-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WiayXRGMQvTvexsoHirMwhHr2axqRIaWMLTd5nc+6xaC0cpbBwpwHcEvU4di+0ed ziDh3h2c+ZKxyu/WttUhow== 0000935069-99-000150.txt : 19990827 0000935069-99-000150.hdr.sgml : 19990827 ACCESSION NUMBER: 0000935069-99-000150 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990826 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WARBURG PINCUS TRUST II CENTRAL INDEX KEY: 0001029879 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-07999 FILM NUMBER: 99699925 BUSINESS ADDRESS: STREET 1: 466 LEXINGTON AVE CITY: NEW YORK STATE: NY ZIP: 10017-3147 BUSINESS PHONE: 2128780600 MAIL ADDRESS: STREET 1: 466 LEXINGTON AVE CITY: NEW YORK STATE: NY ZIP: 10017-3147 N-30D 1 WARBURG PINCUS TRUST II SEMIANNUAL REPORT SEMIANNUAL REPORT JUNE 30, 1999 WARBURG PINCUS TRUST II (BOX) FIXED INCOME PORTFOLIO (BOX) GLOBAL FIXED INCOME PORTFOLIO Warburg Pincus Trust II Shares are not available directly to individual investors, but may be offered only through certain insurance products and pension and retirement plans. More complete information about the Trust, including charges and expenses, is provided in the PROSPECTUS, which must precede or accompany this document and which should be read carefully before investing. You may obtain additional copies by calling 800-222-8977 or by writing to Warburg Pincus, P.O. Box 9030, Boston, MA 02205-9030. Warburg Pincus is a division of Credit Suisse Asset Management, LLC. [GRAPHIC OMITTED] FROM TIME TO TIME, THE PORTFOLIOS' INVESTMENT ADVISER AND CO-ADMINISTRATORS MAY WAIVE SOME FEES AND/OR REIMBURSE SOME EXPENSES, WITHOUT WHICH PERFORMANCE WOULD BE LOWER. WAIVERS AND/OR REIMBURSEMENTS ARE SUBJECT TO CHANGE. RETURNS ARE HISTORICAL AND INCLUDE CHANGE IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE CANNOT GUARANTEE FUTURE RESULTS. RETURNS AND SHARE PRICE WILL FLUCTUATE, AND REDEMPTION VALUE MAY BE MORE OR LESS THAN ORIGINAL COST. THE VIEWS OF THE PORTFOLIOS' MANAGEMENT ARE AS OF THE DATE OF THE LETTERS, AND PORTFOLIO HOLDINGS DESCRIBED IN THIS DOCUMENT ARE AS OF JUNE 30, 1999; THESE VIEWS AND PORTFOLIO HOLDINGS MAY HAVE CHANGED SUBSEQUENT TO THESE DATES. NOTHING IN THIS DOCUMENT IS A RECOMMENDATION TO PURCHASE OR SELL SECURITIES. WARBURG PINCUS TRUST II--FIXED INCOME PORTFOLIO SEMIANNUAL INVESTMENT ADVISER'S REPORT--JUNE 30, 1999 - -------------------------------------------------------------------------------- August 12, 1999 Dear Shareholder: For the six months ended June 30, 1999, Warburg Pincus Trust II--Fixed Income Portfolio had a loss of 0.58%, vs. a loss of 0.59% for the Lehman Brothers Intermediate Government/Corporate Bond Index.* The portfolio's one-year total return through June 30, 1999 was 4.01%. Its since-inception (on March 31, 1997) average annual total return through June 30, 1999 was 7.25%. The period was a mostly difficult one for the domestic bond market, reflecting surprising strength in the U.S. economy. The economy's health created fears that the Federal Reserve would raise interest rates in order to contain potential inflation. These concerns weighed on bonds in general and on high-quality bonds in particular. (Most below-investment-grade bonds had gains for the period. The improving economy and optimism over credit upgrades for these bonds outweighed the negative impact of fears of rising interest rates.) Bonds ended the period on a positive note, however. The Federal Reserve did indeed raise rates--on June 30, by 25 basis points--but quickly announced its reversion to a "neutral" stance on rates. Against this backdrop, the portfolio had a modest loss in terms of total return (i.e., bond-price changes plus coupon income), performing in line with its benchmark. The portfolio's performance reflected the difficult environment for bonds generally. We made few noteworthy changes to the portfolio during the period in terms of sector allocation. We remained well-diversified, maintaining significant exposure to Treasury bonds (which accounted for roughly a third of the portfolio at the end of the period), as well as to corporate, mortgage-backed and asset-backed bonds. In general, yield differentials (or "spreads") between non-Treasury and Treasury bonds remained attractive, in our view, hence our relatively high weighting (compared to that of our benchmark) in non-Treasuries. With respect to interest-rate exposure, we kept the portfolio's duration fairly close to that of its benchmark during much of the period. While we continued to have a positive longer-term outlook on inflation and interest rates, we saw little incentive to take a more aggressive duration stance, given persistent strength in the economy. 1 WARBURG PINCUS TRUST II--FIXED INCOME PORTFOLIO SEMIANNUAL INVESTMENT ADVISER'S REPORT--JUNE 30, 1999 (CONT'D) - -------------------------------------------------------------------------------- Going forward, we plan to maintain a diversified mix of Treasury and non-Treasury issues, adjusting our sector exposure as we deem appropriate on a risk-vs.