WARBURG PINCUS LONG SHORT MARKET NEUTRAL FUND INC, N-1A, 1998-08-05

WARBURG PINCUS LONG SHORT MARKET NEUTRAL FUND INC
N-1A, 1998-08-05

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<PAGE> 1

As filed with the U.S. Securities and Exchange Commission
on August 5, 1998

Securities Act File No. 333-
Investment Company Act File No. 811-

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]

Pre-Effective Amendment No.__ [ ]

Post-Effective Amendment No.__ [ ]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 [x]

Amendment No.__ [ ]
(Check appropriate box or boxes)

Warburg, Pincus Long-Short Market Neutral Fund, Inc.
(Exact Name of Registrant as Specified in Charter)

466 Lexington Avenue
New York, New York 10017-3147
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, including Area Code: (212) 878-0600

Mr. Eugene P. Grace
Warburg, Pincus Long-Short Market Neutral Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(Name and Address of Agent for Service)

Copy to:
Rose F. DiMartino, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019-6099
<PAGE> 2
Approximate Date of Proposed Public Offering: As soon as practicable after the
effective date of this Registration Statement.

CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933

<TABLE>
<CAPTION>
Proposed
Title of Proposed Maximum
Securities Maximum Aggregate Amount of
Being Amount Being Offering Offering Registrat
Registered Registered Price per Price ion Fee
Unit
- ---------------- ------------ ---------- --------- ---------
<S> <C> <C> <C> <C>
Shares of common
stock, $.001
par value
per share Indefinite* Indefinite* Indefinite* $None
</TABLE>

* An indefinite number of shares of common stock of the Registrant is
being registered by this Registration Statement pursuant to Rule 24f-2
under the Investment Company Act of 1940, as amended (the "1940 Act").

The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective date until the
Registrant shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended (the "1933 Act"), or
until the Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
<PAGE> 3
WARBURG, PINCUS LONG-SHORT MARKET NEUTRAL FUND, INC.

FORM N-1A

CROSS REFERENCE SHEET

<TABLE>
<CAPTION>
Part A
Item No. Prospectus Heading
- -------- ------------------

<S> <C> <C>
1. Cover Page.................................................... Cover Page

2. Synopsis...................................................... The Funds' Expenses

3. Condensed Financial Information............................... Not applicable

4. General Description of
Registrant.................................................. Cover Page; Investment Objectives and
Policies; Risk Factors and Special
Considerations and Certain Investment
Strategies; Investment Guidelines;
General Information

5. Management of the Fund........................................ Management of the Funds

6. Capital Stock and Other
Securities.................................................. General Information

7. Purchase of Securities Being
Offered..................................................... How to Open an Account; How to
Purchase Shares; Management of the
Funds; Net Asset Value

8. Redemption or Repurchase...................................... How to Redeem and Exchange Shares

9. Pending Legal Proceedings..................................... Not applicable
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Part B
Item No.
- --------

<S> <C> <C>
10. Cover Page.................................................... Cover Page

11. Table of Contents............................................. Contents

12. General Information and History............................... Directors and Officers

13. Investment Objectives
and Policies................................................ Common Investment Objectives and
Policies

14. Management of the Registrant.................................. Directors and Officers

15. Control Persons and Principal
Holders of Securities....................................... Directors and Officers; See
Prospectus-- "Management of the Funds"

16. Investment Advisory and
Other Services.............................................. Investment Advisory and Servicing
Arrangements; See Prospectus--
"Management of the Funds"

17. Brokerage Allocation
and Other Practices......................................... Common Investment Policies --
Portfolio Transactions; See
Prospectus-- "Portfolio Transactions
and Turnover Rate"

18. Capital Stock and Other
Securities.................................................. Additional Information Concerning the
Company Shares; See
Prospectus-"General Information"

19. Purchase, Redemption and Pricing
of Securities Being Offered................................. Purchase and Redemption Information;
See
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
Prospectus-"How to Open an
Account," "How to Purchase Shares,"
"How to Redeem and Exchange Shares,"
"Net Asset Value"

20. Tax Status.................................................... Taxes; See Prospectus--"Dividends,
Distributions and Taxes"

21. Underwriters.................................................. Common Investment Policies-- Portfolio
Transactions; See Prospectus--
"Management of the Funds"

22. Calculation of Performance Data............................... Performance and Yield Information

23. Financial Statements.......................................... Financial Statements; Report of
PricewaterhouseCoopers LLP,
Independent Accountants
</TABLE>

Part C

Information required to be included in Part C is set forth after the appropriate
item, so numbered, in Part C to this Registration Statement.
<PAGE> 6
SUBJECT TO COMPLETION, DATED AUGUST 5, 1998

PROSPECTUS
September , 1998

WARBURG PINCUS
LONG-SHORT MARKET NEUTRAL FUND

---------------

WARBURG PINCUS
LONG-SHORT EQUITY FUND

---------------

WARBURG PINCUS
SELECT ECONOMIC VALUE EQUITY FUND

---------------

[WARBURG PINCUS FUNDS LOGO]

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF
ANY SUCH STATE.
<PAGE> 7
SUBJECT TO COMPLETION, DATED AUGUST 5, 1998

PROSPECTUS September , 1998

Warburg Pincus Funds is a family of open-end mutual funds that offer investors a
variety of investment opportunities. Three funds are described in this
Prospectus:

WARBURG PINCUS LONG-SHORT MARKET NEUTRAL FUND seeks long-term capital
appreciation while minimizing exposure to general equity market risk. The Fund
seeks a total return greater than the total return of the Salomon Smith Barney
U.S. 1-Month Treasury Bill Index(TM). The Fund pursues its objective by taking
long positions in stocks that the investment adviser has identified as
undervalued and short positions in stocks that the adviser has identified as
overvalued. Generally, the Fund's investments will be concentrated in securities
principally traded in the U.S. markets.

WARBURG PINCUS LONG-SHORT EQUITY FUND seeks a total return greater than that of
the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index"). The
Fund pursues its objective by investing in shares of the Warburg Pincus
Long-Short Market Neutral Fund while simultaneously utilizing S&P 500 Index
futures, options on S&P 500 Index futures and equity swap contracts to gain
exposure to the equity market as measured by the S&P 500 Index.

WARBURG PINCUS SELECT ECONOMIC VALUE EQUITY FUND seeks to provide long term
appreciation of capital. The Fund will invest primarily in U.S. equity
securities the adviser believes are undervalued.

BEA Associates ("BEA" or the "Adviser"), serves as investment adviser to each
of the Funds.

NO LOAD CLASS OF COMMON SHARES

Common Shares that are "no load" are offered by this Prospectus (i) directly
from the Funds' distributor, Counsellors Securities Inc., and (ii) through
various brokerage firms including Charles Schwab & Company, Inc. Mutual Fund
OneSource(TM) Program; Fidelity Brokerage Services, Inc. FundsNetwork(TM)
Program; Jack White & Company, Inc.; and Waterhouse Securities, Inc.

LOW MINIMUM INVESTMENT

The minimum initial investment in each Fund is $2,500 and the minimum subsequent
investment is $250. The minimum initial investment for Individual Retirement
Accounts, Uniform Transfers/Gifts to Minors Act accounts and through the
Automatic Investment Plan is $1000, and the minimum subsequent investment in
each of these is $100. See "How to Purchase Shares."

This Prospectus briefly sets forth certain information about the Funds that
investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about each
Fund has been filed with the Securities and Exchange Commission (the "SEC"). The
SEC maintains a Web site (http://www.sec.gov) that contains the Statement of
Additional Information, material incorporated by reference and other information
regarding the Funds. The Statement of Additional Information is available to
investors without charge by calling Warburg Pincus Funds at (800) 927-2874.
Information regarding the status of shareholder accounts may be obtained by
calling Warburg Pincus Funds at the same number. Warburg Pincus Funds maintains
a Web site at www.warburg.com. The Statement of Additional Information, as
amended or supplemented from time to time, bears the same date as this
Prospectus and is incorporated by reference in its entirety into this
Prospectus.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

-2-
<PAGE> 8
THE FUNDS' EXPENSES

Although authorized to offer three separate classes of shares (Common
Shares, Institutional Shares and Advisor Shares), each of the Warburg Pincus
Long-Short Market Neutral Fund ("Long-Short Neutral Fund"), Warburg Pincus
Long-Short Equity Fund ("Long-Short Equity Fund") and Warburg Pincus Select
Economic Value Equity Fund ("Select Equity Fund") (each, a "Fund") currently
offers two separate classes of shares: Common Shares and Institutional Shares.
For a description of Institutional Shares and Advisor Shares see "General
Information."

<TABLE>
<CAPTION>
LONG-SHORT LONG-SHORT EQUITY
NEUTRAL FUND FUND SELECT EQUITY
------------ ---- -------------

Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) .......................... 0 0 0
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees .............................................. 1.40% .00% .52%
12b-1 Fees ................................................... .25% .25% .25%
Other Expenses* .............................................. .60% 2.50% .48%
------ ------ ------
Total Fund Operating Expenses (after fee
waivers and expense reimbursements)+ ....................... 2.25% 2.75% 1.25%
====== ====== ------
EXAMPLE
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of
each time period:
1 year ...................................................... $ 23 $ 28 $ 13
3 years ..................................................... $ 70 $ 85 $ 40
</TABLE>

+ The Funds' investment adviser and Counsellors Funds Service, Inc., the Funds'
co-administrator ("Counsellors Service") have undertaken to limit Total Fund
Operating Expenses of each of the Funds for the one-year period following the
closing date of the reorganization of the relevant BEA Fund to the extent
necessary for the net expense ratio of each Fund to be no higher than that of
the corresponding series of The RBB Fund, Inc., for the thirty-day period
ending on the closing date of the reorganization of such series (for a
description of the reorganization see "General Information"). The resulting
Total Fund Operating Expenses limit may be greater or less than the estimate
shown above. There is no obligation to continue these waivers after that
time. Absent such waivers and/or reimbursements, Management Fees for the
Long-Short Neutral Fund, Long-Short Equity Fund and Select Equity Fund would
equal 1.50% and 0.10% and .75%, respectively; Other Expenses would equal
.60%, 2.50% and .73%, respectively; and Total Fund Operating Expenses would
equal 2.35%, 2.85% and 1.73%, respectively. Other Expenses for the Funds are
based on annualized estimates of expenses for the fiscal year ending August
31, 1999, net of any fee waivers or expense reimbursements.
* With respect to the Long-Short Equity Fund, "Other Expenses" includes the
indirect expenses associated with the Fund's investment in Institutional
Shares of the Long-Short Neutral Fund.
---------------

The expense table shows the costs and expenses that an investor will bear
directly or indirectly as a Common Shareholder of each Fund. Certain broker-
dealers and financial institutions also may charge their clients fees in
connection with investments in a Fund's Common Shares, which fees are not
reflected in the table. The Example should not be considered a representation of
past or future expenses; actual Fund expenses may be greater or less than those
shown. Moreover, while the Example assumes a 5% annual return, each Fund's
actual performance will vary and may result in a return greater or less than 5%.
Long-term shareholders of each Fund may pay more than the economic equivalent of
the maximum sales charges permitted by the National Association of Securities
Dealers, Inc.

-3-
<PAGE> 9

INVESTMENT OBJECTIVES AND POLICIES

The investment objective of each Fund may not be changed without the
affirmative vote of a majority of the Fund's outstanding shares (as defined in
the Investment Company Act of 1940, as amended (the "1940 Act")). As with other
mutual funds, there can be no assurance that any Fund will achieve its
investment objective. Because of their different investment emphases, each Fund
should be considered as a specialized investment portfolio and not as a balanced
investment program by itself. The Statement of Additional Information contains a
more detailed description of various investments and investment techniques used
by the Funds.

LONG-SHORT NEUTRAL FUND

The investment objective of the Long-Short Neutral Fund is to seek long-term
capital appreciation while minimizing exposure to general equity market risk.
The Fund seeks a total return greater than the return of the Salomon Smith
Barney 1-Month Treasury Bill Index(TM). The Fund attempts to achieve its
objective by taking long positions in stocks that the Adviser has identified as
undervalued and short positions in stocks that the Adviser has identified as
overvalued. See "Risk Factors and Special Considerations -- Short Sales" below.
Generally, the Fund's investments will be concentrated in securities principally
traded in the U.S. markets. By taking long and short positions in different
stocks with similar characteristics, the Fund attempts to minimize the effect of
general stock market movements on the Fund's performance. The Adviser will
determine the size of each long or short position by analyzing the tradeoff
between the attractiveness of each position and its impact on the risk of the
overall portfolio. The Fund seeks to construct a diversified portfolio that has
minimal net exposure to the U.S. equity market generally and low to neutral
exposure to specific industries, specific capitalization ranges (e.g., large
cap, mid cap and small cap) and certain other factors.

Although the Fund's investment strategy seeks to minimize the risk
associated with investing in the equity market, an investment in the Fund will
be subject to the risk of poor stock selection by the Adviser. In other words,
the Adviser may not be successful in executing its strategy of taking long
positions in stocks that outperform the market and short positions in stocks
that underperform the market. Further, since the Adviser will manage both a long
and a short portfolio, an investment in the Fund will involve the risk that the
Adviser may make more poor investment decisions than an adviser of a typical
stock mutual fund with only a long portfolio may make. An investment in
one-month U.S. Treasury Bills is different from an investment in the Fund
because Treasury Bills are backed by the full faith and credit of the U.S.
Government, Treasury Bills have a fixed rate of return and investors in Treasury
Bills do not bear the risk of losing their investment.

To meet margin requirements, redemptions or pending investments, the Fund
may also temporarily hold a portion of its assets in full faith and credit
obligations of the United States government (e.g., U.S. Treasury Bills) and in
short-term notes, commercial paper or other money market instruments of high
quality (i.e., rated at least "A-2" or "AA" by Standard & Poor's Ratings
Services ("S&P") or Prime 2 or "Aa" by Moody's Investors Service, Inc.
("Moody's")) issued by companies having an outstanding debt issue rated at least
"AA" by S&P or at least "Aa" by Moody's, or determined by the Adviser to be of
comparable quality to any of the foregoing.

The Fund's long and short positions may involve (without limit) equity
securities of foreign issuers that are traded in the markets of the United
States as sponsored American Depositary Receipts ("ADRs"). ADRs are receipts
typically issued by a U.S. bank or trust company evidencing ownership of the
underlying foreign securities. Generally, ADRs, in registered form, are designed
for use in U.S. securities markets. The ADRs may not necessarily be denominated
in the same currency as the foreign securities underlying the ADRs. See "Risk
Factors and Special Considerations -- Foreign Securities." The Fund will not
invest in equity securities that are principally traded outside of the United
States.

The value of Fund shares may increase or decrease depending on market,
economic, political, regulatory and other conditions affecting the Fund's
portfolio. Investment in shares of the Fund is more volatile and risky than some
other forms of investment. In addition, if the Adviser takes long positions in
stocks that decline or short positions in stocks that increase in value, then
the losses of the Fund may exceed those of other stock mutual funds that hold
long positions only.

-4-
<PAGE> 10
LONG-SHORT EQUITY FUND

The investment objective of the Long-Short Equity Fund is to seek a total
return greater than that of the Standard & Poor's 500 Composite Stock Price
Index (the "S&P 500 Index"). The Fund seeks to achieve its objective by
investing in Institutional Shares of the Long-Short Neutral Fund while
simultaneously utilizing S&P 500 Index futures, options on S&P 500 Index futures
and equity swap contracts to gain exposure to the equity market as measured by
the S&P 500 Index. See "Certain Investment Strategies -- Long-Short Neutral
Fund" and "Risk Factors and Special Considerations -- S&P 500 Index Futures and
Related Options" and " -- Equity Swap Contracts" below. The Fund has obtained an
exemptive order from the SEC allowing it to invest without limit in the
Long-Short Neutral Fund. Once the Fund has indirectly acquired a diversified
long and short portfolio through the purchase of Institutional Shares of the
Long-Short Neutral Fund, the Adviser will purchase S&P 500 Index futures,
options on S&P 500 Index futures and equity swap contracts in an amount
approximately equal to the net asset value of the Fund in order to gain full net
exposure to the U.S. equity market as measured by the S&P 500 Index. In addition
to purchasing Institutional Shares of the Long-Short Neutral Fund, the Fund may
also take long positions in stocks principally traded in the markets of the
United States that the Adviser has identified as undervalued and short positions
in such stocks that the Adviser has identified as overvalued. See "Risk Factors
and Special Considerations -- Short Sales."

The S&P 500 Index is an unmanaged index composed of 500 common stocks, most
of which are listed on the New York Stock Exchange. The S&P 500 Index assigns
relative values to the stocks included in the index, weighted according to each
stock's total market value relative to the total market value of the other
stocks included in such index.

To meet margin requirements, redemptions or pending investments, the Fund
may also temporarily hold a portion of its assets in full faith and credit
obligations of the United States government (e.g., U.S. Treasury Bills) and in
short-term notes, commercial paper or other money market instruments of high
quality (i.e., rated at least "A-2" or "AA" by S&P or Prime 2 or "Aa" by
Moody's) issued by companies having an outstanding debt issue rated at least
"AA" by S&P or at least "Aa" by Moody's, or determined by the Adviser to be of
comparable quality to any of the foregoing.

The Fund's long and short positions may involve (without limit) equity
securities of foreign issuers that are traded in the markets of the United
States as ADRs, which are described above under "Long-Short Neutral Fund." See
"Risk Factors and Special Considerations -- Foreign Securities." The Fund will
not invest in equity securities that are traded outside of the United States.

In a typical value-oriented stock mutual fund the investment adviser
attempts to earn an excess return (return above market return) or "alpha" by
identifying and purchasing undervalued stocks. However, there is another "alpha"
possibility -- identifying and selling short overvalued stocks. The term "double
alpha" refers to these two potential sources of alpha: one from correctly
identifying undervalued stocks and one from correctly identifying overvalued
stocks. The market neutral strategy employed directly by the Long-Short Neutral
Fund and indirectly by the Long-Short Equity Fund (through investment in shares
of the Long-Short Neutral Fund) seeks to capture both alphas. The Long-Short
Equity Fund also seeks gain (and incurs additional cost and expense risk) by
investing in S&P 500 Index instruments.

SELECT EQUITY FUND

The investment objective of the Select Equity Fund is to seek long-term
appreciation of capital. The Fund seeks to achieve its investment objective by
investing primarily in U.S. equity securities that the Adviser believes are
undervalued. The Adviser will apply its Select Equity analysis in assembling and
managing the Fund's portfolio. In the selection of industry sectors to
emphasize, the Adviser searches for sectors with favorable economic profit
trends. Within this framework, the Adviser will select specific securities by
emphasizing, in addition to traditional analyses such as price/earnings ratios,
the economic profit of a company measured by its cash flow relative to its
capital assets. The Fund normally will not emphasize dividend income in choosing
securities, unless BEA believes the income will contribute to the securities'
appreciation potential.

Under normal market conditions, the Fund will invest at least 65% of its
total assets in U.S. equity securities. Equity securities include common stocks,
preferred stocks, convertible securities, and other securities, such as rights
and warrants, which derive their values from common stocks. The Fund may also
invest in fixed income securities and in money market instruments.

-5-
<PAGE> 11
Special Considerations -- Foreign Securities" and " -- Foreign Currency
Transactions." The Fund may also purchase lower-rated debt securities. See
"Certain Investment Strategies -- Lower-Rated Securities."

PORTFOLIO INVESTMENTS

TEMPORARY INVESTMENTS. For defensive purposes or during temporary periods in
which the Fund's Adviser believes changes in economic, financial or political
conditions make it advisable, each Fund may reduce its holdings in other
securities and invest up to 100% of its assets in cash or certain short-term
(less than twelve months to maturity) and medium-term (not greater than five
years to maturity) interest-bearing instruments or deposits of United States and
foreign issuers. Such investments may include, but are not limited to,
commercial paper, certificates of deposit, variable or floating rate notes,
bankers' acceptances, time deposits, government securities and money-market
deposit accounts. See Statement of Additional Information, "Common Investment
Policies -- Temporary Investments." The Funds may also hold cash or cash
equivalents pending investment.

RULE 144A SECURITIES. Rule 144A Securities (as defined below) are securities
which are restricted as to resale to the general public, but which may be resold
to qualified institutional buyers. Each Fund may invest in Rule 144A Securities
that the Fund's Adviser has determined are liquid pursuant to guidelines
established by the Fund's Board of Directors.

BORROWING. Each Fund may borrow up to 33-1/3 percent of its total assets
without obtaining shareholder approval. The Funds intend to borrow or to engage
in reverse repurchase agreements or dollar roll transactions only for temporary
or emergency purposes. See Statement of Additional Information, "Common
Investment Policies -- All Funds -- Reverse Repurchase Agreements" and " --
Borrowing."

LENDING OF PORTFOLIO SECURITIES. Each Fund may also lend its portfolio
securities to financial institutions against collateral consisting of cash, U.S.
Government securities or irrevocable bank letters of credit, which are equal at
all times to at least 102% of the value of the securities loaned (105% in the
case of foreign securities loaned). Such loans would involve risks of delay in
receiving additional collateral in the event the value of the collateral
decreased below the value of the securities loaned or of delay in recovering the
securities loaned or even loss of rights in the collateral should the borrower
of the securities fail financially. However, loans will be made only to
borrowers deemed by the Fund's Adviser to be of good standing and only when, in
the adviser's judgment, the income to be earned from the loans justifies the
attendant risks. Any loans of a Fund's securities will be fully collateralized
and marked to market daily. A Fund may not make loans in excess of 50% of its
total assets immediately before such loans.

INVESTMENT COMPANIES. Each Fund may invest in securities issued by other
investment companies to the extent permitted by the 1940 Act. As a shareholder
of another investment company, each Fund would bear, along with other
shareholders, its pro rata portion of the other investment company's expenses,
including advisory fees. These expenses would be in addition to the advisory and
other expenses that a Fund bears directly in connection with its own operations.

U.S. GOVERNMENT SECURITIES. The obligations issued or guaranteed by the U.S.
government in which each Fund may invest include direct obligations of the U.S.
Treasury and obligations issued by U.S. government agencies and
instrumentalities. Included among direct obligations of the United States are
Treasury Bills, Treasury Notes and Treasury Bonds, which differ principally in
terms of their maturities. Treasury Bills have maturities of less than one year,
Treasury Notes have maturities of one to 10 years and Treasury Bonds generally
have maturities of greater than 10 years at the date of issuance. Included among
the obligations issued by agencies and instrumentalities of the United States
are: instruments that are supported by the full faith and credit of the United
States (such as certificates issued by the Government National Mortgage
Association ("GNMA")); instruments that are supported by the right of the issuer
to borrow from the U.S. Treasury (such as securities of Federal Home Loan
Banks); and instruments that are supported by the credit of the instrumentality
(such as Federal National Mortgage Association ("FNMA") and Federal Home Loan
Mortgage Corporation ("FHLMC") bonds).

RISK FACTORS AND SPECIAL CONSIDERATIONS

For certain additional risks related to each Fund's investments, see
"Portfolio Investments" and "Certain Investment Strategies."

-6-
<PAGE> 12
GENERAL. Among the factors that may be considered in deciding whether to
invest in a security are the issuer's financial resources, its sensitivity to
economic conditions and trends, its operating history and the ability of the
issuer's management. Bond prices generally vary inversely in relation to changes
in the level of interest rates, as well as in response to other market factors
and changes in the creditworthiness of the issuers of the securities. U.S.
Government Securities are considered to be of the highest credit quality
available. U.S. Government Securities, however, will be affected by general
changes in interest rates. The price volatility of a Fund's shares where the
Fund invests in intermediate maturity bonds will be substantially less than that
of long-term bonds. An intermediate maturity bond will generally have a lower
yield than that of a long-term bond. Longer-term securities in which the Funds
may invest generally offer a higher current yield than is offered by
shorter-term securities, but also generally involve greater volatility of price
and risk of capital than shorter-term securities.

FOREIGN SECURITIES. Investing in the securities of non-U.S. issuers involves
opportunities and risks that are different from investing in the securities of
U.S. issuers. The risks associated with investing in securities of non-U.S.
issuers are generally heightened for investments in securities of issuers in
emerging markets.

Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, and the Funds may hold from time to time various
foreign currencies pending their investment in foreign securities or their
conversion into U.S. dollars, the value of the Funds' assets as measured in U.S.
dollars may be affected favorably or unfavorably by changes in exchange rates.
In addition, investors should realize that the value of the Funds' investments
may be adversely affected by changes in political or social conditions,
diplomatic relations, confiscatory taxation, expropriation, limitation on the
removal of funds or assets, or imposition of (or change in) exchange control
regulations in those foreign nations. In addition, changes in government
administrations or economic or monetary policies in the U.S. or abroad could
result in appreciation or depreciation of portfolio securities and could
favorably or adversely affect the Funds' operations. Furthermore, the economies
of individual foreign nations may differ from that of the United States, whether
favorably or unfavorably, in areas such as growth of gross national product,
rate of inflation, capital reinvestment, resource self-sufficiency and balance
of payments position. Any foreign investments made by the Funds must be made in
compliance with U.S. and foreign currency restrictions and tax laws restricting
the amounts and types of foreign investments.

In general, less information is publicly available with respect to certain
foreign issuers than is available with respect to U.S. companies. Most foreign
companies are also not subject to the uniform accounting and financial reporting
requirements applicable to issuers in the United States. The Funds' foreign
investments may be less liquid and their prices may be more volatile than
comparable investments in securities in U.S. companies. Expenses relating to
foreign investments are generally higher than those relating to domestic
securities. In addition, there is generally less government supervision and
regulation of securities exchanges, brokers and issuers in foreign countries
than in the United States.

DEPOSITARY RECEIPTS. Certain of the above risks may be involved with
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and
International Depositary Receipts ("IDRs"), instruments that evidence ownership
in underlying securities issued by a foreign corporation. ADRs, EDRs and IDRs
may not necessarily be denominated in the same currency as the securities whose
ownership they represent. ADRs are typically issued by a U.S. bank or trust
company. EDRs (sometimes referred to as Continental Depositary Receipts) are
issued in Europe, and IDRs (sometimes referred to as Global Depositary Receipts)
are issued outside the United States, each typically by non-U.S. banks and trust
companies.

FIXED INCOME SECURITIES. The value of the securities held by a Fund, and
thus the net asset value of the shares of a Fund, generally will vary inversely
in relation to changes in prevailing interest rates. Thus, if interest rates
have increased from the time a debt or other fixed income security was
purchased, such security, if sold, might be sold at a price less than its cost.
Conversely, if interest rates have declined from the time such a security was
purchased, such security, if sold, might be sold at a price greater than its
cost. Also, the value of such securities may be affected by changes in real or
perceived creditworthiness of the issuers. Thus, if creditworthiness is
enhanced, the price may rise. Conversely, if creditworthiness declines, the
price may decline. A Fund is not restricted to any maximum or minimum time to
maturity in purchasing portfolio securities, and the average maturity of the
Fund's assets will vary based upon BEA's assessment of economic and market
conditions.

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NON-PUBLICLY TRADED SECURITIES; RULE 144A SECURITIES. Each Fund may purchase
securities that are not registered under the Securities Act of 1933, as amended
(the "Securities Act"), but that can be sold to "qualified institutional buyers"
in accordance with Rule 144A under the Securities Act ("Rule 144A Securities").
A Rule 144A Security will be considered illiquid and therefore subject to each
Fund's limitation on the purchase of illiquid securities, unless the Fund's
Board determines on an ongoing basis that an adequate trading market exists for
the security. In addition to an adequate trading market, the Board will also
consider factors such as trading activity, availability of reliable price
information and other relevant information in determining whether a Rule 144A
Security is liquid. This investment practice could have the effect of increasing
the level of illiquidity in the Funds to the extent that qualified institutional
buyers become uninterested for a time in purchasing Rule 144A Securities. The
Board of each Fund will carefully monitor any investments by the Fund in Rule
144A Securities. The Boards may adopt guidelines and delegate to the Fund's
Adviser the daily function of determining and monitoring the liquidity of Rule
144A Securities, although each Board will retain ultimate responsibility for any
determination regarding liquidity.

Non-publicly traded securities (including Rule 144A Securities) may involve
a high degree of business and financial risk and may result in substantial
losses. These securities may be less liquid than publicly traded securities, and
a Fund may take longer to liquidate these positions than would be the case for
publicly traded securities. Although these securities may be resold in privately
negotiated transactions, the price realized from these sales could be less than
those originally paid by the Fund. Further, companies whose securities are not
publicly traded may not be subject to the disclosure and other investor
protection requirements that would be applicable if their securities were
publicly traded. A Fund's investment in illiquid securities is subject to the
risk that should the Fund desire to sell any of these securities when a ready
buyer is not available at a price that is deemed to be representative of their
value, the value of the Fund's net assets could be adversely affected.

NON-DIVERSIFIED STATUS. Each Fund is classified as a non-diversified
investment company under the 1940 Act, which means that each Fund is not limited
by the 1940 Act in the proportion of its assets that it may invest in the
obligations of a single issuer. Each Fund will, however, comply with
diversification requirements imposed by the Internal Revenue Code of 1986, as
amended (the "Code"), for qualification as a regulated investment company. As a
non-diversified investment company, each Fund may invest a greater proportion of
its assets in the obligations of a small number of issuers and, as a result, may
be subject to greater risk with respect to portfolio securities. To the extent
that a Fund assumes large positions in the securities of a small number of
issuers, its return may fluctuate to a greater extent than that of a diversified
company as a result of changes in the financial condition or in the market's
assessment of the issuers.

EMERGING GROWTH AND SMALLER CAPITALIZATION COMPANIES; UNSEASONED ISSUERS.
Investing in securities of companies with continuous operations of less than
three years ("unseasoned issuers") may involve greater risks since these
securities may have limited marketability and, thus, may be more volatile than
securities of larger, more established companies or the market in general.
Because such companies normally have fewer shares outstanding than larger
companies, it may be more difficult for a Fund to buy or sell significant
amounts of such shares without an unfavorable impact on prevailing prices. These
companies may have limited product lines, markets or financial resources and may
lack management depth. In addition, these companies are typically subject to a
greater degree of changes in earnings and business prospects than are larger,
more established companies. There is typically less publicly available
information concerning these companies than for larger, more established ones.
Although investing in securities of unseasoned issuers offers potential for
above-average returns if the companies are successful, the risk exists that the
companies will not succeed and the prices of the companies' shares could
significantly decline in value. Therefore, an investment in a Fund may involve a
greater degree of risk than an investment in other mutual funds that seek
capital appreciation by investing in more established, larger companies.

YEAR 2000 COMPLIANCE. Many services provided to a Fund and their
shareholders by BEA, Counsellors Securities Inc., the Funds' distributor
("Counsellors Securities"), certain of the latter's affiliates (collectively,
the "Service Providers") and the Funds' other service providers rely on the
functioning of their respective computer systems. Many computer systems cannot
distinguish the year 2000 from the year 1900, with resulting potential
difficulty in performing various calculations (the "Year 2000 Issue"). The Year
2000 Issue could potentially have an adverse impact on the handling of security
trades, the payment of interest and dividends, pricing, account services and
other Fund operations.

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<PAGE> 14
The Service Providers recognize the importance of the Year 2000 Issue and
are taking appropriate steps necessary in preparation for the year 2000. At this
time, there can be no assurance that these steps will be sufficient to avoid any
adverse impact on the Funds nor can there be any assurance that the Year 2000
Issue will not have an adverse effect on the Funds' investments or on global
markets or economies, generally.

The Service Providers anticipate that their systems and those of the Funds'
other service providers will be adapted in time for the year 2000. To further
this goal, the Service Providers have coordinated a plan to repair, adapt or
replace systems that are not year 2000 compliant, and are seeking to obtain
similar representations from the Funds' other major service providers. The
Service Providers will be monitoring the Year 2000 Issue in an effort to ensure
appropriate preparation.

GENERAL. Investment methods described in this prospectus are among those
which the Funds have the power to utilize. Accordingly, reference to any
particular method or technique carries no implication that it will be utilized
or, if it is, that it will be successful.

PORTFOLIO TRANSACTIONS AND TURNOVER RATE

A Fund will attempt to purchase securities with the intent of holding them
for investment but may purchase and sell portfolio securities whenever the
Adviser believes it to be in the best interests of the relevant Fund. The Fund's
Adviser will effect portfolio transactions in each Fund without regard to
holding periods if, in its judgment, such transactions are advisable in light of
general market, economic or financial conditions. Portfolio turnover may vary
greatly from year to year as well as within a particular year. It is not
possible to predict each Fund's portfolio turnover rate. However, it is
anticipated that, under normal market conditions, the annual portfolio turnover
rate for the Long-Short Neutral Fund and the Long-Short Equity Fund will not
exceed 150% and 50%, respectively, and that the Select Equity Fund's annual
turnover rate will not exceed [100%]. High portfolio turnover rates (100% or
more) may result in higher dealer mark-ups or underwriting commissions as well
as other transaction costs, including correspondingly higher brokerage
commissions. In addition, short-term gains realized from portfolio turnover may
be taxable to shareholders as ordinary income. See "Dividends, Distributions and
Taxes -- Taxes" below and "Investment Policies -- Portfolio Transactions" in the
Statement of Additional Information.

All orders for transactions in securities or options on behalf of a Fund are
placed by the Fund's Adviser with broker-dealers that it selects, including
Counsellors Securities and affiliates of Credit Suisse Group ("Credit Suisse").
A Fund may utilize Counsellors Securities or affiliates of Credit Suisse in
connection with a purchase or sale of securities when the Fund's Adviser
believes that the charge for the transaction does not exceed usual and customary
levels and when doing so is consistent with guidelines adopted by the Board.

CERTAIN INVESTMENT STRATEGIES

STRATEGY AVAILABLE TO THE LONG-SHORT NEUTRAL AND LONG-SHORT EQUITY FUNDS

SHORT SALES. When the Adviser anticipates that a security is overvalued, it
may sell the security short by borrowing the same security from a broker or
other institution and selling the security. A Fund will incur a loss as a result
of a short sale if the price of the borrowed security increases between the date
of the short sale and the date on which the Fund replaces such security. A Fund
will realize a gain if there is a decline in price of the security between those
dates, which decline exceeds the costs of the borrowing the security and other
transaction costs. There can be no assurance that a Fund will be able to close
out a short position at any particular time or at an acceptable price. Although
a Fund's gain is limited to the amount at which it sold a security short, its
potential loss is limited only by the maximum attainable price of the security
less the price at which the security was sold. Until a Fund replaces a borrowed
security, it will maintain at all times cash, U.S. Government Securities, or
other liquid securities in an amount which, when added to any amount deposited
with a broker as collateral will at least equal the current market value of the
security sold short. Depending on arrangements made with brokers, a Fund may not
receive any payments (including interest) on collateral deposited with them. The
Funds will not make a short sale if, after giving effect to such sale, the
market value of all securities sold short exceeds 100% of the value of a Fund's
net assets.

STRATEGIES AVAILABLE TO THE LONG-SHORT EQUITY FUND

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<PAGE> 15
are not themselves investment companies. An investor in the Long-Short Equity
Fund will incur a proportionate share of the expenses of the Fund, as well as a
proportionate share of expenses of the Long-Short Neutral Fund and unaffiliated
investment companies in which the Long-Short Equity Fund invests (collectively,
the "underlying funds"). Investors in the Long-Short Equity Fund should realize
that they can invest directly in the underlying funds.

The Long-Short Equity Fund will seek to avoid duplicative fees and the
layering of expenses to a meaningful extent. The Fund will generally only invest
in the Institutional Shares of the Long-Short Neutral Fund, which are offered
with no sales or redemption charges, distribution fees or shareholder servicing
fees. The management fees payable to BEA under the Fund's management contract
are for services that are in addition to, rather than duplicative of, services
provided under the management contract for any underlying funds in which the
Fund invests. The administration, custody and transfer agency fees borne by the
Fund are also for services that are in addition to, and not duplicative of,
services provided to the underlying funds. In addition, the distribution fees
relating to Common Shares of the Fund, when aggregated with any distribution or
shareholder servicing fees paid by the Fund in connection with its investments
in underlying funds will not exceed applicable NASD limits.

As a fund that may invest a substantial portion of its assets in other
investment companies, the Long-Short Equity Fund will be subject to certain
investment risks. The Fund's performance is directly related to the performance
of the Long-Short Neutral Fund and the other investment companies in which it
invests. Accordingly, the ability of the Fund to meet its investment objective
is directly related to the ability of the underlying funds to meet their
objectives. There can be no assurance that the investment objective of any
underlying fund will be achieved.

From time to time, the Long-Short Neutral Fund may experience relatively
large purchases or redemptions due to asset allocation decisions made by in
managing the Long-Short Equity Fund and other client accounts. These
transactions may have a material effect on the Long-Short Neutral Fund. While it
is impossible to predict the overall impact of these transactions over time,
there could be adverse effects on the Long-Short Neutral Fund to the extent that
it may be required to sell securities at times when it would not otherwise do so
or receive cash that cannot be invested in an expeditious manner. There may be
tax consequences associated with purchases and sales of securities, and such
sales may also increase transaction costs. The Adviser is committed to
minimizing the impact of these transactions on the Long-Short Neutral Fund to
the extent it is consistent with pursuing the Long-Short Equity Fund's
investment objective and will monitor the impact of the Long-Short Equity Fund's
asset allocation decisions on the Long-Short Neutral Fund.

S&P 500 INDEX FUTURES AND RELATED OPTIONS. An S&P 500 Index Future contract
(an "Index Future") is a contract to buy or sell an integral number of units of
the S&P 500 Index at a specified future date at a price agreed upon when the
contract is made. A unit is the value at a given time of the S&P 500 Index.
Entering into a contract to buy units is commonly referred to as buying or
purchasing a contract or holding a long position in the S&P 500 Index. An option
on an Index Future gives the purchaser the right, in return for the premium
paid, to assume a long or a short position in an Index Future. The Long-Short
Equity Fund will realize a loss if the value of the S&P 500 Index declines
between the time the Fund purchases an Index Future or an option transaction in
which the Fund has assumed a long position and may realize a gain if the value
of the S&P 500 Index rises between such dates.

The Long-Short Equity Fund may close out a futures contract purchase by
entering into a futures contract sale. This will operate to terminate the Fund's
position in the futures contract. Positions in Index Futures may be closed out
by the Fund only on the futures exchanges on which the Index Futures are then
traded. There can be no assurance that a liquid market will exist for any
particular contract at any particular time. The liquidity of the market in
futures contracts could be adversely affected by "daily price fluctuation
limits" established by the relevant futures exchange which limit the amount of
fluctuation in the price of an Index Future during a single trading day. Once
the daily limit has been reached in the contract, no trades may be entered into
at a price beyond the limit. In such event, it may not be possible for the Fund
to close its futures contract purchase, and, in the event of adverse price
movements, the Fund would continue to be required to make daily cash payments of
variation margin (payments to and from a broker made on a daily basis as the
price of the Index Future fluctuates). The futures market may also attract more
speculators than does the securities market, because deposit requirements in the
futures market are less onerous than margin requirements in the securities
market. Increased participation by speculators in the futures market may also
cause price distortions.

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<PAGE> 16
Further, when the Long-Short Equity Fund purchases an Index Future, it is
required to maintain, at all times while an Index Future is held by the Fund,
cash or liquid securities in an amount which, together with the initial margin
deposit on the futures contract, is equal to the current value of the futures
contract.

EQUITY SWAP CONTRACTS. In an equity swap contract, the counterparty
generally agrees to pay the Long-Short Equity Fund the amount, if any, by which
the notional amount of the equity swap contract would have increased in value
had it been invested in the basket of stocks comprising the S&P 500 Index, plus
the dividends that would have been received on those stocks. The Fund agrees to
pay to the counterparty a floating rate of interest (typically the London Inter
Bank Offered Rate) on the notional amount of the equity swap contract plus the
amount, if any, by which that notional amount would have decreased in value had
it been invested in such stocks. Therefore, the return to the Fund on any equity
swap contract should be the gain or loss on the notional amount plus dividends
on the stocks comprising the S&P 500 Index (as if the Fund had invested the
notional amount in stocks comprising the S&P 500 Index) less the interest paid
by the Fund on the notional amount. Therefore, the Fund will generally realize a
loss if the value of the S&P 500 Index declines and will generally realize a
gain if the value of the S&P 500 Index rises. The Fund will enter into equity
swap contracts only on a net basis, i.e., where the two parties' obligations are
netted out, with the Fund paying or receiving, as the case may be, only the net
amount of any payments. If there is a default by the counterparty to an equity
swap contract, the Fund will be limited to contractual remedies pursuant to the
agreements related to the transaction.

There is no assurance that the equity swap contract counterparties will be
able to meet their obligations or that, in the event of default, the Long-Short
Equity Fund will succeed in pursuing contractual remedies. The Fund thus assumes
the risk that it may be delayed in or prevented from obtaining payments owed to
it pursuant to these contracts. The Adviser will closely monitor the credit of
equity swap contract counterparties to seek to minimize this risk. The Fund will
not use equity swap contracts for leverage.

The Long-Short Equity Fund will not enter into any equity swap contract
unless, at the time of entering into such transaction, the unsecured senior debt
of the counterparty is rated at least A by Moody's or S&P. In addition, the
staff of the SEC considers equity swap contracts to be illiquid securities.
Consequently, as long as the staff maintains this position, the Fund will not
invest in equity swap contracts if, as a result of the investment, the total
value of such investments together with that of all other illiquid securities
which the Fund owns would exceed 15% of the Fund's net assets.

The net amount of the excess, if any, of the Fund's obligations over its
entitlement with respect to each equity swap contract will be accrued on a daily
basis, and an amount of cash or liquid securities having an aggregate market
value at least equal to the accrued excess will be maintained in a segregated
account. The Fund does not believe that the Fund's obligations under equity swap
contracts are senior securities within the meaning of the 1940 Act, so long as
such a segregated account is maintained, and accordingly, the Fund will not
treat them as being subject to its borrowing restrictions.

STRATEGIES AVAILABLE TO THE SELECT EQUITY FUND

FOREIGN CURRENCY TRANSACTIONS. The Fund may enter into contracts to purchase
and sell forward foreign currency exchange contracts to seek to enhance total
return. A forward foreign currency exchange contract is a negotiated agreement
to exchange currency at a future time at a rate or rates that may be higher or
lower than those available on a "spot" (or cash) basis. The Fund may enter into
these contracts for purposes of increasing exposure to a foreign currency or to
shift exposure to foreign currency fluctuations from one country to another. To
the extent that such contracts are entered into to enhance total return, they
are considered speculative. If the Fund enters into such a contract for any
purpose, the Fund will be required to maintain cash or liquid assets in an
amount equal to the value of the Fund's total assets committed to the
consummation of the contract. The Select Equity Fund will not invest more than
50% of their respective total assets in such contracts for the purpose of
enhancing total return. There is no limit on the amount of assets that the Fund
may invest in such transactions for hedging purposes.

The over the counter market in forward foreign currency exchange contracts
offers less protection against defaults by the other party to such instruments
than is available for currency instruments traded on an exchange. Such contracts
are subject to the risk that the counterparty to the contract will default on
its obligations. Since these contracts are not guaranteed by an exchange or
clearinghouse, a default on the contract would deprive the Fund of unrealized
profits, transaction costs or the benefits of a currency hedge or force the Fund
to cover its purchase or sale commitments, if any, at the current market price.
The

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<PAGE> 17
Fund will not enter into forward foreign currency exchange contracts unless
the credit quality of the unsecured senior debt or the claims-paying ability of
the counterparty is considered to be investment grade by BEA.

Currency exchange rates may fluctuate significantly over short periods of
time. They generally are determined by the forces of supply and demand in the
foreign exchange markets and the relative merits of investments in different
countries, actual or perceived changes in interest rates and other complex
factors as seen from an international perspective. Currency exchange rates also
can be affected unpredictably by intervention by U.S. or foreign governments or
central banks, or the failure to intervene, or by currency controls or political
developments in the United States or abroad. The foreign currency market offers
less protection against defaults in the forward trading of currencies than is
available when trading in currencies occurs on an exchange. Since a forward
currency contract is not guaranteed by an exchange or clearinghouse, a default
on the contract would deprive the Fund of unrealized profits or force the Fund
to cover its commitments for purchase or resale, if any, at the current market
price.

MORTGAGE-RELATED PASS-THROUGHS AND DERIVATIVES. The Fund may invest in
mortgage-related securities. Purchasable mortgage-related securities are
represented by pools of mortgage loans assembled for sale to investors by
various governmental agencies such as GNMA and government-related organizations
such as FNMA and FHLMC, as well as by private issuers such as commercial
investment banks, savings and loan institutions, mortgage bankers and private
mortgage insurance companies. As with other interest-bearing securities, the
prices of such securities are inversely affected by changes in interest rates.
However, though the value of a mortgage-related security may decline when
interest rates rise, the converse is not necessarily true because in periods of
declining interest rates, mortgages underlying securities are prone to
prepayment. For this and other reasons, a mortgage-related security's stated
maturity may be shortened by an unscheduled prepayment on underlying mortgages
and, therefore, it is not possible to predict accurately the security's return
to these Funds.

Mortgage-related securities acquired by the Fund may include collateralized
mortgage obligations ("CMOs") issued by FNMA, FHLMC or other U.S. Government
agencies or instrumentalities, as well as by private issuers. These securities
may be considered mortgage derivatives. CMOs provide an investor with a
specified interest in the cash flow of a pool of underlying mortgages or other
mortgage-related securities.

ASSET-BACKED SECURITIES. The Fund may purchase asset-backed securities,
which represent a participation in, or are secured by and payable from, a stream
of payments generated by particular assets, most often a pool of assets similar
to one another. Assets generating such payments will consist of such instruments
as motor vehicle installment purchase obligations, credit card receivables and
home equity loans.

Asset-backed securities may involve certain risks arising primarily from the
nature of the underlying assets (i.e., credit card and automobile loan
receivables as opposed to real estate mortgages). For example, credit card
receivables are generally unsecured and may require the repossession of personal
property upon the default of the debtor which may be difficult or impracticable
in some cases. Asset-backed securities are considered an industry for industry
concentration purposes, and the Fund will therefore not purchase any
asset-backed securities which would cause 25% or more of the Fund's total assets
at the time of purchase to be invested in asset-backed securities.

CONVERTIBLE SECURITIES. A convertible security is a bond, debenture, note,
preferred stock or other security that may be converted into or exchanged for a
prescribed amount of common stock of the same or a different issuer within a
particular period of time at a specified price or formula. A convertible
security entitles the holder to receive interest paid or accrued on debt or the
dividend paid on preferred stock until the convertible security matures or is
redeemed, converted, or exchanged. Before conversion, convertible securities
have characteristics similar to nonconvertible debt securities in that they
ordinarily provide a stable stream of income with generally higher yields than
those of common stocks of the same or similar issuers. The Fund will invest in
convertible securities without regard to their credit ratings. See "Certain
Investment Strategies -- Lower-Rated Securities."

LOWER-RATED SECURITIES. The widespread expansion of government, consumer and
corporate debt within the economy has made the corporate sector, especially
cyclically sensitive industries, more vulnerable to economic downturns or
increased interest rates. Because lower-rated debt securities involve issuers
with weaker credit fundamentals (such as debt-to-equity ratios, interest charge
coverage, earnings history and the like), an economic downturn, or increases in
interest rates, could severely disrupt the

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<PAGE> 18
market for lower-rated debt securities and adversely affect the value of
outstanding debt securities and the ability of the issuers to repay principal
and interest.

Lower-rated debt securities (commonly known as "junk bonds") possess
speculative characteristics and are subject to greater market fluctuations and
risk of lost income and principal than higher-rated debt securities for a
variety of reasons. The markets for and prices of lower-rated debt securities
have been found to be less sensitive to interest rate changes than higher-rated
investments, but more sensitive to adverse economic changes or individual
corporate developments. Also, during an economic downturn or substantial period
of rising interest rates, highly leveraged issuers may experience financial
stress which would adversely affect their ability to service their principal and
interest payment obligations, to meet projected business goals and to obtain
additional financing. If the issuer of a debt security owned by the Fund
defaulted, the Fund could incur additional expenses in seeking recovery with no
guaranty of recovery. In addition, periods of economic uncertainty and changes
can be expected to result in increased volatility of market prices of
lower-rated debt securities and the Fund's net asset value. Lower-rated debt
securities also present risks based on payment expectations. For example,
lower-rated debt securities may contain redemption or call provisions. If an
issuer exercises these provisions in a declining interest rate market, the Fund
would have to replace the security with a lower yielding security, resulting in
a decreased return for investors. Conversely, a lower-rated debt security's
value will decrease in a rising interest rate market, as will the value of the
Fund's assets. If the Fund experiences unexpected net redemptions, this may
force it to sell its lower-rated debt securities, without regard to their
investment merits, thereby decreasing the asset base upon which the Fund's
expenses can be spread and possibly reducing the Fund's rate of return.

In addition, to the extent that there is no established retail secondary
market, there may be thin trading of lower-rated debt securities, and this may
have an impact on the ability of the Adviser to both value accurately
lower-rated debt securities and the Fund's assets, and to dispose of the debt
securities. Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the value and liquidity of lower-rated debt
securities, especially in a thinly traded market.

