Registration No.
Inv. Co. Act No. 811-5518
As filed with the Securities and Exchange Commission on December 4, 1995
===========================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
POST-EFFECTIVE AMENDMENT NO. 31 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 33 [X]
__________________________________
THE RBB FUND, INC.
(Warburg Pincus Growth & Income Fund: Warburg Pincus Class and Warburg Pincus
Series 2 Class; Warburg Pincus Balanced Portfolio: Warburg Pincus Class and
Warburg Pincus Series 2 Class; Warburg Pincus Tax Free Portfolio: Warburg Pincus
Class; Government Securities Portfolio: RBB Family Class; BEA International
Equity Portfolio: BEA Class; BEA Strategic Fixed Income Portfolio: BEA Class;
BEA Emerging Markets Equity Portfolio: BEA Class; BEA U.S. Core Equity
Portfolio: BEA Class; BEA U.S. Core Fixed Income Portfolio; BEA Class; BEA
Global Fixed Income Portfolio: BEA Class; BEA Municipal Bond Fund Portfolio; BEA
Class; BEA Balanced Fund Portfolio; BEA Class; BEA Short Duration Portfolio: BEA
Class; Money Market Portfolio: RBB Family Class, Cash Preservation Class, Sansom
Street Class, Bedford Class, Janney Class, Beta Class, Gamma Class, Delta
Class, Epsilon Class, Zeta Class, Eta Class and Theta Class; Municipal Money
Market Portfolio: RBB Family Class, Cash Preservation Class, Sansom Street
Class, Bedford Class, Bradford Class, Janney Class, Beta Class, Gamma Class,
Delta Class, Epsilon Class, Zeta Class, Eta Class and Theta Class; Government
Obligations Money Market Portfolio: Sansom Street Class, Bedford Class, Bradford
Class, Janney Class, Beta Class, Gamma Class, Delta Class, Epsilon Class, Zeta
Class, Eta Class and Theta Class; New York Municipal Money Market Portfolio:
Bedford Class, Janney Class, Beta Class, Gamma Class, Delta Class, Epsilon
Class, Zeta Class, Eta Class and Theta Class)
________________________________________________________________________________
(Exact Name of Registrant as Specified in Charter)
Bellevue Park Corporate Center
400 Bellevue Parkway
Suite 100
Wilmington, DE 19809
(Address of Principal Executive Offices)
________________________________________
Registrant's Telephone Number: (302) 792-2555
Copies to:
GARY M. GARDNER, ESQUIRE
JOHN N. AKE, ESQUIRE
PNC Bank, National Association Ballard Spahr Andrews & Ingersoll
Broad and Chestnut Streets 1735 Market Street, 51st Floor
Philadelphia, PA 19101 Philadelphia, PA 19101
(Name and Address of
Agent for Service)
Approximate Date of Proposed Public Offering: as soon as
possible after effective date of registration statement.
It is proposed that this filing will become effective (check
appropriate box)
immediately upon filing pursuant to paragraph (b)
------
X on December 29, 1995 pursuant to paragraph (b)
------
60 days after filing pursuant to paragraph (a)(1)
-------
on December ___, 1995 pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on _______________ pursuant to paragraph (a)(2) of
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rule 485
If appropriate, check following box:
this post-effective amendment designates a new
-------
effective date for a previously filed post-effective
amendment.
______________________________
Pursuant to Rule 24f-2 under the Investment Company Act of 1940,
Registrant has elected to register an indefinite number of shares of common
stock of each of the fifty-four classes registered hereby under the Securities
Act of 1933. Registrant filed its notice pursuant to Rule 24f-2 for the fiscal
year ended August 31, 1995 on October 26, 1995.
______________________________
This document contains a total of ___________ pages.
Exhibit Index appears on page __________.
<PAGE>
THE RBB FUND, INC.
(Warburg Pincus Classes of the Warburg Pincus Growth & Income Fund,
Warburg Pincus Balanced Fund and Warburg Pincus Tax Free Fund)
Cross Reference Sheet
Form N-1A Item Location
-------------- --------
PART A PROSPECTUS
1. Cover Page............................ Cover Page
2. Synopsis.............................. Introduction
3. Financial Highlights Information...... Financial Highlights
4. General Description of Registrant..... Cover Page; Investment
Objectives and Policies
5. Management of the Fund................ Management
6. Capital Stock and Other Securities.... Cover Page; Dividends and
Distributions; Shareholder
Servicing; Description of
Shares
7. Purchase of Securities Being Offered.. How to Purchase Shares; Net
Asset Value
8. Redemption or Repurchase.............. How to Redeem and Exchange
Shares; Net Asset Value
9. Legal Proceedings..................... Inapplicable
PART B STATEMENT OF
ADDITIONAL INFORMATION
10. Cover Page............................ Cover Page
11. Table of Contents..................... Contents
12. General Information and History....... General
13. Investment Objectives and Policies.... Investment Objectives and
Policies
14. Management of the Fund................ Directors and Officers;
Investment Advisory,
Distribution and Servicing
Arrangements
15. Control Persons and Principal Holders
of Securities......................... Miscellaneous
<PAGE>
16. Investment Advisory and Other
Services.............................. Investment Advisory,
Distribution and Servicing
Arrangements; See Prospectus -
"Management"
17. Brokerage Allocation and Other
Practices............................. Fund Transactions
18. Capital Stock and Other Securities.... Description of Shares;
Additional Information
Concerning Fund Shares; See
Prospectus - "Dividends and
Distributions"
19. Purchase, Redemption and Pricing of
Securities Being Offered.............. Purchase and Redemption
Information; Valuation of
Shares; See Prospectus - "How
to Purchase Shares," "How to
Redeem and Exchange Shares"
and "Shareholder Servicing"
20. Tax Status............................ Taxes; See Prospectus -
"Taxes"
21. Underwriters.......................... Not Applicable
22. Calculation of Performance Data....... Performance Information
23. Financial Statements.................. Financial Statements
PART C OTHER INFORMATION
Information required to be included in Part C is set forth under the appropriate
item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(Warburg Pincus Series 2 Class of the Warburg Pincus Growth & Income Fund)
Cross Reference Sheet
Form N-1A Item Location
-------------- --------
PART A PROSPECTUS
1. Cover Page............................ Cover Page
2. Synopsis.............................. Introduction
3. Financial Highlights Information...... Financial Highlights
4. General Description of Registrant..... Cover Page; Investment
Objectives and Policies
5. Management of the Fund................ Management
2
<PAGE>
6. Capital Stock and Other Securities.... Cover Page; Dividends and
Distributions; Shareholder
Servicing; Description of
Shares
7. Purchase of Securities Being Offered.. How to Purchase Shares; Net
Asset Value
8. Redemption or Repurchase.............. How to Redeem and Exchange
Shares; Net Asset Value
9. Legal Proceedings..................... Inapplicable
PART B STATEMENT OF
ADDITIONAL INFORMATION
10. Cover Page............................ Cover Page
11. Table of Contents..................... Contents
12. General Information and History....... General
13. Investment Objectives and Policies.... Investment Objectives and
Policies
14. Management of the Fund................ Directors and Officers;
Investment Advisory,
Distribution and Servicing
Arrangements
15. Control Persons and Principal Holders
of Securities......................... Miscellaneous
16. Investment Advisory and Other
Services.............................. Investment Advisory,
Distribution and Servicing
Arrangements; See Prospectus
- "Management"
17. Brokerage Allocation and Other
Practices............................. Fund Transactions
18. Capital Stock and Other Securities.... Description of Shares;
Additional Information
Concerning Fund Shares; See
Prospectus - "Dividends and
Distributions"
19. Purchase, Redemption and Pricing of
Securities Being Offered.............. Purchase and Redemption
Information; Valuation of
Shares; See Prospectus -
"How to Purchase Shares,"
"How to Redeem and Exchange
Shares" and "Shareholder
Servicing"
20. Tax Status............................ Taxes; See Prospectus -
"Taxes"
21. Underwriters.......................... Not Applicable
3
<PAGE>
22. Calculation of Performance Data....... Performance Information
23. Financial Statements.................. Financial Statements
PART C OTHER INFORMATION
Information required to be included in Part C is set forth under the appropriate
item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(Warburg Pincus Series 2 Class of the Warburg Pincus Balanced Fund)
Cross Reference Sheet
Form N-1A Item Location
-------------- --------
PART A PROSPECTUS
1. Cover Page............................ Cover Page
2. Synopsis.............................. Introduction
3. Financial Highlights Information...... Financial Highlights
4. General Description of Registrant..... Cover Page; Investment
Objectives and Policies
5. Management of the Fund................ Management
6. Capital Stock and Other Securities.... Cover Page; Dividends and
Distributions; Shareholder
Servicing; Description of
Shares
7. Purchase of Securities Being Offered.. How to Purchase Shares; Net
Asset Value
8. Redemption or Repurchase.............. How to Redeem and Exchange
Shares; Net Asset Value
9. Legal Proceedings..................... Inapplicable
PART B STATEMENT OF
ADDITIONAL INFORMATION
10. Cover Page............................ Cover Page
11. Table of Contents..................... Contents
12. General Information and History....... General
13. Investment Objectives and Policies.... Investment Objectives and
Policies
14. Management of the Fund................ Directors and Officers;
Investment Advisory,
Distribution and Servicing
Arrangements
4
<PAGE>
15. Control Persons and Principal Holders
of Securities......................... Miscellaneous
16. Investment Advisory and Other
Services.............................. Investment Advisory,
Distribution and Servicing
Arrangements; See Prospectus
- "Management"
17. Brokerage Allocation and Other
Practices............................. Fund Transactions
18. Capital Stock and Other Securities.... Description of Shares;
Additional Information
Concerning Fund Shares; See
Prospectus - "Dividends and
Distributions"
19. Purchase, Redemption and Pricing of
Securities Being Offered.............. Purchase and Redemption
Information; Valuation of
Shares; See Prospectus -
"How to Purchase Shares,"
"How to Redeem and Exchange
Shares" and "Shareholder
Servicing"
20. Tax Status............................ Taxes; See Prospectus -
"Taxes"
21. Underwriters.......................... Not Applicable
22. Calculation of Performance Data....... Performance Information
23. Financial Statements.................. Financial Statements
PART C OTHER INFORMATION
Information required to be included in Part C is set forth under the appropriate
item, so numbered in Part C of this Registration Statement.
5
<PAGE>
[LOGO]
PROSPECTUS
DECEMBER 29, 1995
/ / WARBURG PINCUS GROWTH & INCOME FUND
/ / WARBURG PINCUS BALANCED FUND
/ / WARBURG PINCUS TAX FREE FUND
<PAGE>
WARBURG PINCUS GROWTH & INCOME FUND
WARBURG PINCUS BALANCED FUND
WARBURG PINCUS TAX FREE FUND
PROSPECTUS
December 29, 1995
The WARBURG PINCUS GROWTH & INCOME FUND (the "Growth & Income Fund"), the
WARBURG PINCUS BALANCED FUND (the "Balanced Fund") and the WARBURG PINCUS TAX
FREE FUND (the "Tax Free Fund") (collectively, the "Funds") consist of multiple
classes of common stock of The RBB Fund, Inc. ("RBB"). RBB is an open-end
management investment company registered under the Investment Company Act of
1940 (the "1940 Act") and incorporated under the laws of the State of Maryland
on February 29, 1988. RBB currently operates or proposes to operate seventeen
separate investment portfolios. The shares ("Shares") offered by this Prospectus
represent interests in the Funds.
The Growth & Income Fund's investment objective is to provide long-term growth
of capital and income and a reasonable current return. The Growth & Income Fund
seeks to achieve its objectives by investing primarily in equity securities, and
in various income producing securities including, but not limited to dividend
paying equity securities, fixed income securities and money market instruments.
The Growth & Income Fund may also purchase without limitation dollar-denominated
American Depository Receipts ("ADRs"). ADRs are issued by domestic banks and
evidence ownership of underlying foreign securities.
The Balanced Fund's investment objective is to maximize total return through a
combination of long-term growth of capital and current income consistent with
preservation of capital. It seeks to achieve this objective by diversified
investments in common stocks, preferred stocks, debt securities, preferred
stocks and debt securities which are convertible into common stocks and
government, corporate, bank and commercial obligations. In implementing this
objective, this Balanced Fund will use a multi-manager approach.
The Tax Free Fund's investment objective is to maximize current interest income
which is exempt from Federal income taxes, consistent with preser-vation of
capital. It seeks to achieve such objective by investing substantially all of
its assets in a diver-sified portfolio of obligations issued by or on behalf of
states, territories and possessions of the United States, the District of
Columbia, and their political subdivisions, agencies, instrumentalities and
authorities ("Municipal Obligations"). During periods of normal market
conditions, at least 80% of the net assets of the Tax Free Fund will be invested
in Municipal Obligations, the interest on which is exempt from the regular
Federal income tax and does not constitute an item of tax prefer-ence for
purposes of the Federal alternative mini-mum tax ("Tax-Exempt Interest").
Each Fund offers a class of common shares that is "no load" ("No Load Shares"),
available (a) directly from the Funds' distributor, Counsellors Securities Inc.,
("Counsellors Securities") and (b) through various brokerage firms, including
Charles Schwab & Company, Inc. Mutual Fund OneSourceTM Program and Fidelity
Brokerage Services, Inc. FundsNetworkTM Program. See "How to Purchase Shares."
No Load Shares of the Balanced Fund and the Tax Free Fund are subject to a 12b-1
fee of .25% per annum. No Load Shares of the Growth & Income Fund are not
subject to a 12b-1 fee.
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 FUND INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
This Prospectus contains information that a prospective investor needs to know
before investing. Please keep it for future reference. A Statement of Additional
Information, dated December 29, 1995, has been filed with the Securities and
Exchange Commission and is incorporated by reference in this Prospectus. It may
be obtained free of charge from RBB's distributor by calling (800) 257-5614.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE>
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES*
ANNUAL FUND OPERATING EXPENSES AFTER EXPENSE REIMBURSEMENTS AND WAIVERS
<TABLE><CAPTION>
GROWTH & INCOME TAX FREE
FUND BALANCED FUND FUND
--------------- ------------- --------
<S> <C> <C> <C>
Management fees**..................................... .75% 0% 0%
12b-1 fees**.......................................... -- .25 .25
Other Expenses (after waivers and reimbursements)..... .47 1.35 .25
--
--- ---
Total Fund Operating Expenses (after waivers and
reimbursements)..................................... 1.22% 1.60% .50%
--
--
--- ---
--- ---
</TABLE>
EXAMPLE
An investor would pay the following expenses on a
$1,000 investment in each of the Funds, assuming
(1) a 5% annual return, and (2) redemption at the
end of each time period:
<TABLE><CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ------ ----- -----
<S> <C> <C> <C> <C>
Growth & Income Fund...................................... $ 12 $ 39 $67 $ 148
Balanced Fund............................................. 16 50 87 190
Tax Free Fund............................................. 5 16 28 63
</TABLE>
- ------------
* No sales charge is imposed upon the purchase of shares of the Funds. Thus,
the full amount of the purchase price of Fund shares will be invested at the
time of purchase or upon any other exchange of Shares of other Warburg Pincus
Funds without imposition of any sales charge.
** Management fees and 12b-1 fees are based on average daily net assets and are
calculated daily and paid monthly.
The caption "Other Expenses" does not include extraordinary expenses as
determined by use of generally accepted accounting principles.
The Example in the Fee Table assumes that all dividends and distributions
are reinvested and that the amounts listed under "Annual Fund Operating Expenses
After Expense Reimbursements and Waivers" remain the same as the years shown.
Certain broker-dealers and financial institutions also may charge their clients
fees in connection with investments in a Fund's shares, which fees are not
reflected in the table. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN. Long-term Shareholders of the Balanced Fund and the Tax Free Fund may pay
more than the economic equivalent of the maximum front-end sales charges
permitted by the National Association of Securities Dealers, Inc. (the "NASD").
How-ever, given the Funds' 12b-1 fees, it is estimated that it would require a
substantial number of years to exceed the maximum permissable year-end sales
charges.
The Fee Table is designed to assist an investor in understanding the various
costs and expenses that an investor in the Shares of the Funds will bear
directly or indirectly. (For more complete descriptions of the various costs and
expenses, see "Management" and "Distribution of Shares" below.) The expense
figures for the Growth & Income Fund are based upon fees and costs as of August
31, 1995. Expenses for the Balanced and Tax Free Funds have been restated from
actual expenses paid by such Funds during the year ended August 31, 1995 to
reflect current
2
<PAGE>
expense levels. In addition, the Fee Table reflects a voluntary assumption of
some of the additional expenses of the Balanced Fund and Tax Free Fund by the
investment adviser. Assumption of additional expenses will have the effect of
lowering the Balanced Fund and Tax Free Fund's respective overall expense ratios
and increasing their respective yields to investors. There can be no assurance
that the investment adviser will continue to assume such expenses. Absent such
expense reimbursements, under current expense levels the actual expenses paid by
the Balanced Fund and Tax Free Fund for the year ended August 31, 1995 would
have been as follows:
ANNUAL FUND OPERATING EXPENSES BEFORE EXPENSE REIMBURSEMENTS AND WAIVERS
<TABLE><CAPTION>
BALANCED FUND TAX FREE FUND
------------- -------------
<S> <C> <C>
Management fees................................. .90% .50%
12b-1 Fees...................................... .25 .25
Other Expenses.................................. 4.89 1.37
---- ----
Total Fund Operating Expenses................... 6.04% 2.12%
==== ====
</TABLE>
The caption "Other Expenses" does not include extraordinary expenses as
determined by use of generally accepted accounting principles.
OFFERING PRICES
Shares which represent interests in the Funds will be offered to the public
at the next determined net asset value after receipt of an order by the Funds.
See "How to Purchase Shares."
MINIMUM INITIAL AND SUBSEQUENT INVESTMENTS
The minimum initial investment for the Funds is $1,000. Subsequent
investments must be $100 or more. See "How to Purchase Shares."
EXCHANGES
Shares may be exchanged for Shares of other Warburg Pincus Funds at their
net asset value next determined after receipt by the Funds of an exchange
request. No exchange fee is currently charged for exchanges. See "How to Redeem
and Exchange Shares."
REDEMPTION PRICE
Shares may be redeemed at any time at their net asset value next determined
after receipt by Warburg Pincus Funds of a redemption request. The Funds reserve
the right, upon 30 days written notice, to redeem an account in the Funds if the
total value of the investor's Shares in that account falls below $500 and is not
increased to at least such amount within such 30-day period. See "How to Redeem
and Exchange Shares--Redemption of Shares."
RISK FACTORS
An investment in the Growth & Income, Balanced or Tax Free Funds is subject
to certain risks, as set forth in detail under "Investment Objectives and
Policies." As with other mutual funds, there can be no assurance that any Fund
will achieve its objective. The Funds, to the extent set forth under "Investment
Objectives and Policies," may engage in the following investment practices: the
purchase of mortgage-related securities, the lending of portfolio securities and
engaging in options and futures transactions, engaging in secured borrowings and
investing in lower rated fixed-income securities. High yield bonds are commonly
referred to as "junk bonds." All of these transactions involve certain special
risks, as set forth under "Investment Objectives and Policies."
SHAREHOLDER INQUIRIES
Any questions or communications regarding a shareholder account should be
directed to Warburg Pincus Funds at 1-800-888-6878 and direct communications to
P.O. Box 9030 Boston, Massachusetts 02205-9030.
3
<PAGE>
FINANCIAL HIGHLIGHTS
The tables below sets forth certain information concerning the investment
results of the RBB classes representing interests in No Load Shares of the
Warburg Pincus Growth & Income, Balanced and Tax Free Funds, for the periods
indicated. The financial data included in these tables for each of the years
ended August 31, 1991 through 1995 are a part of RBB's financial statements for
the Funds which have been audited by Coopers & Lybrand L.L.P., RBB's independent
accountants, whose current report thereon appears in the Statement of Additional
Information along with the financial statements. The financial data for the
Funds for the year ended August 31, 1990 and the period ended August 31, 1989 is
part of previous financial statements audited by Coopers & Lybrand L.L.P. The
financial data included in these tables should be read in conjunction with the
financial statements and related notes included in the Statement of Additional
Information. Further information about the performance of the Funds is contained
in the Fund's Annual Report to shareholders. The Annual Report and the Statement
of Additional Information may be obtained by contacting the Warburg Pincus
Funds. See "Other Information--Reports and Inquiries."
WARBURG PINCUS GROWTH & INCOME FUND(D)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE><CAPTION>
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, 1995 AUGUST 31, 1994 AUGUST 31, 1993 AUGUST 31, 1992 AUGUST 31, 1991
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 14.56 $ 16.72 $ 11.99 $ 12.11 $ 11.00
--------------- ------- ------ ------ ------
Income from Investment
Operations:
Net investment income......... 0.2224 .0785 .0464 .1912 .3744
Net gains (losses) on
securities (both realized and
unrealized)................ 1.9834 1.8151 4.8499 .0402 1.6891
--------------- ------- ------ ------ ------
Total from investment
operations.................. 2.2058 1.8936 4.8963 .2314 2.0635
--------------- ------- ------ ------ ------
Less Distributions
Dividends (from net investment
income)..................... (0.1824) (.0785) (.0875) (.1871) (.4043)
Distributions (from capital
gains)...................... (0.1834) (3.9751) (.0788) (.1643) (.5492)
--------------- ------- ------ ------ ------
Total distributions........... (0.3658) (4.0536) (.1663) (.3514) (.9535)
--------------- ------- ------ ------ ------
Net asset value, end of period... $ 16.40 $ 14.56 $ 16.72 $ 11.99 $ 12.11
--------------- ------- ------ ------ ------
--------------- ------- ------ ------ ------
Total Returns.................... 15.62% 14.41% 41.17%(e) 1.99%(e) 19.91%(e)
Ratios/Supplemental Data:
Net assets, end of period
(000)....................... $ 1,038,193 $ 410,658 $60,689 $28,976 $24,726
Ratios of expenses to average
net assets.................... 1.22% 1.28%(a) 1.14%(a) 1.25%(a) 1.30%(a)
Ratios of net investment
income to average net
assets..................... 1.64% .41% .30% 1.66% 3.42%
Portfolio turnover rate.......... 109% 150% 344% 175% 41%
<CAPTION>
FOR THE PERIOD
OCTOBER 6, 1988
FOR THE (COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
AUGUST 31, 1990 AUGUST 31, 1989
--------------- -----------------
<S> <C> <C>
Net asset value, beginning of
period......................... $ 11.53 $ 10.00
----- -----
Income from Investment
Operations:
Net investment income......... .3574 .3876
Net gains (losses) on
securities (both realized and
unrealized)................ (.1856) 1.4225
----- -----
Total from investment
operations.................. .1718 1.8101
----- -----
Less Distributions
Dividends (from net investment
income)..................... (.3951) (.2833)
Distributions (from capital
gains)...................... (.3067) --
----- -----
Total distributions........... (.7018) (.2833)
----- -----
Net asset value, end of period... $ 11.00 $ 11.53
----- -----
----- -----
Total Returns.................... 1.48%(e) 18.48%(c)(e)
Ratios/Supplemental Data:
Net assets, end of period
(000)....................... $ 1,396 $ 1,150
Ratios of expenses to average
net assets.................. 1.40%(a) 1.40%(a)(b)
Ratios of net investment
income to average net
assets..................... 3.32% 4.32%(b)
Portfolio turnover rate.......... 98% 111%(c)
</TABLE>
- ------------
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Warburg Pincus Growth & Income Fund would have
been 1.28%, 1.14%, 1.28%, 2.17% and 3.81% for the years ended August 31,
1994, 1993, 1992, 1991 and 1990, respectively, and 2.82% annualized for the
period ended August 31, 1989.
(b) Annualized.
(c) Not annualized.
(d) Financial Highlights relate solely to the No Load Class of shares of the
Fund. Formerly the Equity Growth & Income Portfolio. Prior to October 1,
1993, the Fund was advised by PNC Institutional Management Corporation.
(e) Sales load not reflected in total return. The sales load was eliminated
effective July 29, 1993.
4
<PAGE>
WARBURG PINCUS BALANCED FUND(E)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE><CAPTION>
FOR THE FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
AUGUST 31, 1995 AUGUST 31, 1994 AUGUST 31, 1993 AUGUST 31, 1992 AUGUST 31, 1991
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 11.01 $ 11.71 $ 12.04 $ 12.05 $ 10.60
------- ------- ------- ------ ------
Income from Investment
Operations
Net investment income......... 0.2080 .4132 .5555 .4408 .4213
Net gains (losses) on
securities (both realized and
unrealized)................ 1.7225 .3248 1.1253 .5155 1.7196
------- ------- ------- ------ ------
Total from Investment
Operations.................. 1.9305 .7380 1.6808 .9563 2.1409
------- ------- ------- ------ ------
Less Distributions
Dividends (from net investment
income)..................... (0.3136) (.4586) (.5412) (.3713) (.4128)
Distributions (from capital
gains)...................... (1.5069) (.9794) (1.4696) (.5950) (.2781)
------- ------- ------- ------ ------
Total Distributions........... (1.8205) (1.4380) (2.0108) (.9663) (.6909)
------- ------- ------- ------ ------
Net asset value, end of period... $ 11.12 $ 11.01 $ 11.71 $ 12.04 $ 12.05
------- ------- ------- ------ ------
------- ------- ------- ------ ------
Total Return..................... 21.56% 6.86%(b) 15.27%(b) 8.07%(b) 21.18%(b)
Ratios/Supplemental Data
Net assets, end of period
(000)....................... $ 5,342 $ 808 $ 762 $ 1,026 $ 1,290
Ratios of expenses to average
net assets.................. 1.53%(a) 0%(a) 0%(a) .67%(a) 1.40%(a)
Ratios of net investment
income to average net
assets..................... 2.27% 3.76% 4.13% 3.68% 3.58%
Portfolio turnover rate.......... 107% 32% 30% 93% 76%
<CAPTION>
FOR THE PERIOD
OCTOBER 6, 1988
FOR THE (COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
AUGUST 31, 1990 AUGUST 31, 1989
--------------- -----------------
<S> <C> <C>
Net asset value, beginning of
period......................... $ 11.32 $ 10.00
------ ------
Income from Investment
Operations
Net investment income......... .4080 .4371
Net gains (losses) on
securities (both realized and
unrealized)................ (.2785) 1.2239
------ ------
Total from Investment
Operations.................. .1295 1.6610
------ ------
Less Distributions
Dividends (from net investment
income)..................... (.4296) (.3419)
Distributions (from capital
gains)...................... (.4199) --
------ ------
Total Distributions........... (.8495) (.3419)
------ ------
Net asset value, end of period... $ 10.60 $ 11.32
------ ------
------ ------
Total Return..................... 1.09%(b) 17.03%(b)(d)
Ratios/Supplemental Data
Net assets, end of period
(000)....................... $ 1,373 $ 1,128
Ratios of expenses to average
net assets.................. 1.40%(a) 1.40%(a)(c)
Ratios of net investment
income to average net
assets..................... 3.80% 4.90%(c)
Portfolio turnover rate.......... 95% 35%(d)
</TABLE>
- ------------
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Balanced Fund would have been 6.04%, 5.46%,
5.37%, 3.88%, 3.89% and 3.76% for the years ended August 31, 1995, 1994,
1993, 1992, 1991 and 1990, respectively, and 2.83% annualized for the period
ended August 31, 1989.
(b) Sales load not reflected in total return. The sales load was eliminated
effective August 31, 1994.
(c) Annualized.
(d) Not Annualized.
(e) Financial Highlights relate to the No Load Class of shares of the Fund.
Formerly the Balanced Portfolio. Prior to October 1, 1994, the Fund was
advised by PNC Institutional Management Corporation.
5
<PAGE>
WARBURG PINCUS TAX FREE FUND(D)
(FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR)
<TABLE><CAPTION>
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED ENDED ENDED
AUGUST 31, 1995 AUGUST 31, 1994 AUGUST 31, 1993 AUGUST 31, 1992 AUGUST 31, 1991
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period......................... $ 10.40 $ 11.53 $ 11.04 $ 10.46 $ 10.05
------- ------- ------- ------- -------
Income from Investment
Operations:
Net investment income......... 0.5426 0.6026 0.6385 0.6771 0.6027
Net gains (losses) on
securities (both realized and
unrealized)................ 0.3077 (0.6259) 0.8654 0.6145 0.4402
------- ------- ------- ------- -------
Total from Investment
Operations................. 0.8503 (0.0233) 1.5039 1.2916 1.0429
------- ------- ------- ------- -------
Less Distributions:
Dividends (from net investment
income)..................... (0.5426) (0.6092) (0.6725) (0.6345) (0.6212)
Distributions (in excess of
net investment income)....... -- (0.0135) -- -- --
Distributions (from capital
gains)...................... (0.2979) (0.4886) (0.3414) (0.0771) (0.0117)
------- ------- ------- ------- -------
Total distributions........... (0.8403) (1.1113) (1.0139) (0.7116) (0.6329)
------- ------- ------- ------- -------
Net asset value, end of period... $ 10.41 $ 10.40 $ 11.53 $ 11.04 $ 10.46
------- ------- ------- ------- -------
------- ------- ------- ------- -------
Total Return..................... 8.89%(e) (0.30%)(e) 14.45%(e) 12.77%(e) 10.66%(e)
Ratios/Supplemental Data
Net assets, end of period
(000)....................... $ 4,127 $ 5,465 $ 6,631 $ 6,491 $ 8,840
Ratios of expenses to average
net assets.................. .48%(a) .15%(a) .17%(a) .33%(a) .83%(a)
Ratios of net investment
income to average net
assets..................... 5.53% 5.51% 5.71% 6.21% 6.02%
Portfolio turnover rate.......... 38% 20% 70% 78% 63%
<CAPTION>
FOR THE PERIOD
OCTOBER 18, 1988
FOR THE YEAR (COMMENCEMENT OF
ENDED OPERATIONS) TO
AUGUST 31, 1990 AUGUST 31, 1989
--------------- ----------------
<S> <C> <C>
Net asset value, beginning of
period......................... $ 10.28 $ 10.00
------- -------
Income from Investment
Operations:
Net investment income......... .5940 .5273
Net gains (losses) on
securities (both realized and
unrealized)................ (.1741) .0247
------- -------
Total from Investment
Operations.................. .4199 .7320
------- -------
Less Distributions:
Dividends (from net investment
income)..................... (.6499) (.4549)
Distributions (in excess of
net investment income)....... -- --
Distributions (from capital
gains)...................... -- --
------- -------
Total distributions........... (.6499) (.4549)
------- -------
Net asset value, end of period... $ 10.05 $ 10.28
------- -------
------- -------
Total Return..................... 4.00%(e) 7.49%(c)(e)
Ratios/Supplemental Data
Net assets, end of period
(000)....................... $ 1,187 $ 1,095
Ratios of expenses to average
net assets.................. 1.25%(a) 1.25%(a)(b)
Ratios of net investment
income to average net
assets...................... 5.74% 6.01%(b)
Portfolio turnover rate.......... 10% 175%(c)
</TABLE>
- ------------
(a) Without the waiver of advisory, administration and custody fees and without
the reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Warburg Pincus Tax Free Fund would have been
2.12%, 1.84%, 1.76%, 1.61%, 3.06% and 3.75% for the years ended August 31,
1995, 1994, 1993, 1992, 1991 and 1990, respectively, and 2.48% annualized
for the period ended August 31, 1989.
(b) Annualized.
(c) Not Annualized.
(d) Formerly the Tax-Free Portfolio. Prior to April 10, 1995, the Fund was
advised by PNC Institutional Management Corporation.
(e) Sales load not reflected in total return. The sales load was eliminated
effective February 1, 1995.
6
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
GROWTH & INCOME FUND
The Growth & Income Fund's investment objectives are to provide long-term
growth of capital and income and a reasonable current return. The Growth &
Income Fund seeks to achieve its objectives by investing primarily in equity
securities. Equity securities include common stocks, securities which are
convertible into common stocks and readily marketable securities, such as rights
and warrants, which derive their value from common stock. The Growth & Income
Fund seeks to achieve its income objective by investing in various income
producing securities including, but not limited to, dividend paying equity
securities and fixed income securities. The portion of the Fund invested from
time to time in equity securities, fixed income securities and money market
securities will vary depending on market conditions and there may be extended
periods when the Fund is primarily invested in one of them. In addition, the
amount of income generated from the Fund will fluctuate depending, among other
things, on the composition of the Fund's holdings and the level of interest and
dividend income paid on those holdings. Investments in common stock in general
are subject to market risks that may cause their prices to fluctuate over time.
Therefore, an investment in the Growth and Income Fund may be more suitable for
long-term investors who can bear the risk of these fluctuations. The Growth &
Income Fund may also purchase without limitation dollar-denominated American
Depository Receipts ("ADRs"). ADRs are issued by domestic banks and evidence
ownership of underlying foreign securities. The policy of the Growth & Income
Fund is to invest substantially all of its assets in equity securities under
normal market conditions.
DEBT SECURITIES. The Growth & Income Fund may invest in debt securities rated no
less than investment grade by either Standard & Poor's or Moody's. Bonds in the
lowest investment grade debt category (e.g., bonds rated BBB by Stan-dard &
Poor's Corporation or Baa by Moody's Investors Services, Inc.) have speculative
charac-teristics, and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and inter-est
payments than is the case with higher grade bonds. The Growth & Income Fund may
retain a bond which was rated as investment grade at the time of purchase but
whose rating is subse-quently downgraded below investment grade.
FOREIGN SECURITIES. The Growth & Income Fund may invest up to 10% of its total
assets in securities of foreign issuers. Investing in securities of foreign
issuers involves considerations not typically associated with investing in
securities of companies organized and operated in the U.S. Foreign securities
generally are denominated and pay dividends or interest in foreign currencies.
The Growth & Income Fund 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 assets of the Growth & Income Fund as measured in U.S.
dollars may therefore be affected favorably or unfavorably by changes in
exchange rates. There may be less publicly available information concerning
foreign issuers than is available with respect to U.S. issuers. Foreign
securities may not be registered with the U.S. Securities and Exchange
Commission, and generally, foreign companies are not subject to uniform
accounting, auditing and financial reporting requirements comparable to those
applicable to U.S. issuers. See "Investment Objectives and Policies--Foreign
Securities" in the Statement of Additional Information.
ILLIQUID SECURITIES. The Growth & Income Fund will not invest more than 15% of
its net assets in illiquid securities, including securities that are illiquid by
virtue of the absence of a readily available market or legal or contractual
restrictions on resale. Securities that have legal or contractual restrictions
on resale but have a readily
7
<PAGE>
available market are not deemed illiquid for purposes of this limitation. The
Growth & Income Fund's adviser will monitor the liquidity of such restricted
securities under the supervision of the investment adviser and the Board of
Directors. See "Investment Objectives and Policies-- Illiquid Securities" in the
Statement of Additional Information.
OPTIONS AND FUTURES CONTRACTS. The Growth & Income Fund 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 Corporation. The
Growth & Income Fund may also invest in futures contracts and options on futures
contracts (index futures contracts or interest rate futures contracts, as
applicable) for hedging purposes 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. However, the Growth & Income Fund may
not write put options or purchase or sell futures contracts or options on
futures contracts to hedge more than its total assets unless immediately after
any such transaction the aggregate amount of premiums paid for put options and
the amount of margin deposits on its existing futures positions do not exceed 5%
of its total assets.
Options trading is a highly specialized activity which entails greater than
ordinary investment risks. A call option for a particular security gives the
purchaser of the option the right to buy, and a writer the obligation to sell,
the underlying security at the stated exercise price at any time prior to the
expiration of the option, regardless of the market price of the security. The
premium paid to the writer is in consideration for undertaking the obligations
under the option contract. A put option for a particular security gives the
purchaser the right to sell the underlying security at the stated exercise price
at any time prior to the expiration date of the option, regardless of the market
price of the security. In contrast to an option on a particular security, an
option on an index provides the holder with the right to make or receive a cash
settlement upon exercise of the option. The amount of this settlement will be
equal to the difference between the closing price of the index at the time of
exercise and the exercise price of the option expressed in dollars, times a
specified multiple.
The Growth & Income Fund will engage in unlisted over-the-counter options
only with broker/dealers deemed creditworthy by its invest-ment adviser. Closing
transactions in certain options are usually effected directly with the same
broker/dealer that effected the original option transaction. The Growth & Income
Fund bears the risk that the broker/dealer will fail to meet its obligations.
There is no assurance that the Growth & Income Fund will be able to close an
unlisted option position. Furthermore, unlisted options are not subject to the
protections afforded purchasers of listed options by the Options Clearing
Corporation, which performs the obligations of its members who fail to do so in
connection with the purchase or sale of options.
To enter into a futures contract, the Growth & Income Fund must make a
deposit of an initial margin with its custodian in a segregated account in the
name of its futures broker. Subsequent payments to or from the broker, called
variation margin, will be made on a daily basis as the price of the underlying
security or index fluctuates, making the long and short positions in the futures
contracts more or less valuable.
The risks related to the use of options and futures contracts include: (i)
the correlation between movements in the market price of a Fund's investments
(held or intended for purchase) being hedged and in the price of the futures
contract or option may be imperfect; (ii)
8
<PAGE>
possible lack of a liquid secondary market for closing out options or futures
positions; (iii) the need for additional portfolio management skills and
techniques; and (iv) losses due to unanticipated market movements. Successful
use of options and futures by the Growth & Income Fund is subject to the
investment adviser's ability to correctly predict movements in the direction of
the market. For example, if the Growth & Income Fund uses future contracts as a
hedge against the possibility of a decline in the market adversely affecting
securities held by it and securities prices increase instead, the Growth &
Income Fund will lose part or all of the benefit of the increased value of its
securities which it has hedged because it will have approximately equal
offsetting losses in its futures positions. 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 future
pricing. As a result, a relatively small price movement in a futures contract
may result in immediate and substantial loss or gain to the investor. Thus, a
purchase or sale of a futures contract may result in losses or gains in excess
of the amount invested in the contract. For a further discussion see "Investment
Policies" in the Statement of Additional Information.
PORTFOLIO TURNOVER. The Growth & Income Fund will effect portfolio transactions
without regard to holding period, if, in its judgment, such transactions are
advisable in light of general market, economic or financial conditions. As a
result, the Fund may engage in a substantial number of portfolio transactions
which could cause the portfolio turnover rate to exceed 100%, although under
normal conditions the Growth & Income Fund does not anticipate that its annual
portfolio turnover rate will exceed 100%. However, it is impossible to predict
portfolio turnover rates. The portfolio turnover rate is calculated by dividing
the lesser of the 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 anticipated portfolio turnover rate for the Growth & Income Fund may be
greater than that of many other investment companies. A higher than normal
portfolio turnover rate may affect the degree to which the Fund's net asset
value fluctuates. Higher portfolio turnover rates are likely to result in
comparatively greater brokerage commissions. In addition, short-term gains
realized from portfolio transactions are taxable to shareholders as ordinary
income. The amount of portfolio activity will not be a limiting factor when
making portfolio decisions. See Statement of Additional Information "Fund
Transactions" and "Taxes."
TEMPORARY DEFENSIVE MEASURES. The Growth & Income Fund reserves the right to
hold, as a temporary defensive measure, cash and eligible, U.S.
dollar-denominated money market instruments, as well as securities subject to
repurchase agreements. The Growth & Income Fund's investment adviser will
determine when market conditions warrant temporary defensive measures.
The Growth & Income Fund's investment objectives and the policies described
above may be changed by RBB's Board of Directors without the affirmative vote of
the holders of a majority of the outstanding Shares representing interests in
the Growth & Income Fund. Such changes may result in the Growth & Income Fund
having investment objectives which differ from those an investor may have
considered at the time of investment. There is no assurance that the Growth &
Income Fund's investment objective will be achieved.
BALANCED FUND
The Balanced Fund's investment objective is to maximize total return through
a combination of long-term growth of capital and current
9
<PAGE>
income consistent with preservation of capital. The Balanced Fund seeks to
achieve this objective through a policy of diversified investment in common
stocks, preferred stocks, debt securities, preferred stocks and debt securities
which are convertible into common stocks, and government, corporate, bank and
commercial obligations. At all times, the Balanced Fund will have a minimum of
25% of its assets in stocks and minimum of 25% in fixed income securities.
Compliance with such percentage requirement may limit the ability of the
Balanced Fund to maximize total return. With respect to convertible senior
securities, only that portion of the value of such securities attributable to
their fixed income characteristics will be used for purposes of determining the
percentage of the assets of the Balanced Fund that are invested in fixed-income
senior securities. The actual percentage of assets invested in equity and
fixed-income securities will vary from time to time, depending on the judgment
of the investment adviser as to general market and economic conditions, trends
and yields and interest rates and changes in fiscal and monetary policies.
MULTI-MANAGER APPROACH. The Balanced Fund will be managed by a team of senior
managers of the investment adviser, Warburg, Pincus Counsellors, Inc. ("WPC").
Six of the managers will be dedicated to managing portions of the Balanced Fund
allocated to equities; one manager will select and manage the fixed income
securities which comprise the fixed income portion of the Balanced Fund. Dale C.
Christensen and Anthony G. Orphanos, Managing Directors of WPC, will be
designated overall portfolio strategists and will be responsible for determining
the portion of the Balanced Fund to be allocated between equity and fixed income
securities, and the allocation among the various equity sectors.
Equity Investment. Each of the equity portfolio managers will manage an
allocated portion of the equity holdings of the Balanced Fund; each manager will
manage his/her portion with a different investment emphasis or approach, but
consistent with the overall objective of long-term growth of capital for the
Balanced Fund's common stock portion.
The four areas represented by the equity portfolio managers are: (1) U.S.
Value Sector, managed by Anthony G. Orphanos, will invest primarily in stocks
whose acquisition price represents low absolute or relative value, based on
historical and financial analysis, and compared to other stocks and sectors of
the Standard & Poor's 500 universe of common stocks and other indices. (2) U.S
Small Company Sector, managed by Elizabeth B. Dater and Stephen J. Lurito, will
invest primarily in common stocks and warrants of small capitalization and
emerging growth U.S. companies that represent attractive opportunities for
maximum capital appreciation. Emerging growth companies are small and
medium-sized companies that have passed their start up phase and that show
positive earnings and prospects for achieving significant profit and gain in a
relatively short period of time. (3) U.S. Mid-Cap Sector, managed by George U.
Wyper and Susan L. Black, will invest primarily in a diversified portfolio of
common stocks, warrants and securities convertible into or exchangeable for
common stock securities of domestic companies which have market capitalizations
in the $660 million to $13.8 billion range, commonly referred to as middle
capitalization or "mid-cap," and includes a potential universe of companies in
such indices as the Russell Midcap Index and Standard & Poor's Midcap 400 Index.
The portfolio manager will attempt to identify sectors of the market and
companies within market sectors that he believes will outperform the overall
market. And, (4) International Equity Sector, managed by Richard H. King and
Nicholas P.W. Horsley, will invest primarily in a broadly diversified portfolio
of equity securities of companies that, wherever organized, have their principal
business activities and interests outside the United States. The international
equity managers intend to invest principally in the securities of
10
<PAGE>
financially strong companies with opportunities for growth within growing
international economies and markets through increased earnings power and
improved utilization or recognition of assets. Investments may be made in equity
securities of companies of any size, whether traded on or off a national
securities exchange. Investments in foreign securities involve risks not
otherwise associated with investments in domestic securities, including risks of
currency fluctuations, tax or excessive government regulation, and political
instability. See "Investment Objectives and Policies--Growth & Income
Fund--Foreign Securities" above.
Fixed Income Investment. The fixed income portion, managed by Mr.
Christensen, will invest primarily in debt instruments such as corporate
obligations, U.S. Government obligations, municipal obligations and mortgage-
related debt securities.
CORPORATE OBLIGATIONS. The Balanced Fund may invest in debt obligations of
corporations, such as corporate bonds, debentures, debentures convertible into
common stocks, and notes, which, at the time of purchase for the Fund, are rated
"AAA," "AA" or "A" by Standard & Poor's Corporation ("S&P") or "Aaa," "Aa" or
"A," by Moody's Investors Service, Inc. ("Moody's"). These ratings are described
in the Appendix to this Prospectus. The Balanced Fund may also purchase debt
obligations which are unrated at the time of purchase provided they are
determined by the Fund's investment adviser to be of comparable quality to rated
obligations pursuant to guidelines approved by RBB's Board of Directors. Such
obligations may include dollar-denominated debt obligations of foreign issuers.
In selecting debt securities for the Balanced Fund, the investment adviser
will review and monitor the creditworthiness of each issuer and issue, in
addition to relying on ratings assigned by S&P or Moody's as indicators of
quality. Interest rate trends and specific developments which may affect
individual issuers will also be analyzed.
U.S. GOVERNMENT OBLIGATIONS. The Balanced Fund may purchase obligations issued
or guaranteed by the U.S. Government or its agencies or instrumentalities.
Obligations which may be so purchased include obligations of agencies and
instrumentalities of the U.S. Government which are supported by the full faith
and credit of the U.S. or by U.S. Treasury guarantees, such as securities of the
Government National Mortgage Association and the Federal Housing Authority, or
obligations supported by the right of the issuer to borrow from the U.S.
Treasury, such as securities of the Federal Home Loan Mortgage Corporation, or
obligations supported only by the credit of the agency or instrumentality
issuing the obligation, such as securities of the Federal National Mortgage
Association and the Federal Loan Banks.
"WHEN-ISSUED" SECURITIES. The Balanced Fund may purchase securities on a
"when-issued" basis. When-issued securities are securities purchased for
delivery beyond the normal settlement date at a stated price and yield. The
Balanced Fund will generally not pay for such securities or start earning
interest on them until they are received. Securities purchased on a when-issued
basis are recorded as an asset when the commitment is entered into and are
subject to changes in value prior to delivery based upon changes in the general
level of interest rates. The Balanced Fund expects that commitments to purchase
when-issued securities will not exceed 25% of the value of its total assets
absent unusual market conditions. The Balanced Fund does not intend to purchase
when-issued securities for speculative purposes but only in furtherance of its
investment objective.
MUNICIPAL OBLIGATIONS. When conditions warrant, the Balanced Fund may also
invest without limitation in Municipal Obligations, whether or not the income
thereon is exempt from regular Federal income tax, provided that the Municipal
11
<PAGE>
Obligations are determined by the Fund's investment adviser to present minimal
credit risks and at the time of purchase are rated "A" or higher by S&P or by
Moody's in the case of bonds, "SP-1" by S&P or "MIG-2" or higher by Moody's in
the case of notes, or "VMIG-2" or higher by Moody's in the case of variable rate
demand notes, or if unrated, are determined by the investment adviser to be of
comparable quality pursuant to guidelines adopted by RBB's Board of Directors.
For a more complete discussion of Municipal Obligations, see "Tax Free
Portfolio--Municipal Obligations" below and "Investment Objectives and
Policies--Municipal Obligations" in the Statement of Additional Information.
MORTGAGE-RELATED DEBT SECURITIES. The Balanced Fund may purchase without
limitation mortgage-related debt securities. Such securities represent interests
in pools of mortgage loans to residential home buyers made by lenders such as
savings and loan institutions, mortgage bankers, commercial banks and others.
Pools of mortgage loans are assembled for sale to investors (such as the
Balanced Fund) by various governmental, government-related and private
organizations. Mortgage-related securities may include asset-backed securities
which are backed by mortgages, installment sales contracts, credit card
receivables or other assets and collateralized mortgage obligations ("CMOs")
issued or guaranteed by U.S. Government agencies and instrumentalities or issued
by private companies. Purchasable mortgage-related securities also include
adjustable rate securities. The estimated life of an asset-backed security
varies with the prepayment experience with respect to the underlying debt
instruments. For this and other reasons, an asset-backed security's stated
maturity may be shortened, and the security's total return may be difficult to
predict precisely. Such difficulties are not expected, however, to have a
significant effect on the Balanced Fund since the remaining maturity of any
asset-backed security acquired will be 397 days or less.
Interests in pools of mortgage loans differ from other forms of debt
securities, which normally provide for periodic payment of interest in fixed
amounts with principal payments at maturity or specified call dates. Instead,
these securities will provide a monthly payment to the Balanced Fund which
consists of both interest and principal payments. In effect, these payments are
"pass-throughs" of the monthly payments made by the individual borrowers on
their residential mortgage loans, net of any fees paid to the issuer or
guarantor of such securities. Additional payments to the Fund may be derived
from repayments of principal resulting from the sale of the underlying
residential property, refinancing or foreclosure, net of fees or costs which may
be incurred. Some mortgage-related securities are described as "modified
pass-throughs." These securities entitle the holder to receive all interest and
principal payments owed on the mortgage pool, net of certain fees, regardless of
whether or not the mortgagor actually makes the payment.
The average life of mortgage-related securities varies with the maturities
of the underlying mortgage instruments. In addition, prepayments of the
mortgages included in the underlying mortgage pool will usually result in the
return of the greatest part of principal invested well before the maturity of
the mortgages in the pool. The volume of such prepayments of principal in a
given pool will influence the actual yield of mortgage-related securities, and
principal returned to the Balanced Fund as a holder of such securities may be
reinvested in instruments whose yield may be higher or lower than that which
might have been obtained had such prepayments not occurred. When interest rates
are decreasing, such prepayments usually increase, thereby reducing the average
life of a pool. As a result, the reinvestment of such principal prepayments will
be at a lower rate than that on the original mortgage-related security, and thus
the Balanced Fund's yield will be lower. In addition, when interest rates are
decreasing, the value of mortgage-related securities may not increase as
12
<PAGE>
much as the value of other debt securities. In quoting yields for
mortgage-related securities, the standard practice is to assume that the
securities will have a 12-year life. As previously noted, however, the life of
individual pools may differ widely and the actual yield earned on mortgage-
related securities may differ significantly from the estimated yield based on
the 12-year life assumption.
The principal governmental guarantor of mortgage-related securities is the
Government National Mortgage Association ("GNMA"). GNMA is a wholly owned U.S.
Government corporation within the U.S. Department of Housing and Urban
Development. Pass-through securities issued by GNMA are guaranteed by the full
faith and credit of the U.S. Government as to the timely payment of principal
and interest. The Federal National Mortgage Association ("FNMA") is a
government-sponsored corporation owned entirely by private stockholders.
Pass-through securities issued by FNMA are guaranteed as to timely payment of
principal and interest by FNMA but are not backed by the full faith and credit
of the U.S. Government. The Federal Home Loan Mortgage Corporation ("FHLMC") is
a government-sponsored corporation owned entirely by private stockholders. FHLMC
issues Participation Certificates ("PCs") which represent interests in mortgages
from FHLMC's national portfolio. FHLMC guarantees the timely payment of interest
and ultimate collection of principal but PCs are not backed by the full faith
and credit of the U.S. Government.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential mortgage loans. Such issuers may
in addition be the originators of the underlying mortgage loans as well as the
guarantors of the mortgage-related securities. Pools created by such
non-governmental issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or indirect
government guarantees of payments in the former pools. However, timely payment
of interest and principal of these pools is supported by various forms of
insurance or guarantees, including individual loan and pool insurance. The
insurance and guarantees are issued by government entities, private insurers and
the mortgage poolers. Such insurance and guarantees and the creditworthiness of
the issuers thereof will be considered in determining whether a mortgage-related
security meets the Balanced Fund's investment quality standards. Private
insurers provide less assurance than government or government-related insurers
that they will be able to meet their obligations. The Balanced Fund may buy
mortgage-related securities without insurance or guarantees if, through an
examination of the financial condition and business history of the pooler,
including among other things the pooler's loan experience, profitability,
capital adequacy, liquidity, foreign exposure, and management, the Balanced
Fund's investment adviser determines that the pooler is creditworthy. Although
the market for such securities is becoming increasingly liquid, securities
issued by certain private organizations may not be readily marketable.
Corporations that are government owned, government-related or are private
mortgage poolers may create mortgage loan pools offering pass-through
investments in addition to those described above. The mortgages underlying these
securities may be mortgage instruments whose principal or interest payments may
vary or whose terms to maturity may differ from customary long-term fixed rate
mortgages. As new types of mortgage-related securities are developed and offered
to investors, the Balanced Fund's adviser will consider making investments in
such new types of securities consistent with the Balanced Fund's investment
objectives and policies and with due regard to those quality and credit
standards, which, in the investment adviser's view, are applicable to such
investments.
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WARRANTS. The Balanced Fund may purchase warrants provided that they are
attached to securities that may otherwise be purchased by the Fund.
INTEREST RATES. As a general rule, the price of fixed income instruments tends
to move inversely to changes in market interest rates.
ILLIQUID SECURITIES. The Balanced Fund will not invest more than 15% of its net
assets in illiquid securities. See "Investment Objectives and Policies--Growth &
Income Fund--Illiquid Securities" above, and "Investment Objectives and
Policies--Illiquid Securities" in the Statement of Additional Information.
PORTFOLIO TURNOVER. The Balanced Fund will effect portfolio transactions without
regard to holding period, if, in its judgment, such transactions are advisable
in light of general market, economic or financial conditions. As a result, the
Fund may engage in a substantial number of portfolio transactions. The Balanced
Fund anticipates that, under normal conditions, its annual portfolio turnover
rate should not exceed 100% for the equity portion and 100% for the fixed income
portion. However, it is impossible to predict portfolio turnover rates. For a
discussion of the effects of higher portfolio turnover rates, see "Investment
Objectives and Policies--Growth & Income Fund--Portfolio Turnover."
TEMPORARY DEFENSIVE MEASURES. The Balanced Fund also reserves the right, as a
temporary defensive measure, to purchase eligible, U.S. dollar-denominated money
market instruments and securities subject to repurchase agreements. The Fund's
investment adviser will determine when market conditions warrant temporary
defensive measures.
SMALL CAP STOCKS. Securities of companies with small capitalizations ("small-cap
companies") tend to be riskier than securities of companies with medium or large
capitalizations. This is because small-cap companies typically have smaller
product lines and less access to liquidity than mid-cap or large-cap companies,
and are therefore more sensitive to economic downturns. In addition, growth
prospects of small-cap com-panies tend to be less certain than mid- or large-cap
companies, and the dividends paid on small-cap stocks are frequently negligible.
Moreover, small cap stocks have, on occasion, fluctuated in the opposite
direction of large-cap stocks or the general stock market. Consequently,
securities of small-cap companies tend to be more volatile than those of mid-
and large-cap companies.
FOREIGN SECURITIES. The Balanced Fund will not invest more than 10% of its net
assets in foreign securities. See "Investment Objectives and Poli-cies--Growth &
Income Fund--Foreign Securities."
OPTIONS AND FUTURE CONTRACTS. The Balanced Fund may write or purchase options
and future contracts for hedging purposes. See "Investment Objectives and
Policies--Growth & Income Fund--Options and Future Contracts."
The investment objective and policies of the Balanced Fund described above
may be changed by RBB's Board of Directors without the approval of a majority of
the outstanding Shares representing interest in the Fund. Such changes may
result in the Fund having investment objectives which differ from those an
investor may have considered at the time of investment. There is no assurance
that the investment objective of the Balanced Fund will be achieved.
TAX FREE FUND
The Tax Free Fund's investment objective is to maximize current interest
income which is exempt from Federal income taxes, consistent with preservation
of capital. The Tax Free Fund intends to meet its investment objective by
investing substantially all of its assets in a diver-sified portfolio of
Municipal Obligations, the interest on which, in the opinion of bond counsel or
counsel to the issuer, as the case may be, is
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<PAGE>
exempt from the regular Federal income tax. During periods of normal market
conditions, at least 80% of the net assets of the Tax Free Fund will be invested
in Municipal Obligations, the interest on which is Tax-Exempt Interest.
MUNICIPAL OBLIGATIONS. The Fund invests in Municipal Obligations which are
determined by the Fund's investment adviser to present minimal credit risks
pursuant to guidelines established by RBB's Board of Directors and which at the
time of purchase are considered to be "high grade"-- e.g., rated "A" or higher
by S&P or "A" or higher by Moody's in the case of bonds; rated "SP-1" by S&P or
"MIG-1" by Moody's in the case of notes; rated "VMIG-1" by Moody's in the case
of variable rate demand notes; or rated "A-1" by S&P or "Prime-1" by Moody's in
the case of tax-exempt commercial paper. In addition, the Fund may invest in
"high quality" notes and tax-exempt commercial paper rated "MIG-2," "VMIG-2,"
or "Prime-2" by Moody's or "A-2" by S&P if deemed advisable by the Fund's
investment adviser. The Fund may also purchase securities that are unrated at
the time of purchase provided that the securities are determined to be of
comparable quality by the Fund's investment adviser pursuant to guidelines
approved by RBB's Board of Directors. The applicable Municipal Obligations
ratings are described in the Appendix to this Prospectus.
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
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.
Municipal Obligations may include variable rate demand notes. Such notes are
frequently not rated by credit rating agencies, but unrated notes purchased by
the Fund will have been determined by the Fund's investment adviser to be of
comparable quality at the time of the purchase to rated instruments purchasable
by the Fund pursuant to guidelines adopted by RBB's Board of Directors. Where
necessary to ensure that a note is of "high quality," the Fund will require that
the issuer's obligation to pay the principal of the note be backed by an
unconditional bank letter or line of credit, guarantee or commitment to lend.
