may be suspended for
specified periods during the day. It is possible that futures contract prices
could move to the daily limit for several consecutive trading days with little
or no trading, thereby preventing prompt liquidation of futures positions at an
advantageous price and subjecting a Portfolio to substantial losses. In such
event, and in the event of adverse price movements, the Portfolio would be
required to make daily cash payments of variation margin. In such situations, if
the Portfolio had insufficient cash, it might have to sell securities to meet
daily variation margin requirements at a time when it would be disadvantageous
to do so. In addition, if the transaction is entered into for hedging purposes,
in such circumstances the Portfolio may realize a loss on a futures contract or
option that is not offset by an increase in the value of the hedged position.
Losses incurred in futures transactions and the costs of these transactions will
affect the Portfolio's performance.
Options on Futures Contracts. Each Portfolio may purchase and write put
and call options on foreign currency, interest rate and index futures contracts
and may enter into closing transactions with respect to such options to
terminate existing positions. There is no guarantee that such closing
transactions can be effected; the ability to establish and close out positions
on such options will be subject to the existence of a liquid market.
An option on a currency, interest rate or securities index futures
contract, as contrasted with the direct investment in such a contract, gives the
purchaser the right, in return for the premium paid, to assume a position in a
futures contract at a specified exercise price at any time prior to the
expiration date of the option. The writer of the option is required upon
exercise to assume an offsetting futures position (a short position if the
option is a call and a
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long position if the option is a put). Upon exercise of an option, the delivery
of the futures position by the writer of the option to the holder of the option
will be accompanied by delivery of the accumulated balance in the writer's
futures margin account, which represents the amount by which the market price of
the futures contract exceeds, in the case of a call, or is less than, in the
case of a put, the exercise price of the option on the futures contract. The
potential loss related to the purchase of an option on a futures contract is
limited to the premium paid for the option (plus transaction costs). Because the
value of the option is fixed at the point of sale, there are no daily cash
payments by the purchaser to reflect changes in the value of the underlying
contract; however, the value of the option does change daily and that change
would be reflected in the net asset value of the Portfolio.
Hedging Generally. In addition to entering into options, futures and
currency exchange transactions for other purposes, including generating current
income to offset expenses or increase return, each Portfolio may enter into
these transactions as hedges to reduce investment risk, generally by making an
investment expected to move in the opposite direction of a portfolio position. A
hedge is designed to offset a loss in a portfolio position with a gain in the
hedged position; at the same time, however, a properly correlated hedge will
result in a gain in the portfolio position being offset by a loss in the hedged
position. As a result, the use of options, futures and currency exchange
transactions for hedging purposes could limit any potential gain from an
increase in the value of the position hedged. In addition, the movement in the
portfolio position hedged may not be of the same magnitude as movement in the
hedge. With respect to futures contracts, since the value of portfolio
securities will far exceed the value of the futures contracts sold by the
Portfolio, an increase in the value of the futures contracts could only
mitigate, but not totally offset, the decline in the value of the Portfolio's
assets.
In hedging transactions based on an index, whether a Portfolio will
realize a gain or loss from the purchase or writing of options on an index
depends upon movements in the level of prices in the securities market generally
or, in the case of certain indexes, in an industry or market segment, rather
than movements in the price of a particular security. The risk of imperfect
correlation increases as the composition of the Portfolio's portfolio varies
from the composition of the index. In an effort to compensate for imperfect
correlation of relative movements in the hedged position and the hedge, the
Portfolio's hedge positions may be in a greater or lesser dollar amount than the
dollar amount of the hedged position. Such "over hedging" or "under hedging" may
adversely affect the Portfolio's net investment results if market movements are
not as anticipated when the hedge is established. Securities index futures
transactions may be subject to additional correlation risks. First, all
participants in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
would distort the normal relationship between the securities index and futures
markets. Secondly, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin requirements in
the securities market. Therefore, increased participation by speculators in the
futures market also may cause temporary price distortions. Because of the
possibility of price distortions in the futures market and the imperfect
correlation between movements in a securities index and movements in the price
of securities index futures, a correct forecast of general market trends by CSAM
still may not result in a successful hedging transaction.
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A Portfolio will engage in hedging transactions only when deemed
advisable by CSAM, and successful use by the Portfolio of hedging transactions
will be subject to CSAM's ability to predict trends in currencies, interest
rates or securities markets, as the case may be, and to predict correctly
movements in the directions of the hedge and the hedged position and the
correlation between them, which predictions could prove to be inaccurate. This
requires different skills and techniques than predicting changes in the price of
individual securities, and there can be no assurance that the use of these
strategies will be successful. Even a well-conceived hedge may be unsuccessful
to some degree because of unexpected market behavior or trends. Losses incurred
in hedging transactions and the costs of these transactions will affect the
Portfolio's performance.
To the extent that a Portfolio engages in the strategies described above,
the Portfolio may experience losses greater than if these strategies had not
been utilized. In addition to the risks described above, these instruments may
be illiquid and/or subject to trading limits, and the Portfolio may be unable to
close out a position without incurring substantial losses, if at all. The
Portfolio is also subject to the risk of a default by a counterparty to an
off-exchange transaction.
Swaps. (Emerging Markets and International Equity Portfolios) The
Emerging Markets and International Equity Portfolios may each enter into swaps
relating to interest rates, indexes, currencies and equity interests of foreign
issuers. A swap transaction is an agreement between a Portfolio and a
counterparty to act in accordance with the terms of the swap contract. Interest
rate swaps involve the exchange by the Portfolio with another party of their
respective commitments to pay or receive interest, such as an exchange of fixed
rate payments for floating rate payments. Index swaps involve the exchange by
the Portfolio with another party of the respective amounts payable with respect
to a notional principal amount related to one or more indexes. Currency swaps
involve the exchange of cash flows on a notional amount of two or more
currencies based on their relative future values. An equity swap is an agreement
to exchange streams of payments computed by reference to a notional amount based
on the performance of a stock index, a basket of stocks or a single stock. A
Portfolio may enter into these transactions for hedging purchases, such as to
preserve a return or spread on a particular investment or portion of its assets,
to protect against currency fluctuations, as a duration management technique or
to protect against any increase in the price of securities the Portfolio
anticipates purchasing at a later date. The Portfolios may also use these
transactions for speculative purposes to increase total return, such as to
obtain the price performance of a security without actually purchasing the
security in circumstances where, for example, the subject security is illiquid,
is unavailable for direct investment or available only on less attractive terms.
Swaps have risks associated with them, including possible default by the
counterparty to the transaction, illiquidity and, where swaps are used as
hedges, the risk that the use of a swap could result in losses greater than if
the swap had not been employed.
A Portfolio will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the agreement, with the Portfolio receiving or paying, as the case
may be, only the net amount of the two payments. Swaps do not involve the
delivery of securities, other underlying assets or principal. Accordingly, the
risk of loss with respect to swaps is limited to the net amount of payments that
the Portfolio is contractually obligated to make. If the counterparty to a swap
defaults, the Portfolio's risk of loss consists of the net amount of payments
that the Portfolio is
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contractually entitled to receive. Where swaps are entered into for good faith
hedging purposes, CSAM believes such obligations do not constitute senior
securities under the Investment Company Act of 1940, as amended (the "1940
Act"), and, accordingly, will not treat them as being subject to a Portfolio's
borrowing restrictions. Where swaps are entered into for other than hedging
purposes, a Portfolio will segregate an amount of cash or liquid securities
having a value equal to the accrued excess of its obligations over its
entitlements with respect to each swap on a daily basis.
Asset Coverage for Forward Contracts, Options, Futures and Options on
Futures and Swaps. Each Portfolio will comply with guidelines established by the
U.S. Securities and Exchange Commission (the "SEC") and other applicable
regulatory bodies with respect to coverage of forward currency contracts;
options written by the Portfolios on currencies, securities and securities
indexes and swaps; and currency, interest rate and index futures contracts and
options on these futures contracts. These guidelines may, in certain instances,
require segregation by the Portfolio of cash or liquid securities with its
custodian or a designated sub-custodian to the extent the Portfolio's
obligations with respect to these strategies are not otherwise "covered" through
ownership of the underlying security, financial instrument or currency or by
other portfolio positions or by other means consistent with applicable
regulatory policies. Segregated assets cannot be sold or transferred unless
equivalent assets are substituted in their place or it is no longer necessary to
segregate them. As a result, there is a possibility that segregation of a large
percentage of a Portfolio's assets could impede portfolio management or the
Portfolio's ability to meet redemption requests or other current obligations.
For example, a call option written by a Portfolio on securities may
require the Portfolio to hold the securities subject to the call (or securities
convertible into the securities without additional consideration) or to
segregate assets (as described above) sufficient to purchase and deliver the
securities if the call is exercised. A call option written by a Portfolio on an
index may require the Portfolio to own portfolio securities that correlate with
the index or to segregate assets (as described above) equal to the excess of the
index value over the exercise price on a current basis. A put option written by
a Portfolio may require the Portfolio to segregate assets (as described above)
equal to the exercise price. The Portfolio could purchase a put option if the
strike price of that option is the same or higher than the strike price of a put
option sold by the Portfolio. If a Portfolio holds a futures or forward
contract, the Portfolio could purchase a put option on the same futures or
forward contract with a strike price as high or higher than the price of the
contract held. The Portfolio may enter into fully or partially offsetting
transactions so that its net position, coupled with any segregated assets (equal
to any remaining obligation), equals its net obligation. Asset coverage may be
achieved by other means when consistent with applicable regulatory policies.
Foreign Investments. Since the Emerging Markets, International Equity and
Global Post-Venture Capital Portfolios will, and the Value Portfolio (up to 20%
of its total assets) and the Small Company Growth and Emerging Growth Portfolios
(up to 10% of total assets) may, invest in foreign securities, investors should
recognize that investing in foreign companies involves certain risks, including
those discussed below, which are in addition to those associated with investing
in U.S. issuers. Individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency and
balance
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of payments positions. A Portfolio may invest in securities of foreign
governments (or agencies or instrumentalities thereof), and many, if not all, of
the foregoing considerations apply to such investments as well.
Foreign Currency Exchange. Since each Portfolio may invest in securities
denominated in currencies other than the U.S. dollar, and since a Portfolio may
temporarily hold funds in bank deposits or other money market investments
denominated in foreign currencies, each Portfolio's investments in foreign
companies may be affected favorably or unfavorably by exchange control
regulations or changes in the exchange rate between such currencies and the
dollar. A change in the value of a foreign currency relative to the U.S. dollar
will result in a corresponding change in the dollar value of a Portfolio's
assets denominated in that foreign currency. Changes in foreign currency
exchange rates may also affect the value of dividends and interest earned, gains
and losses realized on the sale of securities and net investment income and
gains, if any, to be distributed by a Portfolio with respect to its foreign
investments. Unless otherwise contracted, the rate of exchange between the U.S.
dollar and other currencies is determined by the forces of supply and demand in
the foreign exchange markets. Changes in the exchange rate may result over time
from the interaction of many factors directly or indirectly affecting economic
and political conditions in the United States and a particular foreign country,
including economic and political developments in other countries. Governmental
intervention may also play a significant role. National governments rarely
voluntarily allow their currencies to float freely in response to economic
forces. Sovereign governments use a variety of techniques, such as intervention
by a country's central bank or imposition of regulatory controls or taxes, to
affect the exchange rates of their currencies. A Portfolio may use hedging
techniques with the objective of protecting against loss through the fluctuation
of the valuation of foreign currencies against the U.S. dollar, particularly the
forward market in foreign exchange, currency options and currency futures.
Information. The majority of the foreign securities held by a Portfolio
will not be registered with, nor the issuers thereof be subject to reporting
requirements of, the SEC. Accordingly, there may be less publicly available
information about the securities and about the foreign company or government
issuing them than is available about a domestic company or government entity.
Foreign companies are generally subject to financial reporting standards,
practices and requirements that are either not uniform or less rigorous than
those applicable to U.S. companies.
Political Instability. With respect to some foreign countries, there is
the possibility of expropriation or confiscatory taxation, limitations on the
removal of funds or other assets of the Portfolio, political or social
instability, or domestic developments which could affect U.S. investments in
those and neighboring countries.
Foreign Markets. Securities of some foreign companies are less liquid and
their prices are more volatile than securities of comparable U.S. companies.
Certain foreign countries are known to experience long delays between the trade
and settlement dates of securities purchased or sold, which may result in
increased exposure to market and foreign exchange fluctuation and increased
liquidity.
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Increased Expenses. The operating expenses of the International Equity
and Emerging Markets Portfolios (and, to the extent they invest in foreign
securities, the Value, Global Post-Venture Capital and Small Company Growth
Portfolios) can be expected to be higher than that of an investment company
investing exclusively in U.S. securities, since the expenses of the Portfolio
associated with foreign investing, such as custodial costs, valuation costs and
communication costs, as well as the rate of the investment advisory fees, though
similar to such expenses of some other international funds, are higher than
those costs incurred by other investment companies.
Privatizations. Each Portfolio may invest in privatizations (i.e. foreign
government programs of selling interests in government-owned or controlled
enterprises). The ability of U.S. entities, such as the Portfolios, to
participate in privatizations may be limited by local law, or the terms for
participation may be less advantageous than for local investors. There can be no
assurance that privatization programs will be available or successful. The
International Equity and Emerging Markets Portfolios could invest to a
significant extent in privatizations.
Foreign Debt Securities. The returns on foreign debt securities reflect
interest rates and other market conditions prevailing in those countries and the
effect of gains and losses in the denominated currencies against the U.S.
dollar, which have had a substantial impact on investment in foreign fixed
income securities. The relative performance of various countries' fixed income
markets historically has reflected wide variations relating to the unique
characteristics of each country's economy. Year-to-year fluctuations in certain
markets have been significant, and negative returns have been experienced in
various markets from time to time.
The foreign government securities in which a Portfolio may invest
generally consist of obligations issued or backed by national, state or
provincial governments or similar political subdivisions or central banks in
foreign countries. Foreign government securities also include debt obligations
of supranational entities, which include international organizations designated
or backed by governmental entities to promote economic reconstruction or
development, international banking institutions and related government agencies.
Examples include the International Bank for Reconstruction and Development (the
"World Bank"), the European Coal and Steel Community, the Asian Development Bank
and the InterAmerican Development Bank.
Foreign government securities also include debt securities of
"quasi-governmental agencies" and debt securities denominated in multinational
currency units of an issuer (including supranational issuers). Debt securities
of quasi-governmental agencies are issued by entities owned by either a
national, state or equivalent government or are obligations of a political unit
that is not backed by the national government's full faith and credit and
general taxing powers. An example of a multinational currency unit is the
European Currency Unit ("ECU"). An ECU represents specified amounts of the
currencies of certain member states of the European Economic Community. The
specific amounts of currencies comprising the ECU may be adjusted by the Council
of Ministers of the European Community to reflect changes in relative values of
the underlying currencies.
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Brady Bonds. Each Portfolio may invest in so-called "Brady Bonds," which
have been issued by Costa Rica, Mexico, Uruguay and Venezuela and which may be
issued by other Latin American countries. Brady Bonds are issued as part of a
debt restructuring in which the bonds are issued in exchange for cash and
certain of the country's outstanding commercial bank loans. Investors should
recognize that Brady Bonds do not have a long payment history. Brady Bonds may
be collateralized or uncollateralized, are issued in various currencies
(primarily the U.S. dollar) and are actively traded in the over-the-counter
("OTC") secondary market for debt of Latin American issuers. The International
Equity and Emerging Markets Portfolios could invest to a significant extent in
Brady bonds.
Depositary Receipts. Certain of the above risks may be involved with
ADRs, European Depositary Receipts ("EDRs") and International Depositary
Receipts ("IDRs"), instruments that evidence ownership of underlying securities
issued by a foreign corporation. ADRs, EDRs and IDRs may not necessarily be
denominated in the same currency as the securities whose ownership they
represent. ADRs are typically issued by a U.S. bank or trust company. EDRs
(sometimes referred to as Continental Depositary Receipts) are issued in Europe
and IDRs (sometimes referred to as Global Depositary Receipts) are issued
outside the United States, each typically by non-U.S. banks and trust companies.
The risks associated with investing in securities of non-U.S. issuers are
generally heightened for investments in securities of issuers in emerging
markets.
Emerging Markets. One or more Portfolios with authority to invest outside
of the United States may invest in securities of issuers located in less
developed countries considered to be "emerging markets." The Emerging Market
Portfolio and the International Equity Portfolio may invest in securities of
issuers located in emerging markets to a significant extent. Investing in
securities of issuers located in emerging markets involves not only the risks
described above with respect to investing in foreign securities, but also other
risks, including exposure to economic structures that are generally less diverse
and mature than, and to political systems that can be expected to have less
stability than, those of developed countries. For example, many investments in
emerging markets experienced significant declines in value due to political and
currency volatility in emerging markets countries during the latter part of
1997. Other characteristics of emerging markets that may affect investment there
include certain national policies that may restrict investment by foreigners in
issuers or industries deemed sensitive to relevant national interests and the
absence of developed legal structures governing private and foreign investments
and private property. The typically small size of the markets for securities of
issuers located in emerging markets and the possibility of a low or nonexistent
volume of trading in those securities may also result in a lack of liquidity and
in price volatility of those securities.
Euro Conversion. The introduction of a single European currency, the
euro, on January 1, 1999 for participating European nations in the Economic
Monetary Union presented unique risks and uncertainties for investors in those
countries, including (i) the functioning of the payment and operational systems
of banks and other financial institutions; (ii) the creation of suitable
clearing and settlement payment schemes for the euro; (iii) the fluctuation of
the euro relative to non-euro currencies during the transition period from
January 1, 1999 to December 31, 2000 and beyond; and (iv) whether the interest
rate, tax and labor regimes of the European countries participating in the euro
will converge over time. Further, the conversion of the currencies of other
Economic Monetary Union countries, such
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as the United Kingdom, and the admission of other countries, including Central
and Eastern European countries, to the Economic Monetary Union could adversely
affect the euro. These or other factors may cause market disruptions and could
adversely affect the value of foreign securities and currencies held by the
Portfolios.
U.S. Government Securities. The obligations issued or guaranteed by the
U.S. government in which a Portfolio may invest include: direct obligations of
the U.S. Treasury and obligations issued by U.S. government agencies and
instrumentalities. Included among direct obligations of the United States are
Treasury Bills, Treasury Notes and Treasury Bonds, which differ in terms of
their interest rates, maturities and dates of issuance. Treasury Bills have
maturities of less than one year, Treasury Notes have maturities of one to 10
years and Treasury Bonds generally have maturities of greater than 10 years at
the date of issuance. Included among the obligations issued by agencies and
instrumentalities of the United States are: instruments that are supported by
the full faith and credit of the United States (such as certificates issued by
the Government National Mortgage Association ("GNMA")); instruments that are
supported by the right of the issuer to borrow from the U.S. Treasury (such as
securities of Federal Home Loan Banks); and instruments that are supported by
the credit of the instrumentality (such as Federal National Mortgage Association
("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC") bonds).
Other U.S. government securities the Portfolios may invest in include
securities issued or guaranteed by the Federal Housing Administration, Farmers
Home Loan Administration, Export-Import Bank of the United States, Small
Business Administration, Government National Mortgage Association, General
Services Administration, Central Bank for Cooperatives, Federal Farm Credit
Banks, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal
Intermediate Credit Banks, Federal Land Banks, Federal National Mortgage
Association, Federal Maritime Administration, Tennessee Valley Authority,
District of Columbia Armory Board and Student Loan Marketing Association. Each
Portfolio may also invest in instruments that are supported by the right of the
issuer to borrow from the U.S. Treasury and instruments that are supported by
the credit of the instrumentality. Because the U.S. government is not obligated
by law to provide support to an instrumentality it sponsors, a Portfolio will
invest in obligations issued by such an instrumentality only if CSAM determines
that the credit risk with respect to the instrumentality does not make its
securities unsuitable for investment by the Portfolio.
Money Market Obligations. Each Portfolio is authorized to invest under
normal market conditions up to 20% of its assets in domestic and foreign
short-term (one year or less remaining to maturity) and, in the case of the
Emerging Markets, International Equity, Global Post-Venture Capital and Small
Company Growth Portfolios, medium-term (five years or less remaining maturity)
money market obligations. Money market instruments consist of obligations issued
or guaranteed by the U.S. government or a foreign government, their agencies or
instrumentalities; bank obligations (including certificates of deposit, time
deposits and bankers' acceptances of domestic or foreign, domestic savings and
loans and similar institutions) that are high quality investments; commercial
paper rated no lower than A-2 by Standard & Poor's Ratings Services ("S&P") or
Prime-2 by Moody's Investors Service, Inc. ("Moody's") or the equivalent from
another major rating service or, if unrated, of an issuer having an outstanding,
unsecured debt issue then rated within the three highest rating categories; and
repurchase agreements with respect to the foregoing.
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Repurchase Agreements. Each Portfolio may invest in repurchase agreement
transactions with member banks of the Federal Reserve System and certain
non-bank dealers. Repurchase agreements are contracts under which the buyer of a
security simultaneously commits to resell the security to the seller at an
agreed-upon price and date. Under the terms of a typical repurchase agreement, a
Portfolio would acquire any underlying security for a relatively short period
(usually not more than one week) subject to an obligation of the seller to
repurchase, and the Portfolio to resell, the obligation at an agreed-upon price
and time, thereby determining the yield during the Portfolio's holding period.
This arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Portfolio's holding period. The value of the underlying
securities will at all times be at least equal to the total amount of the
purchase obligation, including interest. The Portfolio bears a risk of loss in
the event that the other party to a repurchase agreement defaults on its
obligations or becomes bankrupt and the Portfolio is delayed or prevented from
exercising its right to dispose of the collateral securities, including the risk
of a possible decline in the value of the underlying securities during the
period while the Portfolio seeks to assert this right. CSAM monitors the
creditworthiness of those bank and non-bank dealers with which the Portfolio
enters into repurchase agreements to evaluate this risk. A repurchase agreement
is considered to be a loan under the 1940 Act.
Money Market Mutual Funds. Where CSAM believes that it would be
beneficial to a Portfolio and appropriate considering the factors of return and
liquidity, a Portfolio may invest up to 5% of its assets in securities of money
market mutual funds that are unaffiliated with the Portfolio or CSAM. A money
market mutual fund is an investment company that invests in short-term high
quality money market instruments. A money market mutual fund generally does not
purchase securities with a remaining maturity of more than one year. As a
shareholder in any mutual fund, a Portfolio will bear its ratable share of the
mutual fund's expenses, including management fees, and will remain subject to
payment of the Portfolio's management fees and other expenses with respect to
assets so invested.
Debt Securities. Each of the Emerging Markets Portfolio and the
International Equity Portfolio may invest up to 35%, and each of the Value
Portfolio, the Global Post-Venture Capital Portfolio, Small Company Growth
Portfolio and Emerging Growth Portfolio may invest up to 20%, of its total
assets in debt securities (other than money market obligations). Any percentage
limitation on a Portfolio's ability to invest in debt securities will not be
applicable during periods when the Portfolio pursues a temporary defensive
strategy as discussed below. The interest income to be derived may be
considered as one factor in selecting debt securities for investment by CSAM.
Because the market value of debt obligations can be expected to vary inversely
to changes in prevailing interest rates, investing in debt obligations may
provide an opportunity for capital growth when interest rates are expected to
decline. The success of such a strategy is dependent upon CSAM's ability to
forecast accurately changes in interest rates. The market value of debt
obligations may also be expected to vary depending upon, among other factors,
the ability of the issuer to repay principal and interest, any change in
investment rating and general economic conditions.
Each Portfolio may invest to a limited extent in zero coupon securities.
See "Additional Information Concerning Taxes" for a discussion of the tax
consequences to shareholders in a Portfolio that invests in zero coupon
securities.
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A security will be deemed to be investment grade if it is rated within
the four highest grades by Moody's or S&P or, if unrated, is determined to be
of comparable quality by CSAM. Securities rated in the fourth highest grade may
have speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade bonds. Subsequent to
its purchase by a Portfolio, an issue of securities may cease to be rated or
its rating may be reduced below the minimum required for purchase by the
Portfolio. Neither event will require sale of such securities, although CSAM
will consider such event in its determination of whether the Portfolio should
continue to hold the securities.
Below Investment Grade Securities. The Emerging Markets Portfolio may
invest or hold up to 35% of its net assets in below investment grade debt and
equity securities including convertible securities. Within the 20% limitation
on investments in debt securities, up to 10% of the Value Portfolio's assets
may be invested in debt securities rated below investment grade, including
convertible debt securities. The International Equity, Global Post-Venture
Capital, Small Company Growth and Emerging Growth Portfolios may each invest up
to 5% of its total assets in below investment grade debt securities, which will
be included in any overall investment limitation or investment minimum on debt
securities.
Below investment grade debt securities may be rated as low as C by
Moody's or D by S&P, or be deemed by CSAM to be of equivalent quality.
Securities that are rated C by Moody's are the lowest rated class and can be
regarded as having extremely poor prospects of ever attaining any real
investment standing. A security rated D by S&P is in default or is expected to
default upon maturity or payment date. Below investment grade securities
(commonly referred to as "junk bonds"), (i) will likely have some quality and
protective characteristics that, in the judgment of the rating organizations,
are outweighed by large uncertainties or major risk exposures to adverse
conditions and (ii) are predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the terms of
the obligation. The market values of certain of these securities also tend to
be more sensitive to individual corporate developments and changes in economic
conditions than investment grade securities. In addition, these securities
generally present a higher degree of credit risk. The risk of loss due to
default is significantly greater because these securities generally are
unsecured and frequently are subordinated to the prior payment of senior
indebtedness.
While the market values of below investment grade securities tend to
react less to fluctuations in interest rate levels than do those of investment
grade securities, the market values of certain of these securities also tend to
be more sensitive to individual corporate developments and changes in economic
conditions than investment grade securities. In addition, below investment
grade securities generally present a higher degree of credit risk. Issuers of
below investment grade securities are often highly leveraged and may not have
more traditional methods of financing available to them so that their ability
to service their obligations during an economic downturn or during sustained
periods of rising interest rates may be impaired. The risk of loss due to
default by such issuers is significantly greater because below investment grade
securities generally are unsecured and frequently are subordinated to the prior
payment of senior indebtedness.
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An economic recession could disrupt severely the market for such
securities and may adversely affect the value of such securities and the
ability of the issuers of such securities to repay principal and pay interest
thereon.
A Portfolio may have difficulty disposing of certain of these securities
because there may be a thin trading market. Because there is no established
retail secondary market for many of these securities, the Trust anticipates
that these securities could be sold only to a limited number of dealers or
institutional investors. To the extent a secondary trading market for these
securities does exist, it generally is not as liquid as the secondary market
for investment grade securities. The lack of a liquid secondary market, as well
as adverse publicity and investor perception with respect to these securities,
may have an adverse impact on market price and a Portfolio's ability to dispose
of particular issues when necessary to meet the Portfolio's liquidity needs or
in response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. The lack of a liquid secondary market for
certain securities also may make it more difficult for a Portfolio to obtain
accurate market quotations for purposes of valuing the Portfolio and
calculating its net asset value.
The market value of below investment grade securities is more volatile
than that of investment grade securities. Factors adversely impacting the
market value of these securities will adversely impact the Portfolio's net
asset value. The Portfolio will rely on the judgment, analysis and experience
of CSAM in evaluating the creditworthiness of an issuer. In this evaluation,
CSAM will take into consideration, among other things, the issuer's financial
resources, its sensitivity to economic conditions and trends, its operating
history, the quality of the issuer's management and regulatory matters.