-reward basis. Overall, our focus will remain on high-quality, intermediate-term bonds that have what we deem to be attractive risk-adjusted yields and potential for longer-term appreciation. M. Anthony E. van Daalen Portfolio Manager - ---------------- * The Lehman Brothers Intermediate Government/Corporate Bond Index is an unmanaged index (with no defined investment objective) of intermediate-term government and corporate bonds, and is calculated by Lehman Brothers Inc. 2 WARBURG PINCUS TRUST II--GLOBAL FIXED INCOME PORTFOLIO SEMIANNUAL INVESTMENT ADVISER'S REPORT--JUNE 30, 1999 - -------------------------------------------------------------------------------- August 12, 1999 Dear Shareholder: For the six months ended June 30, 1999, Warburg Pincus Trust II--Global Fixed Income Portfolio had a loss of 1.01%, vs. a loss of 1.37% for the Lehman Brothers Aggregate Bond Index* and gains of 0.11% of 0.10%, respectively, for the Salomon Brothers World Government Bond Index (Currency-Hedged)** and a Composite Benchmark.*** The portfolio's one-year return through June 30, 1999 was 7.00%. Its since-inception (on March 31, 1997) average annual total return through June 30, 1999 was 6.12%. Global bond markets had mixed results for the period. European markets struggled in local-currency terms, reflecting a somewhat uncertain monetary and fiscal backdrop for European Monetary Union economies. Performance here was uniformly--and significantly--lower in dollar terms, as the euro and other regional currencies declined vs. the dollar during the period. The U.S. market also struggled (though U.S. high-yield bonds advanced). A surprisingly healthy U.S. economy created fears that the Federal Reserve would aggressively raise interest rates to contain potential inflation. (These fears subsided somewhat at the end of the period, however. The Federal Reserve raised rates by 25 basis points on June 30, and then quickly announced its return to a "neutral" stance on rates.) Winners for the period included most emerging bond markets, which benefited from optimism over credit upgrades. Japan's market also rallied, despite an increase in bond issuance in Japan during the period. Against this backdrop, the portfolio had a loss, hampered by weakness in the high-quality bonds that continued to comprise the bulk of its assets. On the positive side, in terms of return, factors that aided the portfolio included our currency strategies. We continued to hedge the bulk of the portfolio's exposure to foreign currencies, which proved beneficial, since most currencies weakened vs. the U.S. dollar during the period. We made a few noteworthy adjustments to the portfolio during the period with respect to the main sources of return of global fixed-income investing: duration, credit quality and currency exposure. With regard to the first, we modestly extended the portfolio's overall duration during the six months, reflecting our generally more-positive view of the longer-term backdrop for interest rates. With respect to credit quality, we increased our weighting in high-yield bonds during the period (as of June 30, high-yield securities accounted for about 15% of the portfolio's assets). Yield spreads between these issues and 3 WARBURG PINCUS TRUST II--GLOBAL FIXED INCOME PORTFOLIO SEMIANNUAL INVESTMENT ADVISER'S REPORT--JUNE 30, 1999 (CONT'D) - -------------------------------------------------------------------------------- higher-quality debt widened significantly during last summer's financial-asset selloff. Since we considered this widening excessive, given these markets' underlying fundamentals, we added several emerging-market bonds (most specifically, from Latin America and South Africa) as well as some high-yield U.S. corporate issues we deemed to represent good value. As noted, we maintained a bias toward the U.S. dollar (as of June 30, 100% of the portfolio was either hedged into or denominated in U.S. dollars). We will, however, continue to seek opportunities to invest in foreign currencies that we deem to have improving supply/demand fundamentals. Charles C. Van Vleet Portfolio Manager INTERNATIONAL INVESTING ENTAILS SPECIAL RISK CONSIDERATIONS, INCLUDING CURRENCY FLUCTUATIONS, LOWER LIQUIDITY, ECONOMIC AND POLITICAL RISKS, AND DIFFERENCES IN ACCOUNTING METHODS. - ---------------- * The Lehman Brothers Aggregate Bond Index is composed of the Lehman Brothers Government/Corporate Bond Index and the Lehman Brothers Mortgage-Backed Securities Index. The Aggregate Index includes U.S. Treasury and agency issues, corporate bond issues and mortgage-backed securities rated investment-grade or higher by Moody's Investors Service, Standard & Poor's Corporation or Fitch Investors' Service. ** The Salomon Brothers World Government Bond Index (Currency-Hedged) is a market-capitalization-weighted index designed to track major government debt markets and is currency-hedged into U.S. dollars. *** The Composite Benchmark measures the weighted performance of three component indexes. The weights of the component indexes -- 50% Lehman Brothers Aggregate Index, 35% Salomon Brothers World Government Bond Index excluding the U.S. (Currency-Hedged), and 15% Merrill Lynch High Yield Master II Index -- correspond to the investment strategy of the fund's manager. The Merrill Lynch High Yield Master II Index provides a broad-based measure of the performance of the non-investment-grade U.S. domestic bond market. 4 WARBURG PINCUS TRUST II--FIXED INCOME PORTFOLIO STATEMENT OF NET ASSETS--JUNE 30, 1999 (UNAUDITED) - --------------------------------------------------------------------------------