While there may be no active secondary market with respect to a particular
variable rate demand note purchased by the Fund, the Fund may, upon the notice
specified in the note, demand payment of the principal of the note at any time
or during specified periods not exceeding one year, depending upon the
instrument involved. The absence of such an active secondary market, however,
could make it difficult for the Fund to dispose of a variable rate demand note
if the issuer defaulted on its payment obligation or during the periods that the
Fund is not entitled to exercise its demand rights. The Fund could, for this or
other reasons, suffer a loss to the extent of the default. The Fund invests in
variable rate demand notes only when the Fund's investment adviser deems the
investment to involve minimal credit risk. The Fund's invest-
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ment adviser also monitors the continuing creditworthiness of issuers of such
notes to determine whether the Fund should continue to hold such notes.
The Tax Reform Act of 1986 substantially revised provisions of prior law
affecting the issuance and use of proceeds of certain Municipal Obligations. A
new definition of private activity bonds applies to many types of bonds,
including those which were industrial development bonds under prior law.
Interest on private activity bonds issued after August 15, 1986 is tax-exempt
only if the bonds fall within certain defined categories of qualified private
activity bonds and meet the requirements specified in those respective
categories. In addition, interest on certain private activity bonds issued
after August 7, 1986 that is received by taxpayers subject to alternative
minimum tax is taxable. The Act has generally not changed the tax treatment of
bonds issued to finance governmental operations. As used in this Prospectus, the
term "private activity bonds" also includes industrial development revenue bonds
issued prior to the effective date of the provisions of the Tax Reform Act of
1986. To the extent the Fund invests in certain private activity bonds issued
after August 7, 1986 ("Alternative Minimum Tax Securities"), a portion of the
interest earned by the Fund may constitute an item of tax preference for
purposes of the Federal alternative minimum tax ("AMT Interest"). Investors
should also be aware of the possibility of state and local alternative minimum
or minimum income tax liability on interest from Alternative Minimum Tax
Securities.
Although the Tax Free Fund may invest more than 25% of its net assets in (i)
Municipal Obligations whose issuers are in the same state, (ii) Municipal
Obligations the interest on which is paid solely from revenues of similar
projects and (iii) private activity bonds bearing Tax Exempt Interest, it does
not currently intend to do so on a regular basis. To the extent the Tax Free
Fund's assets are concentrated in Municipal Obligations that are payable from
the revenues of similar projects or are issued by issuers located in the same
state, the Fund will be subject to the peculiar risks presented by the laws and
eco-nomic conditions relating to such states or projects to a greater extent
than it would be if its assets were not so concentrated.
TEMPORARY DEFENSIVE MEASURES. The Fund may hold uninvested cash reserves pending
invest-ment during temporary defensive periods or if, in the opinion of the
Fund's investment adviser, suitable Municipal Obligations are unavailable. There
is no percentage limitation on the amount of assets which may be held uninvested
during temporary defensive periods. Uninvested cash reserves will not earn
income.
"WHEN-ISSUED" SECURITIES. The Fund may purchase securities on a "when-issued"
basis. See "Balanced Fund--'When-Issued' Securi-ties" above. The Fund expects
that commitments to purchase when-issued securities will not exceed 25% of the
value of its total assets absent unusual market conditions. The Fund does not
intend to purchase when-issued securities for speculative purposes but only in
furtherance of its investment objective.
STAND-BY COMMITMENTS. The Fund may acquire "stand-by commitments" with respect
to Municipal Obligations held in its portfolio. Under a standby commitment, a
dealer would agree to purchase at the Fund's option specified Municipal
Obligations at a specified price. The acquisition of a standby commitment may
increase the cost, and thereby reduce the yield, of the Municipal Obligation to
which such commitment relates. The Fund will acquire standby commitments
solely to facilitate portfolio liquidity and does not intend to exercise its
rights thereunder for trading purposes.
ILLIQUID SECURITIES. The Tax Free Fund will not invest more than 15% of its net
assets in illiquid securities, including securities that are illiquid by virtue
of the absence of a readily available mar-
16
<PAGE>
ket or legal or contractual restrictions on resale. Securities that have legal
or contractual restrictions on resale but have a readily available market are
not deemed illiquid for purposes of this limitation. The Fund's investment
adviser will monitor the liquidity of such restricted securities under the
supervision of RBB's Board of Directors. See "Investment Objectives and
Policies-- Illiquid Securities" in the Statement of Additional Information.
TAX-EXEMPT DERIVATIVE SECURITIES. The Tax Free Fund may invest in tax-exempt
derivative securities such as tender option bonds, custodial receipts,
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. In some cases, Municipal Obligations are represented by custodial
receipts evi-dencing rights to future principal or interest payments, or both,
on underlying municipal securities held by a custodian and such receipts include
the option to tender the underlying securities to the sponsor (usually a bank,
broker-dealer or other financial institution). Although the Internal Revenue
Service has not ruled on whether the interest received on derivative securities
in the form of participation interests or custodial receipts is Tax-Exempt
Interest, opinions relating to the validity of, and the tax-exempt status of
payments received by, the Fund from such derivative securities are rendered by
counsel to the respective sponsors of such derivatives and relied upon by the
Fund in purchasing such securities. Neither the Fund nor its investment adviser
will review the proceedings relating to the creation of any tax-exempt
derivative securities or the basis for such legal opinions.
The Tax Free Fund's investment objective and the policies described above
may be changed by RBB's Board of Directors without the affirmative vote of the
holders of a majority of outstanding Shares of RBB representing interests in
the Fund. Such changes may result in the Fund having investment objectives which
differ from those an investor may have considered at the time of investment.
There is no assurance that the investment objective of the Tax Free Fund will be
achieved.
INVESTMENT LIMITATIONS
The Funds may not change the following investment limitations (with certain
exceptions, as noted below) without the affirmative vote of the holders of a
majority of a Fund's outstanding Shares. (A complete list of the investment
limitations that cannot be changed without such a vote of the shareholders is
contained in the Statement of Additional Information under "Investment
Objectives and Policies.")
1. Purchase the securities of any one issuer, other than securities issued
or guaranteed by the U.S. Government or its agencies or instrumentalities, if
immediately after and as a result of such purchase more than 5% of the value of
a Fund's total assets would be invested in the securities of such issuer, or
more than 10% of the outstanding voting securities of such issuer would be owned
by a Fund, except that up to 25% of the value of a Fund's total assets may be
invested without regard to such limitations.
2. Purchase any securities which would cause, at the time of purchase, more
than 25% of the value of the total assets of a Fund to be invested in the
obligations of issuers in the same industry, provided that there is no
limitation with respect to investments in U.S. Government obligations.
In addition, the Growth & Income Fund may not borrow money, except from
banks or by entering into reverse repurchase agreements for temporary purposes
and then in amounts not in excess of 10% of the value of the Fund's total
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<PAGE>
assets at the time of such borrowing, 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 or reverse repurchase agreement and in amounts not in excess of the
lesser of the dollar amounts borrowed or 10% of the value of the Fund's total
assets at the time of such borrowing; or purchase portfolio securities while
borrowings and reverse repurchase agreements in excess of 5% of the Fund's net
assets are outstanding. (This borrowing provision is not for investment
leverage, but solely to facilitate management of the Growth & Income Fund's
securities by enabling the Growth & Income Fund to meet redemption requests
where the liquidation of portfolio securities is deemed to be disadvantageous or
inconvenient.)
Similarly, the Balanced Fund and the Tax Free Fund may not borrow money,
except from banks or by entering into reverse repurchase agreements for
temporary purposes and then in amounts not in excess of 30% of the value of such
Fund's total assets at the time of such borrowing, and only if after such
borrowing there is asset coverage of at least 300% for all borrowings of such
Fund; or mortgage, pledge or hypothecate any of their respective assets except
in connection with any such borrowing or reverse repurchase agreement and in
amounts not in excess of 125% of the dollar amounts borrowed; or purchase
portfolio securities while borrowings and reverse repurchase agreements in
excess of 5% of such Fund's net assets are outstanding. (This borrowing
provision is not for investment leverage, but solely to facilitate management of
the Balanced Fund and Tax Free Fund's securities by enabling these Funds to meet
redemption requests where the liquidation of portfolio securities is deemed to
be disadvantageous or inconvenient.)
In addition, the Tax Free Fund may not change its policy of investing,
during normal market conditions, at least 80% of its net assets in obligations
the interest on which is Tax-Exempt Interest or AMT Interest.
MANAGEMENT
BOARD OF DIRECTORS. The business and affairs of RBB and the Funds are managed
under the direction of RBB's Board of Directors.
INVESTMENT ADVISER. Warburg, Pincus Counsellors, Inc. ("WPC"), a wholly owned
subsidiary of Warburg, Pincus Counsellors G.P., serves as the investment adviser
to the Funds. WPC, organized in 1970, is a professional investment counseling
firm which provides investment services to investment companies, employee
benefit plans, endowment funds, foundations and other institutions and
individuals. WPC currently manages approximately $12 billion in assets, of which
approximately $6 billion are investment companies. WPC's principal offices are
located at 466 Lexington Avenue, New York, New York 10017-3147. As adviser to
the Funds, WPC is responsible for overall management of the Funds, and is
responsible for all purchases and sales of portfolio securities for the Funds.
WPC may, at its own expense, provide promotional incentives to qualified
recipients who support the sale of shares of the Funds. Qualified recipients are
securities dealers who have sold Fund Shares or others, including banks and
other financial institutions, under special arrangements. In some instances,
these incentives may be offered only to certain institutions whose
representatives provide services in connection with the sale or expected sale of
significant amounts of Fund shares.
GROWTH & INCOME FUND. Anthony G. Orphanos, a Managing Director of WPC who has
been with WPC for the last sixteen years, is Chief Investment Officer and is
responsible for the day-to-day management of the Growth & Income Fund's
investments. Mr. Orphanos has been the portfolio manager of the Growth & Income
Fund
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since WPC began serving as sub-advisor to the Fund in November 1991.
Linda Diaz, CFA, Assistant Vice President, is a research analyst and
assistant portfolio man-ager for the Warburg Pincus Growth & Income Fund. Ms.
Diaz has been with WPC since 1995 and has 10 years of investment experience.
Prior to joining WPC, Ms. Diaz was an Assistant Vice President and portfolio
manager in the Asset Management Division for Kidder Peabody & Co. She received
her B.S. degree from The Wharton School, University of Pennsylvania.
For the services provided and expenses assumed by it, WPC is entitled to
receive a fee from RBB computed daily and payable monthly at an annual rate of
.75% of the Growth & Income Fund's average daily net assets. This fee is higher
than that paid by most investment companies.
BALANCED FUND. Dale C. Christensen, a Managing Director of WPC, has been with
WPC since 1989, prior to which he was a Vice President in the International
Private Banking division and the domestic pension fund management division at
Citicorp, a Fixed Income Portfolio Manager at CIC Asset Management and a Vice
President of Investments at First City Trust. Mr. Christensen and Mr. Orphanos
are the overall portfolio strategists for the Balanced Fund and are responsible
for determining the portion of the Fund to be allocated among the various fixed
income and equity sectors. Mr. Christensen also manages the fixed income portion
of the Balanced Fund. Mr. Orphanos is responsible for the U.S. Value Sector.
Elizabeth B. Dater and Stephen J. Lurito are responsible for the U.S. Small
Company Sector. Ms. Dater is a Managing Director of WPC and has been with WPC
since 1978. Mr. Lurito is a Managing Director at WPC and has been with WPC since
1987. George U. Wyper and Susan L. Black manage the U.S. Mid-Cap Sector. Mr.
Wyper is a Managing Director and joined WPC in August 1994, before which time he
was chief investment officer of White River Corporation and president of Hanover
Advisors, Inc. (1993-August 1994), chief investment officer of Fund American
Enterprises, Inc. (1991-1993) and the fixed income portfolio manager of
Firemen's Fund Insurance Company (1987-1990). Ms. Black is a Managing Director
of WPC and has worked at WPC since 1985. The International Equity Sector is
managed by Richard H. King and Nicholas P.W. Horsley. Mr. King has been a
Managing Director of WPC since 1989. Mr. Horsley is an associate portfolio
manager with WPC and has been with WPC since 1993, prior to which he was a
director, portfolio manager and analyst at Barclays deZoete Wedd in New York
City.
For the services provided and expenses assumed by it, WPC is entitled to
receive a fee from RBB computed daily and payable monthly at an annual rate of
.90% of the Balanced Fund's average daily net assets. This fee is higher than
that paid by most investment companies.
TAX FREE FUND. Mr. Christensen and Sharon B. Parente manage the Tax Free Fund.
Ms. Parente, a Senior Vice President of WPC, has been with WPC since 1992 and
has sixteen years of investment experience. Prior to joining WPC, Ms. Parente
was a vice president at Citibank in the Private Banking Group from 1985 to 1992.
She was a fixed income portfolio manager at Calvert Group from 1981 to 1985 and
a municipal trader's assistant at Prescott, Ball & Turben from 1979 to 1981. Ms.
Parente received her B.S. degree from the University of Virginia.
For the services provided and the expenses assumed by it, WPC is entitled to
receive a fee from RBB computed daily and payable monthly at an annual rate of
.50% of the Tax Free Fund's average daily net assets.
THE DISTRIBUTOR. Counsellors Securities Inc. (the "Counsellors Securities"), a
wholly owned subsidiary of WPC, serves as the Funds' distributor. Counseller's
principal offices are located at 466
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Lexington Avenue, New York, New York 10017-3147. No compensation is payable by
the Growth & Income Fund to Counsellors Securities for distribution services.
Counsellors Securities receives a fee at an annual rate equal to .25% of the
Balanced Fund's and Tax Free Fund's respective average daily net assets for
distribution services, pursuant to distribution plans (the "12b-1 Plans")
adopted by each of the Funds pursuant to Rule 12b-1 under the 1940 Act.
Amounts paid to Counsellors Securities under the Balanced Fund's and Tax Free
Fund's respective 12b-1 Plans may be used by Counsel-lors Securities to cover
expenses that are related to (i) the sale of the No Load Shares of each Fund,
(ii) ongoing servicing and/or maintenance of the accounts of shareholders of
each Fund, and (iii) sub-transfer agency services, subaccounting services or
administrative services related to the sale of the No Load Shares of each Fund,
all as set forth in each Fund's 12b-1 Plan. Payments under the 12b-1 Plans are
not tied exclusively to the distribution expenses actually incurred by
Counsellors Securities and payments may exceed distribution expenses actually
incurred. RBB's Board of Directors will evaluate the appropriateness of the
12b-1 Plans on a continuing basis and in doing so will consider all relevant
factors, including expenses borne by Counsellors Securities and amounts
received under the 12b-1 Plans.
CO-ADMINISTRATORS. The Funds employ Counsellors Funds Service, Inc.
("Counsellors Service"), a wholly-owned subsidiary of Counsellors, 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 accounts. As compensation, the Growth &
Income Fund pays to Counsellors Service a fee calculated at an annual rate of
.05% of the Fund's average daily net assets for the first $125 million of
average daily net assets and .10% of average daily net assets for assets above
$125 million; the Balanced and Tax Free Funds each pay to Counsellors Service a
fee calculated at an annual rate of .10% of average daily net assets.
The Funds also employ PFPC Inc. ("PFPC"), an indirect, wholly-owned
subsidiary of PNC Bank Corp., as a co-administrator. As a co-administrator, PFPC
calculates the Funds' net asset values, provides all accounting services for the
Funds and assists in related aspects of the Funds' operations. As compensation,
the Growth & Income Fund pays to PFPC a fee calculated at an annual rate of .20%
of the Fund's first $125 million of average daily net assets, and .15% of
average daily net assets over $125 million; the Balanced and Tax Free Funds each
pay to PFPC a fee calculated at an annual rate of .15% of average daily net
assets with a minimum annual fee of $75,000.
CUSTODIAN. PNC Bank serves as RBB's custodian. State Street Bank and Trust
Company ("State Street") serves as co-custodian for the Funds' foreign
securities.
TRANSFER AGENT AND SUB-TRANSFER AGENT. PFPC serves as RBB's transfer agent and
dividend disbursing agent. PFPC has its principal offices at 400 Bellevue
Parkway, Wilmington, Delaware 19809. State Street acts as shareholder servicing
agent, sub-transfer agent and dividend disbursing agent for the Funds. State
Street's principal business address is 225 Franklin Street, Boston,
Massachusetts 02110. It has delegated to Boston Financial Data Services, Inc.
("BFDS"), a 50% owned subsidiary, responsibility for most shareholder servicing
functions. BFDS's principal business address is 2 Heritage Drive, North Quincy,
Massachussets 02176.
EXPENSES. The expenses of the Funds are deducted from their total income before
dividends are paid. These expenses include, but are not limited to, fees paid to
the investment adviser, fees and expenses of officers and directors who are not
affiliated with the Fund's investment adviser or Distributor, taxes, interest,
legal fees, custodian fees, auditing fees, brokerage fees
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<PAGE>
and commissions, certain of the fees and expenses of registering and qualifying
the Funds and their shares for distribution under Federal and state securities
laws, expenses of preparing prospectuses and statements of additional
information and of printing and distributing prospectuses and statements of
additional information annually to existing shareholders that are not
attributable to a particular class of shares of RBB, the expense of reports to
shareholders, shareholders' meetings and proxy solicitations that are not
attributable to a particular class of shares of RBB, fidelity bond and directors
and officers liability insurance premiums, the expense of using independent
pricing services and other expenses which are not expressly assumed by the
investment adviser under its investment advisory agreements with respect to the
Funds. Any general expenses of RBB that are not readily identifiable as
belonging to a particular investment portfolio of RBB will be allocated among
all investment portfolios of RBB based upon the relative net assets of the
investment portfolios at the time such expenses are cited. Distribution
expenses, transfer agency expenses, expenses of preparation, printing and
distributing prospectuses, statements of additional information, proxy
statements and reports to shareholders, and registration fees, identified as
belonging to a particular class, are allocated to such class.
The investment adviser has agreed to reimburse the Funds for the amount, if
any, by which the total operating and management expenses of the Funds for any
fiscal year exceed the most restrictive state blue sky expense limitation in
effect from time to time, to the extent required by such limitation.
The investment adviser may assume additional expenses of the Funds from time
to time. In certain circumstances, it may assume such expenses on the condition
that it is reimbursed by RBB for such amounts prior to the end of a fiscal
year. In such event, the reimbursement of such amounts will have the effect of
increasing a Fund's expense ratio and of decreasing yield to investors.
For the Funds' fiscal year ended August 31, 1995, the Growth & Income Fund's
total expenses were 1.22% of average net assets, the Balanced Fund's total
expenses were 6.04% of average net assets before expense waivers and
reimbursements, and the Tax Free Fund's expenses were 2.12% of average net
assets before expense waivers and reimbursements. WPC is currently waiving
expenses and providing reimbursements to limit the Balanced Fund's total
expenses to 1.60% per annum of average net assets, and has agreed to limit the
Tax Free Fund's total expenses to .50% per annum of average net assets. However,
there can be no assurance that WPC will continue to assume such expenses.
FUND TRANSACTIONS. The Funds' investment adviser may consider a number of
factors in determining which brokers to use in purchasing or selling the Funds'
securities. These factors, which are more fully discussed in the Statement of
Additional Information, include, but are not limited to, research services, the
reasonableness of commissions and quality of services and execution.
Transactions for the Funds may be effected through broker-dealers who sell Fund
Shares, subject to the requirements of best execution. A higher rate of turnover
of a Fund's securities may involve correspondingly higher transaction costs,
which will be borne directly by the Fund. A Fund may enter into brokerage
transactions with and pay brokerage commissions to brokers that are affiliated
persons (as such term is defined in the 1940 Act) provided that the terms of the
brokerage transactions comply with the provisions of the 1940 Act.
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HOW TO PURCHASE SHARES
Shares of a Fund may be purchased either by mail, or with special advance
instructions, by wire.
BY MAIL. If the investor desires to purchase shares by mail, a check or money
order made payable to RBB or Warburg Pincus Funds (in U.S. currency) should be
sent along with the completed account application to Warburg Pincus Funds
through its distributor, Counsellors Securities Inc., at the address set forth
under "Management--The Distributor" above. Checks payable to the investor and
endorsed to the order of Warburg Pincus Funds will not be accepted as payment
and will be returned to sender. If payment is received by check in proper form
on or before 4:00 p.m. (Eastern time) on a day that a Fund calculates its net
asset value (a "Business Day") the purchase will be made at the Fund's net asset
value calculated at the end of that day. If payment is received after 4:00 p.m.,
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
application will be returned to sender. Shares purchased by check are entitled
to receive dividends and distributions beginning on the day after payment has
been received. Checks should be made payable to Warburg Pincus Funds for an
investment in more than one mutual fund managed by WPC, and should be
accompanied by a breakdown of amounts to be invested in each such Fund. If a
check used for purchase does not clear, the Funds will cancel the purchase and
the investor may be liable for losses or fees incurred. For a description of the
manner of calculating a Fund's net asset value, see "Net Asset Value" below.
BY WIRE. Investors may also purchase shares in a Fund by wiring funds from their
banks. Telephone orders will not be accepted until a completed account
application in proper form has been received and an account number has been
established. After telephoning (800) 888-6878 for instructions, an investor
should then wire federal funds to Counsellors Securities Inc. using the
following wire address:
State Street Bank and Trust Co.
225 Franklin Street
Boston, MA 02101
ABA# 0110 000 28
Attn: Mutual Funds/Custody Dept.
[Warburg Pincus Growth & Income,
Warburg Pincus Balanced Fund or
Warburg Pincus Tax Free Fund, as applicable]
DDA# 9904-649-2
[Shareowner name]
[Shareowner account number]
If a telephone order is received by the close of regular trading on the New
York Stock Exchange (the "NYSE") (currently 4:00 p.m., Eastern time), and
payment by wire is received on the same day in proper form (in accordance with
instructions stated above), the shares will be priced according to the net asset
value of the Fund on that day and are entitled to dividends and distributions
beginning on that day. If payment by wire is received in proper form by the
close of the NYSE without a prior telephone order, the purchase will be priced
according to the net asset value of the Fund on that day and are entitled to
dividends and distributions beginning on that day. However, if a wire received
in proper form is not preceded by a telephone order and is received after the
close of regular trading on the NYSE, the payment will be held uninvested until
the order is effected at the close of business on the next business day. Payment
for orders that are not accepted will be returned to the prospective investor
after prompt inquiry. If a telephone order is placed and payment by wire is not
received on the same day, the Fund will cancel the purchase and the investor may
be liable for losses or fees incurred.
Shares of the Funds are sold without a sales charge. The minimum initial
investment in a Fund
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is $1,000 and the minimum subsequent investments must be $100, except that
subsequent minimum investments can be as low as $50 under the Automatic Monthly
Investment Plan described in the next section. For a tax-deferred retirement
plan, such as an IRA, the minimum initial and subsequent investment is $500,
except that subsequent minimum investments can be as low as $50 under the
Automatic Monthly Investment Plan. The Funds reserve the right to vary further
the initial and subsequent minimum investment requirements at any time.
After an investor has made his initial investment, additional shares may be
purchased at any time by mail or by wire in the manner outlined above. Wire
payments for initial and subsequent investments should clearly indicate the
investor's account number. In the interest of economy and convenience, physical
certificates representing shares in a Fund are not normally issued.
The Funds understand that some broker-dealers (other than Counsellors
Securities), financial institutions, securities dealers and other industry
professionals ("Service Agents") may impose certain conditions on their clients
that invest in the Funds, which are in addition to or different from those
described in this Prospectus, and, to the extent permitted by applicable
regulatory authority, may charge their clients direct fees. Certain features of
the Funds, such as the minimum initial or subsequent investments, may be
modified in these programs, and administrative charges may be imposed for the
services rendered. Therefore, a client or customer should contact the
organization acting on his behalf concerning the fees (if any) charged in
connection with a purchase or redemption of a Fund's shares and should read this
Prospectus in light of the terms governing his accounts with Service Agents.
Service Agents will be responsible for promptly transmitting client or customer
purchase and redemption orders to the Funds in accordance with their agreements
with clients or customers. Certain Service Agents may receive compensation from
Counsellors or Counsellors Service. See "Shareholder Servicing." Certain Service
Agents that have entered into agreements with Counsellors Securities may enter
confirmed purchase orders on behalf of 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 Agent could be held liable for resulting fees
or losses.
Each Fund is available through the brokerage firms Waterhouse Securities,
Inc. and Jack White & Company, Inc. Each Fund is also available through the
Charles Schwab & Company, Inc. Mutual Fund OneSource ProgramTM ("Schwab") and
the Fidelity Brokerage Services, Inc. FundsNetworkTM Program ("Fidelity"). For
distribution and sub-accounting services with respect to shares of a Fund held
by each of these firms, Counsellors pays Jack White & Company up to .25%,
Waterhouse Securities up to .30% and pays Schwab and Fidelity up to .35% of the
annual average value of such accounts. Purchases made through these programs do
not require customers to pay a transaction fee.
AUTOMATIC MONTHLY INVESTING. Automatic monthly investing allows shareholders to
authorize the Funds to debit their bank account monthly ($50 minimum) for the
purchase of Fund shares on or about either the tenth or twentieth business day
of each month. To establish the automatic monthly investing option, obtain a
separate application or complete the "Automatic Investment Program" section of
the account application and include a voided, unsigned check from the bank
account to be debited. Only an account maintained at an automated clearing house
member may be used. Shareholders using this service must satisfy the initial
investment minimum for a Fund prior to or concurrent with the start of any
Automatic Investment Program. Please refer to an account application for further
information or contact Warburg Pincus Funds at (800) 888-6878 to modify or
terminate the program. Investors should allow a period of up to 30 days in order
to implement an
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automated investment program. The failure to provide complete information could
result in further delays.
RETIREMENT PLANS. For information about investing in the Funds through a
tax-deferred retirement plan, such as an Individual Retirement Account ("IRA")
or a Simplified Employee Pension IRA ("SEP-IRA"), an investor should telephone
Warburg Pincus Funds at (800) 888-6878 or write to Warburg Pincus Funds at the
address set forth above. Investors should consult their own tax advisers about
the establishment of retirement plans.
HOW TO REDEEM AND EXCHANGE SHARES
REDEMPTION OF SHARES. An investor of a Fund may redeem (sell) his shares on any
day that the Fund's net asset value is calculated (see "Net Asset Value" below).
Shares of a Fund may either be redeemed by mail or by telephone. Investors
should realize that in using the telephone redemption and exchange option, you
may be giving up a measure of security that you may have if you were to redeem
or exchange your shares in writing. If an investor desires to redeem his shares
by mail, a written request for redemption should be sent to Warburg Pincus Funds
at the address indicated below under "Separate Transfer Agent Agreement." An
investor should be sure that the redemption request identifies the Fund, the
number of shares to be redeemed and the investor's account number. In order to
change the bank account or address designated to receive the redemption
proceeds, the investor must send a written request (with signature guarantee of
all investors listed on the account when such a change is made in conjunction
with a redemption request) to Warburg Pincus Funds. Each mail redemption request
must be signed by the registered owner(s) or his legal representative(s) exactly
as the shares are registered. If an investor has applied for the telephone
redemption feature on his account application, he may redeem his shares by
calling Warburg Pincus Funds at (800) 888-6878 between 9:00 a.m. and 4:00 p.m.,
Eastern time on any business day. An investor making a telephone withdrawal
should state (i) the name of the Fund, (ii) the account number of the Fund,
(iii) the name of the investor(s) appearing on the Fund's records, (iv) the
amount to be withdrawn and (v) the name of the person requesting the redemption.
After receipt of the redemption request by mail or by telephone, the
redemption proceeds will, at the option of the investor, be paid by check and
mailed to the investor of record or be wired to the investor's bank as indicated
in the account application previously filled out by the investor. No Warburg
Pincus Fund currently imposes a service charge for effecting wire transfers but
each such Fund reserves the right to do so in the future. During periods of
significant economic or market change, telephone redemptions may be difficult to
implement. If an investor is unable to contact Warburg Pincus Funds by
telephone, an investor may deliver the redemption request to Warburg Pincus
Funds by mail at the address shown below under "Separate Transfer Agent
Agreement." Although the Funds will redeem shares purchased by check before the
check clears, payments of the redemption proceeds will be delayed until such
check has cleared, which may take up to 15 days from the purchase date.
Investors should consider purchasing shares using a certified bank check or
money order if they anticipate an immediate need for a redemption.
If a redemption order is received prior to the close of regular trading on
the NYSE, the redemption order will be effected at the net asset value per share
as determined on that day. If a redemption order is received after the close of
regular trading on the NYSE, the redemption order will be effected at the net
asset value as next determined. Redemption proceeds will normally be mailed or
wired to an investor on the
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next business day following the date a redemption order is effected. If,
however, in the judgment of WPC, immediate payment would adversely affect a
Fund, the Funds reserve the right to pay the redemption proceeds within seven
days after the redemption order is effected. Furthermore, a Fund may suspend the
right of redemption or postpone the date of payment upon redemption (as well as
suspend or postpone the recordation of an exchange of shares) for such periods
as are permitted under the 1940 Act.
The proceeds paid upon redemption may be more or less than the amount
invested depending upon a share's net asset value at the time of redemption. If
an investor redeems all the shares in his account, all dividends and
distributions declared up to and including the date of redemption are paid along
with the proceeds of the redemption.
If, due to redemptions, the value of an investor's account drops to less
than $500, the Funds reserve the right to redeem the shares in that account at
net asset value. Prior to any redemption, a Fund will notify an investor in
writing that this account has a value of less than $500. The investor will then
have 60 days to make an additional investment before a redemption will be
processed by a Fund.
SEPARATE TRANSFER AGENT ARRANGEMENT. Shareholders who purchased shares of the
Funds through Counsellors Securities or Warburg Pincus Funds should send a
written request for additional share purchases or redemptions in proper form
directly to: Warburg Pincus Funds, P.O. Box 9030, Boston, MA 02205-9030.
Investors who indicated instructions for telephone redemption by wire or check
on their original Warburg Pincus Funds application form may telephone Warburg
Pincus Funds at 1-800-888-6878.
Shareholders who made their purchases of shares of the RBB/Warburg Pincus
Growth & Income Fund through any other broker-dealer may direct their redemption
requests in writing to Warburg Pincus Funds, c/o PFPC, P.O. Box 8950,
Wilmington, Delaware 19899. Shareholders who purchased their shares of these
Funds through any other broker-dealer may also place redemption requests through
such broker-dealer, but such broker-dealer might charge a fee for this service.
TELEPHONE TRANSACTIONS. In order to request redemptions by telephone, investors
must have completed and returned to Warburg Pincus Funds an account application
containing a telephone election. Unless contrary instructions are elected, an
investor will be entitled to make exchanges by telephone. Neither a Fund nor its
agents will be liable for following instructions communicated by telephone that
it reasonably believes to be genuine. Reasonable procedures will be employed on
behalf of the Funds to confirm that instructions communicated by telephone are
genuine. Such procedures include providing written confirmation of telephone
transactions, tape recording telephone instructions and requiring specific
personal information prior to acting upon telephone instructions. If these or
other reasonable procedures are not followed, the Funds may be liable for any
losses due to unauthorized or fraudulent instructions.
AUTOMATIC CASH WITHDRAWAL PLAN. Each Fund offers investors an automatic cash
withdrawal plan under which investors may elect to receive periodic cash
payments of at least $1,000 monthly or quarterly. To establish this service,
complete the "Automatic Withdrawal Plan" section of the account application and
attach a voided check from the bank account to be credited. For further
information regarding the automatic cash withdrawal plan or to modify or
terminate the Plan, investors should contact Warburg Pincus Funds at (800)
888-6878.
EXCHANGE OF SHARES. An investor may exchange shares of a Fund for shares of the
same class of another Fund or for shares of the same class of other mutual funds
advised by WPC at their
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respective net asset value. However, shareholders may not effect exchanges
between No Load Shares and Series 2 Shares. Exchanges may be effected by mail or
by telephone in the manner described under "Redemption of Shares" above. If an
exchange request is received by Warburg Pincus Funds prior to 4:00 p.m. (Eastern
time), the exchange will be made at the 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. Due to the
costs involved in effecting exchanges, the Funds reserve the right to refuse to
honor more than three exchange requests by a shareholder in any 30-day period.
The exchange privilege may be modified or terminated at any time upon 60 days'
notice to shareholders. Currently, exchanges may be made among the Funds with
the following other funds:
. WARBURG PINCUS CASH RESERVE FUND--a money market fund investing in short-
term, high quality money market instruments;
. WARBURG PINCUS NEW YORK TAX EXEMPT FUND--a money market fund investing in
short-term, high quality municipal obligations designed for New York
investors seeking income exempt from federal, New York State and New York
City income tax;
. WARBURG PINCUS NEW YORK INTERMEDIATE MUNICIPAL FUND--an intermediate-term
municipal bond fund designed for New York investors income tax;
. WARBURG PINCUS INTERMEDIATE MATURITY GOVERNMENT FUND--an intermediate-term
bond fund investing in obligations issued or guaranteed by the U.S.
government, its agencies or instrumentalities;
. WARBURG PINCUS FIXED INCOME FUND--a bond fund seeking current income and,
secondarily, capital appreciation by investing in a diversified portfolio
of fixed-income securities;
. WARBURG PINCUS SHORT-TERM TAX-ADVANTAGED BOND FUND--a bond fund seeking
maximum income after the effect of federal income taxes as a primary
objective and capital appreciation as a secondary objective through
investments in taxable and tax-exempt debt instruments;
. WARBURG PINCUS GLOBAL FIXED INCOME FUND--a bond fund investing in a
portfolio consisting of investment grade fixed income securities of
governmental and corporate issuers denominated in various currencies,
including U.S. dollars;
. WARBURG PINCUS CAPITAL APPRECIATION FUND--an equity fund seeking long-term
capital appreciation by investing in equity securities of financially
strong domestic companies;
. WARBURG PINCUS SMALL COMPANY VALUE-- an equity fund seeking long-term
capital appreciation by investing primarily in equity securities of small
companies;
. WARBURG PINCUS POST-VENTURE CAPITAL FUND--an equity fund seeking long-term
growth of capital by investing principally in equity securities of issuers
in their post-venture capital stage of development;
. WARBURG PINCUS EMERGING GROWTH FUND--an equity fund seeking maximum
capital appreciation by investing in emerging growth companies;
. WARBURG PINCUS INTERNATIONAL EQUITY FUND--an international equity fund
seeking long-term capital appreciation; and
. WARBURG PINCUS JAPAN OTC FUND--an equity fund seeking long-term capital
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appreciation by investing in a portfolio of securities traded in the
Japanese over-the-counter market.
The exchange privilege is available to shareholders residing in any state in
which the Funds' 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 shares of
the Funds for 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) 257-5614.
NET ASSET VALUE
The net asset value per class of a Fund is calculated by adding the relevant
classes' pro rata share of the value of the Fund's securities, cash and other
assets, deducting the relevant classes' pro rata share of the actual and accrued
liabilities and the liabilities specifically allocated to the relevant class,
and dividing by the total number of Shares of the relevant class outstanding.
The net asset value per class of the Fund is calculated as of 4:00 p.m. Eastern
time on each Business Day. A Business Day is any day on which the NYSE is open
for business.
Valuation of securities held by the Funds is as follows: securities traded
on a national securities exchange or on the NASDAQ National Market System are
valued at the last reported sale price that day; securities traded on a national
securities exchange or on the NASDAQ National Market System for which there were
no sales on that day and securities traded on other over-the-counter markets for
which market quotations are readily available are valued at the mean of the bid
and asked prices; and securities for which market quotations are not readily
available are valued at fair market value as determined in good faith by or
under the direction of RBB's 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.
With the approval of RBB's Board of Directors, a Fund may use a pricing
service, bank or broker-dealer experienced in such matters to value the Fund's
securities. A more detailed discussion of net asset value and security valuation
is contained in the Statement of Additional Information.
DIVIDENDS AND DISTRIBUTIONS
The Funds will distribute substantially all of the net investment income and
net realized capital gains, if any, of the Funds to the Funds' shareholders. All
distributions are reinvested in the form of additional full and fractional
Shares unless a shareholder elects otherwise.
The Growth & Income and Balanced Funds will declare and pay dividends, if
any, from net investment income quarterly, near the end of each quarter. The Tax
Free Fund will declare dividends daily and pay monthly. Net realized capital
gains (including net short-term capital gains), if any, will be distributed at
least annually.
TAXES
The following discussion is only a brief summary of some of the important
tax considerations generally affecting the Funds and their shareholders and is
not intended as a substitute for careful tax planning. Accordingly, investors in
the Funds should consult their tax advisers with specific reference to their own
tax situation.
The Funds will elect to be taxed as regulated investment companies under
Subchapter M of the Internal Revenue Code of 1986, as
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amended. So long as the Funds qualify for this tax treatment, the Funds will be
relieved of Federal income tax on amounts distributed to shareholders, but
shareholders, unless otherwise exempt, will pay income or capital gains taxes on
amounts so distributed (except distributions that constitute "exempt interest
dividends" or that are treated as a return of capital) regardless of whether
such distributions are paid in cash or reinvested in additional Shares.
Distributions out of the "net capital gain" (the excess of net long-term
capital gain over net short-term capital loss), if any, of the Funds will be
taxed to shareholders as long-term capital gain regardless of the length of time
a shareholder has held his Shares, whether such gain was reflected in the price
paid for the Shares, or whether such gain was attributable to bonds bearing
tax-exempt interest. All other distributions, to the extent they are taxable,
are taxed to shareholders as ordinary income. The maximum marginal rate on
ordinary income for individuals, trusts and estates is generally 31% while the
maximum rate imposed on net capital gain of such taxpayers is 28%. Corporate
taxpayers are taxed at the same rates on both ordinary income and capital gains.
The Growth & Income and Balanced Funds anticipate that dividends paid by
these Funds will be eligible for the 70% dividends received deduction allowed to
certain corporations to the extent of the gross amount of qualified dividends
received, respectively, by the Funds for the year. However, corporate
shareholders will have to take into account the entire amount of any dividend
received in determining their adjusted current earnings adjustment for
alternative minimum tax purposes. The dividends received deduction is not
available for capital gain dividends.
The Tax Free Fund intends to pay substantially all of its dividends as
"exempt interest dividends." Investors in this Fund should note, however, that
taxpayers are required to report the receipt of tax-exempt interest and "exempt
interest dividends" in their Federal income tax returns and that in two
circumstances such amounts, while exempt from regular Federal income tax, are
subject to alternative minimum tax at a rate of 24% in the case of individuals,
trusts and estates, and 20% in the case of corporate taxpayers. First,
tax-exempt interest and "exempt interest dividends" derived from certain private
activity bonds issued after August 7, 1986, will generally constitute an item
of tax preference for corporate and noncorporate taxpayers in determining
alternative minimum tax liability. Depending upon market conditions, the Tax
Free Fund may invest up to 20% of its net assets in such private activity bonds.
Secondly, tax-exempt interest and "exempt interest dividends" derived from all
Municipal Obligations must be taken into account by corporate taxpayers in
determining their adjusted current earnings adjustment for alternative minimum
tax purposes. Shareholders who are recipients of Social Security Act or
Railroad Retirement Act benefits should further note that tax-exempt interest
and "exempt interest dividends" will be taken into account in determining the
taxability of their benefit payments.
The Tax Free Fund will determine annually the percentages of its net
investment income which is fully tax-exempt, which constitute an item of tax
preference for alternative minimum tax purposes, and which is fully taxable, and
will apply such percentages uniformly to all distributions declared from net
investment income during that year. These percentages may differ significantly
from the actual percentages for any particular day.
The Funds will send written notices to shareholders annually regarding the
tax status of distributions made by the Funds. Dividends declared in October,
November or December of any year payable to shareholders of record on a
specified date in such a month will be deemed to have been received by the
shareholders on
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December 31, provided such dividends are paid during January of the following
year. The Funds intend to make sufficient actual or deemed distributions prior
to the end of each calendar year to avoid liability for Federal excise tax.
Investors should be careful to consider the tax implications of buying
Shares just prior to a distribution. The price of shares purchased at that time
will reflect the amount of the forthcoming distribution. Those investors
purchasing just prior to a distribution will nevertheless be taxed on the entire
amount of the distribution received.
Shareholders who exchange Shares representing interests in the Funds for
Shares representing interests in another Fund will generally recognize capital
gain or loss for Federal income tax purposes.
Shareholders who are nonresident alien individuals, foreign trusts or
estates, foreign corporations or foreign partnerships may be subject to
different U.S. Federal income tax treatment.
An investment in any of the Funds is not intended to constitute a balanced
investment program. Shares of the Tax Free Fund would not be suitable for
tax-exempt institutions and may not be suitable for retirement plans qualified
under Section 401 of the Internal Revenue Code, H.R. 10 plans and individual
retirement accounts since such plans and accounts are generally tax-exempt and,
therefore, not only would not gain any additional benefit from the Tax Free
Fund's dividends being tax-exempt but also such dividends would be taxable when
distributed to the beneficiary.
Future legislative or administrative changes or court decisions may
materially affect the tax consequences of investing in the Funds. Shareholders
are also urged to consult their tax advisers concerning the application of state
and local income taxes to investments in the Funds which may differ from the
Federal income tax consequences described above.
SHAREHOLDER SERVICING
No Load Shares may be sold to or through institutions that will not be paid
a distribution fee by the Funds pursuant to Rule 12b-1 under the 1940 Act for
services to their clients or customers who are beneficial owners of No Load
Shares. These institutions may be paid a fee by WPC, Counsellors Securities,
or their affiliates for transfer agency, administrative or other services
provided to their customers that invest in a Fund's No Load Shares. These
services include maintaining account records, processing orders to purchase,
redeem and exchange No Load Shares and responding to certain customer inquiries.
Organizations that provide record-keeping or other services to certain employee
benefit plans and qualified and other retirement plans that include a Fund as an
investment alter-native may also be paid a fee for these services by WPC,
Counsellors Securities or their affiliates. Such compensation does not represent
an additional expense to the Funds or their shareholders, since it will be paid
from the assets of WPC, Counsellors Securities or their affiliates.
The Growth & Income and Balanced Funds are authorized to offer a separate
class of shares of the Fund (the "Advisor Shares") exclusively to investment
professionals, financial institutions and retirement plans ("Institutions"),
whose customers (or participants in the case of retirement plans) ("Customers")
are beneficial owners of Advisor Shares. Either those institutions or companies
providing certain services to them (together, "Service Organizations") will
enter into service agreements ("Agreements") related to the sale of the Advisor
Shares with Counsellors Securities pursuant to a separate Distribution Plan
adopted pursuant to Rule 12b-1 of the 1940 Act. Pursuant to the terms of an
Agreement, the Institution will provide certain distribution, shareholder
servicing, administrative and/or accounting services for its clients and
customers.
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DESCRIPTION OF SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001
par value per share, of which 12.2 billion shares are currently classified into
63 different classes of Common Stock. See "Description of Shares" in the State-
ment of Additional Information.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED
HEREIN RELATE PRIMARILY TO THE WARBURG PINCUS CLASSES AND DESCRIBE ONLY THE
INVESTMENT OBJECTIVES AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS
RELATING TO SUCH CLASSES.
Each Fund offers a separate class of shares, the Advisor Shares, pursuant to
a separate pro-spectus. Advisor Shares may not be purchased by individuals
directly but investment professionals, financial and depository institutions and
retirement plans may purchase Advisor Shares for individuals. Advisor Shares of
each class represent equal pro rata interests in the respective Fund and accrue
dividends and calculate net asset value and performance quotations in the same
manner. Because of the higher fees paid by the Advisor Shares, the total return
on such shares can be expected, at any time, to be lower than the total return
on No Load Shares. Investors may obtain information concerning the Advisor
Shares by calling Counsellors Securities at (800) 888-6878 or by contacting
their sales representative.
Each share that represents an interest in an investment portfolio of RBB
(including each Fund Share) has an equal proportionate interest in the assets
belonging to such portfolio with each other share that represents an interest in
such portfolio, even where a share has a different class designation than
another share representing an interest in that Fund. Shares of RBB do not have
preemptive or conversion rights. When issued for payment as described in this
Prospectus, Shares will be fully paid and non-assessable.
RBB currently does not intend to hold annual meetings of shareholders except
as required by the 1940 Act or other applicable law. The law under certain
circumstances provides shareholders with the right to call for a meeting of
shareholders to consider the removal of one or more directors. To the extent
required by law, RBB will assist in shareholder communication in such matters.
Shareholders of all investment portfolios of RBB (including the Funds) will
vote in the aggregate and not by portfolio except as otherwise required by law
or when the Board of Directors determines that the matter to be voted upon
affects only the interests of the shareholders of a particular investment
portfolio. (See the Statement of Additional Information under "Additional
Information Concerning Fund Shares" for examples when the 1940 Act requires
voting by investment portfolio or by class.) Shareholders of RBB are entitled to
one vote for each full share held (irrespective of class or portfolio) and
fractional votes for fractional shares held. Voting rights are not cumulative
and, accordingly, the holders of more than 50% of the aggregate shares of Common
Stock of RBB may elect all of the directors.
As of November 6, 1995, to RBB's knowledge, no person held of record or
beneficially 25% or more of the outstanding shares of all classes of RBB.
OTHER INFORMATION
REPORTS AND INQUIRIES. Shareholders will receive unaudited semi-annual reports
describing the Funds' investment operations and annual finan-cial statements
audited by independent account-ants. Shareholder inquiries can be made by con-
tacting Warburg Pincus Funds at (800) 888-6878, or by writing to Warburg Pincus
Funds, P.O. Box 9030, Boston, Massachusetts 02205-9030.
SHARE CERTIFICATES. RBB will issue share certifi-cates for the Fund Shares only
upon the written
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request of a shareholder sent to PFPC. Share certificates are not available for
Shares purchased through Counsellors Securities.
PERFORMANCE INFORMATION. The Funds quote the performance of the No Load Shares
separately from the Series 2 Shares. The net asset value of the No Load Shares
are listed in the Wall Street Journal each business day under the heading
"Warburg Pincus Funds." From time to time, the Funds may advertise their
performance, including comparisons to other mutual funds with similar investment
objectives and to stock or other relevant indices. All such advertisements will
show the average annual total return, net of a Fund's maximum sales charge, over
one, five and ten year periods or, if such periods have not yet elapsed, shorter
periods corresponding to the life of the Fund. Such total return quotations will
be computed by finding the compounded average annual total return for each time
period that would equate the assumed initial investment of $1,000 to the ending
redeemable value, according to a required standardized calculation. The standard
calculation is required by the SEC to provide consistency and comparability in
investment company advertising. 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 standardized formula in order to compare more
accurately a Fund's performance with other measures of investment return. For
example, a portfolio's total return may be compared with data published by
Lipper Analytical Services, Inc., CDA Investment Technologies, Inc. or
Weisenberger Investment Company Service, or with the performance of the Standard
& Poor's 500 Stock Index or the Dow Jones Industrial Average. 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.
From time to time, the Funds may also advertise their "30-day yield." The
yield refers to the income generated by an investment in a Fund over the 30-day
period identified in the advertisement, and is computed by dividing the net
investment income per share during the period by the maximum public offering
price per share of the last day of the period. This income is "annualized" by
assuming that the amount of income is generated each month over a one-year
period and is compounded semi-annually. The annualized income is then shown as a
percentage of the net asset value.
The yield on Shares of the Funds will fluctuate and are not necessarily
representative of future results. Shareholders should remember that yield is
generally a function of portfolio quality and maturity, type of instrument,
operating expenses and market conditions. Any fees charged by broker/dealers
directly to their customers in connection with investments in the Funds are not
reflected in the yields on a Fund's Shares, and such fees, if charged, will
reduce the actual return received by shareholders on their investments.
In reports or other communications to investors or in advertising, a 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 a Fund's investments, research
methodology underlying stock selection or a Fund's investment objective. A Fund
may also discuss 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. In addition, a Fund may from time to time
compare its expense ratio to that of investment companies with similar
objectives and policies, based on data generated by Lipper Analytical Services,
Inc. or similar investment services that monitor mutual funds.
31
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE FUNDS' STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY RBB OR ITS DISTRIBUTOR.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY RBB OR BY THE DISTRIBUTOR IN
ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
-------------------
32
<PAGE>
APPENDIX A
RATINGS OF DEBT SECURITIES
STANDARD & POOR'S CORPORATION
<TABLE>
<S> <C>
AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's. Capacity to
pay interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay principal and
differs from the highest rated issues only in a small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal although
it is somewhat more susceptible to the adverse effects of changes in circumstances
and economic conditions than debt in higher rated categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories.
BB Debt rated "BB", "B", "CCC", or "CC" is regarded, on balance, as predominantly
B speculative with respect to capacity to pay interest and repay principal in
CCC accordance with the terms of the obligation. "BB" indicates the lowest degree of
CC speculation and "CC" the highest degree of speculation. While such debt will likely
have some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
C This rating is reserved for income bonds on which no interest is being paid.
D Debt rated "D" is in default, and payment of interest and/or repayment of principal
is in arrears.
(+) OR (-) The ratings from "AAA" or "CCC" may be modified by the addition of a plus or minus
sign to show relative standing or within the major rating categories.
* Continuance of the rating is contingent upon S&P's receipt of an executed copy of
the escrow agreement or closing documentation confirming investments and cash
flows.
NR Indicates no rating has been requested, that there is insufficient information on
which to base a rating, or that S&P does not rate a particular type of obligation
as a matter of policy.
DEBT OBLIGATIONS OF ISSUERS OUTSIDE THE UNITED STATES AND ITS TERRITORIES are rated
on the same basis as domestic corporate and municipal issues. The ratings measure
the creditworthiness of the obligor but do not take into account currency exchange
and related uncertainties.
P PROVISIONAL RATINGS: The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being financed
by the debt being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful and timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of, or the risk of
default upon failure of, such completion. The investor should exercise judgment
with respect to such likelihood and risk.
</TABLE>
A-1
<PAGE>
NOTES
Note rating symbols are as follows:
<TABLE>
<S> <C>
SP-1 Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest.
SP-3 Speculative capacity to pay principal and interest.
</TABLE>
COMMERCIAL PAPER
A Standard & Poor's 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.
Ratings are graded into four categories, ranging from "A" for the highest
quality obligations to "D" for the lowest. The four categories are as follows:
<TABLE>
<S> <C>
A Issues assigned this highest rating are regarded as having the greatest capacity
for timely payment. Issues in this category are delineated with the numbers 1, 2,
and 3 to indicate the relative degree of safety.
A-1 This designation indicates that the degree of safety regarding timely payment is
either overwhelming or very strong. Those issues determined to possess overwhelming
safety characteristics are denoted with a plus (+) sign designation.
A-2 Capacity for timely payment on issues with this designation is strong. However, the
relative degree of safety is not as high as for issues designated "A-1".
A-3 Issues carrying this designation have a satisfactory capacity for timely payment.
They are, however, somewhat more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B Issues rated "B" are regarded as having only an adequate capacity for timely
payment. However, such capacity may be damaged by changing conditions or short-term
adversities.
C This rating is assigned to short-term debt obligations with a doubtful capacity for
payment.
D This rating indicates that the issue is either in default or is expected to be in
default upon maturity.
</TABLE>
VARIABLE RATE DEMAND BONDS
Standard & Poor's assigns "dual" ratings to all long-term debt issues that
have as part of their provisions a long-term rating and a variable rate demand
rating. The first rating addresses the likelihood of repayment of principal and
interest due and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols are used to denote the put
option (for example, "AAA/A-1 +"). If the nominal maturity is short (three years
or less), a note rating is assigned.
A-2
<PAGE>
MOODY'S INVESTORS SERVICE, INC. RATINGS
CORPORATE BONDS
Aaa
Bonds which are rated AAA are judged to be the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or 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 which are rated AA are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A
Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa
Bonds which are rated BAA are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly scecured. Interest payment and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba
Bonds which are rated BA are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
A-3
<PAGE>
B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa
Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca
Bonds which are rated CA represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's bond ratings, where specified, are also applied to senior bank
obligations with an original maturity in excess of one year. Among the bank
obligations covered are bank deposits, bankers acceptance and obligations to
deliver foreign exchange. Obligations relying upon support mechanisms such as
letters-of-credit are excluded unless explicitly rated.
NOTE: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
SHORT-TERM NOTES AND VARIABLE RATE DEMAND OBLIGATIONS
The following summarizes the ratings used by Moody's for short-term notes
and variable rate demand obligations:
MIG-1/VMIG-1. Obligations bearing these designations are of the 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. Obligations bearing these designations are of high quality
with margins of protection ample although not as large as in the preceding
group.
MIG-3/VMIG-3. Obligations bearing these designations are of favorable
quality. All security elements are accounted for but there is a lacking the
undeniable strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is hereby to be
less well established.
A-4
<PAGE>
COMMERCIAL PAPER RATINGS
The rating PRIME-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated PRIME-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of senior short-term debt
obligations. Issuers rated PRIME-2 (or related supporting institutions) are
considered to have strong capacity for repayment of senior short-term debt
obligations. This will normally be evidenced by many of the characteristics of
issuers rated PRIME-1 but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained. Issuers PRIME-3 (or
supporting institutions) have an acceptable capacity rated for repayment of
senior short-term debt obligations. The effect of industry characteristics and
market composition 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. Issuers rated NOT PRIME do not fall within any of the Prime
rating categories.
A-5
<PAGE>
[LOGO]
TABLE OF CONTENTS / / WARBURG PINCUS
GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS............... 4
INVESTMENT OBJECTIVES AND
POLICIES......................... 7 / / WARBURG PINCUS
BALANCED FUND
INVESTMENT LIMITATIONS............. 17
MANAGEMENT....................... 18 / / WARBURG PINCUS
TAX FREE FUND
HOW TO PURCHASE SHARES............. 22
HOW TO REDEEM AND EXCHANGE SHARES.. 24
NET ASSET VALUE.................... 27
DIVIDENDS AND DISTRIBUTIONS........ 27
TAXES.............................. 27
SHAREHOLDER SERVICING.............. 29
DESCRIPTION OF SHARES.............. 29
OTHER INFORMATION.................. 30
PROSPECTUS
WPGBF-1-1294
DECEMBER 29, 1995
<PAGE>
WARBURG PINCUS GROWTH AND INCOME FUND
WARBURG PINCUS BALANCED FUND
WARBURG PINCUS TAX FREE FUND
(Investment Portfolios of The RBB Fund, Inc.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary
information pertaining to shares of the classes (the "Shares") representing
interests in the Warburg Pincus Growth & Income Fund (the "Growth & Income
Fund"), the Warburg Pincus Balanced Fund (the "Balanced Fund") and the Warburg
Pincus Tax Free Fund (the "Tax Free Fund") (collectively, the "Funds") of The
RBB Fund, Inc. ("RBB"). This Statement of Additional Information is not a
prospectus, and should be read only in conjunction with the Warburg Pincus
Family Prospectus dated December 29, 1995 (the "Prospectus"). A copy of the
Prospectus may be obtained from the Funds' distributor by calling toll-free
(800) 888-9723. This Statement of Additional Information is dated December
29, 1995.
CONTENTS
Prospectus
Page Page
---- -----------
General........................................ 2 1
Investment Objectives and Policies ............ 2 7
Directors and Officers ........................ 18 N/A
Investment Advisory, Distribution
and Servicing Arrangements .................. 21 18
Fund Transactions ............................. 25 21
Purchase and Redemption Information ........... 27 22
Valuation of Shares ........................... 28 27
Performance Information....................... 29 30
Taxes ......................................... 32 27
Description of Shares......................... 38 29
Additional Information Concerning Fund Shares.. 40 30
Miscellaneous ................................. 41 N/A
Financial Statements .......................... F-1 N/A
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 Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by RBB or its distributor. The Statement of Additional Information does not
constitute an offering by RBB or by the distributor in any jurisdiction in which
such offering may not lawfully be made.
<PAGE>
GENERAL
The RBB Fund, Inc. ("RBB") is an open-end management investment
company currently operating or proposing to operate seventeen separate
investment portfolios. RBB is an open-end investment company registered under
the Investment Company Act of 1940 (the "1940 Act") and was organized as a
Maryland corporation on February 29, 1988. This Statement of Additional
Information pertains to multiple classes of shares representing interests in the
Warburg Pincus Growth & Income Fund (the "Growth & Income Fund"), the Warburg
Pincus Balanced Fund (the "Balanced Fund") and the Warburg Pincus Tax Free Fund
(the"Tax Free Fund) (collectively, the "Funds") of RBB. The Shares of the
Classes are offered by the Prospectus dated December 29, 1995.
Capitalized terms used herein and not otherwise defined have the same
meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the Prospectus
concerning the investment objectives and policies of the Funds. A description
of ratings of certain instruments the Funds may purchase is set forth in the
Appendix to the Prospectus.
Common Investment Policies of the Funds
Reverse Repurchase Agreements. Reverse repurchase agreements involve
the sale of securities held by a Fund pursuant to the Fund's agreement to
repurchase the securities at an agreed upon price, date and rate of interest.
Such agreements are considered to be borrowings under the Investment Company Act
of 1940, as amended (the "1940 Act"), and may be entered into only for temporary
or emergency purposes. While reverse repurchase transactions are outstanding, a
Fund will maintain in a segregated account with its custodian or a qualified
sub-custodian, cash, U.S. Government securities or other liquid, high-grade debt
securities of an amount at least equal to the market value of the securities,
plus accrued interest, subject to the agreement and will monitor the account to
ensure that such value is maintained. Reverse repurchase agreements involve the
risk that the market value of the securities sold by a Fund may decline below
the price of the securities the Fund is obligated to Repurchase.
Mortgage-Related Debt Securities. Mortgage-related debt securities
represent ownership interests in individual pools of residential mortgage loans.
These securities are designed to provide monthly payments of interest and
principal to the investor. Each mortgagor's monthly payment to his lending
institution on his residential mortgage is "passed-through" to investors.