Normally, below investment grade securities are not intended for short-term
investment. A Portfolio may incur additional expenses to the extent it is
required to seek recovery upon a default in the payment of principal or
interest on its portfolio holdings of such securities.
Convertible Securities. Convertible securities in which a Portfolio may
invest, including both convertible debt and convertible preferred stock, may be
converted at either a stated price or stated rate into underlying shares of
common stock. Because of this feature, convertible securities enable an
investor to benefit from increases in the market price of the underlying common
stock. Convertible securities provide higher yields than the underlying equity
securities, but generally offer lower yields than non-convertible securities of
similar quality. Like bonds, the value of convertible securities fluctuates in
relation to changes in interest rates and, in addition, also fluctuates in
relation to the underlying common stock.
Structured Securities. The Portfolios may purchase any type of publicly
traded or privately negotiated fixed income security, including mortgage-backed
securities; structured notes, bonds or debentures; and assignments of and
participations in loans.
Mortgage-Backed Securities. Each Portfolio may invest in mortgage-backed
securities, such as those issued by the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association ("FNMA"), the
Federal Home Loan Mortgage Corporation ("FHLMC") or certain foreign issuers.
Mortgage-backed securities represent direct or indirect participations in, or
are secured by and payable from, mortgage loans secured by real property. The
mortgages backing these securities include, among other mortgage instruments,
conventional 30-year fixed-rate mortgages, 15-year fixed rate mortgages,
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graduated payment mortgages and adjustable rate mortgages. The government or
the issuing agency typically guarantees the payment of interest and principal
of these securities. However, the guarantees do not extend to the securities'
yield or value, which are likely to vary inversely with fluctuations in
interest rates, nor do the guarantees extend to the yield or value of the
Portfolio's shares. These securities generally are "pass-through" instruments,
through which the holders receive a share of all interest and principal
payments from the mortgages underlying the securities, net of certain fees.
Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average life assumption. The average life of pass-through pools
varies with the maturities of the underlying mortgage loans. A pool's term may
be shortened by unscheduled or early payments of principal on the underlying
mortgages. The occurrence of mortgage prepayments is affected by various
factors, including the level of interest rates, general economic conditions,
the location, scheduled maturity and age of the mortgage and other social and
demographic conditions. Because prepayment rates of individual pools vary
widely, it is not possible to predict accurately the average life of a
particular pool. At present, pools, particularly those with loans with other
maturities or different characteristics, are priced on an assumption of average
life determined for each pool. In periods of falling interest rates, the rate
of prepayment tends to increase, thereby shortening the actual average life of
a pool of mortgage-related securities. Conversely, in periods of rising rates
the rate of prepayment tends to decrease, thereby lengthening the actual
average life of the pool. However, these effects may not be present, or may
differ in degree, if the mortgage loans in the pools have adjustable interest
rates or other special payment terms, such as a prepayment charge. Actual
prepayment experience may cause the yield of mortgage-backed securities to
differ from the assumed average life yield. Reinvestment of prepayments may
occur at higher or lower interest rates than the original investment, thus
affecting the Portfolio's yield. In addition, mortgage-backed securities issued
by certain non-government entities and collateralized mortgage obligations may
be less marketable than other securities.
The rate of interest on mortgage-backed securities is lower than the
interest rates paid on the mortgages included in the underlying pool due to the
annual fees paid to the servicer of the mortgage pool for passing through
monthly payments to certificate holders and to any guarantor, such as GNMA, and
due to any yield retained by the issuer. Actual yield to the holder may vary
from the coupon rate, even if adjustable, if the mortgage-backed securities are
purchased or traded in the secondary market at a premium or discount. In
addition, there is normally some delay between the time the issuer receives
mortgage payments from the servicer and the time the issuer makes the payments
on the mortgage-backed securities, and this delay reduces the effective yield
to the holder of such securities.
Asset-Backed Securities. Each Portfolio may invest in asset-backed
securities, which represent participations in, or are secured by and payable
from, assets such as motor vehicle installment sales, installment loan
contracts, leases of various types of real and personal property and
receivables from revolving credit (credit card) agreements. Such assets are
securitized through the use of trusts and special purpose corporations.
Payments or distributions of principal and interest may be guaranteed up to
certain amounts and for a certain time period by a letter of credit or a pool
insurance policy issued by a financial institution unaffiliated with the trust
or corporation.
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Asset-backed securities present certain risks that are not presented by
other securities in which the Portfolio may invest. Automobile receivables
generally are secured by automobiles. Most issuers of automobile receivables
permit the loan servicers to retain possession of the underlying obligations.
If the servicer were to sell these obligations to another party, there is a
risk that the purchaser would acquire an interest superior to that of the
holders of the asset-backed securities. In addition, because of the large
number of vehicles involved in a typical issuance and technical requirements
under state laws, the trustee for the holders of the automobile receivables may
not have a proper security interest in the underlying automobiles. Therefore,
there is the possibility that recoveries on repossessed collateral may not, in
some cases, be available to support payments on these securities. Credit card
receivables are generally unsecured, and the debtors are entitled to the
protection of a number of state and federal consumer credit laws, many of which
give such debtors the right to set off certain amounts owed on the credit
cards, thereby reducing the balance due. In addition, there is no assurance
that the security interest in the collateral can be realized.
Loan Participations and Assignments. Each Portfolio may invest in fixed
and floating rate loans ("Loans") arranged through private negotiations between
a foreign government (a "Borrower") and one or more financial institutions
("Lenders"). The majority of a Portfolio's investments in Loans are expected to
be in the form of participations in Loans ("Participations") and assignments of
portions of Loans from third parties ("Assignments"). Participations typically
will result in the Portfolio having a contractual relationship only with the
Lender, not with the Borrower. The Portfolio will have the right to receive
payments of principal, interest and any fees to which it is entitled only from
the Lender selling the Participation and only upon receipt by the Lender of the
payments from the Borrower. In connection with purchasing Participations, the
Emerging Markets Portfolio generally will have no right to enforce compliance
by the Borrower with the terms of the loan agreement relating to the Loan, nor
any rights of set-off against the Borrower, and the Portfolio may not directly
benefit from any collateral supporting the Loan in which it has purchased the
Participation. As a result, the Portfolio will assume the credit risk of both
the Borrower and the Lender that is selling the Participation. In the event of
the insolvency of the Lender selling a Participation, the Portfolio may be
treated as a general creditor of the Lender and may not benefit from any
set-off between the Lender and the Borrower. The Emerging Markets Portfolio
will acquire Participations only if the Lender interpositioned between the
Portfolio and the Borrower is determined by CSAM to be creditworthy.
When the Portfolio purchases Assignments from Lenders, the Portfolio
will acquire direct rights against the Borrower on the Loan. However, since
Assignments are generally arranged through private negotiations between
potential assignees and potential assignors, the rights and obligations
acquired by the Portfolio as the purchaser of an Assignment may differ from,
and be more limited than, those held by the assigning Lender.
There are risks involved in investing in Participations and Assignments.
The Portfolio may have difficulty disposing of them because there is no liquid
market for such securities. The lack of a liquid secondary market will have an
adverse impact on the value of such securities and on the Portfolio's ability
to dispose of particular Participations or Assignments when necessary to meet
the Portfolio's liquidity needs or in response to a specific economic event,
such as a deterioration in the creditworthiness of the Borrower. The lack of a
liquid market for Participations and Assignments also may make it more
difficult for the
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Portfolio to assign a value to these securities for purposes of valuing the
Portfolio's portfolio and calculating its net asset value.
Structured Notes, Bonds or Debentures. Typically, the value of the
principal and/or interest on these instruments is determined by reference to
changes in the value of specific currencies, interest rates, commodities,
indexes or other financial indicators (the "Reference") or the relevant change
in two or more References. The interest rate or the principal amount payable
upon maturity or redemption may be increased or decreased depending upon
changes in the applicable Reference. The terms of the structured securities may
provide that in certain circumstances no principal is due at maturity and,
therefore, may result in the loss of a Portfolio's entire investment. The value
of structured securities may move in the same or the opposite direction as the
value of the Reference, so that appreciation of the Reference may produce an
increase or decrease in the interest rate or value of the security at maturity.
In addition, the change in interest rate or the value of the security at
maturity may be a multiple of the change in the value of the Reference so that
the security may be more or less volatile than the Reference, depending on the
multiple. Consequently, structured securities may entail a greater degree of
market risk and volatility than other types of debt obligations.
Stand-By Commitments. (Emerging Markets Portfolio) The Emerging Markets
Portfolio may acquire "stand-by commitments" with respect to securities held in
its portfolio. Under a stand-by commitment, a dealer agrees to purchase at the
Portfolio's option specified securities at a specified price. The Portfolio's
right to exercise stand-by commitments is unconditional and unqualified.
Stand-by commitments acquired by the Portfolio may also be referred to as "put"
options. A stand-by commitment is not transferable by the Portfolio, although
the Portfolio can sell the underlying securities to a third party at any time.
The principal risk of stand-by commitments is that the writer of a
commitment may default on its obligation to repurchase the securities acquired
with it. When investing in stand-by commitments, the Portfolio will seek to
enter into stand-by commitments only with brokers, dealers and banks that, in
the opinion of CSAM, present minimal credit risks. In evaluating the
creditworthiness of the issuer of a stand-by commitment, CSAM will periodically
review relevant financial information concerning the issuer's assets,
liabilities and contingent claims.
The amount payable to the Portfolio upon its exercise of a stand-by
commitment is normally (i) the Portfolio's acquisition cost of the securities
(excluding any accrued interest which the Portfolio paid on their acquisition),
less any amortized market premium or plus any amortized market or original
issue discount during the period the Portfolio owned the securities, plus (ii)
all interest accrued on the securities since the last interest payment date
during that period.
The Portfolio expects that stand-by commitments will generally be
available without the payment of any direct or indirect consideration. However,
if necessary or advisable, the Portfolio may pay for a stand-by commitment
either separately in cash or by paying a higher price for portfolio securities
which are acquired subject to the commitment (thus reducing the yield to
maturity otherwise available for the same securities). The total amount paid in
either manner for outstanding stand-by commitments held in the Portfolio's
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portfolio will not exceed 1/2 of 1% of the value of the Portfolio's total
assets calculated immediately after each stand-by commitment is acquired.
The Portfolio would acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The acquisition of a stand-by commitment would not affect the
valuation or assumed maturity of the underlying securities. Stand-by
commitments acquired by the Portfolio would be valued at zero in determining
net asset value. Where the Portfolio paid any consideration directly or
indirectly for a stand-by commitment, its cost would be reflected as unrealized
depreciation for the period during which the commitment was held by the
Portfolio. Stand-by commitments would not affect the average weighted maturity
of the Portfolio's portfolio.
Temporary Defensive Strategies. When CSAM believes that a defensive
posture is warranted, each Portfolio may invest temporarily without limit in
investment grade debt obligations and in domestic and foreign money market
obligations, including repurchase agreements.
Securities of Other Investment Companies. Each Portfolio may invest in
securities of other investment companies to the extent permitted under the 1940
Act. Presently, under the 1940 Act, a Portfolio may hold securities of another
investment company in amounts which (i) do not exceed 3% of the total
outstanding voting stock of such company, (ii) do not exceed 5% of the value of
the Portfolio's total assets and (iii) when added to all other investment
company securities held by the Portfolio, do not exceed 10% of the value of the
Portfolio's total assets.
Lending of Portfolio Securities. A Portfolio may lend portfolio
securities to brokers, dealers and other financial organizations that meet
capital and other credit requirements or other criteria established by the
Trust's Board of Trustees (the "Board"). These loans, if and when made, may not
exceed 33 1/3% of the Portfolio's total assets (including the Loan collateral)
taken at value. A Portfolio will not lend portfolio securities to its
investment adviser, any sub-investment adviser or their affiliates unless it
has applied for and received specific authority to do so from the SEC. Loans of
portfolio securities will be collateralized by cash or liquid securities, which
are segregated at all times in an amount equal to at least 100% of the current
market value of the loaned securities. Any gain or loss in the market price of
the securities loaned that might occur during the term of the loan would be for
the account of the Portfolio involved. From time to time, a Portfolio may
return a part of the interest earned from the investment of collateral received
for securities loaned to the borrower and/or a third party that is unaffiliated
with the Portfolio and that is acting as a "finder."
By lending its securities, the Portfolio can increase its income by
continuing to receive interest and any dividends on the loaned securities as
well as by either investing the collateral received for securities loaned in
short-term instruments or obtaining yield in the form of interest paid by the
borrower when U.S. Government Securities are used as collateral. Although the
generation of income is not an investment objective of the Portfolios, income
received could be used to pay a Portfolio's expenses and would increase an
investor's total return. Each Portfolio will adhere to the following conditions
whenever its portfolio securities are loaned: (i) the Portfolio must receive at
least 100% cash collateral or equivalent securities of the type discussed in
the preceding paragraph from the borrower; (ii) the borrower must
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increase such collateral whenever the market value of the securities rises
above the level of such collateral; (iii) the Portfolio must be able to
terminate the loan at any time; (iv) the Portfolio must receive reasonable
interest on the loan, as well as any dividends, interest or other distributions
on the loaned securities and any increase in market value; (v) the Portfolio
may pay only reasonable custodian fees in connection with the loan; and (vi)
voting rights on the loaned securities may pass to the borrower, provided,
however, that if a material event adversely affecting the investment occurs,
the Board must terminate the loan and regain the right to vote the securities.
Loan agreements involve certain risks in the event of default or insolvency of
the other party including possible delays or restrictions upon the Portfolio's
ability to recover the loaned securities or dispose of the collateral for the
loan.
When-Issued Securities and Delayed-Delivery Transactions. Each Portfolio
may use up to 20% of its total assets to purchase securities on a "when-issued"
basis or purchase or sell securities for delayed delivery (i.e., payment or
delivery occur beyond the normal settlement date at a stated price and yield). A
Portfolio will enter into a when-issued transaction for the purpose of acquiring
portfolio securities and not for the purpose of leverage, but may sell the
securities before the settlement date if CSAM deems it advantageous to do so.
The payment obligation and the interest rate that will be received on
when-issued securities are fixed at the time the buyer enters into the
commitment. Due to fluctuations in the value of securities purchased or sold on
a when-issued or delayed-delivery basis, the prices obtained on such securities
may be higher or lower than the prices available in the market on the dates when
the investments are actually delivered to the buyers. When a Portfolio agrees to
purchase when-issued or delayed-delivery securities, its custodian will set
aside cash or liquid securities equal to the amount of the commitment. Normally,
the custodian will set aside portfolio securities to satisfy a purchase
commitment, and in such a case the Portfolio may be required subsequently to
segregate additional assets in order to ensure that the value of the segregated
assets remains equal to the amount of the Portfolio's commitment. It may be
expected that the Portfolio's net assets will fluctuate to a greater degree when
it sets aside portfolio securities to cover such purchase commitments than when
it sets aside cash. When the Portfolio engages in when-issued or
delayed-delivery transactions, it relies on the other party to consummate the
trade. Failure of the seller to do so may result in the Portfolio's incurring a
loss or missing an opportunity to obtain a price considered to be advantageous.
Short Sales (Global Post-Venture Capital Portfolio). The Global
Post-Venture Capital Portfolio may engage in "short sales" that do not meet the
definition of short sales "against the box" with respect to up to 10% of its
total assets. In a short sale, the investor sells a borrowed security and has a
corresponding obligation to the lender to return the identical security. The
seller does not immediately deliver the securities sold and is said to have a
short position in those securities until delivery occurs. To deliver the
securities to the buyer, the Portfolio must arrange through a broker to borrow
the securities and, in so doing, the Portfolio becomes obligated to replace the
securities borrowed at their market price at the time of replacement, whatever
that price may be. The Portfolio will make a profit or incur a loss as a result
of a short sale depending on whether the price of the security decreases or
increases between the date of the short sale and the date on which the Portfolio
purchases the security to replace the borrowed securities that have been sold.
The amount of any loss would
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be increased (and any gain decreased) by any premium or interest the Portfolio
is required to pay in connection with a short sale.
The Portfolio's obligation to replace the securities borrowed in
connection with a short sale will be secured by cash or liquid securities
deposited as collateral with the broker. In addition, the Portfolio will place
in a segregated account with its custodian or a qualified subcustodian an
amount of cash or liquid securities equal to the difference, if any, between
(i) the market value of the securities sold at the time they were sold short
and (ii) any cash or liquid securities deposited as collateral with the broker
in connection with the short sale (not including the proceeds of the short
sale). Until it replaces the borrowed securities, the Portfolio will maintain
the segregated account daily at a level so that (a) the amount deposited in the
account plus the amount deposited with the broker (not including the proceeds
from the short sale) will equal the current market value of the securities sold
short and (b) the amount deposited in the account plus the amount deposited
with the broker (not including the proceeds of the short sale) will not be less
than the market value of the securities at the time they were sold short.
Short Sales "Against the Box". Each Portfolio (except the Emerging Growth
Portfolio) may enter into short sales "against the box." Not more than 10% of a
Portfolio's net assets (taken at current value) may be held as collateral for
such sales at any one time. In a short sale, a Portfolio sells a borrowed
security and has a corresponding obligation to the lender to return the
identical security. The seller does not immediately deliver the securities sold
and is said to have a short position in those securities until delivery occurs.
While a short sale is made by selling a security a Portfolio does not own, a
short sale is "against the box" to the extent that a Portfolio contemporaneously
owns or has the right to obtain, at no added cost, securities identical to those
sold short. If the Portfolio engages in a short sale, the collateral for the
short position will be segregated by the Portfolio's custodian or qualified
sub-custodian. While the short sale is open, the Portfolio will continue to
segregate an amount of securities equal in kind and amount to the securities
sold short or securities convertible into or exchangeable for such equivalent
securities. These securities constitute the Portfolio's long position.
The Portfolios do not intend to engage in short sales against the box
for investment purposes. A Portfolio may make a short sale as a hedge, when it
believes that the price of a security may decline, causing a decline in the
value of a security owned by the Portfolio (or a security convertible or
exchangeable for such security). In such case, any future losses in the
Portfolio's long position should be offset by a gain in the short position and,
conversely, any gain in the long position should be reduced by a loss in the
short position. The extent to which such gains or losses are reduced will
depend upon the amount of the security sold short relative to the amount the
Portfolio owns. There will be certain additional transaction costs associated
with short sales against the box, but the Portfolio will endeavor to offset
these costs with the income from the investment of the cash proceeds of short
sales.
If a Portfolio effects a short sale of securities at a time when it has
an unrealized gain on the securities, it may be required to recognize that gain
as if it had actually sold the securities (as a "constructive sale") on the
date it effects the short sale. However, such constructive sale treatment may
not apply if the Portfolio closes out the short sale with
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securities other than the appreciated securities held at the time of the short
sale and if certain other conditions are satisfied. Uncertainty regarding the
tax consequences of effecting short sales may limit the extent to which a
Portfolio may effect short sales.
Reverse Repurchase Agreements and Dollar Rolls. Each Portfolio may enter
into reverse repurchase agreements with member banks of the Federal Reserve
System and certain non-bank dealers. Reverse repurchase agreements involve the
sale of securities held by a Portfolio pursuant to its agreement to repurchase
them at a mutually agreed upon date, price and rate of interest. At the time
the Portfolio enters into a reverse repurchase agreement, it will segregate
cash or liquid securities having a value not less than the repurchase price
(including accrued interest). The segregated assets will be marked-to-market
daily and additional assets will be segregated on any day in which the assets
fall below the repurchase price (plus accrued interest). The Portfolio's
liquidity and ability to manage its assets might be affected when it sets aside
cash or portfolio securities to cover such commitments. Reverse repurchase
agreements involve the risk that the market value of the securities retained in
lieu of sale may decline below the price of the securities the Portfolio has
sold but is obligated to repurchase. In the event the buyer of securities under
a reverse repurchase agreement files for bankruptcy or becomes insolvent, such
buyer or its trustee or receiver may receive an extension of time to determine
whether to enforce the Portfolio's obligation to repurchase the securities, and
the Portfolio's use of the proceeds of the reverse repurchase agreement may
effectively be restricted pending such decision.
The Portfolios also may enter into "dollar rolls," in which the
Portfolio sells fixed-income securities for delivery in the current month and
simultaneously contracts to repurchase similar but not identical (same type,
coupon and maturity) securities on a specified future date. During the roll
period, the Portfolio would forego principal and interest paid on such
securities. The Portfolio would be compensated by the difference between the
current sales price and the forward price for the future purchase, as well as
by the interest earned on the cash proceeds of the initial sale. At the time
the Portfolio enters into a dollar roll transaction, it will segregate with an
approved custodian cash or liquid securities having a value not less than the
repurchase price (including accrued interest) and will subsequently monitor the
segregated assets to ensure that their value is maintained. Reverse repurchase
agreements and dollar rolls that are accounted for as financings are considered
to be borrowings under the 1940 Act.
Warrants. Each Portfolio may invest up to 10% of net assets (15% of its
total assets in the case of the Value Portfolio) in warrants. Warrants are
securities that give the holder the right, but not the obligation to purchase
equity issues of the company issuing the warrants, or a related company, at a
fixed price either on a date certain or during a set period. A Portfolio may
invest in warrants to purchase newly created equity securities consisting of
common and preferred stock. The equity security underlying a warrant is
authorized at the time the warrant is issued or is issued together with the
warrant.
Investing in warrants can provide a greater potential for profit or loss
than an equivalent investment in the underlying security, and, thus, can be a
speculative investment. At the time of issue, the cost of a warrant is
substantially less than the cost of the underlying security itself, and price
movements in the underlying security are generally magnified in the price
movements of the warrant. This leveraging effect enables the investor to gain
exposure
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to the underlying security with a relatively low capital investment. This
leveraging increases an investor's risk, however, in the event of a decline in
the value of the underlying security and can result in a complete loss of the
amount invested in the warrant. In addition, the price of a warrant tends to be
more volatile than, and may not correlate exactly to, the price of the
underlying security. If the market price of the underlying security is below
the exercise price of the warrant on its expiration date, the warrant will
generally expire without value. The value of a warrant may decline because of a
decline in the value of the underlying security, the passage of time, changes
in interest rates or in the dividend or other policies of the company whose
equity underlies the warrant or a change in the perception as to the future
price of the underlying security, or any combination thereof. Warrants
generally pay no dividends and confer no voting or other rights other than to
purchase the underlying security.
Non-Publicly Traded and Illiquid Securities. A Portfolio may not invest
more than 15% of its net assets in illiquid securities, including securities
that are illiquid by virtue of the absence of a readily available market,
repurchase agreements which have a maturity of longer than seven days, time
deposits maturing in more than seven day, certain Rule 144A Securities (as
defined below) and, with respect to the Global Post-Venture Capital Portfolio,
Private Funds (as defined below). Securities that have legal or contractual
restrictions on resale but have a readily available market are not considered
illiquid for purposes of this limitation. Repurchase agreements subject to
demand are deemed to have a maturity equal to the notice period.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Companies whose securities are not publicly traded may not be
subject to the disclosure and other investor protection requirements applicable
to companies whose securities are publicly traded. Limitations on resale may
have an adverse effect on the marketability of portfolio securities and a
mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days without borrowing. A mutual
fund might also have to register such restricted securities in order to dispose
of them resulting in additional expense and delay. Adverse market conditions
could impede such a public offering of securities.
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be
readily resold or on an issuer's ability to honor a demand for repayment. The
fact that there are contractual or legal restrictions on resale to the general
public or to certain institutions may not be indicative of the liquidity of
such investments.
Rule 144A Securities. Rule 144A under the Securities Act adopted by the
SEC allows for a broader institutional trading market for securities otherwise
subject to restriction on resale to the general public. Rule 144A establishes a
"safe harbor" from the registration
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requirements of the Securities Act for resales of certain securities to
qualified institutional buyers. CSAM anticipates that the market for certain
restricted securities such as institutional commercial paper will expand
further as a result of this regulation and use of automated systems for the
trading, clearance and settlement of unregistered securities of domestic and
foreign issuers, such as the PORTAL System sponsored by the National
Association of Securities Dealers, Inc.
An investment in Rule 144A Securities will be considered illiquid and
therefore subject to a Portfolio's limit on the purchase of illiquid securities
unless the Board or its delegates determine that the Rule 144A Securities are
liquid. In reaching liquidity decisions, the Board or its delegates may
consider, inter alia, the following factors: (i) the unregistered nature of the
security; (ii) the frequency of trades and quotes for the security; (iii) the
number of dealers wishing to purchase or sell the security and the number of
other potential purchasers; (iv) dealer undertakings to make a market in the
security and (v) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of the transfer).
Investing in Rule 144A Securities could have the effect of increasing
the level of illiquidity in the Portfolios to the extent that qualified
institutional buyers are unavailable or uninterested in purchasing such
securities from the Portfolios. The Board has adopted guidelines and delegated
to CSAM the daily function of determining and monitoring the illiquidity of
Rule 144A Securities, although the Board will retain ultimate responsibility
for liquidity determinations.
Borrowing. Each Portfolio may borrow up to 30% of its total assets
(except for the Emerging Growth Portfolio which may borrow up to 10% of its
total assets) for temporary or emergency purposes, including to meet portfolio
redemption requests so as to permit the orderly disposition of portfolio
securities or to facilitate settlement transactions on portfolio securities.
Investments (including roll-overs) will not be made when borrowings exceed 5%
of the Portfolio's net assets. Although the principal of such borrowings will
be fixed, the Portfolio's assets may change in value during the time the
borrowing is outstanding. Each Portfolio expects that some of its borrowings
may be made on a secured basis. In such situations, either the custodian will
segregate the pledged assets for the benefit of the lender or arrangements will
be made with a suitable sub-custodian, which may include the lender.
Small Capitalization and Emerging Growth Companies; Unseasoned Issuers.
Investments in small- and medium- sized and emerging growth companies and
companies with continuous operations of less than three years ("unseasoned
issuers"), which may include foreign securities, involve considerations that
are not applicable to investing in securities of established,
larger-capitalization issuers, including reduced and less reliable information
about issuers and markets, less stringent financial disclosure requirements,
illiquidity of securities and markets, higher brokerage commissions and fees
and greater market risk in general. In addition, securities of these companies
may involve greater risks since these securities may have limited marketability
and, thus, may be more volatile.
"Special Situation" Companies. "Special situation companies" are
involved in an actual or prospective acquisition or consolidation;
reorganization; recapitalization; merger, liquidation or distribution of cash,
securities or other assets; a tender or exchange offer; a
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breakup or workout of a holding company; or litigation which, if resolved
favorably, may provide an attractive investment opportunity. If the actual or
prospective situation does not materialize as anticipated, the market price of
the securities of a "special situation company" may decline significantly.
Although investing in securities of small- and medium-sized and emerging growth
companies, unseasoned issuers or issuers in "special situations" offers
potential for above-average returns if the companies are successful, the risk
exists that the companies will not succeed and the prices of the companies'
shares could significantly decline in value. Therefore, an investment in a
Portfolio may involve a greater degree of risk than an investment in other
mutual funds that seek growth of capital or capital appreciation by investing
in better-known, larger companies.
General. The Portfolio may invest in securities of companies of any
size, whether traded on or off a national securities exchange. Portfolio
holdings may include emerging growth companies, which are small- or
medium-sized companies that have passed their start-up phase and that show
positive earnings and prospects for achieving profit and gain in a relatively
short period of time.
