<PAGE>
<PAGE>
As filed with the U.S. Securities and Exchange Commission
on March 14 1996
Securities Act File No. 33-61225
Investment Company Act File No. 811-07327
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. 2 [x]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 4 [x]
(Check appropriate box or boxes)
Warburg, Pincus Post-Venture Capital Fund, Inc.
................................................................................
(Exact Name of Registrant as Specified in Charter)
466 Lexington Avenue
New York, New York 10017-3147
........................................ ..................
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (212) 878-0600
Mr. Eugene P. Grace
Warburg, Pincus Post-Venture Capital Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3147
.........................................
(Name and Address of Agent for Service)
Copy to:
Rose F. DiMartino, Esq.
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022-4677
<PAGE>
<PAGE>
It is proposed that this filing will become effective (check appropriate box):
[ ] immediately upon filing pursuant to paragraph (b)
[ ] on [date] pursuant to paragraph (b)
[x] 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.
---------------
DECLARATION PURSUANT TO RULE 24f-2
Registrant has registered an indefinite number or amount of securities under the
Securities Act of 1933, as amended, pursuant to Section (a)(1) of Rule 24f-2
under the Investment Company of 1940, as amended (the "1940 Act"), and to the
number or amount presently registered is added an indefinite number or amount of
such securities. The Rule 24f-2 Notice for Registrant's fiscal year ended
October 31, 1995 was filed on December 19, 1995.
2
<PAGE>
<PAGE>
WARBURG, PINCUS POST-VENTURE CAPITAL FUND, INC.
FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Part A Heading for the Common Shares
Item No. and the Advisor Shares
- -------- Prospectuses*
-----------------------------
<S> <C> <C>
1. Cover Page................................. Cover Page
2. Synopsis................................... The Funds' Expenses
3. Condensed Financial Information............ Financial Highlights
4. General Description of Registrant.......... Cover Page; Investment
Objective and Policies;
Portfolio Investments; Risk
Factors and Special
Considerations; Certain
Investment Strategies;
Investment Guidelines;
General Information
5. Management of the Fund..................... Management of the Funds
6. Capital Stock and Other
Securities................................. General Information
7. Purchase of Securities
Being Offered.............................. How to Open an Account; How to
Purchase Shares; Net Asset
Value
8. Redemption or
Repurchase................................. How to Redeem and Exchange
Shares
9. Legal Proceedings.......................... Not applicable
</TABLE>
- --------
* With respect to the Advisor Prospectus, all references to
"the Funds" in this cross reference sheet should be read
as "the Fund."
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Part B Statement of Additional
Item No. Information Heading
- -------- -----------------------
<S> <C> <C>
10. Cover Page................................. Cover Page
11. Table of Contents.......................... Contents
12. General Information and History............ Management of the Fund;
Notes to Financial Statements;
See Prospectuses--"General
Information"
13. Investment Objectives and Policies......... Investment Objective;
Investment Policies
14. Management of the Registrant............... Management of the Fund; See
Prospectuses--"Management of
the Fund"
15. Control Persons and
Principal Holders of
Securities................................. Management of the Fund;
Miscellaneous; See
Prospectuses -- "General
Information"
16. Investment Advisory and Other Services..... Management of the Fund; See
Prospectuses--"Management of
the Fund" and "Shareholder
Servicing"
17. Brokerage Allocation....................... Investment Policies; See
Prospectuses -- "Portfolio
Transactions and Turnover
Rate"
18. Capital Stock and Other Securities......... Management of the Fund--
Organization of the Fund; See
Prospectuses -- "General
Information"
</TABLE>
2
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Part B Statement of Additional
Item No. Information Heading
- -------- ------------------------
<S> <C> <C>
19. Purchase, Redemption
and Pricing of
Securities Being
Offered.................................... Additional Purchase and
Redemption Information; See
Prospectuses-- "How to Open an
Account," "How to Purchase
Shares," "How to Redeem and
Exchange Shares" and "Net
Asset Value"
20. Tax Status................................. Additional Information
Concerning Taxes; See
Prospectuses--"Dividends,
Distributions and Taxes"
21. Underwriters............................... Investment Policies--Portfolio
Transactions; See
Prospectuses--"Management of
the Fund" and "Shareholder
Servicing"
22. Calculation of
Performance Data........................... Determination of Performance
23. Financial Statements....................... Report of Independent
Accountants; Financial
Statements
</TABLE>
Part C
Information required to be included in Part C is set forth after the
appropriate item, so numbered, in Part C to this Registration Statement.
3
<PAGE>
<PAGE>
[LOGO]
PROSPECTUS
MAY 10, 1996
[ ] WARBURG PINCUS CAPITAL APPRECIATION FUND
[ ] WARBURG PINCUS EMERGING GROWTH FUND
[ ] WARBURG PINCUS POST-VENTURE CAPITAL FUND
<PAGE>
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 11, 1996
WARBURG PINCUS FUNDS
P.O. BOX 9030
BOSTON, MASSACHUSETTS 02205-9030
TELEPHONE NUMBER: (800) 888-6878
May 10, 1996
PROSPECTUS
Warburg Pincus Funds are a family of open-end mutual funds that offer investors
a variety of investment opportunities. Three funds are described in this
Prospectus:
WARBURG PINCUS CAPITAL APPRECIATION FUND seeks long-term capital appreciation by
investing principally in equity securities of medium-sized domestic companies.
WARBURG PINCUS EMERGING GROWTH FUND seeks maximum capital appreciation by
investing in equity securities of small- to medium-sized domestic companies with
emerging or renewed growth potential.
WARBURG PINCUS POST-VENTURE CAPITAL FUND seeks long-term growth of capital by
investing primarily in equity securities of issuers in their post-venture
capital stage of development and pursues an aggressive investment strategy.
Because of the nature of the Post-Venture Capital Fund's investments and certain
strategies it may use, an investment in the Fund involves certain risks and may
not be appropriate for all investors.
NO LOAD CLASS OF COMMON SHARES
Each Fund offers two classes of shares. A class of Common Shares that is 'no
load' is offered by this Prospectus (i) directly from the Funds' distributor,
Counsellors Securities Inc., and (ii) through various brokerage firms including
Charles Schwab & Company, Inc. Mutual Fund OneSourceTM Program; Fidelity
Brokerage Services, Inc. FundsNetworkTM Program; Jack White & Company, Inc.; and
Waterhouse Securities, Inc. Common Shares of the Post-Venture Capital Fund are
subject to a 12b-1 fee of .25% per annum.
LOW MINIMUM INVESTMENT
The minimum initial investment in each Fund is $2,500 ($500 for an IRA or
Uniform Gifts to Minors Act account) and the minimum subsequent investment is
$100. Through the Automatic Monthly Investment Plan, subsequent investment
minimums may be as low as $50. See 'How to Purchase Shares.'
This Prospectus briefly sets forth certain information about the Funds that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about each
Fund, contained in a Statement of Additional Information, has been filed with
the Securities and Exchange Commission (the 'SEC') and is available to investors
without charge by calling Warburg Pincus Funds at (800) 927-2874. Information
regarding the status of shareholder accounts may be obtained by calling Warburg
Pincus Funds at (800) 888-6878. The Statements of Additional Information, as
amended or supplemented from time to time, bear the same date as this Prospectus
and are incorporated by reference in their entirety into this Prospectus.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT.
A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HA S BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
<PAGE>
<PAGE>
THE FUNDS' EXPENSES
Each of Warburg, Pincus Capital Appreciation Fund, Emerging Growth Fund and
Post-Venture Capital Fund (the 'Funds') currently offers two separate classes of
shares: Common Shares and Advisor Shares. For a description of Advisor Shares
see 'General Information.' Common Shares of the Post-Venture Capital Fund pay
the Fund's distributor a 12b-1 fee. See 'Management of the
Funds -- Distributor.'
<TABLE>
<CAPTION>
POST-
CAPITAL EMERGING VENTURE
APPRECIATION GROWTH CAPITAL
FUND FUND FUND
------------ -------- ---------
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)... 0 0 0
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees............................................................... .70% .90% .92%
12b-1 Fees.................................................................... 0 0 .25%
Other Expenses................................................................ .42% .36% .48%
Total Fund Operating Expenses (after fee waivers)`D'.......................... 1.12% 1.26% 1.65%
EXAMPLE
You would pay the following expenses
on a $1,000 investment, assuming (1) 5% annual return
and (2) redemption at the end of each time period:
1 year........................................................................ $ 11 $ 13 $ 17
3 years....................................................................... $ 36 $ 40 $ 52
5 years....................................................................... $ 62 $ 69 n.a.
10 years...................................................................... $136 $152 n.a.
</TABLE>
- ------------
`D' Management Fees, Other Expenses and Total Fund Operating Expenses for the
Capital Appreciation and Emerging Growth Funds are based on actual expenses
for the fiscal year ended October 31, 1995. Absent the anticipated waiver
of fees by the Post-Venture Capital Fund's investment adviser and co-
administrator, Management Fees would equal 1.25%, Other Expenses would
equal .75% and Total Fund Operating Expenses would equal 2.25%. Other
Expenses for the Post-Venture Capital Fund are based on annualized
estimates of expenses for the fiscal year ending October 31, 1996, net of
any fee waivers or expense reimbursements.The investment adviser and
co-administrator are under no obligation to continue these waivers.
------------------------
The expense table shows the costs and expenses that an investor will bear
directly or indirectly as a Common Shareholder of each Fund. Certain
broker-dealers and financial institutions also may charge their clients fees in
connection with investments in a Fund's Common Shares, which fees are not
reflected in the table. The Example should not be considered a representation of
past or future expenses; actual Fund expenses may be greater or less than those
shown. Moreover, while the Example assumes a 5% annual return, each Fund's
actual performance will vary and may result in a return greater or less than 5%.
Long-term shareholders of the Post-Venture Capital Fund may pay more than the
economic equivalent of the maximum front-end sales charges permitted by the
National Association of Securities Dealers, Inc. (the 'NASD').
2
<PAGE>
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following information regarding each Fund for the three fiscal years or
period ended October 31, 1995 has been derived from information audited by
Coopers & Lybrand L.L.P., independent auditors, whose report dated December 14,
1995 appears in the relevant Fund's Statement of Additional Information. For
the Capital Appreciation and Emerging Growth Funds, the information for the two
prior fiscal years has been audited by Ernst & Young LLP, whose report was
unqualified. Further information about the performance of the Funds is contained
in the Funds' annual report, dated October 31, 1995, copies of which appear in
the Funds' Statements of Additional Information or may be obtained without
charge by calling Warburg Pincus Funds at (800) 927-2874.
CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>
FOR THE
PERIOD
AUGUST 17, 1987
(COMMENCEMENT
OF OPERATIONS)
FOR THE YEAR ENDED OCTOBER 31, THROUGH
----------------------------------------------------------------------------------- OCTOBER 31,
1995 1994 1993 1992 1991 1990 1989 1988 1987
----------- ------ ------ ------ ------ ------ ------ ----- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 14.29 $15.32 $13.30 $12.16 $ 9.78 $11.48 $ 9.47 $7.74 $ 10.00
----------- ------ ------ ------ ------ ------ ------ ----- ------
Income from Investment
Operations
Net Investment
Income............... .04 .04 .05 .04 .15 .20 .19 .17 .04
Net Gains (Loss) from
Securities (both
realized and
unrealized).......... 3.08 .17 2.78 1.21 2.41 (1.28) 2.15 1.70 (2.30)
----------- ------ ------ ------ ------ ------ ------ ----- ------
Total from Investment
Operations........... 3.12 .21 2.83 1.25 2.56 (1.08) 2.34 1.87 (2.26)
----------- ------ ------ ------ ------ ------ ------ ----- ------
Less Distributions
Dividends (from net
investment income)... (.04) (.05) (.05) (.06) (.18) (.21) (.19) (.14) .00
Distributions (from
capital gains)....... (.98) (1.19) (.76) (.05) .00 (.41) (.14) .00 .00
----------- ------ ------ ------ ------ ------ ------ ----- ------
Total Distributions.... (1.02) (1.24) (.81) (.11) (.18) (.62) (.33) (.14) .00
----------- ------ ------ ------ ------ ------ ------ ----- ------
Net Asset Value, End of
Period................. $ 16.39 $14.29 $15.32 $13.30 $12.16 $ 9.78 $11.48 $9.47 $ 7.74
----------- ------ ------ ------ ------ ------ ------ ----- ------
----------- ------ ------ ------ ------ ------ ------ ----- ------
Total Return............. 24.05% 1.65% 22.19% 10.40% 26.39% (10.11%) 25.42% 24.31% (71.26%)*
Ratios/Supplemental Data
Net Assets, End of Period
(000s)................. $235,712 $159,346 $159,251 $117,900 $115,191 $76,537 $56,952 $29,351 $17,917
Ratios to Average Daily
Net Assets:
Operating expenses..... 1.12% 1.05% 1.01% 1.06% 1.08% 1.04% 1.10% 1.07% 1.00%*
Net investment
income............... .31% .26% .30% .41% 1.27% 2.07% 1.90% 2.00% 1.88%*
Decrease reflected in
above operating
expense ratios due to
waivers/reimbursements... .00% .01% .00% .01% .00% .01% .08% .91% .84%*
Portfolio Turnover
Rate................... 146.09% 51.87% 48.26% 55.83% 39.50% 37.10% 36.56% 33.16% 20.00%
</TABLE>
- ------------
* Annualized.
3
<PAGE>
<PAGE>
EMERGING GROWTH FUND
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 21, 1988
(COMMENCEMENT
OF OPERATIONS)
FOR THE YEAR ENDED OCTOBER 31, THROUGH
--------------------------------------------------------------------- OCTOBER 31,
1995 1994 1993 1992 1991 1990 1989 1988
----------- ------ ------ ------ ------ ------ ------ ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period.... $ 22.38 $23.74 $18.28 $16.97 $10.83 $13.58 $11.21 $10.00
----------- ------ ------ ------ ------ ------ ------ ------
Income from Investment
Operations
Net Investment Income
(Loss)............... (.05) (.06) (.10) (.03) .05 .13 .16 .07
Net Gains (Loss) from
Securities (both
realized and
unrealized).......... 7.64 .06 5.93 1.71 6.16 (2.32) 2.51 1.18
----------- ------ ------ ------ ------ ------ ------ ------
Total from Investment
Operations........... 7.59 .00 5.83 1.68 6.21 (2.19) 2.67 1.25
----------- ------ ------ ------ ------ ------ ------ ------
Less Distributions
Dividends (from net
investment income)... .00 .00 .00 (.01) (.07) (.18) (.12) (.04)
Distributions (from
capital gains)....... .00 (1.36) (.37) (.36) .00 (.38) (.18) .00
----------- ------ ------ ------ ------ ------ ------ ------
Total Distributions.... .00 (1.36) (.37) (.37) (.07) (.56) (.30) (.04)
----------- ------ ------ ------ ------ ------ ------ ------
Net Asset Value, End of
Period................. $ 29.97 $22.38 $23.74 $18.28 $16.97 $10.83 $13.58 $11.21
----------- ------ ------ ------ ------ ------ ------ ------
----------- ------ ------ ------ ------ ------ ------ ------
Total Return............. 33.91% .16% 32.28% 9.87% 57.57% (16.90%) 24.20% 16.34%*
Ratios/Supplemental Data
Net Assets, End of Period
(000s)................. $487,537 $240,664 $165,525 $99,562 $42,061 $23,075 $26,685 $10,439
Ratios to Average Daily
Net Assets:
Operating expenses..... 1.26% 1.22% 1.23% 1.24% 1.25% 1.25% 1.25% 1.25%*
Net investment income
(loss)............... (.58%) (.58%) (.60%) (.25%) .32% 1.05% 1.38% 1.10%*
Decrease reflected in
above operating
expense ratios due to
waivers/reimbursements... .00% .04% .00% .08% .47% .42% .78% 3.36%*
Portfolio Turnover
Rate................... 84.82% 60.38% 68.35% 63.35% 97.69% 107.30% 100.18% 82.21%
</TABLE>
- ------------
* Annualized.
POST-VENTURE CAPITAL FUND
<TABLE>
<CAPTION>
FOR THE PERIOD
SEPTEMBER 29, 1995
(COMMENCEMENT OF
OPERATIONS) THROUGH
OCTOBER 31, 1995
---------------------------
<S> <C>
Net Asset Value, Beginning of Period............................................................... $ 10.00
------
Income from Investment Operations
Net Investment Income............................................................................ .00
Net Gain on Securities (both realized and unrealized)............................................ .69
------
Total from Investment Operations................................................................. .69
------
Less Distributions
Dividends from net investment income............................................................. .00
Distributions from capital gains................................................................. .00
------
Total Distributions.............................................................................. .00
------
Net Asset Value, End of Period..................................................................... $ 10.69
------
------
Total Return....................................................................................... 6.90%`D'
Ratios/Supplemental Data
Net Assets, End of Period (000s)................................................................... $ 3,024
Ratios to Average Daily Net Assets:
Operating expenses............................................................................... 1.65%*
Net investment income............................................................................ .25%*
Decrease reflected in above operating expense ratios
due to waivers/reimbursements.................................................................. 23.76%*
Portfolio Turnover Rate............................................................................ 16.90%*
</TABLE>
- ------------
`D' Non-annualized.
* Annualized.
4
<PAGE>
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Each Fund's objective is a fundamental policy and may not be amended
without first obtaining the approval of a majority of the outstanding shares of
that Fund. Any investment involves risk and, therefore, there can be no
assurance that any Fund will achieve its investment objective. See 'Portfolio
Investments' and 'Certain Investment Strategies' for descriptions of certain
types of investments the Funds may make.
CAPITAL APPRECIATION FUND
The Capital Appreciation Fund seeks long-term capital appreciation. The
Fund is a diversified management investment company that pursues its investment
objective by investing in a broadly diversified portfolio of equity securities
of domestic companies. The Fund will ordinarily invest substantially all of its
total assets -- but no less than 80% of its total assets -- in common stocks,
warrants and securities convertible into or exchangeable for common stocks.
Under current market conditions, the Fund intends to focus on securities of
medium-sized companies, consisting of companies having stock market
capitalizations of between $500 million and $4.5 billion. (Market capitalization
means the total market value of a company's outstanding common stock.) The
prices of securities of medium-sized companies, which are traded on exchanges or
in the over-the-counter market, tend to fluctuate in value more than the prices
of securities of large-sized companies.
Warburg, Pincus Counsellors, Inc., the Funds' investment adviser
('Warburg'), will attempt to identify sectors of the market and companies within
market sectors that it believes will outperform the overall market. Warburg also
seeks to identify themes or patterns it believes to be associated with high
growth potential firms, such as significant fundamental changes (including
senior management changes) or generation of a large free cash flow.
EMERGING GROWTH FUND
The Emerging Growth Fund seeks maximum capital appreciation. The Fund is a
non-diversified management investment company that pursues its investment
objective by investing in a portfolio of equity securities of domestic
companies. The Fund ordinarily will invest at least 65% of its total assets in
common stocks or warrants of emerging growth companies that represent attractive
opportunities for maximum capital appreciation. Emerging growth companies are
small- or medium-sized companies that have passed their start-up phase and that
show positive earnings and prospects of achieving significant profit and gain in
a relatively short period of time.
Although under current market conditions the Fund expects to invest in
companies having stock market capitalizations of up to approximately $500
million, the Fund may invest in emerging growth companies without regard to
their market capitalization. Emerging growth companies generally stand to
benefit from new products or services, technological developments or changes in
management and other factors and include smaller companies experiencing unusual
developments affecting their market value. These 'special situation companies'
include companies that are involved in the following: an acquisition or
consolidation; a reorganization; a recapitalization; a merger, liquidation, or
distribution of cash, securities or other assets; a tender or exchange offer; a
breakup or workout of a holding company; litigation which, if resolved
favorably, would improve the value of the company's stock; or a change in
corporate control.
POST-VENTURE CAPITAL FUND
Because of the nature of the Post-Venture Capital Fund's investments and
certain strategies it may use, such as investing in Private Funds (as defined
below), an investment in the Fund should be considered only for the aggressive
portion of
5
<PAGE>
<PAGE>
an investor's portfolio and may not be appropriate for all investors.
The Post-Venture Capital Fund seeks long-term growth of capital. The Fund
is a diversified management investment company that pursues its investment
objective by investing primarily in equity securities of companies considered by
Warburg to be in their post-venture capital stage. Although the Fund may invest
up to 10% of its assets in venture capital and other investment funds, the Fund
is not designed primarily to provide venture capital financing. Rather, under
normal market conditions, the Fund will invest at least 65% of its total assets
in equity securities of 'post-venture capital companies.' A post-venture capital
company is a company that has received venture capital financing either (a)
during the early stages of the company's existence or the early stages of the
development of a new product or service or (b) as part of a restructuring or
recapitalization of the company. The investment of venture capital financing,
distribution of such company's securities to venture capital investors, or
initial public offering ('IPO'), whichever is later, will have been made within
ten years prior to the Fund's purchase of the company's securities.
Warburg 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 or the Fortune 500.
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.
Warburg will consider the impact of such sales in selecting post-venture capital
investments. Venture capitalists may be individuals or funds organized by
venture capitalists which are typically offered only to large institutions, such
as pension funds and endowments, and certain accredited investors. Venture
capital participation in a company is often reduced when the company engages in
an IPO of its securities or when it is involved in a merger, tender offer or
acquisition.
Warburg has experience in researching smaller companies, companies in the
early stages of development and venture capital-financed companies. Its team of
analysts, led by Elizabeth Dater and Stephen Lurito, regularly monitors
portfolio companies whose securities are held by over 250 of the larger domestic
venture capital funds. Ms. Dater and Mr. Lurito have managed post-venture equity
securities in separate accounts for institutions since 1989 and currently manage
over $1 billion of such assets for institutions. The Fund will invest in
securities of post-venture capital companies that are traded on a national
securities exchange or in an organized over-the-counter market.
PRIVATE FUND INVESTMENTS. Up to 10% of the Fund'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, L.P., the Fund's sub-investment adviser with respect to Private
Funds ('Abbott'), attempts to invest in a mix of Private Funds that will provide
an above average internal rate of return (i.e., the discount rate at
which the present value of an investment's future cash inflows (dividend income
and capital gains) are equal to the cost of the investment). Warburg
6
<PAGE>
<PAGE>
believes that the Fund's investments in Private Funds offers individual
investors a unique opportunity to participate in venture capital and other
private investment funds, providing access to investment opportunities typically
available only to large institutions and accredited investors. Although the
Fund's investments in Private Funds are limited to a maximum of 10% of the
Fund's assets, these investments are highly speculative and volatile and may
produce gains or losses in this portion of the portfolio that are in excess of
broader market movements.
Because Private Funds generally are investment companies for purposes of
the Investment Company Act of 1940, as amended (the '1940 Act'), the Fund's
ability to invest in them will be limited. In addition, Fund shareholders will
remain subject to the Fund's expenses while also bearing their pro rata share of
the operating expenses of the Private Funds. The ability of the Fund to dispose
of interests in Private Funds is very limited and will involve the risks
described under 'Risk Factors and Special Considerations -- Non-Publicly Traded
Securities; Rule 144A Securities.' In valuing the Fund's holdings of interests
in Private Funds, the Fund will be relying on the most recent reports provided
by Abbott and by the Private Funds themselves prior to calculation of the Fund's
net asset value. These reports, which may be provided by Abbott and by a Private
Fund on an infrequent basis (not less frequently than quarterly), often depend
on the subjective valuations of the managers of the Private Funds and, in
addition, would not reflect positive or negative subsequent developments
affecting companies held by the Private Fund. See 'Net Asset Value.' Debt
securities held by a Private Fund will tend to be rated below investment grade
and may be rated as low as C by Moody's Investors Service, Inc. ('Moody's') or D
by Standard & Poor's Ratings Group ('S&P'). For a discussion of the risks of
investing in below investment grade debt, see 'Investment Policies -- Below
Investment Grade Debt Securities' in the Statement of Additional Information.
For a discussion of the possible tax consequences of investing in foreign
Private Funds, see 'Additional Information Concerning Taxes -- Investment in
Passive Foreign Investment Companies' in the Statement of Additional
Information.
The Fund 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 Fund's assets invested in these non-publicly traded securities will vary
over time depending on investment opportunities and other factors. The Fund's
illiquid assets, including interests in Private Funds and other illiquid
non-publicly traded securities, may not exceed 15% of assets.
OTHER STRATEGIES. The Fund may invest up to 35% of its assets in exchange-traded
and over-the-counter securities that do not meet the definition of post-venture
capital companies without regard to market capitalization. Up to 10% of the
Fund's assets may be invested, directly or through Private Funds, in securities
of issuers engaged at the time of purchase in 'special situations,' such as a
restructuring or recapitalization; an acquisition, consolidation, merger or
tender offer; a change in corporate control or investment by a venture
capitalist.
To attempt to reduce risk, the Fund will diversify its investments over a
broad range of issuers operating in a variety of industries. The Fund may hold
securities of companies of any size, and will not limit capitalization of
companies it selects to invest in. However, due to the nature of the venture
capital to post-venture cycle, the Fund anticipates that the average market
capitalization of companies in which it invests will be less than $1 billion at
the time of investment. Although the Fund will invest primarily in U.S.
companies, up to 20% of the Fund's assets may be invested in securities of
issuers located in any foreign country. Equity securities in which the Fund will
invest are common stock, preferred stock, warrants, securities convertible into
or exchangeable for common stock and
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partnership interests. The Fund may engage in a variety of strategies to reduce
risk or seek to enhance return, including engaging in short selling (see
'Certain Investment Strategies').
PORTFOLIO INVESTMENTS
INVESTMENT GRADE DEBT. Each Fund may invest up to 20% of its total assets in
investment grade debt securities (other than money market obligations) and, in
the case of the Capital Appreciation and Emerging Growth Funds, preferred stocks
that are not convertible into common stock for the purpose of seeking capital
appreciation. The interest income to be derived may be considered as one factor
in selecting debt securities for investment by Warburg. Because the market value
of debt obligations can be expected to vary inversely to changes in prevailing
interest rates, investing in debt obligations may provide an opportunity for
capital appreciation when interest rates are expected to decline. The success of
such a strategy is dependent upon Warburg's ability to accurately forecast
changes in interest rates. The market value of debt obligations may also be
expected to vary depending upon, among other factors, the ability of the issuer
to repay principal and interest, any change in investment rating and general
economic conditions. A security will be deemed to be investment grade if it is
rated within the four highest grades by Moody's or S&P or, if unrated, is
determined to be of comparable quality by Warburg. Bonds 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 Fund, an issue of securities may cease to
be rated or its rating may be reduced below the minimum required for purchase by
the Fund. Neither event will require sale of such securities, although Warburg
will consider such event in its determination of whether the Fund should
continue to hold the securities.
When Warburg believes that a defensive posture is warranted, each Fund may
invest temporarily without limit in investment grade debt obligations and in
domestic and foreign money market obligations, including repurchase agreements.
MONEY MARKET OBLIGATIONS. Each Fund is authorized to invest, under normal market
conditions, up to 20% of its total assets in domestic and foreign short-term
(one year or less remaining to maturity) and medium-term (five years or less
remaining to maturity) money market obligations and for temporary defensive
purposes may invest in these securities without limit. These 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 banks, domestic savings and loans and similar institutions) that are
high quality investments or, if unrated, deemed by Warburg to be high quality
investments; commercial paper rated no lower than A-2 by S&P or Prime-2 by
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.
Repurchase Agreements. The Funds 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
Fund 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 Fund to resell, the obligation at an agreed-upon price and
time, thereby determining the yield during the Fund's holding period. This
arrangement results in a
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fixed rate of return that is not subject to market fluctuations during the
Fund'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 Fund 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
Fund 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 Fund seeks to assert this
right. Warburg, acting under the supervision of the Fund's Board of Directors or
Board of Trustees (the 'governing Board' or 'Board'), monitors the
creditworthiness of those bank and non-bank dealers with which each Fund 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 Warburg believes that it would be
beneficial to the Fund and appropriate considering the factors of return and
liquidity, each Fund may invest up to 5% of its assets in securities of money
market mutual funds that are unaffiliated with the Fund, Warburg or the Funds'
co-administrator, PFPC Inc. ('PFPC'). As a shareholder in any mutual fund, a
Fund will bear its ratable share of the mutual fund's expenses, including
management fees, and will remain subject to payment of the Fund's administration
fees and other expenses with respect to assets so invested.
U.S. GOVERNMENT SECURITIES. U.S. government securities in which a Fund may
invest include: direct obligations of the U.S. Treasury and obligations issued
by U.S. government agencies and instrumentalities, including instruments that
are supported by the full faith and credit of the United States, instruments
that are supported by the right of the issuer to borrow from the U.S. Treasury
and instruments that are supported by the credit of the instrumentality.
CONVERTIBLE SECURITIES. Convertible securities in which a Fund may invest,
including both convertible debt and convertible preferred stock, may be
converted at either a stated price or stated rate into underlying shares of
common stock. Because of this feature, convertible securities enable an investor
to benefit from increases in the market price of the underlying common stock.
Convertible securities provide higher yields than the underlying equity
securities, but generally offer lower yields than non-convertible securities of
similar quality. The value of convertible securities fluctuates in relation to
changes in interest rates like bonds and, in addition, fluctuates in relation to
the underlying common stock.
RISK FACTORS AND SPECIAL
CONSIDERATIONS
Investing in common stocks and securities convertible into common stocks is
subject to the inherent risk of fluctuations in the prices of such securities.
For certain additional risks relating to each Fund's investments, see 'Portfolio
Investments' beginning at page 8 and 'Certain Investment Strategies' beginning
at page 11.
EMERGING GROWTH AND SMALL COMPANIES. Investing in securities of emerging growth
and small-sized companies may involve greater risks since these securities may
have limited marketability and, thus, may be more volatile. Because small-and
medium-sized companies normally have fewer shares outstanding than larger
companies, it may be more difficult for a Fund to buy or sell significant
amounts of such shares without an unfavorable impact on prevailing prices. In
addition, small- and medium-sized companies are typically subject to a greater
degree of changes in earnings and business prospects than are larger, more
established companies. There is typically less publicly available information
concerning small- and medium-sized companies than for larger, more established
ones. Securities of issuers in 'special situations' also may be more volatile,
since the market value of these securi-
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ties may decline in value if the anticipated benefits do not materialize.
Companies in 'special situations' include, but are not limited to, companies
involved in an acquisition or consolidation; reorganization; recapitalization;
merger, liquidation or distribution of cash, securities or other assets; a
tender or exchange offer, a breakup or workout of a holding company; or
litigation which, if resolved favorably, would improve the value of the
companies' securities. Although investing in securities of emerging growth
companies or '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 Fund may involve a greater degree of risk
than an investment in other mutual funds that seek capital appreciation by
investing in better-known, larger companies.
NON-PUBLICLY TRADED SECURITIES; RULE 144A SECURITIES. The Funds may purchase
securities that are not registered under the Securities Act of 1933, as amended
(the '1933 Act'), but that can be sold to 'qualified institutional buyers' in
accordance with Rule 144A under the 1933 Act ('Rule 144A Securities'). An
investment in Rule 144A Securities will be considered illiquid and therefore
subject to each Fund's limitation on the purchase of illiquid securities, unless
the Fund's governing Board determines on an ongoing basis that an adequate
trading market exists for the security. In addition to an adequate trading
market, the Boards will also consider factors such as trading activity,
availability of reliable price information and other relevant information in
determining whether a Rule 144A Security is liquid. This investment practice
could have the effect of increasing the level of illiquidity in the Funds to the
extent that qualified institutional buyers become uninterested for a time in
purchasing Rule 144A Securities. The Board of each Fund will carefully monitor
any investments by the Fund in Rule 144A Securities. The Boards may adopt
guidelines and delegate to Warburg the daily function of determining and
monitoring the liquidity of Rule 144A Securities, although each Board will
retain ultimate responsibility for any determination regarding liquidity.
Non-publicly traded securities (including interests in Private Funds and
Rule 144A Securities) may involve a high degree of business and financial risk
and may result in substantial losses. These securities may be less liquid than
publicly traded securities, and a Fund may take longer to liquidate these
positions than would be the case for publicly traded securities. Although these
securities may be resold in privately negotiated transactions, the prices
realized on such sales could be less than those originally paid by the Fund.
Further, 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. A Fund's investment in illiquid
securities is subject to the risk that should the Fund desire to sell any of
these securities when a ready buyer is not available at a price that is deemed
to be representative of their value, the value of the Fund's net assets could be
adversely affected.
NON-DIVERSIFIED STATUS. The Emerging Growth Fund is classified as a
non-diversified investment company under the 1940 Act, which means that the Fund
is not limited by the 1940 Act in the proportion of its assets that it may
invest in the obligations of a single issuer. The Fund will, however, comply
with diversification requirements imposed by the Internal Revenue Code of 1986,
as amended (the 'Code'), for qualification as a regulated investment company. As
a non-diversified investment company, the Fund may invest a greater proportion
of its assets in the obligations of a small number of issuers and, as a result,
may be subject to greater risk with respect to portfolio securities. To the
extent that the Fund assumes large positions in the securities of a small number
of issuers, its
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return may fluctuate to a greater extent than that of a diversified company as a
result of changes in the financial condition or in the market's assessment of
the issuers. PORTFOLIO TRANSACTIONS AND TURNOVER RATE
A Fund will attempt to purchase securities with the intent of holding them
for investment but may purchase and sell portfolio securities whenever Warburg
believes it to be in the best interests of the relevant Fund. A Fund will not
consider portfolio turnover rate a limiting factor in making investment
decisions consistent with its investment objective and policies. It is not
possible to predict the Post-Venture Capital Fund's portfolio turnover rate.
However, it is anticipated that the Fund's annual turnover rate should not
exceed 100%. High portfolio turnover rates (100% or more) may result in dealer
mark ups or underwriting commissions as well as other transaction costs,
including correspondingly higher brokerage commissions. In addition, short-term
gains realized from portfolio turnover may be taxable to shareholders as
ordinary income. See 'Dividends, Distributions and Taxes -- Taxes' below and
'Investment Policies -- Portfolio Transactions' in each Fund's Statement of
Additional Information.
All orders for transactions in securities or options on behalf of a Fund
are placed by Warburg with broker-dealers that it selects, including Counsellors
Securities Inc., the Funds' distributor ('Counsellors Securities'). A Fund may
utilize Counsellors Securities in connection with a purchase or sale of
securities when Warburg 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 governing Board.
CERTAIN INVESTMENT STRATEGIES
Although there is no intention of doing so during the coming year, each
Fund is authorized to engage in the following investment strategies: (i)
purchasing securities on a when-issued basis and purchasing or selling
securities for delayed delivery, (ii) lending portfolio securities and (iii) in
the case of the Post-Venture Capital Fund, entering into reverse repurchase
agreements and dollar rolls. Detailed information concerning each Fund's
strategies and related risks is contained below and in the Fund's Statement of
Additional Information.
STRATEGIES AVAILABLE TO ALL FUNDS
FOREIGN SECURITIES. Each Fund may invest up to 20% of its total assets in the
securities of foreign issuers. There are certain risks involved in investing in
securities of companies and governments of foreign nations which are in addition
to the usual risks inherent in domestic investments. These risks include those
resulting from fluctuations in currency exchange rates, revaluation of
currencies, future adverse political and economic developments and the possible
imposition of currency exchange blockages or other foreign governmental laws or
restrictions, reduced availability of public information concerning issuers, the
lack of uniform accounting, auditing and financial reporting standards and other
regulatory practices and requirements that are often generally less rigorous
than those applied in the United States. Moreover, securities of many foreign
companies may be less liquid and their prices more volatile than those of
securities of comparable U.S. companies. Certain foreign countries are known to
experience long delays between the trade and settlement dates of securities
purchased or sold. In addition, with respect to certain foreign countries, there
is the possibility of expropriation, nationalization, confiscatory taxation and
limitations on the use or removal of funds or other assets of the Funds,
including the withholding of dividends. Foreign securities may be subject to
foreign government taxes that would reduce the net yield on such securities.
Moreover, individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of
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gross national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Investment in foreign
securities will also result in higher operating expenses due to the cost of
converting foreign currency into U.S. dollars, the payment of fixed brokerage
commissions on foreign exchanges, which generally are higher than commissions on
U.S. exchanges, higher valuation and communications costs and the expense of
maintaining securities with foreign custodians.
OPTIONS, FUTURES AND CURRENCY TRANSACTIONS. At the discretion of Warburg, each
Fund may, but is not required to, engage in a number of strategies involving
options, futures and forward currency contracts. These strategies, commonly
referred to as 'derivatives,' may be used (i) for the purpose of hedging against
a decline in value of the Fund's current or anticipated portfolio holdings, (ii)
as a substitute for purchasing or selling portfolio securities or (iii) to seek
to generate income to offset expenses or increase return. TRANSACTIONS THAT ARE
NOT CONSIDERED HEDGING SHOULD BE CONSIDERED SPECULATIVE AND MAY SERVE TO
INCREASE A FUND'S INVESTMENT RISK. Transaction costs and any premiums associated
with these strategies, and any losses incurred, will affect a Fund's net asset
value and performance. Therefore, an investment in a Fund may involve a greater
risk than an investment in other mutual funds that do not utilize these
strategies. The Funds' use of these strategies may be limited by position and
exercise limits established by securities and commodities exchanges and the NASD
and by the Code.
Securities and Stock Index Options. Each Fund may write covered call and,
in the case of the Post-Venture Capital Fund, put options on up to 25% of the
net asset value of the stock and debt securities in its portfolio and will
realize fees (referred to as 'premiums') for granting the rights evidenced by
the options. The Capital Appreciation Fund and the Emerging Growth Fund may each
utilize up to 2% of its assets to purchase U.S. exchange-traded and over-the-
counter ('OTC') options; the Post-Venture Capital Fund may utilize up to 10% of
its assets to purchase options on stocks and debt securities that are traded on
U.S. and foreign exchanges, as well as OTC options. The purchaser of a put
option on a security has the right to compel the purchase by the writer of the
underlying security, while the purchaser of a call option has the right to
purchase the underlying security from the writer. In addition to purchasing and
writing options on securities, each Fund may also utilize up to 10% of its total
assets to purchase exchange-listed and OTC put and call options on stock
indexes, and may also write such options. A stock index measures the movement of
a certain group of stocks by assigning relative values to the common stocks
included in the index.
The potential loss associated with purchasing an option is limited to the
premium paid, and the premium would partially offset any gains achieved from its
use. However, for an option writer the exposure to adverse price movements in
the underlying security or index is potentially unlimited during the exercise
period. Writing securities options may result in substantial losses to the Fund,
force the sale or purchase of portfolio securities at inopportune times or at
less advantageous prices, limit the amount of appreciation the Fund could
realize on its investments or require the Fund to hold securities it would
otherwise sell.
Futures Contracts and Related Options. Each Fund may enter into foreign
currency, interest rate and stock index futures contracts and purchase and write
(sell) related options that are traded on an exchange designated by the
Commodity Futures Trading Commission (the 'CFTC') or, if consistent with CFTC
regulations, on foreign exchanges. These futures contracts are standardized
contracts for the future delivery of foreign currency or an interest rate
sensitive security or, in the case of stock index and certain other futures
contracts, are settled in cash with reference to a specified multiplier times
the
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change in the specified index, exchange rate or interest rate. An option on a
futures contract gives the purchaser the right, in return for the premium paid,
to assume a position in a futures contract.
Aggregate initial margin and premiums required to establish positions other
than those considered by the CFTC to be 'bona fide hedging' will not exceed 5%
of a Fund's net asset value, after taking into account unrealized profits and
unrealized losses on any such contracts. Although the Funds are limited in the
amount of assets that may be invested in futures transactions, there is no
overall limit on the percentage of Fund assets that may be at risk with respect
to futures activities.
Currency Exchange Transactions. The Funds will conduct their currency
exchange transactions either (i) on a spot (i.e., cash) basis at the rate
prevailing in the currency exchange market, (ii) through entering into futures
contracts or options on futures contracts (as described above), (iii) through
entering into forward contracts to purchase or sell currency or (iv) by
purchasing exchange-traded currency options. A forward currency contract
involves an obligation to purchase or sell a specific currency at a future date
at a price set at the time of the contract. An option on a foreign currency
operates similarly to an option on a security. Risks associated with currency
forward contracts and purchasing currency options are similar to those described
in this Prospectus for futures contracts and securities and stock index options.
In addition, the use of currency transactions could result in losses from the
imposition of foreign exchange controls, suspension of settlement or other
governmental actions or unexpected events. The Capital Appreciation and Emerging
Growth Funds will only engage in currency exchange transactions for hedging
purposes.
Hedging Considerations. The Funds may engage in options, futures and
currency transactions for, among other reasons, hedging purposes. A hedge is
designed to offset a loss on a portfolio position with a gain in the hedge
position; at the same time, however, a properly correlated hedge will result in
a gain in the portfolio position being offset by a loss in the hedge position.
As a result, the use of options, futures contracts and currency exchange
transactions for hedging purposes could limit any potential gain from an
increase in value of the position hedged. In addition, the movement in the
portfolio position hedged may not be of the same magnitude as movement in the
hedge. A Fund will engage in hedging transactions only when deemed advisable by
Warburg, and successful use of hedging transactions will depend on Warburg's
ability to correctly predict movements in the hedge and the hedged position and
the correlation between them, which could prove to be inaccurate. Even a
well-conceived hedge may be unsuccessful to some degree because of unexpected
market behavior or trends.
Additional Considerations. To the extent that a Fund engages in the
strategies described above, the Fund 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 Fund
may be unable to close out an option or futures position without incurring
substantial losses, if at all. The Fund is also subject to the risk of a default
by a counterparty to an off-exchange transaction.
Asset Coverage. Each Fund will comply with applicable regulatory
requirements designed to eliminate any potential for leverage with respect to
options written by the Fund on securities and indexes; currency, interest rate
and stock index futures contracts and options on these futures contracts; and
forward currency contracts. The use of these strategies may require that the
Fund maintain cash or certain liquid high-grade debt obligations or other assets
that are acceptable as collateral to the appropriate regulatory authority in a
segregated account with its custodian or a designated sub-custodian to the
extent the Fund's obligations with respect to these strategies are
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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 the Fund's assets could impede portfolio
management or the Fund's ability to meet redemption requests or other current
obligations.
STRATEGY AVAILABLE TO THE POST-VENTURE CAPITAL FUND
SHORT SELLING. The Fund may from time to time sell securities short. A short
sale is a transaction in which the Fund sells borrowed securities in
anticipation of a decline in the market price of the securities. Possible losses
from short sales differ from losses that could be incurred from a purchase of a
security, because losses from short sales may be unlimited, whereas losses from
purchases can equal only the total amount invested. The current market value of
the securities sold short will not exceed 10% of the Fund's assets.
When the Fund makes a short sale, the proceeds it receives from the sale
are retained by a broker until the Fund replaces the borrowed securities. To
deliver the securities to the buyer, the Fund must arrange through a broker to
borrow the securities and, in so doing, the Fund becomes obligated to replace
the securities borrowed at their market price at the time of replacement,
whatever that price may be. The Fund may have to pay a premium to borrow the
securities and must pay any dividends or interest payable on the securities
until they are replaced.
The Fund's obligation to replace the securities borrowed in connection with
a short sale will be secured by cash or U.S. government securities deposited as
collateral with the broker. In addition, the Fund will place in a segregated
account with its custodian or a qualified subcustodian an amount of cash or U.S.
government 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 U.S. government 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 Fund will maintain the segregated
account daily at a level so that (a) the amount deposited in the account plus
the amount deposited with the broker (not including the proceeds from the short
sale) will equal the current market value of the securities sold short and (b)
the amount deposited in the account plus the amount deposited with the broker
(not including the proceeds from the short sale) will not be less than the
market value of the securities at the time they were sold short.
Short Sales Against the Box. The Fund may, in addition to engaging in short
sales as described above, enter into a short sale of securities such that when
the short position is open the Fund owns an equal amount of the securities sold
short or owns preferred stocks or debt securities, convertible or exchangeable
without payment of further consideration, into an equal number of securities
sold short. This kind of short sale, which is referred to as one 'against the
box,' will be entered into by the Fund for the purpose of receiving a portion of
the interest earned by the executing broker from the proceeds of the sale. The
proceeds of the sale will generally be held by the broker until the settlement
date when the Fund delivers securities to close out its short position. Although
prior to delivery the Fund will have to pay an amount equal to any dividends
paid on the securities sold short, the Fund will receive the dividends from the
securities sold short or the dividends from the preferred stock or interest from
the debt securities convertible or exchangeable into the securities sold short,
plus a portion of the interest earned from the proceeds of the short sale. The
Fund will deposit, in a segregated
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account with its custodian or a qualified subcustodian, the securities sold
short or convertible or exchangeable preferred stocks or debt securities in
connection with short sales against the box. The Fund will endeavor to offset
transaction costs associated with short sales against the box with the income
from the investment of the cash proceeds. Not more than 10% of the Fund's net
assets (taken at current value) may be held as collateral for short sales
against the box at any one time.
The extent to which the Fund may make short sales may be limited by Code
requirements for qualification as a regulated investment company. See
'Dividends, Distributions and Taxes' for other tax considerations applicable to
short sales.
INVESTMENT GUIDELINES
The Capital Appreciation Fund and the Emerging Growth Fund may each invest
up to 10% of its total assets, and the Post-Venture Capital Fund may invest up
to 15% of its net assets, in securities with contractual or other restrictions
on resale and other instruments that are not readily marketable ('illiquid
securities'), including (i) securities issued as part of a privately negotiated
transaction between an issuer and one or more purchasers; (ii) repurchase
agreements with maturities greater than seven days; (iii) time deposits maturing
in more than seven calendar days; and (iv) certain Rule 144A Securities. In
addition, up to 5% of each Fund's total assets may be invested in the securities
of issuers which have been in continuous operation for less than three years,
and up to an additional 5% of its total assets may be invested in warrants. Each
Fund may borrow from banks for temporary or emergency purposes, such as meeting
anticipated redemption requests, provided that reverse repurchase agreements and
any other borrowing by the Fund may not exceed 10% of its total assets (30% in
the case of the Post-Venture Capital Fund), and may pledge up to 10% of its
assets in connection with borrowings (to the extent necessary to secure
permitted borrowings in the case of the Post-Venture Capital Fund). Whenever
borrowings (including reverse repurchase agreements) exceed 5% of the value of
the Fund's total assets, the Fund will not make any investments (including
roll-overs). Except for the limitations on borrowing, the investment guidelines
set forth in this paragraph may be changed at any time without shareholder
consent by vote of the governing Board of each Fund, subject to the limitations
contained in the 1940 Act. A complete list of investment restrictions that each
Fund has adopted identifying additional restrictions that cannot be changed
without the approval of the majority of the Fund's outstanding shares is
contained in each Fund's Statement of Additional Information.
MANAGEMENT OF THE FUNDS
INVESTMENT ADVISERS. Each Fund employs Warburg as its investment adviser. The
Post-Venture Capital Fund also employs Abbott as its sub-investment adviser.
Warburg, subject to the control of each Fund's officers and the Board, manages
the investment and reinvestment of the assets of the Funds in accordance with
each Fund's investment objective and stated investment policies. Warburg makes
investment decisions for each Fund, places orders to purchase or sell securities
on behalf of each such Fund and, with respect to the Post-Venture Capital Fund,
supervises the activities of Abbott. Warburg also employs a support staff of
management personnel to provide services to the Funds and furnishes each Fund
with office space, furnishings and equipment. Abbott, in accordance with the
investment objective and policies of the Post-Venture Capital Fund, makes
investment decisions for the Fund regarding investments in Private Funds,
effects transactions in interests in Private Funds on behalf of the Fund and
assists in administrative functions relating to investments in Private Funds.
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For the services provided by Warburg, the Capital Appreciation Fund, the
Emerging Growth Fund and the Post-Venture Capital Fund pay Warburg a fee
calculated at an annual rate of .70%, .90% and 1.25%, respectively, of the
Fund's average daily net assets. Warburg pays Abbott a fee of .55% per annum of
the value of Private Fund investments as of the last day of each calendar
quarter. Although in the case of the Emerging Growth Fund and the Post-Venture
Capital Fund the advisory fee is higher than that paid by most other investment
companies, including money market and fixed income funds, Warburg believes that
it is comparable to fees charged by other mutual funds with similar policies and
strategies. The advisory agreement between each Fund and Warburg provides that
Warburg will reimburse the Fund to the extent certain expenses that are
described in the Statement of Additional Information exceed applicable state
expense limitations. Warburg and each Fund's co-administrators may voluntarily
waive a portion of their fees from time to time and temporarily limit the
expenses to be paid by the Fund.
Warburg. Warburg is a professional investment counselling firm which
provides investment services to investment companies, employee benefit plans,
endowment funds, foundations and other institutions and individuals. As of
February 29, 1996, Warburg managed approximately $13.5 billion of assets,
including approximately $7.5 billion of assets of twenty-three investment
companies or portfolios. Incorporated in 1970, Warburg is a wholly owned
subsidiary of Warburg, Pincus Counsellors G.P. ('Warburg G.P.'), a New York
general partnership. E.M. Warburg, Pincus & Co., Inc. ('EMW') controls Warburg
through its ownership of a class of voting preferred stock of Warburg. Warburg
G.P. has no business other than being a holding company of Warburg and its
subsidiaries. Warburg's address is 466 Lexington Avenue, New York, New York
10017-3147.
Abbott. Abbott, which was founded in 1986, is an independent specialized
investment firm with assets under management of approximately $3 billion. Abbott
is a registered investment adviser which concentrates on venture capital, buyout
and special situations partnership investments. Abbott's management team
provides full-service private equity programs to clients. Abbott's principal
office is located at 50 Rowes Wharf, Suite 240, Boston, Massachusetts 02110-
3328.
PORTFOLIO MANAGERS. George U. Wyper and Susan L. Black have been co-portfolio
managers of the Capital Appreciation Fund since December 1994. Mr. Wyper is a
managing director of EMW, which he joined in August 1994, before which time he
was chief investment officer of White River Corporation and president of Hanover
Advisers, Inc. (1993-August 1994), chief investment officer of Fund American
Enterprises, Inc. (1990-1993) and the director of fixed income investments at
Fireman's Fund Insurance Company (1987-1990). Ms. Black is a managing director
of EMW and has been with Warburg since 1985.
The co-portfolio managers of the Emerging Growth Fund and the Post-Venture
Capital Fund are Elizabeth B. Dater and Stephen J. Lurito. Ms. Dater has been
portfolio manager of the Emerging Growth Fund since its inception on January 21,
1988. She is a managing director of EMW and has been a portfolio manager of
Warburg since 1978. Mr. Lurito has been a portfolio manager of the Emerging
Growth Fund since 1990. He is a managing director of EMW and has been with
Warburg since 1987, before which time he was a research analyst at Sanford C.
Bernstein & Company, Inc. Robert S. Janis and Christopher M. Nawn are associate
portfolio managers and research analysts for the Post-Venture Capital Fund. Mr.
Janis has been with Warburg since October 1994, before which time he was a vice
president and senior research analyst at U.S. Trust Company of New York. Mr.
Nawn has been with Warburg since September
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1994, before which time he was a senior sector analyst and portfolio manager at
the Dreyfus Corporation.
Raymond L. Held and Gary H. Solomon, investment managers and general
partners of Abbott, manage the Post-Venture Capital Fund's investments in
Private Funds.
CO-ADMINISTRATORS. The Funds employ Counsellors Funds Service, Inc.
('Counsellors Service'), a wholly owned subsidiary of Warburg, as a co-
administrator. As co-administrator, Counsellors Service provides shareholder
liaison services to the Funds including responding to shareholder inquiries and
providing information on shareholder investments. Counsellors Service also
performs a variety of other services, including furnishing certain executive and
administrative services, acting as liaison between the Funds and their various
service providers, furnishing corporate secretarial services, which include
preparing materials for meetings of the governing Board, preparing proxy
statements and annual, semiannual and quarterly reports, assisting in other
regulatory filings as necessary and monitoring and developing compliance
procedures for the Funds. As compensation, each Fund pays Counsellors Service a
fee calculated at an annual rate of .10% of the Fund's average daily net assets.
Each Fund employs PFPC, an indirect, wholly owned subsidiary of PNC Bank
Corp., as a co-administrator. As a co-administrator, PFPC calculates the Fund's
net asset value, provides all accounting services for the Fund and assists in
related aspects of the Fund's operations. As compensation each Fund pays PFPC a
fee calculated at an annual rate of .10% of its average daily net assets,
subject to a minimum annual fee and exclusive of out-of-pocket expenses. PFPC
has its principal offices at 400 Bellevue Parkway, Wilmington, Delaware 19809.
CUSTODIANS. PNC Bank, National Association ('PNC') serves as custodian of the
assets of the Capital Appreciation Fund and the Emerging Growth Fund. PNC also
serves as custodian of the Post-Venture Capital Fund's U.S. assets, and State
Street Bank and Trust Company ('State Street') serves as custodian of the Fund's
non-U.S. assets. Like PFPC, PNC is a subsidiary of PNC Bank Corp. and its
principal business address is Broad and Chestnut Streets, Philadelphia,
Pennsylvania 19101. State Street's principal business address is 225 Franklin
Street, Boston, Massachusetts 02110.
TRANSFER AGENT. State Street acts as shareholder servicing agent, transfer agent
and dividend disbursing agent for the Funds. It has delegated to Boston
Financial Data Services, Inc., a 50% owned subsidiary ('BFDS'), responsibility
for most shareholder servicing functions. BFDS's principal business address is 2
Heritage Drive, North Quincy, Massachusetts 02171.
DISTRIBUTOR. Counsellors Securities serves as distributor of the shares of the
Funds. Counsellors Securities is a wholly owned subsidiary of Warburg and is
located at 466 Lexington Avenue, New York, New York 10017-3147. No compensation
is payable by the Capital Appreciation or Emerging Growth Funds to Counsellors
Securities for distribution services. Counsellors Securities receives a fee at
an annual rate equal to .25% of the average daily net assets of the Post-Venture
Capital Fund's Common Shares for distribution services, pursuant to a
shareholder servicing and distribution plan (the '12b-1 Plan') adopted by the
Fund pursuant to Rule 12b-1 under the 1940 Act. Amounts paid to Counsellors
Securities under the 12b-1 Plan may be used by Counsellors Securities to cover
expenses that are primarily intended to result in, or that are primarily
attributable to, (i) the sale of the Common Shares, (ii) ongoing servicing
and/or maintenance of the accounts of Common Shareholders of the Fund and (iii)
sub-transfer agency services, subaccounting services or administrative services
related to the sale of the Common Shares, all as set forth in the 12b-1 Plan.
Payments under the 12b-1 Plan are not tied exclusively to the distribution
expenses actually incurred by Counsellors Securities and the payments may exceed
distribution expenses actually
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incurred. The Board of the Post-Venture Capital Fund evaluates the
appropriateness of the 12b-1 Plan on a continuing basis and in doing so
considers all relevant factors, including expenses borne by Counsellors
Securities and amounts received under the 12b-1 Plan.
Warburg or its affiliates may, at their own expense, provide promotional
incentives to parties who support the sale of shares of the Funds, consisting of
securities dealers who have sold Fund shares or others, including banks and
other financial institutions, under special arrangements. In some instances,
these incentives may be offered only to certain institutions whose
representatives provide services in connection with the sale or expected sale of
significant amounts of Fund shares.
DIRECTORS AND OFFICERS. The officers of each Fund manage its day-to-day
operations and are directly responsible to its Board. The Boards set broad
policies for each Fund and choose its officers. A list of the Directors/Trustees
and officers of each Fund and a brief statement of their present positions and
principal occupations during the past five years is set forth in the Statement
of Additional Information of each Fund.
HOW TO OPEN AN ACCOUNT
In order to invest in a Fund, an investor must first complete and sign an
account application. To obtain an application, an investor may telephone Warburg
Pincus Funds at (800) 927-2874 An investor may also obtain an account
application by writing to:
Warburg Pincus Funds
P.O. Box 9030
Boston, Massachusetts 02205-9030
Completed and signed account applications should be mailed to Warburg
Pincus Funds at the above address.
RETIREMENT PLANS AND UGMA ACCOUNTS. For information (i) about investing in the
Funds through a tax-deferred retirement plan, such as an Individual Retirement
Account ('IRA') or a Simplified Employee Pension IRA ('SEP-IRA'), or (ii) about
opening a Uniform Gifts to Minors Act or Uniform Transfers to Minors Act
('UGMA') account, an investor should telephone Warburg Pincus Funds at (800)
888-6878 or write to Warburg Pincus Funds at the address set forth above.
Investors should consult their own tax advisers about the establishment of
retirement plans and UGMA accounts.
CHANGES TO ACCOUNT. For information on how to make changes to an account, an
investor should telephone Warburg Pincus Funds at (800) 888-6878.
HOW TO PURCHASE SHARES
Common Shares of each Fund may be purchased either by mail or, with special
advance instructions, by wire.
BY MAIL. If the investor desires to purchase Common Shares by mail, a check or
money order made payable to the Fund or Warburg Pincus Funds (in U.S. currency)
should be sent along with the completed account application to Warburg Pincus
Funds through its distributor, Counsellors Securities Inc., at the address set
forth above. Checks payable to the investor and endorsed to the order of the
Fund or Warburg Pincus Funds will not be accepted as payment and will be
returned to the sender. If payment is received in proper form by the close of
regular trading on the New York Stock Exchange (the 'NYSE') (currently 4:00
p.m., Eastern time) on a day that the Fund calculates its net asset value (a
'business day'), the purchase will be made at the Fund's net asset value
calculated at the end of that day. If payment is received after the close of
regular trading on the NYSE, the purchase will be effected at the Fund's net
asset value determined for the next business day after payment has been
received. Checks or money orders that are not in proper form or that are not
accompanied or preceded by a complete account application will be returned to
the sender. Shares
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purchased by check or money order are entitled to receive dividends and
distributions beginning on the day after payment has been received. Checks or
money orders in payment for shares of more than one Warburg Pincus Fund should
be made payable to Warburg Pincus Funds and should be accompanied by a breakdown
of amounts to be invested in each fund. If a check used for purchase does not
clear, the Fund will cancel the purchase and the investor may be liable for
losses or fees incurred. For a description of the manner of calculating the
Fund's net asset value, see 'Net Asset Value' below.
BY WIRE. Investors may also purchase Common Shares in a Fund by wiring funds
from their banks. Telephone orders by wire will not be accepted until a
completed account application in proper form has been received and an account
number has been established. Investors should place an order with the Fund prior
to wiring funds by telephoning (800) 888-6878. Federal funds may be wired to
Counsellors Securities Inc. using the following wire address:
State Street Bank and Trust Co.
225 Franklin St.
Boston, MA 02101
ABA# 0110 000 28
Attn: Mutual Funds/Custody Dept.
[Insert Warburg Pincus Fund name(s) here]
DDA# 9904-649-2
[Shareowner name]
[Shareowner account number]
If a telephone order is received by the close of regular trading on the
NYSE and payment by wire is received on the same day in proper form in
accordance with instructions set forth above, the shares will be priced
according to the net asset value of the Fund on that day and are entitled to
dividends and distributions beginning on that day. If payment by wire is
received in proper form by the close of the NYSE without a prior telephone
order, the purchase will be priced according to the net asset value of the Fund
on that day and is entitled to dividends and distributions beginning on that
day. However, if a wire in proper form that is not preceded by a telephone order
is received after the close of regular trading on the NYSE, the payment will be
held uninvested until the order is effected at the close of business on the next
business day. Payment for orders that are not accepted will be returned to the
prospective investor after prompt inquiry. If a telephone order is placed and
payment by wire is not received on the same day, the Fund will cancel the
purchase and the investor may be liable for losses or fees incurred.
The minimum initial investment in each Fund is $2,500 and the minimum
subsequent investment is $100, except that subsequent minimum investments can be
as low as $50 under the Automatic Monthly Investment Plan described in the next
section. For retirement plans and UGMA accounts, the minimum initial investment
is $500. The Fund reserves the right to change the initial and subsequent
investment minimum requirements at any time. In addition, the Fund may, in its
sole discretion, waive the initial and subsequent investment minimum
requirements with respect to investors who are employees of EMW or its
affiliates or persons with whom Warburg has entered into an investment advisory
agreement. Existing investors will be given 15 days' notice by mail of any
increase in investment minimum requirements.
After an investor has made his initial investment, additional shares may be
purchased at any time by mail or by wire in the manner outlined above. Wire
payments for initial and subsequent investments should be preceded by an order
placed with the Fund and should clearly indicate the investor's account number
and the name of the Fund in which shares are being purchased. In the interest of
economy and convenience, physical certificates representing shares in the Funds
are not normally issued.
PURCHASES THROUGH INTERMEDIARIES. The Funds understand that some broker-dealers
(other than Counsellors Securities), financial institutions, securities dealers
and other industry profession-
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als, including certain of the programs discussed below, may impose certain
conditions on their clients or customers that invest in the Funds, which are in
addition to or different than those described in this Prospectus, and may charge
their clients or customers direct fees. Certain features of the Funds, such as
the initial and subsequent investment minimums, redemption fees and certain
trading restrictions, may be modified or waived in these programs, and
administrative charges may be imposed for the services rendered. Therefore, a
client or customer should contact the organization acting on his behalf
concerning the fees (if any) charged in connection with a purchase or redemption
of Fund shares and should read this Prospectus in light of the terms governing
his accounts with the organization. These organizations will be responsible for
promptly transmitting client or customer purchase and redemption orders to the
Funds in accordance with their agreements with clients or customers.
Common Shares of each Fund are available through the Charles Schwab &
Company, Inc. Mutual Fund OneSourceTM Program; Fidelity Brokerage Services, Inc.
Funds-NetworkTM Program; Jack White & Company, Inc.; and Waterhouse Securities,
Inc. Generally, these programs do not require customers to pay a transaction fee
in connection with purchases. These and other organizations that have entered
into agreements with a Fund or its agent may enter confirmed purchase orders on
behalf of clients and customers, with payment to follow no later than the Funds'
pricing on the following business day. If payment is not received by such time,
the organization could be held liable for resulting fees or losses.
AUTOMATIC MONTHLY INVESTING. Automatic monthly investing allows shareholders to
authorize a Fund to debit their bank account monthly ($50 minimum) for the
purchase of Fund shares on or about either the tenth or twentieth calendar day
of each month. To establish the automatic monthly investing option, obtain a
separate application or complete the 'Automatic Investment Program' section of
the account applications and include a voided, unsigned check from the bank
account to be debited. Only an account maintained at a domestic financial
institution which is an automated clearing house member may be used.
Shareholders using this service must satisfy the initial investment minimum for
the Fund prior to or concurrent with the start of any Automatic Investment
Program. Please refer to an account application for further information, or
contact Warburg Pincus Funds at (800) 888-6878 for information or to modify or
terminate the program. Investors should allow a period of up to 30 days in order
to implement an automatic investment program. The failure to provide complete
information could result in further delays.
HOW TO REDEEM AND EXCHANGE
SHARES
REDEMPTION OF SHARES. An investor in a Fund may redeem (sell) his shares on any
day that the Fund's net asset value is calculated (see 'Net Asset Value' below).
Common Shares of the Funds may either be redeemed by mail or by telephone.
Investors should realize that in using the telephone redemption and exchange
option, you may be giving up a measure of security that you may have if you were
to redeem or exchange your shares in writing. If an investor desires to redeem
his shares by mail, a written request for redemption should be sent to Warburg
Pincus Funds at the address indicated above under 'How to Open an Account.' An
investor should be sure that the redemption request identifies the Fund, the
number of shares to be redeemed and the investor's account number. In order to
change the bank account or address designated to receive the redemption
proceeds, the investor must send a written request (with signature guarantee of
all investors listed on the account when such a change is made in conjunction
with a redemption request) to Warburg Pincus Funds.
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Each mail redemption request must be signed by the registered owner(s) (or his
legal representative(s)) exactly as the shares are registered. If an investor
has applied for the telephone redemption feature on his account application, he
may redeem his shares by calling Warburg Pincus Funds at (800) 888-6878 between
9:00 a.m. and 4:00 p.m. (Eastern time) on any business day. An investor making a
telephone withdrawal should state (i) the name of the Fund, (ii) the account
number of the Fund, (iii) the name of the investor(s) appearing on the Fund's
records, (iv) the amount to be withdrawn and (v) the name of the person
requesting the redemption.
After receipt of the redemption request by mail or by telephone, the
redemption proceeds will, at the option of the investor, be paid by check and
mailed to the investor of record or be wired to the investor's bank as indicated
in the account application previously filled out by the investor. No Fund
currently imposes a service charge for effecting wire transfers but each Fund
reserves the right to do so in the future. During periods of significant
economic or market change, telephone redemptions may be difficult to implement.
If an investor is unable to contact Warburg Pincus Funds by telephone, an
investor may deliver the redemption request to Warburg Pincus Funds by mail at
the address shown above under 'How to Open an Account.' Although each Fund will
redeem shares purchased by check before the check clears, payments of the
redemption proceeds will be delayed until such check has cleared, which may take
up to 15 days from the purchase date. Investors should consider purchasing
shares using a certified or bank check or money order if they anticipate an
immediate need for redemption proceeds.
If a redemption order is received prior to the close of regular trading on
the NYSE, the redemption order will be effected at the net asset value per share
as determined on that day. If a redemption order is received after the close of
regular trading on the NYSE, the redemption order will be effected at the net
asset value as next determined. Except as noted above, redemption proceeds will
normally be mailed or wired to an investor on the next business day following
the date a redemption order is effected. If, however, in the judgment of
Warburg, immediate payment would adversely affect a Fund, each Fund reserves the
right to pay the redemption proceeds within seven days after the redemption
order is effected. Furthermore, each Fund may suspend the right of redemption or
postpone the date of payment upon redemption (as well as suspend or postpone the
recordation of an exchange of shares) for such periods as are permitted under
the 1940 Act.
The proceeds paid upon redemption may be more or less than the amount
invested depending upon a share's net asset value at the time of redemption. If
an investor redeems all the shares in his account, all dividends and
distributions declared up to and including the date of redemption are paid along
with the proceeds of the redemption.
If, due to redemptions, the value of an investor's account drops to less
than $2,000 ($250 in the case of a retirement plan or UGMA account), each Fund
reserves the right to redeem the shares in that account at net asset value.
Prior to any redemption, the Fund will notify an investor in writing that this
account has a value of less than the minimum. The investor will then have 60
days to make an additional investment before a redemption will be processed by
the Fund.
TELEPHONE TRANSACTIONS. In order to request redemptions by telephone, investors
must have completed and returned to Warburg Pincus Funds an account application
containing a telephone election. Unless contrary instructions are elected, an
investor will be entitled to make exchanges by telephone. Neither a Fund nor its
agents will be liable for following instructions communicated by telephone that
it reasonably believes to be genuine. Reasonable procedures will be employed on
behalf of each Fund to
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confirm that instructions communicated by telephone are genuine. Such procedures
include providing written confirmation of telephone transactions, tape recording
telephone instructions and requiring specific personal information prior to
acting upon telephone instructions.
AUTOMATIC CASH WITHDRAWAL PLAN. Each Fund offers investors an automatic cash
withdrawal plan under which investors may elect to receive periodic cash
payments of at least $250 monthly or quarterly. To establish this service,
complete the 'Automatic Withdrawal Plan' section of the account application and
attach a voided check from the bank account to be credited. For further
information regarding the automatic cash withdrawal plan or to modify or
terminate the plan, investors should contact Warburg Pincus Funds at (800)
888-6878.
EXCHANGE OF SHARES. An investor may exchange Common Shares of a Fund for Common
Shares of another Fund or for Common Shares of another Warburg Pincus Fund at
their respective net asset values. Exchanges may be effected by mail or by
telephone in the manner described under 'Redemption of Shares' above. If an
exchange request is received by Warburg Pincus Funds prior to the close of
regular trading on the NYSE, the exchange will be made at each Fund's net asset
value determined at the end of that business day. Exchanges may be effected
without a sales charge but must satisfy the minimum dollar amount necessary for
new purchases. Due to the costs involved in effecting exchanges, each Fund
reserves the right to refuse to honor more than three exchange requests by a
shareholder in any 30-day period. The exchange privilege may be modified or
terminated at any time upon 60 days' notice to shareholders. Currently,
exchanges may be made among the Funds and with the following other funds:
WARBURG PINCUS CASH RESERVE FUND -- a money market fund investing in
short-term, high quality money market instruments;
WARBURG PINCUS NEW YORK TAX EXEMPT FUND -- a money market fund investing
in short-term, high quality municipal obligations designed for New York
investors seeking income exempt from federal, New York State and New York
City income tax;
WARBURG PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND -- an
intermediate-term municipal bond fund designed for New York investors
seeking income exempt from federal, New York State and New York City
income tax;
WARBURG PINCUS TAX FREE FUND -- a bond fund seeking maximum current income
exempt from federal income taxes, consistent with preservation of capital;
WARBURG PINCUS INTERMEDIATE MATURITY GOVERNMENT FUND -- an
intermediate-term bond fund investing in obligations issued or guaranteed
by the U.S. government, its agencies or instrumentalities;
WARBURG PINCUS FIXED INCOME FUND -- a bond fund seeking current income
and, secondarily, capital appreciation by investing in a diversified
portfolio of fixed-income securities;
WARBURG PINCUS GLOBAL FIXED INCOME FUND -- a bond fund investing in a
portfolio consisting of investment grade fixed-income securities of
governmental and corporate issuers denominated in various currencies,
including U.S. dollars;
WARBURG PINCUS BALANCED FUND -- a fund seeking maximum total return
through a combination of long-term growth of capital and current income
consistent with preservation of capital through diversified investments in
equity and debt securities;
WARBURG PINCUS GROWTH & INCOME FUND -- an equity fund seeking long-term
growth of capital and income and a reasonable current return;
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WARBURG PINCUS SMALL COMPANY VALUE FUND -- an equity fund seeking
long-term capital appreciation by investing primarily in equity securities
of small companies;
WARBURG PINCUS INTERNATIONAL EQUITY FUND -- an equity fund seeking
long-term capital appreciation by investing primarily in equity securities
of non-United States issuers;
WARBURG PINCUS EMERGING MARKETS FUND -- an equity fund seeking growth of
capital by investing primarily in securities of non-United States issuers
consisting of companies in emerging securities markets;
WARBURG PINCUS JAPAN GROWTH FUND -- an equity fund seeking long-term
growth of capital by investing primarily in equity securities of Japanese
issuers; and
WARBURG PINCUS JAPAN OTC FUND -- an equity fund seeking long-term capital
appreciation by investing in a portfolio of securities traded in the
Japanese over-the-counter market.