INVESTMENT GUIDELINES

Each Fund may invest up to 15% of its net assets in securities with
contractual or other restrictions on resale and other instruments that are not
readily marketable ("illiquid securities"), including (i) securities issued as
part of a privately negotiated transaction between an issuer and one or more
purchasers; (ii) repurchase agreements with maturities greater than seven days;
(iii) time deposits maturing in more than seven calendar days; and (iv) certain
Rule 144A Securities. Each Fund may borrow from banks and enter into reverse
repurchase agreements and dollar rolls for temporary or emergency purposes, such
as meeting redemption requests, provided that reverse repurchase agreements and
any other borrowing by the Fund may not exceed 33 1/3% of total assets, and may
pledge its assets to the extent necessary to secure permitted borrowings.
Whenever borrowings (including reverse repurchase agreements, dollars rolls and
borrowings from banks) exceed 5% of a Fund's assets, the Fund will not make any
investments (including roll-overs). Except for the limitations on borrowing and
the limitation on further investments when borrowings exceed 5% of Fund assets,
the investment guidelines set forth in this paragraph may be changed at any time
without shareholder consent by vote of the Board of each Fund, subject to the
limitations contained in the 1940 Act. A complete list of investment
restrictions that each Fund has adopted identifying additional restrictions that
cannot be changed without the approval of the majority of the Fund's outstanding
shares is contained in the Statement of Additional Information under "Investment
Limitations".

Any investment policy or limitation which involves a maximum or minimum
percentage of securities shall not be considered to be violated unless an excess
over or a deficiency under the percentage occurs immediately after, and is
caused by, an acquisition or disposition of securities or utilization of assets
by a Fund.

MANAGEMENT OF THE FUNDS

INVESTMENT ADVISER. BEA serves as the Investment Adviser for each of the
Funds pursuant to investment advisory agreements (the "Advisory Agreements").
BEA is a general partnership organized under the laws of the State of New York
in December 1990 and, together with its predecessor firms, has been engaged in
the investment advisory business for over 60 years. BEA is a wholly-owned
subsidiary of Credit Suisse and the U.S. arm of Credit Suisse Asset Management.
BEA is a registered investment adviser under the Investment Advisers Act of
1940, as amended. BEA is a diversified investment adviser managing global
equity, fixed-income and derivative securities accounts for corporate pension
and profit-sharing plans, state pension funds, union funds, endowments and other
charitable institutions. As of June 30, 1998, BEA managed approximately $35.6
billion in

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<PAGE> 19
assets. BEA currently acts as investment adviser for eleven other investment
companies registered under the 1940 Act, and acts as sub-adviser to certain
portfolios of thirteen other registered investment companies. BEA's principal
offices are located at One Citicorp Center, 153 East 53rd Street, New York, New
York 10022.

For the advisory services provided and expenses assumed by BEA, the
Long-Short Neutral, Long-Short Equity and Select Equity Funds will pay BEA a fee
computed at an annual rate of 1.50%, 0.10% and .75%, respectively, of the Fund's
average net assets, computed daily and payable quarterly. However, after the
first year of operations of the Long-Short Neutral Fund, this basic management
fee may be increased or decreased by applying an adjustment formula (the
"Performance Adjustment"). The Performance Adjustment is calculated monthly by
comparing the Fund's investment performance to a target during the most recent
twelve-month period. The target is the investment record of the Salomon Smith
Barney U.S. 1-Month Treasury Bill Index-TM- plus 5 percentage points. The
Performance Adjustment is added to or subtracted from the basic fee. The maximum
annualized Performance Adjustment is .50%.

In addition to the undertaking to limit expenses described under "The
Funds' Expenses," the Adviser has voluntarily undertaken to waive some or all of
its management fee and, if necessary, to bear certain expenses of the Long-Short
Neutral Fund and the Long-Short Equity Fund until further notice to the extent
required to limit the total annual operating expenses (which do not include
nonrecurring account fees and extraordinary expenses) of Common Shares to 2.25%
and 2.75%, respectively, of the Fund's average daily net assets attributable to
that class, plus the Performance Adjustment applicable to the Long-Short Neutral
Fund. The Performance Adjustment would be determined without regard to any
waivers of the basic management fee.

BEA may assume additional expenses of a Fund from time to time.

The Advisory Agreements provide that BEA shall not be liable for any error
of judgment or mistake of law or for any loss suffered by the Funds in
connection with the matters to which the Advisory Agreements relate.

PORTFOLIO MANAGERS. Long-Short Neutral and Long-Short Equity Funds. The
day-to-day portfolio management of the Long-Short Neutral and Long-Short Equity
Funds is the responsibility of the BEA Structured Equity Team. The Team consists
of the following investment professionals: William W. Priest, Jr. (Chief
Executive Officer and Executive Director of BEA), Eric Remole (Managing
Director), Marc Bothwell (Vice President) and Michael Welhoelter (Vice
President). Mr. Priest has been engaged as an investment professional with BEA
for more than twenty-five years. Mr. Remole joined BEA in 1997, prior to which
time he was managing director for fourteen years at Citicorp Investment
Management, Inc. (now Chancellor/LGT Asset Management, Inc.). Mr. Bothwell
joined BEA in 1997, prior to which time he was a vice president and portfolio
manager at Chancellor/LGT Asset Management, Inc., where he

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<PAGE> 20
was involved in risk management and research on earnings and earnings surprise
modeling. Prior to 1994, he was a programmer and trader at Keane Dealer
Services, Inc. Mr. Welhoelter joined BEA in 1997, prior to which time he was a
portfolio manager and vice president at Chancellor/LGT Asset Management, Inc.,
where he developed risk management and portfolio construction strategies.

Select Equity Fund. The day-to-day portfolio management of the Select
Equity Fund is the responsibility of the BEA Select Economic Value Equity
Management Team. The Team consists of the following investment professionals:
William W. Priest, Jr. (Chief Executive Officer and Executive Director of BEA),
John Hurford (Executive Director), James Abate (Senior Vice President), Susan
Everly (Vice President) and James Mecca (Vice President). Messrs. Priest and
Hurford have, on an individual basis, been engaged as investment professionals
with BEA for more than twenty-five years. Mr. Abate joined BEA in 1995.
Previously, he was a managing director for Vert Independent Capital Research for
two years. Prior to joining Vert Independent Capital Research, Mr. Abate was a
manager in Price Waterhouse's Valuation/Corporate Finance Group for 6 years. Ms.
Everly joined BEA in 1998. Previously, she was a securities analyst at Goldman
Sachs for two years. Prior to joining Goldman Sachs, she was a student at
Harvard Business School for 2 years. Prior to 1994, she was an analyst at CS
First Boston for 4 years. Mr. Mecca joined BEA in 1998. Previously, he was a
securities analyst at Goldman, Sachs & Co. for 2 years. Prior to joining Goldman
Sachs, he was at Bankers Trust where he was an Emerging Markets Equity Trader
for 3 years.

CO-ADMINISTRATORS. The Funds employ Counsellors Service, a wholly owned
subsidiary of Warburg Pincus Asset Management, Inc., ("Warburg"), as a
co-administrator. As co-administrator, Counsellors Service provides shareholder
liaison services to the Funds including responding to shareholder inquiries and
providing information on shareholder investments. Counsellors Service also
performs a variety of other services, including furnishing certain executive and
administrative services, acting as liaison between the Funds and their various
service providers, furnishing corporate secretarial services, which include
preparing certain materials for meetings of the Board, assisting in the
preparation of proxy statements and annual and semiannual reports and tax
returns and monitoring and developing compliance procedures for the Funds. As
compensation, each Fund pays Counsellors Service a fee calculated at an annual
rate of .05% of the Fund's first $125 million in average daily net assets
attributable to Common Shares and .10% of average daily net assets attributable
to Common Shares over $125 million.

Each Fund employs PFPC Inc. ("PFPC"), an indirect, wholly owned subsidiary
of PNC Bank Corp., as a co-administrator. As a co-administrator, PFPC calculates
the Fund's net asset value, provides all accounting services for the Fund and
assists in related aspects of the Fund's operations. As compensation, the Funds
each pay PFPC a fee calculated at an annual rate of .125% of each Fund's average
daily net assets, subject in each case to a minimum annual fee and exclusive of
out-of-pocket expenses. PFPC has its principal offices at 400 Bellevue Parkway,
Wilmington, Delaware 19809.

CUSTODIANS. Custodial Trust Company ("CTC") serves as custodian of the
assets of the Long-Short Neutral Fund and Long-Short Equity Fund, and Brown
Brothers Harriman & Co. ("BBH") serves as custodian of the assets of the Select
Equity Fund. CTC's principal business address is 101 Carnegie Center, Princeton,
NJ 08540 and BBH's principal business address is 40 Water Street, Boston,
Massachusetts 02109.

TRANSFER AGENT. State Street Bank and Trust Company ("State Street") serves
as shareholder servicing agent, transfer agent and dividend disbursing agent for
the Funds. It has delegated to Boston Financial Data Services, Inc., an
affiliated company ("BFDS"), responsibility for most shareholder servicing
functions. State Street's principal business address is 225 Franklin Street,
Boston, Massachusetts 02110 and BFDS's principal business address is 2 Heritage
Drive, North Quincy, Massachusetts 02171.

DISTRIBUTOR. Counsellors Securities serves as distributor of the shares of
the Funds. Counsellors Securities is a wholly-owned subsidiary of Warburg and is
located at 466 Lexington Avenue, New York, New York 10017-3147. Counsellors
Securities receives a fee at an annual rate equal to .25% of the average daily
net assets of each Fund's Common Shares for distribution services, pursuant to a
shareholder servicing and distribution plan (the "12b-1 Plan") adopted by each
Fund pursuant to Rule 12b-1 under the 1940 Act. Amounts paid to Counsellors
Securities under a 12b-1 Plan may be used by Counsellors Securities to cover
expenses that are primarily intended to result in, or that are primarily
attributable to, (i) the sale of the Common Shares, (ii) ongoing servicing
and/or maintenance of the accounts of Common Shareholders of a Fund and (iii)
sub-transfer agency services, subaccounting services or administrative services
related to the sale of the Common Shares, all as set forth in the 12b-1 Plans.

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<PAGE> 21
Payments under the 12b-1 Plans are not tied exclusively to the distribution
expenses actually incurred by Counsellors Securities and the payments may exceed
distribution expenses actually incurred. The Boards of each Fund evaluate the
appropriateness of the 12b-1 Plans on a continuing basis and in doing so
consider all relevant factors, including expenses borne by Counsellors
Securities and amounts received under the 12b-1 Plans.

BEA or its affiliate may, at its own expense, provide promotional incentives
for qualified recipients who support the sale of shares of a Fund, consisting of
securities dealers who have sold Fund shares or others, including banks and
other financial institutions, under special arrangements. Incentives may include
opportunities to attend business meetings, conferences, sales or training
programs for recipients' employees or clients and other programs or events and
may also include opportunities to participate in advertising or sales campaigns
and/or shareholder services and programs regarding one or more Warburg Pincus
Funds. BEA or its affiliate may pay for travel, meals and lodging in connection
with these promotional activities. In some instances, these incentives may be
offered only to certain institutions whose representatives provide services in
connection with the sale or expected sale of Fund shares.

DIRECTORS AND OFFICERS. The officers of each Fund manage its day-to-day
operations and are directly responsible to the Board. The Boards set broad
policies for each Fund and choose its officers. A list of the Directors and
officers of each Fund and a brief statement of their present positions and
principal occupations during the past five years is set forth in the Statement
of Additional Information.

HOW TO OPEN AN ACCOUNT

In order to invest in a Fund, an investor must first complete and sign an
account application. To obtain an application, an investor may telephone Warburg
Pincus Funds at (800) 927-2874. An investor may also obtain an account
application by writing to:

Warburg Pincus Funds
P.O. Box 9030
Boston, Massachusetts 02205-9030
OR
Overnight to:
BFDS
Attn.: Warburg Pincus Funds
2 Heritage Drive
North Quincy, Massachusetts 02171

Completed and signed account applications should be sent to the above.

RETIREMENT PLANS AND UTMA/UGMA ACCOUNTS. For information (i) about investing
in the Funds through a tax-advantaged retirement plan, such as an Individual
Retirement Account ("IRA"), or (ii) about opening a Uniform Transfers to Minors
Act ("UTMA") account or Uniform Gifts to Minors Act ("UGMA") account, an
investor should telephone Warburg Pincus Funds at (800) 927-2874 or write to
Warburg Pincus Funds at an address set forth above. Investors should consult
their own tax advisers about the establishment of retirement plans and UTMA or
UGMA accounts.

CHANGES TO ACCOUNT. For information on how to make changes to an account,
including changes to account registration, address and/or privileges, an
investor should telephone Warburg Pincus Funds at (800) 927-2874. Shareholders
are responsible for maintaining current account registration and addresses with
a Fund. No interest will be paid on amounts represented by uncashed distribution
or redemption checks.

HOW TO PURCHASE SHARES

Common Shares of each Fund may be purchased either by mail or, with special
advance instructions, by wire and automated clearing house transactions ("ACH on
Demand").

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<PAGE> 22
The minimum initial investment in each Fund is $2,500 and the minimum
subsequent investment is $250, except that subsequent minimum investments can be
as low as $100 under the Automatic Monthly Investment Plan or by ACH on Demand,
as described below. For certain retirement plans (described above) and UTMA/UGMA
accounts, the minimum initial investment is $1,000. The Fund reserves the right
to change the initial and subsequent investment minimum requirements at any
time. In addition, the Fund may, in its sole discretion, waive the initial and
subsequent investment minimum requirements with respect to investors who are
employees of Warburg, BEA or their affiliates or persons with whom [Warburg or
BEA] has entered into an investment advisory agreement. Existing investors will
be given 15 days' notice by mail of any increase in minimum investment
requirements.

After an investor has made his initial investment, additional shares may be
purchased at any time by mail or by wire in the manner outlined below. Wire
payments for initial and subsequent investments should be preceded by an order
placed with the Fund and should clearly indicate the investor's account number
and the name of the Fund in which shares are being purchased. The Fund reserves
the right to suspend the offering of shares for a period of time or to reject
any specific purchase order. In the interest of economy and convenience,
physical certificates representing shares in the Funds are not normally issued.

BY MAIL. If the investor desires to purchase Common Shares by mail, a check
or money order made payable to the Fund or Warburg Pincus Funds (in U.S.
currency) should be sent along with the completed account application to Warburg
Pincus Funds through its distributor, Counsellors Securities at an address set
forth above. Checks payable to the investor and endorsed to the order of the
Fund or Warburg Pincus Funds will not be accepted as payment and will be
returned to the sender. If payment is received in proper form prior to the close
of regular trading on The New York Stock Exchange, Inc. (the "NYSE") (currently
4:00 p.m., Eastern time) on a day that the Fund calculates its net asset value
(a "business day"), the purchase will be made at the Fund's net asset value
calculated at the end of that day. If payment is received at or after the close
of regular trading on the NYSE, the purchase will be effected at the Fund's net
asset value determined for the next business day after payment has been
received. Checks or money orders that are not in proper form or that are not
accompanied or preceded by a complete account application will be returned to
the sender. Shares purchased by check or money order are entitled to receive
dividends and distributions beginning on the day payment is received. Checks or
money orders in payment for shares of more than one Warburg Pincus Fund should
be made payable to Warburg Pincus Funds and should be accompanied by a breakdown
of amounts to be invested in each fund. If a check used for purchase does not
clear, the Fund will cancel the purchase and the investor may be liable for
losses or fees incurred. For a description of the manner of calculating the
Fund's net asset value, see "Net Asset Value" below.

BY WIRE. Investors may also purchase Common Shares in a Fund by wiring funds
from their banks. Telephone orders by wire will not be accepted until a
completed account application in proper form has been received and an account
number has been established. Investors should place an order with the Fund prior
to wiring funds by telephoning (800) 927-2874. Federal funds may be wired using
the following wire address:

State Street Bank and Trust Company
ABA# [0110 000 28]
Attn.: Mutual Funds/Custody Department
[Insert Warburg Pincus Fund name(s) here]
DDA# [9904-649-2]
F/F/C: [Account Number and Account Registration]

If a telephone order is received prior to the close of regular trading on
the NYSE and payment by wire is received on the same day in proper form in
accordance with instructions set forth above, the shares will be priced
according to the net asset value of the Fund on that day and are entitled to
dividends and distributions beginning on that day. However, if a wire in proper
form that is not preceded by a telephone order is received at or after the close
of regular trading on the NYSE, the payment will be held uninvested until the
order is effected at the close of business on the next business day. Payment for
orders that are not accepted will be returned to the prospective investor after
prompt inquiry. If a telephone order is placed and payment by wire is not
received on the same day, the Fund will cancel the purchase and the investor may
be liable for losses or fees incurred.

AUTOMATIC MONTHLY INVESTMENT PLAN AND ACH ON DEMAND. The Automatic Monthly
Investment Plan allows shareholders to authorize a Fund or its agent to debit
their bank account monthly ($100 minimum) for the purchase of Fund shares on or
about

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<PAGE> 23
either the tenth or twentieth calendar day of each month. Shareholders may also
purchase shares by calling Warburg Pincus Funds at (800) 927-2874 on any
business day to request direct debit or credit (for redemptions) of their bank
account through an ACH on Demand transaction.

To establish the Automatic Monthly Investment Plan and/or ACH on Demand
option, obtain a separate application or complete the relevant section of the
account application. Only an account maintained at a financial institution which
is an automated clearing house member may be used, and one common name must
appear on both the shareholder's Fund registration and bank account
registration. Shareholders using this service must satisfy the initial
investment minimum for the Fund prior to or concurrent with the start of any
Automatic Monthly Investment Plan or ACH on Demand transaction. Please contact
Warburg Pincus Funds at (800) 927-2874 for additional information. Investors
should allow a period of up to 30 days in order to implement an Automatic
Investment Plan. The failure to provide complete information could result in
further delays.

If an ACH on Demand transaction request is received prior to the close of
regular trading on the NYSE, the shares will be priced according to the net
asset value of Fund shares on that day and are entitled to dividends and
distributions beginning on that day. If a request is received at or after the
close of regular trading on the NYSE, the shares will be priced at the relevant
Fund's net asset value on the following business day.

TELEPHONE TRANSACTIONS. Unless otherwise indicated on the account
application or if the ACH on Demand option is elected, an investor may request
transactions by telephone. Investors should realize that in conducting
transactions by telephone they may be giving up a measure of security that they
may have if they were to conduct such transactions in writing. Neither a Fund
nor its agents will be liable for following instructions communicated by
telephone that it reasonably believes to be genuine. Reasonable procedures will
be employed on behalf of each Fund designed to give reasonable assurance that
instructions communicated by telephone are genuine. Such procedures include
providing written confirmation of telephone transactions, tape recording
telephone instructions and requiring specific personal information prior to
acting upon telephone instructions.

PURCHASES THROUGH INTERMEDIARIES. Common Shares of each Fund are available
through the Charles Schwab & Company, Inc. Mutual Fund OneSource(TM) Program;
Fidelity Brokerage Services, Inc. Funds-Network(TM) Program; Jack White &
Company, Inc.; and Waterhouse Securities, Inc. Generally, these programs require
customers to pay either no or low transaction fees in connection with purchases,
exchanges or redemptions. The Funds are also available through certain
broker-dealers, financial institutions and other industry professionals
(including the brokerage firms offering the programs described above,
collectively, "Service Organizations"), which may impose certain conditions on
their clients or customers that invest in the Funds, which are in addition to or
different than those described in this Prospectus, and may charge their clients
or customers direct fees. Certain features of the Funds, such as the initial and
subsequent investment minimums, redemption fees and certain trading
restrictions, may be modified or waived by Service Organizations. Service
Organizations may impose transaction or administrative charges or other direct
fees, which charges and fees would not be imposed if Fund shares are purchased
directly from the Funds. Therefore, a client or customer should contact the
Service Organization acting on his behalf concerning the fees (if any) charged
in connection with a purchase, exchange or redemption of Fund shares and should
read this Prospectus in light of the terms governing his accounts with the
Service Organization. Service Organizations will be responsible for promptly
transmitting client or customer purchase and redemption orders to the Funds in
accordance with their agreements with the Funds and with clients or customers.

Service Organizations or, if applicable, their designees may enter confirmed
purchase or redemption orders on behalf of clients and customers, with payment
to follow no later than the Funds' pricing on the following business day. If
payment is not received by such time, the Service Organization could be held
liable for resulting fees or losses. A Fund may be deemed to have received a
purchase or redemption order when a Service Organization, or, if applicable, its
authorized designee, accepts the order. Such orders received by a Fund in proper
form will be priced at the Fund's net asset value next computed after they are
accepted by the Service Organization or its authorized designee.

For administration, subaccounting, transfer agency and/or other services,
Counsellors Securities or its affiliates may pay Service Organizations and
certain recordkeeping organizations a fee of up to .35% (the "Service Fee") (or
up to 40% in connection with certain retirement plan programs)of the average
annual value of accounts with the Funds maintained by such Service Organizations
or recordkeepers. A portion of the Service Fee may be borne by the Funds as a
transfer agency fee. In addition, a Service Organization or recordkeeper may
directly or indirectly pay a portion of its Service Fee to the Funds' custodian
or transfer agent for costs related to accounts of its clients or customers. The

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<PAGE> 24
Service Fee payable to any one Service Organization is determined based upon a
number of factors, including the nature and quality of services provided, the
operations processing requirements of the relationship and the standardized fee
schedule of the Service Organization or recordkeeper.

GENERAL. Each Fund reserves the right to reject any specific purchase order,
including certain purchases made by exchange (see "How to Redeem and Exchange
Shares -- Exchange of Shares" below). Purchase orders may be refused if, in
BEA's judgment, a Fund would be unable to invest the money effectively in
accordance with its investment objective and policies, or would otherwise
potentially be adversely affected. A Fund may discontinue sales of its shares if
management believes that a substantial further increase in assets may adversely
affect that Fund's ability to achieve its investment objective. In such event,
however, it is anticipated that existing shareholders would be permitted to
continue to authorize investment in such Fund and to reinvest any dividends or
capital gains distributions.

HOW TO REDEEM AND EXCHANGE SHARES

REDEMPTION OF SHARES. An investor in a Fund may redeem (sell) his shares on
any day that the Fund's net asset value is calculated (see "Net Asset Value"
below).

Common Shares of the Funds may either be redeemed by mail or by telephone.
If an investor desires to redeem his shares by mail, a written request for
redemption should be sent to Warburg Pincus Funds at an address indicated above
under "How to Open an Account." An investor should be sure that the redemption
request identifies the Fund, the number of shares to be redeemed and the
investor's account number. Payment of redemption proceeds may be delayed in
connection with account changes. Each mail redemption request must be signed by
the registered owner(s) (or his legal representative(s)) exactly as the shares
are registered. If an investor has applied for the telephone redemption feature
on his account application, he may redeem his shares by calling Warburg Pincus
Funds at (800) 927-2874. An investor making a telephone withdrawal should state
(i) the name of the Fund, (ii) the account number of the Fund, (iii) the name of
the investor(s) appearing on the Fund's records, (iv) the amount to be withdrawn
and (v) the name of the person requesting the redemption.

After receipt of the redemption request by mail or by telephone, the
redemption proceeds will, at the option of the investor, be paid by check and
mailed to the investor of record or be wired to the investor's bank as indicated
in the account application previously filled out by the investor. No Fund
currently imposes a service charge for effecting wire transfers but each Fund
reserves the right to do so in the future. During periods of significant
economic or market change, telephone redemptions may be difficult to implement.
If an investor is unable to contact Warburg Pincus Funds by telephone, an
investor may deliver the redemption request to Warburg Pincus Funds by mail at
an address shown above under "How to Open an Account." Although each Fund will
redeem shares purchased by check, through the Automatic Monthly Investment Plan
or by ACH on Demand before the check or funds clear, payments of the redemption
proceeds will be delayed for up to five days (for funds received through the
Automatic Monthly Investment Plan or by ACH on Demand) or up to ten days (for
check purchases) from the date of purchase. Investors should consider purchasing
shares using a certified or bank check, money order or federal funds wire if
they anticipate an immediate need for redemption proceeds.

If a redemption order is received by a Fund or its agent prior to the close
of regular trading on the NYSE, the redemption order will be effected at the net
asset value per share as determined on that day. If a redemption order is
received at or after the close of regular trading on the NYSE, the redemption
order will be effected at the net asset value as next determined. Except as
noted above, redemption proceeds will normally be mailed or wired to an investor
on the next business day following the date a redemption order is effected. If,
however, in the judgment of BEA, immediate payment would adversely affect a
Fund, each Fund reserves the right to pay the redemption proceeds within seven
days after the redemption order is effected. Furthermore, each Fund may suspend
the right of redemption or postpone the date of payment upon redemption (as well
as suspend or postpone the recordation of an exchange of shares) for such
periods as are permitted under the 1940 Act.

The proceeds paid upon redemption may be more or less than the amount
invested depending upon a share's net asset value at the time of redemption. If
an investor redeems all the shares in his account, all dividends and
distributions declared up to and including the date of redemption are paid along
with the proceeds of the redemption.

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<PAGE> 25
a value of less than the minimum. The investor will then have 60 days to make an
additional investment before a redemption will be processed by the Fund.

AUTOMATIC CASH WITHDRAWAL PLAN. Each Fund offers investors an automatic cash
withdrawal plan under which investors may elect to receive periodic cash
payments of at least $250 monthly or quarterly. To establish this service,
complete the "Automatic Withdrawal Plan" section of the account application and
attach a voided check from the bank account to be credited. For further
information regarding the automatic cash withdrawal plan or to modify or
terminate the plan, investors should contact Warburg Pincus Funds at (800)
927-2874.

EXCHANGE OF SHARES. An investor may exchange Common Shares of a Fund for
Common Shares of another Fund or for Common Shares of another Warburg Pincus
Fund at their respective net asset values. Exchanges may be effected by mail or
by telephone in the manner described under "Redemption of Shares" above. If an
exchange request is received by Warburg Pincus Funds or its agent prior to the
close of regular trading on the NYSE, the exchange will be made at each fund's
net asset value determined at the end of that business day. Exchanges will be
effected without a sales charge but must satisfy the minimum dollar amount
necessary for new purchases. A Fund may refuse exchange purchases at any time
without prior notice.

The exchange privilege is available to shareholders residing in any state in
which the Common Shares being acquired may legally be sold. When an investor
effects an exchange of shares, the exchange is treated for federal income tax
purposes as a redemption. Therefore, the investor may realize a taxable gain or
loss in connection with the exchange. Investors wishing to exchange Common
Shares of a Fund for Common Shares in another Warburg Pincus Fund should review
the prospectus of the other fund prior to making an exchange. For further
information regarding the exchange privilege or to obtain a current prospectus
for another Warburg Pincus Fund, an investor should contact Warburg Pincus Funds
at (800) 927-2874.

Each Fund reserves the right to refuse exchange purchases by any person or
group if, in BEA's judgment, the Fund would be unable to invest the money
effectively in accordance with its investment objective and policies, or would
otherwise potentially be adversely affected. Examples of when an exchange
purchase could be refused are when a Fund receives or anticipates receiving
large exchange orders at or about the same time and/or when a pattern of
exchanges within a short period of time (often associated with a "market timing"
strategy) is discerned. Each Fund reserves the right to terminate or modify the
exchange privilege at any time upon 30 days' notice to shareholders.

DIVIDENDS, DISTRIBUTIONS AND TAXES

A Fund may be required to withhold for U.S. federal income taxes 31% of all
distributions payable to shareholders who fail to provide the Fund with their
correct taxpayer identification number or to make required certifications, or
who have been notified by the U.S. Internal Revenue Service that they are
subject to backup withholding.

TAXES. Each Fund intends to qualify each year as a "regulated investment
company" within the meaning of the Code. Each Fund, if it qualifies as a
regulated investment company, will be subject to a 4% non-deductible excise tax
measured with respect to certain undistributed amounts of ordinary income and
capital gain. Each Fund expects to pay such additional dividends and to make
such additional distributions as are necessary to avoid the application of this
tax.

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<PAGE> 26
Fund shares or whether such distributions are received in cash or reinvested in
Fund shares. As a general rule, an investor's gain or loss on a sale or
redemption of Fund shares will be a long-term capital gain or loss if the
investor has held the shares for more than one year and will be a short-term
capital gain or loss if the investor has held the shares for one year or less.
However, any loss realized upon the sale or redemption of shares within six
months from the date of their purchase will be treated as a long-term capital
loss to the extent of any amounts treated as distributions of long-term capital
gain during such six-month period with respect to such shares.

The Taxpayer Relief Act of 1997 made certain changes to the Code with
respect to taxation of long-term capital gains earned by taxpayers other than a
corporation. In general, for sales made after May 6, 1997, the maximum tax rate
for individual taxpayers on net long-term capital gains is lowered to 20% for
most assets (including long-term capital gains recognized by shareholders on the
sale or redemption of Fund shares that were held as capital assets). This 20%
rate applies to sales on or after July 29, 1997 only if the asset was held for
more than 18 months at the time of disposition. Capital gains on the disposition
of assets on or after July 29, 1997 held for more than one year and up to 18
months at the time of disposition will be taxed as "mid-term gain" at a maximum
rate of 28%. A rate of 18% instead of 20% will apply after December 31, 2000 for
assets held for more than five years. However, the 18% rate applies only to
assets acquired after December 31, 2000 unless the taxpayer elects to treat an
asset held prior to such date as sold for fair market value on January 1, 2001.
In the case of individuals whose ordinary income is taxed at a 15% rate, the 20%
rate is reduced to 10% and the 10% rate for assets held for more than five years
is reduced to 8%. Each Fund will provide information relating to that portion of
a "capital gain dividend" that may be treated by investors as eligible for the
reduced capital gains rate for capital assets held for more than 18 months.

Investors may be proportionately liable for taxes on income and gains of
the Funds, but investors not subject to tax on their income will not be required
to pay tax on amounts distributed to them. A Fund's investment activities,
including short sales of securities, will not result in unrelated business
taxable income to a tax-exempt investor. A Fund's dividends may qualify for the
dividends received deduction for corporations to the extent they are derived
from dividends attributable to certain types of stock issued by U.S. domestic
corporations.

Dividends and interest received by the Funds may be subject to withholding
and other taxes imposed by foreign countries. However, tax conventions between
certain countries and the United States may reduce or eliminate such taxes. If a
Fund qualifies as a regulated investment company, if certain asset and
distribution requirements are satisfied and if more than 50% of the Fund's total
assets at the close of its fiscal year consists of stock or securities of
foreign corporations, the Fund may elect for U.S. income tax purposes to treat
foreign income taxes paid by it as paid by its shareholders. A Fund may qualify
for and make this election in some, but not necessarily all, of its taxable
years. If a Fund were to make an election, shareholders of the Fund would be
required to take into account an amount equal to their pro rata portions of such
foreign taxes in computing their taxable income and then treat an amount equal
to those foreign taxes as a U.S. federal income tax deduction or as a foreign
tax credit against their U.S. federal income taxes. Shortly after any year for
which it makes such an election, each Fund will report to its shareholders the
amount per share of such foreign income tax that must be included in each
shareholder's gross income and the amount which will be available for the
deduction or credit. No deduction for foreign taxes may be claimed by a
shareholder who does not itemize deductions. Certain limitations will be imposed
on the extent to which the credit (but not the deduction) for foreign taxes may
be claimed.

GENERAL. Statements as to the tax status of each investor's dividends and
distributions are mailed annually. Each investor will also receive, if
applicable, various written notices after the close of a Fund's prior taxable
year with respect to certain dividends and distributions which were received
from the Fund during the Fund's prior taxable year. Investors should consult
their own tax advisers with specific reference to their own tax situations,
including their state and local tax liabilities.

NET ASSET VALUE

Each Fund's net asset value per share is calculated as of the close of
regular trading on the NYSE (currently 4:00 p.m., Eastern time) on each business
day, Monday through Friday, except on days when the NYSE is closed. The NYSE is
currently scheduled to be closed on New Year's Day, Dr. Martin Luther King, Jr.
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day, and on the preceding Friday or subsequent
Monday when one of these holidays falls on a Saturday or Sunday, respectively.
The net asset value per share of each Fund generally changes each day.

-21-
<PAGE> 27
The net asset value per Common Share of each Fund is computed by adding the
Common Shares' pro rata share of the value of the Fund's assets, deducting the
Common Shares' pro rata share of the Fund's liabilities and the liabilities
specifically allocated to Common Shares and then dividing the result by the
total number of outstanding Common Shares.

Securities listed on a U.S. securities exchange (including securities traded
through the Nasdaq National Market System) or foreign securities exchange or
traded in an over-the-counter market will be valued at the most recent sale
price when the valuation is made. Options and futures contracts will be valued
similarly. Debt obligations that mature in 60 days or less from the valuation
date are valued on the basis of amortized cost, unless the Board determines that
using this valuation method would not reflect the investments' value.
Securities, options and futures contracts for which market quotations are not
readily available and other assets will be valued at their fair value as
determined in good faith pursuant to consistently applied procedures established
by the Board. Further information regarding valuation policies is contained in
the Statement of Additional Information.

PERFORMANCE

The Funds quote the performance of Common Shares separately from
Institutional Shares and Advisor Shares. The net asset value of Common Shares is
listed in The Wall Street Journal each business day under the heading "Warburg
Pincus Funds." From time to time, each Fund may advertise yield and average
annual total return of its Common Shares over various periods of time. The yield
refers to net investment income generated by the Common Shares over a specified
thirty-day period, which is then annualized. That is, the amount of net
investment income generated by the Common Shares during that thirty-day period
is assumed to be generated over a 12-month period and is shown as a percentage
of the investment. The tax equivalent yield demonstrates the yield on a taxable
investment necessary to produce an after-tax yield equal to the Common Shares'
tax-free yield. It is calculated by increasing the yield shown for the Common
Shares to the extent necessary to reflect the payment of specified tax rates.
Thus, the tax equivalent yield will always exceed a Fund's Common Shares' yield.
Total return figures show the average percentage change in value of an
investment in the Common Shares from the beginning of the measuring period to
the end of the measuring period. The figures reflect changes in the price of the
Common Shares assuming that any income dividends and/or capital gain
distributions made by a Fund during the period were reinvested in Common Shares
of the Fund. Total return will be shown for recent one-, five- and ten-year
periods, and may be shown for other periods as well (such as from commencement
of the Fund's operations or on a year-by-year, quarterly or current year-to-date
basis).

When considering average total return figures for periods longer than one
year, it is important to note that the annual total return for one year in the
period might have been greater or less than the average for the entire period.
When considering total return figures for periods shorter than one year,
investors should bear in mind that each Fund seeks long-term appreciation and
that such return may not be representative of any Fund's return over a longer
market cycle. Each Fund may also advertise aggregate total return figures of its
Common Shares for various periods, representing the cumulative change in value
of an investment in the Common Shares for the specific period (again reflecting
changes in share prices and assuming reinvestment of dividends and
distributions). Aggregate and average total returns may be shown by means of
schedules, charts or graphs and may indicate various components of total return
(i.e., change in value of initial investment, income dividends and capital gain
distributions).

Investors should note that yield, tax equivalent yield and total return
figures are based on historical earnings and are not intended to indicate future
performance. The Funds' Statement of Additional Information describes the method
used to determine the yield and total return. Current performance figures may be
obtained by calling Warburg Pincus Funds at (800) 927-2874.

The Funds may also from time to time include in advertisings an aggregate
total return figure or a total return figure that is not calculated according to
the standardized formula in order to compare more accurately a Fund's
performance with other measures of investment return. For example, a Fund's
total return or expense ratio may be compared with data published by Lipper
Analytical Services, Inc., CDA/Weisenberger Investment Technologies, Inc.,
Mutual Fund Forecaster or Morningstar, Inc., or with the performance of the
Standard & Poor's 500 Stock Index, Standard & Poor's MidCap 400 Index, Moody's
Bond Survey Bond Index, Wilshire 5000 Index, Lehman Brothers Bond Indexes,
Morgan Stanley Composite Index EAFE, Morgan Stanley Composite Index-Free
Emerging Markets, JP Morgan Global Government Bond Index (Unhedged), First
Boston High Yield Index, Consumer Price Index, Bond Buyer's 20-Bond Index, Dow
Jones Industrial Average, Salomon Smith Barney U.S. 1-Month Treasury Bill
Index(TM), national publications such as Money, Forbes, Barron's, The Wall
Street Journal or the New York Times or publications of a local or regional
nature, and other industry publications. For these purposes, the performance of
a Fund, as well

-22-
<PAGE> 28
as the performance published by such services or experienced by such indices,
will usually not reflect redemption fees, the inclusion of which would reduce
performance results. If a Fund advertises non-standard computations, however,
the Fund will disclose such fees, and will also disclose that the performance
data do not reflect such fees and that inclusion of such fees would reduce the
performance quoted.

In reports or other communications to investors or in advertising, each Fund
may also describe the general biography or work experience of the portfolio
managers of the Fund and may include quotations attributable to the portfolio
managers describing approaches taken in managing the Fund's investments,
research methodology underlying stock selection or the Fund's investment
objective. In addition, a Fund and its portfolio managers may render periodic
updates of Fund activity, which may include a discussion of significant
portfolio holdings; analysis of holdings by industry, country, credit quality
and other characteristics; and comparison and analysis of the Fund with respect
to relevant market and industry benchmarks. Each Fund may also discuss measures
of risk, the continuum of risk and return relating to different investments and
the potential impact of foreign stocks on a portfolio otherwise composed of
domestic securities.

GENERAL INFORMATION

ORGANIZATION. The Long-Short Neutral Fund, Long-Short Equity Fund and the
Select Equity Fund were each incorporated on July 31, 1998 under the laws of the
State of Maryland under the name "Warburg, Pincus Long-Short Neutral Fund,
Inc.," "Warburg, Pincus Long-Short Equity Fund, Inc." and "Warburg, Pincus
Select Equity Fund, Inc.," respectively. On August __, 1998, the Funds and The
RBB Fund, Inc. entered into an Agreement and Plan of Reorganization whereby the
Funds agreed to acquire all of the assets and liabilities of the corresponding
BEA Funds (the "Reorganization"). The Reorganization is expected to be completed
on or about October 2, 1998.

Each Fund's charter authorizes its Board to issue three billion full and
fractional shares of capital stock, $.001 par value per share, of which one
billion shares are designated Common Shares, one billion shares are designated
Institutional Shares and one billion shares are designated Advisor Shares. Under
each Fund's charter documents, the Board has the power to classify or reclassify
any unissued shares of the Fund into one or more additional classes by setting
or changing in any one or more respects their relative rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption. A Board may similarly classify or reclassify any class
of its shares into one or more series and, without shareholder approval, may
increase the number of authorized shares of the Fund.

MULTI-CLASS STRUCTURE. Each Fund currently offers another class of shares,
the Institutional Shares, pursuant to a separate prospectus. Individual
investors may only purchase Institutional Shares and, if and when offered,
Advisor Shares, through institutional shareholders of record, broker-dealers,
financial institutions, depository institutions, retirement plans and financial
intermediaries. Shares of each class represent equal pro rata interests in the
respective Fund and accrue dividends and calculate net asset value and
performance quotations in the same manner. Because of the higher fees paid by
Common Shares and Advisor Shares, the total return on Common Shares can be
expected to be lower than the total return on Institutional Shares and the total
return of Advisor Shares can be expected to be lower than the total return on
Common Shares and Institutional Shares. Investors may obtain information
concerning the Institutional Shares and, if and when offered, the Advisor Shares
from their investment professional or by calling Counsellors Securities at (800)
369-2728. Unless the context clearly suggests otherwise, references to a fund
in this Prospectus are to the Fund as a whole and not to any particular class
of the Fund's shares.

VOTING RIGHTS. Investors in a Fund are entitled to one vote for each full
share held and fractional votes for fractional shares held. Shareholders of a
Fund will vote in the aggregate except where otherwise required by law and
except that each class will vote separately on certain matters pertaining to its
distribution and shareholder servicing arrangements. There will normally be no
meetings of investors for the purpose of electing members of the Board unless
and until such time as less than a majority of the members holding office have
been elected by investors. Any Director of a Fund may be removed from office
upon the vote of shareholders holding at least a majority of the relevant Fund's
outstanding shares, at a meeting called for that purpose. A meeting will be
called for the purpose of voting on the removal of a Board member at the written
request of holders of 10% of the outstanding shares of a Fund.

-23-
<PAGE> 29
statement of the performance of the Fund. Periodic listings of the investment
securities held by the Fund, as well as certain statistical characteristics of
the Fund, may be obtained by calling Warburg Pincus Funds at (800) 927-2874 or
on the Warburg Pincus Funds Web site at www.warburg.com.

The Common Share prospectuses of the Funds are combined in this Prospectus.
Each Fund offers only its own shares, yet it is possible that a Fund might
become liable for a misstatement, inaccuracy or omission in this Prospectus with
regard to another Fund.

-----------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE FUNDS'
STATEMENT OF ADDITIONAL INFORMATION OR THE FUNDS' OFFICIAL SALES LITERATURE IN
CONNECTION WITH THE OFFERING OF SHARES OF THE FUNDS, AND IF GIVEN OR MADE, SUCH
OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY EACH FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF THE
COMMON SHARES OF THE FUNDS IN ANY STATE IN WHICH, OR TO ANY PERSON TO WHOM, SUCH
OFFER MAY NOT LAWFULLY BE MADE.

-24-
<PAGE> 30
TABLE OF CONTENTS

THE FUNDS' EXPENSES........................3
INVESTMENT OBJECTIVES AND POLICIES.........4
PORTFOLIO INVESTMENTS......................6
RISK FACTORS AND SPECIAL CONSIDERATIONS....6
PORTFOLIO TRANSACTIONS AND TURNOVER RATE...9
CERTAIN INVESTMENT STRATEGIES..............9
INVESTMENT GUIDELINES.....................13
MANAGEMENT OF THE FUNDS...................13
HOW TO OPEN AN ACCOUNT....................16
HOW TO PURCHASE SHARES....................16
HOW TO REDEEM AND EXCHANGE SHARES.........19
DIVIDENDS, DISTRIBUTIONS AND TAXES........20
NET ASSET VALUE...........................21
PERFORMANCE...............................22
GENERAL INFORMATION.......................23

[WARBURG PINCUS FUNDS LOGO]
P.O. Box 9030, Boston, MA 02205-9030
800-WARBURG (800-927-2874)
www.warburg.com

COUNSELLORS SECURITIES INC., DISTRIBUTOR. WP**-1-0998

-25-
<PAGE> 31
SUBJECT TO COMPLETION, DATED AUGUST 5, 1998

BEA INSTITUTIONAL FUNDS
PROSPECTUS
September __, 1998

EMERGING MARKETS II FUND
---------------

HIGH YIELD FUND
---------------

INTERNATIONAL GROWTH FUND
---------------

LONG-SHORT MARKET NEUTRAL FUND
---------------

LONG-SHORT EQUITY FUND
---------------

MUNICIPAL BOND FUND
---------------

SELECT ECONOMIC VALUE EQUITY FUND
---------------

STRATEGIC GLOBAL FIXED INCOME FUND
---------------

U.S. CORE EQUITY FUND
---------------

U.S. CORE FIXED INCOME FUND

[BEA FUNDS LOGO]

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE> 32
SUBJECT TO COMPLETION, DATED AUGUST 5, 1998

September __, 1998

BEA Institutional Funds is the name under which the Institutional class of
shares of certain Warburg Pincus Funds are offered. Ten BEA Institutional Funds
are described in this Prospectus:

EMERGING MARKETS II FUND seeks to provide long-term appreciation of capital. The
Fund will invest primarily in equity securities in emerging country markets.

HIGH YIELD FUND seeks to provide high total return. The Fund will invest
primarily in high yield fixed income securities issued by corporations,
governments and agencies, both domestic and foreign.

INTERNATIONAL GROWTH FUND seeks to provide long-term appreciation of capital.
The Fund will invest primarily in equity securities of non-U.S. issuers.

LONG-SHORT MARKET NEUTRAL FUND seeks long-term capital appreciation while
minimizing exposure to general equity market risk. The Fund seeks a total return
greater than the total return of the Salomon Smith Barney U.S. 1-Month Treasury
Bill Index(TM). The Fund pursues its objective by taking long positions in
stocks that the investment adviser has identified as undervalued and short
positions in stocks that the adviser has identified as overvalued. Generally,
the Fund's investments will be concentrated in securities principally traded in
U.S. markets.

LONG-SHORT EQUITY FUND seeks a total return greater than that of the Standard &
Poor's 500 Composite Stock Price Index (the "S&P 500 Index"). The Fund pursues
its objective by investing in shares of the BEA Long-Short Market Neutral Fund
while simultaneously utilizing S&P 500 Index futures, options on S&P 500 Index
futures and equity swap contracts to gain exposure to the equity market as
measured by the S&P 500 Index.

MUNICIPAL BOND FUND seeks to provide high total return. The Fund will invest
primarily in municipal bonds issued by state and local authorities.

SELECT ECONOMIC VALUE EQUITY FUND seeks to provide long term appreciation of
capital. The Fund will invest primarily in U.S. equity securities that the
adviser believes are undervalued.

STRATEGIC GLOBAL FIXED INCOME FUND seeks to provide high total return. The Fund
will invest primarily in foreign and domestic fixed income securities.

U.S. CORE EQUITY FUND seeks to provide long-term appreciation of capital. The
Fund will invest primarily in U.S. equity securities.

U.S. CORE FIXED INCOME FUND seeks to provide high total return. The Fund will
invest primarily in domestic fixed-income securities consistent with comparable
broad market fixed-income indices, such as the Lehman Brothers Aggregate Bond
Index.

International investing entails special risk considerations, including currency
fluctuations, lower liquidity, economic instability, political uncertainty and
differences in accounting methods.

The High Yield Fund may invest its assets without limitation in securities which
are below investment-grade quality. Investments of this type are subject to
greater risks, including the risk of loss of principal and interest, than those
involved with investment-grade securities. Purchasers should carefully assess
the risks associated with an investment in this Fund.

See "Risk Factors and Special Considerations."

BEA Associates ("BEA") serves as investment adviser to each of the Funds.

This Prospectus briefly sets forth certain information about the Funds
that investors should know before investing. Investors are advised to read this
Prospectus and retain it for future reference. Additional information about each
Fund has been filed with the Securities and Exchange Commission (the "SEC"). The
SEC maintains a Web site (http://www.sec.gov) that contains the Statement of
Additional Information, material incorporated by reference and other information
regarding the Funds. The Statement of Additional Information is available to
investors without charge by calling BEA Institutional Funds at (800) 401-2230.
Information regarding the status of shareholder accounts may be obtained by
calling BEA Institutional Funds at the same number. BEA Institutional Funds
maintains a Web site at www.beafunds.com. The Statement of Additional
Information, as amended or supplemented from time to time, bears the same date
as this Prospectus and is incorporated by reference in its entirety into this
Prospectus.

SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF OR GUARANTEED OR ENDORSED
BY ANY BANK, AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
INVESTMENTS IN SHARES OF THE FUNDS INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED.
<PAGE> 33
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

2
<PAGE> 34
THE FUNDS' EXPENSES

Although authorized to offer three separate classes of shares (Common
Shares, Institutional Shares and Advisor Shares), each of the Emerging Markets
II Fund ("Emerging Markets Fund"), High Yield Fund ("High Yield Fund"),
International Growth Fund ("International Growth Fund"), Long-Short Market
Neutral Fund ("Long-Short Neutral Fund"), Long-Short Equity Fund ("Long-Short
Equity Fund"), Municipal Bond Fund ("Municipal Bond Fund"), Select Economic
Value Equity Fund ("Select Equity Fund"), Strategic Global Fixed Income Fund
("Global Income Fund"), U.S. Core Equity Fund ("U.S. Equity Fund") and U.S. Core
Fixed Income Fund ("U.S. Fixed Income Fund") (each, a "Fund") currently offers
two separate classes of shares: Common Shares and Institutional Shares. For a
description of Common Shares and Advisor Shares see "General Information."