In appropriate circumstances, such as when a direct investment by the
Portfolio in the securities of a particular country cannot be made or when the
securities of an investment company are more liquid than the underlying
portfolio securities, the Portfolio may, consistent with the provisions of the
1940 Act, invest in the securities of closed-end investment companies that
invest in foreign securities. As a shareholder in a closed-end investment
company, the Portfolio will bear its ratable share of the investment company's
expenses, including management fees, and will remain subject to payment of the
Portfolio's administration fees and other expenses with respect to assets so
invested.
Private Funds. (Global Post-Venture Capital Portfolio) Up to 10% of the
Portfolio's assets may be invested in United States or foreign private limited
partnerships or other investment funds ("Private Funds") that themselves invest
in equity or debt securities of (a) companies in the venture capital or
post-venture capital stages of development or (b) companies engaged in special
situations or changes in corporate control, including buyouts. In selecting
Private Funds for investment, Abbott Capital Management, LLC, the Portfolio's
sub-investment adviser with respect to Private Funds ("Abbott"), attempts to
invest in a mix of Private Funds that will provide an above average internal
rate of return (i.e., the discount rate at which the present value of an
investment's future cash inflows (dividend income and capital gains) are equal
to the cost of the investment). CSAM believes that the Portfolio's investments
in Private Funds offer individual investors a unique opportunity to participate
in venture capital and other private investment funds, providing access to
investment opportunities typically available only to large institutions and
accredited investors. Although investments in Private Funds offer the
opportunity for significant capital gains, these investments involve a high
degree of business and financial risk that can result in substantial losses in
the portion of the Global Post-Venture Capital Portfolio's portfolio invested
in these investments. Among these are the risks associated with investment in
companies in an early stage of development or with little or no operating
history, companies operating at a loss or with substantial variation in
operation results from period to period, companies with the need for
substantial additional capital to support expansion or to maintain a
competitive position, or companies with significant financial leverage. Such
companies may also face intense competition from others including those with
greater financial resources or more extensive
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development, manufacturing, distribution or other attributes, over which the
Portfolio will have no control.
Interests in the Private Funds in which the Global Post-Venture Capital
Portfolio may invest will be subject to substantial restrictions on transfer
and, in some instances, may be non-transferable for a period of years. Private
Funds may participate in only a limited number of investments and, as a
consequence, the return of a particular Private Fund may be substantially
adversely affected by the unfavorable performance of even a single investment.
Certain of the Private Funds in which the Portfolio may invest may pay their
investment managers a fee based on the performance of the Private Fund, which
may create an incentive for the manager to make investments that are riskier or
more speculative than would be the case if the manager was paid a fixed fee.
Private Funds are not registered under the 1940 Act and, consequently, are not
subject to the restrictions on affiliated transactions and other protections
applicable to regulated investment companies. The valuation of companies held
by Private Funds, the securities of which are generally unlisted and illiquid,
may be very difficult and will often depend on the subjective valuation of the
managers of the Private Funds, which may prove to be inaccurate. Inaccurate
valuations of a Private Fund's portfolio holdings may affect the Portfolio's
net asset value calculations. Private Funds in which the Portfolio invests will
not borrow to increase the amount of assets available for investment or
otherwise engage in leverage. Debt securities held by a Private Fund will tend
to be rated below investment grade and may be rated as low as C by Moody's or D
by S&P. Securities in these rating categories are in payment default or have
extremely poor prospects of attaining any investment standing. The Portfolio
may also hold non-publicly traded equity securities of companies in the venture
and post-venture stages of development, such as those of closely held companies
or private placements of public companies. The portion of the Portfolio's
assets invested in these non-publicly traded securities will vary over time
depending on investment opportunities and other factors. The Portfolio's
illiquid assets, including interests in Private Funds and other illiquid
non-publicly traded securities, may not exceed 15% of the Portfolio's net
assets (measured at the time the investments are made).
CSAM believes that venture capital participation in a company's capital
structure can lead to revenue/earnings growth rates above those of older,
public companies such as those in the Dow Jones Industrial Average, the Fortune
500 or the Morgan Stanley Capital International Europe, Australasia, Far East
("EAFE") Index. Venture capitalists finance start-up companies, companies in
the early stages of developing new products or services and companies
undergoing a restructuring or recapitalization, since these companies may not
have access to conventional forms of financing (such as bank loans or public
issuances of stock). Venture capitalists may hold substantial positions in
companies that may have been acquired at prices significantly below the initial
public offering price. This may create a potential adverse impact in the
short-term on the market price of a company's stock due to sales in the open
market by a venture capitalist or others who acquired the stock at lower prices
prior to the company's IPO. CSAM will consider the impact of such sales in
selecting post-venture capital investments. Venture capitalists may be
individuals or funds organized by venture capitalists which are typically
offered only to large institutions, such as pension funds and endowments, and
certain accredited investors. Outside of the United States, venture capitalists
may also consist of merchant banks and other banking institutions that provide
venture capital financing in a manner similar to U.S. venture capitalists.
Venture
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capital participation in a company is often reduced when the company engages in
an IPO of its securities or when it is involved in a merger, tender offer or
acquisition.
REITs. Each Portfolio may invest in real estate investment trusts
("REITs"), which are pooled investment vehicles that invest primarily in
income-producing real estate or real estate related loans or interests. Like
regulated investment companies such as the Trust, REITs are not taxed on income
distributed to shareholders provided they comply with several requirements of
the Internal Revenue Code of 1986, amended (the "Code"). By investing in a
REIT, the Portfolio will indirectly bear its proportionate share of any
expenses paid by the REIT in addition to the expenses of the Portfolio.
Investing in REITs involves certain risks. A REIT may be affected by
changes in the value of the underlying property owned by such REIT or by the
quality of any credit extended by the REIT. REITs are dependent on management
skills, are not diversified (except to the extent the Code requires), and are
subject to the risks of financing projects. REITs are subject to heavy cash
flow dependency, default by borrowers, self-liquidation, the possibilities of
failing to qualify for the exemption from tax for distributed income under the
Code and failing to maintain their exemptions from the 1940 Act. REITs are also
subject to interest rate risks.
Non-Diversified Status (Emerging Markets, Small Company Growth and
Emerging Growth Portfolios). These Portfolios are classified as non-diversified
within the meaning of the 1940 Act, which means that each Portfolio is not
limited by such Act in the proportion of its assets that it may invest in
securities of a single issuer. As a non-diversified portfolio, each Portfolio
may invest a greater proportion of its assets in the obligations of a smaller
number of issuers and, as a result, may be subject to greater risk with respect
to portfolio securities. Each Portfolio's investments will be limited, however,
in order to qualify as a "regulated investment company" for purposes of the
Code. To qualify, the Portfolio will comply with certain requirements,
including limiting its investments so that at the close of each quarter of its
taxable year (i) not more than 25% of the market value of its total assets will
be invested in the securities of a single issuer or of two or more issuers of
which the Portfolio has 20% or more voting control and which are in similar or
related trades or businesses, and (ii) with respect to 50% of the market value
of its total assets, not more than 5% of the market value of its total assets
will be invested in the securities of a single issuer and the Portfolio will
not own more than 10% of the outstanding voting securities of a single issuer.
INVESTMENT RESTRICTIONS
The investment limitations numbered 1 through 10 may not be changed
without the affirmative vote of the holders of a majority of a Portfolio's
outstanding shares. Such majority is defined as the lesser of (i) 67% or more
of the shares present at the meeting, if the holders of more than 50% of the
outstanding shares of the Portfolio are present or represented by proxy, or
(ii) more than 50% of the outstanding shares. Investment limitations 11 through
17 may be changed by a vote of the Board at any time. If a percentage
limitation (other than the percentage limitation set forth in investment
restriction No. 1 below) is adhered to at the time of an investment, a later
increase or decrease in the percentage of assets resulting from a change in the
values of portfolio securities or in the amount of the Portfolio's assets will
not constitute a violation of such restriction.
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A Portfolio may not:
1. Borrow money except that the Portfolio may (a) borrow from banks for
temporary or emergency purposes and (b) enter into reverse repurchase
agreements; provided that reverse repurchase agreements, dollar roll
transactions that are accounted for as financings and any other transactions
constituting borrowing by the Portfolio may not exceed 30% (10% in the case of
the Emerging Growth Portfolio) of the value of the Portfolio's total assets at
the time of such borrowing. For purposes of this restriction, short sales, the
entry into currency transactions, options, futures contracts, options on
futures contracts, forward commitment transactions and dollar roll transactions
that are not accounted for as financings (and the segregation of assets in
connection with any of the foregoing) shall not constitute borrowing.
2. Purchase any securities which would cause 25% or more of the value of
the Portfolio's total assets at the time of purchase to be invested in the
securities of issuers conducting their principal business activities in the
same industry; provided that there shall be no limit on the purchase of U.S.
Government Securities.
3. For the Value, International Equity and Global Post-Venture Capital
Portfolios only, purchase the securities of any issuer, if as a result more
than 5% of the value of the Portfolio's total assets would be invested in the
securities of such issuer, except that this 5% limitation does not apply to
U.S. Government Securities and except that up to 25% of the value of the
Portfolio's total assets may be invested without regard to this 5% limitation.
4. Make loans, except that the Portfolio may purchase or hold
fixed-income securities, including loan participations, assignments and
structured securities, lend portfolio securities and enter into repurchase
agreements.
5. Underwrite any securities issued by others except to the extent that
the investment in restricted securities and the sale of securities in
accordance with the Portfolio's investment objective, policies and limitations
may be deemed to be underwriting.
6. Purchase or sell real estate or invest in oil, gas or mineral
exploration or development programs, except that the Portfolio may invest in
(a) securities secured by real estate, mortgages or interests therein (and, in
the case of the Value Portfolio, securities issued by companies which invest in
real estate or interests therein) and (b) securities of companies that invest
in or sponsor oil, gas or mineral exploration or development programs.
7. For the Emerging Markets, Value, International Equity and Small
Company Growth Portfolios only, make short sales of securities or maintain a
short position, except that the Portfolio may maintain short positions in
forward currency contracts, options, futures contracts and options on futures
contracts and make short sales "against the box".
8. Purchase securities on margin, except that the Portfolio may obtain
any short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of initial
or variation margin in connection with transactions in currencies, options,
futures contracts or related options will not be deemed to be a purchase of
securities on margin.
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9. Invest in commodities, except that the Portfolio may purchase and
sell futures contracts, including those relating to securities, currencies and
indexes, and options on futures contracts, securities, currencies or indexes,
and purchase and sell currencies on a forward commitment or delayed-delivery
basis and, with respect to the Emerging Markets Portfolio, enter into stand-by
commitments.
10. Issue any senior security except as permitted in these investment
limitations.
11. Purchase securities of other investment companies except in
connection with a merger, consolidation, acquisition, reorganization or offer
of exchange, or as otherwise permitted under the 1940 Act.
12. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
deposit of assets in escrow and in connection with the writing of covered put
and call options and purchase of securities on a forward commitment or
delayed-delivery basis and collateral and initial or variation margin
arrangements with respect to currency transactions, options, futures contracts,
and options on futures contracts.
13. Invest more than 15% (10% in the case of the Emerging Growth
Portfolio) of the Portfolio's net assets in securities which may be illiquid
because of legal or contractual restrictions on resale or securities for which
there are no readily available market quotations. For purposes of this
limitation, repurchase agreements with maturities greater than seven days shall
be considered illiquid securities.
14. Invest in warrants (other than warrants acquired by the Portfolio as
part of a unit or attached to securities at the time of purchase) if, as a
result, the investments (valued at the lower of cost or market) would exceed
10% of the value of the Portfolio's net assets (in the case of the Value
Portfolio, 15% of the value of that Portfolio's total assets).
15. Make additional investments (including roll-overs) if the
Portfolio's borrowings exceed 5% of its net assets.
16. For the Emerging Growth Portfolio, invest more than 10% of the value
of the Portfolio's total assets in time deposits maturing in more than seven
calendar days.
17. For the Emerging Growth Portfolio, make short sales of securities or
maintain a short position.
PORTFOLIO VALUATION
The following is a description of the procedures used by each Portfolio
in valuing its assets.
Securities listed on an exchange or traded in an over-the-counter market
will be valued at the closing price on the exchange or market on which the
security is primarily traded (the "Primary Market") at the time of valuation
(the "Valuation Time"). If the security did not trade on the Primary Market,
the security will be valued at the
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closing price on another exchange or market where it trades at the Valuation
Time. If there are no such sales prices, the security will be valued at the
most recent bid quotation as of the Valuation Time or at the lowest asked
quotation in the case of a short sale of securities. If there are no such
quotations, the value of the security will be taken to be the most recent bid
quotation on the exchange or market. In determining the market value of
portfolio investments, each Portfolio may employ outside organizations (each, a
"Pricing Service") which may use a matrix, formula or other objective method
that takes into consideration market indexes, matrices, yield curves and other
specific adjustments. The procedures of Pricing Services are reviewed
periodically by the officers of the Trust under the general supervision and
responsibility of the Board, which may replace a Pricing Service at any time.
If a Pricing Service is not able to supply closing prices and bid/asked
quotations, and there are two or more dealers, brokers or market makers in the
security, the security will be valued at the mean between the highest bid and
the lowest asked quotations from at least two dealers, brokers or market makers
or, if such dealers, brokers or market makers only provide bid quotations, at
the mean between the highest and the lowest bid quotations provided. If a
Pricing Service is not able to supply closing prices and bid/asked quotations,
and there is only one dealer, broker or market maker in the security, the
security will be valued at the mean between the bid and the asked quotations
provided, unless the dealer, broker or market maker can only provide a bid
quotation in which case the security will be valued at such bid quotation.
Options contracts will be valued similarly. Futures contracts will be valued at
the most recent settlement price at the time of valuation. Short-term
obligations with maturities of 60 days or less are valued at amortized cost,
which constitutes fair value as determined by the Board. Amortized cost
involves valuing a portfolio instrument at its initial cost and thereafter
assuming a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. The amortized cost method of valuation may also be used with
respect to other debt obligations with 60 days or less remaining to maturity.
Securities, options, futures contracts and other assets which cannot be valued
pursuant to the foregoing will be valued at their fair value as determined in
good faith pursuant to consistently applied procedures established by the
Board. In addition, the Board or its delegates may value a security at fair
value if it determines that such security's value determined by the methodology
set forth above does not reflect its fair value.
Trading in securities in certain foreign countries is completed at
various times prior to the close of business on each business day in New York
(i.e., a day on which The New York Stock Exchange, Inc. (the "NYSE") is open
for trading). In addition, securities trading in a particular country or
countries may not take place on all business days in New York. Furthermore,
trading takes place in various foreign markets on days which are not business
days in New York and days on which the Portfolio's net asset value is not
calculated. As a result, calculation of the Portfolio's net asset value may not
take place contemporaneously with the determination of the prices of certain
foreign portfolio securities used in such calculation. All assets and
liabilities initially expressed in foreign currency values will be converted
into U.S. dollar values at the prevailing rate as quoted by a Pricing Service
as of 12:00 noon (Eastern time). If such quotations are not available, the rate
of exchange will be determined in good faith pursuant to consistently applied
procedures established by the Board.
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Private Funds (Global Post-Venture Capital Portfolio). Private Funds are
initially valued at cost (i.e., the actual dollar amount invested). Thereafter,
Private Funds are valued at the prices set forth in periodic reports received
by Abbott from the Private Funds. These reports are generally made quarterly.
Neither Abbott nor the Portfolio will monitor interim changes in the value of
portfolio holdings of the Private Funds. As a result, these changes will not be
taken into account by the Portfolio in calculating its net asset value.
PORTFOLIO TRANSACTIONS
CSAM is responsible for establishing, reviewing and, where necessary,
modifying each Portfolio's investment program to achieve its investment
objective. Purchases and sales of newly issued portfolio securities are usually
principal transactions without brokerage commissions effected directly with the
issuer or with an underwriter acting as principal. Private Funds may be
purchased directly from the issuer or may involve a broker or placement agent.
Other purchases and sales may be effected on a securities exchange or
over-the-counter, depending on where it appears that the best price or
execution will be obtained. The purchase price paid by a Portfolio to
underwriters of newly issued securities usually includes a concession paid by
the issuer to the underwriter, and purchases of securities from dealers, acting
as either principals or agents in the after market, are normally executed at a
price between the bid and asked price, which includes a dealer's mark-up or
mark-down. Transactions on U.S. stock exchanges and some foreign stock
exchanges involve the payment of negotiated brokerage commissions. On exchanges
on which commissions are negotiated, the cost of transactions may vary among
different brokers. On most foreign exchanges, commissions are generally fixed.
Purchases of Private Funds through a broker or placement agent will involve a
commission or other fee. There is generally no stated commission in the case of
securities traded in domestic or foreign OTC markets, but the price of
securities traded in OTC markets includes an undisclosed commission or mark-up.
U.S. Government Securities are generally purchased from underwriters or
dealers, although certain newly issued U.S. Government Securities may be
purchased directly from the U.S. Treasury or from the issuing agency or
instrumentality. No brokerage commissions are typically paid on purchases and
sales of U.S. Government Securities.
Except for the Global Post-Venture Capital Portfolio's investments in
Private Funds, which will be managed by Abbott, CSAM will select specific
portfolio investments and effect transactions for each Portfolio. In selecting
broker-dealers, CSAM does business exclusively with those broker-dealers that,
in CSAM's judgment, can be expected to provide the best service. The service
has two main aspects: the execution of buy and sell orders and the provision of
research. In negotiating commissions with broker-dealers, CSAM will pay no more
for execution and research services than it considers either, or both together,
to be worth. The worth of execution service depends on the ability of the
broker-dealer to minimize costs of securities purchased and to maximize prices
obtained for securities sold. The worth of research depends on its usefulness
in optimizing portfolio composition and its changes over time. Commissions for
the combination of execution and research services that meet CSAM's standards
may be higher than for execution services alone or for services that fall below
CSAM's standards. CSAM believes that these arrangements may benefit all clients
and not necessarily only the accounts in which the particular investment
transactions occur that are so executed. Further, CSAM will only receive
brokerage or research service in
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connection with securities transactions that are consistent with the "safe
harbor" provisions of Section 28(e) of the Securities Exchange Act of 1934 when
paying such higher commissions. Research services may include research on
specific industries or companies, macroeconomic analyses, analyses of national
and international events and trends, evaluations of thinly traded securities,
computerized trading screening techniques and securities ranking services, and
general research services. For the fiscal year ended December 31, 1999, $420,
$16,947, $162,582, $13,817 and $125,209 of total brokerage commissions were
paid by the Emerging Markets, Value, International Equity, Global Post-Venture
Capital and Small Company Growth Portfolios, respectively, to brokers and
dealers who provided such research and other services. Research received from
brokers or dealers is supplemental to CSAM's own research program. The fees to
CSAM under its advisory agreements with each Portfolio are not reduced by
reason of its receiving any brokerage and research services.
The following table details amounts paid by each Portfolio in
commissions to broker-dealers for execution of portfolio transactions during
the indicated fiscal years (or period) ended December 31.
<TABLE>
<CAPTION>
Portfolio Year Commissions
- --------- ---- -----------
<S> <C> <C>
Emerging Markets 1998 $19,212
1999 $87,475
Value 1997 $2,412
1998 $23,991
1999 $56,028
International Equity 1997 $1,594,509
1998 $1,839,536
1999 $2,528,783
Global Post-Venture Capital 1997 $88,821
1998 $112,145
1999 $115,512
Small Company Growth 1997 $883,377
1998 $794,479
1999 $926,078
Emerging Growth 1999 $6,638
</TABLE>
All orders for transactions in securities or options on behalf of a
Portfolio are placed by CSAM with broker-dealers that it selects, including
Credit Suisse Asset Management Securities, Inc. ("CSAMSI") and affiliates of
Credit Suisse Group ("Credit Suisse"). A Portfolio may utilize CSAMSI or
affiliates of Credit Suisse in connection with a purchase or sale of securities
when CSAM believes that the charge for the transaction does not exceed usual
and customary levels and when doing so is consistent with guidelines adopted by
the Board.
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Investment decisions for each Portfolio concerning specific portfolio
securities are made independently from those for other clients advised by CSAM
or Abbott, as relevant. Such other investment clients may invest in the same
securities as a Portfolio. When purchases or sales of the same security are
made at substantially the same time on behalf of such other clients,
transactions are averaged as to price and available investments allocated as to
amount, in a manner which CSAM or Abbott, as the case may be, believes to be
equitable to each client, including the Portfolios. In some instances, this
investment procedure may adversely affect the price paid or received by a
Portfolio or the size of the position obtained or sold for a Portfolio. To the
extent permitted by law, securities to be sold or purchased for a Portfolio may
be aggregated with those to be sold or purchased for such other investment
clients in order to obtain best execution.
In no instance will portfolio securities be purchased from or sold to
CSAM, Abbott, CSAMSI or Credit Suisse First Boston ("CS First Boston") or any
affiliated person of such companies.
Transactions for the Portfolios may be effected on foreign securities
exchanges. In transactions for securities not actively traded on a foreign
securities exchange, the Portfolios will deal directly with the dealers who
make a market in the securities involved, except in those circumstances where
better prices and execution are available elsewhere. Such dealers usually are
acting as principal for their own account. On occasion, securities may be
purchased directly from the issuer. Such portfolio securities are generally
traded on a net basis and do not normally involve brokerage commissions.
Securities firms may receive brokerage commissions on certain portfolio
transactions, including options, futures and options on futures transactions
and the purchase and sale of underlying securities upon exercise of options.
Each Portfolio may participate, if and when practicable, in bidding for
the purchase of securities for the Portfolio's portfolio directly from an
issuer in order to take advantage of the lower purchase price available to
members of such a group. A Portfolio will engage in this practice, however,
only when CSAM, in its sole discretion, believes such practice to be otherwise
in the Portfolio's interest.
PORTFOLIO TURNOVER
The Portfolios do not intend to seek profits through short-term trading,
but the rate of turnover will not be a limiting factor when a Portfolio deems
it desirable to sell or purchase securities. A Portfolio's portfolio turnover
rate is calculated by dividing the lesser of purchases or sales of its
portfolio securities for the year by the monthly average value of the portfolio
securities. Securities with remaining maturities of one year or less at the
date of acquisition are excluded from the calculation.
Certain practices that may be employed by a Portfolio could result in
high portfolio turnover. For example, options on securities may be sold in
anticipation of a decline in the price of the underlying security (market
decline) or purchased in anticipation of a rise in the price of the underlying
security (market rise) and later sold. To the extent that its portfolio is
traded for the short-term, the Portfolio will be engaged essentially in trading
activities based on short-term considerations affecting the value of an
issuer's stock instead of long-term investments based on fundamental valuation
of securities. Because of this policy, portfolio
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<PAGE> 292
securities may be sold without regard to the length of time for which they have
been held. Consequently, the annual portfolio turnover rate of a Portfolio may
be higher than mutual funds having similar objectives that do not utilize these
strategies.
It is not possible to predict the Portfolios' portfolio turnover rates.
High portfolio turnover rates (100% or more) may result in dealer markups or
underwriting commissions as well as other transaction costs, including
correspondingly higher brokerage commissions. In addition, short-term gains
realized from portfolio turnover may be taxable to shareholders as ordinary
income.
MANAGEMENT OF THE TRUST
Officers and Board of Trustees
The business and affairs of the Trust are managed by the Board of
Trustees in accordance with the laws of the Commonwealth of Massachusetts. The
Board elects officers who are responsible for the day-to-day operations of the
Trust and who execute policies authorized by the Board. Under the Trust's
Declaration of Trust, the Board may classify or reclassify any unissued shares
of the Trust into one or more additional classes by setting or changing in any
one or more respects their relative rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption. The Board may similarly classify or reclassify any class of its
shares into one or more series and, without shareholder approval, may increase
the number of authorized shares of the Trust.
The names (and ages) of the Trust's Trustees and officers, their
addresses, present positions and principal occupations during the past five
years and other affiliations are set forth below.
<TABLE>
<S> <C>
Richard H. Francis (67) Trustee
40 Grosvenor Road Currently retired; Executive Vice
Short Hills, New Jersey 07078 President and Chief Financial Officer of
Pan Am Corporation and Pan American
World Airways, Inc. from 1988 to 1991;
Director of The Infinity Mutual Funds,
BISYS Group Incorporated;
Director/Trustee of Warburg Pincus Funds
and other CSAM-advised investment
companies.
Jack W. Fritz (72) Trustee
2425 North Fish Creek Road Private investor; Consultant and
P.O. Box 483 Director of Fritz Broadcasting, Inc. and
Wilson, Wyoming 83014 Fritz Communications (developers and
operators of radio stations); Director
of Advo, Inc. (direct mail advertising);
Director/Trustee of other Warburg Pincus
Funds.
</TABLE>
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<PAGE> 293
<TABLE>
<S> <C>
Jeffrey E. Garten (53) Trustee
Box 208200 Dean of Yale School of Management and
New Haven, Connecticut 06520-8200 William S. Beinecke Professor in the
Practice of International Trade and
Finance; Undersecretary of Commerce for
International Trade from November 1993
to October 1995; Professor at Columbia
University from September 1992 to
November 1993; Director/Trustee of other
Warburg Pincus Funds.
James S. Pasman, Jr. (69) Trustee
29 The Trillium Currently retired; President and Chief
Pittsburgh, Pennsylvania 15238 Operating Officer of National
InterGroup, Inc. from April 1989 to
March 1991; Chairman of Permian Oil Co.
from April 1989 to March 1991; Director
of Education Management Corp., Tyco
International Ltd.; Trustee, BT
Insurance Funds Trust; Director/Trustee
of other Warburg Pincus Funds and other
CSAM-advised investment companies.
Chairman of the Board
William W. Priest* (58) Chairman- Management Committee, Chief
153 East 53rd Street Executive Officer and Managing Director
New York, New York 10022 of CSAM (U.S.) since 1990; Director of
TIG Holdings, Inc.; Director/Trustee of
other Warburg Pincus Funds and other
CSAM-advised investment companies.
Steven N. Rappaport (51) Trustee
40 East 52nd Street, President of Loanet, Inc. since 1997;
New York, New York 10022 Executive Vice President of Loanet, Inc.
from 1994 to 1997; Director, President,
North American Operations, and former
Executive Vice President from 1992 to
1993 of Worldwide Operations of
Metallurg Inc.; Executive Vice
President, Telerate, Inc. from 1987 to
1992; Partner in the law firm of Hartman
& Craven until 1987; Director/Trustee of
other Warburg Pincus Funds and other
CSAM-advised investment companies.
</TABLE>
* Indicates a Director/Trustee who is an "interested person" of the Fund as
defined in the 1940 Act.
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<PAGE> 294
<TABLE>
<S> <C>
Alexander B. Trowbridge (70) Trustee
1317 F Street, N.W., 5th Floor Currently retired; President of
Washington, DC 20004 Trowbridge Partners, Inc. (business
consulting) from January 1990 to
November 1996; Director or Trustee of
New England Mutual Life Insurance Co.,
ICOS Corporation (biopharmaceuticals),
IRI International (energy services), The
Rouse Company (real estate development),
Harris Corp. (electronics and
communications equipment), The Gillette
Co. (personal care products) and Sunoco,
Inc. (petroleum refining and marketing);
Director/Trustee of other Warburg Pincus
Funds.