Mortgage pools consist of whole mortgage loans or participations in loans. The
terms and characteristics of the mortgage instruments are generally uniform
within a pool but may vary among pools. Lending institutions which originate
mortgages for the pools are subject to certain
2
<PAGE>
standards, including credit and underwriting criteria for individual mortgages
included in the pools.
Since the inception of the mortgage-related pass-through security in
1970, the market for these securities has expanded considerably. The size of
the primary issuance market, and active participation in the secondary market by
securities dealers and many types of investors, historically have made interests
in government and government-related pass-through pools highly liquid, although
no guarantee regarding future market conditions can be made. The average life
of pass-through pools varies with the maturities of the underlying mortgage
instruments. In addition, a pool's term may be shortened by unscheduled or
early payments of principal and interest on the underlying mortgages. The
occurrence of mortgage prepayments is affected by factors including the level of
interest rates, general economic conditions, the location and age of the
mortgages and various social and demographic conditions. Because prepayment
rates of individual pools vary widely, it is not possible to predict accurately
the average life of a particular pool. For pools of fixed rate 30 year
mortgages, common industry practice is to assume that prepayments will result in
a 12 year average life. Pools of mortgages with other maturities or different
characteristics will have varying assumptions concerning average life. The
assumed average life of pools of mortgages having terms of less than 30 years is
less than 12 years, but typically not less than 5 years. Yields on pass-through
securities are typically quoted by investment dealers and vendors based on the
maturity of the underlying instruments and the associated average life
assumption. In periods of falling interest rates, the rate of prepayment tends
to increase, thereby shortening the actual average life of a pool of underlying
mortgage-related securities. Conversely, in periods of rising rates the rate of
prepayment tends to decrease, thereby lengthening the actual average life of the
pool. Historically, actual average life has been consistent with the 12-year
assumption referred to above. Actual prepayment experience may cause the yield
of mortgage-related securities to differ from the assumed average life yield.
In addition, as noted in the Prospectus, reinvestment of prepayments may occur
at higher or lower interest rates than the original investment, thus affecting
the yield of a Fund.
The coupon rate of interest on mortgage-related securities is lower
than the interest rates paid on the mortgages included in the underlying pool,
but only by the amount of the fees paid to the mortgage pooler, issuer, and/or
guarantor of payment of the securities for the guarantee of the services of
passing through monthly payments to investors. Actual yield may vary from the
coupon rate, however, if mortgage-related securities are purchased at a premium
or discount, traded in the secondary market at a premium or discount, or to the
extent that mortgages in the underlying pool are prepaid as noted above. In
addition, interest on mortgage-related securities is earned monthly, rather than
semi-annually as is the case for traditional bonds, and monthly compounding may
tend to raise the effective yield earned on such securities.
U.S. Government Obligations. Examples of types of U.S. Government
obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and
3
<PAGE>
the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal
Land Banks, the Federal Housing Administration, Farmers Home Administration,
Export-Import Bank of the United States, Small Business Administration, Federal
National Mortgage Association, Government National Mortgage Association, General
Services Administration, Student Loan Marketing Association, Central Bank for
Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate
Credit Banks, Maritime Administration, International Bank for Reconstruction and
Development (the "World Bank"), the Asian-American Development Bank and the
Inter-American Development Bank.
Futures Contracts. When a Fund purchases a futures contract, it
agrees to purchase a specified underlying instrument at a specified future date.
When a Fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and sale
will take place is fixed when a Fund enters into the contract. The underlying
instrument may be a specified type of security, such as U.S. Treasury bonds or
notes.
The majority of futures contracts are closed out by entering into an
offsetting purchase or sale transaction in the same contract on the exchange
where they are traded, rather than being held for the life of the contract.
Futures contracts are closed out at their current prices, which may result in a
gain or loss.
If a Fund holds a futures contract until the delivery date, it will be
required to complete the purchase and sale contemplated by the contract. In the
case of futures contracts on securities, the purchaser generally must deliver
the agreed-upon purchase price in cash, and the seller must deliver securities
that meet the specified characteristics of the contract.
A Fund may purchase futures contracts as an alternative to purchasing
actual securities. For example, if a Fund intended to purchase bonds but had
not yet done so, it could purchase a futures contract in order to lock in
current bond prices while deciding on particular investments. This strategy is
sometimes known as an anticipatory hedge. Alternatively, a Fund could purchase
a futures contract if it had cash and short-term securities on hand that it
wished to invest in longer-term securities, but at the same time that Fund
wished to maintain a highly liquid position in order to be prepared to meet
redemption requests or other obligations. In these strategies a Fund would use
futures contracts to attempt to achieve an overall return -- whether positive or
negative -- similar to the return from longer-term securities, while taking
advantage of potentially greater liquidity that futures contracts may offer.
Although the Funds would hold cash and liquid debt securities in a segregated
account with a value sufficient to cover their open futures obligations, the
segregated assets would be available to the Funds immediately upon closing out
the futures position, while settlement of securities transactions can take
several days. However, because a Fund's cash that would otherwise have been
invested in higher-yielding bonds would be held uninvested or invested in
short-term securities so long as the futures position remains
4
<PAGE>
open, the Fund's return would involve a smaller amount of interest income and
potentially a greater amount of capital gain or loss.
The Funds may sell futures contracts to hedge their other investments
against changes in value, or as an alternative to sales of securities. For
example, if the investment adviser anticipated a decline in bond prices, but did
not wish to sell bonds owned by a Fund, it could sell a futures contract in
order to lock in a current sale price. If prices subsequently fell, the future
contract's value would be expected to rise and offset all or a portion of the
loss in the bonds that the Fund had hedged. Of course, if prices subsequently
rose, the futures contract's value could be expected to fall and offset all or a
portion of the benefit of the Fund. In this type of strategy, a Fund's return
will tend to involve a larger component of interest income, because the Fund
will remain invested in longer-term securities rather than selling them and
investing the proceeds in short-term securities which generally provide lower
yields.
Futures margin payments. The purchaser or seller of a futures
contract is not required to deliver or pay for the underlying instrument unless
the contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker (known as
a futures commission merchant, or FCM), when the contract is entered into.
Initial margin deposits are equal to a percentage of the contract's value, as
set by the exchange where the contract is traded, and may be maintained in cash
or high quality liquid securities. If the value of either party's position
declines, that party will be required to make additional "variation margin"
payments to settle the change in value on a daily basis. The party that has a
gain may be entitled to receive all or a portion of this amount. Initial and
variation margin payments are similar to good faith deposits or performance
bonds, unlike margin extended by a securities broker, and initial and variation
margin payments do not constitute purchasing securities on margin for purposes
of a Fund's investment limitations. In the event of the bankruptcy of an FCM
that holds margin on behalf of a Fund, that Fund may be entitled to a return of
margin owed to it only in proportion to the amount received by the FCM's other
customers. The investment adviser will attempt to minimize this risk by careful
monitoring of the creditworthiness of the FCMs with which a Fund does business.
Correlation of price changes. The prices of futures contracts depend
primarily on the value of their underlying instruments. Because there are a
limited number of types of futures contracts, it is likely that the standardized
futures contracts available to a Fund will not match that Fund's current or
anticipated investments. Futures prices can also diverge from the prices of
their underlying instruments, even if the underlying instruments match a Fund's
investments well. Futures prices are affected by such factors as current and
anticipated short-term interest rates, changes in volatility of the underlying
instrument, and the time remaining until expiration of the contract, which may
not affect security prices the same way. Imperfect correlation between a Fund's
investments and its futures positions may also result from differing levels of
demand in the futures markets and the securities markets, from structural
differences in how futures and securities
5
<PAGE>
are traded, or from imposition of daily price fluctuation limits for futures
contracts. The Funds may purchase or sell futures contracts with a greater or
lesser value than the securities they wish to hedge or intend to purchase in
order to attempt to compensate for differences in historical volatility between
the futures contract and the securities, although this may not be successful in
all cases. If price changes in a Fund's futures positions are poorly correlated
with its other investments, its futures positions may fail to produce
anticipated gains or result in losses that are not offset by the gains in the
Fund's other investments.
Liquidity of futures contracts. Because futures contracts are
generally settled within a day from the date they are closed out, compared with
a settlement period of seven days for some types of securities, the futures
markets can provide liquidity superior to the securities markets in many cases.
Nevertheless, there is no assurance a liquid secondary market will exist for any
particular futures contract at any particular time. In addition, futures
exchanges may establish daily price fluctuation limits for futures contracts,
and may halt trading if a contract's price moves upward or downward more than
the limit in a given day. On volatile trading days when the price fluctuation
limit is reached, it may be impossible for a Fund to enter into new positions or
close out existing positions. If the secondary market for a futures contract is
not liquid because of price fluctuation limits or otherwise, it would prevent
prompt liquidation of unfavorable futures positions, and potentially could
require a Fund to continue to hold a futures position until the delivery date
regardless of changes in its value. As a result, a Fund's access to other
assets held to cover its futures positions could also be impaired.
Purchasing Put Options. By purchasing a put option, a Fund obtains
the right (but not the obligation) to sell the option's underlying instrument at
a fixed strike price. The option may give a Fund the right to sell only on the
option's expiration date, or may be exercisable at any time up to and including
that date. In return for this right, a Fund pays the current market price for
the option (known as the option premium). The option's underlying instrument
may be a security, or a futures contract.
A Fund may terminate its position in a put option it has purchased by
allowing it to expire or by exercising the option. If the option is allowed to
expire, the Fund will lose the entire premium it paid. If the Fund exercises
the option, it completes the sale of the underlying instrument at the strike
price. If a Fund exercises a put option on a futures contract, it assumes a
seller's position in the underlying futures contract. Purchasing an option on a
futures contract does not require a Fund to make futures margin payments unless
it exercises the option. A Fund may also terminate a put option position by
closing it out in the secondary market at its current price, if a liquid
secondary market exists.
Put options may be used by a Fund to hedge securities it owns, in a
manner similar to selling futures contracts, by locking in a minimum price at
which the Fund can sell. If security prices fall, the value of the put option
would be expected to rise and offset all or a portion of the Fund's
6
<PAGE>
resulting losses. The put thus acts as a hedge against a fall in the price of
such securities. However, all other things being equal (including securities
prices) option premiums tend to decrease over time as the expiration date nears.
Therefore, because of the cost of the option in the form of the premium (and
transaction costs), a Fund would expect to suffer a loss in the put option if
prices do not decline sufficiently to offset the deterioration in the value of
the option premium. This potential loss represents the cost of the hedge
against a fall in prices. At the same time, because the maximum a Fund has at
risk is the cost of the option, purchasing put options does not eliminate the
potential for a Fund to profit from an increase in the value of the securities
hedged to the same extent as selling a futures contract.
Purchasing Call Options. The features of call options are essentially
the same as those of put options, except that the purchaser of a call option
obtains the right to purchase, rather than sell, the underlying instrument at
the option's strike price (call options on futures contracts are settled by
purchasing the underlying futures contract). By purchasing a call option, a
Fund would attempt to participate in potential price increases of the underlying
instrument, with results similar to those obtainable from purchasing a futures
contract, but with risk limited to the cost of the option if security prices
fell. At the same time, a Fund can expect to suffer a loss if security prices
do not rise sufficiently to offset the cost of the option.
The Funds will purchase call options only in connection with "closing
purchase transactions." A Fund may terminate its position in a call option by
entering into a closing purchase transaction. A closing purchase transaction is
the purchase of a call option on the same security with the same exercise price
and call period as the option previously written by a Fund. If a Fund is unable
to enter into a closing purchase transaction, the Fund may be required to hold a
security that it might otherwise have sold to protect against depreciation.
Writing Put Options. When a Fund writes a put option, it takes the
opposite side of the transaction from the option's purchaser. In return for
receipt of the premium, a Fund assumes the obligation to pay the strike price
for the option's underlying instrument if the other party to the option chooses
to exercise it. When writing an option on a futures contract a Fund will be
required to make margin payments to an FCM as described above for futures
contracts. A Fund may seek to terminate its position in a put option it writes
before exercise by closing out the option in the secondary market at its current
price. If the secondary market is not liquid for an option a Fund has written,
however, the Fund must continue to be prepared to pay the strike price while the
option is outstanding, regardless of price changes, and must continue to set
aside assets to cover its position.
A Fund may write put options as an alternative to purchasing actual
securities. If security prices rise, the Fund would expect to profit from a
written put option, although its gain would be limited to the amount of the
premium it received. If security prices remain the same over time, it is likely
that the Fund will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the Fund would expect
7
<PAGE>
to suffer a loss. This loss should be less than the loss the Fund would have
experienced from purchasing the underlying instrument directly, however, because
the premium received for writing the option should mitigate the effects of the
decline. As with other futures and options strategies used as alternatives for
purchasing securities, a Fund's return from writing put options generally will
involve a smaller amount of interest income than purchasing longer-term
securities directly, because a Fund's cash will be invested in shorter-term
securities which usually offer lower yields.
Writing Call Options. Writing a call option obligates a Fund to sell
or deliver the option's underlying instrument, in return for the strike price,
upon exercise of the option. The characteristics of writing call options are
similar to those of writing put options, as described above, except that writing
covered call options generally is a profitable strategy if prices remain the
same or fall. Through receipt of the option premium, a Fund would seek to
mitigate the effects of a price decline. At the same time, because a Fund would
have to be prepared to deliver the underlying instrument in return for the
strike price, even if its current value is greater, the Fund would give up some
ability to participate in security price increases when writing call options.
Combined Option Positions. A Fund may purchase and write options in
combination with each other to adjust the risk and return characteristics of the
overall position. For example, a Fund may purchase a put option and write a
call option on the same underlying instrument, in order to construct a combined
position whose risk and return characteristics are similar to selling a futures
contract. Another possible combined position would involve writing a call
option at one strike price and buying a call option at a lower price, in order
to reduce the risk of the written call option in the event of a substantial
price increase. Because combined options positions involve multiple trades,
they result in higher transaction costs and may be more difficult to open and
close out.
Risks of Options Transactions. Options are subject to risks similar
to those described above with respect to futures contracts, including the risk
of imperfect correlation between the option and a Fund's other investments and
the risk that there might not be a liquid secondary market for the option. In
the case of options on futures contracts, there is also a risk of imperfect
correlation between the option and the underlying futures contract. Options are
also subject to the risks of an illiquid secondary market, particularly in
strategies involving writing options, which a Fund cannot terminate by exercise.
In general, options whose strike prices are close to their underlying
instruments' current value will have the highest trading volume, while options
whose strike prices are further away may be less liquid. The liquidity of
options may also be affected if options exchanges impose trading halts,
particularly when markets are volatile.
Asset Coverage for Futures and Options Positions. A Fund will not use
leverage in its options and futures strategies. A Fund will hold securities or
other options or futures positions whose values are expected to offset its
obligations under the hedge strategies. A Fund will not enter into
8
<PAGE>
an option or futures position that exposes the Fund to an obligation to another
party unless it owns either (i) an offsetting position in securities or other
options or futures contracts or (ii) cash, receivables and short-term debt
securities with a value sufficient to cover its potential obligations. A Fund
will comply with guidelines established by the SEC with respect to coverage of
options and futures strategies by mutual funds, and if the guidelines so require
will set aside cash and high grade liquid debt securities in a segregated
account with its custodian bank in the amount prescribed. Securities held in a
segregated account cannot be sold while the futures or option strategy is
outstanding, unless they are replaced with similar securities. As a result,
there is a possibility that segregation of a large percentage of a Fund's assets
could impede portfolio management or the Fund's ability to meet redemption
requests or other current obligations.
Limitations on Futures and Options Transactions. RBB, on behalf of
the Funds, has filed a notice of eligibility for exclusion from the definition
of the term "commodity pool operator" with the Commodity Futures Trading
Commission ("CFTC") and the National Futures Association, which regulate trading
in the futures markets. Pursuant to Section 4.5 of the regulations under the
Commodity Exchange Act, the notice of eligibility includes the representation
that the Funds will not enter into any commodity futures contract or option
on a commodity futures contract if, as a result, the sum of initial margin
deposits on commodity futures contracts and related commodity options and
premiums paid for options on commodity futures contracts the Funds have
purchased, after taking into account unrealized profits and losses on such
contracts, would exceed 5% of a Fund's total assets.
In addition, the Funds will not enter into any futures contract and
into any option if, as a result, the sum of (i) the current value of assets
hedged in the case of strategies involving the sale of securities, and (ii) the
current value of securities or other instruments underlying the respective
Fund's other futures or options positions, would exceed 50% of such Fund's net
assets.
The Funds' limitations on investments in futures contracts and their
policies regarding futures contracts and the limitations on investments in
options and its policies regarding options discussed above in this Statement of
Additional Information, are not fundamental policies and may be changed as
regulatory agencies permit. The Funds will not modify the above limitations to
increase its permissible futures and options activities without supplying
additional information in a current Prospectus or Statement of Additional
Information that has been distributed or made available to the Funds'
shareholders.
Various exchanges and regulatory authorities have recently undertaken
reviews of options and futures trading in light of market volatility. Among the
possible actions that have been presented are proposals to adopt new or more
stringent daily price fluctuation limits for futures or options transactions,
and proposals to increase the margin requirements for
9
<PAGE>
various types of strategies. It is impossible to predict what actions, if any,
will result from these reviews at this time.
Short Sales "Against the Box." In a short sale, a Fund sells a
borrowed security and has a corresponding obligation to the lender to return the
identical security. A 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." In a short sale, a seller does not immediately
deliver the securities sold and is said to have a short position in those
securities until delivery occurs. If a Fund engages in a short sale, the
collateral for the short position will be maintained by the Fund's custodian or
a qualified sub-custodian. While the short sale is open, the Fund will maintain
in a segregated account an amount of securities equal in kind and amount to the
securities sold short or securities convertible into or exchangeable for such
equivalent securities. These securities constitute a Fund's long position. The
Funds will not engage in short sales against the box for speculative purposes.
A Fund may, however, make a short sale as a hedge, when it believes that the
price of a security may decline, causing a decline in the value of a security
owned by the Fund (or a security convertible or exchangeable for such security),
or when the Fund wants to sell the security at an attractive current price, but
also wishes to defer recognition of gain or loss for federal income tax purposes
and for purposes of satisfying certain tests applicable to regulated investment
companies under the Internal Revenue Code. In such case, any future losses in a
Fund's long position should be reduced by a gain in the short position.
Conversely, any gain in the long position should be reduced by a loss in the
short position. The extent to which such gains or losses are reduced will
depend upon the amount of the security sold short relative to the amount a Fund
owns. There will be certain additional transaction costs associated with short
sales against the box, but the Funds will endeavor to offset these costs with
the income from the investment of the cash proceeds of short sales.
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" below.
Repurchase Agreements. The repurchase price under the repurchase
agreements described in the Prospectus generally equals the price paid by the
Fund involved plus interest negotiated on the basis of current short-term rates
(which may be more or less than the rate on the securities underlying the
repurchase agreement). Securities subject to repurchase agreements will be held
by RBB's custodian in the Federal Reserve/Treasury book-entry system
10
<PAGE>
or by another authorized securities depository. Repurchase agreements are
considered to be loans by the Fund involved under the 1940 Act.
Rights Offerings and Purchase Warrants. Rights offerings and purchase
warrants are privileges issued by a corporation which enable the owner to
subscribe to and purchase a specified number of shares of the corporation at a
specified price during a specified period of time. Subscription rights normally
have a short lifespan to expiration. The purchase of rights or warrants
involves the risk that a Fund could lose the purchase value of a right or
warrant if the right to subscribe to additional shares is not executed prior to
the rights and warrants expiration. Also, the purchase of rights and/or
warrants involves the risk that the effective price paid for the right and/or
warrant added to the subscription price of the related security may exceed the
value of the subscribed security's market price such as when there is no
movement in the level of the underlying security.
Illiquid Securities. A Fund may not invest more than 15% of its net
assets in illiquid securities, including repurchase agreements which have a
maturity of longer than seven days (except for the Tax Free Fund, which may not
engage in repurchase agreements) and securities that are illiquid by virtue of
the absence of a readily available market or legal or contractual restrictions
on resale. Securities that have legal or contractual restrictions on resale but
have a readily available market are not considered illiquid for purposes of this
limitation. The Funds' investment adviser will monitor the liquidity of such
restricted securities under the supervision of the Board of Directors.
Repurchase agreements subject to demand are deemed to have a maturity equal to
the notice period.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
securities which are otherwise not readily marketable and (except for the Tax
Free Fund, which may not engage in repurchase agreements) repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. The Board has adopted a policy that the Funds will not
purchase private placements (i.e. restricted securities other than Rule 144A
Securities). Mutual funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential for delays on
resale and uncertainty in valuation. Limitations on resale may have an adverse
effect on the marketability of portfolio securities and a mutual fund might be
unable to dispose of restricted or other illiquid securities promptly or at
reasonable prices and might thereby experience difficulty satisfying redemptions
within seven days. A mutual fund might also have to register such restricted
securities in order to dispose of them resulting in additional expense and
delay. Adverse market conditions could impede such a public offering of
securities.
11
<PAGE>
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities Act
including repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.
The SEC adopted Rule 144A which allows for a broader institutional
trading market for securities otherwise subject to restriction on resale to the
general public. Rule 144A establishes a "safe harbor" from the registration
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers. The investment adviser anticipates that the
market for certain restricted securities such as institutional commercial paper
will expand further as a result of this relatively new regulation and the
development of automated systems for the trading, clearance and settlement of
unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the NASD.
The Adviser will monitor the liquidity of restricted securities in the
Funds under the supervision of the Board of Directors. In reaching liquidity
decisions, the Adviser may consider, inter alia, 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).
Additional Investment Policies -- Growth & Income and Balanced Funds
Foreign Securities. Although the Funds generally intend to invest in
securities of companies and governments of developed, stable nations, the value
of a Fund's 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, imposition of (or change in)
exchange control regulations in those foreign nations and difficulty in
enforcing judgments. In addition, changes in government administrations,
economies or monetary policies in the U.S. or abroad could result in
appreciation or depreciation of those portfolio securities. Furthermore, the
economies of individual foreign nations may differ from the U.S. economy,
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 a Fund must be
made in compliance with U.S. and foreign currency restrictions and tax laws
restricting the amounts and types of foreign investments.
12
<PAGE>
In addition, while the volume of transactions effected on foreign
stock exchanges has increased in recent years, it remains appreciably below that
of the New York Stock Exchange. Accordingly, a Fund's foreign investments may
be less liquid and their prices may be more volatile than comparable investments
in securities of U.S. companies. In buying and selling securities on foreign
exchanges, the Funds will normally pay fixed commissions that are generally
higher than the negotiated commissions charged in the U.S. Moreover, the Funds'
expenses may be higher due to the additional cost of custody of foreign
securities. In addition, there is generally less government supervision and
regulation of securities exchanges, brokers and issuers in foreign countries
than in the U.S.
Dollar-Denominated Debt Obligations of Foreign Issuers. U.S.
dollar-denominated debt securities issued by foreign corporations held by a Fund
may not be registered with the Securities and Exchange Commission ("SEC"), and
the issuers thereof may not be subject to its reporting requirements.
Accordingly, there may be less publicly available information concerning foreign
issuers of debt securities held by a Fund than is available concerning U.S.
issuers. Foreign companies 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. Securities of many foreign
companies may be less liquid and their prices more volatile than those of
securities of comparable U.S. companies. In addition, with respect to certain
foreign countries, there is the possibility of expropriation, confiscatory
taxation, limitations on the use or removal of funds or the assets of a Fund,
and political or social instability or diplomatic developments which could
affect investments in those countries. Moreover, individual foreign economies
may differ favorably or unfavorably from the U.S. economy in such respects as
growth of gross national product, rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position.
Additional Investment Considerations - Balanced Portfolio
Normally, RBB will issue shares representing an interest in the
Balanced Fund only for cash or cash equivalents. Transactions involving the
issuance of shares representing an interest in the Balanced Fund for securities
or assets other than cash will be limited to bona fide reorganizations,
statutory mergers and to other acquisitions of portfolio securities (except for
municipal debt securities issued by state political subdivisions or their
agencies or instrumentalities) which (a) meet the Balanced Fund's investment
objectives and policies; (b) are acquired for investment and not for resale; (c)
are liquid securities which are not restricted as to transfer either by law or
liquidity of market; and (d) have a readily ascertainable value as evidenced by
a listing on the American Stock Exchange, the NYSE or NASDAQ.
13
<PAGE>
Additional Investment Policies -- Tax Free Fund
Firm Commitments. Firm commitments for securities include "when
issued" and delayed delivery securities purchased for delivery beyond the normal
settlement date at a stated price and yield. While firm commitments are
outstanding, the Tax Free Fund will maintain in a segregated account with RBB's
custodian or a qualified sub-custodian, cash, U.S. Government securities or
other liquid, high grade debt securities of an amount at least equal to the
purchase price of the securities to be purchased. Normally, the custodian will
set aside portfolio securities to satisfy a purchase commitment and, in such a
case, the Fund may be required subsequently to place additional assets in the
separate account in order to ensure that the value of the account remains equal
to the amount of the Fund's commitment. It may be expected that the Fund's net
assets will fluctuate to a greater degree when it sets aside portfolio
securities to cover such purchase commitments than when it sets aside cash. The
Fund's liquidity and ability to manage its portfolio might be affected when it
sets aside cash or portfolio securities to cover such purchase commitments. The
Fund expects that commitments to purchase "when issued" securities will not
exceed 25% of the value of its respective total assets absent unusual market
conditions. When the Fund engages in when-issued transactions, it relies on the
seller to consummate the trade. Failure of the seller to do so may result in
the Fund incurring a loss or missing an opportunity to obtain a price considered
to be advantageous.
Stand-by Commitments. Under a stand-by commitment with respect to
obligations issued by or on behalf of states, territories and possessions of the
United States, the District of Columbia and their political subdivisions,
agencies, instrumentalities and authorities (collectively, "Municipal
Obligations") held by the Fund, a dealer would agree to purchase at the Fund's
option a specified Municipal Obligation at its amortized cost value to the Fund
plus accrued interest, if any. Stand-by commitments may be exercisable by the
Fund at any time before the maturity of the underlying Municipal Obligations and
may be sold, transferred or assigned only with the instruments involved.
It is expected that stand-by commitments will generally be available
without the payment of any direct or indirect consideration. However, if
necessary or advisable, the Fund may pay for a stand-by commitment either
separately in cash or by paying a higher price for portfolio securities which
are acquired subject to the commitment (thus reducing the yield to maturity
otherwise available for the same securities). The total amount paid in either
manner for outstanding stand-by commitments held by the Fund will not exceed 1/2
of 1% of the value of the Fund's total assets calculated immediately after each
stand-by commitment is acquired.
It is intended that stand-by commitments will be entered into only
with dealers, banks and broker-dealers which, in the investment adviser's
opinion, present minimal credit risks. The Fund's reliance upon the credit of
these dealers, banks and broker-dealers will be secured by the value of the
underlying Municipal Obligations that are subject to the commitment.
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<PAGE>
The Fund will acquire stand-by commitments solely to facilitate
portfolio liquidity and it is not intended that the Fund will exercise its
rights thereunder for trading purposes. The acquisition of a stand-by
commitment will not affect the valuation or assumed maturity of the underlying
Municipal Obligation which will continue to be valued in accordance with the
amortized cost method. The actual stand-by commitment will be valued at zero in
determining net asset value. Accordingly, where the Fund pays directly or
indirectly for a stand-by commitment, its cost will be reflected as an
unrealized loss for the period during which the commitment is held by the Fund
and will be reflected in realized gain or loss when the commitment is exercised
or expires.
Obligations of Domestic Banks, Foreign Banks and Foreign Branches of
U.S. Banks. With respect to bank obligations, the assets of a bank or savings
institution will be deemed to include the assets of its domestic and foreign
branches. Investments in bank obligations will include obligations of domestic
branches of foreign banks and foreign branches of domestic banks. Such
investments may involve risks that are different from investments in securities
of domestic branches of U.S. banks. These risks may include future unfavorable
political and economic developments, possible withholding taxes on interest
income, seizure or nationalization of foreign deposits, currency controls,
interest limitations, or other governmental restrictions which might affect the
payment of principal or interest on the securities held in the Fund.
Additionally, these institutions may be subject to less stringent reserve
requirements and to different accounting, auditing, reporting and recordkeeping
requirements than those applicable to domestic branches of U.S. banks. The Fund
will invest in obligations of domestic branches of foreign banks and foreign
branches of domestic banks only when its investment adviser believes that the
risks associated with such investment are minimal.
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 the Funds' outstanding shares (as defined in Section 2(a)(42)
of the Investment Company Act). The Funds may not:
1. a. Growth of Income Fund. Borrow money, except from banks
or by entering into reverse repurchase agreements for temporary purposes
and then in amounts not in excess of 10% of the value of the Growth &
Income Fund's total assets at the time of such borrowing, and only if after
such borrowing there is asset coverage of at least 300 percent for all
borrowings of the Fund; or mortgage, pledge or hypothecate any of the
Growth and Income Fund's assets except as may be necessary in connection
with such borrowing or reverse repurchase agreements and in amounts not in
excess of the lesser of the dollar amounts borrowed or 10% of the value of
the Growth & Income Fund's total assets at the time of such borrowing; or
purchase portfolio securities while borrowings and reverse repurchase
agreements in excess of 5% of the Fund's net assets are outstanding. (This
borrowing provision is not
15
<PAGE>
for investment leverage, but solely to facilitate management of the Growth
and Income Fund's securities by enabling the Fund to meet redemption
requests where the liquidation of portfolio securities is deemed to be
disadvantageous or inconvenient);
b. Balanced Fund. Borrow money, except from banks or by
entering into reverse repurchase agreements for temporary purposes and then
in amounts not in excess of 30% of the value of the Fund's total assets at
the time of such borrowing, 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 or reverse repurchase agreement and in amounts not in excess of
125% of the dollar amounts borrowed; or purchase portfolio securities while
borrowings and reverse repurchase agreements in excess of 5% of the
Balanced Fund's net assets are outstanding. (This borrowing provision is
not for investment leverage, but solely to facilitate management of the
Balanced Fund's securities by enabling the Balanced Fund to meet redemption
requests where the liquidation of portfolio securities is deemed to be
disadvantageous or inconvenient.)
c. Tax Free Fund. Borrow money, except from banks or by
entering into reverse repurchase agreements for temporary purposes and then
in amounts not in excess of 30% of the value of the Tax Free Fund's total
assets at the time of such borrowing, 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 or reverse repurchase agreement and in amounts not in
excess of 125% of the dollar amounts borrowed; or purchase portfolio
securities while borrowings and reverse repurchase agreements in excess of
5% of the Tax Free Fund's total assets are outstanding. (This borrowing
provision is not for investment leverage, but solely to facilitate
management of the Tax Free Fund's securities by enabling the Fund to meet
redemption requests where the liquidation of portfolio securities is deemed
to be disadvantageous or inconvenient.)
2. Purchase securities of any one issuer, other than securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, if immediately after and as a result of such purchase
more than 5% of a Fund's total assets would be invested in the securities
of such issuer, or more than 10% of the outstanding voting securities of
such issuer would be owned by a Fund, except that up to 25% of the value of
a Fund's assets may be invested without regard to this 5% limitation;
3. Purchase securities on margin, except for short-term credit
necessary for clearance of portfolio transactions, except that the Fund may
establish margin accounts in connection with its use of options, futures
contracts and options on futures contracts;
16
<PAGE>
4. Underwrite securities of other issuers, except to the extent
that, in connection with the disposition of portfolio securities, a Fund
may be deemed an underwriter under Federal securities laws and except to
the extent that the purchase of Municipal Obligations directly from the
issuer thereof in accordance with a Fund's investment objective, policies
and limitations may be deemed to be an underwriting.
5. Make short sales of securities or maintain a short position
or write or sell puts, calls, straddles, spreads or combinations thereof,
except that a Fund may purchase and sell puts and call options on
securities, stock indices and currencies and may purchase and sell options
on futures contracts;
6. Purchase or sell real estate, provided that a Fund may
invest in securities secured by real estate or interests therein or issued
by companies which invest in real estate or interests therein;
7. Purchase or sell commodities or commodity contracts, except
that a Fund may purchase and sell futures contracts and related options;
8. Invest in oil, gas or mineral-related programs or leases;
9. Make loans, except that a Fund may purchase or hold debt
obligations in accordance with its investment objective, policies and
limitations and except that a Fund (other than the Tax Free Fund) may enter
into repurchase agreements;
10. Purchase any securities issued by any other investment
company except in connection with the merger, consolidation or acquisition
of all the securities or assets of such an issuer; or
11. Make investments for the purpose of exercising control or
management.
In addition to the foregoing enumerated investment limitations, the
Growth & Income and Balanced Funds may not (a) invest more than 5% of their
respective total assets (taken at the time of purchase) in securities of issuers
(including their predecessors) with less than three years of continuous
operations, (b) invest more than 5% of their respective total assets (taken at
the time of purchase) in equity securities that are not readily marketable, and
(c) purchase any securities which would cause, at the time of purchase, more
than 25% of the value of their respective total assets to be invested in the
obligations of issuers in any industry (exclusive of the U.S. Government and its
agencies and instrumentalities).
In addition to the foregoing enumerated policy limitations, the
Tax-Free Fund may not:
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<PAGE>
(a) Change its policy of investing during normal market
conditions at least 80% of its net assets in obligations the interest on
which is exempt from the regular Federal income tax and does not constitute
an item of tax preference for purposes of the Federal alternative minimum
tax ("Tax-Exempt Interest") and may not invest in private activity bonds
where the payment of principal and interest are the responsibility of a
company (including its predecessors) with less than three years of
continuous operations.
(b) Purchase any securities which would cause, at the time
of purchase, more than 25% of the value of the total assets of the Tax Free
Fund to be invested in the obligations of issuers in the same industry.
DIRECTORS AND OFFICERS
The directors and executive officers of RBB, their business addresses
and principal occupations during the past five years are:
<TABLE><CAPTION>
Principal Occupation
Name, Address and Age Position with RBB During Past Five Years
- ----------------------- ----------------- ----------------------
<S> <C> <C>
Arnold M. Reichman*-47 Director Since 1984, Managing
466 Lexington Avenue Director and Assistant
New York, NY 10017 Secretary, E. M. Warburg,
Pincus & Co., Inc.; Since
1984 Managing Director,
Warburg Pincus Counsellors,
Inc.; Since 1985, Vice
President and Secretary,
Counsellors Securities Inc;
Officer of various
investment companies
advised by Warburg, Pincus
Counsellors, Inc.
Robert Sablowsky**-57 Director Since 1985, Executive
14 Wall Street Vice President of
New York, NY 10005 Gruntal & Co., Inc.,
Director, Gruntal & Co.,
Inc. and Gruntal Financial
Corp.
Francis J. McKay-60 Director Since 1963, Executive
7701 Burholme Avenue Vice President, Fox Chase
Philadelphia, PA 1911 Cancer Center (Biomedical
research and medical care.)
18
<PAGE>
Principal Occupation
Name, Address and Age Position with RBB During Past Five Years
- ----------------------- ----------------- ----------------------
Marvin E. Sternberg-61 Director Since 1974, Chairman,
937 Mt. Pleasant Road Director and President,
Bryn Mawr, PA 19010 Moyco Industries, Inc.
(manufacturer of dental
supplies and precision
coated abrasives); Since
1968, Director and
President, Mart MMM, Inc.
(formerly Montgomeryville
Merchandise Mart Inc.) and
Mart PMM, Inc. (formerly
Pennsauken Merchandise
Mart, Inc.) (Shopping
Centers); and Since 1975,
Director and Executive Vice
President, Cellucap Mfg.
Co., Inc. (manufacturer of
disposable headwear).
Julian A. Brodsky-62 Director Director, and Vice Chairman
1234 Market Street Comcast Corporation; Director,
16th Floor Comcast Cablevision of
Philadelphia, PA 19107-3723 Philadelphia (cable
television and
communications) and Nextel
(wireless communications).
Donald van Roden-71 Director Self-employed businessman.
1200 Old Mill Lane From February 1980 to March 1987,
Wyomissing, PA 19610 Vice Chairman, SmithKline
Beckman Corporation
(pharmaceuticals);
Director, AAA Mid-Atlantic
(auto service); Director,
Keystone Insurance Co.
Edward J. Roach-71 President and Certified Public Accountant;
Bellevue Park Treasurer Vice Chairman of the Board,
Corporate Center Fox Chase Cancer Center; Vice
400 Bellevue Parkway President and Trustee,
Wilmington, DE 19809 Pennsylvania School for the
Deaf; Trustee, Immaculata
College; Vice President and
Treasurer of various
investment companies
advised by PNC
Institutional Management
Corporation.
19
<PAGE>
Principal Occupation
Name, Address and Age Position with RBB During Past Five Years
- ----------------------- ----------------- ----------------------
Morgan R. Jones-56 Secretary Chairman of the law firm of
1100 PNB Bank Building Drinker Biddle & Reath,
Broad and Chestnut Streets Philadelphia, Pennsylvania;
Philadelphia, PA 19107 Director, Rocking Horse Child
Care Centers of America, Inc.
</TABLE>
- ---------------
* Mr. Reichman is an "interested person" of RBB as that term is defined in
the 1940 Act by virtue of his position with Counsellors Securities Inc.,
RBB's distributor.
** Mr. Sablowsky is an "interested person" of RBB as that term is defined in
the 1940 Act by virtue of his position with Gruntal & Co., Inc., a
broker-dealer which sells RBB's shares.
Messrs. McKay, Sternberg and Brodsky are members of the Audit Committee of
the Board of Directors. The Audit Committee, among other things, reviews
results of the annual audit and recommends to RBB the firm to be selected as
independent auditors.
Messrs. Reichman, McKay and van Roden are members of the Executive
Committee of the Board of Directors. The Executive Committee may generally
carry on and manage the business of RBB when the Board of Directors is not in
session.
Messrs. McKay, Sternberg, Brodsky and van Roden are members of the
Nominating Committee of the Board of Directors. The Nominating Committee
recommends to the Board annually all persons to be nominated as directors of
RBB.
RBB pays directors who are not "affiliated persons" (as that term is
defined in the 1940 Act) of the Fund $9,500 annually and $700 per meeting of the
Board or any committee thereof that is not held in conjunction with a Board
meeting. Directors who are not affiliated persons of RBB are reimbursed for any
expenses incurred in attending meetings of the Board of Directors or any
committee thereof. The Chairman (currently Donald van Roden) receives an
additional $5,000 for his services. For the year ended August 31, 1995,
each of the following members of the Board of Directors received compensation
from the Fund in the following amounts: Julian A. Brodsky in the aggregate
amount of $9,425; Francis J. McKay in the aggregate amount of $12,025;
Marvin E. Sternberg in the aggregate amount of $12,675; Donald van Roden in the
aggregate amount of $14,675. On October 24, 1990, RBB adopted, as a
participating employer, RBB Office Retirement Profit-Sharing Plan and Trust
Agreement, a retirement plan for employees (currently Edward J. Roach) pursuant
to which RBB will contribute on a monthly basis amounts equal to 10% of the
monthly compensation of each eligible employee. By virtue of the services
performed by WPC, the Funds' adviser, and Counsellors Securities, the Funds'
distributor, RBB itself requires only one part-time employee. No
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officer, director or employee of WPC currently receives any compensation from
RBB.
INVESTMENT ADVISORY, DISTRIBUTION AND SERVICING ARRANGEMENTS
Advisory Agreements
WPC renders advisory services to the Funds pursuant to Investment
Advisory Agreements. The Advisory Agreement relating to the Growth &
Income Fund is dated September 30, 1993. The Advisory Agreement relating
to the Balanced Fund is dated September 30, 1994. The Advisory Agreement
relating to the Tax Free Fund is dated March 31, 1995. Such advisory
agreements are hereinafter collectively referred to as the "Advisory Contracts."
Prior to October 1, 1993, PIMC and WPC rendered advisory and sub-advisory
services, respectively, to the Growth & Income Fund pursuant to Advisory and
Sub-Advisory Agreements dated August 16, 1988. Prior to October 1, 1994, PIMC
and WPC rendered advisory and sub-advisory services, respectively, to the
Balanced Fund pursuant to Advisory and Sub-Advisory Agreements dated August 16,
1988. Prior to April 10, 1995, PIMC and PNC Bank rendered advisory and
sub-advisory services, respectively, to the Tax Free Fund pursuant to Advisory
and Sub-Advisory Agreements dated August 16, 1988.
For the year ended August 31, 1995, WPC waived advisory fees with
respectto the Growth & Income Fund in the amount of $ 0 under the
Advisory Contract. During the same period, WPC received advisory fees (after
waivers) with respect to the Growth & Income Fund in the amount of
$5,824,947. For the year ended August 31, 1995, WPC waived advisory
fees with respect to the Balanced Fund in the amount of $14,367
under the Advisory Contract, and PIMC waived advisory fees in the amount of
$362. During the same period, WPC received advisory fees (after waivers) with
respect to the Balanced Fund in the amount of $0, and PIMC received
advisory fees (after waivers) in the amount of $0. For the year ended August
31, 1995, WPC waived advisory fees with respect to the Tax Free Fund of
$9,060 under the Advisory Contract, and PIMC waived advisory fees in the amount
of $13,889. During the same period, WPC received advisory fees (after waivers)
with respect to the Tax Free Fund in the amount of $0, and PIMC received
advisory fees (after waivers) in the amount of $0.
As required by various state regulations, WPC will reimburse RBB
or the Funds affected (as applicable) if and to the extent that the
aggregate operating expenses of RBB or the Funds affected exceed applicable
state limits for the fiscal year, to the extent required by such
state regulations. Currently, the most restrictive of such applicable limits is
believed to be 2 1/2% of the first $30 million of average annual net assets, 2%
of the next $70 million of average annual net assets and 1 1/2% of the remaining
average annual net assets. Certain expenses, such as brokerage commissions,
taxes, interest and extraordinary items, are excluded from this limitation.
Whether such expense limitations apply to RBB as a whole or to the Funds on an
individual basis depends upon the particular regulations of such states.
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The Funds bear all of their own expenses not specifically assumed by
Warburg. General expenses of RBB not readily identifiable as belonging to a
portfolio of RBB are allocated among all investment portfolios by or under the
direction of RBB's Board of Directors in such manner as the Board determines to
be fair and equitable. Expenses borne by a Fund include, but are not limited
to, the following (or a Fund's share of the following): (a) the cost (including
brokerage commissions) of securities purchased or sold by a Fund and any losses
incurred in connection therewith; (b) fees payable to and expenses incurred on
behalf of a Fund by WPC; (c) expenses of organizing RBB that are not
attributable to a class of RBB; (d) certain of the filing fees and expenses
relating to the registration and qualification of RBB and a Fund's shares under
Federal and/or state securities laws and maintaining such registrations and
qualifications; (e) fees and salaries payable to RBB's directors and officers;
(f) taxes (including any income or franchise taxes) and governmental fees; (g)
costs of any liability and other insurance or fidelity bonds; (h) any costs,
expenses or losses arising out of a liability of or claim for damages or other
relief asserted against RBB or a Fund for violation of any law; (i) legal,
accounting and auditing expenses, including legal fees of special counsel for
the independent directors; (j) charges of custodians and other agents; (k)
expenses of setting in type and printing prospectuses, statements of additional
information and supplements thereto for existing shareholders, reports,
statements, and confirmations to shareholders and proxy material that are not
attributable to a class; (l) costs of mailing prospectuses, statements of
additional information and supplements thereto to existing shareholders, as well
as reports to shareholders and proxy material that are not attributable to a
class; (m) any extraordinary expenses; (n) fees, voluntary assessments and other
expenses incurred in connection with membership in investment company
organizations; (o) costs of mailing and tabulating proxies and costs of
shareholders' and directors' meetings; (p) costs of PFPC's use of independent
pricing services to value a portfolio's securities; and (q) the cost of
investment company literature and other publications provided by RBB to its
directors and officers. Distribution expenses, transfer agency expenses,
expenses of preparation, printing and mailing prospectuses, statements of
additional information, proxy statements and reports to shareholders, and
organizational expenses and registration fees, identified as belonging to a
particular class of RBB, are allocated to such class.
Under the Advisory Contracts, WPC will not be liable for any error of
judgment or mistake of law or for any loss suffered by RBB or the Funds in
connection with the performance of an Advisory Contract, except a loss resulting
from willful misfeasance, bad faith or gross negligence on the part of WPC in
the performance of its duties or from reckless disregard of its duties and
obligations thereunder.
The Advisory Contracts were approved on July 26, 1995 by vote of RBB's
Board of Directors, including a majority of those directors who are not parties
to the Advisory Contracts or interested persons (as defined in the 1940 Act) of
such parties. The Advisory Contracts are terminable by vote of RBB's Board of
Directors or by the holders of a majority of the outstanding voting securities
of the Funds, at any time without penalty, on 60 days'
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<PAGE>
written notice to WPC. The Growth & Income Fund Advisory Contract became
effective on October 1, 1993 and was approved by shareholders at a special
meeting held September 30, 1993. The Balanced Fund Advisory Contract became
effective on October 1, 1994 and was approved by shareholders at a special
meeting held September 30, 1994. The Tax Free Fund Advisory Contract became
effective on April 10, 1995 and was approved by Shareholders at a meeting
commenced on March 31, 1995 and concluded on April 25, 1995. The Advisory
Contracts terminate automatically in the event of assignment thereof.
Custodian Agreements
PNC Bank is custodian of the Funds' assets pursuant to a custodian
agreement dated August 16, 1988, as amended (the "Custodian Agreement"). Under
the Custodian Agreement, PNC Bank (a) maintains a separate account or accounts
in the name of the Funds, (b) holds and transfers portfolio securities on
account of the Funds, (c) accepts receipts and makes disbursements of money on
behalf of the Funds, (d) collects and receives all income and other payments and
distributions on account of the Funds' portfolio securities and (e) makes
periodic reports to the RBB's Board of Directors concerning the Funds'
operations. PNC Bank is authorized to select one or more banks or trust
companies to serve as sub-custodian on behalf of the Funds, provided that PNC
Bank remains responsible for the performance of all its duties under the
Custodian Agreement and holds RBB harmless from the acts and omissions of any
sub-custodian. For its services to the Funds under the Custodian Agreement, PNC
Bank receives a fee which is calculated based upon the Funds' average daily
gross assets as follows: $.25 per $1,000 on the first $50 million of average
daily gross assets; $.20 per $1,000 on the next $50 million of average daily
gross assets; and $.15 per $1,000 on average daily gross assets over $100
million, with a minimum monthly fee of $1,000 per Fund, exclusive of transaction
charges and out-of-pocket expenses, which are also charged to the Funds.
State Street Bank and Trust Company ("State Street") is co-custodian
of the Funds' foreign securities pursuant to a sub-custodian agreement dated
October 26, 1994 (the "Foreign Custodian Agreement"). Under the Foreign
Custodian Agreement, State Street performs custodial functions with respect to
the Funds' non-U.S. portfolio holdings, including appointment of non-U.S.
custodians and agents.
Transfer Agency and Sub-Transfer Agency Agreements
PFPC, Inc. ("PFPC"), an affiliate of PNC Bank, serves as the transfer
and dividend disbursing agent for the No Load and Advisor Classes of the
Warburg
Growth & Income and Balanced Funds and the No Load Class of the Tax Free Fund
pursuant to a Transfer Agency Agreement dated August 16, 1988 (the "Transfer
Agency Agreement"). State Street Bank acts as shareholder servicing agent,
sub-transfer agent and dividend disbursing agent for the Funds, under which it
(a) issues and redeems shares of the Classes, (b) addresses and mails all
communications by the Funds to record owners of shares of the Classes, including
reports to shareholders, dividend and distribution notices and proxy materials
for its meetings of shareholders, (c) maintains
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<PAGE>
shareholder accounts and, if requested, sub-accounts and (d) makes periodic
reports to RBB's Board of Directors concerning the operations of the Classes.
For its services to the Fund under the Sub-Transfer Agency Agreement, State
Street receives a fee at the annual rate of $8.00 per account for the Funds,
plus $5.00 per new account establishment, exclusive of out-of-pocket expenses,
and also receives reimbursement of its out-of-pocket expenses.
Co-Administration Agreements
Counsellors Funds Service, Inc. ("Counsellors Service") serves as
co-administrator to the Funds pursuant to Co-Administration Agreements dated
August 4, 1994 for the Growth & Income and Balanced Funds and dated March 31,
1995 for the Tax Free Fund (the "Counsellors Service Co-Administration
Agreements"). Counsellors Service has agreed to provide shareholder liaison
services to the Funds including responding to shareholder inquiries and
providing information on shareholder accounts. The Counsellors Service
Co-Administration Agreements provide that Counsellors Service shall not be
liable for any error of judgment or mistake of law or any loss suffered by RBB
or the Funds in connection with the performance of the agreement, except a loss
resulting from willful misfeasance, bad faith or negligence, or reckless
disregard of its duties and obligations thereunder. In consideration for
providing services pursuant to the Counsellors Service Co-Administration
Agreements, Counsellors Services receives a fee with respect to the Growth &
Income Fund calculated at an annual rate of .05% of the Growth & Income Fund's
average daily net assets for the first $125 million of average daily net assets,
and .10% of average daily net assets for assets above $125 million. With
respect to the Balanced and Tax Free Funds, Counsellors Service receives a fee
calculated at an annual rate of .10% of each Fund's respective average daily net
assets. Under the Counsellors Service Co-Administration Agreements, the Growth
& Income Fund paid Counselors Service $714,152 for the fiscal year ended August
31, 1995 and $24,186 for the fiscal year ended August 31, 1994; the Balanced
Fund paid Counselors Service $1,597 for the fiscal year ended August 31, 1995;
and the Tax Free Fund paid Counselors Service $1,812 for the fiscal year ended
August 31, 1995.
PFPC also serves as co-administrator to Funds pursuant to
Co-Administration Agreements dated August 4, 1994 for the Growth & Income and
Balanced Funds and dated March 31, 1995 for the Tax Free Fund (the "PFPC
Co-Administration Agreements"). PFPC has agreed to calculate the Funds' net
asset values, provide all accounting services for the Funds, and assist in
related aspects of the Funds' operations. The PFPC Co-Administration Agreements
provide that PFPC shall not be liable for any error of judgment or mistake of
law or any loss suffered by RBB or the Funds in connection with the performance
of the agreement, except a loss resulting from willful misfeasance, bad faith or
negligence, or reckless disregard of its duties and obligations thereunder. In
consideration for providing services pursuant to the PFPC Co-Administration
Agreements, PFPC receives a fee with respect to the Growth & Income Fund
calculated at an annual rate of .20% of the Growth & Income Fund's average daily
net assets, with a minimum annual fee of $75,000, for the first $125 million of
average daily net assets, and .15% of average
24
<PAGE>
daily net assets for assets above $125 million. With respect to the Balanced
and Tax Free Funds, PFPC receives a fee calculated at an annual rate of .15% of
each Fund's respective average daily net assets, with a minimum annual fee for
each Fund of $75,000. Under the PFPC Co-Administration Agreements, the Growth &
Income Fund paid PFPC $1,227,497 for the fiscal year ended August 31, 1995 and
$269,859 for the fiscal year ended August 31, 1994; the Balanced Fund paid PFPC
$0 (after waivers) for the fiscal year ended August 31, 1995; and the Tax Free
Fund paid PFPC $0 (after waivers) for the fiscal year ended August 31, 1995.
Distribution and Shareholder Servicing
The Balanced and Tax Free Funds have each entered into Distribution
Agreements with Counsellors Securities pursuant to their Distribution Plans (the
"12b-1 Plans") under Rule 12b-1 of the 1940 Act. In consideration for Services
(as defined below), the Distribution Agreement provides that the Balanced and
Tax Free Funds will each pay Counsellors Securities a fee calculated at an
annual rate of .25% of the respective average daily net assets of the No Load
Shares of the Balanced and Tax Free Funds. Services performed by Counsellors
Securities include (a) the sale of the No Load Shares, as set forth in the 12b-1
Plans ("Selling Services"), (b) ongoing servicing and/or maintenance of the
accounts of shareholders of the Balanced and Tax Free Funds, as set forth in the
12b-1 Plans ("Shareholder Services"), and (c) sub-transfer agency services,
subaccounting services or administrative services, as set forth in the 12b-1
Plans ("Administrative Services" and collectively with Selling Services and
Administrative Services, "Services") including, without limitation, (i) payments
reflecting an allocation of overhead and other office expenses of Counsellors
Securities related to providing Services; (ii) payments made to, and
reimbursement of expenses of, persons who provide support services in connection
with the distribution of the No Load Shares including, but not limited to,
office space and equipment, telephone facilities, answering routine inquiries
regarding the Balanced and Tax Free Funds, and providing any other Shareholder
Services; (iii) payments made to compensate selected dealers or other authorized
persons for providing any Services; (iv) costs relating to the formulation and
implementation of marketing and promotional activities, including, but not
limited to, direct mail promotions and television, radio, newspaper, magazine
and other mass media advertising, and related travel and entertainment expenses;
(v) costs of printing and distributing prospectuses, statements of additional
information and reports of the Balanced and Tax Free Funds to prospective
shareholders of the Funds; and (vi) costs involved in obtaining whatever
information, analyses and reports with respect to marketing and promotional
activities that Counsellors Securities may, from time to time, deem advisable.
FUND TRANSACTIONS
Subject to policies established by the Board of Directors, WPC is
responsible for the execution of portfolio transactions and the allocation of
brokerage transactions for the Funds. In executing portfolio transactions,
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WPC seeks to obtain the best net results for the Funds, 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 WPC 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.
No Fund has any obligation to deal with any broker or group of brokers in
the execution of portfolio transactions. WPC may, consistent with the interests
of the Funds 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 the Funds and other clients of WPC. Information and research
received from such brokers will be in addition to, and not in lieu of, the
services required to be performed by WPC 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 WPC,
as applicable, determines in good faith that such commission is reasonable in
terms either of the transaction or the overall responsibility of WPC, as
applicable, 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.
WPC may seek to obtain an undertaking from issuers of commercial paper or
dealers selling commercial paper to consider the repurchase of such securities
from the Funds prior to their maturity at their original cost plus interest
(sometimes adjusted to reflect the actual maturity of the securities), if it
believes that the Funds' anticipated need for liquidity makes such action
desirable. Any such repurchase prior to maturity reduces the possibility that
the Funds 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 the Funds and for other investment accounts
managed by WPC are made independently of each other in the light of differing
conditions. However, the same investment decision may occasionally 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
26
<PAGE>
effect upon the price or value of the security as far as a Fund is concerned, in
other cases it is believed to be beneficial to the Funds. The Funds will not
purchase securities during the existence of any underwriting or selling group
relating to such security of which WPC or any affiliated person (as defined in
the 1940 Act) thereof is a member except pursuant to procedures adopted by RBB's
Board of Directors pursuant to Rule 10f-3 under the 1940 Act. Among other
things, these procedures, which will be reviewed by RBB's directors as deemed
necessary from time to time, require that the commission paid in connection with
such a purchase be reasonable and fair, that the purchase be at not more than
the public offering price prior to the end of the first business day after the
date of the public offer, and that WPC not participate in or benefit from the
sale to a Fund.
In no instance will portfolio securities be purchased from or sold to
Counsellors Securities, PNC Bank or WPC or any affiliated person of the
foregoing entities except as permitted by SEC exemptive order or by applicable
law.
During the year ended August 31, 1995, the Growth & Income Fund paid
$3,023,620 of brokerage commissions, the Balanced Fund paid $9,437 of
brokerage commissions, and the Tax Free Fund paid $ 0 of brokerage
commissions.
A high rate of portfolio turnover involves correspondingly greater
brokerage commission expenses and other transaction costs, which must be borne
directly by a Fund. Federal income tax laws may restrict the extent to which a
Fund may engage in short term trading of securities. See "Taxes." For the year
ended August 31, 1995, the Growth & Income Fund had a portfolio turnover rate of
109%. For the year or period ended August 31, 1995, the Balanced Fund had a
portfolio turnover rate of 107%. For the year ended August 31, 1995, the
Tax Free Fund had a portfolio turnover rate of 38%. The Funds anticipate
that their annual portfolio turnover rates 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 portfolio during the year.
PURCHASE AND REDEMPTION INFORMATION
The Funds reserve the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption or repurchase of a Fund's
shares by making payment in whole or in part in securities chosen by RBB 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. RBB has
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.
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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 (the "NYSE") is closed (other than customary weekend and holiday
closings), or during which trading on the NYSE is restricted, or during which
(as determined by the SEC by rule or regulation) an emergency exists as a result
of which disposal or valuation of portfolio 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 value per share of each Fund is calculated as of 4:00 p.m.
Eastern Time on each Business Day. "Business Day" means each weekday when the
NYSE is open. Currently, the NYSE is closed on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day (observed), Labor Day,
Thanksgiving Day and Christmas Day (observed). Securities which are listed on
stock exchanges 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 evaluation. 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 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 4:00 p.m.; 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 RBB's 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.
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 or under the direction of
RBB's Board of Directors.
PERFORMANCE INFORMATION
Total Return. For purposes of quoting and comparing the performance of the
Funds to that of other mutual funds and to stock or other relevant indices in
advertisements or in reports to shareholders, performance
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<PAGE>
may be stated in terms of total return. Under the rules of the Securities and
Exchange Commission, funds advertising performance must include total return
quotes calculated according to the following formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value at the end of the 1, 5 or 10 year
periods (or fractional portion thereof) of a hypothetical $1,000 payment made at
the beginning of the 1, 5 or 10 year periods.