<TABLE>
<CAPTION>
INTERNA-
EMERGING HIGH TIONAL
MARKETS YIELD GROWTH
FUND FUND FUND
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 0 0 0
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees .98% .44% .80%
Rule 12b-1 fees 0 0 0
Other Expenses .51% .26% .36%
--- --- ---
Total Fund Operating Expenses (after fee waivers
and expense reimbursements)+ 1.49% .70% 1.16%
=== === ===
EXAMPLE
You would pay the following expenses on a
$1,000 investment, assuming
(1) 5% annual return and (2) redemption at the
end of each time period:
1 year........................................... $15 $ 7 $12
3 years.......................................... $47 $22 $37
</TABLE>

<TABLE>
<CAPTION>
LONG- MUNI-
LONG-SHORT SHORT CIPAL SELECT
NEUTRAL EQUITY BOND EQUITY
FUND FUND FUND FUND
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 0 0 0 0
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 1.40% .00% .47% .52%
Rule 12b-1 fees 0 0 0 0
Other Expenses .60% 2.50% .53% .48%
--- --- --- ---
Total Fund Operating Expenses (after fee waivers
and expense reimbursements)+ 2.00% 2.50% 1.00% 1.00%
=== === === ===
EXAMPLE
You would pay the following expenses on a
$1,000 investment, assuming
(1) 5% annual return and (2) redemption at the
end of each time period:
1 year........................................... $21 $25 $10 $10
3 years.......................................... $68 $78 $32 $32
</TABLE>

<TABLE>
<CAPTION>
U.S.
GLOBAL U.S. FIXED
INCOME EQUITY INCOME
FUND FUND FUND
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) 0 0 0
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees .43% .71% .25%
Rule 12b-1 fees 0 0 0
Other Expenses .32% .29% .25%
--- --- ---
Total Fund Operating Expenses (after fee waivers
and expense reimbursements)+ .75% 1.00% .50%
=== === ===
EXAMPLE
You would pay the following expenses on a
$1,000 investment, assuming
(1) 5% annual return and (2) redemption at the
end of each time period:
1 year........................................... $ 8 $10 $ 5
3 years.......................................... $24 $32 $16
</TABLE>

+ The Funds' investment adviser has undertaken to limit Total
Fund Operating Expenses of each of the Funds for the one-year period
following the closing date of the reorganization of the relevant BEA
Fund to the extent necessary for the net expense ratio of each Fund to
be no higher than that of the corresponding series of The RBB Fund,
Inc. for the thirty-day period ending on the closing date of the
reorganization of such series. (For a description of the reorganization
all "General Information.") The resulting Total Fund Operating Expenses
limit may be greater or less than the estimate shown above. There is no
obligation to continue these waivers after that time. Absent such
waivers and/or reimbursements, Management Fees for the Emerging Markets
Fund, High Yield Fund, International Growth Fund, Long-Short Neutral
Fund, Long-Short Equity Fund, Municipal Bond Fund, Select Equity Fund,
Global Income Fund, U.S. Equity Fund and U.S. Fixed Income Fund would
equal 1.00%, .70%, .80%, 1.50%, .10%, .70%, .75%, 50%, .75% and .375%,
respectively; Other Expenses would equal .63%, .43%, .45%, .60%,
2.50%, .67%, .48%, .48%, .43% and .355% respectively; and Total Fund
Operating Expenses would equal 1.63%, 1.13%, 1.25%, 2.10%, 2.60%,
1.37%, 1.23%, .98%, 1.18% and .73%, respectively. Other Expenses for
the Funds are based on annualized estimates of expenses for the fiscal
year ending August 31, 1999, net of any fee waivers or expense
reimbursements.

The expense table shows the costs and expenses that an investor will
bear directly or indirectly as an Institutional shareholder of each Fund.
Certain broker-dealers and financial institutions also may charge their clients
fees in connection with investments in a Fund's Institutional Shares, which fees
are not reflected in the table. The Example should not be considered a
representation of past or future expenses; actual Fund expenses may be greater
or less than those shown. Moreover, while the Example assumes a 5% annual
return, each Fund's actual performance will vary and may result in a return
greater or less than 5%.

3
<PAGE> 35
FINANCIAL HIGHLIGHTS
(FOR AN INSTITUTIONAL SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

Institutional Shares of each of the Funds had not been issued as of
August 31, 1997 and, accordingly, no financial information is provided with
respect to such shares. The following financial information with respect to
Institutional Shares of certain corresponding series of The RBB Fund, Inc. (the
"BEA Funds"), the assets and liabilities of which are expected to be acquired by
the corresponding BEA Institutional Fund (see "General Information" below), has
been derived from information audited by PricewaterhouseCoopers LLP, independent
accountants, whose report dated October 17, 1997 is contained in the BEA Funds'
annual report, dated August 31, 1997. The report and the semi-annual report for
the period ended February 28, 1998 are incorporated by reference in the Funds'
Statements of Additional Information and may be obtained without charge by
calling BEA Institutional Funds at (800) 401-2230. No financial information is
presented with respect to Institutional Shares of the BEA Long-Short Neutral
Fund, BEA Long-Short Equity Fund and BEA Select Equity Fund, each of which had
not commenced investment operations with respect to such shares as of February
28, 1998.

BEA EMERGING MARKETS EQUITY FUND

<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
FEBRUARY 28, FOR THE YEAR ENDED AUGUST 31,
1998 1997 1996
------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Net asset value, beginning of period ............... $ 19.64 $ 18.20 $ 17.67
------------- ------------- -------------
Income from investment operations:
Net investment income ......................... (0.04) 0.21 0.10
Net realized and unrealized gains on securities
and foreign currency transactions ........... (1.78) 1.30 0.48
------------- ------------- -------------
Total from investment operations .............. (1.82) 1.51 (0.58)
------------- ------------- -------------
Less Dividends and Distributions:
Dividends from net investment income .......... (0.20) (0.07) (0.05)
Distributions from capitalized gains .......... (1.04) -- 0.00
------------- ------------- -------------
Total Dividends and Distributions ............. (1.24) (0.07) (0.05)
------------- ------------- -------------
Net asset value, end of period ................ $ 16.58 $ 19.64 $ 18.20
============= ============= =============
Total return ....................................... (9.42)%(c) 8.31% 3.33%(d)
Ratios/Supplemental Data:
Net assets, end of period (000's omitted) ..... $ 64,052 $ 83,012 $ 114,691
Ratio of expenses to average net assets: ...... 1.50%(a)(b) 1.49%(a) 1.49%(a)
Ratio of net investment income to average net
assets ...................................... (0.61)%(b) 0.99% 0.63%
Portfolio turnover rate ....................... 87%(c) 147% 79%
Average commission rate(e) .................... $ 0.0013 $ 0.0004 $ 0.0005
</TABLE>

<TABLE>
<CAPTION>
FOR THE PERIOD
FEBRUARY 1, 1993*
FOR THE YEAR ENDED AUGUST 31, TO AUGUST 31,
1995 1994 1993
------------- ------------- -------------

<S> <C> <C> <C>
Net asset value, beginning of period ............... $ 24.58 $ 18.38 $ 15.00
------------- ------------- -------------
Income from investment operations:
Net investment income ......................... 0.02 (0.03) 0.02
Net realized and unrealized gains on securities
and foreign currency transactions ........... (5.94) 6.64 3.36
------------- ------------- -------------
Total from investment operations .............. (5.92) 6.61 3.38
------------- ------------- -------------
Less Dividends and Distributions:
Dividends from net investment income .......... (0.07) (0.09) --
Distributions from capitalized gains .......... (0.92) (0.32) --
------------- ------------- -------------
Total Dividends and Distributions ............. (0.99) (0.41) --
------------- ------------- -------------
Net asset value, end of period ................ $ 17.67 $ 24.58 $ 18.38
============= ============= =============
Total return ....................................... (24.42)%(d) 35.99%(d) 22.53%(c)(d)
Ratios/Supplemental Data:
Net assets, end of period (000's omitted) ..... $ 128,323 $ 140,675 $ 21,988
Ratio of expenses to average net assets: ...... 1.50%(a) 1.50%(a) 1.50%(a)(b)
Ratio of net investment income to average net
assets ...................................... 0.02% (0.02)% 0.28%(b)
Portfolio turnover rate ....................... 79% 54% 38%(c)
Average commission rate(e) .................... N/A N/A N/A
</TABLE>

(a) Without the voluntary waiver of advisory fees and administration fees,
the ratios of expenses to average net assets for the Fund's
Institutional Class would have been 2.01% annualized for the six months
ended February 28, 1998 and 1.63%, 1.62%, 1.61%, and 2.01% for the
years ended August 31, 1997, 1996, 1995, and 1994, respectively and
3.23% annualized for the period ended August 31, 1993.

(b) Annualized.

(d) Redemption fees not reflected in total return.

(e) Computed by dividing the total amount of brokerage commissions paid by
the total shares of investment securities purchased and sold during the
period for which commissions were charged, as required by the
Securities and Exchange Commission ("SEC") for fiscal years beginning
after September 1, 1995.

* Commencement of operations.

4
<PAGE> 36
BEA HIGH YIELD FUND

<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
FEBRUARY 28, FOR THE YEAR ENDED AUGUST 31,
1998 1997 1996
----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ............ $ 17.08 $ 16.09 $ 15.72
----------- ----------- -----------
Income from Investment Operations:
Net Investment Income (Loss) ................ 0.69 1.37 1.47
Net Gain (Loss) from Securities and Foreign
Currency Related Items (both
realized and unrealized) .................. 0.76 0.96 0.40
----------- ----------- -----------
Total from Investment Operations ............ 1.45 2.33 1.87
----------- ----------- -----------
Less Distributions:
Dividends from Net Investment Income ........ (0.79) (1.34) (1.50)
-----------
Distributions from Realized Gains ........... -- -- --
----------- ----------- -----------
Total Distributions ......................... (0.79) (1.34) (1.50)

NET ASSET VALUE, END OF PERIOD .................. $ 17.74 $ 17.08 $ 16.09
=========== =========== ===========
Total Return .................................... 8.75%(c) 15.17% 12.42%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000's omitted) ....... $ 100,498 $ 92,630 $ 75,849
Ratios to Average Daily Net Assets:
Operating Expenses .......................... 0.70%(a)(b) .70%(a) 0.88%(a)
Net Investment Income (Loss) ................ 7.94%(b) 8.44% 8.92%
Decrease reflected in above operating expense
ratios due to waivers/reimbursements ...... 43%(a) .43%(a) .23%(a)
Portfolio Turnover Rate ......................... 47%(c) 84% 143%
</TABLE>

<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 31, 1993*
FOR THE YEAR ENDED AUGUST 31, TO AUGUST 31,
1995 1994 1993
----------- ----------- -----------

<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ............ $ 15.94 $ 16.94 $ 15.00
----------- ----------- -----------
Income from Investment Operations:
Net Investment Income (Loss) ................ 1.42 1.20 0.52
Net Gain (Loss) from Securities and Foreign
Currency Related Items (both
realized and unrealized) .................. (0.30) (0.77) 1.42
----------- ----------- -----------
Total from Investment Operations ............ 1.12 0.43 1.94
----------- ----------- -----------
Less Distributions:
Dividends from Net Investment Income ........ (1.34) (1.43) --
Distributions from Realized Gains ........... -- -- --
----------- ----------- -----------
Total Distributions ......................... (1.34) (1.43) --

NET ASSET VALUE, END OF PERIOD .................. $ 15.72 $ 15.94 $ 16.94
=========== =========== ===========
Total Return .................................... 7.79%(d) 2.24%(d) 12.93%(c)(d)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000's omitted) ....... $ 153,621 $ 143,517 $ 98,357
Ratios to Average Daily Net Assets:
Operating Expenses .......................... 1.00%(a) 1.00%(a) 1.00%(a)(b)
Net Investment Income (Loss) ................ 9.37% 7.73% 7.56%(b)
Decrease reflected in above operating expense
ratios due to waivers/reimbursements ...... .08%(a) .13%(a) .17%(a)
Portfolio Turnover Rate ......................... 70% 121% 72%(c)
</TABLE>

(a) Without the voluntary waiver of advisory fees and administration fees,
the ratios of expenses to average net assets for the Fund's
Institutional Class would have been 1.13% annualized for the six months
ended February 28, 1998 and 1.13%, 1.11%, 1.08%, and 1.13% annualized
for the years ended August 31, 1997, 1996, 1995 and 1994, respectively,
and 1.17% annualized for the period ended August 31, 1993.

(b) Annualized.

(d) Redemption fees not reflected in total return.

* Commencement of operations

5
<PAGE> 37
BEA INTERNATIONAL EQUITY FUND

<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED
FEBRUARY 28,
1998 FOR THE YEAR ENDED AUGUST 31,
(UNAUDITED) 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period .................... $ 22.22 $ 19.41 $ 18.24
----------- ----------- -----------
Income from investment operations:
Net investment income .............................. (0.02) 0.18 0.19
Net realized and unrealized gains on securities
and foreign currency transactions .............. 3.23 2.89 1.05
----------- ----------- -----------
Total from investment operations ................... 3.21 3.07 1.24
----------- ----------- -----------
Less Dividends and Distributions:
Dividends from net investment income ............... -- (0.26) (0.07)
Distributions from capitalized gains ............... (2.93) -- --
----------- ----------- -----------
Total Dividends and Distributions .................. (2.93) (0.26) (0.07)
----------- ----------- -----------
Net asset value, end of period ..................... $ 22.50 $ 22.22 $ 19.41
=========== =========== ===========
Total return ............................................ 15.71%(c) 15.93% 6.81%(d)
Ratios/Supplemental Data:
Net assets, end of period (000's omitted) .......... $ 583,493 $ 568,510 $ 682,271
Ratio of expenses to average net assets ............ 1.16%(a)(b) 1.16%(a) 1.19%(a)
Ratio of net investment income to average net assets (0.13)%(b) 0.71% 0.84%
Portfolio turnover rate ............................ 64%(c) 126% 86%
Average commission rate(e) ......................... $ 0.0187 $ 0.0039 $ 0.0007
</TABLE>

FOR THE PERIOD
OCTOBER 1, 1992* TO
FOR THE YEAR ENDED AUGUST 31, AUGUST 31, 1993
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period .................... $ 20.73 $ 18.73 $ 15.00
----------- ----------- -----------
Income from investment operations:
Net investment income .............................. 0.06 0.05 0.04
Net realized and unrealized gains on securities
and foreign currency transactions .............. (1.75) 2.60 3.69
----------- ----------- -----------
Total from investment operations ................... (1.69) 2.65 3.73
----------- ----------- -----------
Less Dividends and Distributions:
Dividends from net investment income ............... -- (0.05) --
Distributions from capitalized gains ............... (0.80) (0.60) --
----------- ----------- -----------
Total Dividends and Distributions .................. (0.80) (0.65) --
----------- ----------- -----------
Net asset value, end of period ..................... $ 18.24 $ 20.73 $ 18.73
=========== =========== ===========
Total return ............................................ (8.06)%(d) 14.23%(d) 24.87%(c)(d)
Ratios/Supplemental Data:
Net assets, end of period (000's omitted) .......... $ 773,255 $ 767,190 $ 268,404
Ratio of expenses to average net assets ............ 1.25%(a) 1.25%(a) 1.25%(a)(b)
Ratio of net investment income to average net assets 0.35% 0.33% 0.41%(b)
Portfolio turnover rate ............................ 78% 104% 106%(c)
Average commission rate(e) ......................... N/A N/A N/A
</TABLE>

(a) Without the voluntary waiver of advisory fees and administration fees,
the ratios of expenses to average net assets for the Fund's
Institutional Class would have been 1.24% annualized for the six months
ended February 28, 1998 and 1.25%, 1.22%, 1.26% and 1.30% for the years
ended August 31, 1997, 1996, 1995 and 1994, respectively and 1.46%
annualized for the period ended August 31, 1993.

(b) Annualized.

(d) Redemption fees not reflected in total return.

(e) Computed by dividing the total amount of brokerage commissions paid by
the total shares of investment securities purchased and sold during the
period for which commissions were charged, as required by the SEC for
fiscal years beginning after September 1, 1995.

* Commencement of operations.

6
<PAGE> 38
BEA MUNICIPAL BOND FUND

<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED JUNE 20, 1994*
FEBRUARY 28, FOR THE YEAR ENDED AUGUST 31, TO AUGUST 31,
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ................ $ 14.84 $ 14.65 $ 15.46 $ 15.06 $ 15.00
------- ------- ------- ------- -------
Income from investment operations
Net investment income .......................... 0.35 0.72 0.73 0.71 0.09
Net realized and unrealized gains (losses) on
securities and foreign currency transactions 0.36 0.65 (0.37) 0.50 (0.03)
------- ------- ------- ------- -------
Total from investment operations ............... 0.71 1.37 0.36 1.21 0.06
------- ------- ------- ------- -------
Less Dividends and Distributions
Dividends from net investment income ........... (0.36) (0.72) (0.74) (0.76) --
Distributions from capital gains ............... (0.11) (0.46) (0.43) (0.05) --
------- ------- ------- ------- -------
Total Dividends and Distributions .............. (0.47) (1.18) (1.17) (0.81) --
------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD ...................... $ 15.08 $ 14.84 $ 14.65 $ 15.46 $ 15.06
======= ======= ======= ======= =======
Total return ........................................ 4.86%(c) 9.74% 2.27% 8.42% 0.40%(c)
Ratio/Supplemental Data
Net assets, end of period (000's omitted) ...... $20,620 $19,810 $19,581 $48,978 $42,310
Ratio of expenses to average net assets ........ 1.00%(a)(b) 1.00%(a) 1.00%(a) 1.00%(a) 1.00%(a)(b)
Ratio of net investment income (loss)
to average net assets ...................... 4.76%(b) 4.88% 4.62% 4.76% 3.27%(b)
Portfolio turnover rate ........................ 25%(c) 43% 34% 25% 9%(c)
</TABLE>

(a) Without the voluntary waiver of advisory fees and administration fees,
the ratios of expenses to average net assets for the Fund's
Institutional Shares would have been 1.32% annualized for the six
months ended February 28, 1998 and 1.37%, 1.42% and 1.19% for the years
ended August 31, 1997, 1996 and 1995, respectively, and 1.34%
annualized for the period ended August 31, 1994.

(b) Annualized.

* Commencement of operations.

7
<PAGE> 39
BEA STRATEGIC GLOBAL FIXED INCOME FUND

<TABLE>
<CAPTION>
FOR THE SIX FOR THE PERIOD
MONTHS ENDED FOR THE YEAR ENDED AUGUST 31, JUNE 20, 1994* TO
FEBRUARY 28, 1998 1997 1996 1995 AUGUST 31, 1994
----------------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ........... $ 15.41 $ 15.75 $ 15.67 $ 15.00 $ 15.00
-------- -------- -------- -------- --------
Income from investment operations
Net investment income ........................ 0.45 0.85 0.87 1.06 0.15
Net realized and unrealized gains(losses) on
securities and foreign currency transactions 0.12 (0.16) 0.58 0.49 (0.15)
-------- -------- -------- -------- --------
Total from investment operations ............. 0.57 0.69 1.45 1.55 --
-------- -------- -------- --------
Less Dividends and Distributions
Dividends from net investment income ......... (0.45) (0.71) (1.22) (0.88) --
Distributions from capital gains ............. (0.48) (0.32) (0.15) -- --
-------- -------- -------- -------- --------
Total Dividends and Distributions ............ (0.93) (1.03) (1.37) (0.88) --
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF PERIOD ................. $ 15.05 $ 15.41 $ 15.75 $ 15.67 $ 15.00
======== ======== ======== ======== ========
Total return ................................... 3.84%(c) 4.48% 9.65% 10.72% 0.00%(c)
RATIO/SUPPLEMENTAL DATA
Net assets, end of period (000's omitted)..... $ 29,400 $ 44,285 $ 38,348 $ 19,565 $ 6,300
Ratio of expenses to average net assets ...... 0.75%(a)(b) 0.75%(a) 0.75%(a) 0.75%(a) 0.75%(a)(b)
Ratio of net investment income(loss) to
average net assets ......................... 5.23%(b) 5.31% 7.37% 7.26% 5.64%(b)
Portfolio turnover rate ...................... 172% 98% 87% 91% 0%(c)
</TABLE>

(a) Without the voluntary waiver of advisory fees and administration fees
and without the reimbursement of operating expenses, the ratios of
expenses to average net assets for the Fund's Institutional Shares
would have been 1.04% annualized for the six months ended February 28,
1998 and 0.98%, 1.07% and 1.29% for the years ended August 31, 1997,
1996 and 1995, respectively, and 1.92% annualized for the period ended
August 31, 1994.

(b) Annualized.

* Commencement of operations.

8
<PAGE> 40
BEA U.S. CORE EQUITY FUND

<TABLE>
<CAPTION>
FOR THE PERIOD
SEPTEMBER 1, 1994*
MONTHS ENDED AUGUST 31, THROUGH
FEBRUARY 28, 1998 1997 1996 AUGUST 31, 1995
------------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD ................................ $ 24.40 $ 19.05 $ 17.86 $ 15.00
------------- ------------- ------------- -------------
Income from Investment
Operations:
Net Investment Income (Loss) .......... 0.06 0.14 0.20 0.22
Net Gain (Loss) from Securities and
Foreign Currency Related Items
(both realized and unrealized) ...... 3.86 6.82 2.81 2.72
------------- ------------- ------------- -------------
Total from Investment Operations ...... 3.92 6.96 3.01 2.94
------------- ------------- ------------- -------------
Less Distributions:
Dividends from Net Investment
Income .............................. (0.13) (0.20) (0.21) (0.08)
Distributions from Realized Gains ..... (3.43) (1.41) (1.61) 0.00
------------- ------------- ------------- -------------
Total Distributions ................... (3.56) (1.61) (1.82) (0.08)
------------- ------------- ------------- -------------
NET ASSET VALUE, END OF
PERIOD ................................ $ 24.76 $ 24.40 $ 19.05 $ 17.86
============= ============= ============= =============
Total Return ............................ 17.57%(c) 38.32% 17.59% 19.75%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000's omitted) $ 109,142 $ 86,182 $ 59,015 $ 31,644
Ratios to Average Daily Net Assets:
Operating Expenses .................... 1.00%(a)(b) 1.00%(a) 1.00%(a) 1.00%(a)
Net Investment Income (Loss) .......... .42%(b) .67% 1.25% 1.59%
Decrease reflected in above
operating expense ratios due to
waivers/reimbursements .............. .15% .18% .34% .51%
Portfolio Turnover Rate ................. 78%(c) 93% 127% 123%
Average Commission Rate(d) .............. $ 0.0568 $ 0.0592 $ 0.0614 --
</TABLE>

(a) Without the voluntary waiver of advisory fees and administration fees,
the ratios of expenses to average net assets for the Fund's
Institutional Shares would have been 1.15% annualized for the six
months ended February 28, 1998 and 1.18% and 1.34%, annualized for the
years ended August 31, 1997 and 1996, respectively, and 1.51%
annualized for the period ended August 31, 1995.

(b) Annualized.

(d) Computed by dividing the total amount of commissions paid by the total
number of shares purchased and sold during the period for which there
was a commission charged. The Average Commission Rate is not required
for fiscal periods beginning before September 1, 1995.

* Commencement of operations.

9
<PAGE> 41
BEA U.S. CORE FIXED INCOME FUND

<TABLE>
<CAPTION>
FOR THE PERIOD
AUGUST 31, APRIL 1, 1994*
MONTHS ENDED -------------------------------------------- THROUGH
FEBRUARY 28, 1998 1997 1996 1995 AUGUST 31, 1995
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD ................................ $ 15.65 $ 15.06 $ 15.42 $ 14.77 $ 15.00
---------- ---------- ---------- ---------- ----------
Income from Investment
Operations:
Net Investment Income (Loss) .......... 0.45 0.92 0.95 0.88 0.42
Net Gain (Loss) from Securities and
Foreign Currency Related Items
(both realized and unrealized) ...... 0.33 0.76 (0.16) 0.61 (0.40)
---------- ---------- ---------- ---------- ----------
Total from Investment Operations ..... 0.78 1.68 0.79 1.49 0.02
---------- ---------- ---------- ---------- ----------
Less Distributions:
Dividends from Net Investment
Income .............................. (0.50) (0.97) (0.93) (0.84) (0.25)
Distributions from Realized Gains ..... (0.23) (0.12) (0.22) (0.00) 0.00
---------- ---------- ---------- ---------- ----------
Total Distributions ................... (0.73) (1.09) (1.15) (0.84) (0.25)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, END OF PERIOD ......... $ 15.70 $ 15.65 $ 15.06 $ 15.42 $ 14.77
========== ========== ========== ========== ==========
Total Return ............................ 15.14%(c) 11.53% 5.23%(c) 10.60% 0.17%(c)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period
(000's omitted)........................ $ 196,795 $ 177,219 $ 118,596 $ 99,250 $ 30,016
Ratios to Average Daily Net Assets:
Operating Expenses .................... 0.50%(a)(b) 0.50%(a) 0.50%(a) 0.50%(a) 0.50%(a)(b)
Net Investment Income (Loss) .......... 5.89%(b) 6.31% 6.43% 6.47% 6.04%(b)
Decrease reflected in above
operating expense ratios due to
waivers/reimbursements .............. .26% .28% .28% .34% .44%
Portfolio Turnover Rate ................. 217%(c) 372% 201% 304% 186%
Average Commission Rate(d) .............. $ -- $ -- $ -- $ -- $ --
</TABLE>

(a) Without the voluntary waiver of advisory fees and administration fees,
the ratios of expenses to average net assets for the Fund's
Institutional Shares would have been .76% annualized for the six months
ended February 28, 1998 and .78%, .78% and .84%, annualized for the
years ended August 31, 1997, 1996 and 1995, respectively, and .99%
annualized for the period ended August 31, 1994.

(b) Annualized.

* Commencement of operations.

10
<PAGE> 42
INVESTMENT OBJECTIVES AND POLICIES

The investment objective of each Fund may not be changed without the
affirmative vote of a majority of the Fund's outstanding shares (as defined in
the Investment Company Act of 1940, as amended (the "1940 Act")). As with other
mutual funds, there can be no assurance that any Fund will achieve its
investment objective. Because of their different investment emphases, each Fund
should be considered as a specialized investment portfolio and not as a balanced
investment program by itself. The Statement of Additional Information contains a
more detailed description of the various investments and investment techniques
used by the Funds.

EMERGING MARKETS FUND

The investment objective of the Emerging Markets II Fund is to provide
long-term appreciation of capital. The Fund seeks to achieve this objective by
investing primarily in equity securities of issuers in "Emerging Markets." As
used in this Prospectus, an Emerging Market is any country which is generally
considered to be an emerging or developing country by the World Bank and the
International Finance Corporation, as well as countries that are classified by
the United Nations as emerging or developing, at the time of the Fund's
investment. The countries that currently will not be considered Emerging Markets
include: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,
Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway,
Portugal, Spain, Switzerland, the United Kingdom and the United States. Under
normal market conditions, the Fund will invest a minimum of 80% of its total
assets in equity securities of issuers in Emerging Markets. The Fund will not
necessarily seek to diversify investments on a geographical basis or on the
basis of the level of economic development of any particular country. The Fund
will at all times, except during defensive periods, maintain investments in at
least three Emerging Market countries.

The Fund normally will not select portfolio securities on the basis of
their dividend or income potential unless BEA or Credit Suisse Asset Management
Ltd., sub-investment administrator to the Fund ("CSAM" and collectively with BEA
as applicable, "Advisers"), believes the income will contribute to the
securities' capital appreciation potential.

An equity security of an issuer in an Emerging Market is defined as
common stock and preferred stock (including convertible preferred stock); bonds,
notes and debentures convertible into common or preferred stock; stock purchase
warrants and rights; equity interests in trusts and partnerships; and depository
receipts of companies: (i) the principal securities trading market for which is
in an Emerging Market; (ii) whose principal trading market is in any country,
provided that, alone or on a consolidated basis, they derive 50% or more of
their annual revenue from either goods produced, sales made or services
performed in Emerging Markets; or (iii) that are organized under the laws of,
and with a principal office in, an Emerging Market. Determinations as to
eligibility will be made by BEA based on publicly available information and
inquiries made to the companies.

To the extent that the Fund's assets are not invested as described
above, the remainder of the assets may be invested in government or corporate
debt securities of Emerging Market or developed countries, although the Fund
does not presently intend to invest more than 5% of its net assets in debt
securities. Debt securities may include lower-rated debt securities. See "Risk
Factors and Special Considerations -- Lower-Rated Securities."

11
<PAGE> 43
HIGH YIELD FUND

The investment objective of the High Yield Fund is to provide high
total return. The Fund seeks to achieve this objective by investing primarily in
high yield fixed-income securities issued by corporations, governments and
agencies, both U.S. and foreign. Under normal market conditions, the Fund will
invest at least 65% of its total assets in such high yield fixed-income
securities. The Fund may also invest in fixed-income securities which may have
equity characteristics, such as convertible bonds and equity securities such as
warrants and options. The Fund is not limited in the extent to which it can
invest in securities rated below BBB, the fourth highest bond rating of Standard
& Poor's Ratings Service (S&P), or in comparable unrated securities. (Securities
rated BBB or better by S&P are commonly referred to as "investors grade.") See
"Risk Factors and Special Considerations -- Lower-Rated Securities." The portion
of the Fund's assets invested in various countries will vary from time to time
depending on the assessment of market opportunities by BEA.

The value of the securities held by the Fund and thus the net asset
value of the Fund, generally will vary inversely in relation to changes in
prevailing interest rates. Also, the value of such securities may be affected by
changes in real or perceived creditworthiness of the issuers. The Fund may
purchase debt securities of any maturity, and the average maturity of the Fund's
assets will vary based upon BEA's assessment of economic and market conditions.

INTERNATIONAL GROWTH FUND

The International Growth Fund's investment objective is to provide
long-term appreciation of capital. The Fund will pursue its objective by
investing primarily in equity securities of non-U.S. issuers. The Fund defines
equity securities of non-U.S. issuers as securities of issuers whose principal
activities are outside the United States. The Fund expects that its investments
will be concentrated in, but not limited to, Argentina, Australia, Austria,
Brazil, Canada, Chile, Columbia, Denmark, Finland, France, Germany, Greece,
Hungary, Israel, Italy, Japan, Malaysia, Mexico, the Netherlands, New Zealand,
Norway, Portugal, Singapore, South Africa, South Korea, Spain, Sweden,
Switzerland, Thailand, the United Kingdom and Venezuela. The Fund may invest in
securities of issuers in Emerging Markets, as defined above under "Investment
Objectives and Policies -- Emerging Markets Fund," but does not expect to invest
more than 40% of its total assets (at the time of purchase) in securities of
issuers in Emerging Markets. The Fund will invest in securities of issuers from
at least three countries outside the United States.

Under normal market conditions, the Fund will invest a minimum of 80%
of its total assets in equity securities of non-U.S. issuers. Such equity
securities may include common stock and preferred stock (including convertible
preferred stock); bonds, notes and debentures convertible into common or
preferred stock; stock purchase warrants and rights; equity interests in trusts
and partnerships; and depository receipts of companies. In choosing investments,
the Adviser looks for companies that present attractive opportunities for
capital growth.

12
<PAGE> 44
The Fund may invest up to 20% of its total assets in debt securities
issued by U.S. or foreign governments or corporations, although it does not
currently intend to invest more than 5% of its net assets in debt securities.
The Fund has no limitation on the maturity or the credit quality of the debt
securities in which it invests, which may include lower-rated debt securities.
See "Risk Factors and Special Considerations -- Lower-Rated Securities."

LONG-SHORT NEUTRAL FUND

The investment objective of the Long-Short Neutral Fund is to seek
long-term capital appreciation while minimizing exposure to general equity
market risk. The Fund seeks a total return greater than the return of the
Salomon Smith Barney 1-Month Treasury Bill Index(TM). The Fund attempts to
achieve its objective by taking long positions in stocks that the Adviser has
identified as undervalued and short positions in stocks that the Adviser has
identified as overvalued. See "Risk Factors and Special Considerations -- Short
Sales" below. Generally, the Fund's investments will be concentrated in
securities principally traded in U.S. markets. By taking long and short
positions in different stocks with similar characteristics, the Fund attempts to
minimize the effect of general stock market movements on the Fund's performance.
The Adviser will determine the size of each long or short position by analyzing
the tradeoff between the attractiveness of each position and its impact on the
risk of the overall portfolio. The Fund seeks to construct a diversified
portfolio that has minimal net exposure to the U.S. equity market generally and
low to neutral exposure to specific industries, specific capitalization ranges
(e.g., large cap, mid cap and small cap) and certain other factors.

To meet margin requirements, redemptions or pending investments, the
Fund may also temporarily hold a portion of its assets in full faith and credit
obligations of the United States government (e.g., U.S. Treasury Bills) and in
short-term notes, commercial paper or other money market instruments of high
quality (i.e., rated at least "A-2" or "AA" by S&P or Prime 2 or "Aa" by Moody's
Investors Service, Inc. ("Moody's")) issued by companies having an outstanding
debt issue rated at least "AA" by S&P or at least "Aa" by Moody's, or determined
by the Adviser to be of comparable quality to any of the foregoing.

LONG-SHORT EQUITY FUND

The investment objective of the Long-Short Equity Fund is to seek a
total return greater than that of the Standard & Poor's 500 Composite Stock
Price Index (the "S&P 500 Index"). The Fund seeks to achieve its objective by
investing in Institutional Shares of the Long-Short Neutral Fund while
simultaneously utilizing S&P 500 Index futures, options on S&P 500 Index futures
and equity swap contracts to gain exposure to the equity market as measured by
the S&P 500 Index. See "Certain Investment Strategies -- Long-Short Neutral
Fund" and "Risk Factors and Special Considerations -- S&P 500 Index Futures and
Related Options" and " -- Equity Swap Contracts" below. The Fund has obtained
an exemptive order from the SEC allowing it to invest without limit in the
Long-Short Neutral Fund. Once the Fund has indirectly acquired a diversified
long and short portfolio through the purchase of Institutional Shares of the
Long-Short Neutral Fund, the Adviser will purchase S&P 500 Index futures,
options on S&P 500 Index futures and equity swap contracts in an amount
approximately equal to the net asset value of the Fund in order to gain full net
exposure to the U.S. equity market as measured by the S&P 500 Index. In addition
to purchasing

13
<PAGE> 45
Institutional Shares of the Long-Short Neutral Fund, the Fund may also take long
positions in stocks principally traded in the markets of the United States that
the Adviser has identified as undervalued and short positions in such stocks
that the Adviser has identified as overvalued. See "Risk Factors and Special
Considerations -- Short Sales."

The S&P 500 Index is an unmanaged index composed of 500 common stocks,
most of which are listed on the New York Stock Exchange. The S&P 500 Index
assigns relative values to the stocks included in the index, weighted according
to each stock's total market value relative to the total market value of the
other stocks included in such index.

To meet margin requirements, redemptions or pending investments, the
Fund may also temporarily hold a portion of its assets in full faith and credit
obligations of the United States government (e.g., U.S. Treasury Bills) and in
short-term notes, commercial paper or other money market instruments of high
quality (i.e., rated at least "A-2" or "AA" by S&P or Prime 2 or "Aa" by
Moody's) issued by companies having an outstanding debt issue rated at least
"AA" by S&P or at least "Aa" by Moody's, or determined by the Adviser to be of
comparable quality to any of the foregoing.

In a typical value-oriented stock mutual fund the investment adviser
attempts to earn an excess return (return above market return) or "alpha" by
identifying and purchasing undervalued stocks. However, there is another "alpha"
possibility --identifying and selling short overvalued stocks. The term "double
alpha" refers to these two potential sources of alpha: one from correctly
identifying undervalued stocks and one from correctly identifying overvalued
stocks. The market neutral strategy employed directly by the Long-Short Neutral
Fund and indirectly by the Long-Short Equity Fund (through investment in shares
of the Long-Short Neutral Fund) seeks to capture both alphas. The Long-Short
Equity Fund also seeks gain (and incurs additional cost and expense risk) by
investing in S&P 500 Index instruments.

The value of Fund shares may increase or decrease depending on market,
economic, political, regulatory and other conditions affecting the Fund's
portfolio. Investment in shares of the Fund is more volatile and risky than
some other forms of investment. In addition, if the Adviser takes long
positions in stocks that decline or short positions in stocks that increase
in value, then the losses of the Fund may exceed those of other stock mutual
funds that hold long positions only.

MUNICIPAL BOND FUND

The investment objective of the Municipal Bond Fund is to provide high
total return. The Fund seeks to achieve this objective by investing at least 65%
of its total assets in fixed-income securities issued by state and local
governments ("Municipal Obligations"), although the Fund may invest its assets
without limitation in securities of below investment-grade quality. See "Risk
Factors and Special Considerations -- Lower-Rated Securities." The Fund may
invest up to 40% of its assets (at the time of purchase) in municipal
obligations the interest on which constitutes an item of tax preference for
purposes of the federal alternative minimum tax ("Alternative Minimum Tax
Securities").

The two principal classifications of Municipal Obligations are "general
obligation" securities and "revenue" securities. General obligation securities
are secured by the issuer's pledge of its full faith, credit and taxing power
for the payment of principal and interest. Revenue securities are payable only
from the revenues derived from a particular facility or class of facilities or,
in some cases, from the proceeds of a special excise tax or other specific
revenue source such as the user of the facility being financed. Revenue
securities include private activity bonds which are not payable from the
unrestricted revenues of the issuer. Consequently, the credit quality of private
activity bonds is usually directly related to the credit standing of the
corporate user of the facility involved. Municipal Obligations may also include
"moral obligation" bonds, which are normally issued by special purpose public
authorities. If the issuer of moral obligation bonds is unable to meet its debt
service obligations from current revenues, it may draw on a reserve fund, the
restoration of which is a moral commitment but not a legal obligation of the
state or municipality which created the issuer.

Eligible Municipal Obligations include debt obligations issued by
governmental entities to obtain funds for various public purposes, including the
construction of a wide range of public facilities, the refunding of outstanding
obligations, the payment of general operating expenses and the extension of
loans to public institutions and facilities. Private activity bonds issued by or
on behalf of public authorities to finance various privately operated facilities
are considered Municipal Obligations.

Also included within the general category of Municipal Obligations are
participation certificates in a lease, an installment purchase contract, or a
conditional sales contract ("lease obligations") entered into by a state or
political subdivision to finance the acquisition or construction of equipment,
land, or facilities. Although lease obligations do not constitute general
obligations

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<PAGE> 46
of the issuer for which the lessee's unlimited taxing power is pledged, certain
lease obligations are backed by the lessee's covenant to appropriate money to
make the lease obligation payments. However, under certain lease obligations,
the lessee has no obligation to make these payments in future years unless money
is appropriated on a yearly basis. Although "non-appropriation" lease
obligations are secured by the leased property, disposition of the property in
the event of foreclosure might prove difficult. These securities represent a
relatively new type of financing that is not yet as marketable as more
conventional securities. Moreover, certain investments in lease obligations may
be illiquid and subject to the investment limitations described in the Statement
of Additional Information under "Common Investment Policies -- All Funds --
Illiquid Securities."

SELECT EQUITY FUND

Under normal market conditions, the Fund will invest at least 65% of
its total assets in U.S. equity securities. Equity securities include common
stocks, preferred stocks, convertible securities, and other securities, such as
rights and warrants, which derive their values from common stocks. The Fund may
also invest in fixed income securities and in money market instruments.

The Fund may invest without limit in foreign securities, principally
through the purchase of dollar-denominated ADRs of foreign issuers, and engage
in foreign currency transactions. See below, and "Risk Factors and Special
Considerations -- Foreign Securities" and " -- Foreign Currency Transactions."
The Fund may also purchase lower-rated debt securities. See "Risk Factors and
Special Considerations -- Lower-Rated Securities."

GLOBAL INCOME FUND

The investment objective of the Global Income Fund is to provide high
total return. The Fund seeks to achieve this objective by investing at least 65%
of its total assets in fixed income securities issued by foreign and domestic
corporations, governments and agencies. Under normal market conditions, the Fund
will seek to maintain an average weighted quality not lower than BBB the fourth
highest bond rating of S&P or in comparable unrated securities. (Securities
rated BBB or better by S&P are commonly referred to as "investment grade"). The
Fund may invest in fixed-income securities which may have equity
characteristics, such as convertible bonds. The Fund will not limit its
investments in securities rated below investment grade by recognized rating
agencies or in comparable unrated securities. The portion of the Fund's assets
invested in various countries will vary from time to time depending on the
assessment of market opportunities by BEA or CSAM, the Fund's sub-investment
adviser. There is no limit on investments in any region, country or currency,
although the Fund will normally invest in at least three different countries.

In addition to fixed income securities issued by foreign and domestic
corporations, the Fund may also invest in foreign government securities
("sovereign bonds"), U.S. Government securities including government agencies'
securities, debt obligations of supranational entities, Brady Bonds, loan
participations and assignments, convertible securities, mortgage-backed
securities, asset-backed securities, zero-coupon securities, when-issued
securities, repurchase and reverse repurchase agreements and dollar rolls.

U.S. EQUITY FUND

The investment objective of the U.S. Equity Fund is to provide
long-term appreciation of capital. The Fund seeks to achieve this objective by
investing, under normal market conditions, at least 65% of its total assets in
U.S. equity securities. Equity securities include common stocks, preferred
stocks, and securities which are convertible into common stock and readily
marketable securities, such as rights and warrants, which derive their value
from common stock. The Fund may also purchase without limitation
dollar-denominated ADRs of foreign issuers and similar securities. For defensive
purposes, the Fund may

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<PAGE> 47
invest in fixed income securities. The Fund normally will not emphasize dividend
or interest income in choosing securities, unless BEA believes the income will
contribute to the securities' appreciation potential.

U.S. FIXED INCOME FUND

The investment objective of the U.S. Fixed Income Fund is to provide
high total return. The Fund seeks to achieve this objective by investing, under
normal market conditions, at least 65% of its total assets in domestic fixed
income securities consistent with comparable broad market fixed-income indices.
Debt securities may include, without limitation, bonds, debentures, notes,
equipment lease and trust certificates, mortgage-related securities of corporate
issuers, and obligations issued or guaranteed by the U.S. Government or its
agencies or instrumentalities. The Fund may invest up to 35% of its total assets
in debt securities of foreign issuers, including emerging market debt. With
respect to 35% of the Fund's total assets, the Fund may also invest in other
securities, including, but not limited to, equity securities such as preferred
stock and equity-related securities. Under normal market conditions, the Fund
will seek to maintain an average dollar-weighted credit rating comparable to the
AA rating of S&P. Subject to this condition, however, the Fund may invest in
lower-rated debt securities. See "Risk Factors and Special Considerations --
Lower-Rated Securities" below. The Adviser estimates that the average weighted
maturity of the Fund will range between 5 and 15 years.

Depending on prevailing market conditions, the Fund may purchase debt
securities at a discount from face value, which produces a yield greater than
the coupon rate. Conversely, if debt securities are purchased at a premium over
face value, the yield will be lower than the coupon rate. An increase in
interest rates will generally reduce the value of the fixed income investments
in the Fund and a decline in interest rates will generally increase the value of
those investments. Also, the value of such securities may be affected by changes
in real or perceived creditworthiness of the issuers.

PORTFOLIO INVESTMENTS

TEMPORARY INVESTMENTS. For defensive purposes or during temporary
periods in which the Fund's Adviser believes changes in economic, financial or
political conditions make it advisable, each Fund may reduce its holdings in
other securities and invest up to 100% of its assets in cash or certain
short-term (less than twelve months to maturity) and medium-term (not greater
than five years to maturity) interest-bearing instruments or deposits of United
States and foreign issuers. Such investments may include, but are not limited
to, commercial paper, certificates of deposit, variable or floating rate notes,
bankers' acceptances, time deposits, government securities and money market
deposit accounts. See Statement of Additional Information, "Common Investment
Policies -- Temporary Investments." The Funds may also hold cash or cash
equivalents pending investment.

RULE 144A SECURITIES. Rule 144A Securities (as defined below) are
securities which are restricted as to resale to the general public, but which
may be resold to "qualified institutional buyers." Each Fund may invest in Rule
144A Securities that the Fund's Adviser has determined are liquid pursuant to
guidelines established by the Fund's Board of Directors.

BORROWING. Each Fund may borrow up to 33-1/3 percent of its total
assets without obtaining shareholder approval. The Funds intend to borrow or to
engage in reverse repurchase agreements or dollar roll transactions only for
temporary or emergency purposes with the exception of the Global Income Fund,
the High Yield Fund and the Municipal Bond Fund. See Statement of Additional
Information, "Common Investment Policies -- All Funds -- Reverse Repurchase
Agreements" and " -- Borrowing."

LENDING OF PORTFOLIO SECURITIES. Each Fund may also lend its portfolio
securities to financial institutions against collateral consisting of cash, U.S.
Government securities or irrevocable bank letters of credit, which are equal at
all times to at least 102% of the value of the securities loaned (105% in the
case of foreign securities loaned). Such loans would involve risks of delay in
receiving additional collateral in the event the value of the collateral
decreased below the value of the securities loaned or of delay in recovering the
securities loaned or even loss of rights in the collateral should the borrower
of the securities fail financially. However, loans will be made only to
borrowers deemed by the Fund's Adviser to be of good standing and only when, in
the Adviser's judgment, the income to be earned from the loans justifies the
attendant risks. Any loans of a Fund's securities will be fully collateralized
and

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<PAGE> 48
marked to market daily. A Fund may not make loans in excess of 50% of its total
assets immediately before such loans.

INVESTMENT COMPANIES. Each Fund may invest in securities issued by
other investment companies to the extent permitted by the 1940 Act. As a
shareholder of another investment company, each Fund would bear, along with
other shareholders, its pro rata portion of the other investment company's
expenses, including advisory fees. These expenses would be in addition to the
advisory and other expenses that a Fund bears directly in connection with its
own operations.

U.S. GOVERNMENT SECURITIES. The obligations issued or guaranteed by the
U.S. government in which each Fund may invest include direct obligations of the
U.S. Treasury and obligations issued by U.S. government agencies and
instrumentalities. Included among direct obligations of the United States are
Treasury Bills, Treasury Notes and Treasury Bonds, which differ principally in
terms of their maturities. Treasury Bills have maturities of less than one year,
Treasury Notes have maturities of one to 10 years and Treasury Bonds generally
have maturities of greater than 10 years at the date of issuance. Included among
the obligations issued by agencies and instrumentalities of the United States
are: instruments that are supported by the full faith and credit of the United
States (such as certificates issued by the Government National Mortgage
Association ("GNMA")); instruments that are supported by the right of the issuer
to borrow from the U.S. Treasury (such as securities of Federal Home Loan
Banks); and instruments that are supported by the credit of the instrumentality
(such as Federal National Mortgage Association ("FNMA") and Federal Home Loan
Mortgage Corporation ("FHLMC") bonds).

RISK FACTORS AND SPECIAL CONSIDERATIONS

For certain additional risks related to each Fund's investments, see
"Portfolio Investments" and "Certain Investment Strategies."

GENERAL. Among the factors that may be considered in deciding whether
to invest in a security are the issuer's financial resources, its sensitivity to
economic conditions and trends, its operating history and the ability of the
issuer's management. Bond prices generally vary inversely in relation to changes
in the level of interest rates, as well as in response to other market factors
and changes in the creditworthiness of the issuers of the securities. U.S.
Government Securities are considered to be of the highest credit quality
available. U.S. Government Securities, however, will be affected by general
changes in interest rates. The price volatility of a Fund's shares where the
Fund invests in intermediate maturity bonds will be substantially less than that
of long-term bonds. An intermediate maturity bond will generally have a lower
yield than that of a long-term bond. Longer-term securities in which the Funds
may invest generally offer a higher current yield than is offered by
shorter-term securities, but also generally involve greater volatility of price
and risk of capital than shorter-term securities.

FOREIGN SECURITIES. Investing in the securities of non-U.S. issuers
involves opportunities and risks that are different from investing in the
securities of U.S. issuers. The risks associated with investing in securities of
non-U.S. issuers are generally heightened for investments in securities of
issuers in emerging markets.

Because foreign securities generally are denominated and pay dividends
or interest in foreign currencies, and the Funds may hold from time to time
various foreign currencies pending their investment in foreign securities or
their conversion into U.S. dollars, the value of the Funds' assets as measured
in U.S. dollars may be affected favorably or unfavorably by changes in exchange
rates. In addition, investors should realize that the value of the Funds'
investments may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation,
limitation on the removal of funds or assets, or imposition of (or change in)
exchange control regulations in those foreign nations. In addition, changes in
government administrations or economic or monetary policies in the U.S. or
abroad could result in appreciation or depreciation of portfolio securities and
could favorably or adversely affect the Funds' operations. Furthermore, the
economies of individual foreign nations may differ from that of the United
States, whether favorably or unfavorably, in areas such as growth of gross
national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position. Any foreign investments made
by the Funds must be made in compliance with U.S. and foreign currency
restrictions and tax laws restricting the amounts and types of foreign
investments.

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<PAGE> 49
applicable to issuers in the United States. The Funds' foreign investments may
be less liquid and their prices may be more volatile than comparable investments
in securities in U.S. companies. Expenses relating to foreign investments are
generally higher than those relating to domestic securities. In addition, there
is generally less government supervision and regulation of securities exchanges,
brokers and issuers in foreign countries than in the United States.

FOREIGN CURRENCY TRANSACTIONS. The over the counter market in forward
foreign currency exchange contracts offers less protection against defaults by
the other party to such instruments than is available for currency instruments
traded on an exchange. Such contracts are subject to the risk that the
counterparty to the contract will default on its obligations. Since these
contracts are not guaranteed by an exchange or clearinghouse, a default on the
contract would deprive a Fund of unrealized profits, transaction costs or the
benefits of a currency hedge or force a Fund to cover its purchase or sale
commitments, if any, at the current market price. A Fund will not enter into
forward foreign currency exchange contracts unless the credit quality of the
unsecured senior debt or the claims-paying ability of the counterparty is
considered to be investment grade by the Fund's Adviser.