Eugene L. Podsiadlo (42) President
466 Lexington Avenue Managing Director of CSAM; Associated
New York, New York 10017-3147 with CSAM since CSAM acquired the
Portfolios' predecessor adviser in July
1999; with the predecessor adviser since
1991; Vice President of Citibank, N.A.
from 1987 to 1991; Officer of CSAMSI and
of other Warburg Pincus Funds.
Hal Liebes, Esq. (35) Vice President and Secretary
153 East 53rd Street Managing Director and General Counsel of
New York, New York 10022 CSAM; Associated with Lehman Brothers,
Inc. from 1996 to 1997; Associated with
CSAM from 1995 to 1996; Associated with
CS First Boston Investment Management
from 1994 to 1995; Associated with
Division of Enforcement, U.S. Securities
and Exchange Commission from 1991 to
1994; Officer of CSAMSI, other Warburg
Pincus Funds and other CSAM-advised
investment companies.
Michael A. Pignataro (40) Treasurer and Chief Financial Officer
153 East 53rd Street Vice President and Director of Fund
New York, New York 10022 Administration of CSAM; Associated with
CSAM since 1984; Officer of other
Warburg Pincus Funds and other
CSAM-advised investment companies.
</TABLE>
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<PAGE> 295
<TABLE>
<S> <C>
Stuart J. Cohen, Esq. (31) Assistant Secretary
466 Lexington Avenue Vice President and Legal Counsel of
New York, New York 10017-3147 CSAM; Associated with CSAM since CSAM
acquired the Portfolios' predecessor
adviser in July 1999; with the
predecessor adviser since 1997;
Associated with the law firm of Gordon
Altman Butowsky Weitzen Shalov & Wein
from 1995 to 1997; Officer of other
Warburg Pincus Funds.
Rocco A. DelGuercio (36) Assistant Treasurer
153 East 53rd Street Assistant Vice President and
New York, New York 10022 Administrative Officer of CSAM;
Associated with CSAM since June 1996;
Assistant Treasurer, Bankers Trust Corp.
-- Fund Administration from March 1994
to June 1996; Mutual Fund Accounting
Supervisor, Dreyfus Corporation from
April 1987 to March 1994; Officer of
other Warburg Pincus Funds and other
CSAM-advised investment companies.
</TABLE>
No employee of CSAM, PFPC Inc., the Trust's co-administrator
("PFPC"), or any of their affiliates receives any compensation from the Trust
for acting as an officer or Trustee of the Trust. For each fund in the Warburg
Pincus family of funds, each Director/Trustee who is not a director, trustee,
officer or employee of CSAM, PFPC or any of their affiliates receives an annual
fee of $500, $1,000 or $2,000 per fund for Director/Trustee services provided,
$250 for each Board meeting attended and $250 for each Audit Committee meeting
attended ($325 for the Chairman of the Audit Committee), in addition to
reimbursement for expenses incurred in connection with attendance at Board
meetings.
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Trustees' Compensation
(for the fiscal year ended December 31, 1999)
<TABLE>
<CAPTION>
Total Compensation from
Total all Investment Companies
Compensation from in Warburg Pincus Fund
Name of Trustee Trust Complex(1)
- ------------------------------ ------------------ -----------------------
<S> <C> <C>
William W. Priest(2) None None
Arnold M. Reichman(3) None None
Richard N. Cooper(4) $1,125 $47,500
Richard H. Francis(5) $1,000 $38,250
Jack W. Fritz $2,250 $94,250
Jeffrey E. Garten(3) $2,250 $94,250
Thomas A. Melfe(4) $1,375 $40,750
James S. Pasman, Jr.(5) $1,000 $38,250
Steven N. Rappaport(5) $1,000 $38,250
Alexander B. Trowbridge $2,325 $97,100
</TABLE>
- -------------------------------
(1) Each Trustee also serves as a Director or Trustee of 45 investment
companies and portfolios in the Warburg Pincus family of funds,
except for Mr. Garten, who serves as a Director or Trustee of 14
investment companies in the Warburg Pincus family of funds.
(2) Mr. Priest receives compensation as an affiliate of CSAM, and,
accordingly, receives no compensation from the Trust or any other
investment company in the Warburg Pincus family of funds.
(3) Mr. Reichman resigned as a Trustee of the Trust effective August 18,
1999. Mr. Garten resigned as a Trustee of the Trust effective
February 3, 2000.
(4) Messrs. Cooper and Melfe resigned as Trustees of the Trust effective
July 6, 1999.
(5) Messrs. Francis, Pasman and Rappaport became Trustees of the Trust
effective July 6, 1999.
As of March 31, 2000, no Trustees or officers of the Trust owned
any of the outstanding shares of the Portfolios.
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<PAGE> 297
Portfolio Managers
Emerging Markets Portfolio. Richard W. Watt is the Portfolio Manager of
the Emerging Markets Portfolio and serves in similar positions with other
Warburg Pincus Funds. Mr. Watt is head of global emerging markets and chief
investment officer for Latin American equities at CSAM. Prior to joining CSAM
in 1995, he was head of emerging markets investments and research at Gartmore
Investment Limited in London; a director of Kleinwort Benson International
Investment in London; and a portfolio manager with the Lothian Regional
Council, a public pension plan sponsor in Scotland. Mr. Watt holds a Diploma in
Management Studies from Napier College, Edinburgh and an M.A. in Politics and
Modern History from the University of Edinburgh.
Emily Alejos is an Associate Portfolio Manager of the Emerging Markets
Portfolio and serves in similar positions with other Warburg Pincus Funds. Ms.
Alejos specializes in the management and research of Latin American equities
and is regional research director for Latin America at CSAM. She joined CSAM in
1997 from Bankers Trust, where she was an emerging markets portfolio manager.
Previously, she focused on Latin American equities at G.T. Capital Management
in San Francisco. Ms. Alejos holds a B.A. in Economics and Development Studies
from Brown University and an M.B.A. from Stanford University. She also studied
economics at L'Institut d' Etudes Politiques in Paris and was a Rotary Scholar
at Instituto di Tella in Buenos Aires. She is a Chartered Financial Analyst.
Robert B. Hrabchak is an Associate Portfolio Manager of the Emerging
Markets Portfolio and serves in similar positions with other Warburg Pincus
Funds. Mr. Hrabchak is a chief investment officer for Asia ex-Japan equities at
CSAM. He joined CSAM in 1997 from Merrill Lynch Asset Management in Hong Kong,
where he was a senior portfolio manager and chaired the Asia Pacific Investment
Strategy Committee. Previously, he worked in corporate finance and equity
capital markets for Salomon Brothers in New York and Hong Kong; specialized in
private equity investments in Taiwan, Hong Kong and China for ChinaVest
Limited; and was an Asian portfolio manager at Chase Manhattan Bank in Hong
Kong. Mr. Hrabchak holds a B.A. in Economics from Harvard College and an M.B.A.
in Finance and Accounting from the University of Pennsylvania's Wharton School.
He is a Chartered Financial Analyst.
Federico D. Laffan is an Associate Portfolio Manager of the Emerging
Markets Portfolio and serves in similar positions with other Warburg Pincus
Funds. Mr. Laffan has been associated with CSAM since Credit Suisse acquired
the Portfolios' predecessor adviser in July 1999 and joined the predecessor
adviser in 1997. He was a senior manager and partner with Green Cay Asset
Management from 1996 to 1997 and a senior portfolio manager and director with
Foreign & Colonial Emerging Markets, London from 1990 to 1996. Prior to that,
Mr. Laffan was a development manager at Bristol Myers Squibb.
Jun Sung Kim is an Associate Portfolio Manager of the Emerging Markets
Portfolio and serves in similar positions with other Warburg Pincus Funds. Mr.
Kim has been associated with CSAM since Credit Suisse acquired the Portfolios'
predecessor adviser in July 1999 and joined the predecessor adviser in 1997. He
was an investment
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<PAGE> 298
manager with Asset Korea Ltd., Seoul from 1994 to 1995. He was also an
assistant investment manager with Koeneman Capital Management, Singapore from
1992 to 1994. Prior to that, Mr. Kim was an Asian institutional salesman at
W.I. Carr and an analyst at Lee & Company.
International Equity Portfolio. P. Nicholas Edwards is a Co-Portfolio
Manager of the International Equity Portfolio and serves in similar positions
with other Warburg Pincus Funds. Mr. Edwards has been associated with CSAM
since Credit Suisse acquired the Portfolios' predecessor adviser in July 1999
and joined the predecessor adviser in 1995. Prior to that Mr. Edwards was a
director at Jardine Fleming Investment Advisers, Tokyo from 1984 to 1995. Mr.
Edwards earned M.A. degrees from Oxford University and Hiroshima University in
Japan.
Harold W. Ehrlich is a Co-Portfolio Manager of the International Equity
Portfolio and serves in similar positions with other Warburg Pincus Funds. Mr.
Ehrlich has been associated with CSAM since CSAM acquired the Portfolios'
predecessor adviser in July 1999 and joined the predecessor adviser in 1995.
Prior to that Mr. Ehrlich was a senior vice president, portfolio manager and
analyst at Templeton Investment Counsel Inc. from 1987 to 1995. He was a
research analyst and assistant portfolio manager at Fundamental Management
Corporation from 1985 to 1986, and a research analyst at First Equity
Corporation of Florida from 1983 to 1985. Mr. Ehrlich earned a B.S.B.A. degree
from University of Florida and earned his Chartered Financial Analyst
designation in 1990.
Harold E. Sharon is a Co-Portfolio Manager of the International Equity
Portfolio and serves in similar positions with other Warburg Pincus Funds. Mr.
Sharon has been associated with CSAM since Credit Suisse acquired the
Portfolios' predecessor adviser in July 1999 and joined the predecessor adviser
in 1998. Prior to that Mr. Sharon was an executive director and portfolio
manager at CIBC Oppenheimer from 1994 to 1998. Mr. Sharon was previously a Vice
President and Portfolio Manager at Warburg from 1990 to 1994. Mr. Sharon earned
a B.S. Degree with honors from the University of Rochester and an M.S. degree
in Management from the Sloan School of Management, M.I.T.
Vincent J. McBride is a Co-Portfolio Manager of the International Equity
Portfolio and serves in similar positions with other Warburg Pincus Funds. Mr.
McBride has been associated with CSAM since Credit Suisse acquired the
Portfolios' predecessor adviser in July 1999 and joined the predecessor adviser
in 1994. Prior to that Mr. McBride was an international equity analyst at Smith
Barney Inc. from 1993 to 1994 and at General Electric Investment Corporation
from 1992 to 1993. He was also a portfolio manager/analyst at United Jersey
Bank from 1989 to 1992 and a portfolio manager at First Fidelity Bank from 1987
to 1989. Mr. McBride earned a B.S. degree from the University of Delaware and
an M.B.A. degree from Rutgers University.
Nancy Nierman is an Associate Portfolio Manager of the International
Equity Portfolio and serves in similar positions with other Warburg Pincus
Funds. Ms. Nierman has been associated with CSAM since Credit Suisse acquired
the Portfolios' predecessor adviser in July 1999 and joined the predecessor
adviser in 1996. Prior to that Ms. Nierman was a vice president at Fiduciary
Trust Company International from 1990
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to 1996 and an international equity trader at TIAA-CREF from 1985 to 1990. She
received her B.B.A. degree from Barite College in 1985.
Value Portfolio. Scott T. Lewis is a Co-Portfolio Manager of the Value
Portfolio and serves in similar positions with other Warburg Pincus Funds. Mr.
Lewis has been associated with CSAM since Credit Suisse acquired the
Portfolios' predecessor adviser in July 1999 and joined the predecessor adviser
in 1986. Prior to that Mr. Lewis was an assistant portfolio manager at Bench
Corporation from 1984 to 1985 and a trader at Atlanta/Sosnoff Management Corp.
from 1984 to 1985 and a trader at E.F. Hutton & Co. from 1982 to 1984. Mr.
Lewis received an M.B.A. and a B.S. degree from New York University.
Robert E. Rescoe is Co-Portfolio Manager of the Value Portfolio and
serves in similar positions with other Warburg Pincus Funds. Mr. Rescoe has
been associated with CSAM since Credit Suisse acquired the Portfolios'
predecessor adviser in July 1999 and joined the predecessor adviser in 1993.
Mr. Rescoe earned an M.B.A. degree from the University of Texas and a B.A.
degree from Tulane University. He is a Chartered Financial Analyst.
Global Post-Venture Capital Portfolio. Mr. Sharon, Mr. Laffan and Mr.
Kim (see biographies above), are also Co-Portfolio Managers of the Global
Post-Venture Capital Portfolio.
Elizabeth B. Dater is a Co-Portfolio Manager of the Global Post-Venture
Capital Portfolio and serves in similar positions with other Warburg Pincus
Funds. Ms. Dater has been associated with CSAM since Credit Suisse acquired the
Portfolios' predecessor adviser in July 1999 and joined the predecessor adviser
in 1978. Prior to that Ms. Dater was a vice president of Research at Fiduciary
Trust Company of New York and an institutional sales assistant at Lehman
Brothers. Ms. Dater has been a regular panelist on Maryland Public Television's
Wall Street Week with Louis Rukeyser since 1976. Ms. Dater earned a B.A. degree
from Boston University in Massachusetts.
Calvin E. Chung is an Associate Portfolio Manager of the Global
Post-Venture Capital Portfolio and serves in similar positions with other
Warburg Pincus Funds. Mr. Chung has been associated with CSAM since January
2000. Prior to that Mr. Chung was a vice president and senior technology
analyst at Eagle Asset Management from 1997 to 1999, a graduate student at the
University of Chicago from 1995 to 1997 and a research associate at Fidelity
Management and Research from 1992 to 1995. Mr. Chung earned a B.A. degree from
Brandeis University and an M.B.A. from the University of Chicago. He is a
Chartered Financial Analyst.
Raymond L. Held and Thaddeus I. Gray, Investment Managers and Managing
Directors of Abbott, manage the Global Post-Venture Capital Portfolio's
investments in Private Funds. Abbott also acts as sub-investment adviser for
other Warburg Pincus Funds. Prior to co-founding a predecessor of Abbott in
1986, Mr. Held had been an investment analyst and portfolio manager at
Manufacturers Hanover Investment Corporation since 1970, before which time he
had been a security analyst with Weis, Voisin, Cannon, Inc., L.M. Rosenthal &
Co., Shearson, Hammill & Co. and Standard & Poor's Corporation. Mr. Held
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<PAGE> 300
earned an M.B.A. from New York University, an M.A. from Columbia University and
a B.A. from Queens College.
Prior to joining a predecessor of Abbott in 1989, Mr. Gray was an
assistant vice president at Commerzbank Capital Markets Corporation, where he
managed the area responsible for underwriting and distributing all new issues
of securities. Prior to this, he was an associate with Credit Commercial de
France in Paris in the Corporate Finance Department. Mr. Gray received his B.A.
in History from the University of Pennsylvania and his M.B.A. in Finance from
New York University. He is also a Chartered Financial Analyst.
Small Company Growth Portfolio. Stephen J. Lurito is a Co-Portfolio
Manager of the Small Company Growth Portfolio and serves in similar positions
with other Warburg Pincus Funds. Mr. Lurito has been associated with CSAM since
Credit Suisse acquired the Portfolios' predecessor adviser in July 1999 and
joined the predecessor adviser in 1987. Prior to that Mr. Lurito was a research
analyst at Sanford C. Bernstein & Company, Inc. Mr. Lurito earned a B.A. degree
from the University of Virginia and an M.B.A. from the University of
Pennsylvania.
Sammy Oh is a Co-Portfolio Manager of the Small Company Growth Portfolio
and serves in similar positions with other Warburg Pincus Funds. Mr. Oh has
been associated with CSAM since Credit Suisse acquired the Portfolios'
predecessor adviser in July 1999 and joined the predecessor adviser in 1997.
Prior to that Mr. Oh was a vice president at Bessemer Trust from 1995 to 1996
and a Vice President at Forstmann-Leff from 1993 to 1995. Mr. Oh earned his
A.B. from Stanford University and his M.B.A. from Dartmouth College.
Emerging Growth Portfolio. Ms. Dater and Mr. Lurito (see biographies
above) are also Co-Portfolio Managers of the Emerging Growth Portfolio.
Code of Ethics
The Trust, CSAM and CSAMSI have each adopted a written Code of Ethics
(the "CSAM Code"), which permits personnel covered by the CSAM Code ("Covered
Persons") to invest in securities, including securities that may be purchased
or held by the Portfolios. The CSAM Code also contains provisions designed to
address the conflicts of interest that could arise from personal trading by
advisory personnel, including: (1) all Covered Persons must report their
personal securities transactions at the end of each quarter; (2) with certain
limited exceptions, all Covered Persons must obtain preclearance before
executing any personal securities transactions; (3) Covered Persons may not
execute personal trades in a security if there are any pending orders in that
security by the Portfolios; and (4) Covered Persons may not invest in initial
public offerings.
Abbott has also adopted a written Code of Ethics (the "Abbott Code" and,
together with the CSAM Code, the "Codes"), which permits personnel covered by
the Abbott Code to invest in securities, including securities that may be
purchased or held by the Portfolios.
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<PAGE> 301
The Board reviews the administration of the Codes at least annually and
may impose sanctions for violations of the Codes.
Investment Advisers and Co-Administrators
CSAM, located at 153 East 53rd Street, New York, New York 10022, serves
as investment adviser to each Portfolio. CSAM is an indirect wholly-owned U.S.
subsidiary of Credit Suisse Group ("Credit Suisse"). Credit Suisse is a global
financial services company, providing a comprehensive range of banking and
insurance products. Active on every continent and in all major financial
centers, Credit Suisse comprises five business units -- Credit Suisse Asset
Management (asset management); Credit Suisse First Boston (investment banking);
Credit Suisse Private Banking (private banking); Credit Suisse (retail
banking); and Winterthur (insurance). The principal business address of Credit
Suisse is Paradeplatz 8, CH 8070, Zurich, Switzerland.
Prior to July 6, 1999, Warburg Pincus Asset Management, Inc. ("Warburg")
served as investment adviser to each Portfolio. On that date, Credit Suisse
acquired Warburg and combined Warburg with Credit Suisse's existing U.S.-based
asset management business ("Credit Suisse Asset Management"). Consequently, the
combined entity, CSAM, became the Portfolios' investment adviser. Credit Suisse
Asset Management, formerly known as BEA Associates, together with its
predecessor firms, has been engaged in the investment advisory business for
over 60 years.
CSAM serves as investment adviser to the Portfolios, Abbott serves as
sub-investment adviser to the Global Post-Venture Capital Portfolio, and CSAMSI
and PFPC serve as co-administrators to the Trust pursuant to separate written
agreements (the "Advisory Agreements," the "CSAMSI Co-Administration
Agreements" and the "PFPC Co-Administration Agreements," respectively). CSAMSI
became co-administrator to the Trust on November 1, 1999. Prior to that,
Counsellors Funds Service, Inc. ("Counsellors Service") served as
co-administrator to the Trust. CSAM, subject to the control of the Trust's
officers and the Board, manages the investment and reinvestment of the assets
of the Portfolios in accordance with each Portfolio's investment objective and
stated investment policies. CSAM makes investment decisions for each Portfolio
and places orders to purchase or sell securities on behalf of the Portfolio
and, with respect to the Global Post-Venture Capital Portfolio, supervises the
activities of Abbott. CSAM also employs a support staff of management personnel
to provide services to the Trust and furnishes the Trust with office space,
furnishings and equipment. Abbott, in accordance with the investment objective
and polices of the Global Post-Venture Capital Portfolio, makes investment
decisions for the Portfolio regarding investments in Private Funds, effects
transactions in Private Funds on behalf of the Portfolio and assists in other
administrative functions relating to investments in Private Funds.
For the services provided by CSAM, the Trust pays CSAM a fee calculated
at an annual rate equal to percentages of the relevant Portfolio's average
daily net assets, as follows: Emerging Markets Portfolio -- 1.25%, Value
Portfolio -- .75%, International Equity Portfolio -- 1.00%, Small Company
Growth Portfolio -- .90% and Emerging Growth Portfolio -- .90%. For the
services provided by CSAM, the Global Post-Venture Capital Portfolio pays CSAM
a fee calculated at an annual rate of 1.25% of the Portfolio's
46
<PAGE> 302
average daily net assets, out of which CSAM pays Abbott for sub-investment
advisory services. CSAM and the Portfolios' co-administrators may voluntarily
waive a portion of their fees from time to time and temporarily limit the
expenses to be borne by the Portfolios.
As co-administrator, CSAMSI provides shareholder liaison services to the
Portfolios, including responding to shareholder inquiries and providing
information on shareholder investments. CSAMSI also performs a variety of other
services, including furnishing certain executive and administrative services,
acting as liaison between each Portfolio and its various service providers,
furnishing corporate secretarial services, which include preparing materials
for meetings of the Board, preparing proxy statements and annual and semiannual
reports, assisting in the preparation of tax returns and developing and
monitoring compliance procedures for the Portfolios. As compensation, each
Portfolio pays CSAMSI a fee calculated at an annual rate of .10% of the
Portfolio's average daily net assets.
As a co-administrator, PFPC calculates each Portfolio's net asset value,
provides all accounting services for the Portfolios and assists in related
aspects of the Portfolios' operations. As compensation, each of the Global
Post-Venture Capital, Small Company Growth and Emerging Growth Portfolios pays
PFPC a fee calculated at an annual rate of .10% of the Portfolio's first $500
million in average daily net assets, .075% of the next $1 billion in average
daily net assets, and .05% of average daily net assets over $1.5 billion. Each
of the Emerging Markets and International Equity Portfolios pays PFPC a fee
calculated at an annual rate of .12% of the Portfolio's first $250 million in
average daily net assets, .10% of the next $250 million in average daily net
assets, .08% of the next $250 million in average daily net assets, and .05% of
average daily net assets over $750 million. The Value Portfolio pays PFPC a fee
calculated at an annual rate of .15% of the Portfolio's first $500 million in
average daily net assets, .10% of the next $1 billion in average daily net
assets and .05% of average daily net assets over $1.5 billion. PFPC has its
principal offices at 400 Bellevue Parkway, Wilmington, Delaware 19809.
The advisory fees earned by CSAM and its predecessor, Warburg, the
co-administration fees earned by PFPC and the aggregate co-administration fees
earned by CSAMSI and Counsellors Service (the Portfolios' predecessor
co-administrator), respectively, for the last three fiscal years (or, in the
case of the Emerging Growth Portfolio, for the period September 13, 1999
(commencement of operations) through December 31, 1999) are described below.
47
<PAGE> 303
Advisory Fees earned by CSAM/Warburg for the fiscal years (or period) ended
December 31
(portions of fees waived, if any, are noted in parentheses next to the amount
earned)*
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
1997 1998 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Emerging
Markets N/A N/A $17,606 ($17,606) $77,967 ($77,967)
- ----------------------------------------------------------------------------------------------------------------
Value $2,055 ($2,055) $58,759 ($52,105) $145,134 ($36,142)
- ----------------------------------------------------------------------------------------------------------------
International
Equity $3,592,157 0 $3,689,492 0 $4,048,114 0
- ----------------------------------------------------------------------------------------------------------------
Global Post-Venture
Capital ** $386,073 ($55,829) $567,052 0 $952,963 ($134,246)
- ----------------------------------------------------------------------------------------------------------------
Small Company
Growth $4,349,002 0 $6,094,569 0 $6,954,618 0
- ----------------------------------------------------------------------------------------------------------------
Emerging
Growth N/A N/A N/A N/A $5,760 ($5,760)
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
- ------------------------
* During the fiscal year ended December 31, 1997, Warburg also reimbursed
expenses of $23,347 to the Value Portfolio. During the fiscal year
ended December 31, 1998, Warburg also reimbursed expenses of $80,129 to
the Emerging Markets Portfolio and $31,926 to the Value Portfolio.
During the fiscal year ended December 31, 1999, CSAM/Warburg also
reimbursed expenses of $22,362 to the Emerging Markets Portfolio. For
the period September 13, 1999 (commencement of operations) through
December 31, 1999, CSAM also reimbursed expenses of $57,056 to the
Emerging Growth Portfolio.
** From its investment advisory fee, CSAM/Warburg paid Abbott a
sub-investment advisory fee for its services to the Global Post-Venture
Capital Portfolio. No compensation was paid by the Global Post-Venture
Capital Portfolio to Abbott for its sub-investment advisory services.
Co-Administration Fees earned by PFPC for the fiscal years (or period) ended
December 31
(portions of fees waived, if any, are noted in parentheses next to the amount
earned)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
1997 1998 1999
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Emerging
Markets N/A N/A $9,116 ($1,690) $17,133 ($7,484)
- -----------------------------------------------------------------------------------------------------------
Value $411 ($411) $15,824 ($11,752) $32,356 ($29,027)
- -----------------------------------------------------------------------------------------------------------
International
Equity $409,216 0 $436,977 0 $472,333 0
- -----------------------------------------------------------------------------------------------------------
Global Post-Venture
Capital $30,886 ($30,886) $48,364 ($45,364) $81,662 0
- -----------------------------------------------------------------------------------------------------------
Small Company
Growth $471,801 0 $638,099 0 $708,373 0
- -----------------------------------------------------------------------------------------------------------
Emerging
Growth N/A N/A N/A N/A $1,028 ($640)
- -----------------------------------------------------------------------------------------------------------
</TABLE>
48
<PAGE> 304
Co-Administration Fees earned by CSAMSI/Counsellors Service (the Portfolios'
predecessor co-administrator) for the fiscal years (or period) ended December
31
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
1997 1998 1999
---- ---- ----
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Emerging Markets N/A $1,409 $6,237
- ------------------------------------------------------------------------------------------
Value $274 $7,835 $19,351
- ------------------------------------------------------------------------------------------
International Equity $359,216 $368,949 $404,811
- ------------------------------------------------------------------------------------------
Global Post-Venture Capital $30,886 $45,364 $76,237
- ------------------------------------------------------------------------------------------
Small Company Growth $483,223 $677,174 $772,735
- ------------------------------------------------------------------------------------------
Emerging Growth N/A N/A $640
- ------------------------------------------------------------------------------------------
</TABLE>
Custodian and Transfer Agent
PFPC Trust Company ("PFPC Trust") serves as custodian of each
Portfolio's U.S. assets and State Street Bank and Trust Company ("State
Street") serves as custodian of the each Portfolio's non-U.S. assets. Each
custodian serves pursuant to separate custodian agreements (the "Custodian
Agreements"). Under the Custodian Agreements, PFPC Trust and State Street each
(i) maintains a separate account or accounts in the name of each Portfolio,
(ii) holds and transfers portfolio securities on account of each Portfolio,
(iii) makes receipts and disbursements of money on behalf of each Portfolio,
(iv) collects and receives all income and other payments and distributions on
account of each Portfolio's portfolio securities held by it and (v) makes
periodic reports to the Board concerning the Trust's custodial arrangements.
PFPC Trust may delegate its duties under its Custodian Agreement with the Trust
to a wholly owned direct or indirect subsidiary of PFPC Trust or PNC Bank Corp.
upon notice to the Trust and upon the satisfaction of certain other conditions.
