-----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, HzlNTO1b52Qf1o5InMOylpZMw9/dzvJwsqyIQdoKjd+GaJ+518HBGMKQ5NQUI3Js vGAKKMM2s/SuAvsIBHgEsw== /in/edgar/work/20001102/0000935069-00-000570/0000935069-00-000570.txt : 20001106 0000935069-00-000570.hdr.sgml : 20001106 ACCESSION NUMBER: 0000935069-00-000570 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000831 FILED AS OF DATE: 20001102 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WARBURG PINCUS EUROPEAN EQUITY FUND INC CENTRAL INDEX KEY: 0001067130 STANDARD INDUSTRIAL CLASSIFICATION: [ ] STATE OF INCORPORATION: MD FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-08903 FILM NUMBER: 751774 BUSINESS ADDRESS: STREET 1: 466 LEXINGTON AVENUE CITY: NEW YORK STATE: NY ZIP: 10017-3147 BUSINESS PHONE: 2127166081 MAIL ADDRESS: STREET 1: 466 LEXINGTON AVENUE CITY: NEW YORK STATE: NY ZIP: 10017-3147 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WARBURG PINCUS GLOBAL HEALTH SCIENCES FUND INC CENTRAL INDEX KEY: 0001025738 STANDARD INDUSTRIAL CLASSIFICATION: [ ] STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-07901 FILM NUMBER: 751775 BUSINESS ADDRESS: STREET 1: 400 WILMINGTON PARKWAY CITY: WILMINGTON STATE: DE ZIP: 19809 BUSINESS PHONE: 3027912919 MAIL ADDRESS: STREET 1: 466 LEXINGTON AVE CITY: NEW YORK STATE: NY ZIP: 10017-3147 FORMER COMPANY: FORMER CONFORMED NAME: WARBURG PINCUS HEALTH SCIENCE FUND INC DATE OF NAME CHANGE: 19961022 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WARBURG PINCUS GLOBAL TELECOMMUNICATIONS FUND INC CENTRAL INDEX KEY: 0001067469 STANDARD INDUSTRIAL CLASSIFICATION: [ ] STATE OF INCORPORATION: MD FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-08935 FILM NUMBER: 751776 BUSINESS ADDRESS: STREET 1: 466 LEXINGTON AVENUE CITY: NEW YORK STATE: NY ZIP: 10017-3147 BUSINESS PHONE: 2127166081 MAIL ADDRESS: STREET 1: 466 LEXINGTON AVENUE CITY: NEW YORK STATE: NY ZIP: 10017-3147 N-30D 1 0001.txt WARBURG EUROPEAN EQTY, GLOBAL TELE., GLOBALHEALTH [GRAPHIC OMITTED] WARBURG PINCUS FUNDS [GRAPHIC OMITTED] CREDIT SUISSE ASSET MANAGEMENT ANNUAL REPORT AUGUST 31, 2000 WARBURG PINCUS EUROPEAN EQUITY FUND (BULLET) WARBURG PINCUS GLOBAL TELECOMMUNICATIONS FUND (BULLET) WARBURG PINCUS GLOBAL HEALTH SCIENCES FUND (FORMERLY, WARBURG PINCUS HEALTH SCIENCES FUND) More complete information about the Funds, including charges and expenses, is provided in the PROSPECTUS, which must precede or accompany this document and which should be read carefully before investing. You may obtain additional copies by calling 800-WARBURG (800-927-2874) or by writing to Warburg Pincus Funds, P.O. Box 9030, Boston, MA 02205-9030. Credit Suisse Asset Management Securities, Inc., Distributor, is located at 466 Lexington Ave., New York, NY 10017-3147. Warburg Pincus Funds are advised by Credit Suisse Asset Management, LLC. FROM TIME TO TIME, THE FUNDS' 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. INTERNATIONAL INVESTING ENTAILS SPECIAL RISK CONSIDERATIONS, INCLUDING CURRENCY FLUCTUATIONS, LOWER LIQUIDITY, ECONOMIC AND POLITICAL RISKS, AND DIFFERENCES IN ACCOUNTING METHODS. THE VIEWS OF THE FUNDS' MANAGEMENT ARE AS OF THE DATE OF THE LETTERS AND PORTFOLIO HOLDINGS DESCRIBED IN THIS DOCUMENT ARE AS OF AUGUST 31, 2000; THESE VIEWS AND PORTFOLIO HOLDINGS MAY HAVE CHANGED SUBSEQUENT TO THESE DATES. NOTHING IN THIS DOCUMENT IS A RECOMMENDATION TO PURCHASE OR SELL SECURITIES. FUND SHARES ARE NOT DEPOSITS OR OTHER OBLIGATIONS OF CREDIT SUISSE ASSET MANAGEMENT, LLC ("CSAM") OR ANY AFFILIATE, ARE NOT FDICINSURED AND ARE NOT GUARANTEED BY CSAM OR ANY AFFILIATE. FUND INVESTMENTS ARE SUBJECT TO INVESTMENT RISKS, INCLUDING LOSS OF YOUR INVESTMENT. WARBURG PINCUS EUROPEAN EQUITY FUND PORTFOLIO MANAGERS' LETTER -- AUGUST 31, 2000 - -------------------------------------------------------------------------------- October 3, 2000 Dear Shareholder: For the 12 months ended August 31, 2000, Warburg Pincus European Equity Fund (the "Fund") had a gain of 22.69%, vs. a gain of 10.08% for the Morgan Stanley Capital International Europe Index1 (the "Index"). Most European equity markets posted gains for the 12 months, though similar to the U.S. market, the group was volatile. These stocks initially rallied, but then struggled over the January-through-August span, hampered by growing inflation and interest-rate uncertainties. Technology, media and telecommunications stocks ("TMT"), which accounted for the bulk of the gains in Europe for the period, were especially volatile. Against this backdrop, the Fund had a good showing, both in absolute terms and compared to the Index. Several factors aided the Fund's return. From a sector standpoint, the Fund benefited from its significant overweighting in TMT stocks early in the period, when the group surged. We then took a less-aggressive stance, which also proved beneficial (although we note that, in absolute terms, certain of the Fund's TMT stocks hampered its return for the period). Other sector strategies that helped the Fund included its avoidance, late in the period, of basic-materials producers (aside from oil companies), which came under pressure from rising input costs. In terms of country attribution, factors that contributed positively to the Fund's return included its overweightings in France and the Netherlands, two of the region's better-performing markets for the period. The Fund's German holdings also supported its return (we focused on financial companies here, and avoided the country's struggling auto and chemical names). In addition, the Fund benefited from our well-timed exposure to Hungary and Turkey. As the period unfolded and market uncertainties mounted, we shifted away from areas we deemed to have increasing earnings risk and toward industries with visible revenue growth and relatively stable earnings streams or towards stocks with valuation support. As a result, we increased our exposure to "Euro-centric" companies that generate the bulk if not all of their revenues within Europe. These companies stand to benefit from projected good internal growth in the region. As noted, we lowered our weighting in TMT stocks over the course of the period, most specifically by de-emphasizing telecommunications operators. This reflected our concerns over growth in the fixed-line area, as well as our belief that expensive licensing fees will weigh on earnings in the wireless- 1 WARBURG PINCUS EUROPEAN EQUITY FUND PORTFOLIO MANAGERS' LETTER -- AUGUST 31, 2000 (CONT'D) - -------------------------------------------------------------------------------- communications industry. We reduced exposure to selected technology stocks, where the combination of high earnings expectations, high valuations and slower global economic growth posed, in our view, earnings risk. Sector weightings we increased included consumer staples and financial services. Our focus in these and other more "defensive" sectors was on companies we deemed to have good earnings-growth potential and compelling valuations. Looking out over the next year and beyond, we have a favorable view on the prospects for Europe's stock markets. Dramatic reforms are taking hold with respect to pensions and taxes (for instance, a sweeping tax-reform package will be implemented in Germany next year), with eventual labor reform a distinct possibility. These reforms stand to support Europe's economy and foster the growth of its equity culture. The privatization of government-controlled companies and ongoing merger & acquisition activity should also be positive factors. There are some near-term concerns, of course, such as the weak euro and high oil prices. (We believe that oil prices will likely trend down in 2001, if not before, with overall inflation staying under control. Combined with ongoing reforms, this stands to spark a recovery in the currency.) However, given the forces at work, we believe that Europe remains a compelling asset class for investors willing to accept short-term risks in pursuit of long-term rewards. As ever, we will continue to strive to identify companies and markets with the best prospects. Sincerely yours, Credit Suisse Asset Management European Equities Management Team Nancy Nierman, Director INTERNATIONAL INVESTING ENTAILS SPECIAL RISK CONSIDERATIONS, INCLUDING CURRENCY FLUCTUATIONS, LOWER LIQUIDITY, ECONOMIC AND POLITICAL RISKS, AND DIFFERENCES IN ACCOUNTING METHODS. SINCE THE FUND FOCUSES ITS INVESTMENTS ON COMPANIES IN EUROPE, AN INVESTMENT IN THE FUND MAY INVOLVE A GREATER DEGREE OF RISK THAN AN INVESTMENT IN A MORE GEOGRAPHICALLY DIVERSIFIED EQUITY FUND. 2 WARBURG PINCUS EUROPEAN EQUITY FUND PORTFOLIO MANAGERS' LETTER -- AUGUST 31, 2000 (CONT'D) - -------------------------------------------------------------------------------- COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE WARBURG PINCUS EUROPEAN EQUITY COMMON SHARES AND THE MSCI EUROPEAN INDEX 1 FROM INCEPTION (1/28/99) AND AT EACH QUARTER END. (UNAUDITED) [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATAPOINTS USED IN PRINTED GRAPHIC Warburg Pincus|European Equity Fund MSCI EAFE Index 1 01/31/99 10000 10000 02/28/99 9560 9688 05/31/99 9110 9608 08/31/99 9790 9968 11/30/99 11040 10540 02/28/00 12935 11363 05/31/00 11981 11040 08/31/00 12001 10973 AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED 8/31/00 1 year 22.69% Since Inception (1/28/99) 12.18% Note:Past performance is not predictive of future performance. Investment return and principle value of an investment will fluctuate so that an investor's shares upon redemption may be worth more or less than their original cost. 1 The Morgan Stanley International Europe Index is a market capitalization-weighted index of 15 European countries. The index is calculated on a total return basis with net dividends reinvested. 