Under the foregoing formula, the time periods used in advertising will
be based on rolling calendar quarters, updated to the last day of the most
recent quarter prior to submission of the advertisement for publication, and
will cover one, five and ten year periods or a shorter period dating from the
effectiveness of the Funds' registration statement. In calculating the ending
redeemable value, the maximum sales load is deducted from the initial $1,000
payment and all dividends and distributions by the Funds are assumed to have
been reinvested at net asset value, as described in the Prospectus, on the
reinvestment dates during the period. Total return, or "T" in the formula
above, is computed by finding the average annual compounded rates of return over
the 1, 5 and 10 year periods (or fractional portion thereof) that would equate
the initial amount invested to the ending redeemable value. Any sales loads
that might in the future be made applicable at the time to reinvestments would
be included as would any recurring account charges that might be imposed by the
Funds.
Calculated according to the SEC rules, for the year ended August 31, 1995,
both the average annual total return and the aggregate total return was
15.62% for the Growth & Income Fund, 21.56% for the Balanced Fund, and
8.89% for the Tax Free Fund. Calculated according to the SEC rules, for the
period beginning on the commencement of the Funds' operations and ending
August 31, 1995, the average annual total return (commencing October , 1988)
was 15.74% for the Growth & Income Fund, 12.96% for the Balanced Fund
and 8.34% for the Tax Free Funds. For the same periods, the aggregate total
return (commencing October , 1988) was 174.48% for the Growth & Income
Fund, 131.99% for the Balanced Fund and 73.39% for the Tax Free Fund.
Performance. From time to time, the Funds may advertise their average
annual total return over various periods of time. These total return figures
show the average percentage change in value of an investment in a Fund from the
beginning of the measuring period to the end of the measuring period. The
figures reflect changes in the price of a Fund's shares assuming that any income
dividends and/or capital gain distributions made by a Fund during the period
were reinvested in shares of the Fund. Total return will be shown for
29
<PAGE>
recent one-, five- and ten-year periods, and may be shown for other periods as
well (such as from commencement of a 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 a Fund's annual total return for one year in
the period might have been grater or less than the average for the entire
period. When considering total return figures for periods shorter than one
year, investors should bear in mind that the Funds seek long-term appreciation
and that such return may not be representative of a Fund's return over a longer
market cycle. The Funds may also advertise aggregate total return figures for
various periods, representing the cumulative change in value of an investment in
a Fund for the specific period (again reflecting changes in a Fund's share
prices and assuming reinvestment of dividends and distributions). Aggregate and
average total returns may be shown by means of schedules, charts or graphs, may
indicate various components of total return (i.e., change in value of initial
investment, income dividends and capital gain distributions) and would be quoted
separately for each class of a Fund's shares.
Investors should note that total return figures are based on historical
earnings and are not intended to indicate future performance.
In reports or other communications to investors or in advertising material,
the Funds may describe general economic and market conditions affecting the
Funds and may compare their performance with (1) that of other mutual funds as
listed in the rankings prepared by Lipper Analytical Services, Inc. or similar
investment services that monitor the performance of mutual funds or as set forth
in the publications listed below; (2) with the S&P 500, which is an unmanaged
indexes of common stocks prepared by Standard & Poor's Corporation or (3) other
appropriate indices of investment securities or with data developed by
Counsellors derived from such indices. The Funds may also include evaluations
published by nationally recognized ranking services and by financial
publications that are nationally recognized, such as The Wall Street Journal,
Investor's Daily, Money, Inc., Institutional Investor, Barron's, Fortune, Forbes
Business Week, Morningstar, Inc. and Financial Times.
In reports or other communications to investors or in advertising, the
Funds may also describe the general biography or work experience of the
portfolio managers of the Funds and may include quotations attributable to the
portfolio managers describing approaches taken in managing the Funds'
investments, research methodology, underlying stock selection or the Funds'
investment objective. The Funds may also discuss the continuum of risk and
return relating to different investments, and the potential impact of foreign
stock on a portfolio otherwise composed of domestic securities. In addition,
the Funds may from time to time compare their expense ratios to those of
investment companies with similar objective and policies, as advertised by
Lipper Analytical Services, Inc. or similar investment services that monitor
mutual funds.
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Yield. The Funds may also advertise their yield. Under the rules of the
SEC, a Fund advertising yield must calculate yield using the following formula:
YIELD = 2 [(a-b+1)6 - 1]
---
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursement).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
Under the foregoing formula, yield is computed by compounding
semi-annually, the net investment income per share earned during a 30 day period
divided by the maximum offering price per share on the last day of the period.
For the purpose of determining the interest earned (variable "a" in the formula)
on debt obligations that were purchased by a Fund at a discount or premium, the
formula generally calls for amortization of the discount or premium; the
amortization schedule will be adjusted monthly to reflect changes in the market
values of the debt obligations.
The yield for the 30 day period ended August 31, 1995 was 0.57%
for the Growth & Income Fund, 1.21% for the Balanced Fund, and 5.04% for
the Tax Free Fund.
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yields will fluctuate, they cannot be compared with
yields on savings account or other investment alternatives that provide an
agreed to or guaranteed fixed yield for a stated period of time. However, yield
information may be useful to an investor considering temporary investments in
money market instruments. In comparing the yield of one fund to another,
consideration should be given to each fund's investment policies, including the
types of investments made, lengths of maturities of the portfolio securities,
the method used by each fund to compute the yield (methods may differ) and
whether there are any special account charges which may reduce the effective
yield.
The yields on certain obligations are dependent on a variety of
factors, including general market conditions, conditions in the particular
market for the obligation, the financial condition of the issuer, the size of
the offering, the maturity of the obligation and the rates on the issue. The
ratings of Moody's Investors Service, Inc. and Standard & Poor's Corporation
represent their respective opinions as to the quality of the obligations they
undertake to rate. Ratings, however, are general and are not absolute standards
of quality. Consequently, obligations with the same rating, maturity and
interest rate may have different market prices. In addition,
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<PAGE>
subsequent to its purchase by a Fund, an issue may cease to be rated or may have
its rating reduced below the minimum required for purchase. In such an event,
the Fund's investment adviser or sub-adviser will consider whether the Fund
should continue to hold the obligation.
From time to time, in advertisements or in reports to shareholders
with respect to the Funds, the yields of the Funds may be quoted and compared to
those of other mutual funds with similar investment objectives and to stock or
other relevant indices. For example, the yield of a Fund may be compared to the
Donoghue's Money RRB Report(R) of Holliston, MA, 10746, a widely recognized
independent publication that monitors the performance of money market funds, or
to the data prepared by Lipper Analytical Services, Inc., a widely-recognized
independent service that monitors the performance of mutual funds.
TAXES
The following is only a summary of certain additional tax
considerations generally affecting the Funds and their shareholders that are not
described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Funds or their shareholders, and the
discussion here and in the Funds' Prospectus 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.
The Funds have elected to be taxed as regulated investment companies
under Part I of Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). As regulated investment companies, the Funds are exempt from
Federal income tax on their net investment income and realized capital gains
which they distribute to shareholders, provided that they distribute an amount
equal to the sum of (a) at least 90% of their 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 (b) at least 90% of
their net tax-exempt interest income, if any, for the year (the "Distribution
Requirement") and satisfy 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") and derive less than 30%
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<PAGE>
of its gross income from the sale or other disposition of any of the following
investments, if such investments were held for less than three months: (a) stock
or securities (as defined in Section 2(a)(36) of the 1940 Act); (b) options,
futures, or forward contracts (other than options, futures or forward contracts
on foreign currencies); and (c) foreign currencies (or options, futures or
forward contracts on foreign currencies) but only if such currencies (or
options, futures or forward contracts) are not directly related to the regulated
investment company's principal business of investing in stock or securities (or
options and futures with respect to stocks or securities) (the "Short-Short Gain
Test"). Interest (including accrued original issue discount and, in the case of
debt securities bearing taxable interest income, "accrued market discount")
received by a Fund at maturity or on disposition of a security held for less
than three months will not be treated as gross income derived from the sale or
other disposition of such security for purposes of the Short-Short Gain Test.
However, any other income which is attributable to realized market appreciation
will be treated as gross income from the sale or other disposition of securities
for this purpose.
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 Requirements. Income derived by a regulated investment
company from a partnership or trust 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 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 a 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 a
Fund has not invested more than 5% of the value of its total assets in
securities of such issuer and as to which a Fund does not hold more than 10% of
the outstanding voting securities of such issuer), and no more than 25% of the
value of a 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 the 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.
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<PAGE>
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 RBB 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.
The Funds intend to distribute to shareholders their 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, regardless of the
length of time the shareholder has held his shares, whether such gain was
recognized by a 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 a Fund for any taxable year,
determined by excluding any net capital loss or 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 RBB to shareholders not later than 60 days after the
close of each Fund's respective taxable year. While the Tax Free Fund does not
expect to realize long-term capital gains, the Fund intends to distribute any
net long-term capital gains that it may realize (such as gains from the sale of
debt securities and realized market discount on tax-exempt Municipal
Obligations).
In the case of corporate shareholders, distributions (other than
capital gain dividends) of a Fund for any taxable year generally qualifies for
the 70% dividends received deduction to the extent of the gross amount of
"qualifying dividends" received by a Fund for the year. Generally, a dividend
will be treated as a "qualifying dividend" if it has been received from a
domestic corporation. However, 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. RBB 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 RBB to
shareholders not later than 60 days after the close of the Fund's taxable year.
Investors should note that changes made to the Code by the Tax Reform
Act of 1986 and subsequent legislation have not entirely eliminated distinctions
in the tax treatment of capital gain and ordinary income distributions. The
nominal maximum marginal rate on ordinary income for individuals, trusts and
estates is currently 31%, but for individual taxpayers
34
<PAGE>
whose adjusted gross income exceeds certain threshold amounts (that differ
depending on the taxpayer's filing status) in taxable years beginning before
1996, provisions phasing out personal exemptions and limiting itemized
deductions may cause the actual maximum marginal rate to exceed 31%. The
maximum rate on the net capital gain of individuals, trusts and estates,
however, is in all cases 28%. Capital gains and ordinary income of corporate
taxpayers are taxed at a nominal maximum rate of 34% (an effective marginal rate
of 39% applies in the case of corporations having taxable income between
$100,000 and $335,000). 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.
Distributions of net investment income received by the Funds from
investments in debt securities will (except in the case of exempt interest
dividends distributed by the Tax-Free Fund) be taxable to shareholders as
ordinary income and will not be treated as "qualifying dividends" for purposes
of the dividends received deduction. Although the Tax-Free Fund does not expect
to receive net investment income other than Tax-Exempt Interest and AMT
Interest, up to 20% of the net assets of the Fund may be invested in Municipal
Obligations that do not bear Tax-Exempt Interest or AMT Interest, and any
taxable income recognized by the Fund will be distributed and taxed to their
shareholders in accordance with the foregoing rules.
The Tax-Free Fund is designed to provide investors with current
tax-exempt interest income. Exempt interest dividends distributed to
shareholders by the Fund is not included in the shareholder's gross income for
regular Federal income tax purposes. In order for the Tax-Free Fund to pay
exempt interest dividends during any taxable year, at the close of each fiscal
quarter at least 50% of the value of the Fund must consist of exempt interest
obligations.
In addition, the Tax-Free Fund may not be appropriate investments
for entities which are "substantial users" of facilities financed by private
activity bonds or "related persons" thereof. "Substantial user" is defined
under U.S. Treasury Regulations to include a nonexempt person who regularly uses
a part of such facilities in his trade or business and (a) whose gross revenues
derived with respect to the facilities financed by the issuance of bonds are
more than 5% of the total revenue derived by all users of such facilities, (b)
who occupies more than 5% of the entire usable area of such facilities, or (c)
for whom such facilities or a part thereof were specifically constructed,
reconstructed or acquired. "Related persons" include certain related natural
persons, affiliated corporations, a partnership and its partners and an S
corporation and its shareholders.
The Tax-Free Fund may acquire standby commitments with respect to
Municipal Obligations held in its portfolio and will treat any interest received
on Municipal Obligations subject to such standby commitments as tax-exempt
income. In Rev. Rul. 82-144, 1982-2 C.B. 34, the Internal Revenue Service held
that a mutual fund acquired ownership of municipal obligations for federal
income tax purposes, even though the fund simultaneously purchased
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<PAGE>
"put" agreements with respect to the same municipal obligations from the seller
of the obligations. The Fund will not engage in transactions involving the use
of standby commitments that differ materially from the transaction described in
Rev. Rul. 82-144 without first obtaining a private letter ruling from the
Internal Revenue Service or the opinion of counsel.
Interest on indebtedness incurred by a shareholder to purchase or
carry shares of the Tax-Free Fund is not deductible for income tax purposes if
(as expected) the Tax-Free Fund distributes exempt interest dividends during the
shareholder's taxable year. Receipt of exempt interest dividends may result in
collateral Federal income tax consequences to certain other taxpayers, including
persons subject to alternative minimum tax (see Prospectus and discussion
below), financial institutions, property and casualty insurance companies,
individual recipients of Social Security or Railroad Retirement benefits, and
foreign corporations engaged in a trade or business in the United States.
Prospective investors should consult their own tax advisers as to such
consequences.
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 Prospectus) 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."
Corporate shareholders will have to take into account (1) all exempt
interest dividends and (2) the full amount of all dividends from the Tax-Free
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%.
Corporate investors should also note that the Superfund Amendments and
Reauthorization Act of 1986 imposes an environmental tax on corporate taxpayers
of 0.12% of the excess of "alternative minimum taxable income" (with certain
modifications) over $2,000,000 for taxable years beginning after 1986 and before
1996, regardless of whether such taxpayers are liable for alternative minimum
tax.
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<PAGE>
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 (including amounts derived
from interest on Municipal Obligations in the case of the Tax-Free Fund) to the
extent of such Fund's current and accumulated earning 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.
A shareholder will recognize gain or loss upon an exchange of shares
of a Fund for shares of another Fund or of another Warburg Pincus Fund upon
exercise of an exchange privilege. Shareholders may not include the initial
sales charge in the tax basis of the Shares exchanged for shares of another Fund
or of another Warburg Pincus Fund for the purpose of determining gain or loss on
the exchange, where the Shares exchanged have been held 90 days or less. The
sales charge will increase the basis of the shares acquired through exercise of
the exchange privilege (unless the shares acquired are also exchanged for shares
of another Fund or of another Warburg Pincus Fund within 90 days after the first
exchange).
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 1-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 the Funds intend to distribute all of
their taxable income currently, no Fund anticipates incurring any liability for
this excise tax. However, investors should note that the Funds may in certain
circumstances be required to liquidate investments in order to make sufficient
distributions to avoid excise tax liability.
RBB will be required in certain cases to withhold and remit to the
United States Treasury 31% of dividends (other than exempt interest dividends of
the Tax Free Fund) 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 failure to report the
receipt of interest or dividend income properly, or (3) who has failed to
certify to RBB that he is not subject to backup withholding or that he is an
"exempt recipient."
The foregoing general discussion of Federal income tax consequences is
based on the Code and the regulations issued thereunder as in
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<PAGE>
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 the Funds expect to qualify as a "regulated investment
company" and to be relieved of all or substantially all Federal income taxes,
depending upon the extent of their activities in states and localities in which
their offices are maintained, in which their agents or independent contractors
are located or in which they are otherwise deemed to be conducting business, the
Funds may be subject to the tax laws of such states or localities.
DESCRIPTION OF SHARES
The Fund has authorized capital of thirty billion shares of Common
Stock, $.001 par value per share, of which 12.2 billion shares are currently
classified as follows: 100 million shares are classified as Class A Common Stock
(Growth & Income), 100 million shares are classified as Class B Common Stock,
100 million shares are classified as Class C Common Stock (Balanced), 100
million shares are classified as Class D Common Stock (Tax-Free), 500 million
shares are classified as Class E Common Stock (Money), 500 million shares are
classified as Class F Common Stock (Municipal Money), 500 million shares are
classified as Class G Common Stock (Money), 500 million shares are classified as
Class H Common Stock (Municipal Money), 1 billion shares are classified as Class
I Common Stock (Money), 500 million shares are classified as Class J Common
Stock (Municipal Money), 500 million shares are classified as Class K Common
Stock (U.S. Government Money), 1,500 million shares are classified as Class L
Common Stock (Money), 500 million shares are classified as Class M Common Stock
(Municipal Money), 500 million shares are classified as Class N Common Stock
(U.S. Government Money), 500 million shares are classified as Class O Common
Stock (N.Y. Money), 100 million shares are classified as Class P Common Stock
(Government), 100 million shares are classified as Class Q Common Stock, 500
million shares are classified as Class R Common Stock (Municipal Money), 500
million shares are classified as Class S Common Stock (U.S. Government Money),
500 million shares are classified as Class T Common Stock (International), 500
million shares are classified as Class U Common Stock (High Yield), 500
million shares are classified as Class V Common Stock (Emerging), 100 million
shares are classified as Class W Common Stock, 50 million shares are
classified as Class X Common Stock (U.S. Core Equity), 50 million shares are
classified as Class Y Common Stock (U.S. Core Fixed Income), 50 million shares
are classified as Class Z Common Stock (Global Fixed Income), 50 million shares
are classified as Class AA Common Stock (Municipal Bond), 50 million shares are
classified as Class BB Common Stock (BEA Balanced), 50 million shares are
classified as Class CC Common Stock (Short Duration), 100 million shares are
classified as Class DD Common Stock (Growth & Income Series 2), 100 million
shares are classified as Class EE Common Stock (Balanced Series 2), 700 million
shares are classified as Class Alpha 1 Common Stock (Money), 200 million shares
are classified as Class Alpha 2 Common Stock (Municipal Money), 500 million
shares are
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classified as Class Alpha 3 Common Stock (U.S. Government Money), 100 million
shares are classified as Class Alpha 4 Common Stock (N.Y. Money), 1 million
shares are classified as Class Beta 1 Common Stock (Money), 1 million shares are
classified as Class Beta 2 Common Stock (Municipal Money), 1 million shares are
classified as Class Beta 3 Common Stock (U.S. Government Money), 1 million
shares are classified as Class Beta 4 Common Stock (N.Y. Money), 1 million
shares are classified as Gamma 1 Common Stock (Money), 1 million shares are
classified as Gamma 2 Common Stock (Municipal Money), 1 million shares are
classified as Gamma 3 Common Stock (U.S. Government Money), 1 million shares are
classified as Gamma 4 Common Stock (N.Y. Money), 1 million shares are classified
as Delta 1 Common Stock (Money), 1 million shares are classified as Delta 2
Common Stock (Municipal Money), 1 million shares are classified as Delta 3
Common Stock (U.S. Government Money), 1 million shares are classified as Delta 4
Common Stock (N.Y. Money), 1 million shares are classified as Epsilon 1 Common
Stock (Money), 1 million shares are classified as Epsilon 2 Common Stock
(Municipal Money), 1 million shares are classified as Epsilon 3 Common Stock
(U.S. Government Money), 1 million shares are classified as Epsilon 4 Common
Stock (N.Y. Money), 1 million shares are classified as Zeta 1 Common Stock
(Money), 1 million shares are classified as Zeta 2 Common Stock (Municipal
Money), 1 million shares are classified as Zeta 3 Common Stock (U.S. Government
Money), 1 million shares are classified as Zeta 4 Common Stock (N.Y. Money), 1
million shares are classified as Eta 1 Common Stock (Money), 1 million shares
are classified as Eta 2 Common Stock (Municipal Money), 1 million shares are
classified as Eta 3 Common Stock (U.S. Government Money), 1 million shares are
classified as Eta 4 Common Stock (N.Y. Money), 1 million shares are classified
as Theta 1 Common Stock (Money), 1 million shares are classified as Theta 2
Common Stock (Municipal Money), 1 million shares are classified as Theta 3
Common Stock (U.S. Government Money), and 1 million shares are classified as
Theta 4 Common Stock (N.Y. Money). Shares of the Class A, C and D Common Stock
constitute the No Load Classes of the Growth & Income, Balanced and Tax Free
Funds, respectively. Under RBB's charter, the Board of Directors has the power
to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate
"families": the RBB Family, the Warburg Pincus Family, the Cash Preservation
Family, the Sansom Street Family, the Bedford Family, the Bradford Family, the
BEA Family, the Janney Montgomery Scott Money Family, the Beta Family, the Gamma
Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family
and the Theta Family. The RBB Family represents interests in one non-money
market portfolio as well as the Money Market and Municipal Money Market
Portfolios; the Warburg Pincus Family represents interests in the Growth &
Income, Balanced, and Tax Free Funds; the Cash Preservation Family represents
interests in the Money Market and Municipal Money Market Portfolios; the Sansom
Street Family represents interests in the Money Market, Municipal Money Market
and Government Obligations Money Market Portfolios; Bedford Family represents
interests in the Money Market, Municipal Money Market, Government Obligations
Money Market and New York Municipal Money Market Portfolios; the Bradford Family
represents interests in the Municipal Money Market and Government Obligations
Money Market Portfolios; the BEA Family represents interests in nine non-money
market portfolios; the Janney
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Montgomery Scott Family and the Beta, Gamma, Delta, Epsilon, Zeta, Eta and Theta
Families represent interests in the Money Market, Municipal Money Market,
Government Obligations Money Market and New York Municipal Money Market
Portfolios.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
RBB does not currently intend to hold annual meetings of shareholders
except as required by the 1940 Act or other applicable law. RBB's amended
By-Laws provide that shareholders collectively owning at least ten percent of
the outstanding shares of all classes of Common Stock of RBB 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, RBB will assist in shareholder
communication in such matters.
As stated in the Prospectus, holders of shares of each class of RBB
will vote in the aggregate and not by class on all matters, except where
otherwise required by law. Further, shareholders of RBB will vote in the
aggregate and not by portfolio except as otherwise required by law or when the
Board of Directors determines that the matter to be voted upon affects only the
interests of the shareholders of a particular portfolio. Rule 18f-2 under the
1940 Act provides that any matter required to be submitted by the provisions of
such Act or applicable state law, or otherwise, to the holders of the
outstanding securities of an investment company such as RBB shall not be deemed
to have been effectively acted upon unless approved by the holders of a majority
of the outstanding shares of each portfolio affected by the matter. Rule 18f-2
further provides that a portfolio shall be deemed to be affected by a matter
unless it is clear that the interests of each portfolio in the matter are
identical or that the matter does not affect any interest of the portfolio.
Under the Rule, the approval of an investment advisory agreement or any change
in a fundamental investment policy would be effectively acted upon with respect
to a portfolio only if approved by the holders of a majority of the outstanding
voting securities of such portfolio. However, the Rule also provides that the
ratification of the selection of independent public accountants, the approval of
principal underwriting contracts and the election of directors are not subject
to the separate voting requirements and may be effectively acted upon by
shareholders of an investment company voting without regard to portfolio.
Notwithstanding any provision of Maryland law requiring a greater vote
of shares of RBB's common stock (or of any class voting as a class) in
connection with any corporate action, unless otherwise provided by law, (for
example by Rule 18f-2 discussed above) or by RBB's Articles of Incorporation,
RBB may take or authorize such action upon the favorable vote of the holders of
more than 50% of all of the outstanding shares of Common Stock voting without
regard to class (or portfolio).
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MISCELLANEOUS
Counsel. The law firm of Ballard Spahr Andrews & Ingersoll, 1735
Market Street, 51st Floor, Philadelphia, Pennsylvania 19103 serves as counsel to
RBB, PIMC, PNC Bank and PFPC. The law firm of Drinker Biddle & Reath,
1100 Philadelphia National Bank Building, Broad and Chestnut Streets,
Philadelphia, Pennsylvania 19107, serves as counsel to RBB's independent
directors.
Independent Accountants. Coopers & Lybrand L.L.P., 2400 Eleven Penn
Center, Philadelphia, Pennsylvania 19103, serves as RBB's independent
accountants. RBB's financial statements which appear in this Statement of
Additional Information have been audited by Coopers & Lybrand L.L.P., as set
forth in their report, which also appears in this Statement of Additional
Information, and have been included herein in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
Control Persons. As of November 6, 1995, to RBB's 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 RBB
indicated below. See "Description of Shares" above. RBB does not know whether
such persons also beneficially own such shares.
PORTFOLIO NAME AND ADDRESS PERCENT OWNED
- --------- ---------------- -------------
Warburg Pincus Charles Schwab & Co., Inc. 32.97
Growth & Income Fund Reinvest Account
(Class A) Attn: Mutual Funds Dept.
101 Montgomery Street
San Francisco, CA 94104-4122
National Financial Services Corp. 12.78
FBO Customers
P.O. Box 3908
Church Street Station
New York, New York 10008-3908
Warburg Pincus Charles Schwab & Co., Inc. 39.41
Balanced Fund Reinvest Account
(Class C) Attn: Mutual Funds Dept.
101 Montgomery Street
San Francisco, CA 94104-4122
National Financial Services Corp. 19.15
FBO Customers
P.O. Box 3908
Church Street Station
New York, New York 10008-3908
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PORTFOLIO NAME AND ADDRESS PERCENT OWNED
- --------- ---------------- -------------
Warburg Pincus Gruntal Co. 11.30
Tax Free Fund FBO 995-10702-19
(Class D) 14 Wall Street
New York, New York 10005-2176
Gruntal Co. 10.20
FBO 995-16852-14
14 Wall Street
New York, New York 10005-2176
RBB Money Market Luanne M. Garvey and Robert J. 13.748
Portfolio Garvey
(Class E) 2729 Woodland Avenue
Trooper, PA 19403
PNC Bank, NA Custodian FBO 13.048
Harold T. Erfer
414 Charles Lane
Wynnewood, PA 19096
PNC Bank, NA Custodian FBO Karen 16.954
M. McElhinny and Contribution
Account
4943 King Arthur Drive
Erie, PA 16506
E.L. Haines Jr. and Betty J. 7.862
Haines
2341 Pinebluff Drive
Dallas, TX 75228
John Robert Estrada and 13.600
Shirley Ann Estrada
1700 Raton Drive
Arlington, TX 76018
Eric Levine and Linda & Howard 29.640
Levine
67 Lanes Pond Road
Howell, NJ 07731
RBB Municipal Money William B. Pettus Trust 12.614
Market Portfolio Augustine W. Pettus Trust
(Class F) 827 Winding Path Lane
St. Louis, MO 63021- 6635
Seymour Fein 87.385
P.O. Box 486
Tremont Post Office
Bronx, NY 10457- 0486
42
<PAGE>
PORTFOLIO NAME AND ADDRESS PERCENT OWNED
- --------- ---------------- -------------
Cash Preservation Money Jewish Family and Children's 54.415
Market Portfolio Agency of Philadelphia
(Class G) Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
Helen M. Ellenby 5.866
503 Falcon Lane
West Chester, PA 19382-5716
Lynda R. Succ Trustee for in Trust 11.363
under The Lynda R. Campbell Caring
Trust
935 Rutger Street
St. Louis, MO 63104
Cash Preservation Kenneth Farwell and Valerie 7.020
Municipal Money Market Farwell Jt. Ten
Portfolio 3854 Sullivan
(Class H) St. Louis, MO 63107
Larnie Johnson and Mary Alice 6.449
Johnson
4927 Lee Avenue
St. Louis, MO 63115-1726
Deborah C. Brown of Trustee 60.191
for Barbara J.C. Custis Trustee
The Crowe Trust
9921 West 128th Terrace
Overland Park, KS 66213
Sansom Street Money Wasner & Co. 14.119
Market Portfolio FAO Paine Webber and Managed
(Class I) Assets Sundry Holdings
Attn: Joe Domizio
200 Stevens Drive
Lester, PA 19113
Saxon and Co. 75.097
FBO Paine Webber
P.O. Box 7780 1888
Philadelphia, PA 19182
Robertson Stephens & Co. 10.432
FBO Exclusive Benefit Investors
555 California St./#2600
San Francisco, CA 94104
43
<PAGE>
PORTFOLIO NAME AND ADDRESS PERCENT OWNED
- --------- ---------------- -------------
Bedford New York Laurel Holding Co. 7.7
Municipal Money Market P.O. Box 2021
(Class O) Jamesport, NY 11947
BEA High Yield Portfolio Chase Manhattan Bankers Trustee 17.943
(Class U) for Kendale Company Master Pension
Plan
Attn: Mark Tesoriero
3 Metrotech Center
6th Floor
Brooklyn, NY 11245
Temple Inland Master Retirement 5.902
Trust
303 South Temple Drive
Diboll, TX 75941
State of Oregon 55.342
Treasury Department
159 State Capital Building
Salem, OR 97310
BEA Emerging Markets Wachovia Bank North Carolina Trust 8.571
Equity Portfolio for Carolina Power & Light Co.
(Class V) Supplemental Retirement Trust
301 N. Main Street
Winston-Salem, NC 27101
Northern Trust Company Trustee for 19.696
Texas Instruments Employee Plan
P.O. Box 92956
Chicago, IL 60675- 2956
Hall Family Foundation 19.836
P.O. Box 419580
Kansas City, MO 64208
Northern Trust 11.799
Trustee for Pillsbury
P.O. Box 92956
Chicago, IL 60675
Amherst H. Wilder Foundation 5.829
919 Lafond Avenue
St. Paul, MN 55104
BEA US Core Equity Bank of New York 61.989
Portfolio Trust APU Buckeye Pipeline
(Class X) One Wall Street
New York, NY 10286
44
<PAGE>
PORTFOLIO NAME AND ADDRESS PERCENT OWNED
- --------- ---------------- -------------
Werner & Pfleiderer Pension 11.181
Plan Employees
663 E. Crescent Avenue
Ramsey, NJ 07446
BEA Associates 10.151
FAO Profit Sharing Trust
153 E. 53rd Street
New York, NY 10022
BEA Associates 6.023
FAO Pension Trust
153 E. 53rd Street
New York, NY 10022
BEA US Core Fixed Income New England UFCW & Employers' 31.493
Portfolio Pension Fund Board of Trustees
(Class Y) 161 Forbes Road, Suite 201
Braintree, MA 02184
Bankers Trust 24.555
Trust Pechniney Corp. Pension
Master Trust
34 Exchange Place
4th Floor
Jersey City, NJ 07302
Kollmorgen Corporation 5.773
Pension Trust
1601 Thapelo Road
Waltham, MA 02154
Patterson & Co. 21.176
P.O. Box 7829
Philadelphia, PA 19102
BEA Global Fixed Income Sunkist Master Trust 64.337
Portfolio 14130 Riverside Drive
(Class Z) Sherman Oaks, CA 91423
Key Trust Co. of Ohio 35.661
FBO Eastern Enterp. Collective
Inv. Trust
P.O. Box 901536
Cleveland, OH 44202-1559
BEA Municipal Bond Fund William A. Marquard 29.461
Portfolio 2199 Maysville Rd.
(Class AA) Carlisle, KY 40311
45
<PAGE>
PORTFOLIO NAME AND ADDRESS PERCENT OWNED
- --------- ---------------- -------------
Arnold Leon 10.294
c/o Fiduciary Trust Company
P.O. Box 3199
Church Street Station
New York, NY 10008
Edgar E. Sharp 7.331
P.O. Box 8338
Longboat Key, FL 34228
John C. Cahill 13.513
c/o David Holmgren
30 White Birch Lane
Cots Cob, CT 06870
Irwin Bard 7.247
1750 North East 183rd St. North
Miami Beach, FL 33160
Warburg Pincus Growth & Connecticut General Life Ins. Co. 98.68
Income Series 2 on behalf of its separate accounts
(Class DD) 55E 55F 55G c/o Melissa Spencer
M110
CIGNA Corp. P.O. Box 2975
Hartford, CT 06104-2975
Warburg Pincus Balanced Warburg Pincus Counsellors Inc. 85.15
Fund Series 2 Attn: Stephen Distler
(Class EE) 466 Lexington Avenue
10th Floor
New York, New York 10017-3140
Janney Montgomery Scott Janney Montgomery Scott 100
Money Market 1801 Market Street
Portfolio Philadelphia, PA 19103-1675
(Class Alpha 1)
Janney Montgomery Scott Janney Montgomery Scott 100
Municipal Money Market 1801 Market Street
Portfolio Philadelphia, PA 19103-1675
(Class Alpha 2)
Janney Montgomery Scott Janney Montgomery Scott 100
Government Obligations 1801 Market Street
Money Market Philadelphia, PA 19103-1675
Portfolio
(Class Alpha 3)
46
<PAGE>
PORTFOLIO NAME AND ADDRESS PERCENT OWNED
- --------- ---------------- -------------
Janney Montgomery Scott Janney Montgomery Scott 100
New York Municipal Money 1801 Market Street
Market Portfolio Philadelphia, PA 19103-1675
(Class Alpha 4)
As of the above date, directors and officers as a group owned less than one
percent of the shares of RBB.
Litigation. There is currently no material litigation affecting RBB.
47
<PAGE>
<TABLE><CAPTION>
- -------------------------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF NET ASSETS
August 31, 1995
- -------------------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCKS AND WARRANTS (82.2%)
Aerospace (1.3%)
Allied-Signal, Inc. 325,000 $ 14,421,875
--------------
Agriculture Production Corporations (0.4%)
Terra Industries, Inc. 320,300 4,284,013
--------------
Air Conditioning & Heating (0.9%)
Management Systems Johnson Controls, Inc. 170,000 10,348,750
--------------
Automobiles (1.3%)
Navistar International** 1,130,000 14,690,000
--------------
Banking (3.2%)
First Interstate Bancorp 368,000 35,144,000
--------------
Chemicals (1.4%)
PPG Industries, Inc. 355,000 15,176,250
--------------
Construction (2.2%)
Stone & Webster, Inc. 655,000 24,235,000
--------------
Electronic Computers (6.2%)
GRC International, Inc.** 667,000 16,341,500
Honeywell, Inc. 655,000 28,656,250
International Business Machines Corp. 221,000 22,845,875
--------------
67,843,625
--------------
Electronics (1.2%)
Motorola, Inc. 175,000 13,081,250
--------------
Entertainment (3.8%)
Acclaim Entertainment, Inc.** 1,420,000 35,855,000
Boardwalk Casino, Inc.** 525,000 4,528,125
Boardwalk Casino, Inc. Warrants (expire 02/14/98)** 375,000 1,453,125
--------------
41,836,250
--------------
Financial Services (7.0%)
BankAmerica Corp. 655,000 37,007,500
Crestar Financial Corp. 270,000 15,221,250
Loyola Capital Corp. 247,500 8,662,500
Midlantic Corp. 302,000 15,553,000
--------------
76,444,250
--------------
Insurance (3.3%)
Chubb Corp. 150,000 13,687,500
USF&G Corp. 1,234,000 22,366,250
--------------
36,053,750
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
F-1
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- -------------------------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- -------------------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCKS AND WARRANTS (CONT'D)
Manufacturing (4.5%)
Corning Glass, Inc. 909,000 $ 29,656,125
Rauma OY Sponsored ADR** 102,900 2,443,875
Trinity Industries, Inc. 500,000 16,187,500
Whitman Corp. 50,000 1,006,250
--------------
49,293,750
--------------
Medical & Medical Services (1.9%)
Acuson Corp.** 210,000 2,756,250
Foxmeyer Health Corp.** 689,000 17,741,750
--------------
20,498,000
--------------
Metals & Mining (19.0%)
Echo Bay Mines Ltd. 500,000 5,187,500
Hecla Mining Co.** 1,940,000 22,310,000
Homestake Mining Co. 2,282,500 37,661,250
Inco Ltd. 985,000 34,475,000
Newmont Mining Corp. 903,000 39,280,500
Pegasus Gold, Inc.** 1,419,000 17,737,500
Placer Dome, Inc. 1,519,600 39,699,550
Prime Resources Group, Inc.** 1,400,000 11,210,360
--------------
207,561,660
--------------
Oil (1.0%)
Quaker State Corp. 715,000 10,725,000
--------------
</TABLE>
<TABLE>
<S> <C> <C>
Oil Services (4.4%)
Baker Hughes, Inc. 871,500 19,608,750
Halliburton Co. 521,000 22,077,375
Occidental Petroleum Corp. 280,000 6,090,000
--------------
47,776,125
--------------
Steel (13.0%)
AK Steel Holding Corp.** 454,000 14,471,250
Bethlehem Steel Corp.** 1,581,000 23,122,125
CBI Industries, Inc. 1,160,000 28,420,000
Inland Steel Industries, Inc. 585,000 16,014,375
LTV Corp.** 1,122,500 17,539,062
USX-US Steel Group 1,050,000 34,387,500
WHX Corp.** 623,000 7,865,376
--------------
141,819,688
--------------
Telecommunications (5.6%)
Airtouch Communications, Inc.** 363,400 11,810,500
Comcast Corp. Special Class A Non-Voting 1,000,000 21,375,000
Qualcomm, Inc.** 280,000 13,650,000
Tele-Communications, Inc. Class A** 800,000 14,800,000
--------------
61,635,500
--------------
</TABLE>
See Accompanying Notes to Financial Statements.
F-2
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- -------------------------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF NET ASSETS (CONCLUDED)
August 31, 1995
- -------------------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCKS AND WARRANTS (CONT'D)
Tire & Rubber (0.4%)
Cooper Tire & Rubber Co. 160,000 $ 4,160,000
--------------
Transportation (0.2%)
Consolidated Freightways, Inc. 100,000 2,587,500
--------------
TOTAL COMMON STOCKS AND WARRANTS (Cost $781,860,824) 899,616,236
--------------
</TABLE>
<TABLE>
<CAPTION>
MATURITY PAR (000)
-------- ---------
<S> <C> <C> <C>
UNITED STATES TREASURY OBLIGATIONS (2.7%)
U.S. Treasury Bills 5.40% (Cost $29,973,000) 09/07/95 $ 30,000 29,973,000
--------------
REPURCHASE AGREEMENTS (13.8%)
Greenwich Capital Markets Inc. 5.83% 09/01/95 151,138 151,138,000
(Agreement dated 08/31/95 to be repurchased at
$151,162,476, collateralized by $150,000,000 U.S.
Treasury Notes 7.50% due 01/31/97. Market value of
collateral is $154,312,500).
(Cost $151,138,000)
--------------
TOTAL INVESTMENTS AT VALUE (Cost $962,971,826*) (98.7%) 1,080,727,236
OTHER ASSETS IN EXCESS OF LIABILITIES (1.3%) 14,368,010
--------------
NET ASSETS (Applicable to 63,295,201 Common Shares and
3,472,875 Advisor Shares) (100.0%) $1,095,095,246
--------------
--------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
COMMON SHARE ($1,038,193,292 : 63,295,201) $16.40
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
ADVISOR SHARE ($56,901,954 : 3,472,875) $16.38
======
</TABLE>
* Cost for Federal income tax purposes at August 31, 1995, is $963,365,013. The
gross appreciation (depreciation) on a tax basis is as follows:
Gross Appreciation $126,262,394
Gross Depreciaton (8,900,171)
------------
Net Appreciation $117,362,223
------------
------------
** Non-income producing.
See Accompanying Notes to Financial Statements.
F-3
- --------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF OPERATIONS
For the Year Ended August 31, 1995
- -------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 10,389,100
Interest 11,731,546
------------
Total investment income 22,120,646
------------
EXPENSES:
Investment advisory fees 5,824,947
Administration fees 1,941,649
Distribution fees 71,233
Custodian fees 162,248
Transfer agent fees 1,060,279
Legal fees 63,384
Audit fees 55,268
Registration fees 264,509
Insurance expense 23,560
Printing expense 86,973
Other expenses 26,827
------------
Total expenses 9,580,877
------------
Net investment income 12,539,769
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investment transactions 41,087,749
Futures contracts (2,798,582)
------------
38,289,167
------------
Net change in unrealized appreciation of investments 96,772,046
------------
Net gain on investments and future contracts 135,061,213
------------
Net increase in net assets resulting from operations $147,600,982
------------
------------
See Accompanying Notes to Financial Statements.
F-4
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- --------------------------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
August 31, 1995 August 31, 1994
--------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 12,539,769 $ 572,031
Net gain on investments and future contracts 135,061,213 17,971,937
--------------- ---------------
Net increase in net assets resulting from operations 147,600,982 18,543,968
--------------- ---------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
Common shares ($.1824 and $.0785, respectively,
per share) (9,949,389) (572,031)
Advisor shares ($.0459 per share for 1995) (137,213) --
Distributions to shareholders from net realized capital
gains:
Common shares ($.1834 and $3.9751, respectively,
per share) (8,067,592) (10,054,939)
--------------- ---------------
Total distributions to shareholders (18,154,194) (10,626,970)
--------------- ---------------
Net capital share transactions 554,990,830 342,051,251
--------------- ---------------
Total increase in net assets 684,437,618 349,968,249
Net assets:
Beginning of year 410,657,628 60,689,379
--------------- ---------------
End of year $ 1,095,095,246 $ 410,657,628
--------------- ---------------
--------------- ---------------
</TABLE>
See Accompanying Notes to Financial Statements.
F-5
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS
August 31, 1995
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
COMMON STOCKS (60.1%)
U.S. COMMON STOCKS
Aerospace (0.2%)
Allied-Signal, Inc. 300 $ 13,313
-----------
Banking (2.5%)
Bank of Boston Corp. 2,200 96,800
First Interstate Bancorp 400 38,200
-----------
135,000
-----------
Business Services (1.2%)
Paging Network, Inc.** 1,600 63,200
-----------
Chemicals (0.2%)
PPG Industries, Inc. 300 12,825
-----------
Communications & Media (1.1%)
Infinity Broadcast Corp.** 1,600 57,400
-----------
Computer & Office Equipment (2.1%)
Shared Medical Systems Corp. 1,800 66,375
Synopsys, Inc.** 800 46,400
-----------
112,775
-----------
Construction (0.7%)
Stone & Webster, Inc. 1,000 37,000
-----------
Electronic Computers (7.4%)
Cabletron Systems, Inc.** 500 26,438
GRC International, Inc.** 2,100 51,450
Honeywell, Inc. 800 35,000
International Business Machines Corp. 300 31,013
Linear Technology Corp. 400 32,400
Netscape Communications Corp.** 1,500 74,250
Platinum Technology, Inc. 2,400 56,700
System Software Associates, Inc. 800 25,250
Xilinx, Inc.** 1,500 64,312
-----------
396,813
-----------
See Accompanying Notes to Financial Statements.
F-6
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
COMMON STOCKS (CONT'D)
Electronics (1.5%)
Motorola, Inc. 200 $ 14,950
Thermospectra Corp.** 3,500 62,563
-----------
77,513
-----------
Entertainment (1.2%)
Acclaim Entertainment, Inc.** 1,500 37,875
Boardwalk Casino, Inc.** 3,000 25,875
-----------
63,750
-----------
Financial Services (5.2%)
BankAmerica Corp. 700 39,550
Citicorp Bank 800 53,100
Crestar Financial Corp. 500 28,188
Midlantic Corp. 300 15,450
Olympic Financial Ltd.** 3,300 75,488
United Companies Financial Corp. 1,100 68,475
-----------
280,251
-----------
Insurance (1.0%)
Chubb Corp. 300 27,375
USF&G Corp. 1,300 23,563
-----------
50,938
-----------
Manufacturing (3.8%)
Allied Products Corp. 1,500 32,438
Corning Glass, Inc. 800 26,100
Maxim Integrated Products, Inc. 1,000 76,250
Roper Industries, Inc. 1,500 51,000
Trinity Industries, Inc. 500 16,188
-----------
201,976
-----------
Medical & Medical Services (1.0%)
Foxmeyer Health Corp.** 2,000 51,500
-----------
See Accompanying Notes to Financial Statements.
F-7
- ------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
COMMON STOCKS (CONT'D)
Metals & Mining (5.3%)
Coeur D'Alene Mines Corp. 2,100 $ 40,163
Hecla Mining Co.** 3,000 34,500
Homestake Mining Co. 2,100 34,650
Inco LTD. 1,000 35,000
Newmont Mining Corp. 1,000 43,500
Pegasus Gold, Inc.** 2,500 31,250
Placer Dome, Inc. 1,500 39,188
Prime Resources Group, Inc.** 3,000 24,022
-----------
282,273
-----------
Office Furniture (1.3%)
Viking Office Products, Inc.** 1,900 68,400
-----------
Oil (3.4%)
Barrett Resources Corp.** 2,500 53,750
Petroleum Geo Services** 2,500 64,063
Quaker State Corp. 500 7,500
Texas Meridian Resources Corp.** 5,000 55,000
-----------
180,313
-----------
Oil Services (0.8%)
Baker Hughes, Inc. 1,000 22,500
Halliburton Co. 500 21,188
-----------
43,688
-----------
Paper Mills (0.8%)
Champion International Corp. 800 45,300
-----------
Pharmaceuticals (1.8%)
Al Laboratories, Inc. Class A 2,000 42,000
Gilead Sciences, Inc.** 2,500 54,375
-----------
96,375
-----------
Retail--Retail Stores (1.1%)
Borders Group, Inc.** 3,000 60,750
-----------
Retail--Women's Clothing Stores (1.0%)
Talbots, Inc. 1,500 51,750
-----------
See Accompanying Notes to Financial Statements.
F-8
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- ---------------------------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- ---------------------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
<S> <C> <C>
COMMON STOCKS (CONT'D)
Steel (3.0%)
Bethlehem Steel Corp.** 2,000 $ 29,250
CBI Industries, Inc. 1,000 24,500
LTV Corp. 1,500 23,438
Republic Engineered Steels** 3,000 20,625
USX-US Steel Group 1,300 42,575
WHX Corp.** 1,600 20,200
-----------
160,588
-----------
Telecommunications (3.2%)
Airtouch Communications, Inc.** 300 9,750
Comcast Corp. Special Class A Non-Voting 1,000 21,375
Mobile Telecommunications Technologies Corp.** 1,900 58,425
Qualcomm, Inc.** 300 14,625
Tele-Communications, Inc. Series A Liberty Media Group** 2,000 53,125
Tele-Communications, Inc. Class A** 800 14,800
-----------
172,100
-----------
Textiles (0.6%)
Westpoint Stevens, Inc.** 1,500 33,562
-----------
FOREIGN COMMON STOCKS
Australia (0.4%)
BTR Nylex Limited 8,500 22,610
-----------
Austria (0.7%)
Va Technologie AG 330 36,446
-----------
Denmark (1.0%)
International Service System B 1,900 51,716
-----------
France (0.8%)
Bouygues 240 29,196
Compagnie Francaise de Petroleum Total 280 16,443
-----------
45,639
-----------
Hong Kong (0.6%)
Jardine Matheson Holdings LTD. 4,400 31,680
-----------
</TABLE>
See Accompanying Notes to Financial Statements.
F-9
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- ---------------------------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- ---------------------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----
COMMON STOCKS (CONT'D)
<S> <C> <C>
Israel (0.4%)
Clal Electronics Industries LTD.** 180 $ 21,505
-----------
Japan (1.9%)
Keyence Corp. 800 102,301
-----------
Malaysia (0.5%)
Westmont B. 6,000 25,496
-----------
Sweden (0.6%)
Astra B Free 960 31,180
-----------
United Kingdom (1.8%)
Central European Media Enterprises LTD.** ADR 2,700 67,837
Takare PLC 8,200 26,715
-----------
94,552
-----------
TOTAL COMMON STOCKS (Cost $2,772,251) 3,212,478
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
-------- ----- -----
<S> <C> <C> <C>
AGENCY OBLIGATIONS (0.2%)
Government National Mortgage Association 6.50% (Cost $12,661) 08/15/03 $ 13 $ 12,858
----------
UNITED STATES TREASURY OBLIGATIONS (26.4%)
U.S. Treasury Notes
5.875% 05/31/96 300 300,390
6.875% 10/31/96 200 202,572
8.125% 02/15/98 20 21,007
8.50% 11/15/00 800 885,536
----------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $1,384,454) 1,409,505
----------
</TABLE>
See Accompanying Notes to Financial Statements.
F-10
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- -------------------------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- -------------------------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ----- -----
<S> <C> <C> <C>
REPURCHASE AGREEMENTS (8.8%)
State Street Bank & Trust Co. 5.78% 09/01/95 468 $ 468,000
(Agreement dated 08/31/95 to be repurchased at $468,081,
collateralized by $480,000 U.S Treasury Notes 6.25% due
08/31/96. Market value of collateral is $481,800.) (Cost
$468,000)
----------
TOTAL INVESTMENTS AT VALUE (Cost $4,637,366*) (95.5%) 5,102,841
OTHER ASSETS IN EXCESS OF LIABILITIES (4.5%) 239,008
----------
NET ASSETS (Applicable to 480,061 Common Shares and 110 Advisor Shares)
(100.0%) $5,341,849
----------
----------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
COMMON SHARE ($5,340,625 : 480,061) $11.12
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
ADVISOR SHARE ($1,224 : 110) $11.13
======
</TABLE>
* Cost for Federal income tax purposes at August 31, 1995 is $4,641,506. The
gross appreciation (depreciation) on a tax basis is as follows:
Gross Appreciation $487,617
Gross Depreciation (26,282)
---------
Net Appreciation $461,335
---------
---------
** Non-income producing.
See Accompanying Notes to Financial Statements.
F-11
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF OPERATIONS
For the Year Ended August 31, 1995
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 52,298
Dividends 11,828
Foreign taxes withheld (202)
--------
Total investment income 63,924
--------
EXPENSES:
Investment advisory fees 14,729
Administration fees 3,991
Distribution fees 4,155
Custodian fees 21,198
Transfer agent fees 27,158
Registration fees 15,075
Printing expense 10,393
Other expenses 4,330
--------
101,029
Less fees waived (17,123)
Less expense reimbursement by advisor (58,364)
--------
Total expenses 25,542
--------
Net investment income 38,382
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investment transactions 115,816
Foreign currency related transactions (679)
--------
115,137
--------
Net change in unrealized appreciation (depreciation) on:
Investments 380,862
Foreign currency related transactions (7)
--------
380,855
--------
Net gain on investments and foreign currency transactions 495,992
--------
Net increase in net assets resulting from operations $534,374
========
See Accompanying Notes to Financial Statements.
F-12
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- -----------------------------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
August 31, 1995 August 31, 1994
--------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 38,382 $ 29,100
Net gain on investments 495,992 23,057
--------------- ---------------
Net increase in net assets resulting from operations 534,374 52,157
--------------- ---------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
Common shares ($.3136 and $.4586, respectively, per share) (38,909) (31,049)
Distributions to shareholders from net realized capital gains:
Common shares ($1.5069 and $.9794, respectively, per share) (111,945) (63,790)
--------------- ---------------
Total distributions to shareholders (150,854) (94,839)
--------------- ---------------
Net capital share transactions 4,150,301 88,893
--------------- ---------------
Total increase in net assets 4,533,821 46,211
Net Assets:
Beginning of year 808,028 761,817
--------------- ---------------
End of year $ 5,341,849 $ 808,028
=============== ===============
</TABLE>
See Accompanying Notes to Financial Statements.
F-13
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- ----------------------------------------------------------------------------------------------------
WARBURG PINCUS TAX FREE FUND
STATEMENT OF NET ASSETS
August 31, 1995
- ----------------------------------------------------------------------------------------------------
PAR
RATE MATURITY (000) VALUE
----- -------- ----- ----------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (97.9%)
Arizona (2.5%)
Phoenix GO Bond (Aa, AA+) 6.375% 07/01/13 $ 100 $ 104,375
----------
California (2.4%)
Palm Springs Community Redevelopment Agency Certificates
VRDN + (AA-, A-1+) 3.70 09/06/95 100 100,000
----------
Georgia (10.0%)
Georgia Municipal Electric Authority/(FGIC Insurance)
(Aaa, AAA) 6.125 01/01/14 200 204,750
Gwinnett County GO Bonds (Aa1, AA) 6.00 01/01/10 200 210,000
----------
414,750
----------
Kansas (4.9%)
Kansas Department of Transportation Series A (Aa, AA) 6.00 09/01/12 200 202,500
----------
Kentucky (8.0%)
Jefferson County PCR RB (Louisville Gas and Electric
Co.) Project A (Aa2, AA) 7.45 06/15/15 300 329,625
----------
Maryland (27.4%)
Baltimore Maryland Consolidated Public Improvement MB
Series 1991C (Aaa, AAA) 7.50 10/15/09 400 485,500
Baltimore Maryland Port Facility RB Consolidated Coal
Sales Series 1984A (Aa2, AA) 6.50 10/01/11 300 321,000
Montgomery County Parking RB (Silver Spring Group)/
(FGIC Insurance) (Aaa, AAA) 6.25 06/01/07 300 322,500
----------
1,129,000
----------
Massachusetts (5.3%)
Massachusetts Bay Transportation Authority (General
Transportation Systems) Series A (A1, A+) 6.25 03/01/05 200 219,500
----------
Michigan (4.9%)
Michigan Underground Storage Tank Financial Assurance
Authority 1995 Revenue Bonds Series I VDRN (Canadian
Imperial Bank LOC)+ (P-1, A-1+) 3.60 09/06/95 200 200,000
----------
New Jersey (10.6%)
New Jersey State Turnpike Authority RB Refunding Series
1991 (MBIA Insurance) (Aaa, AAA) 6.50 01/01/16 400 439,000
----------
North Carolina (5.0%)
North Carolina Municipal Power Agency (Catawba Electric)
RB/(MBIA Insurance) (Aaa, AAA) 6.00 01/01/10 200 207,750
----------
</TABLE>
See Accompanying Notes to Financial Statements.
F-14
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- --------------------------------------------------------------------------------------------------------
WARBURG PINCUS TAX FREE FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------------------------------
PAR
RATE MATURITY (000) VALUE
----- -------- ----- ----------
<S> <C> <C> <C> <C>
MUNICIPAL BONDS (CONT'D)
Pennsylvania (5.2%)
Philadelphia Water & Waste Water Revenue Bonds (Aaa, AAA) 6.25% 08/01/09 $ 200 $ 214,250
----------
Puerto Rico (5.3%)
Puerto Rico Electric Power Authority Power Revenue Bonds
Series W (Aaa, AAA) 6.00 07/01/03 200 217,000
----------
South Carolina (5.1%)
Spartanburg Water Systems Improvement RB (A1, AA-) 6.20 06/01/09 200 208,500
----------
Utah (1.3%)
Intermountain Power Agency (Utah Power Supply) RB Series B
(Aa, AA) 7.625 07/01/08 50 54,375
----------
TOTAL INVESTMENTS AT VALUE (Cost $3,799,912*) (97.9%) 4,040,625
OTHER ASSETS IN EXCESS OF LIABILITIES 2.1% 86,488
----------
NET ASSETS (Applicable to 396,470 Shares) 100.0% $4,127,113
==========
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE ($4,127,113 : 396,470) $10.41
==========
</TABLE>
+ Variable Rate Demand Notes--The interest rate shown is the rate as of August
31, 1995 and the maturity date shown is the longer of the next interest
readjustment date or the date the principal amount can be recovered through
demand.
* Also cost for Federal income tax purposes. The gross appreciation
(depreciation) on a tax basis is as follows:
Gross and Net Appreciation $240,713
========
The Moody's Investors Service, Inc. and Standard & Poor's Ratings Group's
ratings indicated are the most recent ratings available at August 31,1995. These
ratings have not been audited by the Independent Accountants and, therefore, are
not covered by the Report of Independent Accountants.
INVESTMENT ABBREVIATIONS
VRDN....................................... Variable Rate Demand Note
GO......................................... General Obligations
LOC........................................ Letter of Credit
MB......................................... Municipal Bond
PCR........................................ Pollution Control Revenue
RB......................................... Revenue Bond
See Accompanying Notes to Financial Statements.
F-15
<PAGE>
- ------------------------------------------------------------------------------
WARBURG PINCUS TAX FREE FUND
STATEMENT OF OPERATIONS
For the Year Ended August 31, 1995
- ------------------------------------------------------------------------------
INVESTMENT INCOME
Interest $274,436
--------
EXPENSES
Investment advisory fees 22,949
Administration fees 5,051
Distribution fees 14,565
Custodian fees 12,615
Transfer agent fees 17,862
Registration fees 11,966
Printing expense 8,636
Other expenses 2,961
--------
96,605
Less fees waived (32,249)
Less expense reimbursement by advisor (42,354)
--------
Total expenses 22,002
--------
Net investment income 252,434
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Amortized market discount 1,429
Net realized loss on investments (53,450)
Net change in unrealized appreciation of investments 159,794
--------
Net gain on investments 107,773
--------
Net increase in net assets resulting from operations $360,207
========
See Accompanying Notes to Financial Statements.
F-16
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- -----------------------------------------------------------------------------------------------------
WARBURG PINCUS TAX FREE FUND
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------
FOR THE FOR THE
YEAR ENDED YEAR ENDED
AUGUST 31, 1995 AUGUST 31, 1994
--------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 252,434 $ 328,396
Net gain (loss) on investments 107,773 (334,661)
--------------- ---------------
Net increase (decrease) in net assets resulting from
operations 360,207 (6,265)
--------------- ---------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
Common shares ($.5426 and $.6092, respectively,
per share) (252,796) (332,187)
Distributions to shareholders in excess of net investment
income ($.0135 per share for 1994) -- (7,110)
Distributions to shareholders from net realized capital gains:
Common shares ($.2977 and $.4886, respectively, per share) (137,718) (276,466)
--------------- ---------------
Total distributions to shareholders (390,514) (615,763)
--------------- ---------------
Net capital share transactions (1,307,539) (544,098)
--------------- ---------------
Total decrease in net assets (1,337,846) (1,166,126)
Net Assets:
Beginning of year 5,464,959 6,631,085
--------------- ---------------
End of year $ 4,127,113 $ 5,464,959
=============== ===============
</TABLE>
See Accompanying Notes to Financial Statements.