The exchange privilege is available to shareholders residing in any state
in which the Common Shares being acquired may legally be sold. When an investor
effects an exchange of shares, the exchange is treated for federal income tax
purposes as a redemption. Therefore, the investor may realize a taxable gain or
loss in connection with the exchange. Investors wishing to exchange Common
Shares of a Fund for Common Shares in another Warburg Pincus Fund should review
the prospectus of the other fund prior to making an exchange. For further
information regarding the exchange privilege or to obtain a current prospectus
for another Warburg Pincus Fund, an investor should contact Warburg Pincus Funds
at (800) 927-2874.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS. Each Fund calculates its dividends from net
investment income. Net investment income includes interest accrued and dividends
earned on the Fund's portfolio securities for the applicable period less
applicable expenses. Each Fund declares dividends from its net investment income
and net realized short-term and long-term capital gains annually and pays them
in the calendar year in which they are declared, generally in November or
December. Net investment income earned on weekends and when the NYSE is not open
will be computed as of the next business day. Unless an investor instructs a
Fund to pay dividends or distributions in cash, dividends and distributions will
automatically be reinvested in additional Common Shares of the relevant Fund at
net asset value. The election to receive dividends in cash may be made on the
account application or, subsequently, by writing to Warburg Pincus Funds at the
address set forth under 'How to Open an Account' or by calling Warburg Pincus
Funds at (800) 888-6878.
A Fund may be required to withhold for U.S. federal income taxes 31% of all
distributions payable to shareholders who fail to provide the Fund with their
correct taxpayer identification number or to make required certifications, or
who have been notified by the U.S. Internal Revenue Service that they are
subject to backup withholding.
TAXES. Each Fund intends to qualify each year as a 'regulated investment
company' within the meaning of the Code. Each Fund, if it qualifies as a
regulated investment company, will be subject to a 4% non-deductible excise tax
measured with respect to certain undistributed amounts of ordinary income and
capital gain. Each Fund expects to pay such additional dividends and to make
such additional distributions as are necessary to avoid the application of this
tax.
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Dividends paid from net investment income and distributions of net realized
short-term capital gains are taxable to investors as ordinary income, and
distributions derived from net realized long-term capital gains are taxable to
investors as long-term capital gains, in each case regardless of how long the
shareholder has held Fund shares and whether received in cash or reinvested in
additional Fund shares. As a general rule, an investor's gain or loss on a sale
or redemption of his Fund shares will be a long-term capital gain or loss if he
has held his shares for more than one year and will be a short-term capital gain
or loss if he has held his shares for one year or less. However, any loss
realized upon the sale or redemption of shares within six months from the date
of their purchase will be treated as a long-term capital loss to the extent of
any amounts treated as distributions of long-term capital gain during such
six-month period with respect to such shares. Investors may be proportionately
liable for taxes on income and gains of the Funds, but investors not subject to
tax on their income will not be required to pay tax on amounts distributed to
them. The Fund's investment activities, including short sales of securities,
will not result in unrelated business taxable income to a tax-exempt investor. A
Fund's dividends, to the extent not derived from dividends attributable to
certain types of stock issued by U.S. domestic corporations, will not qualify
for the dividends received deduction for corporations.
Special Tax Matters Relating to the Post-Venture Capital Fund. Certain
provisions of the Code may require that a gain recognized by the Fund upon the
closing of a short sale be treated as a short-term capital gain, and that a loss
recognized by the Fund upon the closing of a short sale be treated as a
long-term capital loss, regardless of the amount of time that the Fund held the
securities used to close the short sale. The Fund's use of short sales may also
affect the holding periods of certain securities held by the Fund if such
securities are 'substantially identical' to securities used by the Fund to close
the short sale. The Fund's short selling activities will not result in unrelated
business taxable income to a tax-exempt investor.
GENERAL. Statements as to the tax status of each investor's dividends and
distributions are mailed annually. Each investor will also receive, if
applicable, various written notices after the close of a Fund's prior taxable
year with respect to certain dividends and distributions which were received
from the Fund during the Fund's prior taxable year. Investors should consult
their own tax advisers with specific reference to their own tax situations,
including their state and local tax liabilities.
NET ASSET VALUE
Each Fund's net asset value per share is calculated as of the close of
regular trading on the NYSE (currently 4:00 p.m., Eastern time) on each business
day, Monday through Friday, except on days when the NYSE is closed. The NYSE is
currently scheduled to be closed on New Year's Day, Washington's Birthday, Good
Friday, Memorial Day (observed), Independence Day, Labor Day, Thanksgiving Day
and Christmas Day, and on the preceding Friday or subsequent Monday when one of
these holidays falls on a Saturday or Sunday, respectively. The net asset value
per share of each Fund generally changes each day.
The net asset value per Common Share of each Fund is computed by adding the
Common Shares' pro rata share of the value of the Fund's assets, deducting the
Common Shares' pro rata share of the Fund's liabilities and the liabilities
specifically allocated to Common Shares and then dividing the result by the
total number of outstanding Common Shares.
Securities listed on a U.S. securities exchange (including securities
traded through the NASDAQ National Market System) or foreign securities exchange
or traded in an over-the-
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counter market will be valued at the most recent sale price when the valuation
is made. Options and futures contracts will be valued similarly. Debt
obligations that mature in 60 days or less from the valuation date are valued on
the basis of amortized cost, unless the Board determines that using this
valuation method would not reflect the investments' value. Investments in
Private Funds will be valued in accordance with periodic reports received by
Abbott from the Private Funds (not less frequently than quarterly). Interim
changes in value of investments in Private Funds will not be monitored and, as a
result, will not generally be reflected in the Post-Venture Capital Fund's net
asset value. Securities, options and futures contracts for which market
quotations are not readily available and other assets will be valued at their
fair value as determined in good faith pursuant to consistently applied
procedures established by the Board. Further information regarding valuation
policies is contained in the Statement of Additional Information.
PERFORMANCE
The Funds quote the performance of Common Shares separately from Advisor
Shares. The net asset value of Common Shares is listed in The Wall Street
Journal each business day under the heading 'Warburg Pincus Funds.' From time to
time, each Fund may advertise the average annual total return of its Common
Shares over various periods of time. These total return figures show the average
percentage change in value of an investment in the Common Shares from the
beginning of the measuring period to the end of the measuring period. The
figures reflect changes in the price of the Common Shares assuming that any
income dividends and/or capital gain distributions made by the Fund during the
period were reinvested in Common Shares of the Fund. 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 Fund's operations or on a
year-by-year, quarterly or current year-to-date basis).
When considering average total return figures for periods longer than one
year, it is important to note that the annual total return for one year in the
period might have been greater or less than the average for the entire period.
When considering total return figures for periods shorter than one year,
investors should bear in mind that each Fund seeks long-term appreciation and
that such return may not be representative of any Fund's return over a longer
market cycle. Each Fund may also advertise aggregate total return figures of its
Common Shares for various periods, representing the cumulative change in value
of an investment in the Common Shares for the specific period (again reflecting
changes in share prices and assuming reinvestment of dividends and
distributions). Aggregate and average total returns may be shown by means of
schedules, charts or graphs and may indicate various components of total return
(i.e., change in value of initial investment, income dividends and capital gain
distributions).
Investors should note that total return figures are based on historical
earnings and are not intended to indicate future performance. Each Fund's
Statement of Additional Information describes the method used to determine the
total return. Current total return figures may be obtained by calling Warburg
Pincus Funds at (800) 927-2874.
In reports or other communications to investors or in advertising material,
a Fund may describe general economic and market conditions affecting the Fund.
The Fund may compare its performance with (i) that of other mutual funds as
listed in the rankings prepared by Lipper Analytical Services, Inc. or similar
investment services that monitor the performance of mutual funds or as set forth
in the publications listed below; (ii) in the case of the Capital Appreciation
Fund, with the Russell Midcap
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Index, the S&P Midcap 400 Index and the S&P 500 Index; in the case of the
Emerging Growth Fund, with the Russell 2000 Small Stock Index, the T. Rowe Price
New Horizons Fund Index and the S&P 500 Index; and in the case of the
Post-Venture Capital Fund, with the Venture Capital 100 Index (compiled by
Venture Capital Journal), the Russell 2000 Small Stock Index and the S&P 500
Index; all of which are unmanaged indexes of common stocks; or (iii) other
appropriate indexes of investment securities or with data developed by Warburg
derived from such indexes. The Post-Venture Capital Fund may also make
comparisons using data and indexes compiled by the National Venture Capital
Association, VentureOne and Private Equity Analysts Newsletter and similar
organizations and publications. A Fund may include evaluations of the Fund
published by nationally recognized ranking services and by financial
publications that are nationally recognized, such as The Wall Street Journal,
Investor's Daily, Money, Inc., Institutional Investor, Barron's, Fortune,
Forbes, Business Week, Mutual Fund Magazine, Morningstar, Inc. and Financial
Times.
In reports or other communications to investors or in advertising, each
Fund may also describe the general biography or work experience of the portfolio
managers of the Fund and may include quotations attributable to the portfolio
managers describing approaches taken in managing the Fund's investments,
research methodology underlying stock selection or the Fund's investment
objective. In addition, a Fund and its portfolio managers may render periodic
updates of Fund activity, which may include a discussion of significant
portfolio holdings and analysis of holdings by industry, country, credit quality
and other characteristics. The Post-Venture Capital Fund may discuss
characteristics of venture capital financed companies and the benefits expected
to be achieved from investing in these companies. Each Fund 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. Morningstar, Inc. rates funds in broad
categories based on risk/reward analyses over various time periods. In addition,
each Fund may from time to time compare the expense ratio of its Common Shares
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.
GENERAL INFORMATION
ORGANIZATION. The Capital Appreciation Fund was organized on January 20, 1987
under the laws of The Commonwealth of Massachusetts and is a business entity
commonly known as 'Massachusetts business trust.' On February 26, 1992, the Fund
amended its Agreement and Declaration of Trust to change its name from
'Counsellors Capital Appreciation Fund' to 'Warburg, Pincus Capital Appreciation
Fund.' The Emerging Growth Fund was incorporated on November 12, 1987 under the
laws of the State of Maryland under the name 'Counsellors Emerging Growth Fund,
Inc.' On October 27, 1995 the Fund amended its charter to change its name to
'Warburg, Pincus Emerging Growth Fund, Inc.' The Post-Venture Capital Fund was
incorporated on July 12, 1995 under the laws of the State of Maryland under the
name 'Warburg, Pincus Post-Venture Capital Fund, Inc.'
The Capital Appreciation Fund's Agreement and Declaration of Trust
authorizes the Board to issue an unlimited number of full and fractional shares
of beneficial interest, $.001 par value per share, of which one billion shares
are designated Advisor Shares. The charter of each of the Emerging Growth Fund
and the Post-Venture Capital Fund authorizes the Board to issue three billion
full and fractional shares of capital stock, $.001 par value per share, of which
one billion shares are designated Advisor Shares. Under
26
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<PAGE>
each Fund's charter documents, the governing Board has the power to classify or
reclassify any unissued shares of the Fund 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 of a Fund 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 Fund.
MULTI-CLASS STRUCTURE. Each Fund offers a separate class of shares, the Advisor
Shares, pursuant to a separate prospectus. Individual investors may only
purchase Advisor Shares through institutional shareholders of record,
broker-dealers, financial institutions, depository institutions, retirement
plans and financial intermediaries. Shares of each class represent equal pro
rata interests in the respective Fund and accrue dividends and calculate net
asset value and performance quotations in the same manner. Because of the higher
fees paid by the Advisor Shares, the total return on such shares can be expected
to be lower than the total return on Common Shares. Investors may obtain
information concerning the Advisor Shares from their investment professional or
by calling Counsellors Securities at (800) 888-6878.
VOTING RIGHTS. Investors in a Fund are entitled to one vote for each full share
held and fractional votes for fractional shares held. Shareholders of a Fund
will vote in the aggregate except where otherwise required by law and except
that each class will vote separately on certain matters pertaining to its
distribution and shareholder servicing arrangements. There will normally be no
meetings of investors for the purpose of electing members of the governing Board
unless and until such time as less than a majority of the members holding office
have been elected by investors. Investors of record of no less than two-thirds
of the outstanding shares of the Capital Appreciation Fund 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. Any Director of the Emerging Growth Fund or the
Post-Venture Capital Fund may be removed from office upon the vote of
shareholders holding at least a majority of the relevant Fund's outstanding
shares, at a meeting called for that purpose. A meeting will be called for the
purpose of voting on the removal of a Board member at the written request of
holders of 10% of the outstanding shares of a Fund.
SHAREHOLDER COMMUNICATIONS. Each investor will receive a quarterly statement of
his account, as well as a statement of his account after any transaction that
affects his share balance or share registration (other than the reinvestment of
dividends or distributions or investment made through the Automatic Investment
Program). Each Fund will also send to its investors a semiannual report and an
audited annual report, each of which includes a list of the investment
securities held by the Fund and a statement of the performance of the Fund.
Periodic listings of the investment securities held by a Fund may be obtained by
calling Warburg Pincus Funds at (800) 927-2874.
The prospectuses of the Funds are combined in this Prospectus. Each Fund
offers only its own shares, yet it is possible that a Fund might become liable
for a misstatement, inaccuracy or omission in this Prospectus with regard to
another Fund.
SHAREHOLDER SERVICING
Common Shares may be sold to or through institutions, including insurance
companies, financial institutions and broker-dealers, that will not be paid a
distribution fee by a Fund pursuant to Rule 12b-1 under the 1940 Act for
services to their clients or customers who may be deemed to be beneficial owners
of Common Shares. These institutions may be paid fees by a Fund, Counsel-
27
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<PAGE>
lors Securities, Counsellors Service or any of their affiliates for transfer
agency, administrative, accounting, shareholder liaison and/or other services
provided to their clients or customers that invest in the Funds' Common Shares.
Organizations that provide recordkeeping or other services to certain employee
benefit plans and qualified and other retirement plans that include a Fund as an
investment alternative and registered representatives (including retirement plan
consultants) that facilitate the administration and servicing of shareholder
accounts may also be paid a fee. Fees paid vary depending on the arrangements
and the amount of assets held by an institution's clients or customers and/or
the number of plan participants investing in a Fund. Warburg, Counsellors
Securities, Counsellors Service or any of their affiliates may, from time to
time, at their own expense, pay certain fund transfer agent fees and expenses
related to clients and customers of their institutions and organizations. In
addition, these institutions may use a portion of their compensation to
compensate a Fund's custodian or transfer agent for costs related to accounts of
their clients or customers.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, EACH FUNDS'
STATEMENT OF ADDITIONAL INFORMATION OR THE FUNDS' OFFICIAL SALES LITERATURE IN
CONNECTION WITH THE OFFERING OF SHARES OF THE FUNDS, AND IF GIVEN OR MADE, SUCH
OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY EACH FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF THE
COMMON SHARES OF THE FUNDS IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH
OFFER MAY NOT LAWFULLY BE MADE.
28
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TABLE OF CONTENTS
THE FUNDS' EXPENSES ...................................................... 2
FINANCIAL HIGHLIGHTS ..................................................... 3
INVESTMENT OBJECTIVES AND POLICIES ....................................... 5
PORTFOLIO INVESTMENTS .................................................... 8
RISK FACTORS AND SPECIAL
CONSIDERATIONS ........................................................ 9
PORTFOLIO TRANSACTIONS AND TURNOVER
RATE ................................................................. 11
CERTAIN INVESTMENT STRATEGIES ........................................... 11
INVESTMENT GUIDELINES ................................................... 15
MANAGEMENT OF THE FUNDS ................................................. 15
HOW TO OPEN AN ACCOUNT .................................................. 18
HOW TO PURCHASE SHARES .................................................. 18
HOW TO REDEEM AND EXCHANGE
SHARES ............................................................... 20
DIVIDENDS, DISTRIBUTIONS AND TAXES ...................................... 23
NET ASSET VALUE ......................................................... 24
PERFORMANCE ............................................................. 25
GENERAL INFORMATION ..................................................... 26
SHAREHOLDER SERVICING ................................................... 27
[LOGO]
[ ] WARBURG PINCUS
CAPITAL APPRECIATION FUND
[ ] WARBURG PINCUS
EMERGING GROWTH FUND
[ ] WARBURG PINCUS
POST-VENTURE CAPITAL FUND
PROSPECTUS
MAY 10, 1996
WPDSF-1-0596
<PAGE>
<PAGE>
[Logo]
PROSPECTUS
MAY 10, 1996
[ ] WARBURG PINCUS POST-VENTURE CAPITAL FUND
<PAGE>
<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 11, 1996
WARBURG PINCUS ADVISOR FUNDS
P.O. BOX 9030
BOSTON, MASSACHUSETTS 02205-9030
TELEPHONE NUMBER: (800) 888-6878
May 10, 1996
PROSPECTUS
Warburg Pincus Advisor Funds are a family of open-end mutual funds that are
offered to investors who wish to buy shares through an investment professional,
to financial institutions investing on behalf of their customers and to
retirement plans that elect to make one or more Advisor Funds an investment
option for participants in the plans. One Advisor Fund is described in this
Prospectus:
WARBURG PINCUS POST-VENTURE CAPITAL FUND seeks long-term growth of capital by
investing primarily in equity securities of issuers in their post-venture
capital stage of development and pursues an aggressive investment strategy.
Because of the nature of the Fund's investments and certain strategies it may
use, an investment in the Fund involves certain risks and may not be appropriate
for all investors.
The Fund currently offers two classes of shares, one of which, the Advisor
Shares, is offered pursuant to this Prospectus. The Advisor Shares of the Fund,
as well as Advisor Shares of certain other Warburg Pincus-advised funds, are
sold under the name 'Warburg Pincus Advisor Funds.' Individual investors may
purchase Advisor Shares only through institutional shareholders of record,
broker-dealers, financial institutions, depository institutions, retirement
plans and other financial intermediaries ('Institutions'). The Advisor Shares
impose a 12b-1 fee of up to .75% per annum, which is the economic equivalent of
a sales charge. The Fund's Common Shares are available for purchase by
individuals directly and are offered by a separate prospectus.
NO MINIMUM INVESTMENT
There is no minimum amount of initial or subsequent purchases of shares imposed
on Institutions. See 'How to Purchase Shares.'
This Prospectus briefly sets forth certain information about the Fund that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about the
Fund, contained in a Statement of Additional Information, has been filed with
the Securities and Exchange Commission (the 'SEC') and is available to investors
without charge by calling Warburg Pincus Advisor Funds at (800) 888-6878.
Information regarding the status of shareholder accounts may also be obtained by
calling Warburg Pincus Advisor Funds at (800) 888-6878. The Statement of
Additional Information, as amended or supplemented from time to time, bears the
same date as this Prospectus and is incorporated by reference in its entirety
into this Prospectus.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY ANY BANK AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
<PAGE>
THE FUND'S EXPENSES
The Fund currently offers two separate classes of shares: Common Shares and
Advisor Shares. See 'General Information.' Because of the higher fees paid by
Advisor Shares, the total return on such shares can be expected to be lower than
the total return on Common Shares.
<TABLE>
<S> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases (as a percentage of offering price).......................... 0
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees...................................................................................... .92%
12b-1 Fees........................................................................................... .75%*
Other Expenses....................................................................................... .48%
-----
Total Fund Operating Expenses (after fee waivers)`D'................................................. 2.15%
EXAMPLE
You would pay the following expenses
on a $1,000 investment, assuming (1) 5% annual return and (2) redemption at the end
of each time period:
1 year...................................................................................................... $22
3 years..................................................................................................... $67
</TABLE>
- ------------
* Current 12b-1 fees are .50% out of a maximum .75% authorized under the Advisor
Shares' Distribution Plan. At least a portion of these fees should be
considered by the investor to be the economic equivalent of a sales charge.
`D' Absent the anticipated waiver of fees by the Fund's investment adviser and
co-administrator, Management Fees would equal 1.25%, Other Expenses would
equal .75% and Total Fund Operating Expenses would equal 2.75%. Other
Expenses are based on annualized estimates of expenses for the fiscal year
ending October 31, 1996, net of any fee waivers or expense reimbursements.
The investment adviser and co-administrator are under no obligation to
continue these waivers.
------------------------
The expense table shows the costs and expenses that an investor will bear
directly or indirectly as an Advisor Shareholder of the Fund. Institutions also
may charge their clients fees in connection with investments in Advisor Shares,
which fees are not reflected in the table. The Example should not be considered
a representation of past or future expenses; actual Fund expenses may be greater
or less than those shown. Moreover, while the Example assumes a 5% annual
return, the Fund's actual performance will vary and may result in a return
greater or less than 5%. Long-term holders of Advisor Shares may pay more than
the economic equivalent of the maximum front-end sales charges permitted by the
National Association of Securities Dealers, Inc. (the 'NASD').
2
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FINANCIAL HIGHLIGHTS
(FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following information regarding the Fund for the fiscal period ended
October 31, 1995 has been derived from information audited by Coopers & Lybrand
L.L.P., independent auditors, whose report dated December 14, 1995 appears in
the Fund's Statement of Additional Information. Further information about the
performance of the Fund is contained in the Fund's annual report, dated October
31, 1995, copies of which appear in the Fund's Statement of Additional
Information or may be obtained without charge by calling Warburg Pincus Advisor
Funds at (800) 888-6878.
<TABLE>
<CAPTION>
FOR THE PERIOD
SEPTEMBER 29, 1995
(COMMENCEMENT OF
OPERATIONS)
THROUGH
OCTOBER 31, 1995
----------------
<S> <C>
Net Asset Value, Beginning of Period.......................................................... $10.00
-------
Income from Investment Operations:
Net Investment Income (Loss)................................................................ .00
Net Gains (Loss) from Securities (both realized and unrealized)............................. .68
-------
Total from Investment Operations....................................................... .68
-------
Less Distributions:
Dividends from net investment income..................................................... .00
Distributions from capital gains......................................................... .00
-------
Total Distributions.................................................................... .00
-------
Net Asset Value, End of Period................................................................ $10.68
-------
-------
Total Return.................................................................................. 6.80%*
Ratios/Supplemental Data:
Net Assets, End of Period (000s).............................................................. $1
Ratios to Average Daily Net Assets:
Operating expenses.......................................................................... 2.15%*
Net investment income....................................................................... .09%*
Decrease reflected in above operating expense ratio due to
waivers/reimbursements................................................................... 9.25%*
Portfolio Turnover Rate....................................................................... 16.90%*
</TABLE>
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* Non-annualized.
3
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INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is long-term growth of capital. This
objective is a fundamental policy and may not be amended without first obtaining
the approval of a majority of the outstanding shares of the Fund. Any investment
involves risk and, therefore, there can be no assurance that the Fund will
achieve its investment objective. See 'Portfolio Investments' and 'Certain
Investment Strategies' for descriptions of certain types of investments the Fund
may make.
Because of the nature of the Fund's investments and certain strategies it
may use, such as investing in Private Funds (as defined below), an investment in
the Fund should be considered only for the aggressive portion of an investor's
portfolio and may not be appropriate for all investors.
The Fund is a diversified management investment company that pursues its
investment objective by investing primarily in equity securities of companies
considered by Warburg, Pincus Counsellors, Inc., the Fund's investment adviser
('Warburg') to be in their post-venture capital stage. Although the Fund may
invest up to 10% of its assets in venture capital and other investment funds,
the Fund is not designed primarily to provide venture capital financing. Rather,
under normal market conditions, the Fund will invest at least 65% of its total
assets in equity securities of 'post-venture capital companies.' A post-venture
capital company is a company that has received venture capital financing either
(a) during the early stages of the company's existence or the early stages of
the development of a new product or service, or (b) as part of a restructuring
or recapitalization of the company. The investment of venture capital financing,
distribution of such company's securities to venture capital investors, or
initial public offering ('IPO'), whichever is later, will have been made within
ten years prior to the Fund's purchase of the company's securities.
Warburg 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 or the Fortune 500.
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.
Warburg will consider the impact of such sales in selecting post-venture capital
investments. Venture capitalists may be individuals or funds organized by
venture capitalists which are typically offered only to large institutions, such
as pension funds and endowments, and certain accredited investors. Venture
capital participation in a company is often reduced when the company engages in
an IPO of its securities or when it is involved in a merger, tender offer or
acquisition.
Warburg has experience in researching smaller companies, companies in the
early stages of development and venture capital-financed companies. Its team of
analysts, led by Elizabeth Dater and Stephen Lurito, regularly monitors
portfolio companies whose securities are held by over 250 of the larger domestic
venture capital funds. Ms. Dater and Mr. Lurito have managed post-venture equity
securities in separate accounts for institutions since 1989 and currently manage
over $1 billion of such assets for institutions. The Fund will invest in
securities of post-venture capital companies that are traded on a national
securities exchange or in an organized over-the-counter market.
4
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PRIVATE FUND INVESTMENTS. Up to 10% of the Fund'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, L.P., the Fund's sub-investment adviser with respect to Private
Funds ('Abbott'), attempts to invest in a mix of Private Funds that will
provide an above average internal rate of return (i.e., the discount rate at
which the present value of an investment's future cash inflows (dividend
income and capital gains) are equal to the cost of the investment). Warburg
believes that the Fund's investments in Private Funds offers individual
investors a unique opportunity to participate in venture capital and other
private investment funds, providing access to investment opportunities typically
available only to large institutions and accredited investors. Although the
Fund's investments in Private Funds are limited to a maximum of 10% of the
Fund's assets, these investments are highly speculative and volatile and may
produce gains or losses in the portion of the portfolio that are in excess of
broader market movements.
Because Private Funds generally are investment companies for purposes of the
Investment Company Act of 1940, as amended (the '1940 Act'), the Fund's ability
to invest in them will be limited. In addition, Fund shareholders will remain
subject to the Fund's expenses while also bearing their pro rata share of the
operating expenses of the Private Funds. The ability of the Fund to dispose of
interests in Private Funds is very limited and will involve the risks described
under 'Risk Factors and Special Considerations -- Non-Publicly Traded
Securities; Rule 144A Securities.' In valuing the Fund's holdings of interests
in Private Funds, the Fund will be relying on the most recent reports provided
by Abbott and by the Private Funds themselves prior to calculation of the Fund's
net asset value. These reports, which may be provided by Abbott and by a Private
Fund on an infrequent basis (not less frequently than quarterly), often depend
on the subjective valuations of the managers of the Private Funds and, in
addition, would not reflect positive or negative subsequent developments
affecting companies held by the Private Fund. See 'Net Asset Value.' Debt
securities held by a Private Fund will tend to be rated below investment grade
and may be rated as low as C by Moody's Investors Service, Inc. ('Moody's') or D
by Standard & Poor's Ratings Group ('S&P'). For a discussion of the risks of
investing in below investment grade debt, see 'Investment Policies -- Below
Investment Grade Debt Securities' in the Statement of Additional Information.
For a discussion of the possible tax consequences of investing in foreign
Private Funds, see 'Additional Information Concerning Taxes -- Investment in
Passive Foreign Investment Companies' in the Statement of Additional
Information.
The Fund 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 Fund's
assets invested in these non-publicly traded securities will vary over time
depending on investment opportunities and other factors. The Fund's illiquid
assets, including interests in Private Funds and other illiquid non-publicly
traded securities, may not exceed 15% of the Fund's assets.
OTHER STRATEGIES. The Fund may invest up to 35% of its assets in
exchange-traded and over-the-counter securities that do not meet the definition
of post-venture capital companies without regard to market capitalization. Up to
10% of the Fund's assets may be invested, directly or through Private Funds, in
securities of issuers engaged at the time of purchase in 'special situations,'
such as a restructuring or
5
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recapitalization; an acquisition, consolidation, merger or tender offer; a
change in corporate control or investment by a venture capitalist.
To attempt to reduce risk, the Fund will diversify its investments over a
broad range of issuers operating in a variety of industries. The Fund may hold
securities of companies of any size, and will not limit capitalization of
companies it selects to invest in. However, due to the nature of the venture
capital to post-venture cycle, the Fund anticipates that the average market
capitalization of companies in which it invests will be less than $1 billion at
the time of investment. Although the Fund will invest primarily in U.S.
companies, up to 20% of the Fund's assets may be invested in securities of
issuers located in any foreign country. Equity securities in which the Fund will
invest are common stock, preferred stock, warrants, securities convertible into
or exchangeable for common stock and partnership interests. The Fund may engage
in a variety of strategies to reduce risk or seek to enhance return, including
engaging in short selling (see 'Certain Investment Strategies').
PORTFOLIO INVESTMENTS
INVESTMENT GRADE DEBT. The Fund may invest up to 20% of its total assets in
investment grade debt securities (other than money market obligations) for the
purpose of seeking capital appreciation. The interest income to be derived may
be considered as one factor in selecting debt securities for investment by
Warburg. Because the market value of debt obligations can be expected to vary
inversely to changes in prevailing interest rates, investing in debt obligations
may provide an opportunity for growth of capital when interest rates are
expected to decline. The success of such a strategy is dependent upon Warburg's
ability to accurately forecast changes in interest rates. The market value of
debt obligations may also be expected to vary depending upon, among other
factors, the ability of the issuer to repay principal and interest, any change
in investment rating and general economic conditions. A security will be deemed
to be investment grade if it is rated within the four highest grades by Moody's
or S&P or, if unrated, is determined to be of comparable quality by Warburg.
Bonds 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 the Fund, an issue of
securities may cease to be rated or its rating may be reduced below the minimum
required for purchase by the Fund. Neither event will require sale of such
securities, although Warburg will consider such event in its determination of
whether the Fund should continue to hold the securities.
When Warburg believes that a defensive posture is warranted, the Fund may
invest temporarily without limit in investment grade debt obligations and in
domestic and foreign money market obligations, including repurchase agreements.
MONEY MARKET OBLIGATIONS. The Fund is authorized to invest, under normal market
conditions, up to 20% of its total assets in domestic and foreign short-term
(one year or less) and medium-term (five years or less remaining to maturity)
money market obligations and for temporary defensive purposes may invest in
these securities without limit. These instruments consist of obligations issued
or guaranteed by the U.S. government or a foreign government, its agencies or
instrumentalities; bank obligations (including certificates of deposit, time
deposits and bankers' acceptances of domestic or foreign banks, domestic savings
and loans and similar institutions) that are high quality investments or, if
unrated, deemed by Warburg to be high quality investments; commercial paper
rated no lower than A-2 by S&P or Prime-2 by Moody's or the equivalent from
another major rating service or, if unrated, of an issuer having an
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outstanding, unsecured debt issue then rated within the three highest rating
categories; and repurchase agreements with respect to the foregoing.
Repurchase Agreements. The Fund may invest in repurchase agreement
transactions on portfolio securities 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, the Fund 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 Fund to resell, the obligation
at an agreed-upon price and time, thereby determining the yield during the
Fund's holding period. This arrangement results in a fixed rate of return that
is not subject to market fluctuations during the Fund'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 Fund 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 Fund 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 Fund seeks to assert this right. Warburg,
acting under the supervision of the Fund's Board of Directors (the 'Board'),
monitors the creditworthiness of those bank and non-bank dealers with which the
Fund 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 Warburg believes that it would be
beneficial to the Fund and appropriate considering the factors of return and
liquidity, the Fund may invest up to 5% of its assets in securities of money
market mutual funds that are unaffiliated with the Fund, Warburg or the Fund's
co-administrator, PFPC Inc. ('PFPC'). As a shareholder in any mutual fund, the
Fund will bear its ratable share of the mutual fund's expenses, including
management fees, and will remain subject to payment of the Fund's administration
fees and other expenses with respect to assets so invested.
U.S. GOVERNMENT SECURITIES. U.S. government securities in which the Fund may
invest include: direct obligations of the U.S. Treasury and obligations issued
by U.S. government agencies and instrumentalities, including instruments that
are supported by the full faith and credit of the United States, instruments
that are supported by the right of the issuer to borrow from the U.S. Treasury
and instruments that are supported by the credit of the instrumentality.
CONVERTIBLE SECURITIES. Convertible securities in which the Fund 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 nonconvertible securities of
similar quality. The value of convertible securities fluctuates in relation to
changes in interest rates like bonds and, in addition, fluctuates in relation to
the underlying common stock.
RISK FACTORS AND SPECIAL
CONSIDERATIONS
EMERGING GROWTH AND SMALL COMPANIES. Investing in common stocks and securities
convertible into common stocks is subject to the inherent risk of fluctuations
in the prices of such securities. Investing in securities of emerging growth and
small-sized companies may involve greater risks since these securities may have
limited
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marketability and, thus, may be more volatile. Because small- and medium-sized
companies normally have fewer shares outstanding than larger companies, it may
be more difficult for the Fund to buy or sell significant amounts of such shares
without an unfavorable impact on prevailing prices. In addition, small- and
medium-sized companies are typically subject to a greater degree of changes in
earnings and business prospects than are larger, more established companies.
There is typically less publicly available information concerning smaller
companies than for larger, more established ones. Securities of issuers in
'special situations' also may be more volatile, since the market value of these
securities may decline in value if the anticipated benefits do not materialize.
Companies in 'special situations' include, but are not limited to, companies
involved in an acquisition or consolidation; reorganization; recapitalization;
merger, liquidation or distribution of cash, securities or other assets; a
tender or exchange offer; a breakup or workout of a holding company; or
litigation which, if resolved favorably, would improve the value of the
companies' securities. Although investing in securities of emerging growth
companies or '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 the Fund may involve a greater degree of risk
than an investment in other mutual funds that seek capital appreciation by
investing exclusively in better-known, larger companies. For certain additional
risks relating to the Fund's investments, see 'Portfolio Investments' beginning
at page 5 and 'Certain Investment Strategies' beginning at page 9.
NON-PUBLICLY TRADED SECURITIES; RULE 144A SECURITIES. The Fund may purchase
securities that are not registered under the Securities Act of 1933, as amended
(the '1933 Act'), but that can be sold to 'qualified institutional buyers' in
accordance with Rule 144A under the 1933 Act ('Rule 144A Securities'). An
investment in Rule 144A Securities will be considered illiquid and therefore
subject to the Fund's limitation on the purchase of illiquid securities, unless
the Board determines on an ongoing basis that an adequate trading market exists
for the security. In addition to an adequate trading market, the Board will
consider factors such as trading activity, availability of reliable price
information and other relevant information in determining whether a Rule 144A
Security is liquid. This investment practice could have the effect of increasing
the level of illiquidity in the Fund to the extent that qualified institutional
buyers become uninterested for a time in purchasing Rule 144A Securities. The
Board will carefully monitor any investments by the Fund in Rule 144A
Securities. The Board may adopt guidelines and delegate to Counsellors the daily
function of determining and monitoring the liquidity of Rule 144A Securities,
although the Board will retain ultimate responsibility for any determination
regarding liquidity.
Non-publicly traded securities (including interests in Private Funds and
Rule 144A Securities) may involve a high degree of business and financial risk
and may result in substantial losses. These securities may be less liquid than
publicly traded securities, and the Fund may take longer to liquidate these
positions than would be the case for publicly traded securities. Although these
securities may be resold in privately negotiated transactions, the prices
realized on such sales could be less than those originally paid by the Fund.
Further, 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. The Fund's investment in
illiquid securities is subject to the risk that should the Fund desire to sell
any of these securities when a ready buyer is not available at a price that is
deemed to be representative of their value, the value of the Fund's net assets
could be adversely affected.
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PORTFOLIO TRANSACTIONS AND
TURNOVER RATE
The Fund will attempt to purchase securities with the intent of holding
them for investment but may purchase and sell portfolio securities whenever
Warburg believes it to be in the best interests of the Fund. The Fund will not
consider portfolio turnover rate a limiting factor in making investment
decisions consistent with its investment objective and policies. It is not
possible to predict the Fund's portfolio turnover rate. However, it is
anticipated that the Fund's annual turnover rate should not exceed 100%. Higher
portfolio turnover rates (100% or more) may result in dealer mark ups or
underwriting commissions as well as other transaction costs, including
correspondingly higher brokerage commissions. In addition, short-term gains
realized from portfolio turnover may be taxable to shareholders as ordinary
income. See 'Dividends, Distributions and Taxes -- Taxes' below and 'Investment
Policies -- Portfolio Transactions' in the Statement of Additional Information.
All orders for transactions in securities or options on behalf of the Fund
are placed by Warburg with broker-dealers that it selects, including Counsellors
Securities Inc., the Fund's distributor ('Counsellors Securities'). The Fund may
utilize Counsellors Securities in connection with a purchase or sale of
securities when Warburg 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.
CERTAIN INVESTMENT STRATEGIES
Although there is no intention of doing so during the coming year, the Fund
is authorized to engage in the following investment strategies: (i) purchasing
securities on a when-issued basis and purchasing or selling securities for
delayed-delivery and (ii) lending portfolio securities and (iii) entering into
reverse repurchase agreements and dollar rolls. Detailed information concerning
these strategies and their related risks is contained below and in the Statement
of Additional Information.
FOREIGN SECURITIES. The Fund may invest up to 20% of its total assets in the
securities of foreign issuers. There are certain risks involved in investing in
securities of companies and governments of foreign nations which are in addition
to the usual risks inherent in domestic investments. These risks include those
resulting from fluctuations in currency exchange rates, revaluation of
currencies, future adverse political and economic developments and the possible
imposition of currency exchange blockages or other foreign governmental laws or
restrictions, reduced availability of public information concerning issuers, the
lack of uniform accounting, auditing and financial reporting standards and other
regulatory practices and requirements that are often generally less rigorous
than those applied in the United States. Moreover, securities of many foreign
companies may be less liquid and their prices more volatile than those of
securities of comparable U.S. companies. Certain foreign countries are known to
experience long delays between the trade and settlement dates of securities
purchased or sold. In addition, with respect to certain foreign countries, there
is the possibility of expropriation, nationalization, confiscatory taxation and
limitations on the use or removal of funds or other assets of the Fund,
including the withholding of dividends. Foreign securities may be subject to
foreign government taxes that would reduce the net yield on such securities.
Moreover, individual foreign economies may differ favorably or unfavorably from
the U.S. economy in such respects as growth of gross national product, rate of
inflation, capital reinvestment, resource self-sufficiency and balance of
payments positions. Investment in foreign securities will also result in higher
operating expenses due to the cost of converting foreign currency into U.S.
dollars, the payment of fixed brokerage commissions on foreign exchanges,
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which generally are higher than commissions on U.S. exchanges, higher valuation
and communications costs and the expense of maintaining securities with foreign
custodians.
OPTIONS, FUTURES AND CURRENCY TRANSACTIONS. At the discretion of Warburg, the
Fund may, but is not required to, engage in a number of strategies involving
options, futures and forward currency contracts. These strategies, commonly
referred to as 'derivatives,' may be used (i) for the purpose of hedging against
a decline in value of the Fund's current or anticipated portfolio holdings, (ii)
as a substitute for purchasing or selling portfolio securities or (iii) to seek
to generate income to offset expenses or increase return. TRANSACTIONS THAT ARE
NOT CONSIDERED HEDGING SHOULD BE CONSIDERED SPECULATIVE AND MAY SERVE TO
INCREASE THE FUND'S INVESTMENT RISK. Transaction costs and any premiums
associated with these strategies, and any losses incurred, will affect the
Fund's net asset value and performance. Therefore, an investment in the Fund may
involve a greater risk than an investment in other mutual funds that do not
utilize these strategies. The Fund's use of these strategies may be limited by
position and exercise limits established by securities and commodities exchanges
and the NASD and by the Internal Revenue Code of 1986, as amended (the 'Code').
Securities and Stock Index Options. The Fund may write covered call and put
options on up to 25% of the net asset value of the stock and debt securities in
its portfolio and will realize fees (referred to as 'premiums') for granting the
rights evidenced by the options. The Fund may utilize up to 10% of its assets to
purchase options on stocks and debt securities that are traded on U.S. and
foreign exchanges, as well as over-the-counter ('OTC') options. The purchaser of
a put option on a security has the right to compel the purchase by the writer of
the underlying security, while the purchaser of a call option on a security has
the right to purchase the underlying security from the writer. In addition to
purchasing and writing options on securities, the Fund may also utilize up to
10% of its total assets to purchase exchange-listed and OTC put and call options
on stock indexes, and may also write such options. A stock index measures the
movement of a certain group of stocks by assigning relative values to the common
stocks included in the index.
The potential loss associated with purchasing an option is limited to the
premium paid, and the premium would partially offset any gains achieved from its
use. However, for an option writer the exposure to adverse price movements in
the underlying security or index is potentially unlimited during the exercise
period. Writing securities options may result in substantial losses to the Fund,
force the sale or purchase of portfolio securities at inopportune times or at
less advantageous prices, limit the amount of appreciation the Fund could
realize on its investments or require the Fund to hold securities it would
otherwise sell.
Futures Contracts and Related Options. The Fund may enter into foreign
currency, interest rate and stock index futures contracts and purchase and write
(sell) related options that are traded on an exchange designated by the
Commodity Futures Trading Commission (the 'CFTC') or, if consistent with CFTC
regulations, on foreign exchanges. These futures contracts are standardized
contracts for the future delivery of foreign currency or an interest rate
sensitive security or, in the case of stock index and certain other futures
contracts, are settled in cash with reference to a specified multiplier times
the change in the specified index, exchange rate or interest rate. An option on
a futures contract gives the purchaser the right, in return for the premium
paid, to assume a position in a futures contract.
Aggregate initial margin and premiums required to establish positions other
than those considered by the CFTC to be 'bona fide hedging' will not exceed 5%
of the Fund's net asset value, after taking into account unrealized profits and
unrealized losses on any such con-
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tracts. Although the Fund is limited in the amount of assets that may be
invested in futures transactions, there is no overall limit on the percentage of
Fund assets that may be at risk with respect to futures activities.
Currency Exchange Transactions. The Fund will conduct its currency exchange
transactions either (i) on a spot (i.e., cash) basis at the rate prevailing in
the currency exchange market, (ii) through entering into futures contracts or
options on futures contracts (as described above), (iii) through entering into
forward contracts to purchase or sell currency or (iv) by purchasing
exchange-traded currency options. A forward currency contract involves an
obligation to purchase or sell a specific currency at a future date at a price
set at the time of the contract. An option on a foreign currency operates
similarly to an option on a security. Risks associated with currency forward
contracts and purchasing currency options are similar to those described in this
Prospectus for futures contracts and securities and stock index options. In
addition, the use of currency transactions could result in losses from the
imposition of foreign exchange controls, suspension of settlement or other
governmental actions or unexpected events.
Hedging Considerations. The Fund may engage in options, futures and
currency transactions for, among other reasons, hedging purposes. A hedge is
designed to offset a loss on a portfolio position with a gain in the hedge
position; at the same time, however, a properly correlated hedge will result in
a gain in the portfolio position being offset by a loss in the hedge position.
As a result, the use of options, futures contracts and currency exchange
transactions for hedging purposes could limit any potential gain from an
increase in value of the position hedged. In addition, the movement in the
portfolio position hedged may not be of the same magnitude as movement in the
hedge. The Fund will engage in hedging transactions only when deemed advisable
by Warburg, and successful use of hedging transactions will depend on Warburg's
ability to correctly predict movements in the hedge and the hedged position and
the correlation between them, which could prove to be inaccurate. Even a
well-conceived hedge may be unsuccessful to some degree because of unexpected
market behavior or trends.
Additional Considerations. To the extent that the Fund engages in the
strategies described above, the Fund 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 Fund
may be unable to close out an option or futures position without incurring
substantial losses, if at all. The Fund is also subject to the risk of a default
by a counterparty to an off-exchange transaction.
Asset Coverage. The Fund will comply with applicable regulatory
requirements designed to eliminate any potential for leverage with respect to
options written by the Fund on securities and indexes; currency, interest rate
and stock index futures contracts and options on these futures contracts; and
forward currency contracts. The use of these strategies may require that the
Fund maintain cash or certain liquid high-grade debt obligations or other assets
that are acceptable as collateral to the appropriate regulatory authority in a
segregated account with its custodian or a designated sub-custodian to the
extent the Fund'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 the Fund's assets could impede
portfolio management or the Fund's ability to meet redemption requests or other
current obligations.
SHORT SELLING. The Fund may from time to time sell securities short. A short
sale is a transaction
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in which the Fund sells borrowed securities in anticipation of a decline in the
market price of the securities. Possible losses from short sales differ from
losses that could be incurred from a purchase of a security, because losses from
short sales may be unlimited, whereas losses from purchases can equal only the
total amount invested. The current market value of the securities sold short
will not exceed 10% of the Fund's assets.
When the Fund makes a short sale, the proceeds it receives from the sale
are retained by a broker until the Fund replaces the borrowed securities. To
deliver the securities to the buyer, the Fund must arrange through a broker to
borrow the securities and, in so doing, the Fund becomes obligated to replace
the securities borrowed at their market price at the time of replacement,
whatever that price may be. The Fund may have to pay a premium to borrow the
securities and must pay any dividends or interest payable on the securities
until they are replaced.
The Fund's obligation to replace the securities borrowed in connection with
a short sale will be secured by cash or U.S. government securities deposited as
collateral with the broker. In addition, the Fund will place in a segregated
account with its custodian or a qualified subcustodian an amount of cash or U.S.
government 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 U.S. government securities deposited as collateral with the broker in
connection with the short sale (not including the proceeds of the sort sale).
Until it replaces the borrowed securities, the Fund will maintain the segregated
account daily at a level so that (a) the amount deposited in the account plus
the amount deposited with the broker (not including the proceeds from the short
sale) will equal the current market value of the securities sold short and (b)
the amount deposited in the account plus the amount deposited with the broker
(not including the proceeds from the short sale) will not be less than the
market value of the securities at the time they were sold short.
Short Sales Against the Box. The Fund may, in addition to engaging in short
sales as described above, enter into a short sale of securities such that when
the short position is open the Fund owns an equal amount of the securities sold
short or owns preferred stocks or debt securities, convertible or exchangeable
without payment of further consideration, into an equal number of securities
sold short. This kind of short sale, which is referred to as one 'against the
box,' will be entered into by the Fund for the purpose of receiving a portion of
the interest earned by the executing broker from the proceeds of the sale. The
proceeds of the sale will generally be held by the broker until the settlement
date when the Fund delivers securities to close out its short position. Although
prior to delivery the Fund will have to pay an amount equal to any dividends
paid on the securities sold short, the Fund will receive the dividends from the
securities sold short or the dividends from the preferred stock or interest from
the debt securities convertible or exchangeable into the securities sold short,
plus a portion of the interest earned from the proceeds of the short sale. The
Fund will deposit, in a segregated account with its custodian or a qualified
subcustodian, the securities sold short or convertible or exchangeable preferred
stocks or debt securities in connection with short sales against the box. The
Fund will endeavor to offset transaction costs associated with short sales
against the box with the income from the investment of the cash proceeds. Not
more than 10% of the Fund's net assets (taken at current value) may be held as
collateral for short sales against the box at any one time.
The extent to which the Fund may make short sales may be limited by Code
requirements for qualification as a regulated investment company. See
'Dividends, Distributions and Taxes'
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for other tax considerations applicable to short sales.
INVESTMENT GUIDELINES
The Fund may invest up to 15% of its net assets in securities with
contractual or other restrictions on resale and other investments that are not
readily marketable, including (i) securities issued as part of a privately
negotiated transaction between an issuer and one or more purchasers and (ii)
repurchase agreements with maturities greater than seven days; (iii) time
deposits maturing in more than seven calendar days; and (iv) certain Rule 144A
Securities. In addition, up to 5% of the Fund's total assets may be invested in
the securities of issuers that have been in continuous operation for less than
three years, and an additional 5% of its total assets may be invested in
warrants. The Fund may borrow from banks and enter into reverse repurchase
agreements for temporary or emergency purposes, such as meeting anticipated
redemption requests, provided that reverse repurchase agreements and any other
borrowing by the Fund may not exceed 30% of the Fund's total assets. The Fund
may pledge its assets to the extent necessary to secure permitted borrowings.
Whenever borrowings (including reverse repurchase agreements) exceed 5% of the
value of the Fund's net assets, the Fund will not make any investments
(including roll-overs). Except for the limitations on borrowing, the investment
guidelines set forth in this paragraph may be changed at any time without
shareholder consent by vote of the Board, subject to the limitations contained
in the 1940 Act. A complete list of investment restrictions that the Fund has
adopted identifying additional restrictions that cannot be changed without the
approval of the majority of the Fund's outstanding shares is contained in the
Statement of Additional Information.
MANAGEMENT OF THE FUND
INVESTMENT ADVISERS. The Fund employs Warburg as investment adviser to the Fund
and Abbott as the sub-investment adviser to the Fund. Warburg, subject to the
control of the Fund's officers and the Board, manages the investment and
reinvestment of the assets of the Fund in accordance with its investment
objective and stated investment policies. Warburg makes investment decisions for
the Fund, places orders to purchase or sell securities on behalf of the Fund and
supervises the activities of Abbott. Warburg also employs a support staff of
management personnel to provide services to the Fund and furnishes the Fund with
office space, furnishings and equipment. Abbott, in accordance with the
investment objective and policies of the Fund, makes investment decisions for
the Fund regarding investments in Private Funds, effects transactions in Private
Funds on behalf of the Fund and assists in other administrative functions
relating to investments in Private Funds.
For the services provided by Warburg, the Fund pays Warburg a fee
calculated at an annual rate of 1.25% of the Fund's average daily net assets.
Warburg pays Abbott a fee of .55% per annum of the value of Private Fund
investments as of the last day of each calendar quarter. Although this advisory
fee is higher than that paid by most other investment companies, including money
market and fixed income funds, Warburg believes that it is comparable to fees
charged by other mutual funds with similar policies and strategies. The advisory
agreement between the Fund and Warburg provides that Warburg will reimburse the
Fund to the extent certain expenses that are described in the Statement of
Additional Information exceed applicable state expense limitations. Warburg and
the Fund's co-administrators may voluntarily waive a portion of their fees from
time to time and temporarily limit the expenses to be borne by the Fund.
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Warburg. Warburg is a professional investment counselling firm which
provides investment services to investment companies, employee benefit plans,
endowment funds, foundations and other institutions and individuals. As of
February 29, 1996, Warburg managed approximately $13.5 billion of assets,
including approximately $7.5 billion of assets of twenty-three investment
companies or portfolios. Incorporated in 1970, Warburg is a wholly owned
subsidiary of Warburg, Pincus Counsellors G.P. ('Counsellors G.P.'), a New York
general partnership. E.M. Warburg, Pincus & Co., Inc. ('EMW') controls Warburg
through its ownership of a class of voting preferred stock of Warburg.
Counsellors G.P. has no business other than being a holding company of Warburg
and its subsidiaries. Warburg's address is 466 Lexington Avenue, New York, New
York 10017-3147.
Abbott. Abbott, which was founded in 1986, is an independent specialized
investment firm with assets under management of approximately $3 billion. Abbott
is a registered investment adviser which concentrates on venture capital, buyout
and special situations partnership investments. Abbott's management team
provides full-service private equity programs to clients. Abbott's principal
office is located at 50 Rowes Wharf, Suite 240, Boston, Massachusetts
02110-3328.
PORTFOLIO MANAGERS. The co-portfolio managers of the Fund are Elizabeth B. Dater
and Stephen J. Lurito. Ms. Dater is a managing director of EMW and has been a
portfolio manager of Warburg since 1978. Mr. Lurito is a managing director of
EMW and has been with Warburg since 1987, before which time he was a research
analyst at Sanford C. Bernstein & Company, Inc.
Robert S. Janis and Christopher M. Nawn are associate portfolio managers
and research analysts for the Fund. Mr. Janis has been with Warburg since
October 1994, before which time he was a vice president and senior research
analyst at U.S. Trust Company of New York. Mr. Nawn has been with Warburg since
September 1994, before which time he was a senior sector analyst and portfolio
manager at the Dreyfus Corporation.
Raymond L. Held and Gary H. Solomon, investment managers and general
partners of Abbott, manage the Fund's investments in Private Funds.
CO-ADMINISTRATORS. The Fund employs Counsellors Funds Service, Inc.
('Counsellors Service'), a wholly owned subsidiary of Warburg, as a co-
administrator. As co-administrator, Counsellors Service provides shareholder
liaison services to the Fund, including responding to shareholder inquiries and
providing information on shareholder investments. Counsellors Service also
performs a variety of other services, including furnishing certain executive and
administrative services, acting as liaison between the Fund and its various
service providers, furnishing corporate secretarial services, which include
preparing materials for meetings of the Board, preparing proxy statements and
annual, semiannual and quarterly reports, assisting in the preparation of tax
returns and monitoring and developing compliance procedures for the Fund. As
compensation, the Fund pays Counsellors Service a fee calculated at an annual
rate of .10% of the Fund's average daily net assets.
The Fund employs PFPC, an indirect, wholly owned subsidiary of PNC Bank
Corp., as a co-administrator. As a co-administrator, PFPC calculates the Fund's
net asset value, provides all accounting services for the Fund and assists in
related aspects of the Fund's operations. As compensation, the Fund pays PFPC a
fee calculated at a maximum annual rate of .10% of the Fund's average daily net
assets, subject to a minimum annual fee and exclusive of out-of-pocket expenses.
PFPC has its principal offices at 400 Bellevue Parkway, Wilmington, Delaware
19809.
CUSTODIANS. PNC Bank, National Association ('PNC') serves as custodian of the
Fund's U.S. assets and State Street Bank and Trust Company
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('State Street') serves as custodian of the Fund's non-U.S. assets. Like PFPC,
PNC is a subsidiary of PNC Bank Corp. and its principal business address is
Broad and Chestnut Streets, Philadelphia, Pennsylvania 19101. State Street's
principal business address is 225 Franklin Street, Boston, Massachusetts 02110.
TRANSFER AGENT. State Street also serves as shareholder servicing agent,
transfer agent and dividend disbursing agent for the Fund. It has delegated to
Boston Financial Data Services, Inc., a 50% owned subsidiary ('BFDS'),
responsibility for most shareholder servicing functions. BFDS's principal
business address is 2 Heritage Drive, North Quincy, Massachusetts 02171.
DISTRIBUTOR. Counsellors Securities serves as distributor of the shares of the
Fund. Counsellors Securities is a wholly owned subsidiary of Warburg and is
located at 466 Lexington Avenue, New York, New York 10017-3147. No compensation
is payable by the Advisor Shares to Counsellors Securities for distribution
services.
Warburg or its affiliates may, at their own expense, provide promotional
incentives to parties who support the sale of shares of the Fund, consisting of
securities dealers who have sold Fund shares or others, including banks and
other financial institutions, under special arrangements. In some instances,
these incentives may be offered only to certain institutions whose
representatives provide services in connection with the sale or expected sale of
significant amounts of Fund shares.
DIRECTORS AND OFFICERS. The officers of the Fund manage its day-to-day
operations and are directly responsible to the Board. The Board sets broad
policies for the Fund and chooses its officers. A list of the Directors and
officers of the Fund and a brief statement of their present positions and
principal occupations during the past five years is set forth in the Statement
of Additional Information.
HOW TO PURCHASE SHARES
Individual investors may only purchase Warburg Pincus Advisor Fund shares
through Institutions. The Fund reserves the right to make Advisor Shares
available to other investors in the future. References in this Prospectus to
shareholders or investors are generally to Institutions as the record holders of
the Advisor Shares.
Each Institution separately determines the rules applicable to its
customers investing in the Fund, including minimum initial and subsequent
investment requirements and the procedures to be followed to effect purchases,
redemptions and exchanges of Advisor Shares. There is no minimum amount of
initial or subsequent purchases of Advisor Shares imposed on Institutions,
although the Fund reserves the right to impose minimums in the future.
Orders for the purchase of Advisor Shares are placed with an Institution by
its customers. The Institution is responsible for the prompt transmission of the
order to the Fund or its agent.
Institutions may purchase Advisor Shares by telephoning the Fund and
sending payment by wire. After telephoning (800) 888-6878 for instructions, an
Institution should then wire federal funds to Counsellors Securities Inc. using
the following wire address:
State Street Bank and Trust Co.
225 Franklin St.
Boston, MA 02101
ABA# 0110 000 28
Attn: Mutual Funds/Custody Dept.
Warburg Pincus Advisor Post-Venture Capital Fund
DDA# 9904-649-2
[Shareowner name]
[Shareowner account number]
Orders by wire will not be accepted until a completed account application
has been received in proper form, and an account number has been established. If
a telephone order is received by
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the close of regular trading on the New York Stock Exchange ('NYSE') (currently
4:00 p.m., Eastern time) and payment by wire is received on the same day in
proper form in accordance with instructions set forth above, the shares will be
priced according to the net asset value of the Fund on that day and are entitled
to dividends and distributions beginning on that day. If payment by wire is
received in proper form by the close of the NYSE without a prior telephone
order, the purchase will be priced according to the net asset value of the Fund
on that day and is entitled to dividends and distributions beginning on that
day. However, if a wire in proper form that is not preceded by a telephone order
is received after the close of regular trading on the NYSE, the payment will be
held uninvested until the order is effected at the close of business on the next
business day. Payment for orders that are not accepted will be returned after
prompt inquiry. Certain organizations or Institutions that have entered into
agreements with the Fund or its agent may enter confirmed purchase orders on
behalf of customers, with payment to follow no later than the Fund's pricing on
the following business day. If payment is not received by such time, the
organization could be held liable for resulting fees or losses.
After an investor has made his initial investment, additional shares may be
purchased at any time by mail or by wire in the manner outlined above. Wire
payments for initial and subsequent investments should be preceded by an order
placed with the Fund or its agent and should clearly indicate the investor's
account number. In the interest of economy and convenience, physical
certificates representing shares in the Fund are not normally issued.
The Fund understands that some broker-dealers (other than Counsellors
Securities), financial institutions, securities dealers and other industry
professionals may impose certain conditions on their clients or customers that
invest in the Fund, which are in addition to or different than those described
in this Prospectus, and may charge their clients or customers direct fees.
Certain features of the Fund, such as the initial and subsequent investment
minimums, redemption fees and certain trading restrictions, may be modified or
waived in these programs, and administrative charges may be imposed for the
services rendered. Therefore, a client or customer should contact the
organization acting on his behalf concerning the fees (if any) charged in
connection with a purchase or redemption of Fund shares and should read this
Prospectus in light of the terms governing his account with the organization.
HOW TO REDEEM AND EXCHANGE
SHARES
REDEMPTION OF SHARES. An investor of the Fund may redeem (sell) shares on any
day that the Fund's net asset value is calculated (see 'Net Asset Value' below).
Requests for the redemption (or exchange) of Advisor Shares are placed with an
Institution by its customers, which is then responsible for the prompt
transmission of this request to the Fund or its agent.
Institutions may redeem Advisor Shares by calling Warburg Pincus Advisor
Funds at (800) 888-6878 between 9:00 a.m. and 4:00 p.m. (Eastern time) on any
business day. An investor making a telephone withdrawal should state (i) the
name of the Fund, (ii) the account number of the Fund, (iii) the name of the
investor(s) appearing on the Fund's records, (iv) the amount to be withdrawn and
(v) the name of the person requesting the redemption.
After receipt of the redemption request the redemption proceeds will be
wired to the investor's bank as indicated in the account application previously
filled out by the investor. The Fund does not currently impose a service charge
for effecting wire transfers but reserves the right to do so in the future.
During periods of significant economic or market change, telephone redemptions
may be difficult to implement. If an investor is unable to contact Warburg
Pincus
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Advisor Funds by telephone, an investor may deliver the redemption request to
Warburg Pincus Advisor Funds by mail at Warburg Pincus Advisor Funds, P.O. Box
9030, Boston, Massachusetts 02205-9030.
If a redemption order is received prior to the close of regular trading on
the NYSE, the redemption order will be effected at the net asset value per share
as determined on that day. If a redemption order is received after the close of
regular trading on the NYSE, the redemption order will be effected at the net
asset value as next determined. Except as noted above, redemption proceeds will
normally be wired to an investor on the next business day following the date a
redemption order is effected. If, however, in the judgment of Warburg, immediate
payment would adversely affect the Fund, it reserves the right to pay the
redemption proceeds within seven days after the redemption order is effected.
Furthermore, the Fund may suspend the right of redemption or postpone the date
of payment upon redemption (as well as suspend or postpone the recordation of an
exchange of shares) for such periods as are permitted under the 1940 Act.
The proceeds paid upon redemption may be more or less than the amount
invested depending upon a share's net asset value at the time of redemption. If
an investor redeems all the shares in his account, all dividends and
distributions declared up to and including the date of redemption are paid along
with the proceeds of the redemption.
EXCHANGE OF SHARES. An Institution may exchange Advisor Shares of the Fund for
Advisor Shares of the other Warburg Pincus Advisor Funds at their respective net
asset values. Exchanges may be effected in the manner described under
'Redemption of Shares' above. If an exchange request is received by Warburg
Pincus Advisor Funds prior to the close of regular trading on the NYSE, the
exchange will be made at each fund's net asset value determined at the end of
that business day. Exchanges may be effected without a sales charge. The
exchange privilege may be modified or terminated at any time upon 60 days'
notice to shareholders.
The exchange privilege is available to shareholders residing in any state
in which Advisor Shares being acquired may legally be sold. When an investor
effects an exchange of shares, the exchange is treated for federal income tax
purposes as a redemption. Therefore, the investor may realize a taxable gain or
loss in connection with the exchange. Investors wishing to exchange Advisor
Shares of the Fund for shares in another Warburg Pincus Advisor Fund should
review the prospectus of the other fund prior to making an exchange. For further
information regarding the exchange privilege or to obtain a current prospectus
for another Warburg Pincus Advisor Fund, an investor should contact Warburg
Pincus Advisor Funds at (800) 888-6878.
DIVIDENDS, DISTRIBUTIONS AND TAXES
DIVIDENDS AND DISTRIBUTIONS. The Fund calculates its dividends from net
investment income. Net investment income includes interest accrued and dividends
earned on the Fund's portfolio securities for the applicable period less
applicable expenses. The Fund declares dividends from its net investment income
and net realized short-term and long-term capital gains annually and pays them
in the calendar year in which they are declared, generally in November or
December. Net investment income earned on weekends and when the NYSE is not open
will be computed as of the next business day. Unless an investor instructs the
Fund to pay dividends or distributions in cash, dividends and distributions will
automatically be reinvested in additional Advisor Shares of the Fund at net
asset value. The election to receive dividends in cash may be made on the
account application or, subsequently, by writing to Warburg Pincus Advisor Funds
at the address set forth under 'How to
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Purchase Shares' or by calling Warburg Pincus Advisor Funds at (800) 888-6878.
The Fund may be required to withhold for U.S. federal income taxes 31% of
all distributions payable to shareholders who fail to provide the Fund with
their correct taxpayer identification number or to make required certifications,
or who have been notified by the U.S. Internal Revenue Service that they are
subject to backup withholding.
TAXES. The Fund intends to qualify each year as a 'regulated investment company'
within the meaning of the Code. The Fund, if it qualifies as a regulated
investment company, will be subject to a 4% non-deductible excise tax measured
with respect to certain undistributed amounts of ordinary income and capital
gain. The Fund expects to pay such additional dividends and to make such
additional distributions as are necessary to avoid the application of this tax.
Dividends paid from net investment income and distributions of net realized
short-term capital gains are taxable to investors as ordinary income, and
distributions derived from net realized long-term capital gains are taxable to
investors as long-term capital gains, in each case regardless of the length of
time shareholders have held the Advisor Shares or whether received in cash or
reinvested in additional Advisor Shares. As a general rule, an investor's gain
or loss on a sale or redemption of its Fund shares will be a long-term capital
gain or loss if it has held its shares for more than one year and will be a
short-term capital gain or loss if it has held its shares for one year or less.
However, any loss realized upon the sale or redemption of shares within six
months from the date of their purchase will be treated as a long-term capital
loss to the extent of any amounts treated as distributions of long-term capital
gain during such six-month period with respect to such shares. Investors may be
proportionately liable for taxes on income and gains of the Fund, but investors
not subject to tax on their income will not be required to pay tax on amounts
distributed to them. The Fund's investment activities, including short sales of
securities, will not result in unrelated business taxable income to a tax-exempt
investor. The Fund's dividends, to the extent not derived from dividends
attributable to certain types of stock issued by U.S. domestic corporations,
will not qualify for the dividends received deduction for corporations.
Dividends and interest received by the Fund may be subject to withholding
and other taxes imposed by foreign countries. However, tax conventions between
certain countries and the U.S. may reduce or eliminate such taxes. If the Fund
qualifies as a regulated investment company, if certain asset and distribution
requirements are satisfied and if more than 50% of the Fund's total assets at
the close of its fiscal year consist of stock or securities of foreign
corporations, the Fund may elect for U.S. income tax purposes to treat foreign
income taxes paid by it as paid by its shareholders. The Fund may qualify for
and make this election in some, but not necessarily all, of its taxable years.
If the Fund were to make an election, shareholders of the Fund would be required
to take into account an amount equal to their pro rata portions of such foreign
taxes in computing their taxable income and then treat an amount equal to those
foreign taxes as a U.S. federal income tax deduction or as a foreign tax credit
against their U.S. federal income taxes. Shortly after any year for which it
makes such an election, the Fund will report to its shareholders the amount per
share of such foreign tax that must be included in each shareholder's gross
income and the amount which will be available for the deduction or credit. No
deduction for foreign taxes may be claimed by a shareholder who does not itemize
deductions. Certain limitations will be imposed on the extent to which the
credit (but not the deduction) for foreign taxes may be claimed.
Certain provisions of the Code may require that a gain recognized by the
Fund upon the
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closing of a short sale be treated as a short-term capital gain, and that a loss
recognized by the Fund upon the closing of a short sale be treated as a
long-term capital loss, regardless of the amount of time that the Fund held the
securities used to close the short sale. The Fund's use of short sales may also
affect the holding periods of certain securities held by the Fund if such
securities are 'substantially identical' to securities used by the Fund to close
the short sale. The Fund's short selling activities will not result in unrelated
business taxable income to a tax-exempt investor.
GENERAL. Statements as to the tax status of each investor's dividends and
distributions are mailed annually. Each investor will also receive, if
applicable, various written notices after the close of the Fund's prior taxable
year with respect to certain dividends and distributions which were received
from the Fund during the Fund's prior taxable year. Investors should consult
their own tax advisers with specific reference to their own tax situations,
including their state and local tax liabilities. Individuals investing in the
Fund through Institutions should consult those Institutions or their own tax
advisers regarding the tax consequences of investing in the Fund.
NET ASSET VALUE
The Fund's net asset value per share is calculated as of the close of
regular trading on the NYSE (currently 4:00 p.m., Eastern time) on each business
day, Monday through Friday, except on days when the NYSE is closed. The NYSE is
currently scheduled to be closed on New Year's Day, Washington's Birthday, Good
Friday, Memorial Day (observed), Independence Day, Labor Day, Thanksgiving Day
and Christmas Day, and on the preceding Friday or subsequent Monday when one of
these holidays falls on a Saturday or Sunday, respectively. The net asset value
per share of the Fund generally changes each day.
The net asset value per Advisor Share of the Fund is computed by adding the
Advisor Shares' pro rata share of the value of the Fund's assets, deducting the
Advisor Shares' pro rata share of the Fund's liabilities and the liabilities
specifically allocated to Advisor Shares and then dividing the result by the
total number of outstanding Advisor Shares.
Securities listed on a U.S. securities exchange (including securities
traded through the NASDAQ National Market System) or foreign securities exchange
or traded in an over-the-counter market will be valued at the most recent sale
price when the valuation is made. Options and futures contracts will be valued
similarly. Debt obligations that mature in 60 days or less from the valuation
date are valued on the basis of amortized cost, unless the Board determines that
using this valuation method would not reflect the investments' value.
Investments in Private Funds will be valued in accordance with periodic reports
received by Abbott from the Private Funds (not less frequently than quarterly).
Interim changes in value of investments in Private Funds will generally not be
monitored and, as a result, will not be reflected in the Fund's net asset value.
Securities, options and futures contracts for which market quotations are not
readily available and other assets will be valued at their fair value as
determined in good faith pursuant to consistently applied procedures established
by the Board. Further information regarding valuation policies is contained in
the Statement of Additional Information.
PERFORMANCE
The Fund quotes the performance of Advisor Shares separately from Common
Shares. The net asset value of the Advisor Shares is listed in The Wall Street
Journal each business day under the heading Warburg Pincus Advisor Funds. From
time to time, the Fund may advertise the average annual total return of Advisor
Shares over various periods of time. These total return
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figures show the average percentage change in value of an investment in the
Advisor Shares from the beginning of the measuring period to the end of the
measuring period. The figures reflect changes in the price of the Advisor Shares
assuming that any income dividends and/or capital gain distributions made by the
Fund during the period were reinvested in Advisor Shares. Total return will be
shown for recent one-, five- and ten-year periods, and may be shown for other
periods as well (such as on a year-by-year, quarterly or current year-to-date
basis).
When considering average total return figures for periods longer than one
year, it is important to note that the annual total return for one year in the
period might have been greater or less than the average for the entire period.
When considering total return figures for periods shorter than one year,
investors should bear in mind that the Fund seeks long-term appreciation and
that such return may not be representative of the Fund's return over a longer
market cycle. The Fund may also advertise aggregate total return figures of
Advisor Shares for various periods, representing the cumulative change in value
of an investment in the Advisor Shares for the specific period (again reflecting
changes in share prices and assuming reinvestment of dividends and
distributions). Aggregate and average total returns may be shown by means of
schedules, charts or graphs and may indicate various components of total return
(i.e., change in value of initial investment, income dividends and capital gain
distributions).
Investors should note that total return figures are based on historical
earnings and are not intended to indicate future performance. The Statement of
Additional Information describes the method used to determine total return.
Current total return figures may be obtained by calling Warburg Pincus Advisor
Funds at (800) 888-6878.
In reports or other communications to investors or in advertising material,
the Fund may describe general economic and market conditions affecting the Fund
and may compare its performance with (i) that of other mutual funds as listed in
the rankings prepared by Lipper Analytical Services, Inc. or similar investment
services that monitor the performance of mutual funds or as set forth in the
publications listed below; (ii) with the Venture Capital 100 Index (compiled by
Venture Capital Journal), the Russell 2000 Small Stock Index and the S&P 500
Index, which are unmanaged indexes of common stocks; or (iii) other appropriate
indexes of investment securities or with data developed by Warburg derived from
such indexes. The Fund may also make comparisons using data and indexes compiled
by the National Venture Capital Association, VentureOne and Private Equity
Analysts Newsletter and similar organizations and publications. The Fund may
also include evaluations published by nationally recognized ranking services and
by financial publications that are nationally recognized, such as The Wall
Street Journal, Investor's Daily, Money, Inc., Institutional Investor, Barron's,
Fortune, Forbes, Business Week, Mutual Fund Magazine, Morningstar, Inc. and
Financial Times.