3 WARBURG PINCUS GLOBAL TELECOMMUNICATIONS FUND PORTFOLIO MANAGERS' LETTER -- AUGUST 31, 2000 - -------------------------------------------------------------------------------- September 25, 2000 Dear Shareholders: We are pleased to report on the results of the Warburg Pincus Global Telecommunications Fund (the "Fund") for the fiscal year ended August 31, 2000. At August 31, 2000, the net asset value (NAV) of the Fund was $69.11, compared to an NAV of $41.22 on August 31, 1999. As a result, the Fund's total return was 71.0%, (assuming the reinvestment of distributions totaling $1.23 per share). By comparison, the MSCI Telecommunications Index1 (the "Index") returned - -0.1% during the same period. We attribute the Fund's decisive outperformance of the Index to our allocation of assets among the various subcategories of the global telecommunications equity universe. Stock selection was effective across all geographies in which we invested. Our timing in making various sectoral and regional shifts also proved beneficial. In terms of subcategories, we enjoyed vigorous returns during the global rally in telecom and technology stocks in the fourth quarter of 1999 and much of the first quarter of 2000. We were most heavily invested in this period in the shares of telecommunications equipment manufacturers and wireless companies, which offered an attractive combination of superior growth prospects and reasonable valuations. Our holdings among makers of optical components, wireless infrastructure producers and wireless service providers did especially well. As valuations became increasingly stretched in the first quarter, though, we chose to take profits and restructure the portfolio to capitalize on areas of greater opportunity. We thus reduced exposure to the wireless sector and the largest incumbent wireline service providers, while adding to our positions in producers of telecom equipment and software. Viewed geographically, we opted to shift away from Europe at that point due to several factors that made the climate for telecom investing there much less favorable than previously. These included unsustainably high valuations; the upcoming issuance of an avalanche of new Europe-related telecom equity; and concerns about the high prices paid for so-called "third-generation" wireless licenses in Germany and the U.K. 4 WARBURG PINCUS GLOBAL TELECOMMUNICATIONS FUND PORTFOLIO MANAGERS' LETTER -- AUGUST 31, 2000 (CONT'D) - -------------------------------------------------------------------------------- Instead, we raised exposure to the U.S. and Canada -- where valuations were surprisingly attractive compared to those available elsewhere in the world -- and Japan, where stock prices already reflected considerable negative investor sentiment. In descending order of their contributions to the Fund's overall performance during the fiscal year, returns were best in the U.S., Europe, Japan, Asia/Pacific, Latin America and other emerging markets. Among the few blemishes we suffered were our holdings in competitive local-exchange carriers, which fared poorly on a global basis; and Italy and India, in which we favored incumbent wireline carriers whose shares fell as their outlooks grew more pessimistic. Thank you for your support, and please feel free to call upon us at any time if you have questions. Sincerely yours, Credit Suisse Asset Management Global Telecommunications Management Team Scott T. Lewis, Portfolio Manager Vincent J. McBride, Portfolio Manager INTERNATIONAL INVESTING ENTAILS SPECIAL RISK CONSIDERATIONS, INCLUDING CURRENCY FLUCTUATIONS, LOWER LIQUIDITY, ECONOMIC AND POLITICAL RISKS, AND DIFFERENCES IN ACCOUNTING METHODS. SINCE THE FUND FOCUSES ITS INVESTMENTS ON COMPANIES INVOLVED IN TELECOMMUNICATIONS, 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 IN A BROADER MIX OF ISSUES. MORE INFORMATION ABOUT THE FUND, INCLUDING CHARGES AND EXPENSES AND THE SPECIAL RISK CONSIDERATIONS ASSOCIATED WITH A SINGLE-INDUSTRY FUNDS, IS PROVIDED IN THE PROSPECTUS. 5 WARBURG PINCUS GLOBAL TELECOMMUNICATIONS FUND PORTFOLIO MANAGERS' LETTER -- AUGUST 31, 2000 (CONT'D) - -------------------------------------------------------------------------------- COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE WARBURG PINCUS GLOBAL TELECOMMUNICATIONS FUND COMMON SHARES AND THE MSCI TELECOMMUNICATIONS INDEX1 FROM INCEPTION (12/4/96) AND AT EACH QUARTER END. (UNAUDITED) [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Warburg Pincus| Morgan Stanley| Global Telecommunications Fund Composite Index Telecommunications 1 12/04/96 10000 10000 02/28/97 10787 10508 05/31/97 11460 10994 08/31/97 11533 10996 11/30/97 12860 12408 02/28/98 15179 14210 05/31/98 16664 15396 08/31/98 14461 15455 11/30/98 19460 17686 02/28/99 24138 21361 05/31/99 28188 21569 08/31/99 31920 21112 11/30/99 45317 26016 02/29/00 65274 28849 05/31/00 50861 24356 08/31/00 54581 21099 AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED 8/31/00 (COMMON SHARES) 1 year 70.99% 3 year 67.89% Since Inception (12/4/96) 57.32% Note:Past performance is not predictive of future performance. Investment return and principle value of an investment will fluctuate so that an investor's shares upon redemption may be worth more or less than their original cost. 1 The MSCI Telecommunications Index is an unmanaged index (with no defined investment objective) of telecommunications equities that includes reinvestment of dividends and is compiled by Morgan Stanley & Co., Incorporated. 6 WARBURG PINCUS GLOBAL HEALTH SCIENCES FUND PORTFOLIO MANAGERS' LETTER -- AUGUST 31, 2000 - -------------------------------------------------------------------------------- September 25, 2000 Dear Shareholder: For the 12 months ended August 31, 2000, Warburg Pincus Global Health Sciences Fund 1,2 had a gain of 54.02%, vs. gains of 45.15% and 16.32%, respectively, for the Lipper Health/Biotechnology Funds Index3 and the S&P 500 Index.4 The period was a positive one for the stock market, buoyed by optimism over the economy and corporate profits. Stocks were quite volatile, however, especially over the March-through-May span, due to interest-rate worries and concerns over valuations on technology and "new economy" companies. The health-care group had good performance for the 12 months, outpacing the broader stock market by a considerable margin. Factors that aided health-care stocks included solid earnings reports from a number of leading health-care companies and market frenzy over the near-completion of the human-genome map. Of course, health-care stocks were themselves volatile, but they hardly moved in lockstep with the overall market (many health-care stocks, especially large-cap drug stocks, are perceived to be "defensive" investments, and hence the group has sometimes performed relatively well during periods of uncertainty). Against this backdrop, the Fund had a sizable gain, supported by the favorable environment for the health-care group and good stock selection generally. Many of the Fund's holdings had solid showings, including a number of its large-cap pharmaceutical names as well as specific holdings within the biotechnology and health-care "provider" areas. We made no major changes during the period in terms of overall strategy, remaining focused on innovative companies with viable products or services and good longer-term earnings-growth potential. We continued to employ a relatively diversified approach, both in terms of market cap and industry exposure. Our core holdings included pharmaceutical stocks as well as biotechnology, managed-care and certain specialty health-care companies. We believe that such an approach can achieve good results over time, while potentially limiting portfolio volatility. With respect to regional allocation, we remained heavily biased in favor of the U.S. (indeed, a large majority of the world's publicly traded health-care companies reside in the U.S.). That aside, we continued to find compelling buying opportunities among foreign stocks. Foreign names we purchased during the period included a Swiss biotechnology company, a small-cap Canadian pharmaceutical company and an Ireland-based provider of products and services based on neurology research. 7 WARBURG PINCUS GLOBAL HEALTH SCIENCES FUND PORTFOLIO MANAGERS' LETTER -- AUGUST 31, 2000 (CONT'D) - -------------------------------------------------------------------------------- Looking ahead, our view on the long-term prospects for health care as an asset class remains positive. We believe that these stocks stand to enjoy a favorable demographic tailwind, with rapidly maturing populations in the U.S., Europe and Japan buoying demand for health care. We also feel that this already-strong projected demand should be boosted by the launch of new life-enhancing products and services, for example, treatments discovered thanks to ongoing gene research. To be certain, health-care stocks will remain volatile (though we will continue to attempt to take advantage of this volatility, looking to add high-quality companies trading at compelling valuations). For investors willing to assume short-term risk in pursuit of potential long-term rewards, we believe the group remains well worthy of consideration, and we will continue to focus on stocks we deem to have the brightest prospects. Susan L. Black Peter T. Wen Co-Portfolio Manager Co-Portfolio Manager SINCE THE FUND FOCUSES ITS INVESTMENTS ON COMPANIES INVOLVED IN THE HEALTH SCIENCES, 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 IN A BROADER MIX OF ISSUERS. INTERNATIONAL INVESTING ENTAILS SPECIAL RISK CONSIDERATIONS, INCLUDING CURRENCY FLUCTUATIONS, LOWER LIQUIDITY, ECONOMIC AND POLITICAL RISKS, AND DIFFERENCES IN ACCOUNTING METHODS. 