Currency exchange rates may fluctuate significantly over short periods
of time. They generally are determined by the forces of supply and demand in the
foreign exchange markets and the relative merits of investments in different
countries, actual or perceived changes in interest rates and other complex
factors as seen from an international perspective. Currency exchange rates also
can be affected unpredictably by intervention by U.S. or foreign governments or
central banks, or the failure to intervene, or by currency controls or political
developments in the United States or abroad. The foreign currency market offers
less protection against defaults in the forward trading of currencies than is
available when trading in currencies occurs on an exchange. Since a forward
currency contract is not guaranteed by an exchange or clearinghouse, a default
on the contract would deprive a Fund of unrealized profits or force such Fund to
cover its commitments for purchase or resale, if any, at the current market
price.

EMERGING MARKETS. (Emerging Markets Fund, Global Telecommunications
Fund, International Growth Fund and U.S. Fixed Income Fund only) Investing in
securities of issuers located in emerging markets involves not only the risks
described below with respect to investing in foreign securities, but also other
risks, including exposure to economic structures that are generally less diverse
and mature than, and to political systems that can be expected to have less
stability than, those of developed countries. For example, many investments in
emerging markets experienced significant declines in value due to political and
currency volatility in emerging market countries during the latter part of 1997.
Other characteristics of emerging markets that may affect investment there
include certain national policies that may restrict investment by foreigners in
issuers or industries deemed sensitive to relevant national interests and the
absence of developed legal structures governing private and foreign investments
and private property. The typically small size of the markets for securities of
issuers located in emerging markets and the possibility of a low or nonexistent
volume of trading in those securities may also result in a lack of liquidity and
in price volatility of those securities.

LOWER-RATED SECURITIES. (All Funds except Long-Short Neutral Fund and
Long-Short Equity Fund) The widespread expansion of government, consumer and
corporate debt within the economy has made the corporate sector, especially
cyclically sensitive industries, more vulnerable to economic downturns or
increased interest rates. Because lower-rated debt securities involve issuers
with weaker credit fundamentals (such as debt-to-equity ratios, interest charge
coverage, earnings history and the like), an economic downturn, or increases in
interest rates, could severely disrupt the market for lower-rated debt
securities and adversely affect the value of outstanding debt securities and the
ability of the issuers to repay principal and interest.

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<PAGE> 50
for and prices of lower-rated debt securities have been found to be less
sensitive to interest rate changes than higher-rated investments, but more
sensitive to adverse economic changes or individual corporate developments.
Also, during an economic downturn or substantial period of rising interest
rates, highly leveraged issuers may experience financial stress which would
adversely affect their ability to service their principal and interest payment
obligations, to meet projected business goals and to obtain additional
financing. If the issuer of a debt security owned by a Fund defaulted, the Fund
could incur additional expenses in seeking recovery with no guaranty of
recovery. In addition, periods of economic uncertainty and changes can be
expected to result in increased volatility of market prices of lower-rated debt
securities and a Fund's net asset value. Lower-rated debt securities also
present risks based on payment expectations. For example, lower-rated debt
securities may contain redemption or call provisions. If an issuer exercises
these provisions in a declining interest rate market, a Fund would have to
replace the security with a lower yielding security, resulting in a decreased
return for investors. Conversely, a lower-rated debt security's value will
decrease in a rising interest rate market, as will the value of a Fund's assets.
If a Fund experiences unexpected net redemptions, this may force it to sell its
lower-rated debt securities, without regard to their investment merits, thereby
decreasing the asset base upon which a Fund's expenses can be spread and
possibly reducing a Fund's rate of return.

In addition, to the extent that there is no established retail
secondary market, there may be thin trading of lower-rated debt securities, and
this may have an impact on the ability of the Fund's Adviser to both value
accurately lower-rated debt securities and the Fund's assets, and to dispose of
the debt securities. Adverse publicity and investor perceptions, whether or not
based on fundamental analysis, may decrease the value and liquidity of
lower-rated debt securities, especially in a thinly traded market.

FIXED INCOME SECURITIES. (All Funds except Emerging Markets Fund,
Global Telecommunications Fund and International Growth Fund) The value of the
securities held by a Fund, and thus the net asset value of the shares of a Fund,
generally will vary inversely in relation to changes in prevailing interest
rates. Thus, if interest rates have increased from the time a debt or other
fixed income security was purchased, such security, if sold, might be sold at a
price less than its cost. Conversely, if interest rates have declined from the
time such a security was purchased, such security, if sold, might be sold at a
price greater than its cost. Also, the value of such securities may be affected
by changes in real or perceived creditworthiness of the issuers. Thus, if
creditworthiness is enhanced, the price may rise. Conversely, if
creditworthiness declines, the price may decline. A Fund is not restricted to
any maximum or minimum time to maturity in purchasing portfolio securities, and
the average maturity of the Fund's assets will vary based upon the Adviser's
assessment of economic and market conditions.

NON-PUBLICLY TRADED SECURITIES; RULE 144A SECURITIES. Each Fund may
purchase securities that are not registered under the Securities Act of 1933, as
amended (the "Securities Act"), but that can be sold to "qualified institutional
buyers" in accordance with Rule 144A under the Securities Act ("Rule 144A
Securities"). A Rule 144A Security will be considered illiquid and therefore
subject to each Fund's limitation on the purchase of illiquid securities, unless
the Fund's Board determines on an ongoing basis that an adequate trading market
exists for the security. In addition to an adequate trading market, the Board
will also consider factors such as trading activity, availability of reliable
price information and other relevant information in determining whether a Rule
144A Security is liquid. This investment practice could have the effect of
increasing the level of illiquidity in the Funds to the extent that qualified
institutional buyers become uninterested for a time in purchasing Rule 144A
Securities. The Board of each Fund will carefully monitor any investments by the
Fund in Rule 144A Securities. The Boards may adopt guidelines and delegate to
the relevant Fund's Adviser the daily function of determining and
monitoring the liquidity of Rule 144A Securities, although each Board will
retain ultimate responsibility for any determination regarding liquidity.

Non-publicly traded securities (including Rule 144A Securities) may
involve a high degree of business and financial risk and may result in
substantial losses. These securities may be less liquid than publicly traded
securities, and a Fund may take longer to liquidate these positions than would
be the case for publicly traded securities. Although these securities may be
resold in privately negotiated transactions, the price realized from these sales
could be less than those originally paid by the Fund. Further, companies whose
securities are not publicly traded may not be subject to the disclosure and
other investor protection requirements that would be applicable if their
securities were publicly traded. A Fund's investment in illiquid securities is
subject to the risk that should the Fund desire to sell any of these securities
when a ready buyer is not available at a price that is deemed to be
representative of their value, the value of the Fund's net assets could be
adversely affected.

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<PAGE> 51
NON-DIVERSIFIED STATUS. Each Fund is classified as a non-diversified
investment company under the 1940 Act, which means that each Fund is not limited
by the 1940 Act in the proportion of its assets that it may invest in the
obligations of a single issuer. Each Fund will, however, comply with
diversification requirements imposed by the Internal Revenue Code of 1986, as
amended (the "Code"), for qualification as a regulated investment company. As a
non-diversified investment company, each Fund may invest a greater proportion of
its assets in the obligations of a small number of issuers and, as a result, may
be subject to greater risk with respect to portfolio securities. To the extent
that a Fund assumes large positions in the securities of a small number of
issuers, its return may fluctuate to a greater extent than that of a diversified
company as a result of changes in the financial condition or in the market's
assessment of the issuers.

EMERGING GROWTH AND SMALLER CAPITALIZATION COMPANIES; UNSEASONED
ISSUERS. Investing in securities of companies with continuous operations of less
than three years ("unseasoned issuers") may involve greater risks since these
securities may have limited marketability and, thus, may be more volatile than
securities of larger, more established companies or the market in general.
Because such companies normally have fewer shares outstanding than larger
companies, it may be more difficult for a Fund to buy or sell significant
amounts of such shares without an unfavorable impact on prevailing prices. These
companies may have limited product lines, markets or financial resources and may
lack management depth. In addition, these companies are typically subject to a
greater degree of changes in earnings and business prospects than are larger,
more established companies. There is typically less publicly available
information concerning these companies than for larger, more established ones.
Although investing in securities of unseasoned issuers offers potential for
above-average returns if the companies are successful, the risk exists that the
companies will not succeed and the prices of the companies' shares could
significantly decline in value. Therefore, an investment in a Fund may involve a
greater degree of risk than an investment in other mutual funds that seek
capital appreciation by investing in more established, larger companies.

YEAR 2000 COMPLIANCE. Many services provided to a Fund and their
shareholders by BEA, CSAM Counsellors Securities Inc., the Funds' distributor
("Counsellors Securities"), certain of the latter's affiliates (collectively,
the "Service Providers"), and the Funds' other service providers rely on the
functioning of their respective computer systems. Many computer systems cannot
distinguish the year 2000 from the year 1900, with resulting potential
difficulty in performing various calculations (the "Year 2000 Issue"). The Year
2000 Issue could potentially have an adverse impact on the handling of security
trades, the payment of interest and dividends, pricing, account services and
other Fund operations.

The Service Providers recognize the importance of the Year 2000 Issue
and are taking appropriate steps necessary in preparation for the year 2000. At
this time, there can be no assurance that these steps will be sufficient to
avoid any adverse impact on the Funds nor can there be any assurance that the
Year 2000 Issue will not have an adverse effect on the Funds' investments or on
global markets or economies, generally.

The Service Providers anticipate that their systems and those of the
Funds' other service providers will be adapted in time for the year 2000. To
further this goal, the Service Providers have coordinated a plan to repair,
adapt or replace systems that are not year 2000 compliant, and are seeking to
obtain similar representations from the Funds' other major service providers.
The Service Providers will be monitoring the Year 2000 Issue in an effort to
ensure appropriate preparation.

GENERAL. Investment methods described in this prospectus are among
those which the Funds have the power to utilize. Accordingly, reference to any
particular method or technique carries no implication that it will be utilized
or, if it is, that it will be successful.

PORTFOLIO TRANSACTIONS AND TURNOVER RATE

A Fund will attempt to purchase securities with the intent of holding
them for investment but may purchase and sell portfolio securities whenever the
Fund's Adviser believes it to be in the best interests of the relevant Fund. The
Fund's Adviser will effect portfolio transactions in each Fund without regard to
holding periods if, in its judgment, such transactions are advisable in light of
general market, economic or financial conditions. Portfolio turnover may vary
greatly from year to year as well as within a particular year. It is not
possible to predict each Fund's portfolio turnover rate. However, it is
anticipated that, under normal market conditions, each Fund's annual turnover
rate should not exceed 100% (150% and 50% in the case of the Long-Short
Neutral Fund and Long-Short Equity Fund, respectively).

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High portfolio turnover rates (100% or more) may result in higher dealer
mark-ups or underwriting commissions as well as other transaction costs,
including correspondingly higher brokerage commissions. In addition, short-term
gains realized from portfolio turnover may be taxable to shareholders as
ordinary income. See "Dividends, Distributions and Taxes -- Taxes" below and
"Investment Policies --Portfolio Transactions" in the Statement of Additional
Information.

All orders for transactions in securities or options on behalf of a
Fund are placed by the Fund's Adviser with broker-dealers that it selects,
including Counsellors Securities and affiliates of Credit Suisse Group ("Credit
Suisse"). A Fund may utilize Counsellors Securities or affiliates of Credit
Suisse in connection with a purchase or sale of securities when the Fund's
Adviser believes that the charge for the transaction does not exceed usual and
customary levels and when doing so is consistent with guidelines adopted by the
Board.

CERTAIN INVESTMENT STRATEGIES

STRATEGY AVAILABLE TO ALL FUNDS - EXCEPT THE LONG-SHORT NEUTRAL FUND AND
LONG-SHORT EQUITY FUND

FOREIGN CURRENCY TRANSACTIONS. The Funds may also enter into contracts
to purchase and sell forward foreign currency exchange contracts to seek to
enhance total return. A forward foreign currency exchange contract is a
negotiated agreement to exchange currency at a future time at a rate or rates
that may be higher or lower than those available on a "spot" (or cash) basis. A
Fund may enter into these contracts for purposes of increasing exposure to a
foreign currency or to shift exposure to foreign currency fluctuations from one
country to another. To the extent that such contracts are entered into to
enhance total return, they are considered speculative. If a Fund enters into
such a contract for any purpose, the Fund will be required to maintain cash or
liquid assets in an amount equal to the value of the Fund's total assets
committed to the consummation of the contract. The Funds will not invest more
than 50% of their respective total assets in such contracts for the purpose of
enhancing total return. There is no limit on the amount of assets that the Funds
may invest in such transactions for hedging purposes.

STRATEGIES AVAILABLE TO ALL FUNDS - EXCEPT THE LONG-SHORT NEUTRAL FUND,
LONG-SHORT EQUITY FUND AND MUNICIPAL BOND FUND

MORTGAGE-RELATED PASS-THROUGHS AND DERIVATIVES. The Funds may invest in
mortgage-related securities. Purchasable mortgage-related securities are
represented by pools of mortgage loans assembled for sale to investors by
various governmental agencies such as the GNMA and government-related
organizations such as the FNMA and the FHLMC, as well as by private issuers such
as commercial investment banks, savings and loan institutions, mortgage bankers
and private mortgage insurance companies. As with other interest-bearing
securities, the prices of such securities are inversely affected by changes in
interest rates. However, though the value of a mortgage-related security may
decline when interest rates rise, the converse is not necessarily true because
in periods of declining interest rates mortgages underlying securities are prone
to prepayment. For this and other reasons, a mortgage-related security's stated
maturity may be shortened by an unscheduled prepayment on underlying mortgages
and, therefore, it is not possible to predict accurately the security's return
to these Funds.

Mortgage-related securities acquired by these Funds may include
collateralized mortgage obligations ("CMOs") issued by FNMA, FHLMC or other U.S.
Government agencies or instrumentalities, as well as by private issuers. These
securities may be considered mortgage derivatives. CMOs provide an investor with
a specified interest in the cash flow of a pool of underlying mortgages or other
mortgage-related securities.

ASSET-BACKED SECURITIES. The Funds may purchase asset-backed
securities, which represent a participation in, or are secured by and payable
from, a stream of payments generated by particular assets, most often a pool of
assets similar to one another. Assets generating such payments will consist of
such instruments as motor vehicle installment purchase obligations, credit card
receivables and home equity loans.

Asset-backed securities may involve certain risks arising primarily
from the nature of the underlying assets (i.e., credit card and automobile loan
receivables as opposed to real estate mortgages). For example, credit card
receivables are generally unsecured and may require the repossession of personal
property upon the default of the debtor which may be difficult or impracticable
in some cases. Asset-backed securities are considered an industry for industry
concentration purposes, and the Funds will therefore not purchase any
asset-backed securities which would cause 25% or more of a Fund's total assets
at the time of purchase to be invested in asset-backed securities.

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CONVERTIBLE SECURITIES. A convertible security is a bond, debenture,
note, preferred stock or other security that may be converted into or exchanged
for a prescribed amount of common stock of the same or a different issuer within
a particular period of time at a specified price or formula. A convertible
security entitles the holder to receive interest paid or accrued on debt or the
dividend paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged. Before conversion, convertible securities have
characteristics similar to nonconvertible debt securities in that they
ordinarily provide a stable stream of income with generally higher yields than
those of common stocks of the same or similar issuers. The Funds will invest in
convertible securities without regard to their credit ratings. See "Risk Factors
and Special Considerations -- Lower-Rated Securities".

STRATEGY AVAILABLE TO THE LONG-SHORT NEUTRAL FUND AND LONG-SHORT EQUITY FUND

SHORT SALES. When the Adviser anticipates that a security is
overvalued, it may sell the security short by borrowing the same security from a
broker or other institution and selling the security. A Fund will incur a loss
as a result of a short sale if the price of the borrowed security increases
between the date of the short sale and the date on which the Fund replaces such
security. A Fund will realize a gain if there is a decline in price of the
security between those dates, which decline exceeds the costs of the borrowing
the security and other transaction costs. There can be no assurance that a Fund
will be able to close out a short position at any particular time or at an
acceptable price. Although a Fund's gain is limited to the amount at which it
sold a security short, its potential loss is limited only by the maximum
attainable price of the security less the price at which the security was sold.
Until a Fund replaces a borrowed security, it will maintain at all times liquid
securities in an amount which, when added to any amount deposited with a broker
as collateral will at least equal the current market value of the security sold
short. Depending on arrangements made with brokers, a Fund may not receive any
payments (including interest) on collateral deposited with them. A Fund will not
make a short sale if, after giving effect to such sale, the market value of all
securities sold short exceeds 100% of the value of the Fund's net assets.

STRATEGIES AVAILABLE TO THE LONG-SHORT EQUITY FUND

INVESTING IN INVESTMENT COMPANIES. Because the Long-Short Equity Fund
may invest up to 100% of its assets in shares of the Long-Short Neutral Fund and
other investment companies, the expenses associated with investing in the Fund
may be higher than those associated with a portfolio that directly invests in
securities that are not themselves investment companies. An investor in the
Long-Short Equity Fund will incur a proportionate share of the expenses of the
Fund, as well as a proportionate share of expenses of the Long-Short Neutral
Fund and unaffiliated investment companies in which the Long-Short Equity Fund
invests (collectively, the "underlying funds"). Investors in the Long-Short
Equity Fund should realize that they can invest directly in the underlying
funds.

The Long-Short Equity Fund will seek to avoid duplicative fees and the
layering of expenses to a meaningful extent. The Fund will generally only invest
in the Institutional Shares of the Long-Short Neutral Fund, which are offered
with no sales or redemption charges, distribution fees or shareholder servicing
fees. The management fees payable to BEA under the Fund's management contract
are for services that are in addition to, rather than duplicative of, services
provided under the management contract for any underlying funds in which the
Fund invests. The administration, custody and transfer agency fees borne by
the Fund are also for services that are in addition to, and not duplicative of,
services provided to the underlying funds. In addition, any distribution or
shareholder servicing fees paid by the Fund in connection with its investments
in underlying funds will not exceed applicable NASD limits.

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<PAGE> 54
consequences associated with purchases and sales of securities, and such sales
may also increase transaction costs. BEA is committed to minimizing the impact
of these transactions on the Long-Short Neutral Fund to the extent it is
consistent with pursuing the Long-Short Equity Fund's investment objective and
will monitor the impact of the Long-Short Equity Fund's asset allocation
decisions on the Long-Short Neutral Fund.

S&P 500 INDEX FUTURES AND RELATED OPTIONS. An S&P 500 Index Future
contract (an "Index Future") is a contract to buy or sell an integral number of
units of the S&P 500 Index at a specified future date at a price agreed upon
when the contract is made. A unit is the value at a given time of the S&P 500
Index. Entering into a contract to buy units is commonly referred to as buying
or purchasing a contract or holding a long position in the S&P 500 Index. An
option on an Index Future gives the purchaser the right, in return for the
premium paid, to assume a long or a short position in an Index Future. The
Long-Short Equity Fund will realize a loss if the value of the S&P 500 Index
declines between the time the Fund purchases an Index Future or an option
transaction in which the Fund has assumed a long position and may realize a gain
if the value of the S&P 500 Index rises between such dates.

Further, when the Long-Short Equity Fund purchases an Index Future, it
is required to maintain, at all times while an Index Future is held by the Fund,
cash or liquid securities in an amount which, together with the initial margin
deposit on the futures contract, is equal to the current value of the futures
contract.

There is no assurance that the equity swap contract counterparties will
be able to meet their obligations or that, in the event of default, the
Long-Short Equity Fund will succeed in pursuing contractual remedies. The Fund
thus assumes the risk that it may be delayed in or prevented from obtaining
payments owed to it pursuant to these contracts. The Adviser will closely
monitor the credit of equity swap contract counterparties to seek to minimize
this risk. The Fund will not use equity swap contracts for leverage.

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SEC considers equity swap contracts to be illiquid securities. Consequently, as
long as the staff maintains this position, the Fund will not invest in equity
swap contracts if, as a result of the investment, the total value of such
investments together with that of all other illiquid securities which the Fund
owns would exceed 15% of the Fund's net assets.

The net amount of the excess, if any, of the Fund's obligations over
its entitlement with respect to each equity swap contract will be accrued on a
daily basis, and an amount of cash or liquid securities having an aggregate
market value at least equal to the accrued excess will be maintained in a
segregated account. The Fund does not believe that the Fund's obligations under
equity swap contracts are senior securities within the meaning of the 1940 Act,
so long as such a segregated account is maintained, and accordingly, the Fund
will not treat them as being subject to its borrowing restrictions.

STRATEGIES AVAILABLE TO THE MUNICIPAL BOND FUND

TAX-EXEMPT DERIVATIVES AND OTHER MUNICIPAL OBLIGATIONS. The Fund may
invest in tax-exempt derivative securities relating to Municipal Obligations,
including tender option bonds, participations, beneficial interests in trusts
and partnership interests. A typical tax-exempt derivative security involves the
purchase of an interest in a pool of Municipal Obligations which interest
includes a tender option, demand or other feature allowing the Fund to tender
the underlying Municipal Obligation to a third party at periodic intervals and
to receive the principal amount thereof. A participation interest gives the Fund
an undivided interest in a Municipal Obligation in the proportion the Fund's
participation bears to the total principal amount of the Municipal Obligation,
and typically provides for a repurchase feature for all or any part of the full
principal amount of the participation interest, plus accrued interest. Trusts
and partnerships are typically used to convert long-term fixed rate high quality
bonds of a single state or municipal issuer into variable or floating rate
demand instruments.

During normal market conditions, up to 20% of the Fund's net assets may
be invested in securities which are not Municipal Obligations; at least 80% of
the Fund's net assets will be invested in Municipal Obligations the interest on
which is exempt from regular federal income tax. During temporary defensive
periods, the Fund may invest without limitation in obligations which are not
Municipal Obligations and may hold without limitation uninvested cash reserves.
Such securities may include, without limitation, bonds, notes, variable rate
demand notes and commercial paper, provided such securities are rated within the
relevant categories, applicable to Municipal Obligations set forth above, or if
unrated, are of comparable quality as determined by the Adviser, and may also
include, without limitation, other debt obligations, such as bank obligations.
The Fund may acquire "stand-by commitments" with respect to Municipal
Obligations held by it. Under a stand-by commitment, a dealer agrees to purchase
at the Fund's option specified Municipal Obligations at a specified price. The
acquisition of a stand-by commitment may increase the cost, and thereby reduce
the yield, of the Municipal Obligation to which such commitment relates. The
Fund will acquire stand-by commitments solely to facilitate portfolio liquidity
and does not intend to exercise its rights thereunder for trading purposes.

The amount of information regarding the financial condition of issuers
of Municipal Obligations may not be as extensive as that which is made available
by public corporations and the secondary market for Municipal Obligations may be
less liquid than that for taxable fixed-income securities. Accordingly, the
ability of the Fund to buy and sell tax-exempt securities may, at any particular
time and with respect to any particular securities, be limited.

ALTERNATIVE MINIMUM TAX SECURITIES. The Fund may invest up to 40% of
its assets (at the time of purchase) in Alternative Minimum Tax Securities,
which are certain securities issued after August 7, 1986 to finance certain
non-governmental activities. While the income from Alternative Minimum Tax
Securities is exempt from regular federal income tax, it is a tax preference
item for purposes of the federal individual and corporate "alternative minimum
tax." The alternative minimum tax is a special tax that applies to a limited
number of taxpayers who have certain adjustments or tax preference items.
Available returns on Alternative Minimum Tax Securities acquired by the Fund may
be lower than those from other Municipal Obligations acquired by the Fund due to
the possibility of federal, state and local alternative minimum or minimum
income tax liability on Alternative Minimum Tax Securities.

INVESTMENT GUIDELINES

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transaction between an issuer and one or more purchasers; (ii) repurchase
agreements with maturities greater than seven days; (iii) time deposits maturing
in more than seven calendar days; and (iv) certain Rule 144A Securities. Each
Fund may borrow from banks and enter into reverse repurchase agreements and
dollar rolls for temporary or emergency purposes, such as meeting redemption
requests, provided that reverse repurchase agreements and any other borrowing by
the Fund may not exceed 33-1/3% of total assets, and may pledge its assets to
the extent necessary to secure permitted borrowings. Whenever borrowings
(including reverse repurchase agreements, dollar rolls and borrowings from
banks) exceed 5% of a Fund's assets, the Fund will not make any investments
(including roll-overs). Except for the limitations on borrowing and the
limitation on further investments when borrowings exceed 5% of Fund assets, the
investment guidelines set forth in this paragraph may be changed at any time
without shareholder consent by vote of the Board of each Fund, subject to the
limitations contained in the 1940 Act. A complete list of investment
restrictions that each Fund has adopted identifying additional restrictions that
cannot be changed without the approval of the majority of the Fund's outstanding
shares is contained in the Statement of Additional Information under "Investment
Limitations".

MANAGEMENT OF THE FUNDS

INVESTMENT ADVISER AND SUB-INVESTMENT ADVISER. BEA serves as the
Investment Adviser for each of the Funds pursuant to investment advisory
agreements and CSAM serves as sub-investment adviser to each of the Emerging
Markets Fund and the Global Income Fund pursuant to a sub-investment advisory
agreement (collectively, the "Advisory Agreements"). BEA is a general
partnership organized under the laws of the State of New York in December 1990
and, together with its predecessor firms, has been engaged in the investment
advisory business for over 60 years. BEA is a wholly-owned subsidiary of Credit
Suisse and the U.S. arm of Credit Suisse Asset Management. BEA is a registered
investment adviser under the Investment Advisers Act of 1940, as amended. BEA is
a diversified investment adviser managing global equity, fixed-income and
derivative securities accounts for corporate pension and profit-sharing plans,
state pension funds, union funds, endowments and other charitable institutions.
As of June 30, 1998, BEA managed approximately $35.6 billion in assets. BEA
currently acts as investment adviser for eleven other investment companies
registered under the 1940 Act, and acts as sub-adviser to certain portfolios of
thirteen other registered investment companies. BEA's principal offices are
located at One Citicorp Center, 153 East 53rd Street, New York, New York 10022.

CSAM is a wholly-owned subsidiary of Credit Suisse. Credit Suisse had
identified BEA and CSAM as its leading institutional international asset
management product centers. As of June 30, 1998, CSAM managed $35 billion in
discretionary assets. CSAM Limited is a registered investment adviser under the
Investment Advisers Act of 1940, as amended. CSAM's principal offices are
located at Beaufort House, 1 St. Botolph Street, GB-London EC3A 7JJ.

For the advisory services provided and expenses assumed by BEA, the Global
Telecommunications Fund, the High Yield Fund, the International Growth Fund, the
Long-Short Neutral Fund, the Long-Short Equity Fund, the Municipal Bond Fund,
the Select Equity Fund, U.S. Equity Fund and U.S. Fixed Income Fund each pay BEA
a fee computed at an annual rate of 1.00%, .70%, .80%, 1.50%, .10%, .70%, .75%,
.75% and .375% of the Fund's average net assets, computed daily and payable
quarterly. For the advisory services provided and expenses assumed by BEA, the
Emerging Markets Fund and the Global Income Fund each pay BEA a fee computed
at an annual rate of 1.00% and .50%, respectively, of the Fund's average net
assets, computed daily and payable quarterly, out of which BEA pays CSAM for
sub-investment advisory services.

After the first year of operations of the Long-Short Neutral Fund, the
basic management fee may be increased or decreased by applying an adjustment
formula (the "Performance Adjustment"). The Performance Adjustment is calculated
monthly by comparing the Fund's investment performance to a target during the
most recent twelve-month period. The target is the investment record of the
Salomon Smith Barney U.S. 1-Month Treasury Bill Index-TM- plus 5 percentage
points. The Performance Adjustment is added to or subtracted from the basic fee.
The maximum annualized Performance Adjustment is .50%.

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<PAGE> 57
BEA and each Fund's co-administrators or sub-adviser, if applicable,
may, at their discretion, from time to time agree to voluntarily waive all or
any portion of their fees and temporarily limit the expenses to be borne by the
Funds.

In addition to the understanding to limit expenses described under "The
Funds' Expenses," BEA has voluntarily undertaken to waive some or all of its
management fee and, if necessary, to bear certain expenses of the Long-Short
Neutral Fund and the Long-Short Equity Fund until further notice to the extent
required to limit the total annual operating expenses (which do not include
nonrecurring account fees and extraordinary expenses) of Institutional Shares to
2.00% and 2.50%, respectively, of the Fund's average daily net assets
attributable to that class, plus the Performance Adjustment applicable to the
Long-Short Neutral Fund. The Performance Adjustment would be determined without
regard to any waivers of the basic management fee.

The Advisory Agreements provide that the Adviser shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Funds in connection with the matters to which the Advisory Agreements relate.

PORTFOLIO MANAGERS. Emerging Markets Fund and International Growth
Fund. The day-to-day portfolio management of the Emerging Markets II Fund and
International Growth Fund is the responsibility of the BEA International Equity
Management Team. The Team consists of the following investment professionals:
William P. Sterling (Executive Director), Steven D. Bleiberg (Managing
Director), Richard Watt (Managing Director), Susan Boland (Senior Vice
President), Emily Alejos (Vice President) and Robert B. Hrabchak (Vice
President). Mr. Sterling joined BEA in 1995, prior to which time he was the head
of International Economics at Merrill Lynch & Company. Mr. Watt joined BEA in
1995, prior to which time he was the head of emerging markets investments and
research at Gartmore Investment Limited in London. Mr. Bleiberg has been engaged
as an investment professional with BEA for more than five years. Ms. Boland
joined BEA in 1996, prior to which time she was a director and portfolio manager
for Barran & Partners Limited where she managed a hedge fund that invested in
European equities. Prior to 1995, she was a partner and European portfolio
manager for Teton Partners. Ms. Alejos joined BEA in 1997, prior to which time
she was a vice president and an emerging markets portfolio manager with Bankers
Trust. Mr. Hrabchak joined BEA in 1997, prior to which time he was a senior
portfolio manager at Merrill Lynch Asset Management in Hong Kong, where he
chaired the Asia Pacific Investment Strategy Committee and managed institutional
portfolios. Prior to 1995, he was an associate in investment banking at Salomon
Brothers.

Global Telecommunications Fund. The day-to-day portfolio management of
the Global Telecommunications Fund is the responsibility of the BEA Global
Telecommunications Management Team. The Team consists of the following
investment professionals: William P. Sterling (Executive Director), Steven D.
Bleiberg (Managing Director), Richard Watt (Managing Director), James Abate
(Senior Vice President), Stephen Waite (Vice President), Emily Alejos (Vice
President) and Robert Hrabchak (Vice President). Mr. Abate joined BEA in 1995;
previously, he was a Managing Director for Vert Independent Capital Research.
Prior to joining Vert, Mr. Abate was a manager in Price Waterhouse's
Valuation/Corporate Finance Group. Mr. Waite joined BEA in 1995, prior to which
he was vice president and senior European economist for Merrill Lynch & Company
in London.

High Yield Fund. The day-to-day portfolio management of the High Yield
Fund is the responsibility of the BEA High Yield Management Team. The Team
consists of the following investment professionals: Richard Lindquist (Executive
Director), Misia Dudley (Senior Vice President), Marianne Rossi (Senior Vice
President), John Tobin (Senior Vice President) and Mary Ann Thomas (Vice
President). Mr. Lindquist, Ms. Dudley, Ms. Rossi and Mr. Tobin joined BEA in
1995 as a result of BEA's acquisition of CS First Boston Investment Management.
Prior to joining CS First Boston, Mr. Lindquist and Ms. Rossi were with
Prudential Insurance Company of America. Prior to joining CS First Boston, Ms.
Dudley was with Stockbridge Partners, and prior to that had spent five years
with E.F. Hutton. Prior to joining CS First Boston, Mr. Tobin managed portfolios
for Integrated Resources and prior to that was vice president and industry
analyst with Bankers Trust Company. Ms. Thomas joined BEA in 1997, prior to
which time she was a vice president and high yield bond analyst in the Capital
Management Group of the Prudential Insurance Company of America where she
specialized in analyzing high yield bonds for insurance funds. Prior to 1994,
she was an equity analyst at Lieber and Company.

Long-Short Neutral Fund and Long-Short Equity Fund. The day-to-day
portfolio management of the Long-Short Neutral Fund and Long-Short Equity Fund
is the responsibility of the BEA Structured Equity Team. The Team consists of
the following

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investment professionals: William W. Priest, Jr. (Chief Executive Officer and
Executive Director of BEA), Eric Remole (Managing Director), Marc Bothwell (Vice
President) and Michael Welhoelter (Vice President). Mr. Priest has been engaged
as an investment professional with BEA for more than twenty-five years. Mr.
Remole joined BEA in 1997, prior to which time he was managing director for
fourteen years at Citicorp Investment Management, Inc. (now Chancellor/LGT Asset
Management, Inc.). Mr. Bothwell joined BEA in 1997, prior to which time he was a
vice president and portfolio manager at Chancellor/LGT Asset Management, Inc.,
where he was involved in risk management and research on earnings and earnings
surprise modeling. Prior to 1994, he was a programmer and trader at Keane Dealer
Services, Inc. Mr. Welhoelter joined BEA in 1997, prior to which time he was a
portfolio manager and vice president at Chancellor/LGT Asset Management, Inc.,
where he developed risk management and portfolio construction strategies.

Municipal Bond Fund and Global Income Fund. The day-to-day portfolio
management of the Municipal Bond and Global Income Funds is the responsibility
of the BEA Fixed Income Management Team. The Team consists of the following
investment professionals: Robert J. Moore (Executive Director), William P.
Sterling (Executive Director), Gregg Diliberto (Managing Director), Robert
Justich (Senior Vice President), Ira Edelblum (Senior Vice President), Jo Ann
Corkran (Senior Vice President) and Diane Damskey (Vice President). Messrs.
Moore, Diliberto and Edelblum have, on an individual basis, been engaged as
investment professionals with BEA for more than five years. Mr. Justich joined
BEA in 1995, prior to which he worked at Merrill Lynch and as a manager of
Financial Services with Arthur Young & Company. Ms. Corkran joined BEA in 1997,
prior to which time she was a director of mortgage-backed securities at Morgan
Stanley. Prior to 1994, she was a vice president at Greenwich Capital. Ms.
Damskey joined BEA in 1997, prior to which time she managed fixed income
portfolios at Global Emerging Markets Advisors. Prior to 1996, she was a senior
vice president and portfolio manager for the First National Bank of Chicago.

Select Equity Fund. The day-to-day portfolio management of the Select
Equity Fund is the responsibility of the BEA Select Economic Value Equity
Management Team. The Team consists of the following investment professionals:
William W. Priest, Jr. (Chief Executive Officer and Executive Director of BEA),
John Hurford (Executive Director), James Abate (Senior Vice President), Susan
Everly (Vice President) and James Mecca (Vice President). Messrs. Priest and
Hurford have, on an individual basis, been engaged as investment professionals
with BEA for more than twenty-five years. Ms. Everly joined BEA in 1998.
Previously, she was a securities analyst at Goldman Sachs for two years. Prior
to joining Goldman Sachs, she was a student at Harvard Business School for 2
years. Prior to 1994, she was an analyst at CS First Boston for 4 years. Mr.
Mecca joined BEA in 1998. Previously, he was a securities analyst at Goldman,
Sachs & Co. for 2 years. Prior to joining Goldman Sachs, he was at Bankers Trust
where he was an Emerging Markets Equity Trader for 3 years.

U.S. Equity Fund. The day-to day portfolio management of the U.S.
Equity Fund is the responsibility of the BEA Domestic Equity Management Team.
The Team consists of the following investment professionals: William W. Priest,
Jr. (Chief Executive Officer and Executive Director of BEA), John B. Hurford
(Executive Director), Eric N. Remole (Managing Director), James A. Abate (Senior
Vice President), Marc Bothwell (Vice President) and Michael Welhoelter (Vice
President).

U.S. Fixed Income Fund. The day-to-day portfolio management of the U.S.
Fixed Income Fund is the responsibility of the BEA Fixed Income Management Team.
The Team consists of the following investment professionals: Robert J. Moore
(Executive Director), William P. Sterling (Executive Director), Gregg Diliberto
(Managing Director), Robert Justich (Senior Vice President), Ira Edelblum
(Senior Vice President), Jo Ann Corkran (Senior Vice President) and Diane
Damskey (Vice President).

CO-ADMINISTRATORS. The Funds employ Counsellors Funds Service, Inc.
("Counsellors Service"), a wholly owned subsidiary of Warburg Pincus Asset
Management, Inc. ("Warburg"), as a co-administrator. As co-administrator,
Counsellors Service provides shareholder liaison services to the Funds including
responding to shareholder inquiries and providing information on shareholder
investments. Counsellors Service also performs a variety of other services,
including furnishing certain executive and administrative services, acting as
liaison between the Funds and their various service providers, furnishing
corporate secretarial services, which include preparing certain materials for
meetings of the Board, assisting in the preparation of proxy statements, annual
and semiannual reports and tax returns and monitoring and developing compliance
procedures for the Funds. No compensation is payable by the Funds to Counsellors
Service for co-administration services for the Institutional Shares.

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<PAGE> 59
Each Fund also employs PFPC Inc. ("PFPC"), an indirect, wholly owned
subsidiary of PNC Bank Corp., as a co-administrator. As a co-administrator, PFPC
calculates the Fund's net asset value, provides all accounting services for the
Fund and assists in related aspects of the Fund's operations. As compensation,
the Funds each pay PFPC a fee calculated at an annual rate of .125% of each
Fund's average daily net assets attributable to the Institutional Shares,
subject in each case to a minimum annual fee and exclusive of out-of-pocket
expenses. PFPC has its principal offices at 400 Bellevue Parkway, Wilmington,
Delaware 19809.

CUSTODIANS. Brown Brothers Harriman & Co. ("BBH") serves as custodian
of the assets of each Fund other than the Long-Short Neutral Fund and Long-Short
Equity Fund. Custodial Trust Company ("CTC") serves as custodian of the assets
of the Long-Short Neutral and Long-Short Equity Fund. BBH's principal business
address is 40 Water Street, Boston, Massachusetts 02109 and CTC's principal
business address is 101 Carnegie Center, Princeton, NJ 08540.

TRANSFER AGENT. State Street Bank and Trust Company ("State Street")
serves as shareholder servicing agent, transfer agent and dividend disbursing
agent for the Funds. It has delegated to Boston Financial Data Services, Inc.,
an affiliated company ("BFDS"), responsibility for most shareholder servicing
functions. State Street's principal business address is 225 Franklin Street,
Boston, Massachusetts 02110. BFDS's principal business address is 2 Heritage
Drive, North Quincy, Massachusetts 02171.

DISTRIBUTOR. Counsellors Securities serves as distributor of the shares
of the Funds. Counsellors Securities is a wholly owned subsidiary of Warburg and
is located at 466 Lexington Avenue, New York, New York 10017-3147. No
compensation is payable by any Fund to Counsellors Securities for its
distribution services for Institutional Shares.

BEA, CSAM or an affiliate of either may, at its own expense, provide
promotional incentives for qualified recipients who support the sale of shares
of a Fund, consisting of securities dealers who have sold Fund shares or others,
including banks and other financial institutions, under special arrangements.
Incentives may include opportunities to attend business meetings, conferences,
sales or training programs for recipients' employees or clients and other
programs or events and may also include opportunities to participate in
advertising or sales campaigns and/or shareholder services and programs
regarding one or more BEA Institutional Funds. BEA, CSAM or an affiliate of
either may pay for travel, meals and lodging in connection with these
promotional activities. In some instances, these incentives may be offered only
to certain institutions whose representatives provide services in connection
with the sale or expected sale of Fund shares.

HOW TO OPEN AN ACCOUNT

In order to invest in a Fund, an investor must first complete and sign
an account application. To obtain an application, an investor may telephone BEA
Institutional Funds at (800) 401-2230. An investor may also obtain an account
application by writing to:

BEA Institutional Funds
P.O. Box 8500
Boston, Massachusetts 02266-8500

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<PAGE> 60
OR
Overnight to:
BFDS
Attn: BEA
Institutional Funds
66 Brooks Drive
Braintree, Massachusetts 02184

Completed and signed account applications should be sent to the above.
References in this Prospectus to shareholders or investors also include
Institutions which may act as record holder of Institutional Shares.

CHANGES TO ACCOUNT. For information on how to make changes to an
account, including changes to account registration, address and/or privileges,
an investor should telephone BEA Institutional Funds at (800) 401-2230.
Institutions and their customers are responsible for maintaining current account
registration and addresses with a Fund. No interest will be paid on amounts
represented by uncashed distribution or redemption checks.

HOW TO PURCHASE SHARES

GENERAL. Shares representing interests in the Funds are offered
continuously for sale by the Funds' Distributor. Except as described below, the
Institutional Shares are currently available for purchase only by investors who
have entered into an investment management agreement with BEA or its affiliates.
Shares may be purchased initially by completing the application and forwarding
the application to the address set forth above. Initial investments in any Fund
must be at least $3,000,000, except Shares may be purchased by existing clients
of BEA or its affiliates or by officers of such existing clients (or those
holding similar positions) with an initial investment of at least $100,000; all
subsequent investments for such persons must be at least $1,000. Subsequent
initial investments in any other Fund must be at least $100,000. In addition, a
Fund may, in its sole discretion, waive the initial and subsequent investment
minimum requirements with respect to investors who are employees of Warburg,
BEA or their affiliates or persons with whom Warburg has entered into an
investment advisory agreement. Existing investors will be given 15 days' notice
by mail of any increase in minimum investment requirements.

After an investor has made his initial investment, additional shares
may be purchased at any time by mail or by wire in the manner outlined below.
Wire payments for initial and subsequent investments should be preceded by an
order placed with the Fund and should clearly indicate the investor's account
number and the name of the Fund in which shares are being purchased. The Fund
reserves the right to suspend the offering of shares for a period of time or to
reject any specific purchase order. In the interest of economy and convenience,
physical certificates representing shares in the Funds are not normally issued.

BY MAIL. If the investor desires to purchase Institutional Shares by
mail, a check or Federal Reserve Draft made payable to the Fund or BEA
Institutional Funds (in U.S. currency) should be sent along with the completed
account application to BEA Institutional Funds at an address set forth above.
Checks payable to the investor and endorsed to the order of the Fund or BEA
Institutional Funds will not be accepted as payment and will be returned to the
sender. If payment is received in proper form prior to the close of regular
trading on The New York Stock Exchange, Inc. (the "NYSE") (currently 4:00 p.m.,
Eastern time) on a day that the Fund calculates its net asset value (a "business
day"), the purchase will be made at the Fund's net asset value calculated at the
end of that day. If payment is received at or after the close of regular trading
on the NYSE, the purchase will be effected at the Fund's net asset value
determined for the next business day after payment has been received. Checks or
Federal Reserve Drafts that are not in proper form or that are not accompanied
or preceded by a complete account application will be returned to the sender.
Shares purchased by check or Federal Reserve Drafts are entitled to receive
dividends and distributions beginning on the day payment is received. Checks or
Federal Reserve Drafts in

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payment for shares of more than one BEA Institutional Fund should be made
payable to BEA Institutional Funds and should be accompanied by a breakdown of
amounts to be invested in each fund. If a check used for purchase does not
clear, the Fund will cancel the purchase and the investor may be liable for
losses or fees incurred. For a description of the manner of calculating the
Fund's net asset value, see "Net Asset Value" below.

BY WIRE. Investors may also purchase Institutional Shares in a Fund by
wiring funds from their banks. Federal funds may be wired using the following
wire address:

State Street Bank and Trust Company
ABA# 0110 000 28
Attn.: Mutual Funds/Custody Department
BEA Institutional Funds
DDA# 9905-227-6
F/F/C: [Account # and Registration]

If payment by wire is received prior to the close of regular trading on
the NYSE in proper form in accordance with instructions set forth above, the
shares will be priced according to the net asset value of the Fund on that day
and are entitled to dividends and distributions beginning on that day. However,
if a wire in proper form is received at or after the close of regular trading on
the NYSE, the payment will be held uninvested until the order is effected at the
close of business on the next business day. Payment for orders that are not
accepted will be returned to the prospective investor after prompt inquiry.

PURCHASES IN-KIND. Subject to the approval of the Adviser, investors
may acquire shares of any of the Funds in exchange for portfolio securities that
are eligible for investment by the relevant Fund or Funds. Such portfolio
securities must (a) meet the investment objectives and policies of the Funds,
(b) be acquired for investment and not for resale, (c) be liquid securities
which are not restricted as to transfer either by law or liquidity of market,
and (d) have a value which is readily ascertainable. Generally an investor will
recognize for federal income tax purposes any gain or loss realized on an
exchange of property for shares. Under certain circumstances, initial investors
may not recognize gain or loss on such an exchange. Investors, particularly
initial investors, are urged to consult their tax advisers in determining the
particular federal income tax consequences of their purchase in-kind. Such
exchanges will be subject to each Fund's minimum investment requirement.
Shareholders may be required to bear certain administrative or custodial costs
in effecting purchases in-kind.

GENERAL. Each Fund reserves the right to reject any specific purchase
order, including certain purchases made by exchange (see "How to Redeem and
Exchange Shares -- Exchange of Shares" below). Purchase orders may be refused
if, in BEA's judgment, a Fund would be unable to invest the money effectively in
accordance with its investment objective and policies, or would otherwise
potentially be adversely affected. A Fund may discontinue sales of its shares if
management believes that a substantial further increase in assets may adversely
affect that Fund's ability to achieve its investment objective. In such event,
however, it is anticipated that existing shareholders would be permitted to
continue to authorize investment in such Fund and to reinvest any dividends or
capital gains distributions.

HOW TO REDEEM AND EXCHANGE SHARES

REDEMPTION OF SHARES. An investor in a Fund may redeem (sell) his
shares on any day that the Fund's net asset value is calculated (see "Net Asset
Value" below).

Institutional Shares of the Funds may be redeemed by mail. If an
investor desires to redeem his shares, a written request for redemption should
be sent to BEA Institutional Funds at an address indicated above under "How to
Open an Account." An investor should be sure that the redemption request
identifies the Fund, the number of shares to be redeemed and the investor's
account number. Payment of redemption proceeds may be delayed in connection with
account changes. Each mail redemption request must be signed by the registered
owner(s) (or his legal representative(s)) exactly as the shares are registered.

After receipt of the redemption request by mail, the redemption
proceeds will, at the option of the investor, be paid by check and mailed to the
investor of record or be wired to the investor's bank as indicated in the
account application previously filled out by the investor. No Fund currently
imposes a service charge for effecting wire transfers but each Fund reserves the
right to

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<PAGE> 62
do so in the future. Payment of redemption proceeds may be delayed for up to 15
days pending a determination that the check has cleared.

If a redemption order is received by a Fund or its agent prior to the
close of regular trading on the NYSE, the redemption order will be effected at
the net asset value per share as determined on that day. If a redemption order
is received at or after the close of regular trading on the NYSE, the redemption
order will be effected at the net asset value as next determined. Except as
noted above, redemption proceeds will normally be mailed or wired to an investor
on the next business day following the date a redemption order is effected. If,
however, in the judgment of BEA, immediate payment would adversely affect a
Fund, each Fund reserves the right to pay the redemption proceeds within seven
days after the redemption order is effected. Furthermore, each Fund may suspend
the right of redemption or postpone the date of payment upon redemption (as well
as suspend or postpone the recordation of an exchange of shares) for such
periods as are permitted under the 1940 Act.

If, due to redemptions, the value of an investor's account drops to
less than $500, each Fund reserves the right to redeem the shares in that
account at net asset value. Prior to any redemption, the Fund will notify an
investor in writing that this account has a value of less than the minimum. The
investor will then have 30 days to make an additional investment before a
redemption will be processed by the Fund.

REDEMPTION IN-KIND. The Funds reserve the right, at their discretion,
to honor any request for redemption of a Fund's shares by making payment in
whole or in part in securities chosen by the Fund and valued in the same way as
they would be valued for purposes of computing a Fund's net asset value. If
payment is made in securities, a shareholder may incur transaction costs in
converting these securities into cash after they have redeemed their shares. The
Funds have elected, however, to be governed by Rule 18f-1 under the 1940 Act so
that a Fund is obligated to redeem its shares solely in cash up to the lesser of
$250,000 or 1% of its net asset value during any 90-day period for any one
shareholder of a Fund. Redeeming shareholders will be required to bear certain
administrative or custodial costs in effecting redemptions in-kind.

EXCHANGE OF SHARES. An investor may exchange Institutional Shares of a
Fund for Institutional Shares of another Fund at their respective net asset
values. Exchanges may be effected in the manner described under "Redemption of
Shares" above. If an exchange request is received by BEA Institutional Funds or
its agent prior to the close of regular trading on the NYSE, the exchange will
be made at each fund's net asset value determined at the end of that business
day. Exchanges will be effected without a sales charge but must satisfy the
minimum dollar amount necessary for new purchases. A Fund may refuse exchange
purchases at any time without prior notice.

The exchange privilege is available to shareholders residing in any
state in which the Institutional Shares being acquired may legally be sold. When
an investor effects an exchange of shares, the exchange is treated for federal
income tax purposes as a redemption. Therefore, the investor may realize a
taxable gain or loss in connection with the exchange. For further information
regarding the exchange privilege, an investor should contact BEA Institutional
Funds at (800) 401-2230.