F-17
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- -------------------------------------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
FINANCIAL HIGHLIGHTS (B)
(For a Share Outstanding Throughout Each Year)
- -------------------------------------------------------------------------------------------------------------
For the Years Ended August 31,
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
NET ASSET VALUE, BEGINNING OF YEAR $14.56 $16.72 $11.99 $12.11 $11.00
------ ------ ------ ------ ------
Income From Investment Operations:
Net Investment Income 0.2224 0.0785 0.0464 0.1912 0.3744
Net Gains on Securities (both
realized and unrealized) 1.9834 1.8151 4.8499 0.0402 1.6891
------ ------ ------ ------ ------
Total from Investment Operations 2.2058 1.8936 4.8963 0.2314 2.0635
------ ------ ------ ------ ------
Less Distributions:
Dividends (from net investment income) (0.1824) (0.0785) (0.0875) (0.1871) (0.4043)
Distributions (from capital gains) (0.1834) (3.9751) (0.0788) (0.1643) (0.5492)
-------- -------- -------- -------- --------
Total Distributions (0.3658) (4.0536) (0.1663) (0.3514) (0.9535)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $16.40 $14.56 $16.72 $11.99 $12.11
====== ====== ====== ====== ======
Total Return 15.62% 14.41% 41.17% 1.99% 19.91%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (000) $1,038,193 $410,658 $60,689 $28,976 $24,726
Ratios of Expenses to Average Net Assets 1.22% 1.28%(a) 1.14%(a) 1.25%(a) 1.30%(a)
Ratios of Net Investment Income to
Average Net Assets 1.64% 0.41% 0.30% 1.66% 3.42%
Portfolio Turnover Rate 109% 150% 344% 175% 41%
</TABLE>
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Warburg Pincus Growth & Income Fund would have
been 1.28%, 1.14%, 1.28% and 2.17% for the years ended August 31, 1994,
1993, 1992 and 1991, respectively.
(b) Financial Highlights relate solely to the Common Class of shares with the
Fund.
See Accompanying Notes to Financial Statements.
TAX STATUS OF 1995 DIVIDENDS (Unaudited)
Dividends paid by the Fund taxable as ordinary income amounted to $0.3658
per share; 49.48% of ordinary income dividends qualify for the dividends
received deduction available to corporate shareholders for U.S. income tax
purposes.
Because the Fund's fiscal year is not the calendar year, amounts to be used
by calendar year taxpayers on their Federal return will be reflected on Form
1099-DIV and will be mailed in January 1996.
F-18
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- ------------------------------------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
FINANCIAL HIGHLIGHTS (B)
(For a Share Outstanding Throughout Each Year)
- ------------------------------------------------------------------------------------------------------------
For the Years Ended August 31,
---------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $11.01 $11.71 $12.04 $12.05 $10.60
------ ------ ------ ------ ------
Income From Investment Operations:
Net Investment Income 0.2080 0.4132 0.5555 0.4408 0.4213
Net Gains on Securities (both realized
and unrealized) 1.7225 0.3248 1.1253 0.5155 1.7196
------ ------ ------ ------ ------
Total from Investment Operations 1.9305 0.7380 1.6808 0.9563 2.1409
------ ------ ------ ------ ------
Less Distributions:
Dividends (from net investment income) (0.3136) (0.4586) (0.5412) (0.3713) (0.4128)
Distributions (from capital gains) (1.5069) (0.9794) (1.4696) (0.5950) (0.2781)
-------- -------- -------- -------- --------
Total Distributions (1.8205) (1.4380) (2.0108) (0.9663) (0.6909)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $11.12 $11.01 $11.71 $12.04 $12.05
====== ====== ====== ====== ======
Total Return 21.56% 6.86% 15.27% 8.07% 21.18%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (000) $5,342 $808 $762 $1,026 $1,290
Ratios of Expenses to Average Net Assets 1.53%(a) 0%(a) 0%(a) .67%(a) 1.40%(a)
Ratios of Net Investment Income to
Average Net Assets 2.27% 3.76% 4.13% 3.68% 3.58%
Portfolio Turnover Rate 107% 32% 30% 93% 76%
</TABLE>
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Warburg Pincus Balanced Fund would have been
6.04%, 5.46%, 5.37%, 3.88% and 3.89% for the years ended August 31, 1995,
1994, 1993, 1992 and 1991, respectively.
(b) Financial Highlights relate solely to the Common Class of shares with the
Fund.
See Accompanying Notes to Financial Statements.
TAX STATUS OF 1995 DIVIDENDS (Unaudited)
Dividends paid by the Fund taxable as ordinary income amounted to $0.4755
per share; 18.60% of ordinary income dividends qualify for the dividend received
deduction available to corporate shareholders for U.S. income tax purposes.
Long-term capital gain dividends amounted to $1.3450 per share.
Because the Fund's fiscal year is not the calendar year, amounts to be used
by calendar year taxpayers on their Federal return will be reflected on Form
1099-DIV and will be mailed in January 1996.
F-19
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- ------------------------------------------------------------------------------------------------------------
WARBURG PINCUS TAX FREE FUND
FINANCIAL HIGHLIGHTS
(For a Share Outstanding Throughout Each Year)
- ------------------------------------------------------------------------------------------------------------
For the Years Ended August 31,
---------------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $10.40 $11.53 $11.04 $10.46 $10.05
------ ------ ------ ------ ------
Income From Investment Operations:
Net Investment Income 0.5426 0.6026 0.6385 0.6771 0.6027
Net Gains (Losses) on Securities (both
realized and unrealized) 0.3077 (0.6259) 0.8654 0.6145 0.4402
------ -------- ------ ------ ------
Total from Investment Operations 0.8503 (0.0233) 1.5039 1.2916 1.0429
------ -------- ------ ------ ------
Less Distributions:
Dividends (from net investment income) (0.5426) (0.6092) (0.6725) (0.6345) (0.6212)
Distributions (in excess of net
investment income) -- (0.0135) -- -- --
Distributions (from capital gains) (0.2979) (0.4886) (0.3414) (0.0771) (0.0117)
-------- -------- -------- -------- --------
Total Distributions (0.8403) (1.1113) (1.0139) (0.7116) (0.6329)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR $10.41 $10.40 $11.53 $11.04 $10.46
====== ====== ====== ====== ======
Total Return 8.89% (0.30%) 14.45% 12.77% 10.66%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (000) $4,127 $5,465 $6,631 $6,491 $8,840
Ratios of Expenses to Average Net Assets .48%(a) .15%(a) .17%(a) .33%(a) .83%(a)
Ratios of Net Investment Income to
Average Net Assets 5.53% 5.51% 5.71% 6.21% 6.02%
Portfolio Turnover Rate 38% 20% 70% 78% 63%
</TABLE>
(a) Without the waiver of advisory, administration and custody fees and without
the reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Warburg Pincus Tax Free Fund would have been
2.12%, 1.84%, 1.76%, 1.61% and 3.06% for the years ended August 31, 1995,
1994, 1993, 1992 and 1991, respectively.
See Accompanying Notes to Financial Statements.
TAX STATUS OF 1995 DIVIDENDS (Unaudited)
Long term capital gain dividends amounted to $0.2979 per share.
Because the Fund's fiscal year is not the calendar year, amounts to be used
by calendar year taxpayers on their Federal return will be reflected on Form
1099-DIV and will be mailed in January 1996.
F-20
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS
August 31, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The RBB Fund, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Company was incorporated in Maryland on February 29, 1988, and currently has
seventeen investment Portfolios, three of which are included in these financial
statements.
The Company has authorized capital of thirty billion shares of common stock
of which 12.2 billion are currently classified into sixty-one classes. Each
class represents an interest in one of seventeen investment portfolios of the
Company, fifteen of which are currently in operation. The classes have been
grouped into fifteen separate "families", eight of which have begun investment
operations including the Warburg Pincus Family. The Warburg Pincus Family is
comprised of Warburg Pincus Growth & Income Fund (the "Growth & Income Fund"),
Warburg Pincus Balanced Fund (the "Balanced Fund") and Warburg Pincus Tax Free
Fund (the "Tax Free Fund"), which are covered in this report. The Growth &
Income Fund and the Balanced Fund each have two classes of shares: Common Class
and Advisor Class.
The net asset value of each Fund is determined daily as of the close of
regular trading on the New York Stock Exchange. Each Fund's securities are
valued at market value, which is currently determined using the last reported
sales price. If no sales are reported, as in the case of some securities traded
over-the-counter, portfolio securities are valued at the mean between the last
reported bid and asked prices. Corporate bonds, tax-exempt bonds and notes and
government securities are valued on the basis of quotations provided by an
independent pricing service which uses information with respect to transactions
on bonds, quotations from bond dealers, market transactions in comparable
securities and various relationships between securities in determining value.
Short-term obligations with maturities of 60 days or less are valued at
amortized cost which approximates market value.
Security transactions are accounted for on the trade date. The cost of
investments sold is determined by use of the specific identification method for
both financial reporting and income tax purposes. Interest income is recorded on
the accrual basis. Dividends are recorded on the ex-dividend date. Certain
expenses, principally distribution, transfer agent and printing, are class
specific expenses and vary by class. Expenses not directly attributable to a
specific portfolio or class are allocated based on relative net assets of each
Portfolio and class, respectively.
For the Growth & Income and the Balanced Funds, dividends from net
investment income, if any, are declared and paid at least quarterly. For the Tax
Free Fund, dividends from net investment income, if any, are declared daily and
paid monthly. For all Funds, any net realized capital gains will be distributed
at least annually. Income distributions and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principals.
F-21
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
No provision is made for Federal taxes as it is the Company's intention to
have each portfolio continue to qualify for and elect the tax treatment
applicable to regulated investment companies under the Internal Revenue Code and
make the requisite distributions to its shareholders which will be sufficient to
relieve it from Federal income and excise taxes.
Money market instruments may be purchased subject to the seller's agreement
to repurchase them at an agreed upon date and price. The seller will be required
on a daily basis to maintain the value of the securities subject to the
agreement at not less than the repurchase price. The agreements are conditioned
upon the collateral being deposited under the Federal Reserve book-entry system
or with the Fund's custodian or a third party sub-custodian.
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR
Warburg, Pincus Counsellors, Inc. ("Counsellors"), a wholly owned subsidiary
of Warburg, Pincus Counsellors G.P. ("Counsellors G.P.") serves as investment
advisor for the Growth & Income Fund. The advisory fee is computed daily and
payable monthly at the annual rate of .75% of the Growth & Income Fund's average
daily net assets.
Pursuant to a vote on September 30, 1994, shareholders approved a new
advisory contract between the Balanced Fund and Counsellors. Under the new
agreement, the Balanced Fund pays Counsellors an advisory fee at an annual rate
of .90% of the Fund's average daily net assets. The prior advisory agreement
between the Fund and PNC Institutional Management Corp. ("PIMC") was terminated
as of that date.
Pursuant to a vote on March 31, 1995, shareholders approved a new advisory
contract between Tax Free Fund and Counsellors. Under the new agreement, Tax
Free Fund pays Counsellors an advisory fee at an annual rate of .50% of the Fund
s average daily net assets. The prior agreement between the Fund and PIMC was
terminated as of that date.
Counsellors may, at its discretion, voluntarily waive all or any portion of
its advisory fees for any of the Funds. For the year ended August 31, 1995,
investment advisory fees and waivers were as follows:
GROSS NET
ADVISORY FEE WAIVER ADVISORY FEE
------------ ------- ------------
Growth & Income Fund $ 5,824,947 $ -- $ 5,824,947
Balanced Fund 14,729 (14,729) --
Tax Free Fund 22,949 (22,949) --
PFPC Inc. ("PFPC"), an indirect wholly owned subsidiary of PNC Bank Corp.,
and Counsellors Fund Services, Inc. ("CFSI"), a wholly owned subsidiary of
Counsellors, serve as co-administrators for each of the Funds. For the Growth &
Income Fund, the co-administration fees are computed daily and payable monthly
at an annual rate of .20% of the first $125 million of average daily net assets
and .15%
F-22
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
of average daily net assets in excess of $125 million for PFPC and .05% of the
first $125 million of average daily net assets and .10% of average daily net
assets in excess of $125 million for CFSI.
For the Balanced and Tax Free Funds, the co-administration fees are computed
daily and payable monthly at an annual rate of .15% of average daily net assets
for PFPC and .10% of average daily net assets for CFSI.
CFSI and PFPC may, at their discretion, voluntarily waive all or any portion
of their co-administration fees for any of the Funds. For the year ended August
31, 1995, CFSI and PFPC's co-administration fees and waivers were as follows:
<TABLE><CAPTION>
GROSS NET
CO-ADMINISTRATION FEES WAIVERS CO-ADMINISTRATION FEES
---------------------- ------- ----------------------
<S> <C> <C> <C>
Growth & Income Fund $1,941,649 $ -- $1,941,649
Balanced Fund 3,991 (2,394) 1,597
Tax Free Fund 5,051 (3,239) 1,812
</TABLE>
The Company, on behalf of each class of shares within the investment
portfolios, has adopted Distribution Plans pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, and has entered into Distribution
Contracts with Counsellors Securities Inc. ("CSI"), also a wholly owned
subsidiary of Counsellors, which provide for each class to make monthly
payments, based on average daily net assets, to CSI. No compensation is payable
by the Growth & Income Fund's Common Shares. For distribution services with
respect to the Balanced and the Tax Free Funds' Common Shares, CSI receives a
fee at the annual rate of .25%, computed daily and payable monthly, on average
daily net assets. For distribution services with respect to the Growth & Income
and the Balanced Funds' Advisor Shares, CSI receives a fee of .25% and .50%,
respectively, computed daily and payable monthly, on average daily net assets.
For the year ended August 31, 1995, distribution fees were as follows:
DISTRIBUTION FEES
-----------------
Growth & Income Fund
Advisor Shares $71,233
=======
Balanced Fund
Common Shares $ 4,155
Advisor Shares --
-------
$ 4,155
=======
Tax Free Fund
Common Shares $14,565
=======
F-23
- -----------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- -----------------------------------------------------------------------------
3. INVESTMENT IN SECURITIES
For the year ended August 31, 1995, purchases and sales of investment
securities (other than short-term investments) were as follows:
INVESTMENT SECURITIES
------------------------------
PURCHASES SALES
-------------- ------------
Growth & Income Fund $1,108,363,903 $617,767,292
Balanced Fund 5,047,134 1,602,287
Tax Free Fund 1,669,358 3,357,298
4. CAPITAL SHARES
Transactions in capital shares for each year were as follows:
<TABLE><CAPTION>
GROWTH & INCOME FUND BALANCED FUND
-------------------------------------------------------- ------------------------------------------------------
For the Year Ended For the Year Ended For the Year Ended For the Year Ended
August 31, 1995 August 31, 1994 August 31, 1995 August 31, 1994
--------------------------- -------------------------- --------------------------- ------------------------
Shares Value Shares Value Shares Value Shares Value
----------- ------------- ----------- ------------ ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold
Common Shares 46,345,660 $ 670,088,619 29,256,806 $410,956,025 423,875 $ 4,348,625 609 $ 6,495
Advisor Shares 3,521,620 52,908,038 -- -- 110 1,180 -- --
Shares issued in
reinvestment of
dividends
Common Shares 6,891 96,291 67,788 894,152 16,171 148,491 8,690 93,303
Advisor Shares 9,051 137,213 -- -- -- -- -- --
Shares repurchased
Common Shares (11,270,725) (167,348,709) (4,741,678) (69,798,926) (33,364) (347,995) (982) (10,905)
Advisor Shares (57,795) (890,622) -- -- -- -- -- --
----------- ------------- ----------- ------------ ----------- ------------- ----------- -----------
Net increase 38,554,702 $ 554,990,830 24,582,916 $342,051,251 406,792 $ 4,150,301 8,317 88,893
=========== ============= =========== ============ =========== ============= =========== ===========
Common Shares
authorized 100,000,000 100,000,000 100,000,000 100,000,000
=========== =========== =========== ===========
</TABLE>
F-24
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- ------------------------------------------------------------------------------------------------
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- ------------------------------------------------------------------------------------------------
TAX FREE FUND
--------------------------------------------------------
For the Year Ended For the Year Ended
August 31, 1995 August 31, 1994
-------------------------- --------------------------
Shares Value Shares Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Shares sold:
Common Shares 16,896 $ 172,004 4,183 $ 47,154
Shares issued in reinvestment
of dividends:
Common Shares 24,384 240,772 37,807 414,727
Shares repurchased:
Common Shares (170,342) (1,720,315) (91,398) (1,005,979)
----------- ----------- ----------- -----------
Net decrease (129,062) $(1,307,539) (49,408) $ (544,098)
=========== =========== =========== ===========
Common Shares authorized 100,000,000 100,000,000
=========== ===========
</TABLE>
5. NET ASSETS
At August 31, 1995, net assets consisted of the following:
<TABLE><CAPTION>
GROWTH & INCOME FUND BALANCED FUND TAX FREE FUND
-------------------- -------------- -------------
<S> <C> <C> <C>
Capital paid-in $ 943,960,297 $4,808,416 $ 3,935,026
Undistributed net
investment income (loss) 2,453,167 7,138 --
Amortized market discount -- -- 4,824
Accumulated net realized gain (loss) on
investments transactions, futures
contracts and foreign exchange
transactions 30,926,372 60,835 (53,450)
Unrealized appreciation on investments 117,755,410 465,460 240,713
--------------- -------------- -------------
$1,095,095,246 $5,341,849 $ 4,127,113
=============== ============== =============
</TABLE>
6. FUTURES CONTRACTS
The Growth & Income Fund may enter into futures contracts for hedging or
portfolio management strategy purposes to the extent permitted by its investment
policies and objectives. To enter into a futures contract, the Growth & Income
Fund must make a deposit of an initial margin with its custodian in a segregated
account. Subsequent payments, which are dependent on the daily fluctuations in
the value of the underlying instrument, are made or received by the Fund each
day (daily variation margin) and are recorded as unrealized gains or losses
until the contracts are closed. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the proceeds from (or
F-25
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
cost of) the closing transactions and the Fund's basis in the contract. Risks of
entering into futures contracts include the possibility that a change in the
value of the contract may not correlate with the changes in the value of the
underlying instruments. The Growth & Income Fund entered into futures
transactions during the year ended August 31, 1995. However, the Growth & Income
Fund had no futures contracts open at August 31, 1995.
7. CAPITAL LOSS CARRYOVER
At August 31, 1995, $53,450 capital loss carryover in the Tax Free Fund was
available to offset future realized gains which expires in 2003.
8. OTHER FINANCIAL HIGHLIGHTS
The Growth & Income and the Balanced Funds currently offer one other class
of shares, Advisor Shares, representing an additional interest in each of the
Funds. The financial highlights of each of the Advisor shares are as follows:
F-26
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- ---------------------------------------------------------------------------------------------------------
WARBURG PINCUS FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- ---------------------------------------------------------------------------------------------------------
ADVISOR SHARES
--------------------------------------
GROWTH & INCOME BALANCED
FUND FUND
----------------- -----------------
FOR THE PERIOD FOR THE PERIOD
MAY 15, 1995 JULY 31, 1995
(COMMENCEMENT (COMMENCEMENT
OF OPERATIONS) TO OF OPERATIONS) TO
AUGUST 31, 1995 AUGUST 31, 1995
----------------- -----------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 14.87 $ 10.72
------- ------
Income From Investment Operations:
Net Investment Income 0.0236 0.0170
Net Gains (Losses) on Securities (both realized and unrealized) 1.5323 0.3930
------- ------
Total from Investment Operations 1.5559 0.4100
------- ------
Less Distributions
Dividends (from net investment income) (0.0459) 0.0000
------- ------
Total Distributions (0.0459) 0.0000
------- ------
NET ASSET VALUE, END OF PERIOD $ 16.38 $11.13
======= ======
Total Returns 10.49%(c) 3.82%(c)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $56,902 $ 1
Ratios of Expenses to Average Net Assets 1.92%(b) 1.76%(a)(b)
Ratios of Net Investment Income to Average Net Assets 0.43%(b) 2.00%(b)
Portfolio Turnover Rate 109%(b) 107%(b)
</TABLE>
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Balanced Fund would have been 628.47% annualized
for the period ended August 31, 1995.
(b) Annualized.
(c) Not Annualized.
F-27
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------
To the Shareholders and Board of Directors of The RBB Fund, Inc..:
We have audited the accompanying statements of net assets of Warburg Pincus
Growth & Income Fund, Warburg Pincus Balanced Fund and Warburg Pincus Tax
Free Fund of The RBB Fund, Inc., as of August 31, 1995, and the related
statements of operations for the year then ended, the statements of changes
in net assets for each of the two years in the period then ended and the
financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
investments held as of August 31, 1995, by correspondence with the custodian
and brokers. Au audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above fairly present fairly, in all material respects, the financial position
of Warburg Pincus Growth & Income Fund, Warburg Pincus Balanced Fund and
Warburg Pincus Tax Free Fund of The RBB Fund, Inc., as of August 31, 1995,
and the results of their operations for the year then ended, the changes in
their net assets for each of the two years in the period then ended, and
their financial highlights for each of the periods presented, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
October 16, 1995
F-28
- --------------------------------------------------------------------------
<PAGE>
Prospectus Warburg Pincus Advisor
[ PHOTO ]
GROWTH &
INCOME
FUND
December 29, 1995
WARBURG PINCUS
Advisor
Funds
<PAGE>
WARBURG PINCUS GROWTH & INCOME FUND
PROSPECTUS December 29, 1995
Warburg Pincus Advisor Funds are a family of open-end mutual funds that are
offered to investors who wish to buy shares through an investment professional,
financial institutions investing on behalf of their customers
and to retirement plans that elect to make one or more Advisor Funds an
investment option for participants in the plans. One Advisor Fund is described
in this Prospectus.
The WARBURG PINCUS GROWTH & INCOME FUND (the "Growth & Income Fund" or "Fund")
consists of multiple classes of common stock of The RBB Fund, Inc. ("RBB"). RBB
is an open-end management investment company registered under the Investment
Company Act of 1940 (the "1940 Act") and incorporated under the laws of the
State of Maryland on February 29, 1988. RBB currently operates or proposes to
operate seventeen separate investment portfolios. The Series 2 shares (referred
to as the "Advisor Shares") offered by this Prospectus represent interests in
the Fund.
The Growth & Income Fund's investment objective is to provide long-term growth
of capital and income and a reasonable current return. The Growth & Income Fund
seeks to achieve its objectives by investing primarily in equity securities, and
in various income producing securities including, but not limited to dividend
paying equity securities, fixed income securities and money market instruments.
The Growth & Income Fund may also purchase without limitation dollar-denominated
American Depository Receipts ("ADRs"). ADRs are issued by domestic banks and
evidence ownership of underlying foreign securities.
The Fund currently offers two classes of shares, one of which, the Advisor
Shares, is offered pursuant to this Prospectus. The Advisor Shares of the Fund,
as well as the Advisor (Series 2) Shares of certain other Warburg Pincus-advised
funds, are sold under the name "Warburg Pincus Advisor Funds." The Advisor
Shares may not be purchased by individuals directly from the Fund's distributor,
but other broker-dealers, financial institutions, depository institutions
retirement plans and other financial intermediaries ("Institutions") may
purchase Advisor Shares for individuals. The Advisor Shares impose a 12b-1 fee
of up to .50% per annum, which is the economic equivalent of a sales charge.
NO MINIMUM INVESTMENT. There is no minimum amount of initial or subsequent
purchases of shares imposed on Institutions. See "How to Purchase Shares."
This Prospectus contains information that a prospective investor needs to know
before investing. Please keep it for future reference. A Statement of Additional
Information, dated December 29, 1995 has been filed with the Securities and
Exchange Commission and is incorporated by reference in this Prospectus. It may
be obtained free of charge from RBB's distributor by calling (800) 888-6878.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY ANY BANK AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE>
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES*
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
<S> <C>
Management fees**................................................................... .75%
12b-1 fees**........................................................................ .50
Other Expenses...................................................................... .67
-----
Total Fund Operating Expenses....................................................... 1.92%
=====
</TABLE>
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming (1) a 5% annual return, and (2) redemption at the end of each
time period:
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ------ ----- -----
<S> <C> <C> <C> <C>
Growth & Income Fund Advisor Shares.............................. $ 19 $ 60 $ 104 $ 224
---- ------ ----- -----
</TABLE>
- ------------
* No sales charge is imposed upon the purchase of Advisor Shares of the Fund.
Thus, the full amount of the purchase price of Fund shares will be invested
at the time of purchase or upon any other exchange of Advisor Shares of other
Warburg Pincus Advisor Funds without imposition of any sales charge.
** Management fees and 12b-1 fees are based on average daily net assets and are
calculated daily and paid monthly.
The caption "Other Expenses" does not include extraordinary expenses as
determined by use of generally accepted accounting principles.
The Example in the Fee Table assumes that all dividends and distributions
are reinvested and that the amounts listed under "Annual Fund Operating
Expenses" remain the same as the years shown. Certain broker-dealers and
financial institutions also may charge their clients fees in connection with
investments in the Fund's shares, which fees are not reflected in the table. THE
EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. Long-term Shareholders
of the Advisor Shares of the Growth & Income Fund may pay more than the economic
equivalent of the maximum front-end sales charges permitted by the National
Association of Securities Dealers, Inc. (the "NASD"). How-ever, given the Fund's
12b-1 fees, it is estimated that it would require a substantial number of years
to exceed the maximum permissable year-end sales charges.
The Fee Table is designed to assist an investor in understanding the various
costs and expenses that an investor in the Advisor Shares of the Fund will bear
directly or indirectly. (For more complete descriptions of the various costs and
expenses, see "Management" and "Distribution of Shares" below.)
OFFERING PRICE
Advisor Shares which represent interests in the Fund will be offered to the
public at the next determined net asset value after receipt of an order by the
Fund. See "How to Purchase Shares."
2
<PAGE>
EXCHANGES
An institution may exchange Advisor Shares of the Fund for Advisor Shares of
other Warburg Pincus Advisor Funds at their net asset values next determined
after receipt by the relevant Fund of an exchange request. No exchange fee is
currently charged for exchanges. See "How to Redeem and Exchange Shares."
REDEMPTION PRICE
Advisor Shares may be redeemed at any time at their net asset value next
determined after receipt by the Fund of a redemption request. See "How to Redeem
and Exchange Shares--Redemption of Shares."
RISK FACTORS
An investment in the Growth & Income Fund is subject to certain risks, as
set forth in detail under "Investment Objectives and Policies." As with other
mutual funds, there can be no assurance that the Fund will achieve its
objective. The Fund, to the extent set forth under "Investment Objectives and
Policies," may engage in the following investment practices: the purchase of
mortgage-related securities, the lending of portfolio securities and engaging in
options and futures transactions, and engaging in secured borrowings. All of
these transactions involve certain special risks, as set forth under "Investment
Objectives and Policies."
SHAREHOLDER INQUIRIES
Any questions or communications regarding an institution's account should be
directed to Warburg Pincus Advisor Funds at (800) 888-6878, and written
communications should be directed to P.O. Box 9030 Boston, Massachusetts
02205-9030.
FINANCIAL HIGHLIGHTS
The table below sets forth certain informa-tion concerning the investment
results of the RBB class representing interests in Advisor Shares of the Warburg
Pincus Growth & Income Fund for the period indicated. The financial data
included in this table for the period ended August 31, 1995 are a part of RBB's
financial statements for the Fund which have been audited by Coopers & Lybrand
L.L.P., RBB's indepen-dent accountants, whose current report thereon appears in
the Statement of Additional Informa-tion along with the financial statements.
The financial data included in this table should be read in conjunction with the
financial statements and related notes included in the Statement of Additional
Information. Further information about the performance of the Fund is contained
in the Fund's Annual Report to shareholders. The Annual Report and the Statement
of Addi-tional Information may be obtained without charge by contacting the
Warburg Pincus Advi-sor Funds. See "Other Information--Reports and Inquiries."
3
<PAGE>
WARBURG PINCUS GROWTH & INCOME FUND(C)
(For a Share Outstanding Throughout Each Period)
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 15, 1995
(COMMENCEMENT
OF OPERATIONS) TO
AUGUST 31, 1995
-----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...................................... $ 14.87
--------
Income From Investment Operations:
Net Investment Income................................................... 0.0236
Net Gains (Losses) on Securities (both realized and unrealized)......... 1.5323
--------
Total from Investment Operations...................................... 1.5559
--------
Less Distributions:
Dividends (from net investment income).................................. (0.0459)
--------
Total Distributions................................................... (0.0459)
--------
NET ASSET VALUE, END OF PERIOD............................................ $ 16.38
--------
--------
Total Returns............................................................. 10.49%(b)
RATIOS/SUPPLEMENTAL DATA:
Net Assets, End of Period (000)........................................... $ 56,902
Ratio of Expenses to Average Net Assets................................... 1.92%(a)
Ratio of Net Investment Income to Average Net Assets...................... 0.43%(a)
Portfolio Turnover Rate................................................... 109%(a)
</TABLE>
- ------------
(a) Annualized.
(b) Not Annualized.
(c) Financial Highlights relate solely to the Advisor Class of shares within the
Fund.
INVESTMENT OBJECTIVES AND POLICIES
GROWTH & INCOME FUND
The Growth & Income Fund's investment objectives are to provide long-term
growth of capital and income and a reasonable current return. The Growth &
Income Fund seeks to achieve its objectives by investing primarily in equity
securities. Equity securities include common stocks, securities which are
convertible into common stocks and readily marketable securities, such as rights
and warrants, which derive their value from common stock. The Growth & Income
Fund seeks to achieve its income objective by investing in various income
producing securities including, but not limited to, dividend paying equity
securities and fixed income securities. The portion of the Fund invested from
time to time in equity securities, fixed income securities and money market
securities will vary depending on market conditions and there may be extended
periods when the Fund is primarily invested in one of them. In addition, the
amount of income generated from the Fund will fluctuate depending, among other
things, on the composition of the Fund's holdings and the level of interest and
dividend income paid on those holdings. Investments in common stock in general
are subject to market risks that may cause their prices to fluctuate over time.
Therefore, an investment in the Growth & Income Fund may be more suitable for
long-term investors who can bear the risk of these fluctuations. The Growth &
Income Fund may also purchase without limitation dollar-denominated American
Depository Receipts ("ADRs"). ADRs are issued by domestic banks and evidence
ownership of underlying foreign
4
<PAGE>
securities. The policy of the Growth & Income Fund is to invest substantially
all of its assets in equity securities under normal market conditions.
DEBT SECURITIES. The Growth & Income Fund may invest in debt securities rated no
less than investment grade by either Standard & Poor's or Moody's. Bonds in the
lowest investment grade debt category (e.g., bonds rated BBB by Standard &
Poor's Corporation or Baa by Moody's Investors Services, Inc.) have speculative
characteristics, and changes in economic conditions or other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than is the case with higher grade bonds. The Growth & Income Fund may
retain a bond which was rated as investment grade at the time of purchase but
whose rating is subsequently downgraded below investment grade.
FOREIGN SECURITIES. The Growth & Income Fund may invest up to 10% of its total
assets in securities of foreign issuers. Investing in securities of foreign
issuers involves considerations not typically associated with investing in
securities of companies organized and operated in the U.S. Foreign securities
generally are denominated and pay dividends or interest in foreign currencies.
The Growth & Income Fund 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 assets of the Growth & Income Fund as measured in U.S.
dollars may therefore be affected favorably or unfavorably by changes in
exchange rates. There may be less publicly available information concerning
foreign issuers than is available with respect to U.S. issuers. Foreign
securities may not be registered with the U.S. Securities and Exchange
Commission, and generally, foreign companies are not subject to uniform
accounting, auditing and financial reporting requirements comparable to those
applicable to U.S. issuers. See "Investment Objectives and Policies--Foreign
Securities" in the Statement of Additional Information.
ILLIQUID SECURITIES. The Growth & Income Fund will not invest more than 15% of
its net assets in illiquid securities, including securities that are illiquid by
virtue of the absence of a readily available market or legal or contractual
restrictions on resale. Securities that have legal or contractual restrictions
on resale but have a readily available market are not deemed illiquid for
purposes of this limitation. The Growth & Income Fund's adviser will monitor the
liquidity of such restricted securities under the supervision of the Board of
Directors. See "Investment Objectives and Policies--Illiquid Securities" in the
Statement of Additional Information.
OPTIONS AND FUTURES CONTRACTS. The Growth & Income Fund 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 Corporation. The
Growth & Income Fund may also invest in futures contracts and options on futures
contracts (index futures contracts or interest rate futures contracts, as
applicable) for hedging purposes 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. However, the Growth & Income Fund may
not write put options or purchase or sell futures contracts or options on
futures contracts to hedge more than its total assets unless immediately after
any such transaction the aggregate amount of premiums paid for put options and
the amount of margin deposits on its existing futures positions do not exceed 5%
of its total assets.
5
<PAGE>
Options trading is a highly specialized activity which entails greater than
ordinary investment risks. A call option for a particular security gives the
purchaser of the option the right to buy, and a writer the obligation to sell,
the underlying security at the stated exercise price at any time prior to the
expiration of the option, regardless of the market price of the security. The
premium paid to the writer is in consideration for undertaking the obligations
under the option contract. A put option for a particular security gives the
purchaser the right to sell the underlying security at the stated exercise price
at any time prior to the expiration date of the option, regardless of the market
price of the security. In contrast to an option on a particular security, an
option on an index provides the holder with the right to make or receive a cash
settlement upon exercise of the option. The amount of this settlement will be
equal to the difference between the closing price of the index at the time of
exercise and the exercise price of the option expressed in dollars, times a
specified multiple.
The Growth & Income Fund will engage in unlisted over-the-counter options
only with broker/dealers deemed creditworthy by its investment adviser. Closing
transactions in certain options are usually effected directly with the same
broker/dealer that effected the original option transaction. The Growth & Income
Fund bears the risk that the broker/dealer will fail to meet its obligations.
There is no assurance that the Growth & Income Fund will be able to close an
unlisted option position. Furthermore, unlisted options are not subject to the
protections afforded purchasers of listed options by the Options Clearing
Corporation, which performs the obligations of its members who fail to do so in
connection with the purchase or sale of options.
To enter into a futures contract, the Growth & Income Fund must make a
deposit of an initial margin with its custodian in a segregated account in the
name of its futures broker. Subsequent payments to or from the broker, called
variation margin, will be made on a daily basis as the price of the underlying
security or index fluctuates, making the long and short positions in the futures
contracts more or less valuable.
The risks related to the use of options and futures contracts include: (i)
the correlation between movements in the market price of the Fund's investments
(held or intended for purchase) being hedged and in the price of the futures
contract or option may be imperfect; (ii) possible lack of a liquid secondary
market for closing out options or futures positions; (iii) the need for
additional portfolio management skills and techniques; and (iv) losses due to
unanticipated market movements. Successful use of options and futures by the
Growth & Income Fund is subject to the investment adviser's ability to correctly
predict movements in the direction of the market. For example, if the Growth &
Income Fund uses future contracts as a hedge against the possibility of a
decline in the market adversely affecting securities held by it and securities
prices increase instead, the Growth & Income Fund will lose part or all of the
benefit of the increased value of its securities which it has hedged because it
will have approximately equal offsetting losses in its futures positions. 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 future pricing. As a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss or
gain to the investor. Thus, a purchase or sale of a futures contract may result
in losses or gains in excess of the amount invested in the contract. For a
further discussion see "Investment Policies" in the Statement of Additional
Information.
6
<PAGE>
PORTFOLIO TURNOVER. The Growth & Income Fund will effect portfolio transactions
without regard to holding period, if, in its judgment, such transactions are
advisable in light of general market, economic or financial conditions. As a
result, the Fund may engage in a substantial number of portfolio transactions
which could cause the portfolio turnover rate to exceed 100%, although under
normal conditions the Growth & Income Fund does not anticipate that its annual
portfolio turnover rate will exceed 100%. However, it is impossible to predict
portfolio turnover rates. The portfolio turnover rate is calculated by dividing
the lesser of the 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 anticipated portfolio turnover rate for the Growth & Income Fund may be
greater than that of many other investment companies. A higher than normal
portfolio turnover rate may affect the degree to which the Fund's net asset
value fluctuates. Higher portfolio turnover rates are likely to result in
comparatively greater brokerage commissions. In addition, short-term gains
realized from portfolio transactions are taxable to shareholders as ordinary
income. The amount of portfolio activity will not be a limiting factor when
making portfolio decisions. See Statement of Additional Information "Fund
Transactions" and "Taxes."
TEMPORARY DEFENSIVE MEASURES. The Growth & Income Fund reserves the right to
hold, as a temporary defensive measure, cash and eligible U.S.
dollar-denominated money market instruments, as well as securities subject to
repurchase agreements. The Growth & Income Fund's investment adviser will
determine when market conditions warrant temporary defensive measures.
The Growth & Income Fund's investment objectives and the policies described
above may be changed by RBB's Board of Directors without the affirmative vote of
the holders of a majority of the outstanding Shares representing interests in
the Growth & Income Fund. Such changes may result in the Growth & Income Fund
having investment objectives which differ from those an investor may have
considered at the time of investment. There is no assurance that the Growth &
Income Fund's investment objective will be achieved.
INVESTMENT LIMITATIONS
The Fund may not change the following investment limitations (with certain
exceptions, as noted below) without the affirmative vote of the holders of a
majority of the Fund's outstanding Shares. (A complete list of the investment
limitations that cannot be changed without such a vote of the shareholders is
contained in the Statement of Additional Information under "Investment
Objectives and Policies.")
1. Purchase the securities of any one issuer, other than securities issued
or guaranteed by the U.S. Government or its agencies or instrumentalities, if
immediately after and as a result of such purchase more than 5% of the value of
the Fund's total assets would be invested in the securities of such issuer, or
more than 10% of the outstanding voting securities of such issuer would be owned
by the Fund, except that up to 25% of the value of the Fund's total assets may
be invested without regard to such limitations.
2. Purchase any securities which would cause, at the time of purchase, more
than 25% of the value of the total assets of the Fund to be invested in the
obligations of issuers in any industry, provided that there is no limitation
with respect to investments in U.S. Government obligations.
In addition, the Growth & Income Fund may not borrow money, except from
banks or by entering into reverse repurchase agreements for temporary purposes
and then in amounts not in excess of 10% of the value of the Fund's total assets
at the time of such borrowing, and only if
7
<PAGE>
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 or reverse repurchase agreement and in
amounts not in excess of the lesser of the dollar amounts borrowed or 10% of the
value of the Fund's total assets at the time of such borrowing; or purchase
portfolio securities while borrowings and reverse repurchase agreements in
excess of 5% of the Fund's net assets are outstanding. (This borrowing provision
is not for investment leverage, but solely to facilitate management of the
Growth & Income Fund's securities by enabling the Growth & Income Fund to meet
redemption requests where the liquidation of portfolio securities is deemed to
be disadvantageous or inconvenient.)
MANAGEMENT
BOARD OF DIRECTORS. The business and affairs of RBB and the Fund are managed
under the direction of RBB's Board of Directors.
INVESTMENT ADVISER. Warburg, Pincus Counsellors, Inc. ("WPC") serves as the
investment adviser to the Fund. WPC, organized in 1970, is a professional
investment counseling firm which provides investment services to investment
companies, employee benefit plans, endowment funds, foundations and other
institutions and individuals. WPC currently manages approximately $12 billion in
assets, of which approximately $6 billion are investment companies. WPC is a
wholly owned subsidiary of Warburg Pincus Counsellors G.P., which has no
business other than being a holding company of WPC and its subsidiaries. E.M.
Warburg, Pincus & Co., Inc. controls WPC through its ownership of voting
preferred stock of WPC. WPC's principal offices are located at 466 Lexington
Avenue, New York, New York 10017-3147. As adviser to the Fund, WPC is
responsible for overall management of the Fund, and is responsible for all
purchases and sales of portfolio securities for the Fund.
WPC may, at its own expense, provide promotional incentives to qualified
recipients who support the sale of Advisor Shares of the Fund. Qualified
recipients are securities dealers who have sold Advisor Shares or others,
including banks and other financial institutions, under special arrangements. In
some instances, these incentives may be offered only to certain institutions
whose representatives provide services in connection with the sale or expected
sale of significant amounts of Advisor Shares.
Anthony G. Orphanos, a Managing Director of WPC who has been with WPC for
the last sixteen years, is Chief Investment Officer and is responsible for the
day-to-day management of the Growth & Income Fund's investments. Mr. Orphanos
has been the portfolio manager of the Growth & Income Fund since WPC began
serving as sub-advisor to the Fund in November 1991.
Linda Diaz, CFA, Assistant Vice President, is a research analyst and
assistant portfolio manager for the Warburg Pincus Growth & Income Fund. Ms.
Diaz has been with WPC since 1995 and has 10 years of investment experience.
Prior to joining WPC, Ms. Diaz was an Assistant Vice President and portfolio
manager in the Asset Management Division for Kidder Peabody & Co. She received
her B.S. degree from The Wharton School, University of Pennsylvania.
For the services provided and expenses assumed by it, WPC is entitled to
receive a fee from RBB computed daily and payable monthly at an annual rate of
.75% of the Growth & Income Fund's average daily net assets. This fee is higher
than that paid by most investment companies.
DISTRIBUTOR. Counsellors Securities Inc. ("Counsellors Securities"), a wholly
owned subsidiary of WPC, serves as the Fund's distributor. Counsellors
Securities is located at 466 Lexington Avenue, New York, New York 10017-3147.
Counsellors Securities receives a fee at an annual rate equal to .50% of the
Fund's average daily net
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assets for distribution services, pursuant to a distribution agreement between
Counsellor's Securities and RBB in accordance with a distribution plan (the
"12b-1 Plan") adopted by the Fund pursuant to Rule 12b-1 under the 1940 Act.
Amounts paid to Counsellors Securities under the Fund's 12b-1 Plan may be used
by Counsellors Securities to cover expenses that are related to (i) the sale of
Advisor Shares of the Fund, (ii) ongoing servicing and/or maintenance of the
accounts of shareholders of the Fund, and (iii) sub-transfer agency services,
subaccounting services or administrative services related to the sale of the
Advisor Shares of the Fund, all as set forth in the Fund's 12b-1 Plan. Payments
under the 12b-1 Plan are not tied exclusively to the distribution expenses
actually incurred by Counsellors Securities and payments may exceed distribution
expenses actually incurred. Counsellors Securities may delegate some or all of
these functions to a Service Organization. See "Shareholder Servicing." RBB's
Board of Directors will evaluate the appropriateness of the 12b-1 Plan on a
continuing basis and in doing so will consider all relevant factors, including
expenses borne by Counsellors Securities and amounts received under the 12b-1
Plan.
CO-ADMINISTRATORS. The Fund employs Counsellors Funds Service, Inc.
("Counsellors Service"), a wholly-owned subsidiary of WPC, as a co-
administrator. As co-administrator, Counsellors Service provides shareholder
liaison services to the Fund including responding to shareholder inquiries and
providing information on shareholder accounts. As compensation, the Growth &
Income Fund pays to Counsellors Service a fee calculated at an annual rate of
.05% of the Fund's average daily net assets for the first $125 million of
average daily net assets and .10% of average daily net assets for assets above
$125 million.
The 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 values, provides all accounting services for the
Fund and assists in related aspects of the Funds' operations. As compensation,
the Growth & Income Fund pays to PFPC a fee calculated at an annual rate of .20%
of the Fund's first $125 million of average daily net assets, and .15% of
average daily net assets over $125 million with a minimum annual fee of $75,000.
PFPC has its principal offices at 400 Bellevue Parkway, Wilmington, Delaware
19809.
CUSTODIAN. PNC Bank, National Association ("PNC Bank") serves as RBB's
custodian. PNC is a subsidiary of PNC Bank Corp. Its principal business address
is Broad and Chestnut Streets, Philadelphia, Pennsylvania 19101. State Street
Bank and Trust Company ("State Street") serves as sub-custodian and as
co-custodian for the Fund's foreign securities. State Street's principal
business address is 225 Franklin Street, Boston, Massachusetts 02110.
TRANSFER AGENT AND SUB-TRANSFER AGENT. PFPC serves as RBB's transfer agent and
dividend disbursing agent. State Street acts as shareholder servicing agent,
sub-transfer agent and dividend disbursing agent for the Fund. It has delegated
to Boston Financial Data Services, Inc. ("BFDS"), a 50% owned subsidiary,
responsibility for most shareholder servicing functions. BFDS' principal
business address is 2 Heritage Drive, North Quincy, Massachusetts 02171.
EXPENSES. The expenses of the Fund are deducted from its total income before
dividends are paid. These expenses include, but are not limited to, fees paid to
the investment adviser, fees and expenses of officers and directors who are not
affiliated with the Fund's investment adviser or distributor, taxes, interest,
legal fees, custodian fees, auditing fees, brokerage fees and commissions,
certain of the fees and expenses of registering and qualifying the Fund and the
Advisor Shares for distribution under Federal and state securities laws,
expenses of preparing prospectuses and statements of additional information and
of printing and distributing prospectuses and statements of additional
information
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annually to existing shareholders that are not attributable to a particular
class of shares of RBB, the expense of reports to shareholders, shareholders'
meetings and proxy solicitations that are not attributable to a particular class
of shares of RBB, fidelity bond and directors and officers liability insurance
premiums, the expense of using independent pricing services and other expenses
which are not expressly assumed by the investment adviser under its investment
advisory agreement with respect to the Fund. Any general expenses of RBB that
are not readily identifiable as belonging to a particular investment portfolio
of RBB will be allocated among all investment portfolios of RBB based upon the
relative net assets of the investment portfolios at the time such expenses are
cited. Distribution expenses, transfer agency expenses, expenses of preparation,
printing and distributing prospectuses, statements of additional information,
proxy statements and reports to shareholders, and registration fees, identified
as belonging to a particular class, are allocated to such class.
The investment adviser has agreed to reimburse the Fund for the amount, if
any, by which the total operating and management expenses of the Fund for any
fiscal year exceed the most restrictive state blue sky expense limitation in
effect from time to time, to the extent required by such limitation.
The investment adviser may assume additional expenses of the Fund from time
to time. In certain circumstances, it may assume such expenses on the condition
that it is reimbursed by RBB for such amounts prior to the end of a fiscal year.
In such event, the reimbursement of such amounts will have the effect of
increasing the Fund's expense ratio and of decreasing yield to investors.
For the Fund's fiscal year ended August 31, 1995, the Growth & Income Fund
Advisor Shares' total expenses were 1.92% of average net assets.
FUND TRANSACTIONS. The Fund's investment adviser may consider a number of
factors in determining which brokers to use in purchasing or selling the Fund's
securities. These factors, which are more fully discussed in the Statement of
Additional Information, include, but are not limited to, research services, the
reasonableness of commissions and quality of services and execution.
Transactions for the Fund may be effected through broker-dealers who sell Fund
shares, subject to the requirements of best execution. A higher rate of turnover
of the Fund's securities may involve correspondingly higher transaction costs,
which will be borne directly by the Fund. The Fund may enter into brokerage
transactions with and pay brokerage commissions to brokers that are affiliated
persons (as such term is defined in the 1940 Act) provided that the terms of the
brokerage transactions comply with the provisions of the 1940 Act.
HOW TO PURCHASE SHARES
Warburg Pincus Advisor Funds Shares are only available for investment
through investment professionals, financial institutions on behalf of their
customers, retirement plans that elect to make one or more Advisor Funds an
option for participants in the plans and other financial intermediaries.
Individuals, including participants in retirement plans, cannot invest directly
in Advisor Shares of the Fund, but may do so only through a participating
Institution. The Fund reserves the right to make Advisor Shares available to
other investors in the future. References in this Prospectus to shareholders or
investors are generally to Institutions as the record holders of the Advisor
Shares.
Each Institution separately determines the rules applicable to its customers
investing in the Fund, including minimum initial and subsequent investment
requirements and the procedures to be followed to effect purchases, redemptions
and exchanges of Advisor Shares. There is no minimum amount of initial or
subsequent purchases of Advisor Shares imposed on Institutions, although the
Fund reserves the right to impose minimums in the future.
Orders for the purchase of Fund shares are placed with an Institution by its
customers. The Institution is responsible for the prompt transmission of the
order to the Fund.
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Institutions may purchase Advisor Shares by telephoning Warburg Pincus
Advisor Funds and sending payment by wire. After telephoning (800) 888-6878 for
instructions, an Institution should then wire federal funds to Counsellors
Securities Inc. using the following wire address:
State Street Bank and Trust Co.
225 Franklin St.
Boston, MA 02101
ABA# 0110 000 28
Attn: Mutual Funds/Custody Dept.
Warburg Pincus Advisor Funds--
Growth & Income Fund
DDA# 9904-649-2
[Shareowner name]
[Shareowner account number]
Orders by wire will not be accepted until a completed account application
has been received in proper form, and an account number has been established. If
a telephone order is received by the close of regular trading on the New York
Stock Exchange (the "NYSE") (currently 4:00 p.m., Eastern time) and payment by
wire is received on the same day in proper form in accordance with instructions
set forth above, the shares will be priced according to the net asset value of
the Fund on that day and are entitled to dividends and distributions beginning
on that day. If payment by wire is received in proper form by the close of the
NYSE without a prior telephone order, the purchase will be priced according to
the net asset value of the Fund on that day and is entitled to dividends and
distributions beginning on that day. However, if a wire received in proper form
is not preceded by a telephone order and is received after the close of regular
trading on the NYSE, the payment will be held uninvested until the order is
effected at the close of business on the next day that the Fund calculates its
net asset value (a "business day"). Payment for orders that are not accepted
will be returned to the institution after prompt inquiry. Certain organizations
that have entered into agreements with the Fund or its agent may enter confirmed
purchase orders on behalf of customers, with payment to follow no later than the
Fund's pricing on the following business day. If payment is not received by such
time, the organization could be held liable for resulting losses or fees
incurred.
After an investor has made his initial investment, additional shares may be
purchased at any time in the manner outlined above. Payments for initial and
subsequent investments should be preceded by an order placed with the Fund or
its agent and should clearly indicate the investor's account number. In the
interest of economy and convenience, physical certificates representing shares
in the Fund are not normally issued.
The Fund understands that some broker-dealers (other than Counsellors
Securities), financial institutions, securities dealers and other industry
professionals may impose certain conditions on their clients that invest in the
Fund, which are in addition to or different than those described in this
Prospectus, and, to the extent permitted by applicable regulatory authority, may
charge their clients direct fees. Certain features of the Fund may be modified
in these programs and administrative charges may be imposed for the services
rendered. Therefore, a client or customer should contact the organization acting
on his behalf concerning the fees (if any) charged in connection with a purchase
or redemption of Fund shares and should read this Prospectus in light of the
terms governing his accounts with the organization.
HOW TO REDEEM AND EXCHANGE SHARES
REDEMPTION OF SHARES. An investor may redeem (sell) shares on any day that the
Fund's net asset value is calculated (see "Net Asset Value" below). Requests for
the redemption (or exchange) of Advisor Shares are placed with an Institution by
its customers. The institution is responsible for the prompt transmission of its
customers' requests to the Fund or its agent.
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<PAGE>
Institutions may redeem Advisor Shares by calling Warburg Pincus Advisor
Funds at (800) 888-6878 between 9:00 a.m. and 4:00 p.m. (Eastern time) on any
day on which the Fund's net asset value is calculated. 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 appearing on the Fund's
records, (iv) the amount to be withdrawn and (v) the name of the person
requesting the redemption.
After receipt of the redemption request, the redemption proceeds will be
wired to the investor's bank as indicated in the account application previously
filled out by the investor. The Fund does not currently impose a service charge
for effecting wire transfers but the 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 Advisor Funds by telephone, an investor may deliver the
redemption request to Warburg Pincus Advisor Funds by mail at Warburg Pincus
Advisor Funds, P.O. Box 9030, Boston, Massachusetts 02205-9030.
If a redemption order is received prior to the close of regular trading on
the NYSE, the redemption order will be effected at the net asset value per share
as determined on that day. If a redemption order is received after the close of
regular trading on the NYSE, the redemption order will be effected at the net
asset value as next determined. Redemption proceeds will normally be wired to an
investor on the next business day following the date a redemption order is
effected. If, however, in the judgment of WPC, immediate payment would adversely
affect the Fund, the Fund reserves the right to pay the redemption proceeds
within seven days after the redemption order is effected. Furthermore, the Fund
may suspend the right of redemption or postpone the date of payment upon
redemption (as well as suspend or postpone the recordation of an exchange of
shares) for such periods as are permitted under the 1940 Act.
The proceeds paid upon redemption may be more or less than the amount
invested depending upon a share's net asset value at the time of redemption. If
an investor redeems all the shares in his account, all dividends and
distributions declared up to and including the date of redemption are paid along
with the proceeds of the redemption.
EXCHANGE OF SHARES. An Institution may exchange Advisor Shares of the Fund for
Advi-sor Shares of the other Warburg Pincus Advisor Funds at their respective
net asset values. Exchanges may be effected in the manner described under
"Redemption of Shares" above. If an exchange request is received by Warburg
Pincus Advisor Funds prior to 4:00 p.m. (Eastern time), the exchange will be
made at each fund's
net asset value determined on the same business day. Exchanges may be effected
without a sales charge. The exchange privilege may be modified or terminated at
any time upon 60 days' notice to shareholders.
The exchange privilege is available to shareholders residing in any state in
which the Advisor Shares being acquired may legally be sold. When an investor
effects an exchange of shares, the exchange is treated for federal income tax
purposes as a redemption. Therefore, the investor may realize a taxable gain or
loss in connection with the exchange. Investors wishing to exchange Advisor
Shares of the Funds for Advisor Shares in another Warburg Pincus Advisor Fund
should review the prospectus of the other fund prior to making an exchange. For
further information regarding the exchange privilege or to obtain a current
prospectus for another Warburg Pincus Advisor Fund, an investor should contact
Warburg Pincus Advisor Funds at (800) 888-6878.
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<PAGE>
NET ASSET VALUE
The net asset value per class of the Fund is calculated as of 4:00 p.m.
Eastern Time on each day the NYSE is open. The net asset value of the Advisor
Shares of the Fund is calculated by adding the Advisor Shares' pro rata share of
the value of the Fund's securities, cash and other assets, deducting the Advisor
Shares' pro rata share of the actual and accrued liabilities and the liabilities
specifically allocated to the Advisor Shares, and dividing by the total number
of Advisor Shares outstanding.
Valuation of securities held by the Fund is as follows: securities traded on
a national securities exchange or on the NASDAQ National Market System are
valued at the last reported sale price that day; securities traded on a national
securities exchange or on the NASDAQ National Market System for which there were
no sales on that day and securities traded on other over-the-counter markets for
which market quotations are readily available are valued at the mean of the bid
and asked prices; and securities for which market quotations are not readily
available are valued at fair market value as determined in good faith by or
under the direction of RBB's 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.
With the approval of RBB's Board of Directors, the Fund may use a pricing
service, bank or broker-dealer experienced in such matters to value the Fund's
securities. A more detailed discussion of net asset value and security valuation
is contained in the Statement of Additional Information.
DIVIDENDS AND DISTRIBUTIONS
The Fund will distribute substantially all of the net investment income and
net realized capital gains, if any, of the Fund to the Fund's shareholders. All
distributions are reinvested in the form of additional full and fractional
Advisor Shares unless a shareholder elects otherwise.
The Fund will declare and pay dividends, if any, from net investment income
quarterly, near the end of each quarter. Net realized capital gains (including
net short-term capital gains), if any, will be distributed at least annually.
TAXES
The following discussion is only a brief summary of some of the important
tax considerations generally affecting the Fund and its shareholders and is not
intended as a substitute for careful tax planning. Accordingly, investors in the
Fund should consult their tax advisers with specific reference to their own tax
situation.
The Fund has elected to be taxed as regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended. So long as the
Fund continues to qualify for this tax treatment, the Fund will be relieved of
Federal income tax on amounts distributed to shareholders, but shareholders,
unless otherwise exempt, will pay income or capital gains taxes on amounts so
distributed (except distributions that constitute "exempt interest dividends" or
that are treated as a return of capital) regardless of whether such
distributions are paid in cash or reinvested in additional Advi-sor Shares.
Distributions out of the "net capital gain" (the excess of net long-term
capital gain over net short-term capital loss), if any, of the Fund will be
taxed to shareholders as long-term capital gain regardless of the length of time
a shareholder has held his Advisor Shares, whether such gain was reflected in
the price paid for the Advi-sor Shares, or whether such gain was attributable to
bonds bearing tax-exempt interest. All
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<PAGE>
other distributions, to the extent they are taxable, are taxed to shareholders
as ordinary income. The maximum marginal rate on ordinary income for
individuals, trusts and estates is generally 31% while the maximum rate imposed
on net capital gain of such taxpayers is 28%. Corporate taxpayers are taxed at
the same rates on both ordinary income and capital gains.
The Fund anticipates that dividends paid by the Fund will be eligible for
the 70% dividends received deduction allowed to certain corporations to the
extent of the gross amount of qualified dividends received by the Fund for the
year. However, corporate shareholders will have to take into account the entire
amount of any dividend received in determining their adjusted current earnings
adjustment for alternative minimum tax purposes. The dividends received
deduction is not available for capital gain dividends.