In reports or other communications to investors or in advertising, the Fund
may also describe the general biography or work experience of the portfolio
managers of the Fund and may include quotations attributable to the portfolio
managers describing approaches taken in managing the Fund's investments,
research methodology underlying stock selection or the Fund's investment
objective. In addition, the Fund and its portfolio managers may render updates
of Fund activity, which may include a discussion of significant portfolio
holdings and analysis of holdings by industry, country, credit quality and other
characteristics. The Fund may discuss characteristics of venture capital
financed companies and the benefits expected to be achieved from investing in
these companies. The Fund may also discuss measures of risk, the continuum of
risk and return relating to different invest-
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ments and the potential impact of foreign stocks on a portfolio otherwise
composed of domestic securities. Morningstar, Inc. rates funds in broad
categories based on risk/reward analyses over various time periods. In addition,
the Fund may from time to time compare the expense ratio of Advisor Shares 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.
GENERAL INFORMATION
ORGANIZATION. The Fund was incorporated on July 12, 1995 under the laws of the
State of Maryland under the name 'Warburg, Pincus Post-Venture Capital Fund,
Inc.' The Fund's charter authorizes the Board to issue three billion full and
fractional shares of capital stock, $.001 par value per share, of which one
billion shares are designated Advisor Shares. Under the Fund's charter
documents, the Board has the power to classify or reclassify any unissued shares
of the Fund 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 Fund.
MULTI-CLASS STRUCTURE. The Fund offers a separate class of shares, the Common
Shares, directly to individuals pursuant to a separate prospectus. Shares of
each class represent equal pro rata interests in the Fund and accrue dividends
and calculate net asset value and performance quotations in the same manner,
except that Advisor Shares bear fees payable by the Fund to Institutions for
services they provide to the beneficial owners of such shares and enjoy certain
exclusive voting rights on matters relating to these fees. Because of the higher
fees paid by the Advisor Shares, the total return on such shares can be expected
to be lower than the total return on Common Shares. Investors may obtain
information concerning the Common Shares from their investment professional or
by calling Counsellors Securities at (800) 888-6878.
VOTING RIGHTS. Investors in the Fund are entitled to one vote for each full
share held and fractional votes for fractional shares held. Shareholders of the
Fund will vote in the aggregate except where otherwise required by law and
except that each class will vote separately on certain matters pertaining to its
distribution and shareholder servicing arrangements. There will normally be no
meetings of investors for the purpose of electing members of the Board unless
and until such time as less than a majority of the members holding office have
been elected by investors. Any member of the Board may be removed from office
upon the vote of shareholders holding at least a majority of the Fund's
outstanding shares, at a meeting called for that purpose. A meeting will be
called for the purpose of voting on the removal of a Board member at the written
request of holders of 10% of the outstanding shares of the Fund.
SHAREHOLDER COMMUNICATIONS. Each investor will receive a quarterly statement of
its account, as well as a statement of its account after any transaction that
affects its share balance or share registration (other than the reinvestment of
dividends or distributions). The Fund will also send to its investors a
semiannual report and an audited annual report, each of which includes a list of
the investment securities held by the Fund and a statement of the performance of
the Fund. Periodic listings of the investment securities held by the Fund may be
obtained by calling Warburg Pincus Advisor Funds at (800) 888-6878. Each
Institution that is the record owner of Advisor Shares on behalf of its
customers will send a statement to those customers periodically showing their
indirect interest in Advisor Shares, as well as providing other information
about the Fund. See 'Shareholder Servicing.'
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SHAREHOLDER SERVICING
The Fund is authorized to offer Advisor Shares exclusively through
Institutions whose clients or customers (or participants in the case of
retirement plans) ('Customers') are owners of Advisor Shares. Either those
Institutions or companies providing certain services to Customers (together,
'Service Organizations') will enter into agreements ('Agreements') with the Fund
and/or Counsellors Securities pursuant to a Distribution Plan as described
below. Such entities may provide certain distribution, shareholder servicing,
administrative and/or accounting services for its Customers. Distribution
services would be marketing or other services in connection with the promotion
and sale of Advisor Shares. Shareholder services that may be provided include
responding to Customer inquiries, providing information on Customer investments
and providing other shareholder liaison services. Administrative and accounting
services related to the sale of Advisor Shares may include (i) aggregating and
processing purchase and redemption requests from Customers and placing net
purchase and redemption orders with the Fund's transfer agent, (ii) processing
dividend payments from the Fund on behalf of Customers and (iii) providing
sub-accounting related to the sale of Advisor Shares beneficially owned by
Customers or the information to the Fund necessary for sub-accounting. The Board
has approved a Distribution Plan (the 'Plan') pursuant to Rule 12b-1 under the
1940 Act under which each participating Service Organization will be paid, out
of the assets of the Fund (either directly or by Counsellors Securities on
behalf of the Fund), a negotiated fee on an annual basis not to exceed .75% (up
to a .25% annual service fee and a .50% annual distribution fee) of the value of
the average daily net assets of its Customers invested in Advisor Shares. The
current 12b-1 fee is .50% per annum. The Board evaluates the appropriateness of
the Plan on a continuing basis and in doing so considers all relevant factors.
Warburg, Counsellors Securities and Counsellors Service or any of their
affiliates may, from time to time, at their own expense, provide compensation to
Service Organizations. To the extent they do so, such compensation does not
represent an additional expense to the Fund or its shareholders. In addition,
Warburg, Counsellors Securities or any of their affiliates may, from time to
time, at their own expense, pay certain Fund transfer agent fees and expenses
related to accounts of Customers. A Service Organization may use a portion of
the fees paid pursuant to the Plan to compensate the Fund's custodian or
transfer agent for costs related to accounts of its Customers.
------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE FUND'S
STATEMENT OF ADDITIONAL INFORMATION OR THE FUND'S OFFICIAL SALES LITERATURE IN
CONNECTION WITH THE OFFERING OF SHARES OF THE FUND, AND IF GIVEN OR MADE, SUCH
OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF THE
ADVISOR SHARES IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH OFFER MAY
NOT LAWFULLY BE MADE.
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TABLE OF CONTENTS
THE FUND'S EXPENSES .......................................... 2
FINANCIAL HIGHLIGHTS ......................................... 3
INVESTMENT OBJECTIVE AND POLICIES ............................ 4
PORTFOLIO INVESTMENTS ........................................ 5
RISK FACTORS AND SPECIAL
CONSIDERATIONS ............................................ 7
PORTFOLIO TRANSACTIONS AND TURNOVER
RATE ...................................................... 8
CERTAIN INVESTMENT STRATEGIES ................................ 9
INVESTMENT GUIDELINES ....................................... 12
MANAGEMENT OF THE FUND ...................................... 13
HOW TO PURCHASE SHARES ...................................... 15
HOW TO REDEEM AND EXCHANGE
SHARES ................................................... 16
DIVIDENDS, DISTRIBUTIONS AND TAXES .......................... 17
NET ASSET VALUE ............................................. 18
PERFORMANCE ................................................. 19
GENERAL INFORMATION ......................................... 20
SHAREHOLDER SERVICING ....................................... 21
[LOGO]
[ ] WARBURG PINCUS
POST-VENTURE CAPITAL FUND
PROSPECTUS
MAY 10, 1996
ADPVC-1-0596
<PAGE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE A
PROSPECTUS.
<PAGE>
<PAGE>
Subject to Completion, dated March 14, 1996
STATEMENT OF ADDITIONAL INFORMATION
May 10, 1996
WARBURG PINCUS POST-VENTURE CAPITAL FUND
P.O. Box 9030, Boston, Massachusetts 02205-9030
For information, call (800) 888-6878
Contents
Page
----
Investment Objective.................................................. 2
Investment Policies................................................... 2
Management of the Fund................................................ 25
Additional Purchase and Redemption Information........................ 33
Exchange Privilege.................................................... 34
Additional Information Concerning Taxes............................... 34
Determination of Performance.......................................... 37
Independent Accountants and Counsel................................... 39
Miscellaneous......................................................... 40
Financial Statements.................................................. 40
Appendix -- Description of Ratings.................................... A-1
Annual Report and Report of Independent Accountants................... A-5
This Statement of Additional Information is meant to be read in
conjunction with the combined Prospectus for the Common Shares of Warburg Pincus
Post-Venture Capital Fund (the "Fund"), Warburg Pincus Capital Appreciation Fund
and Warburg Pincus Emerging Growth Fund, and with the Prospectus for the Advisor
Shares of the Fund, each dated May 10, 1996, as amended or supplemented from
time to time, and is incorporated by reference in its entirety into those
Prospectuses. Because this Statement of Additional Information is not itself a
prospectus, no investment in shares of the Fund should be made solely upon the
information contained herein. Copies of the Fund's Prospectuses and information
regarding the Fund's current performance may be obtained by calling the Fund at
(800) 927-2874. Information regarding the status of shareholder accounts may be
obtained by calling the Fund at (800) 888-6878 or by writing to the Fund, P.O.
Box 9030, Boston, Massachusetts 02205-9030.
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INVESTMENT OBJECTIVE
The investment objective of the Fund is long-term growth of
capital.
INVESTMENT POLICIES
The following policies supplement the descriptions of the Fund's
investment objective and policies in the Prospectuses.
Options, Futures and Currency Exchange Transactions
Securities Options. The Fund may write covered put and call
options on stock and debt securities and may purchase such options that are
traded on foreign and U.S. exchanges, as well as over-the-counter ("OTC").
The Fund realizes fees (referred to as "premiums") for granting
the rights evidenced by the options it has written. A put option embodies the
right of its purchaser to compel the writer of the option to purchase from the
option holder an underlying security at a specified price for a specified time
period or at a specified time. In contrast, a call option embodies the right of
its purchaser to compel the writer of the option to sell to the option holder an
underlying security at a specified price for a specified time period or at a
specified time.
The principal reason for writing covered options on a security is
to attempt to realize, through the receipt of premiums, a greater return than
would be realized on the securities alone. In return for a premium, the Fund as
the writer of a covered call option forfeits the right to any appreciation in
the value of the underlying security above the strike price for the life of the
option (or until a closing purchase transaction can be effected). Nevertheless,
the Fund as a put or call writer retains the risk of a decline in the price of
the underlying security. The size of the premiums that the Fund 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 fall, the put writer would expect to suffer a
loss. This loss should be less than the loss from purchasing the underlying
instrument directly, however, because the premium received for writing the
option should mitigate the effects of the decline.
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In the case of options written by the Fund that are deemed
covered by virtue of the Fund'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 Fund
has written options may exceed the time within which the Fund must make delivery
in accordance with an exercise notice. In these instances, the Fund may purchase
or temporarily borrow the underlying securities for purposes of physical
delivery. By so doing, the Fund will not bear any market risk, since the Fund
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
Fund may incur additional transaction costs or interest expenses in connection
with any such purchase or borrowing.
Additional risks exist with respect to certain of the securities
for which the Fund may write covered call options. For example, if the Fund
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 Fund
will compensate for the decline in the value of the cover by purchasing an
appropriate additional amount of mortgage-backed securities.
Options written by the Fund 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 Fund may write (i) in-the-money call
options when Warburg, Pincus Counsellors, Inc., the Fund's investment adviser
("Warburg"), expects that the price of the underlying security will remain flat
or decline moderately during the option period, (ii) at-the-money call options
when Warburg expects that the price of the underlying security will remain flat
or advance moderately during the option period and (iii) out-of-the-money call
options when Warburg expects that the premiums received from writing the call
option plus the appreciation in market price of the underlying security up to
the exercise price will be greater than the appreciation in the price of the
underlying security alone. In any of the preceding situations, if the market
price of the underlying security declines and the security is sold at this lower
price, the amount of any realized loss will be offset wholly or in part by the
premium received. Out-of-the-money, at-the-money and in-the-money put options
(the reverse of call options as to the relation of exercise price to market
price) may be used in the same market environments that such call options are
used in equivalent transactions. To secure its obligation to deliver the
underlying security when it writes a call option, the Fund 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 Fund prior to
the exercise of options that it has purchased or written, respectively, of
options of the same series) in which the Fund may
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realize a profit or loss from the sale. An option position may be closed out
only where there exists a secondary market for an option of the same series on a
recognized securities exchange or in the over-the-counter market. When the Fund
has purchased an option and engages in a closing sale transaction, whether the
Fund 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 Fund initially
paid for the original option plus the related transaction costs. Similarly, in
cases where the Fund 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 Fund 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 Fund under an option it has written would be terminated by a
closing purchase transaction, but the Fund would not be deemed to own an option
as a result of the transaction. So long as the obligation of the Fund as the
writer of an option continues, the Fund may be assigned an exercise notice by
the broker-dealer through which the option was sold, requiring the Fund to
deliver the underlying security against payment of the exercise price. This
obligation terminates when the option expires or the Fund effects a closing
purchase transaction. The Fund can no longer effect a closing purchase
transaction with respect to an option once it has been assigned an exercise
notice.
There is no assurance that sufficient trading interest will exist
to create a liquid secondary market on a securities exchange for any particular
option or at any particular time, and for some options no such secondary market
may exist. A liquid secondary market in an option may cease to exist for a
variety of reasons. In the past, for example, higher than anticipated trading
activity or order flow or other unforeseen events have at times rendered certain
of the facilities of the Clearing Corporation and various securities exchanges
inadequate and resulted in the institution of special procedures, such as
trading rotations, restrictions on certain types of orders or trading halts or
suspensions in one or more options. There can be no assurance that similar
events, or events that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such event, it might not be possible to
effect closing transactions in particular options. Moreover, the Fund's ability
to terminate options positions established in the over-the-counter market may be
more limited than for exchange-traded options and may also involve the risk that
securities dealers participating in over-the-counter transactions would fail to
meet their obligations to the Fund. The Fund, however, intends to purchase
over-the-counter options only from dealers whose debt securities, as determined
by Warburg, are considered to be investment grade. If, as a covered call option
writer, the Fund is unable to effect a closing purchase transaction in a
secondary market, it will not be able to sell the underlying security until the
option expires or it delivers the underlying security upon exercise. In either
case, the Fund would continue to be at market risk on the security and could
face higher transaction costs, including brokerage commissions.
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Securities exchanges generally have established limitations
governing the maximum number of calls and puts of each class which may be held
or written, or exercised within certain time periods by an investor or group of
investors acting in concert (regardless of whether the options are written on
the same or different securities exchanges or are held, written or exercised in
one or more accounts or through one or more brokers). It is possible that the
Fund and other clients of Warburg and certain of its affiliates may be
considered to be such a group. A securities exchange may order the liquidation
of positions found to be in violation of these limits and it may impose certain
other sanctions. These limits may restrict the number of options the Fund will
be able to purchase on a particular security.
Stock Index Options. The Fund may purchase and write
exchange-listed and OTC put and call options on stock indexes. A stock index
measures the movement of a certain group of stocks by assigning relative values
to the common stocks included in the index, fluctuating with changes in the
market values of the stocks included in the index. Some stock index options are
based on a broad market index, such as the NYSE Composite Index, or a narrower
market index such as the Standard & Poor's 100. Indexes may also be based on a
particular industry or market segment.
Options on stock indexes are similar to options on stock except
that (i) the expiration cycles of stock index options are monthly, while those
of stock options are currently quarterly, and (ii) the delivery requirements are
different. Instead of giving the right to take or make delivery of stock at a
specified price, an option on a stock index gives the holder the right to
receive a cash "exercise settlement amount" equal to (a) the amount, if any, by
which the fixed exercise price of the option exceeds (in the case of a put) or
is less than (in the case of a call) the closing value of the underlying index
on the date of exercise, multiplied by (b) a fixed "index multiplier." Receipt
of this cash amount will depend upon the closing level of the stock index upon
which the option is based being greater than, in the case of a call, or less
than, in the case of a put, the exercise price of the index and the exercise
price of the option times a specified multiple. The writer of the option is
obligated, in return for the premium received, to make delivery of this amount.
Stock index options may be offset by entering into closing transactions as
described above for securities options.
OTC Options. The Fund may purchase OTC or dealer options or sell
covered OTC options. Unlike exchange-listed options where an intermediary or
clearing corporation, such as the Clearing Corporation, assures that all
transactions in such options are properly executed, the responsibility for
performing all transactions with respect to OTC options rests solely with the
writer and the holder of those options. A listed call option writer, for
example, is obligated to deliver the underlying stock to the clearing
organization if the option is exercised, and the clearing organization is then
obligated to pay the writer the exercise price of the option. If the Fund 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 Fund, the Fund would lose the
premium it paid for the option and the expected benefit of the transaction.
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Listed options generally have a continuous liquid market while
dealer options have none. Consequently, the Fund 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 Fund 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 Fund originally wrote the option. Although the Fund 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 Fund,
there can be no assurance that the Fund 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 the Fund.
Until the Fund, 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 Fund's ability to sell portfolio
securities or, with respect to currency options, currencies at a time when such
sale might be advantageous. In the event of insolvency of the other party, the
Fund may be unable to liquidate a dealer option.
Futures Activities. The Fund may enter into foreign currency,
interest rate and stock index futures contracts and purchase and write (sell)
related options traded on exchanges designated by the Commodity Futures Trading
Commission (the "CFTC") or consistent with CFTC regulations on foreign
exchanges. These transactions may be entered into for "bona fide hedging"
purposes as defined in CFTC regulations and other permissible purposes including
hedging against changes in the value of portfolio securities due to anticipated
changes in currency values, interest rates and/or market conditions and
increasing return.
The Fund will not enter into futures contracts and related
options for which the aggregate initial margin and premiums (discussed below)
required to establish positions other than those considered to be "bona fide
hedging" by the CFTC exceed 5% of the Fund's net asset value after taking into
account unrealized profits and unrealized losses on any such contracts it has
entered into. The ability of the Fund to trade in futures contracts and options
on futures contracts may be limited by the requirements of the Internal Revenue
Code of 1986, as amended (the "Code"), applicable to a regulated investment
company.
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. Stock indexes are capitalization weighted
indexes which reflect the market value of the stock listed on the indexes. A
stock index futures contract is an agreement to be settled by delivery of an
amount of cash equal to a specified multiplier times the difference between the
value of the index at the close of the last trading day on the contract and the
price at which the agreement is made.
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No consideration is paid or received by the Fund upon entering
into a futures contract. Instead, the Fund is required to deposit in a
segregated account with its custodian an amount of cash or cash equivalents,
such as U.S. government securities or other liquid high-grade debt obligations,
equal to approximately 1% to 10% of the contract amount (this amount is subject
to change by the exchange on which the contract is traded, and brokers may
charge a higher amount). This amount is known as "initial margin" and is in the
nature of a performance bond or good faith deposit on the contract which is
returned to the Fund 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 Fund fails to meet its contractual
obligations. Subsequent payments, known as "variation margin," to and from the
broker, will be made daily as the currency, financial instrument or stock index
underlying the futures contract fluctuates, making the long and short positions
in the futures contract more or less valuable, a process known as
"marking-to-market." The Fund will also incur brokerage costs in connection with
entering into futures transactions.
At any time prior to the expiration of a futures contract, the
Fund may elect to close the position by taking an opposite position, which will
operate to terminate the Fund'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
Fund intends to enter into futures contracts only if there is an active market
for such contracts, there is no assurance that an active market will exist at
any particular time. Most futures exchanges limit the amount of fluctuation
permitted in futures contract prices during a single trading day. Once the daily
limit has been reached in a particular contract, no trades may be made that day
at a price beyond that limit or trading may be suspended for specified periods
during the day. It is possible that futures contract prices could move to the
daily limit for several consecutive trading days with little or no trading,
thereby preventing prompt liquidation of futures positions at an advantageous
price and subjecting the Fund to substantial losses. In such event, and in the
event of adverse price movements, the Fund would be required to make daily cash
payments of variation margin. In such situations, if the fund 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 Fund 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 Fund's
performance.
Options on Futures Contracts. The Fund may purchase and write put
and call options on foreign currency, interest rate and stock 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.
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An option on a currency, interest rate or stock index futures
contract, as contrasted with the direct investment in such a contract, gives the
purchaser the right, in return for the premium paid, to assume a position in a
futures contract at a specified exercise price at any time prior to the
expiration date of the option. The writer of the option is required upon
exercise to assume an offsetting futures position (a short position if the
option is a call and a long position if the option is a put). Upon exercise of
an option, the delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the accumulated
balance in the writer's futures margin account, which represents the amount by
which the market price of the futures contract exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
futures contract. The potential loss related to the purchase of an option on
futures contracts is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed at the point of
sale, there are no daily cash payments by the purchaser to reflect changes in
the value of the underlying contract; however, the value of the option does
change daily and that change would be reflected in the net asset value of the
Fund.
Currency Exchange Transactions. The value in U.S. dollars of the
assets of the Fund that are invested in foreign securities may be affected
favorably or unfavorably by changes in exchange control regulations, and the
Fund 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. The Fund will conduct its currency
exchange transactions (i) on a spot (i.e., cash) basis at the rate prevailing in
the currency exchange market, (ii) through entering into futures contracts or
options on such contracts (as described above), (iii) through entering into
forward contracts to purchase or sell currency or (iv) by purchasing
exchange-traded currency options.
Forward Currency Contracts. A forward currency contract involves
an obligation to purchase or sell a specific currency at a future date, which
may be any fixed number of days from the date of the contract as agreed upon by
the parties, at a price set at the time of the contract. These contracts are
entered into in the interbank market conducted directly between currency traders
(usually large commercial banks and brokers) and their customers. Forward
currency contracts are similar to currency futures contracts, except that
futures contracts are traded on commodities exchanges and are standardized as to
contract size and delivery date.
At or before the maturity of a forward contract, the Fund may
either sell a portfolio security and make delivery of the currency, or retain
the security and fully or partially offset its contractual obligation to deliver
the currency by negotiating with its trading partner to purchase a second,
offsetting contract. If the Fund retains the portfolio security and engages in
an offsetting transaction, the Fund, 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.
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Currency Options. The Fund 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 Fund's 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 the Fund 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. The Fund
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 Fund's securities are denominated will reduce the U.S. dollar value of the
securities, even if their value in the foreign currency remains constant. The
use of currency hedges does not eliminate fluctuations in the underlying prices
of the securities, but it does establish a rate of exchange that can be achieved
in the future. For example, in order to protect against diminutions in the U.S.
dollar value of securities it holds, the Fund may purchase currency put options.
If the value of the currency does decline, the Fund will have the right to sell
the currency for a fixed amount in dollars and will thereby offset, in whole or
in part, the adverse effect on the U.S. dollar value of its securities that
otherwise would have resulted. Conversely, if a rise in the U.S. dollar value of
a currency in which securities to be acquired are denominated is projected,
thereby potentially increasing the cost of the securities, the Fund 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 Fund derived from purchases of currency options, like
the benefit derived from other types of options, will be reduced by premiums and
other transaction costs. Because transactions in currency exchange are generally
conducted on a principal basis, no fees or commissions are generally involved.
Currency hedging involves some of the same risks and considerations as other
transactions with similar instruments. Although currency hedges limit the risk
of loss due to a decline in the value of a hedged currency, at the same time,
they also limit any potential gain that might result should the value of the
currency increase. If a devaluation is generally anticipated, the Fund 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 Fund's investments and a currency hedge may not be entirely
successful in mitigating changes in the value of the Fund's investments
denominated in that currency. A currency hedge, for example, should protect a
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Yen-denominated bond against a decline in the Yen, but will not protect the Fund
against a price decline if the issuer's creditworthiness deteriorates.
Hedging. In addition to entering into options, futures and
currency exchange transactions for other purposes, including generating current
income to offset expenses or increase return, the Fund 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, contracts 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 Fund,
an increase in the value of the futures contracts could only mitigate, but not
totally offset, the decline in the value of the Fund's assets.
In hedging transactions based on an index, whether the Fund will
realize a gain or loss from the purchase or writing of options on an index
depends upon movements in the level of stock prices in the stock market
generally or, in the case of certain indexes, in an industry or market segment,
rather than movements in the price of a particular stock. The risk of imperfect
correlation increases as the composition of the Fund'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 Fund'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 Fund's net investment results if market movements are not as anticipated
when the hedge is established. Stock index futures transactions may be subject
to additional correlation risks. First, all participants in the futures market
are subject to margin deposit and maintenance requirements. Rather than meeting
additional margin deposit requirements, investors may close futures contracts
through offsetting transactions which would distort the normal relationship
between the stock index and futures markets. Secondly, from the point of view of
speculators, the deposit requirements in the futures market are less onerous
than margin requirements in the securities market. Therefore, increased
participation by speculators in the futures market also may cause temporary
price distortions. Because of the possibility of price distortions in the
futures market and the imperfect correlation between movements in the stock
index and movements in the price of stock index futures, a correct forecast of
general market trends by Warburg still may not result in a successful hedging
transaction.
The Fund will engage in hedging transactions only when deemed
advisable by Warburg, and successful use by the Fund of hedging transactions
will be subject to Warburg's ability to predict trends in currency, interest
rate or securities markets, as the case may be, and to correctly predict
movements in the directions of the hedge and the hedged
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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 Fund's performance.
Asset Coverage for Forward Contracts, Options, Futures and
Options on Futures. As described in the Prospectuses, the Fund will comply with
guidelines established by the Securities and Exchange Commission (the "SEC")
with respect to coverage of forward currency contracts; options written by the
Fund on securities and indexes; and currency, interest rate and index futures
contracts and options on these futures contracts. These guidelines may, in
certain instances, require segregation by the Fund of cash or liquid high-grade
debt securities or other securities that are acceptable as collateral to the
appropriate regulatory authority.
For example, a call option written by the Fund on securities may
require the Fund to hold the securities subject to the call (or securities
convertible into the securities without additional consideration) or to
segregate assets (as described above) sufficient to purchase and deliver the
securities if the call is exercised. A call option written by the Fund on an
index may require the Fund to own portfolio securities that correlate with the
index or to segregate assets (as described above) equal to the excess of the
index value over the exercise price on a current basis. A put option written by
the Fund may require the Fund to segregate assets (as described above) equal to
the exercise price. The Fund 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 Fund. If the Fund holds a futures or forward contract, the Fund 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 Fund may enter
into fully or partially offsetting transactions so that its net position,
coupled with any segregated assets (equal to any remaining obligation), equals
its net obligation. Asset coverage may be achieved by other means when
consistent with applicable regulatory policies.
Additional Information on Other Investment Practices
Foreign Investments. The Fund may invest up to 20% of its total
assets in the securities of foreign issuers. Investors should recognize that
investing in foreign companies involves certain risks, including those discussed
below, which are not typically associated with investing in U.S. issuers. Since
the Fund may invest in securities denominated in currencies other than the U.S.
dollar, and since the Fund may temporarily hold funds in bank deposits or other
money market investments denominated in foreign currencies, the Fund 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 the Fund's assets denominated in that foreign
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currency. Changes in foreign currency exchange rates may also affect the value
of dividends and interest earned, gains and losses realized on the sale of
securities and net investment income and gains, if any, to be distributed to
shareholders by the Fund. 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. Of particular
importance are rates of inflation, interest rate levels, the balance of payments
and the extent of government surpluses or deficits in the United States and the
particular foreign country, all of which are in turn sensitive to the monetary,
fiscal and trade policies pursued by the governments of the United States and
foreign countries important to international trade and finance. Governmental
intervention may also play a significant role. National governments rarely
voluntarily allow their currencies to float freely in response to economic
forces. Sovereign governments use a variety of techniques, such as intervention
by a country's central bank or imposition of regulatory controls or taxes, to
affect the exchange rates of their currencies. The Fund may use hedging
techniques with the objective of protecting against loss through the fluctuation
of the value of foreign currencies against the U.S. dollar, particularly the
forward market in foreign exchange, currency options and currency futures.
See "Currency Transactions" and "Futures Activities" above.
Many of the foreign securities held by the Fund will not be
registered with, nor the issuers thereof be subject to reporting requirements
of, the SEC. Accordingly, there may be less publicly available information about
the securities and about the foreign company or government issuing them than is
available about a domestic company or government entity. Foreign companies are
generally not subject to uniform financial reporting standards, practices and
requirements comparable to those applicable to U.S. companies. In addition, 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 Fund, political or social instability, or domestic developments which could
affect U.S. investments in those countries. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and balance of payments positions. The
Fund 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.
Securities of some foreign companies are less liquid and their
prices are more volatile than securities of comparable U.S. companies. Certain
foreign countries are known to experience long delays between the trade and
settlement dates of securities purchased or sold. Due to the increased exposure
of the Fund to market and foreign exchange fluctuations brought about by such
delays, and due to the corresponding negative impact on Fund liquidity, the Fund
will avoid investing in countries which are known to experience settlement
delays which may expose the Fund to unreasonable risk of loss.
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U.S. Government Securities. The Fund may invest in debt
obligations of varying maturities issued or guaranteed by the United States
government, its agencies or instrumentalities ("U.S. Government Securities").
Direct obligations of the U.S. Treasury include a variety of securities that
differ in their interest rates, maturities and dates of issuance. U.S.
Government Securities also include securities issued or guaranteed by the
Federal Housing Administration, Farmers Home Loan Administration, Export-Import
Bank of the United States, Small Business Administration, Government National
Mortgage Association ("GNMA"), General Services Administration, Central Bank for
Cooperatives, Federal Farm Credit Banks, Federal Home Loan Banks, Federal Home
Loan Mortgage Corporation ("FHLMC"), Federal Intermediate Credit Banks, Federal
Land Banks, Federal National Mortgage Association ("FNMA"), Maritime
Administration, Tennessee Valley Authority, District of Columbia Armory Board
and Student Loan Marketing Association. The Fund 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, the Fund will invest in obligations issued by such
an instrumentality only if Warburg determines that the credit risk with respect
to the instrumentality does not make its securities unsuitable for investment by
the Fund.
Special Situation Companies. The Fund may invest up to 10% of its
assets, directly or indirectly, in the securities of "special situation
companies" involved in an actual or prospective acquisition or consolidation;
reorganization; recapitalization; merger, liquidation or distribution of cash,
securities or other assets; a tender or exchange offer; a breakup or workout of
a holding company; or litigation which, if resolved favorably, would improve the
value of the company's stock. If the actual or prospective situation does not
materialize as anticipated, the market price of the securities of a "special
situation company" may decline significantly. The Fund believes, however, that
if "special situation companies" are analyzed carefully and invested in at the
appropriate time, the Fund may achieve capital growth. There can be no
assurance, however, that a special situation that exists at the time the Fund
makes its investment will be consummated under the terms and within the time
period contemplated.
Securities of Other Investment Companies. The Fund may invest in
securities of other investment companies and partnerships and other investment
vehicles deemed to be investment companies under the Investment Company Act of
1940, as amended (the "1940 Act"), to the extent permitted under that Act.
Presently, under the 1940 Act, the Fund 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 Fund's total assets and (iii) when added to all other investment company
securities held by the Fund, do not exceed 10% of the value of the Fund's total
assets.
Lending of Portfolio Securities. The Fund may lend portfolio
securities to brokers, dealers and other financial organizations that meet
capital and other credit requirements or other criteria established by the
Fund's Board of Directors (the "Board").
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These loans, if and when made, may not exceed 20% of the Fund's total assets
taken at value. The Fund will not lend portfolio securities to affiliates of
Warburg unless it has applied for and received specific authority to do so from
the SEC. Loans of portfolio securities will be collateralized by cash, letters
of credit or U.S. Government Securities, which are maintained at all times in an
amount equal to at least 100% of the current market value of the loaned
securities. Any gain or loss in the market price of the securities loaned that
might occur during the term of the loan would be for the account of the Fund.
From time to time, the Fund 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 Fund and that is acting as a "finder."
By lending its securities, the Fund 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 Fund, income received
could be used to pay the Fund's expenses and would increase an investor's total
return. The Fund will adhere to the following conditions whenever its portfolio
securities are loaned: (i) the Fund must receive at least 100% cash collateral
or equivalent securities of the type discussed in the preceding paragraph from
the borrower; (ii) the borrower must increase such collateral whenever the
market value of the securities rises above the level of such collateral; (iii)
the Fund must be able to terminate the loan at any time; (iv) the Fund 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 Fund 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
Fund's ability to recover the loaned securities or dispose of the collateral for
the loan.
When-Issued Securities and Delayed-Delivery Transactions. The
Fund may utilize 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). When-issued transactions normally settle within 30-45 days. The Fund
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 Warburg 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 yields obtained on such securities may be higher or
lower than the yields available in the market on the dates when the investments
are actually delivered to the buyers.
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When the Fund agrees to purchase when-issued or delayed-delivery
securities, its custodian will set aside cash, U.S. Government Securities or
other liquid high-grade debt obligations or other securities that are acceptable
as collateral to the appropriate regulatory authority equal to the amount of the
commitment in a segregated account. Normally, the custodian will set aside
portfolio securities to satisfy a purchase commitment, and in such a case the
Fund may be required subsequently to place additional assets in the segregated
account in order to ensure that the value of the account remains equal to the
amount of the Fund's commitment. It may be expected that the Fund'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 Fund
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
Fund's incurring a loss or missing an opportunity to obtain a price considered
to be advantageous.
Securities of Smaller Companies. The Fund's investments involves
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 accounting standards,
illiquidity of securities and markets, higher brokerage commissions and fees and
greater market risk in general. In addition, securities of smaller companies may
involve greater risks since these securities may have limited marketability and,
thus, may be more volatile.
American, European and Continental Depositary Receipts. The
assets of the Fund may be invested in the securities of foreign issuers in the
form of American Depositary Receipts ("ADRs") and European Depositary Receipts
("EDRs"). These securities may not necessarily be denominated in the same
currency as the securities into which they may be converted. ADRs are receipts
typically issued by a U.S. bank or trust company which evidence ownership of
underlying securities issued by a foreign corporation. EDRs, which are sometimes
referred to as Continental Depositary Receipts ("CDRs"), are receipts issued in
Europe typically by non-U.S. banks and trust companies that evidence ownership
of either foreign or domestic securities. Generally, ADRs in registered form are
designed for use in U.S. securities markets and EDRs and CDRs in bearer form are
designed for use in European securities markets.
Warrants. The Fund may invest up to 5% of net assets in warrants
(valued at the lower of cost or market) (other than warrants acquired by the
Fund as part of a unit or attached to securities at the time of purchase).
Because a warrant does not carry with it the right to dividends or voting rights
with respect to the securities which it entitles a holder to purchase, and
because it does not represent any rights in the assets of the issuer, warrants
may be considered more speculative than certain other types of investments.
Also, the value of a warrant does not necessarily change with the value of the
underlying securities and a warrant ceases to have value if it is not exercised
prior to its expiration date.
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Non-Publicly Traded and Illiquid Securities. The Fund 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, time deposits maturing in more than seven days, Private Funds (as
defined in the Prospectuses), certain Rule 144A Securities (as defined below)
and repurchase agreements which have a maturity of longer than seven days.
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. Mutual funds do not typically hold a significant
amount of these restricted or other illiquid securities because of the potential
for delays on resale and uncertainty in valuation. 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. A mutual fund might also have to
register such restricted securities in order to dispose of them resulting in
additional expense and delay. Adverse market conditions could impede such a
public offering of securities.
In recent years, however, a large institutional market has
developed for certain securities that are not registered under the Securities
Act including repurchase agreements, commercial paper, foreign securities,
municipal securities and corporate bonds and notes. Institutional investors
depend on an efficient institutional market in which the unregistered security
can be readily resold or on an issuer's ability to honor a demand for repayment.
The fact that there are contractual or legal restrictions on resale to the
general public or to certain institutions may not be indicative of the liquidity
of such investments.
Rule 144A Securities. Rule 144A under the Securities Act adopted
by the SEC allows for a broader institutional trading market for securities
otherwise subject to restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of the Securities
Act for resales of certain securities to qualified institutional buyers. Warburg
anticipates that the market for certain restricted securities such as
institutional commercial paper will expand further as a result of this
regulation and use of automated systems for the trading, clearance and
settlement of unregistered securities of domestic and foreign issuers, such as
the PORTAL System sponsored by the National Association of Securities Dealers,
Inc.
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An investment in Rule 144A Securities will be considered illiquid
and therefore subject to the Fund's 15% limit on the purchase of illiquid
securities unless the Board or its delegates determines that the Rule 144A
Securities are liquid. In reaching liquidity decisions, the Board and 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).
Private Funds. 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 Fund'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 operating results from period to period,
companies with the need for substantial additional capital to support expansion
or to maintain a competitive position, or companies with significant financial
leverage. Such companies may also face intense competition from others including
those with greater financial resources or more extensive development,
manufacturing, distribution or other attributes, over which the Fund will have
no control.
Interests in the Private Funds in which the Fund 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 Fund may invest may pay their investment managers a fee based
on the performance of the 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 Fund's net asset value calculations. Private Funds in which the
Fund invests will not borrow to increase the amount of assets available for
investment or otherwise engage in leverage.
Below Investment Grade Securities. Although the Fund may invest
only in investment grade non-convertible debt securities (as described in the
Prospectuses), securities held by Private Funds may be rated below investment
grade. In addition, the Fund may invest in below investment grade convertible
debt and preferred securities and it is not required to dispose of securities
downgraded below investment grade subsequent to acquisition by the Fund. While
the market values of medium- and lower-rated securities and unrated securities
of comparable quality tend to react less to fluctuations in interest rate levels
than do those of higher-rated 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 higher-quality securities. In addition,
medium- and lower-rated securities and comparable unrated securities generally
present a higher degree of credit risk. Issuers of medium- and lower-rated
securities and unrated securities are often highly leveraged and may not have
more traditional methods of financing available to them so that their ability to
service their
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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 medium- and lower-rated securities and unrated
securities generally are unsecured and frequently are subordinated to the prior
payment of senior indebtedness.
The market for medium- and lower-rated and unrated securities is
relatively new and has not weathered a major economic recession. Any such
recession could disrupt severely the market for such securities and may
adversely affect the value of such securities and the ability of the issuers of
such securities to repay principal and pay interest thereon.
Certain of these securities may be difficult to dispose of
because there may be a thin trading market. Because there is no established
retail secondary market for many of these securities, it is anticipated 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
higher-rated 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 the ability to dispose of particular
issues when necessary to meet 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 to obtain accurate market quotations for purposes of valuation
and calculation of net asset value.
The market value of securities in medium- and lower-rated
categories is more volatile than that of higher quality securities. Factors
adversely impacting the market value of these securities will adversely impact
the Fund's net asset value. Normally, medium-and lower-rated and comparable
unrated securities are not intended for short-term investment. Additional
expenses may be incurred, to the extent required to seek recovery upon a default
in the payment of principal or interest on its portfolio holdings of such
securities. Recent adverse publicity regarding lower-rated securities may have
depressed the prices for such securities to some extent. Whether investor
perceptions will continue to have a negative effect on the price of such
securities is uncertain.
Borrowing. The Fund may borrow up to 30% of its total assets for
temporary or emergency purposes, including to meet portfolio redemption requests
so as to permit the orderly disposition of portfolio securities or to facilitate
settlement transactions on portfolio securities. Additional investments
(including roll-overs) will not be made when borrowings exceed 5% of the Fund's
net assets. Although the principal of such borrowings will be fixed, the Fund's
assets may change in value during the time the borrowing is outstanding. The
Fund 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
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lender or arrangements will be made with a suitable subcustodian, which may
include the lender.
Other Investment Limitations
The investment limitations numbered 1 through 9 may not be
changed without the affirmative vote of the holders of a majority of the Fund'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 Fund are present or represented by proxy, or (ii) more
than 50% of the outstanding shares. Investment limitations 10 through 16 may be
changed by a vote of the Board at any time.
The Fund may not:
1. Borrow money except that the Fund 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 Fund may not exceed 30% of the value of the Fund'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 Fund'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. Purchase the securities of any issuer if as a result more than
5% of the value of the Fund'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 Fund's total assets may
be invested without regard to this 5% limitation.
4. Make loans, except that the Fund 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 Fund'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 Fund may invest in (a)
securities secured by real
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estate, mortgages or interests therein and (b) securities of companies that
invest in or sponsor oil, gas or mineral exploration or development programs.
7. Purchase securities on margin, except that the Fund may obtain
any short-term credits necessary for the clearance of purchases and sales of
securities. For purposes of this restriction, the deposit or payment of initial
or variation margin in connection with transactions in currencies, options,
futures contracts or related options will not be deemed to be a purchase of
securities on margin.
8. Invest in commodities, except that the Fund may purchase and
sell futures contracts, including those relating to securities, currencies and
indexes, and options on futures contracts, securities, currencies or indexes,
purchase and sell currencies on a forward commitment or delayed-delivery basis
and enter into stand-by commitments.
9. Issue any senior security except as permitted in the Fund'
investment limitations.
10. Purchase securities of other investment companies except in
connection with a merger, consolidation, acquisition, reorganization or offer of
exchange, or as otherwise permitted under the 1940 Act.
11. Pledge, mortgage or hypothecate its assets, except to the
extent necessary to secure permitted borrowings and to the extent related to the
deposit of assets in escrow in connection with the purchase of securities on a
forward commitment or delayed-delivery basis and collateral and initial or
variation margin arrangements with respect to currency transactions, options,
futures contracts, and options on futures contracts.
12. Invest more than 15% of the Fund's net assets in securities
which may be illiquid because of legal or contractual restrictions on resale or
securities for which there are no readily available market quotations. For
purposes of this limitation, repurchase agreements with maturities greater than
seven days shall be considered illiquid securities.
13. Purchase any security if as a result the Fund would then have
more than 5% of its total assets invested in securities of companies (including
predecessors) that have been in continuous operation for fewer than three years.
14. Purchase or retain securities of any company if any of the
Fund's officers or Directors or any officer or director of Warburg individually
owns more than 1/2 of 1% of the outstanding securities of such company and
together they own beneficially more than 5% of the securities.
15. Invest in warrants (other than warrants acquired by the Fund
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 5%
of the value of the Fund's net assets.
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16. Make additional investments (including roll-overs) if the
Fund's borrowings exceed 5% of its net assets.
Certain non-fundamental investment limitations are currently
required by one or more states in which shares of the Fund are sold. These may
be more restrictive than the limitations set forth above. Should the Fund
determine that any such commitment is no longer in the best interest of the Fund
and its shareholders, the Fund will revoke the commitment by terminating the
sale of Fund shares in the state involved. In addition, the relevant state may
change or eliminate its policy regarding such investment limitations.
If a percentage restriction (other than the percentage limitation
set forth in No. 1 above) 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 Fund's assets will not
constitute a violation of such restriction.
Portfolio Valuation
The Prospectuses discuss the time at which the net asset value of
the Fund is determined for purposes of sales and redemptions. The following is a
description of the procedures used by the Fund in valuing its assets.
Securities listed on a U.S. securities exchange (including
securities traded through the NASDAQ National Market System) or foreign
securities exchange or traded in an over-the-counter market will be valued at
the most recent sale as of the time the valuation is made or, in the absence of
sales, at the mean between the bid and asked quotations. If there are no such
quotations, the value of the securities will be taken to be the highest bid
quotation on the exchange or market. Options and futures contracts will be
valued similarly. A security which is listed or traded on more than one exchange
is valued at the quotation on the exchange determined to be the primary market
for such security. Short-term obligations with maturities of 60 days or less are
valued at amortized cost, which constitutes fair value as determined by the
Board. Amortized cost involves valuing a portfolio instrument at its initial
cost and thereafter assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. The amortized cost method of valuation may also be used
with respect to other debt obligations with 60 days or less remaining to
maturity. In determining the market value of portfolio investments, the Fund may
employ outside organizations (a "Pricing Service") which may use a matrix,
formula or other objective method that takes into consideration market indexes,
matrices, yield curves and other specific adjustments. The procedures of Pricing
Services are reviewed periodically by the officers of the Fund under the general
supervision and responsibility of the Board, which may replace a Pricing Service
at any time. Securities, options and futures contracts for which market
quotations are not available and other assets of the Fund 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
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determines that such security's value determined by the methodology set forth
above does not reflect its fair value.
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 Capital Management, L.P., the
Fund's sub-investment adviser ("Abbott"), from the Funds. These reports are
generally made monthly but not less frequently than quarterly. Neither Abbott
nor the Fund 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 Fund in calculating its net asset 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 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 Fund's net
asset value is not calculated. As a result, calculation of the Fund's net asset
value may not take place contemporaneously with the determination of the prices
of certain portfolio securities used in such calculation. Events affecting the
values of portfolio securities that occur between the time their prices are
determined and the close of regular trading on the NYSE will not be reflected in
the Fund's calculation of net asset value unless the Board or its delegates
deems that the particular event would materially affect net asset value, in
which case an adjustment may be made. All assets and liabilities initially
expressed in foreign currency values will be converted into U.S. dollar values
at the prevailing rate as quoted by a Pricing Service. If such quotations are
not available, the rate of exchange will be determined in good faith pursuant to
consistently applied procedures established by the Board.
Portfolio Transactions
Warburg is responsible for establishing, reviewing and, where
necessary, modifying the Fund'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 the Fund 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
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most foreign exchanges, commissions are generally fixed. Purchases of Private
Funds through a broker or placement agent will also involve a commission or
other fee. There is generally no stated commission in the case of securities
traded in domestic or foreign over-the-counter markets, but the price of
securities traded in over-the-counter markets includes an undisclosed commission
or mark-up. U.S. government securities are generally purchased from underwriters
or dealers, although certain newly issued U.S. Government Securities may be
purchased directly from the U.S. Treasury or from the issuing agency or
instrumentality.
Except for Private Funds managed by Abbott, Warburg will select
specific portfolio investments and effect transactions for the Fund and in doing
so seeks to obtain the overall best execution of portfolio transactions. In
evaluating prices and executions, Warburg will consider the factors it deems
relevant, which may include the breadth of the market in the security, the price
of the security, the financial condition and execution capability of a broker or
dealer and the reasonableness of the commission, if any, for the specific
transaction and on a continuing basis. Warburg may, in its discretion, effect
transactions in portfolio securities with dealers who provide brokerage and
research services (as those terms are defined in Section 28(e) of the Securities
Exchange Act of 1934) to the Fund and/or other accounts over which Warburg
exercises investment discretion. Warburg may place portfolio transactions with a
broker or dealer with whom it has negotiated a commission that is in excess of
the commission another broker or dealer would have charged for effecting the
transaction if Warburg determines in good faith that such amount of commission
was reasonable in relation to the value of such brokerage and research services
provided by such broker or dealer viewed in terms of either that particular
transaction or of the overall responsibilities of Warburg. Research and other
services received may be useful to Warburg in serving both the Fund and its
other clients and, conversely, research or other services obtained by the
placement of business of other clients may be useful to Warburg in carrying out
its obligations to the Fund. Research may include furnishing advice, either
directly or through publications or writings, as to the value of securities, the
advisability of purchasing or selling specific securities and the availability
of securities or purchasers or sellers of securities; furnishing seminars,
information, analyses and reports concerning issuers, industries, securities,
trading markets and methods, legislative developments, changes in accounting
practices, economic factors and trends and portfolio strategy; access to
research analysts, corporate management personnel, industry experts, economists
and government officials; comparative performance evaluation and technical
measurement services and quotation services; and products and other services
(such as third party publications, reports and analyses, and computer and
electronic access, equipment, software, information and accessories that
deliver, process or otherwise utilize information, including the research
described above) that assist Warburg in carrying out its responsibilities. For
the fiscal year ended October 31, 1995, $1,119 of total brokerage commissions
was paid to brokers and dealers who provided such research and other services.
Research received from brokers or dealers is supplemental to Warburg's own
research program. The fees to Warburg under its advisory agreement with the Fund
are not reduced by reason of its receiving any brokerage and research services.
23
<PAGE>
<PAGE>
During the fiscal period ended October 31, 1995, the Fund paid an
aggregate of approximately $2,616 in commissions to broker-dealers for execution
of portfolio transactions.
Investment decisions for the Fund concerning specific portfolio
securities are made independently from those for other clients advised by
Warburg or Abbott. Such other investment clients may invest in the same
securities as the Fund. When purchases or sales of the same security are made at
substantially the same time on behalf of such other clients, transactions are
averaged as to price and available investments allocated as to amount, in a
manner which Warburg or Abbott, as the case may be, believes to be equitable to
each client, including the Fund. In some instances, this investment procedure
may adversely affect the price paid or received by the Fund or the size of the
position obtained or sold for the Fund. To the extent permitted by law,
securities to be sold or purchased for the Fund may be aggregated with those to
be sold or purchased for such other investment clients in order to obtain best
execution.
Any portfolio transaction for the Fund may be executed through
Counsellors Securities Inc., the Fund's distributor ("Counsellors Securities"),
if, in Warburg's judgment, the use of Counsellors Securities is likely to result
in price and execution at least as favorable as those of other qualified
brokers, and if, in the transaction, Counsellors Securities charges the Fund a
commission rate consistent with those charged by Counsellors Securities to
comparable unaffiliated customers in similar transactions. All transactions with
affiliated brokers will comply with Rule 17e-1 under the 1940 Act. No portfolio
transactions have been executed through Counsellors Securities since the
commencement of the Fund's operations.
In no instance will portfolio securities be purchased from or
sold to Warburg, Abbott or Counsellors Securities or any affiliated person of
such companies. In addition, the Fund will not give preference to any
institutions with whom the Fund enters into distribution or shareholder
servicing agreements concerning the provision of distribution services or
support services. See the Prospectuses, "Shareholder Servicing."
Transactions for the Fund may be effected on foreign securities
exchanges. In transactions for securities not actively traded on a foreign
securities exchange, the Fund will deal directly with the dealers who make a
market in the securities involved, except in those circumstances where better
prices and execution are available elsewhere. Such dealers usually are acting as
principal for their own account. On occasion, securities may be purchased
directly from the issuer. Such portfolio securities are generally traded on a
net basis and do not normally involve brokerage commissions. Securities firms
may receive brokerage commissions on certain portfolio transactions, including
options, futures and options on futures transactions and the purchase and sale
of underlying securities upon exercise of options.
24
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<PAGE>
The Fund may participate, if and when practicable, in bidding for
the purchase of securities for the Fund's portfolio directly from an issuer in
order to take advantage of the lower purchase price available to members of such
a group. The Fund will engage in this practice, however, only when Warburg, in
its sole discretion, believes such practice to be otherwise in the Fund's
interest.
Portfolio Turnover
The Fund does not intend to seek profits through short-term
trading, but the rate of turnover will not be a limiting factor when the Fund
deems it desirable to sell or purchase securities. The Fund'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 the Fund could result
in high portfolio turnover. For example, options on securities may be sold in
anticipation of a decline in the price of the underlying security (market
decline) or purchased in anticipation of a rise in the price of the underlying
security (market rise) and later sold. The Fund's investment in special
situation companies could result in high portfolio turnover. To the extent that
its portfolio is traded for the short-term, the Fund 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 securities may be
sold without regard to the length of time for which they have been held.
Consequently, the annual portfolio turnover rate of the Fund may be higher than
mutual funds having a similar objective that do not invest in special situation
companies.
MANAGEMENT OF THE FUND
Officers and Board of Directors
The names (and ages) of the Fund's Directors and officers, their
addresses, present positions and principal occupations during the past five
years and other affiliations are set forth below.
<TABLE>
<S> <C>
Richard N. Cooper (61)................ Director
Room 7E47OHB National Intelligence Counsel;
Central Intelligence Agency Professor at Harvard University;
930 Dolly Madison Blvd Director or Trustee of Circuit
McClain, Virginia 22107 City Stores, Inc. (retail electronics and
appliances) and Phoenix Home Life Insurance
Co.
</TABLE>
25
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Donald J. Donahue (71)................ Director
99 Indian Field Road Chairman of Magma Copper Company
Greenwich, Connecticut 06830 since January 1987; Director or Trustee of
GEV Corporation and Signet Star
Reinsurance Company; Chairman and
Director of NAC Holdings from
September 1990-June 1993.
Jack W. Fritz (68).................... Director
2425 North Fish Creek Road Private investor; Consultant and
P.O. Box 483 Director of Fritz Broadcasting, Inc. and
Wilson, Wyoming 83014 Fritz Communications (developers and
operators of radio stations); Director of
Advo, Inc. (direct mail advertising).
John L. Furth* (65)................... Chairman of the Board
466 Lexington Avenue Vice Chairman and Director of E.M. Warburg,
New York, New York 10017-3147 Pincus & Co., Inc. ("EMW"); Associated with
EMW since 1970; Chairman of the Board and
officer of other investment companies advised
by Warburg.
Thomas A. Melfe (63).................. Director
30 Rockefeller Plaza Partner in the law firm of Donovan Leisure
New York, New York 10112 Newton & Irvine; Director of Municipal Fund
for New York Investors, Inc.
Arnold M. Reichman* (47).............. President and Director
466 Lexington Avenue Managing Director and Assistant Secretary
**1 New York, New York 10017-3147 of EMW; Associated with EMW since 1984;
Senior Vice President, Secretary and Chief
Operating Officer of Counsellors Securities;
Officer of other investment companies advised
by Warburg.
Alexander B. Trowbridge (66).......... Director
1155 Connecticut Avenue, N.W. President of Trowbridge Partners, Inc.
Suite 700 (business consulting) from January 1990-
Washington, DC 20036 January 1994; President of the National
Association of Manufacturers from 1980-1990;
Director or Trustee of New England Mutual
</TABLE>
- --------
* Indicates a Director who is an "interested person" of the Fund as defined
in the 1940 Act.
26
<PAGE>
<PAGE>
<TABLE>
<S> <C>
Life Insurance Co., ICOS Corporation
(biopharmaceuticals), P.H.H. Corporation
(fleet auto management; housing and plant
relocation service), WMX Technologies Inc.
(solid and hazardous waste collection and
disposal), The Rouse Company (real estate
development), SunResorts International Ltd.
(hotel and real estate management), Harris
Corp. (electronics and communications
equipment), The Gillette Co. (personal care
products) and Sun Company Inc. (petroleum
refining and marketing).
Eugene L. Podsiadlo (38).............. Senior Vice President
466 Lexington Avenue Managing Director of EMW;
New York, New York 10017-3147 Associated with EMW since 1991; Vice
President of Citibank, N.A. from
1987-1991; Senior Vice President
of Counsellors Securities and
officer of other investment
companies advised by Warburg.
Stephen Distler (42).................. Vice President and Chief Financial Officer
466 Lexington Avenue Managing Director, Controller and Assistant
New York, New York 10017-3147 Secretary of EMW; Associated with EMW
since 1984; Treasurer of
Counsellors Securities; Officer
of other investment companies
advised by Warburg.
Eugene P. Grace (44).................. Vice President and Secretary
466 Lexington Avenue Associated with EMW since April 1994;
New York, New York 10017-3147 Attorney-at-law from September 1989-April
1994; life insurance agent, New
York Life Insurance Company from
1993-1994; General Counsel and
Secretary, Home Unity Savings
Bank from 1991-1992; Vice
President and Chief Compliance
Officer of Counsellors
Securities; Vice President and
Secretary of other investment
companies advised by Warburg.
Howard Conroy (41).................... Vice President, Treasurer and Chief
</TABLE>
27
<PAGE>
<PAGE>
<TABLE>
<S> <C>
466 Lexington Avenue.................. Accounting Officer
New York, New York 10017-3147 Associated with EMW since 1992;
Associated with Martin Geller, C.P.A. from
1990-1992; Vice President, Finance with
Gabelli/Rosenthal & Partners, L.P. until 1990;
Vice President, Treasurer and Chief Accounting
Officer of other investment companies advised by
Warburg.
Karen Amato (32)...................... Assistant Secretary
466 Lexington Avenue Associated with EMW since 1987;
New York, New York 10017-3147 Assistant Secretary of other investment
companies advised by Warburg.
</TABLE>
No employee of Warburg or PFPC Inc., the Fund's co-administrator
("PFPC"), or any of their affiliates receives any compensation from the Fund for
acting as an officer or director of the Fund. Each Director who is not a
director, trustee, officer or employee of Warburg, PFPC or any of their
affiliates receives an annual fee of $500, and $250 for each meeting of the
Board attended by him for his services as Director and is reimbursed for
expenses incurred in connection with his attendance at Board meetings.
Directors' Compensation
<TABLE>
<CAPTION>
Total Total Compensation from
Compensation from all Investment Companies
Name of Director Fund Managed by Warburg`D'*
- ---------------------------------- ------------------------- --------------------------
<S> <C> <C>
John L. Furth None** None**
Arnold M. Reichman None** None**
Richard N. Cooper $1,500 $47,000
Donald J. Donahue $1,500 $47,000
Jack W. Fritz $1,500 $47,000
Thomas A. Melfe $1,500 $47,000
Alexander B. Trowbridge $1,500 $47,000
</TABLE>
- --------
`D' Amounts shown are estimates of future payments to be made in the fiscal
year ending October 31, 1996 pursuant to existing arrangements.
28
<PAGE>
<PAGE>
* Each Director also serves as a Director or Trustee of 20 other
investment companies advised by Warburg.
** Mr. Furth and Mr. Reichman are considered to be interested persons of
the Fund and Warburg, as defined under Section 2(a)(19) of the 1940 Act,
and, accordingly, receive no compensation from the Fund or any other
investment company managed by Warburg.
As of February 29, 1996, directors and officers of the Fund as a
group owned of record 40,737 of the Fund's outstanding Common Shares. As of the
same date, Mr. Furth may be deemed to have beneficially owned 21.07% of the
Fund's outstanding Common Shares, including shares owned by clients for which
Warburg has investment discretion. Mr. Furth disclaims ownership of these shares
and does not intend to exercise voting rights with respect to these shares. No
Director or officer owned of record any Advisor Shares.
Ms. Elizabeth B. Dater, co-portfolio manager of the Fund, is also
co-portfolio manager of Warburg Pincus Emerging Growth Fund and the Small
Company Growth Portfolio of Warburg Pincus Trust. Ms. Dater also manages an
institutional post-venture capital fund and is the former Director of Research
for Warburg's investment management activities. Prior to joining Warburg in
1978, she was a vice president of research at Fiduciary Trust Company of New
York and an institutional sales assistant at Lehman Brothers. Ms. Dater has been
a regular panelist on Maryland Public Television's Wall Street Week with Louis
Rukeyser since 1976. Ms. Dater earned a B.A. degree from Boston University in
Massachusetts.
Mr. Stephen J. Lurito, co-portfolio manager of the Fund, is also
co-portfolio manager of Warburg Pincus Emerging Growth Fund and the Small
Company Growth Portfolio of Warburg Pincus Trust. Mr. Lurito, also the research
coordinator and a portfolio manager for micro-cap equity and post-venture
products, has been with EMW since 1987. Prior to that he was a research analyst
at Sanford C. Bernstein & Company, Inc. Mr. Lurito earned a B.A. degree from the
University of Virginia and an M.B.A. from The Wharton School, University of
Pennsylvania.
Mr. Robert S. Janis and Mr. Christopher M. Nawn are associate
portfolio managers and research analysts of the Fund. Prior to joining
Counsellors in October 1994, Mr. Janis was a vice president and senior research
analyst at U.S. Trust Company of New York. He earned B.A. and M.B.A. degrees
from the University of Pennsylvania. Prior to joining Warburg in September 1994,
Mr. Nawn was a senior sector analyst and portfolio manager at the Dreyfus
Corporation. He earned a B.A. degree from the Colorado College and an M.B.A.
degree from the University of Texas.
Investment Adviser, Sub-Investment Adviser and Co-Administrators
29
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<PAGE>
Warburg serves as investment adviser to the Fund, Abbott serves
as sub- investment adviser to the Fund, Counsellors Funds Service, Inc.
("Counsellors Service") serves as a co-administrator to the Fund and PFPC serves
as a co-administrator to the Fund pursuant to separate written agreements (the
"Advisory Agreement," the "Sub-Advisory Agreement," the "Counsellors Service
Co-Administration Agreement" and the "PFPC Co- Administration Agreement,"
respectively). The services provided by, and the fees payable by the Fund to,
Warburg under the Advisory Agreement, Abbott under the Sub-Advisory Agreement,
Counsellors Service under the Counsellors Service Co-Administration Agreement
and PFPC under the PFPC Co-Administration Agreement are described in the
Prospectuses. Each class of shares of the Fund bears its proportionate share of
fees payable to Warburg, Counsellors Service and PFPC in the proportion that its
assets bear to the aggregate assets of the Fund at the time of calculation.
These fees are calculated at an annual rate based on a percentage of the Fund's
average daily net assets. See the Prospectuses, "Management of the Funds."
Warburg agrees that if, in any fiscal year, the expenses borne by
the Fund exceed the applicable expense limitations imposed by the securities
regulations of any state in which shares of the Fund are registered or qualified
for sale to the public, it will reimburse the Fund to the extent required by
such regulations. Unless otherwise required by law, such reimbursement would be
accrued and paid on a monthly basis. At the date of this Statement of Additional
Information, the most restrictive annual expense limitation applicable to the
Fund is 2.5% of the first $30 million of the average net assets of the Fund, 2%
of the next $70 million of the average net assets of the Fund and 1.5% of the
remaining average net assets of the Fund.
During the fiscal period ended October 31, 1995, Warburg earned,
and voluntarily waived, $1,756, the full amount due it under the Advisory
Agreement; Warburg also reimbursed the Fund $31,458 during the fiscal period
ended October 31, 1995. During the fiscal year ended October 31, 1995,
Counsellors Service and PFPC each earned $140 in co-administrative fees. PFPC
voluntarily waived all of such fees. The Sub-Advisory Agreement had not been
entered into as of October 31, 1995.
Custodians and Transfer Agent
PNC Bank, National Association ("PNC") and State Street Bank and
Trust Company ("State Street") serve as custodians of the Fund's U.S. and
foreign assets, respectively, pursuant to separate custodian agreements (the
"Custodian Agreements"). Under the Custodian Agreements, PNC and State Street
each (i) maintains a separate account or accounts in the name of the Fund, (ii)
holds and transfers portfolio securities on account of the Fund, (iii) makes
receipts and disbursements of money on behalf of the Fund, (iv) collects and
receives all income and other payments and distributions for the account of the
Fund's portfolio securities held by it and (v) makes periodic reports to the
Board concerning the Fund's custodial arrangements. PNC may delegate its duties
under its Custodian Agreement with the Fund to a wholly owned direct or indirect
subsidiary of PNC
30
<PAGE>
<PAGE>
or PNC Bank Corp. upon notice to the Fund and upon the satisfaction of certain
other conditions. With the approval of the Board, State Street is authorized to
select one or more foreign banking institutions and foreign securities
depositories to serve as sub-custodian on behalf of the Fund. PNC is an
indirect, wholly owned subsidiary of PNC Bank Corp., and its principal business
address is Broad and Chestnut Streets, Philadelphia, Pennsylvania 19101. The
principal business address of State Street is 225 Franklin Street, Boston,
Massachusetts 02110.
State Street also acts as the shareholder servicing, transfer and
dividend disbursing agent of the Fund pursuant to a Transfer Agency and Service
Agreement, under which State Street (i) issues and redeems shares of the Fund,
(ii) addresses and mails all communications by the Fund to record owners of Fund
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 Fund. State
Street has delegated to Boston Financial Data Services, Inc., a 50% owned
subsidiary ("BFDS"), responsibility for most shareholder servicing functions.
BFDS's principal business address is 2 Heritage Drive, Boston, Massachusetts
02171.
Organization of the Fund
The Fund's charter authorizes the Board to issue three billion
full and fractional shares of common stock, $.001 par value per share. Common
Stock ("Common Shares"), of which one billion shares are designated Common Stock
- - Series 1 and one billion shares are designated Common Stock - Series 2 (the
"Advisor Shares"). Only Common Shares and Advisor Shares have been issued by the
Fund.
All shareholders of the Fund in each class, upon liquidation,
will participate ratably in the Fund's net assets. Shares do not have cumulative
voting rights, which means that holders of more than 50% of the shares voting
for the election of Directors can elect all Directors. Shares are transferable
but have no preemptive, conversion or subscription rights.
Distribution and Shareholder Servicing
Common Shares. The Fund has entered into a Shareholder Servicing
and Distribution Plan (the "12b-1 Plan"), pursuant to Rule 12b-1 under the 1940
Act, pursuant to which the Fund will pay Counsellors Securities, in
consideration for Services (as defined below), a fee calculated at an annual
rate of .25% of the average daily net assets of the Common Shares of the Fund.
Services performed by Counsellors Securities include (i) the sale of the Common
Shares, as set forth in the 12b-1 Plan ("Selling Services"), (ii) ongoing
servicing and/or maintenance of the accounts of Common Shareholders of the Fund,
as set forth in the 12b-1 Plan ("Shareholder Services"), and (iii) sub-transfer
agency services, subaccounting services or administrative services related to
the sale of the Common Shares, as set forth in the 12b-1 Plan ("Administrative
Services" and collectively with Selling
31
<PAGE>
<PAGE>
Services and Administrative Services, "Services") including, without limitation,
(a) payments reflecting an allocation of overhead and other office expenses of
Counsellors Securities related to providing Services; (b) payments made to, and
reimbursement of expenses of, persons who provide support services in connection
with the distribution of the Common Shares including, but not limited to, office
space and equipment, telephone facilities, answering routine inquiries regarding
the Fund, and providing any other Shareholder Services; (c) payments made to
compensate selected dealers or other authorized persons for providing any
Services; (d) costs relating to the formulation and implementation of marketing
and promotional activities for the Common Shares, including, but not limited to,
direct mail promotions and television, radio, newspaper, magazine and other mass
media advertising, and related travel and entertainment expenses; (e) costs of
printing and distributing prospectuses, statements of additional information and
reports of the Fund to prospective shareholders of the Fund; and (f) costs
involved in obtaining whatever information, analyses and reports with respect to
marketing and promotional activities that the Fund may, from time to time, deem
advisable. During the period commencing September 30, 1995 (commencement of
operations) to October 31, 1995, the Fund paid $351.00 in 12b-1 fees, all of
which was spent on advertising and marketing communications.
Pursuant to the 12b-1 Plan, Counsellors Securities provides the
Board with periodic reports of amounts expended under the 12b-1 Plan and the
purpose for which the expenditures were made.
Advisor Shares. The Fund may, in the future, enter into
agreements ("Agreements") with institutional shareholders of record,
broker-dealers, financial institutions, depository institutions, retirement
plans and financial intermediaries ("Institutions") to provide certain
distribution, shareholder servicing, administrative and/or accounting services
for their clients or customers (or participants in the case of retirement plans)
("Customers") who are beneficial owners of Advisor Shares. See the Advisor
Prospectus, "Shareholder Servicing." Agreements will be governed by a
distribution plan (the "Distribution Plan") pursuant to Rule 12b-1 under the
1940 Act. The Distribution Plan requires the Board, at least quarterly, to
receive and review written reports of amounts expended under the Distribution
Plan and the purposes for which such expenditures were made.
An Institution with which the Fund has entered into an Agreement
with respect to its Advisor Shares may charge a Customer one or more of the
following types of fees, as agreed upon by the Institution and the Customer,
with respect to the cash management or other services provided by the
Institution: (i) account fees (a fixed amount per month or per year); (ii)
transaction fees (a fixed amount per transaction processed); (iii) compensation
balance requirements (a minimum dollar amount a Customer must maintain in order
to obtain the services offered); or (iv) account maintenance fees (a periodic
charge based upon the percentage of assets in the account or of the dividend
paid on those assets). Services provided by an Institution to Customers are in
addition to, and not duplicative of, the services to be provided under the
Fund's co-administration and distribution and shareholder
32
<PAGE>
<PAGE>
servicing arrangements. A Customer of an Institution should read the relevant
Prospectus and this Statement of Additional Information in conjunction with the
Agreement and other literature describing the services and related fees that
would be provided by the Institution to its Customers prior to any purchase of
Fund shares. Prospectuses are available from the Fund's distributor upon
request. No preference will be shown in the selection of Fund portfolio
investments for the instruments of Institutions.
General. The Distribution Plan and the 12b-1 Plan will continue
in effect for so long as their continuance is specifically approved at least
annually by the Board, including a majority of the Directors who are not
interested persons of the Fund and who have no direct or indirect financial
interest in the operation of the Distribution Plan or the 12b-1 Plan, as the
case may be ("Independent Directors"). Any material amendment of the
Distribution Plan or the 12b-1 Plan would require the approval of the Board in
the manner described above. The Distribution Plan or the 12b-1 Plan may not be
amended to increase materially the amount to be spent thereunder without
shareholder approval of the Advisor Shares or the Common Shares, as the case may
be. Neither the Distribution Plan nor the 12b-1 Plan may be terminated at any
time, without penalty, by vote of a majority of the Independent Directors or by
a vote of a majority of the outstanding voting securities of the Advisor Shares
or the Common Shares, as the case may be.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The offering price of the Fund's shares is equal to the per share
net asset value of the relevant class of shares of the Fund. Information on how
to purchase and redeem Fund shares and how such shares are priced is included in
the Prospectuses under "Net Asset Value."
Under the 1940 Act, the Fund 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. (The Fund may also suspend or postpone the recordation of an
exchange of its shares upon the occurrence of any of the foregoing conditions.)
If the Board determines that conditions exist which make payment
of redemption proceeds wholly in cash unwise or undesirable, the Fund may make
payment wholly or partly in securities or other investment instruments which may
not constitute securities as such term is defined in the applicable securities
laws. If a redemption is paid wholly or partly in securities or other property,
a shareholder would incur transaction costs in disposing of the redemption
proceeds. The Fund intends to comply with Rule 18f-1 promulgated under the 1940
Act with respect to redemptions in kind.
33
<PAGE>
<PAGE>
Automatic Cash Withdrawal Plan. An automatic cash withdrawal plan
(the "Plan") is available to shareholders who wish to receive specific amounts
of cash periodically. Withdrawals may be made under the Plan by redeeming as
many shares of the Fund as may be necessary to cover the stipulated withdrawal
payment. To the extent that withdrawals exceed dividends, distributions and
appreciation of a shareholder's investment in the Fund, there will be a
reduction in the value of the shareholder's investment and continued withdrawal
payments may reduce the shareholder's investment and ultimately exhaust it.
Withdrawal payments should not be considered as income from investment in the
Fund. All dividends and distributions on shares in the Plan are automatically
reinvested at net asset value in additional shares of the Fund.
EXCHANGE PRIVILEGE
An exchange privilege with certain other funds advised by Warburg
is available to investors in the Fund. The funds into which exchanges of Common
Shares currently can be made are listed in the Common Share Prospectus.