Each Fund reserves the right to refuse exchange purchases by any person
or group if, in the Adviser's judgment, the Fund would be unable to invest the
money effectively in accordance with its investment objective and policies, or
would otherwise potentially be adversely affected. Examples of when an exchange
purchase could be refused are when a Fund receives or anticipates receiving

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large exchange orders at or about the same time and/or when a pattern of
exchanges within a short period of time (often associated with a "market timing"
strategy) is discerned. Each Fund reserves the right to terminate or modify the
exchange privilege at any time upon 60 days' notice to shareholders.

DIVIDENDS, DISTRIBUTIONS AND TAXES

DIVIDENDS AND DISTRIBUTIONS. Each Fund calculates its dividends from
net investment income. Net investment income includes interest accrued and
dividends earned on the Fund's portfolio securities for the applicable period
less applicable expenses. Each of the Emerging Markets Fund, International
Growth Fund, Long-Short Neutral Fund, Long-Short Equity Fund, Select Equity Fund
and U.S. Equity Fund will distribute substantially all of its net realized
capital gains and all net investment income, if any, to its shareholders
annually. Each of the High Yield Fund, Global Income Fund and U.S. Fixed income
Fund will distribute substantially all of its net realized capital gains, if
any, to its shareholders annually and will distribute net investment income at
least quarterly. The Municipal Bond Fund will distribute substantially all of
its net realized capital gains, if any, annually and all net investment income
monthly. Net investment income earned on weekends and when the NYSE is not open
will be computed as of the next business day. Unless an investor instructs a
Fund to pay dividends or distributions in cash, dividends and distributions will
automatically be reinvested in additional Institutional Shares of the relevant
Fund at net asset value. The election to receive dividends in cash may be made
on the account application or, subsequently, by writing to BEA Institutional
Funds at an address set forth under "How to Open an Account" or by calling BEA
Institutional Funds at (800) 401-2230.

Special Distribution Matters Relating to the Municipal Bond Fund. If,
for any full fiscal year, the Municipal Bond Fund's total distributions exceed
net investment income and net realized capital gains, the excess distributions
may be treated as a taxable dividend or a tax-free return of capital (up to the
amount of the shareholder's tax basis in his shares). The amount treated as a
tax-free return of capital will reduce a shareholder's adjusted basis in his
shares. Pursuant to the requirements of the 1940 Act and other applicable laws,
a notice will accompany any distribution paid from sources other than net
investment income. In the event the Fund distributes amounts in excess of its
net investment income and net realized capital gains, such distributions may
have the effect of decreasing the Fund's total assets, which may increase the
Fund's expense ratio.

A Fund may be required to withhold for U.S. federal income taxes 31% of
all distributions payable to shareholders who fail to provide the Fund with
their correct taxpayer identification number or to make required certifications,
or who have been notified by the U.S. Internal Revenue Service that they are
subject to backup withholding.

TAXES. Each Fund intends to qualify each year as a "regulated
investment company" within the meaning of the Code. Each Fund, if it qualifies
as a regulated investment company, will be subject to a 4% non-deductible excise
tax measured with respect to certain undistributed amounts of ordinary income
and capital gain. Each Fund expects to pay such additional dividends and to make
such additional distributions as are necessary to avoid the application of this
tax.

Investments in zero coupon securities may create special tax
consequences. Zero coupon securities do not make interest payments, although a
portion of the difference between a zero coupon security's maturity value and
its purchase price is imputed as income to the Funds each year even though the
Funds receive no cash distribution until maturity. Under the U.S. federal tax
laws applicable to mutual funds, the Funds will not be subject to tax on this
income if they pay dividends to their shareholders substantially equal to all
the income received from, or imputed with respect to, their investments during
the year, including their zero coupon securities. These dividends ordinarily
will constitute taxable income to the shareholders of the Funds.

Dividends paid from net investment income and distributions derived
from net realized short-term capital gains are taxable to investors as ordinary
income whether received in cash or reinvested in additional Fund shares.
Distributions derived from net realized long-term capital gains will be taxable
to investors as long-term capital gains, regardless of how long investors have
held Fund shares or whether such distributions are received in cash or
reinvested in Fund shares. As a general rule, an investor's gain or loss on a
sale or redemption of Fund shares will be a long-term capital gain or loss if
the investor has held the shares for more than one year and will be a short-term
capital gain or loss if the investor has held the shares for one year or less.
However, any loss realized upon the sale or redemption of shares within six
months from the date of their purchase will be treated as a

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<PAGE> 64
long-term capital loss to the extent of any amounts treated as distributions of
long-term capital gain during such six-month period with respect to such shares.

Investors may be proportionately liable for taxes on income and gains
of the Funds, but investors not subject to tax on their income will not be
required to pay tax on amounts distributed to them. A Fund's investment
activities, including short sales of securities, will not result in unrelated
business taxable income to a tax-exempt investor. A Fund's dividends may qualify
for the dividends received deduction for corporations to the extent they are
derived from dividends attributable to certain types of stock issued by U.S.
domestic corporations.

Dividends and interest received by the Funds may be subject to
withholding and other taxes imposed by foreign countries. However, tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. If a Fund qualifies as a regulated investment company, if
certain asset and distribution requirements are satisfied and if more than 50%
of the Fund's total assets at the close of its fiscal year consists of stock or
securities of foreign corporations, the Fund may elect for U.S. income tax
purposes to treat foreign income taxes paid by it as paid by its shareholders. A
Fund may qualify for and make this election in some, but not necessarily all, of
its taxable years. If a Fund were to make an election, shareholders of the Fund
would be required to take into account an amount equal to their pro rata
portions of such foreign taxes in computing their taxable income and then treat
an amount equal to those foreign taxes as a U.S. federal income tax deduction or
as a foreign tax credit against their U.S. federal income taxes. Shortly after
any year for which it makes such an election, each Fund will report to its
shareholders the amount per share of such foreign income tax that must be
included in each shareholder's gross income and the amount which will be
available for the deduction or credit. No deduction for foreign taxes may be
claimed by a shareholder who does not itemize deductions. Certain limitations
will be imposed on the extent to which the credit (but not the deduction) for
foreign taxes may be claimed.

Special Tax Matters Relating to the Municipal Bond Fund. As a regulated
investment company, the Municipal Bond Fund will designate and pay
exempt-interest dividends derived from interest earned on qualifying Municipal
Obligations. Such exempt-interest dividends may be excluded by investors of the
Fund from their gross income for federal income tax purposes although (i) all or
a portion of such exempt-interest dividends will be a specific tax-preference
item for purposes of the federal individual and corporate alternative minimum
taxes to the extent they are derived from certain types of private activity
bonds issued after August 7, 1996 and (ii) all exempt-interest dividends will be
a component of the "current earnings" adjustment item for purposes of the
federal corporate alternative minimum tax. Moreover, dividends paid by the Fund
will be subject to a branch profits tax of up to 30% when received by certain
foreign corporate investors.

GENERAL. Statements as to the tax status of each investor's dividends
and distributions are mailed annually. Each investor will also receive, if
applicable, various written notices after the close of a Fund's prior taxable
year with respect to certain dividends and distributions which were received
from the Fund during the Fund's prior taxable year. Investors should consult
their own tax advisers with specific reference to their own tax situations,
including their state and local tax liabilities.

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NET ASSET VALUE

The net asset value per Institutional Share of each Fund is computed by
adding the Institutional Shares' pro rata share of the value of the Fund's
assets, deducting the Institutional Shares' pro rata share of the Fund's
liabilities and the liabilities specifically allocated to Institutional Shares
and then dividing the result by the total number of outstanding Institutional
Shares.

Securities listed on a U.S. securities exchange (including securities
traded through the Nasdaq National Market System) or foreign securities exchange
or traded in an over-the-counter market will be valued at the most recent sale
price when the valuation is made. Options and futures contracts will be valued
similarly. Debt obligations that mature in 60 days or less from the valuation
date are valued on the basis of amortized cost, unless the Board determines that
using this valuation method would not reflect the investments' value.
Securities, options and futures contracts for which market quotations are not
readily available and other assets will be valued at their fair value as
determined in good faith pursuant to consistently applied procedures established
by the Board. Further information regarding valuation policies is contained in
the Statement of Additional Information.

PERFORMANCE

The Funds quote the performance of Institutional Shares separately from
Common Shares and Advisor Shares. The net asset value of Institutional Shares is
listed in The Wall Street Journal each business day under the heading "BEA
Institutional Funds." From time to time, each Fund may advertise yield and
average annual total return of its Institutional Shares over various periods of
time. The yield refers to net investment income generated by the Institutional
Shares over a specified thirty-day period, which is then annualized. That is,
the amount of net investment income generated by the Institutional Shares during
that thirty-day period is assumed to be generated over a 12-month period and is
shown as a percentage of the investment. In addition, advertisements concerning
the Municipal Bond Fund may describe a tax equivalent yield. The tax equivalent
yield demonstrates the yield on a taxable investment necessary to produce an
after-tax yield equal to the Institutional Shares' tax-free yield. It is
calculated by increasing the yield shown for the Institutional Shares to the
extent necessary to reflect the payment of specified tax rates. Thus, the tax
equivalent yield will always exceed a Fund's Institutional Shares' yield. Total
return figures show the average percentage change in value of an investment in
the Institutional Shares from the beginning of the measuring period to the end
of the measuring period. The figures reflect changes in the price of the
Institutional Shares assuming that any income dividends and/or capital gain
distributions made by a Fund during the period were reinvested in Institutional
Shares of the Fund. Total return will be shown for recent one-, five- and
ten-year periods, and may be shown for other periods as well (such as from
commencement of the Fund's operations or on a year-by-year, quarterly or current
year-to-date basis).

When considering average total return figures for periods longer than
one year, it is important to note that the annual total return for one year in
the period might have been greater or less than the average for the entire
period. When considering total return figures for periods shorter than one year,
investors should bear in mind that each Fund seeks long-term appreciation and
that such return may not be representative of any Fund's return over a longer
market cycle. Each Fund may also advertise aggregate total return figures of its
Institutional Shares for various periods, representing the cumulative change in
value of an investment in the Institutional Shares for the specific period
(again reflecting changes in share prices and assuming reinvestment of dividends
and distributions). Aggregate and average total returns may be shown by means of
schedules, charts or graphs and may indicate various components of total return
(i.e., change in value of initial investment, income dividends and capital gain
distributions).

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<PAGE> 66
determine the yield and total return. Current performance figures may be
obtained by calling BEA Institutional Funds at (800) 401-2230.

The Funds may also from time to time include in advertisings an
aggregate total return figure or a total return figure that is not calculated
according to the standardized formula in order to compare more accurately a
Fund's performance with other measures of investment return. For example, a
Fund's total return or expense ratio may be compared with data published by
Lipper Analytical Services, Inc., CDA/Weisenberger Investment Technologies,
Inc., Mutual Fund Forecaster or Morningstar, Inc., or with the performance of
the Standard & Poor's 500 Stock Index, Standard & Poor's MidCap 400 Index,
Moody's Bond Survey Bond Index, Wilshire 5000 Index, Lehman Brothers Bond
Indexes, Morgan Stanley Composite Index EAFE, Morgan Stanley Composite
Index-Free Emerging Markets, JP Morgan Global Government Bond Index (Unhedged),
First Boston High Yield Index, Consumer Price Index, Bond Buyer's 20-Bond Index,
Dow Jones Industrial Average, Salomon Smith Barney U.S. 1-Month Treasury Bill
Index(TM), national publications such as Money, Forbes, Barron's, The Wall
Street Journal or the New York Times or publications of a local or regional
nature, and other industry publications. For these purposes, the performance of
a Fund, as well as the performance published by such services or experienced by
such indices, will usually not reflect redemption fees, the inclusion of which
would reduce performance results. If a Fund advertises non-standard
computations, however, the Fund will disclose such fees, and will also disclose
that the performance data do not reflect such fees and that inclusion of such
fees would reduce the performance quoted.

In reports or other communications to investors or in advertising, each
Fund may also describe the general biography or work experience of the portfolio
managers of the Fund and may include quotations attributable to the portfolio
managers describing approaches taken in managing the Fund's investments,
research methodology underlying stock selection or the Fund's investment
objective. In addition, a Fund and its portfolio managers may render periodic
updates of Fund activity, which may include a discussion of significant
portfolio holdings; analysis of holdings by industry, country, credit quality
and other characteristics; and comparison and analysis of the Fund with respect
to relevant market and industry benchmarks. Each Fund may also discuss measures
of risk, the continuum of risk and return relating to different investments and
the potential impact of foreign stocks on a portfolio otherwise composed of
domestic securities.

GENERAL INFORMATION

ORGANIZATION. On July 31, 1998, the Emerging Markets Fund,
International Growth Fund, High Yield Fund, Municipal Bond Fund, Global Income
Fund, Long-Short Neutral, Long-Short Equity, the Select Equity Fund, U.S. Equity
Fund and U.S. Fixed Income Fund were each incorporated under the laws of the
State of Maryland under the name "Warburg, Pincus Emerging Markets II Fund,
Inc.," "Warburg, Pincus International Growth Fund, Inc.," "Warburg, Pincus High
Yield Fund, Inc.," "Warburg, Pincus Municipal Bond Fund, Inc.," "Warburg, Pincus
Strategic Global Fixed Income Fund, Inc.," "Warburg, Pincus Long-Short Market
Neutral Fund, Inc.," "Warburg, Pincus Long-Short Equity Fund, Inc.," "Warburg,
Pincus Select Economic Value Equity Fund, Inc.," "Warburg, Pincus U.S. Core
Equity Fund, Inc." and "Warburg, Pincus U.S. Core Fixed Income Fund, Inc.,"
respectively. Each Warburg Pincus Fund is an open-end mutual fund. On August __,
1998, the Funds and The RBB Fund, Inc. entered into an Agreement and Plan of
Reorganization whereby the Funds agreed to acquire all of the assets and
liabilities of the corresponding BEA Funds (the "Reorganization"). The
Reorganization is expected to be completed on or about October 2, 1998.

Each Fund's charter authorizes its Board to issue three billion full
and fractional shares of capital stock, $.001 par value per share, of which one
billion shares are designated Common Shares, one billion shares are designated
Institutional Shares and one billion shares are designated Advisor Shares. Under
each Fund's charter documents, the Board has the power to classify or reclassify
any unissued shares of the Fund into one or more additional classes by setting
or changing in any one or more respects their relative rights, voting powers,
restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption. A Board may similarly classify or reclassify any class
of its shares into one or more series and, without shareholder approval, may
increase the number of authorized shares of the Fund.

MULTI-CLASS STRUCTURE. Each Fund currently offers another class of
shares, the Common Shares, pursuant to a separate prospectus. Individual
investors may purchase Common Shares and, if and when offered, individual
investors may only purchase Advisor Shares, through institutional shareholders
of record, broker-dealers, financial institutions, depository institutions,
retirement plans and financial intermediaries. Shares of each class represent
equal pro rata interests in the respective Fund and

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<PAGE> 67
accrue dividends and calculate net asset value and performance quotations in the
same manner. Because of the higher fees paid by Common Shares and Advisor
Shares, the total return on Common Shares can be expected to be lower than the
total return on Institutional Shares and the total return of Advisor Shares can
be expected to be lower than the total return on Common Shares and Institutional
Shares. Investors may obtain information concerning the Common Shares and, if
and when offered, the Advisor Shares from their investment professional or by
calling Counsellors Securities at (800) 369-2728. Unless the context clearly
suggests otherwise, references to a Fund in this Prospectus are to the Fund as
a whole and not to any particular class of the Fund's shares.

VOTING RIGHTS. Investors in a Fund are entitled to one vote for each
full share held and fractional votes for fractional shares held. Shareholders of
a Fund will vote in the aggregate except where otherwise required by law and
except that each class will vote separately on certain matters pertaining to its
distribution and shareholder servicing arrangements. There will normally be no
meetings of investors for the purpose of electing members of the Board unless
and until such time as less than a majority of the members holding office have
been elected by investors. Any Director of a Fund may be removed from office
upon the vote of shareholders holding at least a majority of the relevant Fund's
outstanding shares, at a meeting called for that purpose. A meeting will be
called for the purpose of voting on the removal of a Board member at the written
request of holders of 10% of the outstanding shares of a Fund.

SHAREHOLDER COMMUNICATIONS. Each investor will receive a quarterly
statement of his account, as well as a statement of his account after any
transaction that affects his share balance or share registration (other than the
reinvestment of dividends or distributions or investment made through the
Automatic Monthly Investment Plan). Each Fund will also send to its investors a
semiannual report and an audited annual report, each of which includes a list of
the investment securities held by the Fund and a statement of the performance of
the Fund. Periodic listings of the investment securities held by the Fund, as
well as certain statistical characteristics of the Fund, may be obtained by
calling BEA Institutional Funds at (800) 401-2230 or on the BEA Institutional
Funds Web site at www.beafunds.com.

The Institutional Share prospectuses of the Funds are combined in this
Prospectus. Each Fund offers only its own shares, yet it is possible that a Fund
might become liable for a misstatement, inaccuracy or omission in this
Prospectus with regard to another Fund.

-----------------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE FUNDS'
STATEMENT OF ADDITIONAL INFORMATION OR THE FUNDS' OFFICIAL SALES LITERATURE IN
CONNECTION WITH THE OFFERING OF SHARES OF THE FUNDS, AND IF GIVEN OR MADE, SUCH
OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY EACH FUND. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF THE
INSTITUTIONAL SHARES OF THE FUNDS IN ANY STATE IN WHICH, OR TO ANY PERSON TO
WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE.

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TABLE OF CONTENTS

The Funds' Expenses............................................................3
Financial Highlights...........................................................4
Investment Objectives and Policies............................................11
Portfolio Investments.........................................................16
Risk Factors and Special Considerations.......................................17
Portfolio Transactions and Turnover Rate......................................20
Certain Investment Strategies.................................................21
Investment Guidelines.........................................................24
Management of the Funds.......................................................25
How to Open an Account........................................................28
How to Purchase Shares........................................................29
How to Redeem and Exchange Shares.............................................30
Dividends, Distributions and Taxes............................................32
Net Asset Value...............................................................34
Performance...................................................................34
General Information...........................................................35

[BEA Institutional Funds Logo]
P.O. Box 8500, Boston, MA 02266-8500
800-401-2230
www.beafunds.com

WP___-1-0998
<PAGE> 69
SUBJECT TO COMPLETION, DATED AUGUST 5, 1998

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
any offers to buy be accepted prior to the time the registration statement
becomes effective. This Statement of Additional Information does not
constitute a prospectus.

STATEMENT OF ADDITIONAL INFORMATION

September [INSERT], 1998

for the

Common and Institutional Shares of the

WARBURG, PINCUS LONG-SHORT MARKET NEUTRAL FUND, INC.
WARBURG, PINCUS LONG-SHORT EQUITY FUND, INC.

P.O. Box 9030, Boston, Massachusetts 02205-9030

For information, call (800) WARBURG

This combined Statement of Additional Information is meant to be read
in conjunction with the Prospectuses for the Common Shares and Institutional
Shares of the Warburg Pincus Long-Short Market Neutral Fund and Warburg Pincus
Long-Short Equity Fund (collectively, the "Funds"), dated September __, 1998, as
amended or supplemented from time to time, and is incorporated by reference in
its entirety into those Prospectuses. Because this Statement of Additional
Information is not itself a prospectus, no investment in shares of a Fund
should be made solely upon the information contained herein. Copies of the
Funds' Prospectuses and information regarding each Fund's current performance
may be obtained by calling the Funds at (800) 927-2874. Information regarding
the status of shareholder accounts may also be obtained by calling the Funds at
the same number or by writing to the Fund, P.O. Box 9030, Boston, Massachusetts
02205-9030.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS STATEMENT OF ADDITIONAL INFORMATION IN
CONNECTION WITH THE OFFERING MADE BY THE COMMON AND INSTITUTIONAL SHARE
PROSPECTUSES AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE FUNDS OR THEIR DISTRIBUTOR. THE
STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONSTITUTE AN OFFERING BY THE FUNDS
OR BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT
LAWFULLY BE MADE.
<PAGE> 70
CONTENTS

Page

General.................................................................. 1
Common Investment Policies -- All Funds.................................. 1
Supplemental Investment Policies -- Long-Short Equity Fund............... 8
Investment Limitations................................................... 10
Risk Factors............................................................. 12
Directors and Officers................................................... 16
Directors' Estimated Compensation Through August 31, 1999................ 20
Investment Advisory and Servicing Arrangements........................... 20
Portfolio Transactions................................................... 26
Purchase and Redemption Information...................................... 28
Valuation of Shares...................................................... 29
Performance Information.................................................. 30
Taxes.................................................................... 32
Additional Information Concerning the Funds' Shares...................... 40
Miscellaneous............................................................ 40
Financial Statements..................................................... 40

Appendix A............................................................... A-1
Appendix B............................................................... B-1
<PAGE> 71
GENERAL

The investment objective of the Warburg Pincus Long-Short Market
Neutral Fund ("Long-Short Neutral Fund") is long-term capital appreciation. The
investment objective of the Warburg Pincus Long-Short Equity Fund ("Long-Short
Equity Fund") is to achieve a total return greater than that of the Standard &
Poor's 500 Composite Stock Price Index (the "S&P 500 Index").

Each of the Funds is an open-end management investment company.
Each Fund was organized as a Maryland corporation on [INSERT], 1988.

Unless otherwise indicated, the following investment policies may
be changed by the Funds' Board of Directors without an affirmative vote of
shareholders. Capitalized terms used herein and not otherwise defined have the
same meanings as are given to such terms in the combined Common and
Institutional Share Prospectuses.

COMMON INVESTMENT POLICIES -- ALL FUNDS

The following supplements the information contained in the
combined Common and Institutional Share Prospectuses concerning the investment
objectives and policies of, and techniques used by the Funds.

NON-DIVERSIFIED STATUS. Each Fund is classified as non-diversified
within the meaning of the Investment Company Act of 1940 (the "1940 Act"), which
means that each Fund is not limited by such Act in the proportion of its assets
that it may invest in securities of a single issuer. Each Fund's investments
will be limited, however, in order to qualify as a "regulated investment
company" for purposes of the Internal Revenue Code of 1986, as amended (the
"Code"). See "Taxes." To qualify, each Fund will comply with certain
requirements, including limiting its investments so that at the close of each
quarter of the taxable year (i) not more than 25% of the market value of each
Fund's total assets will be invested in the securities of a single issuer, and
(ii) with respect to 50% of the market value of its total assets, not more than
5% of the market value of each Fund's total assets will be invested in the
securities of a single issuer and each Fund will not own more than 10% of the
outstanding voting securities of a single issuer. To the extent that each Fund
assumes large positions in the securities of a small number of issuers, each
Fund's return may fluctuate to a greater extent than that of a diversified
company as a result of changes in the financial condition or in the market's
assessment of the issuers.

TEMPORARY INVESTMENTS. The short-term and medium-term debt
securities in which a Fund may invest for temporary defensive purposes consist
of: (a) obligations of the United States or foreign governments, their
respective agencies or instrumentalities; (b) bank deposits and bank obligations
(including certificates of deposit, time deposits and bankers'
<PAGE> 72
acceptances) of U.S. or foreign banks denominated in any currency; (c) floating
rate securities and other instruments denominated in any currency issued by
international development agencies; (d) finance company and corporate commercial
paper and other short-term corporate debt obligations of U.S. and foreign
corporations; and (e) repurchase agreements with banks and broker-dealers with
respect to such securities.

REPURCHASE AGREEMENTS. Each Fund may agree to purchase securities
from a bank or recognized securities dealer and simultaneously commit to resell
the securities to the bank or dealer at an agreed-upon date and price reflecting
a market rate of interest unrelated to the coupon rate or maturity of the
purchased securities ("repurchase agreements"). Such Fund would maintain custody
of the underlying securities prior to their repurchase; thus, the obligation of
the bank or dealer to pay the repurchase price on the date agreed to would be,
in effect, secured by such securities. If the value of such securities were less
than the repurchase price, plus interest, the other party to the agreement would
be required to provide additional collateral so that at all times the collateral
is at least equal to the repurchase price plus accrued interest. Default by or
bankruptcy of a seller would expose a Fund to possible loss because of averse
market action, expenses and/or delays in the connection with the disposition of
the underlying obligations. The financial institutions with which a Fund may
enter into repurchase agreements will be banks and non-bank dealers of U.S.
Government securities that are listed on the Federal Reserve Bank of New York's
list of reporting dealers, if such banks and non-bank dealers are deemed
creditworthy by the Fund's adviser. A Fund's adviser will continue to monitor
creditworthiness of the seller under a repurchase agreement, and will require
the seller to maintain during the term of the agreement the value of the
securities subject to the agreement to equal at least the repurchase price
(including accrued interest). In addition, the Fund's adviser will require that
the value of this collateral, after transaction costs (including loss of
interest) reasonably expected to be incurred on a default, be equal to or
greater than the repurchase price (including accrued premium) provided in the
repurchase agreement or the daily amortization of the difference between the
purchase price and the repurchase price specified in the repurchase agreement.
The Fund's adviser will mark-to-market daily the value of the securities. There
are no percentage limits on a Fund's ability to enter into repurchase
agreements. Repurchase agreements are considered to be loans by the Fund under
the 1940 Act.

REVERSE REPURCHASE AGREEMENTS. Each Fund may enter into reverse
repurchase agreements with respect to portfolio securities for temporary
purposes (such as to obtain cash to meet redemption requests when the
liquidation of portfolio securities is deemed disadvantageous or inconvenient by
the Adviser). Reverse repurchase agreements involve the sale of securities held
by a Fund pursuant to such Fund's agreement to repurchase them at

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a mutually agreed upon date, price and rate of interest. At the time a Fund
enters into a reverse repurchase agreement, it will establish and maintain a
segregated account with an approved custodian containing cash or liquid
securities having a value not less than the repurchase price (including accrued
interest). The assets contained in the segregated account will be
marked-to-market daily and additional assets will be placed in such account on
any day in which the assets fall below the repurchase price (plus accrued
interest). A Fund's liquidity and ability to manage its assets might be affected
when it sets aside cash or portfolio securities to cover such commitments.
Reverse repurchase agreements involve the risk that the market value of the
securities retained in lieu of sale may decline below the price of the
securities a Fund has sold but is obligated to repurchase. In the event the
buyer of securities under a reverse repurchase agreement files for bankruptcy or
becomes insolvent, such buyer or its trustee or receiver may receive an
extension of time to determine whether to enforce a Fund's obligation to
repurchase the securities, and a Fund's use of the proceeds of the reverse
repurchase agreement may effectively be restricted pending such decision.
Reverse repurchase agreements are considered to be borrowings under the 1940
Act. The Funds do not presently intend to invest more than 5% of net assets in
reverse repurchase agreements.

ILLIQUID SECURITIES. Each Fund does not presently intend to invest
more than 15% of its net assets in illiquid securities (including repurchase
agreements which have a maturity of longer than seven days), including
securities that are illiquid by virtue of the absence of a readily available
market or legal or contractual restrictions on resale. The term "illiquid
securities" for this purpose means securities that cannot be disposed of within
seven days in the ordinary course of business at approximately the amount at
which the Fund has valued the securities. Such securities may include, among
other things, equity swaps, loan participations and assignments, options
purchased in the over-the-counter markets, repurchase agreements maturing in
more than seven days, structured notes and restricted securities other than Rule
144A securities that the Adviser has determined are liquid pursuant to
guidelines established by the Funds' Board of Directors. Because of the absence
of any liquid trading market currently for these investments, a Fund may take
longer to liquidate these positions than would be the case for publicly traded
securities. Although these securities may be resold in privately negotiated
transactions, the prices realized on such sales could be less than those
originally paid by a Fund. Securities that have legal or contractual
restrictions on resale but have a readily available market are not considered
illiquid for purposes of this limitation. With respect to each Fund, repurchase
agreements subject to demand are deemed to have a maturity equal to the notice
period.

Mutual funds do not typically hold a significant amount of
restricted or other illiquid securities because of the

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potential for delays on resale and uncertainty in valuation. Limitations on
resale may have an adverse effect on the marketability of portfolio securities
and a mutual fund might be unable to dispose of restricted or other illiquid
securities promptly or at reasonable prices and might thereby experience
difficulty satisfying redemptions within seven days. A mutual fund might also
have to register such restricted securities in order to dispose of them,
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.

If otherwise consistent with their investment objectives and
policies, the Funds may purchase securities that are not registered under the
Securities Act but which may be sold to "qualified institutional buyers" in
accordance with Rule 144A under the Securities Act. These securities will not be
considered illiquid so long as it is determined by the Adviser, under guidelines
approved by the Board of Directors, that an adequate trading market exists for
the securities. This investment practice could have the effect of increasing the
level of illiquidity in a Fund during any period that qualified institutional
buyers become uninterested in purchasing restricted securities.

The Adviser will monitor the liquidity of restricted securities in
a Fund under the supervision of the Board of Directors. In reaching liquidity
decisions, the Adviser may consider, among others, the following factors: (1)
the unregistered nature of the security; (2) the frequency of trades and quotes
for the security; (3) the number of dealers wishing to purchase or sell the
security and the number of other potential purchasers; (4) dealer undertakings
to make a market in the security and (5) the nature of the security and the
nature of the marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers and the mechanics of the transfer).
Where there are no readily available market quotations, the security shall be
valued at fair value as determined in good faith by the Board of Directors of
the Funds.

UNSEASONED ISSUERS. Each Fund will not invest in securities of
unseasoned issuers, including equity securities of unseasoned issuers which are
not readily marketable, if the aggregate investment in such securities would
exceed 5% of such Fund's net assets. The term "unseasoned" refers to issuers
which, together with their predecessors, have been in operation for less than
three years.

LENDING OF PORTFOLIO SECURITIES. To increase income on its
investments, a Fund may lend its portfolio securities with an aggregate value of
up to 33 1/3% of its total assets (including the loan collateral) to
broker/dealers and other institutional investors. Each Fund may lend its
portfolio securities on a short or long term basis to broker-dealers or
institutional investors that the Adviser deems qualified, but only when the

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borrower maintains, with a Fund's custodian, collateral either in cash or money
market instruments, in an amount at least equal to the market value of the
securities loaned, plus accrued interest and dividends, determined on a daily
basis and adjusted accordingly. Collateral for such loans may include cash,
securities of the U.S. Government or its agencies or instrumentalities or an
irrevocable letter of credit issued by a bank which is deemed creditworthy by
the Adviser. In determining whether to lend securities to a particular
broker-dealer or institutional investor, the Adviser will consider, and during
the period of the loan will monitor, all relevant facts and circumstances,
including the creditworthiness of the borrower. Such loans would involve risks
of delay in receiving additional collateral in the event the value of the
collateral decreased below the value of the securities loaned or of delay in
recovering the securities loaned or even the loss of rights in the collateral
should the borrower of the securities fail financially. Default by or bankruptcy
of a borrower would expose the Funds to possible loss because of adverse market
action, expenses and/or delays in connection with the disposition of the
underlying securities.

BORROWING. Each Fund may borrow up to 33 1/3 percent of its total
assets. The Adviser intends to borrow only for temporary or emergency purposes,
including to meet portfolio redemption requests so as to permit the orderly
disposition of portfolio securities, or to facilitate settlement transactions on
portfolio securities. Additional investments will not be made when borrowings
exceed 5% of a Fund's total assets. Although the principal of such borrowings
will be fixed, a Fund's assets may change in value during the time the borrowing
is outstanding. Each Fund expects that some of its borrowings may be made on a
secured basis. In such situations, either the custodian will segregate the
pledged assets for the benefit of the lender or arrangements will be made with a
suitable subcustodian, which may include the lender.

U.S. GOVERNMENT SECURITIES. The U.S. Government securities in
which a Fund may invest include direct obligations of the U.S. Treasury (such as
Treasury bills, notes and bonds) and obligations issued by U.S. Government
agencies and instrumentalities, including securities that are supported by the
full faith and credit of the United States and securities that are supported
primarily or solely by the creditworthiness of the issuer (such as securities of
the Federal Home Loan Banks, the Student Loan Marketing Association and the
Tennessee Valley Authority).

OPTIONS AND FUTURES CONTRACTS. The Funds may write covered call
options, buy put options, buy call options and write put options, without
limitation except as noted in this paragraph. Such options may relate to
particular securities or to various indexes and may or may not be listed on a
national securities exchange and issued by the Options Clearing

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Corporation. These Funds may also invest in futures contracts and options on
futures contracts (index futures contracts or interest rate futures contracts,
as applicable) for hedging purposes (including currency hedging) or for other
purposes so long as aggregate initial margins and premiums required for
non-hedging positions do not exceed 5% of its net assets, after taking into
account any unrealized profits and losses on any such contracts it has entered
into. See Appendix "B" for a description of futures contracts and options on
futures contracts and the risks thereof.

Options trading is a highly specialized activity which entails
greater than ordinary investment risks. Options on particular securities may be
more volatile than the underlying securities, and therefore, on a percentage
basis, an investment in the underlying securities themselves. A Fund will write
call options only if they are "covered." In the case of a call option on a
security, the option is "covered" if a Fund owns the security underlying the
call or has an absolute and immediate right to acquire that security without
additional cash consideration (or, if additional cash consideration is required,
liquid assets in such amount as are held in a segregated account by its
custodian) upon conversion or exchange of other securities held by it. For a
call option on an index, the option is covered if a Fund maintains with its
custodian liquid assets equal to the contract value. A call option is also
covered if a Fund holds a call on the same security or index as the call written
where the exercise price of the call held is (i) equal to or less than the
exercise price of the call written, or (ii) greater than the exercise price of
the call written provided the difference is maintained by the Fund in liquid
assets in a segregated account with its custodian.

When a Fund purchases a put option, the premium paid by it is
recorded as an asset of the Fund. When a Fund writes an option, an amount equal
to the net premium (the premium less the commission) received by the Fund is
included in the liability section of the Fund's statement of assets and
liabilities as a deferred credit. The amount of this asset or deferred credit
will be subsequently marked-to-market to reflect the current value of the option
purchased or written. The current value of the traded option is the last sale
price or, in the absence of a sale, the mean between the last bid and asked
prices. If an option purchased by a Fund expires unexercised, the Fund realizes
a loss equal to the premium paid. If a Fund enters into a closing sale
transaction on an option purchased by it, the Fund will realize a gain if the
premium received by the Fund on the closing transaction is more than the premium
paid to purchase the option, or a loss if it is less. If an option written by a
Fund expires on the stipulated expiration date or if the Fund enters into a
closing purchase transaction, it will realize a gain (or loss if the cost of a
closing purchase transaction exceeds the net premium received when the option is
sold) and the deferred credit related to such option will be eliminated. If an
option

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written by a Fund is exercised, the proceeds of the sale will be increased by
the net premium originally received and the Fund will realize a gain or loss.

There are several risks associated with transactions in options on
securities and indexes. For example, there are significant differences between
the securities and options markets that could result in an imperfect correlation
between these markets, causing a given transaction not to achieve its
objectives. In addition, a liquid secondary market for particular options,
whether traded over-the-counter or on a national securities exchange
("Exchange"), may be absent for reasons which include the following: there may
be insufficient trading interest in certain options; restrictions may be imposed
by an Exchange on opening transactions or closing transactions or both; trading
halts, suspensions or other restrictions may be imposed with respect to
particular classes or series of options or underlying securities; unusual or
unforeseen circumstances may interrupt normal operations on an Exchange; the
facilities of an Exchange or the Options Clearing Corporation may not at all
times be adequate to handle current trading volume; or one or more Exchanges
could, for economic or other reasons, decide or be compelled at some future date
to discontinue the trading of options (or a particular class or series of
options), in which event the secondary market on that Exchange (or in that class
or series of options) would cease to exist, although outstanding options that
had been issued by the Options Clearing Corporation as a result of trades on
that Exchange would continue to be exercisable in accordance with their terms.

SHORT SALES. The Long-Short Neutral Fund will seek, and the
Long-Short Equity Fund may seek, to realize additional gains through short
sales. Short sales are transactions in which a Fund sells a security it does not
own, in anticipation of a decline in the value of that security relative to the
long positions held by the Fund. To complete such a transaction, a Fund must
borrow the security to make delivery to the buyer. A Fund then is obligated to
replace the security borrowed by purchasing it at the market price at or prior
to the time of replacement. The price at such time may be more or less than the
price at which the security was sold by a Fund. Until the security is replaced,
a Fund is required to repay the lender any dividends or interest that accrue
during the period of the loan. To borrow the security, a Fund also may be
required to pay a premium, which would increase the cost of the security sold.
The net proceeds of the short sale will be retained by the broker (or by the
Fund's custodian in a special custody account), to the extent necessary to meet
margin requirements, until the short position is closed out. A Fund also will
incur transaction costs in effecting short sales.

A Fund will incur a loss as a result of the short sale if the
price of the security increases between the date of the short sale and the date
on which the Fund replaces the borrowed

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security. A Fund will realize a gain if the security declines in price between
those dates. The amount of any gain will be decreased, and the amount of any
loss increased, by the amount of the premium, dividends, interest or expenses a
Fund may be required to pay in connection with a short sale. An increase in the
value of a security sold short by a Fund over the price at which it was sold
short will result in a loss to the Fund, and there can be no assurance that the
Fund will be able to close out the position at any particular time or at an
acceptable price.

Each Fund may engage in short sales if at the time of the short
sale it owns or has the right to obtain, at no additional cost, an equal amount
of the security being sold short. This investment technique is known as a short
sale "against the box."

SECTION 4(2) PAPER. "Section 4(2) paper" is commercial paper which
is issued in reliance on the "private placement" exemption from registration
which is afforded by Section 4(2) of the Securities Act of 1933. Section 4(2)
paper is restricted as to disposition under the federal securities laws and is
generally sold to institutional investors such as the Funds which agree that
they are purchasing the paper for investment and not with a view to public
distribution. Any resale by the purchaser must be in an exempt transaction.
Section 4(2) paper normally is resold to other institutional investors through
or with the assistance of investment dealers who make a market in the Section
4(2) paper, thereby providing liquidity. See "Illiquid Securities" above. See
Appendix "A" for a list of commercial paper ratings.

SUPPLEMENTAL INVESTMENT POLICIES -- LONG-SHORT EQUITY FUND

S&P 500 INDEX FUTURES AND RELATED OPTIONS. An S&P 500 Index Future
contract (an "Index Future") is a contract to buy or sell an integral number of
units of the Standard & Poor's 500 Composite Stock Price Index (the "S&P 500
Index") at a specified future date at a price agreed upon when the contract is
made. A unit is the value of the S&P 500 Index from time to time. Entering into
a contract to buy units is commonly referred to as buying or purchasing a
contract or holding a long position in the S&P 500 Index.

Index Futures can be traded through all major commodity brokers.
Currently, contracts are expected to expire on the tenth day of March, June,
September and December. The Long-Short Equity Fund will ordinarily be able to
close open positions on the United States futures exchange on which Index
Futures are then traded at any time up to and including the expiration day.

In contrast to purchases of a common stock, no price is paid or
received by the Long-Short Equity Fund upon the purchase of a futures contract.
Upon entering into a futures contract, the Fund will be required to deposit with
its custodian in a segregated account in the name of the futures broker a
specified

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amount of cash or securities. This is known by participants in the market as
"initial margin". The type of instruments that may be deposited as initial
margin, and the required amount of initial margin, are determined by the futures
exchange(s) on which the Index Futures are traded. The nature of initial margin
in futures transactions is different from that of margin in securities
transactions in that futures contract margin does not involve the borrowing of
funds by the customer to finance the transactions. Rather, the initial margin is
in the nature of a performance bond or good faith deposit on the contract which
is returned to the Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied. Subsequent payments, called
"variation margin", to and from the broker, will be made on a daily basis as the
price of the S&P 500 Index fluctuates, making the position in the futures
contract more or less valuable, a process known as "marking to the market". For
example, when the Fund has purchased an Index Future and the price of the S&P
500 Index has risen, that position will have increased in value and the Fund
will receive from the broker a variation margin payment equal to that increase
in value. Conversely, when the Fund has purchased an Index Future and the price
of the S&P 500 Index has declined, the position would be less valuable and the
Fund would be required to make a variation margin payment to the broker. When
the Fund terminates a position in a futures contract, a final determination of
variation margin is made, additional cash is paid by or to the Fund, and the
Fund realizes a gain or a loss.

The price of Index Futures may not correlate perfectly with
movement in the underlying index due to certain market distortions. First, all
participants in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
could distort the normal relationship between the S&P 500 Index and futures
markets. Secondly, the deposit requirements in the futures market are less
onerous than margin requirements in the securities market, and as a result the
futures market may attract more speculators than does the securities market.
Increased participation by speculators in the futures market may also cause
temporary price distortions.

Options on index futures contracts give the purchaser the right,
in return for the premium paid, to assume a position in an index futures
contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the period of
the option. Upon exercise of the option, the holder would assume the underlying
futures position and would receive a variation margin payment of cash or
securities approximating the increase in the value of the holder's option
position. If an option is exercised on the last trading day prior to the
expiration date of the option, the settlement will be made entirely in cash
based on the difference between the exercise price of the option and the closing
level of

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the index on which the futures contract is based on the expiration date.
Purchasers of options who fail to exercise their options prior to the exercise
date suffer a loss of the premium paid.

The ability to establish and close out positions in options on
futures contracts will be subject to the development and maintenance of a liquid
secondary market. It is not certain that such a market will develop. Although
the Long-Short Equity Fund generally will purchase only those options for which
there appears to be an active secondary market, there is no assurance that a
liquid secondary market on an exchange will exist for any particular option or
at any particular time. In the event no such market exists for particular
options, it might not be possible to effect closing transactions in such
options, with the result that the Fund would have to exercise the options in
order to realize any profit.

INVESTMENT LIMITATIONS

The Funds have adopted the following fundamental investment
limitations which may not be changed without the affirmative vote of the holders
of a majority of each Fund's outstanding Shares (as defined in Section 2(a)(42)
of the 1940 Act). Each Fund may not:

1. Borrow money, except from banks, and only if after such
borrowing there is asset coverage of at least 300% for all borrowings of the
Fund; or mortgage, pledge or hypothecate any of its assets except in connection
with any such borrowing and in amounts not in excess of the lesser of the dollar
amounts borrowed or 33 1/3% of the value of the Fund's total assets at the time
of such borrowing, provided that: (a) short sales and related borrowings of
securities are not subject to this restriction; and, (b) for the purposes of
this restriction, collateral arrangements with respect to options, short sales,
stock index, interest rate, currency or other futures, options on futures
contracts, collateral arrangements with respect to initial and variation margin
and collateral arrangements with respect to swaps and other derivatives are not
deemed to be a pledge or other encumbrance of assets.

2. Issue any senior securities, except as permitted under the
1940 Act;

3. Act as an underwriter of securities within the meaning of
the Securities Act except insofar as it might be deemed to be an underwriter
upon disposition of certain portfolio securities acquired within the limitation
on purchases of restricted securities;

4. Purchase or sell real estate (including real estate limited
partnership interests), provided that a Fund may invest in securities secured by
real estate or interests therein or

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issued by companies that invest in real estate or interests therein;

5. Purchase or sell commodities or commodity contracts, except
that a Fund may deal in forward foreign exchange transactions between currencies
of the different countries in which it may invest and purchase and sell stock
index and currency options, stock index futures, financial futures and currency
futures contracts and related options on such futures;

6. Make loans, except through loans of portfolio instruments
and repurchase agreements, provided that for purposes of this restriction the
acquisition of bonds, debentures or other debt instruments or interests therein
and investment in government obligations, Loan Participations and Assignments,
short-term commercial paper, certificates of deposit and bankers' acceptances
shall not be deemed to be the making of a loan; and

7. Purchase any securities which would cause 25% or more of
the value of the Fund's total assets at the time of purchase to be invested in
the securities of one or more issuers conducting their principal business
activities in the same industry, provided that (a) there is no limitation with
respect to (i) instruments issued or guaranteed by the United States, any state,
territory or possession of the United States, the District of Columbia or any of
their authorities, agencies, instrumentalities or political subdivisions, and
(ii) repurchase agreements secured by the instruments described in clause (i);
(b) wholly-owned finance companies will be considered to be in the industries of
their parents if their activities are primarily related to financing the
activities of the parents; and (c) utilities will be divided according to their
services, for example, gas, gas transmission, electric and gas, electric and
telephone will each be considered a separate industry.

For purposes of Investment Limitation No. 1, collateral
arrangements with respect to, if applicable, the writing of options, futures
contracts, options on futures contracts, forward currency contracts and
collateral arrangements with respect to initial and variation margin are not
deemed to be a pledge of assets and neither such arrangements nor the purchase
or sale of futures or related options are deemed to be the issuance of a senior
security for purposes of Investment Limitation No. 2.

In addition to the fundamental investment limitations specified
above, a Fund may not:

1. Make investments for the purpose of exercising control or
management, but investments by a Fund in wholly-owned investment
entities created under the laws of certain countries will not be deemed
the making of investments for the purpose of exercising control or
management;

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2. Purchase securities on margin, except for short-term credits
necessary for clearance of portfolio transactions, and except that a
Fund may make margin deposits in connection with its use of options,
futures contracts, options on futures contracts and forward contracts;

3. Purchase or sell interests in mineral leases, oil, gas or other
mineral exploration or development programs, except that a Fund may
invest in securities issued by companies that engage in oil, gas or
other mineral exploration or development activities;

4. Purchase or retain the securities of any issuer, if those
individual officers and directors of the Funds, the Adviser or any
subsidiary thereof each owning beneficially more than 1/2 of 1% of the
securities of such issuer own in the aggregate more than 5% of the
securities of such issuer; and

5. (Long-Short Neutral Fund only) Acquire any securities of
registered open-end investment companies or registered unit investment
trusts in reliance on Section 12(d)(1)(F) or (G) of the 1940 Act.

The policies set forth above are not fundamental and thus may be
changed by the Funds' Board of Directors without a vote of the shareholders.

Except as required by the 1940 Act with respect to the borrowing
of money, if a percentage restriction is adhered to at the time of investment, a
later increase or decrease in percentage resulting from a change in market
values of portfolio securities or amount of total or net assets will not be
considered a violation of any of the foregoing restrictions.

Securities held by a Fund generally may not be purchased from,
sold or loaned to the Adviser or its affiliates or any of their directors,
officers or employees, acting as principal, unless pursuant to a rule or
exemptive order under the 1940 Act.

RISK FACTORS

FOREIGN SECURITIES. Investments in foreign securities are subject
to certain risks, as discussed below.

Political, Economic and Market Factors. Investments in foreign
securities involve risks relating to political and economic developments abroad,
as well as those that result from the differences between the regulations to
which U.S. and foreign issuers are subject. These risks may include
expropriation, confiscatory taxation, withholding taxes on dividends and
interest, limitations on the use or transfer of a Fund's assets and political or
social instability or diplomatic developments. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments positions.
Securities of many foreign issuers may be less liquid, and their

-12-
<PAGE> 83
prices may be more volatile, than those of securities of comparable U.S.
issuers. Brokerage commissions, custodial services and other costs relating to
investment in foreign securities markets are generally more expensive than in
the United States. Such markets have different clearance and settlement
procedures and in certain markets there have been times when settlements have
been unable to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. There is generally less government
supervision and regulation of exchanges, brokers and issuers in foreign
securities markets than there is in the United States.

In addition, substantial limitations may exist in certain
countries with respect to the Funds' ability to repatriate investment income,
capital or the proceeds of sales of securities by foreign investors. The Funds
could be adversely affected by delays in, or a refusal to grant, any required
government approval for repatriation of capital, as well as by the application
to the Funds of any restrictions on investments.

Reporting Standards. Most of the foreign securities held by the
Funds will not be registered with the SEC, nor will the issuers thereof be
subject to SEC or other U.S. reporting requirements. Accordingly, there will be
less publicly available information concerning foreign issuers of securities
held by the Funds than will be available concerning U.S. companies. Foreign
companies, and in particular, companies in emerging markets, are not generally
subject to uniform accounting, auditing and financial reporting standards or to
other regulatory requirements comparable to those applicable to U.S. companies.

Exchange Rate Fluctuations. Because foreign securities ordinarily
will be denominated in currencies other than the U.S. dollar, changes in foreign
currency exchange rates will affect a Fund's net asset value, the value of
interest and dividends earned, gains and losses realized on the sale of
securities and net investment income and capital gain, if any, to be distributed
to shareholders by a Fund. If the value of a foreign currency rises against the
U.S. dollar, the value of a Fund's assets denominated in that currency will
increase; conversely, if the value of a foreign currency declines against the
U.S. dollar, the value of a Fund's assets denominated in that currency will
decrease. The exchange rates between the U.S. dollar and other currencies are
determined by supply and demand in the currency exchange markets, international
balances of payments, government intervention, speculation and other economic
and political conditions.

Investment Controls. In certain countries that currently prohibit
direct foreign investment in the securities of their companies, indirect foreign
investment in the securities of companies listed and traded on the stock
exchanges in these countries is permitted through investment funds which have
been specifically authorized. The Funds may invest in these

-13-
<PAGE> 84
investment funds and registered investment companies subject to the provisions
of the 1940 Act. If these Funds invest in such investment companies, they will
each bear their proportionate share of the costs incurred by such companies,
including investment advisory fees.