The Fund will send written notices to shareholders annually regarding the
tax status of distributions made by the Fund. Dividends declared in October,
November or December of any year payable to shareholders of record on a
specified date in such a month will be deemed to have been received by the
shareholders on December 31, provided such dividends are paid during January of
the following year. The Fund intends to make sufficient actual or deemed
distributions prior to the end of each calendar year to avoid liability for
Federal excise tax.
Investors should be careful to consider the tax implications of buying
Advisor Shares just prior to a distribution. The price of shares purchased at
that time will reflect the amount of the forthcoming distribution. Those
investors purchasing just prior to a distribution will nevertheless be taxed on
the entire amount of the distribution received.
Shareholders who exchange Advisor Shares representing interests in the Fund
for Advisor Shares representing interests in another fund will generally
recognize capital gain or loss for Federal income tax purposes.
Shareholders who are nonresident alien individuals, foreign trusts or
estates, foreign corporations or foreign partnerships may be subject to
different U.S. Federal income tax treatment.
An investment in any RBB portfolio is not intended to constitute a balanced
investment program.
Future legislative or administrative changes or court decisions may
materially affect the tax consequences of investing in the Fund. Shareholders
are also urged to consult their tax advisers concerning the application of state
and local income taxes to investments in the Fund which may differ from the
Federal income tax consequences described above.
SHAREHOLDER SERVICING
The Fund is authorized to offer Advisor Shares exclusively to Institutions
whose clients or customers (or participants in the case of retirement plans)
("Customers") are beneficial owners of Advisor Shares. Either those Institutions
or companies providing certain services to them (together, "Service
Organizations") will enter into service agreements ("Agreements") related to the
sale of the Advisor Shares with Counsellors Securities pursuant to a
Distribution Plan as described below. Pursuant to the terms of an Agreement, the
Service Organization agrees to perform certain distribution, shareholder
servicing, administrative and accounting services for its Customers.
Distribution services would be marketing or other services in connection with
the promotion and sale of Advisor Shares. Shareholder services that may be
provided include responding to Customer inquiries, providing information on
Customer investments and providing other shareholder liaison services.
Administrative and accounting services related to the
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<PAGE>
sale of the Advisor Shares may include (i) aggregating and processing purchase
and redemption requests from Customers and placing net purchase and redemption
orders with the Fund's transfer agent, (ii) processing dividend payments from
the Fund on behalf of Customers and (iii) providing sub-accounting relating to
the sale of Advisor Shares beneficially owned by Customers or the information to
RBB necessary for sub-accounting. The Board of Directors of RBB has approved a
Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the 1940 Act under
which Counsellors Securities may pay each participating Service Organization a
negotiated fee on an annual basis not to exceed .75% of the value of the average
daily net assets of its Customers invested in the Advisor Shares. However, under
the current Distribution Agreement between Counsellors Securities and RBB on
behalf of the Fund, this fee shall not exceed .50% of average daily net assets
of Customers. The Fund may, in the future, enter into additional Agreements with
Service Organizations. The Board of Directors of RBB will evaluate the
appropriateness of the Plan on a continuing basis.
DESCRIPTION OF SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001
par value per share, of which 12.2 billion shares are currently classified into
63 different classes of common stock. See "Description of Shares" in the State-
ment of Additional Information.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED
HEREIN RELATE PRIMARILY TO THE WARBURG PINCUS GROWTH & INCOME FUND ADVISOR CLASS
AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS
AND OTHER MATTERS RELATING TO SUCH CLASS.
MULTI-CLASS STRUCTURE. The Fund offers a class of common shares (the "Common
Shares") which are offered directly to individual investors pursuant to a
separate prospectus. Shares of each class represent equal pro rata interests in
the Fund and accrue dividends and calculate net asset value and performance
quotations in the same manner. The Fund quotes performance of Common Shares
separately from Advisor Shares. Because of different fees paid by the Advisor
Shares, the total return on such shares can be expected, at any time, to be
different than the total return on Common Shares. Investors may obtain
information concerning the Common Shares by calling Counsellors Securities at
(800) 888-6878 or by calling the Institution through which Advisor Shares are
purchased.
VOTING RIGHTS. Each share that represents an interest in an investment portfolio
of RBB (including each Fund Share) has an equal proportionate interest in the
assets belonging to such portfolio with each other share that represents an
interest in such portfolio, even where a share has a different class designation
than another share representing an interest in the Fund. Shares of RBB do not
have preemptive or conversion rights. When issued for payment as described in
this Prospectus, Advisor Shares will be fully paid and non-assessable.
RBB currently does not intend to hold annual meetings of shareholders except
as required by the 1940 Act or other applicable law. The law under certain
circumstances provides shareholders with the right to call for a meeting of
shareholders to consider the removal of one or more directors. To the extent
required by law, RBB will assist in shareholder communication in such matters.
Shareholders of all investment portfolios of RBB (including the Fund) will
vote in the aggregate and not by portfolio except as otherwise required by law
or when the Board of Directors determines that the matter to be voted upon
affects only the interests of the shareholders of a
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<PAGE>
particular investment portfolio or class within a portfolio. (See the Statement
of Additional Information under "Additional Information Concerning Fund Shares"
for examples when the 1940 Act requires voting by investment portfolio or by
class.) Shareholders of RBB are entitled to one vote for each full share held
(irrespective of class or portfolio) and fractional votes for fractional shares
held. Voting rights are not cumulative and, accordingly, the holders of more
than 50% of the aggregate shares of Common Stock of RBB may elect all of the
directors.
RECORD OWNERSHIP. As of November 6, 1995, to RBB's knowledge, no person held of
record 25% or more of the outstanding shares of all classes of RBB.
OTHER INFORMATION
REPORTS AND INQUIRIES. Shareholders will receive unaudited semi-annual reports
describing the Fund's investment operations and annual financial statements
audited by independent accountants. Shareholder inquiries can be made by
contacting Warburg Pincus Advisor Funds at (800) 888-6878, or by writing to
Warburg Pincus Advisor Funds, P.O. Box 9030, Boston, Massachusetts 02205-9030.
SHARE CERTIFICATES. Share certificates are not available for Shares purchased
through Warburg Pincus Advisor Funds.
PERFORMANCE INFORMATION. From time to time, the Fund may advertise its
performance, including comparisons to other mutual funds with similar investment
objectives and to stock or other relevant indices. All such advertisements will
show the average annual total return, net of the Fund's maximum sales charge,
over one, five and ten year periods or, if such periods have not yet elapsed,
shorter periods corresponding to the life of the Fund. Such total return
quotations will be computed by finding the compounded average annual total
return for each time period that would equate the assumed initial investment of
$1,000 to the ending redeemable value, according to a required standardized
calculation. The standard calculation is required by the Securities and Exchange
Commission to provide consistency and comparability in investment company
advertising. The Fund 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 standardized formula in order to compare more accurately the
Fund's performance with other measures of investment return. For example, a
portfolio's total return may be compared with data published by Lipper
Analytical Services, Inc., CDA Investment Technologies, Inc. or Weisenberger
Investment Company Service, or with the performance of the Standard & Poor's 500
Stock Index or the Dow Jones Industrial Average. 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 Advisor Shares, when
redeemed, may be worth more or less than their original cost. Warburg Pincus
Advisor Funds separately list the Advisor Shares in The Wall Street Journal each
business day.
From time to time, the Fund may also advertise its "30-day yield." The yield
refers to the income generated by an investment in a Fund over the 30-day period
identified in the advertisement, and is computed by dividing the net investment
income per share during the period by the maximum public offering price per
share of the last day of the period. This income is "annualized" by assuming
that the amount of income is generated each month over a one-year period and is
compounded semi-annually. The annualized income is then shown as a percentage of
the net asset value.
The yield on Advisor Shares of the Fund will fluctuate and are not
necessarily representative of future results. Shareholders should
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<PAGE>
remember that yield is generally a function of portfolio quality and maturity,
type of instrument, operating expenses and market conditions. Any fees charged
by broker/dealers directly to their customers in connection with investments in
the Fund are not reflected in the yields on the Fund's Advisor Shares, and such
fees, if charged, will reduce the actual return received by shareholders on
their investments.
In reports or other communications to investors or in advertising, the Fund
may also describe the general biography or work experience of the portfolio
managers of the Fund and may include quotations attributable to the portfolio
managers describing approaches taken in managing the Fund's investments,
research methodology underlying stock selection or the Fund's investment
objective. The Fund may also discuss 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. In addition, the Fund may
from time to time compare its expense ratio to that of investment companies with
similar objectives and policies, based on data generated by
Lipper Analytical Services, Inc. or similar investment services that monitor
mutual funds.
-------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY RBB OR ITS DISTRIBUTOR.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY RBB OR BY THE DISTRIBUTOR IN
ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
17
<PAGE>
APPENDIX A
RATINGS OF DEBT SECURITIES
STANDARD & POOR'S CORPORATION
<TABLE>
<S> <C>
AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's. Capacity to
pay interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay principal and
differs from the highest rated issues only in a small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal although
it is somewhat more susceptible to the adverse effects of changes in circumstances
and economic conditions than debt in higher rated categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories.
BB Debt rated "BB", "B", "CCC", or "CC" is regarded, on balance, as predominantly
B speculative with respect to capacity to pay interest and repay principal in
CCC accordance with the terms of the obligation. "BB" indicates the lowest degree of
CC speculation and "CC" the highest degree of speculation. While such debt will likely
have some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
C This rating is reserved for income bonds on which no interest is being paid.
D Debt rated "D" is in default, and payment of interest and/or repayment of principal
is in arrears.
(+) or (-) The ratings from "AAA" or "CCC" may be modified by the addition of a plus or minus
sign to show relative standing or within the major rating categories.
* Continuance of the rating is contingent upon S&P's receipt of an executed copy of
the escrow agreement or closing documentation confirming investments and cash
flows.
NR Indicates no rating has been requested, that there is insufficient information on
which to base a rating, or that S&P does not rate a particular type of obligation
as a matter of policy.
DEBT OBLIGATIONS OF ISSUERS OUTSIDE THE UNITED STATES AND ITS TERRITORIES are rated
on the same basis as domestic corporate and municipal issues. The ratings measure
the creditworthiness of the obligor but do not take into account currency exchange
and related uncertainties.
p PROVISIONAL RATINGS: The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being financed
by the debt being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful and timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of. or the risk of
default upon failure of, such completion. The investor should exercise judgment
with respect to such likelihood and risk.
</TABLE>
A-1
<PAGE>
NOTES
Note rating symbols are as follows:
<TABLE>
<S> <C>
SP-1 Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest.
SP-3 Speculative capacity to pay principal and interest.
</TABLE>
COMMERCIAL PAPER
A Standard & Poor's 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.
Ratings are graded into four categories, ranging from "A" for the highest
quality obligations to "D" for the lowest. The four categories are as follows:
<TABLE>
<S> <C>
A Issues assigned this highest rating are regarded as having the greatest capacity
for timely payment. Issues in this category are delineated with the numbers 1, 2,
and 3 to indicate the relative degree of safety.
A-1 This designation indicates that the degree of safety regarding timely payment is
either overwhelming or very strong. Those issues determined to possess overwhelming
safety characteristics are denoted with a plus (+) sign designation.
A-2 Capacity for timely payment on issues with this designation is strong. However, the
relative degree of safety is not as high as for issues designated "A-1".
A-3 Issues carrying this designation have a satisfactory capacity for timely payment.
They are, however, somewhat more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B Issues rated "B" are regarded as having only an adequate capacity for timely
payment. However, such capacity may be damaged by changing conditions or short-term
adversities.
C This rating is assigned to short-term debt obligations with a doubtful capacity for
payment.
D This rating indicates that the issue is either in default or is expected to be in
default upon maturity.
</TABLE>
VARIABLE RATE DEMAND BONDS
Standard & Poor's assigns "dual" ratings to all long-term debt issues that
have as part of their provisions a long-term rating and a variable rate demand
rating. The first rating addresses the likelihood of repayment of principal and
interest due and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols are used to denote the put
option (for example, "AAA/A-1 +"). If the nominal maturity is short (three years
or less), a note rating is assigned.
A-2
<PAGE>
MOODY'S INVESTORS SERVICE, INC. RATINGS
CORPORATE BONDS
Aaa
Bonds which are rated AAA are judged to be the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or 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 which are rated AA are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A
Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa
Bonds which are rated BAA are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly scecured. Interest payment and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba
Bonds which are rated BA are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
A-3
<PAGE>
B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa
Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca
Bonds which are rated CA represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's bond ratings, where specified, are also applied to senior bank
obligations with an original maturity in excess of one year. Among the bank
obligations covered are bank deposits, bankers acceptance and obligations to
deliver foreign exchange. Obligations relying upon support mechanisms such as
letters-of-credit are excluded unless explicitly rated.
NOTE: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
SHORT-TERM NOTES AND VARIABLE RATE DEMAND OBLIGATIONS
The following summarizes the ratings used by Moody's for short-term notes
and variable rate demand obligations:
MIG-1/VMIG-1. Obligations bearing these designations are of the 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. Obligations bearing these designations are of high quality
with margins of protection ample although not as large as in the preceding
group.
MIG-3/VMIG-3. Obligations bearing these designations are of favorable
quality. All security elements are accounted for but there is a lacking the
undeniable strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is hereby to be
less well established.
A-4
<PAGE>
COMMERCIAL PAPER RATINGS
The rating PRIME-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated PRIME-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of senior short-term debt
obligations. Issuers rated PRIME-2 (or related supporting institutions) are
considered to have strong capacity for repayment of senior short-term debt
obligations. This will normally be evidenced by many of the characteristics of
issuers rated PRIME-1 but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained. Issuers PRIME-3 (or
supporting institutions) have an acceptable capacity rated for repayment of
senior short-term debt obligations. The effect of industry characteristics and
market composition 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. Issuers rated NOT PRIME do not fall within any of the Prime
rating categories.
A-5
<PAGE>
ADGI-1-1095
Warburg Pincus Advisor Funds
Counsellors Securities Inc., distributor
Table of Contents
3 FINANCIAL HIGHLIGHTS
4 INVESTMENT OBJECTIVES AND POLICIES
7 INVESTMENT LIMITATIONS
8 MANAGEMENT
10 HOW TO PURCHASE SHARES
11 HOW TO REDEEM AND EXCHANGE SHARES
13 NET ASSET VALUE [ PHOTO ]
13 DIVIDENDS AND DISTRIBUTIONS
13 TAXES
14 SHAREHOLDER SERVICING
15 DESCRIPTION OF SHARES
16 OTHER INFORMATION
WARBURG PINCUS
Advisor
Funds
<PAGE>
WARBURG PINCUS GROWTH AND INCOME FUND
(Investment Portfolio of The RBB Fund, Inc.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary
information pertaining to shares of the Series 2 Class (the "Advisor
Shares") representing interests in the Warburg Pincus Growth & Income Fund
(the "Growth & Income Fund" or "Fund") of The RBB Fund, Inc. ("RBB"). This
Statement of Additional Information is not a prospectus, and should be read only
in conjunction with the Warburg Pincus Advisor Funds Prospectus dated
December 29, 1995, (the "Prospectus"). A copy of the Prospectus may be
obtained from the Funds' distributor by calling toll-free (800) 888-9723. This
Statement of Additional Information is dated December 29, 1995.
CONTENTS
Prospectus
Page Page
---- -----------
General........................................ 2 1
Investment Objectives and Policies ............ 2 4
Directors and Officers ........................ 14 N/A
Investment Advisory, Distribution
and Servicing Arrangements ................... 17 8
Fund Transactions ............................. 22 10
Purchase and Redemption Information ........... 24 10
Valuation of Shares ........................... 24 13
Performance Information....................... 25 16
Taxes ......................................... 28 13
Description of Shares......................... 32 15
Additional Information Concerning Fund Shares.. 34 16
Miscellaneous ................................. 34 N/A
Financial Statements .......................... F-1 N/A
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 Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by RBB or its distributor. The Statements of Additional Information does
not constitute an offering by RBB or by the distributor in any jurisdiction in
which such offering may not lawfully be made.
<PAGE>
GENERAL
The RBB Fund, Inc. ("RBB") is an open-end management investment
company currently operating or proposing to operate seventeen separate
investment portfolios. RBB is an open-end investment company registered under
the Investment Company Act of 1940 (the "1940 Act") and was organized as a
Maryland corporation on February 29, 1988. This Statement of Additional
Information pertains to the Series 2 Class of shares ("Advisor Shares")
representing interests in the Warburg Pincus Growth & Income Fund (the
"Growth & Income Fund" or "Fund") of RBB. The Shares are offered by
the Prospectus dated December 29, 1995.
Capitalized terms used herein and not otherwise defined have the same
meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the Prospectus
concerning the investment objectives and policies of the Fund. A
description of ratings of certain instruments the Fund may purchase is set forth
in the Appendix to the Prospectus.
Additional Information on Fund Investments
Reverse Repurchase Agreements. Reverse repurchase agreements involve
the sale of securities held by the Fund pursuant to the Fund's agreement to
repurchase the securities at an agreed upon price, date and rate of interest.
Such agreements are considered to be borrowings under the Investment Company Act
of 1940, as amended (the "1940 Act"), and may be entered into only for temporary
or emergency purposes. While reverse repurchase transactions are outstanding, a
Fund will maintain in a segregated account with the RBB's custodian or a
qualified sub-custodian, cash, U.S. Government securities or other liquid,
high-grade debt securities of an amount at least equal to the market value of
the securities, plus accrued interest, subject to the agreement and will monitor
the account to ensure that such value is maintained. Reverse repurchase
agreements involve the risk that the market value of the securities sold by
the Fund may decline below the price of the securities the Fund is obligated to
Repurchase.
Foreign Securities. Although the Fund generally intends to
invest in securities of companies and governments of developed, stable nations,
the value of the Fund's 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, imposition of (or
change in) exchange control regulations in those foreign nations and difficulty
in enforcing judgments. In addition, changes in government administrations,
economies or monetary policies in the U.S. or abroad could result in
appreciation or depreciation of those portfolio securities. Furthermore, the
economies of individual foreign nations may differ from the U.S. economy,
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
2
<PAGE>
investments made by the Fund must be made in compliance with U.S. and
foreign currency restrictions and tax laws restricting the amounts and types of
foreign investments.
In addition, while the volume of transactions effected on foreign
stock exchanges has increased in recent years, it remains appreciably below that
of the New York Stock Exchange. Accordingly, the Fund's foreign investments
may be less liquid and their prices may be more volatile than comparable
investments in securities of U.S. companies. In buying and selling securities
on foreign exchanges, the Fund will normally pay fixed commissions that are
generally higher than the negotiated commissions charged in the U.S. Moreover,
the Fund's expenses may be higher due to the additional cost of custody of
foreign securities. In addition, there is generally less government supervision
and regulation of securities exchanges, brokers and issuers in foreign countries
than in the U.S.
Dollar-Denominated Debt Obligations of Foreign Issuers. U.S.
dollar-denominated debt securities issued by foreign corporations held by a Fund
may not be registered with the Securities and Exchange Commission ("SEC"), and
the issuers thereof may not be subject to its reporting requirements.
Accordingly, there may be less publicly available information concerning foreign
issuers of debt securities held by the Fund than is available concerning
U.S. issuers. Foreign companies 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. Securities of
many foreign companies may be less liquid and their prices more volatile than
those of securities of comparable U.S. companies. In addition, with respect to
certain foreign countries, there is the possibility of expropriation,
confiscatory taxation, limitations on the use or removal of funds or the assets
of the Fund, and political or social instability or diplomatic developments
which could affect investments in those countries. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.
Mortgage-Related Debt Securities. Mortgage-related debt securities
represent ownership interests in individual pools of residential mortgage loans.
These securities are designed to provide monthly payments of interest and
principal to the investor. Each mortgagor's monthly payment to his lending
institution on his residential mortgage is "passed-through" to investors.
Mortgage pools consist of whole mortgage loans or participations in loans. The
terms and characteristics of the mortgage instruments are generally uniform
within a pool but may vary among pools. Lending institutions which originate
mortgages for the pools are subject to certain standards, including credit and
underwriting criteria for individual mortgages included in the pools.
Since the inception of the mortgage-related pass-through security in
1970, the market for these securities has expanded considerably. The size of
the primary issuance market, and active participation in the secondary market by
securities dealers and many types of investors, historically have made interests
in government and government-related pass-through pools highly
3
<PAGE>
liquid, although no guarantee regarding future market conditions can be made.
The average life of pass-through pools varies with the maturities of the
underlying mortgage instruments. In addition, a pool's term may be shortened by
unscheduled or early payments of principal and interest on the underlying
mortgages. The occurrence of mortgage prepayments is affected by factors
including the level of interest rates, general economic conditions, the location
and age of the mortgages and various social and demographic conditions. Because
prepayment rates of individual pools vary widely, it is not possible to predict
accurately the average life of a particular pool. For pools of fixed rate 30
year mortgages, common industry practice is to assume that prepayments will
result in a 12 year average life. Pools of mortgages with other maturities or
different characteristics will have varying assumptions concerning average life.
The assumed average life of pools of mortgages having terms of less than 30
years is less than 12 years, but typically not less than 5 years. Yields on
pass-through securities are typically quoted by investment dealers and vendors
based on the maturity of the underlying instruments and the associated average
life assumption. In periods of falling interest rates, the rate of prepayment
tends to increase, thereby shortening the actual average life of a pool of
underlying mortgage-related securities. Conversely, in periods of rising rates
the rate of prepayment tends to decrease, thereby lengthening the actual average
life of the pool. Historically, actual average life has been consistent with
the 12-year assumption referred to above. Actual prepayment experience may
cause the yield of mortgage-related securities to differ from the assumed
average life yield. In addition, as noted in the Prospectus, reinvestment of
prepayments may occur at higher or lower interest rates than the original
investment, thus affecting the yield of the Fund.
The coupon rate of interest on mortgage-related securities is lower
than the interest rates paid on the mortgages included in the underlying pool,
but only by the amount of the fees paid to the mortgage pooler, issuer, and/or
guarantor of payment of the securities for the guarantee of the services of
passing through monthly payments to investors. Actual yield may vary from the
coupon rate, however, if mortgage-related securities are purchased at a premium
or discount, traded in the secondary market at a premium or discount, or to the
extent that mortgages in the underlying pool are prepaid as noted above. In
addition, interest on mortgage-related securities is earned monthly, rather than
semi-annually as is the case for traditional bonds, and monthly compounding may
tend to raise the effective yield earned on such securities.
U.S. Government Obligations. Examples of types of U.S. Government
obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and
the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal
Land Banks, the Federal Housing Administration, Farmers Home Administration,
Export-Import Bank of the United States, Small Business Administration, Federal
National Mortgage Association, Government National Mortgage Association, General
Services Administration, Student Loan Marketing Association, Central Bank for
Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate
Credit Banks, Maritime Administration, International Bank for Reconstruction and
Development (the "World Bank"), the Asian-American Development Bank and the
Inter-American Development Bank.
4
<PAGE>
Futures Contracts. When the Fund purchases a futures contract, it
agrees to purchase a specified underlying instrument at a specified future date.
When the Fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and sale
will take place is fixed when the Fund enters into the contract. The
underlying instrument may be a specified type of security, such as U.S. Treasury
bonds or notes.
The majority of futures contracts are closed out by entering into an
offsetting purchase or sale transaction in the same contract on the exchange
where they are traded, rather than being held for the life of the contract.
Futures contracts are closed out at their current prices, which may result in a
gain or loss.
If the Fund holds a futures contract until the delivery date, it
will be required to complete the purchase and sale contemplated by the contract.
In the case of futures contracts on securities, the purchaser generally must
deliver the agreed-upon purchase price in cash, and the seller must deliver
securities that meet the specified characteristics of the contract.
The Fund may purchase futures contracts as an alternative to
purchasing actual securities. For example, if the Fund intended to
purchase bonds but had not yet done so, it could purchase a futures contract in
order to lock in current bond prices while deciding on particular investments.
This strategy is sometimes known as an anticipatory hedge. Alternatively,
the Fund could purchase a futures contract if it had cash and short-term
securities on hand that it wished to invest in longer-term securities, but at
the same time that Fund wished to maintain a highly liquid position in order to
be prepared to meet redemption requests or other obligations. In these
strategies the Fund would use futures contracts to attempt to achieve an
overall return -- whether positive or negative -- similar to the return from
longer-term securities, while taking advantage of potentially greater liquidity
that futures contracts may offer. Although the Fund would hold cash and
liquid debt securities in a segregated account with a value sufficient to cover
its open futures obligations, the segregated assets would be available to
the Fund immediately upon closing out the futures position, while settlement
of securities transactions can take several days. However, because the
Fund's cash that would otherwise have been invested in higher-yielding bonds
would be held uninvested or invested in short-term securities so long as the
futures position remains open, the Fund's return would involve a smaller amount
of interest income and potentially a greater amount of capital gain or loss.
The Fund may sell futures contracts to hedge its other
investments against changes in value, or as an alternative to sales of
securities. For example, if the investment adviser anticipated a decline in
bond prices, but did not wish to sell bonds owned by the Fund, it could sell
a futures contract in order to lock in a current sale price. If prices
subsequently fell, the future contract's value would be expected to rise and
offset all or a portion of the loss in the bonds that the Fund had hedged. Of
course, if prices subsequently rose, the futures contract's value could be
expected to fall and offset all or a portion of the benefit of the Fund. In
5
<PAGE>
this type of strategy, the Fund's return will tend to involve a larger
component of interest income, because the Fund will remain invested in
longer-term securities rather than selling them and investing the proceeds in
short-term securities which generally provide lower yields.
Futures margin payments. The purchaser or seller of a futures
contract is not required to deliver or pay for the underlying instrument unless
the contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker (known as
a futures commission merchant, or FCM), when the contract is entered into.
Initial margin deposits are equal to a percentage of the contract's value, as
set by the exchange where the contract is traded, and may be maintained in cash
or high quality liquid securities. If the value of either party's position
declines, that party will be required to make additional "variation margin"
payments to settle the change in value on a daily basis. The party that has a
gain may be entitled to receive all or a portion of this amount. Initial and
variation margin payments are similar to good faith deposits or performance
bonds, unlike margin extended by a securities broker, and initial and variation
margin payments do not constitute purchasing securities on margin for purposes
of the Fund's investment limitations. In the event of the bankruptcy of an
FCM that holds margin on behalf of a Fund, that Fund may be entitled to
return of margin owed to it only in proportion to the amount received by the
FCM's other customers. The investment adviser will attempt to minimize this
risk by careful monitoring of the creditworthiness of the FCMs with which
the Fund does business.
Correlation of price changes. The prices of futures contracts depend
primarily on the value of their underlying instruments. Because there are a
limited number of types of futures contracts, it is likely that the standardized
futures contracts available to the Fund will not match that Fund's current
or anticipated investments. Futures prices can also diverge from the prices of
their underlying instruments, even if the underlying instruments match the
Fund's investments well. Futures prices are affected by such factors as current
and anticipated short-term interest rates, changes in volatility of the
underlying instrument, and the time remaining until expiration of the contract,
which may not affect security prices the same way. Imperfect correlation
between the Fund's investments and its futures positions may also result
from differing levels of demand in the futures markets and the securities
markets, from structural differences in how futures and securities are traded,
or from imposition of daily price fluctuation limits for futures contracts. The
Fund may purchase or sell futures contracts with a greater or lesser value
than the securities it wishes to hedge or intends to purchase in order
to attempt to compensate for differences in historical volatility between the
futures contract and the securities, although this may not be successful in all
cases. If price changes in the Fund's futures positions are poorly
correlated with its other investments, its futures positions may fail to produce
anticipated gains or result in losses that are not offset by the gains in the
Fund's other investments.
Liquidity of futures contracts. Because futures contracts are
generally settled within a day from the date they are closed out, compared with
a settlement period of seven days for some types of securities, the
6
<PAGE>
futures markets can provide liquidity superior to the securities markets in many
cases. Nevertheless, there is no assurance a liquid secondary market will exist
for any particular futures contract at any particular time. In addition,
futures exchanges may establish daily price fluctuation limits for futures
contracts, and may halt trading if a contract's price moves upward or downward
more than the limit in a given day. On volatile trading days when the price
fluctuation limit is reached, it may be impossible for the Fund to enter
into new positions or close out existing positions. If the secondary market for
a futures contract is not liquid because of price fluctuation limits or
otherwise, it would prevent prompt liquidation of unfavorable futures positions,
and potentially could require the Fund to continue to hold a futures
position until the delivery date regardless of changes in its value. As a
result, the Fund's access to other assets held to cover its futures
positions could also be impaired.
Purchasing Put Options. By purchasing a put option, the Fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. The option may give the Fund the right
to sell only on the option's expiration date, or may be exercisable at any time
up to and including that date. In return for this right, the Fund pays the
current market price for the option (known as the option premium). The option's
underlying instrument may be a security, or a futures contract.
The Fund may terminate its position in a put option it has
purchased by allowing it to expire or by exercising the option. If the option
is allowed to expire, the Fund will lose the entire premium it paid. If the
Fund exercises the option, it completes the sale of the underlying instrument at
the strike price. If the Fund exercises a put option on a futures contract,
it assumes a seller's position in the underlying futures contract. Purchasing
an option on a futures contract does not require the Fund to make futures
margin payments unless it exercises the option. A Fund may also terminate a put
option position by closing it out in the secondary market at its current price,
if a liquid secondary market exists.
Put options may be used by the Fund to hedge securities it owns,
in a manner similar to selling futures contracts, by locking in a minimum price
at which the Fund can sell. If security prices fall, the value of the put
option would be expected to rise and offset all or a portion of the Fund's
resulting losses. The put thus acts as a hedge against a fall in the price of
such securities. However, all other things being equal (including securities
prices), option premiums tend to decrease over time as the expiration date
nears. Therefore, because of the cost of the option in the form of the premium
(and transaction costs), a Fund would expect to suffer a loss in the put option
if prices do not decline sufficiently to offset the deterioration in the value
of the option premium. This potential loss represents the cost of the hedge
against a fall in prices. At the same time, because the maximum the Fund
has at risk is the cost of the option, purchasing put options does not eliminate
the potential for the Fund to profit from an increase in the value of the
securities hedged to the same extent as selling a futures contract.
7
<PAGE>
Purchasing Call Options. The features of call options are essentially
the same as those of put options, except that the purchaser of a call option
obtains the right to purchase, rather than sell, the underlying instrument at
the option's strike price (call options on futures contracts are settled by
purchasing the underlying futures contract). By purchasing a call option,
the Fund would attempt to participate in potential price increases of the
underlying instrument, with results similar to those obtainable from purchasing
a futures contract, but with risk limited to the cost of the option if security
prices fell. At the same time, a Fund can expect to suffer a loss if security
prices do not rise sufficiently to offset the cost of the option.
The Fund will purchase call options only in connection with
"closing purchase transactions." The Fund may terminate its position in a
call option by entering into a closing purchase transaction. A closing purchase
transaction is the purchase of a call option on the same security with the same
exercise price and call period as the option previously written by the Fund.
If the Fund is unable to enter into a closing purchase transaction, the Fund
may be required to hold a security that it might otherwise have sold to protect
against depreciation.
Writing Put Options. When the Fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In return for
receipt of the premium, the Fund assumes the obligation to pay the strike
price for the option's underlying instrument if the other party to the option
chooses to exercise it. When writing an option on a futures contract the
Fund will be required to make margin payments to an FCM as described above for
futures contracts. The Fund may seek to terminate its position in a put
option it writes before exercise by closing out the option in the secondary
market at its current price. If the secondary market is not liquid for an
option the Fund has written, however, the Fund must continue to be prepared
to pay the strike price while the option is outstanding, regardless of price
changes, and must continue to set aside assets to cover its position.
The Fund may write put options as an alternative to purchasing
actual securities. If security prices rise, the Fund would expect to profit
from a written put option, although its gain would be limited to the amount of
the premium it received. If security prices remain the same over time, it is
likely that the Fund will also profit, because it should be able to close out
the option at a lower price. If security prices fall, the Fund would expect to
suffer a loss. This loss should be less than the loss the Fund would have
experienced from purchasing the underlying instrument directly, however, because
the premium received for writing the option should mitigate the effects of the
decline. As with other futures and options strategies used as alternatives for
purchasing securities, the Fund's return from writing put options generally
will involve a smaller amount of interest income than purchasing longer-term
securities directly, because the Fund's cash will be invested in
shorter-term securities which usually offer lower yields.
Writing Call Options. Writing a call option obligates the Fund to
sell or deliver the option's underlying instrument, in return for the strike
price, upon exercise of the option. The characteristics of writing call options
are similar to those of writing put options, as described above,
8
<PAGE>
except that writing covered call options generally is a profitable strategy if
prices remain the same or fall. Through receipt of the option premium, the
Fund would seek to mitigate the effects of a price decline. At the same time,
because the Fund would have to be prepared to deliver the underlying
instrument in return for the strike price, even if its current value is greater,
the Fund would give up some ability to participate in security price increases
when writing call options.
Combined Option Positions. The Fund may purchase and write
options in combination with each other to adjust the risk and return
characteristics of the overall position. For example, the Fund may purchase
a put option and write a call option on the same underlying instrument, in order
to construct a combined position whose risk and return characteristics are
similar to selling a futures contract. Another possible combined position would
involve writing a call option at one strike price and buying a call option at a
lower price, in order to reduce the risk of the written call option in the event
of a substantial price increase. Because combined options positions involve
multiple trades, they result in higher transaction costs and may be more
difficult to open and close out.
Risks of Options Transactions. Options are subject to risks similar
to those described above with respect to futures contracts, including the risk
of imperfect correlation between the option and a Fund's other investments and
the risk that there might not be a liquid secondary market for the option. In
the case of options on futures contracts, there is also a risk of imperfect
correlation between the option and the underlying futures contract. Options are
also subject to the risks of an illiquid secondary market, particularly in
strategies involving writing options, which a Fund cannot terminate by exercise.
In general, options whose strike prices are close to their underlying
instruments' current value will have the highest trading volume, while options
whose strike prices are further away may be less liquid. The liquidity of
options may also be affected if options exchanges impose trading halts,
particularly when markets are volatile.
Asset Coverage for Futures and Options Positions. A Fund will not use
leverage in its options and futures strategies. Such investments will be
made for hedging purposes only. The Fund will hold securities or other options
or futures positions whose values are expected to offset its obligations under
the hedge strategies. The Fund will not enter into an option or futures
position that exposes the Fund to an obligation to another party unless it owns
either (i) an offsetting position in securities or other options or futures
contracts or (ii) cash, receivables and short-term debt securities with a value
sufficient to cover its potential obligations. A Fund will comply with
guidelines established by the SEC with respect to coverage of options and
futures strategies by mutual funds, and if the guidelines so require will set
aside cash and high grade liquid debt securities in a segregated account with
its custodian bank in the amount prescribed. Securities held in a segregated
account cannot be sold while the futures or option strategy is outstanding,
unless they are replaced with similar securities. As a result, there is a
possibility that segregation of a large percentage of the Fund's assets
could impede portfolio management or the Fund's ability to meet redemption
requests or other current obligations.
9
<PAGE>
Limitations on Futures and Options Transactions. RBB on behalf
of the Fund has filed a notice of eligibility for exclusion from the
definition of the term "commodity pool operator" with the Commodity Futures
Trading Commission ("CFTC") and the National Futures Association, which regulate
trading in the futures markets. Pursuant to Section 4.5 of the regulations
under the Commodity Exchange Act, the notice of eligibility includes the
representation that the Fund will not enter into any commodity futures contract
or option on a commodity futures contract if, as a result, the sum of initial
margin deposits on commodity futures contracts and related commodity
options and premiums paid for options on commodity futures contracts the
Fund has purchased, after taking into account unrealized profits and losses
on such contracts, would exceed 5% of the Fund's total assets.
In addition, the Fund will not enter into any futures contract and
into any option if, as a result, the sum of (i) the current value of assets
hedged in the case of strategies involving the sale of securities, and (ii) the
current value of securities or other instruments underlying the respective
Fund's other futures or options positions, would exceed 50% of the Fund's
net assets.
The Fund's limitations on investments in futures contracts and
its policies regarding futures contracts and the limitations on investments in
options and its policies regarding options discussed above in this Statement of
Additional Information, are not fundamental policies and may be changed as
regulatory agencies permit. The Fund will not modify the above limitations
to increase its permissible futures and options activities without supplying
additional information in a current Prospectus or Statement of Additional
Information that has been distributed or made available to the Fund's
shareholders.
Various exchanges and regulatory authorities have recently undertaken
reviews of options and futures trading in light of market volatility. Among the
possible actions that have been presented are proposals to adopt new or more
stringent daily price fluctuation limits for futures or options transactions,
and proposals to increase the margin requirements for various types of
strategies. It is impossible to predict what actions, if any, will result from
these reviews at this time.
Short Sales "Against the Box." In a short sale, the Fund sells a
borrowed security and has a corresponding obligation to the lender to return the
identical security. The 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." In a short sale, a seller does not
immediately deliver the securities sold and is said to have a short position in
those securities until delivery occurs. If the Fund engages in a short
sale, the collateral for the short position will be maintained by the Fund's
custodian or a qualified sub-custodian. While the short sale is open, the Fund
will maintain in a segregated account an amount of securities equal in kind and
amount to the securities sold short or securities convertible into or
exchangeable for such equivalent securities. These securities constitute
the Fund's long position. The Fund will
10
<PAGE>
not engage in short sales against the box for speculative purposes. The
Fund may, however, make a short sale as a hedge, when it believes that the price
of a security may decline, causing a decline in the value of a security owned by
the Fund (or a security convertible or exchangeable for such security), or when
the Fund wants to sell the security at an attractive current price, but also
wishes to defer recognition of gain or loss for federal income tax purposes and
for purposes of satisfying certain tests applicable to regulated investment
companies under the Internal Revenue Code. In such case, any future losses in
the Fund's long position should be reduced by a gain in the short position.
Conversely, any gain in the long position should be reduced by a loss in the
short position. The extent to which such gains or losses are reduced will
depend upon the amount of the security sold short relative to the amount the
Fund owns. There will be certain additional transaction costs associated with
short sales against the box, but the Fund will endeavor to offset these
costs with the income from the investment of the cash proceeds of short sales.
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 RBB 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" below.
Repurchase Agreements. The repurchase price under the repurchase
agreements described in the Prospectus generally equals the price paid by the
Fund involved plus interest negotiated on the basis of current short-term rates
(which may be more or less than the rate on the securities underlying the
repurchase agreement). Securities subject to repurchase agreements will be held
by the RBB's custodian in the Federal Reserve/Treasury book-entry system or by
another authorized securities depository. Repurchase agreements are considered
to be loans by the Fund involved under the 1940 Act.
Rights Offerings and Purchase Warrants. Rights offerings and purchase
warrants are privileges issued by a corporation which enable the owner to
subscribe to and purchase a specified number of shares of the corporation at a
specified price during a specified period of time. Subscription rights normally
have a short lifespan to expiration. The purchase of rights or warrants
involves the risk that the Fund could lose the purchase value of a right or
warrant if the right to subscribe to additional shares is not executed prior to
the rights and warrants expiration. Also, the purchase of rights and/or
warrants involves the risk that the effective price paid for the right and/or
warrant added to the subscription price of the related security may exceed the
value of the subscribed security's market price such as when there is no
movement in the level of the underlying security.
11
<PAGE>
Illiquid Securities. The Fund may not invest more than 15% of its
total assets in illiquid securities, including repurchase agreements which
have a maturity of longer than seven days and securities that are illiquid by
virtue of the absence of a readily available market or legal or contractual
restrictions on resale. Securities that have legal or contractual restrictions
on resale but have a readily available market are not considered illiquid for
purposes of this limitation. The Fund's investment adviser will monitor the
liquidity of such restricted securities under the supervision of the Board of
Directors. Repurchase agreements subject to demand are deemed to have a
maturity equal to the notice period.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. The Board has adopted a policy that the Fund will not
purchase private placements (i.e. restricted securities other than Rule 144A
Securities). Mutual funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential for delays on
resale and uncertainty in valuation. Limitations on resale may have an adverse
effect on the marketability of portfolio securities and a mutual fund might be
unable to dispose of restricted or other illiquid securities promptly or at
reasonable prices and might thereby experience difficulty satisfying redemptions
within seven days. A mutual fund might also have to register such restricted
securities in order to dispose of them resulting in additional expense and
delay. Adverse market conditions could impede such a public offering of
securities.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities Act
including repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.
The SEC adopted Rule 144A which allows for a broader institutional
trading market for securities otherwise subject to restriction on resale to the
general public. Rule 144A establishes a "safe harbor" from the registration
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers. The investment adviser anticipates that the
market for certain restricted securities such as institutional commercial paper
will expand further as a result of this relatively new regulation and the
development of automated systems for the trading, clearance and settlement of
unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the NASD.
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<PAGE>
The Advisor will monitor the liquidity of restricted securities in
the Fund under the supervision of the Board of Directors. In reaching
liquidity decisions, the Advisor may consider, inter alia, 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).
Investment Limitations
The Fund has adopted the following fundamental investment
limitations which may not be changed without the affirmative vote of the holders
of a majority of the Fund's outstanding shares (as defined in Section
2(a)(42) of the Investment Company Act). The Fund may not:
1. Borrow money, except from banks or by entering into reverse
repurchase agreements for temporary purposes and then in amounts not in excess
of 10% of the value of the Growth & Income Fund's total assets at the time of
such borrowing, and only if after such borrowing there is asset coverage of at
least 300 percent for all borrowings of the Fund; or mortgage, pledge or
hypothecate any of the Growth & Income Fund's assets except as may be
necessary in connection with such borrowing or reverse repurchase agreements and
in amounts not in excess of the lesser of the dollar amounts borrowed or 10% of
the value of the Growth & Income Fund's total assets at the time of such
borrowing; or purchase portfolio securities while borrowings and reverse
repurchase agreements in excess of 5% of the Fund's net assets are outstanding.
(This borrowing provision is not for investment leverage, but solely to
facilitate management of the Growth & Income Fund's securities by enabling
-
the Fund to meet redemption requests where the liquidation of portfolio
securities is deemed to be disadvantageous or inconvenient);
2. Purchase securities of any one issuer, other than securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, if immediately after and as a result of such purchase more
than 5% of the Fund's total assets would be invested in the securities of
such
13
<PAGE>
issuer, or more than 10% of the outstanding voting securities of such issuer
would be owned by the Fund, except that up to 25% of the value of the
Fund's assets may be invested without regard to this 5% limitation;
3. Purchase securities on margin, except for short-term credit
necessary for clearance of portfolio transactions, except that the Fund may
establish margin accounts in connection with its use of options, futures
contracts and options on futures contracts;
4. Underwrite securities of other issuers, except to the extent
that, in connection with the disposition of portfolio securities, the Fund
may be deemed an underwriter under Federal securities laws;
5. Make short sales of securities or maintain a short position or
write or sell puts, calls, straddles, spreads or combinations thereof, except
that the Fund may purchase and sell puts and call options on securities,
stock indices and currencies and may purchase and sell options on futures
contracts;
6. Purchase or sell real estate (including interests in real
estate limited partnerships), provided that the Fund may invest in readily
marketable interests in real estate investment trusts or in securities secured
by real estate or interests therein or issued by companies which invest in real
estate or interests therein;
7. Purchase or sell commodities or commodity contracts, except that
the Fund may purchase and sell futures contracts and related options;
8. Invest in oil, gas or mineral-related programs or leases;
9. Make loans except that the Fund may purchase or hold debt
obligations in accordance with its investment objective, policies and
limitations and except that the Fund may enter into repurchase agreements;
10. Purchase any securities issued by any other investment company
except in connection with the merger, consolidation or acquisition of all the
securities or assets of such an issuer; or
11. Make investments for the purpose of exercising control or
management.
In addition to the foregoing enumerated investment limitations,
the Fund may not (a) invest more than 5% of its total assets (taken at the time
of purchase) in securities of issuers (including their predecessors) with less
than three years of continuous operations, (b) invest more than 5% of its total
assets (taken at the time of purchase) in equity securities that are not readily
marketable, and (c) purchase any securities which would cause, at the time of
purchase, more than 25% of the value of the total assets of the Fund to be
invested in the obligations of issuers in any industry (exclusive of the U.S.
Government and its agencies and instrumentalities).
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<PAGE>
DIRECTORS AND OFFICERS
The directors and executive officers of RBB, their business addresses
and principal occupations during the past five years are:
Name, Address and Age Position with Principal Occupation
- ---------------------- RBB During Past --------------------
Five Years
---------------
Arnold M. Reichman*-47 Director Since 1984, Managing Director
466 Lexington Avenue and Assistant Secretary, E.M.
New York, NY 10017 Warburg, Pincus & Co., Inc.;
Since 1984 Managing Director,
Warburg Pincus Counsellors,
Inc.; Since 1985, Vice
President and Secretary,
Counsellors Securities Inc;
Officer of various investment
companies advised by Warburg,
Pincus Counsellors, Inc.
Robert Director Since 1985, Executive Vice
Sablowsky**-57 President of Gruntal & Co.,
14 Wall Street Inc., Director, Gruntal &
New York, NY 10005 Co., Inc. and Gruntal
Financial Corp.
Francis J. McKay-60 Director Since 1963, Executive Vice
7701 Burholme Avenue President, Fox Chase Cancer
Philadelphia, PA 19111 Center (Biomedical
research and medical care.)
Marvin E. Sternberg-61 Director Since 1974, Chairman,
937 Mt. Pleasant Road Director and President, Moyco
Bryn Mawr, PA Industries, Inc.
19010 (manufacturer of dental
supplies and precision coated
abrasives); Since 1968,
Director and President, Mart
MMM, Inc. (formerly
Montgomeryville Merchandise
Mart Inc.) and Mart PMM, Inc.
(formerly Pennsauken
Merchandise Mart, Inc.)
(Shopping Centers); and Since
1975, Director and Executive
Vice President, Cellucap Mfg.
Co., Inc. (manufacturer of
disposable headwear).
15
<PAGE>
Name, Address and Age Position with Principal Occupation
------------------------- RBB During Past --------------------
Five Years
------------
Julian A. Brodsky-62 Director Director, and Vice Chairman
1234 Market Street Comcast Corporation;
16th Floor Director, Comcast
Philadelphia, PA Cablevision of
19107-3723 Philadelphia (cable
television and
communications) and Nextel
(wireless communications).
Donald van Roden-71 Director Self-employed businessman.
1200 Old Mill Lane From February 1980 to march
Wyomissing, PA 1987, Vice Chairman,
19610 SmithKline Beckman
Corporation
(pharmaceuticals); Director,
AAA Mid-Atlantic (auto
service); Director, Keystone
Insurance Co.
Edward J. Roach-71 President and Certified Public Accountant;
Bellevue Park Corporate Treasurer Vice Chairman of the Board,
Center Fox Chase Cancer Center; Vice
400 Bellevue Parkway President and Trustee,
Wilmington, DE 19809 Pennsylvania School for
the Deaf; Trustee,
Immaculata College; Vice
President and Treasurer of
various investment companies
advised by PNC Institutional
Management Corporation.
Morgan R. Jones-56 Secretary Chairman of the law firm of
1100 PNB Bank Building Drinker Biddle & Reath,
Broad and Chestnut Philadelphia, Pennsylvania;
Streets Director, Rocking Horse Child
Philadelphia, PA 19107 Care Centers of America, Inc.
________________________
* Mr. Reichman is an "interested person" of RBB as that term is defined in
the 1940 Act by virtue of his position with Counsellors Securities Inc.,
RBB's distributor.
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<PAGE>
** Mr. Sablowsky is an "interested person" of RBB as that term is defined in
the 1940 Act by virtue of his position with Gruntal & Co., Inc., a
broker-dealer which sells RBB's shares.
Messrs. McKay, Sternberg and Brodsky are members of the Audit
Committee of the Board of Directors. The Audit Committee, among other things,
reviews results of the annual audit and recommends to RBB the firm to be
selected as independent auditors.
Messrs. Reichman, McKay and van Roden are members of the Executive
Committee of the Board of Directors. The Executive Committee may generally
carry on and manage the business of RBB when the Board of Directors is not in
session.
Messrs. McKay, Sternberg, Brodsky and van Roden are members of the
Nominating Committee of the Board of Directors. The Nominating Committee
recommends to the Board annually all persons to be nominated as directors of
RBB.
RBB pays directors who are not "affiliated persons" (as that term is
defined in the 1940 Act) of the Fund $9,500 annually and $700 per
meeting of the Board or any committee thereof that is not held in conjunction
with a Board meeting. Directors who are not affiliated persons of RBB are
reimbursed for any expenses incurred in attending meetings of the Board of
Directors or any committee thereof. The Chairman (currently Donald Van Roden)
receives an additional $5,000 for his services. For the year ended August 31,
1995, each of the following members of the Board of Directors received
compensation from the Fund in the following amounts: Julian A. Brodsky in
the aggregate amount of $9,425; Francis J. McKay in the aggregate amount of
$12,025; Marvin E. Sternberg in the aggregate amount of $12,675; Donald van
Roden in the aggregate amount of $14,675. On October 24, 1990, RBB adopted, as
a participating employer, RBB Office Retirement Profit-Sharing Plan and Trust
Agreement, a retirement plan for employees (currently Edward J. Roach) pursuant
to which RBB will contribute on a monthly basis amounts equal to 10% of the
monthly compensation of each eligible employee. By virtue of the services
performed by WPC, the Fund's adviser, and Counsellors Securities, the
Fund's distributor, RBB itself requires only one part-time employee. No
officer, director or employee of WPC currently receives any compensation
from RBB.
INVESTMENT ADVISORY, DISTRIBUTION AND SERVICING ARRANGEMENTS
Advisory Agreements
WPC renders advisory services to the Fund pursuant to an
Investment Advisory Agreement. The Advisory Agreement relating to the
Growth & Income Fund is dated September 30, 1993 ("Advisory Contract").
Prior to October 1, 1994, PIMC and WPC rendered advisory and sub-advisory
services, respectively, to the Growth & Income Fund pursuant to Advisory and
Sub-Advisory Agreements dated August 16, 1988. For the year ended August
31, 1995, WPC waived advisory fees with respect to the Growth & Income Fund
in the amount of $0 under the Advisory Contract. During the same period,
WPC received advisory fees
17
<PAGE>
(after waivers) in the amount of $5,824,947.
As required by various state regulations, WPC will reimburse RBB
or the Fund (as applicable) if and to the extent that the aggregate
operating expenses of RBB or the Fund exceeds applicable state limits for
the fiscal year, to the extent required by such state regulations. Currently,
the most restrictive of such applicable limits is believed to be 2 1/2% of the
first $30 million of average annual net assets, 2% of the next $70 million of
average annual net assets and 1 1/2% of the remaining average annual net assets.
Certain expenses, such as brokerage commissions, taxes, interest and
extraordinary items, are excluded from this limitation. Whether such expense
limitations apply to RBB as a whole or to the Fund depends upon the
particular regulations of such states.
The Fund bears all of its own expenses not specifically
assumed by WPC. General expenses of RBB not readily identifiable as
belonging to a portfolio of RBB are allocated among all investment portfolios by
or under the direction of RBB's Board of Directors in such manner as the Board
determines to be fair and equitable. Expenses borne by the Fund include,
but are not limited to, the following (or the Fund's share of the
following): (a) the cost (including brokerage commissions) of securities
purchased or sold by the Fund and any losses incurred in connection
therewith; (b) fees payable to and expenses incurred on behalf of the Fund
by WPC; (c) expenses of organizing RBB that are not attributable to a class
of RBB; (d) certain of the filing fees and expenses relating to the registration
and qualification of RBB and the Fund's shares under Federal and/or state
securities laws and maintaining such registrations and qualifications; (e) fees
and salaries payable to RBB's directors and officers; (f) taxes (including any
income or franchise taxes) and governmental fees; (g) costs of any liability and
other insurance or fidelity bonds; (h) any costs, expenses or losses arising out
of a liability of or claim for damages or other relief asserted against RBB or
the Fund for violation of any law; (i) legal, accounting and auditing
expenses, including legal fees of special counsel for the independent directors;
(j) charges of custodians and other agents; (k) expenses of setting in type and
printing prospectuses, statements of additional information and supplements
thereto for existing shareholders, reports, statements, and confirmations to
shareholders and proxy material that are not attributable to a class; (l) costs
of mailing prospectuses, statements of additional information and supplements
thereto to existing shareholders, as well as reports to shareholders and proxy
material that are not attributable to a class; (m) any extraordinary expenses;
(n) fees, voluntary assessments and other expenses incurred in connection with
membership in investment company organizations; (o) costs of mailing and
tabulating proxies and costs of shareholders' and directors' meetings; (p) costs
of PFPC's use of independent pricing services to value a portfolio's securities;
and (q) the cost of investment company literature and other publications
provided by RBB to its directors and officers. Distribution expenses, transfer
agency expenses, expenses of preparation, printing and mailing prospectuses,
statements of additional information, proxy statements and reports to
shareholders, and organizational expenses and registration fees, identified as
belonging to a particular class of RBB, are allocated to such class.
18
<PAGE>
Under the Advisory Contract, WPC will not be liable for any error
of judgment or mistake of law or for any loss suffered by RBB or the Fund in
connection with the performance of the Advisory Contract, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
WPC in the performance of its duties or from reckless disregard of its
duties and obligations thereunder.
The Advisory Contract was approved on July 26, 1995, by vote
of RBB's Board of Directors, including a majority of those directors who are not
parties to the Advisory Contract or interested persons (as defined in the
1940 Act) of such parties. The Advisory Contract is terminable by vote of
RBB's Board of Directors or by the holders of a majority of the outstanding
voting securities of the Fund, at any time without penalty, on 60 days'
written notice to WPC. The Growth & Income Fund Advisory Contract became
effective on October 1, 1993, and was approved by shareholders at a special
meeting held September 30, 1993. The Advisory Contract terminates
automatically in the event of assignment thereof.
Custodian Agreements
PNC Bank is custodian of RBB's assets pursuant to a custodian
agreement dated August 16, 1988, as amended (the "Custodian Agreement"). Under
the Custodian Agreement, PNC Bank (a) maintains a separate account or accounts
in the name of the Fund (b) holds and transfers portfolio securities on
account of the Fund, (c) accepts receipts and makes disbursements of money
on behalf of the Fund, (d) collects and receives all income and other
payments and distributions on account of the Fund's portfolio securities
and (e) makes periodic reports to the RBB's Board of Directors concerning the
Fund's operations. PNC Bank is authorized to select one or more banks or
trust companies to serve as sub-custodian on behalf of RBB, provided that
PNC Bank remains responsible for the performance of all its duties under the
Custodian Agreement and holds RBB harmless from the acts and omissions of any
sub-custodian. For its services to RBB under the Custodian Agreement, PNC
Bank receives a fee which is calculated based upon the Fund's average daily
gross assets as follows: $.25 per $1,000 on the first $50 million of average
daily gross assets; $.20 per $1,000 on the next $50 million of average daily
gross assets; and $.15 per $1,000 on average daily gross assets over $100
million, with a minimum monthly fee of $1,000 per Fund, exclusive of transaction
charges and out-of-pocket expenses, which are also charged to RBB.
State Street Bank and Trust Company ("State Street") is co-custodian
of the Fund's foreign securities pursuant to a sub-custodian agreement dated
October 26, 1994 (the "Foreign Custodian Agreement"). Under the Foreign
Custodian Agreement, State Street performs custodial functions with respect to
the Fund's non-U.S. portfolio holdings, including appointment of non-U.S.
custodians and agents.
Transfer Agency and Sub-Transfer Agency Agreements
PFPC, Inc. ("PFPC"), an affiliate of PNC Bank, serves as the transfer
and dividend disbursing agent for the Advisor Shares pursuant to a Transfer
Agency Agreement dated August 16, 1988 (the "Transfer Agency
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<PAGE>
Agreement"). State Street Bank and Trust Company ("State Street") acts as
shareholder servicing agent, sub-transfer agent and dividend disbursing agent
for the Fund, under which it (a) issues and redeems Shares, (b) addresses
and mails all communications by the Fund to record owners of Shares,
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 RBB's Board of
Directors concerning the operations of the class . For its services to the
Fund under the Sub-Transfer Agency Agreement, State Street receives a fee at the
annual rate of $8.00 per account for the Funds, plus $5.00 per new account
establishment, exclusive of out-of-pocket expenses, and also receives
reimbursement of its out-of-pocket expenses.
Co-Administration Agreements
Counsellors Funds Service, Inc. ("Counsellors Service") serves as
co-administrator to the Fund pursuant to a Co-Administration Agreement
dated August 4, 1994 (the "Counsellors Service Co-Administration
Agreement"). Counsellors Service has agreed to provide shareholder liaison
services to the Fund including responding to shareholder inquiries and
providing information on shareholder accounts. The Counsellors Service
Co-Administration Agreement provides that Counsellors Service shall not be
liable for any error of judgment or mistake of law or any loss suffered by RBB
or the Fund in connection with the performance of the agreement, except a
loss resulting from willful misfeasance, bad faith or negligence, or reckless
disregard of its duties and obligations thereunder. In consideration for
providing services pursuant to the Counsellors Service Co-Administration
Agreement, Counsellors Services receives a fee with respect to the Growth &
Income Fund calculated at an annual rate of .05% of the Growth & Income Fund's
average daily net assets for the first $125 million of average daily net assets,
and .10% of average daily net assets for assets above $125 million. Under
the Counsellors Service Co-Administration Agreements, the Growth & Income
Fund paid Counselors Service $714,152 for the fiscal year ended August 31, 1995
and $24,186 for the fiscal year ended August 31, 1994.