Exchanges may also be made between certain Warburg Pincus Advisor Funds.
The exchange privilege enables shareholders to acquire shares in
a fund with a different investment objective when they believe that a shift
between funds is an appropriate investment decision. This privilege is available
to shareholders residing in any state in which the Common Shares or Advisor
Shares being acquired, as relevant, may legally be sold. Prior to any exchange,
the investor should obtain and review a copy of the current prospectus of the
relevant class of each fund into which an exchange is being considered.
Shareholders may obtain a prospectus of the relevant class of the fund into
which they are contemplating an exchange from Counsellors Securities.
Upon receipt of proper instructions and all necessary supporting
documents, shares submitted for exchange are redeemed at the then-current net
asset value of the relevant class and the proceeds are invested on the same day,
at a price as described above, in shares of the relevant class of the fund being
acquired. Warburg reserves the right to reject more than three exchange requests
by a shareholder in any 30-day period. The exchange privilege may be modified or
terminated at any time upon 60 days' notice to shareholders.
34
<PAGE>
<PAGE>
ADDITIONAL INFORMATION CONCERNING TAXES
The discussion set out below of tax considerations generally
affecting the Fund 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 their own tax advisers with
respect to the particular tax consequences to them of an investment in the Fund.
The Fund intends to qualify each year as a "regulated investment
company" under Subchapter M of the Code. If it qualifies as a regulated
investment company, the Fund will pay no federal income taxes on its taxable net
investment income (that is, taxable income other than net realized capital
gains) and its net realized capital gains that are distributed to shareholders.
To qualify under Subchapter M, the Fund must, among other things: (i) distribute
to its shareholders at least 90% of its taxable net investment income (for this
purpose consisting of taxable net investment income and net realized short-term
capital gains); (ii) derive at least 90% of its gross income from dividends,
interest, payments with respect to loans of securities, gains from the sale or
other disposition of securities, or other income (including, but not limited to,
gains from options, futures, and forward contracts) derived with respect to the
Fund's business of investing in securities; (iii) derive less than 30% of its
annual gross income from the sale or other disposition of securities, options,
futures or forward contracts held for less than three months; and (iv) diversify
its holdings so that, at the end of each fiscal quarter of the Fund (a) at least
50% of the market value of the Fund's assets is represented by cash, U.S.
Government Securities and other securities, with those other securities limited,
with respect to any one issuer, to an amount no greater in value than 5% of the
Fund's total assets and to not more than 10% of the outstanding voting
securities of the issuer, and (b) not more than 25% of the market value of the
Fund's assets is invested in the securities of any one issuer (other than U.S.
Government Securities or securities of other regulated investment companies) or
of two or more issuers that the Fund controls and that are determined to be in
the same or similar trades or businesses or related trades or businesses. In
meeting these requirements, the Fund may be restricted in the selling of
securities held by the Fund for less than three months and in the utilization of
certain of the investment techniques described above and in the Fund's
Prospectuses. As a regulated investment company, the Fund will be subject to a
4% non-deductible excise tax measured with respect to certain undistributed
amounts of ordinary income and capital gain required to be but not distributed
under a prescribed formula. The formula requires payment to shareholders during
a calendar year of distributions representing at least 98% of the Fund's taxable
ordinary income for the calendar year and at least 98% of the excess of its
capital gains over capital losses realized during the one-year period ending
October 31 during such year, together with any undistributed, untaxed amounts of
ordinary income and capital gains from the previous calendar year. The Fund
expects to pay the dividends and make the distributions necessary to avoid the
application of this excise tax.
The Fund's transactions, if any, in foreign currencies, forward
contracts, options and futures contracts (including options and forward
contracts on foreign currencies)
35
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<PAGE>
will be subject to special provisions of the Code that, among other things, may
affect the character of gains and losses recognized by the Fund (i.e., may
affect whether gains or losses are ordinary or capital), accelerate recognition
of income to the Fund, defer Fund losses and cause the Fund to be subject to
hyperinflationary currency rules. These rules could therefore affect the
character, amount and timing of distributions to shareholders. These provisions
also (i) will require the Fund to mark-to-market certain types of its positions
(i.e., treat them as if they were closed out) and (ii) may cause the Fund 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. The Fund will monitor its transactions, will
make the appropriate tax elections and will make the appropriate entries in its
books and records when it acquires any foreign currency, forward contract,
option, futures contract or hedged investment so that (a) neither the Fund nor
its shareholders will be treated as receiving a materially greater amount of
capital gains or distributions than actually realized or received, (b) the Fund
will be able to use substantially all of its losses for the fiscal years in
which the losses actually occur and (c) the Fund will continue to qualify as a
regulated investment company.
Upon the sale or exchange of shares, a shareholder will realize a
taxable gain or loss depending upon the amount realized and the basis in the
shares. Such gain or loss will be treated as capital gain or loss if the shares
are capital assets in the shareholder's hands, and, as described in the
Prospectuses, will be long-term or short-term depending upon the shareholder's
holding period for the shares. Any loss realized on a sale or exchange will be
disallowed to the extent the shares disposed of are replaced, including
replacement through the reinvestment of dividends and capital gains
distributions in the Fund, within a period of 61 days beginning 30 days before
and ending 30 days after the disposition of the shares. In such a case, the
basis of the shares acquired will be increased to reflect the disallowed loss.
A shareholder of the Fund receiving dividends or distributions in
additional shares should be treated for federal income tax purposes as receiving
a distribution in an amount equal to the amount of money that a shareholder
receiving cash dividends or distributions receives, and should have a cost basis
in the shares received equal to that amount. Investors considering buying shares
just prior to a dividend or capital gain distribution should be aware that,
although the price of shares purchased at that time may reflect the amount of
the forthcoming distribution, those who purchase just prior to a distribution
will receive a distribution that will nevertheless be taxable to them. Proposed
legislation would reduce the dividends received deduction available to
corporations (as discussed in the Prospectuses) from 70% to 50% of dividends
received.
Each shareholder will receive an annual statement as to the
federal income tax status of his dividends and distributions from the Fund for
the prior calendar year. Furthermore, shareholders will also receive, if
appropriate, various written notices after the close of the Fund's taxable year
regarding the federal income tax status of certain dividends
36
<PAGE>
<PAGE>
and distributions that were paid (or that are treated as having been paid) by
the Fund to its shareholders during the preceding year.
If a shareholder fails to furnish a correct taxpayer
identification number, fails to report fully dividend or interest income, or
fails to certify that he has provided a correct taxpayer identification number
and that he is not subject to "backup withholding," the shareholder may be
subject to a 31% "backup withholding" tax with respect to (i) taxable dividends
and distributions and (ii) the proceeds of any sales or repurchases of shares of
the Fund. An individual's taxpayer identification number is his social security
number. Corporate shareholders and other shareholders specified in the Code are
or may be exempt from backup withholding. The backup withholding tax is not an
additional tax and may be credited against a taxpayer's federal income tax
liability. Dividends and distributions also may be subject to state and local
taxes depending on each shareholder's particular situation.
Investment in Passive Foreign Investment Companies
If the Fund purchases shares in certain foreign entities
classified under the Code as "passive foreign investment companies" ("PFICs"),
the Fund may be subject to federal income tax on a portion of an "excess
distribution" or gain from the disposition of the shares, even though the income
may have to be distributed as a taxable dividend by the Fund to its
shareholders. 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 Fund. Certain interest charges may be imposed on either the Fund or
its shareholders with respect to any taxes arising from excess distributions or
gains on the disposition of shares in a PFIC.
The Fund may be eligible to elect 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 stock, but such an election may have the effect of accelerating
the recognition of income and gains by the Fund 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 Fund.
On April 1, 1992 proposed regulations of the Internal Revenue
Service (the "IRS") were published providing a mark-to-market election for
regulated investment companies. The IRS subsequently issued a notice indicating
that final regulations will provide that regulated investment companies may
elect the mark-to-market election for tax years ending after March 31, 1992 and
before April 1, 1993. Whether and to what extent the notice will apply to
taxable years of the Fund is unclear. If the Fund is not able to make the
foregoing election, it may be able to avoid the interest charge (but not the
ordinary income treatment) on disposition of the stock by electing, under
proposed regulations, each year to mark-to-market the stock (that is, treat it
as if it were sold for fair market value). Such an election could result in
acceleration of income to the Fund. Recently proposed legislation would codify
the mark-to-market election for regulated investment companies.
37
<PAGE>
<PAGE>
DETERMINATION OF PERFORMANCE
From time to time, the Fund may quote the total return of its
Common Shares and/or Advisor Shares in advertisements or in reports and other
communications to shareholders. With respect to the Fund's Common Shares, the
actual (non-annualized) total return for the period commencing September 30,
1995 (commencement of operations) and ended October 31, 1995 was 6.90% (5.60%
without waivers), and the average annual total return for the same period was
109.18% (82.70% without waivers). These figures are calculated by finding the
average annual compounded rates of return for the one-, five- and ten- (or such
shorter period as the relevant class of shares 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)'pp'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. With respect to Advisor Shares, the Fund's actual
(non-annualized) total return for the period commencing September 30, 1995
(commencement of operation) and ended October 31, 1995 was 6.80% (2.70% without
waivers), and the Fund's average annual total return for the same period was
107.02% (34.27% without waivers). Investors should note that this performance
may not be representative of the Fund's total return in longer market cycles.
The Fund may advertise, from time to time, comparisons of the
performance of its Common Shares and/or Advisor Shares with that of one or more
other mutual funds with similar investment objectives. The Fund 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.
The performance of a class of Fund shares will vary from time to
time depending upon market conditions, the composition of the Fund's 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, the Fund's performance will fluctuate, unlike
certain bank deposits or other investments which pay a fixed yield for a stated
period of time. Any fees charged by Institutions or other institutional
investors directly to their customers in connection with investments in Fund
shares are not reflected in the Fund's total return, and
38
<PAGE>
<PAGE>
such fees, if charged, will reduce the actual return received by customers on
their investments.
Reference may be made in advertising a class of Fund shares to
opinions of Wall Street economists and analysts regarding economic cycles and
their effects historically on the performance of small companies, both as a
class and relative to other investments. The Fund may also discuss its beta, or
volatility relative to the market, and make reference to its relative
performance in various market cycles in the United States.
INDEPENDENT ACCOUNTANTS AND COUNSEL
Coopers & Lybrand L.L.P. ("Coopers & Lybrand"), with principal
offices at 2400 Eleven Penn Center, Philadelphia, Pennsylvania 19103, serves as
independent accountants for the Fund. The Fund's financial statement for the
fiscal period ended October 31, 1995 that appears in this Statement of
Additional Information has been audited by Coopers & Lybrand, whose report
thereon appears elsewhere herein and has been included herein in reliance upon
the report of such firm of independent accountants given upon their authority as
experts in accounting and auditing.
Willkie Farr & Gallagher serves as counsel for the Fund as well
as counsel to Warburg, Counsellors Service and Counsellors Securities.
MISCELLANEOUS
As of February 29, 1996, the name, address and percentage of
ownership of each person (other than Mr. Furth, see "Management of Fund") that
owns of record 5% or more of the Fund's outstanding shares where as follows:
Common Shares
Charles Schwab & Co., Inc. ("Schwab"), Reinvest Account, Attn:
Mutual Funds Dept., 101 Montgomery Street, San Francisco, CA 94104-4122 --
24.55%; Schwab, Cash Account, Attn: Mutual Funds Dept., 101 Montgomery Street,
San Francisco, CA 94104-4122 -- 5.06% and National Financial Services Corp.,
P.O. Box 3908, Church Street Station, New York, NY 10008 -- 9.43%. The Fund
believes these entities are not the beneficial owners of shares held of record
by them. Mr. Lionel I. Pincus, Chairman of the Board and Chief Executive Officer
of EMW, may be deemed to have beneficially owned 21.26% of the Common Shares
outstanding, including shares owned by clients for which Warburg has investment
discretion and by companies that EMW may be deemed to control. Mr. Pincus
disclaims ownership of these shares and does not intend to exercise voting
rights with respect to these shares.
39
<PAGE>
<PAGE>
Advisor Shares
Warburg, Pincus Counsellors, Inc., 466 Lexington Avenue, 10th
Floor, New York, NY 10017 -- 83.88%. Warburg holds these shares as a result of
limited distribution activities of the Advisor Shares since commencement of the
Fund's operations. Mr. Pincus may be deemed to have beneficially owned 83.88% of
the Advisor Shares outstanding, including shares owned by clients for which
Warburg has investment discretion and by companies that EMW may be deemed to
control. Mr. Pincus disclaims ownership of these shares and does not intend to
exercise voting rights with respect to these shares.
FINANCIAL STATEMENTS
The Fund's audited financial statements and Report of Independent
Accountants for the fiscal period ended October 31, 1995 are attached to this
Statement of Additional Information.
40
<PAGE>
<PAGE>
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 it is 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 is
regarded as having an adequate capacity to pay interest and repay principal.
Although it normally exhibits adequate protection parameters, adverse economic
conditions or changing circumstances are more likely to lead to a weakened
capacity to pay interest and repay principal for bonds in this category than for
bonds in higher rated categories.
BB, B and CCC - Debt rated BB and B are regarded, on balance, as
predominately speculative with respect to capacity to pay interest and repay
principal in
<PAGE>
<PAGE>
accordance with the terms of the obligation. BB represents a lower degree of
speculation than B, and CCC the highest degree of speculation. While such bonds
will likely have some quality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.
BB - Debt rated BB has less near-term vulnerability to default
than other speculative issues. However, they face major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions, which could
lead to inadequate capacity to meet timely interest and principal payments. The
BB rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB rating.
B - Debt rated B has a greater vulnerability to default but
currently have the capacity to meet interest payments and principal repayments.
Adverse business, financial, or economic conditions will likely impair capacity
or willingness to pay interest and repay principal. The B rating category is
also used for debt subordinated to senior debt that is assigned an actual or
implied BB or BB- rating.
CCC - Debt rated CCC has a currently identifiable vulnerability
to default and is dependent upon favorable business, financial and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it is not likely to
have the capacity to pay interest and repay principal. The CCC rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied B or B- rating.
CC - This rating is typically applied to debt subordinated to
senior debt that is assigned an actual or implied CCC rating.
C - This rating is typically applied to debt subordinated to
senior debt which is assigned an actual or implied CCC- debt rating. The C
rating may be used to cover a situation where a bankruptcy petition has been
filed, but debt service payments are continued.
Additionally, the rating CI is reserved for income bonds on which
no interest is being paid. Such debt is rated between debt rated C and debt
rated D.
To provide more detailed indications of credit quality, the
ratings may be modified by the addition of a plus or minus sign to show relative
standing within this major rating category.
D - Debt rated D is in payment default. The D rating category is
used when interest payments or principal payments are not made on the date due
even if the applicable grace period has not expired, unless S&P believes that
such payments will be
A-2
<PAGE>
<PAGE>
made during such grace period. The D rating also will be used upon the filing of
a bankruptcy petition if debt service payments are jeopardized.
The following summarizes the ratings used by Moody's for
corporate bonds:
Aaa - Bonds that are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." 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.
Ba - Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate and thereby
not well safeguarded during both good and bad times over the future. Uncertainty
of position characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of
desirable investments. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Moody's applies numerical modifiers (1, 2 and 3) with respect to
the bonds rated "Aa" through "B." The modifier 1 indicates that the bond being
rated ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the bond ranks
in the lower end of its generic rating category.
A-3
<PAGE>
<PAGE>
Caa - Bonds that are rated Caa are of poor standing. These issues
may be in default or present elements of danger may exist with respect to
principal or interest.
Ca - Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default or have other
marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
A-4
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS POST-VENTURE CAPITAL FUND
- --------------------------------------------------------------------------------
December 8, 1995
Dear Shareholder:
The objective of Warburg Pincus Post-Venture Capital Fund (the 'Fund') is
long-term growth of capital. The Fund pursues its objective by investing
primarily in equity securities of companies deemed to be in their
post-venture-capital stage.
From the Fund's inception on September 29, 1995, through October 31, 1995,
it gained 6.90%*. Its total net assets were $3,025,429.
We are quite optimistic about the Fund's prospects. A major study assessing
the impact of venture-capital financing on firms' performance** concluded that
venture-backed companies generate superior results relative to those that lacked
such backing. According to the study, venture-backed firms create innovative
products and services. Relative to Fortune 500 companies, they create jobs at a
faster pace, spend more on research and development, and create sales-especially
export sales-at a faster rate. Our own considerable experience researching and
evaluating the performance of venture-backed companies yields similarly
favorable conclusions.
We believe that the Fund's focus on such companies offers a unique and
attractive opportunity to aggressive investors.
<TABLE>
<S> <C>
Elizabeth B. Dater Stephen J. Lurito
Co-Portfolio Manager Co-Portfolio Manager
</TABLE>
* Non-annualized. This figure represents past performance and does not
guarantee future results. Investment return and principal value of an
investment will fluctuate so that an investor's shares upon redemption may be
worth more or less than original cost.
**Fifth Annual Economic Impact of Venture Capital Study, National Venture
Capital Association/ Coopers & Lybrand L.L.P. (U.S.A.), 1995.
12
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Boards of Directors, Trustees and Shareholders of
Warburg Pincus Equity Funds:
We have audited the accompanying statements of net assets of the Warburg Pincus
Capital Appreciation Fund, Warburg Pincus Emerging Growth Fund and Warburg
Pincus International Equity Fund and the accompanying statements of assets and
liabilities including the schedules of investments of Warburg Pincus Japan OTC
Fund, Warburg Pincus Emerging Markets Fund and Warburg Pincus Post-Venture
Capital Fund (all Funds collectively referred to as the 'Warburg Pincus Equity
Funds') as of October 31, 1995, and the related statements of operations for the
year (or period) then ended, and the statements of changes in net assets for
each of the two years (or period) and the financial highlights for each of the
three years (or period) in the period then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The financial highlights of the
Warburg Pincus Equity Funds for each of the two years in the period ended
October 31, 1992, were audited by other auditors, whose report dated December
15, 1992, expressed an unqualified opinion.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995, by correspondence with the custodians and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the Warburg Pincus Equity Funds as of October 31, 1995, and the results of
their operations for the year (or period) then ended, and the changes in their
net assets for each of the two years (or period) and the financial highlights
for each of the three years (or period) in the period then ended, in conformity
with generally accepted accounting principles.
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, PA
December 14, 1995
67
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<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS POST-VENTURE CAPITAL FUND
SCHEDULE OF INVESTMENTS
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
-------- ----------
<S> <C> <C>
COMMON STOCK (81.2%)
CAPITAL GOODS
Computers (26.7%)
Applix, Inc. + 2,400 $ 66,600
Atria Software, Inc. + 400 14,300
Auspex Systems, Inc. + 1,100 15,537
Boca Research, Inc. + 1,100 27,775
Brock Control Systems, Inc. + 5,000 39,375
Cheyenne Software, Inc. + 1,500 31,125
Continuum, Inc. + 800 31,500
FileNet Corp. + 1,300 58,987
Hyperion Software Corp. + 1,300 64,025
Logic Works, Inc. + 3,000 45,750
Macromedia, Inc. + 500 18,500
Manugistics Group, Inc. + 3,400 58,650
McAfee Associates, Inc. + 1,200 69,900
Network General Corp. + 1,300 53,950
Parametric Technology Corp. + 500 33,437
Softkey International, Inc. + 2,200 69,300
Synopsys, Inc. + 800 30,000
System Software Associates, Inc. 2,000 61,750
Verity, Inc. + 2,000 73,500
----------
863,961
----------
Electronics (5.5%)
Asyst Technologies, Inc. + 1,300 54,600
Maxim Integrated Products, Inc. + 400 29,900
Watkins Johnson Co. 1,100 52,938
Xilinx, Inc. + 900 41,400
----------
178,838
----------
Office Equipment & Supplies (1.1%)
Viking Office Products, Inc. + 800 35,600
----------
CONSUMER
Business Services (4.9%)
Norrell Corp. 600 18,525
On Assignment, Inc. + 1,100 29,700
PMT Services, Inc. + 1,200 32,250
QuickResponse Services, Inc. + 1,200 30,000
Solectron Corp. + 1,200 48,300
----------
158,775
----------
Consumer Services (0.5%)
DEVRY, Inc. + 700 15,575
----------
</TABLE>
See Accompanying Notes to Financial Statements.
33
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS POST-VENTURE CAPITAL FUND
SCHEDULE OF INVESTMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
-------- ----------
<S> <C> <C>
COMMON STOCK (CONT'D)
Healthcare (16.9%)
American Oncology Resources, Inc. + 600 $ 21,000
Arbor Health Care Co. + 2,200 37,400
EMcare Holdings, Inc. + 2,700 62,100
Endosonics Corp. + 2,000 31,750
Enterprise Systems, Inc. + 3,500 81,813
Health Care & Retirement Corp. + 200 5,875
Health Managment System, Inc. + 1,600 51,200
Healthsource, Inc. + 1,300 68,900
Oxford Health Plans, Inc. + 800 62,600
ThermoTrex Corp. + 600 21,525
Total Renal Care Holdings, Inc. + 5,000 101,875
----------
546,038
----------
Leisure & Entertainment (1.1%)
Regal Cinemas, Inc. + 900 35,325
----------
Lodging & Restaurants (0.4%)
Doubletree Corp. + 600 13,200
----------
Pharmaceuticals (4.2%)
Cephalon, Inc. + 900 27,000
DepoTech Corp. + 2,000 29,000
Genzyme Corp. + 800 46,600
Genzyme Corp. -- Tissue Repair Division + 1,900 33,963
----------
136,563
----------
Retail (4.4%)
Borders Group, Inc. + 1,500 25,688
Micro Warehouse, Inc. + 600 26,700
Neostar Retail Group, Inc. + 1,900 28,975
Office Depot, Inc. + 1,100 31,487
PETsMART, Inc. + 900 30,150
----------
143,000
----------
ENERGY AND RELATED
Oil Services (0.9%)
Input/Output, Inc. + 800 29,900
----------
FINANCE
Financial Services (1.1%)
MS Financial Corp. + 1,100 12,375
Mutual Risk Management Ltd. 300 11,063
United Companies Financial Corp. 400 11,300
----------
34,738
----------
</TABLE>
See Accompanying Notes to Financial Statements.
34
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<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS POST-VENTURE CAPITAL FUND
SCHEDULE OF INVESTMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
-------- ----------
<S> <C> <C>
COMMON STOCK (CONT'D)
MEDIA
Communications & Media (1.1%)
America Online, Inc. + 300 $ 24,000
Central European Media Enterprises Ltd. Class A + 500 11,500
----------
35,500
----------
Telecommunications (12.4%)
Ascend Communications, Inc. + 200 13,000
Bay Networks, Inc. + 400 26,500
Cascade Communications Corp. + 500 35,625
Cisco Systems, Inc. + 200 15,500
DSP Communications, Inc. + 800 29,000
Gilat Satellite Networks Ltd. + 800 17,800
Paging Network, Inc. + 900 20,700
Pairgain Technologies, Inc. + 1,000 42,750
PictureTel Corp. + 400 26,400
QUALCOMM, Inc. 300 11,550
StrataCom, Inc. + 1,100 67,650
Tellabs, Inc. + 1,200 40,800
US Robotics Corp. + 600 55,500
----------
402,775
----------
TOTAL COMMON STOCK (Cost $2,465,347) 2,629,788
----------
PAR
--------
SHORT-TERM INVESTMENTS (18.8%)
Repurchase agreement with State Street Bank and Trust Co.
dated 10/31/95 at 5.83% to be repurchased at $610,099 on 11/01/95.
(Collateralized by $620,000 U.S. Treasury Note at 6.875%,
due 10/31/96, with a market value of $627,750.) (Cost $610,000) $610,000 610,000
----------
TOTAL INVESTMENTS AT VALUE (100.0%) (Cost $3,075,347*) $3,239,788
----------
----------
</TABLE>
+ Non-income producing security.
* Also cost for Federal income tax purposes.
See Accompanying Notes to Financial Statements.
35
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS POST-VENTURE CAPITAL FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at value (Cost $3,075,347) $ 3,239,788
Receivable for Fund shares sold 125,583
Cash 108,361
Deferred organizational costs (Note 1) 108,338
Receivable for investment securities sold 57,748
Other receivables 6,557
-----------
Total assets 3,646,375
-----------
LIABILITIES
Payable for investment securities purchased 484,782
Organizational costs payable 110,270
Accrued expenses 25,894
-----------
Total liabilities 620,946
-----------
NET ASSETS applicable to 282,937 Common Shares outstanding and
119 Advisor Shares outstanding $ 3,025,429
-----------
-----------
NET ASSET VALUE, offering and redemption price per Common Share
($3,024,158[div]282,937) $10.69
------
------
NET ASSET VALUE, offering and redemption price per Advisor Share
($1,271[div]119) $10.68
------
------
</TABLE>
See Accompanying Notes to Financial Statements.
38
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
STATEMENTS OF OPERATIONS
For the Year or Period Ended October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus Warburg Pincus
Capital Appreciation Emerging Growth International Equity
Fund Fund Fund
-------------------- --------------- --------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 2,107,232 $ 772,834 $ 40,091,101
Interest 684,526 2,112,707 7,110,116
Foreign taxes withheld (2,423) 0 (5,031,072)
-------------------- --------------- --------------------
Total investment income 2,789,335 2,885,541 42,170,145
-------------------- --------------- --------------------
EXPENSES:
Investment advisory 1,367,729 3,824,061 20,225,631
Administrative services 390,780 849,790 3,408,846
Audit 27,208 27,469 69,286
Custodian/Sub-custodian 63,554 145,277 1,753,400
Directors/Trustees 10,500 10,500 11,500
Distribution/Shareholder servicing 45,989 531,359 1,274,343
Insurance 10,104 14,770 58,340
Legal 90,851 76,677 102,549
Organizational 0 0 0
Printing 27,954 41,914 172,129
Registration 62,918 159,555 428,595
Transfer agent 92,488 149,133 1,538,272
Miscellaneous 35,776 37,625 380,319
-------------------- --------------- --------------------
2,225,851 5,868,130 29,423,210
Less: fees waived and expenses reimbursed 0 0 0
-------------------- --------------- --------------------
Total expenses 2,225,851 5,868,130 29,423,210
-------------------- --------------- --------------------
Net investment income (loss) 563,484 (2,982,589) 12,746,935
-------------------- --------------- --------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
AND FOREIGN CURRENCY RELATED ITEMS:
Net realized gain (loss) from security transactions 31,649,453 49,113,782 (34,444,203)
Net realized gain (loss) from foreign currency
related items 0 0 16,792,905
Net change in unrealized appreciation (depreciation)
from investments and foreign currency related items 12,386,702 84,670,426 (4,675,049)
-------------------- --------------- --------------------
Net realized and unrealized gain (loss) from
investments and foreign currency related
items 44,036,155 133,784,208 (22,326,347)
-------------------- --------------- --------------------
Net increase (decrease) in net assets
resulting from operations $ 44,599,639 $ 130,801,619 $ (9,579,412)
-------------------- --------------- --------------------
-------------------- --------------- --------------------
</TABLE>
40
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus Warburg Pincus
Japan OTC Emerging Markets Post-Venture Capital
Fund Fund (1) Fund (2)
-------------- ---------------- --------------------
<S> <C> <C>
$ 221,577 $ 33,788 $ 0
412,522 22,711 2,675
(33,237) (3,250) 0
-------------- ---------------- -----------
600,862 53,249 2,675
-------------- ---------------- -----------
599,720 29,641 1,756
138,679 5,217 280
25,700 16,000 9,000
60,612 45,701 5,771
11,290 14,625 1,250
119,941 5,926 351
2,761 855 0
96,359 54,987 5,000
42,449 37,432 1,932
2,579 14,765 1,000
115,649 26,664 6,000
100,690 28,656 2,833
10,620 6,070 500
-------------- ---------------- -----------
1,327,049 286,539 35,673
(652,386) (262,824) (33,354)
-------------- ---------------- -----------
674,663 23,715 2,319
-------------- ---------------- -----------
(73,801) 29,534 356
-------------- ---------------- -----------
(4,629,196) 102,219 (26,884)
7,895,010 (4,992) 0
(195,368) (9,058) 164,441
-------------- ---------------- -----------
3,070,446 88,169 137,557
-------------- ---------------- -----------
$2,996,645 $117,703 $137,913
-------------- ---------------- -----------
-------------- ---------------- -----------
(1) For the period December 30, 1994 (Commencement of Operations) through October 31, 1995.
(2) For the period September 29, 1995 (Commencement of Operations) through October 31, 1995.
</TABLE>
See Accompanying Notes to Financial Statements.
41
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus
Capital Appreciation Emerging Growth
Fund Fund
----------------------------------- -----------------------------------
For the Year Ended October 31, For the Year Ended October 31,
1995 1994 1995 1994
--------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ 563,484 $ 384,246 $ (2,982,589) $ (1,678,646)
Net realized gain (loss) from
security transactions 31,649,453 11,173,174 49,113,782 (5,721,525)
Net realized gain (loss) from foreign
currency related items 0 0 0 0
Net change in unrealized appreciation
(depreciation) from investments and
foreign currency related items 12,386,702 (9,106,613) 84,670,426 10,930,919
--------------- ---------------- --------------- ----------------
Net increase (decrease) in net
assets resulting from
operations 44,599,639 2,450,807 130,801,619 3,530,748
--------------- ---------------- --------------- ----------------
FROM DISTRIBUTIONS:
Dividends from net investment income:
Common Shares (563,484) (419,337) 0 0
Advisor Shares 0 (27,724) 0 0
Distributions in excess of net
investment income:
Common Shares 0 0 0 0
Distributions from capital gains:
Common Shares (10,419,627) (12,899,141) 0 (10,576,150)
Advisor Shares (575,892) (852,608) 0 (1,639,316)
--------------- ---------------- --------------- ----------------
Net decrease from distributions (11,559,003) (14,198,810) 0 (12,215,466)
--------------- ---------------- --------------- ----------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 88,963,455 45,617,531 335,569,078 180,813,270
Reinvested dividends 11,246,752 13,809,167 0 12,758,387
Net asset value of shares redeemed (53,459,471) (49,851,500) (116,280,844) (71,767,717)
--------------- ---------------- --------------- ----------------
Net increase in net assets from
capital share transactions 46,750,736 9,575,198 219,288,234 121,803,940
--------------- ---------------- --------------- ----------------
Net increase (decrease) in net
assets 79,791,372 (2,172,805) 350,089,853 113,119,222
NET ASSETS:
Beginning of period 167,514,493 169,687,298 304,672,758 191,553,536
--------------- ---------------- --------------- ----------------
End of period $ 247,305,865 $167,514,493 $ 654,762,611 $304,672,758
--------------- ---------------- --------------- ----------------
--------------- ---------------- --------------- ----------------
</TABLE>
42
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus Warburg Pincus
Japan OTC Emerging Markets Post-Venture
Warburg Pincus Fund Fund Capital Fund
International Equity --------------------------------------- ------------------- -------------------
Fund For the Period For the Period For the Period
----------------------------------- September 30, 1994 December 30, 1994 September 29, 1995
For the (Commencement of (Commencement of (Commencement of
For the Year Ended October 31, Year Ended Operations) through Operations) through Operations) through
1995 1994 October 31, 1995 October 31, 1994 October 31, 1995 October 31, 1995
--------------- ---------------- ---------------- ------------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
$ 12,746,935 $ 1,310,933 $ (73,801) $ 5,115 $ 29,534 $ 356
(34,444,203 ) 48,091,665 (4,629,196) 0 102,219 (26,884)
16,792,905 (2,772,944) 7,895,010 (294,437) (4,992) 0
(4,675,049 ) 82,484,415 (195,368) (35,099) (9,058) 164,441
--------------- ---------------- ---------------- ------------------- ------------------- -------------------
(9,579,412 ) 129,114,069 2,996,645 (324,421) 117,703 137,913
--------------- ---------------- ---------------- ------------------- ------------------- -------------------
(11,671,023 ) (1,764,380) 0 0 (14,321) 0
(629,473 ) (218,961) 0 0 (3) 0
0 (223,659) 0 0 0 0
(42,332,078 ) (1,047,367) 0 0 0 0
(5,756,403 ) (129,979) 0 0 0 0
--------------- ---------------- ---------------- ------------------- ------------------- -------------------
(60,388,977 ) (3,384,346) 0 0 (14,324) 0
--------------- ---------------- ---------------- ------------------- ------------------- -------------------
1,383,361,959 1,430,739,923 200,565,875 20,287,158 7,753,908 2,792,403
54,872,977 2,950,772 0 0 13,802 0
(715,598,203 ) (249,050,078) (44,871,674) (185,101) (1,191,160) (4,887)
--------------- ---------------- ---------------- ------------------- ------------------- -------------------
722,636,733 1,184,640,617 155,694,201 20,102,057 6,576,550 2,787,516
--------------- ---------------- ---------------- ------------------- ------------------- -------------------
652,668,344 1,310,370,340 158,690,846 19,777,636 6,679,929 2,925,429
1,733,275,503 422,905,163 19,878,636 101,000 101,000 100,000
--------------- ---------------- ---------------- ------------------- ------------------- -------------------
$2,385,943,847 $1,733,275,503 $178,569,482 $19,878,636 $ 6,780,929 $ 3,025,429
--------------- ---------------- ---------------- ------------------- ------------------- -------------------
--------------- ---------------- ---------------- ------------------- ------------------- -------------------
</TABLE>
See Accompanying Notes to Financial Statements.
43
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS POST-VENTURE CAPITAL FUND
FINANCIAL HIGHLIGHTS
(For a Common Share of the Fund Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
September 29, 1995
(Commencement of
Operations) through
October 31, 1995
---------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-------
Income from Investment Operations:
Net Investment Income .00
Net Gain on Securities (both realized and unrealized) .69
-------
Total from Investment Operations .69
-------
Less Distributions:
Dividends from Net Investment Income .00
Distributions from Capital Gains .00
-------
Total Distributions .00
-------
NET ASSET VALUE, END OF PERIOD $ 10.69
-------
-------
Total Return 6.90%+
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $ 3,024
Ratios to average daily net assets:
Operating expenses 1.65%*
Net investment income .25%*
Decrease reflected in above operating expense ratio due to
waivers/reimbursements 23.76%*
Portfolio Turnover Rate 16.90%*
* Annualized
+ Non-annualized
</TABLE>
See Accompanying Notes to Financial Statements.
49
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Warburg Pincus Equity Funds are comprised of Warburg Pincus Capital
Appreciation Fund (the 'Capital Appreciation Fund'), Warburg Pincus
International Equity Fund (the 'International Equity Fund') and Warburg Pincus
Post-Venture Capital Fund (the 'Post-Venture Capital Fund') which are registered
under the Investment Company Act of 1940, as amended (the '1940 Act'), as
diversified, open-end management investment companies, and Warburg Pincus
Emerging Growth Fund (the 'Emerging Growth Fund'), Warburg Pincus Japan OTC Fund
(the 'Japan OTC Fund') and Warburg Pincus Emerging Markets Fund (the 'Emerging
Markets Fund', together with the Capital Appreciation Fund, the International
Equity Fund, the Post-Venture Capital Fund, the Emerging Growth Fund and the
Japan OTC Fund, the 'Funds') which are registered under the 1940 Act as non-
diversified, open-end management investment companies.
Investment objectives for each Fund are as follows: the Capital
Appreciation Fund, the International Equity Fund and the Japan OTC Fund seek
long-term capital appreciation; the Emerging Growth Fund seeks maximum capital
appreciation; the Emerging Markets Fund seeks growth of capital; the
Post-Venture Capital Fund seeks long-term growth of capital.
Each Fund offers two classes of shares, one class being referred to as
Common Shares and one class being referred to as Advisor Shares. Common and
Advisor Shares in each Fund represent an equal pro rata interest in such Fund,
except that they bear different expenses which reflect the difference in the
range of services provided to them. Common Shares for the Japan OTC Fund, the
Emerging Markets Fund and the Post-Venture Capital Fund bear expenses paid
pursuant to a shareholder servicing and distribution plan adopted by each Fund
at an annual rate not to exceed .25% of the average daily net asset value of
each Fund's outstanding Common Shares. Advisor Shares for each Fund bear
expenses paid pursuant to a distribution plan adopted by each Fund at an annual
rate not to exceed .75% of the average daily net asset value of each Fund's
outstanding Advisor Shares. The Common and the Advisor Shares are currently
bearing expenses of .25% and .50% of average daily net assets, respectively.
The net asset value of each Fund is determined daily as of the close of
regular trading on the New York Stock Exchange. Each Fund's investments are
valued at market value, which is currently determined using the last reported
sales price. If no sales are reported, investments are generally valued at the
last reported bid price. In the absence of market quotations, investments are
generally valued at fair value as determined by or under the direction of the
Fund's governing Board. Short-term investments that mature in 60 days or less
are valued on the basis of amortized cost, which approximates market value.
The books and records of the Funds are maintained in U.S. dollars.
Transactions denominated in foreign currencies are recorded at the current
prevailing exchange rates. All assets and liabilities denominated in foreign
currencies are translated into U.S. dollar amounts at the current exchange rate
at the end of the period. Translation gains or losses resulting from changes in
the exchange rate during the reporting period and realized gains and losses on
the settlement of foreign currency transactions are
50
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
reported in the results of operations for the current period. The Funds do not
isolate that portion of gains and losses on investments in equity securities
which are due to changes in the foreign exchange rate from that which are due to
changes in market prices of equity securities. The Funds isolate that portion of
gains and losses on investments in debt securities which are due to changes in
the foreign exchange rate from that which are due to changes in market prices of
debt securities.
Security transactions are accounted for on trade date. Interest income is
recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
Income, expenses (excluding class-specific expenses, principally distribution,
transfer agent and printing) and realized/unrealized gains/losses are allocated
proportionately to each class of shares based upon the relative net asset value
of outstanding shares. The cost of investments sold is determined by use of the
specific identification method for both financial reporting and income tax
purposes.
Dividends from net investment income are declared and paid semiannually for
all Funds. Distributions of net realized capital gains, if any, are declared and
paid annually. However, to the extent that a net realized capital gain can be
reduced by a capital loss carryover, such gain will not be distributed. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
Certain amounts in the Financial Highlights have been reclassified to
conform with current year presentation.
No provision is made for Federal taxes as it is each Fund's intention to
continue to qualify for and elect the tax treatment applicable to regulated
investment companies under the Internal Revenue Code and make the requisite
distributions to its shareholders which will be sufficient to relieve it from
Federal income and excise taxes.
Costs incurred by the Japan OTC Fund, the Emerging Markets Fund and the
Post-Venture Capital Fund in connection with their organization have been
deferred and are being amortized over a period of five years from the date each
Fund commenced its operations.
Each Fund may enter into repurchase agreement transactions. Under the terms
of a typical repurchase agreement, a Fund acquires an underlying security
subject to an obligation of the seller to repurchase. The value of the
underlying security collateral will be maintained at an amount at least equal to
the total amount of the purchase obligation, including interest. The collateral
is in the Fund's possession.
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR
Warburg, Pincus Counsellors, Inc. ('Warburg'), a wholly owned subsidiary of
Warburg, Pincus Counsellors G.P. ('Counsellors G.P.'), serves as each Fund's
investment adviser. For its investment advisory services, Warburg receives the
following fees based on each Fund's average daily net assets:
51
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND ANNUAL RATE
- --------------------------------- ----------------------------------
<S> <C>
Capital Appreciation .70% of average daily net assets
Emerging Growth .90% of average daily net assets
International Equity 1.00% of average daily net assets
Japan OTC 1.25% of average daily net assets
Emerging Markets 1.25% of average daily net assets
Post-Venture Capital 1.25% of average daily net assets
</TABLE>
For the period or year ended October 31, 1995, investment advisory fees,
waivers and reimbursements were as follows:
<TABLE>
<CAPTION>
GROSS NET EXPENSE
FUND ADVISORY FEE WAIVER ADVISORY FEE REIMBURSEMENTS
- ------------------------------------------- ------------ --------- ------------ --------------
<S> <C> <C> <C> <C>
Capital Appreciation $ 1,367,729 $ 0 $ 1,367,729 $ 0
Emerging Growth 3,824,061 0 3,824,061 0
International Equity 20,225,631 0 20,225,631 0
Japan OTC 599,720 (599,720) 0 (25,920)
Emerging Markets 29,641 (29,641) 0 (230,338)
Post-Venture Capital 1,756 (1,756) 0 (31,458)
</TABLE>
SPARX Investment & Research, USA, Inc. ('SPARX USA') serves as
sub-investment adviser for the Japan OTC Fund. From its investment advisory fee,
Warburg pays SPARX USA a fee at an annual rate of .625% of the average daily net
assets of the Japan OTC Fund. No compensation is paid by the Japan OTC Fund to
SPARX USA for its sub-investment advisory services.
Counsellors Funds Service, Inc. ('CFSI'), a wholly owned subsidiary of
Warburg, and PFPC Inc. ('PFPC'), an indirect, wholly owned subsidiary of PNC
Bank Corp. ('PNC'), serve as each Fund's co-administrators. For its
administrative services, CFSI currently receives a fee calculated at an annual
rate of .10% of each Fund's average daily net assets. For the period or year
ended October 31, 1995, administrative services fees earned by CFSI were as
follows:
<TABLE>
<CAPTION>
FUND CO-ADMINISTRATION FEE
- ------------------------------------------- ------------------------------
<S> <C>
Capital Appreciation $ 195,390
Emerging Growth 424,895
International Equity 2,022,563
Japan OTC 47,978
Emerging Markets 2,372
Post-Venture Capital 140
</TABLE>
For its administrative services, PFPC currently receives a fee calculated
at an annual rate of .10% of the average daily net assets of the Capital
Appreciation Fund, the Emerging Growth Fund and the Post-Venture Capital Fund.
For the International Equity Fund, the Japan OTC Fund and the Emerging Markets
Fund, PFPC currently receives a fee calculated at an annual rate of .12% on each
Fund's first $250 million in average daily net assets, .10% on the next $250
million in average daily net assets, .08%
52
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
on the next $250 million in average daily net assets, and .05% of the average
daily net assets over $750 million.
For the period or year ended October 31, 1995, administrative service fees
earned and waived by PFPC were as follows:
<TABLE>
<CAPTION>
NET
FUND CO-ADMINISTRATION FEE WAIVER CO-ADMINISTRATION FEE
- ----------------------------------------- --------------------- -------- -------------------------
<S> <C> <C> <C>
Capital Appreciation $ 195,390 $ 0 $ 195,390
Emerging Growth 424,895 0 424,895
International Equity 1,386,283 0 1,386,283
Japan OTC 90,701 (26,746) 63,955
Emerging Markets 2,845 (2,845) 0
Post-Venture Capital 140 (140) 0
</TABLE>
Counsellors Securities Inc. ('CSI'), also a wholly owned subsidiary of
Warburg, serves as each Fund's distributor. No compensation is paid by the
Capital Appreciation Fund, the Emerging Growth Fund or the International Equity
Fund to CSI for distribution services. For its shareholder servicing and
distribution services, CSI currently receives a fee calculated at an annual rate
of .25% of the average daily net assets of the Common Shares for the Japan OTC
Fund, the Emerging Markets Fund and the Post-Venture Capital Fund pursuant to a
shareholder servicing and distribution plan adopted by each Fund. For the period
or year ended October 31, 1995, distribution fees earned by CSI were as follows:
<TABLE>
<CAPTION>
FUND DISTRIBUTION FEE
- ------------------------------------------- ------------------------------
<S> <C>
Japan OTC $119,941
Emerging Markets 5,926
Post-Venture Capital 351
</TABLE>
3. INVESTMENTS IN SECURITIES
For the period or year ended October 31, 1995, purchases and sales of
investment securities (excluding short-term investments) were as follows:
<TABLE>
<CAPTION>
FUND PURCHASES SALES
- ----------------------------------------------------------- -------------- ------------
<S> <C> <C>
Capital Appreciation $ 299,741,274 $269,962,070
Emerging Growth 532,722,466 336,581,792
International Equity 1,457,609,458 735,613,078
Japan OTC 189,768,420 36,507,703
Emerging Markets 7,181,659 1,297,140
Post-Venture Capital 2,714,501 222,270
</TABLE>
53
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
At October 31, 1995, the net unrealized appreciation from investments for
those securities having an excess of value over cost and net unrealized
depreciation from investments for those securities having an excess of cost over
value (based on cost for Federal income tax purposes) was as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
FUND APPRECIATION DEPRECIATION (DEPRECIATION)
- ----------------------------------- ------------ ------------- --------------
<S> <C> <C> <C>
Capital Appreciation $ 45,397,319 $ (3,203,157) $ 42,194,162
Emerging Growth 144,909,782 (9,681,675) 135,228,107
International Equity 260,125,513 (171,560,066) 88,565,447
Japan OTC 6,205,079 (7,100,852) (895,773)
Emerging Markets 341,944 (352,944) (11,000)
Post-Venture Capital 233,929 (69,488) 164,441
</TABLE>
4. FORWARD FOREIGN CURRENCY CONTRACTS
The International Equity Fund, the Japan OTC Fund, the Emerging Markets
Fund and the Post-Venture Capital Fund may enter into forward currency contracts
for the purchase or sale of a specific foreign currency at a fixed price on a
future date. Risks may arise upon entering into these contracts from the
potential inability of counterparties to meet the terms of their contracts and
from unanticipated movements in the value of a foreign currency relative to the
U.S. dollar. The Funds will enter into forward contracts primarily for hedging
purposes. The forward currency contracts are adjusted by the daily exchange rate
of the underlying currency and any gains or losses are recorded for financial
statement purposes as unrealized until the contract settlement date.
54
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
At October 31, 1995, the International Equity Fund and the Japan OTC Fund had
the following open forward foreign currency contracts:
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
- -----------------------------------------------------------------------------------------------------------
FOREIGN UNREALIZED
FORWARD CURRENCY EXPIRATION CURRENCY CONTRACT CONTRACT FOREIGN EXCHANGE
CONTRACT DATE TO BE SOLD AMOUNT VALUE GAIN (LOSS)
- ------------------- ----------- -------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
French Francs 11/15/95 260,000,000 $ 52,170,074 $ 53,253,590 $ (1,083,516)
French Francs 11/16/95 122,216,250 25,050,833 25,032,515 18,318
German Marks 11/16/95 110,000,000 78,272,317 78,263,963 8,354
German Marks 05/17/96 78,928,380 55,400,000 56,652,584 (1,252,584)
Japanese Yen 03/21/96 5,547,240,000 57,000,000 55,475,507 1,524,493
Japanese Yen 03/21/96 4,764,377,500 47,298,496 47,646,443 (347,947)
Japanese Yen 03/21/96 4,764,377,500 47,276,203 47,646,443 (370,240)
Japanese Yen 03/21/96 1,385,445,000 13,761,286 13,855,226 (93,940)
Japanese Yen 05/13/96 8,731,990,000 109,000,000 88,008,212 20,991,788
Japanese Yen 05/16/96 9,247,700,000 110,000,000 93,246,752 16,753,248
Japanese Yen 05/16/96 4,586,012,000 55,400,000 46,241,847 9,158,153
Japanese Yen 09/18/96 4,660,000,000 50,000,000 47,860,895 2,139,105
------------ ------------ ----------------
$700,629,209 $653,183,977 $ 47,445,232
------------ ------------ ----------------
------------ ------------ ----------------
</TABLE>
<TABLE>
<CAPTION>
FOREIGN
CURRENCY UNREALIZED
FORWARD CURRENCY EXPIRATION TO BE CONTRACT CONTRACT FOREIGN EXCHANGE
CONTRACT DATE PURCHASED AMOUNT VALUE GAIN (LOSS)
- ------------------- ----------- -------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
German Marks 11/16/95 34,500,000 $ 25,050,828 $ 24,546,425 $ (504,403)
------------ ------------ ----------------
------------ ------------ ----------------
</TABLE>
<TABLE>
<CAPTION>
JAPAN OTC FUND
- -----------------------------------------------------------------------------------------------------------
FOREIGN UNREALIZED
FORWARD CURRENCY EXPIRATION CURRENCY CONTRACT CONTRACT FOREIGN EXCHANGE
CONTRACT DATE TO BE SOLD AMOUNT VALUE GAIN (LOSS)
- ------------------- ----------- -------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
Japanese Yen 11/30/95 12,567,400,000 $124,000,000 $123,536,813 $ 463,187
Japanese Yen 11/30/95 2,027,000,000 20,000,000 19,925,293 74,707
Japanese Yen 11/30/95 1,520,250,000 15,000,000 14,943,969 56,031
------------ ------------ ----------------
$159,000,000 $158,406,075 $ 593,925
------------ ------------ ----------------
------------ ------------ ----------------
</TABLE>
55
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<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
5. EQUITY SWAP TRANSACTIONS
The International Equity Fund (the 'Fund') entered into a Taiwanese equity
swap agreement (which represents approximately .005% of the Fund's net assets at
October 31, 1995) dated August 11, 1995, where the Fund receives a quarterly
payment, representing the total return (defined as market appreciation and
dividend income) on a basket of three Taiwanese common stocks ('Common Stocks').
In return, the Fund pays quarterly the Libor rate (London Interbank Offered
Rate), plus 1.25% per annum (7.125% on October 31, 1995) on the initial stock
purchase amount ('Notional amount') of $12,000,000. The Notional amount is
marked to market on each quarterly reset date. In the event that the Common
Stocks decline in value, the Fund will be required to pay quarterly, the amount
of any depreciation in value from the notional amount. The equity swap agreement
will terminate on August 11, 1996.
During the term of the equity swap transaction, changes in the value of the
Common Stocks as compared to the Notional amount is recognized as unrealized
gain or loss. Dividend income for the Common Stocks are recorded on the
ex-dividend date. Interest expense is accrued daily. At October 31, 1995, the
Fund has recorded an unrealized gain of $502,018 and interest payable of
$192,375 on the equity swap transaction.
56
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
6. CAPITAL SHARE TRANSACTIONS
The Capital Appreciation Fund is authorized to issue three billion of full
and fractional shares of beneficial interest, $.001 par value per share, of
which one billion shares are classified as Series 2 Shares (the Advisor Shares).
The Emerging Growth Fund, the International Equity Fund, the Japan OTC Fund, the
Emerging Markets Fund and the Post-Venture Capital Fund are each authorized to
issue three billion full and fractional shares of capital stock, $.001 par value
per share, of which one billion shares of each Fund are designated as Series 2
Shares (the Advisor Shares).
Transactions in shares of each Fund were as follows:
<TABLE>
<CAPTION>
CAPITAL APPRECIATION FUND
Common Shares Advisor Shares
----------------------------- ---------------------------
For the Year Ended October 31,
-------------------------------------------------------------
1995 1994 1995 1994
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Shares sold 6,020,619 2,958,494 201,782 290,193
Shares issued to
shareholders on
reinvestment of
dividends 850,478 920,210 46,554 61,526
Shares redeemed (3,638,974) (3,126,497) (110,027) (460,020)
------------ ------------ ----------- -----------
Net increase
(decrease) in
shares outstanding 3,232,123 752,207 138,309 (108,301)
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
Proceeds from sale
of shares $ 85,992,655 $ 41,570,590 $ 2,970,800 $ 4,046,941
Reinvested dividends 10,670,876 12,945,690 575,876 863,477
Net asset value of
shares redeemed (51,907,650) (43,449,501) (1,551,821) (6,401,999)
------------ ------------ ----------- -----------
Net increase
(decrease) from
capital share
transactions $ 44,755,881 $ 11,066,779 $ 1,994,855 $(1,491,581)
------------ ------------ ----------- -----------
------------ ------------ ----------- -----------
<CAPTION>
EMERGING GROWTH FUND
Common Shares Advisor Shares
----------------------------- ----------------------------
For the Year Ended October 31,
--------------------------------------------------------------
1995 1994 1995 1994
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 9,808,362 6,133,751 3,172,686 2,233,737
Shares issued to
shareholders on
reinvestment of
dividends 0 506,720 0 80,473
Shares redeemed (4,294,179) (2,859,413) (383,922) (517,898)
------------ ------------ ----------- ------------
Net increase
(decrease) in
shares outstanding 5,514,183 3,781,058 2,788,764 1,796,312
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
Proceeds from sale
of shares $256,886,928 $132,922,995 $78,682,150 $ 47,890,275
Reinvested dividends 0 11,015,146 0 1,743,241
Net asset value of
shares redeemed (106,777,032) (61,126,667) (9,503,812) (10,641,050)
------------ ------------ ----------- ------------
Net increase
(decrease) from
capital share
transactions $150,109,896 $ 82,811,474 $69,178,338 $ 38,992,466
------------ ------------ ----------- ------------
------------ ------------ ----------- ------------
</TABLE>
57
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
6. CAPITAL SHARE TRANSACTIONS (CONTINUED)
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND EMERGING MARKETS FUND
Common Shares Advisor Shares
Common Shares Advisor Shares ------------- --------------
-------------------------------- ---------------------------- For the Period
For the Year Ended October 31, December 30, 1994
---------------------------------------------------------------- (Commencement of Operations)
1995 1994 1995 1994 through October 31, 1995
-------------- -------------- ------------ ------------ -------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 68,096,606 64,218,907 7,225,150 7,956,088 694,008 22
Shares issued to
shareholders on
reinvestment of
dividends 2,623,005 147,031 346,377 6,879 1,267 0
Shares redeemed (38,317,625) (11,861,720) (770,753) (795,406) (104,480) 0
-------------- -------------- ------------ ------------ ------------- -----
Net increase (decrease)
in shares outstanding 32,401,986 52,504,218 6,800,774 7,167,561 590,795 22
-------------- -------------- ------------ ------------ ------------- -----
-------------- -------------- ------------ ------------ ------------- -----
Proceeds from sale of
shares $1,251,776,887 $1,275,306,263 $131,585,072 $155,433,660 $ 7,753,651 $257
Reinvested dividends 48,487,109 2,820,903 6,385,868 129,869 13,802 0
Net asset value of shares
redeemed (701,310,424) (233,614,600) (14,287,779) (15,435,478) (1,191,160) 0
-------------- -------------- ------------ ------------ ------------- -----
Net increase (decrease)
from capital share
transactions $ 598,953,572 $1,044,512,566 $123,683,161 $140,128,051 $ 6,576,293 $257
-------------- -------------- ------------ ------------ ------------- -----
-------------- -------------- ------------ ------------ ------------- -----
</TABLE>
7. NET ASSETS
Net Assets at October 31, 1995, consisted of the following:
<TABLE>
<CAPTION>
CAPITAL EMERGING
APPRECIATION FUND GROWTH FUND
----------------- ------------
<S> <C> <C>
Capital contributed, net $ 173,327,827 $479,035,241
Accumulated net investment income (loss) 0 0
Accumulated net realized gain (loss) from security transactions 31,648,355 40,302,640
Net unrealized appreciation (depreciation) from investments and
foreign currency related items 42,329,683 135,424,730
----------------- ------------
Net assets $ 247,305,865 $654,762,611
----------------- ------------
----------------- ------------
</TABLE>
58
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JAPAN OTC FUND
Common Shares Advisor Shares
------------------------------------- -------------------------------------
For the Period For the Period POST-VENTURE CAPITAL FUND
September 30, September 30, Common Shares Advisor Shares
1994 1994 ------------- --------------
(Commencement (Commencement For the Period
For the of Operations) For the of Operations) September 29, 1995
Year Ended through Year Ended through (Commencement of Operations)
October 31, 1995 October 31, 1994 October 31, 1995 October 31, 1994 through October 31, 1995
---------------- ---------------- ---------------- ---------------- --------------------------------
<S> <C> <C> <C> <C> <C>
22,809,795 2,025,697 0 15 273,510 19
0 0 0 0 0 0
(5,180,432) (18,605) 0 0 (473) 0
---------------- ---------------- --- ----- ------------- -----
17,629,363 2,007,092 0 15 273,037 19
---------------- ---------------- --- ----- ------------- -----
---------------- ---------------- --- ----- ------------- -----
$200,565,875 $ 20,287,008 $0 $150 $ 2,792,203 $200
0 0 0 0 0 0
(44,871,674) (185,101) 0 0 (4,887) 0
---------------- ---------------- --- ----- ------------- -----
$155,694,201 $ 20,101,907 $0 $150 $ 2,787,316 $200
---------------- ---------------- --- ----- ------------- -----
---------------- ---------------- --- ----- ------------- -----
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EMERGING POST-VENTURE
EQUITY FUND MARKETS FUND JAPAN OTC FUND CAPITAL FUND
-------------- ------------ -------------- ------------
<S> <C> <C> <C>
$2,271,007,433 $6,677,550 $175,619,527 $2,887,516
19,124,669 10,218 7,821,209 356
(40,671,086) 102,219 (4,640,787) (26,884)
136,482,831 (9,058) (230,467) 164,441
-------------- ------------ -------------- ------------
$2,385,943,847 $6,780,929 $178,569,482 $3,025,429
-------------- ------------ -------------- ------------
-------------- ------------ -------------- ------------
</TABLE>
59
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
8. CAPITAL LOSS CARRYOVER
At October 31, 1995, the International Equity Fund, the Japan OTC Fund and
the Post-Venture Capital Fund had capital loss carryovers of $40,671,086,
$4,629,196 and $26,884, respectively, expiring in 2003 to offset possible future
capital gains of each Fund.
9. OTHER FINANCIAL HIGHLIGHTS
Each Fund currently offers one other class of shares, Advisor Shares,
representing equal prorata interests in each of the respective Warburg Pincus
Equity Funds. The financial highlights for an Advisor Share of each Fund are as
follows:
<TABLE>
<CAPTION>
Capital Appreciation Fund
----------------------------------------------------------------
Advisor Shares
----------------------------------------------------------------
April 4, 1991
(Initial
For the Year Ended October 31, Issuance)
------------------------------------------ through
1995 1994 1993 1992 October 31, 1991
------ ------ ------ ------ ----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $14.22 $15.28 $13.28 $12.16 $12.04
------ ------ ------ ------ -------
Income from Investment Operations:
Net Investment Income (Loss) .00 (.08) .00 (.01) .05
Net Gain on Securities (both realized and
unrealized) 3.02 .23 2.76 1.20 .13
------ ------ ------ ------ -------
Total from Investment Operations 3.02 .15 2.76 1.19 .18
------ ------ ------ ------ -------
Less Distributions:
Dividends from Net Investment Income .00 (.02) .00 (.02) (.06)
Distributions from Capital Gains (.98) (1.19) (.76) (.05) .00
------ ------ ------ ------ -------
Total Distributions (.98) (1.21) (.76) (.07) (.06)
------ ------ ------ ------ -------
NET ASSET VALUE, END OF PERIOD $16.26 $14.22 $15.28 $13.28 $12.16
------ ------ ------ ------ -------
------ ------ ------ ------ -------
Total Return 23.41% 1.23% 21.64% 9.83% 2.66%*
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $11,594 $8,169 $10,437 $1,655 $443
Ratios to average daily net assets:
Operating expenses 1.62% 1.55% 1.51% 1.56% 1.63%*
Net investment income (loss) (.18%) (.24%) (.25%) (.11%) .25%*
Decrease reflected in above operating expense
ratios due to waivers/reimbursements .00% .01% .00% .01% .01%*
Portfolio Turnover Rate 146.09% 51.87% 48.26% 55.83% 39.50%
* Annualized
</TABLE>
60
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
TAX STATUS OF 1995 DIVIDENDS (Unaudited)
Taxable dividends paid by the Fund on per share basis were as follows:
<TABLE>
<S> <C>
Ordinary income $.02
Long-term capital gain .96
</TABLE>
Ordinary income dividends qualifying for the dividends received deduction
available to corporate shareholders was 100.00%.
Because the Fund's fiscal year is not the calendar year, amounts to be used by
calendar year taxpayers on their Federal return will be reflected on Form
1099-DIV and will be mailed in January 1996.
61
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Emerging Growth Fund
--------------------------------------------------------
Advisor Shares
--------------------------------------------------------
April 4, 1991
(Initial
For the Year Ended October 31, Issuance)
------------------------------------ through
1995 1994 1993 1992 October 31, 1991
------ ------ ------ ------ ----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $22.05 $23.51 $18.19 $16.99 $15.18
------ ------ ------ ------ -------
Income from Investment Operations:
Net Investment Loss (.09) (.08) (.08) (.06) .00
Net Gain (Loss) on Securities (both
realized and unrealized) 7.42 (.02) 5.77 1.62 1.82
------ ------ ------ ------ -------
Total from Investment Operations 7.33 (.10) 5.69 1.56 1.82
------ ------ ------ ------ -------
Less Distributions:
Dividends from Net Investment Income .00 .00 .00 .00 (.01)
Distributions from Capital Gains .00 (1.36) (.37) (.36) .00
------ ------ ------ ------ -------
Total Distributions .00 (1.36) (.37) (.36) (.01)
------ ------ ------ ------ -------
NET ASSET VALUE, END OF PERIOD $29.38 $22.05 $23.51 $18.19 $16.99
------ ------ ------ ------ -------
------ ------ ------ ------ -------
Total Return 33.24% (.29%) 31.67% 9.02% 23.43%*
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $167,225 $64,009 $26,029 $5,398 $275
Ratios to average daily net assets:
Operating expenses 1.76% 1.72% 1.73% 1.74% 1.74%*
Net investment loss (1.08%) (1.08%) (1.09%) (.87%) (.49%)*
Decrease reflected in above operating expense ratios
due to waivers/reimbursements .00% .04% .00% .06% .42%*
Portfolio Turnover Rate 84.82% 60.38% 68.35% 63.38% 97.69%
* Annualized
</TABLE>
62
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Equity Fund
--------------------------------------------------------
Advisor Shares
--------------------------------------------------------
April 4, 1991
(Initial
For the Year Ended October 31, Issuance)
------------------------------------ through
1995 1994 1993 1992 October 31, 1991
------ ------ ------ ------ ----------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $20.38 $16.91 $12.20 $13.66 $13.14
------ ------ ------ ------ -------
Income from Investment Operations:
Net Investment Income (Loss) .03 .16 (.01) .13 .00
Net Gain (Loss) on Securities and
Foreign Currency Related Items
(both realized and unrealized) (.67) 3.35 4.86 (1.32) .58
------ ------ ------ ------ -------
Total from Investment Operations (.64) 3.51 4.85 (1.19) .58
------ ------ ------ ------ -------
Less Distributions:
Dividends from Net Investment Income (.05) .00 (.01) (.12) (.06)
Distributions from Capital Gains (.53) (.04) (.13) (.15) .00
------ ------ ------ ------ -------
Total Distributions (.58) (.04) (.14) (.27) (.06)
------ ------ ------ ------ -------
NET ASSET VALUE, END OF PERIOD $19.16 $20.38 $16.91 $12.20 $13.66
------ ------ ------ ------ -------
------ ------ ------ ------ -------
Total Return (3.04%) 20.77% 40.06% (8.86%) 7.85%*
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $317,736 $199,404 $44,244 $1,472 $153
Ratios to average daily net assets:
Operating expenses 1.89% 1.94% 2.00% 2.00% 2.23%*
Net investment income (loss) .20% (.29%) (.36%) .54% .30%*
Decrease reflected in above operating expense ratios due to
waivers/reimbursements .00% .00% .00% .07% .17%*
Portfolio Turnover Rate 39.24% 17.02% 22.60% 53.29% 54.95%
* Annualized
</TABLE>
TAX STATUS OF 1995 DIVIDENDS (Unaudited)
Taxable dividends paid by the Fund on per share basis were as follows:
<TABLE>
<S> <C>
Ordinary income $.38
Long-term capital gain .20
</TABLE>
Because the Fund's fiscal year is not the calendar year, amounts to be used by
calendar year taxpayers on their Federal return will be reflected on Form
1099-DIV and will be mailed in January 1996.
63
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Japan OTC Fund
----------------------------------------
Advisor Shares
----------------------------------------
For the Period
September 30, 1994
For the (Commencement of
Year Ended Operations) through
October 31, 1995 October 31, 1994
---------------- -------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $9.85 $10.00
------ -------
Income from Investment Operations:
Net Investment Income (Loss) (.02) .00
Net Loss on Securities and Foreign Currency Related Items (both
realized and unrealized) (.75) (.15)
------ -------
Total from Investment Operations (.77) (.15)
------ -------
Less Distributions:
Dividends from Net Investment Income .00 .00
Distributions from Capital Gains .00 .00
------ -------
Total Distributions .00 .00
------ -------
NET ASSET VALUE, END OF PERIOD $ 9.08 $ 9.85
------ -------
------ -------
Total Return (7.82%) (15.84%)*
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $1 $1
Ratios to average daily net assets:
Operating expenses 1.31% 1.18%*
Net investment income (loss) (.19%) .12%*
Decrease reflected in above operating expense ratios due to
waivers/reimbursements 1.83% 4.74%*
Portfolio Turnover Rate 82.98% .00%
* Annualized
</TABLE>
64
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Emerging Markets Fund
---------------------
Advisor Shares
---------------------
December 30, 1994
(Commencement of
Operations) through
October 31, 1995
---------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-------
Income from Investment Operations:
Net Investment Income .14
Net Gain on Securities and Foreign Currency Related Items (both realized and unrealized) 1.19
-------
Total from Investment Operations 1.33
-------
Less Distributions:
Dividends from Net Investment Income (.03)
Distributions from Capital Gains .00
-------
Total Distributions (.03)
-------
NET ASSET VALUE, END OF PERIOD $ 11.30
-------
-------
Total Return 16.05%*
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $1
Ratios to average daily net assets:
Operating expenses 1.22%*
Net investment income 1.76%*
Decrease reflected in above operating expense ratio due to
waivers/reimbursements 16.36%*
Portfolio Turnover Rate 69.12%*
* Annualized
</TABLE>
TAX STATUS OF 1995 DIVIDENDS (Unaudited)
Taxable dividends paid by the Fund on per share basis were as follows:
<TABLE>
<S> <C>
Ordinary income $.03
</TABLE>
Because the Fund's fiscal year is not the calendar year, amounts to be used by
calendar year taxpayers on their Federal return will be reflected on Form
1099-DIV and will be mailed in January 1996.
65
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Post-Venture Capital Fund
-------------------------
Advisor Shares
-------------------------
For the Period
September 29, 1995
(Commencement of
Operations) through
October 31, 1995
-------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-------
Income from Investment Operations:
Net Investment Income .00
Net Gain on Securities .68
-------
Total from Investment Operations .68
-------
Less Distributions:
Dividends from Net Investment Income .00
Distributions from Capital Gains .00
-------
Total Distributions .00
-------
NET ASSET VALUE, END OF PERIOD $ 10.68
-------
-------
Total Return 6.80%+
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $1
Ratios to average daily net assets:
Operating expenses 2.15%*
Net investment income .09%*
Decrease reflected in above operating expense ratio due to
waivers/reimbursements 9.25%*
Portfolio Turnover Rate 16.90%*
* Annualized
+ Non annualized
</TABLE>
66
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS POST-VENTURE CAPITAL FUND -- ADVISOR SHARES
- --------------------------------------------------------------------------------
December 8, 1995
Dear Shareholder:
The objective in Advisor Shares of Warburg Pincus Post-Venture Capital Fund
(the 'Fund') is long-term growth of capital. The Fund pursues its objective by
investing primarily in equity securities of companies deemed to be in their
post-venture-capital stage.
From the Fund's inception on September 29, 1995, through October 31, 1995,
it gained 6.80%*. Its total net assets were $3,025,429.
We are quite optimistic about the Fund's prospects. A major study assessing
the impact of venture-capital financing on firms' performance** concluded that
venture-backed companies generate superior results relative to those that lacked
such backing. According to the study, venture-backed firms create innovative
products and services. Relative to Fortune 500 companies, they create jobs at a
faster pace, spend more on research and development, and create
sales -- especially export sales -- at a faster rate. Our own considerable
experience researching and evaluating the performance of venture-backed
companies yields similarly favorable conclusions.
We believe that the Fund's focus on such companies offers a unique and
attractive opportunity to aggressive investors.
<TABLE>
<S> <C>
Elizabeth B. Dater Stephen J. Lurito
Co-Portfolio Manager Co-Portfolio Manager
</TABLE>
* Non-annualized return. This figure represents past performance and does not
guarantee future results. Investment return and principal value of an
investment will fluctuate so that an investor's shares upon redemption may be
worth more or less than original cost.
** Fifth Annual Economic Impact of Venture Capital Study, National Venture
Capital Association/Coopers & Lybrand L.L.P. (U.S.A.), 1995.
12
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS POST-VENTURE CAPITAL FUND
SCHEDULE OF INVESTMENTS
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
-------- ----------
<S> <C> <C>
COMMON STOCK (81.2%)
CAPITAL GOODS
Computers (26.7%)
Applix, Inc. + 2,400 $ 66,600
Atria Software, Inc. + 400 14,300
Auspex Systems, Inc. + 1,100 15,537
Boca Research, Inc. + 1,100 27,775
Brock Control Systems, Inc. + 5,000 39,375
Cheyenne Software, Inc. + 1,500 31,125
Continuum, Inc. + 800 31,500
FileNet Corp. + 1,300 58,987
Hyperion Software Corp. + 1,300 64,025
Logic Works, Inc. + 3,000 45,750
Macromedia, Inc. + 500 18,500
Manugistics Group, Inc. + 3,400 58,650
McAfee Associates, Inc. + 1,200 69,900
Network General Corp. + 1,300 53,950
Parametric Technology Corp. + 500 33,437
Softkey International, Inc. + 2,200 69,300
Synopsys, Inc. + 800 30,000
System Software Associates, Inc. 2,000 61,750
Verity, Inc. + 2,000 73,500
----------
863,961
----------
Electronics (5.5%)
Asyst Technologies, Inc. + 1,300 54,600
Maxim Integrated Products, Inc. + 400 29,900
Watkins Johnson Co. 1,100 52,938
Xilinx, Inc. + 900 41,400
----------
178,838
----------
Office Equipment & Supplies (1.1%)
Viking Office Products, Inc. + 800 35,600
----------
CONSUMER
Business Services (4.9%)
Norrell Corp. 600 18,525
On Assignment, Inc. + 1,100 29,700
PMT Services, Inc. + 1,200 32,250
QuickResponse Services, Inc. + 1,200 30,000
Solectron Corp. + 1,200 48,300
----------
158,775
----------
Consumer Services (0.5%)
DEVRY, Inc. + 700 15,575
----------
</TABLE>
See Accompanying Notes to Financial Statements.