RATINGS PAR (MOODY'S/S&P) MATURITY RATE% VALUE ---- -------------- -------- ------- ------- CORPORATE BONDS (24.9%) $ 15,000 ABN-AMRO Bank N.V. New York Branch, Subordinate Deposit Notes (Callable 08/01/04 @ $100.00) (Aa3, NR) 08/01/09 8.250 $ 15,787 10,000 Aetna Services, Inc. (A3, A) 08/15/06 7.125 9,912 50,000 AT&T Capital Corp. (Baa3, BBB) 11/15/00 7.500 50,939 20,000 Charter Communications Holdings. LLC. (B2, B+) 04/01/09 8.625 19,250 30,000 Conagra, Inc. Senior Notes (Putable 08/01/09 @ $100.00) (Baa1, BBB+) 08/01/09 6.700 30,000 40,000 Countrywide Home Loan Co. (A3, A) 04/15/09 6.250 37,250 50,000 Delphi Auto Systems Corp. (Baa2, BBB) 05/01/04 6.125 48,937 20,000 EchoStar DBS Corporation, Senior Notes (B2, B) 02/01/09 9.375 20,450 50,000 Federal-Mogul Corp. (Callable @ Greater of Par or Make Whole +50BP) (Ba2, BB+) 01/15/06 7.375 47,125 20,000 Golden State Escrow Corp. (Callable @ Make Whole +50BP) (Ba1, BB+) 08/01/03 7.000 19,550 50,000 The Goldman Sachs Group, Inc. (A1, A+) 05/15/09 6.650 48,437 20,000 HMH Properties, Inc. (Ba2, BB-) 05/15/05 9.500 21,350 50,000 Household Finance Corp. (A2, A) 11/15/08 6.500 47,812 40,000 Ingersoll-Rand Co. Medium Term Note (Putable 11/19/03 @ $100.00) (A3, A-) 11/19/03 6.230 39,800 30,000 Lowes Companies Medium Term Note (Putable 05/15/07 @ $100.00) (A2, A) 05/15/07 7.110 30,975 10,000 Nationwide Health Properties, Inc. (Putable 07/07/03 @ $100.00) (Baa2, BBB) 07/07/03 6.590 9,487 50,000 Niagara Mohawk Power Corp. Series D (Callable 4/01/99 to 12/31/00 @ Make Whole +50BP) (Baa3, BBB-) 10/01/02 7.250 50,187 40,000 Noble Drilling Corp. (Baa2, A-) 03/15/09 6.950 39,900 20,000 NTL Communications Corp. Class B (B3, B-) 10/01/08 11.500 21,600 30,000 Occidental Petroleum Corp. (Baa3, BBB) 02/15/06 7.650 30,338 10,000 Philip Morris Cos., Inc. (Putable 06/01/01 @ $100.00) (A2, A) 06/01/01 6.950 10,113 5,000 Potomac Electric Power Co. (Callable 05/15/02 @ $103.21) (A1, A) 05/15/27 8.500 5,225 45,000 Qwest Communications Intl., Inc. Class B (Ba1, BB+) 11/01/08 7.500 44,775 5,000 Riggs Capital Trust II Series C (Callable 03/15/07 @ $104.44) (baa3, BB) 03/15/27 8.875 4,925 65,000 Sears Roebuck Acceptance Corp. (A2, A-) 05/01/09 6.250 61,181 -------- TOTAL CORPORATE BONDS (Cost $786,740) 765,305 --------
See Accompanying Notes to Financial Statements. 5 WARBURG PINCUS TRUST II--FIXED INCOME PORTFOLIO STATEMENT OF NET ASSETS (CONT'D)--JUNE 30, 1999 (UNAUDITED) - --------------------------------------------------------------------------------
RATINGS PAR (MOODY'S/S&P) MATURITY RATE% VALUE ---- -------------- -------- ------- ---------- MORTGAGE BACKED SECURITIES (32.7%) $ 25,000 Asset Securitization Corp. (Nomura Asset Securities Corp.) Series 1996-D2, Class A2 (NR, AA) 02/14/29 7.206# $ 25,286 100,000 California Infrastructure PG & E Series 97-1, Class A7 (Aaa, AAA) 09/25/08 6.420 99,449 70,000 Commonwealth Edison Transitional Funding Trust Series 1998-1 Class-A6 (Aaa, AAA) 06/25/09 5.630 66,249 59,635 Fannie Mae (Aaa, AAA) 12/01/08 5.690# 55,293 89,546 Fannie Mae (Aaa, AAA) 04/01/29 6.500 86,506 90,000 Fannie Mae (Aaa, AAA) 02/18/21 5.750 86,822 100,000 Fannie Mae, Series 1993-50 (Aaa, AAA) 09/25/20 5.000 94,527 20,000 Fannie Mae, Series 1997-51, Class KB Guaranteed REMIC Trust (Aaa, AAA) 03/20/08 7.000 20,156 25,000 Fannie Mae, Series 1998-M4, Class B, (Aaa, AAA) 12/25/23 6.424 24,810 110,000 Freddie Mac Series 2072, Class PK (Aaa, AAA) 07/15/24 6.000 106,918 88,509 Ginnie Mae (Aaa, AAA) 10/15/28 6.500 85,282 90,000 MBNA Master Credit Card Trust, Series 1998-J, Class A (Aaa, AAA) 02/15/06 5.250 86,420 30,000 Mortgage Capital Funding, Inc. Series 1998-MC1, Class E, (NR, BBB+) 01/18/08 7.060# 29,277 13,867 Nomura Asset Securities Corp. Series 1994-4B, Class 4A (Aaa, AAA) 09/25/24 8.300 14,125 120,000 Standard Credit Card Master Trust, Series 1995-9, Class A (Aaa, AAA) 10/07/07 6.550 120,988 ---------- TOTAL MORTGAE BACKED SECURITIES (Cost $1,039,614) 1,002,108 ---------- U.S. TREASURY OBLIGATIONS (34.7%) U.S TREASURY BONDS (2.4%) 55,000 U.S. Treasury Bond (Aaa, AAA) 02/15/16 9.250 71,631 ---------- U.S. TREASURY NOTES (29.9%) 220,000 U.S. Treasury Notes (Aaa, AAA) 05/15/01 8.000 229,637 300,000 U.S. Treasury Notes (Aaa, AAA) 08/15/02 6.375 305,525 25,000 U.S. Treasury Notes (Aaa, AAA) 02/15/05 7.500 26,864 75,000 U.S. Treasury Notes (Aaa, AAA) 05/15/09 5.500 73,431 275,000 U.S. Treasury Notes Inflation Index (Aaa, AAA) 07/15/02 3.625 282,636 ---------- 918,093 ---------- U.S. TREASURY PRINCIPAL STRIPS (2.4%) 75,000 U.S. Treasury Principal Strip (Aaa, AAA) 08/15/99 4.640## 74,563 ---------- TOTAL U.S. TREASURY OBLIGATIONS (Cost $1,069,138) 1,064,287 ----------
See Accompanying Notes to Financial Statements. 6 WARBURG PINCUS TRUST II--FIXED INCOME PORTFOLIO STATEMENT OF NET ASSETS (CONT'D)--JUNE 30, 1999 (UNAUDITED) - -------------------------------------------------------------------------------- NUMBER OF SHARES RATE% VALUE - --------- ------- ---------- PREFERRED STOCK (1.7%) 200 Equity Residential Properties Trust Series D (Callable 07/15/07 @ $25.00) REIT 8.600 $ 5,063 500 Natexis AMBS Co. Series A (Callable 06/30/08 @ $100.00) 8.440 47,719 ---------- TOTAL PREFERRED STOCK (Cost $54,749) 52,782 ---------- SHORT TERM INVESTMENTS (4.6%) 140,336 RBB Money Market Fund (Cost $140,336) 140,336 ---------- TOTAL INVESTMENTS AT VALUE (98.6%) (Cost $3,090,577*) 3,024,818 OTHER ASSETS IN EXCESS OF LIABILITIES (1.4%) 42,045 ---------- NET ASSETS (100.0%) (applicable to 298,973 shares outstanding) $3,066,863 ========== NET ASSET VALUE, offering and redemption price per share ($3,066,863 (DIVIDE) 298,973) $10.26 ====== INVESTMENT ABBREVIATIONS NR = NOT RATED REMIC = Real Estate Mortgage Investment Conduit REIT = Real Estate Investment Trust - -------------------------------------------------------------------------------- # On instruments with variable rates, the rate shown reflects the current rate as of June 30, 1999. ## Rate shown reflects the yield to maturity on date of purchase. * Also cost for federal income tax purposes. See Accompanying Notes to Financial Statements. 7 WARBURG PINCUS TRUST II--GLOBAL FIXED INCOME PORTFOLIO STATEMENT OF NET ASSETS--JUNE 30, 1999 (UNAUDITED) - --------------------------------------------------------------------------------