PFPC also serves as co-administrator to the Fund pursuant to a
Co-Administration Agreement dated August 4, 1994 (the "PFPC
Co-Administration Agreement"). PFPC has agreed to calculate the Fund's
net asset value, provide all accounting services for the Fund, and
assist in related aspects of the Fund's operations. The PFPC
Co-Administration Agreement provides that PFPC shall not be liable for any
error of judgment or mistake of law or any loss suffered by RBB or the Fund
in connection with the performance of the agreement, except a loss resulting
from willful misfeasance, bad faith or negligence, or reckless disregard of its
duties and obligations thereunder. In consideration for providing services
pursuant to the PFPC Co-Administration Agreement, PFPC receives a fee with
respect to the Growth & Income Fund calculated at an annual rate of .20% of the
Growth & Income Fund's average daily net assets, with a minimum annual fee of
$75,000, for the first $125 million of average daily net assets, and .15% of
average daily net assets for assets above $125 million. Under the PFPC
Co-Administration Agreements, the Growth & Income Fund paid PFPC $1,227,497 for
the fiscal year ended August 31, 1995 and $269,859 for the fiscal year ended
August 31, 1994.
Distribution and Shareholder Servicing
Counsellors Securities has entered into a Servicing Agreement with
Service Organizations with respect to the Growth & Income Fund pursuant to which
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support services are provided to the holders of Advisor Shares in consideration
of the Fund's payment of up to .50%, on an annualized basis, of the average
daily net assets of the Advisor Shares held of record of the Fund. See
Prospectus, "Shareholder Servicing." Counsellors Securities may, in the
future, enter into additional Servicing Agreements with Service Organizations to
perform certain distribution, shareholder servicing, administrative and
accounting services for their Customers who are beneficial owners of the
Fund's Shares.
A Service Organization with which Counsellors Securities has entered
into Servicing Agreements on behalf of the Fund may charge a Customer one or
more of the following types of fees, as agreed upon by the Service Organization
and the Customer, with respect to the cash management or other services provided
by the Service Organization: (a) account fees (a fixed amount per month or per
year); (b) transaction fees (a fixed amount per transaction processed); (c)
compensation balance requirements (a minimum dollar amount a Customer must
maintain in order to obtain the services offered); or (d) account maintenance
fees (a periodic charge based upon the percentage of assets in the account or of
the dividend paid on those assets). Services provided by a Service Organization
to Customers are in addition to, and not duplicative of, the services to be
provided under Servicing Agreements. A Customer of a Service Organization
should read the Fund's Prospectus and Statement of Additional Information in
conjunction with the Servicing Agreement and other literature describing the
services and related fees that would be provided by the Service Organization to
its Customers prior to any purchase of shares of the Fund. Service
Organizations and other interested investors may obtain Prospectuses from the
Fund's distributor upon request. No preference will be shown in the
selection of the Fund's portfolio investments for the instruments of Service
Organizations.
There are currently unresolved issues with respect to existing laws
and regulations relating to the permissible activities of banks and trust
companies, including the extent to which certain Service Organizations may
perform shareholder and administrative services. A judicial or administrative
decision or interpretation with respect to those laws and regulations, as well
as future changes in such laws and regulations, could prevent certain Service
Organizations from performing these services or from receiving payments for
performing such services. If a Service Organization was prohibited from
performing these services, it is expected that all arrangements between
Counsellors Securities or behalf of the Fund and the Service Organization
would be terminated and that Customers of the Service Organization who seek to
invest in the Fund would have to purchase and redeem shares directly through
the Fund's distributor or transfer agent.
Counsellors Securities' agreements with Service Organizations is
governed by a Distribution Plan (the "Plan"). The Plan requires PFPC and
Counsellors Service, the Fund's co-administrators, to provide the Board of
Directors, at least quarterly, with written reports of amounts expended under
the Plan and the purpose for which such expenditures were made. The Plan will
continue in effect for so long as their continuance is specifically approved at
least annually by the Board of Directors, including a majority of the Directors
who are not interested persons of RBB and who have no direct or indirect
financial interest in the operation of the Plan ("Independent
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<PAGE>
Directors"). Any material amendment of the Plan would require the approval of
the Board of Directors in the manner described above. The Plan may be
terminated at any time, without penalty, by vote of a majority of the
Independent Directors or by a vote of a majority of the outstanding voting
securities of the relevant class of shares of the Fund.
FUND TRANSACTIONS
Subject to policies established by the Board of Directors, WPC is
responsible for the execution of portfolio transactions and the allocation of
brokerage transactions for the Fund. In executing portfolio transactions,
WPC seeks to obtain the best net results for the 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 WPC 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.
No Fund has any obligation to deal with any broker or group of brokers
in the execution of portfolio transactions. WPC may, consistent with the
interests of the 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 the Fund and other clients of WPC. Information and
research received from such brokers will be in addition to, and not in lieu of,
the services required to be performed by WPC 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 WPC, as applicable, determines in good faith that such commission is
reasonable in terms either of the transaction or the overall responsibility of
or WPC, as applicable, 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.
WPC may seek to obtain an undertaking from issuers of commercial
paper or dealers selling commercial paper to consider the repurchase of such
securities from the 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 the Fund's anticipated need for liquidity makes such
action desirable. Any such repurchase prior to maturity reduces the possibility
that the Fund would incur a capital loss in liquidating commercial paper
(for which there is no established market),
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<PAGE>
especially if interest rates have risen since acquisition of the particular
commercial paper.
Investment decisions for the Fund and for other investment
accounts managed by WPC are made independently of each other in the light of
differing conditions. However, the same investment decision may occasionally 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 beneficial to the Fund. The Fund will not purchase
securities during the existence of any underwriting or selling group relating to
such security of which WPC or any affiliated person (as defined in the 1940
Act) thereof is a member except pursuant to procedures adopted by the RBB's
Board of Directors pursuant to Rule 10f-3 under the 1940 Act. Among other
things, these procedures, which will be reviewed by the RBB's directors as
deemed necessary from time to time, require that the commission paid in
connection with such a purchase be reasonable and fair, that the purchase be at
not more than the public offering price prior to the end of the first business
day after the date of the public offer, and that WPC not participate in or
benefit from the sale to the Fund.
In no instance will portfolio securities be purchased from or sold to
Counsellors Securities, PNC Bank or WPC or any affiliated person of the
foregoing entities except as permitted by SEC exemptive order or by applicable
law.
During the year ended August 31, 1995, the Growth & Income Fund
paid $3,023,620 of brokerage commissions. A high rate of portfolio
turnover involves correspondingly greater brokerage commission expenses and
other transaction costs, which must be borne directly by the Fund. Federal
income tax laws may restrict the extent to which the Fund may engage in
short term trading of securities. See "Taxes". For the year or period ended
August 31, 1995, the Growth & Income Fund had a portfolio turnover rate of
109%. The Fund anticipates that its annual portfolio turnover rate will
vary from year to year. The portfolio turnover rate is calculated by dividing
the lesser of the 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 portfolio during the year.
PURCHASE AND REDEMPTION INFORMATION
The Fund reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption or repurchase of
the Fund's shares by making payment in whole or in part in securities chosen by
RBB and valued in the same way as they would be valued for purposes of computing
the Fund's net asset value. If payment is made in
23
<PAGE>
securities, a shareholder may incur transaction costs in converting these
securities into cash. RBB has elected, however, to be governed by Rule 18f-1
under the 1940 Act so that the 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 the Fund.
Under the 1940 Act, the 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 (the "NYSE") is closed (other than customary weekend and
holiday closings), or during which trading on the NYSE is restricted, or
during which (as determined by the SEC by rule or regulation) an emergency
exists as a result of which disposal or valuation of portfolio securities is not
reasonably practicable, or for such other periods as the SEC may permit.
(The Fund may also suspend or postpone the recordation of the transfer of its
shares upon the occurrence of any of the foregoing conditions.)
VALUATION OF SHARES
The net asset value per share of the Fund is calculated as of 4:00
p.m. Eastern Time on each Business Day. "Business Day" means each weekday when
the NYSE is open. Currently, the NYSE is closed on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day (observed), Labor Day,
Thanksgiving Day and Christmas Day (observed). Securities which are listed on
stock exchanges 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 evaluation. 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 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 4:00 p.m.; 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 RBB's 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.
In determining the approximate market value of portfolio investments,
the Fund 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 Fund's books at their face value. Other assets, if any, are
valued at fair value as determined in good faith or under the direction of
RBB's Board of Directors.
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<PAGE>
PERFORMANCE INFORMATION
Total Return. For purposes of quoting and comparing the performance
of the Fund to that of other mutual funds and to stock or other relevant
indices in advertisements or in reports to shareholders, performance may be
stated in terms of total return. Under the rules of the Securities and Exchange
Commission, the Fund's advertising performance must include total return
quotes calculated according to the following formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value at the end of the 1, 5 or 10 year
periods (or fractional portion thereof) of a hypothetical $1,000 payment made at
the beginning of the 1, 5 or 10 year periods.
Under the foregoing formula, the time periods used in advertising will
be based on rolling calendar quarters, updated to the last day of the most
recent quarter prior to submission of the advertisement for publication, and
will cover one, five and ten year periods or a shorter period dating from the
effectiveness of the Fund's registration statement. In calculating the
ending redeemable value, the maximum sales load is deducted from the initial
$1,000 payment and all dividends and distributions by the Fund are assumed
to have been reinvested at net asset value, as described in the Prospectus, on
the reinvestment dates during the period. Total return, or "T" in the formula
above, is computed by finding the average annual compounded rates of return over
the 1, 5 and 10 year periods (or fractional portion thereof) that would equate
the initial amount invested to the ending redeemable value. Any sales loads
that might in the future be made applicable at the time to reinvestments would
be included as would any recurring account charges that might be imposed by the
Fund.
Calculated according to the SEC rules, for the period from May
15, 1995 (commencement of operations) to August 31, 1995, both the average total
return and the aggregate total return was 10.49% (not annualized) for the
Growth & Income Fund.
Performance. From time to time, the Fund may advertise its
average annual total return over various periods of time. These total return
figures show the average percentage change in value of an investment in the
Fund from the beginning of the measuring period to the end of the measuring
period. The figures reflect changes in the price of the Fund's shares
assuming that any income dividends and/or capital gain distributions made by
the Fund during the period were reinvested in 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
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<PAGE>
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 Fund's annual total return for
one year in the period might have been grater or less than the average for the
entire period. When considering total return figures for periods shorter than
one year, investors should bear in mind that the Fund seeks long-term
appreciation and that such return may not be representative of the Fund's
return over a longer market cycle. The Fund may also advertise aggregate
total return figures for various periods, representing the cumulative change in
value of an investment in the Fund for the specific period (again reflecting
changes in the Fund's share prices and assuming reinvestment of dividends
and distributions). Aggregate and average total returns may be shown by means
of schedules, charts or graphs, may indicate various components of total return
(i.e., change in value of initial investment, income dividends and capital gain
distributions) and would be quoted separately for each class of the Fund's
shares.
Investors should note that total return figures are based on
historical earnings and are not intended to indicate future performance.
In reports or other communications to investors or in advertising
material, the Fund may describe general economic and market conditions
affecting the Fund and may compare their performance with (1) that of other
mutual funds as listed in the rankings prepared by Lipper Analytical Services,
Inc. or similar investment services that monitor the performance of mutual funds
or as set forth in the publications listed below; (2) with the S&P 500, which is
an unmanaged indexes of common stocks prepared by Standard & Poor's Corporation
or (3) other appropriate indices of investment securities or with data developed
by Counsellors derived from such indices. The Fund may also include
evaluations published by nationally recognized ranking services and by financial
publications that are nationally recognized, such as The Wall Street Journal,
Investor's Daily, Money, Inc., Institutional Investor, Barron's, Fortune, Forbes
Business Week, Morningstar, Inc. and Financial Times.
In reports or other communications to investors or in advertising, the
Fund may also describe the general biography or work experience of the
portfolio managers of the Fund and may include quotations attributable to
the portfolio managers describing approaches taken in managing the Fund's
investments, research methodology, underlying stock selection or the Fund's
investment objective. The Fund may also discuss the continuum of risk and
return relating to different investments, and the potential impact of foreign
stock on a portfolio otherwise composed of domestic securities. In addition,
the Fund may from time to time compare their expense ratios to those of
investment companies with similar objective and policies, as advertised by
Lipper Analytical Services, Inc. or similar investment services that monitor
mutual funds.
Yield. The Fund may also advertise its yield. Under the
rules of the SEC, the Fund advertising yield must calculate yield using the
following formula:
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YIELD = 2 [(a-b+1)6 - 1]
---
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursement).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
Under the foregoing formula, yield is computed by compounding
semi-annually, the net investment income per share earned during a 30 day period
divided by the maximum offering price per share on the last day of the period.
For the purpose of determining the interest earned (variable "a" in the formula)
on debt obligations that were purchased by the Fund at a discount or
premium, the formula generally calls for amortization of the discount or
premium; the amortization schedule will be adjusted monthly to reflect changes
in the market values of the debt obligations.
The yield for the 30 day period ended August 31, 1995 was
- -0.01% for the Growth & Income Fund.
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yields will fluctuate, they cannot be compared with
yields on savings account or other investment alternatives that provide an
agreed to or guaranteed fixed yield for a stated period of time. However, yield
information may be useful to an investor considering temporary investments in
money market instruments. In comparing the yield of one fund to another,
consideration should be given to each fund's investment policies, including the
types of investments made, lengths of maturities of the portfolio securities,
the method used by each fund to compute the yield (methods may differ) and
whether there are any special account charges which may reduce the effective
yield.
The yields on certain obligations are dependent on a variety of
factors, including general market conditions, conditions in the particular
market for the obligation, the financial condition of the issuer, the size of
the offering, the maturity of the obligation and the rates on the issue. The
ratings of Moody's Investors Service, Inc. and Standard & Poor's Corporation
represent their respective opinions as to the quality of the obligations they
undertake to rate. Ratings, however, are general and are not absolute standards
of quality. Consequently, obligations with the same rating, maturity and
interest rate may have different market prices. In addition, subsequent to its
purchase by the Fund, an issue may cease to be rated or may have its rating
reduced below the minimum required for purchase. In such an event, the Fund's
investment adviser or sub-adviser will consider whether the Fund should continue
to hold the obligation.
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<PAGE>
From time to time, in advertisements or in reports to shareholders
with respect to the Fund, the yields of the Fund may be quoted and
compared to those o other mutual funds with similar investment objectives and to
stock or other relevant indices. For example, the yield of the Fund may be
compared to the Donoghue's Money RRB Report(R) of Holliston, MA, 10746, a widely
recognized independent publication that monitors the performance of money market
funds, or to the data prepared by Lipper Analytical Services, Inc., a
widely-recognized independent service that monitors the performance of mutual
funds.
TAXES
The following is only a summary of certain additional tax
considerations generally affecting the Fund and their shareholders that are
not described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or their shareholders, and the
discussion here and in the RBB's Prospectus 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.
The 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, the Fund is
exempt from Federal income tax on its net investment income and realized
capital gains which it distributes to shareholders, provided that it
distributes an amount equal to the sum of (a) 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 (b) at least 90% of its net tax-exempt interest income, if any, for the
year (the "Distribution Requirement") and 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") and derive less than 30% of its gross
income from the sale or other disposition of any of the following investments,
if such investments were held for less than three months: (a) stock or
securities (as defined in Section 2(a)(36) of the 1940 Act); (b) options,
futures, or forward contracts (other than options, futures or forward contracts
on foreign currencies); and (c) foreign currencies (or options, futures or
forward contracts on foreign currencies) but only if such currencies (or
options, futures or forward contracts) are not directly related
28
<PAGE>
to the regulated investment company's principal business of investing in stock
or securities (or options and futures with respect to stocks or securities) (the
"Short-Short Gain Test"). Interest (including accrued original issue discount
and, in the case of debt securities bearing taxable interest income, "accrued
market discount") received by the Fund at maturity or on disposition of a
security held for less than three months will not be treated as gross income
derived from the sale or other disposition of such security for purposes of the
Short-Short Gain Test. However, any other income which is attributable to
realized market appreciation will be treated as gross income from the sale or
other disposition of securities for this purpose.
Future Treasury regulations may provide that currency gains that are
not "directly related" to the 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 Requirements. Income derived by a
regulated investment company from a partnership or trust 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 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 the 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 the 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 the 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 RBB 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.
The 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
29
<PAGE>
gain dividend and is taxable to shareholders as long-term capital gain,
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
the Fund for any taxable year, determined by excluding any net capital loss or
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 RBB to shareholders 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 generally qualify for
the 70% dividends received deduction to the extent of the gross amount of
"qualifying dividends" received by the Fund for the year. Generally, a
dividend will be treated as a "qualifying dividend" if it has been received from
a domestic corporation. However, 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. RBB will
designate the portion, if any, of the distribution made by the Fund that
qualifies for the dividends received deduction in a written notice mailed by RBB
to shareholders not later than 60 days after the close of the Fund's taxable
year.
Investors should note that changes made to the Code by the Tax Reform
Act of 1986 and subsequent legislation have not entirely eliminated distinctions
in the tax treatment of capital gain and ordinary income distributions. The
nominal maximum marginal rate on ordinary income for individuals, trusts and
estates is currently 31%, but for individual taxpayers whose adjusted gross
income exceeds certain threshold amounts (that differ depending on the
taxpayer's filing status) in taxable years beginning before 1996, provisions
phasing out personal exemptions and limiting itemized deductions may cause the
actual maximum marginal rate to exceed 31%. The maximum rate on the net capital
gain of individuals, trusts and estates, however, is in all cases 28%. Capital
gains and ordinary income of corporate taxpayers are taxed at a nominal maximum
rate of 34% (an effective marginal rate of 39% applies in the case of
corporations having taxable income between $100,000 and $335,000). 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.
Distributions of net investment income received by the Fund from
investments in debt securities will be taxable to shareholders as
30
<PAGE>
ordinary income and will not be treated as "qualifying dividends" for purposes
of the dividends received deduction.
A shareholder will recognize gain or loss upon an exchange of shares
of the Fund for shares of another Warburg Pincus Advisor Fund upon
exercise of an exchange privilege. Shareholders may not include the initial
sales charge in the tax basis of the Shares exchanged for shares of another
Warburg Pincus Advisor Fund for the purpose of determining gain or loss on the
exchange, where the Shares exchanged have been held 90 days or less. The sales
charge will increase the basis of the shares acquired through exercise of the
exchange privilege (unless the shares acquired are also exchanged for shares of
another Warburg Pincus Advisor Fund within 90 days after the first
exchange).
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 1-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 the Fund intends to distribute all of
its taxable income currently, no Fund anticipates incurring any liability
for this excise tax. However, investors should note that the Fund may in
certain circumstances be required to liquidate investments in order to make
sufficient distributions to avoid excise tax liability.
RBB 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 failure
to report the receipt of interest or dividend income properly, or (3) who has
failed to certify to RBB that he is not subject to backup withholding or that he
is an "exempt recipient."
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 the 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, the Fund may be subject to the tax laws of such states or
localities.
DESCRIPTION OF SHARES
---------------------
31
<PAGE>
The Fund has authorized capital of thirty billion shares of Common
Stock, $.001 par value per share, of which 12.2 billion shares are currently
classified as follows: 100 million shares are classified as Class A Common Stock
(Growth & Income), 100 million shares are classified as Class B Common Stock,
100 million shares are classified as Class C Common Stock (Balanced), 100
million shares are classified as Class D Common Stock (Tax-Free), 500 million
shares are classified as Class E Common Stock (Money), 500 million shares are
classified as Class F Common Stock (Municipal Money), 500 million shares are
classified as Class G Common Stock (Money), 500 million shares are classified as
Class H Common Stock (Municipal Money), 1 billion shares are classified as Class
I Common Stock (Money), 500 million shares are classified as Class J Common
Stock (Municipal Money), 500 million shares are classified as Class K Common
Stock (U.S. Government Money), 1,500 million shares are classified as Class L
Common Stock (Money), 500 million shares are classified as Class M Common Stock
(Municipal Money), 500 million shares are classified as Class N Common Stock
(U.S. Government Money), 500 million shares are classified as Class O Common
Stock (N.Y. Money), 100 million shares are classified as Class P Common Stock
(Government), 100 million shares are classified as Class Q Common Stock, 500
million shares are classified as Class R Common Stock (Municipal Money), 500
million shares are classified as Class S Common Stock (U.S. Government Money),
500 million shares are classified as Class T Common Stock (International), 500
million shares are classified as Class U Common Stock (High Yield), 500 million
shares are classified as Class V Common Stock (Emerging), 100 million shares are
classified as Class W Common Stock, 50 million shares are classified as Class X
Common Stock (U.S. Core Equity), 50 million shares are classified as Class Y
Common Stock (U.S. Core Fixed Income), 50 million shares are classified as Class
Z Common Stock (Global Fixed Income), 50 million shares are classified as Class
AA Common Stock (Municipal Bond), 50 million shares are classified as Class BB
Common Stock (BEA Balanced), 50 million shares are classified as Class CC Common
Stock (Short Duration), 100 million shares are classified as Class DD Common
Stock (Growth & Income Series 2), 100 million shares are classified as Class EE
Common Stock (Balanced Series 2), 700 million shares are classified as Class
Alpha 1 Common Stock (Money), 200 million shares are classified as Class Alpha 2
Common Stock (Municipal Money), 500 million shares are classified as Class Alpha
3 Common Stock (U.S. Government Money), 100 million shares are classified as
Class Alpha 4 Common Stock (N.Y. Money), 1 million shares are classified as
Class Beta 1 Common Stock (Money), 1 million shares are classified as Class Beta
2 Common Stock (Municipal Money), 1 million shares are classified as Class Beta
3 Common Stock (U.S. Government Money), 1 million shares are classified as Class
Beta 4 Common Stock (N.Y. Money), 1 million shares are classified as Gamma 1
Common Stock (Money), 1 million shares are classified as Gamma 2 Common Stock
(Municipal Money), 1 million shares are classified as Gamma 3 Common Stock (U.S.
Government Money), 1 million shares are classified as Gamma 4 Common Stock (N.Y.
Money), 1 million shares are classified as Delta 1 Common Stock (Money), 1
million shares are classified as Delta 2 Common Stock (Municipal Money), 1
million shares are classified as Delta 3 Common Stock (U.S. Government Money), 1
million shares are classified as Delta 4 Common Stock (N.Y. Money), 1 million
shares are classified as Epsilon 1 Common Stock (Money), 1 million shares are
classified as Epsilon 2 Common Stock (Municipal Money), 1 million shares are
classified as Epsilon 3 Common Stock (U.S. Government Money), 1 million shares
are classified as Epsilon 4 Common Stock (N.Y. Money), 1 million shares are
classified as Zeta 1
32
<PAGE>
Common Stock (Money), 1 million shares are classified as Zeta 2 Common Stock
(Municipal Money), 1 million shares are classified as Zeta 3 Common Stock (U.S.
Government Money), 1 million shares are classified as Zeta 4 Common Stock (N.Y.
Money), 1 million shares are classified as Eta 1 Common Stock (Money), 1 million
shares are classified as Eta 2 Common Stock (Municipal Money), 1 million shares
are classified as Eta 3 Common Stock (U.S. Government Money), 1 million shares
are classified as Eta 4 Common Stock (N.Y. Money), 1 million shares are
classified as Theta 1 Common Stock (Money), 1 million shares are classified as
Theta 2 Common Stock (Municipal Money), 1 million shares are classified as Theta
3 Common Stock (U.S. Government Money), and 1 million shares are classified as
Theta 4 Common Stock (N.Y. Money). Shares of the Class A, C and D Common Stock
constitute the No Load Classes of the Growth & Income, Balanced and Tax Free
Funds, respectively. Under RBB's charter, the Board of Directors has the power
to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate
"families": the RBB Family, the Warburg Pincus Family, the Cash Preservation
Family, the Sansom Street Family, the Bedford Family, the Bradford Family, the
BEA Family, the Janney Montgomery Scott Money Family, the Beta Family, the Gamma
Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family
and the Theta Family. The RBB Family represents interests in one non-money
market portfolio as well as the Money Market and Municipal Money Market
Portfolios; the Warburg Pincus Family represents interests in the Growth &
Income, Balanced, and Tax Free Funds; the Cash Preservation Family represents
interests in the Money Market and Municipal Money Market Portfolios; the Sansom
Street Family represents interests in the Money Market, Municipal Money Market
and Government Obligations Money Market Portfolios; Bedford Family represents
interests in the Money Market, Municipal Money Market, Government Obligations
Money Market and New York Municipal Money Market Portfolios; the Bradford Family
represents interests in the Municipal Money Market and Government Obligations
Money Market Portfolios; the BEA Family represents interests in nine non-money
market portfolios; the Janney Montgomery Scott Family and the Beta, Gamma,
Delta, Epsilon, Zeta, Eta and Theta Families represent interests in the Money
Market, Municipal Money Market, Government Obligations Money Market and New York
Municipal Money Market Portfolios.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
RBB does not currently intend to hold annual meetings of shareholders
except as required by the 1940 Act or other applicable law. RBB's amended
By-Laws provide that shareholders collectively owning at least ten percent of
the outstanding shares of all classes of Common Stock of RBB 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, RBB will assist in shareholder
communication in such matters.
As stated in the Prospectus, holders of shares of each class of RBB
will vote in the aggregate and not by class on all matters, except where
33
<PAGE>
otherwise required by law. Further, shareholders of RBB will vote in the
aggregate and not by portfolio except as otherwise required by law or when the
Board of Directors determines that the matter to be voted upon affects only the
interests of the shareholders of a particular portfolio. Rule 18f-2 under the
1940 Act provides that any matter required to be submitted by the provisions of
such Act or applicable state law, or otherwise, to the holders of the
outstanding securities of an investment company such as RBB shall not be deemed
to have been effectively acted upon unless approved by the holders of a majority
of the outstanding shares of each portfolio affected by the matter. Rule 18f-2
further provides that a portfolio shall be deemed to be affected by a matter
unless it is clear that the interests of each portfolio in the matter are
identical or that the matter does not affect any interest of the portfolio.
Under the Rule, the approval of an investment advisory agreement or any change
in a fundamental investment policy would be effectively acted upon with respect
to a portfolio only if approved by the holders of a majority of the outstanding
voting securities of such portfolio. However, the Rule also provides that the
ratification of the selection of independent public accountants, the approval of
principal underwriting contracts and the election of directors are not subject
to the separate voting requirements and may be effectively acted upon by
shareholders of an investment company voting without regard to portfolio.
Notwithstanding any provision of Maryland law requiring a greater vote
of shares of RBB's common stock (or of any class voting as a class) in
connection with any corporate action, unless otherwise provided by law, (for
example by Rule 18f-2 discussed above) or by RBB's Articles of Incorporation,
RBB may take or authorize such action upon the favorable vote of the holders of
more than 50% of all of the outstanding shares of Common Stock voting without
regard to class (or portfolio).
MISCELLANEOUS
Counsel. The law firm of Ballard Spahr Andrews & Ingersoll, 1735
Market Street, 51st Floor, Philadelphia, Pennsylvania 19103 serves as counsel to
RBB, PIMC, PNC Bank and PFPC. The law firm of Drinker Biddle & Reath,
1100 Philadelphia National Bank Building, Broad and Chestnut Streets,
Philadelphia, Pennsylvania 19107, serves as counsel to RBB's independent
directors.
Independent Accountants. Coopers & Lybrand L.L.P., 2400 Eleven Penn
Center, Philadelphia, Pennsylvania 19103, serves as RBB's independent
accountants. RBB's financial statements which appear in this Statement of
Additional Information have been audited by Coopers & Lybrand L.L.P., as set
forth in their report, which also appears in this Statement of Additional
Information, and have been included herein in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
Control Persons. As of November 6, 1995, to RBB's 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 RBB
indicated below. See "Description of Shares" above. RBB does not know
whether such persons also beneficially own such shares.
34
<PAGE>
PORTFOLIO NAME AND ADDRESS PERCENT OWNED
- --------- ---------------- -------------
Warburg Pincus Charles Schwab & Co., Inc. 32.97
Growth & Income Fund Reinvest Account
(Class A) Attn: Mutual Funds Dept.
101 Montgomery Street
San Francisco, CA 94104-4122
National Financial Services Corp. 12.78
FBO Customers
P.O. Box 3908
Church Street Station
New York, New York 10008-3908
Warburg Pincus Charles Schwab & Co., Inc. 39.41
Balanced Fund Reinvest Account
(Class C) Attn: Mutual Funds Dept.
101 Montgomery Street
San Francisco, CA 94104-4122
National Financial Services Corp. 19.15
FBO Customers
P.O. Box 3908
Church Street Station
New York, New York 10008-3908
Warburg Pincus Gruntal Co. 11.30
Tax Free Fund FBO 995-10702-19
(Class D) 14 Wall Street
New York, New York 10005-2176
Gruntal Co. 10.20
FBO 995-16852-14
14 Wall Street
New York, New York 10005-2176
RBB Money Market Luanne M. Garvey and Robert J. 13.748
Portfolio Garvey
(Class E) 2729 Woodland Avenue
Trooper, PA 19403
PNC Bank, NA Custodian FBO 13.048
Harold T. Erfer
414 Charles Lane
Wynnewood, PA 19096
PNC Bank, NA Custodian FBO Karen 16.954
M. McElhinny and Contribution
Account
4943 King Arthur Drive
Erie, PA 16506
35
<PAGE>
PORTFOLIO NAME AND ADDRESS PERCENT OWNED
- --------- ---------------- -------------
E.L. Haines Jr. and Betty J. 7.862
Haines
2341 Pinebluff Drive
Dallas, TX 75228
John Robert Estrada and 13.600
Shirley Ann Estrada
1700 Raton Drive
Arlington, TX 76018
Eric Levine and Linda & Howard 29.640
Levine
67 Lanes Pond Road
Howell, NJ 07731
RBB Municipal Money William B. Pettus Trust 12.614
Market Portfolio Augustine W. Pettus Trust
(Class F) 827 Winding Path Lane
St. Louis, MO 63021- 6635
Seymour Fein 87.385
P.O. Box 486
Tremont Post Office
Bronx, NY 10457- 0486
Cash Preservation Money Jewish Family and Children's 54.415
Market Portfolio Agency of Philadelphia
(Class G) Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
Helen M. Ellenby 5.866
503 Falcon Lane
West Chester, PA 19382-5716
Lynda R. Succ Trustee for in Trust 11.363
under The Lynda R. Campbell Caring
Trust
935 Rutger Street
St. Louis, MO 63104
Cash Preservation Kenneth Farwell and Valerie 7.020
Municipal Money Market Farwell Jt. Ten
Portfolio 3854 Sullivan
(Class H) St. Louis, MO 63107
Larnie Johnson and Mary Alice 6.449
Johnson
4927 Lee Avenue
St. Louis, MO 63115-1726
36
<PAGE>
PORTFOLIO NAME AND ADDRESS PERCENT OWNED
- --------- ---------------- -----------
Deborah C. Brown of Trustee 60.191
for Barbara J.C. Custis Trustee
The Crowe Trust
9921 West 128th Terrace
Overland Park, KS 66213
Sansom Street Money Wasner & Co. 14.119
Market Portfolio FAO Paine Webber and Managed
(Class I) Assets Sundry Holdings
Attn: Joe Domizio
200 Stevens Drive
Lester, PA 19113
Saxon and Co. 75.097
FBO Paine Webber
P.O. Box 7780 1888
Philadelphia, PA 19182
Robertson Stephens & Co. 10.432
FBO Exclusive Benefit Investors
555 California St./#2600
San Francisco, CA 94104
Bedford New York Laurel Holding Co. 7.7
Municipal Money Market P.O. Box 2021
(Class O) Jamesport, NY 11947
BEA High Yield Portfolio Chase Manhattan Bankers Trustee 17.943
(Class U) for Kendale Company Master Pension
Plan
Attn: Mark Tesoriero
3 Metrotech Center
6th Floor
Brooklyn, NY 11245
Temple Inland Master Retirement 5.902
Trust
303 South Temple Drive
Diboll, TX 75941
State of Oregon 55.342
Treasury Department
159 State Capital Building
Salem, OR 97310
BEA Emerging Markets Wachovia Bank North Carolina Trust 8.571
Equity Portfolio for Carolina Power & Light Co.
(Class V) Supplemental Retirement Trust
301 N. Main Street
Winston-Salem, NC 27101
37
<PAGE>
PORTFOLIO NAME AND ADDRESS PERCENT OWNED
- --------- ---------------- -------------
Northern Trust Company Trustee for 19.696
Texas Instruments Employee Plan
P.O. Box 92956
Chicago, IL 60675- 2956
Hall Family Foundation 19.836
P.O. Box 419580
Kansas City, MO 64208
Northern Trust 11.799
Trustee for Pillsbury
P.O. Box 92956
Chicago, IL 60675
Amherst H. Wilder Foundation 5.829
919 Lafond Avenue
St. Paul, MN 55104
BEA US Core Equity Bank of New York 61.989
Portfolio Trust APU Buckeye Pipeline
(Class X) One Wall Street
New York, NY 10286
Werner & Pfleiderer Pension 11.181
Plan Employees
663 E. Crescent Avenue
Ramsey, NJ 07446
BEA Associates 10.151
FAO Profit Sharing Trust
153 E. 53rd Street
New York, NY 10022
BEA Associates 6.023
FAO Pension Trust
153 E. 53rd Street
New York, NY 10022
BEA US Core Fixed Income New England UFCW & Employers' 31.493
Portfolio Pension Fund Board of Trustees
(Class Y) 161 Forbes Road, Suite 201
Braintree, MA 02184
Bankers Trust 24.555
Trust Pechniney Corp. Pension
Master Trust
34 Exchange Place
4th Floor
Jersey City, NJ 07302
Kollmorgen Corporation 5.773
Pension Trust
1601 Thapelo Road
Waltham, MA 02154
38
<PAGE>
PORTFOLIO NAME AND ADDRESS PERCENT OWNED
- --------- ---------------- -------------
Patterson & Co. 21.176
P.O. Box 7829
Philadelphia, PA 19102
BEA Global Fixed Income Sunkist Master Trust 64.337
Portfolio 14130 Riverside Drive
(Class Z) Sherman Oaks, CA 91423
Key Trust Co. of Ohio 35.661
FBO Eastern Enterp. Collective
Inv. Trust
P.O. Box 901536
Cleveland, OH 44202-1559
BEA Municipal Bond Fund William A. Marquard 29.461
Portfolio 2199 Maysville Rd.
(Class AA) Carlisle, KY 40311
Arnold Leon 10.294
c/o Fiduciary Trust Company
P.O. Box 3199
Church Street Station
New York, NY 10008
Edgar E. Sharp 7.331
P.O. Box 8338
Longboat Key, FL 34228
John C. Cahill 13.513
c/o David Holmgren
30 White Birch Lane
Cots Cob, CT 06870
Irwin Bard 7.247
1750 North East 183rd St. North
Miami Beach, FL 33160
Warburg Pincus Growth & Connecticut General Life Ins. Co. 98.68
Income Series 2 on behalf of its separate accounts
(Class DD) 55E 55F 55G c/o Melissa Spencer
M110
CIGNA Corp. P.O. Box 2975
Hartford, CT 06104-2975
Warburg Pincus Balanced Warburg Pincus Counsellors Inc. 85.15
Fund Series 2 Attn: Stephen Distler
(Class EE) 466 Lexington Avenue
10th Floor
New York, New York 10017-3140
Janney Montgomery Scott Janney Montgomery Scott 100
Money Market 1801 Market Street
Portfolio Philadelphia, PA 19103-1675
(Class Alpha 1)
39
<PAGE>
Janney Montgomery Scott Janney Montgomery Scott 100
Municipal Money Market 1801 Market Street
Portfolio Philadelphia, PA 19103-1675
(Class Alpha 2)
Janney Montgomery Scott Janney Montgomery Scott 100
Government Obligations 1801 Market Street
Money Market Philadelphia, PA 19103-1675
Portfolio
(Class Alpha 3)
Janney Montgomery Scott Janney Montgomery Scott 100
New York Municipal Money 1801 Market Street
Market Portfolio Philadelphia, PA 19103-1675
(Class Alpha 4)
As of such date, no person owned of record or, to RBB's
knowledge, beneficially, more than 25% of the outstanding shares of all classes
of RBB.
As of the above date, directors and officers as a group owned
less than one percent of the shares of RBB.
Litigation. There is currently no material litigation affecting
RBB.
40
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF NET ASSETS
August 31, 1995
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- --------------
COMMON STOCKS AND WARRANTS (82.2%)
Aerospace (1.3%)
Allied-Signal, Inc. 325,000 $ 14,421,875
--------------
Agriculture Production Corporations (0.4%)
Terra Industries, Inc. 320,300 4,284,013
--------------
Air Conditioning & Heating (0.9%)
Management Systems Johnson Controls, Inc. 170,000 10,348,750
--------------
Automobiles (1.3%)
Navistar International** 1,130,000 14,690,000
--------------
Banking (3.2%)
First Interstate Bancorp 368,000 35,144,000
--------------
Chemicals (1.4%)
PPG Industries, Inc. 355,000 15,176,250
--------------
Construction (2.2%)
Stone & Webster, Inc. 655,000 24,235,000
--------------
Electronic Computers (6.2%)
GRC International, Inc.** 667,000 16,341,500
Honeywell, Inc. 655,000 28,656,250
International Business Machines Corp. 221,000 22,845,875
--------------
67,843,625
--------------
Electronics (1.2%)
Motorola, Inc. 175,000 13,081,250
--------------
Entertainment (3.8%)
Acclaim Entertainment, Inc.** 1,420,000 35,855,000
Boardwalk Casino, Inc.** 525,000 4,528,125
Boardwalk Casino, Inc. Warrants
(expire 02/14/98)** 375,000 1,453,125
--------------
41,836,250
--------------
Financial Services (7.0%)
BankAmerica Corp. 655,000 37,007,500
Crestar Financial Corp. 270,000 15,221,250
Loyola Capital Corp. 247,500 8,662,500
Midlantic Corp. 302,000 15,553,000
--------------
76,444,250
--------------
Insurance (3.3%)
Chubb Corp. 150,000 13,687,500
USF&G Corp. 1,234,000 22,366,250
--------------
36,053,750
--------------
See Accompanying Notes to Financial Statements.
F-1
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- --------------
COMMON STOCKS AND WARRANTS (CONT'D)
Manufacturing (4.5%)
Corning Glass, Inc. 909,000 $ 29,656,125
Rauma OY Sponsored ADR** 102,900 2,443,875
Trinity Industries, Inc. 500,000 16,187,500
Whitman Corp. 50,000 1,006,250
--------------
49,293,750
--------------
Medical & Medical Services (1.9%)
Acuson Corp.** 210,000 2,756,250
Foxmeyer Health Corp.** 689,000 17,741,750
--------------
20,498,000
--------------
Metals & Mining (19.0%)
Echo Bay Mines Ltd. 500,000 5,187,500
Hecla Mining Co.** 1,940,000 22,310,000
Homestake Mining Co. 2,282,500 37,661,250
Inco Ltd. 985,000 34,475,000
Newmont Mining Corp. 903,000 39,280,500
Pegasus Gold, Inc.** 1,419,000 17,737,500
Placer Dome, Inc. 1,519,600 39,699,550
Prime Resources Group, Inc.** 1,400,000 11,210,360
--------------
207,561,660
--------------
Oil (1.0%)
Quaker State Corp. 715,000 10,725,000
--------------
Oil Services (4.4%)
Baker Hughes, Inc. 871,500 19,608,750
Halliburton Co. 521,000 22,077,375
Occidental Petroleum Corp. 280,000 6,090,000
--------------
47,776,125
--------------
Steel (13.0%)
AK Steel Holding Corp.** 454,000 14,471,250
Bethlehem Steel Corp.** 1,581,000 23,122,125
CBI Industries, Inc. 1,160,000 28,420,000
Inland Steel Industries, Inc. 585,000 16,014,375
LTV Corp.** 1,122,500 17,539,062
USX-US Steel Group 1,050,000 34,387,500
WHX Corp.** 623,000 7,865,376
--------------
141,819,688
--------------
Telecommunications (5.6%)
Airtouch Communications, Inc.** 363,400 11,810,500
Comcast Corp. Special Class A Non-Voting 1,000,000 21,375,000
Qualcomm, Inc.** 280,000 13,650,000
Tele-Communications, Inc. Class A** 800,000 14,800,000
--------------
61,635,500
--------------
See Accompanying Notes to Financial Statements.
F-2
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- ---------------------------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF NET ASSETS (CONCLUDED)
August 31, 1995
- ---------------------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- --------------
<S> <C> <C>
COMMON STOCKS AND WARRANTS (CONT'D)
Tire & Rubber (0.4%)
Cooper Tire & Rubber Co. 160,000 $ 4,160,000
--------------
Transportation (0.2%)
Consolidated Freightways, Inc. 100,000 2,587,500
--------------
TOTAL COMMON STOCKS AND WARRANTS (Cost $781,860,824) 899,616,236
--------------
</TABLE>
<TABLE>
<CAPTION>
MATURITY PAR (000)
-------- ---------
<S> <C> <C> <C>
UNITED STATES TREASURY OBLIGATIONS (2.7%)
U.S. Treasury Bills 5.40% (Cost $29,973,000) 09/07/95 $ 30,000 29,973,000
--------------
REPURCHASE AGREEMENTS (13.8%)
Greenwich Capital Markets Inc. 5.83% 09/01/95 151,138 151,138,000
(Agreement dated 08/31/95 to be repurchased at
$151,162,476, collateralized by $150,000,000 U.S.
Treasury Notes 7.50% due 01/31/97. Market value of
collateral is $154,312,500).
(Cost $151,138,000)
--------------
TOTAL INVESTMENTS AT VALUE (Cost $962,971,826*) (98.7%) 1,080,727,236
OTHER ASSETS IN EXCESS OF LIABILITIES (1.3%) 14,368,010
--------------
NET ASSETS (Applicable to 63,295,201 Common Shares and
3,472,875 Advisor Shares) (100.0%) $1,095,095,246
--------------
--------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
COMMON SHARE ($1,038,193,292 : 63,295,201) $16.40
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER ======
ADVISOR SHARE ($56,901,954 : 3,472,875) $16.38
======
</TABLE>
* Cost for Federal income tax purposes at August 31, 1995, is $963,365,013. The
gross appreciation (depreciation) on a tax basis is as follows:
Gross Appreciation $126,262,394
Gross Depreciation (8,900,171)
------------
Net Appreciation $117,362,223
------------
------------
** Non-income producing.
See Accompanying Notes to Financial Statements.
F-3
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF OPERATIONS
For the Year Ended August 31, 1995
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 10,389,100
Interest 11,731,546
------------
Total investment income 22,120,646
------------
EXPENSES:
Investment advisory fees 5,824,947
Administration fees 1,941,649
Distribution fees 71,233
Custodian fees 162,248
Transfer agent fees 1,060,279
Legal fees 63,384
Audit fees 55,268
Registration fees 264,509
Insurance expense 23,560
Printing expense 86,973
Other expenses 26,827
------------
Total expenses 9,580,877
------------
Net investment income 12,539,769
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investment transactions 41,087,749
Futures contracts (2,798,582)
------------
38,289,167
------------
Net change in unrealized appreciation of investments 96,772,046
------------
Net gain on investments and future contracts 135,061,213
------------
Net increase in net assets resulting from operations $147,600,982
------------
------------
See Accompanying Notes to Financial Statements.
F-4
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- --------------------------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
August 31, 1995 August 31, 1994
--------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 12,539,769 $ 572,031
Net gain on investments and future contracts 135,061,213 17,971,937
--------------- ---------------
Net increase in net assets resulting from operations 147,600,982 18,543,968
--------------- ---------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
Common shares ($.1824 and $.0785, respectively,
per share) (9,949,389) (572,031)
Advisor shares ($.0459 per share for 1995) (137,213) --
Distributions to shareholders from net realized capital
gains:
Common shares ($.1834 and $3.9751, respectively,
per share) (8,067,592) (10,054,939)
--------------- ---------------
Total distributions to shareholders (18,154,194) (10,626,970)
--------------- ---------------
Net capital share transactions 554,990,830 342,051,251
--------------- ---------------
Total increase in net assets 684,437,618 349,968,249
Net assets:
Beginning of year 410,657,628 60,689,379
--------------- ---------------
End of year $ 1,095,095,246 $ 410,657,628
--------------- ---------------
--------------- ---------------
</TABLE>
See Accompanying Notes to Financial Statements.
F-5
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS
August 31, 1995
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----------
COMMON STOCKS (60.1%)
U.S. COMMON STOCKS
Aerospace (0.2%)
Allied-Signal, Inc. 300 $ 13,313
-----------
Banking (2.5%)
Bank of Boston Corp. 2,200 96,800
First Interstate Bancorp 400 38,200
-----------
135,000
-----------
Business Services (1.2%)
Paging Network, Inc.** 1,600 63,200
-----------
Chemicals (0.2%)
PPG Industries, Inc. 300 12,825
-----------
Communications & Media (1.1%)
Infinity Broadcast Corp.** 1,600 57,400
-----------
Computer & Office Equipment (2.1%)
Shared Medical Systems Corp. 1,800 66,375
Synopsys, Inc.** 800 46,400
-----------
112,775
-----------
Construction (0.7%)
Stone & Webster, Inc. 1,000 37,000
-----------
Electronic Computers (7.4%)
Cabletron Systems, Inc.** 500 26,438
GRC International, Inc.** 2,100 51,450
Honeywell, Inc. 800 35,000
International Business Machines Corp. 300 31,013
Linear Technology Corp. 400 32,400
Netscape Communications Corp.** 1,500 74,250
Platinum Technology, Inc. 2,400 56,700
System Software Associates, Inc. 800 25,250
Xilinx, Inc.** 1,500 64,312
-----------
396,813
-----------
See Accompanying Notes to Financial Statements.
F-6
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----------
COMMON STOCKS (CONT'D)
Electronics (1.5%)
Motorola, Inc. 200 $ 14,950
Thermospectra Corp.** 3,500 62,563
-----------
77,513
-----------
Entertainment (1.2%)
Acclaim Entertainment, Inc.** 1,500 37,875
Boardwalk Casino, Inc.** 3,000 25,875
-----------
63,750
-----------
Financial Services (5.2%)
BankAmerica Corp. 700 39,550
Citicorp Bank 800 53,100
Crestar Financial Corp. 500 28,188
Midlantic Corp. 300 15,450
Olympic Financial Ltd.** 3,300 75,488
United Companies Financial Corp. 1,100 68,475
-----------
280,251
-----------
Insurance (1.0%)
Chubb Corp. 300 27,375
USF&G Corp. 1,300 23,563
-----------
50,938
-----------
Manufacturing (3.8%)
Allied Products Corp. 1,500 32,438
Corning Glass, Inc. 800 26,100
Maxim Integrated Products, Inc. 1,000 76,250
Roper Industries, Inc. 1,500 51,000
Trinity Industries, Inc. 500 16,188
-----------
201,976
-----------
Medical & Medical Services (1.0%)
Foxmeyer Health Corp.** 2,000 51,500
-----------
See Accompanying Notes to Financial Statements.
F-7
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----------
COMMON STOCKS (CONT'D)
Metals & Mining (5.3%)
Coeur D'Alene Mines Corp. 2,100 $ 40,163
Hecla Mining Co.** 3,000 34,500
Homestake Mining Co. 2,100 34,650
Inco LTD. 1,000 35,000
Newmont Mining Corp. 1,000 43,500
Pegasus Gold, Inc.** 2,500 31,250
Placer Dome, Inc. 1,500 39,188
Prime Resources Group, Inc.** 3,000 24,022
-----------
282,273
-----------
Office Furniture (1.3%)
Viking Office Products, Inc.** 1,900 68,400
-----------
Oil (3.4%)
Barrett Resources Corp.** 2,500 53,750
Petroleum Geo Services** 2,500 64,063
Quaker State Corp. 500 7,500
Texas Meridian Resources Corp.** 5,000 55,000
-----------
180,313
-----------
Oil Services (0.8%)
Baker Hughes, Inc. 1,000 22,500
Halliburton Co. 500 21,188
-----------
43,688
-----------
Paper Mills (0.8%)
Champion International Corp. 800 45,300
-----------
Pharmaceuticals (1.8%)
Al Laboratories, Inc. Class A 2,000 42,000
Gilead Sciences, Inc.** 2,500 54,375
-----------
96,375
-----------
Retail--Retail Stores (1.1%)
Borders Group, Inc.** 3,000 60,750
-----------
Retail--Women's Clothing Stores (1.0%)
Talbots, Inc. 1,500 51,750
-----------
See Accompanying Notes to Financial Statements.
F-8
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----------
COMMON STOCKS (CONT'D)
Steel (3.0%)
Bethlehem Steel Corp.** 2,000 $ 29,250
CBI Industries, Inc. 1,000 24,500
LTV Corp. 1,500 23,438
Republic Engineered Steels** 3,000 20,625
USX-US Steel Group 1,300 42,575
WHX Corp.** 1,600 20,200
-----------
160,588
-----------
Telecommunications (3.2%)
Airtouch Communications, Inc.** 300 9,750
Comcast Corp. Special Class A Non-Voting 1,000 21,375
Mobile Telecommunications Technologies Corp.** 1,900 58,425
Qualcomm, Inc.** 300 14,625
Tele-Communications, Inc. Series A Liberty
Media Group** 2,000 53,125
Tele-Communications, Inc. Class A** 800 14,800
-----------
172,100
-----------
Textiles (0.6%)
Westpoint Stevens, Inc.** 1,500 33,562
-----------
FOREIGN COMMON STOCKS
Australia (0.4%)
BTR Nylex Limited 8,500 22,610
-----------
Austria (0.7%)
Va Technologie AG 330 36,446
-----------
Denmark (1.0%)
International Service System B 1,900 51,716
-----------
France (0.8%)
Bouygues 240 29,196
Compagnie Francaise de Petroleum Total 280 16,443
-----------
45,639
-----------
Hong Kong (0.6%)
Jardine Matheson Holdings LTD. 4,400 31,680
-----------
See Accompanying Notes to Financial Statements.
F-9
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- ---------------------------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- ---------------------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----------
COMMON STOCKS (CONT'D)
<S> <C> <C>
Israel (0.4%)
Clal Electronics Industries LTD.** 180 $ 21,505
-----------
Japan (1.9%)
Keyence Corp. 800 102,301
-----------
Malaysia (0.5%)
Westmont B. 6,000 25,496
-----------
Sweden (0.6%)
Astra B Free 960 31,180
-----------
United Kingdom (1.8%)
Central European Media Enterprises LTD.** ADR 2,700 67,837
Takare PLC 8,200 26,715
-----------
94,552
-----------
TOTAL COMMON STOCKS (Cost $2,772,251) 3,212,478
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
-------- ----- ----------
<S> <C> <C> <C>
AGENCY OBLIGATIONS (0.2%)
Government National Mortgage Association 6.50% (Cost $12,661) 08/15/03 $ 13 $ 12,858
----------
UNITED STATES TREASURY OBLIGATIONS (26.4%)
U.S. Treasury Notes
5.875% 05/31/96 300 300,390
6.875% 10/31/96 200 202,572
8.125% 02/15/98 20 21,007
8.50% 11/15/00 800 885,536
----------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $1,384,454) 1,409,505
----------
</TABLE>
See Accompanying Notes to Financial Statements.
F-10
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- --------------------------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ----- ----------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS (8.8%)
State Street Bank & Trust Co. 5.78% 09/01/95 468 $ 468,000
(Agreement dated 08/31/95 to be repurchased at $468,081,
collateralized by $480,000 U.S Treasury Notes 6.25% due
08/31/96. Market value of collateral is $481,800.) (Cost
$468,000)
----------
TOTAL INVESTMENTS AT VALUE (Cost $4,637,366*) (95.6%) 5,102,841
OTHER ASSETS IN EXCESS OF LIABILITIES (4.4%) 239,008
----------
NET ASSETS (Applicable to 480,061 Common Shares and 110 Advisor Shares)
(100.0%) $5,341,849
----------
----------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
COMMON SHARE ($5,340,625 : 480,061) $11.12
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
ADVISOR SHARE ($1,224 : 110) $11.13
======
</TABLE>
* Cost for Federal income tax purposes at August 31, 1995 is $4,641,506. The
gross appreciation (depreciation) on a tax basis is as follows:
Gross Appreciation $487,617
Gross Depreciation (26,282)
--------
Net Appreciation $461,335
--------
--------
** Non-income producing.
See Accompanying Notes to Financial Statements.
F-11
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF OPERATIONS
For the Year Ended August 31, 1995
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 52,298
Dividends 11,828
Foreign taxes withheld (202)
--------
Total investment income 63,924
--------
EXPENSES:
Investment advisory fees 14,729
Administration fees 3,991
Distribution fees 4,155
Custodian fees 21,198
Transfer agent fees 27,158
Registration fees 15,075
Printing expense 10,393
Other expenses 4,330
--------
101,029
Less fees waived (17,123)
Less expense reimbursement by advisor (58,364)
--------
Total expenses 25,542
--------
Net investment income 38,382
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investment transactions 115,816
Foreign currency related transactions (679)
--------
115,137
--------
Net change in unrealized appreciation (depreciation) on:
Investments 380,862
Foreign currency related transactions (7)
--------
380,855
--------
Net gain on investments and foreign currency
transactions 495,992
--------
Net increase in net assets resulting from operations $534,374
--------
--------
See Accompanying Notes to Financial Statements.
F-12
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- -----------------------------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
August 31, 1995 August 31, 1994
--------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 38,382 $ 29,100
Net gain on investments 495,992 23,057
--------------- ---------------
Net increase in net assets resulting from operations 534,374 52,157
--------------- ---------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
Common shares ($.3136 and $.4586, respectively, per share) (38,909) (31,049)
Distributions to shareholders from net realized capital
gains:
Common shares ($1.5069 and $.9794, respectively, per
share) (111,945) (63,790)
--------------- ---------------
Total distributions to shareholders (150,854) (94,839)
--------------- ---------------
Net capital share transactions 4,150,301 88,893
--------------- ---------------
Total increase in net assets 4,533,821 46,211
Net Assets:
Beginning of year 808,028 761,817
--------------- ---------------
End of year $ 5,341,849 $ 808,028
--------------- ---------------
--------------- ---------------
</TABLE>
See Accompanying Notes to Financial Statements.
F-13
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- --------------------------------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR FUNDS
FINANCIAL HIGHLIGHTS (D)
(For a Share Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------------------------------
Warburg Pincus Warburg Pincus
Growth & Income Balanced
Fund Fund
--------------- -----------------
<S> <C> <C>
For the Period
May 15, 1995 For the Period
(Commencement July 31, 1995
of Operations) (Commencement
to of Operations) to
August 31, 1995 August 31, 1995
--------------- -----------------
<CAPTION>
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $14.87 $10.72
Income From Investment Operations:
Net Investment Income 0.0236 0.0170
Net Gains (Losses) on Securities (both realized and
unrealized) 1.5323 0.3930
Total from Investment Operations 1.5559 0.4100
Less Distributions:
Dividends (from net investment income) (0.0459) 0.0000
------ -----
Total Distributions (0.0459) 0.0000
NET ASSET VALUE, END OF PERIOD $16.38 $11.13
Total Returns 10.49%(c) 3.82%(c)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $56,902 $1
Ratios of Expenses to Average Net Assets 1.92%(b) 1.76%(a)(b)
Ratios of Net Investment Income to Average Net Assets 0.43%(b) 2.00%(b)
Portfolio Turnover Rate 109%(b) 107%(b)
</TABLE>
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Balanced Fund would have been 628.47% annualized
for the period ended August 31, 1995.
(b) Annualized.
(c) Not Annualized.
(d) Financial Highlights relate solely to the Advisor Class of shares within the
Fund.
See Accompanying Notes to Financial Statements.
TAX STATUS OF 1995 DIVIDENDS (unaudited)
Dividends paid by the Warburg Pincus Growth & Income Fund Advisor shares
taxable as ordinary income amounted to $0.0459 per share. 100.0% of ordinary
income dividends qualify for the dividend received deduction available to
corporate shareholders for U.S. income tax purposes.
Because the Fund's fiscal year is not the calendar year, amounts to be used
by calendar year taxpayers on their Federal return will be reflected on Form
1099-DIV and will be mailed in January 1996.
F-14
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR FUNDS
NOTES TO FINANCIAL STATEMENTS
August 31, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The RBB Fund, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Company was incorporated in Maryland on February 29, 1988, and currently has
seventeen investment Portfolios, two of which are included in these financial
statements.
The Company has authorized capital of thirty billion shares of common stock
of which 12.2 billion are currently classified into sixty-one classes. Each
class represents an interest in one of seventeen investment portfolios of the
Company, fifteen of which are currently in operation. The classes have been
grouped into fifteen separate "families", eight of which have begun investment
operations including the Warburg Pincus Family. The Warburg Pincus Family
represents interests in three funds, two of which, the Warburg Pincus Growth &
Income Fund (the "Growth & Income Fund") and the Warburg Pincus Balanced Fund
(the "Balanced Fund"), are covered in this report. The Growth & Income Fund and
Balanced Fund each have two classes of shares: Common Class and Advisor Class.
The Advisor Class (also referred to as Series 2 shares) are sold by financial
institutions and operate under the name Warburg Pincus Advisor Funds.