Clearance and Settlement Procedures. Delays in clearance and
settlement could result in temporary periods when assets of a Fund are
uninvested and no return is earned thereon. The inability of a Fund to make
intended security purchases due to settlement problems could cause a Fund to
miss attractive investment opportunities. Inability to dispose of a portfolio
security due to settlement problems could result either in losses to a Fund due
to subsequent declines in the value of such portfolio security or, if a Fund has
entered into a contract to sell the security, could result in possible liability
to the purchaser.

Operating Expenses. The costs attributable to foreign investing
that a Fund must bear frequently are higher than those attributable to domestic
investing. For example, the cost of maintaining custody of foreign securities
exceeds custodian costs for domestic securities. Investment income on certain
foreign securities in which a Fund may invest may be subject to foreign
withholding or other taxes that could reduce the return on those securities. Tax
treaties between the United States and foreign countries however, may reduce or
eliminate the amount of foreign tax to which a Fund would be subject.

SOVEREIGN DEBT. Investments in sovereign debt involve special
risks. The issuer of the debt or the governmental authorities that control the
repayment of the debt may be unable or unwilling to repay principal or interest
when due in accordance with the terms of such debt, and the Fund may have
limited legal recourse in the event of a default.

Sovereign debt differs from debt obligations issued by private
entities in that, generally, remedies for defaults must be pursued in the courts
of the defaulting party. Legal recourse is therefore somewhat limited. Political
conditions, especially a sovereign entity's willingness to meet the terms of its
debt obligations, are of considerable significance. Also, there can be no
assurance that the holders of commercial bank loans to the same sovereign entity
may not contest payments to the holders of sovereign debt in the event of
default under commercial bank loan agreements.

A sovereign debtor's willingness or ability to repay principal and
pay interest in a timely manner may be affected by, among other factors, its
cash flow situation, the extent of its foreign reserves, the availability of
sufficient foreign exchange on the date a payment is due, the relative size of
the debt service burden to the economy as a whole, the sovereign debtor's policy
toward principal international lenders and the political

-14-
<PAGE> 85
constraints to which a sovereign debtor may be subject. Increased protectionism
on the part of a country's trading partners, or political changes in those
countries, could also adversely affect its exports. Such events could diminish a
country's trade account surplus, if any, or the credit standing of a particular
local government or agency.

The occurrence of political, social or diplomatic changes in one
or more of the countries issuing sovereign debt could adversely affect a Fund's
investments. Political changes or a deterioration of a country's domestic
economy or balance of trade may affect the willingness of countries to service
their sovereign debt. While the Adviser intends to manage the Funds in a manner
that will minimize the exposure to such risks, there can be no assurance that
adverse political changes will not cause a Fund to suffer a loss of interest or
principal on any of its holdings.

Investors should also be aware that certain sovereign debt
instruments in which a Fund may invest involve great risk. Sovereign debt issued
by issuers in many emerging markets generally is deemed to be the equivalent in
terms of quality to securities rated below investment grade by Moody's and S&P.
Such securities are regarded as predominantly speculative with respect to the
issuer's capacity to pay interest and repay principal in accordance with the
terms of the obligations and involve major risk exposure to adverse conditions.
Some of such sovereign debt, which may not be paying interest currently or may
be in payment default, may be comparable to securities rated "D" by S&P or "C"
by Moody's. A Fund may have difficulty disposing of certain sovereign debt
obligations because there may be a limited trading market for such securities.
Because there is no liquid secondary market for many of these securities, the
Funds anticipate that such securities could be sold only to a limited number of
dealers or institutional investors. The lack of a liquid secondary market may
have an adverse impact on the market price of such securities and a Fund's
ability to dispose of particular issues when necessary to meet a Fund's
liquidity needs or in response to a specific economic event, such as a
deterioration in the creditworthiness of the issuer. The lack of a liquid
secondary market for certain securities also may make it more difficult for a
Fund to obtain accurate market quotations for purposes of valuing a Fund's
portfolio and calculating its net asset value. When and if available, fixed
income securities may be purchased by a Fund at a discount from face value.
However, the Funds do not intend to hold such securities to maturity for the
purpose of achieving potential capital gains, unless current yields on these
securities remain attractive. From time to time, a Fund may purchase securities
not paying interest at the time acquired if, in the opinion of the Adviser, such
securities have the potential for future income or capital appreciation.

-15-
<PAGE> 86
DIRECTORS AND OFFICERS

The directors and executive officers of the Funds, their ages,
business addresses and principal occupations during the past five years are:

Richard N. Cooper* (64) Director
Harvard University Professor at Harvard
1737 Cambridge Street University; National
Cambridge, Massachusetts 02138 Intelligence Council from June
1995 until January 1997;
Director or Trustee of Circuit
City Stores, Inc. (retail
electronics and appliances) and
Phoenix Home Life Mutual
Insurance Company;
Director/Trustee of other
investment companies advised by
Warburg.

Jack W. Fritz (71) Director
2425 North Fish Creek Road Private investor; Consultant
P.O. Box 483 and Director of Fritz
Wilson, Wyoming 83014 Broadcasting, Inc. and Fritz
Communications (developers and
operators of radio stations);
Director of Advo, Inc. (direct
mail advertising);
Director/Trustee of other
investment companies advised by
Warburg.

John L. Furth* (67) Chairman of the Board
466 Lexington Avenue Vice Chairman, Managing
New York, New York 10017-3147 Director and Director of
Warburg; Associated with
Warburg since 1970; Director of
Counsellors Securities;
Chairman of the Board of other
investment companies advised by
Warburg.

- ---------------
* Indicates a Director who is an "interested person" of the Funds as
defined in the 1940 Act.

-16-
<PAGE> 87
Jeffrey E. Garten (51) Director
Box 208200 Dean of Yale School of
New Haven, Connecticut 06520-8200 Management and William S.
Beinecke Professor in the
Practice of International Trade
and Finance; Undersecretary of
Commerce for International
Trade from November 1993 to
October 1995; Professor at
Columbia University from
September 1992 to November
1993; Director/Trustee of other
investment companies advised by
Warburg.

[Insert Director to be Elected] Director
[Insert Biography]

Arnold M. Reichman* (50) Director
466 Lexington Avenue Managing Director, Chief
New York, New York 10017-3147 Operating Officer and Assistant
Secretary of Warburg; Director
of The RBB Fund, Inc.;
Associated with Warburg since
1984; Director and officer of
Counsellors Securities;
Director/Trustee of other
investment companies advised by
Warburg.

- ---------------
* Indicates a Director who is an "interested person" of the Funds as
defined in the 1940 Act.

-17-
<PAGE> 88
Alexander B. Trowbridge (68) Director
1317 F Street President of Trowbridge
5th Floor Partners, Inc. (business
Washington, DC 20004 consulting) from January 1990
to November 1996; Director or
Trustee of New England Mutual
Life Insurance Co., ICOS
Corporation (biopharmaceuti-
cals), Waste Management, Inc.
(solid and hazardous waste
collection and disposal), IRI
International (energy
services), The Rouse Company
(real estate development),
Harris Corp. (electronics and
communications equipment), The
Gillette Co. (personal care
products) and Sun Company Inc.
(petroleum refining and
marketing); Director/Trustee of
other investment companies
advised by Warburg.

[Insert BEA Director] Director
[Insert Biography]

Eugene L. Podsiadlo (41) President
466 Lexington Avenue Managing Director of Warburg;
New York, New York 10017-3147 Associated with Warburg since
1991; Officer of Counsellors
Securities and other investment
companies advised by Warburg.

Stephen Distler (44) Vice President
466 Lexington Avenue Managing Director of Warburg;
New York, New York 10017-3147 Associated with Warburg since
1984; Treasurer of Counsellors
Securities; Officer of other
investment companies advised by
Warburg.

-18-
<PAGE> 89
Eugene P. Grace (46) Vice President and Secretary
466 Lexington Avenue Senior Vice President of
New York, New York 10017-3147 Warburg; Associated with
Warburg since April 1994;
Attorney-at-law from September
1989-April 1994; Life insurance
agent, New York Life Insurance
Company from 1993 to 1994;
Officer of Counsellors
Securities and other investment
companies advised by Warburg.

Howard Conroy, CPA (44) Vice President and Chief
466 Lexington Avenue Financial Officer
New York, New York 10017-3147 Vice President of Warburg;
Associated with Warburg since
1992; Officer of other
investment companies advised by
Warburg.

Daniel S. Madden, CPA (32) Treasurer and Chief Accounting
466 Lexington Avenue Officer
New York, New York 10017-3147 Vice President of Warburg;
Associated with Warburg since
1995; Associated with BlackRock
Financial Management, Inc. from
September 1994 to October 1995;
Associated with BEA Associates
from April 1993 to September
1994; Associated with Ernst &
Young LLP from 1990 to 1993;
Officer of other investment
companies advised by Warburg.

Janna Manes, Esq. (30) Assistant Secretary
466 Lexington Avenue Vice President of Warburg;
New York, New York 10017-3147 Associated with Warburg since
1996; Associated with the law
firm of Willkie Farr &
Gallagher from 1993 to 1996;
Officer of other investment
companies advised by Warburg.

Hal Liebes (34) Assistant Secretary
153 East 53rd Street Senior Vice President and
New York, New York 10022 General Counsel of BEA from
March 1997 to present; Vice
President and Legal Counsel for BEA from
June 1995 to March 1997; Chief Compliance
Officer, CS First Boston Investment
Management from 1994 to 1995; Staff
Attorney, Division of Enforcement, U.S.
Securities and Exchange Commission from
1991 to 1994; Associate, Morgan, Lewis &
Bockius from 1989 to 1991; Officer of
other investment companies advised by
BEA.

Michael A. Pignataro (38) Assistant Secretary
153 East 53rd Street Vice President of BEA from December 1995
New York, New York 10022 to present; Assistant Vice President and
Chief Administrative Officer for
Investment Companies of BEA from 1989 to
December 1995; Officer of other
investment companies advised by BEA.

Wendy S. Setnicka (33) Assistant Treasurer
153 East 53rd Street Assistant Vice President of BEA from
New York, New York 10022 January 1997 to the present;
Administrative Officer for Investment
Companies of BEA from November 1993 to
the present; Supervisor of Fund
Accounting and Administration at Reich &
Tang LP from June 1989 to November 1993;
Officer of other investment companies
advised by BEA.

Rocco A. DelGuercio (35) Assistant Treasurer
153 East 53rd Street Administrative Officer for BEA-advised
New York, New York 10022 investment companies from June 1996 to
the present; Assistant Treasurer, Bankers
Trust Corp. -- Fund Administration from
March 1994 to June 1996; Mutual Fund
Accounting Supervisor, Dreyfus
Corporation from April 1987 to March
1994; Officer of other investment
companies advised by BEA.

No employee of Warburg, PFPC Inc. and Counsellor Funds Service,
Inc., the Funds' co-administrators ("PFPC" and "Counsellors Funds Service,"
respectively), or any of their affiliates, receives any compensation from the
Funds for acting as an officer or director of a Fund. Each Director who is not a
director, trustee, officer or employee of Warburg, PFPC, Counsellors Funds
Service or any of their affiliates receives an

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<PAGE> 90
annual fee of $500 and $250 for each meeting of the Boards attended by him for
his services as Director, and is reimbursed for expenses incurred in connection
with his attendance at Board meetings. Each member of the Audit Committee
receives an annual fee of $250, and the chairman of the Audit Committee receives
an annual fee of $325.

DIRECTORS' ESTIMATED COMPENSATION THROUGH AUGUST 31, 1999

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
Long-Short All Investment
Neutral Long-Short Companies Managed by
Name of Director Fund Equity Fund Warburg+
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
John L. Furth* None None None
- -----------------------------------------------------------------------------------
Arnold M. Reichman* None None None
- -----------------------------------------------------------------------------------
Richard N. Cooper $44,500
- -----------------------------------------------------------------------------------
Jack W. Fritz $44,500
- -----------------------------------------------------------------------------------
[****] None
- -----------------------------------------------------------------------------------
[****] $44,500
- -----------------------------------------------------------------------------------
Alexander B. Trowbridge $44,500
- -----------------------------------------------------------------------------------
</TABLE>

- ------------------

+ Each Director also serves as a Director or Trustee of 40 investment
companies advised by Warburg.

* Mr. Furth and Mr. Reichman receive compensation as affiliates of Warburg
and, accordingly, receive no compensation from the Funds or any other
investment company advised by Warburg.

As of [INSERT], 1998, Directors and officers as a group, owned of
record less than 1% of each Fund's outstanding Common Shares. No Director or
officer owned any of the Funds' outstanding Advisor Shares.

INVESTMENT ADVISORY AND SERVICING ARRANGEMENTS

ADVISORY AGREEMENTS. BEA Associates (sometimes referred to as the
"Adviser" or "BEA") renders advisory and administrative services to each of the
Funds pursuant to Investment Advisory Agreements. Such advisory agreements are
hereinafter collectively referred to as the "Advisory Agreements." Prior to the
Reorganization, BEA rendered advisory services to the corresponding series of
the RBB Fund (the "BEA Funds").

BEA is a diversified investment adviser, managing global equity,
fixed income and derivative securities accounts for private individuals, as well
as corporate pension and profit-sharing plans, state pension funds, union funds,
endowments and other charitable institutions. As of December 31, 1997, BEA
managed approximately $34.2 billion in assets. BEA is a wholly-owned subsidiary
of Credit Suisse Group, a Swiss corporation.

-20-
<PAGE> 91
BEA is a registered investment advisor under the Investment Advisors Act of
1940, as amended.

As an investment adviser, BEA emphasizes a global investment
strategy. BEA currently acts as investment adviser for eleven other investment
companies registered under the 1940 Act. They are: BEA Strategic Global Income
Fund, Inc., BEA Income Fund, Inc., The Brazilian Equity Fund, Inc., The Chile
Fund, Inc., The Emerging Markets Infrastructure Fund, Inc., The Emerging Markets
Telecommunications Fund, Inc., The First Israel Fund, Inc., The Indonesia Fund,
Inc., The Latin America Equity Fund, Inc., The Latin America Investment Fund,
Inc., and The Portugal Fund, Inc. In addition, BEA acts as sub-adviser to
certain portfolios of twelve other registered investment companies: Frank
Russell Investment Company (Fixed Income III Fund and Multi-strategy Bond Fund),
Oppenheimer (LifeSpan Balanced Fund, LifeSpan Income Fund and LifeSpan Growth
Fund), Panorama (LifeSpan Balanced Account, LifeSpan Capital Appreciation
Account and LifeSpan Diversified Income Account), SEI Institutional Managed
Trust (High Yield Bond Fund), WNL Series Trust (BEA Growth and Income Fund),
Touchstone International Equity Fund and Touchstone Variable Annuity
International Equity Fund.

BEA has sole investment discretion for the Funds and will make all
decisions affecting assets in the Funds under the supervision of the Funds'
Board of Directors and in accordance with each Fund's stated policies. BEA will
select investments for the Funds and will place purchase and sale orders on
behalf of the Funds.

The Long-Short Neutral Fund pays BEA a basic management fee,
computed daily and payable monthly, at the annual rate of 1.50% of the average
net assets of the Fund. After the first year of operations, this basic
management fee may be increased or decreased by applying an adjustment formula
(the "Performance Adjustment"). The Performance Adjustment is calculated monthly
by comparing the Fund's investment performance to a Target (as defined below)
during the most recent twelve-month period. The "Target" is the investment
record of the Salomon Smith Barney 1-Month U.S. Treasury Bill Index-TM- plus 5
percentage points. The Performance Adjustment is added to or subtracted from the
basic fee.

The Performance Adjustment may increase or decrease the basic fee
in five steps. The first step would occur if the Fund's performance during the
most recent 12-month period differed from that of the Target by more than one
but not more than two percentage points. In this event, the

-21-
<PAGE> 92
Performance Adjustment would be 0.10%, and the annual rate of the total
management fee would be either 1.40% or 1.60%. The second step would occur if
the Fund's performance during the most recent 12-month period differed from that
of the Target by more than two but not more than three percentage points. In
this event, the Performance Adjustment would be 0.20%, and the annual rate of
the total management fee would be either 1.30% or 1.70%. The third step would
occur if the Fund's performance during the most recent 12-month period differed
from that of the Target by more than three but not more than four percentage
points. In this event, the Performance Adjustment would be 0.30%, and the annual
rate of the total management fee would be either 1.20% or 1.80%. The fourth step
would occur if the Fund's performance during the most recent 12-month period
differed from that of the Target by more than four but not more than five
percentage points. In this event, the Performance Adjustment would be 0.40%, and
the annual rate of the total management fee would be either 1.10% or 1.90%. The
fifth step would occur if the Fund's performance during the most recent 12-month
period differed from that of the Target by five percentage points or more. In
this event, the Performance Adjustment would be 0.50%, and the annual rate of
the total management fee would be either 1.00% or 2.00%. Thus:

<TABLE>
<CAPTION>
PERFORMANCE
TOTAL MANAGEMENT BASIC RATE ADJUSTMENT FEE RATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>

No adjustment 1.50% N/A 1.50%
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
First Step:
Performance
exceeds Target
by more than 1
but not more
than 2
percentage
points 1.50 .10% 1.60

Performance lags
Target by more
than 1 but not
more than 2
percent points 1.50 (.10) 1.40
- --------------------------------------------------------------------------------

Second Step:
Performance
exceeds Target
by more than 2
but not more
than 3
percentage
points 1.50 .20 1.0

Performance lags
Target by more
than 1 but not
more than 3
percent points 1.50 (.20) 1.30
- --------------------------------------------------------------------------------

Third Step:
</TABLE>

-22-
<PAGE> 93
<TABLE>
<CAPTION>
PERFORMANCE
TOTAL MANAGEMENT BASIC RATE ADJUSTMENT FEE RATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Performance
exceeds Target
by more than 3
but not more
than 4
percentage
points 1.50 .30 1.80

Performance lags
Target by more
than 3 but not
more than 4
percent
points 1.50 (.30) 1.20
- --------------------------------------------------------------------------------

Fourth Step:
Performance
exceeds Target
by more than 4
but not more
than 5
percentage
points 1.50 .40 1.90

Performance lags
Target by more
than 4 but not
more than 5
percent points 1.50 (.40) 1.10
- --------------------------------------------------------------------------------

Fifth Step:
Performance
exceeds Target
by more than 5
percentage
points 1.50 .50 2.00

Performance lags
Target by more
than 5 percent
points 1.50 (.50) 1.00
- --------------------------------------------------------------------------------
</TABLE>

The Long-Short Equity Fund pays BEA a management fee, computed
daily and payable quarterly, at the annual rate of 0.10% of the average net
assets of the Fund.

As disclosed in the combined Common and Institutional Share
Prospectuses, each of the Funds has agreed to pay the Adviser a management fee
at the annual percentage rate of the relevant Fund's average daily net assets
set forth in the Prospectuses. The Adviser has informed the Funds that it will
voluntarily waive some or all of its management fees under the Advisory
Agreements and, if necessary, will bear certain expenses of each Fund until
further notice so that each Fund's total annual operating

-23-
<PAGE> 94
expenses (including the management fee but not including nonrecurring account
fees and extraordinary expenses) applicable to each class will not exceed the
percentage of each Fund's average daily net assets attributable to that class as
set forth in the Prospectuses plus the Performance Adjustment applicable to the
Long-Short Neutral Fund. The Performance Adjustment would be determined without
regard to any waivers of the basic management fee.

Each class of the Fund bears all of its own expenses not
specifically assumed by the Adviser. General expenses of the Funds not readily
identifiable as belonging to a Fund are allocated among all Funds by or under
the direction of the Funds' Board of Directors in such manner as the Board
determines fair and equitable. The Common and Institutional Classes of the Funds
pay their own administration fees, and may pay a different share than the other
classes of the Funds of other expenses (excluding management and custodial fees)
if those expenses are actually incurred in a different amount by each Class or
if it receives different services.

Under the Advisory Agreements, BEA will not be liable for any
error of judgment or mistake of law or for any loss suffered by the Funds in
connection with the performance of the Advisory Agreements.

The Advisory Agreements are dated ______________, 1998. The
Advisory Agreements were approved by each Fund's initial shareholder. Each
Advisory Agreement is terminable by vote of the Funds' Board of Directors or by
the holders of a majority of the outstanding voting securities of the relevant
Fund, at any time without penalty, on 60 days' written notice to BEA. Each of
the Advisory Agreements may also be terminated by BEA on 60 days' written notice
to a Fund. Each of the Advisory Agreements terminates automatically in the event
of assignment thereof.

CUSTODIAN AND TRANSFER AGENCY AGREEMENTS. Brown Brothers Harriman
& Co. ("BBH") acts as the custodian for the Funds and also acts as the custodian
for the Fund's foreign securities pursuant to a Custodian Agreement (the
"Custodian Agreement"). Under the Custodian Agreement, BBH (a) maintains a
separate account or accounts in the name of each Fund, (b) holds and transfers
portfolio securities on account of each Fund, (c) accepts receipts and makes
disbursements of money on behalf of each Fund, (d) collects and receives all
income and other payments and distributions on account of each Fund's portfolio
securities, and (e) makes periodic reports to the Funds' Board of Directors
concerning each Fund's operations. BBH is authorized to select one or more banks
or trust companies to serve as sub-custodian on behalf of the Funds, provided
that BBH remains responsible for the performance of all its duties under the
Custodian Agreement and holds the Funds harmless from the negligent acts and
omissions of any sub-custodian. For its services to the Funds under the
Custodian Agreement, BBH receives

-24-
<PAGE> 95
a fee which is calculated based upon each Fund's average daily gross assets,
exclusive of transaction charges and out-of-pocket expenses, which are also
charged to the Funds.

State Street Bank and Trust Company ("State Street") serves as the
transfer agent for the Funds. It has delegated to Boston Financial Data
Services, Inc. ("BFDS"), a 50%-owned subsidiary, responsibility for most
transfer agent servicing functions. State Street serves as the transfer and
dividend disbursing agent for the Funds pursuant to a Transfer Agency Agreement,
as supplemented (collectively, the "Transfer Agency Agreement"), under which it
(a) issues and redeems shares of each of the Funds, (b) addresses and mails all
communications by each Fund to record owners of shares of each such Fund,
including reports to shareholders, dividend and distribution notices and proxy
materials for its meetings of shareholders, (c) maintains shareholder accounts
and, if requested, sub-accounts and (d) makes periodic reports to the Funds'
Board of Directors concerning the operations of each Fund. For its services to
the Funds under the Transfer Agency Agreement, State Street receives a fee on a
per transaction basis.

ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENTS. PFPC Inc.
("PFPC"), an indirect, wholly-owned subsidiary of PNC Bank Corp., and
Counsellors Fund Service, Inc. ("Counsellors Service") serve as
co-administrators to each of the Common and Institutional Class of the Funds
pursuant to Administration and Accounting Services Agreements, dated
_______________, 1998 (the "PFPC Co-Administration and Accounting Services
Agreements" and the "CFS Co-Administration and Accounting Services Agreements,"
respectively). PFPC has agreed to furnish statistical and research data,
clerical, accounting and bookkeeping services and certain other services with
respect to the Funds. Counsellors Funds Service has agreed to provide
shareholder liaison services to the Funds including responding to shareholder
inquiries and providing information on shareholder accounts.

The PFPC Co-Administration and Accounting Services Agreements
provide that PFPC shall not be liable for any loss suffered by the Funds in
connection with the performance of services under the PFPC Co-Administration and
Accounting Services Agreements, except a loss resulting from willful
misfeasance, gross negligence, or reckless disregard of its duties and
obligations under the PFPC Co-Administration and Accounting Services Agreements.
In consideration for providing services pursuant to the PFPC Co-Administration
and Accounting Services Agreements, PFPC receives a fee calculated at an annual
rate of .125% of average daily net assets of the Funds.

The CFS Co-Administration and Accounting Services Agreements
provide that Counsellors Funds Service shall not be liable for any error of
judgment or mistake of law or any loss suffered by the Funds in connection with
the performance of the agreement, except a loss resulting from willful
misfeasance, bad

-25-
<PAGE> 96
faith or negligence, or reckless disregard of its duties and obligations
thereunder. In consideration for providing services pursuant to the CFS
Co-Administration and Accounting Services Agreements, Counsellors Service
receives a fee calculated at an annual rate of .05% of average daily net assets
of the Common Class of the Funds for assets up to $125 million and .10%
thereafter. Pursuant to the CFS Co-Administration and Accounting Services
Agreements, Counsellors Service has agreed to accept no fee for providing
services to the Institutional Class of Shares of the Funds.

PORTFOLIO TRANSACTIONS

Subject to policies established by the Board of Directors, BEA is
responsible for the execution of portfolio transactions and the allocation of
brokerage transactions for the Funds. In executing portfolio transactions, BEA
seeks to obtain the best net results for a Fund, taking into account such
factors as the price (including the applicable brokerage commission or dealer
spread), size of the order, difficulty of execution and operational facilities
of the firm involved. While BEA generally seeks reasonably competitive
commission rates, payment of the lowest commission or spread is not necessarily
consistent with obtaining the best results in particular transactions.

Portfolio transactions for the Funds shall be effected on domestic
securities exchanges. In transactions for securities not actively traded on a
securities exchange, a Fund will deal directly with the dealers who make a
market in the securities involved, except in those circumstances where better
prices and execution are available elsewhere. Such dealers usually are acting as
principal for their own account. On occasion, securities may be purchased
directly from the issuer. Such portfolio securities are generally traded on a
net basis and do not normally involve brokerage commissions. Securities firms
may receive brokerage commissions on certain portfolio transactions, including
options, futures and options on futures transactions and the purchase and sale
of underlying securities upon exercise of options. The Funds have no obligation
to deal with any broker in the execution of transactions in portfolio
securities. The Funds may use affiliates of Credit Suisse Group, BEA's parent
company, in connection with the purchase or sale of securities in accordance
with rules or exemptive orders adopted by the Securities and Exchange Commission
(the "SEC") when BEA believes that the charge for the transaction does not
exceed usual and customary levels.

Commission rates for brokerage transactions on foreign stock
exchanges are generally fixed. The reasonableness of any negotiated commission
paid by the Funds will be evaluated on the basis of the difficulty involved in
execution, the time taken to conclude the transaction, the extent of the
broker's commitment, if any, of its own capital and the amount involved in the
transaction. It should be noted that commission rates in U.S. markets are
negotiated.

In the case of over-the-counter issues, there is generally no
stated commission, but the price usually includes an undisclosed commission or
markup, and the Fund will normally deal

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with the principal market makers unless it can obtain better terms elsewhere.

No Fund has any obligation to deal with any broker or group of
brokers in the execution of portfolio transactions. BEA may, consistent with the
interests of a Fund and subject to the approval of the Board of Directors,
select brokers on the basis of the research, statistical and pricing services
they provide to a Fund and other clients of BEA. Information and research
received from such brokers will be in addition to, and not in lieu of, the
services required to be performed by BEA under its respective contracts. A
commission paid to such brokers may be higher than that which another qualified
broker would have charged for effecting the same transaction, provided that BEA,
as applicable, determines in good faith that such commission is reasonable in
terms either of the transaction or the overall responsibility of BEA to a Fund
and its other clients and that the total commissions paid by a Fund will be
reasonable in relation to the benefits to a Fund over the long-term.

Corporate debt and U.S. Government securities are generally traded
on the over-the-counter market on a "net" basis without a stated commission,
through dealers acting for their own account and not as brokers. The Funds will
primarily engage in transactions with these dealers or deal directly with the
issuer unless a better price or execution could be obtained by using a broker.
Prices paid to a dealer in debt securities will generally include a "spread,"
which is the difference between the prices at which the dealer is willing to
purchase and sell the specific security at the time, and includes the dealer's
normal profit.

BEA may seek to obtain an undertaking from issuers of commercial
paper or dealers selling commercial paper to consider the repurchase of such
securities from a Fund prior to their maturity at their original cost plus
interest (sometimes adjusted to reflect the actual maturity of the securities),
if it believes that a Fund's anticipated need for liquidity makes such action
desirable. Any such repurchase prior to maturity reduces the possibility that a
Fund would incur a capital loss in liquidating commercial paper (for which there
is no established market), especially if interest rates have risen since
acquisition of the particular commercial paper.

Investment decisions for each Fund and for other investment
accounts managed by BEA are made independently of each other in light of
differing conditions. However, the same investment decision may be made for two
or more of such accounts. In such cases, simultaneous transactions are
inevitable. Purchases or sales are then averaged as to price and allocated as to
amount according to a formula deemed equitable to each such account. While in
some cases this practice could have a detrimental effect upon the price or value
of the security as far as a Fund is concerned, in other cases it is believed to
be

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<PAGE> 98
beneficial to a Fund. A Fund will not purchase securities during the existence
of any underwriting or selling group relating to such security of which BEA or
any affiliated person (as defined in the 1940 Act) thereof is a member except
pursuant to procedures adopted by the Funds' Board of Directors pursuant to Rule
10f-3 under the 1940 Act.

In no instance will portfolio securities be purchased from or sold
to BEA or any affiliated person of the foregoing entities except as permitted by
SEC exemptive order or by applicable law.

It is anticipated that, under normal market conditions, the annual
portfolio turnover rate for the Long-Short Neutral Fund and the Long-Short
Equity Fund will not exceed 150% and 50%, respectively. A high rate of portfolio
turnover (100% or more) involves correspondingly greater brokerage commission
expenses and other transaction costs, which must be borne directly by a Fund.
Each of the Funds anticipates that its annual portfolio turnover rate will vary
from year to year. The portfolio turnover rate is calculated by dividing the
lesser of a Fund's annual sales or purchases of portfolio securities (exclusive
of purchases or sales of securities whose maturities at the time of acquisition
were one year or less) by the monthly average value of the securities in the
Fund during the year.

[The Funds have the benefit of an exemptive order issued by the
SEC under the 1940 Act authorizing the Funds and other investment companies
advised by BEA to acquire jointly securities issued in private placements,
subject to the terms and conditions of the order.]

PURCHASE AND REDEMPTION INFORMATION

The Funds reserve the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption of a Fund's shares by
making payment in whole or in part in securities chosen by the Funds and valued
in the same way as they would be valued for purposes of computing a Fund's net
asset value. If payment is made in securities, a shareholder may incur
transaction costs in converting these securities into cash. Investors may also
be required to bear certain transaction costs associated with redemptions in
kind. The Funds have elected, however, to be governed by Rule 18f-1 under the
1940 Act so that a Fund is obligated to redeem its shares solely in cash up to
the lesser of $250,000 or 1% of its net asset value during any 90-day period for
any one shareholder of a Fund.

Under the 1940 Act, a Fund may suspend the right to redemption or
postpone the date of payment upon redemption for any period during which The New
York Stock Exchange, Inc. (the "NYSE") is closed (other than customary weekend
and holiday closings), or during which trading on said Exchange is restricted,
or during which (as determined by the SEC by rule or

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<PAGE> 99
regulation) an emergency exists as a result of which disposal or valuation of
Fund securities is not reasonably practicable, or for such other periods as the
SEC may permit. (A Fund may also suspend or postpone the recordation of the
transfer of its shares upon the occurrence of any of the foregoing conditions.)

VALUATION OF SHARES

The net asset values per share of each class of the Funds are
calculated separately from each other class as of the close of regular trading
of the NYSE on each Business Day. The net asset value per share, the value of an
individual share in a Fund, is computed by adding the value of the proportionate
interest of each class of a Fund in the Fund's securities, cash and other
assets, subtracting the actual and accrued liabilities of the class and dividing
the result by the number of outstanding shares of such class. "Business Day"
means each weekday when the NYSE is open. Currently, the NYSE is closed on New
Year's Day, Dr. Martin Luther King Jr., Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day
and the preceding Friday or subsequent Monday when one of these holidays falls
on a Saturday or Sunday. Although the Fund does not invest directly in foreign
securities, it invests in American Depository Receipts, the value of which
depends on the underlying foreign security. Securities which are listed on stock
exchanges, whether U.S. or foreign are valued at the last sale price on the day
the securities are valued or, lacking any sales on such day, at the mean of the
bid and asked prices available prior to the valuation. Fund securities primarily
traded in foreign markets may be traded in such markets on days which are not
Business Days. Because net asset value per share of each Fund is determined only
on Business Days, the net asset value of shares of a Fund may be significantly
affected on days when an investor does not have access to the Fund. If on any
Business Day, a foreign securities exchange or foreign market is closed, the
securities traded on such exchange or in such market will be valued at the last
sale price reported on the previous business day of such foreign exchange or
market. In cases where securities are traded on more than one exchange, the
securities are generally valued on the exchange designated by the Board of
Directors or its delegates as the primary market. Securities traded in the
over-the-counter market and listed on the National Association of Securities
Dealers Automatic Quotation System ("NASDAQ") are valued at the last trade price
listed on the NASDAQ at the close of regular trading (generally 4:00 p.m.
Eastern Time); securities listed on NASDAQ for which there were no sales on that
day and other over-the-counter securities are valued at the mean of the bid and
asked prices available prior to valuation. Securities for which market
quotations are not readily available are valued at fair value as determined in
good faith by or under the direction of the Funds' Board of Directors. The
amortized cost method of valuation may also be used with respect to debt
obligations with sixty days or less remaining to maturity. Any assets which are
denominated in

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a foreign currency are converted into U.S. dollars at the prevailing market
rates for purposes of calculating net asset value.

Foreign currency exchange rates are generally determined prior to
the close of the NYSE. Occasionally, events affecting the value of foreign
securities and such exchange rates occur between the time at which they are
determined and the close of the NYSE, which events will not be reflected in a
computation of the Fund's net asset value. If events materially affecting the
value of such securities or assets or currency exchange rates occurred during
such time period, the securities or assets would be valued at their fair value
as determined in good faith by or under the direction of the Board of Directors.
The foreign currency exchange transactions of a Fund conducted on a spot basis
will be valued at the spot rate for purchasing or selling currency prevailing on
the foreign exchange market. Under normal market conditions this rate differs
from the prevailing exchange rate by an amount generally less than one-tenth of
one percent due to the costs of converting from one currency to another.

In determining the approximate market value of portfolio
investments, the Funds may employ outside organizations, which may use a matrix
or formula method that takes into consideration market indices, matrices, yield
curves and other specific adjustments. This may result in the securities being
valued at a price different from the price that would have been determined had
the matrix or formula method not been used. All cash, receivables and current
payables are carried on the Funds' books at their face value. Other assets, if
any, are valued at fair value as determined in good faith by the Funds' Board of
Directors.

PERFORMANCE INFORMATION

TOTAL RETURN. Each Fund that advertises its "average annual total
return" computes such return separately for each class of shares by determining
the average annual compounded rate of return during specified periods that
equates the initial amount invested to the ending redeemable value of such
investment according to the following formula:

ERV 1/n
T = [(______) - 1]
P

Where: T = average annual total return;

ERA = ending redeemable value of a hypothetical
$1,00 payment made at the beginning of the 1,
5 or 10 year (or other) periods at the end of
the applicable period (or a fractional
portion thereof);

P = hypothetical initial payment of $1,000; and

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n = period covered by the computation, expressed
in years.

Each Fund that advertises its "aggregate total return" computes
such returns separately for each class of shares by determining the aggregate
compounded rates of return during specified periods that likewise equate the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating aggregate total return is as follows:

ERV
Aggregate Total Return = [(-----) - l]
P

The calculations are made assuming that (1) all dividends and
capital gain distributions are reinvested on the reinvestment dates at the price
per share existing on the reinvestment date, (2) all recurring fees charged to
all shareholder accounts are included, and (3) for any account fees that vary
with the size of the account, a mean (or median) account size in the Fund during
the periods is reflected. The ending redeemable value (variable "ERV" in the
formula) is determined by assuming complete redemption of the hypothetical
investment after deduction of all nonrecurring charges at the end of the
measuring period.

The Funds may also from time to time include in such advertising
an aggregate total return figure or a total return figure that is not calculated
according to the formula set forth above in order to compare more accurately a
Fund's performance with other measures of investment return. For example, in
comparing a Fund's total return with data published by Lipper Analytical
Services, Inc., CAD Investment Technologies, Inc. or Weisenberger Investment
Company Service, or with the performance of the Salomon Smith Barney 1-Month
Treasury Bill Index,-TM- Standard & Poor's 500 Stock Index or the Dow Jones
Industrial Average, as appropriate, a Fund may calculate its aggregate and/or
average annual total return for the specified periods of time by assuming the
investment of $10,000 in Fund shares and assuming the reinvestment of each
dividend or other distribution at net asset value on the reinvestment date. The
Funds do not, for these purposes, deduct from the initial value invested any
amount representing sales charges. The Funds will, however, disclose the maximum
sales charge and will also disclose that the performance data do not reflect
sales charges and that inclusion of sales charges would reduce the performance
quoted. Such alternative total return information will be given no greater
prominence in such advertising than the information prescribed under SEC rules,
and all advertisements containing performance data will include a legend
disclosing that such performance data represent past performance and that the
investment return and principal value of an investment will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.

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TAXES

GENERAL TAX CONSEQUENCES TO THE FUNDS AND ITS SHAREHOLDERS. The
following is only a summary of certain additional tax considerations generally
affecting the Funds and their shareholders that are not described in the Funds'
Prospectuses. No attempt is made to present a detailed explanation of the tax
treatment of the Funds or their shareholders, and the discussion in this
Statement of Additional Information and in the Prospectuses is not intended as a
substitute for careful tax planning. Investors are urged to consult their tax
advisers with specific reference to their own tax situation.

Each Fund has elected to be taxed as a regulated investment
company under Part I of Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). As a regulated investment company, each Fund is exempt
from federal income tax on its net investment income and realized capital gains
which it distributes to shareholders, provided that it (a) distributes an amount
equal to the sum of (i) at least 90% of its investment company taxable income
(net taxable investment income and the excess of net short-term capital gain
over net long-term capital loss, if any, for the year) and (ii) at least 90% of
its net tax-exempt interest income, if any, for the year (the "Distribution
Requirement"), and (b) satisfies certain other requirements of the Code that are
described below. Distributions of investment company taxable income and net
tax-exempt interest income made during the taxable year or, under specified
circumstances, within twelve months after the close of the taxable year will
satisfy the Distribution Requirement. The Distribution Requirement for any year
may be waived if a regulated investment company establishes to the satisfaction
of the Internal Revenue Service that it is unable to satisfy the Distribution
Requirement by reason of distributions previously made for the purpose of
avoiding liability for federal excise tax (discussed below).

In addition to satisfaction of the Distribution Requirement, each
Fund must derive at least 90% of its gross income from dividends, interest,
certain payments with respect to securities loans and gains from the sale or
other disposition of stock or securities or foreign currencies, or from other
income derived with respect to its business of investing in such stock,
securities, or currencies (the "Income Requirement").

Future Treasury regulations may provide that currency gains that
are not "directly related" to a Fund's principal business of investing in stock
or securities (or in options or futures with respect to stock or securities)
will not satisfy the Income Requirement. Income derived by a regulated
investment company from a partnership or trust (including a foreign entity that
is classified as a partnership or trust for U.S. federal income tax purposes)
will satisfy the Income Requirement only to the extent such income is
attributable to items of income of the partnership or trust that would satisfy
the Income Requirement if

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they were realized by a regulated investment company in the same manner as
realized by the partnership or trust.

In addition to the foregoing requirements, at the close of each
quarter of its taxable year, at least 50% of the value of each Fund's assets
must consist of cash and cash items, U.S. Government securities, securities of
other regulated investment companies, and securities of other issuers (as to
which the Fund has not invested more than 5% of the value of its total assets in
securities of such issuer and as to which the Fund does not hold more than 10%
of the outstanding voting securities of such issuer), and no more than 25% of
the value of each Fund's total assets may be invested in the securities of any
one issuer (other than U.S. Government securities and securities of other
regulated investment companies), or in two or more issuers which such Fund
controls and which are engaged in the same or similar trades or businesses (the
"Asset Diversification Requirement").

The Internal Revenue Service has taken the position, in informal
rulings issued to other taxpayers, that the issuer of a repurchase agreement is
the bank or dealer from which securities are purchased. A Fund will not enter
into repurchase agreements with any one bank or dealer if entering into such
agreements would, under the informal position expressed by the Internal Revenue
Service, cause it to fail to satisfy the Asset Diversification Requirement.

Distributions of investment company taxable income will be taxable
(subject to the possible allowance of the dividend received deduction described
below) to shareholders as ordinary income, regardless of whether such
distributions are paid in cash or are reinvested in shares. Shareholders
receiving any distribution from the Funds in the form of additional shares will
be treated as receiving a taxable distribution in an amount equal to the fair
market value of the shares received, determined as of the reinvestment date.

Each Fund intends to distribute to shareholders its excess of net
long-term capital gain over net short-term capital loss ("net capital gain"), if
any, for each taxable year. Such gain is distributed as a capital gain dividend
and is taxable to shareholders as long-term capital gain (20% or 28%, as
applicable), regardless of the length of time the shareholder has held his
shares, whether such gain was recognized by the Fund prior to the date on which
a shareholder acquired shares of the Fund and whether the distribution was paid
in cash or reinvested in shares. The aggregate amount of distributions
designated by any Fund as capital gain dividends may not exceed the net capital
gain of such Fund for any taxable year, determined by excluding any net
long-term capital loss attributable to transactions occurring after October 31
of such year and by treating any such loss as if it arose on the first day of
the following taxable year. Such distributions will be designated as capital
gain dividends in a written notice mailed by the Funds to shareholders

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not later than 60 days after the close of each Fund's respective taxable year.

In the case of corporate shareholders, distributions (other than
capital gain dividends) of a Fund for any taxable year will qualify for the 70%
dividends received deduction, only to the extent of the gross amount of
"qualifying dividends" received by such Fund for the year. Generally, a dividend
will be treated as a "qualifying dividend" only if it has been received from a
domestic corporation. However, if a Fund owns at least 10 percent of the stock
(by vote and value) of certain foreign corporations with U.S. source income,
then a portion of the dividends paid by such foreign corporations may constitute
"qualifying dividends." A dividend received by a taxpayer will not be treated as
a "qualifying dividend" if (1) it has been received with respect to any share of
stock that the taxpayer has held for 45 days (90 days in the case of certain
preferred stock) or less (excluding any day more than 45 days (or 90 days in the
case of certain preferred stock) after the date on which the stock becomes
ex-dividend), or (2) to the extent that the taxpayer is under an obligation
(pursuant to a short sale or otherwise) to make related payments with respect to
positions in substantially similar or related property. The Funds will designate
the portion, if any, of the distribution made by a Fund that qualifies for the
dividends received deduction in a written notice mailed by the Funds to
shareholders not later than 60 days after the close of the Fund's taxable year.

Investors should be aware that any loss realized upon the sale,
exchange or redemption of shares held for six months or less will be treated as
a long-term capital loss to the extent any capital gain dividends have been paid
with respect to such shares.

Corporate taxpayers may be liable for alternative minimum tax,
which is imposed at the rate of 20% of "alternative minimum taxable income"
(less, in the case of corporate shareholders with "alternative minimum taxable
income" of less than $310,000, the applicable "exemption amount"), in lieu of
the regular corporate income tax. "Alternative minimum taxable income," is equal
to "taxable income", (as determined for corporate income regular tax purposes)
with certain adjustments.

Although corporate taxpayers in determining "alternative minimum
taxable income" are allowed to exclude exempt interest dividends (other than
exempt interest dividends derived from certain private activity bonds ("AMT
Preference Dividends"), as explained in the Prospectuses) and to utilize the 70%
dividends received deduction at the first level of computation, the Code
requires (as a second computational step) that "alternative minimum taxable
income" be increased by 75% of the excess of "adjusted current earnings" over
other "alternative minimum taxable income."

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<PAGE> 105
Corporate shareholders will have to take into account (1) all
exempt interest dividends, if any, and (2) the full amount of all dividends from
a Fund that are treated as "qualifying dividends" for purposes of the dividends
received deduction in determining their "adjusted current earnings." As much as
75% of any exempt interest dividend and 82.5% of any "qualifying dividend"
received by a corporate shareholder could, as a consequence, be subject to
alternative minimum tax. Exempt interest dividends received by such a corporate
shareholder may accordingly be subject to alternative minimum tax at an
effective rate of 15%.

"Constructive sale" provisions apply to activities by a Fund which
lock in gain on an "appreciated financial position." Generally, a "position" is
defined to include stock, a debt instrument, or partnership interest, or an
interest in any of the foregoing, including through a short sale, a swap
contract, or a future or forward contract. The entry into a short sale, a swap
contract or a future or forward contract relating to an appreciated direct
position in any stock or debt instrument, or the acquisition of stock or debt
instrument at a time when the Fund occupies an offsetting (short) appreciated
position in the stock or debt instrument, is treated as a "constructive sale"
that gives rise to the immediate recognition of gain (but not loss). The
application of these rules may cause a Fund to recognize taxable income from
these offsetting transactions in excess of the cash generated by such
activities.

If for any taxable year any Fund does not qualify as a regulated
investment company, all of its taxable income will be subject to tax at regular
corporate rates without any deduction for distributions to shareholders, and all
distributions will be taxable as ordinary dividends to the extent of such Fund's
current and accumulated earnings and profits. Such distributions will be
eligible for the dividends received deduction in the case of corporate
shareholders. Investors should be aware that any loss realized on a sale of
shares of a Fund will be disallowed to the extent an investor repurchases shares
of the same Fund within a period of 61 days (beginning 30 days before and ending
30 days after the day of disposition of the shares). Dividends paid by a Fund in
the form of shares within the 61-day period would be treated as a purchase for
this purpose.

The Code imposes a non-deductible 4% excise tax on regulated
investment companies that do not distribute with respect to each calendar year
an amount equal to 98% of their ordinary income for the calendar year plus 98%
of their capital gain net income for the one-year period ending on October 31 of
such calendar year. The balance of such income must be distributed during the
next calendar year. For the foregoing purposes, a company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year. Because each Fund intends to distribute all of its
taxable income currently, no Fund anticipates

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incurring any liability for this excise tax. However, investors should note that
a Fund may in certain circumstances be required to liquidate investments in
order to make sufficient distributions to avoid excise tax liability.

The Funds will be required in certain cases to withhold and remit
to the United States Treasury 31% of dividends paid to any shareholder (1) who
has provided either an incorrect tax identification number or no number at all,
(2) who is subject to backup withholding by the Internal Revenue Service for
prior failure to report the receipt of interest or dividend income properly, or
(3) who has failed to certify to the Funds that he is not subject to backup
withholding or that he is an "exempt recipient."

Transactions in foreign currencies, forward contracts, options and
futures contracts (including options and futures contracts on foreign
currencies) will be subject to special provisions of the Code that, among other
things, may affect the character (i.e., ordinary or capital) of gains or losses
realized by a Fund, accelerate the recognition of income by a Fund and defer a
Fund's losses. Exchange control regulations may restrict repatriations of
investment income and capital or of the proceeds of sales of securities by
investors such as the Funds. In addition, certain investments (such as zero
coupon securities and shares of so-called "passive foreign investment companies"
or "PFICs") may cause a Fund to recognize income without the receipt of cash.
Each of these circumstances, whether separately or in combination, may limit a
Fund's ability to pay sufficient dividends and to make sufficient distributions
to satisfy the Subchapter M and excise tax distributions requirements.

The foregoing general discussion of federal income tax
consequences is based on the Code and the regulations issued thereunder as in
effect on the date of this Statement of Additional Information. Future
legislative or administrative changes or court decisions may significantly
change the conclusions expressed herein, and any such changes or decisions may
have a retroactive effect with respect to the transactions contemplated herein.

Although each Fund expects to qualify as a "regulated investment
company" and to be relieved of all or substantially all federal income taxes,
depending upon the extent of its activities in states and localities in which
its offices are maintained, in which its agents or independent contractors are
located or in which it is otherwise deemed to be conducting business, each Fund
may be subject to the tax laws of such states or localities.

Certain states exempt from state income taxation dividends paid by
a regulated investment company that are derived from interest on U.S. Government
obligations. Each Fund will accordingly inform its shareholders annually of the
percentage,

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if any, of its ordinary dividends that is derived from interest on U.S.
Government obligations. Shareholders should consult with their tax advisers as
to the availability and extent of any applicable state income tax exemption.

SPECIAL TAX CONSIDERATIONS. The following discussion relates to
the particular federal income tax consequences of the investment policies of the
Funds. The ability of the Funds to engage in options, short sale and futures
activities will be somewhat limited by the requirements for their continued
qualification as regulated investment companies under the Code, in particular
the Distribution Requirement and the Asset Diversification Requirement.

Straddles. The options transactions that the Funds enter into may
result in "straddles" for federal income tax purposes. The straddle rules of the
Code may affect the character of gains and losses realized by the Funds. In
addition, losses realized by the Funds on positions that are part of a straddle
may be deferred under the straddle rules, rather than being taken into account
in calculating the investment company taxable income and net capital gain of the
Funds for the taxable year in which such losses are realized. Losses realized
prior to October 31 of any year may be similarly deferred under the straddle
rules in determining the "required distribution" that the Funds must make in
order to avoid federal excise tax. Furthermore, in determining their investment
company taxable income and ordinary income, the Funds may be required to
capitalize, rather than deduct currently, any interest expense on indebtedness
incurred or continued to purchase or carry any positions that are part of a
straddle. The tax consequences to the Funds of holding straddle positions may be
further affected by various elections provided under the Code and Treasury
regulations, but at the present time the Funds are uncertain which (if any) of
these elections they will make.