8 WARBURG PINCUS GLOBAL HEALTH SCIENCES FUND PORTFOLIO MANAGERS' LETTER -- AUGUST 31, 2000 (CONT'D) - -------------------------------------------------------------------------------- COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE WARBURG PINCUS GLOBAL HEALTH SCIENCES FUND 1,2 COMMON SHARES, LIPPER HEALTH/BIOTECHNOLOGY FUNDS INDEX ("LHBFI"), 3 AND THE S&P 500 INDEX ("S&P 500") 4 FRON INCEPTION (12/31/96) AND AT EACH QUARTER END. (UNAUDITED) [GRAPHIC OMITTED] EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC Warburg Pincus| Lipper Health/ Global Health Biotechnology Funds S&P 500 Sciences Fund 1,2 Index 3 Index 4 12/31/96 10000 10000 10000 01/01/97 10330 10511 10624.1 02/01/97 10220 10546 10707.4 03/01/97 9620 9748 10268.8 04/01/97 9820 9749 10880.9 05/01/97 10530 10728 11542.2 06/01/97 11330 11270 12058.6 07/01/97 11760 11637 13016.9 08/01/97 11260 11324 12288.8 09/01/97 12020 12233 12960.9 10/01/97 12220 11926 12529.3 11/01/97 12710 12014 13108.2 12/01/97 12735.4 12070 13333.6 01/01/98 13234.7 12321 13480.8 02/01/98 14232.6 13012 14451.7 03/01/98 14827.5 13502 15191.8 04/01/98 15230.8 13600.4 15344.6 05/01/98 14869.8 13204.3 15081.5 06/01/98 15539 13587.3 15694.1 07/01/98 15135 13435.1 15527.4 08/01/98 13064.5 11473.8 13282.8 09/01/98 14551.2 12881.1 14133.8 10/01/98 15305 13373 15283.3 11/01/98 16081 14064 16209.5 12/01/98 16962.2 15208.8 17143 01/01/99 16782.4 15458 17859.5 02/01/99 16367.9 15056.7 17304.6 03/01/99 16389.1 15443.3 17996.8 04/01/99 15274.7 14694 18693.7 05/01/99 15465.6 14615.4 18252.3 06/01/99 16187.9 15324.7 19265.3 07/01/99 15911 15343.1 18664.2 08/01/99 16517.2 15763.5 18570.3 09/01/99 15369.3 14625.3 18061.5 10/01/99 15847.3 15318.6 19204.8 11/01/99 16432 15964 19594.7 12/01/99 18047.3 16782.9 20746.8 01/01/00 19460.4 17981.2 19705.3 02/01/00 22700.6 20473.4 19332.9 03/01/00 19449.9 18364.6 21224.2 04/01/00 18471.5 18177.7 20585.8 05/01/00 17993.1 18507.2 20163.4 06/01/00 21859.8 21667.9 20660.6 07/01/00 22061 20998.4 20337.7 08/01/00 25438.5 22881.9 21600.3 AVERAGE ANNUAL TOTAL RETURNS FOR PERIODS ENDED 8/31/00 1 year 54.02% 3 year 31.21% Since Inception (12/4/96) 28.96% Note: Past performance is not predictive of future performance. Investment return and principle value of an investment will fluctuate so that an investor's shares upon redemption may be worth more or less than their original cost. 1 Name changed from Warburg Pincus Health Sciences Fund effecctive May 1, 2000. 2 Fiscal year end changed from October 31st to August 31st. 3 The Lipper Health/Biotechnology Funds Index is an equal-weighted performance index, adjusted for capital-gain distributions and income dividends, of the largest qualifying funds in this investment objective, and is compiled by Lipper Inc. 4 The S&P 500 Index is an unmanaged index (with no defined investment objective) of common stocks, includes reinvestment of dividends, and is a registered trademark of McGraw-Hill Co., Inc. 9 WARBURG PINCUS EUROPEAN EQUITY FUND SCHEDULE OF INVESTMENTS August 31, 2000 - -------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------- ------ COMMON STOCKS (84.2%) DENMARK (1.0%) COMMERCIAL SERVICES & SUPPLIES (1.0%) ISS A/S 4,605 $ 312,997 ----------- TOTAL DENMARK 312,997 ----------- FINLAND (4.4%) CAPITAL GOODS (1.0%) Metso Oyj 24,920 301,306 ----------- TECHNOLOGY HARDWARE & EQUIPMENT (1.1%) Nokia Oyj 7,488 328,662 ----------- TELECOMMUNICATION SERVICES (2.3%) Elisa Communications Oyj Cl. A 18,404 700,288 ----------- TOTAL FINLAND 1,330,256 ----------- FRANCE (16.3%) BANKS (2.4%) Banque Nationale de Paris 7,754 713,488 ----------- ENERGY (2.2%) Coflexip S.A. ADR 4,075 242,080 Total Fina S.A. Cl. B 2,903 431,265 ----------- 673,345 ----------- INSURANCE (2.5%) AXA S.A. 5,260 749,618 ----------- MATERIALS (1.5%) Pechiney S.A. Cl. A 9,950 455,566 ----------- MEDIA (2.6%) Lagardere S.C.A. 11,151 795,572 ----------- SOFTWARE & SERVICES (1.3%) Infogrames Entertainment S.A.** 5,000 145,802 Ubi Soft Entertainment S.A.** 4,444 231,127 376,929 ----------- TECHNOLOGY HARDWARE & EQUIPMENT (3.8%) Alcatel ADR 6,500 538,688 STMicroelectronics N.V. 9,600 588,899 1,127,587 ----------- TOTAL FRANCE 4,892,105 ----------- See Accompanying Notes to Financial Statements. 10 WARBURG PINCUS EUROPEAN EQUITY FUND SCHEDULE OF INVESTMENTS (CONT'D) August 31, 2000 - ------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------- ------ COMMON STOCKS (CONT'D) GERMANY (12.5%) BANKS (2.8%) Deutsche Bank AG 9,570 $ 837,197 ----------- INSURANCE (7.1%) Ergo Versicherungs Gruppe AG 4,700 593,345 Hannover Rueckversicherungs AG 9,190 747,580 Marschollek, Lautenschlaeger und Partner AG 5,764 781,474 2,122,399 ----------- UTILITIES (2.6%) E.On AG 16,700 800,251 ----------- Total Germany 3,759,847 ----------- HUNGARY (1.0%) BANKS (1.0%) OTP Bank Rt. GDR 144A 5,660 304,127 ----------- TOTAL HUNGARY 304,127 ----------- ITALY (3.4%) INSURANCE (1.5%) Riunione Adriatica di Sicurta S.p.A. 38,500 450,783 ----------- TRANSPORTATION (1.9%) Concessioni e Costruzioni Autostrade S.p.A. 81,251 557,657 ----------- TOTAL ITALY 1,008,440 ----------- NETHERLANDS (11.2%) BANKS (2.5%) ABN AMRO Holding NV 30,100 749,282 ----------- CAPITAL GOODS (1.5%) IHC Caland N.V. 8,450 439,474 ----------- ENERGY (2.0%) Petroplus International N.V. 40,495 590,427 ----------- FOOD & DRUG RETAILING (2.1%) Koninklijke Ahold N.V. 21,950 620,948 ----------- TECHNOLOGY HARDWARE & EQUIPMENT (3.1%) Koninklijke (Royal) Philips Electronics N.V. 19,394 944,867 ----------- TOTAL NETHERLANDS 3,344,998 ----------- PORTUGAL (1.4%) TELECOMMUNICATION SERVICES (1.4%) Portugal Telecom S.A. 40,960 426,784 ----------- TOTAL PORTUGAL 426,784 ----------- See Accompanying Notes to Financial Statements. 11 WARBURG PINCUS EUROPEAN EQUITY FUND SCHEDULE OF INVESTMENTS (CONT'D) August 31, 2000 - ------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------- ------ COMMON STOCKS (CONT'D) SPAIN (6.1%) BANKS (2.8%) Banco Bilbao Vizcaya S.A. 57,253 $ 850,542 ----------- FOOD & DRUG RETAILING (2.8%) Centros Comerciales Continente S.A.** 24,150 422,321 Centros Comerciales Pryca S.A.** 31,500 418,671 ----------- 840,992 ----------- MEDIA (0.5%) Grupo Prisa SA 5,950 142,560 ----------- TOTAL SPAIN 1,834,094 ----------- SWEDEN (3.9%) BANKS (2.0%) Nordic Baltic Holding (NBH) AB 85,900 596,261 ----------- TECHNOLOGY HARDWARE & EQUIPMENT (1.9%) Telefonaktiebolaget L.M. Ericsson Cl. B 28,066 566,601 ----------- TOTAL SWEDEN 1,162,862 ----------- UNITED KINGDOM (23.0%) BANKS (1.0%) LLoyds TSB Holdings Group plc 31,494 296,938 ----------- CAPITAL GOODS (3.4%) BAE Systems plc 91,400 570,514 Enodis plc 137,900 430,382 ----------- 1,000,896 ----------- ENERGY (1.4%) BP Amoco plc 46,670 428,140 ----------- INSURANCE (2.6%) Prudential Corporation plc 58,706 770,463 ----------- MEDIA (5.1%) EMI Group plc 77,300 718,693 Granada Media plc** 40,000 378,300 Reed International plc 51,750 444,248 ----------- 1,541,241 ----------- PHARMACEUTICALS & BIOTECHNOLOGY (3.5%) AstraZeneca Group plc 15,931 727,840 SmithKline Beecham plc 24,350 317,978 ----------- 1,045,818 ----------- See Accompanying Notes to Financial Statements. 12 WARBURG PINCUS EUROPEAN EQUITY FUND SCHEDULE OF INVESTMENTS (CONT'D) August 31, 2000 - ------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------- ------ COMMON STOCKS (CONT'D) UNITED KINGDOM (CONT'D) TECHNOLOGY HARDWARE & EQUIPMENT (1.4%) FirstGroup plc 116,900 $ 429,051 ----------- TELECOMMUNICATION SERVICES (2.2%) Vodafone Group plc 160,224 648,673 ----------- TRANSPORTATION (2.4%) Railtrack Group plc 50,400 721,587 ----------- TOTAL UNITED KINGDOM 6,882,807 ----------- TOTAL COMMON STOCKS (Cost $22,911,779) 25,259,317 ----------- Par (000) -------- SHORT-TERM INVESTMENT (13.6%) BBH Grand Cayman U.S. Dollar Time Deposit 5.710% 09/01/00 $4,090 4,090,000 ----------- (Cost $4,090,000) TOTAL INVESTMENTS AT VALUE (97.9%) (COST $27,001,779*) 29,349,317 OTHER ASSETS IN EXCESS OF LIABILITIES (2.1%) 657,806 ----------- TOTAL NET ASSETS (100.0%) $30,007,123 =========== * The cost for Federal income tax purposes at August 31, 2000 is $27,222,511. The gross appreciation (depreciation) on a tax basis is as follows: Gross Appreciation $ 2,830,382 Gross Depreciation (703,576) ----------- Net Appreciation $ 2,126,806 =========== ** Non-income producing securities. INVESTMENT ABBREVIATIONS ADR = American Depository Receipts GDR = Global Depository Receipts See Accompanying Notes to Financial Statements. 13 WARBURG PINCUS GLOBAL COMMUNICATIONS FUND SCHEDULE OF INVESTMENTS August 31, 2000 - ------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------- ------ COMMON STOCKS (98.4%) AUSTRALIA (2.3%) MEDIA (0.6%) News Corp. Ltd. ADR 62,500 $ 2,765,625 ----------- SOFTWARE & SERVICES (1.7%) Open Telecommunications, Ltd.** 6,043,461 7,822,153 ----------- TOTAL AUSTRALIA 10,587,778 ----------- BELGIUM (0.0%) TELECOMMUNICATION SERVICES (0.0%) Telinfo NV-Strip VVPR** 61 1 ----------- TOTAL BELGIUM 1 ----------- BERMUDA (2.6%) CAPITAL GOODS (1.1%) Tyco International Ltd. ADR 90,300 5,147,100 ----------- TECHNOLOGY HARDWARE & EQUIPMENT (1.2%) TyCom, Ltd. ADR** 134,200 5,586,075 ----------- TELECOMMUNICATION SERVICES (0.3%) Global Crossing, Ltd. ADR** 44,200 1,328,762 ----------- TOTAL BERMUDA 12,061,937 ----------- BRAZIL (3.1%) TELECOMMUNICATION SERVICES (3.1%) Celular crt Participacoes S.A. Pfd. A** 11,331,000 5,343,932 Embratel Participacoes S.A. ADR 118,300 2,587,812 Tele Centro Oeste Celular Participacoes S.A. ADR 214,000 2,728,500 Telecomunicacoes Brasileiras S.A. Pfd. Block ADR 42,600 3,908,550 ----------- 14,568,794 ----------- TOTAL BRAZIL 14,568,794 ----------- CANADA (4.7%) SOFTWARE & SERVICES (1.6%) Descartes Systems Group, Inc. (The)** 90,100 4,188,382 Descartes Systems Group, Inc. (The)** 71,800 3,325,237 ----------- 7,513,619 ----------- TECHNOLOGY HARDWARE & EQUIPMENT (1.8%) C-MAC Industries, Inc.** 52,000 3,727,750 Nortel Networks Corp. 57,000 4,649,062 ----------- 8,376,812 ----------- See Accompanying Notes to Financial Statements. 14 WARBURG PINCUS GLOBAL TELECOMMUNICATIONS FUND SCHEDULE OF INVESTMENTS (CONT'D) August 31, 2000 - ------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------- ------ COMMON STOCKS (CONT'D) CANADA (CONT'D) TELECOMMUNICATION SERVICES (1.3%) Axxent, Inc.** 580,000 $ 2,949,873 GT Group Telecom, Inc. Class B** 200,000 3,175,000 ----------- 6,124,873 ----------- TOTAL CANADA 22,015,304 ----------- FINLAND (2.6%) SOFTWARE & SERVICES (0.5%) Comptel Oyj 128,200 2,160,962 ----------- TECHNOLOGY HARDWARE & EQUIPMENT (0.6%) Nokia Oyj 37,000 1,623,999 Nokia Corp. ADR 30,700 1,379,581 ----------- 3,003,580 ----------- TELECOMMUNICATION SERVICES (1.5%) Elisa Communications Oyj Class A 183,773 6,992,723 ----------- TOTAL FINLAND 12,157,265 ----------- FRANCE (3.3%) CAPITAL GOODS (0.9%) Bouygues S.A. 71,540 4,499,831 ----------- TECHNOLOGY HARDWARE & EQUIPMENT (2.4%) Alcatel 106,500 8,715,539 Alcatel ADR 30,000 2,486,250 ----------- 11,201,789 ----------- TOTAL FRANCE 15,701,620 ----------- GREECE (0.7%) TELECOMMUNICATION SERVICES (0.7%) Hellenic Telecommunications Organization S.A. ADR 361,300 3,342,025 ----------- TOTAL GREECE 3,342,025 ----------- HONG KONG (1.1%) TELECOMMUNICATION SERVICES (1.1%) China Mobile (Hong Kong), Ltd.