RATINGS PAR+ (MOODY'S/S&P) MATURITY RATE% VALUE ---- ------------- -------- ------- --------- BONDS (95.4%) ARGENTINA (0.9%) $ 20,000(A) Telecom Argentina (Ba3, BBB-) 07/12/01 9.750 $ 20,037 --------- CANADA (3.4%) 20,000(A) Newcourt Credit Group (Baa3, BBB) 12/17/03 7.125 20,225 83,000 Province of British Colombia (NR, NR) 12/01/06 5.250 53,889 --------- 74,114 --------- CHILE (0.8%) 19,000(A) Republic of Chile (Baa1, A-) 04/28/09 6.875 18,240 --------- COLOMBIA (1.4%) 36,000(A) Republic of Colombia (Baa3, BBB-) 04/23/09 9.750 29,700 --------- DENMARK (4.0%) 555,000 Kingdom of Denmark (Aaa, AAA) 11/15/07 7.000 88,894 --------- GERMANY (11.1%) 60,000(B) Deutsche Bank AG (A1, AA-) 12/29/49 7.872 57,870 70,000(B) Republic of Germany (Aaa, NR) 10/14/05 6.500 80,800 90,000(B) Republic of Germany (Aaa, NR) 01/04/09 3.750 87,533 18,000(B) Republic of Germany (Aaa,NR) 07/04/09 4.000 17,815 --------- 244,018 --------- GREECE (2.2%) 13,500,000 Hellenic Republic (A2, NR) 03/21/04 8.900 47,306 --------- MEXICO (1.5%) 30,000(A) United Mexican States (Ba2, BB) 05/15/26 11.500 32,700 --------- NETHERLANDS (1.7%) 37,000(B) KPNQwest BV, Series Regs (Callable 06/01/04 @ 103.56) (Ba1, BB) 06/01/09 7.125 38,109 --------- NORWAY (3.0%) 510,000 Norwegian Government (Aaa, AAA) 11/30/04 5.750 65,303 --------- PANAMA (0.7%) 17,000(A) Republic of Panama (Putable 04/01/06 @ $100) (Ba1, BB+) 04/01/06 9.375 16,065 --------- PHILIPPINES (1.2%) 27,000(A) Republic of Philippines (Ba1, BB+) 01/15/19 9.875 26,561 --------- SOUTH AFRICA (2.7%) 390,000 Republic of South Africa (Baa1, BBB+) 02/28/05 12.000 58,361 --------- SWEDEN (5.4%) 500,000 Swedish Government (Aa1, AAA) 01/15/04 5.000 59,955 500,000 Swedish Government (Aa1, AAA) 01/28/09 5.000 58,424 --------- 118,379 ---------
See Accompanying Notes to Financial Statements. 8 WARBURG PINCUS TRUST II--GLOBAL FIXED INCOME PORTFOLIO STATEMENT OF NET ASSETS (CONT'D)--JUNE 30, 1999 (UNAUDITED) - --------------------------------------------------------------------------------
RATINGS PAR+ (MOODY'S/S&P) MATURITY RATE% VALUE ---- ------------- -------- ------- ---------- BONDS (CONT'D) UNITED KINGDOM (2.2%) $ 30,000 Orange PLC (Callable 6/01/04 @ 104.438) (NR, NR) 06/01/09 8.875 $ 47,747 ---------- UNITED STATES (53.2%) 42,000(B) Amercian Standard, Inc. (NR, NR) 06/01/06 7.125 43,259 50,000 California Infrastructure San Diego Gas & Electric Rate Reduction Series 1997-1 Class A7 (Aaa, AAA) 12/26/09 6.370 48,488 20,000 Charter Communications Holdings LLC, (B2, B+) 04/01/09 8.625 19,250 20,000 Echostar Corp. (Callable 02/01/04 @ $104.688) (B2, B) 02/01/09 9.375 20,450 25,000 Federal Mogul (Ba2, BB+) 01/15/06 7.375 23,562 99,000 Ginnie Mae Pool 506601 (Aaa,AAA) 03/15/29 6.500 95,683 20,000 Golden State Escrow Corp. (Ba1, BB+) 08/01/03 7.000 19,550 25,000(B) Hunstman ICI Chemicals, Series 144A (Callable 07/01/04 @ 105.063) (B2, B+) 07/01/09 10.125 26,040 35,000 Illinois Power Transitional Funding Trust (Aaa,AAA) 06/25/09 5.540 32,822 65,000 Nomura Asset Securities Co. (NR, A) 03/16/13 6.690 62,071 20,000 NTL Communications Corp. Cl-B (B3, B-) 10/01/08 11.500 21,600 70,000 PECO Energy Co., Series 99, Class A6 Rate Reduction Bond (Aaa, AAA) 03/01/09 6.050 67,074 25,000 Qwest Communications International, Inc. Cl-B (Ba1, BB+) 11/01/08 7.500 24,875 258,000 U.S Treasury Bond (Aaa, AAA) 11/15/08 4.750 236,855 443,000 U.S. Treasury Note (Aaa, AAA) 02/15/04 4.750 424,726 ---------- 1,166,305 ---------- TOTAL BONDS (Cost $2,162,695) 2,091,839 ---------- NUMBER OF SHARES - --------- PREFERRED STOCK (1.3%) UNITED STATES 300 Natexis AMBS Co. Series A 8.44% (Callable 06/30/08 At $100.00) (Cost $29,875) 8.440 28,631 ---------- WARRANTS (0.0%) ARGENTINA 30(A) Republic of Argentina, Expires 12/03/99, (Cost $0) 293 --------- SHORT TERM INVESTMENTS (1.2%) 27,084 RBB Money Market Fund (Cost $27,084) 27,084 ---------- TOTAL INVESTMENTS AT VALUE (97.9%) (Cost $2,219,654*) 2,147,847 OTHER ASSETS IN EXCESS OF LIABILITIES (2.1%) 46,154 ---------- NET ASSETS (100.0%) (applicable to 224,244 shares outstanding) $2,194,001 ========== NET ASSET VALUE, offering and redemption price per share ($2,194,001 (DIVIDE) 224,244) $9.78 =====
INVESTMENT ABBREVIATIONS NR=Not Rated - -------------------------------------------------------------------------------- + Unless otherwise indicated below, all securities are denominated in the issuers' country of origin. (A) Denominated in U.S. Dollars. (B) Denominated in Euro. * Also cost for federal income tax purposes. See Accompanying Notes to Financial Statements. 9 WARBURG PINCUS TRUST II PORTFOLIOS STATEMENTS OF OPERATIONS For the Six Months Ended June 30, 1999 (Unaudited) - --------------------------------------------------------------------------------