Because only a few regulations implementing the straddle rules
have been promulgated by the U.S. Treasury, the tax consequences to the Funds of
engaging in options transactions are not entirely clear. Nevertheless, it is
evident that application of the straddle rules may substantially increase or
decrease the amount which must be distributed to shareholders in satisfaction of
the Distribution Requirement (or to avoid federal excise tax liability) for any
taxable year in comparison to a fund that did not engage in options
transactions.

Options and Section 1256 Contracts. The writer of a covered put or
call option generally does not recognize income upon receipt of the option
premium. If the option expires unexercised or is closed on an exchange, the
writer generally recognizes short-term capital gain. If the option is exercised,
the premium is included in the consideration received by the writer in
determining the capital gain or loss recognized in the resultant sale. However,
certain options transactions that the

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Funds enter into, as well as futures transactions and transactions in forward
foreign currency contracts that are traded in the interbank market entered into
by the Funds, will be subject to special tax treatment as "Section 1256
contracts." Section 1256 contracts are treated as if they are sold for their
fair market value on the last business day of the taxable year (i.e.,
marked-to-market), regardless of whether a taxpayer's obligations (or rights)
under such contracts have terminated (by delivery, exercise, entering into a
closing transaction or otherwise) as of such date. Any gain or loss recognized
as a consequence of the year-end marking-to-market of Section 1256 contracts is
combined (after application of the straddle rules that are described above) with
any other gain or loss that was previously recognized upon the termination of
Section 1256 contracts during that taxable year. The net amount of such gain or
loss for the entire taxable year is generally treated as 60% long-term capital
gain or loss and 40% short-term capital gain or loss, except in the case of
marked-to-market forward foreign currency contracts for which such gain or loss
is treated as ordinary income or loss. Such short-term capital gain (and, in the
case of marked-to-market forward foreign currency contracts, such ordinary
income) would be included in determining the investment company taxable income
of the relevant Fund for purposes of the Distribution Requirement, even if it
were wholly attributable to the year-end marking-to-market of Section 1256
contracts that the relevant Fund continued to hold. Investors should also note
that Section 1256 contracts will be treated as having been sold on October 31 in
calculating the "required distribution" that a Fund must make to avoid federal
excise tax liability.

Each of the Funds may elect not to have the year-end
mark-to-market rule apply to Section 1256 contracts that are part of a "mixed
straddle" with other investments of such Fund that are not Section 1256
contracts (the "Mixed Straddle Election").

Foreign Currency Transactions. In general, gains from "foreign
currencies" and from foreign currency options, foreign currency futures and
forward foreign exchange contracts relating to investments in stock, securities
or foreign currencies will be qualifying income for purposes of determining
whether the Fund qualifies as a RIC. It is currently unclear, however, who will
be treated as the issuer of a foreign currency instrument or how foreign
currency options, futures or forward foreign currency contracts will be valued
for purposes of the Asset Diversification Requirement. A Fund may request a
private letter ruling from the Internal Revenue Service for guidance on some or
all of these issues.

Under Code Section 988, special rules are provided for certain
transactions in a foreign currency other than the taxpayer's functional currency
(I.E., unless certain special rules apply, currencies other than the U.S.
dollar). In general, foreign currency gains or losses from certain forward
contracts,

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from futures contracts that are not "regulated futures contracts", and from
unlisted options will be treated as ordinary income or loss. In certain
circumstances where the transaction is not undertaken as part of a straddle, a
Fund may elect capital gain or loss treatment for such transactions.
Alternatively, a Fund may elect ordinary income or loss treatment for
transactions in futures contracts and options on foreign currency that would
otherwise produce capital gain or loss. In general, gains or losses from a
foreign currency transaction subject to Code Section 988 will increase or
decrease the amount of the Fund's investment company taxable income available to
be distributed to shareholders as ordinary income, rather than increasing or
decreasing the amount of the Fund's net capital gain. Additionally, if losses
from a foreign currency transaction subject to Code Section 988 exceed other
investment company taxable income during a taxable year, a Fund will not be able
to make any ordinary dividend distributions, and any distributions made before
the losses were realized but in the same taxable year would be recharacterized
as a return of capital to shareholders, thereby reducing each shareholder's
basis in his Shares.

Passive Foreign Investment Companies. If a Fund acquires shares in
certain foreign investment entities, called "passive foreign investment
companies" ("PFIC"), such Fund may be subject to "deferred" federal income tax
on a portion of any "excess distribution" received with respect to such shares
or on a portion of any gain recognized upon a disposition of such shares,
notwithstanding the distribution of such income to the shareholders of such
Fund. Additional charges in the nature of interest may also be imposed on a Fund
in respect of such deferred taxes. However, in lieu of sustaining the foregoing
tax consequences, a Fund may elect to have its investment in any PFIC taxed as
an investment in a "qualified electing fund" ("QEF"). A Fund making a QEF
election would be required to include in its income each year a ratable portion,
whether or not distributed, of the ordinary earnings and net capital gain of the
QEF. Any such QEF inclusions would have to be taken into account by a Fund for
purposes of satisfying the Distribution Requirement and the excise tax
distribution requirement.

The Code permits a Fund to elect (in lieu of paying deferred tax
or making a QEF election) to mark-to-market annually any PFIC shares that it
owns and to include any gains (but not losses) that it is deemed to realize as
ordinary income. A Fund generally is not subject to deferred federal income tax
on any gains that it is deemed to realize as a consequence of making a
mark-to-market election, but such gains are taken into account by the Fund for
purposes of satisfying the Distribution Requirement and the excise tax
distribution requirement.

Asset Diversification Requirement. For purposes of the Asset
Diversification Requirement, the issuer of a call option on a security
(including an option written on an exchange) will be deemed to be the issuer of
the underlying security. The Internal

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Revenue Service has informally ruled, however, that a call option that is
written by a fund need not be counted for purposes of the Asset Diversification
Requirement where the fund holds the underlying security. However, the Internal
Revenue Service has also informally ruled that a put option written by a fund
must be treated as a separate asset and its value measured by "the value of the
underlying security" for purposes of the Asset Diversification Requirement,
regardless (apparently) of whether it is "covered" under the rules of the
exchange. The Internal Revenue Service has not explained whether in valuing a
written put option in this manner a fund should use the current value of the
underlying security (its prospective future investment); the cash consideration
that must be paid by the fund if the put option is exercised (its liability); or
some other measure that would take into account the fund's unrealized profit or
loss in writing the option. Under the Code, a fund may not rely on informal
rulings of the Internal Revenue Service issued to other taxpayers. Consequently,
a Fund may find it necessary to seek a ruling from the Internal Revenue Service
on this issue or to curtail its writing of options in order to stay within the
limits of the Asset Diversification Requirement.

ADDITIONAL INFORMATION CONCERNING THE COMPANY SHARES

The Funds do not currently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. The
Funds' By-Laws provide that shareholders collectively owning at least ten
percent of the outstanding shares of all classes of Common Stock of the Funds
have the right to call for a meeting of shareholders to consider the removal of
one or more directors. To the extent required by law, the Funds will assist in
shareholder communication in such matters.

MISCELLANEOUS

COUNSEL. The law firm of Willkie Farr & Gallagher, 787 Seventh
Avenue, New York, New York 10019-6099, serves as counsel to the Funds and the
non-interested directors.

INDEPENDENT ACCOUNTANTS. PricewaterhouseCoopers LLP, 2400 Eleven
Penn Center, Philadelphia, Pennsylvania 19103, serves as the Funds' independent
accountants ("PWC").

CONTROL PERSONS. As of [INSERT], 1998, to the Funds' knowledge,
the following named persons at the addresses shown below owned of record
approximately 5% or more of the total outstanding shares of the class of the
Funds indicated below. See "Additional Information Concerning the Fund's Shares"
above. The Funds do not know whether such persons also beneficially own such
shares.

FINANCIAL STATEMENTS

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The Funds' financial statements follow the Report of Independent
Accountants.

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APPENDIX A

COMMERCIAL PAPER RATINGS

A Standard & Poor's Ratings Services ("S&P") commercial paper
rating is a current assessment of the likelihood of timely payment of debt
having an original maturity of no more than 365 days. The following summarizes
the rating categories used by Standard and Poor's for commercial paper:

"A-1" - Obligations are rated in the highest category indicating
that the obligor's capacity to meet its financial commitment is strong. Within
this category, certain obligations are designated with a plus sign (+). This
indicates that the obligor's capacity to meet its financial commitment on these
obligations is extremely strong.

"A-2" - Obligations are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations
rated "A-1". However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.

"A-3" - Obligations exhibit adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.

"B" - Obligations are regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.

"C" - Obligations are currently vulnerable to nonpayment and are
dependent on favorable business, financial, and economic conditions for the
obligor to meet its financial obligation.

"D" - Obligations are in payment default. The "D" rating category
is used when payments on an obligation are not made on the date due, even if the
applicable grace period has not expired, unless S&P believes such payments will
be made during such grace period. The "D" rating will also be used upon the
filing of a bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.

Moody's Investors Service, Inc. ("Moody's") commercial paper
ratings are opinions of the ability of issuers to repay punctually senior debt
obligations not having an original maturity in excess of one year, unless
explicitly noted. The following summarizes the rating categories used by Moody's
for commercial paper:

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"Prime-1" - Issuers (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.

"Prime-2" - Issuers (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

"Prime-3" - Issuers (or supporting institutions) have an
acceptable ability for repayment of senior short-term debt obligations. The
effect of industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.

"Not Prime" - Issuers do not fall within any of the Prime rating
categories.

The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D-1+," "D-1" and "D-1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper:

"D-1+" - Debt possesses the highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.

"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.

"D-1-" - Debt possesses high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental protection
factors. Risk factors are very small.

"D-2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound.

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<PAGE> 114
Although ongoing funding needs may enlarge total financing requirements, access
to capital markets is good. Risk factors are small.

"D-3" - Debt possesses satisfactory liquidity and other protection
factors qualify issues as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.

"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.

"D-5" - Issuer has failed to meet scheduled principal and/or
interest payments.

Fitch IBCA short-term ratings apply to debt obligations that have
time horizons of less than 12 months for most obligations, or up to three years
for U.S. public finance securities. The following summarizes the rating
categories used by Fitch IBCA for short-term obligations:

"F1" - Securities possess the highest credit quality. This
designation indicates the strongest capacity for timely payment of financial
commitments and may have an added "+" to denote any exceptionally strong credit
feature.

"F2" - Securities possess good credit quality. This designation
indicates a satisfactory capacity for timely payment of financial commitments,
but the margin of safety is not as great as in the case of securities rated
"F1".

"F3" - Securities possess fair credit quality. This designation
indicates that the capacity for timely payment of financial commitments is
adequate; however, near-term adverse changes could result in a reduction to
non-investment grade.

"B" - Securities possess speculative credit quality. This
designation indicates minimal capacity for timely payment of financial
commitments, plus vulnerability to near-term adverse changes in financial and
economic conditions.

"C" - Securities possess high default risk. This designation
indicates that the capacity for meeting financial commitments is solely reliant
upon a sustained, favorable business and economic environment.

"D" - Securities are in actual or imminent payment default.

Thomson BankWatch short-term ratings assess the likelihood of an
untimely payment of principal and interest of

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debt instruments with original maturities of one year or less. The following
summarizes the ratings used by Thomson BankWatch:

"TBW-1" - This designation represents Thomson BankWatch's highest
category and indicates a very high likelihood that principal and interest will
be paid on a timely basis.

"TBW-2" - This designation represents Thomson BankWatch's
second-highest category and indicates that while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated "TBW-1."

"TBW-3" - This designation represents Thomson BankWatch's lowest
investment-grade category and indicates that while the obligation is more
susceptible to adverse developments (both internal and external) than those with
higher ratings, the capacity to service principal and interest in a timely
fashion is considered adequate.

"TBW-4" - This designation represents Thomson BankWatch's lowest
rating category and indicates that the obligation is regarded as non-investment
grade and therefore speculative.

CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS

The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:

"AAA" - An obligation rated "AAA" has the highest rating assigned
by Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.

"AA" - An obligation rated "AA" differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.

"A" - An obligation rated "A" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity to meet
its financial commitment on the obligation is still strong.

"BBB" - An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.

"BB," "B," "CCC," "CC" and "C" - Debt is regarded as having
significant speculative characteristics. "BB" indicates

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the least degree of speculation and "C" the highest. While such obligations will
likely have some quality and protective characteristics, these may be outweighed
by large uncertainties or major exposures to adverse conditions.

"BB" - Debt is less vulnerable to non-payment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.

"B" - Debt is more vulnerable to non-payment than obligations
rated "BB", but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial or economic conditions
will likely impair the obligor's capacity or willingness to meet its financial
commitment on the obligation.

"CCC" - Debt is currently vulnerable to non-payment, and is
dependent upon favorable business, financial and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial or economic conditions, the obligor is not likely to
have the capacity to meet its financial commitment on the obligation.

"CC" - An obligation rated "CC" is currently highly vulnerable to
non-payment.

"C" - The "C" rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action has been taken, but
payments on this obligation are being continued.

"D" - An obligation rated "D" is in payment default. This rating
is used when payments on an obligation are not made on the date due, even if the
applicable grace period has not expired, unless S & P believes that such
payments will be made during such grace period. "D" rating is also used upon the
filing of a bankruptcy petition or the taking of similar action if payments on
an obligation are jeopardized.

PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.

"r" - This rating is attached to highlight derivative, hybrid, and
certain other obligations that S & P believes may experience high volatility or
high variability in expected returns due to non-credit risks. Examples of such
obligations are: securities whose principal or interest return is indexed to
equities, commodities, or currencies; certain swaps and options; and
interest-only and principal-only mortgage securities. The absence of an "r"
symbol should not be taken as an indication that an obligation will exhibit no
volatility or variability in total return.

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The following summarizes the ratings used by Moody's for corporate
and municipal long-term debt:

"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

"Aa" - Bonds are judged to be of high quality by all standards.
Together with the "Aaa" group they comprise what are generally known as
high-grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in "Aaa"
securities.

"A" - Bonds possess many favorable investment attributes and are
to be considered as upper medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.

"Baa" - Bonds are considered as medium-grade obligations, (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of these
ratings provide questionable protection of interest and principal ("Ba"
indicates speculative elements; "B" indicates a general lack of characteristics
of desirable investment; "Caa" are of poor standing; "Ca" represents obligations
which are speculative in a high degree; and "C" represents the lowest rated
class of bonds). "Caa," "Ca" and "C" bonds may be in default.

Con. (---) - Bonds for which the security depends upon the
completion of some act or the fulfillment of some condition are rated
conditionally. These are bonds secured by (a) earnings of projects under
construction, (b) earnings of projects unseasoned in operation experience, (c)
rentals which begin when facilities are completed, or (d) payments to which some
other limiting condition attaches. Parenthetical rating denotes probable credit
stature upon completion of construction or elimination of basis of condition.

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Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols, Aa1, A1, Baa1, Ba1 and B1.

The following summarizes the long-term debt ratings used by Duff &
Phelps for corporate and municipal long-term debt:

"AAA" - Debt is considered to be of the highest credit quality.
The risk factors are negligible, being only slightly more than for risk-free
U.S. Treasury debt.

"AA" - Debt is considered of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.

"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.

"BBB" - Debt possesses below-average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.

"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of
these ratings is considered to be below investment grade.

Although below investment grade, debt rated "BB" is deemed likely
to meet obligations when due. Debt rated "B" possesses the risk that obligations
will not be met when due. Debt rated "CCC" is well below investment grade and
has considerable uncertainty as to timely payment of principal, interest or
preferred dividends. Debt rated "DD" is a defaulted debt obligation, and the
rating "DP" represents preferred stock with dividend arrearages.

To provide more detailed indications of credit quality, the "AA,"
"A," "BBB," "BB" and "B" ratings may be modified by the addition of a plus (+)
or minus (-) sign to show relative standing within these major categories.

The following summarizes the ratings used by Fitch IBCA for
corporate and municipal bonds:

"AAA" - Bonds considered to be investment grade and of the highest
credit quality. These ratings denote the lowest expectation of investment risk
and are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is very unlikely to be adversely
affected by foreseeable events.

"AA" - Bonds considered to be investment grade and of very high
credit quality. These ratings denote a very low

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expectation of investment risk and indicate very strong capacity for timely
payment of financial commitments. This capacity is not significantly vulnerable
to foreseeable events.

"A" - Bonds considered to be investment grade and of high credit
quality. These ratings denote a low expectation of investment risk and indicate
strong capacity for timely payment of financial commitments. This capacity may,
nevertheless, be more vulnerable to adverse changes in circumstances or in
economic conditions than bonds with higher ratings.

"BBB" - Bonds considered to be investment grade and of good credit
quality. These ratings denote that there is currently a low expectation of
investment risk. The capacity for timely payment of financial commitments is
adequate, but adverse circumstances and in economic conditions are more likely
to impair this category.

"BB" - Bonds considered to be speculative. These ratings indicate
that there is a possibility of credit risk developing, particularly as the
result of adverse economic changes over time; however, business or financial
alternatives may be available to allow financial commitments to be met.
Securities rated in this category are not investment grade.

"B" - Bonds are considered highly speculative. these ratings
indicate that significant credit risk is present, but a limited margin of safety
remains. Financial commitments are currently being met; however, capacity for
continued payment is contingent upon a sustained, favorable business and
economic environment.

"CCC", "CC", "C" - Bonds have high default risk. Capacity for
meeting financial commitments is reliant upon sustained, favorable business or
economic developments. "CC" ratings indicate that default of some kind appears
probable, and "C" ratings signal imminent default.

"DDD," "DD" and "D" - Bonds are in default. Securities are not
meeting obligations and are extremely speculative. "DDD" designates the highest
potential for recovery on these securities, and "D" represents the lowest
potential for recovery.

To provide more detailed indications of credit quality, the Fitch
IBCA ratings from and including "AA" to "B" may be modified by the addition of a
plus (+) or minus (-) sign to show relative standing within these major rating
categories.

Thomson BankWatch assesses the likelihood of an untimely repayment
of principal or interest over the term to maturity of long term debt and
preferred stock which are issued by United States commercial banks, thrifts and
non-bank banks; non-United States banks; and broker-dealers. The following

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summarizes the rating categories used by Thomson BankWatch for long-term debt
ratings:

"AAA" - This designation represents the highest category assigned
by Thomson BankWatch to long-term debt and indicates that the ability to repay
principal and interest on a timely basis is extremely high.

"AA" - This designation indicates a very strong ability to repay
principal and interest on a timely basis with limited incremental risk compared
to issues rated in the highest category.

"A" - This designation indicates that the ability to repay
principal and interest is strong. Issues rated "A" could be more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.

"BBB" - This designation represents Thomson BankWatch's lowest
investment-grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.

"BB," "B," "CCC," and "CC," - These designations are assigned by
Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.

"D" - This designation indicates that the long-term debt is in
default.

PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may
include a plus or minus sign designation which indicates where within the
respective category the issue is placed.

MUNICIPAL NOTE RATINGS

A S&P rating reflects the liquidity concerns and market access
risks unique to notes due in three years or less. The following summarizes the
ratings used by Standard & Poor's Ratings Group for municipal notes:

"SP-1" - The issuers of these municipal notes exhibit a strong
capacity to pay principal and interest. Those issues determined to possess very
strong characteristics are given a plus (+) designation.

"SP-2" - The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest, with some vulnerability to adverse
financial and economic changes over the term of the notes.

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"SP-3" - The issuers of these municipal notes exhibit speculative
capacity to pay principal and interest.

Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:

"MIG-1"/"VMIG-1" - This designation denotes best quality, enjoying
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.

"MIG-2"/"VMIG-2" - This designation denotes high quality, with
margins of protection ample although not so large as in the preceding group.

"MIG-3"/"VMIG-3" - This designation denotes favorable quality,
with all security elements accounted for but lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be narrow and
market access for refinancing is likely to be less well established.

"MIG-4"/"VMIG-4" - This designation denotes adequate quality,
carrying specific risk but having protection commonly regarded as required of an
investment security and not distinctly or predominantly speculative.

"SG" - This designation denotes speculative quality and lack of
margins of protection.

Fitch IBCA and Duff & Phelps use the short-term ratings described
under Commercial Paper Ratings for municipal notes.

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APPENDIX B

As stated in the Prospectuses, the Funds may enter into certain
futures transactions. Such transactions are described in this Appendix.

I. INTEREST RATE FUTURES CONTRACTS

USE OF INTEREST RATE FUTURES CONTRACTS. Bond prices are
established in both the cash market and the futures market. In the cash market,
bonds are purchased and sold with payment for the full purchase price of the
bond being made in cash, generally within five business days after the trade. In
the futures market, only a contract is made to purchase or sell a bond in the
future for a set price on a certain date. Historically, the prices for bonds
established in the futures markets have tended to move generally in the
aggregate in concert with the cash market prices and have maintained fairly
predictable relationships. Accordingly, a Fund may use interest rate futures
contracts as a defense, or hedge, against anticipated interest rate changes. As
described below, this would include the use of futures contract sales to protect
against expected increases in interest rates and futures contract purchases to
offset the impact of interest rate declines.

A Fund could accomplish a similar result to that which it hopes to
achieve through the use of futures contracts by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase, or conversely, selling short-term bonds and investing in
long-term bonds when interest rates are expected to decline. However, because of
the liquidity that is often available in the futures market, the protection is
more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by the Fund, by using futures contracts.

DESCRIPTION OF INTEREST RATE FUTURES CONTRACTS. An interest rate
futures contract sale would create an obligation by a Fund, as seller, to
deliver the specific type of financial instrument called for in the contract at
a specific future time for a specified price. A futures contract purchase would
create an obligation by a Fund, as purchaser, to take delivery of the specific
type of financial instrument at a specific future time at a specific price. The
specific securities delivered or taken, respectively, at settlement date, would
not be determined until at or near that date. The determination would be in
accordance with the rules of the exchange on which the futures contract sale or
purchase was made.

Although interest rate futures contracts by their terms call for
actual delivery or acceptance of securities, in most cases the contracts are
closed out before the settlement date without the making or taking of delivery
of securities. Closing out a futures contract sale is effected by a Fund
entering into a

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futures contract purchase for the same aggregate amount of the specific type of
financial instrument and the same delivery date. If the price of the sale
exceeds the price of the offsetting purchase, the Fund is immediately paid the
difference and thus realizes a gain. If the offsetting purchase price exceeds
the sale price, the Fund pays the difference and realizes a loss. Similarly, the
closing out of a futures contract purchase is effected by the Fund entering into
a futures contract sale. If the offsetting sale price exceeds the purchase
price, the Fund realizes a gain, and if the purchase price exceeds the
offsetting sale price, the Fund realizes a loss.

Interest rate futures contracts are traded in an auction
environment on the floors of several exchanges -- principally, the Chicago Board
of Trade, the Chicago Mercantile Exchange and the New York Futures Exchange.
Each exchange guarantees performance under contract provisions through a
clearing corporation, a nonprofit organization managed by the exchange
membership.

A public market now exists in futures contracts covering various
financial instruments including long-term U.S. Treasury Bonds and Notes;
Government National Mortgage Association (GNMA) modified pass-through mortgage
backed securities; three-month U.S. Treasury Bills; and ninety-day commercial
paper. The Funds may trade in any interest rate futures contracts for which
there exists a public market, including, without limitation, the foregoing
instruments.

With regard to each Fund, the Adviser also anticipates engaging in
transactions, from time to time, in foreign stock index futures such as the
ALL-ORDS (Australia), CAC-40 (France), TOPIX (Japan) and the FTSE-100 (United
Kingdom).

II. INDEX FUTURES CONTRACTS

GENERAL. A stock or bond index assigns relative values to the
stocks or bonds included in the index, which fluctuates with changes in the
market values of the stocks or bonds included. Some stock index futures
contracts are based on broad market indexes, such as Standard & Poor's 500 or
the New York Stock Exchange Composite Index. In contrast, certain exchanges
offer futures contracts on narrower market indexes, such as the Standard &
Poor's 100 or indexes based on an industry or market indexes, such as Standard &
Poor's 100 or indexes based on an industry or market segment, such as oil and
gas stocks. Futures contracts are traded on organized exchanges regulated by the
Commodity Futures Trading Commission. Transactions on such exchanges are cleared
through a clearing corporation, which guarantees the performance of the parties
to each contract. With regard to each Fund, to the extent consistent with its
investment objective, the Adviser anticipates engaging in transactions, from
time to time, in foreign stock index futures such as the ALL-ORDS

B-2
<PAGE> 124
(Australia), CAC-40 (France), TOPIX (Japan) and the FTSE-100 (United Kingdom).

A Fund might sell index futures contracts in order to offset a
decrease in market value of its portfolio securities that might otherwise result
from a market decline. A Fund might do so either to hedge the value of its
portfolio as a whole, or to protect against declines, occurring prior to sales
of securities, in the value of the securities to be sold. Conversely, a Fund
might purchase index futures contracts in anticipation of purchases of
securities. A long futures position may be terminated without a corresponding
purchase of securities.

In addition, a Fund might utilize index futures contracts in
anticipation of changes in the composition of its portfolio holdings. For
example, in the event that a Fund expects to narrow the range of industry groups
represented in its holdings it may, prior to making purchases of the actual
securities, establish a long futures position based on a more restricted index,
such as an index comprised of securities of a particular industry group. A Fund
may also sell futures contracts in connection with this strategy, in order to
protect against the possibility that the value of the securities to be sold as
part of the restructuring of the portfolio will decline prior to the time of
sale.

III. FUTURES CONTRACTS ON FOREIGN CURRENCIES

A futures contract on foreign currency creates a binding
obligation on one party to deliver, and a corresponding obligation on another
party to accept delivery of, a stated quantity of foreign currency, for an
amount fixed in U.S. dollars (or another currency). Foreign currency futures may
be used by a Fund to hedge against exposure to fluctuations in exchange rates
between different currencies arising from multinational transactions.

IV. MARGIN PAYMENTS

Unlike purchase or sales of portfolio securities, no price is paid
or received by a Fund upon the purchase or sale of a futures contract.
Initially, a Fund will be required to deposit with the broker or in a segregated
account with a custodian an amount of liquid assets known as initial margin,
based on the value of the contract. The nature of initial margin in futures
transactions is different from that of margin in security transactions in that
futures contract margin does not involve the borrowing of funds by the customer
to finance the transactions. Rather, the initial margin is in the nature of a
performance bond or good faith deposit on the contract which is returned to the
Fund upon termination of the futures contract assuming all contractual
obligations have been satisfied. Subsequent payments, called variation margin,
to and from the broker, will be made on a daily basis as the price of the

B-3
<PAGE> 125
underlying instruments fluctuates making the long and short positions in the
futures contract more or less valuable, a process known as
marking-to-the-market. For example, when a particular Fund has purchased a
futures contract and the price of the contract has risen in response to a rise
in the underlying instruments, that position will have increased in value and
the Fund will be entitled to receive from the broker a variation margin payment
equal to that increase in value. Conversely, where the Fund has purchased a
futures contract and the price of the future contract has declined in response
to a decrease in the underlying instruments, the position would be less valuable
and the Fund would be required to make a variation margin payment to the broker.
Prior to expiration of the futures contract, the Adviser may elect to close the
position by taking an opposite position, subject to the availability of a
secondary market, which will operate to terminate the Fund's position in the
futures contract. A final determination of variation margin is then made,
additional cash is required to be paid by or released to the Fund, and the Fund
realizes a loss or gain.

V. RISKS OF TRANSACTIONS IN FUTURES CONTRACTS

There are several risks in connection with the use of futures by a
Fund. One risk arises because of the imperfect correlation between movements in
the price of the futures and movements in the price of any instruments which are
the subject of a hedge. The price of the futures may move more than or less than
the price of the instruments being hedged. If the price of the futures moves
less than the price of the instruments which are the subject of the hedge, the
hedge will not be fully effective but, if the price of the instruments being
hedged has moved in an unfavorable direction, the Fund would be in a better
position than if it had not hedged at all. If the price of the instruments being
hedged has moved in a favorable direction, this advantage will be partially
offset by the loss on the futures. If the price of the futures moves more than
the price of the hedged instruments, the Fund involved will experience either a
loss or gain on the futures which will not be completely offset by movements in
the price of the instruments which are the subject of the hedge. To compensate
for the imperfect correlation of movements in the price of instruments being
hedged and movements in the price of futures contracts, a Fund may buy or sell
futures contracts in a greater dollar amount than the dollar amount of
instruments being hedged if the volatility over a particular time period of the
prices of such instruments has been greater than the volatility over such time
period of the future, or if otherwise deemed to be appropriate by the Adviser.
Conversely, a Fund may buy or sell fewer futures contracts if the volatility
over a particular time period of the prices of the instruments being hedged is
less than the volatility over such time period of the futures contract being
used, or if otherwise deemed to be appropriate by the Adviser. It is also
possible that, where a Fund has sold futures to hedge its portfolio against a
decline in the market, the market may advance and the

B-4
<PAGE> 126
value of instruments held in the Fund may decline. If this occurred, the Fund
would lose money on the futures and also experience a decline in value in its
portfolio securities.

When futures are purchased to hedge against a possible increase in
the price of securities or a currency before a Fund is able to invest its cash
(or cash equivalents) in an orderly fashion, it is possible that the market may
decline instead; if the Fund then concludes not to invest its cash at that time
because of concern as to possible further market decline or for other reasons,
the Fund will realize a loss on the futures contract that is not offset by a
reduction in the price of the instruments that were to be purchased.

In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the futures and any
instruments being hedged, the price of futures may not correlate perfectly with
movement in the cash market due to certain market distortions. Rather than
meeting additional margin deposit requirements, investors may close futures
contracts through off-setting transactions which could distort the normal
relationship between the cash and futures markets. Second, with respect to
financial futures contracts, the liquidity of the futures market depends on
participants entering into off-setting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced thus producing distortions. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price distortion in the
futures market, and because of the imperfect correlation between the movements
in the cash market and movements in the price of futures, a correct forecast of
general market trends or interest rate movements by the adviser may still not
result in a successful hedging transaction over a short time frame.

Positions in futures may be closed out only on an exchange or
board of trade which provides a secondary market for such futures. Although the
Funds intend to purchase or sell futures only on exchanges or boards of trade
where there appear to be active secondary markets, there is no assurance that a
liquid secondary market on any exchange or board of trade will exist for any
particular contract or at any particular time. In such event, it may not be
possible to close a futures investment position, and in the event of adverse
price movements, a Fund would continue to be required to make daily cash
payments of variation margin. However, in the event futures contracts have been
used to hedge portfolio securities, such securities will not be sold until the
futures contract can be terminated. In such circumstances, an increase in the
price of the securities, if any, may partially or completely offset losses on
the futures

B-5
<PAGE> 127
contract. However, as described above, there is no guarantee that the price of
the securities will in fact correlate with the price movements in the futures
contract and thus provide an offset on a futures contract.

Further, it should be noted that the liquidity of a secondary
market in a futures contract may be adversely affected by "daily price
fluctuation limits" established by commodity exchanges which limit the amount of
fluctuation in a futures contract price during a single trading day. Once the
daily limit has been reached in the contract, no trades may be entered into at a
price beyond the limit, thus preventing the liquidation of open futures
positions. The trading of futures contracts is also subject to the risk of
trading halts, suspensions, exchange or clearing house equipment failures,
government intervention, insolvency of a brokerage firm or clearing house or
other disruptions of normal activity, which could at times make it difficult or
impossible to liquidate existing positions or to recover excess variation margin
payments.

Successful use of futures by a Fund is also subject to the
Adviser's ability to predict correctly movements in the direction of the market.
For example, if a particular Fund has hedged against the possibility of a
decline in the market adversely affecting securities held by it and securities
prices increase instead, the Fund will lose part or all of the benefit to the
increased value of its securities which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such situations, if
the Fund has insufficient cash, it may have to sell securities to meet daily
variation margin requirements. Such sales of securities may be, but will not
necessarily be, at increased prices which reflect the rising market. A Fund may
have to sell securities at a time when it may be disadvantageous to do so.

The risk of loss in trading futures contracts in some strategies
can be substantial, due both to the low margin deposits required, and the
extremely high degree of leverage involved in futures pricing. As a result, a
relatively small price movement in a futures contract may result in immediate
and substantial loss (as well as gain) to the investor. For example, if at the
time of purchase, 10% of the value of the futures contract is deposited as
margin, a subsequent 10% decrease in the value of the futures contract would
result in a total loss of the margin deposit, before any deduction for the
transaction costs, if the account were then closed out. A 15% decrease would
result in a loss equal to 150% of the original margin deposit, before any
deduction for the transaction costs, if the contract were closed out. Thus, a
purchase or sale of a futures contract may result in losses in excess of the
amount invested in the contract.

B-6
<PAGE> 128
VI. OPTIONS ON FUTURES CONTRACTS

A Fund may purchase and write options on the futures contracts
described above. A futures option gives the holder, in return for the premium
paid, the right to buy (call) from or sell (put) to the writer of the option a
futures contract at a specified price at any time during the period of the
option. Upon exercise, the writer of the option is obligated to pay the
difference between the cash value of the futures contract and the exercise
price. Like the buyer or seller of a futures contract, the holder, or writer, of
an option has the right to terminate its position prior to the scheduled
expiration of the option by selling, or purchasing an option of the same series,
at which time the person entering into the closing transaction will realize a
gain or loss. A Fund will be required to deposit initial margin and variation
margin with respect to put and call options on futures contracts written by it
pursuant to brokers' requirements similar to those described above. Net option
premiums received will be included as initial margin deposits. As an example, in
anticipation of a decline in interest rates, a Portfolio may purchase call
options on futures contracts as a substitute for the purchase of futures
contracts to hedge against a possible increase in the price of securities which
the Fund intends to purchase. Similarly, if the value of the securities held by
a Fund is expected to decline as a result of an increase in interest rates, the
Fund might purchase put options or sell call options on futures contracts rather
than sell futures contracts.

Investments in futures options involve some of the same
considerations that are involved in connection with investments in futures
contracts (for example, the existence of a liquid secondary market). In
addition, the purchase or sale of an option also entails the risk that changes
in the value of the underlying futures contract will not correspond to changes
in the value of the option purchased. Depending on the pricing of the option
compared to either the futures contract upon which it is based, or upon the
price of the underlying securities or currencies, an option may or may not be
less risky than ownership of the futures contract or such securities or
currencies. In general, the market prices of options can be expected to be more
volatile than the market prices on the underlying futures contract. Compared to
the purchase or sale of futures contracts, however, the purchase of call or put
options on futures contracts may frequently involve less potential risk to a
Fund because the maximum amount at risk is the premium paid for the options
(plus transaction costs). The writing of an option on a futures contract
involves risks similar to those risks relating to the sale of futures contracts.

VII. OTHER MATTERS

Accounting for futures contracts will be in accordance with
generally accepted accounting principles.

B-7
<PAGE> 129
The Funds intend to comply with the regulations of the Commodity
Futures Trading Commission exempting the Funds from registration as a "commodity
pool operator."

B-8
<PAGE> 130
PART C
OTHER INFORMATION

Item 24. Financial Statements and Exhibits

(a) Financial Statements --

(1) Financial Statements included in Part B. *

(a) Report of PricewaterhouseCoopers LLP, Independent
Accountants*

(b) Statement of Net Assets and Liabilities*

(b) Exhibits:

Exhibit No. Description of Exhibit

1 Articles of Incorporation.

2 By-Laws.

3 Not applicable.

4 Registrant's Forms of Stock Certificates. *

5 Form of Investment Advisory Agreement. *

6 Form of Distribution Agreement. *

7 Not applicable.

8(a) Custodian Agreement with Custodian Trust Company. *

9(a) Transfer Agency and Service Agreement. *

(b) Form of Co-Administration Agreement with Counsellors Funds
Service, Inc. *

10(a) Opinion and Consent of Willkie Farr & Gallagher, counsel to
the Fund. *

(b) Opinion and Consent of Venable, Baetjer and Howard, LLP,
Maryland counsel to the Fund. *

11 Consent of PricewaterhouseCoopers LLP, Independent
Accountants. *

12 Not applicable.

- -----------
* To be filed by amendment.
<PAGE> 131
13 Form of Purchase Agreement. *

14 Not applicable

15(a) Form of Shareholder Servicing and Distribution Plan. *

(b) Form of Distribution Plan. *

16 Not applicable.

17 Not applicable

18 Form of 18f-3 Plan. *

Item 25. Persons Controlled by or Under Common Control with Registrant

All of the outstanding shares of common stock of Registrant on the date
Registrant's Registration Statement becomes effective will be owned by Warburg
Pincus Asset Management, Inc. ("Warburg"), a corporation formed under New York
law.

Item 26. Number of Holders of Securities

It is anticipated that Warburg will hold all Registrant's shares of
common stock, par value $.001 per share, on the date Registrant's Registration
Statement becomes effective.

Item 27. Indemnification

Registrant, officers and directors of Warburg, of Counsellors
Securities Inc. ("Counsellors Securities") and of Registrant are covered by
insurance policies indemnifying them for liability incurred in connection with
the operation of Registrant. These policies provide insurance for any "Wrongful
Act" of an officer, director or trustee. Wrongful Act is defined as breach of
duty, neglect, error, misstatement, misleading statement, omission or other act
done or wrongfully attempted by an officer, director or trustee in connection
with the operation of Registrant. Insurance coverage does not extend to (a)
conflicts of interest or gain in fact any profit or advantage to which one is
not legally entitled, (b) intentional non-compliance with any statute or
regulation or (c) commission of dishonest, fraudulent acts or omissions. Insofar
as it related to Registrant, the coverage is limited in amount and, in certain
circumstances, is subject to a deductible.

Under Article VIII of the Articles of Incorporation (the "Articles"),
the Directors and officers of Registrant shall not have any liability to
Registrant or its stockholders for money damages, to the fullest extent
permitted by Maryland law. This limitation on liability applies to events
occurring at the
<PAGE> 132
time a person serves as a Director or officer of Registrant whether or not such
person is a Director or officer at the time of any proceeding in which liability
is asserted. No provision of Article VIII shall protect or purport to protect
any Director or officer of Registrant against any liability to Registrant or its
stockholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office. Registrant shall indemnify and advance
expenses to its currently acting and its former Director to the fullest extent
that indemnification of Directors and advancement of expenses to Directors is
permitted by the Maryland General Corporation Law.

Registrant shall indemnify and advance expenses to its officers to the
same extent as its Directors and to such further extent as is consistent with
such law. The Board of Directors may, through a by-law, resolution or agreement,
make further provisions for indemnification of directors, officers, employees
and agents to the fullest extent permitted by the Maryland General Corporation
Law.

Article V of the By-Laws further limits the liability of the Directors
by providing that any person who was or is a party or is threatened to be made a
party in any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that such person is a current or former director or officer of Registrant, or is
or was serving while a director or officer of Registrant at the request of
Registrant as a director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust, enterprise
or employee benefit plan, shall be indemnified by Registrant against judgments,
penalties, fines, excise taxes, settlements and reasonable expenses (including
attorneys' fees) actually incurred by such person in connection with such
action, suit or proceeding to the full extent permissible under the Maryland
General Corporation Law, the 1993 Act and the 1940 Act, as such statutes are now
or hereafter in force, except that such indemnity shall not protect any such
person against any liability to Registrant or any stockholder thereof to which
such person would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of this office.

Item 28. Business and Other Connections of Investment Adviser

BEA Associates ("BEA") acts as investment adviser to the Registrant.
BEA renders investment advice to a wide variety of individual and institutional
clients. The list required by this Item 28 of officers and directors of BEA,
together with information as to their other business, profession, vocation or
employment of a substantial nature during the past
<PAGE> 133
two years, is incorporated by reference to Schedules A and D of Form ADV filed
by BEA (SEC File No. 801-37170).

Item 29. Principal Underwriter

(a) Counsellors Securities will act as distributor for
Registrant, as well as for Warburg Pincus Balanced Fund; Warburg Pincus Capital
Appreciation Fund; Warburg Pincus Cash Reserve Fund; Warburg Pincus Central and
Eastern Europe Fund; Warburg Pincus Emerging Growth Fund; Warburg Pincus
Emerging Markets Fund; Warburg Pincus Emerging Markets II Fund; Warburg Pincus
European Equity Fund; Warburg Pincus Fixed Income Fund; Warburg Pincus Global
Fixed Income Fund; Warburg Pincus Global Post-Venture Capital Fund; Warburg
Pincus Global Telecommunications Fund; Warburg Pincus Growth & Income Fund;
Warburg Pincus Health Sciences Fund; Warburg Pincus High Yield Fund; Warburg
Pincus Institutional Fund; Warburg Pincus Intermediate Maturity Government Fund;
Warburg Pincus International Equity Fund; Warburg Pincus International Growth
Fund; Warburg Pincus International Small Company Fund; Warburg Pincus Japan
Growth Fund; Warburg Pincus Japan OTC Fund; Warburg Pincus Long-Short Equity
Fund; Warburg Pincus Long-Short Market Neutral Fund; Warburg Pincus Major
Foreign Markets Fund; Warburg Pincus Money Market Fund; Warburg Pincus Municipal
Bond Fund; Warburg Pincus New York Intermediate Municipal Fund; Warburg Pincus
New York Tax Exempt Fund; Warburg Pincus Post-Venture Capital Fund; Warburg
Pincus Select Economic Value Equity Fund; Warburg Pincus Small Company Growth
Fund; Warburg Pincus Small Company Value Fund; Warburg Pincus Strategic Global
Fixed Income Fund; Warburg Pincus Strategic Value Fund; Warburg Pincus Tax Free
Money Market Fund; Warburg Pincus Trust; Warburg Pincus Trust II; Warburg Pincus
U.S. Core Fixed Income Fund and Warburg Pincus U.S. Core Equity Fund.

(b) For information relating to each director, officer or
partner of Counsellors Securities, reference is made to Form BD (SEC File No.
8-32482) filed by Counsellors Securities under the Securities Exchange Act of
1934.

Item 30. Location of Accounts and Records

(1) Warburg, Pincus Long-Short Market Neutral
Fund, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(Fund's Articles of Incorporation, By-Laws and minute books)

(2) BEA Associates
One Citicorp Center
153 East 53rd Street
New York, New York 10022
<PAGE> 134
(records relating to its functions as investment adviser)

(3) PFPC Inc.
400 Bellevue Parkway
Wilmington, Delaware 19809
(records relating to its functions as co-administrator)

(4) Counsellors Funds Service, Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as co-administrator)

(5) State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110
(records relating to its functions as transfer agent and
dividend disbursing agent)

(7) Boston Financial Data Services, Inc.
2 Heritage Drive
North Quincy, Massachusetts 02171
(records relating to its functions as transfer agent and
dividend disbursing agent)

(8) Custodial Trust Company
101 Carnegie Center
Princeton, NJ 08540
(records relating to its functions as custodian)

(9) Counsellors Securities Inc.
466 Lexington Avenue
New York, New York 10017-3147
(records relating to its functions as distributor)

Item 31. Management Services

Not applicable.

Item 32. Undertakings.

(a) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the latest annual report to shareholders
for the Fund, upon request and without charge.

(b) Registrant hereby undertakes to call a meeting of its shareholders
for the purpose of voting upon the question of removal of a director or
directors of Registrant when requested in writing to do so by the holders of at
least 10% of Registrant's outstanding shares. Registrant undertakes further, in
connection with the meeting, to comply with the provisions of
<PAGE> 135
Section 16(c) of the 1940 Act relating to communications with the shareholders
of certain common-law trusts.

(c) Registrant hereby undertakes not to sell its shares to the public,
except in connection with the reorganization, until the Fund files a
post-effective amendment to its registration statement including audited
financial statements.
<PAGE> 136
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York and the State of
New York, on the 20th day of July, 1998.

WARBURG, PINCUS LONG-SHORT MARKET NEUTRAL
FUND, INC.

By: /s/ Eugene L. Podsiadlo
-----------------------
Eugene L. Podsiadlo
President

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the date indicated:

Signature Title Date
- --------- ----- ----

/s/John L. Furth Chairman of the Board of July 20, 1998
- ------------------------- Directors
John L. Furth

/s/Eugene L. Podsiadlo President July 20, 1998
- -------------------------
Eugene L. Podsiadlo

/s/Howard Conroy Vice President and Chief July 20, 1998
- ------------------------- Financial Officer
Howard Conroy

/s/Daniel S. Madden Treasurer and Chief July 20, 1998
- ------------------------- Accounting Officer
Daniel S. Madden

/s/Richard N. Cooper Director July 20, 1998
- -------------------------
Richard N. Cooper

/s/Jack W. Fritz Director July 20, 1998
- -------------------------
Jack W. Fritz

/s/Jeffrey E. Garten Director July 20, 1998
- -------------------------
Jeffrey E. Garten

/s/Arnold M. Reichman Director July 20, 1998
- -------------------------
Arnold M. Reichman

/s/Alexander B. Trowbridge Director July 20, 1998
- -------------------------
Alexander B. Trowbridge
@@
<PAGE> 137
INDEX TO EXHIBITS

Exhibit No. Description of Exhibit

1 Articles of Incorporation

2 By-Laws

<PAGE> 1
ARTICLES OF INCORPORATION

WARBURG, PINCUS LONG-SHORT MARKET NEUTRAL FUND, INC.

ARTICLE I

INCORPORATOR

The undersigned, John H. Kim, whose post office address is c/o
Willkie Farr & Gallagher, 787 Seventh Avenue, New York, New York 10019-6099,
being at least 18 years of age, does hereby act as an incorporator and forms a
corporation under the Maryland General Corporation Law.

ARTICLE II

NAME

The name of the corporation is Warburg, Pincus Long-Short
Market Neutral Fund, Inc. (the "Corporation").

ARTICLE III

PURPOSES AND POWERS

To conduct and carry on the business of an investment company.

(1) To hold, invest and reinvest its assets in securities and other
investments or to hold part or all of its assets in cash.

(2) To issue and sell shares of its capital stock in such amounts, on such
terms and conditions, for such purposes and for such amount or kind of
consideration as may now or hereafter be permitted by law.

(3) To redeem, purchase or acquire in any other manner, hold, dispose of,
resell, transfer, reissue or cancel (all without the vote or consent of
the stockholders of the Corporation) shares of its capital stock, in
any manner and to the extent now or hereafter permitted by law and by
this Charter.

(4) To do any and all additional acts and to exercise any and all
additional powers or rights as may be necessary, incidental,
appropriate or desirable for the accomplishment of all or any of the
foregoing purposes.

(5) The Corporation shall be authorized to exercise and enjoy all of the
powers, rights and privileges granted to, or
<PAGE> 2
conferred upon, corporations by the Maryland General Corporation Law
now or hereafter in force, and the enumeration of the foregoing shall
not be deemed to exclude any powers, rights or privileges so granted or
conferred.

ARTICLE IV

PRINCIPAL OFFICE AND RESIDENT AGENT

The post office address of the principal office of the
Corporation in the State of Maryland is c/o The Corporation Trust Company
Incorporated, 32 South Street, Baltimore, Maryland 21202. The name and address
of the resident agent of the Corporation in the State of Maryland is The
Corporation Trust Company Incorporated, a Maryland corporation, 32 South Street,
Baltimore, Maryland 21202.

ARTICLE V

CAPITAL STOCK

(1)

(A) The total number of shares of capital stock that the
Corporation shall have authority to issue is three billion
(3,000,000,000) shares, of the par value of one tenth of one
cent ($.001) per share and of the aggregate par value of three
million dollars ($3,000,000), all of which three billion
(3,000,000,000) shares are designated Common Stock.

(B)

(i) One billion (1,000,000,000) shares of Common Stock
have been divided into and classified initially as a
series of Common Stock, designated "Common Shares."

(ii) One billion (1,000,000,000) shares of Common Stock
have been divided into and classified initially as a
series of Common Stock, designated "Institutional
Shares."

(iii) One billion (1,000,000,000) shares of Common Stock
have been divided into and classified initially as a
series of Common Stock, designated "Advisor Shares."