** 160,000 1,230,921 China Mobile (Hong Kong), Ltd. ADR** 108,000 4,164,750 ----------- 5,395,671 ----------- TOTAL HONG KONG 5,395,671 ----------- See Accompanying Notes to Financial Statements. 15 WARBURG PINCUS GLOBAL TELECOMMUNICATIONS FUND SCHEDULE OF INVESTMENTS (CONT'D) August 31, 2000 - ------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------- ------ COMMON STOCKS (CONT'D) INDIA (0.4%) TELECOMMUNICATION SERVICES (0.4%) Videsh Sanchar Nigam, Ltd. 144A GDR 162,700 $ 1,777,497 ----------- TOTAL INDIA 1,777,497 ----------- ITALY (1.4%) TELECOMMUNICATION SERVICES (0.6%) Olivetti S.p.A. 927,400 2,910,467 ----------- TRANSPORTATION (0.8%) Concessioni e Costruzioni Autostrade S.p.A. 524,100 3,597,098 ----------- TOTAL ITALY 6,507,565 ----------- JAPAN (7.8%) CAPITAL GOODS (2.2%) Furukawa Electric Co., Ltd. 321,000 10,325,090 ----------- CONSUMER DURABLES & APPAREL (1.0%) Sony Corp. 26,400 2,946,087 Sony Corp. ADR 14,400 1,645,200 ----------- 4,591,287 ----------- SOFTWARE & SERVICES (0.8%) Softbank Corp. 28,100 3,712,889 ----------- TECHNOLOGY, HARDWARE, & EQUIPMENT (2.1%) Matsushita Communication Industrial Co., Ltd. 36,700 5,076,364 Tokyo Electron, Ltd. 34,700 4,874,566 ----------- 9,950,930 ----------- Telecommunication Services (1.7%) NTT DoCoMo, Inc. 314 8,303,734 ----------- TOTAL JAPAN 36,883,930 ----------- MEXICO (1.7%) TELECOMMUNICATION SERVICES (1.7%) Grupo Iusacell S.A. de C.V. ADR** 159,232 2,030,208 Telefonos de Mexico S.A. de C.V. Cl. L ADR 111,800 6,086,112 ----------- 8,116,320 ----------- TOTAL MEXICO 8,116,320 ----------- See Accompanying Notes to Financial Statements. 16 WARBURG PINCUS GLOBAL TELECOMMUNICATIONS FUND SCHEDULE OF INVESTMENTS (CONT'D) August 31, 2000 - ------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------- ------ COMMON STOCKS (CONT'D) NETHERLANDS (0.8%) TELECOMMUNICATION SERVICES (0.8%) Completel Europe N.V.** 155,600 $ 1,359,828 United Pan-Europe Communications N.V.** 102,774 2,513,591 ----------- 3,873,419 ----------- TOTAL NETHERLANDS 3,873,419 ----------- PORTUGAL (1.6%) TELECOMMUNICATION SERVICES (1.6%) Portugal Telecom S.A. 458,720 4,779,650 Telecel-Comunicacoes Pessoais S.A.** 195,800 2,579,774 ----------- 7,359,424 ----------- TOTAL PORTUGAL 7,359,424 ----------- SINGAPORE (0.8%) TECHNOLOGY HARDWARE & EQUIPMENT (0.8%) Chartered Semiconductor Manufacturing Ltd. ADR** 43,100 3,658,112 ----------- TOTAL SINGAPORE 3,658,112 ----------- SOUTH KOREA (3.9%) TECHNOLOGY HARDWARE & EQUIPMENT (1.4%) Samsung Electronics Co. 27,200 6,709,768 ----------- TELECOMMUNICATION SERVICES (2.5%) Hanaro Telecom, Inc.** 352,300 1,849,341 Hansol M.com Co., Ltd.** 132,100 1,697,849 Korea Telecom Corp. ADR 112,100 4,245,787 SK Telecom Co., Ltd. ADR 158,210 4,054,131 ----------- 11,847,108 ----------- TOTAL SOUTH KOREA 18,556,876 ----------- SPAIN (0.8%) TELECOMMUNICATION SERVICES (0.8%) Telefonica S.A.** 93,300 1,791,663 Telefonica S.A. ADR** 36,551 2,094,829 ----------- 3,886,492 ----------- TOTAL SPAIN 3,886,492 ----------- SWEDEN (1.9%) TECHNOLOGY HARDWARE & EQUIPMENT (1.5%) Telefonaktiebolaget L.M. Ericsson Cl. B 262,200 5,293,338 Telefonaktiebolaget L.M. Ericsson ADR 100,000 2,050,000 ----------- 7,343,338 ----------- See Accompanying Notes to Financial Statements. 17 WARBURG PINCUS GLOBAL TELECOMMUNICATIONS FUND SCHEDULE OF INVESTMENTS (CONT'D) August 31, 2000 - ------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------- ------ COMMON STOCKS (CONT'D) SWEDEN (CONT'D) TELECOMMUNICATION SERVICES (0.4%) Tele1 Europe Holding AB** 150,300 $ 1,847,647 ----------- TOTAL SWEDEN 9,190,985 ----------- TAIWAN (2.4%) TECHNOLOGY HARDWARE & EQUIPMENT (2.4%) Realtek Semiconductor Corp.** 633,000 4,767,137 United Microelectronics Corp.** 2,500,000 6,637,920 ----------- 11,405,057 ----------- TOTAL TAIWAN 11,405,057 ----------- THAILAND (0.6%) TELECOMMUNICATION SERVICES (0.6%) TelecomAsia Corp. Public Co., Ltd.** 3,478,700 2,808,587 TelecomAsia Corp. Public Co., Ltd., Rights Strike .3077 THB** 1,599,978 0 ----------- 2,808,587 ----------- TOTAL THAILAND 2,808,587 ----------- UNITED KINGDOM (4.1%) SOFTWARE & SERVICES (0.5%) NDS Group plc ADR** 28,700 2,245,775 ----------- TELECOMMUNICATION SERVICES (3.6%) British Telecommunications plc 287,500 3,660,234 British Telecommunications plc ADR 3,800 485,450 COLT Telecom Group plc ADR** 20,763 2,813,386 Vodafone Group plc 1,445,042 5,850,307 Vodafone Group plc ADR 102,100 4,179,719 ----------- 16,989,096 ----------- TOTAL UNITED KINGDOM 19,234,871 ----------- UNITED STATES (49.8%) MEDIA (8.3%) AT&T Corp. - Liberty Media Group Class A** 219,000 4,681,125 Comcast Corp. - Special Class A** 200,000 7,450,000 Emmis Communications Corp.** 110,000 3,609,375 Fox Entertainment Group, Inc.** 100,600 2,911,112 Gemstar-TV Guide International, Inc.** 78,876 7,118,559 Infinity Broadcasting Corp.** 80,000 3,030,000 Time Warner, Inc. 63,597 5,437,543 Viacom, Inc. Class B** 70,335 4,734,425 ----------- 38,972,139 ----------- See Accompanying Notes to Financial Statements. 18 WARBURG PINCUS GLOBAL TELECOMMUNICATIONS FUND SCHEDULE OF INVESTMENTS (CONT'D) August 31, 2000 - ------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------- ------ COMMON STOCKS (CONT'D) United States (cont'd) SOFTWARE & SERVICES (3.8%) America Online** 60,108 $ 3,523,831 Go2Net, Inc.** 57,300 3,953,700 Microsoft Corp.** 67,000 4,677,437 Rhythms NetConnections, Inc.** 167,000 1,503,000 VeriSign, Inc.** 12,900 2,565,487 Yahoo, Inc.** 13,732 1,668,438 ----------- 17,891,893 ----------- TECHNOLOGY HARDWARE & EQUIPMENT (16.0%) Advanced Micro Devices, Inc.** 67,000 2,520,875 Applied Materials, Inc.** 60,000 5,178,750 Broadcom Corp. Class A** 20,424 5,106,000 Cisco Systems** 81,788 5,612,702 Gateway, Inc.** 57,000 3,881,700 General Motors Corp. Class H** 80,000 2,650,000 Harris Corp. 194,000 5,832,125 Intel Corp. 39,600 2,965,050 Lucent Technologies 111,000 4,641,188 Motorola, Inc. 137,900 4,973,019 PMC-Sierra, Inc.** 27,100 6,395,600 QUALCOMM, Inc.** 40,200 2,406,975 Sanmina Corp.** 65,400 7,717,200 SBA Communications Corp.** 75,000 3,346,875 Sun Microsystems, Inc.** 59,000 7,489,313 Texas Instruments, Inc. 70,600 4,725,788 ----------- 75,443,160 ----------- TELECOMMUNICATION SERVICES (21.7%) Advanced Fibre Communications, Inc.** 125,000 6,607,422 Allegiance Telecom, Inc.** 48,500 2,415,906 AT&T Corp. 73,000 2,299,500 AT&T Wireless Group** 200,000 5,237,500 BellSouth Corp. 70,300 2,623,069 Broadwing, Inc.** 132,600 3,704,513 Covad Communications Group, Inc.** 132,000 2,153,250 Crown Castle International Corp.** 87,500 3,035,156 EchoStar Communications Corp.** 125,500 6,118,125 Intermedia Communications, Inc.** 244,100 5,065,075 Leap Wireless International, Inc.** 59,500 4,722,813 Level 3 Communications, Inc.** 29,000 2,529,797 McLeodUSA, Inc. Class A**/# 284,200 4,493,913 Nextel Communications, Inc. Class A** 69,000 3,825,188 See Accompanying Notes to Financial Statements. 19 WARBURG PINCUS GLOBAL TELECOMMUNICATIONS FUND SCHEDULE OF INVESTMENTS (CONT'D) August 31, 2000 - ------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------- ------ COMMON STOCKS (CONT'D) UNITED STATES (CONT'D) NEXTLINK Communications, Inc.** 263,100 $ 9,224,944 Qwest Communications International, Inc.** 161,052 8,314,310 SBC Communications, Inc. 206,321 8,613,902 Time Warner Telecom, Inc. Class A** 86,800 5,636,575 Verizon Communications 111,532 4,865,584 Western Wireless Corp.** 52,200 2,668,725 WinStar Communications, Inc.** 80,000 2,150,000 WorldCom, Inc.** 169,292 6,179,158 ----------- 102,484,425 ----------- TOTAL UNITED STATES 234,791,617 ----------- TOTAL COMMON STOCKS (Cost $434,767,294) 463,881,147 ----------- TOTAL INVESTMENTS AT VALUE (98.4%) (Cost $434,767,294*) 463,881,147 OTHER ASSETS IN EXCESS OF LIABILITIES (1.6%) 7,574,305 ----------- TOTAL NET ASSETS (100.0%) $471,455,452 =========== * Cost for Federal income tax purposes at August 31, 2000 is $436,087,029. The gross appreciation (depreciation) on a tax basis is as follows: Gross Appreciation $74,010,817 Gross Depreciation (46,216,699) ----------- Net Appreciation $27,794,118 =========== ** Non-income producing securities. # Security or a portion thereof is out on loan. INVESTMENT ABBREVIATIONS ADR = American Depository Receipts GDR = Global Depository Receipts THB = Thailand Baht See Accompanying Notes to Financial Statements. 20 WARBURG PINCUS GLOBAL HEALTH SCIENCES FUND SCHEDULE OF INVESTMENTS August 31, 2000 - ------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------- ------ COMMON STOCKS (91.2%) ISRAEL (0.7%) PHARMACEUTICALS (0.7%) Teva Pharmaceutical Industries, Ltd. PLC ADR 10,700 $ 648,687 ----------- TOTAL ISRAEL 648,687 ----------- SWITZERLAND (1.8%) PHARMACEUTICALS (1.8%) Serono SA 1,400 1,642,266 ----------- TOTAL SWITZERLAND 1,642,266 ----------- UNITED STATES (88.7%) COMMUNICATIONS & MEDIA (1.1%) Healtheon WebMD Corp.** 56,000 987,000 ----------- FINANCIAL SERVICES (0.6%) Aetna, Inc. 9,800 548,187 ----------- HEALTHCARE (19.0%) Affymetrix, Inc.** 18,800 1,485,200 Allergan, Inc. 10,400 760,500 ALZA Corp.** 32,200 2,435,125 Baxter International, Inc. 16,000 1,332,000 Foundation Health Systems, Inc. Class A** 43,900 770,994 HCA-The Healthcare Co. 22,300 769,350 Health Management Associates, Inc. Class A** 150,000 2,446,875 Hooper Holmes, Inc. 161,800 1,891,037 Inhale Therapeutic Systems, Inc.** 12,600 636,300 LifePoint Hospitals, Inc.** 25,800 777,225 MiniMed, Inc.** 21,600 1,550,812 Tenet Healthcare Corp.** 21,500 666,500 UnitedHealth Group Inc. 9,500 897,750 Wellpoint Health Networks, Inc.** 9,200 794,075 ----------- 17,213,743 ----------- INDUSTRIAL MFG. & PROCESSING (6.9%) PE Corp - PE Biosystems Group 23,400 2,301,975 PE Corp. - Celera Genomics Group** 17,800 1,930,187 Waters Corp.