State Street is authorized to select one or more foreign banking institutions
and foreign securities depositaries as sub-custodian on behalf of the relevant
Portfolio and PFPC Trust is authorized to select one or more domestic banks or
trust companies to serve as sub-custodian on behalf of the Portfolios. PFPC
Trust has entered into a sub-custodian agreement with PNC Bank, National
Association ("PNC"), pursuant to which PNC provides asset safekeeping and
securities clearing services. PFPC Trust and PNC are indirect, wholly owned
subsidiaries of PNC Bank Corp., and their principal business address is 200
Stevens Drive, Suite 440, Lester, Pennsylvania 19113. The principal business
address of State Street is 225 Franklin Street, Boston, Massachusetts 02110.
State Street also serves as the shareholder servicing, transfer and
dividend disbursing agent of the Trust pursuant to a Transfer Agency and
Service Agreement, under which State Street (i) issues and redeems shares of
each Portfolio, (ii) addresses and mails all communications by the Trust to
record owners of Portfolio shares, including reports to shareholders, dividend
and distribution notices and proxy material for its meetings of shareholders,
(iii) maintains shareholder accounts and, if requested, sub-accounts and (iv)
makes periodic reports to the Board concerning the transfer agent's operations
with respect to the Trust. State Street has delegated to Boston Financial Data
Services, Inc., an affiliate of State Street ("BFDS"), responsibility for most
shareholder servicing functions. BFDS's principal business address is 2
Heritage Drive, Boston, Massachusetts 02171.
49
<PAGE> 305
Distribution and Shareholder Servicing
Distributor . Provident Distributors, Inc. ("PDI") serves as distributor
of the Portfolios' shares. PDI offers the Portfolios' shares on a continuous
basis. No compensation is payable by the Portfolios to PDI for distribution
services, however, pursuant to a separate agreement with CSAM, PDI is
compensated for the services provided to the Portfolios. PDI's principal
business address is 3200 Horizon Drive, King of Prussia, Pennsylvania 19406.
Shareholder Servicing. The Trust has authorized certain insurance
companies ("Service Organizations") or, if applicable, their designees to enter
confirmed purchase and redemption orders on behalf of their clients and
customers, with payment to follow no later than the relevant Portfolio's
pricing on the following business day. If payment is not received by such time,
the Service Organization could be held liable for resulting fees or losses. The
Trust may be deemed to have received a purchase or redemption order when a
Service Organization, or, if applicable, its authorized designee, accepts the
order. Such orders received by the Trust in proper form will be priced at the
relevant Portfolio's net asset value next computed after they are accepted by
the Service Organization or its authorized designee. Service Organizations may
impose transaction or administrative charges or other direct fees, which
charges or fees would not be imposed if a Portfolio's shares are purchased
directly from the Trust.
For administration, subaccounting, transfer agency and/or other
services, CSAM or its affiliates may pay Service Organizations a fee of up to
.35% of the average annual value of accounts with the Trust maintained by such
Service Organizations. Service Organizations may also be reimbursed for
marketing costs. The Service Fee payable to any one Service Organization is
determined based upon a number of factors, including the nature and quality of
services provided, the operations processing requirements of the relationship
and the standardized fee schedule of the Service Organization or recordkeeper.
Organization of the Trust
The Trust was organized on March 15, 1995 under the laws of the
Commonwealth of Massachusetts as a "Massachusetts business trust." The Trust's
Declaration of Trust authorizes the Board to issue an unlimited number of full
and fractional shares of beneficial interest, $.001 par value per share. Shares
of six series have been authorized which constitute the interests in the
Portfolios. The Board may classify or reclassify any of its shares into one or
more additional series without shareholder approval. The "Post-Venture Capital
Portfolio" and the "Growth & Income Portfolio" were renamed the "Global
Post-Venture Capital Portfolio" and the "Value Portfolio", respectively,
effective May 1, 2000.
When matters are submitted for shareholder vote, shareholders of each
Portfolio will have one vote for each full share held and fractional votes for
fractional shares held. Generally, shares of the Trust will vote by individual
Portfolio on all matters except where otherwise required by law. There will
normally be no meetings of shareholders for the purpose of electing Trustees
unless and until such time as less than a majority of the members holding
office have been elected by shareholders. Shareholders of record of no less
than two-
50
<PAGE> 306
thirds of the outstanding shares of the Trust may remove a Trustee through a
declaration in writing or by vote cast in person or by proxy at a meeting
called for that purpose. A meeting will be called for the purpose of voting on
the removal of a Trustee at the written request of holders of 10% of the
Trust's outstanding shares. Under current law, a Participating Insurance
Company is required to request voting instructions from Variable Contract
owners and must vote all Trust shares held in the separate account in
proportion to the voting instructions received. Plans may or may not pass
through voting rights to Plan participants, depending on the terms of the
Plan's governing documents. For a more complete discussion of voting rights,
refer to the sponsoring Participating Insurance Company separate account
prospectus or the Plan documents or other informational materials supplied by
Plan sponsors.
Massachusetts law provides that shareholders could, under certain
circumstances, be held personally liable for the obligations of a Portfolio.
However, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given
in each agreement, obligation or instrument entered into or executed by the
Trust or a Trustee. The Declaration of Trust provides for indemnification from
a Portfolio's property for all losses and expenses of any shareholder held
personally liable for the obligations of the Trust. Thus, the risk of a
shareholder's incurring financial loss on account of shareholder liability is
limited to circumstances in which the relevant Portfolio would be unable to
meet its obligations, a possibility that CSAM believes is remote and
immaterial. Upon payment of any liability incurred by the Trust, the
shareholder paying the liability will be entitled to reimbursement from the
general assets of the relevant Portfolio. The Trustees intend to conduct the
operations of the Trust in such a way so as to avoid, as far as possible,
ultimate liability of the shareholders for liabilities of the Trust.
All shareholders of a Portfolio, upon liquidation, will participate
ratably in the Portfolio's net assets. Shares do not have cumulative voting
rights, which means that holders of more than 50% of the shares voting for the
election of Trustees can elect all Trustees. Shares are transferable but have
no preemptive, conversion or subscription rights.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of the Portfolios may not be purchased or redeemed by individual
investors directly but may be purchased or redeemed only through Variable
Contracts offered by separate accounts of Participating Insurance Companies and
through Plans, including participant-directed Plans which elect to make a
Portfolio an investment option for Plan participants. The offering price of
each Portfolio's shares is equal to its per share net asset value.
Under the 1940 Act, a Portfolio may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed, other than customary weekend and holiday closings, or during
which trading on the NYSE is restricted, or during which (as determined by the
SEC) an emergency exists as a result of which disposal or fair valuation of
portfolio securities is not reasonably practicable, or for such other periods
as the SEC may permit. (A Portfolio may also suspend or postpone the
recordation of an exchange of its shares upon the occurrence of any of the
foregoing conditions.)
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<PAGE> 307
If conditions exist which make payment of redemption proceeds wholly in
cash unwise or undesirable, a Portfolio may make payment wholly or partly in
securities or other investment instruments which may not constitute securities
as such term is defined in the applicable securities laws. If a redemption is
paid wholly or partly in securities or other property, a shareholder would
incur transaction costs in disposing of the redemption proceeds. The Trust has
elected, however, to be governed by Rule 18f-1 under the 1940 Act as a result
of which each Portfolio is obligated to redeem shares, with respect to any one
shareholder during any 90 day period, solely in cash up to the lesser of
$250,000 or 1% of the net asset value of that Portfolio at the beginning of the
period.
ADDITIONAL INFORMATION CONCERNING TAXES
The discussion set out below of tax considerations generally affecting
the Trust and its shareholders is intended to be only a summary and is not
intended as a substitute for careful tax planning by prospective shareholders.
Shareholders are advised to consult the sponsoring Participating Insurance
Company separate account prospectus or the Plan documents or other
informational materials supplied by Plan sponsors and their own tax advisers
with respect to the particular tax consequences to them of an investment in a
Portfolio.
Each Portfolio intends to continue to qualify to be treated as a
regulated investment company each taxable year under the Code. If it qualifies
as a regulated investment company, a Portfolio will effectively pay no federal
income taxes on its investment company taxable income (that is, any excess of
its net realized long-term capital gains over its net realized short-term
capital losses ("net realized capital gains")) and on its net realized capital
gains that are distributed to Shareholders. To so qualify, a Portfolio must,
among other things: (a) derive at least 90% of its gross income in each taxable
year from dividends, interest, payments with respect to securities, loans and
gains from the sale or other disposition of stock, securities or foreign
currencies, or other income (including, but not limited to, gains from options,
futures or forward contracts) derived with respect to its business of investing
in such stock, securities or currencies; and (b) diversify its holdings so
that, at the end of each quarter of the Portfolio's taxable year, (i) at least
50% of the market value of the Portfolio's assets is represented by cash,
securities of other regulated investment companies, U.S. Government securities
and other securities, with such other securities limited, in respect of any one
issuer, to an amount not greater than 5% of the Portfolio's assets and not
greater than 10% of the outstanding voting securities of such issuer and (ii)
not more than 25% of the value of its assets is invested in the securities
(other than U.S. Government Securities or securities of other regulated
investment companies) of any one issuer or any two or more issuers that the
Portfolio controls and which are determined to be engaged in the same or
similar trades or businesses or related trades or businesses.
If, in any taxable year, a Portfolio fails to qualify as a regulated
investment company under the Code or fails to meet the distribution
requirement, it would be taxed in the same manner as an ordinary corporation
and distributions to its Shareholders would not be deductible by the Portfolio
in computing its taxable income. In addition, in the event of a failure to
qualify, the Portfolio's distributions, to the extent derived from the
Portfolio's current or accumulated earnings and profits would constitute
dividends (eligible for the corporate dividends-received deduction) which are
taxable to Shareholders as ordinary
52
<PAGE> 308
income, even though those distributions might otherwise (at least in part) have
been treated in the Shareholders' hands as long-term capital gains. If a
Portfolio fails to qualify as a regulated investment company in any year, it
must pay out its earnings and profits accumulated in that year in order to
qualify again as a regulated investment company. In addition, if a Portfolio
failed to qualify as a regulated investment company for a period greater than
one taxable year, the Portfolio may be required to recognize any net built-in
gains with respect to certain of its assets (the excess of the aggregate gains,
including items of income, over aggregate losses that would have been realized
if it had been liquidated) in order to qualify as a regulated investment
company in a subsequent year.
In addition, each Portfolio intends to comply with the diversification
requirements of Section 817(h) of the Code which relate to the tax-deferred
status of insurance company separate accounts. To comply with regulations under
Section 817(h) of the Code, each Portfolio will be required to diversify its
investments so that on the last day of each calendar quarter no more than 55%
of the value of its assets is represented by any one investment, no more than
70% is represented by any two investments, no more than 80% is represented by
any three investments and no more than 90% is represented by any four
investments. Generally, all securities of the same issuer are treated as a
single investment. For the purposes of Section 817(h), obligations of the
United States Treasury and of each U.S. Government agency or instrumentality
are treated as securities of separate issuers. The Treasury Department has
indicated that it may issue future pronouncements addressing the circumstances
in which a Variable Contract owner's control of the investments of a separate
account may cause the Variable Contract owner, rather than the Participating
Insurance Company, to be treated as the owner of the assets held by the
separate account. If the Variable Contract owner is considered the owner of the
securities underlying the separate account, income and gains produced by those
securities would be included currently in the Variable Contract owner's gross
income. It is not known what standards will be set forth in such pronouncements
or when, if ever, these pronouncements may be issued. In the event that rules
or regulations are adopted, there can be no assurance that the Portfolios will
be able to operate as currently described, or that the Trust will not have to
change the investment goal or investment policies of a Portfolio. While a
Portfolio's investment goal is fundamental and may be changed only by a vote of
a majority of the Portfolio's outstanding shares, the Board reserves the right
to modify the investment policies of a Portfolio as necessary to prevent any
such prospective rules and regulations from causing a Variable Contract owner
to be considered the owner of the shares of the Portfolio underlying the
separate account.
A Portfolio's short sales against the box, if any, and transactions in
foreign currencies, forward contracts, options and futures contracts (including
options and futures contracts on foreign currencies) will be subject to special
provisions of the Code that, among other things, may affect the character of
gains and losses realized by the Portfolio (i.e., may affect whether gains or
losses are ordinary or capital), accelerate recognition of income to the
Portfolio and defer Portfolio losses. These rules could therefore affect the
character, amount and timing of distributions to Shareholders. These provisions
also (a) will require a Portfolio to mark-to-market certain types of the
positions in its portfolio (i.e., treat them as if they were closed out) and
(b) may cause the Portfolio to recognize income without receiving cash with
which to pay dividends or make distributions in amounts necessary to satisfy
the distribution requirements for avoiding income and excise taxes. Each
Portfolio will monitor
53
<PAGE> 309
its transactions, will make the appropriate tax elections and will make the
appropriate entries in its books and records when it engages in a short sale
against-the-box or acquires any foreign currency, forward contract, option,
futures contract or hedged investment in order to mitigate the effect of these
rules and prevent disqualification of the Portfolio as a regulated investment
company.
Investments by a Portfolio in zero coupon securities may create special
tax consequences. Zero coupon securities do not make interest payments,
although a portion of the difference between a zero coupon security's face
value and its purchase price is imputed as income to the Portfolio each year
even though the Portfolio receives no cash distribution until maturity. Under
the U.S. federal tax laws, the Portfolio will not be subject to tax on this
income if it pays dividends to its shareholders substantially equal to all the
income received from, or imputed with respect to, its investments during the
year, including its zero coupon securities. These dividends ordinarily will
constitute taxable income to the Shareholders of the Portfolio.
Because shares of a Portfolio may only be purchased through Variable
Contracts and Plans, it is anticipated that dividends and distributions will be
exempt from current taxation if left to accumulate within the Variable
Contracts or Plans.
Investment in Passive Foreign Investment Companies
If a Portfolio purchases shares in certain foreign entities classified
under the Code as "passive foreign investment companies" ("PFICs"), the
Portfolio may be subject to federal income tax on a portion of an "excess
distribution" or gain from the disposition of such shares, even though the
income may have to be distributed by the Portfolio to its Shareholders, the
Variable Contracts and Plans. In addition, gain on the disposition of shares in
a PFIC generally is treated as ordinary income even though the shares are
capital assets in the hands of the Portfolio. Certain interest charges may be
imposed on the Portfolio with respect to deferred taxes arising from excess
distributions or gains on the disposition of shares in a PFIC.
A Portfolio may be eligible to elect Qualified Electing Fund treatment,
which would require the Portfolio to include in its gross income its share of
earnings of a PFIC on a current basis. Generally, the election would eliminate
the interest charge and the ordinary income treatment on the disposition of
PFIC stock, but such an election may have the effect of accelerating the
recognition of income and gains by the Portfolio compared to a fund that did
not make the election. In addition, information required to make such an
election may not be available to the Portfolio.
Alternatively, a Portfolio may make a mark-to-market election that will
result in a Portfolio being treated as if it had sold and repurchased all of
the PFIC stock at the end of each year. If such an election were made, the
Portfolio would report gains as ordinary income and would deduct losses as
ordinary losses to the extent of previously recognized gains. The election,
once made, would be effective for all subsequent taxable years of the
Portfolio, unless revoked with the consent of the IRS. By making the election,
a Portfolio could potentially ameliorate the adverse tax consequences with
respect to its ownership of shares in a PFIC, but in any particular year may be
required to recognize income in excess of
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<PAGE> 310
the distributions it receives from PFICs and its proceeds from dispositions of
PFIC stock. The Portfolio may have to distribute this "phantom" income and gain
to satisfy its distribution requirement and to avoid imposition of the 4%
excise tax. Each Portfolio will make the appropriate tax elections, if
possible, and take any additional steps that are necessary to mitigate the
effect of these rules.
Income received by a Portfolio from investments in foreign securities
may be subject to withholding and other taxes imposed by foreign countries. The
foreign taxes paid by a Portfolio will reduce its return from investments in
the Portfolio.
DETERMINATION OF PERFORMANCE
From time to time, a Portfolio may quote its total return in
advertisements or in reports and other communications to shareholders. The
average annual total return for the fiscal periods ended December 31, 1999,
were as follows (performance figures calculated without the waiver of fees by a
Portfolio's service provider(s), if any, are noted in italics):
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
One-Year Since Inception (Date)
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Emerging Markets (81.40%) (80.12%) (22.45%) (21.17%)
(12/31/97)
- ---------------------------------------------------------------------------------------------------
Value 6.24% 5.91% 10.33% 9.45%
(10/31/97)
- ---------------------------------------------------------------------------------------------------
International Equity (53.43%) (53.43%) 14.81% 14.76%
(6/30/95)
- ---------------------------------------------------------------------------------------------------
Global Post-Venture Capital 62.94% 62.86% 22.30% 22.21%
(9/30/96)
- ---------------------------------------------------------------------------------------------------
Small Company Growth (69.08%) (69.08%) 24.71% 24.71%
(6/30/95)
- ---------------------------------------------------------------------------------------------------
Emerging Growth 150.92% 139.44%
(9/13/99)
- ---------------------------------------------------------------------------------------------------
</TABLE>
These total return figures show the average percentage change in value
of an investment in a Portfolio from the beginning of the measurement period to
the end of the measurement period. The figures reflect changes in the price of
the Portfolio's shares assuming that any income dividends and/or capital gain
distributions made by the Portfolio during the period were reinvested in shares
of the Portfolio. Total return will be shown for recent one-, five- and
ten-year periods, and may be shown for other periods as well (such as from
commencement of the Portfolio's operations or on a year-by-year, quarterly or
current year-to-date basis).
55
<PAGE> 311
Total return is calculated by finding the average annual compounded
rates of return for the one-, five-, and ten- (or such shorter period as the
Portfolio has been offered) year periods that would equate the initial amount
invested to the ending redeemable value according to the following formula:
P (1 + T)(n) = ERV. For purposes of this formula, "P" is a hypothetical
investment of $1,000; "T" is average annual total return; "n" is number of
years; and "ERV" is the ending redeemable value of a hypothetical $1,000
payment made at the beginning of the one-, five- or ten-year periods (or
fractional portion thereof). Total return or "T" is computed by finding the
average annual change in the value of an initial $1,000 investment over the
period and assumes that all dividends and distributions are reinvested during
the period.
When considering average total return figures for periods longer than
one year, it is important to note that the annual total return for one year in
the period might have been greater or less than the average for the entire
period. When considering total return figures for periods shorter than one
year, investors should bear in mind that such return may not be representative
of any Portfolio's return over a longer market cycle. A Portfolio may also
advertise aggregate total return figures for various periods, representing the
cumulative change in value of an investment in the relevant Portfolio for the
specific period. Aggregate and average total returns may be shown by means of
schedules, charts or graphs, and may indicate various components of total
return (i.e., change in value of initial investment, income dividends and
capital gain distributions).
A Portfolio may advertise, from time to time, comparisons of its
performance with that of one or more other mutual funds with similar investment
objectives. A Portfolio may advertise average annual calendar-year-to-date and
calendar quarter returns, which are calculated according to the formula set
forth in the preceding paragraph, except that the relevant measuring period
would be the number of months that have elapsed in the current calendar year or
most recent three months, as the case may be. Investors should note that this
performance may not be representative of the Portfolio's total return in longer
market cycles.
A Portfolio's performance will vary from time to time depending upon
market conditions, the composition of its portfolio and operating expenses
allocable to it. As described above, total return is based on historical
earnings and is not intended to indicate future performance. Consequently, any
given performance quotation should not be considered as representative of
performance for any specified period in the future. Performance information may
be useful as a basis for comparison with other investment alternatives.
However, a Portfolio's performance will fluctuate, unlike certain bank deposits
or other investments which pay a fixed yield for a stated period of time.
Performance quotations for the Portfolios include the effect of deducting each
Portfolio's expenses, but may not include charges and expenses attributable to
any particular Variable Contract or Plan, which would reduce the returns
described in this section.
A Portfolio may compare its performance with (i) that of other mutual
funds with similar investment objectives and policies, which may be based on
the rankings prepared by Lipper Analytical Services, Inc. or similar investment
services that monitor the performance of mutual funds; (ii) in the case of the
Global Post-Venture Capital Portfolio, with the Nasdaq Industrials Index and
appropriate indexes prepared by Frank Russell Company relating to securities
represented in the Portfolio, which are unmanaged indexes of common
56
<PAGE> 312
stocks; in the case of the Small Company Growth Portfolio, with appropriate
indexes prepared by Frank Russell company relating to securities represented in
the Portfolio; in the case of the Value Portfolio, with the S&P 500 Index,
which is an unmanaged index; in the case of the Emerging Markets Portfolio,
with the Morgan Stanley Capital International Emerging Markets Free Index; and
in the case of the International Equity Portfolio, the Morgan Stanley Capital
International All Country World Except U.S. Index and the Morgan Stanley
Capital International Europe, Australia, Far East ("EAFE") Index, which are
unmanaged indexes of common stocks; or (iii) other appropriate indexes of
investment securities or with data developed by CSAM derived from such indexes.
A Portfolio may also include evaluations of the Portfolio published by
nationally recognized ranking services and by financial publications such as
Barron's, Business Week, Financial Times, Forbes, Fortune, Inc., Institutional
Investor, Investor's Business Daily, Money, Morningstar, Mutual Fund Magazine,
SmartMoney, The Wall Street Journal and Worth. Morningstar, Inc. rates funds in
broad categories based on risk/reward analyses over various time periods. In
addition, each Portfolio may from time to time compare its expense ratio to
that of investment companies with similar objectives and policies, based on
data generated by Lipper Analytical Services, Inc. or similar investment
services that monitor mutual funds.
In reports or other communications to investors or in advertising, each
Portfolio may also describe the general biography or work experience of the
portfolio managers of the Portfolio and may include quotations attributable to
the portfolio managers describing approaches taken in managing the Portfolio's
investments, research methodology underlying stock selection or the Portfolio's
investment objective. In addition, a Portfolio and its portfolio managers may
render updates of Portfolio activity, which may include a discussion of
significant portfolio holdings; analysis of holdings by industry, country,
credit quality and other characteristics; and comparison and analysis of the
Portfolio with respect to relevant market and industry benchmarks. The Global
Post-Venture Capital Portfolio may discuss characteristics of venture capital
financed companies and the benefits expected to be achieved from investing in
these companies. Each Portfolio may also discuss measures of risk, the
continuum of risk and return relating to different investments and the
potential impact of foreign stocks on a portfolio otherwise composed of
domestic securities.
CSAM believes that a diversified portfolio of international equity
securities, when combined with a similarly diversified portfolio of domestic
equity securities, tends to have a lower volatility than a portfolio composed
entirely of domestic securities. Furthermore, international equities have been
shown to reduce volatility in single asset portfolios regardless of whether the
investments are in all domestic equities or all domestic fixed-income
instruments, and research has indicated that volatility can be significantly
decreased when international equities are added.
To illustrate this point, the performance of international equity
securities, as measured by the Morgan Stanley Capital International (EAFE)
Europe, Australasia, Far East Index (the "EAFE Index"), has equaled or exceeded
that of domestic equity securities, as measured by the Standard & Poor's 500
Composite Stock Index (the "S&P 500 Index") in 14
57
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of the last 26 years. The following table compares annual total returns of the
EAFE Index and the S&P 500 Index for the calendar years shown.
<TABLE>
<CAPTION>
EAFE INDEX VS. S&P 500 INDEX
1972-1999
ANNUAL TOTAL RETURN+
YEAR EAFE(R) INDEX S&P 500 INDEX
---- ------------- -------------
<S> <C> <C>
1972* 33.28 15.63
1973* -16.82 -17.37
1974* -25.60 -29.72
1975 31.21 31.55
1976 -.36 19.15
1977* 14.61 -11.50
1978* 28.91 1.06
1979 1.82 12.31
1980 19.01 25.77
1981* -4.85 -9.73
1982 -4.63 14.76
1983* 20.91 17.27
1984* 5.02 1.40
1985* 52.97 26.33
1986* 66.80 14.62
1987* 23.18 2.03
1988* 26.66 12.40
1989 9.22 27.25
1990 -24.71 -6.56
1991 10.19 26.31
1992 -13.89 4.46
1993* 30.49 7.06
1994* 6.24 -1.54
1995 9.42 34.11
1996 4.40 20.26
1997 0.24 31.01
1998 19.99 28.57
1999 26.97 21.02
</TABLE>
- -----------------
+ Without reinvestment of dividends.
* The EAFE Index has outperformed the S&P 500 Index 14 out of the last 26
years. Source: Morgan Stanley Capital International; Bloomberg Financial
Markets
The quoted performance information shown above is not intended to
indicate the future performance of the International Equity Portfolio.
Advertising or supplemental sales literature relating to the Portfolio may
describe the percentage decline from all-time high levels for certain foreign
stock markets. It may also describe how the Portfolio differs from the EAFE(R)
Index in composition.
INDEPENDENT ACCOUNTANTS AND COUNSEL
PricewaterhouseCoopers LLP ("PwC"), with principal offices at 2400
Eleven Penn Center, Philadelphia, Pennsylvania 19103, serves as independent
accountants for the Trust. The financial statements for the Trust that are
incorporated by reference in this Statement of Additional Information have been
audited by PwC, and have been included herein
58
<PAGE> 314
in reliance upon the report of such firm of independent accountants given upon
their authority as experts in accounting and auditing.
Willkie Farr & Gallagher serves as counsel for the Trust and provides
legal services from time to time for CSAM and CSAMSI.
FINANCIAL STATEMENTS
The Trust's audited Annual Report dated December 31, 1999, which either
accompanies this Statement of Additional Information or has previously been
provided to the investor to whom this Statement of Additional Information is
being sent, is incorporated herein by reference with respect to all information
regarding the Portfolios included therein. The Trust will furnish without
charge a copy of its Annual Report upon request by calling the Trust at
1-800-222-8977.
MISCELLANEOUS
The Portfolios and the Trust are not sponsored, endorsed, sold or
promoted by Warburg, Pincus & Co. Warburg, Pincus & Co. makes no representation
or warranty, express or implied, to the owners of the Portfolios or any member
of the public regarding the advisability of investing in securities generally
or in the Portfolios particularly. Warburg, Pincus & Co. licenses certain
trademarks and trade names of Warburg, Pincus & Co., and is not responsible for
and has not participated in the calculation of the Portfolios' net asset value,
nor is Warburg, Pincus & Co. a distributor of the Portfolios. Warburg, Pincus &
Co. has no obligation or liability in connection with the administration,
marketing or trading of the Portfolios.
As of March 31, 2000, the following persons owned of record 5% or more
of each Portfolio's outstanding shares:
EMERGING MARKETS PORTFOLIO
The Travelers Separate Account 24.06%
TM2 for Variable Annuities
of The Travelers Insurance Co.
1 Tower Square
Hartford, CT 06183-0002
Warburg, Pincus Asset Management 24.59%
Attn: Stephen Distler
466 Lexington Avenue 10th Fl.
New York, NY 10017-3140
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<PAGE> 315
Kemper Investors Life Insurance Co. 20.61%
Variable Annuity Separate Account
Attn: Karen Porten
1 Kemper Drive
Long Grove, IL 60049-00001
The Travelers Separate Account 16.57%
ABD2 for Variable Annuities
of The Travelers Insurance Co.
1 Tower Square
Hartford, CT 06183-0002
Sun Life of Canada (US) 13.28%
c/o Retirement Products &
Services Accounting Control
P.O. Box 9134
Boston, MA 02117-9134
The Travelers Separate Account 7.71%
ABD for Variable Annuities
of The Travelers Insurance Co.
1 Tower Square
Hartford, CT 06183-0002
The Travelers Separate Account 6.35%
06 for Variable Annuities
of The Travelers Insurance Co.