(C) Each Common Share will have the same preferences, conversion
and other rights, voting powers, restrictions, limitations as
to dividends, qualifications and terms and conditions of
redemption as every other share of Common Stock, except that,
subject to the provisions of any governing order, rule

-2-
<PAGE> 3
or regulation issued pursuant to the Investment Company Act of
1940, as amended (the "1940 Act"):

(i) Common Shares will share equally with Common Stock
other than Common Shares ("Non-Common Shares") in the
income, earnings and profits derived from investment
and reinvestment of the assets belonging to the
Corporation and will be charged equally with
Non-Common Shares with the liabilities and expenses
of the Corporation, except that Common Shares will
bear the expense of payments made pursuant to any
agreements entered into by the Corporation pursuant
to any shareholder services plan and/or distribution
plan adopted by the Corporation with respect to
Common Shares;

(ii) On any matter submitted to a vote of shareholders of
the Corporation that pertains to the agreements or
expenses described in clause (C)(i) above (or to any
plan adopted by the Corporation relating to said
agreements or expenses), only Common Shares will be
entitled to vote, except that if said matter affects
Non-Common Shares, Non-Common Shares will also be
entitled to vote, and in such case Common Shares will
be voted in the aggregate together with such
Non-Common Shares and not by series except where
otherwise required by law. Common Shares will not be
entitled to vote on any matter that does not affect
Common Shares (except where otherwise required by
law) even though the matter is submitted to a vote of
the holders of Non-Common Shares; and

(iii) The Board of Directors of the Corporation in its sole
discretion may determine whether a matter affects a
particular class or series of Corporation shares.

(D) Each Institutional Share will have the same preferences,
conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and
conditions of redemption as every other share of Common Stock,
except that, subject to the provisions of any governing order,
rule or regulation issued pursuant to the 1940 Act:

(i) Institutional Shares will share equally with Common
Stock other than Institutional Shares
("Non-Institutional Shares") in the income, earnings
and profits derived from investment

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<PAGE> 4
and reinvestment of the assets belonging to the
Corporation and will be charged equally with
Non-Institutional Shares with the liabilities and
expenses of the Corporation, except that
Institutional Shares will bear the expense of
payments made pursuant to any agreements entered into
by the Corporation pursuant to any shareholder
services plan and/or distribution plan adopted by the
Corporation with respect to Institutional Shares;

(ii) On any matter submitted to a vote of shareholders of
the Corporation that pertains to the agreements or
expenses described in clause (D)(i) above (or to any
plan adopted by the Corporation relating to said
agreements or expenses), only Institutional Shares
will be entitled to vote, except that if said matter
affects Non-Institutional Shares, Non-Institutional
Shares will also be entitled to vote, and in such
case Institutional Shares will be voted in the
aggregate together with such Non-Institutional Shares
and not by series except where otherwise required by
law. Institutional Shares will not be entitled to
vote on any matter that does not affect Institutional
Shares (except where otherwise required by law) even
though the matter is submitted to a vote of the
holders of Non-Institutional Shares; and

(iii) The Board of Directors of the Corporation in its sole
discretion may determine whether a matter affects a
particular class or series of Corporation shares.

(E) Each Advisor Share will have the same preferences, conversion
and other rights, voting powers, restrictions, limitations as
to dividends, qualifications and terms and conditions of
redemption as every other share of Common Stock, except that,
subject to the provisions of any governing order, rule or
regulation issued pursuant to the 1940 Act:

(i) Advisor Shares will share equally with Common Stock
other than Advisor Shares ("Non-Advisor Shares") in
the income, earnings and profits derived from
investment and reinvestment of the assets belonging
to the Corporation and will be charged equally with
Non-Advisor Shares with the liabilities and expenses
of the Corporation, except that Advisor Shares

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<PAGE> 5
will bear the expense of payments made pursuant to
any agreements entered into by the Corporation
pursuant to any shareholder services plan and/or
distribution plan adopted by the Corporation with
respect to Advisor Shares;

(ii) On any matter submitted to a vote of shareholders of
the Corporation that pertains to the agreements or
expenses described in clause (E)(i) above (or to any
plan adopted by the Corporation relating to said
agreements or expenses), only Advisor Shares will be
entitled to vote, except that if said matter affects
Non-Advisor Shares, Non-Advisor Shares will also be
entitled to vote, and in such case Advisor Shares
will be voted in the aggregate together with such
Non-Advisor Shares and not by series except where
otherwise required by law. Advisor Shares will not be
entitled to vote on any matter that does not affect
Advisor Shares (except where otherwise required by
law) even though the matter is submitted to a vote of
the holders of Non-Advisor Shares; and

(iii) The Board of Directors of the Corporation in its sole
discretion may determine whether a matter affects a
particular class or series of Corporation shares.

(2) Any fractional share shall carry proportionately the rights of a whole
share including, without limitation, the right to vote and the right to
receive dividends. A fractional share shall not, however, have the
right to receive a certificate evidencing it.

(3) All persons who shall acquire stock in the Corporation shall acquire
the same subject to the provisions of this Charter and the By-Laws of
the Corporation.

(4) No holder of stock of the Corporation by virtue of being such a holder
shall have any preemptive or other right to purchase or subscribe for
any shares of the Corporation's capital stock or any other security
that the Corporation may issue or sell (whether out of the number of
shares authorized by this Charter or out of any shares of the
Corporation's capital stock that the Corporation may acquire) other
than a right that the Board of Directors in its discretion may
determine to grant.

(5) The Board of Directors shall have authority by resolution to classify
or to reclassify, as the case may be, any authorized but unissued
shares of capital stock from time to

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<PAGE> 6
time by setting or changing in any one or more respects the
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or terms or conditions of
redemption of the capital stock.

(6) Notwithstanding any provision of law requiring any action to be taken
or authorized by the affirmative vote of a greater proportion of the
votes of all classes or of any class of stock of the Corporation, such
action shall be effective and valid if taken or authorized by the
affirmative vote of a majority of the total number of votes entitled to
be cast thereon, except as otherwise provided in this Charter.

(7) The presence in person or by proxy of the holders of one-third of the
shares of stock of the Corporation entitled to vote (without regard to
class) shall constitute a quorum at any meeting of the stockholders,
except with respect to any matter which, under applicable statutes or
regulatory requirements, requires approval by a separate vote of one or
more classes of stock, in which case the presence in person or by proxy
of the holders of one-third of the shares of stock of each class
required to vote as a class on the matter shall constitute a quorum.

ARTICLE VI

REDEMPTION

Each holder of shares of the Corporation's capital stock shall
be entitled to require the Corporation to redeem all or any part of the shares
of capital stock of the Corporation standing in the name of the holder on the
books of the Corporation, and all shares of capital stock issued by the
Corporation shall be subject to redemption by the Corporation, at the redemption
price of the shares as in effect from time to time as may be determined by or
pursuant to the direction of the Board of Directors of the Corporation in
accordance with the provisions of Article VII, subject to the right of the Board
of Directors of the Corporation to suspend the right of redemption or postpone
the date of payment of the redemption price in accordance with provisions of
applicable law. Without limiting the generality of the foregoing, the
Corporation shall, to the extent permitted by applicable law, have the right at
any time to redeem the shares owned by any holder of capital stock of the
Corporation (i) if the redemption is, in the opinion of the Board of Directors
of the Corporation, desirable in order to prevent the Corporation from being
deemed a "personal holding company" within the meaning of the Internal Revenue
Code of 1986, as amended, or (ii) if the value of the shares in the account
maintained by the Corporation or its transfer agent for any class of stock for
the stockholder is below an amount determined from time to time by the Board of
Directors of the Corporation (the "Minimum Account Balance") and the stockholder
has been given notice of the redemption and has failed to make additional
purchases of shares in an amount

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<PAGE> 7
sufficient to bring the value in his account to at least the Minimum Account
Balance before the redemption is effected by the Corporation. Payment of the
redemption price shall be made in cash by the Corporation at the time and in the
manner as may be determined from time to time by the Board of Directors of the
Corporation unless, in the opinion of the Board of Directors, which shall be
conclusive, conditions exist that make payment wholly in cash unwise or
undesirable; in such event the Corporation may make payment wholly or partly by
securities or other property included in the assets belonging or allocable to
the class of the shares for which redemption is being sought, the value of which
shall be determined as provided herein. The Board of Directors may establish
procedures for redemption of shares.

ARTICLE VII

BOARD OF DIRECTORS

(1) The number of directors constituting the Board of Directors shall be
one or such other number as may be set forth in the By-Laws or
determined by the Board of Directors pursuant to the By-Laws. The
number of Directors shall at no time be less than the minimum number
required under the Maryland General Corporation Law. Arnold M. Reichman
has been appointed director of the Corporation to hold office until the
first annual meeting of stockholders or until his successor is elected
and qualified.

(2) In furtherance, and not in limitation, of the powers conferred by the
Maryland General Corporation Law, the Board of Directors is expressly
authorized:

(i) To make, alter or repeal the By-Laws of the
Corporation, except where such power is reserved by
the By-Laws to the stockholders, and except as
otherwise required by the 1940 Act.

(ii) From time to time to determine whether and to what
extent and at what times and places and under what
conditions and regulations the books and accounts of
the Corporation, or any of them other than the stock
ledger, shall be open to the inspection of the
stockholders. No stockholder shall have any right to
inspect any account or book or document of the
Corporation, except as conferred by law or authorized
by resolution of the Board of Directors or of the
stockholders.

(iii) Without the assent or vote of the stockholders, to
authorize the issuance from time to time of shares of
the stock of any class of the Corporation, whether
now or

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<PAGE> 8
hereafter authorized, and securities convertible into
shares of stock of the Corporation of any class or
classes, whether now or hereafter authorized, for
such consideration as the Board of Directors may deem
advisable.

(iv) Without the assent or vote of the stockholders, to
authorize and issue obligations of the Corporation,
secured and unsecured, as the Board of Directors may
determine, and to authorize and cause to be executed
mortgages and liens upon the real or personal
property of the Corporation.

(v) Notwithstanding anything in this Charter to the
contrary, to establish in its absolute discretion the
basis or method for determining the value of the
assets belonging to any class, the value of the
liabilities belonging to any class and the net asset
value of each share of any class of the Corporation's
stock.

(vi) To determine in accordance with generally accepted
accounting principles and practices what constitutes
net profits, earnings, surplus or net assets in
excess of capital, and to determine what accounting
periods shall be used by the Corporation for any
purpose; to set apart out of any funds of the
Corporation reserves for such purposes as it shall
determine and to abolish the same; to declare and pay
any dividends and distributions in cash, securities
or other property from surplus or any other funds
legally available therefor, at such intervals as it
shall determine; to declare dividends or
distributions by means of a formula or other method
of determination, at meetings held less frequently
than the frequency of the effectiveness of such
declarations; and to establish payment dates for
dividends or any other distributions on any basis,
including dates occurring less frequently than the
effectiveness of declarations thereof.

(vii) In addition to the powers and authorities granted
herein and by statute expressly conferred upon it,
the Board of Directors is authorized to exercise all
powers and do all acts that may be exercised or done
by the Corporation pursuant to the provisions of the

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<PAGE> 9
laws of the State of Maryland, this Charter and the
By-Laws of the Corporation.

(3) Any determination made in good faith, and in accordance with applicable
law and generally accepted accounting principles and practices, if
applicable, by or pursuant to the direction of the Board of Directors,
with respect to the amount of assets, obligations or liabilities of the
Corporation, as to the amount of net income of the Corporation from
dividends and interest for any period or amounts at any time legally
available for the payment of dividends, as to the amount of any
reserves or charges set up and the propriety thereof, as to the time of
or purpose for creating reserves or as to the use, alteration or
cancellation of any reserves or charges (whether or not any obligation
or liability for which the reserves or charges have been created has
been paid or discharged or is then or thereafter required to be paid or
discharged), as to the value of any security owned by the Corporation,
the determination of the net asset value of shares of any class of the
Corporation's capital stock, or as to any other matters relating to the
issuance, sale or other acquisition or disposition of securities or
shares of capital stock of the Corporation, and any reasonable
determination made in good faith by the Board of Directors regarding
whether any transaction constitutes a purchase of securities on
"margin," a sale of securities "short," or an underwriting of the sale
of, or a participation in any underwriting or selling group in
connection with the public distribution of, any securities, shall be
final and conclusive, and shall be binding upon the Corporation and all
holders of its capital stock, past, present and future, and shares of
the capital stock of the Corporation are issued and sold on the
condition and understanding, evidenced by the purchase of shares of
capital stock or acceptance of share certificates, that any and all
such determinations shall be binding as aforesaid. No provision of this
Charter shall be effective to (i) require a waiver of compliance with
any provision of the Securities Act of 1933, as amended, or the 1940
Act, or of any valid rule, regulation or order of the Securities and
Exchange Commission under those Acts or (ii) protect or purport to
protect any director or officer of the Corporation against any
liability to the Corporation or its security holders to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his office.

ARTICLE VIII

INDEMNIFICATION AND LIMITATION OF LIABILITY

(1) To the fullest extent that limitations on the liability of directors
and officers are permitted by the Maryland General

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<PAGE> 10
Corporation Law, no director or officer of the Corporation shall have
any liability to the Corporation or its stockholders for money damages.
This limitation on liability applies to events occurring at the time a
person serves as a director or officer of the Corporation whether or
not such person is a director or officer at the time of any proceeding
in which liability is asserted.

(2) The Corporation shall indemnify and advance expenses to its currently
acting and its former directors to the fullest extent that
indemnification of directors and advancement of expenses to directors
is permitted by the Maryland General Corporation Law. The Corporation
shall further indemnify and advance expenses to each person who at the
time of the execution of the Agreement and Plan of Reorganization
between the Corporation and The RBB Fund, Inc. (the "RBB Fund"), on
behalf of the BEA Long-Short Market Neutral Fund (the "BEA Fund"),
served as a director or officer (an "Indemnified Person") of the RBB
Fund, against money damages actually and reasonably incurred by such
Indemnified Person in connection with any claim that is asserted
against such Indemnified Person arising out of such Indemnified
Person's service as a director or officer of the RBB Fund with respect
to matters specifically relating to the BEA Fund, provided that such
indemnification and advancement of expenses shall be permitted to the
fullest extent that is available under the Maryland General Corporation
law and other applicable law. The Corporation shall indemnify and
advance expenses to its officers to the same extent as its directors
and to such further extent as is consistent with such law. The Board of
Directors may, through a by-law, resolution or agreement, make further
provisions for indemnification of directors, officers, Indemnified
Persons, employees and agents to the fullest extent permitted by the
Maryland General Corporation Law.

(3) No provision of this Article VIII shall be effective to protect or
purport to protect any director or officer of the Corporation or any
Indemnified Person against any liability to the Corporation or its
stockholders to which he would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office.

(4) References to the Maryland General Corporation Law in this Article VIII
are to the law as from time to time amended. No amendment to this
Charter shall affect any right of any person under this Article VIII
based on any event, omission or proceeding prior to such amendment. The
term "Charter" as used herein shall have the meaning set forth in the
Maryland General Corporation Law and includes these Articles of
Incorporation and all amendments thereto.

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<PAGE> 11
ARTICLE IX

AMENDMENTS

The Corporation reserves the right from time to time to make
any amendment to its Charter, now or hereafter authorized by law, including any
amendment that alters the contract rights, as expressly set forth in this
Charter, of any outstanding stock, and all rights at any time conferred upon the
stockholders of the Corporation by its Charter are granted subject to the
provisions of this Article and the reservation of the right to amend the Charter
herein contained.

IN WITNESS WHEREOF, I have adopted and signed these Articles
of Incorporation and do hereby acknowledge that the adoption and signing are my
act.

/s/ John H. Kim
---------------
Incorporator

Dated the 30th day of July, 1998

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<PAGE> 1
BY-LAWS

WARBURG, PINCUS LONG-SHORT MARKET NEUTRAL FUND, INC.

A Maryland Corporation

ARTICLE I

STOCKHOLDERS

SECTION 1. Annual Meetings. No annual meeting of the
stockholders of the Warburg, Pincus Long-Short Market Neutral Fund, Inc. (the
"Corporation") shall be held in any year in which the election of directors is
not required to be acted upon under the Investment Company Act of 1940, as
amended (the "1940 Act"), unless otherwise determined by the Board of Directors.
An annual meeting may be held at any place within the United States as may be
determined by the Board of Directors and as shall be designated in the notice of
the meeting, at the time specified by the Board of Directors. Any business of
the Corporation may be transacted at an annual meeting without being
specifically designated in the notice unless otherwise provided by statute, the
Corporation's Charter or these By-Laws.

SECTION 2. Special Meetings. Special meetings of the
stockholders for any purpose or purposes, unless otherwise prescribed by statute
or by the Corporation's Charter, may be held at any place within the United
States, and may be called at any time by the Board of Directors or by the
President, and shall be called by the President or Secretary at the request in
writing of a majority of the Board of Directors or at the request in writing of
stockholders entitled to cast at least 10% (ten percent) of the votes entitled
to be cast at the meeting upon payment by such stockholders to the Corporation
of the reasonably estimated cost of preparing and mailing a notice of the
meeting (which estimated cost shall be provided to such stockholders by the
Secretary of the Corporation). Notwithstanding the foregoing, unless requested
by stockholders entitled to cast a majority of the votes entitled to be cast at
the meeting, a special meeting of the stockholders need not be called at the
request of stockholders to consider any matter which is substantially the same
as a matter voted on at any special meeting of the stockholders held during the
preceding 12 (twelve) months. A written request shall state the purpose or
purposes of the proposed meeting.

SECTION 3. Notice of Meetings. Written or printed notice of
the purpose or purposes and of the time and place of every meeting of the
stockholders shall be given by the Secretary of the Corporation to each
stockholder of record entitled to vote at the meeting, by placing the notice in
the mail at least 10 (ten) days, but not more than 90 (ninety) days, prior to
the date
<PAGE> 2
designated for the meeting addressed to each stockholder at his address
appearing on the books of the Corporation or supplied by the stockholder to the
Corporation for the purpose of notice. The notice of any meeting of stockholders
may be accompanied by a form of proxy approved by the Board of Directors in
favor of the actions or the election of persons as the Board of Directors may
select. Notice of any meeting of stockholders shall be deemed waived by any
stockholder who attends the meeting in person or by proxy, or who before or
after the meeting submits a signed waiver of notice that is filed with the
records of the meeting.

SECTION 4. Quorum. Except as otherwise provided by statute or
by the Corporation's Charter, the presence in person or by proxy of stockholders
of the Corporation entitled to cast at least one-third of the votes to be cast
shall constitute a quorum at each meeting of the stockholders and all questions
shall be decided by majority of the votes cast (except with respect to the
election of directors, which shall be by a plurality of votes cast). In the
absence of a quorum, the stockholders present in person or by proxy, by majority
vote and without notice other than by announcement, may adjourn the meeting from
time to time as provided in Section 5 of this Article I until a quorum shall
attend. The stockholders present at any duly organized meeting may continue to
do business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. The absence from any meeting in person
or by proxy of holders of the number of shares of stock of the Corporation in
excess of a majority that may be required by Maryland law, the 1940 Act, or any
other applicable statute, the Corporation's Charter or these By-Laws, for action
upon any given matter shall not prevent action at the meeting on any other
matter or matters that may properly come before the meeting, so long as there
are present, in person or by proxy, holders of the number of shares of stock of
the Corporation required for action upon such other matter or matters.

SECTION 5. Adjournment. Any meeting of the stockholders may be
adjourned from time to time, without notice other than by announcement at the
meeting at which the adjournment is taken. At any adjourned meeting at which a
quorum shall be present, any action may be taken that could have been taken at
the meeting originally called. A meeting of the stockholders may not be
adjourned without further notice to a date more than 120 (one hundred twenty)
days after the original record date determined pursuant to Section 9 of this
Article I.

SECTION 6. Organization. At every meeting of the stockholders,
the Chairman of the Board, or in his absence or inability to act (or if there is
none), the President, or in his absence or inability to act, a Vice President,
or in the absence or inability to act of the Chairman of the Board, the
President and all the Vice Presidents, a chairman chosen by the stockholders
shall act as chairman of the meeting. The Secretary, or in his absence or
inability to act, a person

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<PAGE> 3
appointed by the chairman of the meeting, shall act as secretary of the meeting
and keep the minutes of the meeting.

SECTION 7. Order of Business. The order of business at all
meetings of the stockholders shall be as determined by the chairman of the
meeting.

SECTION 8. Voting. Except as otherwise provided by statute or
the Corporation's Charter, each holder of record of shares of stock of the
Corporation having voting power shall be entitled at each meeting of the
stockholders to one vote for every share of stock standing in his name on the
records of the Corporation as of the record date determined pursuant to Section
9 of this Article I.

Each stockholder entitled to vote at any meeting of
stockholders may authorize another person to act as proxy for the stockholder
by, (a) signing a writing authorizing another person to act as proxy, or (b) any
other means permitted by law. Signing may be accomplished by the stockholder or
the stockholder's authorized agent signing the writing or causing the
stockholder's signature to be affixed to the writing by any reasonable means,
including facsimile signature.

If a vote shall be taken on any question other than the
election of directors, which shall be by written ballot, then unless required by
statute or these By-Laws, or determined by the chairman of the meeting to be
advisable, any such vote need not be by ballot. On a vote by ballot, each ballot
shall be signed by the stockholder voting, or by his proxy, and shall state the
number of shares voted.

SECTION 9. Fixing of Record Date. The Board of Directors may
set a record date for the purpose of determining stockholders entitled to vote
at any meeting of the stockholders. The record date for a particular meeting
shall be not more than 90 (ninety) nor fewer than 10 (ten) days before the date
of the meeting. All persons who were holders of record of shares as of the
record date of a meeting, and no others, shall be entitled to vote at such
meeting and any adjournment thereof.

SECTION 10. Inspectors. The Board of Directors may, in advance
of any meeting of stockholders, appoint one or more inspectors to act at the
meeting or at any adjournment of the meeting. If the inspectors shall not be so
appointed or if any of them shall fail to appear or act, the chairman of the
meeting may, and on the request of any stockholder entitled to vote at the
meeting shall, appoint inspectors. Each inspector, before entering upon the
discharge of his duties, shall take and sign an oath to execute faithfully the
duties of inspector at the meeting with strict impartiality and according to the
best of his ability. The inspectors shall determine the number of shares
outstanding and the voting power of each share, the number of shares represented
at the meeting, the existence of a quorum and

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<PAGE> 4
the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result, and do those acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the chairman of the
meeting or any stockholder entitled to vote at the meeting, the inspectors shall
make a report in writing of any challenge, request or matter determined by them
and shall execute a certificate of any fact found by them. No director or
candidate for the office of director shall act as inspector of an election of
directors. Inspectors need not be stockholders of the Corporation.

SECTION 11. Consent of Stockholders in Lieu of Meeting. Except
as otherwise provided by statute or the Corporation's Charter, any action
required to be taken at any meeting of stockholders, or any action that may be
taken at any meeting of the stockholders, may be taken without a meeting,
without prior notice and without a vote, if the following are filed with the
records of stockholders' meetings: (a) a unanimous written consent that sets
forth the action and is signed by each stockholder entitled to vote on the
matter; and (b) a written waiver of notice and any right to dissent signed by
each stockholder entitled to notice of the meeting but not entitled to vote at
the meeting.

SECTION 12. Notice of Stockholder Business.

(a) At any annual or special meeting of the stockholders, only
such business shall be conducted as shall have been properly brought before the
meeting. To be properly brought before an annual or special meeting business
must be, (i), (A) specified in the notice of meeting (or any supplement thereto)
given by or at the direction of the Board of Directors, (B) otherwise properly
brought before the meeting by or at the direction of the Board of Directors, or
(C) subject to the provisions of Section 13 of this Article I, otherwise
properly brought before the meeting by a stockholder, and (ii) a proper subject
under applicable law for stockholder action.

(b) For business to be properly brought before an annual or
special meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, any such
notice must be delivered to or mailed and received at the principal executive
offices of the Corporation not later than 60 (sixty) days prior to the date of
the meeting; provided, however, that if less than 70 (seventy) days' notice or
prior public disclosure of the date of the meeting is given or made to
stockholders, any such notice by a stockholder to be timely must be so received
not later than the close of business on the tenth day following the day on which
notice of the date of the annual or special meeting was given or such public
disclosure was made.

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<PAGE> 5
(c) Any such notice by a stockholder shall set forth as to
each matter the stockholder proposes to bring before the annual or special
meeting, (i) a brief description of the business desired to be brought before
the annual or special meeting and the reasons for conducting such business at
the annual or special meeting, (ii) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, (iii) the class
and number of shares of the capital stock of the Corporation which are
beneficially owned by the stockholder, and (iv) any material interest of the
stockholder in such business.

(d) Notwithstanding anything in the By-Laws to the contrary,
no business shall be conducted at any annual or special meeting except in
accordance with the procedures set forth in this Section 12. The chairman of the
annual or special meeting shall, if the facts warrant, determine and declare to
the meeting that business was not properly brought before the meeting and in
accordance with the provisions of this Section 12, and if he should so
determine, he shall so declare to the meeting and any such business not properly
brought before the meeting shall not be considered or transacted.

SECTION 13. Stockholder Business not Eligible for
Consideration.

(a) Notwithstanding anything in these By-Laws to the contrary,
any proposal that is otherwise properly brought before an annual or special
meeting by a stockholder will not be eligible for consideration by the
stockholders at such annual or special meeting if such proposal is substantially
the same as a matter properly brought before such annual or special meeting by
or at the direction of the Board of Directors of the Corporation. The chairman
of such annual or special meeting shall, if the facts warrant, determine and
declare that a stockholder proposal is substantially the same as a matter
properly brought before the meeting by or at the direction of the Board of
Directors, and, if he should so determine, he shall so declare to the meeting
and any such stockholder proposal shall not be considered at the meeting.

(b) This Section 13 shall not be construed or applied to make
ineligible for consideration by the stockholders at any annual or special
meeting any stockholder proposal required to be included in the Corporation's
proxy statement relating to such meeting pursuant to Rule 14a-8 under the
Securities Exchange Act of 1934 (the "Exchange Act"), or any successor rule
thereto.

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<PAGE> 6
ARTICLE II

BOARD OF DIRECTORS

SECTION 1. General Powers. Except as otherwise provided in the
Corporation's Charter, the business and affairs of the Corporation shall be
managed under the direction of its Board of Directors. All powers of the
Corporation may be exercised by or under authority of the Board of Directors
except as conferred on or reserved to the stockholders by law, by the
Corporation's Charter or by these By-Laws.

SECTION 2. Number of Directors. The number of directors shall
be fixed from time to time by resolution of the Board of Directors adopted by a
majority of the entire Board of Directors; provided, however, that the number of
directors shall in no event be fewer than one nor more than fifteen. Any vacancy
created by an increase in directors may be filled in accordance with Section 7
of this Article II. No reduction in the number of directors shall have the
effect of removing any director from office prior to the expiration of his term
unless the director is specifically removed pursuant to Section 6 of this
Article II at the time of the decrease. A director need not be a stockholder of
the Corporation, a citizen of the United States or a resident of the State of
Maryland.

SECTION 3. Election and Term of Directors. The term of office
of each director shall be from the time of his election and qualification until
his successor shall have been elected and shall have qualified, or until his
death, or until his resignation or removal as provided in these By-Laws, or as
otherwise provided by statute or the Corporation's Charter.

SECTION 4. Director Nominations.

(a) Only persons who are nominated in accordance with the
procedures set forth in this Section 4 shall be eligible for election or
re-election as directors. Nominations of persons for election or re-election to
the Board of Directors of the Corporation may be made at a meeting of
stockholders by or at the direction of the Board of Directors or by any
stockholder of the Corporation who is entitled to vote for the election of such
nominee at the meeting and who complies with the notice procedures set forth in
this Section 4.

(b) Such nominations, other than those made by or at the
direction of the Board of Directors, shall be made pursuant to timely notice
delivered in writing to the Secretary of the Corporation. To be timely, any such
notice by a stockholder must be delivered to or mailed and received at the
principal executive offices of the Corporation not later than 60 (sixty) days
prior to the meeting; provided, however, that if less than 70 (seventy) days'
notice or prior public disclosure of the date of the meeting is given or made to
stockholders, any such notice by a

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stockholder to be timely must be so received not later than the close of
business on the tenth day following the day on which notice of the date of the
meeting was given or such public disclosure was made.

(c) Any such notice by a stockholder shall set forth, (i) as
to each person whom the stockholder proposes to nominate for election or
re-election as a director, (A) the name, age, business address and residence
address of such person, (B) the principal occupation or employment of such
person, (C) the class and number of shares of the capital stock of the
Corporation which are beneficially owned by such person, and (D) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for the election of directors pursuant to Regulation
14A under the Exchange Act or any successor regulation thereto (including
without limitation such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected and whether any
person intends to seek reimbursement from the Corporation of the expenses of any
solicitation of proxies should such person be elected a director of the
Corporation); and (ii) as to the stockholder giving the notice, (A) the name and
address, as they appear on the Corporation's books, of such stockholder, and (B)
the class and number of shares of the capital stock of the Corporation which are
beneficially owned by such stockholder. At the request of the Board of
Directors, any person nominated by the Board of Directors for election as a
director shall furnish to the Secretary of the Corporation that information
required to be set forth in a stockholder's notice of nomination which pertains
to the nominee.

(d) If a notice by a stockholder is required to be given
pursuant to this Section 4, no person shall be entitled to receive reimbursement
from the Corporation of the expenses of a solicitation of proxies for the
election as a director of a person named in such notice unless such notice
states that such reimbursement will be sought from the Corporation. No person
shall be eligible for election as a director of the Corporation unless nominated
in accordance with the procedures set forth in this Section 4. The chairman of
the meeting shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the procedures prescribed by
the By-Laws, and if he should so determine, he shall so declare to the meeting
and the defective nomination shall be disregarded for all purposes.

SECTION 5. Resignation. A director of the Corporation may
resign at any time by giving written notice of his resignation to the Board of
Directors or the Chairman of the Board or to the President or the Secretary of
the Corporation. Any resignation shall take effect at the time specified in it
or, should the time when it is to become effective not be specified in it,
immediately upon its receipt. Acceptance of a resignation

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shall not be necessary to make it effective unless the resignation states
otherwise.

SECTION 6. Removal of Directors. Any director of the
Corporation may be removed by the stockholders with or without cause at any time
by a vote of a majority of the votes entitled to be cast for the election of
directors.

SECTION 7. Vacancies. Subject to the provisions of the 1940
Act, any vacancies in the Board of Directors, whether arising from death,
resignation, removal or any other cause except an increase in the number of
directors, shall be filled by a vote of the majority of the Board of Directors
then in office even though that majority is less than a quorum, provided that no
vacancy or vacancies shall be filled by action of the remaining directors if,
after the filling of the vacancy or vacancies, fewer than two-thirds of the
directors then holding office shall have been elected by the stockholders of the
Corporation. A majority of the entire Board as calculated prior to Board
expansion may fill a vacancy which results from an increase in the number of
directors. In the event that at any time a vacancy exists in any office of a
director that may not be filled by the remaining directors, a special meeting of
the stockholders shall be held as promptly as possible and in any event within
60 (sixty) days, for the purpose of filling the vacancy or vacancies. Any
director elected or appointed to fill a vacancy shall hold office until a
successor has been chosen and qualifies or until his earlier death, resignation
or removal.

SECTION 8. Place of Meetings. Meetings of the Board may be
held at any place that the Board of Directors may from time to time determine or
that is specified in the notice of the meeting.

SECTION 9. Regular Meetings. Regular meetings of the Board of
Directors may be held without notice at the time and place determined by the
Board of Directors.

SECTION 10. Special Meetings. Special meetings of the Board of
Directors may be called by two or more directors of the Corporation or by the
Chairman of the Board or the President.

SECTION 11. Notice of Special Meetings. Notice of each special
meeting of the Board of Directors shall be given by the Secretary as hereinafter
provided. Each notice shall state the time and place of the meeting and shall be
delivered to each director, either personally or by telephone, facsimile
transmission or other standard form of telecommunication, at least 24
(twenty-four) hours before the time at which the meeting is to be held, or by
first-class mail, postage prepaid, addressed to the director at his residence or
usual place of business, and mailed at least 3 (three) days before the day on
which the meeting is to be held.

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SECTION 12. Waiver of Notice of Meetings. Notice of any
special meeting need not be given to any director who shall, either before or
after the meeting, sign a written waiver of notice that is filed with the
records of the meeting or who shall attend the meeting.

SECTION 13. Quorum and Voting. One-third (but not fewer than
two unless there be only one director) of the members of the entire Board of
Directors shall be present in person at any meeting of the Board in order to
constitute a quorum for the transaction of business at the meeting, and except
as otherwise expressly required by statute, the Corporation's Charter, these
By-Laws, the 1940 Act, or any other applicable statute, the act of a majority of
the directors present at any meeting at which a quorum is present shall be the
act of the Board. In the absence of a quorum at any meeting of the Board, a
majority of the directors present may adjourn the meeting to another time and
place until a quorum shall be present. Notice of the time and place of any
adjourned meeting shall be given to the directors who were not present at the
time of the adjournment and, unless the time and place were announced at the
meeting at which the adjournment was taken, to the other directors. At any
adjourned meeting at which a quorum is present, any business may be transacted
that might have been transacted at the meeting as originally called.

SECTION 14. Organization. The Board of Directors may, by
resolution adopted by a majority of the entire Board, designate a Chairman of
the Board, who shall preside at each meeting of the Board. In the absence or
inability of the Chairman of the Board to act or if there is none, the
President, or, in his absence or inability to act, another director chosen by a
majority of the directors present, shall act as chairman of the meeting and
preside at the meeting. The Secretary, or, in his absence or inability to act,
any person appointed by the chairman, shall act as secretary of the meeting and
keep the minutes thereof.

SECTION 15. Committees. The Board of Directors may designate
one or more committees of the Board of Directors, each consisting of 2 (two) or
more directors. To the extent provided in the resolution, and permitted by law,
the committee or committees shall have and may exercise the powers of the Board
of Directors in the management of the business and affairs of the Corporation
and may authorize the seal of the Corporation to be affixed to all papers that
may require it. Any committee or committees shall have the name or names
determined from time to time by resolution adopted by the Board of Directors.
Each committee shall keep regular minutes of its meetings and report the same to
the Board of Directors when required. The members of a committee present at any
meeting, whether or not they constitute a quorum, may appoint a director to act
in the place of an absent member.

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SECTION 16. Written Consent of Directors in Lieu of a Meeting.
Subject to the provisions of the 1940 Act, any action required or permitted to
be taken at any meeting of the Board of Directors or of any committee of the
Board may be taken without a meeting if all members of the Board or committee,
as the case may be, consent thereto in writing, and the writing or writings are
filed with the records of the Board's or such committee's meetings.

SECTION 17. Telephone Conference. Members of the Board of
Directors or any committee of the Board may participate in any Board or
committee meeting by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other at the same time. Participation by such means shall constitute
presence in person at the meeting.

SECTION 18. Compensation. Each director shall be entitled to
receive compensation, if any, as may from time to time be fixed by the Board of
Directors, including a fee for each meeting of the Board or any committee
thereof, regular or special, he attends. Directors may also be reimbursed by the
Corporation for all reasonable expenses incurred in traveling to and from the
place of a Board or committee meeting.

ARTICLE III

OFFICERS, AGENTS AND EMPLOYEES

SECTION 1. Number and Qualifications. The officers of the
Corporation shall be a President, a Secretary and a Treasurer, each of whom
shall be elected by the Board of Directors. The Board of Directors may elect or
appoint one or more Vice Presidents and may also appoint any other officers,
agents and employees it deems necessary or proper. Any two or more offices may
be held by the same person, except the offices of President and Vice President,
but no officer shall execute, acknowledge or verify any instrument in more than
one capacity. Officers shall be elected by the Board of Directors, each to hold
office until his successor shall have been duly elected and shall have
qualified, or until his death, or until his resignation or removal as provided
in these By-Laws. The Board of Directors may from time to time elect, or
designate to the President the power to appoint, such officers (including one or
more Assistant Vice Presidents, one or more Assistant Treasurers and one or more
Assistant Secretaries) and such agents as may be necessary or desirable for the
business of the Corporation. Such other officers and agents shall have such
duties and shall hold their offices for such terms as may be prescribed by the
Board or by the appointing authority.

SECTION 2. Resignations. Any officer of the Corporation may
resign at any time by giving written notice of his resignation to the Board of
Directors, the Chairman of the

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Board, the President or the Secretary. Any resignation shall take effect at the
time specified therein or, if the time when it shall become effective is not
specified therein, immediately upon its receipt. Acceptance of a resignation
shall not be necessary to make it effective unless the resignation states
otherwise.

SECTION 3. Removal of Officer, Agent or Employee. Any officer,
agent or employee of the Corporation may be removed by the Board of Directors
with or without cause at any time, and the Board may delegate the power of
removal as to agents and employees not elected or appointed by the Board of
Directors. Removal shall be without prejudice to the person's contract rights,
if any, but the appointment of any person as an officer, agent or employee of
the Corporation shall not of itself create contract rights.

SECTION 4. Vacancies. A vacancy in any office whether arising
from death, resignation, removal or any other cause, may be filled for the
unexpired portion of the term of the office that shall be vacant, in the manner
prescribed in these By-Laws for the regular election or appointment to the
office.

SECTION 5. Compensation. The compensation of the officers of
the Corporation shall be fixed by the Board of Directors, but this power may be
delegated to any officer with respect to other officers under his control.

SECTION 6. Bonds or Other Security. If required by the Board,
any officer, agent or employee of the Corporation shall give a bond or other
security for the faithful performance of his duties, in an amount and with any
surety or sureties as the Board may require.

SECTION 7. President. The President shall be the chief
executive officer of the Corporation. In the absence or inability of the
Chairman of the Board to act (or if there is none), the President shall preside
at all meetings of the stockholders and of the Board of Directors. The President
shall have, subject to the control of the Board of Directors, general charge of
the business and affairs of the Corporation, and may employ and discharge
employees and agents of the Corporation, except those elected or appointed by
the Board, and he may delegate these powers.

SECTION 8. Vice President. Each Vice President shall have the
powers and perform the duties that the Board of Directors or the President may
from time to time prescribe.

SECTION 9. Treasurer. Subject to the provisions of any
contract that may be entered into with any custodian pursuant to authority
granted by the Board of Directors, the Treasurer shall have charge of all
receipts and disbursements of the Corporation and shall have or provide for the
custody of the Corporation's funds and securities; he shall have full

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authority to receive and give receipts for all money due and payable to the
Corporation, and to endorse checks, drafts and warrants, in its name and on its
behalf and to give full discharge for the same; he shall deposit all funds of
the Corporation, except those that may be required for current use, in such
banks or other places of deposit as the Board of Directors may from time to time
designate; and, in general, he shall perform all duties incident to the office
of Treasurer and such other duties as may from time to time be assigned to him
by the Board of Directors or the President.

SECTION 10. Secretary. The Secretary shall:

(a) keep or cause to be kept in one or more books provided for
the purpose, the minutes of all meetings of the Board of Directors, the
committees of the Board and the stockholders;

(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;

(c) be custodian of the records and the seal of the
Corporation and affix and attest the seal to all stock certificates of the
Corporation (unless the seal of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and attest the seal to all other
documents to be executed on behalf of the Corporation under its seal;

(d) see that the books, reports, statements, certificates and
other documents and records required by law to be kept and filed are properly
kept and filed; and

(e) in general, perform all the duties incident to the office
of Secretary and such other duties as from time to time may be assigned to him
by the Board of Directors or the President.

SECTION 11. Delegation of Duties. In case of the absence of
any officer of the Corporation, or for any other reason that the Board of
Directors may deem sufficient, the Board may confer for the time being the
powers or duties, or any of them, of such officer upon any other officer or upon
any director.

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ARTICLE IV

STOCK

SECTION 1. Stock Certificates. Each holder of stock of the
Corporation shall be entitled upon specific written request to such person as
may be designated by the Corporation to have a certificate or certificates, in a
form approved by the Board, representing the number of shares of stock of the
Corporation owned by him; provided, however, that certificates for fractional
shares will not be delivered in any case. The certificates representing shares
of stock shall be signed by or in the name of the Corporation by the Chairman of
the Board, President or a Vice President and by the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer and sealed with the seal of
the Corporation. Any or all of the signatures or the seal on the certificate may
be facsimiles. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate
shall be issued, it may be issued by the Corporation with the same effect as if
such officer, transfer agent or registrar were still in office at the date of
issue.

SECTION 2. Books of Account and Record of Stockholders. There
shall be kept at the principal executive office of the Corporation correct and
complete books and records of account of all the business and transactions of
the Corporation. There shall be made available upon request of any stockholder,
in accordance with Maryland law, a record containing the number of shares of
stock issued during a specified period not to exceed 12 (twelve) months and the
consideration received by the Corporation for each such share.

SECTION 3. Transfers of Shares. Transfers of shares of stock
of the Corporation shall be made on the stock records of the Corporation only by
the registered holder thereof, or by his attorney thereunto authorized by power
of attorney duly executed and filed with the Secretary or with a transfer agent
or transfer clerk, and on surrender of the certificate or certificates, if
issued, for the shares properly endorsed or accompanied by a duly executed stock
transfer power and the payment of all taxes thereon. Except as otherwise
provided by law, the Corporation shall be entitled to recognize the exclusive
right of a person in whose name any share or shares stand on the record of
stockholders as the owner of the share or shares for all purposes, including,
without limitation, the rights to receive dividends or other distributions and
to vote as the owner, and the Corporation shall not be bound to recognize any
equitable or legal claim to or interest in any such share or shares on the part
of any other person.

SECTION 4. Regulations. The Board of Directors may make any
additional rules and regulations, not inconsistent with

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these By-Laws, as it may deem expedient concerning the issue, transfer and
registration of certificates for shares of stock of the Corporation. It may
appoint, or authorize any officer or officers to appoint, one or more transfer
agents or one or more transfer clerks and one or more registrars and may require
all certificates for shares of stock to bear the signature or signatures of any
of them.

SECTION 5. Stolen, Lost, Destroyed or Mutilated Certificates.
The holder of any certificate representing shares of stock of the Corporation
shall immediately notify the Corporation of its theft, loss, destruction or
mutilation and the Corporation may issue a new certificate of stock in the place
of any certificate issued by it that has been alleged to have been stolen, lost
or destroyed or that shall have been mutilated. The Board may, in its
discretion, require the owner (or his legal representative) of a stolen, lost,
destroyed or mutilated certificate to give to the Corporation a bond in a sum,
limited or unlimited, and in a form and with any surety or sureties, as the
Board in its absolute discretion shall determine or to indemnify the Corporation
against any claim that may be made against it on account of the alleged theft,
loss, destruction or the mutilation of any such certificate, or issuance of a
new certificate. Anything herein to the contrary notwithstanding, the Board of
Directors, in its absolute discretion, may refuse to issue any such new
certificate, except pursuant to legal proceedings under the Maryland General
Corporation Law.

SECTION 6. Fixing of Record Date for Dividends, Distributions,
etc. The Board may fix, in advance, a date not more than 90 (ninety) days
preceding the date fixed for the payment of any dividend or the making of any
distribution or the allotment of rights to subscribe for securities of the
Corporation, or for the delivery of evidences of rights or evidences of
interests arising out of any change, conversion or exchange of common stock or
other securities, as the record date for the determination of the stockholders
entitled to receive any such dividend, distribution, allotment, rights or
interests, and in such case only the stockholders of record at the time so fixed
shall be entitled to receive such dividend, distribution, allotment, rights or
interests.

SECTION 7. Information to Stockholders and Others. Any
stockholder of the Corporation or his agent may inspect and copy during the
Corporation's usual business hours the Corporation's By-Laws, minutes of the
proceedings of its stockholders, annual statements of its affairs and voting
trust agreements on file at its principal office.

ARTICLE V

INDEMNIFICATION AND INSURANCE

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SECTION 1. Indemnification of Directors and Officers. Any
person who was or is a party or is threatened to be made a party in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person: (i) is a current or former director or officer of the Corporation, (ii)
is or was serving while a director or officer of the Corporation at the request
of the Corporation as a director, officer, partner, trustee, employee, agent or
fiduciary of another corporation, partnership, joint venture, trust, enterprise
or employee benefit plan, or (iii) was, at the time of the execution of the
Agreement and Plan of Reorganization between the Corporation and The RBB Fund,
Inc. (the "RBB Fund"), on behalf of the BEA Long-Short Market Neutral Fund (the
"BEA Fund"), a director or officer (an "Indemnified Person") of the RBB Fund,
and the claim asserted against such Indemnified Person arises out of the
Indemnified Person's service as a director or officer of the RBB Fund with
respect to matters specifically relating to the BEA Fund, shall be indemnified
by the Corporation against judgments, penalties, fines, excise taxes,
settlements and reasonable expenses (including attorneys' fees) actually
incurred by such person in connection with such action, suit or proceeding to
the full extent permissible under the Maryland General Corporation Law, the
Securities Act of 1933, as amended (the "Securities Act"), and the 1940 Act, as
such statutes are now or hereafter in force, except that such indemnity shall
not protect any such person against any liability to the Corporation or any
stockholder thereof to which such person would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office ("disabling conduct").

SECTION 2. Advances. Any current or former director or officer
of the Corporation or Indemnified Person claiming indemnification within the
scope of this Article V shall be entitled to advances from the Corporation for
payment of the reasonable expenses incurred by him in connection with
proceedings to which he is a party in the manner and to the full extent
permissible under the Maryland General Corporation Law, the Securities Act and
the 1940 Act, as such statutes are now or hereafter in force; provided however,
that the person seeking indemnification shall provide to the Corporation a
written affirmation of his good faith belief that the standard of conduct
necessary for indemnification by the Corporation has been met and a written
undertaking to repay any such advance unless it is ultimately determined that he
is entitled to indemnification, and provided further that at least one of the
following additional conditions is met: (a) the person seeking indemnification
shall provide a security in form and amount acceptable to the Corporation for
his undertaking; (b) the Corporation is insured against losses arising by reason
of the advance; or (c) a majority of a quorum of directors of the Corporation
who are neither "interested persons" as defined in Section 2(a)(19) of the 1940
Act, nor parties to the proceeding ("disinterested non-

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party directors"), or independent legal counsel, in a written opinion, shall
determine, based on a review of facts readily available to the Corporation at
the time the advance is proposed to be made, that there is reason to believe
that the person seeking indemnification will ultimately be found to be entitled
to indemnification.

SECTION 3. Procedure. At the request of any current or former
director or officer, Indemnified Person, or any employee or agent whom the
Corporation proposes to indemnify, the Board of Directors shall determine, or
cause to be determined, in a manner consistent with the Maryland General
Corporation Law, the Securities Act and the 1940 Act, as such statutes are now
or hereafter in force, whether the standards required by this Article V have
been met; provided, however, that indemnification shall be made only following:
(a) a final decision on the merits by a court or other body before whom the
proceeding was brought that the person to be indemnified was not liable by
reason of disabling conduct; or (b) in the absence of such a decision, a
reasonable determination, based upon a review of the facts, that the person to
be indemnified was not liable by reason of disabling conduct by, (i) the vote of
a majority of a quorum of disinterested non-party directors, or (ii) an
independent legal counsel in a written opinion.

SECTION 4. Indemnification of Employees and Agents. Employees
and agents who are not officers or directors of the Corporation may be
indemnified, and reasonable expenses may be advanced to such employees or
agents, in accordance with the procedures set forth in this Article V to the
extent permissible under the 1940 Act, the Securities Act and Maryland General
Corporation Law, as such statutes are now or hereafter in force, to the extent,
consistent with the foregoing, as may be provided by action of the Board of
Directors or by contract.

SECTION 5. Other Rights. The indemnification provided by this
Article V shall not be deemed exclusive of any other right, in respect of
indemnification or otherwise, to which those seeking such indemnification may be
entitled under any insurance or other agreement, vote of stockholders or
disinterested directors or otherwise, both as to action by a director or officer
of the Corporation or Indemnified Person in his official capacity and as to
action by such person in another capacity while holding such office or position,
and shall continue as to a person who has ceased to be a director or officer and
shall inure to the benefit of the heirs, executors and administrators of such a
person.

SECTION 6. Insurance. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or who, while a
director, officer, employee or agent of the Corporation, is or was serving at
the request of the Corporation as a director, officer, partner, trustee,
employee, agent or fiduciary of another corporation, partnership, joint

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venture, trust, enterprise or employee benefit plan, against any liability
asserted against and incurred by him in any such capacity, or arising out of his
status as such, provided that no insurance may be obtained by the Corporation
for liabilities against which it would not have the power to indemnify him under
this Article V or applicable law.

SECTION 7. Constituent, Resulting or Surviving Corporations.
For the purposes of this Article V, references to the "Corporation" shall
include all constituent corporations absorbed in a consolidation or merger as
well the resulting or surviving corporation so that any person who is or was a
director, officer, employee or agent of a constituent corporation or is or was
serving at the request of a constituent corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise shall stand in the same position under this Article V with
respect to the resulting or surviving corporation as he would if he had served
the resulting or surviving corporation in the same capacity.

ARTICLE VI

SEAL

The seal of the Corporation shall be circular in form and
shall bear the name of the Corporation, the year of its incorporation, the words
"Corporate Seal" and "Maryland" and any emblem or device approved by the Board
of Directors. The seal may be used by causing it or a facsimile to be impressed
or affixed or in any other manner reproduced, or by placing the word "(seal)"
adjacent to the signature of the authorized officer of the Corporation.

ARTICLE VII

FISCAL YEAR

The Corporation's fiscal year shall be fixed by the Board of
Directors.

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ARTICLE VIII

AMENDMENTS

These By-Laws may be amended or repealed by the affirmative
vote of a majority of the Board of Directors at any regular or special meeting
of the Board of Directors, subject to the requirements of the 1940 Act.

As adopted, July 20th, 1998

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