** 25,400 2,020,887 ----------- 6,253,049 ----------- PHARMACEUTICALS (61.2%) Alkermes, Inc.** 19,200 888,000 Alpharma, Inc. Class A 19,000 1,075,875 American Home Products Corp. 14,000 758,625 Amgen, Inc.** 19,300 1,463,181 See Accompanying Notes to Financial Statements. 21 WARBURG PINCUS GLOBAL HEALTH SCIENCES FUND SCHEDULE OF INVESTMENTS (CONT'D) August 31, 2000 - ------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------- ------ COMMON STOCKS (CONT'D) UNITED STATES (CONT'D) Angiotech Pharmaceuticals, Inc.** 30,700 $ 1,389,175 Antigenics, Inc.** 26,100 440,437 Biogen, Inc.** 12,400 857,150 Biomarin Pharmaceutical, Inc.** 64,000 1,080,000 Cardinal Health, Inc. 20,600 1,685,338 Celgene Corp.** 27,600 2,042,400 Dyax Corp.** 56,000 1,960,000 Forest Laboratories, Inc.** 21,800 2,133,675 Genaissance Pharmaceuticals, Inc.** 31,000 691,688 Genentech, Inc.** 16,000 3,048,000 Genzyme Corp.** 18,600 1,396,163 Gilead Sciences, Inc.** 15,700 1,695,600 IDEC Pharmaceuticals Corp.** 20,000 2,792,500 Immunex Corp.** 32,100 1,613,025 Inspire Pharmaceuticals, Inc.** 74,700 1,307,250 Ivax Corp. 42,200 1,461,175 Jones Pharma, Inc. 32,700 1,169,025 King Pharmaceuticals, Inc.** 36,900 1,185,413 Lilly (Eli) & Co. 16,700 1,219,100 Medarex, Inc.** 13,500 1,491,750 Medicines Co.** 96,600 2,415,000 Medimmune, Inc.** 25,300 2,128,363 Merck & Co., Inc. 9,000 628,875 Neorx Corp.** 42,100 799,900 Pfizer, Inc. 95,725 4,140,106 Pharmacia Corp. 43,197 2,529,724 Pharsight Corp.** 135,500 1,304,188 QLT PhotoTherapeutics, Inc.** 22,100 1,636,781 Ribozyme Pharmaceuticals, Inc.** 27,900 805,613 Schering-Plough Corp. 11,700 469,463 Sepracor, Inc.** 7,000 770,000 United Therapeutics Corp.** 11,700 1,010,405 Watson Pharmaceuticals, Inc.** 32,000 1,974,000 ----------- 55,456,963 ----------- TOTAL UNITED STATES 80,458,942 ----------- TOTAL COMMON STOCKS (Cost $52,779,979) 82,749,895 ----------- See Accompanying Notes to Financial Statements. 22 WARBURG PINCUS GLOBAL HEALTH SCIENCES FUND SCHEDULE OF INVESTMENTS (CONT'D) August 31, 2000 - ------------------------------------------------------------------------------- NUMBER OF SHARES VALUE -------- ------ SHORT TERM INVESTMENTS (11.6%) Institutional Money Market Trust 7,627,041 $ 7,627,042 RBB Money Market Portfolio 2,937,717 2,937,717 ----------- TOTAL SHORT TERM INVESTMENTS (Cost $10,564,759) 10,564,759 ----------- TOTAL INVESTMENTS AT VALUE (102.8%) (Cost $63,344,738*) 93,314,654 LIABILITIES IN EXCESS OF OTHER ASSETS (-2.8%) (2,514,014) ----------- TOTAL NET ASSETS (100.0%) $90,800,640 =========== * Cost for Federal income tax purposes at August 31, 2000 is $63,417,871. The gross appreciation (depreciation) on a tax basis is as follows: Gross Appreciation $30,450,901 Gross Depreciation (554,118) ----------- Net Appreciation $29,896,783 =========== ** Non-income producing securities. INVESTMENT ABBREVIATIONS ADR = American Depository Receipt See Accompanying Notes to Financial Statements. 23 WARBURG PINCUS FUNDS STATEMENT OF ASSETS AND LIABILITIES August 31, 2000 - ------------------------------------------------------------------------------- GLOBAL GLOBAL EUROPEAN TELECOMMUNICATIONS HEALTH SCIENCES EQUITY FUND FUND FUND ------------ ------------- ------------ ASSETS Investments, at value (cost - $27,001,779, $434,767,294 and $63,344,738 respectively) $ 29,349,317 $ 463,881,147 $ 93,314,654 ------------ ------------- ------------ Foreign currency (cost - $555,694) -- 555,578 -- Cash 81,283 -- -- Collateral received for securities loaned -- 8,594,600 -- Receivable for investments sold 1,222,285 11,904,130 -- Receivable for Fund shares sold 580,301 2,890,621 660,567 Receivable from investment adviser 26,249 -- -- Deferred organizational/offering costs -- -- 7,863 Dividends and interest receivable 87,191 205,081 41,352 Prepaid expenses and other assets 38,713 85,768 17,689 ------------ ------------- ------------ Total Assets 31,385,339 488,116,925 94,042,125 ------------ ------------- ------------ LIABILITIES Payable upon return of securities loaned -- 8,594,600 -- Payable for investments purchased 1,247,125 2,943,797 3,078,494 Payable for Fund shares repurchased 45,703 1,751,342 38,520 Due to custodian -- 2,520,787 -- Advisory fee payable -- 303,941 29,392 Administration fee payable 1,257 19,672 6,586 Distribution fee payable 6,287 98,411 16,487 Accrued expenses payable 77,844 428,923 72,006 ------------ ------------- ------------ Total Liabilities 1,378,216 16,661,473 3,241,485 ------------ ------------- ------------ NET ASSETS Capital stock, $0.001 par value 2,518 6,823 3,619 Paid-in capital 23,347,336 429,535,968 52,228,372 Accumulated net realized gain from investments and foreign currency related transactions, if any 4,315,009 12,816,059 8,598,733 Net unrealized appreciation from investments and foreign currency related items 2,342,260 29,096,602 29,969,916 ------------ ------------- ------------ Net Assets $ 30,007,123 $ 471,455,452 $ 90,800,640 ============ ============= ============ COMMON SHARES Net assets $ 30,007,123 $ 471,455,452 $ 90,800,640 ------------ ------------- ------------ Shares outstanding 2,508,959 6,821,488 3,791,995 ------------ ------------- ------------ Net asset value, offering price and redemption price per share $ 11.96 $ 69.11 $ 23.95 ============ ============= ============
See Accompanying Notes to Financial Statements. 24 WARBURG PINCUS FUNDS STATEMENT OF OPERATIONS For the year of period ended August 31, 2000 - -------------------------------------------------------------------------------
GLOBAL GLOBAL EUROPEAN TELECOMMUNICATIONS HEALTH SCIENCES EQUITY FUND FUND FUND * ------------ ------------- ------------ INVESTMENT INCOME: Dividends $ 503,564 $ 1,371,530 $ 162,616 Interest 101,248 1,201,947 151,586 Securities lending 12,131 203,546 -- Foreign taxes withheld (74,468) (77,534) (672) ------------ ------------- ------------ Total Investment Income 542,475 2,699,489 313,530 ------------ ------------- ------------ EXPENSES: Investment advisory fees 309,531 3,596,187 479,215 Administration fees 69,148 803,240 96,502 Printing fees 150,218 106,833 24,374 Custodian fees 87,330 212,303 12,599 Distribution fees 77,089 899,136 119,804 Registration fees 74,602 163,236 33,522 Transfer agent fees 73,908 484,566 88,524 Interest expense 20,519 -- 422 Audit fees 15,828 13,869 15,150 Legal fees 12,002 33,125 15,573 Directors fees 9,325 8,042 9,458 Insurance expense 854 1,657 1,027 Offering/Organizational costs -- -- 4,941 Miscellaneous fees 9,356 30,003 6,007 ------------ ------------- ------------ 909,710 6,352,197 907,118 Less: fees waived, expenses reimbursed and transfer agent offsets (459,850) (447,171) (145,165) ------------ ------------- ------------ Total Expenses 449,860 5,905,026 761,953 ------------ ------------- ------------ Net Investment Income/(Loss) 92,615 (3,205,537) (448,423) ------------ ------------- ------------ REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY RELATED ITEMS Net realized gain/(loss) from: Security transactions 6,222,283 18,226,203 9,295,075 Foreign exchange transactions (259,418) (462,242) (3,322) ------------ ------------- ------------ 5,962,865 17,763,961 9,291,753 ------------ ------------- ------------ Net change in unrealized appreciation/(depreciation): Investments 1,398,248 24,011,051 18,249,726 Translation of assets and liabilities in foreign currencies (9,178) (17,422) -- ------------ ------------- ------------ 1,389,070 23,993,629 18,249,726 ------------ ------------- ------------ Net gain on investments and foreign currency transactions 7,351,935 41,757,590 27,541,479 ------------ ------------- ------------ Net increase in net assets resulting from operations $ 7,444,550 $ 38,552,053 $ 27,093,056 ============ ============= ============ * For the period November 1, 1999 to August 31, 2000.
See Accompanying Notes to Financial Statements. 25 WARBURG PINCUS FUNDS STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------
EUROPEAN EQUITY FUND GLOBAL TELECOMMUNICATIONS FUND ----------------------------------- ----------------------------------- FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE YEAR ENDED JANUARY 28, 1999* ENDED ENDED AUGUST 31, 2000 TO AUGUST 31, 1999 AUGUST 31, 2000 AUGUST 31, 1999 --------------- ------------------ --------------- ------------------ FROM OPERATIONS: Net investment income/(loss) $ 92,615 $ 213,741 $ (3,205,537) $ (67,321) Net gain/(loss) on investments and foreign currency transactions 7,351,935 (865,652) 41,757,590 7,197,021 ------------ ------------ ------------- ----------- Net increase/(decrease) in net assets resulting from operations 7,444,550 (651,911) 38,552,053 7,129,700 ------------ ------------ ------------- ----------- FROM DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional shares (667) -- -- -- Common shares (134,704) -- -- -- Net realized capital gains: Institutional shares -- -- -- -- Common shares -- -- (3,754,559) (179,290) ------------ ------------ ------------- ----------- Net decrease in net assets from dividends and distributions (135,371) -- (3,754,559) (179,290) ------------ ------------ ------------- ----------- FROM CAPITAL SHARE TRANSACTIONS: Proceeds from sale of shares 125,018,796 40,739,940 737,422,782 68,055,242 Reinvestment of dividends and distributions 132,898 -- 3,567,097 167,194 Net asset value of shares redeemed (127,110,194) (15,431,585) (369,497,412) (10,725,448) ------------ ------------ ------------- ----------- Net increase/(decrease) in net assets from capital share transactions (1,958,500) 25,308,355 371,492,467 57,496,988 ------------ ------------ ------------- ----------- Total increase/(decrease) in net assets 5,350,679 24,656,444 406,289,961 64,447,398 NET ASSETS: Beginning of period 24,656,444 -- 65,165,491 718,093 ------------ ------------ ------------- ----------- End of period $ 30,007,123 $ 24,656,444 $ 471,455,452 $65,165,491 ============ ============ ============= =========== Undistributed net investment income $ -- $ 135,265 $ -- -- ============ ============ ============= =========== * Inception Date ** Fiscal year end changed from October 31st to August 31.