1 Tower Square
Hartford, CT 06183-0002
VALUE PORTFOLIO
Nationwide Life Insurance Company 87.78%
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029
INTERNATIONAL EQUITY PORTFOLIO
Nationwide Life Insurance Company 41.45%
Nationwide Variable Account II
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029
60
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Golden American Life 32.37%
Separate Account B
1001 Jefferson Street Suite 400
Wilmington, DE 19801-1493
Equitable Life Insurance Co of Iowa 9.43%
Separate Account A
Danielle Knopf
909 Locust Street
Des Moines, IA 50309-2803
Fidelity Investments 6.41%
Life Insurance Company
Attn: Angela Kardaris
82 Devonshire Street #R25B
Boston, MA 02109-3614
Nationwide Life Insurance Company 5.65%
Nationwide Variable Account II
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029
GLOBAL POST-VENTURE CAPITAL PORTFOLIO
Nationwide Life Insurance Company 34.24%
Nationwide Variable Account II
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029
Pruco Life Flexible Premium 27.03%
Variable Annuity Account
213 Washington Street 7th Floor
Newark, NJ 07102-2917
Nationwide Life Insurance Company 12.83%
NWVA-9
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029
Fidelity Investments 12.82%
Life Insurance Company
82 Devonshire St #R25B
Boston, MA 02109-3605
61
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SMALL COMPANY GROWTH PORTFOLIO
IDS Life Insurance Company 44.80%
c/o American Express Financial
Attn: Flex Variable Annuity T11-125
IDS Tower 10
Minneapolis, MN 55440
Nationwide Life Insurance Company 38.23%
Nationwide Variable Account II
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029
Fidelity Investments 7.58%
Life Insurance Company
82 Devonshire St #R25B
Boston, MA 02109-3605
EMERGING GROWTH PORTFOLIO
IDS Life Insurance Company 55.25%
(For Account 1EG)
IDS Tower 10 T11/340
Minneapolis, MN 55440
IDS Life Insurance Company 39.30%
(For Account 2EG)
IDS Tower 10 T11/340
Minneapolis, MN 55440
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<PAGE> 318
APPENDIX
DESCRIPTION OF RATINGS
Commercial Paper Ratings
Commercial paper rated A-1 by Standard and Poor's Ratings Group ("S&P")
indicates that the degree of safety regarding timely payment is strong. Those
issues determined to possess extremely strong safety characteristics are
denoted with a plus sign designation. Capacity for timely payment on commercial
paper rated A-2 is satisfactory, but the relative degree of safety is not as
high as for issues designated A-1.
The rating Prime-1 is the highest commercial paper rating assigned by
Moody's Investors Services, Inc. ("Moody's"). Issuers rated Prime-1 (or related
supporting institutions) are considered to have a superior capacity for
repayment of short-term promissory obligations. Issuers rated Prime-2 (or
related supporting institutions) are considered to have a strong capacity for
repayment of short-term promissory obligations. This will normally be evidenced
by many of the characteristics of issuers rated Prime-1 but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternative liquidity is maintained.
Corporate Bond Ratings
The following summarizes the ratings used by S&P for corporate bonds:
AAA - This is the highest rating assigned by S&P to a debt obligation
and indicates an extremely strong capacity to pay interest and repay principal.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in small degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher-rated
categories.
BBB - This is the lowest investment grade. Debt rated BBB has an
adequate capacity to pay interest and repay principal. Although they normally
exhibit adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest
and repay principal for bonds in this category than for bonds in higher-rated
categories.
To provide more detailed indications of credit quality, the ratings from
"AA" to "BBB" may be modified by the addition of a plus or minus sign to show
relative standing within this major rating category.
The following summarizes the ratings used by Moody's for corporate bonds:
A-1
<PAGE> 319
Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present which suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium-grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Moody's applies numerical modifiers (1, 2 and 3) with respect to the
bonds rated "Aa" through "Baa". The modifier 1 indicates that the bond being
rated ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the bond ranks
in the lower end of its generic rating category.
A-2
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PART C
OTHER INFORMATION
Item 23. Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- -----------------------
<S> <C>
a(1) Declaration of Trust.(1)
(2) Amendment to Declaration of Trust.(2)
(3) Amendment to Declaration of Trust.
(4) Amendment to Declaration of Trust.
(5) Designation of Series relating to addition of Post-Venture Capital
and Emerging Markets Portfolios.(3)
(6) Designation of Series relating to addition of Growth & Income
Portfolio.(4)
(7) Designation of Series relating to addition of Emerging Growth
Portfolio(5)
b(1) By-Laws.(1)
(2) Amendment to By-Laws.(6)
</TABLE>
- ----------
(1) Incorporated by reference to Registrant's Registration Statement on Form
N-1A filed with the Commission on March 17, 1995.
(2) Incorporated by reference to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement on Form N-1A filed with the
Commission on June 14, 1995.
(3) Incorporated by reference to Post-Effective Amendment No. 2 to
Registrant's Registration Statement on Form N-1A, filed with the
Commission on April 18, 1996.
(4) Incorporated by reference to Post-Effective Amendment No. 4 to
Registrant's Registration Statement on Form N-1A, filed with the
Commission on August 11, 1997.
(5) Incorporated by reference to Post-Effective Amendment No. 10 to
Registrant's Registration Statement on Form N-1A, filed with the
Commission on April 16, 1999.
(6) Incorporated by reference; material provisions of this exhibit are
substantially similar to those of the
C-1
<PAGE> 321
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- -----------------------
<S> <C>
c Form of Share Certificate.(2)
d(1) Forms of Investment Advisory Agreements pertaining to the
International Equity and Small Company Growth Portfolios. (2)
(2) Forms of Investment Advisory Agreements pertaining to the
Post-Venture Capital and Emerging Markets Portfolios. (3)
(3) Form of Investment Advisory Agreement pertaining to the Growth &
Income Portfolio. (4)
(4) Form of Investment Advisory Agreements pertaining to the Emerging
Growth Portfolio. (5)
(5) Form of Investment Advisory Agreement. (7)
(6) Form of Sub-Investment Advisory Agreement pertaining to the Global
Post-Venture Capital Portfolio. (7)
e Distribution Agreement with Provident Distributors, Inc. ("PDI").(8)
f Not applicable
g(1) Form of Custodian Services Agreement with PFPC Trust Company.(5)
</TABLE>
- --------------------------------------------------------------------------------
corresponding exhibit to Post-Effective Amendment No. 19 to the
Registration Statement on Form N-1A of Warburg, Pincus Capital
Appreciation Fund filed on February 23, 1998 (Securities Act File No.
33-12344; Investment Company Act File No. 811-5041).
(7) Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit in the
Registration Statement on Form N-14 of Warburg, Pincus Global
Post-Venture Capital Fund, Inc. filed November 4, 1999 (Securities Act
File No. 333-90341).
(8) Incorporated by reference to Post-Effective Amendment No. 9 to the
Registration Statement on Form N-1A of Warburg, Pincus Balanced Fund,
Inc., filed on February 24, 2000 (Securities Act File No. 333-00533).
C-2
<PAGE> 322
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- -----------------------
<S> <C>
(2) Form of Custodian Agreement with State Street Bank and Trust
Company.(9)
(3) Form of Sub-Custodian Services Agreement with PFPC Trust
Company and PNC Bank, National Association.(5)
h(1) Form of Transfer Agency Agreement.(2)
(2) Form of Co-Administration Agreement with Credit Suisse Asset
Management Securities, Inc. (10)
(3) Form of Co-Administration Agreement with PFPC Inc.(2)
(4) Form of Letter Agreement between Registrant and PFPC Inc.
pertaining to inclusion of the Post-Venture Capital and
Emerging Markets Portfolios to the existing
Co-Administration Agreement. (3)
(5) Form of Participation Agreement.(2)
(6) Form of Co-Administration Agreement between Registrant and
PFPC Inc. pertaining to inclusion of the Growth & Income
Portfolio.(4)
(7) Form of Letter Agreement between Registrant and State Street
pertaining to the inclusion of the Growth & Income Portfolio
under the Transfer Agency and Service Agreement.(4)
</TABLE>
- ----------
(9) Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit to the
Registration Statement on Form N-14 of Warburg, Pincus Major Foreign
Markets Fund, Inc. (formerly known as Warburg, Pincus Managed
EAFE(R) Countries Fund, Inc.) on November 5, 1997 (Securities Act File
No. 333-39611).
(10) Incorporated by reference to the Registration Statement on Form N-14 of
Warburg, Pincus Global Post-Venture Capital Fund, Inc., filed November 4,
1999 (Securities Act File No. 333-90341).
C-3
<PAGE> 323
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- -----------------------
<S> <C>
(8) Form of Letter Agreement between Registrant and State Street
pertaining to the inclusion of the Emerging Growth Portfolio
under the Transfer Agency and Service Agreement.(5)
i(1) Opinion and Consent of Willkie Farr & Gallagher, counsel to
the Trust.
(2) Opinion and Consent of Sullivan & Worcester, Massachusetts
counsel to the Trust. (2)
j(1) Consent of PricewaterhouseCoopers LLP, independent
accountants.
(2) Powers of Attorney. (10)
l(1) Purchase Agreement pertaining to the International Equity and
Small Company Growth Portfolios.(2)
(2) Form of Purchase Agreement pertaining to the Post-Venture
Capital and Emerging Markets Portfolios.(3)
(3) Form of Purchase Agreement pertaining to the Growth & Income
Portfolio.(4)
(4) Form of Purchase Agreement pertaining to the Emerging Growth
Portfolio.(5)
m Not applicable.
n Not applicable
o Not applicable.
p(1) Form of Code of Ethics.
(2) Form of Code of Ethics for Abbott Capital Management, LLC.
</TABLE>
Item 24. Persons Controlled by or Under Common Control with Registrant
From time to time, Credit Suisse Asset Management, LLC ("CSAM, LLC")
may be deemed to control Registrant and other registered investment companies it
advises through its beneficial ownership of more than 25% of the relevant fund's
shares on
C-4
<PAGE> 324
behalf of discretionary advisory clients. CSAM, LLC has three wholly-owned
subsidiaries: Warburg, Pincus Asset Management International, Inc., a Delaware
corporation; Warburg Pincus Asset Management (Japan), Inc., a Japanese
corporation; and Warburg Pincus Asset Management (Dublin) Limited, an Irish
corporation.
Item 25. Indemnification
Registrant, and officers and directors of CSAM, LLC, Credit Suisse
Asset Management Securities, Inc. ("CSAM Securities") and Registrant are covered
by insurance policies indemnifying them for liability incurred in connection
with the operation of Registrant. Discussion of this coverage is incorporated by
reference to Item 27 of Part C of the Trust's Registration Statement filed on
March 17, 1995 (Securities Act File No. 33-58125).
Item 26. Business and Other Connections of Investment Adviser
CSAM, LLC acts as investment adviser to Registrant. CSAM, LLC renders
investment advice to a wide variety of individual and institutional clients. The
list required by this Item 26 of officers and directors of CSAM, LLC, together
with information as to their other business, profession, vocation or employment
of a substantial nature during the past two years, is incorporated by reference
to Schedules A and D of Form ADV filed by CSAM, LLC (SEC File No. 801-37170).
Abbott Capital Management, LLC ("Abbott") acts as sub-investment
adviser for the Global Post-Venture Capital Portfolio. Abbott renders investment
advice and provides full-service private equity programs to clients. The list
required by this Item 26 of Officers and Directors of Abbott, together with
information as to their other business, profession, vocation, or employment of a
substantial nature during the past two years, is incorporated by reference to
Schedules A and D of Form ADV filed by Abbott (SEC File No. 801-27914).
Item 27. Principal Underwriter
(a) PDI acts as distributor for Registrant, as well as for Warburg
Pincus Balanced Fund; Warburg Pincus Capital Appreciation Fund; Warburg Pincus
Cash Reserve Fund; Warburg Pincus Central & Eastern Europe Fund; Warburg Pincus
Emerging Growth Fund; Warburg Pincus Emerging Markets Fund; Warburg Pincus
European Equity Fund; Warburg Pincus Fixed Income Fund; Warburg Pincus Focus
Fund; Warburg Pincus Global Fixed Income Fund; Warburg Pincus Global Health
Sciences Fund; Warburg Pincus Global Post-Venture Capital Fund; Warburg Pincus
Global Telecommunications Fund; Warburg Pincus High Yield Fund; Warburg Pincus
Institutional Fund; Warburg Pincus Intermediate Maturity Government Fund;
Warburg Pincus International Equity
C-5
<PAGE> 325
Fund; Warburg Pincus International Growth Fund; Warburg Pincus International
Small Company Fund; Warburg Pincus Japan Growth Fund; Warburg Pincus Japan Small
Company Fund; Warburg Pincus Long-Short Market Neutral Fund; Warburg Pincus
Major Foreign Markets Fund; Warburg Pincus Municipal Bond Fund; Warburg Pincus
New York Intermediate Municipal Fund; Warburg Pincus New York Tax Exempt Fund;
Warburg Pincus Small Company Growth Fund; Warburg Pincus Small Company Value
Fund; Warburg Pincus Strategic Global Fixed Income Fund; Warburg Pincus Trust
II; Warburg Pincus U.S. Core Equity Fund; Warburg Pincus U.S. Core Fixed Income
Fund; Warburg Pincus Value Fund; Warburg Pincus WorldPerks Money Market Fund;
and Warburg Pincus WorldPerks Tax Free Money Market Fund.
PDI also acts as principal underwriter for the following investment
companies: International Dollar Reserve Fund I, Ltd.; Provident Institutional
Funds Trust; Columbia Common Stock Fund, Inc.; Columbia Growth Fund, Inc.;
Columbia International Stock Fund, Inc.; Columbia Special Fund, Inc.; Columbia
Small Cap Fund, Inc.; Columbia Real Estate Equity Fund, Inc.; Columbia Balanced
Fund, Inc.; Columbia Daily Income Company; Columbia U.S. Government Securities
Fund, Inc.; Columbia Fixed Income Securities Fund, Inc.; Columbia Municipal Bond
Fund, Inc.; Columbia High Yield Fund, Inc.; Columbia National Municipal Bond
Fund, Inc.; GAMNA Series Funds, Inc.; WT Investment Trust; Kalmar Pooled
Investment Trust; The RBB Fund, Inc.; Robertson Stephens Investment Trust; HT
Insight Funds, Inc.; Harris Insight Funds Trust; Hilliard-Lyons Government Fund,
Inc.; Hilliard-Lyons Growth Fund, Inc.; Hilliard-Lyons Research Trust; Senbanc
Fund; ABN AMRO Funds; Alleghany Funds; BT Insurance Funds Trust; First Choice
Funds Trust; Forward Funds, Inc.; IAA Trust Asset Allocation Fund, Inc.; IAA
Trust Growth Fund, Inc.; IAA Trust Tax Exempt Bond Fund, Inc.; IAA Trust Taxable
Fixed Income Series Fund, Inc.; IBJ Funds Trust; Light Index Funds, Inc.; LKCM
Funds; Matthews International Funds; McM Funds; Metropolitan West Funds; New
Covenant Funds, Inc.; Panorama Trust; Smith Breeden Series Funds; Smith Breeden
Trust; Stratton Growth Funds, Inc.; Stratton Monthly Dividend REIT Shares, Inc.;
The Stratton Funds, Inc.; The Galaxy Fund; The Galaxy VIP Fund; Galaxy Fund II;
The Govett Funds, Inc.; Trainer, Wortham First Mutual Funds; Undiscovered
Managers Funds; Wilshire Target Funds, Inc.; Weiss, Peck & Greer Funds Trust;
Weiss, Peck & Greer International Fund; WPG Growth and Income Fund; WPG Growth
Fund; WPG Tudor Fund; RWB/WPG U.S. Large Stock Fund; Tomorrow Funds Retirement
Trust; The BlackRock Funds, Inc. (distributed by BlackRock Distributors, Inc. a
wholly owned subsidiary of PDI); Northern Funds Trust and Northern Institutional
Funds Trust (distributed by Northern Funds Distributors, LLC a wholly owned
subsidiary of PDI); The Offit Investment Fund, Inc. (distributed by Offit Funds
Distributor, Inc. a wholly owned subsidiary of PDI) and The Offit Variable
Insurance Fund, Inc. (distributed by Offit Funds Distributor, Inc. a wholly
owned subsidiary of PDI).
(b) For information relating to each director, officer or partner of
PDI, reference is made to Form BD (SEC
C-6
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File No. 8-46564) filed by PDI under the Securities Exchange Act of 1934.
(c) None.
Item 28. Location of Accounts and Records
<TABLE>
<S> <C>
(1) Warburg, Pincus Trust
335 Madison Avenue New York,
New York 10017
(Trust's Declaration of Trust, by-laws and minute
books)
(2) Credit Suisse Asset Management Securities, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as co-
administrator and distributor)
(3) PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
(records relating to its functions as co-
administrator)
(4) Credit Suisse Asset Management, LLC
One Citicorp Center
153 East 53rd Street
New York, New York 10022
(records relating to its functions as
investment adviser)
(5) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
(records relating to its functions as custodian,
shareholder servicing agent, transfer agent and
dividend disbursing agent)
(6) PFPC Trust Company
8800 Tinicum Boulevard
Philadelphia, Pennsylvania 19153
(records relating to its functions as custodian)
(7) Boston Financial Data Services, Inc.
2 Heritage Drive
North Quincy, Massachusetts 02171
(records relating to its functions as shareholder
servicing agent, transfer agent and dividend
disbursing agent)
</TABLE>
C-7
<PAGE> 327
<TABLE>
<S> <C>
(8) Provident Distributors, Inc.
3200 Horizons Drive
King of Prussia, PA 19406
(records relating to its functions as distributor)
</TABLE>
Item 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable.
C-8
<PAGE> 328
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended
(the "Securities Act"), and the Investment Company Act of 1940, as amended, the
Registrant certifies that it meets all of the requirements for effectiveness of
this Amendment to the Registration Statement pursuant to Rule 485(b) under the
Securities Act, and has duly caused this Amendment to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of New York and the
State of New York, on the 26th day of April, 2000.
WARBURG, PINCUS TRUST
By:/s/Eugene L. Podsiadlo
------------------------------
Eugene L. Podsiadlo
President
Pursuant to the requirements of the Securities Act, this Amendment has
been signed below by the following persons in the capacities and on the date
indicated:
<TABLE>
<CAPTION>
Signature Title Date
- ---------- ----- ----
<S> <C> <C>
/s/William W. Priest* Chairman of the April 26, 2000
- --------------------------- Board of Trustees
William W. Priest
/s/Eugene L. Podsiadlo President April 26, 2000
- ---------------------------
Eugene L. Podsiadlo
/s/Michael A. Pignataro Treasurer and April 26, 2000
- --------------------------- Chief Financial
Michael A. Pignataro Officer
/s/Richard H. Francis* Trustee April 26, 2000
- ---------------------------
Richard H. Francis
/s/Jack W. Fritz* Trustee April 26, 2000
- ---------------------------
Jack W. Fritz
/s/Jeffrey E. Garten* Trustee April 26, 2000
- ---------------------------
Jeffrey E. Garten
/s/James S. Pasman, Jr.* Trustee April 26, 2000
- ---------------------------
James S. Pasman, Jr.
/s/Steven N. Rappaport* Trustee April 26, 2000
- ---------------------------
Steven N. Rappaport
/s/Alexander B. Trowbridge* Trustee April 26, 2000
- ---------------------------
Alexander B. Trowbridge
*By /s/Michael A. Pignataro
- ---------------------------
Michael A. Pignataro as
Attorney-in-Fact
</TABLE>
C-9
<PAGE> 329
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
a(3) Amendment to Declaration of Trust.
(4) Amendment to Declaration of Trust.
i(1) Opinion and Consent of Willkie Farr & Gallagher, counsel to the Fund.
j(1) Consent of PricewaterhouseCoopers LLP, Independent Accountants.
p(1) Form of Code of Ethics.
p(2) Form of Code of Ethics for Abbott Capital Management, LLC.
</TABLE>
<PAGE> 1
EXHIBIT a(3)
WARBURG, PINCUS TRUST
Certificate of Amendment
The undersigned, being the Vice President and Secretary of Warburg,
Pincus Trust, a trust with transferable shares of the type commonly called a
Massachusetts business trust (hereinafter referred to as the "Trust"), DOES
HEREBY CERTIFY that, pursuant to the authority conferred upon the Trustees of
the Trust by Section 9.3 of the Agreement and Declaration of Trust, dated March
15, 1995 (the "Declaration of Trust"), and by the action of the Trustees of the
Trust at a meeting duly held on October 26, 1999, the Declaration of Trust is
hereby amended as follows:
Section 6.2 of the Declaration of Trust is hereby amended to
change the name of the Post-Venture Capital Portfolio of the
Trust to be the "Global Post-Venture Capital Portfolio"
effective as of May 1, 2000.
IN WITNESS WHEREOF, the undersigned has set his/her hand and seal this
8th day of March, 2000.
/s/Hal Liebes
-------------
Hal Liebes
Vice President and Secretary
ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
March 8, 2000
Then personally appeared the above-named Hal Liebes and acknowledged
the foregoing instrument to be his free act and deed.
Before me
/s/Joseph A. Messing
- --------------------
Notary Public
My commission expires: ___________
Joseph A. Messing
Notary Public, State of New York
No. 5002535
Qualified in Westchester County
Commission Expires October 5, 2000
<PAGE> 1
EXHIBIT a(4)
WARBURG, PINCUS TRUST
Certificate of Amendment
The undersigned, being the Vice President and Secretary of Warburg,
Pincus Trust, a trust with transferable shares of the type commonly called a
Massachusetts business trust (hereinafter referred to as the "Trust"), DOES
HEREBY CERTIFY that, pursuant to the authority conferred upon the Trustees of
the Trust by Section 9.3 of the Agreement and Declaration of Trust, dated March
15, 1995 (the "Declaration of Trust"), and by the action of the Trustees of the
Trust at a meeting duly held on February 3, 2000, the Declaration of Trust is
hereby amended as follows:
Section 6.2 of the Declaration of Trust is hereby amended to
change the name of the Growth & Income Portfolio of the Trust to
be the "Value Portfolio" effective as of May 1, 2000.
IN WITNESS WHEREOF, the undersigned has set his/her hand and seal this
8th day of March, 2000.
/s/Hal Liebes
-------------
Hal Liebes
Vice President and Secretary
ACKNOWLEDGMENT
STATE OF NEW YORK )
) ss.
COUNTY OF NEW YORK )
March 8, 2000
Then personally appeared the above-named Hal Liebes and acknowledged the
foregoing instrument to be his free act and deed.
Before me
Joseph A. Messing
- ------------------
Notary Public
My commission expires:
-------------
Joseph A. Messing
Notary Public, State of New York
No. 5002535
Qualified in Westchester County
Commission Expires October 5, 2000
<PAGE> 1
EXHIBIT i
April 26, 2000
Warburg, Pincus Trust
466 Lexington Avenue
New York, New York 10017-3147
Re: Post-Effective Amendment No. 13 to Registration Statement
(Securities Act File No. 33-58125; Investment Company Act
File No. 811-07261)
Ladies and Gentlemen:
You have requested us, as counsel to Warburg, Pincus Trust (the "Trust"), a
business trust organized under the laws of The Commonwealth of Massachusetts, to
furnish you with this opinion in connection with the Trust's filing of
Post-Effective Amendment No. 13 (the "Amendment") to its Registration Statement
on Form N-1A (the "Registration Statement").
We have examined copies of the Trust's Declaration of Trust, as amended to the
date hereof (the "Declaration"), the Trust's By-Laws, as amended to the date
hereof (the "By-Laws"), and the Amendment. We have also examined such other
records, documents, papers, statutes and authorities as we have deemed necessary
to form a basis for the opinion hereinafter expressed.
In our examination of material, we have assumed the genuineness of all
signatures and the conformity to original documents of all copies submitted to
us. As to various questions of fact material to our opinion, we have relied upon
statements and certificates of officers and representatives of the Trust and
others.
Based upon the foregoing, we are of the opinion that the shares of beneficial
interest of the Trust, par value $.001 per share (the "Shares"), when and if
duly sold, issued and paid for in accordance with the terms of the Declaration,
the By-Laws and the Registration Statement, will be will be valid, legally
issued, fully paid and non-assessable, assuming (i) that at the time of sale
such Shares are sold at a sales price in each case in excess of the par value of
the Shares; (ii) that the issuance of the Shares does not cause the number of
outstanding Shares to exceed that number of authorized
<PAGE> 2
Warburg Pincus Trust
April 26, 2000
Page 2
shares provided for in the Declaration, as amended to the date of issuance; and
(iii) that resolutions of the Board of Directors authorizing the issuance of the
Shares that are in effect on the date hereof have not been modified or withdrawn
and are in full force and effect on the date of issuance.
We hereby consent to the filing of this opinion as an exhibit to the Amendment,
to any reference to our name under the heading "Independent Accountants and
Counsel" in the Statement of Additional Information included as part of the
Amendment, and to the filing of this opinion as an exhibit to any application
made by or on behalf of the Trust or any distributor or dealer in connection
with the registration or qualification of the Trust or the Shares under the
securities laws of any state or other jurisdiction.
We are members of the Bar of the State of New York only and do not opine as to
the laws of any jurisdiction other than the laws of the State of New York and
the laws of the United States, and the opinions set forth above are,
accordingly, limited to the laws of those jurisdictions.
Very truly yours,
/s/Willkie Farr & Gallagher
<PAGE> 1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Post-Effective
Amendment No. 13 to the Registration Statement under the Securities Act of 1933
and Post-Effective Amendment No. 14 to the Registration Statement under the
Investment Company Act of 1940 on Form N-1A (File Nos. 33-58125 and 811-07261,
respectively) of our report dated February 3, 2000 on our audit of the financial
statements and financial highlights of Warburg, Pincus Trust, which report is
included in the Annual Report to Shareholders for the year ended December 31,
1999 and for the respective periods then ended. We also consent to the reference
of our firm under the heading "Financial Highlights" in the Prospectus and
"Independent Accountants and Counsel" in the Statement of Additional
Information.
/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
April 25, 2000
2400 Eleven Penn Center
Philadelphia, Pennsylvania
<PAGE> 1
EXHIBIT p(1)
CREDIT SUISSE ASSET MANAGEMENT, LLC
WARBURG PINCUS FUNDS/CSAM CLOSED-END FUNDS
CODE OF ETHICS
I. APPLICABILITY
This Code of Ethics establishes rules of conduct for "Access Persons" (as
defined below) of Credit Suisse Asset Management, LLC, its subsidiaries and
Credit Suisse Asset Management Securities, Inc. (collectively referred to as
"CSAM") and each U.S. registered investment company that adopts this Code
("Covered Fund") (CSAM and the Covered Funds are collectively referred to as the
"Covered Companies"). For purposes of this Code, "Access Person" shall mean:
- - any "Advisory Person" -- any employee or officer of CSAM and any natural
person in a control relationship to a Covered Company (except for a
natural persons who, but for their his or her holdings in a Covered Fund,
would not be considered an Advisory Person, unless they he or she obtains
information concerning recommendations made to the Covered Fund with
regard to the purchase or sale of securities by the Covered Fund, in
which case such person shall be considered an Advisory Person only with
respect to the Covered Fund); or
- - any director, trustee or officer of a Covered Fund, whether or not such
person is an Advisory Person, in which case such person shall be
considered an Access Person only with respect to the Covered Fund.