33
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS POST-VENTURE CAPITAL FUND
SCHEDULE OF INVESTMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
-------- ----------
COMMON STOCK (CONT'D)
<S> <C> <C>
Healthcare (16.9%)
American Oncology Resources, Inc. + 600 $ 21,000
Arbor Health Care Co. + 2,200 37,400
EMcare Holdings, Inc. + 2,700 62,100
Endosonics Corp. + 2,000 31,750
Enterprise Systems, Inc. + 3,500 81,813
Health Care & Retirement Corp. + 200 5,875
Health Managment System, Inc. + 1,600 51,200
Healthsource, Inc. + 1,300 68,900
Oxford Health Plans, Inc. + 800 62,600
ThermoTrex Corp. + 600 21,525
Total Renal Care Holdings, Inc. + 5,000 101,875
----------
546,038
----------
Leisure & Entertainment (1.1%)
Regal Cinemas, Inc. + 900 35,325
----------
Lodging & Restaurants (0.4%)
Doubletree Corp. + 600 13,200
----------
Pharmaceuticals (4.2%)
Cephalon, Inc. + 900 27,000
DepoTech Corp. + 2,000 29,000
Genzyme Corp. + 800 46,600
Genzyme Corp. -- Tissue Repair Division + 1,900 33,963
----------
136,563
----------
Retail (4.4%)
Borders Group, Inc. + 1,500 25,688
Micro Warehouse, Inc. + 600 26,700
Neostar Retail Group, Inc. + 1,900 28,975
Office Depot, Inc. + 1,100 31,487
PETsMART, Inc. + 900 30,150
----------
143,000
----------
ENERGY AND RELATED
Oil Services (0.9%)
Input/Output, Inc. + 800 29,900
----------
FINANCE
Financial Services (1.1%)
MS Financial Corp. + 1,100 12,375
Mutual Risk Management Ltd. 300 11,063
United Companies Financial Corp. 400 11,300
----------
34,738
----------
</TABLE>
See Accompanying Notes to Financial Statements.
34
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS POST-VENTURE CAPITAL FUND
SCHEDULE OF INVESTMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
-------- ----------
COMMON STOCK (CONT'D)
<S> <C> <C>
MEDIA
Communications & Media (1.1%)
America Online, Inc. + 300 $ 24,000
Central European Media Enterprises Ltd. Class A + 500 11,500
----------
35,500
----------
Telecommunications (12.4%)
Ascend Communications, Inc. + 200 13,000
Bay Networks, Inc. + 400 26,500
Cascade Communications Corp. + 500 35,625
Cisco Systems, Inc. + 200 15,500
DSP Communications, Inc. + 800 29,000
Gilat Satellite Networks Ltd. + 800 17,800
Paging Network, Inc. + 900 20,700
Pairgain Technologies, Inc. + 1,000 42,750
PictureTel Corp. + 400 26,400
QUALCOMM, Inc. 300 11,550
StrataCom, Inc. + 1,100 67,650
Tellabs, Inc. + 1,200 40,800
US Robotics Corp. + 600 55,500
----------
402,775
----------
TOTAL COMMON STOCK (Cost $2,465,347) 2,629,788
----------
</TABLE>
<TABLE>
<CAPTION>
PAR
--------
<S> <C> <C>
SHORT-TERM INVESTMENTS (18.8%)
Repurchase agreement with State Street Bank and Trust Co.
dated 10/31/95 at 5.83% to be repurchased at $610,099 on 11/01/95.
(Collateralized by $620,000 U.S. Treasury Note at 6.875%,
due 10/31/96, with a market value of $627,750.) (Cost $610,000) $610,000 610,000
----------
TOTAL INVESTMENTS AT VALUE (100.0%) (Cost $3,075,347*) $3,239,788
----------
----------
</TABLE>
+ Non-income producing security.
* Also cost for Federal income tax purposes.
See Accompanying Notes to Financial Statements.
35
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS POST-VENTURE CAPITAL FUND
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at value (Cost $3,075,347) $ 3,239,788
Receivable for Fund shares sold 125,583
Cash 108,361
Deferred organizational costs (Note 1) 108,338
Receivable for investment securities sold 57,748
Other receivables 6,557
-----------
Total assets 3,646,375
-----------
LIABILITIES
Payable for investment securities purchased 484,782
Organizational costs payable 110,270
Accrued expenses 25,894
-----------
Total liabilities 620,946
-----------
NET ASSETS applicable to 282,937 Common Shares outstanding and
119 Advisor Shares outstanding $ 3,025,429
-----------
-----------
NET ASSET VALUE, offering and redemption price per Common Share
($3,024,158[div]282,937) $10.69
------
------
NET ASSET VALUE, offering and redemption price per Advisor Share
($1,271[div]119) $10.68
------
------
</TABLE>
See Accompanying Notes to Financial Statements.
38
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
STATEMENTS OF OPERATIONS
For the Year or Period Ended October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus Warburg Pincus
Capital Appreciation Emerging Growth International Equity
Fund Fund Fund
-------------------- --------------- --------------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends $ 2,107,232 $ 772,834 $ 40,091,101
Interest 684,526 2,112,707 7,110,116
Foreign taxes withheld (2,423) 0 (5,031,072)
-------------------- --------------- --------------------
Total investment income 2,789,335 2,885,541 42,170,145
-------------------- --------------- --------------------
EXPENSES:
Investment advisory 1,367,729 3,824,061 20,225,631
Administrative services 390,780 849,790 3,408,846
Audit 27,208 27,469 69,286
Custodian/Sub-custodian 63,554 145,277 1,753,400
Directors/Trustees 10,500 10,500 11,500
Distribution/Shareholder servicing 45,989 531,389 1,274,343
Insurance 10,104 14,770 58,340
Legal 90,851 76,677 102,549
Organizational 0 0 0
Printing 27,954 41,914 172,129
Registration 62,918 159,555 428,595
Transfer agent 92,488 149,133 1,538,272
Miscellaneous 35,776 37,625 380,319
-------------------- --------------- --------------------
2,225,851 5,868,130 29,423,210
Less: fees waived and expenses reimbursed 0 0 0
-------------------- --------------- --------------------
Total expenses 2,225,851 5,868,130 29,423,210
-------------------- --------------- --------------------
Net investment income (loss) 563,484 (2,982,589) 12,746,935
-------------------- --------------- --------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS
AND FOREIGN CURRENCY RELATED ITEMS:
Net realized gain (loss) from security transactions 31,649,453 49,113,782 (34,444,203)
Net realized gain (loss) from foreign currency
related items 0 0 16,792,905
Net change in unrealized appreciation (depreciation)
from investments and foreign currency related items 12,386,702 84,670,426 (4,675,049)
-------------------- --------------- --------------------
Net realized and unrealized gain (loss) from
investments and foreign currency related
items 44,036,155 133,784,208 (22,326,347)
-------------------- --------------- --------------------
Net increase (decrease) in net assets
resulting from operations $ 44,599,639 $ 130,801,619 $ (9,579,412)
-------------------- --------------- --------------------
-------------------- --------------- --------------------
</TABLE>
40
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus Warburg Pincus
Japan OTC Emerging Markets Post-Venture Capital
Fund Fund (1) Fund (2)
-------------- ---------------- --------------------
<S> <C> <C> <C>
$ 221,577 $ 33,788 $ 0
412,522 22,711 2,675
(33,237) (3,250) 0
-------------- ---------------- -----------
600,862 53,249 2,675
-------------- ---------------- -----------
599,720 29,641 1,756
138,679 5,217 280
25,700 16,000 9,000
60,612 45,701 5,771
11,290 14,625 1,250
119,941 5,926 351
2,761 855 0
96,359 54,987 5,000
42,449 37,432 1,932
2,579 14,765 1,000
115,649 26,664 6,000
100,690 28,656 2,833
10,620 6,070 500
-------------- ---------------- -----------
1,327,049 286,539 35,673
(652,386) (262,824) (33,354)
-------------- ---------------- -----------
674,663 23,715 2,319
-------------- ---------------- -----------
(73,801) 29,534 356
-------------- ---------------- -----------
(4,629,196) 102,219 (26,884)
7,895,010 (4,992) 0
(195,368) (9,058) 164,441
-------------- ---------------- -----------
3,070,446 88,169 137,557
-------------- ---------------- -----------
$2,996,645 $117,703 $137,913
-------------- ---------------- -----------
-------------- ---------------- -----------
</TABLE>
(1) For the period December 30, 1994 (Commencement of Operations) through
October 31, 1995.
(2) For the period September 29, 1995 (Commencement of Operations) through
October 31, 1995.
See Accompanying Notes to Financial Statements.
41
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus
Capital Appreciation Emerging Growth
Fund Fund
----------------------------------- -----------------------------------
For the Year Ended October 31, For the Year Ended October 31,
1995 1994 1995 1994
--------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
FROM OPERATIONS:
Net investment income (loss) $ 563,484 $ 384,246 $ (2,982,589) $ (1,678,646)
Net realized gain (loss) from
security transactions 31,649,453 11,173,174 49,113,782 (5,721,525)
Net realized gain (loss) from foreign
currency related items 0 0 0 0
Net change in unrealized appreciation
(depreciation) from investments and
foreign currency related items 12,386,702 (9,106,613) 84,670,426 10,930,919
--------------- ---------------- --------------- ----------------
Net increase (decrease) in net
assets resulting from
operations 44,599,639 2,450,807 130,801,619 3,530,748
--------------- ---------------- --------------- ----------------
FROM DISTRIBUTIONS:
Dividends from net investment income:
Common Shares (563,484) (419,337) 0 0
Advisor Shares 0 (27,724) 0 0
Distributions in excess of net
investment income:
Common Shares 0 0 0 0
Distributions from capital gains:
Common Shares (10,419,627) (12,899,141) 0 (10,576,150)
Advisor Shares (575,892) (852,608) 0 (1,639,316)
--------------- ---------------- --------------- ----------------
Net decrease from distributions (11,559,003) (14,198,810) 0 (12,215,466)
--------------- ---------------- --------------- ----------------
FROM CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares 88,963,455 45,617,531 335,569,078 180,813,270
Reinvested dividends 11,246,752 13,809,167 0 12,758,387
Net asset value of shares redeemed (53,459,471) (49,851,500) (116,280,844) (71,767,717)
--------------- ---------------- --------------- ----------------
Net increase in net assets from
capital share transactions 46,750,736 9,575,198 219,288,234 121,803,940
--------------- ---------------- --------------- ----------------
Net increase (decrease) in net
assets 79,791,372 (2,172,805) 350,089,853 113,119,222
NET ASSETS:
Beginning of period 167,514,493 169,687,298 304,672,758 191,553,536
--------------- ---------------- --------------- ----------------
End of period $ 247,305,865 $167,514,493 $ 654,762,611 $304,672,758
--------------- ---------------- --------------- ----------------
--------------- ---------------- --------------- ----------------
</TABLE>
42
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Warburg Pincus Warburg Pincus
Japan OTC Emerging Markets
Warburg Pincus Fund Fund
International Equity --------------------------------------- -------------------
Fund For the Period For the Period
----------------------------------- September 30, 1994 December 30, 1994
For the (Commencement of (Commencement of
For the Year Ended October 31, Year Ended Operations) through Operations) through
1995 1994 October 31, 1995 October 31, 1994 October 31, 1995
--------------- ---------------- ---------------- ------------------- -------------------
<S> <C> <C> <C> <C> <C>
$ 12,746,935 $ 1,310,933 $ (73,801) $ 5,115 $ 29,534
(34,444,203 ) 48,091,665 (4,629,196) 0 102,219
16,792,905 (2,772,944) 7,895,010 (294,437) (4,992)
(4,675,049 ) 82,484,415 (195,368) (35,099) (9,058)
--------------- ---------------- ---------------- ------------------- -------------------
(9,579,412 ) 129,114,069 2,996,645 (324,421) 117,703
--------------- ---------------- ---------------- ------------------- -------------------
(11,671,023 ) (1,764,380) 0 0 (14,321)
(629,473 ) (218,961) 0 0 (3)
0 (223,659) 0 0 0
(42,332,078 ) (1,047,367) 0 0 0
(5,756,403 ) (129,979) 0 0 0
--------------- ---------------- ---------------- ------------------- -------------------
(60,388,977 ) (3,384,346) 0 0 (14,324)
--------------- ---------------- ---------------- ------------------- -------------------
1,383,361,959 1,430,739,923 200,565,875 20,287,158 7,753,908
54,872,977 2,950,772 0 0 13,802
(715,598,203 ) (249,050,078) (44,871,674) (185,101) (1,191,160)
--------------- ---------------- ---------------- ------------------- -------------------
722,636,733 1,184,640,617 155,694,201 20,102,057 6,576,550
--------------- ---------------- ---------------- ------------------- -------------------
652,668,344 1,310,370,340 158,690,846 19,777,636 6,679,929
1,733,275,503 422,905,163 19,878,636 101,000 101,000
--------------- ---------------- ---------------- ------------------- -------------------
$2,385,943,847 $1,733,275,503 $178,569,482 $19,878,636 $ 6,780,929
--------------- ---------------- ---------------- ------------------- -------------------
--------------- ---------------- ---------------- ------------------- -------------------
<CAPTION>
Warburg Pincus
Post-Venture
Capital Fund
-------------------
For the Period
September 29, 1995
(Commencement of
Operations) through
October 31, 1995
-------------------
<S> <C>
$ 356
(26,884)
0
164,441
-------------------
137,913
-------------------
0
0
0
0
0
-------------------
0
-------------------
2,792,403
0
(4,887)
-------------------
2,787,516
-------------------
2,925,429
100,000
-------------------
$ 3,025,429
-------------------
-------------------
</TABLE>
See Accompanying Notes to Financial Statements.
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS POST-VENTURE CAPITAL FUND
FINANCIAL HIGHLIGHTS
(For an Advisor Share of the Fund Outstanding Throughout the Period)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
September 29, 1995
(Commencement of
Operations) through
October 31, 1995
-------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-------
Income from Investment Operations:
Net Investment Income .00
Net Gain on Securities .68
-------
Total from Investment Operations .68
-------
Less Distributions:
Dividends from Net Investment Income .00
Distributions from Capital Gains .00
-------
Total Distributions .00
-------
NET ASSET VALUE, END OF PERIOD $ 10.68
-------
-------
Total Return 6.80%+
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $1
Ratios to average daily net assets:
Operating expenses 2.15%*
Net investment income .09%*
Decrease reflected in above operating expense ratio due to
waivers/reimbursements 9.25%*
Portfolio Turnover Rate 16.90%
* Annualized
+ Non-annualized
</TABLE>
See Accompanying Notes to Financial Statements.
49
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS
October 31, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The Warburg Pincus Equity Funds are comprised of Warburg Pincus Capital
Appreciation Fund (the 'Capital Appreciation Fund'), Warburg Pincus
International Equity Fund (the 'International Equity Fund') and Warburg Pincus
Post-Venture Capital Fund (the 'Post-Venture Capital Fund') which are registered
under the Investment Company Act of 1940, as amended (the '1940 Act'), as
diversified, open-end management investment companies, and Warburg Pincus
Emerging Growth Fund (the 'Emerging Growth Fund'), Warburg Pincus Japan OTC Fund
(the 'Japan OTC Fund') and Warburg Pincus Emerging Markets Fund (the 'Emerging
Markets Fund', together with the Capital Appreciation Fund, the International
Equity Fund, the Post-Venture Capital Fund, the Emerging Growth Fund and the
Japan OTC Fund, the 'Funds') which are registered under the 1940 Act as non-
diversified, open-end management investment companies.
Investment objectives for each Fund are as follows: the Capital
Appreciation Fund, the International Equity Fund and the Japan OTC Fund seek
long-term capital appreciation; the Emerging Growth Fund seeks maximum capital
appreciation; the Emerging Markets Fund seeks growth of capital; the
Post-Venture Capital Fund seeks long-term growth of capital.
Each Fund offers two classes of shares, one class being referred to as
Common Shares and one class being referred to as Advisor Shares. Common and
Advisor Shares in each Fund represent an equal pro rata interest in such Fund,
except that they bear different expenses which reflect the difference in the
range of services provided to them. Common Shares for the Japan OTC Fund, the
Emerging Markets Fund and the Post-Venture Capital Fund bear expenses paid
pursuant to a shareholder servicing and distribution plan adopted by each Fund
at an annual rate not to exceed .25% of the average daily net asset value of
each Fund's outstanding Common Shares. Advisor Shares for each Fund bear
expenses paid pursuant to a distribution plan adopted by each Fund at an annual
rate not to exceed .75% of the average daily net asset value of each Fund's
outstanding Advisor Shares. The Common and the Advisor Shares are currently
bearing expenses of .25% and .50% of average daily net assets, respectively.
The net asset value of each Fund is determined daily as of the close of
regular trading on the New York Stock Exchange. Each Fund's investments are
valued at market value, which is currently determined using the last reported
sales price. If no sales are reported, investments are generally valued at the
last reported bid price. In the absence of market quotations, investments are
generally valued at fair value as determined by or under the direction of the
Fund's governing Board. Short-term investments that mature in 60 days or less
are valued on the basis of amortized cost, which approximates market value.
The books and records of the Funds are maintained in U.S. dollars.
Transactions denominated in foreign currencies are recorded at the current
prevailing exchange rates. All assets and liabilities denominated in foreign
currencies are translated into U.S. dollar amounts at the current exchange rate
at the end of the period. Translation gains or losses resulting from changes in
the exchange rate during the reporting period and realized gains and losses on
the settlement of foreign currency transactions are
50
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
reported in the results of operations for the current period. The Funds do not
isolate that portion of gains and losses on investments in equity securities
which are due to changes in the foreign exchange rate from that which are due to
changes in market prices of equity securities. The Funds isolate that portion of
gains and losses on investments in debt securities which are due to changes in
the foreign exchange rate from that which are due to changes in market prices of
debt securities.
Security transactions are accounted for on trade date. Interest income is
recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
Income, expenses (excluding class-specific expenses, principally distribution,
transfer agent and printing) and realized/unrealized gains/losses are allocated
proportionately to each class of shares based upon the relative net asset value
of outstanding shares. The cost of investments sold is determined by use of the
specific identification method for both financial reporting and income tax
purposes.
Dividends from net investment income are declared and paid semiannually for
all Funds. Distributions of net realized capital gains, if any, are declared and
paid annually. However, to the extent that a net realized capital gain can be
reduced by a capital loss carryover, such gain will not be distributed. Income
and capital gain distributions are determined in accordance with Federal income
tax regulations which may differ from generally accepted accounting principles.
Certain amounts in the Financial Highlights have been reclassified to
conform with current year presentation.
No provision is made for Federal taxes as it is each Fund's intention to
continue to qualify for and elect the tax treatment applicable to regulated
investment companies under the Internal Revenue Code and make the requisite
distributions to its shareholders which will be sufficient to relieve it from
Federal income and excise taxes.
Costs incurred by the Japan OTC Fund, the Emerging Markets Fund and the
Post-Venture Capital Fund in connection with their organization have been
deferred and are being amortized over a period of five years from the date each
Fund commenced its operations.
Each Fund may enter into repurchase agreement transactions. Under the terms
of a typical repurchase agreement, a Fund acquires an underlying security
subject to an obligation of the seller to repurchase. The value of the
underlying security collateral will be maintained at an amount at least equal to
the total amount of the purchase obligation, including interest. The collateral
is in the Fund's possession.
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR
Warburg, Pincus Counsellors, Inc. ('Warburg'), a wholly owned subsidiary of
Warburg, Pincus Counsellors G.P. ('Counsellors G.P.'), serves as each Fund's
investment adviser. For its investment advisory services, Warburg receives the
following fees based on each Fund's average daily net assets:
51
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FUND ANNUAL RATE
- --------------------------------- ----------------------------------
<S> <C>
Capital Appreciation .70% of average daily net assets
Emerging Growth .90% of average daily net assets
International Equity 1.00% of average daily net assets
Japan OTC 1.25% of average daily net assets
Emerging Markets 1.25% of average daily net assets
Post-Venture Capital 1.25% of average daily net assets
</TABLE>
For the period or year ended October 31, 1995, investment advisory fees,
waivers and reimbursements were as follows:
<TABLE>
<CAPTION>
GROSS NET EXPENSE
FUND ADVISORY FEE WAIVER ADVISORY FEE REIMBURSEMENTS
- ------------------------------------------- ------------ --------- ------------ --------------
<S> <C> <C> <C> <C>
Capital Appreciation $ 1,367,729 $ 0 $ 1,367,729 $ 0
Emerging Growth 3,824,061 0 3,824,061 0
International Equity 20,225,631 0 20,225,631 0
Japan OTC 599,720 (599,720) 0 (25,920)
Emerging Markets 29,641 (29,641) 0 (230,338)
Post-Venture Capital 1,756 (1,756) 0 (31,458)
</TABLE>
SPARX Investment & Research, USA, Inc. ('SPARX USA') serves as
sub-investment adviser for the Japan OTC Fund. From its investment advisory fee,
Warburg pays SPARX USA a fee at an annual rate of .625% of the average daily net
assets of the Japan OTC Fund. No compensation is paid by the Japan OTC Fund to
SPARX USA for its sub-investment advisory services.
Counsellors Funds Service, Inc. ('CFSI'), a wholly owned subsidiary of
Warburg, and PFPC Inc. ('PFPC'), an indirect, wholly owned subsidiary of PNC
Bank Corp. ('PNC'), serve as each Fund's co-administrators. For its
administrative services, CFSI currently receives a fee calculated at an annual
rate of .10% of each Fund's average daily net assets. For the period or year
ended October 31, 1995, administrative services fees earned by CFSI were as
follows:
<TABLE>
<CAPTION>
FUND CO-ADMINISTRATION FEE
- ------------------------------------------- ------------------------------
<S> <C>
Capital Appreciation $ 195,390
Emerging Growth 424,895
International Equity 2,022,563
Japan OTC 47,978
Emerging Markets 2,372
Post-Venture Capital 140
</TABLE>
For its administrative services, PFPC currently receives a fee calculated
at an annual rate of .10% of the average daily net assets of the Capital
Appreciation Fund, the Emerging Growth Fund and the Post-Venture Capital Fund.
For the International Equity Fund, the Japan OTC Fund and the Emerging Markets
Fund, PFPC currently receives a fee calculated at an annual rate of .12% on each
Fund's first $250 million in average daily net assets, .10% on the next $250
million in average daily net assets, .08%
52
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
on the next $250 million in average daily net assets, and .05% of the average
daily net assets over $750 million.
For the period or year ended October 31, 1995, administrative service fees
earned and waived by PFPC were as follows:
<TABLE>
<CAPTION>
NET
FUND CO-ADMINISTRATION FEE WAIVER CO-ADMINISTRATION FEE
- ----------------------------------------- --------------------- -------- -------------------------
<S> <C> <C> <C>
Capital Appreciation $ 195,390 $ 0 $ 195,390
Emerging Growth 424,895 0 424,895
International Equity 1,386,283 0 1,386,283
Japan OTC 90,701 (26,746) 63,955
Emerging Markets 2,845 (2,845) 0
Post-Venture Capital 140 (140) 0
</TABLE>
Counsellors Securities Inc. ('CSI'), also a wholly owned subsidiary of
Warburg, serves as each Fund's distributor. No compensation is paid by the
Capital Appreciation Fund, the Emerging Growth Fund or the International Equity
Fund to CSI for distribution services. For its shareholder servicing and
distribution services, CSI currently receives a fee calculated at an annual rate
of .25% of the average daily net assets of the Common Shares for the Japan OTC
Fund, the Emerging Markets Fund and the Post-Venture Capital Fund pursuant to a
shareholder servicing and distribution plan adopted by each Fund. For the period
or year ended October 31, 1995, distribution fees earned by CSI were as follows:
<TABLE>
<CAPTION>
FUND DISTRIBUTION FEE
- ------------------------------------------- ------------------------------
<S> <C>
Japan OTC $119,941
Emerging Markets 5,926
Post-Venture Capital 351
</TABLE>
3. INVESTMENTS IN SECURITIES
For the period or year ended October 31, 1995, purchases and sales of
investment securities (excluding short-term investments) were as follows:
<TABLE>
<CAPTION>
FUND PURCHASES SALES
- ----------------------------------------------------------- -------------- ------------
<S> <C> <C>
Capital Appreciation $ 299,741,274 $269,962,070
Emerging Growth 532,722,466 336,581,792
International Equity 1,457,609,458 735,613,078
Japan OTC 189,768,420 36,507,703
Emerging Markets 7,181,659 1,297,140
Post-Venture Capital 2,714,501 222,270
</TABLE>
53
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
At October 31, 1995, the net unrealized appreciation from investments for
those securities having an excess of value over cost and net unrealized
depreciation from investments for those securities having an excess of cost over
value (based on cost for Federal income tax purposes) was as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
FUND APPRECIATION DEPRECIATION (DEPRECIATION)
- ----------------------------------- ------------ ------------- --------------
<S> <C> <C> <C>
Capital Appreciation $ 45,397,319 $ (3,203,157) $ 42,194,162
Emerging Growth 144,909,782 (9,681,675) 135,228,107
International Equity 260,125,513 (171,560,066) 88,565,447
Japan OTC 6,205,079 (7,100,852) (895,773)
Emerging Markets 341,944 (352,944) (11,000)
Post-Venture Capital 233,929 (69,488) 164,441
</TABLE>
4. FORWARD FOREIGN CURRENCY CONTRACTS
The International Equity Fund, the Japan OTC Fund, the Emerging Markets
Fund and the Post-Venture Capital Fund may enter into forward currency contracts
for the purchase or sale of a specific foreign currency at a fixed price on a
future date. Risks may arise upon entering into these contracts from the
potential inability of counterparties to meet the terms of their contracts and
from unanticipated movements in the value of a foreign currency relative to the
U.S. dollar. The Funds will enter into forward contracts primarily for hedging
purposes. The forward currency contracts are adjusted by the daily exchange rate
of the underlying currency and any gains or losses are recorded for financial
statement purposes as unrealized until the contract settlement date.
54
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
At October 31, 1995, the International Equity Fund and the Japan OTC Fund had
the following open forward foreign currency contracts:
<TABLE>
<CAPTION>
INTERNATIONAL EQUITY FUND
- -----------------------------------------------------------------------------------------------------------
FOREIGN UNREALIZED
FORWARD CURRENCY EXPIRATION CURRENCY CONTRACT CONTRACT FOREIGN EXCHANGE
CONTRACT DATE TO BE SOLD AMOUNT VALUE GAIN (LOSS)
- ------------------- ----------- -------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
French Francs 11/15/95 260,000,000 $ 52,170,074 $ 53,253,590 $ (1,083,516)
French Francs 11/16/95 122,216,250 25,050,833 25,032,515 18,318
German Marks 11/16/95 110,000,000 78,272,317 78,263,963 8,354
German Marks 05/17/96 78,928,380 55,400,000 56,652,584 (1,252,584)
Japanese Yen 03/21/96 5,547,240,000 57,000,000 55,475,507 1,524,493
Japanese Yen 03/21/96 4,764,377,500 47,298,496 47,646,443 (347,947)
Japanese Yen 03/21/96 4,764,377,500 47,276,203 47,646,443 (370,240)
Japanese Yen 03/21/96 1,385,445,000 13,761,286 13,855,226 (93,940)
Japanese Yen 05/13/96 8,731,990,000 109,000,000 88,008,212 20,991,788
Japanese Yen 05/16/96 9,247,700,000 110,000,000 93,246,752 16,753,248
Japanese Yen 05/16/96 4,586,012,000 55,400,000 46,241,847 9,158,153
Japanese Yen 09/18/96 4,660,000,000 50,000,000 47,860,895 2,139,105
------------ ------------ ----------------
$700,629,209 $653,183,977 $ 47,445,232
------------ ------------ ----------------
------------ ------------ ----------------
<CAPTION>
FOREIGN
CURRENCY UNREALIZED
FORWARD CURRENCY EXPIRATION TO BE CONTRACT CONTRACT FOREIGN EXCHANGE
CONTRACT DATE PURCHASED AMOUNT VALUE GAIN (LOSS)
- ------------------- ----------- -------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
German Marks 11/16/95 34,500,000 $ 25,050,828 $ 24,546,425 $ (504,403)
------------ ------------ ----------------
------------ ------------ ----------------
</TABLE>
<TABLE>
<CAPTION>
JAPAN OTC FUND
- -----------------------------------------------------------------------------------------------------------
FOREIGN UNREALIZED
FORWARD CURRENCY EXPIRATION CURRENCY CONTRACT CONTRACT FOREIGN EXCHANGE
CONTRACT DATE TO BE SOLD AMOUNT VALUE GAIN (LOSS)
- ------------------- ----------- -------------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C>
Japanese Yen 11/30/95 12,567,400,000 $124,000,000 $123,536,813 $ 463,187
Japanese Yen 11/30/95 2,027,000,000 20,000,000 19,925,293 74,707
Japanese Yen 11/30/95 1,520,250,000 15,000,000 14,943,969 56,031
------------ ------------ ----------------
$159,000,000 $158,406,075 $ 593,925
------------ ------------ ----------------
------------ ------------ ----------------
</TABLE>
55
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
5. EQUITY SWAP TRANSACTIONS
The International Equity Fund (the 'Fund') entered into a Taiwanese equity
swap agreement (which represents approximately .005% of the Fund's net assets at
October 31, 1995) dated August 11, 1995, where the Fund receives a quarterly
payment, representing the total return (defined as market appreciation and
dividend income) on a basket of three Taiwanese common stocks ('Common Stocks').
In return, the Fund pays quarterly the Libor rate (London Interbank Offered
Rate), plus 1.25% per annum (7.125% on October 31, 1995) on the initial stock
purchase amount ('Notional amount') of $12,000,000. The Notional amount is
marked to market on each quarterly reset date. In the event that the Common
Stocks decline in value, the Fund will be required to pay quarterly, the amount
of any depreciation in value from the notional amount. The equity swap agreement
will terminate on August 11, 1996.
During the term of the equity swap transaction, changes in the value of the
Common Stocks as compared to the Notional amount is recognized as unrealized
gain or loss. Dividend income for the Common Stocks are recorded on the
ex-dividend date. Interest expense is accrued daily. At October 31, 1995, the
Fund has recorded an unrealized gain of $502,018 and interest payable of
$192,375 on the equity swap transaction.
56
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
6. CAPITAL SHARE TRANSACTIONS
The Capital Appreciation Fund is authorized to issue three billion of full
and fractional shares of beneficial interest, $.001 par value per share, of
which one billion shares are classified as Series 2 Shares (the Advisor Shares).
The Emerging Growth Fund, the International Equity Fund, the Japan OTC Fund, the
Emerging Markets Fund and the Post-Venture Capital Fund are each authorized to
issue three billion full and fractional shares of capital stock, $.001 par value
per share, of which one billion shares of each Fund are designated as Series 2
Shares (the Advisor Shares).
Transactions in shares of each Fund were as follows:
<TABLE>
<CAPTION>
CAPITAL APPRECIATION FUND EMERGING GROWTH FUND
Common Shares Advisor Shares Common Shares Advisor Shares
----------------------------- --------------------------- ------------------------------ --------------
For the Year Ended October 31, For the Year Ended October 31,
------------------------------------------------------------- ----------------------------------------------
1995 1994 1995 1994 1995 1994 1995
------------ ------------ ----------- ----------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Shares sold 6,020,619 2,958,494 201,782 290,193 9,808,362 6,133,751 3,172,686
Shares issued to
shareholders on
reinvestment of
dividends 850,478 920,210 46,554 61,526 0 506,720 0
Shares redeemed (3,638,974) (3,126,497) (110,027) (460,020) (4,294,179) (2,859,413) (383,922)
------------ ------------ ----------- ----------- ------------- ------------ -----------
Net increase
(decrease) in
shares
outstanding 3,232,123 752,207 138,309 (108,301) 5,514,183 3,781,058 2,788,764
------------ ------------ ----------- ----------- ------------- ------------ -----------
------------ ------------ ----------- ----------- ------------- ------------ -----------
Proceeds from sale
of shares $ 85,992,655 $ 41,570,590 $ 2,970,800 $ 4,046,941 $ 256,886,928 $132,922,995 $78,682,150
Reinvested
dividends 10,670,876 12,945,690 575,876 863,477 0 11,015,146 0
Net asset value of
shares redeemed (51,907,650) (43,449,501) (1,551,821) (6,401,999) (106,777,032) (61,126,667) (9,503,812)
------------ ------------ ----------- ----------- ------------- ------------ -----------
Net increase
(decrease) from
capital share
transactions $ 44,755,881 $ 11,066,779 $ 1,994,855 $(1,491,581) $ 150,109,896 $ 82,811,474 $69,178,338
------------ ------------ ----------- ----------- ------------- ------------ -----------
------------ ------------ ----------- ----------- ------------- ------------ -----------
<CAPTION>
1994
------------
<S> <C>
Shares sold 2,233,737
Shares issued to
shareholders on
reinvestment of
dividends 80,473
Shares redeemed (517,898)
------------
Net increase
(decrease) in
shares
outstanding 1,796,312
------------
------------
Proceeds from sale
of shares $ 47,890,275
Reinvested
dividends 1,743,241
Net asset value of
shares redeemed (10,641,050)
------------
Net increase
(decrease) from
capital share
transactions $ 38,992,466
------------
------------
</TABLE>
57
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
6. CAPITAL SHARE TRANSACTIONS (CONT'D)
<TABLE>
<CAPTION>
EMERGING MARKETS FUND
INTERNATIONAL EQUITY FUND Common Shares Advisor Shares
Common Shares Advisor Shares --------------- -----------------
-------------------------------- ---------------------------- For the Period
For the Year Ended October 31, December 30, 1994
---------------------------------------------------------------- (Commencement of Operations)
1995 1994 1995 1994 through October 31, 1995
-------------- -------------- ------------ ------------ ----------------------------------
<S> <C> <C> <C> <C> <C> <C>
Shares sold 68,096,606 64,218,907 7,225,150 7,956,088 694,008 22
Shares issued to
shareholders on
reinvestment of
dividends 2,623,005 147,031 346,377 6,879 1,267 0
Shares redeemed (38,317,625) (11,861,720) (770,753) (795,406) (104,480) 0
-------------- -------------- ------------ ------------ --------------- -----
Net increase
(decrease) in
shares outstanding 32,401,986 52,504,218 6,800,774 7,167,561 590,795 22
-------------- -------------- ------------ ------------ --------------- -----
-------------- -------------- ------------ ------------ --------------- -----
Proceeds from sale of
shares $1,251,776,887 $1,275,306,263 $131,585,072 $155,433,660 $ 7,753,651 $ 257
Reinvested dividends 48,487,109 2,820,903 6,385,868 129,869 13,802 0
Net asset value of
shares redeemed (701,310,424) (233,614,600) (14,287,779) (15,435,478) (1,191,160) 0
-------------- -------------- ------------ ------------ --------------- -----
Net increase
(decrease) from
capital share
transactions $ 598,953,572 $1,044,512,566 $123,683,161 $140,128,051 $ 6,576,293 $ 257
-------------- -------------- ------------ ------------ --------------- -----
-------------- -------------- ------------ ------------ --------------- -----
</TABLE>
7. NET ASSETS
Net Assets at October 31, 1995, consisted of the following:
<TABLE>
<CAPTION>
CAPITAL EMERGING
APPRECIATION FUND GROWTH FUND
----------------- ------------
<S> <C> <C>
Capital contributed, net $ 173,327,827 $479,035,241
Accumulated net investment income (loss) 0 0
Accumulated net realized gain (loss) from security transactions 31,648,355 40,302,640
Net unrealized appreciation (depreciation) from investments and
foreign currency related items 42,329,683 135,424,730
----------------- ------------
Net assets $ 247,305,865 $654,762,611
----------------- ------------
----------------- ------------
</TABLE>
58
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JAPAN OTC FUND
Common Shares Advisor Shares
------------------------------------- -------------------------------------
For the Period For the Period POST-VENTURE CAPITAL FUND
September 30, September 30, Common Shares
1994 1994 ------------------
(Commencement of (Commencement of For the Period
For the Operations) For the Operations) September 29, 1995
Year Ended through Year Ended through (Commencement of Operations)
October 31, 1995 October 31, 1994 October 31, 1995 October 31, 1994 through October 31, 1995
---------------- ---------------- ---------------- ---------------- --------------------------
<S> <C> <C> <C> <C> <C>
22,809,795 2,025,697 0 15 273,510
0 0 0 0 0
(5,180,432) (18,605) 0 0 (473)
--
---------------- ---------------- ----- ------------------
17,629,363 2,007,092 0 15 273,037
--
--
---------------- ---------------- ----- ------------------
---------------- ---------------- ----- ------------------
$200,565,875 $ 20,287,008 $0 $150 $2,792,203
0 0 0 0 0
(44,871,674) (185,101) 0 0 (4,887)
--
---------------- ---------------- ----- ------------------
$155,694,201 $ 20,101,907 $0 $150 $2,787,316
--
--
---------------- ---------------- ----- ------------------
---------------- ---------------- ----- ------------------
<CAPTION>
Advisor Shares
---------------------
<S> <C>
19
0
0
-----
19
-----
-----
$ 200
0
0
-----
$ 200
-----
-----
</TABLE>
<TABLE>
<CAPTION>
INTERNATIONAL EMERGING POST-VENTURE
EQUITY FUND MARKETS FUND JAPAN OTC FUND CAPITAL FUND
-------------- ------------ -------------- ------------
<S> <C> <C> <C> <C>
$2,271,007,433 $6,677,550 $175,619,527 $2,887,516
19,124,669 10,218 7,821,209 356
(40,671,086 ) 102,219 (4,640,787) (26,884)
136,482,831 (9,058) (230,467) 164,441
-------------- ------------ -------------- ------------
$2,385,943,847 $6,780,929 $178,569,482 $3,025,429
-------------- ------------ -------------- ------------
-------------- ------------ -------------- ------------
</TABLE>
59
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
8. CAPITAL LOSS CARRYOVER
At October 31, 1995, the International Equity Fund, the Japan OTC Fund and
the Post-Venture Capital Fund had capital loss carryovers of $40,671,086,
$4,629,196 and $26,884, respectively, expiring in 2003 to offset possible future
capital gains of each Fund.
9. OTHER FINANCIAL HIGHLIGHTS
Each Fund currently offers one other class of shares, Common Shares,
representing equal prorata interests in each of the respective Warburg Pincus
Equity Funds. The financial highlights for a Common Share of each Fund are as
follows:
<TABLE>
<CAPTION>
Capital Appreciation Fund
------------------------------------------------------
Common Shares
------------------------------------------------------
For the Year Ended October 31,
------------------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $14.29 $15.32 $13.30 $12.16 $ 9.78
------ ------ ------ ------ ------
Income from Investment Operations:
Net Investment Income .04 .04 .05 .04 .15
Net Gain on Securities (both
realized and unrealized) 3.08 .17 2.78 1.21 2.41
------ ------ ------ ------ ------
Total from Investment Operations 3.12 .21 2.83 1.25 2.56
------ ------ ------ ------ ------
Less Distributions:
Dividends from Net Investment Income (.04) (.05) (.05) (.06) (.18)
Distributions from Capital Gains (.98) (1.19) (.76) (.05) .00
------ ------ ------ ------ ------
Total Distributions (1.02) (1.24) (.81) (.11) (.18)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $16.39 $14.29 $15.32 $13.30 $12.16
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Total Return 24.05% 1.65% 22.19% 10.40% 26.39%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Year (000s) $235,712 $159,346 $159,251 $117,900 $115,191
Ratios to average daily net assets:
Operating expenses 1.12% 1.05% 1.01% 1.06% 1.08%
Net investment income .31% .26% .30% .41% 1.27%
Decrease reflected in above operating expense
ratios due to waivers/reimbursements .00% .01% .00% .01% .00%
Portfolio Turnover Rate 146.09% 51.87% 48.26% 55.83% 39.50%
</TABLE>
60
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
TAX STATUS OF 1995 DIVIDENDS (Unaudited)
Taxable dividends paid by the Fund on per share basis were as follows:
<TABLE>
<S> <C>
Ordinary income $.06
Long-term capital gain .96
</TABLE>
Ordinary income dividends qualifying for the dividends received deduction
available to corporate shareholders was 100.00%.
Because the Fund's fiscal year is not the calendar year, amounts to be used by
calendar year taxpayers on their Federal return will be reflected on Form
1099-DIV and will be mailed in January 1996.
61
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Emerging Growth Fund
------------------------------------------------------
Common Shares
------------------------------------------------------
For the Year Ended October 31,
------------------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $22.38 $23.74 $18.28 $16.97 $10.83
------ ------ ------ ------ ------
Income from Investment Operations:
Net Investment Income (Loss) (.05) (.06) (.10) (.03) .05
Net Gain on Securities (both
realized and unrealized) 7.64 .06 5.93 1.71 6.16
------ ------ ------ ------ ------
Total from Investment Operations 7.59 .00 5.83 1.68 6.21
------ ------ ------ ------ ------
Less Distributions:
Dividends from Net Investment Income .00 .00 .00 (.01) (.07)
Distributions from Capital Gains .00 (1.36) (.37) (.36) .00
------ ------ ------ ------ ------
Total Distributions .00 (1.36) (.37) (.37) (.07)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $29.97 $22.38 $23.74 $18.28 $16.97
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Total Return 33.91% .16% 32.28% 9.87% 57.57%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Year (000s) $487,537 $240,664 $165,525 $99,562 $42,061
Ratios to average daily net assets:
Operating expenses 1.26% 1.22% 1.23% 1.24% 1.25%
Net investment income (loss) (.58%) (.58%) (.60%) (.25%) .32%
Decrease reflected in above operating expense
ratios due to waivers/reimbursements .00% .04% .00% .08% .47%
Portfolio Turnover Rate 84.82% 60.38% 68.35% 63.35% 97.69%
</TABLE>
62
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International Equity Fund
------------------------------------------------------
Common Shares
------------------------------------------------------
For the Year Ended October 31,
------------------------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $20.51 $17.00 $12.22 $13.66 $11.81
------ ------ ------ ------ ------
Income from Investment Operations:
Net Investment Income .12 .09 .09 .15 .19
Net Gain (Loss) on Securities and
Foreign Currency Related Items (both
realized and unrealized) (.67) 3.51 4.84 (1.28) 2.03
------ ------ ------ ------ ------
Total from Investment Operations (.55) 3.60 4.93 (1.13) 2.22
------ ------ ------ ------ ------
Less Distributions:
Dividends from Net Investment Income (.13) (.04) (.02) (.16) (.33)
Distributions in Excess of
Net Investment Income .00 (.01) .00 .00 .00
Distributions from Capital Gains (.53) (.04) (.13) (.15) (.04)
------ ------ ------ ------ ------
Total Distributions (.66) (.09) (.15) (.31) (.37)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR $19.30 $20.51 $17.00 $12.22 $13.66
------ ------ ------ ------ ------
------ ------ ------ ------ ------
Total Return (2.55%) 21.22% 40.68% (8.44%) 19.42%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Year (000s) $2,068,207 $1,533,872 $378,661 $101,763 $72,553
Ratios to average daily net assets:
Operating expenses 1.39% 1.44% 1.48% 1.49% 1.50%
Net investment income .69% .19% .38% .88% 1.19%
Decrease reflected in above operating expense
ratios due to waivers/reimbursements .00% .00% .00% .07% .17%
Portfolio Turnover Rate 39.24% 17.02% 22.60% 53.29% 54.95%
</TABLE>
TAX STATUS OF 1995 DIVIDENDS (Unaudited)
Taxable dividends paid by the Fund on per share basis were as follows:
<TABLE>
<S> <C>
Ordinary income $.46
Long-term capital gain .20
</TABLE>
Because the Fund's fiscal year is not the calendar year, amounts to be used by
calendar year taxpayers on their Federal return will be reflected on Form
1099-DIV and will be mailed in January 1996.
63
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Japan OTC Fund
---------------------------------------------------------
Common Shares
---------------------------------------------------------
For the Period
September 30, 1994
(Commencement of
For the Year Ended Operations) through
October 31, 1995 October 31, 1994
--------------------------- --------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.85 $ 10.00
----------- ----------
Income from Investment Operations:
Net Investment Income .00 .00
Net Loss on Securities and Foreign Currency
Related Items (both realized and unrealized) (.76) (.15)
----------- ----------
Total from Investment Operations (.76) (.15)
----------- ----------
Less Distributions:
Dividends from Net Investment Income .00 .00
Distributions from Capital Gains .00 .00
----------- ----------
Total Distributions .00 .00
----------- ----------
NET ASSET VALUE, END OF PERIOD $ 9.09 $ 9.85
----------- ----------
----------- ----------
Total Return (7.72%) (15.84%)*
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $ 178,568 $ 19,878
Ratios to average daily net assets:
Operating expenses 1.41% 1.00%*
Net investment income (loss) (.15%) .49%*
Decrease reflected in above operating expense
ratios due to waivers/reimbursements 1.35% 4.96%*
Portfolio Turnover Rate 82.98% .00%
* Annualized
</TABLE>
64
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Emerging Markets Fund
---------------------------
Common Shares
---------------------------
For the Period
December 30, 1994
(Commencement of
Operations) through
October 31, 1995
---------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-------
Income from Investment Operations:
Net Investment Income .08
Net Gain on Securities and Foreign Currency Related Items (both
realized and unrealized) 1.25
-------
Total from Investment Operations 1.33
-------
Less Distributions:
Dividends from Net Investment Income (.05)
Distributions from Capital Gains .00
-------
Total Distributions (.05)
-------
NET ASSET VALUE, END OF PERIOD $ 11.28
-------
-------
Total Return 16.09%*
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $ 6,780
Ratios to average daily net assets:
Operating expenses 1.00%*
Net investment income 1.25%*
Decrease reflected in above operating expense ratio due to
waivers/reimbursements 11.08%*
Portfolio Turnover Rate 69.12%*
* Annualized
</TABLE>
TAX STATUS OF 1995 DIVIDENDS (Unaudited)
Taxable dividends paid by the Fund on per share basis were as follows:
<TABLE>
<S> <C>
Ordinary income $.05
</TABLE>
Because the Fund's fiscal year is not the calendar year, amounts to be used by
calendar year taxpayers on their Federal return will be reflected on Form
1099-DIV and will be mailed in January 1996.
65
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS EQUITY FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
October 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Post-Venture Capital Fund
---------------------------
Common Shares
---------------------------
For the Period
September 29, 1995
(Commencement of
Operations) through
October 31, 1995
---------------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
-------
Income from Investment Operations:
Net Investment Income .00
Net Gain on Securities (both realized and unrealized) .69
-------
Total from Investment Operations .69
-------
Less Distributions:
Dividends from Net Investment Income .00
Distributions from Capital Gains .00
-------
Total Distributions .00
-------
NET ASSET VALUE, END OF PERIOD $ 10.69
-------
-------
Total Return 6.90%+
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000s) $ 3,024
Ratios to average daily net assets:
Operating expenses 1.65%*
Net investment income .25%*
Decrease reflected in above operating expense ratio due to
waivers/reimbursements 23.76%*
Portfolio Turnover Rate 16.90%*
* Annualized
+ Non-annualized
</TABLE>
66
- --------------------------------------------------------------------------------
<PAGE>
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial Statements included in Part A:
(a) Financial Highlights
(2) Audited Financial Statements included in Part B:
(a) Schedule of Investments
(b) Statement of Assets and Liabilities
(c) Statement of Operations
(d) Statement of Changes in Net Assets
(e) Financial Highlights
(f) Notes to Financial Statements
(g) Report of Independent Accountants
(b) Exhibits:
Exhibit No. Description of Exhibit
1 Articles of Incorporation.(1)
2 By-Laws.(1)
3 Not applicable.
4 Forms of Share Certificates.(1)
5(a) Form of Investment Advisory Agreement.(1)
(b) Form of Sub-Investment Advisory Agreement.
6 Distribution Agreement.(2)
7 Not applicable.
- --------
1 Incorporated by reference to Registrant's Pre-Effective
Amendment No. 2 to its Registration Statement on Form N-1A,
filed on September 22, 1995.
2 Contained in Exhibit No. 15 hereto.
C-1
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ---------- ----------------------
<S> <C>
8(a) Form of Custodian Agreement with PNC Bank,
National Association.(3)
(b) Form of Custodian Agreement with State Street
Bank and Trust Company.(3)
9(a) Form of Transfer Agency Agreement.(3)
(b) Form of Counsellors Service Co-Administration
Agreement.(3)
(c) Form of PFPC Co-Administration Agreement.(3)
(d) Form of Services Agreements.(4)
(e) Form of Credit Agreement with Deutsche Bank AG,
New York Branch.
(f) Form of Letter Agreement and Discretionary Line
of Credit Demand Note with PNC Bank.
(g) Form of Credit Agreement with PNC Bank.
10(a) Consent of Willkie Farr & Gallagher, counsel to
Registrant.
(b) Opinion of Willkie Farr & Gallagher, counsel to
Registrant.(5)
11 Consent of Coopers & Lybrand L.L.P., Independent
Accountants.
12 Not applicable.
13 Form of Purchase Agreement.(1)
</TABLE>
- --------
(3) Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit in
Pre-Effective Amendment No. 1 to the Registration Statement on Form N-1A
of Warburg, Pincus Trust filed on June 14, 1995 (Securities Act File No.
33-58125).
(4) Incorporated by reference; material provisions of this exhibit
substantially similar to those of the corresponding exhibit in
Pre-Effective Amendment No. 1 to the Registration Statement on Form N-1A
of Warburg, Pincus Japan Growth Fund, Inc. filed on December 18, 1995
(Securities Act File No. 33-63655).
(5) Incorporated by reference to Opinion of Willkie Farr & Gallagher filed
with Registrant's Rule 24f-2 Notice filed on December 19, 1995.
C-2
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ---------- ----------------------
<S> <C>
14 Form of Retirement Plan.
15(a) Form of Shareholder Servicing and Distribution
Plan.(1)
(b) Form of Shareholder Services Plan.(6)
(c) Form of Amended and Restated Distribution Plan.(4)
(d) Form of Distribution Agreement.(1)
(e) Rule 18f-3 Plan.(4)
16 Schedule for Computation of Total Return
Performance Quotation.(7)
17(a) Financial Data Schedule relating to Common Shares.
(b) Financial Data Schedule relating to Advisor
Shares.
</TABLE>
Item 25. Persons Controlled by or Under Common
Control with Registrant
Not applicable.
- --------
(6) Incorporated by reference; material provisions of this exhibit
substantially similar to the corresponding exhibit in Post-Effective
Amendment No. 10 to the Registration Statement on Form N-1A of Warburg,
Pincus International Equity Fund, Inc. filed on September 22, 1995
(Securities Act File No. 33-27031).
(7) Incorporated by reference to Registrant's Post-Effective Amendment No. 1
to its Registration Statement on Form N-1A, filed on December 28, 1995.
C-3
<PAGE>
<PAGE>
Item 26. Number of Holders of Securities
<TABLE>
<CAPTION>
Number of Record Holders
Title of Class as of February 29, 1996
-------------- ------------------------
<S> <C>
Common Stock par value
$.001 per share 2,111
Common Stock par value
$.001 per share - Series 1 0
Common Stock par value
$.001 per share - Series 2 5
(Advisor Shares)
</TABLE>
Item 27. Indemnification
Registrant, officers and directors of Warburg, of Counsellors
Securities Inc. ("Counsellors Securities") and of Registrant are covered by
insurance policies indemnifying them for liability incurred in connection with
the operation of Registrant. Discussion of this coverage is incorporated by
reference to Item 27 of Part C of Registrant's Registration Statement, filed on
July 21, 1995.
Item 28. Business and Other Connections of
Investment Adviser
Warburg is a wholly owned subsidiary of Warburg, Pincus
Counsellors G.P., acts as investment adviser to Registrant. Warburg renders
investment advice to a wide variety of individual and institutional clients. The
list required by this Item 28 of officers and directors of Warburg, together
with information as to their other business, profession, vocation or employment
of a substantial nature during the past two years, is incorporated by reference
to Schedules A and D of Form ADV filed by Warburg (SEC File No. 801-07321).
Item 29. Principal Underwriter
(a) Counsellors Securities acts as distributor for Registrant, as
well as for The RBB Fund, Inc.; Warburg Pincus Balanced Fund; Warburg Pincus
Capital Appreciation Fund; Warburg Pincus Cash Reserve Fund; Warburg Pincus
Emerging Growth Fund; Warburg Pincus Emerging Markets Fund; Warburg Pincus Fixed
Income Fund; Warburg Pincus Global Fixed Income Fund; Warburg Pincus Growth &
Income Fund; Warburg Pincus Institutional Fund, Inc.; Warburg Pincus
Intermediate Maturity Government Fund; Warburg Pincus International Equity Fund;
Warburg Pincus Japan OTC Fund; Warburg Pincus New York Intermediate Municipal
Fund; Warburg Pincus New York Tax Exempt Fund; Warburg Pincus Tax Free Fund and
Warburg Pincus Trust.
C-4
<PAGE>
<PAGE>
(b) For information relating to each director and officer of
Counsellors Securities, reference is made to Form BD (SEC File No. 15-654) filed
by Counsellors Securities under the Securities Exchange Act of 1934, as amended.
(c) None.
Item 30. Location of Accounts and Records
(1) Warburg, Pincus Post-Venture Capital Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(Fund's Articles of Incorporation, By-laws and
minute books)
(2) Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as investment
adviser)
(3) Counsellors Funds Service, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as co-
administrator)
(4) PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
(records relating to its functions as co-
administrator)
(5) Counsellors Securities Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as distributor)
(6) PNC Bank, National Association
Broad and Chestnut Streets
Philadelphia, Pennsylvania 19101
(records relating to its functions as custodian)
(7) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110 (records relating to its
functions as shareholder servicing agent, transfer agent,
dividend disbursing agent and custodian)
C-5
<PAGE>
<PAGE>
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Registrant hereby undertakes to call a meeting of its
shareholders for the purpose of voting upon the question of removal of a
director or directors of Registrant when requested in writing to do so by the
holders of at least 10% of Registrant's outstanding shares. Registrant
undertakes further, in connection with the meeting, to comply with the
provisions of Section 16(c) of the 1940 Act relating to communications with the
shareholders of certain common-law trusts.
(b) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of Registrant's latest annual report to
shareholders, upon request and without charge.
C-6
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, and the Investment Company Act of 1940, as amended, the Registrant has
duly caused this Amendment to the Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York
and the State of New York, on the 10th day of March, 1996.
WARBURG, PINCUS POST-VENTURE
CAPITAL FUND, INC.
By: /s/ Arnold M. Reichman
--------------------------
Arnold M. Reichman
President
ATTEST:
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment to the Registration Statement 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/ John L. Furth Chairman of the March 10, 1996
- ----------------------------
John L. Furth Board and Director
/s/ Arnold M. Reichman President March 10, 1996
- ----------------------------
Arnold M. Reichman and Director
/s/ Stephen Distler Vice President March 10, 1996
- ---------------------------- and Chief Financial
Stephen Distler Officer
/s/ Howard Conroy Vice President, March 10, 1996
- ---------------------------- Treasurer and Chief
Howard Conroy Accounting Officer
/s/ Richard N. Cooper Director March 10, 1996
- ----------------------------
Richard N. Cooper
/s/ Donald J. Donahue Director March 10, 1996
- ----------------------------
Donald J. Donahue
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Jack W. Fritz Director March 10, 1996
- ----------------------------
Jack W. Fritz
/s/ Thomas A. Melfe Director March 10, 1996
- ----------------------------
Thomas A. Melfe
/s/ Alexander B. Trowbridge Director March 10, 1996
- ----------------------------
Alexander B. Trowbridge
</TABLE>
STATEMENT OF DIFFERENCES
------------------------
The dagger symbol shall be expressed as........ `D'
Mathematical powers normally expressed
as superscript shall be preceded by ...........'pp'
<PAGE>
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
- ---------- -----------------------
<S> <C>
5(b) Form of Sub-Investment Advisory Agreement.
9(e) Form of Credit Agreement with Deutsche Bank AG,
New York Branch.
(f) Form of Letter Agreement and Discretionary Line of
Credit Demand Note with PNC Bank.
(g) Form of Credit Agreement with PNC Bank.
10(a) Consent of Willkie Farr & Gallagher, counsel to
Registrant.
11 Consent of Coopers & Lybrand L.L.P., Independent
Accountants.
14 Form of Retirement Plan.
17(a) Financial Data Schedule relating to Common Shares.
(b) Financial Data Schedule relating to Advisor Shares.
</TABLE>
<PAGE>
<PAGE>
FORM OF SUB-INVESTMENT ADVISORY AGREEMENT
, 1996
ABBOTT CAPITAL MANAGEMENT, L.P.
50 Rowes Wharf
Boston, MA 02110
Dear Sirs:
Warburg, Pincus Post-Venture Capital Fund, Inc., a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the '1940
Act'), as an open-end, management investment company (the 'Fund'), and Warburg,
Pincus Counsellors, Inc., as investment adviser to the Fund ('Warburg'),
herewith confirms their agreement with Abbott Capital Management, L.P. (the
'Sub-Adviser') as follows:
1. INVESTMENT DESCRIPTION; APPOINTMENT
The Fund desires to employ its capital by investing and reinvesting in
securities of the kind and in accordance with the limitations specified in its
Articles of Incorporation, as may be amended from time to time (the 'Articles'),
and in its Prospectuses and Statement of Additional Information as from time to
time in effect (the 'Prospectus' and 'SAI,' respectively), and in such manner
and to such extent as may from time to time be approved by the Board of
Directors of the Fund. Copies of the Prospectus, SAI and Articles have been or
will be submitted to the Sub-Adviser. The Fund agrees to provide the Sub-Adviser
copies of all amendments to the Prospectus and SAI on an on-going basis. The
Fund employs Warburg as its investment adviser. Warburg desires to employ and
hereby appoints the Sub-Adviser to act as its sub-investment adviser upon the
terms set forth in this Agreement. The Sub-Adviser accepts the appointment and
agrees to furnish the services set forth below for the compensation provided for
herein.
2. SERVICES AS SUB-INVESTMENT ADVISER
(a) Subject to the supervision and direction of Warburg, the Sub-Adviser
will provide investment advisory assistance and portfolio management advice to
the Fund in accordance with (a) the Articles, (b) the 1940 Act and the
Investment Advisers Act of 1940, as amended (the 'Advisers Act'), and all
applicable Rules and Regulations of the Securities and Exchange Commission (the
'SEC') and all other applicable laws and regulations and (c) the Fund's
investment objective and policies as stated in the Prospectus and SAI and
investment parameters provided by Warburg from time to time. In connection
therewith, the Sub-Adviser will:
(i) determine whether to purchase, retain or sell interests in United
States or foreign private investment vehicles that themselves invest in
debt and equity securities of companies in the venture capital and
post-venture capital stages of development or companies engaged in special
situations or changes in corporate control, including buyouts
('Investments'). The Sub-Adviser is hereby authorized to execute, or place
orders for the execution of, all Investments on behalf of the Fund;
(ii) assist the custodian and accounting agent for the Fund in
determining or confirming, consistent with the procedures and policies
stated in the Prospectus and SAI, the value of any Investments for which
the custodian and accounting agent seek assistance from or identify for
review by the Sub-Adviser;
(iii) monitor the execution of orders for the purchase or sale of
Investments and the settlement and clearance of those orders;
(iv) exercise voting rights in respect of Investments; and
B-1
<PAGE>
<PAGE>
(v) provide reports to the Fund's Board of Directors for consideration
at quarterly meetings of the Board on the Investments and furnish Warburg
and the Fund's Board of Directors with such periodic and special reports as
the Fund or Warburg may reasonably request.
(b) In connection with the performance of the services of the Sub-Adviser
provided for herein, the Sub-Adviser may contract at its own expense with third
parties for the acquisition of research, clerical services and other
administrative services that would not require such parties to be required to
register as an investment adviser under the Advisers Act; provided that the
Sub-Adviser shall remain liable for the performance of its duties hereunder.
3. EXECUTION OF TRANSACTIONS
(a) The Sub-Adviser will not effect orders for the purchase or sale of
securities on behalf of the Fund through brokers or dealers as agents.
(b) It is understood that the services of the Sub-Adviser are not
exclusive, and nothing in this Agreement shall prevent the Sub-Adviser from
providing similar services to other investment companies or from engaging in
other activities, provided that those activities do not adversely affect the
ability of the Sub-Adviser to perform its services under this Agreement. The
Fund and Warburg further understand and acknowledge that the persons employed by
the Sub-Adviser to assist in the performance of its duties under this Agreement
will not devote their full time to that service. Nothing contained in this
Agreement will be deemed to limit or restrict the right of the Sub-Adviser or
any affiliate of the Sub-Adviser to engage in and devote time and attention to
other businesses or to render services of whatever kind or nature, provided that
doing so does not adversely affect the ability of the Sub-Adviser to perform its
services under this Agreement.
(c) On occasions when the Sub-Adviser deems the purchase or sale of a
security to be in the best interest of the Fund as well as of other investment
advisory clients of the Sub-Adviser, the Sub-Adviser may, to the extent
permitted by applicable laws and regulations, but shall not be obligated to,
aggregate the securities to be so sold or purchased with those of its other
clients. In such event, allocation of the securities so purchased or sold, as
well as the expenses incurred in the transaction, will be made by the
Sub-Adviser in a manner that is fair and equitable, in the judgment of the
Sub-Adviser, in the exercise of its fiduciary obligations to the Fund and to
such other clients. The Sub-Adviser shall provide to Warburg and the Fund all
information reasonably requested by Warburg and the Fund relating to the
decisions made by the Sub-Adviser regarding allocation of securities purchased
or sold, as well as the expenses incurred in a transaction, among the Fund and
the Sub-Adviser's other investment advisory clients.
(d) In connection with the purchase and sale of securities for the Fund,
the Sub-Adviser will provide such information as may be reasonably necessary to
enable the custodian and co-administrators to perform their administrative and
recordkeeping responsibilities with respect to the Fund.
4. DISCLOSURE REGARDING THE SUB-ADVISER
(a) The Sub-Adviser has reviewed the disclosure about the Sub-Adviser
contained in the Fund's registration statement and represents and warrants that,
with respect to such disclosure about the Sub-Adviser or information related,
directly or indirectly, to the Sub-Adviser, such registration statement
contains, as of the date hereof, no untrue statement of any material fact and
does not omit any statement of a material fact which is required to be stated
therein or necessary to make the statements contained therein not misleading.
(b) The Sub-Adviser agrees to notify Warburg and the Fund promptly of any
(i) statement about the Sub-Adviser contained in the Fund's registration
statement that becomes untrue in any material respect or (ii) omission of a
material fact about the Sub-Adviser in the Fund's registration statement which
is required to be stated therein or necessary to make the statements contained
therein not misleading or (iii) any reorganization or change in the Sub-Adviser,
including any change in its ownership or key employees.
B-2
<PAGE>
<PAGE>
(c) Prior to the Fund or Warburg or any affiliated person (as defined in
the 1940 Act, an 'Affiliate') of either using or distributing sales literature
or other promotional material referring to the Sub-Adviser, the Sub-Adviser
shall have the right to approve the general advertising or promotional plan
pursuant to which such literature or material is being utilized or distributed;
provided that the Sub-Adviser shall be deemed to have approved such advertising
or plan if it has not objected to its use within ten (10) business days after
such material has been sent to it. The Fund or Warburg will use all
reasonable efforts to ensure that all advertising, sales and promotional
material used or distributed by or on behalf of the Fund or Warburg that refers
to the Sub-Adviser will comply with the requirements of the Advisers Act, the
1940 Act and the rules and regulations promulgated thereunder.
(d) The Sub-Adviser has supplied Warburg and the Fund copies of its Form
ADV with all exhibits and attachments thereto and will hereinafter supply
Warburg, promptly upon preparation thereof, copies of all amendments or
restatements of such document.
5. CERTAIN REPRESENTATIONS AND WARRANTIES OF THE SUB-ADVISER
(a) The Sub-Adviser represents and warrants that it is a duly registered
investment adviser under the Advisers Act, a duly registered investment adviser
in any and all states of the United States in which the Sub-Adviser is required
to be so registered and has obtained all necessary licenses and approvals in
order to perform the services provided in this Agreement. The Sub-Adviser
covenants to maintain all necessary registrations, licenses and approvals in
effect during the term of this Agreement.
(b) The Sub-Adviser represents that it has read and understands the
Prospectus and SAI and warrants that in investing the Fund's assets it will use
all reasonable efforts to adhere to the Fund's investment objectives, policies
and restrictions contained therein.
6. COMPLIANCE
(a) The Sub-Adviser agrees that it shall promptly notify Warburg and the
Fund (i) in the event that the SEC or any other regulatory authority has
censured its activities, functions or operations; suspended or revoked its
registration as an investment adviser; or has commenced proceedings or an
investigation that may result in any of these actions, (ii) in the event that
there is a change in the Sub-Adviser, financial or otherwise, that adversely
affects its ability to perform services under this Agreement or (iii) upon
having a reasonable basis for believing that, as a result of the Sub-Adviser's
investing the Fund's assets, the Fund's investment portfolio has ceased to
adhere to the Fund's investment objectives, policies and restrictions as stated
in the Prospectus or SAI or is otherwise in violation of applicable law.
(b) Warburg agrees that it shall promptly notify the Sub-Adviser in the
event that the SEC has censured Warburg or the Fund; placed limitations upon any
of their activities, functions or operations; suspended or revoked Warburg's
registration as an investment adviser; or has commenced proceedings or an
investigation that may result in any of these actions.
(c) The Fund and Warburg shall be given access to the records of the
Sub-Adviser at reasonable times solely for the purpose of monitoring compliance
with the terms of this Agreement and the rules and regulations applicable to the
Sub-Adviser relating to its providing investment advisory services to the Fund,
including without limitation records relating to trading by employees of the
Sub-Adviser for their own accounts and on behalf of other clients. The
Sub-Adviser agrees to cooperate with the Fund and Warburg and their
representatives in connection with any such monitoring efforts.
7. BOOKS AND RECORDS
(a) In compliance with the requirements of Rule 31a-3 under the 1940 Act,
the Sub-Adviser hereby agrees that all records which it maintains for the Fund
are the property of the Fund and further agrees to surrender promptly to either
Warburg or the Fund any of such records upon the request of either of them. The
Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-2
under the 1940 Act the records required to be maintained by Rule 31a-1 under the
1940 Act and to preserve the records required by Rule 204-2 under the Advisers
Act for the period specified therein.
B-3
<PAGE>
<PAGE>
(b) The Sub-Adviser hereby agrees to furnish to regulatory authorities
having the requisite authority any information or reports in connection with
services that the Sub-Adviser renders pursuant to this Agreement which may be
requested in order to ascertain whether the operations of the Fund are being
conducted in a manner consistent with applicable laws and regulations.
8. PROVISION OF INFORMATION; PROPRIETARY AND CONFIDENTIAL INFORMATION
(a) Warburg agrees that it will furnish to the Sub-Adviser information
related to or concerning the Fund that the Sub-Adviser may reasonably request.
(b) The Sub-Adviser agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Fund all records and other
information relative to the Fund, Warburg and prior, present or potential
shareholders and not to use such records and information for any purpose other
than performance of its responsibilities and duties hereunder except after prior
notification to and approval in writing of the Fund, which approval shall not be
unreasonably withheld and may not be withheld where the Sub-Adviser may be
exposed to civil or criminal contempt proceedings for failure to comply or when
requested to divulge such information by duly constituted authorities.
(c) The Sub-Adviser represents and warrants that neither it nor any
affiliate will use the name of the Fund, Warburg or any of their affiliates in
any prospectus, sales literature or other material in any manner without the
prior written approval of the Fund or Warburg, as applicable.
9. STANDARD OF CARE
The Sub-Adviser shall exercise its best judgment in rendering the services
described herein. The Sub-Adviser shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Fund or Warburg in connection
with the matters to which this Agreement relates, except that the Sub-Adviser
shall be liable for a loss resulting from a breach of fiduciary duty by the
Sub-Adviser with respect to the receipt of compensation for services; provided
that nothing herein shall be deemed to protect or purport to protect the
Sub-Adviser against any liability to the Fund, to Warburg or to shareholders of
the Fund to which the Sub-Adviser would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence on its part in the
performance of its duties or by reason of the Sub-Adviser's reckless disregard
of its obligations and duties under this Agreement. The Fund and Warburg
understand and agree that the Sub-Adviser may rely upon information furnished to
it reasonably believed by the Sub-Adviser to be accurate and reliable and,
except as herein provided, the Sub-Adviser shall not be accountable for loss
suffered by the Fund by reason of such reliance of the Sub-Adviser.
10. INDEMNIFICATION
(a) The Sub-Adviser agrees to indemnify and hold harmless the Fund,
Warburg, any affiliate of either, and each person, if any, who, within the
meaning of Section 15 of the Securities Act of 1933, as amended (the '1933
Act'), controls ('controlling person') either or both of the Fund and Warburg
(all of such persons being referred to as 'Fund Indemnified Persons') against
any and all losses, claims, damages, liabilities or litigation (including legal
and other expenses) to which any Fund Indemnified Person may become subject
under the 1933 Act, the 1940 Act, the Advisers Act, the Internal Revenue Code or
under any other statute, at common law or otherwise, arising out of the
Sub-Adviser's responsibilities as Sub-Adviser to the Fund which (i) may be based
upon any misfeasance, malfeasance or nonfeasance by the Sub-Adviser, or any of
its employees or representatives, or any affiliate of or any person acting on
behalf of the Sub-Adviser, (ii) may be based upon a failure to comply with
paragraph 5(b) of this Agreement, or (iii) may be based upon any untrue
statement or alleged untrue statement of a material fact about the Sub-Adviser
contained in the registration statement covering the shares of the Fund, or any
amendment or supplement thereto, or the omission or alleged omission to state
therein a material fact about the Sub-Adviser known or which should have been
known to the Sub-Adviser and was required to be stated therein or necessary to
make the statements therein not misleading, if such a
B-4
<PAGE>
<PAGE>
statement or omission was made in reliance upon information furnished to
Warburg, the Fund or any affiliate of either by the Sub-Adviser or any affiliate
of the Sub-Adviser; provided that in no case shall the indemnity in favor of any
Indemnified Person be deemed to protect such persons against any liability to
which any such person would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence in the performance of its duties or by
reason of its reckless disregard of its obligations and duties under this
Agreement.