FIXED INCOME GLOBAL FIXED INCOME PORTFOLIO PORTFOLIO -------------- ------------------- INVESTMENT INCOME: Dividends $ 1,426 $ 821 Interest 82,001 55,608 -------- -------- Total investment income 83,427 56,429 -------- -------- EXPENSES: Investment advisory 7,065 9,534 Administrative services 4,486 2,147 Professional fees 7,729 9,265 Custodian/Sub-custodian 6,915 1,024 Trustees 2,332 2,887 Insurance 123 164 Interest 16 49 Organizational costs 816 921 Printing 5,616 5,351 Registration 116 248 Transfer agent 202 99 Miscelleneous 460 1,060 -------- -------- 35,876 32,749 Less: fees waived, expenses reimbursed and transfer agent fee offsets (21,888) (23,310) -------- -------- Total expenses 13,988 9,439 -------- -------- Net investment income 69,439 46,990 -------- -------- NET REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS AND FOREIGN CURRENCY RELATED ITEMS: Net realized loss from security transactions (12,844) (4,140) Net realized gain from foreign currency related items 0 39,023 Net change in unrealized appreciation (depreciation) from investments and foriegn currency related items (76,726) (109,282) -------- -------- Net realized and unrealized gain (loss) from investments and foreign currency related items (89,570) (74,399) -------- -------- Net decrease in net assets resulting from operations $(20,131) $(27,409) ======== ========
See Accompanying Notes to Financial Statements. 10 ` WARBURG PINCUS TRUST IIPORTFOLIOS STATEMENTS OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
FIXED INCOME PORTFOLIO GLOBAL FIXED INCOME PORTFOLIO -------------------------------- -------------------------------- FOR THE SIX FOR THE SIX MONTHS ENDED FOR THE MONTHS ENDED FOR THE JUNE 30, 1999 YEAR ENDED JUNE 30, 1999 YEAR ENDED (UNAUDITED) DECEMBER 31, 1998 (UNAUDITED) DECEMBER 31, 1998 ------------- ----------------- ------------- ----------------- FROM OPERATIONS: Net investment income $ 69,439 $ 62,035 $ 46,990 $ 81,184 Net realized gain (loss) from security transactions (12,844) 46,770 (4,140) (5,603) Net realized gain from foreign currency related items 0 0 39,023 34,315 Net change in unrealized appreciation (depreciation) from investments and foreign currency related items (76,726) (4,228) (109,282) 84,140 ----------- ----------- ---------- ----------- Net increase (decrease) in net assets resulting from operations (20,131) 104,577 (27,409) 194,036 ----------- ----------- ---------- ----------- FROM DISTRIBUTIONS: Dividends from net investment income 0 (62,035) 0 (81,184) Distributions in excess of net investment income 0 (9,850) 0 (10,205) Distributions from realized gains 0 (46,781) 0 (1,413) Distributions in excess of realized gains 0 0 0 (31,073) ----------- ----------- ---------- ----------- Net decrease in net assets from distributions 0 (118,666) 0 (123,875) ----------- ----------- ---------- ----------- FROM CAPITAL SHARE TRANSACTIONS: Proceeds from sale of shares 4,282,241 3,910,106 431,210 0 Reinvested dividends 0 118,666 0 0 Net asset value of shares redeemed (4,022,443) (1,786,826) (242) 123,873 ----------- ----------- ---------- ----------- Net increase in net assets from capital share transactions 259,798 2,241,946 430,968 123,873 ----------- ----------- ---------- ----------- Net increase in net assets 299,653 2,227,857 403,559 194,034 NET ASSETS: Beginning of period 2,827,196 599,339 1,790,442 1,596,408 ----------- ----------- ---------- ----------- End of Period $ 3,066,863 $ 2,827,196 $2,194,001 $ 1,790,442 ----------- ----------- ---------- ----------- Undistributed (or distributions in excess of) net investment income $ 69,862 $ 423 $ 15,917 $ (31,073) =========== =========== ========== ===========
See Accompanying Notes to Financial Statements. 11 WARBURG PINCUS TRUST II--FIXED INCOME PORTFOLIO FINANCIAL HIGHLIGHTS (For a Share of the Portfolio Outstanding Throughout Each Period) - --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1999 PERIOD ENDED: (UNAUDITED) 1998 1997 1 ------------- -------- -------- PER-SHARE DATA Net asset value, beginning of period $10.32 $ 9.97 $10.00 ------ ------ ------ INVESTMENT ACTIVITIES: Net investment income 0.23 0.24 0.44 Net gain or losses on investments and foreign currency related items (both realized and unrealized) (0.29) 0.57 0.45 ------ ------ ----- Total from investment activities (0.06) 0.81 0.89 ------ ------ ------ DISTRIBUTIONS: From net investment income 0.00 (0.24) (0.41) In excess of net investment income 0.00 (0.04) (0.31) From realized capital gains 0.00 (0.18) (0.20) ------ ------ ------ Total distributions 0.00 (0.46) (0.92) ------ ------ ------ NET ASSET VALUE, END OF PERIOD $10.26 $10.32 $ 9.97 ====== ====== ====== Total return (0.58)%2 8.08% 8.96%2 RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000s omitted) $3,067 $2,827 $ 599 Ratio of expenses to average net assets .99%3,4 .99%3 .99%3,4 Ratio of net income to average net assets 4.91%4 4.69% 5.29%4 Decrease reflected in above operating expense ratios due to waivers/reimbursements 1.54%4 4.33% 12.05%4 Portfolio turnover rate 125.47%2 318.95% 138.28%2 - --------------------------------------------------------------------------------------------- 1 For the period March 31, 1997 (commencement of operations) through December 31, 1997. 2 Non-annualized. 3 Interest earned on uninvested cash balances is used to offset portions of the transfer agent expense. These arrangements had no effect on the portfolio's expense ratio. 4 Annualized.