For purposes of this Code:
- - the term "security" shall include any option to purchase or sell, any
security that is convertible or exchangeable for, and any other
derivative interest relating to the security; and
- - the terms "purchase" and "sale" of a security shall include, among other
things, the writing of an option to purchase or sell a security; and
- - all other terms .shall have the same meanings as under the Investment
Company Act of 1940 ("1940 Act"), unless indicated otherwise.
<PAGE> 2
II. Statement of General Principles
In conducting personal investment activities, all Access Persons are required to
act consistent with the following general fiduciary principles:
- - the interests of CSAM clients, including Covered Funds, must always be
placed first, provided, however, that persons who are Access Persons only
with respect to certain Covered Funds shall place the interests of such
Covered Funds first;
- - all personal securities transactions must be conducted in such a manner
as to avoid any actual or potential conflict of interest or any abuse of
an individual's position of trust and responsibility; and
- - Access Persons must not take inappropriate advantage of their positions.
CSAM has a separate policy and procedures designed to detect and prevent insider
trading, which should be read together with this Code. Nothing contained in this
Code should be interpreted as relieving any Access Person from the obligation to
act in accordance with any applicable law, rule or regulation or any other
statement of policy or procedure adopted by any Covered Company.
III. Prohibitions
The following prohibitions and related requirements apply to Advisory Persons
and/or Access Persons (as stated) and accounts in which they have "Beneficial
Ownership" (as defined in Exhibit 1).
A. Short Term Trading. CSAM discourages Advisory Persons from short-term trading
(i.e., purchases and sales within a 60 day period), as such activity could be
viewed as being in conflict with CSAM's general fiduciary principles. In no
event, however, may an Advisory Person make a purchase and sale (or sale and
purchase) of a security, including shares of Covered Funds and other U.S.
registered open-end investment companies (other than money market funds), within
five "Business Days" (meaning days on which the New York Stock Exchange is open
for trading). CSAM reserves the right to extend this prohibition period for the
short-term trading activities of any or all Advisory Persons if CSAM
<PAGE> 3
determines that such activities are being conducted in a manner that may be
perceived to be in conflict with CSAM's general fiduciary principles.
B. Side-by-Side Trading. No Access Person may purchase or sell (directly or
indirectly) any security for which there is a "buy" or "sell" order pending for
a CSAM client (except that this restriction does not apply to any Access Person
who is neither an Advisory Person nor an officer of a Covered Fund, unless he or
she knows, or in the ordinary course of fulfilling official duties with a
Covered Fund should know, that there is a "buy" or "sell" order pending with
respect to such security for a CSAM client), or that such Access Person knows
(or should know) at the time of such purchase or sale:
- - is being considered for purchase or sale by or for any CSAM client; or
- - is being purchased or sold by or for any CSAM client.
C. Blackout Periods. No Advisory Person may execute a securities transaction
within five Business Days before and one Business Day after a transaction in
that security for a CSAM client.
D. Public Offerings. No Advisory Person may directly or indirectly acquire
Beneficial Ownership in any security in a public offering in the primary
securities market.
E. Private Placements. No Advisory Person may directly or indirectly acquire or
dispose of any Beneficial Ownership in any privately placed security without the
express prior written approval of a supervisory person designated in Section IX
of this Code ("Designated Supervisory Person"). Approval will take into account,
among other factors, whether the investment opportunity should be reserved for a
CSAM client, whether the opportunity is being offered to the Advisory Person
because of his or her position with CSAM or as a reward for past transactions
and whether the investment creates or may in the future create a conflict of
interest.
F. Short Selling. Advisory Persons are only permitted to engage in short selling
for hedging purposes. No Advisory Person may engage in any transaction that has
the effect of creating any net "short exposure" in an individual security.
<PAGE> 4
G. Futures Contracts. No Advisory Person may invest in futures contracts, except
through the purchase of options on futures contracts.
H. Options. No Advisory Person may write (i.e., sell) any options except for
hedging purposes and only if the option is fully covered.
I. Trading, Hedging and Speculation in Credit Suisse Group Securities.
Transactions by employees, officers and directors of CSAM in securities of
Credit Suisse Group ("CSG") are prohibited for each period beginning 15 calendar
days before announcement of CSG yearly or half-yearly results and ending two
Business Days after the announcement. Employees, officers and directors of CSAM
may only hedge vested positions in CSG stock through short sales or derivative
instruments. Uncovered short exposure, through short sales or otherwise, is not
permitted without the express prior written approval of a Designated Supervisory
Person.
J. Investment Clubs. No Advisory Person may participate in an "investment club"
or similar activity.
K. Disclosure of Interest. No Advisory Person may recommend to or effect for any
CSAM client any securities transaction without having disclosed his or her
personal interest (actual or potential), if any, in the issuer of the
securities, including without limitation:
- - any ownership or contemplated ownership of any privately placed
securities of the issuer or any of its affiliates;
- - any employment, management or official position with the issuer or any of
its affiliates;
- - any present or proposed business relationship between the Advisory Person
and the issuer or any of its affiliates; and
- - any additional factors that may be relevant to a conflict of interest
analysis.
Where the Advisory Person has a personal interest in an issuer, a decision to
purchase or sell securities of the issuer or any of its affiliates by or for a
CSAM client
<PAGE> 5
shall be subject to an independent review by a Designated Supervisory Person.
L. Gifts. No Advisory Person may seek or accept any gift of more than a de
minimis value (approximately $250 per year) from any person or entity that does
business with or on behalf of a CSAM client, other than reasonable,
business-related meals and tickets to sporting events, theater and similar
activities. If any Advisory Person is unsure of the appropriateness of any gift,
a Designated Supervisory Person should be consulted.
M. Directorships and Other Outside Business Activities. No Advisory Person may
serve on the board of directors/trustees of any issuer without the express prior
written approval of a Designated Supervisory Person. Approval will be based upon
a determination that the board service would be consistent with the interests of
CSAM clients. Where board service is authorized, Advisory Persons serving as
directors will be isolated from those making investment decisions regarding the
securities of that issuer through "informational barrier" or other procedures
specified by a Designated Supervisory Person.
No Advisory Person may be employed (either for compensation or in a voluntary
capacity) outside his or her regular position with CSAM or its affiliated
companies without the written approval of a Designated Supervisory Person.
IV. EXEMPT TRANSACTIONS
A. Exemptions from Prohibitions.
1. Purchases and sales of securities issued or guaranteed by the U.S.
government or any agencies or instrumentalities of the U.S. government,
municipal securities, and other non-convertible fixed income securities, which
are in each case rated investment grade, are exempt from the prohibitions
described in paragraphs C and D of Section III if such transactions are made in
compliance with the preclearance requirements of Section V(B) below.
2. Any securities transaction, or series of related transactions,
involving 500 shares or less of an issuer having a market capitalization
(outstanding shares multiplied by the current market price per share) greater
than $2.5 billion is exempt from the prohibition described
<PAGE> 6
in paragraph C of Section III if such transaction is made in compliance with the
preclearance requirements of Section V(B) below.
B. Exemptions from Prohibitions and Preclearance. The prohibitions described in
paragraphs B through E of Section III and the preclearance requirements of
Section V(B) shall not apply to:
- - purchases and sales of securities that are direct obligations of the U.S.
government;
- - purchases and sales of securities of U.S. registered open-end investment
companies;
- - purchases and sales of bankers' acceptances, bank certificates of
deposit, and commercial paper;
- - purchases that are part of an automatic dividend reinvestment plan;
- - purchases and sales that are non-volitional on the part of either the
Access Person or the CSAM client;
- - purchases and sales in any account maintained with a party that has no
affiliation with the Covered Companies and over which no Advisory Person
has, in the judgment of a Designated Supervisory Person after reviewing
the terms and circumstances, direct or indirect influence or control over
the investment or trading of the account; and
- - purchases by the exercise of rights offered by an issuer pro rata to all
holders of a class of its securities, to the extent that such rights were
acquired from the issuer, and sales of these rights.
C. Further Exemptions. Express prior written approval may be granted by a
Designated Supervisory Person if a purchase or sale of securities or other
outside activity is consistent with the purposes of this Code and Section 17(j)
of the Investment Company Act of 1940 ("1940 Act") and rules thereunder
(attached as Attachment B A is a form to request such approval). For example, a
purchase or sale may be considered consistent with those purposes if the
purchase or sale is not harmful to a CSAM client because such purchase or sale
would be unlikely to affect a highly institutional market, or because such
purchase
<PAGE> 7
or sale is clearly not related economically to the securities held, purchased or
sold by the CSAM client.
V. TRADING, PRE-CLEARANCE, REPORTING AND OTHER COMPLIANCE PROCEDURES
A. Trading Through CSAM. No Advisory Person shall purchase or sell securities
for an account in which he or she has Beneficial Ownership other than through
the CSAM trading desk persons designated by a Designated Supervisory Person,
unless express prior written approval is granted by a Designated Supervisory
Person.
B. Preclearance. Except as provided in Section IV, before any Advisory Person
purchases or sells any security for any account in which he or she has
Beneficial Ownership, preclearance shall be obtained in writing from a
Designated Supervisory Person (attached as Attachment BC is a form to request
such approval). If clearance is given for a purchase or sale and the transaction
is not effected on that Business Day, a new preclearance request must be made.
C. Reporting.
1. Initial Certification. Within 10 days after the commencement of his or her
employment with CSAM or his or her affiliation with any Covered Fund, each
Access Person shall submit to a Designated Supervisory Person an initial
certification in the form of Attachment CD to certify that:
- - he or she has read and understood this Code of Ethics and recognizes that
he or she is subject to its requirements; and
- - he or she has disclosed or reported all personal securities holdings in
which he or she has any direct or indirect Beneficial Ownership and all
accounts in which any securities are held for his or her direct or
indirect benefit.
2. Annual Certification. In addition, each Access Person shall submit to a
Designated Supervisory Person an annual certification in the form of Attachment
DE to certify that:
<PAGE> 8
- - he or she has read and understood this Code of Ethics and recognizes that
he or she is subject to its requirements;
- - he or she has complied with all requirements of this Code of Ethics; and
- - he or she has disclosed or reported (a) all personal securities
transactions for the previous year and (b) all personal securities
holdings in which he or she has any direct or indirect Beneficial
Ownership and accounts in which any securities are held for his or her
direct or indirect benefit as of a date no more than 30 days before the
annual certification is submitted.
Access Persons may comply with the initial and annual reporting requirements by
submitting account statements and/or Attachment E to a Designated Supervisory
Person within the prescribed periods. An Access Persons who is not an Advisory
Persons is not required to submit initial or annual certifications, unless such
Access Person is an officer of a Covered Fund.
Each Advisory Person shall annually disclose all directorships and outside
business activities (attached as Attachment F is a form for such disclosure).
3. Quarterly Reporting. Each All Advisory Persons and each Access Person who is
an officer of a Covered Fund shall also supply a Designated Supervisory Person,
on a timely basis, with duplicate copies of confirmations of all personal
securities transactions and copies of periodic statements for all securities
accounts, including confirmations and statements for transactions and accounts
described in Section IV(B) above (exempt from prohibitions and preclearance).
This information must be supplied at least once per calendar quarter, within 10
days after the end of the calendar quarter.
Each Access Persons who is neither an Advisory Persons nor an officer of a
Covered Fund is required to report a transaction only if he or she, at the time
of that transaction, knew (or in the ordinary course of fulfilling official
duties with a Covered Fund should have known) that during the 15-day period
immediately before or after the date of the transaction the security such person
purchased or sold was purchased or sold by the Covered Fund or was being
considered for purchase or sale by the Covered Fund.
<PAGE> 9
VI. COMPLIANCE MONITORING AND SUPERVISORY REVIEW
A Designated Supervisory Person will periodically review reports from the CSAM
trading desk (or, if applicable, confirmations from brokers) to assure that all
transactions effected by Access Persons for accounts in which they have
Beneficial Ownership are in compliance with this Code and Rule 17j-1 under the
1940 Act.
Material violations of this Code and any sanctions imposed shall be reported not
less frequently than quarterly to the board of directors of each relevant
Covered Fund and to the senior management of CSAM. At least annually, each
Covered Company shall prepare a written report to the board of
directors/trustees of each Covered Fund, and to the senior management of CSAM,
that:
- - describes issues that have arisen under the Code since the last report,
including, but not limited to, material violations of the Code or
procedures that implement the Code and any sanctions imposed in response
to those violations; and
- - certifies that each Covered Company has adopted procedures reasonably
necessary to prevent Access Persons from violating the Code.
Material changes to this Code of Ethics must be approved by the Board of
Directors of each Covered Fund no later than six months after the change is
adopted. That approval must be based on a determination that the changes are
reasonably necessary to prevent Access Persons from engaging in any conduct
prohibited by the Code and Rule 17j-1 under the 1940 Act. Board approval must
include a separate vote of a majority of the independent directors.
VII. SANCTIONS
Upon discovering that an Access Person has not complied with the requirements of
this Code, the senior management of the relevant Covered Company may impose on
that person whatever sanctions are deemed appropriate, including censure; fine;
reversal of transactions and disgorgement of profits; suspension; or termination
of employment.
VIII. CONFIDENTIALITY
<PAGE> 10
All information obtained from any Access Person under this Code shall be kept in
strict confidence, except that reports of transactions will be made available to
the Securities and Exchange Commission or any other regulatory or
self-regulatory organization to the extent required by law or regulation.
IX. FURTHER INFORMATION
The Designated Supervisory Persons are Hal Liebes and James W. Bernaiche or
their designees in CSAM's legal and compliance department. Any questions
regarding the Code of Ethics should be directed to a Designated Supervisory
Person.
Dated: March 1, 2000
<PAGE> 11
EXHIBIT 1
CREDIT SUISSE ASSET MANAGEMENT, LLC
WARBURG PINCUS FUNDS
CODE OF ETHICS
DEFINITION OF BENEFICIAL OWNERSHIP
The term "Beneficial Ownership" as used in the attached Code of Ethics is to be
interpreted by reference to Rule 16a-1(a)(2) under the Securities Exchange Act
of 1934 ("Rule"). Under the Rule, a person is generally deemed to have
Beneficial Ownership of securities if the person (directly or indirectly),
through any contract, arrangement, understanding, relationship or otherwise, has
or shares a direct or indirect pecuniary interest in the securities.
The term "pecuniary interest" is generally defined in the Rule to mean the
opportunity (directly or indirectly) to profit or share in any profit derived
from a transaction in the securities. A person is deemed to have an "indirect
pecuniary interest" within the meaning of the Rule:
- - in any securities held by members of the person's immediate family
sharing the same household; the term "immediate family" includes any
child, stepchild, grandchild, parent, stepparent, grandparent, spouse,
sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law or sister-in-law, as well as adoptive relationships;
- - a general partner's proportionate interest in the portfolio securities
held by a general or limited partnership;
- - a person's right to dividends that is separated or separable from the
underlying securities;
- - a person's interest in certain trusts; and
<PAGE> 12
- - a person's right to acquire equity securities through the exercise or
conversion of any derivative security, whether or not presently
exercisable.(1)
For purposes of the Rule, a person who is a shareholder of a corporation or
similar entity is not deemed to have a pecuniary interest in portfolio
securities held by the corporation or entity, so long as the shareholder is not
a controlling shareholder of the corporation or the entity and does not have or
share investment control over the corporation's or the entity's portfolio. The
term "control" means the power to exercise a controlling influence over
management or policies, unless the power is solely the result of an official
position with the company.
- ----------
(1) The term "derivative security" is defined as any option, warrant,
convertible security, stock appreciation right of similar right with an
exercise or conversion privilege at price related to an equity security
(or similar securities) with a value derived from the value of an equity
security.
<PAGE> 13
ATTACHMENT A
Credit Suisse Asset Management, LLC
Warburg Pincus Funds/CSAM Closed-End Funds
Code of Ethics -- Special Approval Form
1.The following is a private placement of securities or other investment
requiring special approval in which I want to acquire or dispose of Beneficial
Ownership:
- ------------------------------------------------------------------------------
Name of Date to Amount Record Purchase How Acquired
Private be to be Owner Price Acquired
Security Acquired Held (Broker/
or other Issuer)
Investment
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Would this investment opportunity be appropriate for a CSAM client?
___ Yes ___ No
2. I want to engage in the following outside business
activity:
-------------------------------------------------------
-------------------------------------------------------
-------------------------------------------------------
3. I want special approval to place personal securities
trades other than through the CSAM trading desk (please describe):
-----------------------------------------------------
-----------------------------------------------------
-----------------------------------------------------
<PAGE> 14
I certify, as applicable, that I (a) am not aware of any non-public information
about the issuer, (b) have made all disclosures required by the Code of Ethics
and (c) will comply with all reporting requirements of the Code.
- ------------------- ------------------
Signature Date
- --------------------------------
Print Name
___ Approved
___ Not Approved
- --------------------------- -------------------------
Designated Supervisory Person Date
<PAGE> 15
ATTACHMENT B
Credit Suisse Asset Management, LLC
Warburg Pincus Funds/CSAM Closed-End Funds
Code of Ethics -- Personal Trading Pre-Clearance Form
This form should be filled out completely to expedite approval.
1. Security: ____________________________________________________
Ticker: ____________________________________________________
____ Purchase ____ Sale
2. Number of shares/bonds/units/contracts: ______________
3. Account Name/Shortname: ___________________________
4. Brokerage Firm and Account Number: ____________________
5. Why do you want to purchase or sell? Is this an opportunity appropriate
for CSAM clients?
----------------------------------------------------------------------
6. Are you aware of a CSAM Advisory Person who is buying or selling or who
plans to buy or sell this security for his or her personal accounts or
CSAM clients?
___ Yes ___ No
If yes, who?
----------------------------------------------------------------------
7. If the amount is less than 500 shares, is the issuer market
capitalization greater than $2.5 billion?
____ Yes _____ No
I certify that I (a) am not aware of any non-public information about the
issuer, (b) have made all disclosures required by the Code of Ethics and this
trade otherwise complies with the Code, including the prohibition on investments
in initial public offerings, and (c) will comply with all reporting requirements
of the Code.
<PAGE> 16
- ---------------------------------- ---------------
Signature of Advisory Person Date
- ----------------------------------
Print Name
___ Approved
___ Not Approved
- ---------------------------------- -----------------
Designated Supervisory Person Date - Valid this
Business Day only.
<PAGE> 17
ATTACHMENT C
CREDIT SUISSE ASSET MANAGEMENT, LLC
WARBURG PINCUS FUNDS/CSAM CLOSED-END FUNDS
CODE OF ETHICS
INITIAL CERTIFICATION
I certify that I:
- - have read and understood the Code of Ethics for Credit Suisse Asset
Management, LLC, and the Warburg Pincus Funds and the CSAM Closed-End
Funds dated February 3, 2000 and recognize that I am subject to its
requirements; and
- - have disclosed or reported all personal securities holdings in which I
had any direct or indirect Beneficial Ownership and accounts in which any
securities were held for my direct or indirect benefit as of the date I
commenced employment with CSAM or the date I became affiliated with a
Covered Fund.
- -------------------------------- -------------------
Signature of Access Person Date
- --------------------------------
Print Name
<PAGE> 18
ATTACHMENT D
CREDIT SUISSE ASSET MANAGEMENT, LLC
WARBURG PINCUS FUNDS/CSAM CLOSED-END FUNDS
CODE OF ETHICS
ANNUAL CERTIFICATION
I certify that I:
- - have read and understood the Code of Ethics for Credit Suisse Asset
Management, LLC, and the Warburg Pincus Funds and the CSAM Closed-End
Funds dated February 3, 2000 and recognize that I am subject to its
requirements;
- - have complied with all requirements of the Code of Ethics and Policy and
Procedures Designed to Detect and Prevent Insider Trading in effect
during the year ended December 31, 1999; and
- - have disclosed or reported all personal securities transactions for the
year ended December 31, 1999 and all personal securities holdings in
which I had any direct or indirect Beneficial Ownership and all accounts
in which any securities were held for my direct or indirect benefit as of
December 31, 1999.
- -------------------------------- -------------------
Signature of Access Person Date
- --------------------------------
Print Name
<PAGE> 19
ATTACHMENT E
Credit Suisse Asset Management, LLC
Warburg Pincus Funds/CSAM Closed-End Funds
Code of Ethics - Personal Securities Account Declaration
All Access Persons must complete each applicable item (1, 2, 3 or 4) and sign
below.
1. The following is a list of securities/commodities accounts in which I
have Beneficial Ownership:
Broker/Dealer Account Title and Number
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. The following is a list of securities/commodities accounts in which I had
Beneficial Ownership that have been opened or closed in the past year:
Broker/Dealer Account Title and Number
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. The following is a list of any other securities or other investment
holdings in which I have Beneficial Ownership (for securities held in
accounts other than those disclosed in response to items 1 and 2):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Name of Date to Amount Record Purchase How Acquired
Private be to be Owner Price Acquired
Security Acquired Held (Broker/
or other Issuer)
Investment
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
<PAGE> 20
4. I do not have Beneficial Ownership in any securities/commodities accounts
or otherwise have Beneficial Ownership of any securities or other
instruments subject to the Code of Ethics. (Please initial.)
- -------------
Initials
I declare that the information given above is true and accurate:
- -------------------------------- --------------------
Signature of Access Person Date
- -------------------------------
Print Name
<PAGE> 21
ATTACHMENT F
CREDIT SUISSE ASSET MANAGEMENT, LLC
WARBURG PINCUS FUNDS/CSAM CLOSED-END FUNDS
CODE OF ETHICS
OUTSIDE BUSINESS ACTIVITIES
Outside business activities include, but are not limited to, the following:
- - self-employment ;
- - receiving compensation from another person or company;
- - serving as an officer, director, partner, or consultant of another
business organization (including a family owned company); and
- - becoming a general or limited partner in a partnership or owning any
stock in a business, unless the stock is publicly traded and no control
relationship exists.
Outside business activities include serving with a governmental (federal, state
or local) or charitable organization whether or not for compensation.
All Advisory Persons must complete at least one choice (1 or 2) and sign below.
1. The following are my outside business activities:
<TABLE>
<CAPTION>
Approved By
Outside Business Description of Designated
Activity Activity Supervisory Person
<S> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
2. I am not involved in any outside business activities. (Please initial)
<PAGE> 22
------------
Initials
I declare that the information given above is true and accurate:
- -------------------------------- -------------------
Signature of Advisory Person Date
- --------------------------------
Print Name
<PAGE> 1
EXHIBIT p(2)
ABBOTT CAPITAL MANAGEMENT, LLC
POLICIES AND PROCEDURES
TO PREVENT THE MISUSE OF
MATERIAL NONPUBLIC INFORMATION
AND
CODE OF ETHICS
<PAGE> 2
SECTION I
POLICY ON INSIDER TRADING
Abbott Capital Management, LLC and Abbott Capital Management, Inc.
(collectively, "Abbott") unequivocally prohibits and forbids any member or
employee (each an "employee" and collectively, the "employees") from trading,
either personally or on behalf of others (including, without limitation,
investment companies and private accounts advised by Abbott) on material
nonpublic information or communicating material nonpublic information to others
in violation of law. This conduct is commonly referred to as "insider trading".
Abbott's policy applies to every member and employee of Abbott and extends to
activities within and outside their duties at Abbott. Every member and employee
of Abbott must read and retain these Policies and Procedures, in addition to
Abbott's Code of Ethics, attached as Exhibit A. Any questions regarding these
Policies and Procedures or the Code of Ethics should be referred to Lauren
Massey, the Compliance Director.
There exists no precise definition of insider trading. Indeed, in the
face of considerable sentiment in favor of establishing a statutory definition,
Congress refused to do so when considering the Insider Trading and Securities
Fraud Enforcement Act of 1988. Instead, Congress continues to permit the
Securities and Exchange Commission ("SEC") and the courts to oversee the
evolution of the definition of insider trading. Despite the haziness of the
outer boundaries of this activity, the phrase "insider trading" generally is
used to refer to the use of material nonpublic information to trade in
securities (whether or not the trader is an "insider") or the communication of
material nonpublic information to others.
While the law concerning insider trading is not static and is constantly
evolving, it is generally understood that the law prohibits
(1) trading by an insider, while in possession of material nonpublic
information, or
(2) trading by a non-insider, while in possession of material
nonpublic information, where the information either was disclosed
to the non- insider in violation of an insider's duty to keep it
confidential or was misappropriated, or
(3) communicating material nonpublic information to others.
The concept of "insider" is broad. It includes members and employees of a
limited liability company such as Abbott. In addition, a person can be a
temporary insider if he or she enters into a special confidential relationship
in the conduct of a company's affairs and as a result is given access to
information solely for the company's purposes. A temporary insider can include,
for example, a company's attorneys, accountants and consultants, a bank which
lends money to the company, and the employees of such organizations. In
addition, a person may become a temporary insider of a company which such person
advises or for which such person performs other services or with which such
person has entered a special relationship. Generally, the company must expect
the outsider to keep the disclosed nonpublic information confidential and the
relationship must at least imply such a duty before the outsider will be
considered to be an insider.
<PAGE> 3
-2-
Trading on inside information is not a basis for liability unless the
information is material. "Material" information is generally considered to be
information for which there is a substantial likelihood that a reasonable
investor would consider it important in making his or her investment decisions,
or information that is reasonably certain to have a substantial effect (whether
favorable or adverse) on the price of a company's securities. A number of
insider trading cases have involved trading in securities which were the subject
of actual or impending tender offers, or communicating nonpublic information
regarding a potential tender offer. A tender offer will always be considered
material by the SEC and the courts. Other information which might be considered
material (depending on the attendant facts and circumstances) includes, but is
certainly not limited to: dividend changes or omissions, changes in previously
released earnings estimates, important financing developments, impending default
on debt obligations, acquisition or loss of a major contract, significant
mineral discoveries, purchase or sale of significant assets, merger, acquisition
or joint venture negotiations, proposals or agreements, plans for "going
private", recapitalizations, leveraged buyouts, spinoffs, liquidations, asset
dispositions and other corporate restructurings, and other events which
investors would consider significant or which may have a substantial effect on
market price. Note that material information does not have to relate to a
company's business. For example, in a 1987 case the Supreme Court considered as
material certain information about the contents of a forthcoming newspaper
column that was expected to affect the market price of a security. In that case,
a Wall Street Journal reporter was found criminally liable for disclosing to
others the dates that reports on various companies would appear in the Journal
and whether those reports would be favorable or not. Note also that any judgment
regarding materiality may be second-guessed by the SEC or a court with the
benefit of hindsight.
Information is nonpublic until it has been effectively communicated to
the market place. One must be able to point to some fact to show that the
information is generally public. For example, information found in a report
filed with the SEC, or appearing in the Dow Jones or Reuters news service, The
Wall Street Journal, The New York Times, Investors Business Daily or other
publications of general circulation would generally be considered to have been
communicated to the marketplace.
The penalties for trading on or communicating material nonpublic
information are extremely severe in nature, both for the individuals involved in
such unlawful conduct and for any person who at the time of such conduct
directly or indirectly controlled the person who engaged in such conduct. A
person can be subject to the penalties below even if he or she does not
personally benefit from the violation. Penalties include:
- civil injunctions,
- damages to contemporaneous traders on the opposite side of
the market,
- jail sentences of up to 10 years,
- a civil penalty for the person who committed the violation
of up to three times the profit gained or loss avoided,
whether or not such person actually benefited,
<PAGE> 4
-3-
- a civil penalty for the controlling person of up to the
greater of $1,000,000 or three times the amount of the
profit gained or loss avoided as a result of the violator's
conduct, and
- criminal fines of up to $1,000,000 for individuals and up
to $2,500,000 for firms.