(b) The Fund agrees to indemnify and hold harmless the Sub-Adviser, any of
its affiliates, and each controlling person, if any, of the Sub-Adviser (all of
such persons being referred to as 'Sub-Adviser Indemnified Persons') against any
and all losses, claims, damages, liabilities or litigation (including legal and
other expenses) to which any Sub-Adviser Indemnified Person may become subject
under the 1933 Act, the 1940 Act, the Advisers Act, the Internal Revenue Code or
under any other statute, at common law or otherwise, which (i) may be based upon
any misfeasance, malfeasance or nonfeasance by the Fund or Warburg, or any of
its respective employees or representatives, or any affiliate of or any person
acting on behalf of the Fund or Warburg, (ii) may be based upon a failure by the
Fund or Warburg to comply with this Agreement, or (iii) may be based upon any
untrue statement or alleged untrue statement of a material fact contained in the
registration statement covering the shares of the Fund, or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact known or which should have been known to the Fund and was required
to be stated therein or necessary to make the statements therein not misleading,
unless such a statement or omission was made in reliance upon information
furnished to Warburg, the Fund or any affiliate of either by the Sub-Adviser or
any affiliate of the Sub-Adviser; provided that in no case shall the indemnity
in favor of any Sub-Adviser Indemnified Person be deemed to protect such persons
against any liability to which any such person would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence in the performance of
its duties or by reason of its reckless disregard of its obligations and duties
under this Agreement.
(c) A party (the 'Indemnifying Person') shall not be liable under
paragraphs 10(a) or 10(b) herein with respect to any claim made against any Fund
Indemnified Person or Sub-Adviser Indemnified Person, as applicable (a Fund
Indemnified Person and a Sub-Adviser Indemnified Person may be referred to in
this paragraph 10(c) as an 'Indemnified Person'), unless such Indemnified Person
shall have notified the Indemnifying Person in writing within a reasonable time
after the summons, notice or other first legal process or notice giving
information of the nature of the claim shall have been served upon such
Indemnified Person (or after such Indemnified Person shall have received notice
of such service on any designated agent), but failure to notify the Indemnifying
Person of any such claim shall not relieve the Indemnifying Person from any
liability which it may have to any Indemnified Person against whom such action
is brought otherwise than on account of this paragraph 10. In case any such
action is brought against any Indemnified Person, the Indemnifying Person will
be entitled to participate, at its own expense, in the defense thereof or, after
notice to the Indemnified Person, to assume the defense thereof, with counsel
satisfactory to the Indemnified Person. If the Indemnifying Person assumes the
defense of any such action and the selection of counsel by the Indemnifying
Person to represent the Indemnifying Person and the Indemnified Person would
result in a conflict of interests and therefore would not, in the reasonable
judgment of the Indemnified Person, adequately represent the interests of the
Indemnified Person, the Indemnifying Person will, at its own expense, assume the
defense with counsel to the Indemnifying Person and, also at its own expense,
with separate counsel to the Indemnified Person which counsel shall be
satisfactory to the Indemnifying Person and to the Indemnified Person. The
Indemnified Person shall bear the fees and expenses of any additional counsel
retained by it, and the Indemnifying Person shall not be liable to the
Indemnified Person under this Agreement for any legal or other expenses
subsequently incurred by the Indemnified Person independently in connection with
the defense thereof other than reasonable costs of investigation. The
Indemnifying Person shall not have the right to compromise on or settle the
litigation without the prior written consent of the Indemnified Person if such
compromise or settlement results, or may result, in a finding of wrongdoing on
the part of the Indemnified Person.
B-5
<PAGE>
<PAGE>
11. COMPENSATION
In consideration of the services rendered pursuant to this Agreement,
Warburg will pay the Sub-Adviser a quarterly fee calculated at an annual rate of
.55% of the net asset value of the Investments as of the last day of each
calendar quarter. The fee for the period from the date of this Agreement to the
end of the quarter during which this Agreement commenced shall be prorated
according to the proportion that such period bears to the full quarterly period.
Such fee shall be paid by Warburg to the Sub-Adviser within ten (10) business
days after the last day of each quarter or, upon termination of this Agreement
before the end of a quarter, within ten (10) business days after the effective
date of such termination. Upon any termination of this Agreement before the end
of a quarter, the fee for such part of that quarter shall be prorated according
to the proportion that such period bears to the full quarterly period. For the
purpose of determining fees payable to the Sub-Adviser, the value of the
Investments shall be computed in the manner specified in the Prospectus or SAI.
The Sub-Adviser shall have no right to obtain compensation directly from the
Fund for services provided hereunder and agrees to look solely to Warburg for
payment of fees due.
12. EXPENSES
(a) The Sub-Adviser will bear all expenses in connection with the
performance of its services under this Agreement, which shall not include the
Fund's expenses listed in paragraph 12(b).
(b) The Fund will bear certain other expenses to be incurred in its
operation, including: investment advisory and administration fees; taxes,
interest, brokerage fees and commissions, if any; fees of Directors of the Fund
who are not officers, directors, or employees of the Fund, Warburg or the Sub-
Adviser or affiliates of any of them; fees of any pricing service employed to
value shares of the Fund; SEC fees, state Blue Sky qualification fees and any
foreign qualification fees; charges of custodians and transfer and dividend
disbursing agents; the Fund's proportionate share of insurance premiums; outside
auditing and legal expenses; costs of maintenance of the Fund's existence; costs
attributable to investor services, including, without limitation, telephone and
personnel expenses; costs of preparing and printing prospectuses and statements
of additional information for regulatory purposes and for distribution to
existing shareholders; costs of shareholders' reports and meetings of the
shareholders of the Fund and of the officers or Board of Directors of the Fund;
and any extraordinary expenses.
13. TERM OF AGREEMENT
This Agreement shall continue until April 17, 1997 and thereafter shall
continue automatically for successive annual periods, provided such continuance
is specifically approved at least annually by (a) the Board of Directors of the
Fund or (b) a vote of a 'majority' (as defined in the 1940 Act) of the Fund's
outstanding voting securities, provided that in either event the continuance is
also approved by a majority of the Board of Directors who are not 'interested
persons' (as defined the 1940 Act) of any party to this Agreement, by vote cast
in person at a meeting called for the purpose of voting on such approval. This
Agreement is terminable, without penalty, (i) by Warburg on 60 (sixty) days'
written notice to the Fund and the Sub-Adviser, (ii) by the Board of Directors
of the Fund or by vote of holders of a majority of the Fund's shares on 60
(sixty) days' written notice to Warburg and the Sub-Adviser, or (iii) by the
Sub-Adviser upon 60 (sixty) days' written notice to the Fund and Warburg. This
Agreement will also terminate automatically in the event of its assignment (as
defined in the 1940 Act) by any party hereto. In the event of termination of
this Agreement for any reason, all records relating to the Fund kept by the
Sub-Adviser shall promptly be returned to Warburg or the Fund, free from any
claim or retention of rights in such records by the Sub-Adviser. In the event
this Agreement is terminated or is not approved in the foregoing manner, the
provisions contained in paragraph numbers 4(c), 7, 8, 9 and 10 shall remain in
effect.
14. AMENDMENTS
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver,
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discharge or termination is sought, and no amendment of this Agreement shall be
effective until approved by an affirmative vote of (a) the holders of a majority
of the outstanding voting securities of the Fund and (b) the Board of Directors
of the Fund, including a majority of Directors who are not 'interested persons'
(as defined in the 1940 Act) of the Fund or of either party to this Agreement,
by vote cast in person at a meeting called for the purpose of voting on such
approval, if such approval is required by applicable law.
15. NOTICES
All communications hereunder shall be given (a) if to the Sub-Adviser, to
Abbott Capital Management, L.P., 1330 Avenue of the Americas, Suite 2800, New
York, New York 10019 (Attention: Raymond L. Held), telephone: (212) 757-2700,
telecopy: (212) 757-0835, (b) if to Warburg, to Warburg, Pincus Counsellors,
Inc., 466 Lexington Avenue, New York, New York 10017-3147 (Attention: Eugene P.
Grace), telephone: (212) 878-0600, telecopy: (212) 878-9351, and (c) if to the
Fund, to Warburg, Pincus Post-Venture Capital Fund, Inc., c/o Warburg Pincus
Funds, 466 Lexington Avenue, New York, New York 10017-3147, telephone: (212)
878-0600, telecopy: (212) 878-9351 (Attention: President).
16. CHOICE OF LAW
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York in the United States, including choice of law
principles; provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or any applicable rules,
regulations or orders of the SEC.
17. CHANGE OF MEMBERSHIP
For so long as the Sub-Adviser is a partnership, the Sub-Adviser agrees to
notify Warburg and the Fund of any change in the membership of the Sub-Adviser
within a reasonable time after such change.
18. MISCELLANEOUS
(a) The captions of this Agreement are included for convenience only and in
no way define or limit any of the provisions herein or otherwise affect their
construction or effect.
(b) If any provision of this Agreement shall be held or made invalid by a
court decision, by statute or otherwise, the remainder of this Agreement shall
not be affected thereby and, to this extent, the provisions of this Agreement
shall be deemed to be severable.
(c) Nothing herein shall be construed to make the Sub-Adviser an agent of
Warburg or the Fund.
(d) This Agreement may be executed in counterparts, with the same effect as
if the signatures were upon the same instrument.
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Please confirm that the foregoing is in accordance with your understanding
by indicating your acceptance hereof at the place below indicated, whereupon it
shall become a binding agreement between us.
Very truly yours,
WARBURG, PINCUS COUNSELLORS, INC.
By: __________________________________
WARBURG, PINCUS POST-VENTURE CAPITAL
FUND, INC.
By: __________________________________
President
Accepted:
ABBOTT CAPITAL MANAGEMENT, L.P.
By: __________________________________
General Partner
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CREDIT AGREEMENT
among
The Entities Listed on the Signature Pages Hereto
and
DEUTSCHE BANK AG,
NEW YORK BRANCH
--------------------------------------------
Dated as of February 16, 1996
--------------------------------------------
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
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SECTION 1. Amount and Terms of Credit....................................4
1.1. The Facility........................................................................4
1.2. Minimum Amount of Each Borrowing....................................................4
1.3. Request for Borrowing...............................................................4
1.4. Disbursement of Funds...............................................................5
1.5. Notes...............................................................................5
1.6. Bank Notations......................................................................5
1.7. Interest............................................................................5
1.8. Interest Periods....................................................................6
1.9. Compensation........................................................................6
1.10. Addition of New Borrowers...........................................................7
1.11. Increased Costs, Illegality, etc....................................................8
SECTION 2. Prepayments; Payments........................................10
2.1. Prepayments........................................................................10
2.2. Method and Place of Payment........................................................11
SECTION 3. Conditions Precedent to Effective Date.......................11
3.1. Execution of Agreement; Notes......................................................11
3.2. Officer's Certificate..............................................................11
3.3. Opinions of Counsel................................................................11
3.4. Corporate Documents; Proceedings; etc..............................................11
3.5. Adverse Change, etc................................................................12
3.6. Litigation.........................................................................12
SECTION 4. Conditions Precedent to All Loans............................13
4.1. No Default; Representations and Warranties.........................................13
4.2. Request for Borrowing..............................................................13
4.3. Monthly Report.....................................................................13
4.4. Bank's Discretion..................................................................13
SECTION 5. Representations, Warranties and Agreements...................13
5.1. Corporate or Trust Status..........................................................14
</TABLE>
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<TABLE>
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5.2. Power and Authority................................................................14
5.3. No Violation.......................................................................14
5.4. Governmental Approvals.............................................................15
5.5. Financial Statements; Financial Condition;
Undisclosed Liabilities; etc...................................................15
5.6. Litigation.........................................................................15
5.7. True and Complete Disclosure.......................................................16
5.8. Use of Proceeds; Margin Regulations................................................16
5.9. ERISA..............................................................................16
5.10. Compliance with Statutes, etc......................................................16
5.11. Investment Company.................................................................17
5.12. Investment Advisor.................................................................17
5.13. Affiliation with the Bank..........................................................17
SECTION 6. Affirmative Covenants........................................17
6.1. Information Covenants..............................................................17
6.2. Books, Records and Inspections.....................................................19
6.3. Compliance with Statutes, etc......................................................19
6.4. Investment Company.................................................................19
6.5. Compliance with Investment Practices...............................................19
SECTION 7. Negative Covenants...........................................19
7.1. Liens..............................................................................19
7.2. Consolidation, Merger, Sale or Purchase of
Assets, etc....................................................................20
7.3. Modifications of Investment Practices, Articles
of Incorporation, By-Laws and Certain Other
Agreements.....................................................................20
7.4. Business...........................................................................21
7.5. ERISA..............................................................................21
7.6. Affiliated Person..................................................................21
SECTION 8. Events of Default............................................21
8.1. Payments...........................................................................21
8.2. Representations, etc...............................................................21
8.3. Covenants..........................................................................21
8.4. Default Under Other Agreements.....................................................22
</TABLE>
(ii)
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<TABLE>
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8.5. Bankruptcy, etc....................................................................22
8.6. Judgments..........................................................................22
8.7. Investment Advisor.................................................................23
8.8. Asset Coverage.....................................................................23
SECTION 9. Definitions and Accounting Terms.............................23
9.1. Defined Terms......................................................................23
SECTION 10. Miscellaneous................................................31
10.1. Payment of Expenses, etc...........................................................31
10.2. Right of Setoff....................................................................31
10.3. Notices............................................................................31
10.4. Benefit of Agreement...............................................................32
10.5. No Waiver; Remedies Cumulative; Recourse...........................................33
10.6. Calculations; Computations.........................................................34
10.7. GOVERNING LAW; SUBMISSION TO JURISDICTION;
VENUE; WAIVER OF JURY TRIAL....................................................34
10.8. Counterparts.......................................................................35
10.9. Headings Descriptive...............................................................35
10.10. Amendment or Waiver; etc...........................................................35
10.11. Survival...........................................................................35
10.12. Domicile of Loans..................................................................35
10.13. Separate Agreements................................................................35
10.14. Organization.......................................................................36
</TABLE>
(iii)
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CREDIT AGREEMENT, dated as of February 16, 1996, among the entities
on the signature pages hereto (each a "Borrower" and, together with any
Requested Additional Borrower which becomes a Borrower pursuant to Section 1.10,
collectively the "Borrowers"), and Deutsche Bank AG, New York Branch (together
with its successors and assigns, the "Bank"; all capitalized terms used herein
and defined in Section 9 are used herein as therein defined).
W I T N E S S E T H:
WHEREAS, subject to and upon the terms and conditions herein set
forth, the Borrowers may request that the Bank make available the credit
facilities provided for herein;
NOW, THEREFORE, IT IS AGREED:
SECTION 1 Amount and Terms of Credit.
1.1 The Facility. (a) Subject to and upon the terms and
conditions set forth herein, the Bank agrees, at any time and from time to time
on and after the Initial Borrowing Date and prior to the Expiry Date, to
consider requests from a Borrower to make a Loan or Loans (each a "Loan" and,
collectively, the "Loans") to such Borrower, which Loans (i) shall, at the
option of such Borrower, be Base Rate Loans or NIBOR Loans, provided that all
Loans comprising the same Borrowing shall at all times be of the same Type, (ii)
may be repaid and reborrowed in accordance with the provisions hereof, and (iii)
shall not exceed for any particular Borrower the lesser of such Borrower's
Borrowing Base and, when aggregated with all Loans then outstanding, the Total
Borrower Facility. Notwithstanding anything to the contrary contained herein the
Bank shall not at any time have any obligation or commitment to make any Loan to
any Borrower.
1.2 Minimum Amount of Each Borrowing. The aggregate principal
amount of each Borrowing shall not be less than $50,000 and, if greater, shall
be in an integral multiple of $10,000. More than one Borrowing may occur on the
same date.
1.3 Request for Borrowing. Whenever a Borrower desires to make
a Borrowing hereunder, it shall give the Bank at its Notice Office notice of its
request before 2:30 p.m. (New York time) on the Business Day on which it desires
to incur such Loan. Each such request (each a "Request for Borrowing") shall be
given by or on behalf of a Borrower in the form of Exhibit A, appropriately
completed to specify (a) the identity of such requesting Borrower, (b) the
aggregate principal amount of the Loans requested to be
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made pursuant to such Borrowing, (c) the Business Day on which such Loans are to
be made, (d) whether such Loans are to be Base Rate Loans or NIBOR Loans (and
the Interest Period requested to be applicable thereto), (e) the aggregate
amount of principal and interest on outstanding Loans which are payable by such
Borrower on such date, (f) if the amount specified pursuant to clause (b) is
greater than the amount specified pursuant to clause (e), the net amount to be
remitted by the Bank pursuant to Section 1.4 in the event that the Bank elects
to make the Requested Loan and (g) if the amount specified pursuant to clause
(e) is greater than the amount specified pursuant to clause (b), the net amount
to be remitted by such Borrower pursuant to Section 2.2.
1.4 Disbursement of Funds. In the event that the Bank elects
to make a Loan, it will make funds available to the relevant Borrower in an
amount equal to the net amount, if any specified in the related Request for
Borrowing pursuant to Section 1.3(g) by a wire transfer, initiated no later than
4:00 P.M. New York Time on the date specified in a Request for Borrowing, of
immediately available funds to an account specified by or on behalf of such
Borrower. To the extent the Bank elects not to make a Loan, it shall notify the
relevant Borrower not later than 4:00 P.M. on such date.
1.5 Notes. Each Borrower's obligation to pay the principal
of, and interest on, the Loans made to it by the Bank shall be evidenced by a
promissory note duly executed and delivered by such Borrower substantially in
the form of Exhibit B, with blanks appropriately completed in conformity
herewith (each a "Note" and collectively the "Notes"). The Note shall (i) be
executed by the relevant Borrower, (ii) be payable to the Bank and be dated the
Effective Date, (iii) be in a stated principal amount equal to the Total
Borrower Facility and be payable in the principal amount of the Loans evidenced
thereby, (iv) bear interest as provided in the appropriate clause of Section 1.7
in respect of the Base Rate Loans or NIBOR Loans, as the case may be, evidenced
thereby, (v) be subject to mandatory repayment as provided in Section 2.1 and
(vi) be entitled to the benefits of this Agreement and the other Credit
Documents.
1.5 Bank Notations. The Bank will note on its internal records
the amount of each Loan made by it to a Borrower and each payment in respect
thereof and will prior to any transfer of any of its Notes endorse on the
reverse side thereof the outstanding principal amount of Loans evidenced
thereby. Failure to make any such notation shall not affect such Borrower's
obligations in respect of such Loans.
1.7 Interest. (a) Each Borrower agrees to pay interest in
respect of the unpaid principal amount of each Base
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Rate Loan made to it from the date the proceeds thereof are made available to
such Borrower until the maturity thereof (whether by acceleration, demand or
otherwise) at a rate per annum which shall, during each Interest Period
applicable thereto, be equal to the Base Rate in effect from time to time.
(b) Each Borrower agrees to pay interest in respect of the unpaid
principal amount of each NIBOR Loan made to it from the date the proceeds
thereof are made available to such Borrower until the maturity thereof (whether
by acceleration, demand or otherwise) at a rate per annum which shall, during
each Interest Period applicable thereto, be equal to the sum of the NIBOR Rate
for such Interest Period plus .55%.
(c) Overdue principal and, to the extent permitted by law, overdue
interest in respect of each Loan and any other overdue amount payable hereunder
shall, in each case, bear interest at a rate per annum equal to the greater of
(x) 2% per annum in excess of the rate otherwise applicable to Loans maintained
as Base Rate Loans from time to time or (y) the rate which is 2% in excess of
the rate then borne by such Loans, in each case with such interest to be payable
on demand by the relevant Borrower.
(d) Accrued (and theretofore unpaid) interest shall be payable (i)
in respect of each Loan, on the last day of each Interest Period applicable
thereto and, in the case of an Interest Period in excess of three months on each
date occurring at three month intervals after the first day of such Interest
Period and (ii) in respect of each Loan, on any repayment or prepayment (on the
amount repaid or prepaid), at maturity (whether by acceleration, demand or
otherwise) and, after such maturity, on demand.
(e) Upon each Interest Determination Date, the Bank shall determine
the interest rate for the NIBOR Loans for which such determination is being made
and shall promptly notify the relevant Borrower thereof. The Bank shall make
such determination promptly following its determination to make a Loan
hereunder. Each determination of the interest rate shall, absent manifest error,
be final and conclusive and binding on all parties hereto.
1.8 Interest Periods. The interest period applicable to each
Loan (each an "Interest Period") shall be a one week, two week, three week, or
monthly period as selected by the Borrower and accepted by the Bank at the time
of each borrowing but in no event shall exceed a six month period.
1.9 Compensation. Each Borrower with respect to its Loans
shall compensate the Bank, upon its written request (which request shall set
forth the basis for requesting such
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<PAGE>
compensation), for all reasonable losses, expenses and liabilities (including,
without limitation, any loss, expense or liability incurred by reason of the
liquidation or reemployment of deposits or other funds required by the Bank to
fund NIBOR Loans made to such Borrower) which such Bank may sustain: (i) if for
any reason (other than the Bank's failure to make a Loan) a Borrowing of NIBOR
Loans made to such Borrower does not occur on a date specified therefor in a
Request for Borrowing; (ii) if any repayment (including any repayment made
pursuant to Section 2.1 as a result of any demand made by the Bank or an
acceleration of the Loans pursuant to Section 8) of any of its Loans made to
such Borrower occurs on a date which is not the last day of an Interest Period
with respect thereto; or (iii) as a consequence of any other default by such
Borrower to repay its Loans when required by the terms of this Agreement or any
Note held by the Bank.
1.10 Addition of New Borrowers. Counsellors may from time to time
request in writing (each such Request, an "Additional Borrower Request") from
time to time that an open-end management investment company for which
Counsellors acts as primary investment advisor be included hereunder as an
additional Borrower subject to the terms and conditions of this Agreement (any
such investment company, a "Requested Additional Borrower"). Such Additional
Borrower Request shall include (i) a certification by a senior officer of a
Requested Additional Borrower that (x) all representations and warranties
contained herein are true and correct in all material respects, (y) Counsellors
is the primary investment advisor and specify any other relevant investment
advisor, and (z) no Default or Event of Default has occurred and is continuing
or will occur as a result of such Requested Additional Borrower becoming a
Borrower hereunder and (z) stating that all of the conditions set forth in
Sections 3.6 and 4.1 are satisfied provided that for purposes of such
certification references to "Borrower" shall mean and include such Requested
Additional Borrower, (ii) the most recent audited and unaudited financial
statements of such Requested Additional Borrower, (iii) an updated Note meeting
the requirements of Section 1.5 duly executed by such Requested Additional
Borrower, and (iv) documents meeting the requirements of Section 3.4. If the
Bank consents to the inclusion of such Requested Additional Borrower by so
indicating on counterparts of the Additional Borrower Request, the Bank shall
insert the date of its agreement on the Note submitted by such Requested
Additional Borrower and from and after such date, such Requested Additional
Borrower shall be a party hereto and have the rights and obligations of a
"Borrower" hereunder. The Bank shall not be required to consent to the inclusion
of any Requested Additional Borrower, and any such consent shall be at the
discretion of the Bank. In the event that the Bank does not so consent, it shall
promptly return the Note referred to above to the relevant Requested Additional
Borrower.
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1.11 Increased Costs, Illegality, etc. (a) In the event that the
Bank shall have determined (which determination shall, absent manifest error, be
final and conclusive and binding upon all parties hereto): (i) on any Interest
Determination Date that, by reason of any changes arising after the date of this
Agreement affecting the interbank market, adequate and fair means do not exist
for ascertaining the applicable interest rate on the basis provided for in the
definition of NIBOR; or (ii) at any time, that the Bank shall incur increased
costs or reductions in the amounts received or receivable hereunder with respect
to any NIBOR Loan because of any change since the date of this Agreement in any
applicable law or governmental rule, regulation, order or request (whether or
not having the force of law) (or in the interpretation or administration thereof
and including the introduction of any new law or governmental rule, regulation,
order or request), such as, for example, but not limited to, (A) a change in the
basis of taxation of payments to the Bank or its applicable lending office of
the principal of or interest on the Notes or any other amounts payable hereunder
(except for changes in the rate of tax on, or determined by reference to, the
net income or profits of the Bank or its applicable lending office imposed by
the jurisdiction in which its principal office or applicable lending office is
located) or (B) a change in official reserve requirements, but, in all events,
excluding reserves required under Regulation D to the extent covered by Section
1.11(d) or included in the computation of NIBOR; or (iii) at any time, that the
making or continuance of any NIBOR Loan has been made (x) unlawful by any law or
governmental rule, regulation or order, or (y) impossible by compliance by the
Bank with any governmental request (whether or not having force of law); then,
and in any such event, the Bank shall promptly give notice (by telephone
confirmed in writing) to the Borrower. Thereafter (x) in the case of clause (i)
above, NIBOR Loans shall no longer be available until such time as the Bank
notifies the Borrower that the circumstances giving rise to such notice by the
Bank no longer exist, and any Request for Borrowing given by the Borrower with
respect to NIBOR Loans which have not yet been incurred shall be deemed
rescinded by the Borrower; (y) in the case of clause (ii) above, the Borrower
shall pay to the Bank, within five Business Days after written demand therefor,
such additional amounts (in the form of an increased rate of, or a different
method of calculating, interest or otherwise as the Bank in its sole discretion
shall determine) as shall be required to compensate the Bank for such increased
costs or reductions in amounts received or receivable hereunder (a written
notice as to the additional amounts owed to the Bank, showing the basis for the
calculation thereof, submitted to the Borrower by such Bank shall be conclusive,
absent manifest error); and (z) in the case of clause (iii) above, take one of
the actions specified in Section 1.11(b) as promptly as possible and, in any
event, within the time period required by law.
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(b) At any time that any NIBOR Loan is affected by the
circumstances described in Section 1.11(a)(ii) or (iii), the Borrower may (and,
in the case of a NIBOR Loan affected by the circumstances described in Section
1.11(a)(iii), shall) either (i) if the affected NIBOR Loan is then being made
initially or pursuant to a conversion, cancel said Borrowing, or change the Type
of Loan to become a Base Rate Loan by giving the Bank notice by telephone
(confirmed in writing) of the cancellation on the same date (if practicable)
that the Borrower was notified by the Bank pursuant to Section 1.11(a)(ii) or
(iii); or (ii) if the affected Loan is then outstanding, upon at least three
Business Days' written notice, require the Bank to convert such NIBOR Loan into
a Base Rate Loan.
(c) If the Bank determines at any time that any change since the
date of this Agreement in any applicable law or governmental rule, regulation,
order or request (whether or not having the force of law) concerning capital
adequacy, or any change since the date of this Agreement in the interpretation
or administration thereof by any governmental authority, central bank or
comparable agency, will have the effect of increasing the amount of capital
required or expected to be maintained by the Bank based on the existence of the
Bank's obligations hereunder, then the Borrower shall pay to the Bank, upon its
written demand therefor, such additional amounts as shall be required to
compensate the Bank for the increased cost to the Bank as a result of such
increase of capital. The Bank, upon determining that any additional amounts will
be payable pursuant to this Section 1.11(c), will give prompt written notice
thereof to the Borrower, which notice shall show the basis for calculation of
such additional amounts. In determining such additional amounts, the Bank will
act reasonably and in good faith and will use averaging and attribution methods
that are reasonable; provided that the Bank's determination of compensation
owing under this Section 1.11(c) shall be conclusive, absent manifest error.
(d) In the event that the Bank shall determine (which determination
shall be prima facie evidence with respect to all the parties hereto) at any
time that by reason of Regulation D the Bank's lending office is required to
maintain reserves in respect of Eurocurrency liabilities (as defined in
Regulation D) during any period in which it has a NIBOR Loan outstanding (each
such period, for the Bank, a "Eurocurrency Reserve Period"), then the Bank shall
promptly give notice (by telephone confirmed in writing) to the Borrower of such
determination, and the Borrower shall pay to the Bank additional interest on the
unpaid principal amount of each NIBOR Loan of the Bank during such Eurocurrency
Reserve Period at a rate per annum which shall, during each Interest Period
applicable to such NIBOR Loan, be the amount by which (i) the NIBOR Rate for
such Interest Period divided (and rounded to the nearest whole
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multiple of 1/16 of 1%) by a percentage equal to 100% minus the then stated
maximum rate of all reserve requirements (including, without limitation, any
marginal, emergency, supplemental, special or other reserves) applicable to any
member bank of the Federal Reserve System in respect of Eurocurrency liabilities
(as defined in Regulation D) exceeds (ii) the NIBOR Rate for such Interest
Period. Additional interest payable pursuant to the immediately preceding
sentence shall be paid by the Borrower at the time that it is otherwise required
to pay interest in respect of such NIBOR Loan. The Bank agrees that if it gives
notice to the Borrower of the existence of a Eurocurrency Reserve Period, it
shall promptly notify the Borrower of any termination thereof, at which time the
Borrower shall cease to be obligated to pay additional interest to such Bank
pursuant to the first sentence of this Section 1.11(d) until such time, if any,
as a subsequent Eurocurrency Reserve Period shall occur.
SECTION 2 Prepayments; Payments.
2.1 Prepayments. (a) On any day on which the aggregate
outstanding principal amount of Loans made to a Borrower when aggregated with
all Loans then outstanding exceeds the Total Borrower Facility as then in
effect, such Borrower shall prepay principal of such Loans in an amount equal to
such excess.
(b) If on any date the aggregate outstanding principal amount of
Loans made to a Borrower exceeds such Borrower's Borrowing Base, such Borrower
shall promptly (and in any event within 2 Business Days) after the occurrence of
such date, prepay principal of Loans in an amount equal to such excess.
(c) Each Borrower shall have the right to prepay the Loans made to
it, subject to Section 1.9, in whole or in part at any time and from time to
time on the following terms and conditions: (i) such Borrower shall give the
Bank prior to 11:00 A.M. (New York time) (x) at least one Business Days' prior
written notice (or telephonic notice promptly confirmed in writing) of its
intent to prepay Base Rate Loans on such Business Day and (y) at least two
Business Days' prior written notice (or telephonic notice promptly confirmed in
writing) of its intent to prepay NIBOR Loans, the amount of such prepayment and
the Types of Loans to be prepaid and, in the case of NIBOR Loans the specific
Borrowing or Borrowings pursuant to which made, and (ii) each prepayment shall
be in an aggregate principal amount of at least US$50,000.0.
(d) Notwithstanding anything to the contrary contained elsewhere in
this Agreement, each Borrower shall repay the outstanding principal amount of
each Loan made to it on the last day of the Interest Period for such Loan and
all then outstanding Loans shall be repaid in full on the Expiry Date.
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2.2 Method and Place of Payment. Except as otherwise specifically
provided herein, all payments shall be made in Dollars in immediately available
funds at the Payment Office of the Bank not later than 2:30 P.M. (New York time)
on the date such payments are due. In the event that, on any date on which a
payment of principal or interest is due on a Loan to a Borrower, the Bank elects
to make a new Loan to such Borrower pursuant to Section 1.4, such Borrower shall
only be obligated to remit to the Bank an amount equal to the difference, if a
positive number, between the amount of such payment of principal and interest
less the amount of the new Loan. Whenever any payment to be made hereunder or
under any Note shall be stated to be due on a day which is not a Business Day,
the due date thereof shall be extended to the next succeeding Business Day and,
with respect to payments of principal, interest shall be payable at the
applicable rate during such extension.
SECTION 3 Conditions Precedent to Effective Date. This Agreement
will become effective on the date (the "Effective Date") on which the following
conditions have been satisfied:
3.1 Execution of Agreement; Notes. Each Borrower and the Bank
shall have executed a counterpart of this Agreement and there shall have been
delivered to the Bank the appropriate Note executed by each Borrower in the
amount, maturity and as otherwise provided herein.
3.2 Officer's Certificate. The Bank shall have received a
certificate dated the Effective Date signed on behalf of each Borrower by any
authorized officer of such Borrower stating that all of the conditions set forth
in Sections 3.5, 3.6 and 4.1 have been satisfied on such date.
3.3 Opinions of Counsel. The Bank shall have received from
counsel to each Borrower, an opinion addressed to the Bank and dated the
Effective Date covering the matters set forth in Exhibit C and such other
matters incident to the transactions contemplated herein as the Bank may
reasonably request.
3.4 Corporate Documents; Proceedings;etc. (a) The Bank shall have
received a certificate, dated the Effective Date, signed by any authorized
officer of each Borrower, and attested to by the Secretary or any Assistant
Secretary of such Borrower, in the form of Exhibit D with appropriate
insertions, together with copies of the Articles of Incorporation and By-Laws or
Declaration of Trust of such Borrower, the resolutions of such Borrower referred
to in such certificate, the Prospectus of such Borrower and its Investment
Advisory Agreement, and the foregoing shall be acceptable to the Bank.
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(b) All corporate and legal proceedings and all instruments and
agreements in connection with the transactions contemplated by this Agreement
and the other Credit Documents shall be satisfactory in form and substance to
the Bank and the Bank shall have received all information and copies of all
documents and papers, including records of corporate proceedings, governmental
approvals, good standing certificates and bring-down telegrams, if any, which
the Bank reasonably may have requested in connection therewith, such documents
and papers where appropriate to be certified by proper corporate or governmental
authorities.
3.4 Adverse Change, etc. (a) Nothing shall have occurred (and
the Bank shall not have become aware of any facts or conditions not previously
known) which the Bank shall have determined has, or could reasonably be expected
to have, a material adverse effect on the rights or remedies of the Bank, or on
the ability of any Borrower to perform its obligations to the Bank or which has,
or could reasonably be expected to have, a materially adverse effect on the
business, operations, property, assets, liabilities, condition (financial or
otherwise) or prospects of such Borrower.
(b) All necessary governmental (domestic and foreign) and third
party approvals, if any, in connection with the transactions contemplated by the
Credit Documents and otherwise referred to herein or therein shall have been
obtained and remain in effect, and all applicable waiting periods shall have
expired without any action being taken by any competent authority which
restrains, prevents or imposes materially adverse conditions upon the
consummation of the transactions contemplated by the Credit Documents and
otherwise referred to herein or therein. Additionally, there shall not exist any
judgment, order, injunction or other restraint issued or filed or a hearing
seeking injunctive relief or other restraint pending or notified prohibiting or
imposing materially adverse conditions upon the consummation of the transactions
contemplated by the Credit Documents or the making of the Loans.
3.6 Litigation. No litigation by any entity (private or
governmental) shall be pending or threatened with respect to this Agreement or
any documentation executed in connection herewith or the transactions
contemplated hereby, or which the Bank shall have determined could reasonably be
expected to have a materially adverse effect on the business, operations,
property, assets, liabilities, condition (financial or otherwise) or prospects
of any Borrower.
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SECTION 4 Conditions Precedent to All Loans. No Loan shall be made
to any Borrower hereunder unless the following conditions are satisfied:
4.1 No Default; Representations and Warranties. At the time of
each such Loan and also after giving effect thereto (i) there shall exist no
Default or Event of Default with respect to such Borrower, (ii) such Borrower
shall be in compliance in all material respects with the Investment Company Act
(including without limitation Section 18 thereof) and (iii) all representations
and warranties by or with respect to such Borrower contained herein shall be
true and correct in all material respects with the same effect as though such
representations and warranties had been made on the date of the making of such
Loan (it being understood and agreed that any representation or warranty which
by its terms is made as of a specified date shall be required to be true and
correct in all material respects only as of such specified date).
4.2 Request for Borrowing. Prior to the making of each Loan, the
Bank shall have received a Request for Borrowing meeting the requirements of
Section 1.3.
4.3 Monthly Report. At least five Business Days prior to the
making of the first Loan made hereunder to a Borrower, such Borrower shall have
delivered a Monthly Report meeting the requirements of Section 6.1(b) prepared
as of the last day of the calendar month most recently ended.
4.4 Bank's Discretion. The Bank in its sole discretion desires to
make such Loan.
The acceptance of the proceeds of each Loan shall constitute a representation
and warranty by the relevant Borrower to the Bank that all the conditions
specified in Section 3 and in Sections 4.1 and 4.2 and applicable to such Loan
are satisfied as of that time. All of the Notes, certificates, legal opinions
and other documents and papers referred to in Section 3 and in Section 4, unless
otherwise specified, shall be delivered to the Bank at its Notice Office and
shall be in form and substance satisfactory to the Bank.
SECTION 5 Representations, Warranties and Agreements. In order to
induce the Bank to enter into this Agreement and to make the Loans, each
Borrower makes the following representations, warranties and agreements as to
itself, all of which shall survive the execution and delivery of this Agreement
and the Notes and the making of the Loans, with the incurrence of each Loan on
or after the Initial Borrowing Date being deemed to constitute a representation
and warranty that the matters specified in this
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Section 5 are true and correct on and as of the Effective Date and on the date
of each such Loan:
5.1 Corporate or Trust Status. Such Borrower (i) is a duly
organized and validly existing trust, series of a trust or corporation in good
standing under the laws of the jurisdiction of its establishment or
incorporation, (ii) has the trust or corporate power and authority to own its
property and assets and to transact the business in which it is engaged and
presently proposes to engage and (iii) is duly qualified and is authorized to do
business and is in good standing in each jurisdiction where the ownership,
leasing or operation of its property or the conduct of its business requires
such qualifications except for failures to be so qualified which, individually
or in the aggregate, could not reasonably be expected to have a material adverse
effect on the business, operations, property, assets, liabilities, condition
(financial or otherwise) or prospects of such Borrower.
5.2 Power and Authority. Such Borrower has the power and
authority to execute, deliver and perform the terms and provisions of each of
the Credit Documents and has taken all necessary corporate action to authorize
the execution, delivery and performance by it of each of the Credit Documents.
Such Borrower has duly executed and delivered each of the Credit Documents to
which it is party, and each of the Credit Documents (assuming due authorization
and execution by the other parties hereto) constitutes its legal, valid and
binding obligation enforceable against it in accordance with its terms, except
to the extent that the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
generally affecting creditors' rights and by equitable principles (regardless of
whether enforcement is sought in equity or at law).
5.3 No Violation. To the best of such Borrower's knowledge
after due inquiry, neither the execution, delivery or performance (including
such Borrowing of Loans hereunder) by any Borrower of any of the Credit
Documents, nor compliance by it with the terms and provisions thereof, (i) will
contravene any provision of any law, statute, rule or regulation (including,
without limitation, the Investment Company Act) or any order, writ, injunction
or decree of any court or governmental instrumentality, (ii) will conflict with
or result in any breach of any of the terms, covenants, conditions or provisions
of, or constitute a default under, or result in the creation or imposition of
(or the obligation to create or impose) any Lien upon any of the property or
assets of any Borrower pursuant to the terms of any indenture, mortgage, deed of
trust, credit agreement or loan agreement, or any other material agreement,
contract or instrument to which such Borrower is a party or by which it or any
of its property or assets is bound or to which it may be subject or (iii) will
violate or
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conflict with the Investment Practices or any provision of the Articles of
Incorporation, By-Laws or Declaration of Trust of such Borrower.
5.4 Governmental Approvals. No order, consent, approval,
license, authorization or validation of, or filing, recording or registration
with (except as have been obtained or made prior to the Effective Date and which
remain in full force and effect), or exemption by, any governmental or public
body or authority, or any subdivision thereof, is required to authorize, or is
required in connection with, (i) the execution, delivery and performance by such
Borrower of any Credit Document to which it is a party or (ii) the legality,
validity, binding effect or enforceability of any such Credit Document.
5.5 Financial Statements; Financial Condition; Undisclosed
Liabilities; etc. (a) The statements of financial condition of such Borrower as
of October 31, 1995 and the related statements of assets and liabilities,
operations and changes in net assets of such Borrower for the fiscal year ended
on such date, and furnished to the Bank prior to the Effective Date present
fairly the financial condition of such Borrower at the date of such statements
of financial condition and the results of the operations of such Borrower for
such fiscal year. All such financial statements have been prepared in accordance
with generally accepted accounting principles and practices consistently
applied. Since October 31, 1995, there has been no material adverse change in
the business, operations, property, assets, liabilities, condition (financial or
otherwise) or prospects of such Borrower that would materially and adversely
affect its ability to perform its obligations hereunder).
(b) Except as fully disclosed in the financial statements delivered
pursuant to Section 5.5(a), there were as of the Effective Date no liabilities
or obligations with respect to such Borrower of any nature whatsoever (whether
absolute, accrued, contingent or otherwise and whether or not due) which, either
individually or in aggregate, would be material to such Borrower other than
obligations owed to service providers incurred in the ordinary course and
consistent with past practice. As of the Effective Date, no Borrower knows of
any basis for the assertion against it of any liability or obligation of any
nature whatsoever that is not fully disclosed in the financial statements
delivered pursuant to Section 5.5(a) which, either individually or in the
aggregate, could be material to such Borrower.
5.6 Litigation. There are no actions, suits or proceedings
pending or, to the best knowledge of such Borrower after due inquiry, threatened
(i) with respect to any Credit Document or (ii) that could reasonably be
expected to materially
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and adversely affect the business, operations, property, assets, liabilities,
condition (financial or otherwise) or prospects of such Borrower.
5.7 True and Complete Disclosure. All factual information (taken
as a whole) furnished by or on behalf of such Borrower in writing to the Bank
(including, without limitation, all information contained in the Credit
Documents) for purposes of or in connection with this Agreement, the other
Credit Documents or any transaction contemplated herein or therein is, and all
other such factual information (taken as a whole) hereafter furnished by or on
behalf of such Borrower in writing to the Bank will be, true and accurate in all
material respects on the date as of which such information is dated or certified
and not incomplete by omitting to state any fact necessary to make such
information (taken as a whole) not misleading in any material respect at such
time in light of the circumstances under which such information was provided.
5.8 Use of Proceeds; Margin Regulations. (a) The proceeds of all
Loans shall be utilized by such Borrower to repay Loans outstanding hereunder
and to finance temporarily until settlement the sale or purchase of portfolio
securities by such Borrower, the repurchase or redemption of shares of such
Borrower at the request of the holders of such and other temporary and emergency
purposes.
(b) Neither the making of any Loan nor the use of the proceeds
thereof will violate or be inconsistent with the provisions of Regulations G, T,
U or X of the Board of Governors of the Federal Reserve System.
5.9 ERISA. No Borrower nor any ERISA Affiliate has ever
maintained or been obligated to contribute to any "employee benefit plan" (as
defined in Section 3(3) of ERISA).
5.10 Compliance with Statutes, etc. Such Borrower is in
compliance with (i) all applicable statutes (including, without limitation, the
Investment Company Act), regulations and orders of, and all applicable
restrictions imposed by, all governmental bodies, domestic or foreign, in
respect of the conduct of its business and the ownership of its property, except
such noncompliances as could not, individually or in the aggregate, reasonably
be expected to have a material adverse effect on the business, operations,
property, assets, liabilities, condition (financial or otherwise) or prospects
of such Borrower or any adverse effect on the legality, validity or
enforceability of this Agreement or any of the other Credit Documents and (ii)
all investment policies and restrictions set forth in its Articles of
Incorporation, By-Laws or Declaration of Trust, as applicable, and Investment
Practices.
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5.11 Investment Company. Such Borrower is duly registered as an
open-end management investment company or is a series thereof under the
Investment Company Act, and such registration has not been revoked or rescinded
and is in full force and effect.
5.12 Investment Advisor. The Investment Advisor to such
Borrower is duly registered as an investment adviser under the Investment
Advisers Act and is the sole investment advisor to such Borrower.
5.13 Affiliation with the Bank. Neither such Borrower nor any
ffiliated Person of such Borrower is an Affiliated Person of the Bank.
SECTION 6 Affirmative Covenants. Each Borrower covenants and
agrees that on and after the Effective Date and until Loans and Notes, together
with interest, incurred hereunder and thereunder are paid in full:
6.1 Information Covenants. Such Borrower will deliver to the Bank:
(a) Semi-Annual and Annual Financial Statements. Within 60 days
after the close of each semi-annual and annual accounting period in each
fiscal year of such Borrower, the statement of assets and liabilities,
operations and changes in net assets of such Borrower as of the end of
such semi-annual and annual accounting period, in each case setting
forth comparative figures where applied for the related periods in the
prior fiscal year, all of which shall be certified by the Treasurer of
such Borrower, subject to normal year-end audit adjustments, together
with, in the case of annual statements, a certification by an
independent certified public accountant of recognized standing stating
that its regular audit was conducted in accordance with generally
accepted audit standards.
(b) Monthly Reports. At least five Business Days prior to the date
the first Loan is made to a Borrower hereunder and thereafter promptly
(and in any event within five Business Days) following each Monthly
Valuation Date, a monthly unaudited statement (each a "Monthly Report"),
prepared in accordance with generally accepted accounting principles,
listing (i) the value (as determined in accordance with the definition
of "Asset Coverage Numerator") of all of such Borrower's assets and (ii)
the Asset Coverage Ratio (and, in each case, showing in reasonable
detail the calculation
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thereof), all as of the open of business on such Monthly Valuation
Date, and certified by the Treasurer of such Borrower, which
certification shall also include the calculations required to establish
the Asset Coverage Ratio as of such Monthly Valuation Date.
(c) Officer's Certificates. At the time of the delivery of the
financial statements provided for in Section 6.1(a) and (b), a
certificate by the Treasurer of such Borrower to the effect that the
representations and warranties by or with respect to such Borrower are
true and correct in all material respects and no Default or Event of
Default has occurred and is continuing or, if any Default or Event of
Default has occurred and is continuing, specifying the nature and extent
thereof, which certificate shall set forth the calculations required to
establish the Borrowing Base and the Asset Coverage Ratio of such
Borrower at the end of such monthly, semi-annual or annual period, as
the case may be.
(d) Notice of Default or Litigation. Promptly, and in any event
within five Business Days after an officer of such Borrower obtains
knowledge thereof, notice of (i) the occurrence of any event which
constitutes a Default or an Event of Default and (ii) any litigation or
governmental investigation or proceeding pending (x) against any
Borrower which could reasonably be expected to materially and adversely
affect the business, operations, property, assets, liabilities,
condition (financial or otherwise) or prospects of such Borrower or (y)
with respect to any Credit Document. In the event that any event occurs
which constitutes a Default or Event of Default with respect to a
Borrower, each other Borrower shall within five Business Days after a
request by the Bank deliver a certificate to the Bank which certificate
shall either certify that with respect to such Borrower no Default or
Event of Default has occurred and is then continuing or shall specify
the nature of any Default or Event of Default with respect to such
Borrower.
(e) Other Reports and Filings. (i) Promptly, copies of all
financial information, proxy materials, prospectuses and statements of
additional information, and other information and reports which such
Borrower shall deliver to holders of its Indebtedness pursuant to the
terms of the documentation governing such Indebtedness (or any trustee,
agent or other representative therefor).
(f) Other Information. From time to time, such other information
or documents (financial or otherwise) with respect to such Borrower or
any of its investments as the Bank may reasonably request in writing.
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6.2 Books, Records and Inspections. Such Borrower will keep
proper books of record and account in which full, true and correct entries in
conformity with generally accepted accounting principles and all requirements of
law shall be made of all dealings and transactions in relation to its business
and activities. Such Borrower will permit officers and designated
representatives of the Bank to visit and inspect, under guidance of officers of
such Borrower, any of the properties of such Borrower, and to examine the books
of account of such Borrower and discuss the affairs, finances and accounts of
such Borrower with, and be advised as to the same by, its officers and
independent accountants, all at such reasonable times and intervals and to such
reasonable extent as the Bank may request.
6.3 Compliance with Statutes, etc. Such Borrower will comply with
all applicable statutes (including, without limitation, the Investment Company
Act), regulations and orders of, and all applicable restrictions imposed by, all
governmental bodies, domestic or foreign, in respect of the conduct of its
business and the ownership of its property, except such noncompliances as could
not, individually or in the aggregate, reasonably be expected to have a material
adverse effect on the business, operations, property, assets, liabilities,
condition (financial or otherwise) or prospects of such Borrower or any adverse
effect on the legality, validity or enforceability of this Agreement or any of
the other Credit Documents.
6.4 Investment Company. Such Borrower will at all times (x) be
a registered, open-end management investment company under the Investment
Company Act or a series thereof and (y) qualify and be treated as a regulated
investment company under the Code.
6.5 Compliance with Investment Practices. Such Borrower will at
all times comply with the investment policies and restrictions in all material
respects set forth in its Investment Practices.
SECTION 7 Negative Covenants. Each Borrower covenants and agrees
that on and after the Effective Date and until the Loans and Notes, together
with interest and all other Obligations incurred by such Borrower hereunder and
thereunder are paid in full:
7.1 Liens. Such Borrower will not create, incur, assume or
suffer to exist any Lien upon or with respect to any of its property or assets
(real or personal, tangible or intangible), whether now owned or hereafter
acquired, or sell any such property
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or assets subject to an understanding or agreement, contingent or otherwise, to
repurchase such property or assets (including pursuant to repurchase agreements
relating to securities), or assign any right to receive income or permit the
filing of any financing statement under the UCC or any other similar notice of
Lien under any similar recording or notice statute; provided that the provisions
of this Section 7.1 shall not prevent the creation, incurrence, assumption or
existence of the following:
(i) inchoate Liens for taxes, assessments or governmental charges
or levies not yet due or Liens for taxes, assessments or governmental
charges or levies being contested in good faith and by appropriate
proceedings for which adequate reserves have been established in
accordance with generally accepted accounting principles;
(ii) Liens in respect of property or assets of such Borrower
imposed by law, which were incurred in the ordinary course of business
and do not secure Indebtedness for borrowed money, such as carriers',
warehousemen's, materialmen's and mechanics' liens and other similar
Liens arising in the ordinary course of business, and (x) which do not
in the aggregate materially detract from the value of a Borrower's
property or assets or materially impair the use thereof in the operation
of the business of a Borrower or (y) which are being contested in good
faith by appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the property or assets subject to
any such Lien; and
(iii) Liens in respect of Hedging Agreements entered into in the
ordinary course of business.
7.2 Consolidation, Merger, Saleor Purchase of Assets, etc. Such
Borrower will not wind up, liquidate or dissolve its affairs or enter into any
transaction of merger or consolidation, or convey, sell, lease or otherwise
dispose of (or agree to do any of the foregoing at any future time) all or
substantially all of its property or assets, or enter into any short sales
contracts or contracts to sell assets that it does not yet own, (except as
permitted by its Prospectus) or enter into any sale-leaseback transactions, or
purchase or otherwise acquire (in one or a series of related transactions) all
or substantially all of the property or assets of any Person other than with the
consent of the Bank (not to be unreasonably witheld).
7.3 Modifications of Investment Practices, Articles of
Incorporation, By-Laws and Certain Other Agreements. Such Borrower will not (i)
amend or modify, or permit the amendment or modification of, its Investment
Practices, (ii) amend, modify or change its Articles of Incorporation
(including, without
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limitation, by the filing or modification of any certificate of designation) or
By-Laws or trust documentation, or any agreement entered into by it with respect
to its capital stock, or enter into any new agreement with respect to its
capital stock or (iii) amend, modify or change its Investment Advisory Agreement
other than any amendments, modifications or changes pursuant to clauses (i),
(ii) or (iii) of this Section 7.3 which are not in any way materially adverse to
its ability to perform its obligations hereunder and copies of which are
provided to the Bank.
7.4 Business. Such Borrower will not engage (directly or
indirectly) in any business other than the business in which such Borrower is
engaged on the Effective Date and other businesses reasonably related thereto.
7.5 ERISA. Such Borrower will not and will not permit any ERISA
Affiliate to maintain or become obligated to contribute to any Plan.
7.6 Affiliated Person. Neither such Borrower nor any
Affiliated Person of such Borrower will directly or indirectly own, control or
hold with power to vote 5% or more of the outstanding voting securities of (or
otherwise be or become an Affiliated Person of) the Bank.
SECTION 8 Events of Default. Upon the occurrence of any of the
following specified events (each an "Event of Default"):
8.1 Payments. A Borrower shall (i) default in the payment when
due of any principal of any Loan or any Note or (ii) default, and such default
shall continue unremedied for five or more days, in the payment when due of any
interest on any Loan or Note, or any other amounts owing hereunder or
thereunder; or
8.2 Representations, etc. Any representation, warranty or
statement made by a Borrower herein or in any other Credit Document or in any
certificate delivered pursuant hereto or thereto shall prove to be untrue in any
material respect on the date as of which made or deemed made; or
8.3 Covenants. (a) A Borrower shall (i) default in the due
performance or observance by it of any term, covenant or agreement contained in
Section 6.4, 6.5 or Section 7 (other than 7.3) or (ii) default in the due
performance or observance by it of any other term, covenant or agreement
contained in this Agreement and such default shall continue unremedied for a
period of 30 days after written notice to such Borrower by the Bank; or
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8.4 Default Under Other Agreements. A Borrower shall (i) default
in any payment of any Indebtedness in an amount individually or in the aggregate
equal to or exceeding 3% of the Asset Coverage Numerator then in effect with
respect to such Borrower beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness was created or (ii)
default in the observance or performance of any agreement or condition relating
to such Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or holders of such Indebtedness (or a trustee or agent on
behalf of such holder or holders) to cause (determined without regard to whether
any notice is required), any such Indebtedness to become due prior to its stated
maturity, or (iii) any such Indebtedness of a Borrower shall be declared to be
due and payable, or required to be prepaid other than by a regularly scheduled
required prepayment, prior to the stated maturity thereof; or
8.5 Bankruptcy, etc. A Borrower shall commence a voluntary
case concerning itself under Title 11 of the United States Code entitled
"Bankruptcy," as now or hereafter in effect, or any successor thereto (the
"Bankruptcy Code"); or an involuntary case is commenced against a Borrower, and
the petition is not controverted within 10 days, or is not dismissed within 60
days, after commencement of the case; or a custodian (as defined in the
Bankruptcy Code) is appointed for, or takes charge of, all or substantially all
of the property of a Borrower, or a Borrower commences any other proceeding
under any reorganization, arrangement, adjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar law of any jurisdiction
whether now or hereafter in effect relating to such Borrower, or there is
commenced against a Borrower any such proceeding which remains undismissed for a
period of 60 days, or a Borrower is adjudicated insolvent or bankrupt; or any
order of relief or other order approving any such case or proceeding is entered;
or a Borrower suffers any appointment of any custodian or the like for it or any
substantial part of its property to continue undischarged or unstayed for a
period of 60 days; or a Borrower makes a general assignment for the benefit of
creditors; or any corporate action is taken by a Borrower for the purpose of
effecting any of the foregoing; or
8.6 Judgments. One or more judgments or decrees shall be
entered against a Borrower involving a liability (not paid or fully covered by a
reputable and solvent insurance company) and such judgments and decrees either
shall be final and non-appealable or shall not be vacated, discharged or stayed
or bonded pending appeal for any period of 30 consecutive days, and the
aggregate
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amount of all such judgments equals or exceeds 3% of the Asset Coverage
Numerator then in effect with respect to such Borrower; or
8.7 Investment Advisor. (i) The Investment Advisor shall cease
to be the primary investment advisor to any Borrower or (ii) any Investment
Advisory Agreement shall cease to be in full force and effect or the Investment
Advisor shall deny or disaffirm any of its material obligations to be performed
by it under its Investment Advisory Agreement or shall default in the
performance of any such obligations; or
8.8 Asset Coverage. The aggregate outstanding principal amount
of Loans made to a Borrower shall exceed an amount equal to 33-1/3% of the Asset
Coverage Numerator at such time;
then, and in any such event, and at any time thereafter, if any Event of Default
shall then be continuing, the Bank, may by written notice (or five days prior
written notice in the case of an Event of Default under Section 8.7) to the
relevant Borrower, take any or all of the following actions, without prejudice
to the rights of the Bank or the holder of any Note to enforce its claims
against such Borrower (provided, that, if an Event of Default specified in
Section 8.5 shall occur, the result which would occur upon the giving of written
notice by the Bank to such Borrower as specified in clauses (i) and (ii) below
shall occur automatically without the giving of any such notice): (i) declare
the Total Borrower Facility terminated with respect to such Borrower; and (ii)
declare the principal of and any accrued interest in respect of all Loans made
to such Borrower and the Note issued by such Borrower and all Obligations owing
by such Borrower hereunder and thereunder to be, whereupon the same shall
become, forthwith due and payable without any other presentment, demand, protest
or other notice of any kind, all of which are hereby waived by each Borrower.
SECTION 9 Definitions and Accounting Terms.
9.1 Defined Terms. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally applicable
to both the singular and plural forms of the terms defined):
"Additional Borrower Request" shall have the meaning provided in
Section 1.10 of this Agreement.
"Affiliated Person" shall have the meaning provided in the
Investment Company Act.
"Agreement" shall mean this Credit Agreement, as modified,
supplemented or amended from time to time.
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"Asset Coverage Denominator" at any time shall mean the aggregate
amount of Senior Securities (including in any event all Loans hereunder)
representing indebtedness of a Borrower, determined in accordance with Section
18 of the Investment Company Act.
"Asset Coverage Numerator" shall mean the value of the total assets
of a Borrower, less all liabilities and indebtedness not represented by Senior
Securities, all determined in accordance with Section 18 of the Investment
Company Act, provided that for purposes of this Agreement (x) in no event shall
the value of the total assets of a Borrower as so calculated exceed the values
of the assets as same would be determined in computing net asset value as
described in the Prospectus of each Borrower under the heading "Net Asset Value"
and (y) in no event shall the liabilities and indebtedness (other than Senior
Securities) be less than the respective liabilities as same would be determined
in calculating net asset value as described under the heading "Net Asset Value"
in such Prospectus.
"Asset Coverage Ratio" at any time shall mean the ratio of the
Asset Coverage Numerator at such time to the Asset Coverage Denominator at such
time.
"Bank" shall mean Deutsche Bank AG, New York Branch as well as any
Person which becomes a "Bank" hereunder pursuant to 10.4(b).
"Bankruptcy Code" shall have the meaning provided in Section 8.5.
"Base Rate" at any time shall mean the higher of (i) 1/2 of 1% in
excess of the Federal Funds Rate and (ii) the Prime Lending Rate.
"Base Rate Loan" shall mean each Loan designated or deemed
designated as such by a Borrower at the time of the incurrence thereof or
conversion thereto.
"Borrower" and "Borrowers" shall have the meaning provided in the
first paragraph of this Agreement.
"Borrowing" shall mean and include the borrowing of one Type of
Loan by one Borrower from the Bank on a given date.
"Borrowing Base" shall mean, with respect to a Borrower, 33 1/3% of
its Asset Coverage Numerator at the time of determination (or such lesser amount
as shall be permitted indebtedness pursuant to such Borrower's Prospectus).
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"Business Day" shall mean (i) for all purposes other than as
covered by clauses (ii) and (iii) below, any day except Saturday, Sunday and any
day which shall be in New York City a legal holiday or a day on which banking
institutions are authorized or required by law or other government action to
close, (ii) with respect to all notices and determinations in connection with,
and payments of principal and interest on, NIBOR Loans, any day which is a
Business Day described in clause (i) above and which is also a day for trading
by and between banks in the New York interbank market and (iii) with respect to
the information required to be delivered in each Monthly Report, any day which
is a Business Day described in clause (i) above and which is also a day on which
the New York Stock Exchange is open for trading.
"Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time and the regulations promulgated and the rulings issued
thereunder. Section references to the Code are to the Code, as in effect at the
date of this Agreement, and to any subsequent provision of the Code, amendatory
thereof, supplemental thereto or substituted therefor.
"Contingent Obligation" shall mean, as to any Person, any
obligation of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations ("primary obligations") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (x) for the purchase or payment of any such primary obligation or
(y) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor
to make payment of such primary obligation or (iv) otherwise to assure or hold
harmless the holder of such primary obligation against loss in respect thereof;
provided, that the term Contingent Obligation shall not include endorsements of
instruments for deposit or collection in the ordinary course of business. The
amount of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof (assuming such Person is
required to perform thereunder) as determined by such Person in good faith.
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"Counsellors" shall mean Warburg, Pincus Counsellors, Inc.
"Credit Documents" shall mean this Agreement and, after the
execution and delivery thereof, each Note.
"Default" shall mean any event, act or condition which with notice
or lapse of time, or both, would constitute an Event of Default.
"Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States.
"Effective Date" shall have the meaning provided in Section 3.
"Eligible Transferee" shall mean and include a commercial bank,
financial institution or other "accredited investor" (as defined in Regulation D
of the Securities Act); provided that no Affiliated Person of a Borrower and no
Affiliated Person of such an Affiliated Person of a Borrower shall be an
Eligible Transferee.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder. Section references to ERISA are to ERISA, as in effect at the
date of this Agreement, and to any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.
"ERISA Affiliate" shall mean each person (as defined in Section
3(9) of ERISA) which together with a Borrower would be deemed to be a "single
employer" within the meaning of Section 414(b), (c), (m) or (o) of the Code.
"Event of Default" shall have the meaning provided in Section 8.
"Expiry Date" shall mean February 14, 1997.
"Federal Funds Rate" shall mean the rate at which the Bank, as a
branch of a foreign bank, in its sole discretion can obtain federal funds in the
interbank overnight federal funds market including through brokers of recognized
standing.
"Hedging Agreement" shall mean any Repurchase Agreements, Reverse
Repurchase Agreements, securities lending arrangements, futures contracts,
agreement to purchase and sell (or write) exchange listed or over-the-counter
put and call options on securities, futures, currencies and indices, Interest
Rate Protection Agreement, foreign exchange contracts, swap agreements,
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other arrangements for which security is required under Section 18 of the
Investment Company Act or other similar agreements or arrangements.
"Indebtedness" shall mean, as to any Person, without duplication,
(i) all indebtedness (including principal, interest, fees and charges) of such
Person for borrowed money or for the deferred purchase price of property or
services, (ii) the maximum amount available to be drawn under all letters of
credit issued for the account of such Person and all unpaid drawings in respect
of such letters of credit, (iii) all Indebtedness of the types described in
clause (i), (ii), (iv), (v), (vi), (vii) or (viii) of this definition secured by
any Lien on any property owned by such Person, whether or not such Indebtedness
has been assumed by such Person, (iv) the aggregate amount required to be
capitalized under leases under which such Person is the lessee, (v) all
obligations of such person to pay a specified purchase price for goods or
services, whether or not delivered or accepted, i.e., take-or-pay and similar
obligations, (vi) all Contingent Obligations of such Person, (vii) borrowings of
securities by such Person, and (viii) all obligations under any Hedging
Agreement.
"Initial Borrowing Date" shall mean the date occurring on or after
the Effective Date on which the initial Borrowing of Loans hereunder occurs.
"Interest Determination Date" shall mean with respect to any NIBOR
Loan, the Business Day any NIBOR Loan is made on.
"Interest Period" shall have the meaning provided in Section 1.8.
"Interest Rate Protection Agreement" shall mean any interest rate
swap agreement, interest rate cap agreement, interest collar agreement, swap
hedging agreement or other similar agreement or arrangement.
"Investment Advisor" shall mean Warburg, Pincus Counsellors, Inc.
and, in the case of Japan OTC, shall also mean and include SPARX Investment &
Research USA, Inc.
"Investment Advisers Act" shall mean the Investment Advisers Act of
1940, as amended, including the rules and regulations promulgated thereunder.
"Investment Advisory Agreement" shall mean collectively each of the
Investment Advisory Agreements listed on Schedule I as each such agreement may
be amended from time to time in accordance with the terms of this Agreement.
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"Investment Company Act" shall mean the Investment Company Act of
1940, as amended, including the rules and regulations promulgated thereunder.
"Investment Practices" shall mean the investment objectives,
investment policies and investment restrictions of a Borrower as set forth in
the Prospectus.
"Japan OTC" shall mean Warburg, Pincus Japan OTC Fund, Inc.
"Lien" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), preference,
priority or other security agreement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing or similar statement or notice filed under the UCC or
any other similar recording or notice statute, and any lease having
substantially the same effect as any of the foregoing).
"Loan" shall have the meaning provided in Section 1.1(a).
"Monthly Report" shall have the meaning provided in Section 6.1(b).
"Monthly Valuation Date" shall mean the last Friday of each
calendar month, or if such Friday is not a Business Day, the immediately
preceding Business Day.
"NIBOR Loan" shall mean each Loan designated as such by a Borrower
at the time of the incurrence thereof or conversion thereto.
"NIBOR Rate" shall mean the offered quotation in the New York
interbank market to Deutsche Bank AG, New York Branch for Dollar deposits of
amounts in immediately available funds comparable to the outstanding principal
amount of the NIBOR Loan with respect to which such determination is being made
with maturities comparable to the Interest Period applicable to such NIBOR Loan
commencing on the Business Day which is the commencement of such Interest Period
rounded off to the nearest 1/16 of 1%.
"Note" shall have the meaning provided in Section 1.5.
"Notice Office" shall mean the office of the Bank located at 31
West 52 Street, New York, New York 10019, Attention: Lynn Sierra, or such other
office as the Bank may hereafter designate in writing as such to the other
parties hereto.
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"Obligations" shall mean all amounts owing to the Bank by a
Borrower pursuant to the terms of this Agreement or any other Credit Document.
"Payment Office" shall mean the office of the Bank located at 31
West 52 Street, New York, New York 10019, or such other office in the United
States as the Bank may hereafter designate in writing as such to the other
parties hereto.
"Permitted Investments" shall mean those investments in portfolio
securities permitted to be made by a Borrower in accordance with (x) its
Investment Practices and (y) the terms of this Agreement.
"Person" shall mean any individual, partnership, joint venture,
firm, corporation, association, trust or other enterprise or any government or
political subdivision or any agency, department or instrumentality thereof.
"Plan" shall mean any multiemployer or single-employer plan as
defined in Section 4001 of ERISA, which is maintained or contributed to by (or
to which there is an obligation to contribute of) a Borrower or an ERISA
Affiliate.
"Prime Lending Rate" shall mean the rate which Deutsche Bank AG,
New York Branch announces from time to time as its prime lending rate, the Prime
Lending Rate to change when and as such prime lending rate changes. The Prime
Lending Rate is a reference rate and does not necessarily represent the lowest
or best rate actually charged to any customer. Deutsche Bank AG, New York Branch
may make commercial loans or other loans at rates of interest at, above or below
the Prime Lending Rate.
"Prospectus" shall mean with respect to each Borrower its
Prospectus as listed on Schedule II as may be supplemented from time to time
together with each statement of additional information related thereto.
"Registration Statement" shall mean each Borrower's Registration
Statement.
"Regulation D" shall mean Regulation D of the Board of Governors of
the Federal Reserve System as from time to time in effect and any successor to
all or a portion thereof establishing reserve requirements.
"Regulations G, T, U and X" shall mean Regulations G, T, U and X of
the Board of Governors of the Federal Reserve System as from time to time in
effect and any successor to all or a portion thereof.
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"Repurchase Agreement" shall mean any agreement to purchase an
asset presently and then to sell such asset to a third party in the future.
"Request for Borrowing" shall have the meaning provided in Section
1.3.
"Requested Additional Borrower" shall have the meaning set forth in
Section 1.10 of this Agreement.
"Reverse Repurchase Agreement" shall mean any agreement to sell an
asset presently and then to repurchase such asset in the future.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Securities Exchange Act" shall mean the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
"Senior Securities" shall have the meaning ascribed to such term in
Section 18 of the Investment Company Act.
"Subsidiary" shall mean, as to any Person, (i) any corporation more
than 50% of whose stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time owned by such Person and/or one or
more Subsidiaries of such Person and (ii) any partnership, association, joint
venture or other entity in which such Person and/or one or more Subsidiaries of
such Person has more than a 50% equity interest at the time.
"Total Borrower Facility" shall mean $100 million.
"Type" shall mean the type of Loan determined with regard to the
interest option applicable thereto, i.e., whether a Federal Funds Rate Loan, a
Base Rate Loan or a NIBOR Loan.
"UCC" shall mean the Uniform Commercial Code as from time to time
in effect in the relevant jurisdiction.
"Unfunded Current Liability" of any Plan means the amount, if any,
by which the actuarial present value of the
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accumulated benefits under the Plan as of the close of its most recent plan
year exceed the fair market value of the assets allocable thereto determined
in accordance with the Code.
"United States" and "U.S." shall each mean the United States of
America.
"Valuation Date" shall mean each Monthly Valuation Date, each day
on which a Borrowing occurs and the first day of each Interest Period.
SECTION 10. Miscellaneous.
10.1 Payment of Expenses, etc. Each Borrower, on a pro rata basis
(or such basis as Counsellors on behalf of the Borrowers may specify to the Bank
from time to time in writing) shall pay all out-of-pocket costs and expenses of
the Bank (including, without limitation, the reasonable fees and disbursements
of counsel) in connection with any amendment, waiver or consent relating hereto
or thereto, of the Bank in connection with its syndication efforts with respect
to this Agreement and of the Bank in connection with the enforcement of this
Agreement and the other Credit Documents and the documents and instruments
referred to herein and therein (including, without limitation, the reasonable
fees and disbursements of counsel for the Bank).
10.2 Right of Setoff. In addition to any rights now or hereafter
granted under applicable law or otherwise, and not by way of limitation of any
such rights, upon the occurrence of an Event of Default, the Bank is hereby
authorized at any time or from time to time, without presentment, demand,
protest or other notice of any kind to the relevant Borrower or to any other
Person, any such notice being hereby expressly waived, to set off and to
appropriate and apply any and all deposits (general or special) and any other
Indebtedness at any time held or owing by the Bank (including, without
limitation, by branches and agencies of the Bank wherever located) to or for the
credit or the account of the relevant Borrower against and on account of the
Obligations and liabilities of such Borrower to the Bank under this Agreement or
under any of the other Credit Documents, including, without limitation, all
interests in Obligations purchased by the Bank pursuant to Section 10.4(b), and
all other claims of any nature or description arising out of or connected with
this Agreement or any other Credit Document, irrespective of whether or not the
Bank shall have made any demand hereunder.
10.3 Notices. Except as otherwise expressly provided herein,
all notices and other communications provided for hereunder shall be in writing
(including telegraphic, telex, telecopier or
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cable communication) and mailed by overnight delivery, telegraphed, telexed,
telecopied, cabled or delivered: if to a Borrower, at such Borrower's address
specified opposite its signature below; if to the Bank, at its Notice Office;
or, as to either Borrower or the Bank, at such other address as shall be
designated by such party in a written notice to the other parties hereto. All
such notices and communications shall, when mailed, telegraphed, telexed,
telecopied, or cabled or sent by overnight courier, be effective when sent by
overnight delivery, delivered to the telegraph company, cable company or
overnight courier, as the case may be, or sent by telex or telecopier.