GLOBAL HEALTH SCIENCES FUND ---------------------------------------- FOR THE PERIOD FOR THE YEAR NOVEMBER 1, 1999 ENDED TO AUGUST 31, 2000** OCTOBER 31, 1999 -------------------- ------------------ FROM OPERATIONS: Net investment income/(loss) $ (448,423) $ (401,889) Net gain/(loss) on investments and foreign currency transactions 27,541,479 2,959,345 ----------- ----------- Net increase/(decrease) in net assets resulting from operations 27,093,056 2,557,456 ----------- ----------- FROM DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS: Net investment income: Institutional shares -- -- Common shares -- -- Net realized capital gains: Institutional shares -- -- Common shares -- -- ----------- ----------- Net decrease in net assets from dividends and distributions -- -- ----------- ----------- FROM CAPITAL SHARE TRANSACTIONS: Proceeds from sale of shares 83,655,931 35,244,741 Reinvestment of dividends and distributions -- -- Net asset value of shares redeemed (67,522,268) (54,564,366) ----------- ----------- Net increase/(decrease) in net assets from capital share transactions 16,133,663 (19,319,625) ----------- ----------- Total increase/(decrease) in net assets 43,226,719 (16,762,169) NET ASSETS: Beginning of period 47,573,921 64,336,090 ----------- ----------- End of period $90,800,640 $47,573,921 =========== =========== Undistributed net investment income $ -- $ -- =========== =========== * Inception Date ** Fiscal year end changed from October 31st to August 31.
See Accompanying Notes to Financial Statements. 26-27 WARBURG PINCUS EUROPEAN EQUITY FUNDS FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout each Period) - -------------------------------------------------------------------------------
COMMON INSTITUTIONAL ------------------------------------ -------------------------------------- FOR THE YEAR FOR THE PERIOD FOR THE PERIOD FOR THE PERIOD ENDED JANUARY 28, 1999* ENDED JANUARY 28, 1999* AUGUST 31, 2000 TO AUGUST 31, 1999 AUGUST 29, 2000** TO AUGUST 31, 1999 --------------- ------------------ ----------------- ------------------ PER SHARE DATA Net asset value, beginning of period $ 9.79 $ 10.00 $ 9.80 $ 10.00 ---------- ---------- ---------- ---------- INVESTMENT ACTIVITIES: Net investment income 0.03 0.08 0.07 0.09 Net gain/(loss) on investments and foreign currency transactions (both realized and unrealized) 2.19 (0.29) 2.29 (0.29) ---------- ---------- ---------- ---------- Total from investment operations 2.22 (0.21) 2.36 (0.20) ---------- ---------- ---------- ---------- Less Dividends and Distributions: Dividends from net investment income (0.05) -- (0.07) -- Distributions from net realized capital gains -- -- -- -- ---------- ---------- ---------- ---------- Total dividends and distributions (0.05) -- (0.07) -- ---------- ---------- ---------- ---------- Net asset value, end of period $ 11.96 $ 9.79 $ 12.09 $ 9.80 ========== ========== ========== ========== Total return 22.69% (2.10)%3 24.07%3 (2.00)%3 Ratios/Supplemental Data: Net assets, end of period (000s omitted) $ 30,007 $ 24,588 $ -- $ 98 Ratio of expenses to average net assets 1.46%1,2 1.46%1,4 1.16%1,2,4 1.16%1,4 Ratio of net investment income to average net assets 0.30% 1.41%4 0.59%4 1.67%4 Portfolio turnover rate 186% 161%3 186%3 161%3 1 Without the voluntary waiver of advisory fees and administration fees, the ratios of expenses to average net assets for the Common Class would have been 2.93% for the year ended August 31, 2000 and 2.64% annualized for the period ended August 31, 1999. Without the voluntary waiver of advisory fees and administration fees, the ratios of expenses to average net assets for the Institutional Class would have been 2.59% annualized for the period ended August 29, 2000 and 2.29% annualized for the period ended August 31, 1999. 2 Interest earned on uninvested cash balances is used to offset portions of the transfer agent expense. These arrangements resulted in a reductive to net expense ratio by .01% for the year or period ended August 31, 2000. The operating expense ratio after these arrangements was 1.45% for the Common Class for the year ended August 31, 2000 and 1.15% annualized for the Institutional Class for the period ended August 29, 2000. 3 Not Annualized. 4 Annualized. * Inception Date. ** Last day of operations.
See Accompanying Notes to Financial Statements. 28 WARBURG PINCUS GLOBAL TELECOMMUNICATIONS FUND FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout each Period) - --------------------------------------------------------------------------------
COMMON --------------------------------------------------------- FOR THE PERIOD FOR THE YEAR ENDED AUGUST 31, DECEMBER 4, 1996* ------------------------------------- TO AUGUST 31, 2000 1999 1998 1997 ----------- ----------- ----------- ----------------- PER SHARE DATA Net asset value, beginning of period $ 41.22 $ 20.54 $ 17.30 $ 15.00 -------- -------- -------- ---------- INVESTMENT ACTIVITIES: Net investment income/(loss) (0.44) (0.04) (0.01) 0.02 Net gain on investments and foreign currency transactions (both realized and unrealized) 29.56 23.56 4.29 2.28 -------- -------- -------- ---------- Total from investment operations 29.12 23.52 4.28 2.30 -------- -------- -------- ---------- LESS DIVIDENDS AND DISTRIBUTIONS: Dividends from net investment income -- -- -- -- Distributions from net realized capital gains (1.23) (2.84) (1.04) -- -------- -------- -------- ---------- Total dividends and distributions (1.23) (2.84) (1.04) -- -------- -------- -------- ---------- NET ASSET VALUE, END OF PERIOD $ 69.11 $ 41.22 $ 20.54 $ 17.30 ======== ======== ======== ========== Total return 70.99% 120.73% 25.38% 15.33%3 RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000s omitted) $471,455 $ 65,165 $ 718 $ 569 Ratio of expenses to average net assets 1.66%1,2 1.65%1 1.65%1 1.65%1,4 Ratio of net investment income/(loss) to average net assets (0.89)% (0.35)% (0.03)% 0.16%4 Portfolio turnover rate 143% 203% 169% 43%3 - -------------------- 1 Without the voluntary waiver of advisory fees and administration fees, the ratios of expenses to average net assets for the Common Class would have been 1.77%, 2.52% and 6.86% for the years ended August 31, 2000, 1999 and 1998, respectively, and 8.38% annualized for the period ended August 31, 1997. 2 Interest earned on uninvested cash balances is used to offset portions of the transfer agent expense. These arrangements resulted in a reduction to the net expense ratio by .02% for the year ended August 31, 2000. The operating expense ratio after reflecting these arrangements was 1.64% for the year ended August 31, 2000. 3 Not Annualized. 4 Annualized. * Inception Date.
See Accompanying Notes to Financial Statements. 29 WARBURG PINCUS GLOBAL HEALTH SCIENCES FUND FINANCIAL HIGHLIGHTS (For a Share Outstanding Throughout each Period) - --------------------------------------------------------------------------------
COMMON ------------------------------------------------------------------- FOR THE PERIOD FOR THE PERIOD NOVEMBER 1, 1999 FOR THE YEAR ENDED OCTOBER 31, DECEMBER 31, 1996* TO AUGUST 31, ------------------------------- TO OCTOBER 31, 2000** 1999 1998 1997 ---------- ---------- ----------- ---------- PER SHARE DATA Net asset value, beginning of period $ 14.92 $ 14.41 $ 12.22 $ 10.00 -------- -------- -------- -------- INVESTMENT ACTIVITIES: Net investment loss (0.08) (0.13) (0.06) (0.02) Net gains on investments and foreign currency transactions (both realized and unrealized) 9.11 0.64 2.97 2.24 -------- -------- -------- -------- Total from investment activities 9.03 0.51 2.91 2.22 -------- -------- -------- -------- LESS DIVIDENDS AND DISTRIBUTIONS: Dividends from net investment income -- -- (0.04) -- Distributions from net realized capital gains -- -- (0.68) -- -------- -------- -------- -------- Total dividends and distributions -- -- (0.72) -- -------- -------- -------- -------- NET ASSET VALUE, END OF PERIOD $ 23.95 $ 14.92 $ 14.41 $ 12.22 ======== ======== ======== ======== Total return 60.52%1 3.54% 25.25% 22.20%1 RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000s omitted) $ 90,801 $ 47,574 $ 64,336 $ 18,246 Ratio of expenses to average net assets(4) 1.61%2,3 1.59%3 1.59%3 1.59%2,3 Ratio of net investment income/ (loss) to average net assets (0.94)%2 0.62% (0.58)% (0.24)%2 Portfolio turnover rate 106%1 146% 63% 160%1 - ------------------ 1 Not Annualized. 2 Annualized. 3 Without the voluntary waiver of advisory fees and administration fees, the ratios of expenses to average net assets for the Common Class would have been 1.89% annualized for the period November 1, 1999 to August 31, 2000, 1.88% and 1.97% for the years ended October 31, 1999 and 1998, respectively, and 3.42% annualized for the period December 31, 1996 to October 31, 1997. 4 Interest earned on uninvested cash balances is used to offset positions of the transfer agent expense. These arrangements resulted in a reduction to the Common Shares net expense ratio by .02% annualized for the period November 1, 1999 to August 31, 2000. These arrangements had no affect on the fund's expense ratio for the previous periods. The Common Shares operating expense ratio after reflecting these arrangements was 1.59% annualized for the period November 1, 1999 to August 31, 2000. * Inception Date. ** Effective May 1, 2000, Global Health Sciences changed its fiscal and tax year ends from October 31st to August 31st.