In addition, any violation of the law or of these Policies and Procedures
can be expected to result in serious sanctions by Abbott, including dismissal of
the person or persons involved.
The foregoing is a very brief and simple summary of what constitutes
insider trading under the current law. If you have a question concerning insider
trading or concerning the status of specific information in your possession you
should consult with the Compliance Director.
SECTION II
PERSONAL SECURITIES TRADING
Subject to certain limited exceptions discussed in the Code of Ethics,
all members and employees of Abbott must pre-clear all trades. In addition,
within ten days after the end of each calendar quarter, all members and
employees of Abbott shall report all transactions in securities during such
quarter with respect to personal securities transactions. All members and
employees of Abbott shall also report all transactions in securities with
respect to each account in which any such member or employee has a direct or
indirect beneficial ownership interest (see Exhibit B).
From time to time the Compliance Director may promulgate lists of
restricted securities which may affect personal securities trading by some or
all of the members and employees of Abbott and accounts in which they have a
direct or indirect beneficial ownership interest. Any such list may also contain
prohibitions, restrictions and limitations on trading for accounts advised by
Abbott. All persons to whom any such list is distributed must comply with the
prohibitions, restrictions and limitations set forth in the list, and
authorizations for exceptions therefrom may only be granted by the individual
who promulgated the list.
A narrow exception from such preclearance and quarterly reporting
obligations, as well as from any prohibitions, restrictions and limitations on
trading contained in any list of restricted securities circulated by the
Compliance Director generally will be allowed for any Abbott employee's
Immediate Family Member (as defined herein) in cases where the Immediate Family
Member engages in securities transactions in such person's capacity as a regular
employee of an entity unaffiliated with Abbott and which entity primarily and
routinely engages in securities transactions in its normal and ordinary cause of
business.
<PAGE> 5
-4-
SECTION III
SUPERVISORY PROCEDURES
A. PREVENTION OF INSIDER TRADING
Abbott has adopted the following supervisory procedures to prevent
insider trading:
(1) These Policies and Procedures will be reviewed with each new
employee when hired by Abbott. The Compliance Director shall also
obtain, from each member and employee on an annual basis, a
written acknowledgment that such person has read and understands
these Policies and Procedures and will comply in all respects with
these Policies and Procedures, and that such person's securities
transactions have been made in full compliance with these Policies
and Procedures.
(2) The Compliance Director shall resolve all issues of whether
information received by a member or employee of Abbott is material
and nonpublic, and when it has been determined that a member or
employee of Abbott is in possession of material nonpublic
information, he or she shall implement appropriate measures to
prevent trading and communication of such information to others.
Such measures may involve the promulgation and distribution of
"watch" or "restricted" lists or other directives which must be
complied with by each recipient thereof.
(3) The Compliance Director will review these Policies and Procedures
on a regular basis and, if considered appropriate, update and
revise the same with the assistance of legal counsel.
B. DETECTION OF INSIDER TRADING
Abbott has adopted the following procedures to detect insider trading:
(1) The Compliance Director or designee thereof shall review the
trading activity as reported by each member and employee of Abbott to determine
whether there are any suspect patterns of trading which may be indicative of
insider trading.
(2) The Compliance Director or designee thereof shall also compare
such trading activity with any "restricted" or "watch" lists and when desirable
shall coordinate such trading review with other appropriate persons.
(3) Upon learning of a potential violation of these Policies and
Procedures, the Compliance Director shall, with the assistance of legal counsel
if deemed appropriate, investigate the matter and report the facts to the
members of Abbott with their recommendations for further action.
<PAGE> 6
STATEMENT OF ACKNOWLEDGMENT
I have read Abbott's Insider Trading Policies and Procedures (the
"Policies and Procedures"). I understand the Policies and Procedures and I am
now in compliance with them and will comply in the future. I have no knowledge
of any violations of the Policies and Procedures except those I have
specifically disclosed to the Compliance Director. I understand that failure to
abide by the Policies and Procedures may result in disciplinary actions as
severe as dismissal.
------------------------------
Signature
------------------------------
Date
<PAGE> 7
EXHIBIT A
ABBOTT CAPITAL MANAGEMENT, LLC CODE OF ETHICS
GENERAL STATEMENT
It is the policy of Abbott Capital Management, LLC to uphold strict
standards of ethical business conduct that include compliance with all federal,
state and local regulations. Failure of employees to abide by this code could
damage Abbott Capital Management, LLC's reputation as a responsible investment
adviser and lead to the revocation of its status as a registered investment
adviser. Abbott Capital Management, LLC will review compliance on an ongoing
basis, and employees will be subject to disciplinary action as severe as
dismissal for infractions.
DEFINITIONS
The following definitions are used throughout the Code to make the text
more simple and readable:
ABBOTT - Abbott Capital Management, LLC and Abbott Capital Management,
Inc.
ABBOTT CLIENT - any advisory client of Abbott. Reference to transactions
by Abbott clients in the case of advisory accounts refers only to client
accounts managed by Abbott, and not by other investment managers.
ABBOTT EMPLOYEE - any employee of Abbott, acting for his or her own
account, for a member of his or her immediate family, or for an account in which
the employee and/or Immediate Family Member (as defined below) have a direct or
indirect interest (e.g., family trust) and which receive investment advice of
any sort from the employee.
COMPLIANCE DIRECTOR - The Abbott officer assigned the responsibility of
enforcing and interpreting this Code. The Compliance Director is currently
Lauren Massey.
IMMEDIATE FAMILY MEMBER - Any spouse, child, stepchild, grandchild,
parent, stepparent, grandparent, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law, or sister-in-law, as well as
adoptive relationships.
INTEREST - any interest in a private equity fund.
SECURITY - any type of equity or debt security, and any rights relating
to a security, such as put and call options, warrants and convertible
securities. It is important to note that any particular security includes any
other right to acquire (or dispose of) that security, such as a warrant, put or
call option, or convertible issue. Unless otherwise noted, the term "security"
does not include: U.S. government securities, commercial paper, certificates of
deposit, bankers'
<PAGE> 8
-2-
acceptances or open-end investment companies other than those affiliated with,
or advised by, Abbott.
PROHIBITED TRANSACTIONS
The following categories of transactions may not be engaged in by Abbott
employees unless an exemption is indicated:
1. TRANSACTIONS IN CONJUNCTION WITH ABBOTT CLIENTS. Without the prior
written consent of the Compliance Director, no Abbott employee may purchase or
sell an Interest in a private equity fund in which an Interest (a) was or is
being purchased or sold for an Abbott client or (b) is being actively considered
for purchase or sale by an Abbott client. Further, without the prior written
consent of the Compliance Director, no Abbott employee may purchase or sell a
security of a company whose securities are held by a private equity fund or have
been received from a private equity fund and are being held by an Abbott client
at the time pending its sale or distribution.
2. PUBLIC OFFERINGS. Without the prior written consent of the Compliance
Director, no Abbott employee may purchase any of a new class of equity security
of a company in an initial public offering if any securities of such company are
held by a private equity fund in which an Interest is held by an Abbott client.
3. PRIVATE OFFERINGS. No Abbott employee may purchase a security in a
private offering by a company whose securities are held by a private equity fund
in which an Interest is held by an Abbott client without the prior consent of
the Compliance Director.
4. TRANSACTIONS WITH OR INVOLVING ABBOTT CLIENTS. No Abbott employee may
purchase from or sell to an Abbott client any securities or other property, nor
engage in any transaction to which an Abbott client is a party, or which
transaction has a significant relationship to any action taken by an Abbott
client.
5. ABBOTT CAPITAL PRIVATE EQUITY FUND, L.P., ABBOTT CAPITAL PRIVATE
EQUITY FUND II, L.P. AND, ABBOTT CAPITAL PRIVATE EQUITY FUND III, L.P., ABBOTT
CAPITAL 1330 INVESTORS I, LP. AND ABBOTT CAPITAL 1330 INVESTORS II, L.P. It
shall not be a prohibited transaction for Abbott or its employees to serve as
partners of the general partner of Abbott Capital Private Equity Fund, L.P.,
Abbott Capital Private Equity Fund II, L.P., Abbott Capital Private Equity Fund
III, L.P., or Abbott Capital 1330 Investors I, LP., or Abbott Capital 1330
Investors II, L.P. or to serve as partners, directors, officers or members of
the general partner of any future Abbott-sponsored project.
6. SIDE-BY-SIDE TRADING. No Abbott employee may buy or sell a security
which has been recommended to its clients until all client transactions based on
such recommendation have been completed. This provision is not applicable to
transactions involving a single or simultaneous closing.
<PAGE> 9
-3-
7. DISCLOSURE OF INTEREST. No transaction can be recommended to any
Abbott client without disclosing any interest held by the recommending person in
the security or the issuer.
8. TRADING FOR 48 HOURS. In the event Abbott maintains a recommended list
of securities, no Abbott employee may trade in a security for 48 hours after a
change to, or confirmation of, the status of such security on the list.
WAIVERS
A written request for a waiver from the prohibited transaction rules may
be granted by the Compliance Director after consultation with the applicable
personnel, upon a determination that the waiver is warranted to avoid undue
hardship to the employee and that none of the abuses or potential abuses that
the Code is designed to prevent would occur. Seeking waivers is not encouraged
and waivers will not be routinely granted.
A narrow exception from the prohibited transactions set forth above
generally will be allowed for any Abbott employee's Immediate Family Member in
cases where the Immediate Family Member engages in securities transactions in
such person's capacity as a regular employee of an entity unaffiliated with
Abbott and which entity primarily and routinely engages in securities
transactions in its normal and ordinary course of business. Such exception or
waiver shall be applicable and effective upon and after written notice is
provided to the Compliance Director by the Abbott employee that such employee
has an Immediate Family Member requiring the above exemption. (see Exhibit C).
PRE-CLEARANCE
ABBOTT EMPLOYEES MUST PRE-CLEAR ALL TRADES, EXCEPT AS NOTED BELOW.
All transactions must be pre-cleared except:
- purchases or sales that are non-volitional
- purchases or sales of U.S. government securities, commercial
paper, certificates of deposit, bankers' acceptances or open-end
investment companies other than those affiliated with, or advised
by, Abbott
- purchases that are part of an automatic dividend reinvestment plan
- transactions with respect to which the Abbott employee claims to
have had no direct or indirect influence or control
- purchases or sales of securities of a single public issuer, which
have not been part of an initial public offering during the last
three months, for all related accounts of
<PAGE> 10
-4-
an Abbott employee for which the aggregate amount of shares
purchased is equal to 500 shares or less or for which the
aggregate cost is $50,000 or less over the course of a calendar
quarter
- purchases or sales of investment grade fixed income securities
(including municipal securities) which do not exceed $500,000 over
the course of a calendar quarter
- purchases and sales of securities of a single public issuer with a
market capitalization in excess of $1 billion and average daily
reported volume of trading exceeding 100,000 shares; and/or whose
shares are included in the Standard & Poor's 100 Index
- transactions exempted from pre-clearance obligations pursuant to
the waiver and exception set forth in Exhibit C attached hereto
The form at Appendix I should be completed and sent to the Compliance
Director for all transactions requiring pre-clearance. This form is not an
admission that any Abbott employee has or had any direct or indirect beneficial
ownership interest in the securities set forth therein. Approvals for
transactions involving initial public offerings or private placements must be
writing. Once securities transactions requiring pre-clearance have been reported
to the Compliance Director, the Compliance Director shall review all requests
for approval. Records of each approval, and the rationale supporting each such
approval shall be maintained for at least five years after the end of the fiscal
year in which such approval is granted. Once securities transactions requiring
pre-clearance have been reported to the Compliance Director, approval will
generally be given if the possibility of a conflict of interest is considered
remote. Such approval will be valid for 48 hours.
REPORTING
- All Abbott employees who have any access to investment information
must disclose all securities holdings upon hiring within ten days
of the date their employment commences, which shall include: (1)
the name, number of shares and cost basis of all securities owned
by such person; (ii) any securities account such person maintains
with a broker dealer or bank; and (iii) the date that the report
is submitted.
- A Quarterly Summary of all purchases and sales of securities by
all Abbott employees who have any access to investment
information, as well as supporting reports or duplicate copies of
confirmations from brokers, must be filed with the Compliance
Director within ten (10) calendar days after the end of each
calendar quarter. See Appendix II for the Quarterly Summary Form
which must be completed by all employees. If a securities account
is established during the prior quarter, such Summary must
disclose the name of the broker dealer or bank with which the
account was established and the date on which the account was
established.
<PAGE> 11
- 5 -
- An Annual Summary of all purchases and sales of securities by all
Abbott employees who have any access to investment information, as
well as supporting reports or duplicate copies of confirmations
from brokers, must be filed with the Compliance Director within
ten (10) calendar days after the end of each calendar year. See
Appendix III for the Annual Summary Form which must be completed
by all employees. All Abbott employees must disclose all
securities holdings upon hiring and then annually, upon request.
- All Abbott employees must certify annually that they have read and
understand the Code or Ethics.
- These reports will be reviewed for compliance with the Code, and
may be reviewed by SEC representatives or representatives of
Abbott clients at any time.
- A narrow exception from the above reporting requirements generally
will be allowed for any Abbott employee's Immediate Family Member
in cases where the Immediate Family Member engages in securities
transactions in such person's capacity as a regular employee of an
entity unaffiliated with Abbott and which entity primarily and
routinely engages in securities transactions in its normal and
ordinary course of business. Such exception or waiver shall be
applicable and effective upon and after written notice is provided
to the Compliance Director by the Abbott employee that such
employee has an Immediate Family Member requiring the above
exemption (see Exhibit C).
The Compliance Director will prepare, for consideration and review by the
Managing Directors of Abbott, an annual written report to the Managing Directors
of Abbott that:
- Summarizes any changes in the procedures concerning personal
investing during the past year;
- Identifies any Abbott employee's Immediate Family Member(s) who
may be exempted from the preclearance and reporting obligations
with respect to securities transactions pursuant to the waiver and
exception set forth in Exhibit C;
- Describes any issues arising under this Code of Ethics since the
last report to the Managing Directors of Abbott, including, but
not limited to, information about material violations thereof and
sanctions imposed in response to the material violations;
- Certifies that procedures reasonably necessary to prevent
violations of this Code of Ethics have been adopted or currently
in effect; and
- Identifies any recommended changes in restrictions and/or
procedures based upon Abbott's experience under this Code of
Ethics, evolving industry practices or developments in applicable
laws or regulations.
<PAGE> 12
- 6 -
This Code of Ethics, as revised, has been approved by the Managing
Directors of Abbott. Any material change to this Code of Ethics shall be
approved by the Managing Directors of Abbott within six months of such change.
RULES OF CONDUCT
1. COMPLIANCE WITH THE LAW. Employees must conform their business conduct
to state and federal laws and regulations. Illegal conduct, even if it conforms
with practices prevailing in an employee's business environment, will not be
tolerated.
Laws and regulations covering such areas as financial reporting,
competition, pricing and employee relations may be ambiguous or difficult to
interpret. Employees should consult the Compliance Director if they have
questions about how to conform job performance to legal requirements. The
Compliance Director will refer employees to Abbott's legal counsel, as
appropriate.
2. GIFTS OR OTHER PREFERENTIAL TREATMENT. No Abbott employee or member of
his or her family may seek or accept gifts, favors, preferential treatment or
special arrangement of material value from any actual or potential Abbott
broker, dealer, investment advisor, financial institution or other supplier of
goods or services to Abbott or Abbott clients. Notwithstanding the above, an
Abbot employee's Immediate Family Member is exempt from this rule to the extent
such Immediate Family Member seeks or receives such gifts, favors, preferential
treatment or special arrangement solely in his or her capacity as a regular
employee of an entity unaffiliated with Abbott.
This rule is intended to permit only the most proper type of customary
business amenities. Listed below are examples of items which would be permitted
under proper circumstances and of items which are prohibited under the intent of
this rule. These examples are illustrative and not all-inclusive.
Notwithstanding these examples, an Abbott employee may not, under any
circumstances, accept anything which could lead to or create the appearance of
any kind of conflict of interest. For example, acceptance of any consideration
is prohibited if it would create the appearance of a "reward" or inducement for
business conducted with the person providing the consideration, or their
employer.
Among items not considered of "material value" which, under proper
circumstances, would be considered permissible are:
(a) Occasional lunches or dinners conducted for business
purposes;
(b) Occasional cocktail parties or similar social gatherings
conducted for business purposes;
(c) Occasional attendance at theater, sporting or other
entertainment events; and
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(d) Small gifts, usually in the nature of reminder advertising,
such as pens, calendars, etc.
Among items of consideration of "material value" which are not permitted
under any circumstances are the following:
(a) Any gift over $100 in value, or any accumulation of gifts
which in aggregate exceeds $100 in value from one source in one calendar year;
(b) Entertainment of a recurring nature such as sporting
events, theater, golf games, etc.;
(c) The cost of transportation to a locality outside the Boston
or New York metropolitan area, and lodging or meals while in another locality,
unless such attendance and reimbursement arrangements are in connection with
performance of such employee's duties or have been approved in advance by the
Compliance Director;
(d) Personal loans to the Abbott employee on terms more
favorable than those generally available for comparable credit standing and
collateral; and
(e) Preferential brokerage commissions or spreads or allocation
of stock in "hot issue" initial public offerings, for the Abbott employee's
personal trading account.
Questions regarding the permissibility of accepting items of material
value should be referred to the Compliance Director.
Employees may not solicit charitable, political or other contributions
using Abbott letterhead or a reference to Abbott in the solicitation, nor
personally while on Abbott business. Discretion is urged in making a conforming
solicitation to Abbott service providers; there should never be a suggestion
that they have to contribute to keep Abbott's business.
3. DISCLOSURE OF ABBOTT INFORMATION. No information regarding the
portfolio or actual or proposed securities trading activities of any Abbott
client may be disclosed outside the Abbott organization unless the information
has been publicly announced or reported. Abbott research information must not be
disclosed unnecessarily and never for personal gain. Information generally about
Abbott and Abbott clients is confidential, and should not be disclosed without a
valid business purpose.
4. USE OF INFORMATION. No Abbott employee may use information from any
source in a manner contrary to the interest of, or in competition with, any
Abbott client. This rule is not intended to prohibit any Abbott employee from
uncovering and capitalizing on new "investment ideas", but requires that Abbott
have the first right to such ideas for its clients.
<PAGE> 14
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5. "INSIDE" INFORMATION. Neither Abbott nor any Abbott employee may
utilize "inside" information about any issuer of securities. Inside information
is material information not generally available to the public. No Abbott
employee may solicit inside information from any company, whether or not Abbott
clients own stock of the company or Abbott analysts follow the company. Any
Abbott employee inadvertently receiving inside information should contact the
Compliance Director immediately.
6. OUTSIDE INVESTMENT ORGANIZATIONS. An Abbott employee may have a
beneficial interest in an investment company, limited partnership, investment
club or other investment organization not connected with Abbott, provided that,
unless waived by the prior written consent of the Compliance Director, his or
her only connection is as an outside investor, that he or she takes no part in
the investment decisions, and the outside investment organization is not managed
by a broker or dealer. Notwithstanding the above, an Abbott employee's Immediate
Family Member may have a direct interest in an outside investment organization
provided that the Abbott employee takes no part in the investment decisions.
7. DIRECTORSHIPS AND TRUSTEESHIPS IN OUTSIDE ORGANIZATIONS. Except in
connection with the performance of such employee's duties, no Abbott employee
may accept a directorship or trusteeship in an unaffiliated company without the
prior notification and written approval of the Compliance Director. An officer
or director who is a member of more than one board must disclose all of his or
her board memberships to each board of which he or she is a member.
8. OUTSIDE TRUSTEESHIPS, ETC. No Abbott employee may accept a position
as trustee, executor or custodian or as any other fiduciary, or as a private
investment adviser or counselor for any outside account, without the prior
notification and written approval of the Compliance Director.
9. CONSULTING FEES. No Abbott employee may become involved in
consultations or negotiations for corporate financing, acquisitions or other
transactions for outside companies (whether or not held by any Abbott client),
nor negotiate nor accept a fee in connection with these activities, without
prior written permission of the Compliance Director.
10. IMPROPER USE OF FUNDS. No Abbott employee may pay, or offer or commit
to pay, any amount of consideration which might be or appear to be a bribe,
kickback, or other similar improper act in connection with Abbott's business.
Any questions on this subject should be immediately brought to the attention of
the Compliance Director.
11. POLITICAL CONTRIBUTIONS. It is against Abbott's policy to use
partnership assets to fund political contributions of any sort, even where such
contributions may be legal. No Abbott employee may offer or agree to make any
political contribution (including political dinners and similar fund raisers) on
behalf of Abbott, and no employee will be reimbursed by Abbott for such
contributions made by the employee personally.
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12. RECORDKEEPING. Compliance with generally accepted accounting
principles and controls is expected at all times. All financial records must
truly reflect the transactions they record.
13. OUTSIDE EMPLOYMENT. Employees may not work for any company that
competes with Abbott or any of its clients unless specifically authorized to do
so by Abbott. Outside employment for companies that are not competitors and that
do not do business with Abbott or any of its clients is permitted if such
employment does not interfere with the employee's work for Abbott or any of its
clients.
SANCTIONS
Failure to comply with this Code may adversely affect an Abbott
employee's performance evaluation, may require the employee to return any
benefit derived from the violation, may require the employee to refrain from
personal trading for a period, and may lead to termination of employment in
appropriate cases. Penalties under the federal securities laws are also possible
in certain circumstances.
<PAGE> 16
APPENDIX I
ABBOTT CAPITAL MANAGEMENT, LLC
PERSONAL SECURITIES TRANSACTION PRE-CLEARANCE FORM
To: Lauren Massey, Compliance Director
Date:
---------------
NAME OF EMPLOYEE/MEMBER:
------------------------------------------
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DATE OF TRANSACTION:
------------------------------------------------------------
BUY: SELL:
------------------ ----------
NAME OF SECURITY:
---------------------------------------------------------
COUNTRY OF ISSUANCE: TYPE OF SECURITY:
------------ ---------------------
NUMBER OF SHARES/PAR VALUE: PRICE:
-------------- -----------------------
NAME/ADDRESS OF BROKER:
--------------------------------------------------
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--------------------------------------------------
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EMPLOYEE SIGNATURE DATE
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APPENDIX II
Abbott Capital Management
Quarterly Summary:
------------
Employee Name:
------------
Quarter Ended:
------------
Please list all personal securities transactions during the quarter.
<TABLE>
<CAPTION>
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No. of Country
Transaction Transaction Type Type of Shares Unit Aggregate of Broker/Name
Security Name Date Buy Sell Security Par Value Price Price Issuance Address
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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</TABLE>
I attest that the above listed information is complete and accurate to the best
of my knowledge and belief:
- ---------------------------------- -------------------
Employee Signature Date
<PAGE> 18
APPENDIX III
Abbott Capital Management
Annual Summary:
--------------
Employee Name:
-------------
Year Ended:
------------------
Please list all securities beneficially owned during the Year.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
No. of Shares Country of
Type of Unit Aggregate Broker/Name
Security Name Security Par Value Price Price Issuance Address
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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</TABLE>
I attest that the above listed information is complete and accurate to the best
of my knowledge and belief:
- -------------------------------------- ------------------------
Employee Signature Date
<PAGE> 19
EXHIBIT B
ACCOUNTS IN WHICH ANY EMPLOYEE HAS A DIRECT OR
INDIRECT BENEFICIAL OWNERSHIP INTEREST
Reporting requirements under the Abbott Capital Management, LLC Code of
Ethics with respect to personal securities transactions apply to all accounts in
which an Abbott employee has a direct or indirect "beneficial ownership"
interest except for those accounts over which such individual has no direct or
indirect influence or control and for those accounts which are exempt pursuant
to the waiver and exception set forth in Exhibit C attached thereto. Examples of
beneficial ownership are described below.
What constitutes "beneficial ownership" has been dealt with in a number
of SEC rules and releases and has grown to encompass many diverse situations.
"Beneficial ownership" shall be interpreted in the same manner as it would be in
determining whether a person is subject to the provisions of Section 16 of the
Securities Exchange Act of 1934 and the rules and regulations thereunder. These
include securities held:
(a) by an Abbott employee for his or her own benefit, whether bearer,
registered in his or her own name, or otherwise;
(b) by others for an Abbott employee's benefit (regardless of whether
or how registered), such as securities held for such Abbott employee by
custodians, brokers, relatives, executors or administrators;
(c) for an Abbott employee's own account by pledgees;
(d) by a trust in which an Abbott employee has an income or remainder
interest. Exceptions: where such Abbott employee's only interest is to receive
principal if (1) some other remainderman dies before distribution or (2) some
other person can direct by will a distribution of trust property or income to
such Abbott employee;
(e) by an Abbott employee as trustee or co-trustee, where either such
Abbott employee or members of his or her immediate family, i.e., spouse,
children and their descendants, step-children, parents and their ancestors, and
step-parents (treating a legal adoption as blood relationship), have an income
or remainder interest in the trust;
(f) by a trust of which an Abbott employee is the settlor, if such
Abbott employee has the power to revoke the trust without obtaining the consent
of all the beneficiaries;
(g) by any partnership in which an Abbott employee is a partner;
(h) by a personal holding company controlled by an Abbott employee
alone or jointly with others;
<PAGE> 20
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(i) in the name of an Abbott employee's spouse unless legally
separated;
(j) in the names of minor children or in the name of any relative of
an Abbott employee or of his or her spouse (including an adult child) who is
presently sharing such Abbott employee's home. This applies even if the
securities were not received from such Abbott employee and the dividends are not
actually used for the maintenance of such Abbott employee's home.
(k) in the name of another person (other than those listed in (i) and
(j) above), if by reason of any contract, understanding, relationship,
agreement, or other arrangement, an Abbott employee obtains benefits
substantially equivalent to those of ownership; or
(l) in the name of any person other than an Abbott employee, even
though such Abbott employee does not obtain benefits substantially equivalent to
those of ownership (as described in (k) above), if such Abbott employee can vest
or revest title in himself or herself.
<PAGE> 21
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EXHIBIT C
IMMEDIATE FAMILY MEMBER BUSINESS EXCEPTION
Reporting requirements and restrictions under the Abbott Capital
Management, LLC Code of Ethics with respect to personal securities transactions
shall not apply to the accounts of an Abbott employee's Immediate Family Member
who holds and/or invests on behalf of such accounts in such person's capacity as
a regular employee of an entity unaffiliated with Abbott and which entity
primarily and routinely engages in securities transactions in its normal and
ordinary course of business. Such exception or waiver shall be applicable and
effective upon and after written notice is provided to the Compliance Director
by the Abbott employee that such employee has an Immediate Family Member
requiring the above exemption. This exception does not in any way relax Abbott's
absolute prohibition on insider trading. Any Abbott employee seeking to take
advantage of this exception and waiver with respect to a particular Immediate
Family Member must disclose the Immediate Family Member's name, job title and
job description to Abbott's Compliance Director at such time as the above
exception and waiver may or is reasonably believed by such Abbott employee to
become necessary. The Compliance Director will keep record of the information
provided and shall present it as part of his or her annual report to the
Managing Directors of Abbott.