10.4 Benefit of Agreement. (a) This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto; provided, that no Borrower may assign or
transfer any of its rights, obligations or interest hereunder or under any other
Credit Document without the prior written consent of the Bank and, provided
further, that although the Bank may transfer or assign its rights hereunder, the
Bank shall remain a "Bank" for all purposes hereunder (and may not transfer or
assign all or any portion of its Loans hereunder except as provided in Section
10.4(b)) and the transferee or assignee, as the case may be, shall not
constitute a "Bank" hereunder and, provided further, that the Bank shall not
transfer or grant any participation under which the participant shall have
rights to approve any amendment to or waiver of this Agreement or any other
Credit Document except to the extent such amendment or waiver would (i) extend
the final scheduled maturity of any Loan or Note in which such participant is
participating, or reduce the rate or extend the time of payment of interest
thereon (except in connection with a waiver of applicability of any post-default
increase in interest rates) or reduce the principal amount thereof, or increase
the amount of the participant's participation over the amount thereof then in
effect , or (ii) consent to the assignment or transfer by a Borrower of any of
its rights and obligations under this Agreement. In the case of any such
participation, the participant shall not have any rights under this Agreement or
any of the other Credit Documents (the participant's rights against the Bank in
respect of such participation to be those set forth in the agreement executed by
such Bank in favor of the participant relating thereto) and all amounts payable
by the Borrowers hereunder shall be determined as if such Bank had not sold such
participation.
(b) Notwithstanding the foregoing, the Bank may (x) assign all or a
portion of its Loans, rights and related outstanding Obligations hereunder to
its parent company and/or any affiliate of such Bank or to any one or more
Banks, provided that any such assignee is a bank (as defined in the Investment
Company Act) or (y) with the consent of each Borrower (not to be
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unreasonably withheld) assign all or a portion of such Loans, rights and
obligations to one or more Eligible Transferees, each of which assignees shall
become party to this Agreement as a Bank by execution of an Assignment and
Assumption Agreement, provided that (i) at such time the Banks and the Borrower
shall modify this Agreement to the extent necessary to effect such assignment
and (ii) new Notes will be issued, at the Borrowers' expense, to such new Bank
and to the assigning Bank upon the request of such new Bank or assigning Bank,
such new Notes to be in conformity with the requirements of Section 1.5. To the
extent of any assignment pursuant to this Section 10.4(b), the assigning Bank
shall be relieved of its obligations hereunder with respect to its assigned
Loans, rights and Obligations.
(c) Notwithstanding anything to the contrary contained above, in
connection with any participation or assignment pursuant to preceding Sections
10.4(a) or (b), the Bank granting the assignment or participation shall, in the
agreement with respect thereto, obtain a representation from the participant or
assignee to the effect that it is not an Affiliated Person of any Borrower or an
Affiliated Person of such an Affiliated Person of any Borrower.
(d) Nothing in this Agreement shall prevent or prohibit the Bank
from pledging its Loans and Notes hereunder to a Federal Reserve Bank in support
of borrowings made by the Bank from such Federal Reserve Bank.
(e) Each Borrower hereby acknowledges and agrees that the Bank may
share with any of its affiliates any information related to such Borrower and
its affiliates (including, without limitation, any non-public customer
information regarding the creditworthiness of such Borrower and its affiliates),
provided that such affiliate shall keep any such information confidential in
accordance with its customary banking procedures.
10.5 No Waiver; Remedies Cumulative; Recourse.
No failure or delay on the part of the Bank or any holder of any Note in
exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between any Borrower and the Bank or the
holder of any Note shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder or under any other
Credit Document preclude any other or further exercise thereof or the exercise
of any other right, power or privilege hereunder or thereunder. The rights,
powers and remedies herein or in any other Credit Document expressly provided
are cumulative and not exclusive of any rights, powers or remedies which the
Bank or the holder of any Note would otherwise have. No notice to or demand on a
Borrower in any case shall entitle such Borrower to any other or
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further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Bank or the holder of any Note to any other or
further action in any circumstances without notice or demand.
10.6 Calculations; Computations. (a) The financial statements
to be furnished to the Bank and the calculation of Asset Coverage Ratios
pursuant hereto shall be made and prepared in accordance with generally accepted
accounting principles in the United States, consistently applied throughout the
periods involved (except as set forth in the notes thereto or as otherwise
disclosed in writing by the relevant Borrower to the Bank); provided that,
except as otherwise specifically provided herein, all computations determining
compliance with Section 6, shall utilize accounting principles and policies in
conformity with those used to prepare the historical financial statements
delivered to the Bank pursuant to Section 5.5(a).
(b) All computations of interest hereunder shall be made on the
basis of a year of 360 days for the actual number of days (including the first
day but excluding the last day) occurring in the period for which such interest
is payable.
10.7 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE; WAIVER OF
JURY TRIAL. (a) THIS AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK. ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER CREDIT DOCUMENT
MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES
FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH BORROWER HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF
ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID
COURTS. EACH BORROWER HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT SUCH
COURTS LACK JURISDICTION OVER SUCH BORROWER, AND AGREES NOT TO PLEAD OR CLAIM,
IN ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT BROUGHT IN ANY OF THE AFORESAID COURTS, THAT ANY SUCH COURT
LACKS JURISDICTION OVER SUCH BORROWER. NOTHING HEREIN SHALL AFFECT THE RIGHT OF
THE BANK UNDER THIS AGREEMENT, THE BANK OR THE HOLDER OF ANY NOTE TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR
OTHERWISE PROCEED AGAINST ANY BORROWER IN ANY OTHER JURISDICTION.
(b) EACH BORROWER HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS
OR PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER
CREDIT DOCUMENT BROUGHT
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IN THE COURTS REFERRED TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY
WAIVES AND AGREES NOT TO PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH
ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM.
(c) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES
ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING
OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
10.8 Counterparts. This Agreement may be executed in any
number of counterparts and by the different parties hereto on separate
counterparts, each of which when so executed and delivered shall be an original,
but all of which shall together constitute one and the same instrument. A set of
counterparts executed by all the parties hereto shall be lodged with the
Borrowers and the Bank.
10.9 Headings Descriptive. The headings of the several sections
and subsections of this Agreement are inserted for convenience only and shall
not in any way affect the meaning or construction of any provision of this
Agreement.
10.10 Amendment or Waiver; etc. Neither this Agreement nor any
other Credit Document nor any terms hereof or thereof may be changed, waived,
discharged or terminated unless such change, waiver, discharge or termination is
in writing signed by the Borrowers and the Bank. In the event that there is no
Default or Event of Default, the Total Borrower Facility has been terminated and
all amounts due and owing shall have been paid, the Bank shall agree to
terminate this Agreement upon the request of the Borrowers.
10.11 Survival. All indemnities set forth herein shall survive
the execution, delivery and termination of this Agreement and the Notes and the
making and repayment of the Loans.
10.12 Domicile of Loans. The Bank may transfer and carry its
Loans at, to or for the account of any office, Subsidiary or banking affiliate
of the Bank.
10.13 Separate Agreements. Notwithstanding any other provision,
the relationship and agreements as set forth in the Agreement between each
Borrower and the Bank shall be several, separate and distinct from those between
each other Borrower and the Bank, to the same effect as would be the case if
each Borrower executed a separate Agreement with the Bank in the form hereof
without execution thereof by any other such Borrower.
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10.14 Organization. (a) The Bank acknowledges that each of the
following Borrowers is a series (each series a "Portfolio") of a registered
investment company organized in series form and that this Agreement is entered
into by each such investment company on behalf of and with respect to such
Portfolio: Warburg, Pincus Balanced Fund, Warburg, Pincus Growth & Income Fund,
Warburg, Pincus Tax Free Fund, Warburg, Pincus Trust-Small Company Growth
Portfolio and -International Equity Portfolio, and Warburg, Institutional Fund,
Inc.-International Equity Portfolio. In those cases all references herein to
"Borrower" are to the individual Portfolio. All Obligations of such Borrower
shall be satisfied solely from the assets of the appropriate Portfolio and not
from any other assets of the investment company or any other series or portfolio
of such investment company.
(b) A copy of the Declarations of Trust of: (i) Warburg, Pincus
Capital Appreciation Fund; (ii) Warburg, Pincus Fixed Income Fund; (iii)
Warburg, Pincus New York Intermediate Municipal Fund; and (iv) Warburg Pincus
Trust (each a Trust and collectively, the "Trusts") are on file with the
Secretary of the Commonwealth of Massachusetts. The parties hereto acknowledge
that this Agreement is not executed by such Trusts on behalf of the trustees of
the Trusts as individuals and that the obligations of this Agreement are not
binding upon any of the trustees, officers, shareholders or partners of a Trust
individually, but are binding upon the assets and property of each Trust
individually. The parties agree that no shareholder, trustee, officer or partner
of a Trust may be held personally liable or responsible for any obligations of
the Trust arising out of this Agreement and that the Bank shall have no claim
under this Agreement on the assets or property of any portfolio or series of a
Trust other than the assets or property of such Trust, and that no portfolio or
series of such Trust shall have the right of set off against assets, property or
obligations of the Bank owed to or held by any other portfolio or series of a
Trust.
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IN WITNESS WHEREOF, the parties hereto have caused their duly
authorized officers to execute and deliver this Agreement as of the date first
above written.
<TABLE>
<S> <C>
Address: WARBURG, PINCUS CAPITAL
WARBURG, PINCUS CAPITAL APPRECIATION FUND
APPRECIATION FUND
c/o:
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue /s/_________________________
New York, New York 10017 Name: Eugene P. Grace
Telephone: (212) 878-0812 Title: Vice President &
Telecopier: (212) 878-9351 Secretary
Attention: Eugene Grace
Address: WARBURG, PINCUS EMERGING GROWTH
WARBURG, PINCUS EMERGING GROWTH FUND FUND, INC.
c/o:
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue /s/_________________________
New York, New York 10017 Name: Eugene P. Grace
Telephone: (212) 878-0812 Title: Vice President &
Telecopier: (212) 878-9351 Secretary
Attention: Eugene Grace
Address: WARBURG, PINCUS FIXED INCOME
WARBURG, PINCUS FIXED INCOME FUND FUND, INC.
c/o:
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue /s/_________________________
New York, New York 10017 Name: Eugene P. Grace
Telephone: (212) 878-0812 Title: Vice President &
Telecopier: (212) 878-9351 Secretary
Attention: Eugene Grace
Address: THE RBB FUND, INC. on behalf of WARBURG,
WARBURG, PINCUS BALANCED FUND PINCUS BALANCED FUND
c/o:
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue
New York, New York 10017 _____________________________
Telephone: (212) 878-0812 Name:
Telecopier: (212) 878-9351 Title:
Attention: Eugene Grace
-37-
<PAGE>
<PAGE>
Address: THE RBB FUND, INC. on behalf of WARBURG,
WARBURG, PINCUS TAX FREE FUND PINCUS TAX FREE FUND
c/o:
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue
New York, New York 10017 _____________________________
Telephone: (212) 878-0812 Name:
Telecopier: (212) 878-9351 Title:
Attention: Eugene Grace
Address: WARBURG, PINCUS INTERMEDIATE MATURITY
WARBURG, PINCUS INTERMEDIATE GOVERNMENT FUND, INC.
MATURITY GOVERNMENT FUND
c/o:
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue /s/ _________________________
New York, New York 10017 Name: Eugene P. Grace
Telephone: (212) 878-0812 Title: Vice President &
Telecopier: (212) 878-9351 Secretary
Attention: Eugene Grace
Address: WARBURG, PINCUS NEW YORK
WARBURG, PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND
INTERMEDIATE MUNICIPAL FUND
c/o:
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue /s/__________________________
New York, New York 10017 Name: Eugene P. Grace
Telephone: (212) 878-0812 Title: Vice President &
Telecopier: (212) 878-9351 Secretary
Attention: Eugene Grace
Address: WARBURG, PINCUS TRUST-SMALL
WARBURG, PINCUS TRUST-SMALL COMPANY GROWTH PORTFOLIO
COMPANY GROWTH PORTFOLIO
PORTFOLIO
c/o:
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue /s/__________________________
New York, New York 10017 Name: Eugene P. Grace
Telephone: (212) 878-0812 Title: Vice President &
Telecopier: (212) 878-9351 Secretary
Attention: Eugene Grace
-38-
<PAGE>
<PAGE>
Address: WARBURG, PINCUS TRUST-
WARBURG, PINCUS TRUST- INTERNATIONAL EQUITY PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
c/o:
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue /s/__________________________
New York, New York 10017 Name: Eugene P. Grace
Telephone: (212) 878-0812 Title: Vice President &
Telecopier: (212) 878-9351 Secretary
Attention: Eugene Grace
Address: WARBURG, PINCUS MANAGED BOND
WARBURG, PINCUS SHORT-TERM TAX- TRUST, ON BEHALF OF WARBURG,
ADVANTAGED FUND PINCUS SHORT-TERM TAX-
c/o: ADVANTAGED FUND
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue
New York, New York 10017
Telephone: (212) 878-0812 _____________________________
Telecopier: (212) 878-9351 Name:
Attention: Eugene Grace Title:
Address: WARBURG, PINCUS POST-VENTURE
WARBURG, PINCUS POST-VENTURE CAPITAL FUND, INC.
CAPITAL FUND
c/o:
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue
New York, New York 10017 /s/__________________________
Telephone: (212) 878-0812 Name: Eugene P. Grace
Telecopier: (212) 878-9351 Title: Vice President &
Attention: Eugene Grace Secretary
Address: WARBURG, PINCUS INTERNATIONAL
WARBURG, PINCUS INTERNATIONAL EQUITY FUND, INC.
EQUITY FUND
c/o:
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue
New York, New York 10017 /s/__________________________
Telephone: (212) 878-0812 Name: Eugene P. Grace
Telecopier: (212) 878-9351 Title: Vice President &
Attention: Eugene Grace Secretary
-39-
<PAGE>
<PAGE>
Address: WARBURG, PINCUS INSTITUTIONAL
WARBURG, PINCUS INSTITUTIONAL FUND FUND, INC. - INTERNATIONAL
- - INTERNATIONAL EQUITY PORTFOLIO EQUITY PORTFOLIO
c/o:
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue /s/__________________________
New York, New York 10017 Name: Eugene P. Grace
Telephone: (212) 878-0812 Title: Vice President &
Telecopier: (212) 878-9351 Secretary
Attention: Eugene Grace
Address: WARBURG, PINCUS GLOBAL FIXED
WARBURG, PINCUS GLOBAL FIXED INCOME FUND, INC.
INCOME
c/o:
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue
New York, New York 10017 /s/__________________________
Telephone: (212) 878-0812 Name: Eugene P. Grace
Telecopier: (212) 878-9351 Title: Vice President &
Attention: Eugene Grace Secretary
Address: WARBURG, PINCUS JAPAN OTC FUND,
WARBURG, PINCUS JAPAN OTC FUND INC.
c/o:
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue /s/__________________________
New York, New York 10017 Name: Eugene P. Grace
Telephone: (212) 878-0812 Title: Vice President &
Telecopier: (212) 878-9351 Secretary
Attention: Eugene Grace
Address: WARBURG, PINCUS, INC. EMERGING
WARBURG, PINCUS EMERGING MARKETS MARKETS FUND, INC.
FUND
c/o:
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue
New York, New York 10017 /s/__________________________
Telephone: (212) 878-0812 Name: Eugene P. Grace
Telecopier: (212) 878-9351 Title: Vice President &
Attention: Eugene Grace Secretary
-40-
<PAGE>
<PAGE>
Address: THE RBB FUND, INC. on Behalf of
WARBURG, PINCUS GROWTH & INCOME FUND WARBURG, PINCUS GROWTH & INCOME
c/o: FUND
Warburg, Pincus Counsellors, Inc.
466 Lexington Avenue
New York, New York 10017 _____________________________
Telephone: (212) 878-0812 Name:
Telecopier: (212) 878-9351 Title:
Attention: Eugene Grace
DEUTSCHE BANK AG, NEW YORK
BRANCH
_____________________________
Name:
Title:
_____________________________
Name:
Title:
-41-
<PAGE>
<PAGE>
EXHIBIT A
REQUEST FOR BORROWING
</TABLE>
<TABLE>
<S> <C> <C>
Wire Instructions
DATE: ABA#
TO: Deutsche Bank AG, New York
Branch
FROM: [NAME OF BORROWER] Acct#
RE: Loan Transactions - Warburg, Ref Warburg, Pincus Counsellors,
Pincus Funds Inc. on behalf of the Warburg,
Pincus Funds
</TABLE>
<TABLE>
<CAPTION>
Daily Accrued
Interest
Principal Payment
Fund# Fund Name New Borrowings Repayments
<S> <C> <C> <C> <C>
$ ($ ) ($ )
$ ($ ) ($ )
$ ($ ) ($ )
$ ($ ) ($ )
Totals $___________ ($_______) ($______)
Net Wire: To (From) $___________
[Name of Borrower]
</TABLE>
- -----------------------
Authorized Signature
<PAGE>
<PAGE>
EXHIBIT B
REVOLVING NOTE
[Date]
FOR VALUE RECEIVED, [NAME OF BORROWER], a _______________
organized and existing under the laws of _____________________ (the "Borrower"),
hereby promises to pay to the order of DEUTSCHE BANK AG, NEW YORK BRANCH (the
"Bank"), in lawful money of the United States of America in immediately
available funds, at the office of Deutsche Bank AG, New York Branch, located at
31 West 52nd Street, New York, New York 10019, on the earlier of any Expiry Date
(capitalized terms used herein and not otherwise defined shall have the meaning
in the Agreement referred to below), the principal sum of ONE HUNDRED MILLION
DOLLARS ($100,000,000) or, if less, the then unpaid principal amount of the Loan
made to the Borrower evidenced by this Note and outstanding on such date.
The Borrower promises also to pay interest on the unpaid
principal amount of this Note in like money at such office from the date hereof
until paid at the rates and at the times provided in Section 1.7 of the
Agreement.
This Note is one of the Notes referred to in the Credit Agreement
dated as of February ___, 1996 among the Borrowers listed therein and the Bank
(as amended, modified and supplemented from time to time, the "Agreement"), and
is entitled to the benefits thereof.
In case an Event of Default shall occur and be continuing, the
principal of and accrued interest on this Note may be declared to be due and
payable in the manner and with the effect provided in the Agreement.
The Borrower hereby waives presentment, demand, protest or notice
of any kind in connection with this Note.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED
BY THE LAW OF THE STATE OF NEW YORK.
[NAME OF BORROWER]
By_____________________
Name:
Title:
<PAGE>
<PAGE>
GRID
<TABLE>
<CAPTION>
Unpaid
Principal Principal
Amount Paid or Amount Notation
Date of Loan Prepaid of Note Made by
---- ------- --------- ---------- --------
<S> <C> <C> <C> <C>
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</TABLE>
<PAGE>
<PAGE>
EXHIBIT C
OPINION OF COUNSEL
[Date]
To the Bank party to the
Credit Agreement referred to below
Ladies and Gentlemen:
We have acted as counsel for [Name of Borrowers], each a
corporation or trust organized and existing under the laws of (each a "Borrower"
and collectively the "Borrowers"), in connection with the execution and delivery
of the following documents (collectively, the "Credit Documents"):
(a) the Credit Agreement, dated as of February __, 1996 among the
Borrowers and Deutsche Bank AG, New York Branch, (the "Agreement"); and
(b) the Notes of each Borrower, dated the date hereof and delivered
pursuant to the Agreement;
This opinion is delivered to you pursuant to Section 3.3 of the
Agreement. Terms used herein which are defined in the Agreement shall have the
respective meanings set forth in the Agreement, unless otherwise defined herein.
In connection with this opinion, we have examined the originals,
or certified, conformed or reproduction copies of all records, agreements,
instruments and documents as we have deemed relevant or necessary as the basis
for the opinions hereinafter expressed. In stating our opinion, we have assumed
the genuineness of all signatures on original or certified copies, the
authenticity of documents submitted to us as originals and the conformity to
original or certified copies of all copies submitted to us as certified or
reproduction copies.
We have also assumed, for purposes of the opinions expressed
herein, that the parties to the Credit Documents other than the Borrowers have
the corporate power and authority to enter into and perform each of the Credit
Documents and that each of the Credit Documents has been duly authorized,
executed and delivered by each such other party.
<PAGE>
<PAGE>
Exhibit C
page 2
Based upon the foregoing, and subject to the qualifications set
forth herein, we are of the opinion that:
1. Each Borrower (i) is a duly organized and validly existing
trust or corporation in good standing under the laws of the jurisdiction of its
incorporation, (ii) has the power and authority to own its property and assets
and to transact the business in which it is engaged and (iii) is duly qualified
as a foreign corporation and in good standing in each jurisdiction where the
ownership, leasing or operation of property or the conduct of its business
requires such qualification.
2. Each Borrower has the corporate or trust power to execute,
deliver and perform the terms and provisions of each of the Credit Documents to
which it is party and has taken all necessary corporate action to authorize the
execution, delivery and performance by it of each of such Credit Documents. Each
Borrower has duly execute and delivered each of the Credit Documents to which it
is party, and assuming due authorization, execution and delivery by the other
parties thereto, each of such Credit Documents constitutes its legal, valid and
binding obligation enforceable in accordance with its terms except as the
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws affecting creditors' rights generally and
by general equitable principles (regardless of whether the issue of
enforceability is considered in a proceeding in equity or at law).
3. Neither the execution, delivery or performance by any Borrower
of the Credit Documents to which it is a party, nor compliance by it with the
terms and provisions thereof, (i) will contravene any provision of any law,
statute, rule or regulation (including, without limitation, the Investment
Company Act and Regulations G, T, U and X of the Board of Governors of the
Federal Reserve System) or, to the best of our knowledge after due inquiry, any
order, writ, injunction or decree of any court or governmental instrumentality,
(ii) will conflict or be inconsistent with or result in any breach of any of the
terms, covenants, conditions or provisions of, or constitutes a default under,
or result in the creation or imposition of (or the obligation to create or
impose) any Lien upon any of the property or assets of such Borrower, pursuant
to the terms of any indenture, mortgage, deed of trust, credit agreement, loan
agreement or any other material agreement, contract or instrument of which we
are aware to which any Borrower is a party or by which it or any of its property
or assets is bound or to which it may be subject or (iii) will violate any
provision of the Certificate of Incorporation or By-Laws or trust documentation
of any Borrower. The basis for the opinions expressed in this paragraph 3 as
they relate to Section 17(d) of the 1940 Act and Rule 17d-1 promulgated
thereunder by the
<PAGE>
<PAGE>
Exhibit C
page 3
Securities and Exchange Commission (the "Commission") is explained below.
Section 17(d) of the 1940 Act provides, in pertinent part, as
follows:
It shall be unlawful for any affiliated person of . . . a registered
investment company . . . or any affiliated person of such person . . .
acting as principal to effect any transaction in which such registered
company . . . is a joint or a joint and several participant with such
person . . . or affiliated person, in contravention of such rules and
regulations as the Commission may prescribe for the purpose of limiting
or preventing participation by such registered or controlled company on
a basis different from or less advantageous than that of such other
participant.
Rule 17d-1 under the 1940 Act provides, in relevant part, as follows:
No affiliated person of . . . any registered investment company . . .
and no affiliated person of such a person . . . acting as principal,
shall participate in, or effect and transaction in connection with, any
joint enterprise or other joint arrangement or profit-sharing plan in
which any such registered company . . . is a participant, and which is
entered into, adopted or modified subsequent to the effective date of
this rule, unless an application regarding such joint enterprise,
arrangement or profit-sharing plan has been filed with the Commission
and has been granted by an order entered prior to the submission of such
plan or modification to security holders for approval .... Rule
17d-1(a).
A "joint enterprise or other joint arrangement or profit-sharing plan"
as used in this rule shall mean any written or oral plan, contract,
authorization or arrangement, or any practice or understanding
concerning an enterprise or undertaking whereby a registered investment
company . . . and any affiliated person of . . . such registered
investment company, or an affiliated person of such a person... have a
joint or a joint and several participation, or share in the profits of
such enterprise or undertaking. . . . Rule 17(d)-1(c).
Execution and delivery of the Credit Agreement by the Borrowers could be
considered a "joint enterprise or other joint arrangement or profit-sharing
plan" as defined in Rule 17d-1(c) under the 1940 Act, so as to require the
Borrowers to obtain a prior order from the Commission authorizing such action
pursuant to Rule 17(d)-1(a). However, in a letter (the "T. Rowe Price Letter")
publicly
<PAGE>
<PAGE>
Exhibit C
page 4
available July 31, 1995 addressed to the T. Rowe Price Funds (the "TRP Funds"),
the Office of the Chief Counsel of the Division of Investment Management at the
Commission stated that it would not recommend that the Commission take
enforcement action against the TRP Funds under Section 17(d) of the 1940 Act or
Rule 17d-1 thereunder if the TRP Funds jointly entered into a credit facility
having terms and conditions set forth in the T. Rowe Price Letter.
Our opinion with respect to the necessity of obtaining authorizations from or
making filings with any regulatory authority of the United States in connection
with execution, delivery, and performance of the Credit Agreement by the Fund on
behalf of the Borrowers, and our opinion with respect to execution, delivery and
performance of the Credit Agreement by the Fund on behalf of the Borrowers not
violating any statutory law, rule or regulation of the United States, as they
relate to Section 17(d) of the 1940 Act and Rule 17d-1, are based upon the
interpretation of those provisions in the T. Rowe Price Letter. We believe that
the Commission's Division of Investment Management would, upon request, issue a
"no-action" letter to the Borrowers similar to the T. Rowe Price Letter, because
the terms and conditions of the Credit Agreement are not materially different
from the terms and conditions of the credit arrangement described in the T. Rowe
Price Letter. We note, however, that while members of the public are entitled to
rely upon "no-action" letters like the T. Rowe Price Letter, such letters are
only expressions of the views of the Commission's staff and are not an
expression of the views of the Commission. 17 C.F.R. ss. 202.l(d). We also note
that the T. Rowe Price Letter is the only authoritative pronouncement of the
Commission or its staff that we found relating to the application of Section
17(d) of the 1940 Act and Rule 17d-1 to arrangements like those contemplated by
the Credit Agreement.
4. To the best of our knowledge after due inquiry, there are no
actions, suits or proceedings pending or threatened (i) with respect to any
Credit Document or (ii) that are reasonably likely to materially and adversely
affect the operations, business, property, assets, condition (financial or
otherwise) or prospects of any Borrower.
5. No order, consent, approval, license, authorization or
validation of, or filing, recording or registration with (except as have been
obtained or made prior to the Effective Date), or exemption by, any governmental
or public body or authority, or any subdivision thereof, is required to
authorize, or is required in connection with, (i) the execution, delivery and
performance of any Credit Document to which a Borrower is a party or (ii) the
legality, validity, binding effect or enforceability of any such Credit
Document.
<PAGE>
<PAGE>
Exhibit C
page 5
6. Each Borrower is duly registered as an open-end management
investment company, or series thereof, under the Investment Company Act and such
registration and has not been revoked and is in full force and effect.
The foregoing opinions are subject to the following exceptions,
limitations, and qualifications:
(a) We express no opinion as to the validity or enforceability of
any provision of the Credit Agreement which (i) permits the Bank to increase the
rate of interest or to collect a late charge in the event of delinquency or
default; (ii) purports to be a waiver by a Borrower of any right or benefit
except to the extent permitted by applicable law; (iii) purports to require that
waivers must be in writing to the extent that an oral agreement or implied
agreement by trade practice or course of conduct modifying provisions of the
Credit Agreement has been made; (iv) purports to be a waiver of the right to a
jury trial; (v) purports to be a waiver of the obligations of good faith, fair
dealing, diligence, mitigation of damages or commercial reasonableness; (vi)
purports to exculpate any party from its own negligent acts or limit any party
from certain liabilities; or (vii) chooses the governing law of New York where
such choice of law would violate a public policy of the State of Maryland or the
Commonwealth of Massachusetts, although we are not aware of any such policy in
the State of Maryland or the Commonwealth of Massachusetts which is violated by
any provision of the Credit Agreement.
(b) We express no opinion as to the enforceability of forum
selection clauses upon the courts in the forum selected.
We are members of the Bar of the State of New York and we do not
hold ourselves out as being conversant with, and express no opinion as to, the
laws of any jurisdiction other than those of the United States of America and
the State of New York.
The opinions expressed herein are solely for your benefit and may
not be relied upon in any manner or for any purpose by any other person.
Very truly yours,
<PAGE>
<PAGE>
EXHIBIT D
[NAME OF BORROWER]
Officers' Certificate
I, the undersigned, [President/Vice-President] of (Name of Borrower), a
[corporation] [trust] organized and existing under the laws of ___________ (the
"Borrower"), DO HEREBY CERTIFY that:
1. This Certificate is furnished pursuant to Section 3.2 of the
Credit Agreement, dated as of February __, 1996 among the Borrowers listed
therein and Deutsche Bank AG, New York Branch (such Credit Agreement, as in
effect on the date of this Certificate, being herein called the "Credit
Agreement"). Unless otherwise defined herein capitalized terms used in this
Certificate have the meanings assigned to those terms in the Credit Agreement.
2. The persons named below have been duly elected, have been duly
qualified as and at all times since _____________ 1 to and including and date
hereof, have been officers of the Borrower, holding the respective offices below
set opposite their names, and the signatures below set opposite their names are
their genuine signatures.
<TABLE>
<CAPTION>
Name2 Office Signature
<S> <C> <C>
------------ ----------- -------------
------------ ----------- -------------
------------ ----------- -------------
</TABLE>
3. Attached hereto as Exhibit A is a copy of the [Trust Charter]
[Certificate of Incorporation] of the Borrower as filed in the
_______________________ Office of on ________ 19__, together with all amendments
thereto adopted through the date hereof
- ---------------------
1 Insert a date prior to the time of any corporate action relating to the
Credit Agreement.
2 Include name, office, and signature of each officer who will sign any
Credit document, including the officer who will sign the certification
at the end of this certificate.
<PAGE>
<PAGE>
EXHIBIT D
page 2
4. Attached hereto as Exhibit B is a true and correct copy of the
By-Laws of the Borrower as in effect on 3 together with all amendments thereto
adopted through the date hereof.
5. Attached hereto as Exhibit C is a true and correct copy of
resolutions duly adopted by the Board of [Trustees][Directors] of the Borrower
at a meeting on _________________ at which a quorum was present and acting
throughout, which resolutions have not been revoked, modified, amended or
rescinded and are still in full force and effect. Except as attached hereto as
Exhibit C, no resolutions have been adopted by the Board of
[Trustees][Directors] of the Borrower which deal with the execution, delivery or
performance of any of the Credit Documents.
6. On the date hereof, the representations and warranties
contained in Section 5 of the Credit Agreement are true and correct, both before
and after giving effect to each Borrowing to be incurred on the date hereof and
the application of the proceeds thereof.
7. On the date hereof, no Default or Event of Default has
occurred and is continuing or would result from the Borrowings to be incurred on
the date hereof or from the application of the proceeds thereof.
8. I know of no proceeding for the dissolution or liquidation of
the Borrower or threatening its existence.
9. On the date hereof, all of the conditions set forth in
Sections 3.5, 3.6 and 4.1 have been satisfied on such date.
IN WITNESS WHEREOF, I have hereunto set my hand this this __th
day of December 1995.
[Name of Borrower]
Name:______________________
Title:_____________________
- ---------------------
3 Insert same date as in paragraph 2 of this certificate.
<PAGE>
<PAGE>
EXHIBIT D
page 3
I, the undersigned, [Secretary/Assistant Secretary,] of the Borrower, DO HEREBY
CERTIFY that:
1. [Insert name of Person making the above certifications] is the
duly elected and qualified [Insert Office] of the Borrower and the signature
above is his genuine signature.
2. The certifications made by [name] in items 2, 3, 4 and 5 above
are true and correct.
3. I know of no proceeding for the dissolution or liquidation of
the Borrower or threatening its existence.
IN WITNESS WHEREOF, I have hereunto set my hand this __th day of
February, 1996.
[Name of Borrower]
Name: _____________________
Title:_____________________
<PAGE>
<PAGE>
SCHEDULE I
Warburg, Pincus Funds
List of Investment Advisory Agreements
Warburg, Pincus Balanced Fund
Investment Advisory Agreement between Warburg, Pincus Balanced Fund and Warburg,
Pincus Counsellors, Inc. ("Counsellors") dated August 16, 1994
Warburg, Pincus Capital Appreciation Fund
Investment Advisory Agreement between Warburg, Pincus Capital Appreciation Fund
and Counsellors dated July 10, 1987
Warburg, Pincus Emerging Growth Fund
Investment Advisory Agreement between Warburg, Pincus Emerging Growth Fund, Inc.
and Counsellors dated January 21, 1988
Warburg, Pincus Emerging Markets Fund
Investment Advisory Agreement between Warburg, Pincus Emerging Markets Fund,
Inc. and Counsellors dated December 30, 1994
Warburg, Pincus Fixed Income Fund
Investment Advisory Agreement between Warburg, Pincus Fixed Income Fund and
Counsellors dated July 10, 1987
Warburg, Pincus Growth & Income Fund
Investment Advisory Agreement between Warburg, Pincus Growth & Income Fund and
Counsellors, Inc. dated September 30, 1993
Warburg, Pincus Global Fixed Income Fund
Investment Advisory Agreement between Warburg, Pincus Global Fixed Income Fund
and Counsellors dated November 1, 1990
Warburg, Pincus Institutional Fund
Investment Advisory Agreement between Warburg, Pincus Institutional Fund, Inc.
("Institutional") and Counsellors, relating to the International Equity
Portfolio, dated August 26, 1992
Investment Advisory Agreement between Institutional and Counsellors, relating to
the Global Fixed Income Portfolio, dated August 26, 1992
<PAGE>
<PAGE>
Warburg Pincus Intermediate Maturity Government Fund
Investment Advisory Agreement between Warburg, Pincus Intermediate Maturity
Government Fund, Inc. and Counsellors dated August 22, 1988
Warburg, Pincus International Equity Fund
Investment Advisory Agreement between Warburg, Pincus International Equity Fund,
Inc. and Counsellors dated April 27, 1989
Warburg, Pincus Japan OTC Fund
Investment Advisory Agreement between Warburg, Pincus Japan OTC Fund, Inc. and
Counsellors dated September 27, 1994
Sub-Investment Advisory Agreement between Warburg, Pincus Japan OTC Fund and
SPARX Investment & Research, USA, Inc. dated September 27, 1994
Warburg, Pincus New York Intermediate Municipal Fund
Investment Advisory Agreement between New York Intermediate Municipal Fund, Inc.
and Counsellors dated April 1, 1987
Warburg, Pincus Post-Venture Capital Fund
Investment Advisory Agreement between Warburg, Pincus Post-Venture Capital Fund,
Inc. and Counsellors dated September 29, 1995
Warburg, Pincus Managed Bond Trust -
Warburg, Pincus Short-Term Tax-Advantaged Bond Portfolio
Investment Advisory Agreement between Warburg, Pincus Managed Bond Trust and
Counsellors dated July 29, 1994
Warburg, Pincus Tax Free Fund
Investment Advisory Agreement between Warburg, Pincus Tax Free Fund and
Counsellors dated March 31, 1995
Warburg, Pincus Trust
Investment Advisory Agreement between Warburg, Pincus Trust and Counsellors,
relating to the Small Company Growth Portfolio, dated June 20, 1995
-49-
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Investment Advisory Agreement between Warburg, Pincus Trust and Counsellors,
relating to the International Equity Portfolio, dated June 20, 1995
<PAGE>
<PAGE>
SCHEDULE II
Warburg, Pincus Funds
List of Fund Prospectuses
<TABLE>
<CAPTION>
Description Date
- ----------- -----
<S> <C>
Combined Prospectus relating to
the Common Shares of the following funds:
Warburg, Pincus Capital Appreciatrion
Fund
Warburg, Pincus Emerging Growth Fund
Warburg, Pincus Post-Venture Capital Fund
Warburg, Pincus International Equity Fund
Warburg, Pincus Japan OTC Fund September 29, 1995
Advisor Share Prospectus of
Warburg, Pincus Capital Appreciation
Fund September 29, 1995
Advisor Share Prospectus of
Warburg, Pincus Emerging Growth Fund September 29, 1995
Advisor Share Prospectus of
Warburg, Pincus Post-Venture Capital Fund September 29, 1995
Advisor Share Prospectus of
Warburg, Pincus International Equity Fund September 29, 1995
Advisor Share Prospectus of
Warburg, Pincus Japan OTC Fund September 29, 1995
Combined Prospectus relating to
all shares of the following funds:
Warburg, Pincus Fixed Income Fund
Warburg, Pincus Intermediate
Maturity Government Fund
Warburg, Pincus Global Fixed
Income Fund
Warburg, Pincus New York
Intermediate Municipal Fund March 1, 1995
Common Shares Prospectus of
Warburg, Pincus Emerging
Markets Fund June 30, 1995
Advisor Shares Prospectus of
Warburg, Pincus Emerging
Markets Fund June 30, 1995
</TABLE>
<PAGE>
<PAGE>
SCHEDULE II
Warburg, Pincus Funds
List of Fund Prospectuses
<TABLE>
<CAPTION>
Description Date
- ----------- -----
<S> <C>
Prospectus of Warburg, Pincus
Institutional Fund March 1, 1995
Prospectus of Warburg, Pincus
Managed Bond Trust March 1, 1995
Prospectus of Warburg, Pincus Trust June 20, 1995
Common Shares Prospectus of
Warburg, Pincus Growth
& Income Fund December 28, 1994,
revised March 10, 1995
Combined Prospectus reflecting Common
Shares of the following funds:
Warburg, Pincus Balanced Fund
Warburg, Pincus Growth &
Income Fund December 28, 1994,
revised May 10, 1995
Advisor Shares Prospectus of
Warburg, Pincus Growth
& Income Fund December 28, 1994,
revised May 15, 1995
Advisor Shares Prospectus of
Warburg, Pincus Balanced
Fund December 28, 1994,
revised August 31, 1995
Prospectus of Warburg, Pincus
Tax Free Fund December 21, 1994,
supplemented February
14, 1995
Statements of Additional Information
relating to the following funds:
Warburg, Pincus Capital Appreciation Fund September 29, 1995
Warburg, Pincus Emerging Growth Fund September 29, 1995
Warburg, Pincus Post-Venture Capital Fund September 29, 1995
Warburg, Pincus International Equity Fund September 29, 1995
Warburg, Pincus Japan OTC Fund September 29, 1995
Warburg, Pincus Fixed Income Fund March 1, 1995
Warburg, Pincus Global Fixed Income Fund March 1, 1995
</TABLE>
<PAGE>
<PAGE>
SCHEDULE II
Warburg, Pincus Funds
List of Fund Prospectuses
<TABLE>
<CAPTION>
Description Date
- ----------- -----
<S> <C>
Warburg, Pincus Intermediate
Maturity Government Fund March 1, 1995
Warburg, Pincus New York
Intermediate Municipal Fund March 1, 1995
Warburg, Pincus Emerging Markets Fund June 30, 1995
Warburg, Pincus Institutional Fund March 1, 1995
Warburg, Pincus Managed Bond Trust March 1, 1995
Warburg, Pincus Trust June 20, 1995
Warburg, Pincus Balanced Fund December 28, 1994
Warburg, Pincus Growth & Income Fund December 28, 1994
Warburg, Pincus Tax Free Fund December 28, 1994
</TABLE>
<PAGE>
<PAGE>
October 30, 1995
Warburg Pincus Funds
466 Lexington Avenue
New York, NY 10017-3147
Attention: Eugene Grace
Dear Gene:
You have requested that PNC Bank, National Association (the "Bank") provide
financing to the Warburg, Pincus mutual funds that are signatories to this
letter (and any additional fund to which Warburg, Pincus Counsellors, Inc. acts
as investment adviser which, with Bank's consent, becomes a party to this letter
by executing a joinder in the form attached) (each, a "Fund" or a "Borrower" and
collectively, the "Borrowers"). This letter is to confirm that the Bank has
approved a $100,000,000.00 discretionary line of credit to the Borrowers.
Advances made under the line of credit, if any, shall be due and payable on
demand; provided, however, that Bank shall provide the Borrowers five (5) days
prior written notice of demand, except in the event of (i) commencement of a
bankruptcy, insolvency or similar proceeding by or against any Borrower, (ii)
acceleration of any other indebtedness of any Borrower for borrowed money, or
(iii) cancellation of any committed line of credit of any Borrower with any
financial institution (each, a "Committed Line of Credit") or a failure of any
lender to make an advance to a Borrower under any Committed Line of Credit for
any reason, in which event no such notice is required. All advances will bear
interest and be subject to the terms and conditions defined in the attached
promissory notes for each Borrower.
THIS IS NOT A COMMITTED LINE OF CREDIT. EACH BORROWER ACKNOWLEDGES AND AGREES
THAT ADVANCES UNDER THIS LINE OF CREDIT, IF ANY, SHALL BE MADE AT THE SOLE
DISCRETION OF THE BANK. THE BANK MAY DECLINE TO MAKE ADVANCES UNDER THE LINE,
TERMINATE THE LINE OR DEMAND REPAYMENT OF ALL OUTSTANDING OBLIGATIONS
THEREUNDER, AT ANY TIME AND FOR ANY REASON WITHOUT PRIOR NOTICE TO THE BORROWERS
EXCEPT AS SET FORTH ABOVE IN THE CASE OF DEMAND. THIS LETTER SETS FORTH CERTAIN
TERMS AND CONDITIONS SOLELY TO ASSURE THAT THE PARTIES UNDERSTAND EACH OTHER'S
EXPECTATIONS AND TO ASSIST THE BANK IN EVALUATING THE STATUS, ON AN ONGOING
BASIS, OF THE LINE OF CREDIT.
Each Borrower may request an advance of the full amount of this line of credit;
provided, however (i) total outstanding advances under the line at any time may
not exceed $100,000,000, and (ii) the aggregate outstandings under the line, and
under any committed line of credit that may
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<PAGE>
Warburg Pincus Funds
October 30, 1995
Page 2
be made available by the Bank to the Borrowers, to any one Fund may not exceed
the lowest of (a) one-third of that Fund's assets, (b) any lower leverage limit
defined by that Fund's prospectus or statement of additional information, or (c)
the maximum amount permitted to be borrowed by such Fund under the Investment
Company Act of 1940. Each Borrower shall be severally, and not jointly liable
for its particular advances under the line, and the Bank shall have no recourse
against any Borrower except for the payment or performance of the obligations of
such Borrower and not for the payment or performance of the obligations of any
other Borrower.
The Bank's willingness to consider making advances under this facility to a
Borrower is subject to the Borrower's ongoing agreement as follows:
(a) Each Borrower must furnish the Bank with its audited annual financial
statements within sixty (60) days after the end of its fiscal year, its
unaudited semi-annual financial statements within sixty (60) days after the
end of each semi-annual period, and such other financial information as the
Bank may reasonably request from time to time promptly after receipt of
each request;
(b) Borrowers may not incur any other indebtedness or grant any lien or
security interest on any of its assets, except indebtedness to or liens in
favor of the Bank, and except in connection with repurchase agreements,
options or other transactions in the ordinary course of Borrowers'
business; and
(c) Each request for an advance, and the acceptance of the proceeds thereof,
shall be deemed a representation and warranty by the applicable Borrower
(i) that it is in compliance with all applicable laws and regulations,
including but not limited to the Investment Company Act of 1940, (ii) that
both before and after giving effect to the advance, Borrower is in
compliance with all of the terms and conditions contained in its Prospectus
and Statement of Additional Information, and (iii) that such Borrower is
not advised or sub-advised by either the Bank or any of its affiliates.
Enclosed is the form of Note to be executed by each Fund evidencing this
facility. Please indicate each Borrower's agreement to the terms and conditions
of this letter by having the enclosed copy of this letter executed where
indicated and returning it to me. Prior to the making of any advances hereunder
to any Borrower, the Borrower must deliver to the Bank a duly executed original
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Warburg Pincus Funds
October 30, 1995
Page 3
of its respective Note and a certified copy of resolutions and an incumbency
certificate, each in form and substance satisfactory to the Bank.
This line of credit replaces that certain $50,000,000 discretionary line of
credit made available to the Borrowers pursuant to a confirmation letter dated
April 1, 1994, and this letter supersedes and replaces my letter to you dated
October 11, 1995.
Sincerely,
PNC BANK, NATIONAL ASSOCIATION
By:___________________________________
Robert W. Beatty
Assistant Vice President
Financial Institutions Group
/jf
Encl.
3162c.ltr
With the intent to be legally bound, the above terms and conditions are hereby
agreed to and accepted this _____ day of ____________________, 1995:
Warburg Pincus New York Intermediate Warburg Pincus Intermediate Maturity
Municipal Fund Government Fund
By:_________________________________ By:__________________________________
Title:_______________________________ Title:________________________________
<PAGE>
<PAGE>
Warburg Pincus Funds
October 30, 1995
Page 4
<TABLE>
<S> <C>
Warburg Pincus Growth & Income Fund Warburg Pincus Balanced Fund
By:_________________________________ By:__________________________________
Title:_______________________________ Title:________________________________
Warburg Pincus Tax-Free Fund Warburg Pincus Fixed Income Fund
By:_________________________________ By:__________________________________
Title:_______________________________ Title:________________________________
Warburg Pincus Global Fixed Income Warburg Pincus Short Term
Tax-Advantaged
Fund Bond Fund
By:_________________________________ By:__________________________________
Title:_______________________________ Title:________________________________
Warburg Pincus Capital Appreciation Warburg Pincus Japan OTC Fund
Fund
By:_________________________________ By:__________________________________
Title:_______________________________ Title:________________________________
Warburg Pincus Emerging Growth Fund Warburg Pincus Emerging Markets Fund
By:_________________________________ By:__________________________________
Title:_______________________________ Title:________________________________
<PAGE>
<PAGE>
Warburg Pincus Funds
October 30, 1995
Page 5
Warburg Pincus International Equity Fund Warburg Pincus Institutional Fund, Inc.,
on behalf of the International Equity
Portfolio
By:_________________________________ By:__________________________________
Title:_______________________________ Title:________________________________
Warburg Pincus Trust, on behalf of the Warburg Pincus Trust, on behalf of the
International Equity Portfolio Small Company Growth Portfolio
By:_________________________________ By:__________________________________
Title:_______________________________ Title:_______________________________
</TABLE>
<PAGE>
<PAGE>
Warburg Pincus Funds
October 30, 1995
Page 6
FORM OF JOINDER
The undersigned, with intent to be legally bound, hereby joins in and
becomes a party to the attached letter dated October 30, 1995 between PNC Bank,
National Association and certain Warburg Pincus mutual funds and agrees to be
bound by all the terms and conditions thereof. Attached are the executed
agreements and other documents set forth in the letter as required to be
delivered prior to being considered for an advance.
[______________________________]
By:_____________________________
Title:__________________________
Date:___________________________
Agreed to and acknowledged this _____
day of ____________________, 1995:
PNC BANK, NATIONAL ASSOCIATION
By:___________________________________
Title:________________________________
<PAGE>
<PAGE>
DISCRETIONARY LINE OF CREDIT DEMAND NOTE
$100,000,000.00 ________________________, 1995
Philadelphia, PA
FOR VALUE RECEIVED, [_____________________________________] (the
"Borrower", or the "Fund"), with an address at 466 Lexington Avenue, New York,
New York 10017-3147, promises to pay to the order of PNC BANK, NATIONAL
ASSOCIATION (the "Bank"), in lawful money of the United States of America in
immediately available funds at its offices located at 100 South Broad Street,
Philadelphia, Pennsylvania 19110, or at such other location as the Bank may
designate from time to time, the principal sum of up to one hundred million
dollars ($100,000,000.00) (the "Facility") or such lesser amount as may be
advanced to or for the benefit of the Borrower hereunder, together with interest
accruing on the outstanding principal balance from the date hereof, as provided
below; provided, however, the maximum amount the Bank will consider advancing
hereunder shall be subject to the limitations set forth in the Loan Documents,
as hereinafter defined.
1. RATE OF INTEREST. Advances under this Note will bear interest at a
money market rate negotiated with the Bank at the time advances are made.
Interest will be calculated on the basis of a year of 360 days for the actual
number days elapsed. In no event will the rate of interest hereunder exceed the
maximum rate allowed by law.
2. DISCRETIONARY ADVANCES. THIS IS NOT A COMMITTED LINE OF CREDIT AND
ADVANCES UNDER THIS NOTE, IF ANY, SHALL BE MADE BY THE BANK IN ITS SOLE
DISCRETION. NOTHING CONTAINED IN THIS NOTE OR ANY OTHER LOAN DOCUMENTS SHALL BE
CONSTRUED TO OBLIGATE THE BANK TO MAKE ANY ADVANCES. THE BANK SHALL HAVE THE
RIGHT TO REFUSE TO MAKE ANY ADVANCES AT ANY TIME WITHOUT PRIOR NOTICE TO THE
BORROWER.
The Borrower may request advances, repay, and request additional
advances hereunder, subject to the terms and conditions of this Note and the
Loan Documents (as defined herein). In no event shall the aggregate unpaid
principal amount of advances under this Note exceed the limits set forth in the
Loan Documents.
3. PAYMENT TERMS. The outstanding principal balance and any accrued but
unpaid interest shall be due and payable ON DEMAND; provided, however, that Bank
shall provide the Borrower five (5) days prior written notice of demand, except
in the event of (i) commencement of a bankruptcy, insolvency or similar
proceeding by or against any Borrower under the Loan Documents, as hereinafter
defined, (ii) acceleration of any other indebtedness of any Borrower under the
Loan Documents for borrowed money, or (iii) cancellation of any committed line
of credit of any Borrower under the
<PAGE>
<PAGE>
Loan Documents with any financial institution (each, a "Committed Line of
Credit") or a failure of any lender to make an advance to a Borrower under the
Loan Documents under any Committed Line of Credit for any reason, in which event
no such notice is required and Bank may make immediate demand for repayment
hereunder. THE BORROWER ACKNOWLEDGES AND AGREES THAT THE BANK MAY AT ANY TIME
AND IN ITS SOLE DISCRETION DEMAND PAYMENT OF ALL AMOUNTS OUTSTANDING UNDER THIS
NOTE SUBJECT TO THE PRIOR NOTIFICATION PROVISIONS SET FORTH IN THE FIRST
SENTENCE OF THIS PARAGRAPH.
Any payment of principal or interest under this Note must be received by
the Bank by 2:00 p.m. prevailing Eastern Time on a business day in order to be
credited on such date. If any payment under this Note shall become due on a
Saturday, Sunday or public holiday under the laws of the Commonwealth of
Pennsylvania, such payment shall be made on the next succeeding business day and
such extension of time shall be included in computing interest in connection
with such payment. Payments received will be applied to charges, fees and
expenses (including attorneys' fees), accrued interest and principal in any
order the Bank may choose, in its sole discretion.
4. DEFAULT RATE. From and after five (5) days following written notice
of demand, this Note shall bear interest at a rate per annum (based on a year of
360 days and actual days elapsed) which shall be one percentage point (1%) in
excess of the Prime Rate, but not more than the maximum rate allowed by law (the
"Default Rate"). As used herein, "Prime Rate" shall mean the rate publicly
announced by the Bank from time to time as its prime rate. The Prime Rate is not
tied to any external rate or index and does not necessarily reflect the lowest
rate of interest actually charged by the Bank to any particular class or
category of customers. If and when such Prime Rate changes, the rate of interest
on this Note will change automatically without notice to the Borrower effective
the date of any such change.
The Default Rate herein shall continue to apply whether or not judgment
shall be entered on this Note.
5. PREPAYMENT. The indebtedness evidenced by this Note
may be prepaid in whole or in part at any time without penalty.
6. OTHER LOAN DOCUMENTS. This Note is issued in connection with a
confirmation letter dated October 30, 1995 among Borrower, Bank and certain
other Warburg Pincus mutual funds (the "Loan Documents") and is secured by the
property, if any, described therein.
7. ADVANCE PROCEDURES. A request for advance must be received by the
Bank by telephone prior to 12:00 noon, prevailing Eastern Time, for same-day
advances, which telephonic request shall
2
<PAGE>
<PAGE>
be promptly confirmed in writing. The Borrower authorizes the Bank to accept
telephonic requests for advances, and the Bank shall be entitled to rely upon
the authority of any person designated by Borrower in writing to provide such
instructions. The Borrower hereby indemnifies and holds the Bank harmless from
and against any and all damages, losses, liabilities, costs and expenses
(including reasonable attorneys' fees and expenses) which may arise or be
created by the acceptance of such telephone requests reasonably believed to be
genuine or the making such advances. The Bank will enter on its books and
records, which entry when made will be presumed correct, the date and amount of
each advance, as well as the date and amount of each payment made by the
Borrower.
8. RIGHT OF SETOFF. In addition to all liens upon and rights of setoff
against the money, securities or other property of the Borrower given to the
Bank by law, the Bank shall have, with respect to the Borrower's obligations to
the Bank under this Note and to the extent permitted by law, a contractual
possessory security interest in and a right of setoff against, and the Borrower
hereby assigns, conveys, delivers, pledges and transfers to the Bank all of the
Borrower's right, title and interest in and to, all deposits, moneys, securities
and other property of the Borrower now or hereafter in the possession of or on
deposit with the Bank whether held in a general or special account or deposit,
whether held jointly with someone else, or whether held for safekeeping or
otherwise, excluding, however, all IRA, Keogh, and trust accounts. Every such
security interest and right of setoff may be exercised without demand upon or
notice to the Borrower.
9. MISCELLANEOUS. No delay or omission of the Bank to exercise any right or
power arising hereunder shall impair any such right or power or be considered to
be a waiver of any such right or power or any acquiescence therein nor shall the
action or non- action of the Bank impair any right or power resulting therefrom.
The Borrower agrees to pay on demand, to the extent permitted by law, all costs
and expenses incurred by the Bank in the enforcement of its rights in this Note
and any security therefor, including without limitation reasonable fees and
expenses of the Bank's counsel. If any provision of this Note is found to be
invalid by a court, all the other provisions of this Note will remain in full
force and effect.
The Borrower hereby forever waives presentment, demand, protest, notice
of dishonor, non-payment or default and any other notices of any kind.
This Note has been delivered to and accepted by the Bank and will be
deemed to be made in the Commonwealth of Pennsylvania. This Note will be
interpreted and the rights and liabilities of the parties hereto determined in
accordance with the laws of the Commonwealth of Pennsylvania. The Borrower
hereby agrees to the
3
<PAGE>
<PAGE>
jurisdiction of any state or federal court located within the county where the
Bank's office identified above is located, or such other venue as the Bank
chooses, and consents that all service of process be made by certified mail
directed to Borrower at the Borrower's address set forth herein, and service so
made will be deemed to be completed five (5) business days after the same has
been deposited in U.S. mails, postage prepaid; provided that nothing contained
herein will prevent the Bank from bringing any action or exercising any rights
against any security or against the Borrower individually, or against any
property of the Borrower within any other state or nation to enforce any award
or judgment obtained in the venue specified above or such other venue as the
Bank chooses. The Borrower waives any objection to venue and any objection based
on a more convenient forum in any action instituted hereunder.
10. WAIVER OF JURY TRIAL. THE BORROWER WAIVES ANY AND ALL RIGHTS THE
BORROWER MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY
NATURE RELATING TO THIS NOTE, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS
NOTE OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS AND ACKNOWLEDGES
THAT THE FOREGOING WAIVER IS KNOWING AND VOLUNTARY.
THE BORROWER ACKNOWLEDGES THAT IT HAS READ AND UNDERSTOOD ALL THE
PROVISIONS OF THIS NOTE, INCLUDING THE WAIVER OF JURY TRIAL, AND HAS BEEN
ADVISED BY COUNSEL AS NECESSARY OR APPROPRIATE.
WITNESS the due execution and sealing hereof with the intent to be
legally bound hereby.
[CORPORATE SEAL] [____________________________]
Attest:_______________________ By:___________________________
Title:________________________ Title:________________________
4
<PAGE>
<PAGE>
February 9, 1996
Warburg Pincus Funds
466 Lexington Avenue
New York, NY 10017-3147
Attention: Eugene Grace
RE: $50,000,000.00 COMMITTED LINE OF CREDIT
Dear Gene:
We are pleased to inform you that PNC Bank, National Association (the "Bank")
has approved your request for a committed line of credit (the "Line of Credit")
to the registered investment companies or one or more of their respective
investment portfolios or series that are signatories to this letter (and any
additional registered investment company (or series or portfolio thereof) to
which Warburg, Pincus Counsellors, Inc. acts as investment adviser (each, a
"Warburg Pincus Fund") which, with Bank's consent, in its discretion, becomes a
party to this letter by executing a joinder in the form attached) (each, a
"Borrower" and collectively, the "Borrowers"). We look forward to this
opportunity to help you meet the financing needs of your business.
The terms and conditions of the Line of Credit are outlined in the following
sections of this letter. If these terms are satisfactory, please follow the
instructions provided at the end of this letter.
1. Type of Facility; Advances. This is a committed revolving line of credit
under which any Borrower may request and the Bank, subject to the terms and
conditions of this letter, will make advances to such Borrower from time to
time until the Expiration Date; provided, however, that (i) the total
outstanding advances under the Line of Credit at any time may not exceed
$50,000,000, and (ii) the aggregate outstandings to any Borrower under the
Line of Credit, and under the $100,000,000 discretionary line of credit
made available to Borrowers by Bank, may not exceed the lowest of (a)
one-third of the assets of that Borrower, (b) any lower leverage limit
defined by such Borrower's prospectus or statement of additional
information, or (c) the maximum amount permitted to be borrowed by such
Borrower under the Investment Company Act of 1940, as amended (the "1940
Act"). The "Expiration Date" means October 31, 1996, or such later date as
may be designated by the Bank by written notice to the Borrowers. Each
Borrower shall be severally, and not jointly, liable for its particular
advances under the line, and the Bank shall have no recourse against any
Borrower except for the payment or
<PAGE>
<PAGE>
Warburg Pincus Funds
February 9, 1996
Page 2
performance of the obligations of such Borrower and not for the payment or
performance of the obligations of any other Borrower.
In the event that at any time Borrowers request advances under the Line of
Credit in excess of the maximum amount of the Line of Credit, advances will
be allocated among the Borrowers in accordance with the allocation method
adopted by the Boards of Directors or Trustees of the Borrowers. Borrowers
shall provide to Bank a certified copy of all resolutions addressing the
allocation method. It shall be the sole responsibility of the Borrowers to
act in accordance with the directions of their respective Boards of
Directors or Trustees; provided, however, the Bank shall not be obligated
to make any advance hereunder if the Bank believes that the Borrowers are
not following such allocation method.
2. Use of Proceeds. Advances under the Line of Credit may be used to fund
shareholder redemption requests and for other short term temporary or
emergency general business purposes of a Borrower.
3. Interest Rate. Interest on the unpaid balance of the Line of Credit
advances will be charged at a rate per annum as set forth in the Note
described below.
4. Repayment. Subject to the terms and conditions of this letter, the
Borrowers may borrow, repay and reborrow until the Expiration Date, on
which date the outstanding principal balance and any accrued but unpaid
interest shall be due and payable. Interest will be due and payable on the
last day of each month, and will be computed on the basis of a year of 360
days and paid on the actual number of days elapsed.
5. Note. The obligation of each Borrower to repay loans made to it under the
Line of Credit shall be evidenced by a promissory note (collectively, the
"Note") in form and content satisfactory to the Bank.
6. Covenants. Unless compliance is waived in writing by the Bank or until
payment in full and termination of the Line of Credit, the following
covenants shall be applicable to each Borrower:
(a) Each Borrower will deliver to the Bank:
(i) Financial Statements for its fiscal year, within sixty (60) days
after fiscal year end, audited and certified without
qualification by a certified public accountant acceptable to the
Bank.
<PAGE>
<PAGE>
Warburg Pincus Funds
February 9, 1996
Page 3
(ii) Financial Statements for each semi-annual period, within
sixty (60) days after the end of the semi-annual period,
certified as true and correct in all material respects by
its chief financial officer.
(iii) Prospectuses and statements of additional information and
all supplements thereto for the Borrower as soon as
practicable and in any event within fifteen (15) days after
their first use.
(iv) Press releases issued by the Borrower within five (5) days
of issuance, and such other information relating to the
Borrower's affairs as the Bank may reasonably request,
promptly after receipt of each request.
"Financial Statements" means the balance sheet and statements of
income and cash flows prepared in accordance with generally accepted
accounting principles in effect from time to time ("GAAP") applied on
a consistent basis (subject in the case of interim statements to
normal year-end adjustments).
(b) No Borrower will make or permit any change in the nature of its
business as carried on as of the date of this letter or in its
fundamental (i) investment objectives, (ii) policies or (iii)
restrictions, or in its senior management.
(c) No Borrower may incur any other indebtedness or issue any senior
security (as defined in the 1940 Act) or grant any lien or security
interest in any of its assets, except (i) indebtedness to or liens in
favor of the Bank, (ii) in connection with repurchase agreements,
options or other transactions in the ordinary course of Borrower's
business, and (iii) any Borrower may borrow on an unsecured basis
under a discretionary facility with Deutsche Bank provided that there
are no amounts outstanding or borrowed thereunder during any period in
which such Borrower has amounts outstanding under this Line of Credit
or the $100,000,000 discretionary line of credit with the Bank.
(d) Each Borrower will (i) comply in all material respects with all laws
and regulations applicable to Borrower and the operation of its
business, including but not limited to the 1940 Act, and (ii) will
comply (A) with all of the fundamental investment objectives, policies
and restrictions and (B) in all material respects with all other
investment objectives, policies and restrictions, in each case as set
forth in its respective prospectus and statement of additional
information.
(e) No Borrower will liquidate, merge or consolidate with or into any
person, firm, corporation or other entity, or sell, lease, transfer or
otherwise dispose of all or any substantial part of its respective
property or assets, whether now owned or hereafter
<PAGE>
<PAGE>
Warburg Pincus Funds
February 9, 1996
Page 4
acquired, except that any Borrower may merge or consolidate with any
other Borrower or any other Warburg Pincus Fund not advised or
sub-advised by the Bank or any of its affiliates.
7. Representations and Warranties. To induce the Bank to extend the Line of
Credit, and upon the making of any advance to a Borrower, the Borrower,
with respect to itself, represents and warrants as follows:
(a) The Borrower's latest Financial Statements provided to the Bank are
true, complete and accurate in all material respects and fairly
present the financial condition, assets and liabilities, whether
accrued, absolute, contingent or otherwise and the results of the
Borrower's operations for the period specified therein. The Borrower's
Financial Statements have been prepared in accordance with generally
accepted accounting principles consistently applied from period to
period subject in the case of interim statements to normal year-end
adjustments. Since the date of the latest Financial Statements
provided to the Bank, the Borrower has not suffered any damage,
destruction or loss which has materially adversely affected its
business, assets, operations, financial condition or results of
operations.
(b) There are no actions, suits, proceedings or governmental
investigations pending or, to the knowledge of the Borrower,
threatened against the Borrower which could result in a material
adverse change in its business, assets, operations, financial
condition or results of operations and there is no basis known to the
Borrower or its officers, directors, trustees or shareholders for any
such action, suit, proceedings or investigation.
(c) The Borrower has filed all returns and reports that are required to be
filed by it in connection with any federal, state or local tax, duty
or charge levied, assessed or imposed upon the Borrower or its
property, including unemployment, social security and similar taxes,
and all of such taxes have been either paid or adequate reserve or
other provision has been made therefor.
(d) The Borrower is duly organized, validly existing and in good standing
under the laws of the state of its incorporation or organization and
has the power and authority to own and operate its assets and to
conduct its business as now or proposed to be carried on, and is duly
qualified, licensed and in good standing to do business in all
jurisdictions where its ownership of property or the nature of its
business requires such qualification or licensing.
(e) The Borrower has full power and authority to enter into the
transactions provided for in this Letter Agreement and has been duly
authorized to do so by all necessary and
<PAGE>
<PAGE>
Warburg Pincus Funds
February 9, 1996
Page 5
appropriate action, and when executed and delivered by the Borrower,
this Letter Agreement and the other loan documents executed and
delivered pursuant hereto will constitute the legal, valid and binding
obligations of the Borrower enforceable in accordance with their
terms.
(f) There does not exist any default or violation by the Borrower of or
under any of the terms, conditions or obligations of: (i) its
organizational documents; (ii) any indenture, mortgage, deed of trust,
franchise, permit, contract, agreement, or other instrument to which
it is a party or by which it is bound; or (iii) any law, regulation,
ruling, order, injunction, decree, condition or other requirement
applicable to or imposed upon the Borrower by any law or by any
governmental authority, court or agency which individually or in the
aggregate could be reasonably expected to have a material adverse
effect on the Borrower.
(g) Each request for an advance, and the acceptance of the proceeds
thereof, shall be deemed a representation and warranty by the
applicable Borrower (i) that it is in compliance in all material
respects with all applicable laws and regulations, including but not
limited to the 1940 Act, (ii) that both before and after giving effect
to the advance, Borrower is in compliance within all of the
fundamental terms and conditions contained in its prospectus and
statement of additional information and is in compliance in all
material respects with all of the other terms and conditions contained
therein, (iii) that such Borrower is not advised or sub-advised by
either the Bank or any of its affiliates, and (iv) that such Borrower
does not have any amounts outstanding under a discretionary facility
with Deutsche Bank, and will not borrow any amounts thereunder for so
long as any obligations are outstanding under this Line of Credit or
the Borrower's discretionary line of credit with the Bank.
8. FEES. On the date of execution of this Agreement, and continuing on the
first day of each fiscal quarter thereafter until the Expiration Date, the
Borrowers shall pay a non-refundable facility fee to the Bank, in advance,
at the rate of ten basis points (.10%) per annum on the amount of the Line
of Credit. The fee shall be computed on the basis of a year of 360 days and
paid on the actual number of days elapsed. Each Borrower shall be liable
only for, and shall pay, that portion (the "Pro Rata Portion") of the
facility fee as allocated among the Borrowers as determined by the Boards
of Directors or Trustees of Borrowers and communicated to the Bank in
writing. Any such allocation is the sole responsibility of Borrowers and
shall be done in compliance with the 1940 Act. Each Borrower also shall
reimburse the Bank for its Pro Rata Portion of the Bank's expenses
(including the reasonable fees and expenses of the Bank's outside and
in-house counsel) in connection with the review of the legal opinion
required hereunder, and in connection with any amendments, modifications,
renewals or enforcement actions relating to the Line of Credit.
<PAGE>
<PAGE>
Warburg Pincus Funds
February 9, 1996
Page 6
9. ADDITIONAL PROVISIONS. Bank's obligation to make any advance to any
Borrower under the Line of Credit is subject to the condition precedent
that the Borrower execute and deliver to the Bank its respective Note and
other required documents and deliver such other instruments and documents
as the Bank may reasonably request, such as certified resolutions,
incumbency certificates or other evidence of authority, and an opinion of
counsel to the Borrowers in form and substance satisfactory to the Bank
covering such matters as may be requested by Bank, including but not
limited to due authorization and enforceability of this Agreement and the
Note and compliance with the 1940 Act. In addition, the Bank will not be
obligated to make any advance to any Borrower under the Line of Credit if
any Event of Default (as defined in such Borrower's Note) or event which
with the passage of time, provision of notice or both would constitute an
Event of Default under such Borrower's Note shall have occurred and be
continuing.
10. OBLIGATIONS SEVERAL, NOT JOINT. The obligations of each Borrower under its
respective Note shall be several and not joint. Notwithstanding anything to
the contrary contained in this Agreement, the parties hereto acknowledge
and agree that the sole source of payment of the obligations of each
Borrower hereunder, including, without limitation, the principal of and
interest on each loan made hereunder to any Borrower, the facility fee
payable pursuant to Section 8 and any other amounts attributable to the
loans made hereunder to a Borrower shall be the revenues and assets of such
Borrower. The parties agree that certain Borrowers are separate portfolios
of an investment company and as such are not separately existing legal
entities entitled to enter into contractual agreements or to execute
instruments and, for these reasons, the relevant investment company is
executing this Agreement and the other documents, instruments, certificates
and notices on behalf of such Borrowers and that such Borrowers will
utilize the loans thus made on their behalf.
11. LIMITATION ON RECOURSE. Notice is hereby given, and the parties hereby
agree, that this Agreement and the Notes described herein have been
executed by an officer of each Borrower and not individually, and that all
persons dealing with a Borrower must look solely to the assets of such
Borrower as described herein for the enforcement of any claim against such
Borrower and none of the directors, Trustees, officers, agents or
shareholders of any Borrower assume any personal liability for obligations
entered into on behalf of any Borrower.
Prior to execution of the final documents, the Bank may terminate this letter
with respect to a Borrower if a material adverse change occurs with respect to
the Borrower or Warburg, Pincus Counsellors, Inc., or if the Borrower fails to
comply with any of the terms and conditions of this letter, or if the Bank
reasonably determines that any of the conditions cannot be met.
<PAGE>
<PAGE>
Warburg Pincus Funds
February 9, 1996
Page 7
This letter is governed by the laws of Pennsylvania. No modification or waiver
of any of the terms of this letter will be valid and binding unless agreed to in
writing by the Bank. When accepted, this letter and the other documents
described herein will constitute the entire agreement between the Bank and each
Borrower concerning the Line of Credit, and shall replace all prior
understandings, statements, negotiations and written materials relating to the
Line of Credit.
To accept these terms, please sign the enclosed copy of this letter as set forth
below and return it to the Bank by February 29, 1996. If accepted, the final
documents must be executed by February 29, 1996, or this letter may be
terminated at the Bank's option without liability or further obligation of the
Bank.