See Accompanying Notes to Financial Statements. 30 WARBURG PINCUS FUNDS NOTES TO FINANCIAL STATEMENTS August 31, 2000 - -------------------------------------------------------------------------------- NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Warburg Pincus Funds covered in this report are comprised of Warburg, Pincus European Equity Fund, Inc. ("European Equity"), Warburg, Pincus Global Telecommunications Fund, Inc. ("Global Telecommunications") and Warburg, Pincus Global Health Sciences Fund, Inc. (formerly, Warburg Pincus Health Sciences Fund, Inc.) ("Global Health Sciences") (each, a "Fund" and collectively, the "Funds"), which are registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as non-diversified (other than European Equity which is diversified), open-end management investment companies. Each Fund is authorized to offer three classes of shares: Common, Advisor and Institutional, although only Common shares of each Fund are currently offered. The Institutional shares for European Equity were exchanged for common shares of the same Fund and ceased operations on August 29, 2000. Common shares for each Fund bear expenses paid pursuant to a shareholder servicing and distribution agreement at an annual rate not to exceed .25% of the average daily net asset value of the Fund's outstanding Common shares. In addition, the Common shares bear a co-administration fee. Global Health Sciences changed its fiscal and tax year ends from October 31st to August 31st, which was approved by the Fund's Board of Directors on May 1, 2000. A) SECURITY VALUATION -- The net asset value of each Fund is determined daily as of the close of regular trading on The New York Stock Exchange Inc. Each Fund's securities for which market quotations are readily available are valued at market value, which is currently determined using the last reported sales price. If no sales are reported, as in the case of some securities traded over-the-counter, the securities are valued at the mean between the last reported bid and asked prices. All other securities and assets are valued as determined in good faith by the Fund's Board of Directors. Short-term obligations with maturities of 60 days or less are valued at amortized cost, which approximates market value. B) FOREIGN CURRENCY TRANSACTIONS -- Transactions denominated in foreign currencies are recorded in each Fund's records at the current prevailing exchange rates. Asset and liability accounts that are denominated in a foreign currency are adjusted daily to reflect current exchange rates. Transaction gains or losses resulting from changes in exchange rates during the reporting period or upon settlement of the foreign currency transaction are reported in operations for the current period. It is not practical to isolate that portion of both realized and unrealized gains and losses on investments in the statement of 31 WARBURG PINCUS FUNDS NOTES TO FINANCIAL STATEMENTS (CONT'D) August 31, 2000 - -------------------------------------------------------------------------------- NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONT'D) operations that result from fluctuations in foreign currency exchange rates. Each Fund reports certain foreign currency related transactions as components of realized gains for financial reporting purposes, whereas such components are treated as ordinary income (loss) for Federal income tax purposes. C) SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security transactions are accounted for on the trade date. The cost of investments sold is determined by use of the specific identification method for both financial reporting and income tax purposes. Interest income is recorded on the accrual basis. Dividends are recorded on the ex-dividend date. Certain expenses are class specific expenses and vary by class. Expenses not directly attributable to a specific Fund or class are allocated based on relative net assets of each Fund and class, respectively. D) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- 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 expense. Each Fund will distribute substantially all of its net realized capital gains and all net investment income, if any, to its shareholders at least annually. The character of distributions made during the year for net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes due to generally accepted accounting principles (GAAP) and tax differences in the character of income and expense recognition. These differences are primarily due to differing treatments for net operating losses and forward foreign currency contracts. To the extent these differences are permanent in nature, such amounts are reclassified within capital accounts based on U.S. tax-basis treatment. Temporary differences do not require reclassification. At August 31, 2000, European Equity, Global Telecommunications and Global Health Sciences reclassified $(92,509), $3,205,537 and $448,423, respectively, from accumulated net realized gain/(loss) to undistributed net investment income. 32 WARBURG PINCUS FUNDS NOTES TO FINANCIAL STATEMENTS (CONT'D) August 31, 2000 - -------------------------------------------------------------------------------- NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONT'D) E) FEDERAL INCOME TAXES -- No provision is made for Federal taxes as it is each Fund's intention 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. F) USE OF ESTIMATES -- The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. G) REPURCHASE AGREEMENTS -- Money market instruments may be purchased from banks and non-bank dealers subject to the seller's agreement to repurchase them at an agreed upon date and price. Collateral for repurchase agreements may have longer maturities than the maximum permissible remaining maturity of portfolio investments. The seller will be required on a daily basis to maintain the value of the securities subject to the agreement at not less than the repurchase price. The agreements are conditional upon the collateral being deposited under the Federal Reserve book-entry system or held in a separate account by each Fund's custodian or an authorized securities depository. H) SECURITIES LENDING -- Loans of the securities are required at all times to be secured by collateral at least equal to 102% of the market value of domestic securities on loan including any accrued interest thereon and 105% of the market value of foreign securities on loan including any accrued interest thereon. Cash collateral received by the Fund in connection with securities lending activity is invested in the Boston Global Investment Trust. However, in the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral may be subject to legal proceedings. The market value of securities on loan to brokers and the value of collateral held by each Fund with respect to such loans (including right to draw on letter of credit) at August 31, 2000 is as follows: MARKET VALUE OF VALUE OF FUND SECURITIES LOANED COLLATERAL RECORDED ---------------------------- ----------------- ------------------- Global Telecommunications $8,394,763 $8,594,60 33 WARBURG PINCUS FUNDS NOTES TO FINANCIAL STATEMENTS (CONT'D) August 31, 2000 - -------------------------------------------------------------------------------- NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONT'D) I) OTHER -- Securities denominated in currencies other than U.S. dollars are subject to changes in value due to fluctuations in exchange rates. Some countries in which the Funds invest require governmental approval for the repatriation of investment income, capital or the proceeds of sales of securities by foreign investors. In addition, if there is a deterioration in a country's balance of payments or for other reasons, a country may impose temporary restrictions on foreign capital remittances abroad. The securities exchanges of certain foreign markets are substantially smaller, less liquid and more volatile than the major securities markets in the United States. Consequently, acquisition and disposition of securities by each Fund may be inhibited. In addition, a significant proportion of the aggregate market value of equity securities listed on the major securities exchanges in emerging markets are held by a smaller number of investors. This may limit the number of shares available for acquisition or disposition by a Fund. NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES Pursuant to Investment Advisory Agreements, Credit Suisse Asset Management, LLC ("CSAM") an indirect, wholly-owned subsidiary of Credit Suisse Group, serves as investment advisor for each of the three Funds described herein. For its advisory services, CSAM is entitled to receive a fee, computed daily and payable monthly at 1.00% of average daily net assets of each Fund. CSAM may, at its discretion, voluntarily waive all or any portion of its advisory fee for any of the Funds. For the year or period ended August 31, 2000 advisory fees and waivers for each of the three investment Funds were as follows: GROSS NET FUND ADVISORY FEE WAIVER ADVISORY FEE ---------------------- ------------ ----------- ------------ European Equity $ 309,531 $(309,531) $ 0 Global Telecommunications 3,596,187 (208,789) 3,387,398 Global Health Sciences 479,215 (108,512) 370,703 34 WARBURG PINCUS FUNDS NOTES TO FINANCIAL STATEMENTS (CONT'D) August 31, 2000 - -------------------------------------------------------------------------------- NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES -- (CONT'D) CSAM reimbursed expenses of European Equity in the amount of $93,965 for the year ended August 31, 2000. For its sub-advisory services, CSAM pays Credit Suisse Asset Management Limited ("CSAM Limited"), an indirect, wholly-owned subsidiary of Credit Suisse Group, an annual fee equal to .50% of the net quarterly amount (after fee waivers and reimbursements) received by CSAM for CSAM's services as European Equity's adviser. For the year ended August 31, 2000, CSAM Limited was not entitled to receive any fees from CSAM for sub-advisory services provided to European Equity, all of which fees were waived. State Street Bank and Trust Company ("State Street"), serves as each Fund's transfer and dividend disbursement agent. State Street has delegated most of its Fund service obligations to Boston Financial Data Services, Inc. (BFDS), a 50% owned subsidiary of State Street. The Funds have an arrangement with their transfer agent whereby interest earned on uninvested cash balances was used to offset a portion of their transfer agent expenses. For the year or period ended August 31, 2000, the Funds received credits or reimbursements under this arrangement as follows: FUND AMOUNT ---------------------- -------- European Equity $ 2,623 Global Telecommunications 58,573 Global Health Sciences 11,236 Counsellors Fund Services, Inc. ("CFSI"), a wholly-owned subsidiary of Credit Suisse Asset Management, LLC. served as co-administrator of each Fund (except Global Health Sciences) until November 1, 1999. On November 1, 1999 Credit Suisse Asset Management Securities, Inc. ("CSAMSI") replaced CFSI as co-administrator to each Fund. PFPC Inc. ("PFPC"), an indirect, wholly-owned subsidiary of PNC Financial Services Group, Inc., also serves as each Fund's co-administrator. For administration services, each Fund, except Global Telecommunications, pays CSAMSI a fee calculated at an annual rate of .10% of the Fund's average daily net assets of the Common shares. For Global Telecommunications, CSAMSI is entitled to receive a fee calculated at an annual rate of .05% of the Fund's first $125 million in average daily nets assets of the Common shares and .10% of average daily net assets of the Common shares over $125 million. No compensation is payable by the Funds to CSAMSI for co-administration services for the Institutional shares. 