See Accompanying Notes to Financial Statements. 12 WARBURG PINCUS TRUST II--GLOBAL FIXED INCOME PORTFOLIO FINANCIAL HIGHLIGHTS (For a Share of the Portfolio Outstanding Throughout Each Period) - --------------------------------------------------------------------------------
FOR THE SIX MONTHS ENDED JUNE 30, 1999 PERIOD ENDED: (UNAUDITED) 1998 1997 1 ------------ -------- -------- PER-SHARE DATA Net asset value, beginning of period $ 9.88 $ 9.47 $10.00 ------ ------ ------ INVESTMENT ACTIVITIES: Net investment income 0.28 0.48 0.45 Net gain or losses on investments and foreign currency related items (both realized and unrealized) (0.38) 0.66 (0.15) ------ ------ ------ Total from investment activities (0.10) 1.14 0.30 ------ ------ ------ DISTRIBUTIONS: From net investment income 0.00 (0.48) (0.44) In excess of net investment income 0.00 (0.06) (0.11) From realized capital gains 0.00 (0.01) (0.07) In excess of realized capital gains 0.00 (0.18) (0.21) ------ ------ ------ Total distributions 0.00 (0.73) (0.83) ------ ------ ------ NET ASSET VALUE, END OF PERIOD $ 9.78 $ 9.88 $ 9.47 ====== ====== ====== Total return (1.01)%2 12.09% 2.62%2 RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000s omitted) $2,194 $1,790 $1,596 Ratio of expenses to average net assets .99%3,4 .99%3 .99%3,4 Ratio of net income to average net assets 4.93%4 4.84% 5.67%4 Decrease reflected in above operating expense ratios due to waivers/reimbursements 2.44%4 3.00% 4.59%4 Portfolio turnover rate 195.75%2 232.58% 139.81%2 - -------------------------------------------------------------------------------- 1 For the period March 31, 1997 (commencement of operations) through December 31, 1997. 2 Non-annualized. 3 Interest earned on uninvested cash balances is used to offset portions of the transfer agent expense. These arrangements had no effect on the portfolio's expense ratio. 4 Annualized.
See Accompanying Notes to Financial Statements. 13 WARBURG PINCUS TRUST II NOTES TO FINANCIAL STATEMENTS June 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES Warburg Pincus Trust II is an open-end management investment company registered under the Investment Company Act of 1940, as amended (1940 Act), and currently offers two investment portfolios classified as non-diversified. The Fixed Income Portfolio seeks total return consistent with prudent investment management, and the Global Fixed Income Portfolio seeks total return consistent with prudent investment management, consisting of a combination of interest income, currency gains and capital appreciation. Shares of a portfolio are not available directly to individual investors but may be offered only through (a) variable-annuity contracts and variable life insurance contracts and (b) tax-qualified pension and retirement plans. Certain portfolios may not be available in connection with a particular contract or plan. The net asset value of each portfolio is determined daily as of the close of regular trading on the New York Stock Exchange. Each Portfolio's investments are valued at market value, which is currently determined using the last reported sales price. If no sales are reported, investments are generally valued at the mean between the bid and asked prices. In the absence of market quotations, investments are generally valued at fair value as determined by or under the direction of the Trust's Board of Trustees. Debt that matures in 60 days or less is valued on the basis of amortized cost, which approximates market value, unless the Board determines that using this method would not reflect an investment value. The books and records of the portfolios are maintained in U.S. dollars. Transactions denominated in foreign currencies are recorded at the current prevailing exchange rates. All assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at the current exchange rate at the end of the period. Translation gains or losses resulting from changes in the exchange rate during the reporting period and realized gains and losses on the settlement of foreign currency transactions are reported in the results of operations for the current period. The Global Fixed Income Portfolio isolates 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. 14 WARBURG PINCUS TRUST II NOTES TO FINANCIAL STATEMENTS (CONT'D) June 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES -- (CONT'D) The Portfolios may invest in securities of foreign countries and governments which involve certain risks in addition to those inherent in domestic investments. Such risks generally include, among others, fluctuations in currency exchange rates, revaluation of currencies, future adverse political and economic developments and the imposition of foreign laws and restrictions. Securities of foreign issuers are often subject to less rigorous regulatory practices and requirements than those applied in the United States and may also be less liquid (and their prices more volatile) than securities of comparable U.S companies. Moreover, individual foreign economies may differ favorably or unfavorably from the U.S economy in many respects. Security transactions are accounted for on a trade date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. The cost of investments sold is determined by use of the specific identification method for both financial reporting and income tax purposes. Dividends from net investment income and distributions of net realized capital gains, if any, are declared and paid annually. However, to the extent that a net realized capital gain can be reduced by a capital loss carryover, such gain will not be distributed. Income and capital gain distributions are determined in accordance with federal income tax regulations which may differ from generally accepted accounting principles. No provision is made for federal income taxes as it is the Trust's intention to have each Portfolio continue to qualify for and elect the tax treatment applicable to regulated investment companies under the Internal Revenue Code of 1986, as amended, and make the requisite distributions to its shareholders which will be sufficient to relieve it from federal income and excise taxes. Costs incurred by the Trust in connection with its organization have been deferred and are being amortized over a period of five years from the date the Trust commenced its operations. 15 WARBURG PINCUS TRUST II NOTES TO FINANCIAL STATEMENTS (CONT'D) June 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- 1. SIGNIFICANT ACCOUNTING POLICIES -- (CONT'D) Pursuant to an exemptive order issued by the Securities and Exchange Commission, each Portfolio, along with other Warburg Pincus Funds, transfers uninvested cash balances to a pooled cash account, which is invested in repurchase agreements secured by U.S. government securities. Securities pledged as collateral for repurchase agreements are held by the portfolios' custodian bank until the agreements mature. Each agreement requires that the market value of the collateral be sufficient to cover payments of interest and principal; however, in the event of default or bankruptcy by the counterparty to the agreement, retention of the collateral may be subject to legal proceedings. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. The portfolios have an arrangement with their transfer agent whereby interest earned on uninvested cash balances is used to offset a portion of their transfer agent expense. For the six months ended June 30, 1999, the Fixed Income Portfolio and the Global Fixed Income Portfolio received credits or reimbursements of $64 and $46, respectively, under this arrangement. 2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR On July 6, 1999, Credit Suisse Asset Management, LLC (CSAM) became each portfolio's investment adviser as a result of the completion of the previously announced acquisition of Warburg Pincus Asset Management, Inc. (WPAM) by Credit Suisse Group (Credit Suisse) and the combination of WPAM with Credit Suisse's existing U.S. asset management business. CSAM is an indirect wholly-owned U.S. subsidiary of Credit Suisse. For its investment advisory services, CSAM receives a fee from the Fixed Income Portfolio and the Global Fixed Income Portfolio calculated at an annual rate of .50% and 1.00%, respectively, of the relevant Portfolio's average daily net assets. For the six months ended June 30, 1999, investment advisory fees, voluntarily waivers and reimbursements were as follows: 16 WARBURG PINCUS TRUST II NOTES TO FINANCIAL STATEMENTS (CONT'D) June 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- 2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR (CONT'D) GROSS NET EXPENSE PORTFOLIO ADVISORY FEE WAIVER ADVISORY FEE REIMBURSEMENTS -------- -------------- -------- ------------ -------------- Fixed Income $7,065 $(7,065) $0 $(14,052) Global Fixed Income 9,534 (9,534) 0 (13,253) Counsellors Fund Services, Inc. (CFSI), an indirect wholly-owned subsidiary of Credit Suisse, and PFPC, Inc. (PFPC), an indirect, wholly owned subsidiary of PNC Bank Corp. (PNC), serve as each Portfolio's co-administrators. For its administrative services, CFSI currently receives a fee calculated at an annual rate of .10% of each Portfolio's average daily net assets. For the six months ended June 30, 1999, administrative services fees earned by CFSI were as follows: Portfolio Co-Administration Fee -------- --------------------- Fixed Income $1,413 Global Fixed Income 953 For its administrative services, PFPC currently receives a fee from the Fixed Income Portfolio and the Global Fixed Income Portfolio calculated at an annual rate of .05% of the Portfolio's average daily net assets. For the six months ended June 30, 1999, administrative services fees earned and waived by PFPC were as follows: NET PORTFOLIO CO-ADMINISTRATION FEE WAIVER CO-ADMINISTRATION FEE -------- --------------------- ------ --------------------- Fixed Income $3,073 $(707) $2,366 Global Fixed Income 1,194 (477) 717 It is currently contemplated that, on or before January 6, 2000, CFSI will be replaced as co-administrator of each Portfolio by Credit Suisse Asset Management Securities, Inc. (CSAMSI), an indirect wholly-owned subsidiary of Credit Suisse that was formerly known as Counsellors Securities Inc. CSAMSI serves as each Portfolio's distributor. No compensation is paid by the Portfolios to CSAMSI for its distribution services. On June 20, 1999, the Trust's Board of Trustees approved Provident Distributors, Inc. (PDI) as each Portfolio's distributor, effective on or before January 6, 2000. PDI, a Delaware corporation, is a registered broker-dealer and serves as distributor to other mutual funds. 3. LINE OF CREDIT The portfolios, together with other funds advised by CSAM, have established a $250 million committed line of credit facility (Credit Facility) with Deutsche Bank, AG as administrative agent, State Street Bank and Trust Company as operations agent, Bank of Nova Scotia as syndication agent 17 WARBURG PINCUS TRUST II NOTES TO FINANCIAL STATEMENTS (CONT'D) June 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- 3. LINE OF CREDIT (CONT'D) and certain other lenders, for temporary or emergency purposes primarily relating to unanticipated portfolio share redemptions. Under the terms of the Credit Facility, the funds with access to the Credit Facility pay an aggregate commitment fee at a rate of .075% per annum on the average daily balance of the Credit Facility that is undisbursed and uncanceled during the preceding quarter allocated among the participating funds in such manner as is determined by the governing Boards of the various funds. In addition, the participating funds will pay interest on borrowings at the Federal Funds rate plus .50% 4. INVESTMENTS IN SECURITIES For the six months ended June 30, 1999, purchases and sales of investment securities (excluding short-term investments) were as follows: U.S. GOVERNMENT AND INVESTMENT SECURITIES AGENCY OBLIGATIONS ---------------------- ------------------------ PORTFOLIO PURCHASES SALES PURCHASES SALES -------- ---------- ---------- ------------ ---------- Fixed Income $3,964,511 $3,092,719 $3,235,117 $2,484,631 Global Fixed Income 2,542,401 1,560,860 1,461,122 1,909,498 At June 30, 1999, the net unrealized appreciation from investments for those securities having an excess of value over cost and net unrealized depreciation from investments for those securities having an excess of cost over value (based on cost for federal income tax purposes) were as follows: NET UNREALIZED UNREALIZED UNREALIZED APPRECIATION PORTFOLIO APPRECIATION DEPRECIATION (DEPRECIATION) -------- ------------ ------------ -------------- Fixed Income $641 $(66,400) $(65,759) Global Fixed Income 0 (71,807) (71,807) 5. FORWARD CURRENCY CONTRACTS The Portfolios may enter into forward currency contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date. Risks may arise from movements in the value of a foreign currency relative to the U.S. dollar and from the potential default of counterparties to the contract. Each portfolio will enter into forward contracts primarily for hedging purposes. The portfolios may also enter into forward contracts for speculative purposes, which may increase the portfolios' investment risk. 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. 18 WARBURG PINCUS TRUST II NOTES TO FINANCIAL STATEMENTS (CONT'D) June 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- 5. FORWARD CURRENCY CONTRACTS (CONT'D) At June 30, 1999, the Global Fixed Income Portfolio had the following open forward currency contracts:
FOREIGN UNREALIZED EXPIRATION CURRENCY CONTRACT CONTRACT FOREIGN EXCHANGE FORWARD CURRENCY CONTRACTS DATE TO BE SOLD AMOUNT VALUE GAIN/(LOSS) - -------------------------- ---------- ---------- -------- --------- ---------------- Canadian Dollars 07/28/99 88,156 $ 60,325 $ 59,585 $ 740 Euro 07/28/99 616,388 651,748 637,037 14,711 British Pounds 07/28/99 30,000 48,120 47,301 819 South African Rand 07/28/99 367,500 58,454 60,534 (2,080)
6. CAPITAL SHARE TRANSACTIONS Each portfolio is authorized to issue an unlimited number of full and fractional shares of beneficial interest, par value of $.001 per share. Transactions in shares of each Portfolio were as follows:
FIXED INCOME PORTFOLIO GLOBAL FIXED INCOME PORTFOLIO -------------------------------- ------------------------------ FOR THE SIX FOR THE SIX MONTHS ENDED FOR THE MONTHS ENDED FOR THE JUNE 30, 1999 YEAR ENDED JUNE 30, 1999 YEAR ENDED (UNAUDITED) DECEMBER 31, 1998 (UNAUDITED) DECEMBER 31, 1998 ------------- ----------------- ------------- ----------------- Shares sold 416,180 370,058 43,102 0 Shares issued to shareholders on reinvestment of dividends 0 11,498 0 12,538 Shares Redeemed 391,083 (167,794) (25) 0 ------- -------- ------ ------ Net increase in shares outstanding 25,097 213,762 43,077 12,538 ======= ======== ====== ======
7. LIABILITIES At June 30, 1999, the Global Fixed Income Portfolio had an investment related liability of $19,975 payable toward investment securities purchased. 8. NET ASSETS Net assets at June 30, 1999, consisted of the following:
FIXED INCOME GLOBAL FIXED INCOME PORTFOLIO PORTFOLIO ------------ ------------------- Capital contributed, net $3,075,615 $2,206,859 Undistributed Net Investment Income 69,862 15,917 Accumulated (or Distributions in excess of) net realized gain (loss) from security transactions (12,855) 29,280 Net unrealized appreciation (depreciation) from investments and foreign currency related items (65,759) (58,055) ---------- ---------- Net assets $3,066,863 $2,194,001 ========== ==========
19 WARBURG PINCUS TRUST II NOTES TO FINANCIAL STATEMENTS (CONT'D) June 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- 9. RESULTS OF SPECIAL MEETING OF SHAREHOLDERS At a special meeting of shareholders held on May 21, 1999, the following proposals were submitted for the vote of shareholders of the Trust. The proposals and voting results were: 1. To approve a new investment advisory agreement between each portfolio and CSAM. TRUST II FIXED % OF SHARES TO TOTAL % OF SHARES TO TOTAL INCOME PORTFOLIO SHARES OUTSTANDING SHARES SHARES VOTED - ---------------- ------ -------------------- -------------------- For 278,252.4320 99.9973% 100.0000% Against 0.0000 0.0000% 0.0000% Abstain 0.0000 0.0000% 0.0000% TRUST II GLOBAL % OF SHARES TO TOTAL % OF SHARES TO TOTAL FIXED INCOME PORTFOLIO SHARES OUTSTANDING SHARES SHARES VOTED - ---------------------- ------ -------------------- -------------------- For 181,158.5880 99.9956% 100.0000% Against 0.0000 0.0000% 0.0000% Abstain 0.0000 0.0000% 0.0000% 2. To elect Trustees of the Trust. TRUST II FIXED INCOME PORTFOLIO FOR WITHHELD ---------------- ------------ -------- R.H. Francis 278,252.4320 0.0000 J.W. Fritz 278,252.4320 0.0000 J.E. Garten 278,252.4320 0.0000 J.S. Pasman 278,252.4320 0.0000 W.W. Priest 278,252.4320 0.0000 S.N. Rappaport 278,252.4320 0.0000 A.M. Reichman 278,252.4320 0.0000 A.B. Trowbridge 278,252.4320 0.0000 TRUST II GLOBAL FIXED INCOME PORTFOLIO FOR WITHHELD ---------------- ------------ -------- R.H. Francis 181,158.5880 0.0000 J.W. Fritz 181,158.5880 0.0000 J.E. Garten 181,158.5880 0.0000 J.S. Pasman 181,158.5880 0.0000 W.W. Priest 181,158.5880 0.0000 S.N. Rappaport 181,158.5880 0.0000 A.M. Reichman 181,158.5880 0.0000 A.B. Trowbridge 181,158.5880 0.0000 20 WARBURG PINCUS DOMESTIC EQUITY FUNDS NOTES TO FINANCIAL STATEMENTS June 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- 9. RESULTS OF SPECIAL MEETING OF SHAREHOLDERS (CONT'D) 3. To ratify the selection of PricewaterhouseCoopers LLP as the independent accountants for the Trust. TRUST II FIXED % OF SHARES TO TOTAL % OF SHARES TO TOTAL INCOME PORTFOLIO SHARES OUTSTANDING SHARES SHARES VOTED - ---------------- ------ -------------------- -------------------- For 278,252.4320 99.9973% 100.0000% Against 0.0000 0.0000% 0.0000% Abstain 0.0000 0.0000% 0.0000% TRUST II GLOBAL FIXED % OF SHARES TO TOTAL % OF SHARES TO TOTAL INCOME PORTFOLIO SHARES OUTSTANDING SHARES SHARES VOTED - --------------------- ------ -------------------- -------------------- For 181,158.5880 99.9956% 100.0000% Against 0.0000 0.0000% 0.0000% Abstain 0.0000 0.0000% 0.0000% 10. YEAR 2000 COMPLIANCE Many services provided to the portfolios and their shareholders by CSAM and certain of its affiliates (CSAM Service Providers) and the portfolios' other service providers rely on the functioning of their respective computer systems. Many computer systems cannot distinguish the year 2000 from the year 1900, resulting in potential difficulty in performing various calculations (Year 2000 Issue). The Year 2000 could potentially have an adverse impact on the handling of security trades, the payment of interest and dividends, pricing, account services and other portfolio operations. It has been reported that foreign institutions have made less progress in addressing the Year 2000 Issue than major U.S. entities, which could adversely affect the portfolios' foreign investments. The CSAM Service Providers recognize the importance of the Year 2000 Issue and are taking appropriate steps necessary in preparation for the year 2000. The CSAM Service Providers anticipate that their systems and those of the portfolios' other service providers will be adapted in time for the Year 2000. The CSAM Service Providers have completed mission critical systems testing and have participated in industry-wide testing programs. In addition, the CSAM Service Providers are formulating a contingency plan to address the Year 2000 Issue and anticipate completion of the plan by the end off the third quarter of 1999. The CSAMService Providers have also completed investigations of material operations of the portfolios' other major service providers. The CSAMService Providers continue to monitor the Year 2000 Issue and its potential impact on the portfolios. However, there can be no assurance that these steps will be sufficient to avoid any adverse impact on the portfolios nor can there be any assurance that the Year 2000 Issue will not have an adverse effect on the portfolios' investments or on global markets or economies, generally. 21 This page intentionally left blank This page intentionally left blank This page intentionally left blank [GRAPHIC OMITTED] P.O. BOX 9030, BOSTON, MA 02205-9030 800-222-8977 (TRADE MARK) www.warburg.com CREDIT SUISSE ASSET MANAGEMENT SECURITIES, Inc., Distributor. TRBDF-3-0699 -----END PRIVACY-ENHANCED MESSAGE-----