Very truly yours,
PNC BANK, NATIONAL ASSOCIATION
By:__________________________________
Title:________________________________
/jf
3247c.ltr
ACCEPTANCE
With the intent to be legally bound, the above terms and conditions are hereby
agreed to and accepted this _____ day of ____________________, 1996:
Warburg Pincus New York Intermediate Warburg Pincus Intermediate Maturity
Municipal Fund Government Fund
By:_________________________________ By:_________________________________
Title:_______________________________ Title:______________________________
<PAGE>
<PAGE>
Warburg Pincus Funds
February 9, 1996
Page 8
<TABLE>
<S> <C>
The RBB Fund, Inc., on behalf of The RBB Fund, Inc., on behalf of
Warburg Pincus Growth & Income Fund Warburg Pincus Balanced Fund
By:_________________________________ By:__________________________________
Title:_______________________________ Title:________________________________
The RBB Fund, Inc., on behalf of Warburg Pincus Fixed Income Fund
Warburg Pincus Tax Free Fund
By:_________________________________ By:__________________________________
Title:_______________________________ Title:________________________________
Warburg Pincus Global Fixed Income Warburg Pincus Institutional Fund, Inc.,
Fund on behalf of the Small Company Growth
Portfolio
By:_________________________________ By:__________________________________
Title:_______________________________ Title:________________________________
Warburg Pincus Capital Appreciation Warburg Pincus Japan OTC Fund
Fund
By:_________________________________ By:__________________________________
Title:_______________________________ Title:________________________________
Warburg Pincus Emerging Growth Fund Warburg Pincus Emerging Markets Fund
By:_________________________________ By:__________________________________
Title:_______________________________ Title:________________________________
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Warburg Pincus Funds
February 9, 1996
Page 9
<S> <C>
Warburg Pincus International Equity Fund Warburg Pincus Institutional Fund, Inc.,
on behalf of the International Equity
Portfolio
By:_________________________________ By:__________________________________
Title:______________________________ Title:_______________________________
Warburg Pincus Trust, on behalf of the Warburg Pincus Trust, on behalf of the
International Equity Portfolio Small Company Growth Portfolio
By:_________________________________ By:__________________________________
Title:______________________________
Title:______________________________
Warburg Pincus Post-Venture Capital Fund
By:_________________________________
Title:______________________________
</TABLE>
FORM OF JOINDER
The undersigned, with intent to be legally bound, hereby joins in and
becomes a party to the attached letter dated February 9, 1996 between PNC Bank,
National Association and certain Warburg Pincus mutual funds and agrees to be
bound by all the terms and conditions thereof. Attached are the executed
agreements and other documents set forth in the letter as required to be
delivered prior to being considered for an advance.
[______________________________]
By:_____________________________
Title:__________________________
Date:___________________________
Agreed to and acknowledged this _____
day of ____________________, 199__:
PNC BANK, NATIONAL ASSOCIATION
By:___________________________________
Title:________________________________
<PAGE>
<PAGE>
COMMITTED LINE OF CREDIT NOTE [GRAPHIC OMITTED]
$50,000,000.00 _________________ ___, _____
FOR VALUE RECEIVED, __________________________________________________________
(the "BORROWER"), with an address at 466 Lexington Avenue, New York, New York
10017-3147, promises to pay to the order of PNC BANK, NATIONAL ASSOCIATION (the
"BANK"), in lawful money of the United States of America in immediately
available funds at its offices located at 100 South Broad Street, Philadelphia,
Pennsylvania 19110, or at such other location as the Bank may designate from
time to time, the principal sum of FIFTY MILLION DOLLARS ($50,000,000.00) (the
"FACILITY") or such lesser amount as may be advanced to or for the benefit of
the Borrower hereunder, together with interest accruing on the outstanding
principal balance from the date hereof, as provided below; provided, however,
the maximum amount the Bank will consider advancing hereunder shall be subject
to the limitations set forth in the Loan Documents, as hereinafter defined:
1. RATE OF INTEREST. Each advance outstanding under this Note will bear interest
for the interest period requested, not to exceed thirty (30) days, at a per
annum rate equal to the Bank's fully absorbed cost of funds (as determined by
Bank in its sole discretion) plus fifty-five (55) basis points. Interest will
be calculated on the basis of a year of 360 days for the actual number of days
in each interest period. In no event will the rate of interest hereunder exceed
the maximum rate allowed by law.
2. ADVANCES. The Borrower may borrow, repay and reborrow hereunder until the
Expiration Date, subject to the terms and conditions of this Note and the Loan
Documents (as defined herein). The "EXPIRATION Date" shall mean October 31,
1996, or such later date as may be designated by the Bank by written notice from
the Bank to the Borrower. The Borrower acknowledges and agrees that in no event
will the Bank be under any obligation to extend or renew the Facility or this
Note beyond the initial Expiration Date. In no event shall the aggregate unpaid
principal amount of advances under this Note exceed the face amount of this Note
or the limits set forth in the Loan Documents.
3. ADVANCE PROCEDURES. A request for advance made by telephone must be promptly
confirmed in writing by such method as the Bank may require. The Borrower
authorizes the Bank to accept telephonic requests for advances, and the Bank
shall be entitled to rely upon the authority of any person providing such
instructions. The Borrower hereby indemnifies and holds the Bank harmless from
and against any and all damages, losses, liabilities, costs and expenses
(including reasonable attorneys' fees and expenses) which may arise or be
created by the acceptance of such telephone requests or making such advances.
The Bank will enter on its books and records, which entry when made will be
presumed correct, the date and amount of each advance, as well as the date and
amount of each payment made by the Borrower.
4. PAYMENT TERMS. Accrued interest will be due and payable on the last day of
each month. The outstanding principal balance and any accrued but unpaid
interest shall be due and payable on the last day of each interest period and on
the Expiration Date.
Any payment of principal or interest under this Note must be received by the
Bank by 2:00 p.m. prevailing Eastern time on a business day in order to be
credited on such date. If any payment under this Note shall become due on a
Saturday, Sunday or public holiday under the laws of the State where the Bank's
office indicated above is located,
<PAGE>
<PAGE>
such payment shall be made on the next succeeding business day and such
extension of time shall be included in computing interest in connection with
such payment. The Borrower hereby authorizes the Bank to charge the Borrower's
deposit account at the Bank for any payment when due hereunder. Payments
received will be applied to charges, fees and expenses (including attorneys'
fees), accrued interest and principal in any order the Bank may choose, in its
sole discretion.
5. DEFAULT RATE. Upon maturity, whether by acceleration, demand or otherwise,
and at the option of the Bank upon the occurrence of any Event of Default (as
hereinafter defined) and during the continuance thereof, this Note shall bear
interest at a rate per annum (based on a year of 360 days and actual days
elapsed) which shall be one percentage point (1%) in excess of the Prime Rate,
but not more than the maximum rate allowed by law (the "DEFAULT RATE"). As used
herein, "PRIME RATE" shall mean the rate publicly announced by the Bank from
time to time as its prime rate. The Prime Rate is not tied to any external rate
or index and does not necessarily reflect the lowest rate of interest actually
charged by the Bank to any particular class or category of customers. If and
when the Prime Rate changes, the rate of interest on this Note will change
automatically without notice to the Borrower, effective on the date of any such
change. The Default Rate shall continue to apply whether or not judgment shall
be entered on this Note.
6. PREPAYMENT. The Borrower shall have the right to prepay this Note at any time
and from time to time, in whole or in part, without penalty.
7. OTHER LOAN DOCUMENTS. This Note is issued in connection with a letter
agreement dated February 9, 1996, the terms of which are incorporated herein by
reference (the "LOAN DOCUMENTS"), and is secured by the property described in
the Loan Documents (if any) and by such other collateral as previously may have
been or may in the future be granted to the Bank to secure this Note.
8. EVENTS OF DEFAULT. The occurrence of any of the following events will be
deemed to be an "EVENT OF DEFAULT" under this Note: (i) the nonpayment of any
principal under this Note when due, or the nonpayment of any interest or other
indebtedness under this Note within five (5) days of the date when due; (ii) the
occurrence of any event of default or default and the lapse of any notice or
cure period under any Loan Document or any other debt, liability or obligation
to the Bank of the Borrower in an amount exceeding five percent (5%) of the
Borrower's net assets at such time; (iii) Borrower shall commence a voluntary
case concerning itself under Title 11 of the United States Code entitled
"Bankruptcy", as now or hereafter in effect, or any successor thereto (the
"Bankruptcy Code"); or an involuntary case is commenced against Borrower, and
the petition is not controverted within ten (10) days, or is not dismissed
within sixty (60) days, after commencement of the case; or a custodian (as
defined in the Bankruptcy Code) is appointed for, or takes charge of, all or
substantially all of the property of Borrower, or Borrower commences any other
proceeding under any reorganization, arrangement, adjustment of debt, relief of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to such Borrower, or
there is commenced against Borrower any such proceeding which remains
undismissed for a period of sixty (60) days, or Borrower is adjudicated
insolvent or bankrupt; or any order of relief or other order approving any such
case or proceeding is entered; or Borrower suffers any appointment of any
custodian or the like for it or any substantial part of its property to continue
undischarged or unstayed for a period of sixty (60) days; or Borrower makes a
general assignment for the benefit of creditors; or any action is taken by
Borrower for the purpose of effecting any of the foregoing; or any levy,
garnishment, attachment or similar proceeding is instituted against any property
of the Borrower held by or deposited with the Bank; (iv) a default with respect
to any other indebtedness of the Borrower for borrowed money in an amount
exceeding five percent (5%) of the Borrower's net assets at such time, if the
effect of such default is to cause or permit the acceleration of such debt; (v)
the commencement of any foreclosure proceeding, execution or attachment against
any collateral securing the obligations of the Borrower to the Bank; (vi) the
entry of a final judgment against the Borrower in an amount exceeding five
percent (5%) of the Borrower's net assets at such time and the failure of the
Borrower to discharge the judgment within ten (10) days of the entry thereof;
(vii) any material adverse change in the business, assets, operations, financial
condition or results of operations of the Borrower; (viii) any representation or
warranty made by the Borrower to the Bank in any Loan Document, or any other
documents now or in the future securing the obligations of the Borrower to the
Bank, is false, erroneous or misleading in any material respect; (ix) any change
in control of Borrower or its investment adviser; (x) Borrower changes its
investment adviser from the investment adviser existing on the date hereof, or
such investment adviser ceases to be the primary investment adviser to Borrower;
(xi) Borrower's net assets decline in market value by more than fifty percent
(50%) in any consecutive twelve (12) month period; or (xii) the failure of
2
<PAGE>
<PAGE>
the Borrower to observe or perform any covenant or other agreement with the Bank
contained in any Loan Document, other than as mentioned above in this Section 8,
which failure shall continue unremedied for a period of thirty (30) days after
written notice to the Borrower by the Bank.
Upon the occurrence of an Event of Default: (a) the Bank shall be under no
further obligation to make advances hereunder; (b) if an Event of Default
specified in clause (iii) above shall occur, the outstanding principal balance
and accrued interest hereunder together with any additional amounts payable
hereunder shall be immediately due and payable without demand or notice of any
kind; (c) if any other Event of Default shall occur, the outstanding principal
balance and accrued interest hereunder together with any additional amounts
payable hereunder, at the option of the Bank, may be accelerated without demand
or notice of any kind and thereby become due and payable five (5) days after
notice of such Event of Default to the Borrower; (d) at the option of the Bank,
this Note will bear interest at the Default Rate from the date of the occurrence
of the Event of Default; and (e) the Bank may exercise from time to time any of
the rights and remedies available to the Bank under the Loan Documents or under
applicable law.
9. RIGHT OF SETOFF. In addition to all liens upon and rights of setoff against
the money, securities or other property of the Borrower given to the Bank by
law, the Bank shall have, with respect to the Borrower's obligations to the Bank
under this Note and to the extent permitted by law, a contractual possessory
security interest in and a right of setoff against, and the Borrower hereby
assigns, conveys, delivers, pledges and transfers to the Bank all of the
Borrower's right, title and interest in and to, all deposits, moneys, securities
and other property of the Borrower now or hereafter in the possession of or on
deposit with the Bank whether held in a general or special account or deposit,
whether held jointly with someone else, or whether held for safekeeping or
otherwise, excluding, however, all IRA, Keogh, and trust accounts. Every such
security interest and right of setoff may be exercised upon or after the
occurrence of an Event of Default without demand upon or notice to the Borrower.
10. MISCELLANEOUS. No delay or omission of the Bank to exercise any right or
power arising hereunder shall impair any such right or power or be considered to
be a waiver of any such right or power or any acquiescence therein, nor shall
the action or inaction of the Bank impair any right or power hereunder. The
Borrower agrees to pay on demand, to the extent permitted by law, all costs and
expenses incurred by the Bank in the enforcement of its rights in this Note and
in any security therefor, including without limitation reasonable fees and
expenses of the Bank's counsel. If any provision of this Note is found to be
invalid by a court, all the other provisions of this Note will remain in full
force and effect. The Borrower hereby forever waives presentment, protest,
notice of dishonor and notice of non-payment. The Borrower also waives all
defenses based on suretyship or impairment of collateral. This Note shall bind
the Borrower and the successors and assigns of the Borrower, and the benefits
hereof shall inure to the benefit of Bank and its successors and assigns.
This Note has been delivered to and accepted by the Bank and will be deemed to
be made in the State where the Bank's office indicated above is located. THIS
NOTE WILL BE INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO
DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE WHERE THE BANK'S OFFICE
INDICATED ABOVE IS LOCATED, EXCLUDING ITS CONFLICT OF LAWS RULES. The Borrower
hereby irrevocably consents to the jurisdiction of any state or federal court
for the county or judicial district where the Bank's office indicated above is
located, and consents that all service of process be sent by nationally
recognized overnight courier service directed to the Borrower at Borrower's
address set forth herein, and service so made will be deemed completed on the
business day after deposit with such courier; provided that nothing contained in
this Note will prevent the Bank from bringing any action, enforcing any award or
judgment or exercising any rights against the Borrower individually, against any
security or against any property of the Borrower within any other county, state
or other foreign or domestic jurisdiction. The Borrower waives any objection to
venue and any objection based on a more convenient forum in any action
instituted under this Note.
11. WAIVER OF JURY TRIAL. THE BORROWER IRREVOCABLY WAIVES ANY AND ALL RIGHTS THE
BORROWER MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY
NATURE RELATING TO THIS NOTE, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS
NOTE OR ANY TRANSACTION CONTEMPLATED IN ANY OF SUCH
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<PAGE>
<PAGE>
DOCUMENTS. THE BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVER IS KNOWING AND
VOLUNTARY.
THE BORROWER ACKNOWLEDGES THAT IT HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE WAIVER OF JURY TRIAL, AND HAS BEEN ADVISED BY COUNSEL
AS NECESSARY OR APPROPRIATE.
WITNESS the due execution hereof as a document under seal, as of the date first
written above, with the intent to be legally bound hereby.
[CORPORATE SEAL] _____________________________
(Corporation, Partnership or
other Entity)
Attest:__________________________ By:___________________________
Print Name:______________________ Print Name:___________________
Title:___________________________ Title:________________________
<PAGE>
<PAGE>
CONSENT OF COUNSEL
Warburg, Pincus Post-Venture Capital Fund, Inc.
We hereby consent to being named in the Statement of Additional
Information included in Post-Effective Amendment No. 2 (the "Amendment") to
the Registration Statement on Form N-1A (Securities Act File No. 33-61225;
Investment Company Act File No. 811-07327) of Warburg, Pincus Post-Venture
Capital Fund, Inc. (the "Fund") under the caption "Independent Accountants and
Counsel" and to the Fund filing a copy of this Consent as an exhibit to
the Amendment.
/s/ Willkie Farr & Gallagher
Willkie Farr & Gallagher
New York, New York
March 14, 1996
<PAGE>
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Post-Effective Amendment No. 2 to the
Registration Statement under the Securities Act of 1933 on Form N-1A (File No.
33-61225) of our report dated December 14, 1995 on our audit of the financial
statements and financial highlights of Warburg, Pincus Post-Venture Capital
Fund, Inc. We also consent to the reference to our Firm under the
caption "Financial Highlights" and "Independent Accountants and Counsel."
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
March 14, 1996
<PAGE>
<PAGE>
INDIVIDUAL RETIREMENT ACCOUNT
DISCLOSURE STATEMENT
AND CUSTODIAL AGREEMENT
WARBURG PINCUS FUNDS
<PAGE>
<PAGE>
DISCLOSURE STATEMENT
ESTABLISHING YOUR IRA
This Disclosure Statement contains information about your
Individual Retirement Custodial Account with State Street Bank and Trust
Company as Custodian. Your IRA gives you several tax benefits. Earnings on
the assets held in your IRA are not subject to federal income tax until
withdrawn by you. You may be able to deduct all or part of your IRA
contribution on your federal income tax return. State income tax
treatment of your IRA may differ from federal treatment; ask your state tax
department or your personal tax advisor for details.
All IRAs must meet certain requirements. Contributions generally
must be made in cash. The IRA trustee or custodian must be a bank or other
person who has been approved by the Secretary of the Treasury. Your
contributions may not be invested in life insurance or be commingled with
other property except in a common trust or investment fund. Your
interest in the account must be nonforfeitable at all times. You may
obtain further information on IRAs from any district office of the Internal
Revenue Service.
You may revoke a newly established IRA at any time within seven
days after the date on which you receive this Disclosure Statement.
An IRA established more than seven days after the date of your receipt
of this Disclosure Statement may not be revoked.
To revoke your IRA, mail or deliver a written notice of revocation
to the Custodian at the address which appears at the end of this
Disclosure Statement. Questions pertaining to the revocation of your IRA should
be directed to our IRA department by calling toll-free 800-888-6878. Mailed
notice will be deemed given on the date that it is postmarked (or, if sent
by certified or registered mail, on the date of certification or
registration). If you revoke your IRA within the seven-day period, you are
entitled to a return of the entire amount you contributed into your IRA,
without adjustment for such items as sales charges, administrative expenses or
fluctuations in market value.
FEES AND EXPENSES
CUSTODIAN'S FEES
The following fee will be imposed by the Custodian for maintaining your
IRA.
Annual Custodial Fee Per IRA $10
The following are additional fees that may be imposed by the Custodian
for maintaining your IRA.
One-Time Fee for Lump-Sum
Withdrawal $10
Fee for Periodic Withdrawal
(Per Withdrawal) $2
GENERAL FEE POLICIES
- Fees may be paid by you directly or the Custodian may deduct
them from your IRA.
- Annual $10 Custodial Fee will be waived if your Warburg
Pincus IRA, with State Street Bank and Trust Company as the
Custodian, has a balance of $10,000 or more at the end of the
year.
- Fees (including the Custodial Fee waiver) may be changed upon 30
days written notice to you.
1
<PAGE>
<PAGE>
- The full annual Custodial Fee will be charged for any
calendar year during which you have an IRA with us. This fee is
not prorated for periods of less than one full year. The fee
must be received by December 31 of each year or it will be
automatically deducted from your account.
- Termination fees are charged when your account is closed
whether the funds are distributed to you or transferred to a
successor custodian or trustee.
- The Custodian may charge you for its reasonable expenses for
services not covered by its fee schedule.
OTHER CHARGES
- There may be sales or other charges associated with the
purchase or redemption of shares of a Fund in which your IRA is
invested. Be sure to read carefully the current prospectus
of any Fund you are considering as an investment for your
IRA for a description of applicable charges.
ELIGIBILITY
WHAT ARE THE ELIGIBILITY REQUIREMENTS FOR AN IRA?
You are eligible to establish and contribute to an IRA for a year if:
- You received compensation (or earned income if you are
self-employed) during the year for personal services you
rendered. If you received taxable alimony, this is treated like
compensation for IRA purposes.
- You did not reach age 70-1/2 during the year.
CAN I CONTRIBUTE TO AN IRA FOR MY SPOUSE?
For each year before the year when your spouse attains age 701/2, you
can contribute to a separate IRA for your spouse, regardless of whether
your spouse had any compensation or earned income in that year. This is
called a "spousal IRA." To make a contribution to a spousal IRA for your
spouse, you must file a joint tax return and your spouse must either have no
compensation or earned income, or must elect to be treated as having no
compensation or earned income for that year. For a spousal IRA, your spouse
must set up a different IRA, separate from yours, to which you contribute.
CONTRIBUTIONS
WHEN CAN I MAKE CONTRIBUTIONS TO AN IRA?
You may make a contribution to your existing IRA or establish a new
IRA for a taxable year by the due date (not including any extensions) for
your federal income tax return for the year. Usually this is April 15
of the following year.
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HOW MUCH CAN I CONTRIBUTE TO MY IRA?
For each year when you are eligible (see above), you can contribute
up to the lesser of $2,000 or 100% of your compensation (or earned income, if
you are self-employed). However, under the tax laws, all or a portion of
your contribution may not be deductible.
If you and your spouse have spousal IRAs, you may contribute each year up to
a maximum of $2,250 from your compensation (or earned income) to both
spousal IRAs. You may divide the contribution between the spousal IRAs as
you wish, as long as you do not contribute more than $2,000 to either of the
spousal IRAs.
HOW DO I KNOW IF MY CONTRIBUTION IS TAX-DEDUCTIBLE?
The deductibility of your contribution depends upon whether you are (or
your spouse is) an active participant in any employer-sponsored retirement
plan. If neither you nor your spouse is an active participant, the
entire IRA contribution is deductible.
If either you or your spouse is an active participant, your IRA
contribution may still be completely or partly deductible on your tax
return. This depends on the amount of your income.
HOW DO I DETERMINE MY OR MY SPOUSE'S "ACTIVE PARTICIPANT" STATUS?
Your IRS Form W-2 (or your spouse's W-2) should indicate if you were an
active participant in an employer-sponsored retirement plan for a year. If you
have a question, you should ask your employer or the plan administrator.
In one situation, your spouse's "active participant" status will not
affect the deductibility of your contributions to your IRA. This rule applies
only if you and your spouse file separate tax returns for the taxable year
and you lived apart at all times during the taxable year.
WHAT ARE THE DEDUCTION RESTRICTIONS?
The portion of your contribution that is deductible depends upon your
filing status and the amount of your modified adjusted gross income ("AGI").
The following chart shows the deduction rules.
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<TABLE>
<CAPTION>
IF YOUR MODIFIED IF YOU ARE COVERED BY A RETIREMENT PLAN AT WORK
AGI(1) IS: AND YOUR FILING STATUS IS:
<S> <C> <C> <C> <C>
- Single - Married filing - Married filing
- Head of jointly (even if separately(2)
household your spouse is not
covered by a plan
at work)
- Qualifying
widow(er)
AT BUT LESS
LEAST THAN YOU CAN TAKE YOU CAN TAKE YOU CAN TAKE
$-0- $10,000 Full deduction Full deduction Partial deduction
$10,000 $25,000 Full deduction Full deduction No deduction
$25,000 $35,000 Partial deduction Full deduction No deduction
$35,000 $40,000 No deduction Full deduction No deduction
$40,000 $50,000 No deduction Partial deduction No deduction
$50,000 or over No deduction No deduction No deduction
</TABLE>
4
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<PAGE>
<TABLE>
<CAPTION>
If Your Modified If You Are Not Covered by a Retirement Plan at Work
AGI(1) Is: And Your Filing Status Is:
<S> <C> <C> <C> <C> <C>
- Married filing - Single - Married filing - Married filing
jointly (and - Head of jointly or separately (even if
your spouse is household separately (and your spouse is
covered by a plan your spouse is not covered by a plan
at work) covered by a plan at work)(3)
at work)
- Qualifying widow(er)
AT BUT LESS
LEAST THAN YOU CAN TAKE YOU CAN TAKE YOU CAN TAKE
$-0- $10,000 Full deduction
$10,000 $25,000 Full deduction
$25,000 $35,000 Full deduction Full deduction Full deduction Full deduction
$35,000 $40,000 Full deduction
$40,000 $50,000 Partial deduction
$50,000 or over No deduction
</TABLE>
_________________
(1) Modified AGI (adjusted gross income) is: (1) for IRS Form 1040A-the amount
on line 14 increased by any excluded Series EE bond interest shown on IRS
Form 8815, Exclusion of interest from Series EE U.S. Savings Bonds issued after
1989, or (2) for IRS Form 1040-the amount on line 31, figured without
taking into account any IRA deduction or any foreign earned income
exclusion and foreign housing exclusion (deduction), or any Series EE bond
interest exclusion from IRS Form 8815.
(2) If you did not live with your spouse at any time during the year, your
filing status is considered, for this purpose, as Single (therefore your IRA
deduction is determined under the "Single" column).
(3) You are entitled to the full deduction only if you did not live with your
spouse at any time during the year. If you did live with your spouse during
the year, you are, for this purpose, treated as though you are covered
by a retirement plan at work (therefore, your IRA deduction is
determined under the "Married Filing Separately" column in the "If You Are
Covered by a Retirement Plan..." section of the chart).
5
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HOW DO I CALCULATE MY DEDUCTION IF I FALL IN THE "PARTIAL DEDUCTION"
RANGE?
If your modified AGI falls in the partial deduction range, you
must calculate the portion of your contribution that is deductible. To do
this, multiply your contribution by a fraction. The numerator is the amount
by which your modified AGI exceeds the lower limit of the partial
deduction range ($25,000 if single, or $40,000 if married filing jointly).
The denominator is $10,000. Subtract this from your contribution and then
round up to the nearest $10. The deductible amount is the greater of the
amount calculated or $200 (provided you contributed at least $200). If your
contribution was less than $200, then the entire contribution is deductible.
For example, assume that you make a $2,000 contribution to your IRA
in a year in which you are an active participant in your employer's
retirement plan. Also assume that your modified AGI for the year is $47,555
and you are married, filing jointly. You would calculate the deductible
portion of your contribution this way:
1) The amount by which your modified AGI exceeds the lower limit of
the partial deduction range:
($47,555 - $40,000) = $7,555
2) Divide this by $10,000:
$7,555
-------
$10,000 = 0.7555
3) Multiply this by your contribution:
0.7555 x $2,000 = $1,511
4) Subtract this from your contribution:
($2,000 - $1,511) = $489
5) Round this up to the nearest $10: = $490
6) Your deductible contribution is the greater
of this amount or $200.
Even though part or all of your contribution is not deductible, you
may still contribute to your IRA up to the limit on contributions ($2,000, or
$2,250 for spousal IRAs). When you file your tax return for the year,
you must designate the amount of nondeductible IRA contributions for the
year. See IRS Form 8606.
HOW DO I DETERMINE MY MODIFIED AGI?
Modified AGI is your gross income minus those deductions that
are available to all taxpayers even if they don't itemize. Instructions to
calculate your modified AGI are provided with your IRS Form 1040 or 1040A.
6
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WHAT HAPPENS IF I CONTRIBUTE MORE THAN ALLOWED TO MY IRA?
The maximum contribution you can make to an IRA is $2,000 ($2,250
for spousal IRAs) or 100% of compensation or earned income, whichever is
less. Any amount contributed to the IRA above the maximum is considered
an "excess contribution." The excess is calculated using your contribution
limit, not the deductible limit. An excess contribution is subject to excise
tax of 6% for each year it remains in the IRA.
HOW CAN I CORRECT AN EXCESS CONTRIBUTION?
Excess contributions may be corrected without paying a 6% penalty.
To do so, you must withdraw the excess and any earnings on the excess before
the due date (including extensions) for filing your federal income tax
return for the year for which you made the excess contribution. A deduction
should not be taken for any excess contribution. Earnings on the amount
withdrawn must also be withdrawn. The earnings must be included in your
income for the tax year for which the contribution was made and may be subject
to a 10% premature withdrawal tax if you have not reached age 59-1/2.
WHAT HAPPENS IF I DON'T CORRECT THE EXCESS CONTRIBUTION BY THE TAX RETURN
DUE DATE?
Any excess contribution withdrawn after the tax return due
date (including any extensions) for the year for which the contribution was
made will be subject to the 6% excise tax. There will be an additional 6%
excise tax for each year the excess remains in your account.
Under limited circumstances, you may correct an excess
contribution after tax filing time by withdrawing the excess contribution
(leaving the earnings in the account). This withdrawal will not be
includible in income nor will it be subject to any premature withdrawal penalty
if (1) your contributions to all IRAs do not exceed $2,250 and (2) you did not
take a deduction for the excess contribution (or you file an amended return,
Form 1040X, which removes the excess contribution).
HOW ARE EXCESS CONTRIBUTIONS TREATED IF NONE OF THE PRECEDING RULES APPLY?
Unless an excess contribution qualifies for the special treatment
outlined above, the excess contribution and any earnings on it withdrawn
after tax filing time will be includible in taxable income and may be subject
to a 10% premature withdrawal penalty. No deduction will be allowed for the
excess contribution for the year in which it is made.
Excess contributions may be corrected in a subsequent year to the
extent that you contribute less than your maximum amount. As the prior excess
contribution is reduced or eliminated, the 6% excise tax will become
correspondingly reduced or eliminated for subsequent tax years. Also, you
may be able to take an income tax deduction for the amount of excess that was
reduced or eliminated, depending on whether you would be able to take a
deduction if you had instead contributed the same amount.
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TRANSFERS/ROLLOVERS
CAN I TRANSFER OR ROLL OVER A DISTRIBUTION I RECEIVE FROM MY EMPLOYER'S
RETIREMENT PLAN INTO AN IRA?
Almost all distributions from employer plans or 403(b)
arrangements (for employees of tax-exempt employers) are eligible for rollover
to an IRA. The main exceptions are:
- payments over the lifetime or life expectancy of the participant
(or participant and a designated beneficiary);
- installment payments for a period of 10 years or more;
- required distributions starting at age 70-1/2; and
- payments of employee after-tax contributions.
If you are eligible to receive a distribution from a
tax-qualified retirement plan as a result of, for example, termination of
employment, plan discontinuance, or retirement, all or part of the
distribution may be transferred directly into your IRA. This is a called a
"direct rollover." Or, you may receive the distribution and make a regular
rollover to your IRA within 60 days. By making a direct rollover or a regular
rollover, you can defer income taxes on the amount rolled over until you
subsequently make withdrawals from your IRA.
The maximum amount you may roll over is the amount of
employer contributions and earnings distributed. You may not roll over any
after-tax employee contributions you made to the employer retirement plan. If
you are over age 70-1/2 and are required to take minimum distributions under the
tax laws, you may not roll over any amount required to be distributed to you
under the minimum distribution rules. Also, if you are receiving periodic
payments over your or your and your designated beneficiary's life
expectancy or for a period of at least 10 years, you may not roll over these
payments. A regular rollover to an IRA must be completed within 60 days after
the distribution from the employer retirement plan to be valid.
NOTE: A QUALIFIED PLAN ADMINISTRATOR OR 403(B) SPONSOR MUST WITHHOLD 20% OF
YOUR DISTRIBUTION FOR FEDERAL INCOME TAXES UNLESS YOU ELECT A DIRECT
ROLLOVER. YOUR PLAN OR 403(B) SPONSOR IS REQUIRED TO PROVIDE YOU WITH
INFORMATION ABOUT DIRECT AND REGULAR ROLLOVERS AND WITHHOLDING TAXES BEFORE
YOU RECEIVE YOUR DISTRIBUTION AND MUST COMPLY WITH YOUR DIRECTIONS TO MAKE A
DIRECT ROLLOVER.
The rules governing rollovers are complicated. Be sure to consult
your tax advisor or the IRS if you have a question about rollovers.
ONCE I HAVE ROLLED OVER A PLAN DISTRIBUTION INTO AN IRA, CAN I SUBSEQUENTLY
ROLL OVER INTO ANOTHER EMPLOYER'S QUALIFIED RETIREMENT PLAN?
Yes. Part or all of an eligible distribution received from a
qualified plan may be transferred to another qualified plan through the medium
of an IRA. However, the IRA must have no assets other than those which
were previously distributed to you from the qualified plan. Specifically, the
IRA cannot contain any regular IRA contributions. Also, the new qualified
plan must accept rollovers.
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HOW OFTEN CAN I MAKE A REGULAR ROLLOVER FROM MY IRA TO ANOTHER IRA?
You may make a regular rollover from one IRA to another only once
in any 365-day period. This rule applies to each individual IRA.
WHAT HAPPENS IF I COMBINE ROLLOVER CONTRIBUTIONS WITH MY REGULAR CONTRIBUTIONS
IN ONE IRA?
If you wish to make both a regular annual contribution and a
rollover contribution, you may wish to open two separate IRAs by completing
two adoption agreements and two sets of forms. You should consult a tax advisor
before making your regular contribution to the IRA you established with
rollover contributions (or make a rollover contribution to the IRA to which
you make your regular contributions). This is because combining your regular
annual contributions and rollover contributions originating from an employer
plan distribution would prohibit the future rollover of the assets of the
IRA into another qualified plan. If despite this, you still wish to combine a
rollover contribution and the IRA holding your regular contributions, you
should establish the account as an Accumulation IRA on the Adoption Agreement
and make the contributions to that account.
HOW DO ROLLOVERS AFFECT MY CONTRIBUTION OR DEDUCTION LIMITS?
Rollover contributions, if properly made, do not count toward
the maximum contribution. Also, rollovers are not deductible and they do not
affect your deduction limits as described above.
INVESTMENTS
HOW ARE MY IRA CONTRIBUTIONS INVESTED?
You control the investment and reinvestment of contributions to
your IRA. Investments must be in one or more of the Fund(s) available from
time to time as listed in the Adoption Agreement for your IRA or in an
investment selection form included with your IRA Adoption Agreement. You
direct the investment of your IRA by giving your investment instructions to
the Distributor or Service Company for the Fund(s). Since you control the
investment of your IRA, you are responsible for any losses; neither the
Custodian, the Distributor nor the Service Company has any responsibility
for any loss or diminution in value occasioned by your exercise of investment
control. Transactions for your IRA will generally be effected at the
applicable public offering price or net asset value for shares of the
Fund(s) involved next established after the Distributor or the Service
Company (whichever may apply) receives proper investment instructions from
you; consult the current prospectus for the Fund(s) involved for additional
information.
Before making any investment, read carefully the current prospectus
for any Fund you are considering as an investment for your IRA. The prospectus
will contain information about the Fund's investment objectives and policies,
as well as any minimum initial investment or minimum balance requirements and
any sales, redemption or other charges.
Because you control the selection of investments for your IRA,
the growth in value of your IRA cannot be guaranteed or projected.
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ARE THERE ANY RESTRICTIONS ON THE USE OF MY IRA ASSETS?
The tax-exempt status of your IRA will be revoked if you engage in
any of the prohibited transactions listed in Section 4975 of the tax code. The
fair market value of your IRA will be includible in your taxable income in
the year in which such prohibited transaction takes place. The fair market
value of your IRA may also be subject to a 10% penalty tax as a premature
withdrawal if you have not yet reached the age of 59-1/2.
Any investment in a collectible (for example, rare stamps) by your
IRA is treated as a taxable withdrawal; the only exception involves certain
types of government-sponsored coins.
WHAT IS A PROHIBITED TRANSACTION?
Generally, a prohibited transaction is any improper use of the
assets in your IRA. Some examples of prohibited transactions are:
- Direct or indirect sale or exchange of property between you and
your IRA.
- Transfer of any property from your IRA to yourself or from
yourself to your IRA.
Your IRA could lose its tax-exempt status if you use all or part
of your interest in your IRA as security for a loan or borrow any money from
your IRA. Any portion of your IRA used as security for a loan will be
taxed as ordinary income in the year in which the money is borrowed. If you are
under age 59-1/2, this amount will also be subject to a 10% penalty tax as
a premature distribution.
WITHDRAWALS
WHEN CAN I MAKE WITHDRAWALS FROM MY IRA?
You may withdraw from your IRA at any time. However, withdrawals
before age 59-1/2 may be subject to a 10% penalty tax in addition to regular
income taxes (see below).
WHEN MUST I START MAKING WITHDRAWALS?
If you have not withdrawn your entire IRA by the April 1 following
the year in which you reach age 70-1/2, you must make minimum withdrawals in
order to avoid penalty taxes. The minimum withdrawal amount is determined by
dividing the balance in your IRA (or IRAs) by your life expectancy or the
combined life expectancy of you and your designated beneficiary. The minimum
withdrawal rules are complex. Consult your tax advisor for assistance.
The penalty tax is 50% of the difference between the minimum
withdrawal amount and your actual withdrawals during a year. The IRS may
waive or reduce the penalty tax if you can show that your failure to make the
required minimum withdrawals was due to reasonable cause and you are taking
reasonable steps to remedy the problem.
HOW ARE WITHDRAWALS FROM MY IRA TAXED?
Amounts withdrawn by you are includible in your gross income in
the taxable year that you receive them, and are taxable as ordinary income.
Lump-sum withdrawals from an IRA are not eligible for averaging treatment
available to certain lump-sum distributions from qualified employer retirement
plans.
10
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Since the purpose of the IRA is to accumulate funds for retirement,
your receipt or use of any portion of your IRA before you attain age
59-1/2 generally will be considered as an early withdrawal and subject to a 10%
penalty tax.
The 10% penalty tax for early withdrawal will not apply if the
distribution:
- was a result of your death or disability; or
- is one of a scheduled series of substantially equal
periodic payments for your life or life expectancy (or
the joint lives or life expectancies of you and your
beneficiary).
If there is an adjustment to the scheduled series of payments, the
10% penalty tax will apply. For example, if you begin receiving payments at
age 50 under a withdrawal program providing for substantially equal payments
over your life expectancy, and at age 58 you elect to receive the remaining
amount in your IRA in a lump sum, the 10% penalty tax will apply to the
lump sum and to the amounts previously paid to you before age 59-1/2.
HOW ARE NONDEDUCTIBLE CONTRIBUTIONS TAXED WHEN THEY ARE WITHDRAWN?
A withdrawal of nondeductible contributions (not including earnings)
will be tax-free. However, if you made both deductible and nondeductible IRA
contributions, then each distribution will be treated as partly a return of
your nondeductible contributions (not taxable) and partly a distribution
of deductible contributions and earnings (taxable). The nontaxable amount is
the portion of the amount withdrawn that bears the same ratio as your
total nondeductible IRA contributions bear to the total balance of all
your IRAs (including rollover IRAs and SEPs).
For example, assume that you made the following IRA contributions:
Year Deductible Nondeductible
1988 $2,000
1989 $2,000
1990 $1,000 $1,000
1991 $1,000
------ ------
$5,000 $2,000
------ ------
------ ------
In addition, assume that your IRA has total investment earnings
through 1992 of $1,000. During 1992 you withdraw $500. Your total account
balance as of 12/31/92 is $7,500 as shown below.
Deductible Contributions $5,000
Nondeductible Contributions $2,000
Earnings on IRAs $1,000
Less 1992 Withdrawal ($ 500)
--------
Total Account Balance
as of 12/31/92 $7,500
--------
--------
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To determine the nontaxable portion of your 1992 withdrawal, the
total 1992 withdrawal ($500) must be multiplied by a fraction. The numerator
of the fraction is the total of all nondeductible contributions remaining
in the account before the 1992 withdrawal ($2,000). The denominator is
the total account balance as of 12/31/92 ($7,500) plus the 1992 withdrawal
($500) or $8,000. The calculation is:
Total Remaining
Nondeductible
Contributions $2,000
x $500 = $125
------------------------- --------
Total Account Balance $8,000
Plus Withdrawal
Thus, $125 of the $500 withdrawal in 1992 will not be included in
your taxable income. The remaining $375 will be taxable for 1992. In
addition, for future calculations the remaining nondeductible contribution
total will be $2,000 minus $125, or $1,875.
A loss in your IRA investment may be deductible. You should
consult your tax advisor for further details on the appropriate calculation
for this deduction if applicable.
TAX MATTERS
WHAT IRA REPORTS DOES THE CUSTODIAN ISSUE?
The Custodian will report all withdrawals to the IRS and the
recipient on the appropriate form. For reporting purposes, a direct transfer
of assets to a successor custodian or trustee is not considered a withdrawal.
The Custodian will report to the IRS the year-end value of your
account and the amount of any rollover or accumulation contribution made
during a calendar year, as well as the tax year for which a contribution is
made. Unless the Custodian receives an indication from you to the contrary, it
will treat any amount as a contribution for the tax year in which it is
received. It is most important that a contribution between January and April
15 for the prior year be clearly designated as such.
WHAT TAX INFORMATION MUST I REPORT TO THE IRS?
You must file IRS Form 5329 with the IRS for each taxable year
for which you made an excess contribution, or you take a premature
withdrawal, or you withdraw less than the required minimum amount from your
IRA.
You must also report each nondeductible contribution to the IRS
by designating it a nondeductible contribution on your tax return. Use IRS
Form 8606. In addition, for any year in which you make a nondeductible
contribution or take a withdrawal, you must include additional
information on your tax return. The information required includes: (1) the
amount of your nondeductible contributions for that year; (2) the amount of
withdrawals from IRAs in that year; (3) the amount by which your total
nondeductible contributions for all the years exceed the total amount of your
distributions previously excluded from gross income; and (4) the total value
of all your IRAs as of the end of the year. If you fail to report any of this
information, the IRS will assume that all your contributions were deductible.
This will result in the taxation of the portion of your withdrawals that
should be treated as a nontaxable return of your nondeductible contributions.
ARE IRA WITHDRAWALS SUBJECT TO WITHHOLDING?
Federal income tax will be withheld at a flat rate of 10% from
any withdrawal from your IRA, unless you elect not to have tax withheld.
Withdrawals from an IRA are not subject to the mandatory 20% income tax
withholding that applies to most distributions from qualified plans or
403(b) accounts that are not directly rolled over to another plan or IRA.
ARE THE EARNINGS ON MY IRA FUNDS TAXED?
Any earnings on investments held in your IRA are generally exempt
from federal income taxes and will not be taxed until withdrawn by you,
unless the tax-exempt status of your IRA is revoked.
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ACCOUNT TERMINATION
You may terminate your IRA at any time after its establishment by
sending a complete IRA Distribution Form, or a transfer authorization form, to:
Warburg Pincus Funds
c/o State Street Bank
And Trust Company
P.O. Box 9030
Boston, MA 02205-9030
Your IRA with State Street Bank and Trust Company will terminate upon
the first to occur of the following:
- The date your properly executed IRA Distribution Form (as
described above) is received and accepted by the Custodian or,
if later, the termination date specified in the withdrawal form.
- The date the IRA ceases to qualify under the tax code. This will
be deemed a termination.
- The transfer of the IRA to another custodian/trustee.
- The rollover of the amounts in the IRA to another
custodian/trustee.
- The written notice of revocation to the Custodian within seven
days of receipt of this Disclosure Statement.
Any outstanding fees must be received prior to such a termination
of your account. Otherwise such fees may be deducted from the proceeds of
your IRA.
The amount you receive from your IRA will be treated as a withdrawal,
and thus the rules relating to IRA withdrawals will apply. For example, if the
IRA is terminated before you reach age 59-1/2, the 10% early withdrawal penalty
may apply on the amount you receive.
IRA DOCUMENTS
The terms contained in Articles I to VII of the State Street Bank
and Trust Company Individual Retirement Custodial Account document have
been promulgated by the IRS in Form 5305-A for use in establishing an
individual retirement custodial account that meets the requirements of the
tax laws for a valid IRA. This IRS approval relates only to the form of
Articles I to VIII and is not an approval of the merits of the IRA or of any
investment permitted by the IRA.
Warburg Pincus Funds
c/o State Street Bank
And Trust Company
P.O. Box 9030
Boston, MA 02205-9030
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<PAGE>
STATE STREET BANK
AND TRUST COMPANY
INDIVIDUAL RETIREMENT
CUSTODIAL ACCOUNT
THE FOLLOWING PROVISIONS OF ARTICLES I TO VII ARE IN THE
FORM PROMULGATED BY THE IRS IN FORM 5305-A FOR USE IN ESTABLISHING AN
INDIVIDUAL RETIREMENT CUSTODIAL ACCOUNT.
ARTICLE I
The Custodian may accept additional cash contributions on behalf of
the Depositor for a tax year of the Depositor. The total cash contributions
are limited to $2,000 for the tax year unless the contribution is a
rollover contribution described in Section 402(c) (but only after December
31, 1992), 403(a)(4), 403(b)(8), 408(d)(3), or an employer contribution to
a simplified employee pension plan as described in Section 408(k). Rollover
contributions before January 1, 1993, include rollovers described in
Section 402(a)(5), 402(a)(6), 402(a)(7), 403(a)(4), 403(b)(8) or
408(d)(3) of the Code or an employer contribution to a simplified
employee pension plan as described in Section 408(k).
ARTICLE II
The Depositor's interest in the balance in the custodial account is
nonforfeitable.
ARTICLE III
1) No part of the custodial funds may be invested in life insurance
contracts, nor may the assets of the custodial account be commingled with
other property except in a common trust fund or common investment fund
(within the meaning of Section 408(a)(5) of the Code).
2) No part of the custodial funds may be invested in collectibles
(within the meaning of Section 408(m)) except as otherwise
permitted by Section 408(m)(3), which provides an exception for
certain gold and silver coins and coins issued under the laws of any state.
ARTICLE IV
1) Notwithstanding any provisions of this Agreement to the contrary, the
distribution of the Depositor's interest in the custodial account shall be
made in accordance with the following requirements and shall otherwise
comply with Section 408(a)(6) and Proposed Regulations section 1.408-8,
including the incidental death benefit provisions of Proposed
Regulations Section 1.401(a)(9)-2, the provisions of which are
incorporated by reference.
2) Unless otherwise elected by the time distributions are required to
begin to the Depositor under paragraph 3, or to the surviving spouse under
paragraph 4, other than in the case of a life annuity, life expectancies
shall be recalculated annually. Such election shall be irrevocable as
to the Depositor and the surviving spouse and shall apply to all
subsequent years. The life expectancy of a nonspouse beneficiary may not
be recalculated.
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3) The Depositor's entire interest in the custodial account must be, or begin
to be, distributed by the Depositor's required beginning date, the April 1
following the calendar year end in which the Depositor reaches age 70-1/2.
By that date, the Depositor may elect, in a manner acceptable to the
Custodian, to have the balance in the custodial account distributed in:
(a) A single-sum payment.
(b) An annuity contract that provides equal or substantially equal
monthly, quarterly or annual payments over the life of the
Depositor.
(c) An annuity contract that provides equal or substantially equal
monthly, quarterly or annual payments over the joint and last
survivor lives of the Depositor and his or her designated
beneficiary.
(d) Equal or substantially equal annual payments over a specified
period that may not be longer than the Depositor's life expectancy.
(e) Equal or substantially equal annual payments over a specified
period that may not be longer than the joint life and last
survivor expectancy of the Depositor and his or her designated
beneficiary.
4) If the Depositor dies before his or her entire interest is distributed to
him or her, the entire remaining interest will be distributed as follows:
(a) If the Depositor dies on or after distribution of his or her
interest has begun, distribution must continue to be made in
accordance with paragraph 3.
(b) If the Depositor dies before distribution of his or her interest
has begun, the entire remaining interest will, at the election of
the Depositor or, if the Depositor has not so elected, at the
election of the beneficiary or beneficiaries, either:
(i) be distributed by the December 31 of the year containing
the fifth anniversary of the Depositor's death; or
(ii) be distributed in equal or substantially equal payments
over the life or life expectancy of the designated
beneficiary or beneficiaries starting by December 31 of
the year following the year of the Depositor's death. If,
however, the beneficiary is the Depositor's surviving
spouse, then this distribution is not required to begin
before December 31 of the year in which the Depositor
would have turned age 70-1/2.
(c) Except where distribution in the form of an annuity meeting
the requirements of Section 408(b)(3) and its related regulations
has irrevocably commenced, distributions are treated as having
begun on the Depositor's required beginning date, even though
payments may actually have been made before that date.
(d) If the Depositor dies before his or her entire interest has been
distributed and if the beneficiary is other than the surviving
spouse, no additional cash contributions or rollover contributions
may be accepted in the account.
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5) In the case of distribution over life expectancy in equal or
substantially equal annual payments, to determine the minimum annual payment
for each year, divide the Depositor's entire interest in the custodial
account as of the close of business on December 31 of the preceding
year by the life expectancy of the Depositor (or the joint life and last
survivor expectancy of the Depositor and the Depositor's designated
beneficiary, or the life expectancy of the designated beneficiary, whichever
applies). In the case of distributions under paragraph 3, determine the
initial life expectancy (or joint life and last survivor expectancy) using
the attained ages of the Depositor and designated beneficiary as of their
birthdays in the year the Depositor reaches age 70 1/2. In the case of a
distribution in accordance with paragraph 4(b)(ii), determine life
expectancy using the attained age of the designated beneficiary as of the
beneficiary's birthday in the year distributions are required to commence.
6) The owner of two or more individual retirement accounts may use the
"alternative method" described in Notice 88-38, 1988-1 C.B. 524, to
satisfy the minimum distribution requirements described above. This method
permits an individual to satisfy these requirements by taking from one
individual retirement account the amount required to satisfy the
requirement for another.
ARTICLE V
1) The Depositor agrees to provide the Custodian with information necessary for
the Custodian with information necessary for the Custodian to prepare any
reports required under Section 408(i) and Regulations Sections 1.408-5 and
1.408-6.
2) The Custodian agrees to submit reports to the Internal Revenue Service and
the Depositor as prescribed by the Internal Revenue Service.
ARTICLE VI
Notwithstanding any other articles that may be added or incorporated, the
provisions of Articles through and this sentence will be controlling. Any
additional articles that are not consistent with Section 408(a) and the related
regulations will be invalid.
ARTICLE VII
This Agreement will be amended from time to time to comply with the provisions
of the Code and related regulations. Other amendments may be made with the
consent of the persons whose signatures appear on the Adoption Agreement.
ARTICLE VIII
1) As used in this Article the following terms have the following meanings:
"Custodian" means State Street Bank and Trust Company.
"Fund" means a mutual fund or registered investment company
that is specified in the Adoption Agreement, or that is designated by
the Distributor named in the Adoption Agreement, as being available
as an investment for the custodial account, provided, however, that
such a mutual fund or registered investment company must be legally
offered for sale in the state of the Depositor's residence in order
to be a Fund hereunder.
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"Distributor" means the entity which has a contract with the
Fund(s) to serve as distributor of the shares of such Fund(s).
In any case where there is no Distributor, the duties assigned
hereunder to the Distributor may be performed by the Fund(s) or by
an entity that has a contract to perform management or investment
advisory services for the Fund(s).
"Service Company" means any entity employed by the Custodian or
the Distributor, including the transfer agent for the Fund(s), to
perform various administrative duties of either the Custodian or the
Distributor.
In any case where there is no Service Company, the duties
assigned hereunder to the Service Company will be performed by the
Distributor (if any) or by an entity specified in the second
preceding paragraph.
2) The Depositor may revoke the custodial account established hereunder by
mailing or delivering a written notice of revocation to the Custodian
within seven days after the Depositor receives the Disclosure Statement
related to the custodial account. Mailed notice is treated as given to the
Custodian on date of the postmark (or on the date of Post Office
certification or registration in the case of notice sent by certified
or registered mail). Upon timely revocation, the Depositor's initial
contribution will be returned, without adjustment for administrative
expenses, commissions or sales charges, fluctuations in market value
or other changes.
3) All contributions to the custodial account shall be invested and
reinvested in full and fractional shares of one or more Funds. Such
investments shall be made in such proportions and/or in such amounts as
the Depositor from time to time in the Adoption Agreement or by other
written notice to the Service Company (in such form as may be acceptable
to the Service Company) may direct.
The Service Company shall be responsible for promptly transmitting
all investment directions by the Depositor for the purchase or sale of
shares of one or more Funds hereunder to the Funds' transfer agent for
execution. However, if investment directions with respect to the
investment of any contribution hereunder are not received from the
Depositor as required or, if received, are unclear or incomplete in the
opinion of the Service Company, the contribution will be returned
to the Depositor without liability for interest or for loss of income or
appreciation. If any directions or other orders by the Depositor with
respect to the sale or purchase of shares of one or more Funds for the
custodial account are unclear or incomplete in the opinion of the Service
Company, the Service Company will refrain from carrying out such
investment directions or from executing any such sale or purchase,
without liability for loss of income or for appreciation or depreciation
of any asset, pending receipt of clarification or completion from the
Depositor.
All investment directions by the Depositor will be subject to any
minimum initial or additional investment or minimum balance rules
applicable to a Fund as described in its prospectus.
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All dividends and capital gains or other distributions received on the
shares of any Fund held in the Depositor's account shall be retained in the
account and (unless received in additional shares) shall be reinvested in
full and fractional shares of such Fund.
4) Subject to the minimum initial or additional investment, minimum balance
and other exchange rules applicable to a Fund, the Depositor may at any
time direct the Service Company to exchange all or a specified portion
of the shares of a Fund in the Depositor's account for shares and
fractional shares of one or more other Funds. The Depositor shall give
such directions by written or telephonic notice acceptable to the Service
Company, and the Service Company will process such directions as soon as
practicable after receipt thereof (subject to the second paragraph of
Section 3 of this Article).
5) Any purchase or redemption of shares of a Fund for or from the Depositor's
account will be effected at the public offering price or net asset value
of such Fund (as described in the then effective prospectus for such Fund)
next established after the Service Company has transmitted the Depositor's
investment directions to the transfer agent for the Fund(s).
Any purchase, exchange, transfer or redemption of shares of a Fund for
or from the Depositor's account will be subject to any applicable sales,
redemption or other charge as described in the then effective prospectus
for such Fund.
6) The Service Company shall maintain adequate records of all purchases or
sales of shares of one or more Funds for the Depositor's custodial
account. Any account maintained in connection herewith shall be in the
name of the Custodian for the benefit of the Depositor. All assets of the
custodial account shall be registered in the name of the Custodian or of
a suitable nominee. The books and records of the Custodian shall
show that all such investments are part of the custodial account.
The Custodian shall maintain or cause to be maintained adequate records
reflecting transactions of the custodial account. In the discretion of the
Custodian, records maintained by the Service Company with respect to the
account hereunder will be deemed to satisfy the Custodian's
recordkeeping responsibilities therefor. The Service Company agrees to
furnish the Custodian with any information the Custodian requires to
carry out the Custodian's recordkeeping responsibilities.
7) Neither the Custodian nor any other party providing services to the
custodial account will have any responsibility for rendering advice with
respect to the investment and reinvestment of the Depositor's custodial
account, nor shall such parties be liable for any loss or diminution in
value which results from the Depositor's exercise of investment control
over his custodial account. The Depositor shall have and exercise
exclusive responsibility for and control over the investment of the assets
of his custodial account, and neither the Custodian nor any other such
party shall have any duty to question his directions in that regard or to
advise him regarding the purchase, retention or sale of shares of one or
more Funds for the custodial account.
8) The Depositor may appoint an investment advisor with respect to the
custodial account on a form acceptable to the Custodian and the Service
Company. The investment advisor's appointment will be in effect until
written notice to the contrary is received by the Custodian and the
Service Company. While an investment advisor's appointment is in effect,
the investment advisor may issue investment directions or may issue orders
for the sale or purchase of shares of one or more Funds to the Service
Company, and the Service Company will be fully protected in carrying out
such investment directions or orders to the same extent as if they had
been given by the Depositor.
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The Depositor's appointment of any investment advisor will also be
deemed to be instructions to the Custodian and the Service Company to pay
such investment advisor's fees to the investment advisor from the
custodial account hereunder without additional authorization by the
Depositor or the Custodian.
9) Distribution of the assets of the custodial account shall be made at
such time and in such form as the Depositor (or the Beneficiary if the
Depositor is deceased) shall elect by written order to the Custodian. The
Depositor acknowledges that any distribution (except for distribution on
account of the Depositor's disability or death, return of an "excess
contribution" referred to in Code Section 408(d), or a "rollover" from
this custodial account) made earlier than age 59-1/2 may subject the
Depositor to an "additional tax on early distributions" under Code
Section 72(t). For that purpose, the Depositor will be considered
disabled if the Depositor can prove, as provided in Code Section 72(m)(7),
that the Depositor is unable to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment
that can be expected to result in death or be of long-continued and
indefinite duration. It is the responsibility of the Depositor (or
Beneficiary) by appropriate distribution instructions to the Custodian
to insure that the distribution requirements of Code Section 401(a)(9)
and the Article above are met. If the Depositor (or Beneficiary) does not
direct the Custodian to make distributions from the custodial account by
the time that such distributions are required to commence in accordance
with such distribution requirements, the Custodian (and Service Company)
shall assume that the Depositor (or Beneficiary) is meeting the minimum
distribution requirements from another individual retirement arrangement
maintained by the Depositor (or Beneficiary) and the Custodian and Service
Company shall be fully protected in so doing. The Depositor (or the
Depositor's surviving spouse) may elect to comply with the distribution
requirements in Article IV using the recalculation of life expectancy
method, or may elect that the life expectancy of the Depositor
(and/or the Depositor's surviving spouse) will not be recalculated; any
such election may be in such form as the Depositor (or surviving
spouse) provides (including the calculation of minimum distribution
amounts in accordance with a method that does not provide for
recalculation of the life expectancy of one or both of the Depositor and
surviving spouse and instructions to the Custodian in accordance with
such method). Neither Custodian nor any other party providing
services to the custodial account assumes any responsibility for
the tax treatment of any distribution from the custodial account;
such responsibility rests solely with the person ordering the
distribution.
10) The Custodian assumes (and shall have) no responsibility to make any
distribution except upon the written order of the Depositor (or the
Beneficiary if the Depositor is deceased) containing such information
as the Custodian may reasonably request. Also, before making any
distribution or honoring any assignment of the custodial account,
the Custodian shall be furnished with any and all applications,
certificates, tax waivers, signature guarantees and other documents
(including proof of any legal representative's authority) deemed
necessary or advisable by the Custodian, but the Custodian shall not be
responsible for complying with an order that appears on its face to be
genuine, or for refusing to comply if not satisfied it is genuine, and
the Custodian has no duty of further inquiry. Any distributions from the
account may be mailed, first-class postage prepaid, to the last known
address of the person who is to receive such distribution, as shown on
the Custodian's records, and such distribution shall to the extent
thereof completely discharge the Custodian's liability for such
payment.
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11) (a) The term "Beneficiary" means the person or persons designated as such
by the "designating person" (as defined below) on a form acceptable
to the Custodian for use in connection with the custodial account,
signed by the designating person, and filed with the Custodian.
The form may name individuals, trusts, estates, or other entities as
either primary or contingent beneficiaries. However, if the designation
does not effectively dispose of the entire custodial account as of the
time distribution is to commence, the term "Beneficiary" shall then
mean the designating person's estate with respect to the assets of the
custodial account not disposed of by the designation form. The form
last accepted by the Custodian before such distribution is to
commence, provided it was received by the Custodian (or deposited
in the U.S. Mail or with a delivery service) during the designating
person's lifetime, shall be controlling and, whether or not fully
dispositive of the custodial account, thereupon shall revoke all such
forms previously filed by that person. The term "designating person"
means the Depositor during his or her lifetime; after the Depositor's
death, it also means the Depositor's spouse if the spouse begins to
receive a portion of the custodial account (pursuant to such a
designation by the Depositor) under a form of distribution permitted
by Article IV. A designation by the Depositor's spouse shall relate
solely to the balance remaining in the spouse's portion of the
custodial account after the death of the spouse.
(b) When and after distributions from the custodial account to the
Depositor's Beneficiary commence, all rights and obligations assigned
to the Depositor hereunder shall inure to, and be enjoyed and
exercised by, the Beneficiary instead of the Depositor.
12) (a) The Depositor agrees to provide information to the Custodian at such
time and in such manner as may be necessary for the Custodian to
prepare any reports required under Section 408(i) of the Code and
the regulations thereunder or otherwise.
(b) The Custodian or the Service Company will submit reports to the
Internal Revenue Service and the Depositor at such time and manner
and containing such information as is prescribed by the Internal
Revenue Service.
(c) The Depositor, Custodian and Service Company shall furnish to
each other such information relevant to the custodial account as may
be required under the Code and any regulations issued or forms
adopted by the Treasury Department thereunder or as may otherwise
be necessary for the administration of the custodial account.
(d) The Depositor shall file any reports to the Internal Revenue
Service that are required of him by law (including Form 5329), and
neither the Custodian nor Service Company shall have any duty to
advise the Depositor concerning or monitor the Depositor's
compliance with such requirement.
13) (a) The Depositor retains the right to amend this custodial account
document in any respect at any time, effective on a stated date that
shall be at least 60 days after giving written notice of the
amendment (including its exact terms) to the Custodian by registered
or certified mail, unless the Custodian waives notice as to such
amendment. If the Custodian does not wish to continue serving as such
under this custodial account document as so amended, it may resign in
accordance with Section 17 below.
20
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(b) The Depositor delegates to the Custodian the Depositor's right so to
amend, provided the Custodian amends in the same manner all
agreements comparable to this one, having the same Custodian,
permitting comparable investments, and under which such power has
been delegated to it; this includes the power to amend retroactively
if necessary or appropriate in the opinion of the Custodian in
order to conform this custodial account to pertinent provisions of
the Code and other laws or successor provisions of law, or to obtain a
governmental ruling that such requirements are met, to adopt a
prototype or master form of agreement in substitution for this
Agreement, or as otherwise may be advisable in the opinion of the
Custodian. Such an amendment by the Custodian shall be communicated
in writing to the Depositor, and the Depositor shall be deemed to
have consented thereto unless, within 30 days after such communication
to the Depositor is mailed, the Depositor either (i) gives the
Custodian a written order for a complete distribution or transfer of
the custodial account, or (ii) removes the Custodian and appoints a
successor under Section 17 below.
Pending the adoption of any amendment necessary or desirable to
conform this custodial account document to the requirements of any
amendment to the Internal Revenue Code or regulations or rulings
thereunder, the Custodian and the Service Company may operate the
Depositor's custodial account in accordance with such requirements
to the extent that the Custodian and/or the Service Company deem
necessary to preserve the tax benefits of the account.
(c) Notwithstanding the provisions of subsections (a) and (b) above, no
amendment shall increase the responsibilities or duties of the
Custodian without its prior written consent.
(d) This Section 13 shall not be construed to restrict the Custodian's
right to substitute fee schedules in the manner provided by Section 16
below, and no such substitution shall be deemed to be an amendment
of this Agreement.
14) (a) The Custodian shall terminate the custodial account if this Agreement
is terminated or if, within 30 days (or such longer time as the
Custodian may agree) after resignation or removal of the Custodian
under Section 17, the Depositor has not appointed a successor
that has accepted such appointment. Termination of the
custodial account shall be effected by distributing all assets
thereof in a single payment in cash or in kind to the Depositor,
subject to the Custodian's right to reserve funds as provided in
Section 17.
(b) Upon termination of the custodial account, this custodial account
document shall have no further force and effect, and the Custodian
shall be relieved from all further liability hereunder or with
respect to the custodial account and all assets thereof so
distributed.
15) (a) In its discretion, the Custodian may appoint one or more
contractors or service providers to carry out any of its functions
and may compensate them from the custodial account for expenses
attendant to those functions.
21
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(b) The Service Company shall be responsible for receiving all
instructions, notices, forms and remittances from the Depositor and
for dealing with or forwarding the same to the transfer agent for the
Fund(s).
(c) The parties do not intend to confer any fiduciary duties on the
Custodian or Service Company (or any other party providing services
to the custodial account), and none shall be implied. Neither shall
be liable (or assumes any responsibility) for the collection of
contributions, the proper amount, time or deductibility of any
contribution to the custodial account or the propriety of any
contributions under this Agreement, or the purpose, time, amount
(including any minimum distribution amounts) or propriety of
any distribution hereunder, which matters are the responsibility of
the Depositor and the Depositor's Beneficiary.
(d) As soon as is practicable after the close of each taxable year, and
whenever required by the Code, or Regulations thereunder, the
Custodian and Service Company shall each file with the Depositor
a written report or reports reflecting the transactions effected by it
during such period and the assets of the custodial account at its
close. Upon the expiration of 60 days after such a report is sent
to the Depositor (or Beneficiary), the Custodian and Service
Company shall be forever released and discharged from all liability
and accountability to anyone with respect to transactions shown in or
reflected by such report except with respect to any such acts or
transactions as to which the Depositor shall have filed written
objections with the Custodian or Service Company within such 60-day
period.
(e) The Service Company shall deliver, or cause to be delivered, to
the Depositor all notices, prospectuses, financial statements and
other reports to shareholders, proxies and proxy soliciting materials
relating to the shares of the Funds(s) credited to the custodial
account. No shares shall be voted, and no other action shall be taken
pursuant to such documents, except upon receipt of adequate written
instructions from the Depositor.
(f) The Depositor shall always fully indemnify the Service Company,
Distributor, Fund(s) and Custodian, and save them harmless from any and
all liability whatsoever that may arise either (i) in connection
with this Agreement and the matters that it contemplates, except
that which arises directly out of the Service Company's,
Distributor's or Custodian's negligence or willful misconduct; or
(ii) with respect to making or failing to make any distribution,
other than for failure to make distribution in accordance with an order
therefor that is in full compliance with Section 10. Neither the
Service Company nor the Custodian shall be obligated or expected to
commence or defend any legal action or proceeding in connection with
this Agreement or such matters unless agreed upon by that party and the
Depositor, and unless fully indemnified for so doing to that party's
satisfaction.
(g) The Custodian and Service Company shall each be responsible
solely for performance of those duties expressly assigned to it in
this Agreement, and neither assumes any responsibility as to duties
assigned to anyone else hereunder or by operation of law.
(h) The Custodian and Service Company may each conclusively rely upon and
shall be protected in acting upon any written order from the
Depositor or Beneficiary, or any investment advisor appointed under
Section 8, or any other notice, request, consent, certificate or other
instrument or paper believed by it to be genuine and to have been
properly executed, and so long as it acts in good faith, in taking
or omitting to take any other action in reliance thereon. In
addition, the Custodian will carry out the requirements of any
apparently valid court order relating to the custodial account and
will incur no liability or responsibility for so doing.
22
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16) (a) The Custodian, in consideration of its services under this
Agreement, shall receive the fees specified on the applicable fee
schedule. The fee schedule originally applicable shall be the one
specified in the Disclosure Statement furnished to the Depositor.
The Custodian may substitute a different fee schedule at any time
upon 30 days' written notice to the Depositor. The Custodian shall
also receive reasonable fees for any services not contemplated by any
applicable fee schedule and either deemed by it to be necessary or
desirable or requested by the Depositor.
(b) Any income, gift, estate and inheritance taxes and other taxes of any
kind whatsoever, including transfer taxes incurred in connection
with the investment or reinvestment of the assets of the custodial
account, that may be levied or assessed in respect to such
assets, and all other administrative expenses incurred by the
Custodian in the performance of its duties (including fees for legal
services rendered to it in connection with the custodial account) shall
be charged to the custodial account.
(c) All such fees and taxes and other administrative expenses charged to
the custodial account shall be collected either from the amount of
any contribution or distribution to or from the account, or (at the
option of the person entitled to collect such amounts) to the extent
possible under the circumstances by the conversion into cash of
sufficient shares of one or more Funds held in the custodial account
(without liability for any loss incurred thereby). Notwithstanding
the foregoing, the Custodian or Service Company may make demand upon
the Depositor for payment of the amount of such fees, taxes and other
administrative expenses. Fees that remain outstanding after 60 days may
be subject to a collection charge.
17) (a) Upon 30 days' prior written notice to the Custodian, the Depositor
may remove it from its office hereunder. Such notice, to be
effective, shall designate a successor custodian and shall be
accompanied by the successor's written acceptance. The Custodian also
may at any time resign upon 30 days' prior written notice to the
Depositor, whereupon the Depositor shall appoint a successor to the
Custodian.
(b) The successor custodian shall be a bank, insured credit union, or
other person satisfactory to the Secretary of the Treasury under Code
Section 408(a)(2). Upon receipt by the Custodian of written
acceptance by its successor of such successor's appointment, the
Custodian shall transfer and pay over to such successor the assets of
the custodial account and all records (or copies thereof) of the
Custodian pertaining thereto, provided that the successor custodian
agrees not to dispose of any such records without the Custodian's
consent. The Custodian is authorized, however, to reserve such sum of
money or property as it may deem advisable for payment of all its
fees, compensation, costs, and expenses, or for payment of any other
liabilities constituting a charge on or against the assets of the
custodial account or on or against the Custodian, with any balance of
such reserve remaining after the payment of all such items to be paid
over to the successor custodian.
23
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(c) Any Custodian shall not be liable for the acts or comissions of
its predecessor or its successor.
18) References herein to the "Internal Revenue Code" or "Code" and sections
thereof shall mean the same as amended from time to time, including
successors to such sections.
19) Except where otherwise specifically required in this Agreement, any
notice from the Custodian to any person provided for in this Agreement
shall be effective if sent by first-class mail to such person at that
person's last address on the Custodian's records.
20) The Depositor or the Depositor's Beneficiary shall not have the right or
power to anticipate any part of the custodial account or to sell,
assign, transfer, pledge or hypothecate any part thereof. The custodial
account shall not be liable for the debts of the Depositor or the
Depositor's Beneficiary, or subject to any seizure, attachment,
execution or other legal process in respect thereof. At no time shall it
be possible for any part of the assets of the custodial account to be
used for or diverted to purposes other than for the exclusive benefit of
the Depositor or his or her Beneficiary.
21) When accepted by the Custodian, this Agreement is accepted in and
shall be construed and administered in accordance with the laws of the
Commonwealth of Massachusetts. Any action involving the Custodian
brought by any other party must be brought in a state or federal court in
such Commonwealth.
This Agreement is intended to qualify under Code Section 408(a) as an
individual retirement custodial account and to entitle the Depositor
to the retirement savings deduction under Code Section 219 if available,
and if any provision hereof is subject to more than one interpretation
or any term used herein is subject to more than one construction, such
ambiguity shall be resolved in favor of that interpretation or
construction which is consistent with that intent.
However, the Custodian shall not be responsible for whether or not such
intentions are achieved through use of this Agreement, and the Depositor
is referred to the Depositor's attorney for any such assurances.
22) The Depositor should seek advice from the Depositor's attorney regarding
the legal consequences (including but not limited to federal and state tax
matters) of entering into this Agreement, contributing to the custodial
account, and ordering the Custodian to make distributions from the
account. The Depositor acknowledges that the Custodian and Service
Company (and any company associated therewith) are prohibited by law from
rendering such advice.
23) Articles through of this Agreement are in the form promulgated by the
Internal Revenue Service. It is anticipated that if and when the Internal
Revenue Service promulgates changes to Form 5305-A, the Custodian will
amend this Agreement correspondingly.
24) The Depositor acknowledges that he or she has received and read the current
prospectus for each Fund in which his or her account is invested and the
Individual Retirement Account Disclosure Statement related to the Account.
The Depositor represents under penalties of perjury that his or her Social
Security Number (or other Taxpayer Identification Number) as stated in the
Adoption Agreement is correct.
24
<PAGE>
<PAGE>
WARBURG PINCUS FUNDS
WARBURG PINCUS FUNDS
P.O. BOX 9030,
BOSTON, MA 02205-9030
800-WARBURG
(800-927-2874)
25
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> COMMON SHARES
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1995
<PERIOD-END> OCT-31-1995
<INVESTMENTS-AT-COST> 3,075,347
<INVESTMENTS-AT-VALUE> 3,239,788
<RECEIVABLES> 189,888
<ASSETS-OTHER> 216,699
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,646,375
<PAYABLE-FOR-SECURITIES> 484,782
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 136,164
<TOTAL-LIABILITIES> 620,946
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,887,516
<SHARES-COMMON-STOCK> 283,056
<SHARES-COMMON-PRIOR> 10,000
<ACCUMULATED-NII-CURRENT> 356
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<PAGE>
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<NAME> ADVISOR SHARES
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<PAGE>