35 WARBURG PINCUS FUNDS NOTES TO FINANCIAL STATEMENTS (CONT'D) August 31, 2000 - -------------------------------------------------------------------------------- NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES -- (CONT'D CFSI, at its discretion, voluntarily waived a portion of its co-administration fees for the Funds. For the period September 1, 1999 to October 31, 1999, co-administration fees earned and waived by CFSI on the Common shares were as follows: GROSS NET FUND CO-ADMINISTRATION FEE WAIVER CO-ADMINISTRATION FEE --------------------- ---------------- ---------- --------------- European Equity $ 3,988 $ (1,995) $ 1,993 Global Telecommunications 6,554 -- 6,554 CSAMSI may, at its discretion, voluntarily waive all or any portion of its administrative fee for any of the Funds. For the period November 1, 1999 to August 31, 2000, co-administrative service fees earned and waived CSAMSI on the Common shares were as follows: GROSS NET FUND CO-ADMINISTRATION FEE WAIVER CO-ADMINISTRATION FEE --------------------- ---------------- ---------- --------------- European Equity $ 26,847 $(13,423) $ 13,424 Global Telecommunications 353,064 (179,809) 173,255 Global Health Sciences 47,921 -- 47,921 For administration services, PFPC received a fee for the period September 1, 1999 to July 31, 2000 calculated on each Fund's average daily net assets, subject to a minimum annual fee and exclusive of out-of-pocket expenses, as follows: FUND ANNUAL RATE ---------------------- -------------------------- European Equity .12% for first $250 million .10% for next $250 million .08% for next $250 million .05% for over $750 million Global Telecommunications .125% Global Health Sciences .10% for first $500 million .075% for next $1 billion .05% for over $1.5 billion As of August 1, 2000, PFPC receives a fee for administration services calculated at an annual rate of .11% of each Fund's first $500 million in average daily net assets .09% of the next $1 billion in average daily net assets, and .07% of average daily net assets over $1.5 billion, subject to a minimum annual fee and exclusive of out of pocket expenses. PFPC may, at its discretion, voluntarily waive all or any portion of it administration fee for any of the Funds. For the year or period ended August 31, 2000, the co-administration fees earned and waived by PFPC were as follows: 36 WARBURG PINCUS FUNDS NOTES TO FINANCIAL STATEMENTS (CONT'D) August 31, 2000 - -------------------------------------------------------------------------------- NOTE 2. TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES -- (CONT'D) GROSS CO-ADMINISTRATIVE NET CO-ADMINISTRATIVE FUND SERVICE FEE WAIVER SERVICE FEE --------------------- ------------------ --------- ----------- European Equity $ 38,313 $ (38,313) $ 0 Global Telecommunications 443,622 -- 443,622 Global Health Sciences 48,581 (25,417) 23,164 In addition to serving as each Funds co-administrator, CSAMSI served as distributor of each Fund's shares until January 1, 2000. On January 1, 2000, Provident Distributors, Inc. ("PDI") replaced CSAMSI as distributor to each fund. On August 1, 2000, CSAMSI replaced PDI as distributor to fund. No compensation is payable by any of the Funds to PDI or CSAMSI for distribution services, but CSAMSI receives compensation from each Fund's Common shares under the co-administration agreement for shareholder servicing and distribution. For the Shareholder Servicing and Distribution Plan on the Common shares, CSAMSI receives a fee calculated at an annual rate of .25% of the average daily net assets of the Common shares of each Fund. For the year or period ended August 31, 2000, shareholder services fees, earned by CSAMSI were as follows: FUND DISTRIBUTION FEE --------------------- ---------------- European Equity $ 77,089 Global Telecommunications 899,136 Global Health Sciences 119,804 NOTE 3. PURCHASES AND SALES OF SECURITIES For the year or period ended August 31, 2000, purchases and sales of investment securities (other than short-term investments) were as follows: INVESTMENT SECURITIES ---------------------------- FUND PURCHASES SALES --------------------- -------------- ------------ European Equity $ 51,855,094 $57,290,665 Global Telecommunications 834,443,375 473,207,962 Global Health Sciences 67,996,218 58,443,790 37 WARBURG PINCUS FUNDS NOTES TO FINANCIAL STATEMENTS (CONT'D) August 31, 2000 - -------------------------------------------------------------------------------- NOTE 4. CAPITAL SHARES Transactions in capital shares for each period were as follows:
EUROPEAN EQUITY FUND ----------------------------------------------------------------------------------------------- COMMON INSTITUTIONAL --------------------------------------------- ---------------------------------------------- FOR THE PERIOD FOR THE FOR THE PERIOD FOR THE YEAR ENDED JANUARY 28, 1999* PERIOD ENDED JANUARY 28, 1999* AUGUST 31, 2000 THROUGH AUGUST 31, 1999 AUGUST 29, 2000** THROUGH AUGUST 31, 1999 ----------------------------- ------------------------ ------------------ ----------------------- SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE ----------- ------------- --------- ----------- ------- --------- ------- --------- Shares sold/ exchanged 10,330,170 $ 125,018,796 4,115,201 $40,639,910 -- $ -- 10,003 $ 100,030 Shares issued in reinvestment of dividends 11,320 132,331 -- -- 48 567 -- -- Shares repurchased (10,342,282 (126,988,697) (1,605,450) (15,431,585 (10,051) (121,497) -- -- ----------- ------------- --------- ----------- ------- --------- ------- --------- Net increase/ (decrease) (792) $ (1,837,570) 2,509,751 $25,208,325 (10,003) $(120,930) 10,003 $ 100,030 =========== ============= ========= =========== ======= ========= ======= =========
GLOBAL TELECOMMUNICATIONS FUND --------------------------------------------------- COMMON --------------------------------------------------- FOR THE YEAR ENDED FOR THE YEAR ENDED AUGUST 31, 2000 AUGUST 31, 1999 -------------------- -------------------- SHARES VALUE SHARES VALUE ---------- ------------- --------- ------------ Shares sold 10,430,600 $ 737,422,782 1,820,386 $ 68,055,242 Shares issued in reinvestment of dividends 57,720 3,567,097 5,883 167,194 Shares repurchased (5,247,593) (369,497,412) (280,472) (10,725,448) ---------- ------------- --------- ------------ Net increase 5,240,727 $ 371,492,467 1,545,79 $ 57,496,988 ========== ============= ========= ============ *Inception Date. **Ceased operations. 38 WARBURG PINCUS FUNDS NOTES TO FINANCIAL STATEMENTS (CONT'D) August 31, 2000 - -------------------------------------------------------------------------------- NOTE 4. CAPITAL SHARES -- (CONT'D) GLOBAL HELATH SCIENCES FUND --------------------------------------------------- COMMON --------------------------------------------------- FOR THE PERIOD NOVEMBER 1, 1999 FOR THE YEAR ENDED TO AUGUST 31, 2000 AUGUST 31, 1999 -------------------- --------------------- SHARES VALUE SHARES VALUE ---------- ------------- --------- ------------ Shares sold 4,232,530 $ 83,655,931 2,314,620 $ 35,244,741 Shares issued in reinvestment of dividends -- -- -- -- Shares repurchased (3,628,441) (67,522,268) (3,590,606) (54,564,366) ---------- ------------- --------- ------------ Net increase/(decrease) 604,089 $ 16,133,663 (1,275,986) $(19,319,625) ========== ============= ========= ============ ***Effective May 1, 2000, GlobalHealth Sciences Fund changed its fiscal and tax year ends from October 31st to August 31st, which was approved by the Fund's Board of Directors on May 1, 2000. On August 31, 2000, the number of shareholders that held 5% or more of the outstanding shares are as follows: NUMBER OF APPROXIMATE PERCENTAGE SHAREHOLDERS OF OUTSTANDING SHARES ------------ --------------------- European Equity Common Shares 2 78.75% Global Telecommunications Common Shares 2 56.80 Global Health Sciences Common Shares 2 48.95 NOTE 5. FORWARD FOREIGN CURRENCY CONTRACTS The Funds will generally enter into forward foreign currency exchange contracts as a way of managing foreign exchange rate risk and enhance total return. Each Fund may enter into these contracts to fix the U.S. dollar value of a security that it has agreed to buy or sell for the period between the date the trade was entered into and the date the security is delivered and paid for. Each Fund may also use these contracts to hedge the U.S. dollar value of securities denominated in foreign currencies that it already owns. The Fund may enter into these contracts for the purchase or sale of a specific foreign currency at a fixed price on a future date as a hedge or cross-hedge against either transactions or portfolio positions. Forward foreign currency contracts are valued at the forward rate, and are marked-to-market daily. The change in market value is recorded by each Fund as an unrealized gain or loss. When the contract is closed, each Fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Each Fund's policy is to include this portion of realized and unrealized gains 39 WARBURG PINCUS FUNDS NOTES TO FINANCIAL STATEMENTS (CONT'D) August 31, 2000 - -------------------------------------------------------------------------------- NOTE 5. FORWARD FOREIGN CURRENCY CONTRACTS (CONT'D) and losses on investments that result from foreign currency changes with other foreign currency gains and losses on the Statement of Operations. At August 31, 2000, there were no open foreign currency contracts. NOTE 6. LINE OF CREDIT The Funds, together with other funds advised by CSAM, have established a $350 million committed and a $75 million uncommitted, unsecured, line of credit facility ("Credit Facility") with Deutche Bank, AG as administrative agent, State Street Bank and Trust Company as operations agents, Bank of Nova Scotia as syndication agent and certain other lenders, for temporary or emergency purposes primarily relating to unanticipated Fund share redemption. 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 entire amount of the Credit Facility, which is 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 borrowing at the Federal funds rate plus .50%. During the year ending August 31, 2000, the following funds had borrowings under the line of credit agreement. AVERAGE DAILY AVERAGE MAXIMUM DAILY LOAN OUTSTANDING PORTFOLIO LOAN BALANCE INTEREST RATE % LOAN OUTSTANDING AT 08/31/00 -------------- ------------- --------------- ---------------- --------------- European Equity $223,685 6.09% $5,858,000 $0 40 WARBURG PINCUS FUNDS REPORT OF INDEPENDENT ACCOUNTANTS - -------------------------------------------------------------------------------- To the Board of Directors and Shareholders of Warburg, Pincus European Equity Fund, Inc.; Warburg, Pincus Global Telecommunications Fund, Inc.; Warburg, Pincus Global Health Sciences Fund, Inc.: In our opinion, the accompanying statements of assets and liabilities including the schedules of investments of Warburg, Pincus European Equity Fund, Inc., Warburg, Pincus Global Telecommunications Fund, and Warburg, Pincus Health Sciences Fund, Inc. (all funds collectively referred to as the "Funds") as of August 31, 2000, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects the financial position of the Funds at August 31, 2000, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years (or periods) in the period then ended and their financial highlights for each of the years (or periods) presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2000 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP Two Commerce Square 2001 Market Street Philadelphia, Pennsylvania October 13, 2000 41 WARBURG PINCUS FUNDS TAX INFORMATION LETTER - -------------------------------------------------------------------------------- IMPORTANT TAX INFORMATION FOR SHAREHOLDERS OF WARBURG PINCUS EUROPEAN EQUITY FUND (UNAUDITED) During the fiscal year ended August 31, 2000, the European Equity Fund - Common Class distributed $34,526 of foreign source income on which the Fund paid foreign taxes of $20,893. This information is being furnished to you pursuant to notice requirements of Section 853(a) and 855(d) of the Internal Revenue Code 1986, as amended the "Code", and the Treasury Regulations thereunder. IMPORTANT TAX INFORMATION FOR SHAREHOLDERS (UNAUDITED) During the year ended August 31, 2000, the Warburg Pincus Global Telecommunications Fund declared the following Dividends from realized capital gains: Short-term Long-term capital gain capital gain per share per share ---------- ---------- $1.1663 $0.0611 THE WARBURG PINCUS FUNDS SPECIAL SHAREHOLDER MEETING RESULTS August 31, 2000 (Unaudited) - ------------------------------------------------------------------------------- WARBURG PINCUS GLOBAL TELECOMMUNIATIONS FUND WARBURG PINCUS GLOBAL HEALTH SCIENCES FUND A special meeting of shareholders of each Fund was held on July 14, 2000. Shareholders of each Fund voted on the following matter: Proposal 1: To approve a Sub-Investment Advisory Agreement among each Fund, Credit Suisse Asset Management LLC and Credit Suisse Asset Management Limited. In addition, shareholders of Warburg Pincus Global Health Sciences Fund voted on the following matter: Proposal 2: To approve change of sub-classification of the Global Health Sciences Fund from a diversified to a non-diversified investment company and elimination of the Fund's fundamental investment restriction regarding diversification. The voting results for each Fund were as follows: Proposal 1: - ------------------------------------------------------------------------------- GLOBAL % of Shares to Total % of Shares to Total TELECOMMUNICATIONS Shares Outstanding Shares Shares Voted - ------------------------------------------------------------------------------- For 3,641,776.780 50.5680% 97.7624% - ------------------------------------------------------------------------------- Against 33,018.056 0.4585% 0.8864% - ------------------------------------------------------------------------------- Abstain 50,334.113 0.6989% 1.3512% - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- GLOBAL HEALTH % of Shares to Total % of Shares to Total SCIENCES Shares Outstanding Shares Shares Voted - ------------------------------------------------------------------------------- For 1,498,623.828 50.5441% 93.8764% - ------------------------------------------------------------------------------- Against 63,688.473 2.1480% 3.9896% - ------------------------------------------------------------------------------- Abstain 34,066.675 1.1490% 2.1340% - ------------------------------------------------------------------------------- 43 WARBURG PINCUS FUNDS SPECIAL SHAREHOLDER MEETING RESULTS (CONT'D) August 31, 2000 (Unaudited) - ------------------------------------------------------------------------------- Proposal 2: - ------------------------------------------------------------------------------- GLOBAL HEALTH % of Shares to Total % of Shares to Total SCIENCES Shares Outstanding Shares Shares Voted - ------------------------------------------------------------------------------- For 1,086,693.410 36.6509% 68.0724% - ------------------------------------------------------------------------------- Against 89,868.011 3.0310% 5.6295% - ------------------------------------------------------------------------------- Abstain 32,524.555 1.0970% 2.0374% - ------------------------------------------------------------------------------- Delivered Not Voted 387,293.000 13.0622% 24.2607% - ------------------------------------------------------------------------------- 43 [GRAPHIC OMITTED] WARBURG PINCUS FUNDS P.O. BOX 9030, BOSTON, MA 02205-9030 800-WARBURG (800-927-2874) (TM) WWW.WARBURG.COM CREDIT SUISSE ASSET MANAGEMENT SECURITIES, INC., DISTRIBUTOR. WPEGG-2-0800 -----END PRIVACY-ENHANCED MESSAGE-----