The net asset value of each Fund is determined daily as of the close of
regular trading on the New York Stock Exchange. Each Fund's securities are
valued at market value, which is currently determined using the last reported
sales price. If no sales are reported, as in the case of some securities traded
over-the-counter, portfolio securities are valued at the mean between the last
reported bid and asked prices. Corporate bonds and government securities are
valued on the basis of quotations provided by an independent pricing service
which uses information with respect to transactions on bonds, quotations from
bond dealers, market transactions in comparable securities and various
relationships between securities in determining value. Short-term obligations
with maturities of 60 days or less are valued at amortized cost which
approximates market value.
Security transactions are accounted for on the trade date. The cost of
investments sold is determined by use of the specific identification method for
both financial reporting and income tax purposes. Interest income is recorded on
the accrual basis. Dividends are recorded on the ex-dividend date. Certain
expenses, principally distribution, transfer agent and printing, are class
specific expenses and vary by class. Expenses not directly attributable to a
specific portfolio or class are allocated based on relative net assets of each
Portfolio and class, respectively.
Dividends from net investment income, if any, are declared and paid at least
quarterly. Any net realized capital gains will be distributed at least annually.
Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principals.
No provision is made for Federal taxes as it is the Company's intention to
have each portfolio continue to qualify for and elect the tax treatment
applicable to regulated investment companies under the Internal Revenue Code and
make the requisite distributions to its shareholders which will be sufficient to
relieve it from Federal income and excise taxes.
F-15
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
Money market instruments may be purchased subject to the seller's agreement
to repurchase them at an agreed upon date and price. The seller will be required
on a daily basis to maintain the value of the securities subject to the
agreement at not less than the repurchase price. The agreements are conditioned
upon the collateral being deposited under the Federal Reserve book-entry system
or with the Fund's custodian or a third party sub-custodian.
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR
Warburg, Pincus Counsellors, Inc. ("Counsellors"), a wholly owned subsidiary
of Warburg, Pincus Counsellors G.P. ("Counsellors G.P.") serves as investment
advisor for the Growth & Income Fund. The advisory fee is computed daily and
payable monthly at the annual rate of .75% of the Growth & Income Fund's average
daily net assets.
Pursuant to a vote on September 30, 1994, shareholders approved a new
advisory contract between the Balanced Fund and Counsellors. Under the new
agreement, the Balanced Fund pays Counsellors an advisory fee at an annual rate
of .90% of the Fund's average daily net assets. The prior advisory agreement
between the Fund and PNC Institutional Management Corp. ("PIMC") was terminated
as of that date.
Counsellors may, at its discretion, voluntarily waive all or any portion of
its advisory fees for any of the Funds. For the year ended August 31, 1995,
investment advisory fees and waivers were as follows:
GROSS NET
ADVISORY FEE WAIVER ADVISORY FEE
------------ ------- ------------
Growth & Income Fund $ 5,824,947 $ -- $ 5,824,947
Balanced Fund 14,729 (14,729) --
PFPC Inc. ("PFPC"), an indirect wholly owned subsidiary of PNC Bank Corp.,
and Counsellors Fund Services, Inc. ("CFSI"), a wholly owned subsidiary of
Counsellors, serve as co-administrators for each of the Funds. For the Growth &
Income Fund, the co-administration fees are computed daily and payable monthly
at an annual rate of .20% of the first $125 million of average daily net assets
and .15% of average daily net assets in excess of $125 million for PFPC and .05%
of the first $125 million of average daily net assets and .10% of average daily
net assets in excess of $125 million for CFSI.
For the Balanced Fund, the co-administration fees are computed daily and
payable monthly at an annual rate of .15% of average daily net assets for PFPC
and .10% of average daily net assets for CFSI.
F-16
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- -----------------------------------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- -----------------------------------------------------------------------------------------------------------
CFSI and PFPC may, at their discretion, voluntarily waive all or any portion
of their co-administration fees for any of the Funds. For the year ended August
31, 1995, CFSI and PFPC's co-administration fees and waivers were as follows:
GROSS NET
CO-ADMINISTRATION FEES WAIVERS CO-ADMINISTRATION FEES
---------------------- ------- ----------------------
<S> <C> <C> <C>
Growth & Income Fund $1,941,649 $ -- $1,941,649
Balanced Fund 3,991 (2,394) 1,597
</TABLE>
The Company, on behalf of each class of shares within the investment
portfolios, has adopted Distribution Plans pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, and has entered into Distribution
contracts with Counsellors Securities Inc. ("CSI"), also a wholly owned
subsidiary of Counsellors, which provide for each class to make monthly
payments, based on average daily net assets to CSI. No compensation is payable
by the Growth & Income Fund's Common Shares. For distribution services with
respect to the Balanced Fund's Common Shares, CSI receives a fee at the annual
rate of .25%, computed daily and payable monthly, on average daily net assets.
For distribution services with respect to the Growth & Income and the Balanced
Funds' Advisor shares, CSI receives a fee of .25% and .50%, respectively,
computed daily and payable montly on average daily net assets. For the year
ended August 31, 1995, distribution fees and waivers were as follows:
DISTRIBUTION FEES
-----------------
Growth & Income Fund
Advisor Shares $71,233
--------
--------
Balanced Fund
Common Shares $ 4,155
Advisor Shares --
--------
$ 4,155
--------
--------
3. INVESTMENT IN SECURITIES
For the year ended August 31, 1995, purchases and sales of investment
securities (other than short-term investments) were as follows:
INVESTMENT SECURITIES
------------------------------
PURCHASES SALES
-------------- ------------
Growth & Income Fund $1,108,363,903 $617,767,292
Balanced Fund $ 5,047,134 $ 1,602,287
F-17
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- -------------------------------------------------------------------------------------------------------------------------
4. CAPITAL SHARES
Transactions in capital shares for each year were as follows:
GROWTH & INCOME FUND BALANCED FUND
---------------------------------------------------- ---------------------------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
August 31, 1995 August 31, 1994 August 31, 1995 August 31, 1994
------------------------- ------------------------- ----------------------- --------------------
<CAPTION>
Shares Value Shares Value Shares Value Shares Value
----------- ------------ ----------- ------------ ----------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares Sold
Common Shares 46,345,660 $670,088,619 29,256,806 $410,956,025 423,825 $4,348,625 609 $ 6,495
Advisor Shares 3,521,620 52,908,038 -- -- 110 1,180 -- --
Shares issued in
reinvestment of
dividends
Common Shares 6,891 96,291 67,788 894,152 16,171 148,491 8,690 93,303
Advisor Shares 9,051 137,213 -- -- -- -- -- --
Shares repurchased
Common Shares (11,270,725) (167,348,709) (4,741,678) (69,798,926) (33,364) (347,995) (982) (10,905)
Advisor Shares (57,795) (890,622) -- -- -- -- -- --
----------- ------------ ----------- ------------ ----------- ---------- ----------- -------
Net increase 38,554,702 $554,990,830 24,582,916 $342,051,251 406,792 $4,150,301 8,317 $88,893
----------- ------------ ----------- ------------ ----------- ---------- ----------- -------
----------- ------------ ----------- ------------ ----------- ---------- ----------- -------
Advisor shares
authorized 100,000,000 100,000,000 100,000,000 100,000,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
5. NET ASSETS
At August 31, 1995, net assets consisted of the following:
<TABLE>
<CAPTION>
GROWTH & INCOME FUND BALANCED FUND
-------------------- --------------
<S> <C> <C>
Capital paid-in.......................... $ 943,969,297 $4,808,416
Undistributed net investment income...... 2,435,167 7,138
Accumulated net realized gain (loss) on
investment transactions, futures
contracts and foreign exchange
transactions........................... 30,926,372 60,835
Unrealized appreciation on investments... 117,755,410 465,460
-------------------- --------------
$1,095,095,246 $5,341,849
-------------------- --------------
-------------------- --------------
</TABLE>
6. FUTURES CONTRACTS
The Growth & Income Fund may enter into futures contracts for hedging or
portfolio management strategy purposes to the extent permitted by its investment
policies and objectives. To enter into a futures contract, the Growth & Income
Fund must make a deposit of an initial margin with its custodian in a segregated
account. Subsequent payments, which are dependent on the daily fluctuations in
the value of the underlying instrument, are made or received by the Fund each
day (daily variation margin) and are recorded as unrealized gains or losses
until the contracts are closed. When the contract
F-18
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
is closed, the Fund records a realized gain or loss equal to the difference
between the proceeds from (or cost of) the closing transactions and the Fund's
basis in the contract. Risks of entering into futures contracts include the
possibility that a change in the value of the contract may not correlate with
changes in the value of the underlying instruments. The Growth & Income Fund
entered into futures transactions during the year ended August 31, 1995.
However, the Warburg Pincus Growth & Income Fund had no futures contracts open
at August 31, 1995.
7. OTHER FINANCIAL HIGHLIGHTS
The Growth & Income and the Balanced Fund currently offer one other class of
shares, Common Shares, representing an additional interest in each of the Funds.
The financial highlights of each of the Common Shares are as follows:
F-19
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- -------------------------------------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- -------------------------------------------------------------------------------------------------------------
Growth and Income Fund
Common Class of Shares
For the Years Ended August 31,
-------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $14.56 $16.72 $11.99 $12.11 $11.00
Income From Investment
Operations:
Net Investment Income 0.2224 0.0785 0.0464 0.1912 0.3744
Net Gains on Securities (both
realized and unrealized) 1.9834 1.8151 4.8499 0.0402 1.6891
Total from Investment
Operations 2.2058 1.8936 4.8963 0.2314 2.0635
Less Distributions:
Dividends (from net investment
income) (0.1824) (0.0785) (0.0875) (0.1871) (0.4043)
Distributions (from capital
gains) (0.1834) (3.9751) (0.0788) (0.1643) (0.5492)
Total Distributions (0.3658) (4.0536) (0.1663) (0.3514) (0.9535)
NET ASSET VALUE, END OF YEAR $16.40 $14.56 $16.72 $11.99 $12.11
Total Return 15.62]% 14.41% 41.17% 1.99% 19.91%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (000) $1,038,193 $410,658 $60,689 $28,976 $24,726
Ratios of Expenses to Average Net
Assets 1.22% 1.28%(a) 1.14%(a) 1.25%(a) 1.30%(a)
Ratios of Net Investment Income to
Average Net Assets 1.64% 0.41% 0.30% 1.66% 3.42%
Portfolio Turnover Rate 109% 150% 344% 175% 41%
</TABLE>
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Growth & Income Fund would have been 1.28%,
1.14%, 1.28% and 2.17% for the years ended August 31, 1994, 1993, 1992 and
1991, respectively.
F-20
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- -------------------------------------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- -------------------------------------------------------------------------------------------------------------
Balanced Fund
Common Class of Shares
For the Years Ended August 31,
---------------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $11.01 $11.71 $12.04 $12.05 $10.60
Income From Investment Operations:
Net Investment Income 0.2080 0.4132 0.5555 0.4408 0.4213
Net Gains on Securities (both
realized and unrealized) 1.7225 0.3248 1.1253 0.5155 1.7196
Total from Investment Operations 1.9305 0.7380 1.6808 0.9563 2.1409
Less Distributions:
Dividends (from net investment
income) (0.3136) (0.4586) (0.5412) (0.3713) (0.4128)
Distributions (from capital gains) (1.5069) (0.9794) (1.4696) (0.5950) (0.2781)
Total Distributions (1.8205) (1.4380) (2.0108) (0.9663) (0.6909)
NET ASSET VALUE, END OF YEAR $11.12 $11.01 $11.71 $12.04 $12.05
Total Return 21.56% 6.86% 15.27% 8.07% 21.18%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (000) $5,342 $808 $762 $1,026 $1,290
Ratios of Expenses to Average Net Assets 1.53%(a) 0%(a) 0%(a) .67%(a) 1.40%(a)
Ratios of Net Investment Income to
Average Net Assets 2.27% 3.76% 4.13% 3.68% 3.58%
Portfolio Turnover Rate 107% 32% 30% 93% 76%
</TABLE>
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Balanced Fund would have been 6.04%, 5.46%,
5.37%, 3.88% and 3.89% for the years ended August 31, 1995, 1994, 1993, 1992
and 1991, respectively.
F-21
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------
To the Shareholders and Board of Directors of The RBB Fund, Inc..:
We have audited the accompanying statements of net assets of Warburg Pincus
Growth & Income Fund and Warburg Pincus Balanced Fund of The RBB Fund, Inc.,
as of August 31, 1995, and the related statements of operations for the year
then ended, the statements of changes in net assets for each of the two years
in the period then ended, and the financial highlights for each of the
periods presented. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
investments held as of August 31, 1995, by correspondence with the custodian
and brokers. Au audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above fairly present fairly, in all material respects, the financial position
of Warburg Pincus Growth & Income Fund and Warburg Pincus Balanced Fund of
The RBB Fund, Inc., as of August 31, 1995, and the results of their
operations for the year then ended, the changes in their net assets for each
of the two years in the period then ended, and their financial highlights for
each of the periods presented, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
October 16, 1995
F-22
- --------------------------------------------------------------------------
<PAGE>
Prospectus Warburg Pincus Advisor
[ PHOTO ]
BALANCED
FUND
December 29, 1995
WARBURG PINCUS
Advisor
Funds
<PAGE>
WARBURG PINCUS BALANCED FUND
PROSPECTUS December 29, 1995
Warburg Pincus Advisor Funds are a family of open-end mutual funds that are
offered to investors who wish to buy shares through an investment professional,
financial institutions investing on behalf of their customers and to retirement
plans that elect to make one or more Advisor Funds an investment option for
participants in the plans. One Advisor Fund is described in this Prospectus.
The WARBURG PINCUS BALANCED FUND (the "Balanced Fund" or "Fund") consists of
multiple classes of common stock of The RBB Fund, Inc. ("RBB"). RBB is an
open-end management investment company registered under the Investment Company
Act of 1940 (the "1940 Act") and incorporated under the laws of the State of
Maryland on February 29, 1988. RBB currently operates or proposes to operate
seventeen separate investment portfolios. The Series 2 shares (referred to as
"Advisor Shares") offered by this Prospectus represent interests in the Fund.
The Balanced Fund's investment objective is to maximize total return through a
combination of long-term growth of capital and current income consistent with
preservation of capital. It seeks to achieve this objective by diversified
investments in common stocks, preferred stocks, debt securities, preferred
stocks and debt securities which are convertible into common stocks and
government, corporate, bank and commercial obligations. In implementing this
objective, the Balanced Fund will use a multi-manager approach.
The Fund currently offers two classes of shares, one of which, the Advisor
Shares, is offered pursuant to this Prospectus. The Advisor Shares of the Fund,
as well as the Advisor (Series 2) Shares of certain other Warburg Pincus-advised
funds, are sold under the name "Warburg Pincus Advisor Funds." The Advisor
Shares may not be purchased by individuals directly from the Fund's distributor,
but other broker-dealers, financial institutions, depository institutions
retirement plans and other financial intermediaries ("Institutions") may
purchase Advisor Shares for individuals. The Advisor Shares impose a 12b-1 fee
of up to .50% per annum, which is the economic equivalent of a sales charge.
NO MINIMUM INVESTMENT. There is no minimum amount of initial or subsequent
purchases of shares imposed on Institutions. See "How to Purchase Shares."
This Prospectus contains information that a prospective investor needs to know
before investing. Please keep it for future reference. A Statement of Additional
Information, dated December 29, 1995 has been filed with the Securities and
Exchange Commission and is incorporated by reference in this Prospectus. It may
be obtained free of charge from RBB's distributor by calling (800) 888-6878.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY ANY BANK AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE>
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES*
ANNUAL FUND OPERATING EXPENSES AFTER EXPENSE REIMBURSEMENTS AND WAIVERS
<TABLE>
<S> <C>
Management fees**.................................................................... 0%
12b-1 fees**......................................................................... .50
Other Expenses (after waivers and reimbursements).................................... 1.35
----
Total Fund Operating Expenses (after waivers and reimbursements)..................... 1.85%
----
----
</TABLE>
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the
Fund, assuming (1) a 5% annual return, and (2) redemption at the end of each
time period:
<TABLE><CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
Balanced Fund Advisor Shares.............................. $ 19 $58 $ 100 $ 217
---- ----- ----- -----
</TABLE>
- ------------
* No sales charge is imposed upon the purchase of Advisor Shares of the Fund.
Thus, the full amount of the purchase price of Fund shares will be invested
at the time of purchase or upon any other exchange of Advisor Shares of other
Warburg Pincus Advisor Funds without imposition of any sales charge.
** Management fees and 12b-1 fees are based on average daily net assets and are
calculated daily and paid monthly.
The caption "Other Expenses" does not include extraordinary expenses as
determined by use of generally accepted accounting principles.
The Example in the Fee Table assumes that all dividends and distributions
are reinvested and that the amounts listed under "Annual Fund Operating Expenses
After Expense Reimbursements and Waivers" remain the same as the years shown.
Certain broker-dealers and financial institutions also may charge their clients
fees in connection with investments in the Fund's shares, which fees are not
reflected in the table. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF
PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN. Long-term Shareholders of the Shares of the Balanced Fund may pay more
than the economic equivalent of the maximum front-end sales charges permitted by
the National Association of Securities Dealers, Inc. (the "NASD"). However,
given the Fund's 12b-1 fees, it is estimated that it would require a substantial
number of years to exceed the maxi-mum permissable year-end sales charges.
The Fee Table is designed to assist an investor in understanding the various
costs and expenses that an investor in the Advisor Shares of the Fund will bear
directly or indirectly. (For more complete descriptions of the various costs and
expenses, see "Management" and "Distribution of Shares" below.) The expense
figures for the Advisor Shares Class of the Balanced Fund have been restated
from actual expenses paid by such Fund during the period ended August 31, 1995
to reflect current expense levels. In addition, the Fee Table reflects a
voluntary assumption of some of the additional expenses of the Balanced Fund by
the investment adviser. Assumption of additional expenses will have the
2
<PAGE>
effect of lowering the Balanced Fund's overall expense ratios and increasing its
yield to investors. There can be no assurance that the investment adviser will
continue to assume such expenses. Absent such expense reimbursements, for the
period ended August 31, 1995 under current expense levels Management Fees would
have been .90%, Other Expenses would have been 627.07%, and Total Fund Operating
Expenses would have been 628.47%. The caption "Other Expenses" does not include
extraordinary expenses as determined by use of generally accepted accounting
principles.
OFFERING PRICE
Advisor Shares which represent interests in the Fund will be offered to the
public at the next determined net asset value after receipt of an order by the
Fund. See "How to Purchase Shares."
EXCHANGES
An institution may exchange Advisor Shares of the Fund for Advisor Shares of
other Warburg Pincus Advisor Funds at their net asset values next determined
after receipt by the relevant Fund of an exchange request. No exchange fee is
currently charged for exchanges. See "How to Redeem and Exchange Shares."
REDEMPTION PRICE
Advisor Shares may be redeemed at any time at their net asset value next
determined after receipt by the Fund of a redemption request. See "How to Redeem
and Exchange Shares--Redemption of Shares."
RISK FACTORS
An investment in the Balanced Fund is subject to certain risks, as set forth
in detail under "Investment Objectives and Policies." As with other mutual
funds, there can be no assurance that the Fund will achieve its objective. The
Fund, to the extent set forth under "Investment Objectives and Policies," may
engage in the following investment practices: the purchase of mortgage-related
securities, the lending of portfolio securities, engaging in options and futures
transactions, and engaging in secured borrowings. All of these transactions
involve certain special risks, as set forth under "Investment Objectives and
Policies."
SHAREHOLDER INQUIRIES
Any questions or communications regarding an institution's account should be
directed to Warburg Pincus Advisor Funds at (800) 888-6878, and written
communications should be directed to P.O. Box 9030 Boston, Massachusetts
02205-9030.
FINANCIAL HIGHLIGHTS
The table below sets forth certain informa-tion concerning the investment
results of the RBB class representing interests in Advisor Shares of the Warburg
Pincus Balanced Fund for the period indicated. The financial data included in
this table for the period ended August 31, 1995 are a part of RBB's financial
statements for the Fund which have been audited by Coopers & Lybrand L.L.P.,
RBB's independent account-ants, whose current report thereon appears in the
Statement of Additional Information along with the financial statements. The
financial data included in this table should be read in conjunc-tion with the
financial statements and related notes included in the Statement of Additional
Information. Further information about the per-formance of the Fund is contained
in the Fund's Annual Report to shareholders. The Annual Report and the Statement
of Additional Infor-mation may be obtained without charge by con-tacting the
Warburg Pincus Advisor Funds. See "Other Information--Reports and Inquiries."
3
<PAGE>
WARBURG PINCUS BALANCED FUND(D)
(For a Share Outstanding Throughout Each Period)
<TABLE><CAPTION>
FOR THE PERIOD
JULY 31, 1995
(COMMENCEMENT
OF OPERATIONS) TO
AUGUST 31, 1995
-----------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD...................................... $ 10.72
--------
Income From Investment Operations:
Net Investment Income................................................... 0.0170
Net Gains (Losses) on Securities (both realized and unrealized)......... 0.3930
--------
Total from Investment Operations...................................... 0.4100
--------
Less Distributions:
Dividends (from net investment income).................................. 0.0000
--------
Total Distributions................................................... 0.0000
--------
NET ASSET VALUE, END OF PERIOD............................................ $ 11.13
--------
--------
Total Returns............................................................. 3.82%(c)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000)........................................... $ 1
Ratio of Expenses to Average Net Assets................................... 1.76%(a)(b)
Ratio of Net Investment Income to Average Net Assets...................... 2.00%(b)
Portfolio Turnover Rate................................................... 107%(b)
</TABLE>
- ------------
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Balanced Fund would have been 628.47% annualized
for the period ended August 31, 1995.
(b) Annualized.
(c) Not Annualized.
(d) Financial Highlights relate solely to the Advisor Class of shares within the
Fund.
INVESTMENT OBJECTIVES AND POLICIES
BALANCED FUND
The Balanced Fund's investment objective is to maximize total return through
a combination of long-term growth of capital and current income consistent with
preservation of capital. The Balanced Fund seeks to achieve this objective
through a policy of diversified investment in common stocks, preferred stocks,
debt securities, preferred stocks and debt securities which are convertible into
common stocks, and government corporate, bank and commercial obligations. At all
times, the Balanced Fund will have a minimum of 25% of its assets in stocks and
minimum of 25% in fixed income securities. Compliance with such percentage
requirement may limit the ability of the Balanced Fund to maximize total return.
With respect to convertible senior securities, only that portion of the value of
such securities attributable to their fixed income characteristics will be used
for purposes of determining the percentage of the assets of the Balanced Fund
that are invested in fixed-income senior securities. The actual percentage of
assets invested in equity and fixed-income securities will vary from time to
time, depending on the judgment of the investment adviser as to general market
and economic conditions, trends and yields and interest rates and changes in
fiscal and monetary policies.
MULTI-MANAGER APPROACH. The Balanced Fund will be managed by a team of senior
managers of
4
<PAGE>
the investment adviser, Warburg, Pincus Counsellors, Inc. ("WPC"). Six of the
managers will be dedicated to managing portions of the Balanced Fund allocated
to equities; one manager will select and manage the fixed income securities
which comprise the fixed income portion of the Balanced Fund. Dale C.
Christensen and Anthony G. Orphanos, Managing Directors of WPC, will be
designated overall portfolio strategists and will be responsible for determining
the portion of the Balanced Fund to be allocated between equity and fixed income
securities, and the allocation among the various equity sectors.
Equity Investment. Each of the equity portfolio managers will manage an
allocated portion of the equity holdings of the Balance Fund; each manager will
manage his/her portion with a different investment emphasis or approach, but
consistent with the overall objective of long-term growth of capital for the
Balanced Fund's common stock portion.
The four areas represented by the equity portfolio managers are: (1) U.S.
Value Sector, managed by Anthony G. Orphanos, will invest primarily in stocks
whose acquisition price represents low absolute or relative value, based on
historical and financial analysis, and compared to other stocks and sectors of
the Standard & Poor's 500 universe of common stocks and other indices. (2) U.S
Small Company Sector, managed by Elizabeth B. Dater and Stephen J. Lurito, will
invest primarily in common stocks and warrants of small capitalization (i.e.,
capitalization less than $660 million at the time of purchase) and emerging
growth U.S. companies that represent attractive opportunities for maximum
capital appreciation. Emerging growth companies are small and medium-sized
companies that have passed their start up phase and that show positive earnings
and prospects for achieving significant profit and gain in a relatively short
period of time. (3) U.S. Mid-Cap Sector, managed by George U. Wyper and Susan L.
Black, will invest primarily in a diversified portfolio of common stocks,
warrants and securities convertible into or exchangeable for common stock
securities of domestic companies which have market capitalizations in the $660
million to $13.8 billion range, commonly referred to as middle capitalization or
"mid-cap," and includes a potential universe of companies in such indices as the
Russell Midcap Index and Standard & Poor's Midcap 400 Index. The portfolio
manager will attempt to identify sectors of the market and companies within
market sectors that he believes will outperform the overall market. And, (4)
International Equity Sector, managed by Richard H. King and Nicholas P.W.
Horsley, will invest primarily in a broadly diversified portfolio of equity
securities of companies that, wherever organized, have their principal business
activities and interests outside the United States. The international equity
managers intend to invest principally in the securities of financially strong
companies with opportunities for growth within growing international economies
and markets through increased earnings power and improved utilization or
recognition of assets. Investments may be made in equity securities of companies
of any size, whether traded on or off a national securities exchange. The Fund
will not invest more than 10% of its net assets in foreign securities.
Investments in foreign securities involve risks not otherwise associated with
investments in domestic securities, including risks of currency fluctuations,
tax or excessive government regulation, and political instability. See "Foreign
Securities" below for a discussion of the various risks associated with
investments in foreign securities.
Fixed Income Investment. The fixed income portion, managed by Mr.
Christensen, will invest primarily in debt instruments such as corporate
obligations, U.S. Government obligations, municipal obligations and mortgage-
related debt securities.
CORPORATE OBLIGATIONS. The Balanced Fund may invest in debt obligations of
corporations, such as
5
<PAGE>
corporate bonds, debentures, debentures convertible into common stocks, and
notes, which, at the time of purchase for the Fund, are rated "AAA," "AA" or "A"
by Standard & Poor's Corporation ("S&P") or "Aaa," "Aa" or "A," by Moody's
Investors Service, Inc. ("Moody's"). These ratings are described in the Appendix
to this Prospectus. The Balanced Fund may also purchase debt obligations which
are unrated at the time of purchase provided they are determined by the Fund's
adviser to be of comparable quality to rated obligations pursuant to guidelines
approved by RBB's Board of Directors. Such obligations may include
dollar-denominated debt obligations of foreign issuers.
In selecting debt securities for the Balanced Fund, the adviser will review
and monitor the creditworthiness of each issuer and issue, in addition to
relying on ratings assigned by S&P or Moody's as indicators of quality. Interest
rate trends and specific developments which may affect individual issuers will
also be analyzed.
U.S. GOVERNMENT OBLIGATIONS. The Balanced Fund may purchase obligations issued
or guaranteed by the U.S. Government or its agencies or instrumentalities.
Obligations which may be so purchased include obligations of agencies and
instrumentalities of the U.S. Government which are supported by the full faith
and credit of the U.S. or by U.S. Treasury guarantees, such as securities of the
Government National Mortgage Association and the Federal Housing Authority, or
obligations supported by the right of the issuer to borrow from the U.S.
Treasury, such as securities of the Federal Home Loan Mortgage Corporation, or
obligations supported only by the credit of the agency or instrumentality
issuing the obligation, such as securities of the Federal National Mortgage
Association and the Federal Loan Banks.
"WHEN-ISSUED" SECURITIES. The Balanced Fund may purchase securities on a
"when-issued" basis. When-issued securities are securities purchased for
delivery beyond the normal settle-ment date at a stated price and yield. The
Balanced Fund will generally not pay for such securities or start earning
interest on them until they are received. Securities purchased on a when-issued
basis are recorded as an asset when the commitment is entered into and are
subject to changes in value prior to delivery based upon changes in the general
level of interest rates. The Balanced Fund expects that commitments to purchase
when-issued securities will not exceed 25% of the value of its total assets
absent unusual market conditions. The Balanced Fund does not intend to purchase
when-issued securities for speculative purposes but only in furtherance of its
investment objective.
MUNICIPAL OBLIGATIONS. When conditions warrant, the Balanced Fund may also
invest without limitation in Municipal Obligations, whether or not the income
thereon is exempt from regular Federal income tax, provided that the Municipal
Obligations are determined by the Fund's adviser to present minimal credit risks
and at the time of purchase are rated "A" or higher by S&P or by Moody's in the
case of bonds, "SP-1" by S&P or "MIG-2" or higher by Moody's in the case of
notes, or "VMIG-2" or higher by Moody's in the case of variable rate demand
notes, or if unrated, are determined by the adviser to be of comparable quality
pursuant to guidelines adopted by RBB's Board of Directors. For a more complete
discussion of Municipal Obligations, see "Investment Objectives and
Policies--Municipal Obligations" in the Statement of Additional Information.
MORTGAGE-RELATED DEBT SECURITIES. The Balanced Fund may purchase without
limitation mortgage-related debt securities. Such securities represent interests
in pools of mortgage loans to residential home buyers made by lenders such as
savings and loan institutions, mortgage bankers, commercial banks and others.
Pools of mortgage loans are assembled for sale to investors (such as
6
<PAGE>
the Balanced Fund) by various governmental, government-related and private
organizations. Mortgage-related securities may include asset-backed securities
which are backed by mortgages, installment sales contracts, credit card
receivables or other assets and collateralized mortgage obligations ("CMOs")
issued or guaranteed by U.S. Government agencies and instrumentalities or issued
by private companies. Purchasable mortgage-related securities also include
adjustable rate securities. The estimated life of an asset-backed security
varies with the prepayment experience with respect to the underlying debt
instruments. For this and other reasons, an asset-backed security's stated
maturity may be shortened, and the security's total return may be difficult to
predict precisely. Such difficulties are not expected, however, to have a
significant effect on the Balanced Fund since the remaining maturity of any
asset-backed security acquired will be 397 days or less.
Interests in pools of mortgage loans differ from other forms of debt
securities, which normally provide for periodic payment of interest in fixed
amounts with principal payments at maturity or specified call dates. Instead,
these securities will provide a monthly payment to the Balanced Fund which
consists of both interest and principal payments. In effect, these payments are
"pass-throughs" of the monthly payments made by the individual borrowers on
their residential mortgage loans, net of any fees paid to the issuer or
guarantor of such securities. Additional payments to the Fund may be derived
from repayments of principal resulting from the sale of the underlying
residential property, refinancing or foreclosure, net of fees or costs which may
be incurred. Some mortgage-related securities are described as "modified
pass-throughs." These securities entitle the holder to receive all interest and
principal payments owed on the mortgage pool, net of certain fees, regardless of
whether or not the mortgagor actually makes the payment.
The average life of mortgage-related securities varies with the maturities
of the underlying mortgage instruments. In addition, prepayments of the
mortgages included in the underlying mortgage pool will usually result in the
return of the greatest part of principal invested well before the maturity of
the mortgages in the pool. The volume of such prepayments of principal in a
given pool will influence the actual yield of mortgage-related securities, and
principal returned to the Balanced Fund as a holder of such securities may be
reinvested in instruments whose yield may be higher or lower than that which
might have been obtained had such prepayments not occurred. When interest rates
are decreasing, such prepayments usually increase, thereby reducing the average
life of a pool. As a result, the reinvestment of such principal prepayments will
be at a lower rate than that on the original mortgage-related security, and thus
the Balanced Fund's yield will be lower. In addition, when interest rates are
decreasing, the value of mortgage-related securities may not increase as much as
the value of other debt securities. In quoting yields for mortgage-related
securities, the standard practice is to assume that the securities will have a
12-year life. As previously noted, however, the life of individual pools may
differ widely and the actual yield earned on mortgage-related securities may
differ significantly from the estimated yield based on the 12-year life
assumption.
The principal governmental guarantor of mortgage-related securities is the
Government National Mortgage Association ("GNMA"). GNMA is a wholly owned U.S.
Government corporation within the U.S. Department of Housing and Urban
Development. Pass-through securities issued by GNMA are guaranteed by the full
faith and credit of the U.S. Government as to the timely payment of principal
and interest. The Federal National Mortgage Association ("FNMA") is a
government-sponsored corporation owned entirely by private stockholders.
7
<PAGE>
Pass-through securities issued by FNMA are guaranteed as to timely payment of
principal and interest by FNMA but are not backed by the full faith and credit
of the U.S. Government. The Federal Home Loan Mortgage Corporation ("FHLMC") is
a government-sponsored corporation owned entirely by private stockholders. FHLMC
issues Participation Certificates ("PCs") which represent interests in mortgages
from FHLMC's national portfolio. FHLMC guarantees the timely payment of interest
and ultimate collection of principal but PCs are not backed by the full faith
and credit of the U.S. Government.
Commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers and other secondary market issuers also create
pass-through pools of conventional residential mortgage loans. Such issuers may
in addition be the originators of the underlying mortgage loans as well as the
guarantors of the mortgage-related securities. Pools created by such
non-governmental issuers generally offer a higher rate of interest than
government and government-related pools because there are no direct or indirect
government guarantees of payments in the former pools. However, timely payment
of interest and principal of these pools is supported by various forms of
insurance or guarantees, including individual loan and pool insurance. The
insurance and guarantees are issued by government entities, private insurers and
the mortgage poolers. Such insurance and guarantees and the creditworthiness of
the issuers thereof will be considered in determining whether a mortgage-related
security meets the Balanced Fund's investment quality standards. Private
insurers provide less assurance than government or government-related insurers
that they will be able to meet their obligations. The Balanced Fund may buy
mortgage-related securities without insurance or guarantees if, through an
examination of the financial condition and business history of the pooler,
including among other things the pooler's loan experience, profitability,
capital adequacy, liquidity, foreign exposure, and management, the Balanced
Fund's investment adviser determines that the pooler is creditworthy. Although
the market for such securities is becoming increasingly liquid, securities
issued by certain private organizations may not be readily marketable.
Corporations that are government owned, government-related or are private
mortgage poolers may create mortgage loan pools offering pass-through
investments in addition to those described above. The mortgages underlying these
securities may be mortgage instruments whose principal or interest payments may
vary or whose terms to maturity may differ from customary long-term fixed rate
mortgages. As new types of mortgage-related securities are developed and offered
to investors, the Balanced Fund's adviser will consider making investments in
such new types of securities consistent with the Balanced Fund's investment
objectives and policies and with due regard to those quality and credit
standards, which, in the investment adviser's view, are applicable to such
investments.
WARRANTS. The Balanced Fund may purchase warrants provided that they are
attached to securities that may otherwise be purchased by the Fund.
INTEREST RATES. As a general rule, the price of fixed income instruments tends
to move inversely to changes in market interest rates.
ILLIQUID SECURITIES. The Balanced Fund will not invest more than 15% of its net
assets in illiquid securities including securities that are illiquid by virtue
of the absence of a readily available market or legal or contractual
restrictions on resale. Securities that have legal or contractual restrictions
on resale but have a readily available market are not deemed illiquid for
purposes of this limitation. WPC will monitor the liquidity of such restricted
securities under the supervision of RBB's Board of Directors. See "Investment
Objectives and Policies--Illiquid Securities" in the Statement of Additional
Information.
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PORTFOLIO TURNOVER. The Balanced Fund will effect portfolio transactions without
regard to holding period, if, in its judgment, such transactions are advisable
in light of general market, economic or financial conditions. As a result, the
Fund may engage in a substantial number of portfolio transactions. The Balanced
Fund anticipates that, under normal conditions, its annual portfolio turnover
rate should not exceed 100% for the equity portion and 100% for the fixed income
portion. However, it is impossible to predict portfolio turnover rates.
The anticipated portfolio turnover rate for the debt and equity portions of
the Balanced Fund may be greater than that of many other investment companies. A
higher than normal portfolio turnover rate may affect the degree to which the
Fund's net asset value fluctuates. Higher portfolio turnover rates are likely to
result in comparatively greater brokerage commissions. In addition, short-term
gains realized from portfolio transactions are taxable to shareholders as
ordinary income. The amount of portfolio activity will not be a limiting factor
when making portfolio decisions. See Statement of Additional Information, "Fund
Transactions" and "Taxes."
TEMPORARY DEFENSIVE MEASURES. The Balanced Fund also reserves the right, as a
temporary defensive measure, to purchase eligible U.S. dollar-denominated money
market instruments and securities subject to repurchase agreements. The Fund's
investment adviser will determine when market conditions warrant temporary
defensive measures.
SMALL CAP STOCKS. Securities of companies with small capitalizations ("small-cap
companies") tend to be riskier than securities of companies with medium or large
capitalizations. This is because small-cap companies typically have smaller
product lines and less access to liquidity than mid-cap or large-cap companies,
and are therefore more sensitive to economic downturns. In addition, growth
prospects of small-cap companies tend to be less certain than mid- or large-cap
companies, and the dividends paid on small-cap stocks are frequently negligible.
Moreover, small cap stocks have, on occasion, fluctuated in the opposite
direction of large-cap stocks or the general stock market. Consequently,
securities of small-cap companies tend to be more volatile than those of mid-and
large-cap companies.
FOREIGN SECURITIES. The Balanced Fund will not invest more than 10% of its net
assets in foreign securities. Investing in securities of foreign issuers
involves considerations not typically associated with investing in securities of
companies organized and operated in the U.S. Foreign securities generally are
denominated and pay dividends or interest in foreign currencies. The Balanced
Fund 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 assets of the Balanced Fund as measured in U.S. dollars may
therefore be affected favorably or unfavorably by changes in exchange rates.
There may be less publicly available information concerning foreign issuers than
is available with respect to U.S. issuers. Foreign securities may not be
registered with the U.S. Securities and Exchange Commission, and generally,
foreign companies are not subject to uniform accounting, auditing and financial
reporting requirements comparable to those applicable to U.S. issuers. See
"Investment Objectives and Policies--Foreign Securities" in the Statement of
Additional Information.
OPTIONS AND FUTURES CONTRACTS. The Balanced Fund 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 Corporation. The Fund may
also invest in futures contracts and options on futures contracts (index futures
9
<PAGE>
contracts or interest rate futures contracts, as applicable) for hedging
purposes. However, the Fund may not write put options or purchase or sell
futures contracts or options on futures contracts to hedge more than its total
assets unless immediately after any such transaction the aggregate amount of
premiums paid for put options and the amount of margin deposits on its existing
futures positions do not exceed 5% of its total assets.
Options trading is a highly specialized activity which entails greater than
ordinary investment risks. A call option for a particular security gives the
purchaser of the option the right to buy, and a writer the obligation to sell,
the underlying security at the stated exercise price at any time prior to the
expiration of the option, regardless of the market price of the security. The
premium paid to the writer is in consideration for undertaking the obligations
under the option contract. A put option for a particular security gives the
purchaser the right to sell the underlying security at the stated exercise price
at any time prior to the expiration date of the option, regardless of the market
price of the security. In contrast to an option on a particular security, an
option on an index provides the holder with the right to make or receive a cash
settlement upon exercise of the option. The amount of this settlement will be
equal to the difference between the closing price of the index at the time of
exercise and the exercise price of the option expressed in dollars, times a
specified multiple.
The Balanced Fund will engage in unlisted over-the-counter options only with
broker/dealers deemed creditworthy by its investment adviser. Closing
transactions in certain options are usually effected directly with the same
broker/dealer that effected the original option transaction. The Fund bears the
risk that the broker/dealer will fail to meet its obligations. There is no
assurance that the Fund will be able to close an unlisted option position.
Furthermore, unlisted options are not subject to the protections afforded
purchasers of listed options by the Options Clearing Corporation, which performs
the obligations of its members who fail to do so in connection with the purchase
or sale of options.
To enter into a futures contract, the Balanced Fund must make a deposit of
an initial margin with its custodian in a segregated account in the name of its
futures broker. Subsequent payments to or from the broker, called variation
margin, will be made on a daily basis as the price of the underlying security or
index fluctuates, making the long and short positions in the futures contracts
more or less valuable.
The risks related to the use of options and futures contracts include: (i)
the correlation between movements in the market price of the Fund's investments
(held or intended for purchase) being hedged and in the price of the futures
contract or option may be imperfect; (ii) possible lack of a liquid secondary
market for closing out options or futures positions; (iii) the need for
additional portfolio management skills and techniques; and (iv) losses due to
unanticipated market movements. Successful use of options and futures by the
Fund is subject to the investment adviser's ability to correctly predict
movements in the direction of the market. For example, if the Fund uses future
contracts as a hedge 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 of the increased value of
its securities which it has hedged because it will have approximately equal
offsetting losses in its futures positions. 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 future
pricing. As a result, a relatively small price movement in a futures contract
may result in immediate and substantial loss or gain to the investor. Thus, a
purchase or sale of a futures contract may result in losses or gains in excess
of the amount invested in the
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contract. For a further discussion see "Investment Policies" in the Statement of
Additional Information.
The investment objective and policies of the Balanced Fund described above
may be changed by RBB's Board of Directors without the approval of a majority of
the outstanding Shares representing interest in the Fund. Such changes may
result in the Fund having investment objectives which differ from those an
investor may have considered at the time of investment. There is no assurance
that the investment objective of the Balanced Fund will be achieved.
INVESTMENT LIMITATIONS
The Fund may not change the following investment limitations (with certain
exceptions, as noted below) without the affirmative vote of the holders of a
majority of the Fund's outstanding Shares. (A complete list of the investment
limitations that cannot be changed without such a vote of the shareholders is
contained in the Statement of Additional Information under "Investment
Objectives and Policies.")
The Fund may not:
1. Purchase the securities of any one issuer, other than securities issued
or guaranteed by the U.S. Government or its agencies or instrumentalities, if
immediately after and as a result of such purchase more than 5% of the value of
the Fund's total assets would be invested in the securities of such issuer, or
more than 10% of the outstanding voting securities of such issuer would be owned
by the Fund, except that up to 25% of the value of the Fund's total assets may
be invested without regard to such limitations.
2. Purchase any securities which would cause, at the time of purchase, more
than 25% of the value of the total assets of the Fund to be invested in the
obligations of issuers in any industry, provided that there is no limitation
with respect to investments in U.S. Government obligations.
In addition, the Balanced Fund may not borrow money, except from banks or by
entering into reverse repurchase agreements for temporary purposes and then in
amounts not in excess of 30% of the value of the Fund's total assets at the time
of such borrowing, 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 or reverse
repurchase agreement and in amounts not in excess of 125% of the dollar amounts
borrowed; or purchase portfolio securities while borrowings and reverse
repurchase agreements in excess of 5% of the Fund's net assets are outstanding.
(This borrowing provision is not for investment leverage, but solely to
facilitate management of the Balanced Fund's securities by enabling the Balanced
Fund to meet redemption requests where the liquidation of portfolio securities
is deemed to be disadvantageous or inconvenient.)
MANAGEMENT
BOARD OF DIRECTORS. The business and affairs of RBB and the Fund are managed
under the direction of RBB's Board of Directors.
INVESTMENT ADVISER. Warburg, Pincus Counsellors, Inc. ("WPC") serves as the
investment adviser to the Fund. WPC, organized in 1970, is a professional
investment counseling firm which provides investment services to investment
companies, employee benefit plans, endowment funds, foundations and other
institutions and individuals. WPC currently manages approximately $12 billion in
assets, of which approximately $6 billion are investment companies. WPC is a
wholly owned subsidiary of Warburg Pincus Counsellors G.P., which has no
business other than being a holding company of WPC and its subsidiaries. E.M.
Warburg, Pincus
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<PAGE>
& Co., Inc. controls WPC through its ownership of voting preferred stock of WPC.
WPC's principal offices are located at 466 Lexington Avenue, New York, New York
10017-3147. As adviser to the Fund, WPC is responsible for overall management of
the Fund, and is responsible for all purchases and sales of portfolio securities
for the Fund.
WPC may, at its own expense, provide promotional incentives to qualified
recipients who support the sale of Advisor Shares of the Fund. Qualified
recipients are securities dealers who have sold Advisor Shares or others,
including banks and other financial institutions, under special arrangements. In
some instances, these incentives may be offered only to certain institutions
whose representatives provide services in connection with the sale or expected
sale of significant amounts of Advisor Shares.
Dale C. Christensen, a Managing Director of WPC, has been with WPC since
1989, prior to which he was a Vice President in the International Private
Banking division and the domestic pension fund management division at Citibank,
N.A., a Fixed Income Portfolio Manager at CIC Asset Management and a Vice
President of Investments at First City Trust. Anthony G. Orphanos, a Managing
Director of WPC, has been with WPC for the last sixteen years. Mr. Christensen
and Mr. Orphanos are the overall portfolio strategists for the Balanced Fund and
are responsible for determining the portion of the Fund to be allocated among
the various fixed income and equity sectors. Mr. Christensen also manages the
fixed income portion of the Balanced Fund. Mr. Orphanos is responsible for the
U.S. Value Sector. Elizabeth B. Dater and Stephen J. Lurito are responsible for
the U.S. Small Company Sector. Ms. Dater is a Managing Director of WPC and has
been with WPC since 1978. Mr. Lurito is a Managing Director at WPC and has been
with WPC since 1987. George U. Wyper and Susan L. Black manage the U.S.
Mid-Capital Sector. Mr. Wyper is a Managing Director of WPC and joined WPC in
August 1994, before which time he was chief investment officer of White River
Corporation and president of Hanover Advisers, Inc. (1993-August 1994), chief
investment officer of Fund American Enterprises, Inc. (1991-1993) and the fixed
income portfolio manager of Firemen's Fund Insurance Company (1987-1990). Ms.
Black is a Managing Director of WPC and has been with WPC since 1985. The
International Equity Sector is managed by Richard H. King and Nicholas P.W.
Horsley. Mr. King has been a Managing Director of WPC since 1989. Mr. Horsley is
an associate portfolio manager at WPC and has been with WPC since 1993, prior to
which time he was a Director, portfolio manager and analyst at Barclays deZoete
Wedd in New York City.
For the services provided and expenses assumed by it, WPC is entitled to
receive a fee from RBB, computed daily and payable monthly at an annual rate of
.90% of the Balanced Fund's average daily net assets. This fee is higher than
that paid by most investment companies.
DISTRIBUTOR. Counsellors Securities Inc. ("Counsellors Securities"), a wholly
owned subsidiary of WPC, serves as the Fund's distributor. Counsellors
Securities is located at 466 Lexington Avenue, New York, New York 10017-3147.
Counsellors Securities receives a fee at an annual rate equal to .50% of the
Fund's average daily net assets for distribution services, pursuant to a
distribution agreement between Counsellor's Securities and RBB in accordance
with a distribution plan (the "12b-1 Plan") adopted by the Fund pursuant to Rule
12b-1 under the 1940 Act. Amounts paid to Counsellors Securities under the
Fund's 12b-1 Plan may be used by Counsellors Securities to cover expenses that
are related to (i) the sale of Advisor Shares of the Fund, (ii) ongoing
servicing and/or maintenance of the accounts of shareholders of the Fund, and
(iii) sub-transfer agency services, subaccounting services or administrative
services related to the
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<PAGE>
sale of the Advisor Shares of the Fund, all as set forth in the Fund's 12b-1
Plan. Payments under the 12b-1 Plan are not tied exclusively to the distribution
expenses actually incurred by Counsellors Securities and payments may exceed
distribution expenses actually incurred. Counsellors Securities may delegate
some or all of these functions to a Service Organization. See "Shareholder
Servicing." RBB's Board of Directors will evaluate the appropriateness of the
12b-1 Plan on a continuing basis and in doing so will consider all relevant
factors, including expenses borne by Counsellors Securities and amounts received
under the 12b-1 Plan.
CO-ADMINISTRATORS. The Fund employs Counsellors Funds Service, Inc.
("Counsellors Service"), a wholly-owned subsidiary of WPC, as a co-
administrator. As co-administrator, Counsellors Service provides shareholder
liaison services to the Fund including responding to shareholder inquiries and
providing information on shareholder accounts. As compensation, the Balanced
Fund pays to Counsellors Service a fee calculated at an annual rate of .10% of
average daily net assets.
The 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 values, provides all accounting services for the
Fund and assists in related aspects of the Funds" operations. As compensation,
the Balanced Fund pays to PFPC a fee calculated at an annual rate of .15% of
average daily net assets with a minimum annual fee of $75,000. PFPC has its
principal offices at 400 Bellevue Parkway, Wilmington, Delaware 19809.
CUSTODIAN. PNC Bank, National Association ("PNC Bank") serves as RBB's
custodian. PNC is a subsidiary of PNC Bank Corp. Its principal business address
is Broad and Chestnut Streets, Philadelphia, Pennsylvania 19101. State Street
Bank and Trust Company ("State Street") serves as sub-custodian and as
co-custodian for the Fund's foreign securities. State Street's principal
business address is 225 Franklin Street, Boston, Massachusetts 02110.
TRANSFER AGENT AND SUB-TRANSFER AGENT. PFPC serves as RBB's transfer agent and
dividend disbursing agent. State Street acts as shareholder servicing agent,
sub-transfer agent and dividend disbursing agent for the Fund. It has delegated
to Boston Financial Data Services, Inc. ("BFDS"), a 50% owned subsidiary,
responsibility for most shareholder servicing functions. BFDS" principal
business address is 2 Heritage Drive, North Quincy, Massachusetts 02171.
EXPENSES. The expenses of the Fund are deducted from its total income before
dividends are paid. These expenses include, but are not limited to, fees paid to
the investment adviser, fees and expenses of officers and directors who are not
affiliated with the Fund's investment adviser or distributor, taxes, interest,
legal fees, custodian fees, auditing fees, brokerage fees and commissions,
certain of the fees and expenses of registering and qualifying the Fund and the
Advisor Shares for distribution under Federal and state securities laws,
expenses of preparing prospectuses and statements of additional information and
of printing and distributing prospectuses and statements of additional
information annually to existing shareholders that are not attributable to a
particular class of shares of RBB, the expense of reports to shareholders,
shareholders" meetings and proxy solicitations that are not attributable to a
particular class of shares of RBB, fidelity bond and directors and officers
liability insurance premiums, the expense of using independent pricing services
and other expenses which are not expressly assumed by the investment adviser
under its investment advisory agreement with respect to the Fund. Any general
expenses of RBB that are not readily identifiable as belonging to a particular
investment portfolio of RBB will be allocated among all investment portfolios of
RBB based upon the relative net assets of the investment portfolios at the time
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<PAGE>
such expenses are cited. Distribution expenses, transfer agency expenses,
expenses of preparation, printing and distributing prospectuses, statements of
additional information, proxy statements and reports to shareholders, and
registration fees, identified as belonging to a particular class, are allocated
to such class.
The investment adviser has agreed to reimburse the Fund for the amount, if
any, by which the total operating and management expenses of the Fund for any
fiscal year exceed the most restrictive state blue sky expense limitation in
effect from time to time, to the extent required by such limitation.
The investment adviser may assume additional expenses of the Fund from time
to time. In certain circumstances, it may assume such expenses on the condition
that it is reimbursed by RBB for such amounts prior to the end of a fiscal year.
In such event, the reimbursement of such amounts will have the effect of
increasing the Fund's expense ratio and of decreasing yield to investors.
For the Fund's fiscal year ended August 31, 1995, the Balanced Fund Advisor
Shares' total expenses were 628.47% of average net assets before expense waivers
and reimbursements. WPC has agreed to waive expenses and provide reimbursements
to limit the Balanced Fund's total expenses to 1.85% per annum of average net
assets for the first year that WPC serves as investment adviser to the Fund.
However, there can be no assurance that WPC will continue to assume such
expenses.
FUND TRANSACTIONS. The Fund's investment adviser may consider a number of
factors in determining which brokers to use in purchasing or selling the Fund's
securities. These factors, which are more fully discussed in the Statement of
Additional Information, include, but are not limited to, research services, the
reasonableness of commissions and quality of services and execution.
Transactions for the Fund may be effected through broker-dealers who sell Fund
shares, subject to the requirements of best execution. A higher rate of turnover
of the Fund's securities may involve correspondingly higher transaction costs,
which will be borne directly by the Fund. The Fund may enter into brokerage
transactions with and pay brokerage commissions to brokers that are affiliated
persons (as such term is defined in the 1940 Act) provided that the terms of the
brokerage transactions comply with the provisions of the 1940 Act.
HOW TO PURCHASE SHARES
Warburg Pincus Advisor Funds shares are only available for investment
through investment professionals, financial institutions on behalf of their
customers, retirement plans that elect to make one or more Advisor Funds an
option for participants in the plans, and other financial intermediaries.
Individuals, including participants in retirement plans, cannot invest directly
in Advisor Shares of the Fund, but may do so only through a participating
Institution. The Fund reserves the right to make Advisor Shares available to
other investors in the future. References in this Prospectus to shareholders or
investors are generally to Institutions as the record holders of the Advisor
Shares.
Each Institution separately determines the rules applicable to its customers
investing in the Fund, including minimum initial and subsequent investment
requirements and the procedures to be followed to effect purchases, redemptions
and exchanges of Advisor Shares. There is no minimum amount of initial or
subsequent purchases of Advisor Shares imposed on Institutions, although the
Fund reserves the right to impose minimums in the future.
Orders for the purchase of Fund shares are placed with an Institution by its
customers. The Institution is responsible for the prompt transmission of the
order to the Fund.
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Institutions may purchase Advisor Shares by telephoning Warburg Pincus
Advisor Funds and sending payment by wire. After telephoning (800) 888-6878 for
instructions, an Institution should then wire federal funds to Counsellors
Securities Inc. using the following wire address:
State Street Bank and Trust Co.
225 Franklin St.
Boston, MA 02101
ABA# 0110 000 28
Attn: Mutual Funds/Custody Dept.
Warburg Pincus Advisor Funds--
Balanced Fund
DDA# 9904-649-2
[Shareowner name]
[Shareowner account number]
Orders by wire will not be accepted until a completed account application
has been received in proper form, and an account number has been established. If
a telephone order is received by the close of regular trading on the New York
Stock Exchange (the "NYSE") (currently 4:00 p.m., Eastern time) and payment by
wire is received on the same day in proper form in accordance with instructions
set forth above, the shares will be priced according to the net asset value of
the Fund on that day and are entitled to dividends and distributions beginning
on that day. If payment by wire is received in proper form by the close of the
NYSE without a prior telephone order, the purchase will be priced according to
the net asset value of the Fund on that day and is entitled to dividends and
distributions beginning on that day. However, if a wire received in proper form
is not preceded by a telephone order and is received after the close of regular
trading on the NYSE, the payment will be held uninvested until the order is
effected at the close of business on the next day that the Fund calculates its
net asset value (a "business day"). Payment for orders that are not accepted
will be returned to the institution after prompt inquiry. Certain organizations
that have entered into agreements with the Fund or its agent may enter confirmed
purchase orders on behalf of customers, with payment to follow no later than the
Fund's pricing on the following business day. If payment is not received by such
time, the organization could be held liable for resulting losses or fees
incurred.
After an investor has made his initial investment, additional shares may be
purchased at any time in the manner outlined above. Payments for initial and
subsequent investment should be preceded by an order placed with the Fund or its
agent and should clearly indicate the investor's account number. In the interest
of economy and convenience, physical certificates representing shares in the
Fund are not normally issued.
The Fund understands that some broker-dealers (other than Counsellors
Securities), financial institutions, securities dealers and other industry
professionals may impose certain condi-tions on their clients that invest in the
Fund, which are in addition to or different than those described in this
Prospectus, and, to the extent permitted by applicable regulatory authority, may
charge their clients direct fees. Certain features of the Fund may be modified
in these programs, and administrative charges may be imposed for the services
rendered. Therefore, a client or customer should contact the organization acting
on his behalf concerning the fees (if any) charged in connection with a purchase
or redemption of Fund shares and should read this Prospectus in light of the
terms governing his accounts with the organization.
HOW TO REDEEM AND EXCHANGE SHARES
REDEMPTION OF SHARES. An investor may redeem (sell) shares on any day that the
Fund's net asset value is calculated (see "Net Asset Value" below). Requests for
the redemption (or exchange) of Advisor Shares are placed with an Institution by
its customers. The institution is
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<PAGE>
responsible for the prompt transmission of its customers" requests to the Fund
or its agent.
Institutions may redeem Advisor Shares by calling Warburg Pincus Advisor
Funds at (800) 888-6878 between 9:00 a.m. and 4:00 p.m. (Eastern time) on any
day on which the Fund's net asset value is calculated. 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 appearing on the Fund's
records, (iv) the amount to be withdrawn and (v) the name of the person
requesting the redemption.
After receipt of the redemption request, the redemption proceeds will be
wired to the investor's bank as indicated in the account application previously
filled out by the investor. The Fund does not currently impose a service charge
for effecting wire transfers but the 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 Advisor Funds by telephone, an investor may deliver the
redemption request to Warburg Pincus Advisor Funds by mail at Warburg Pincus
Advisor Funds, P.O. Box 9030, Boston, Massachusetts 02205-9030.
If a redemption order is received prior to the close of regular trading on
the NYSE, the redemption order will be effected at the net asset value per share
as determined on that day. If a redemption order is received after the close of
regular trading on the NYSE, the redemption order will be effected at the net
asset value as next determined. Redemption proceeds will normally be wired to an
investor on the next business day following the date a redemption order is
effected. If, however, in the judgment of WPC, immediate payment would adversely
affect the Fund, the Fund reserves the right to pay the redemption proceeds
within seven days after the redemption order is effected. Furthermore, the Fund
may suspend the right of redemption or postpone the date of payment upon
redemption (as well as suspend or postpone the recordation of an exchange of
shares) for such periods as are permitted under the 1940 Act.
The proceeds paid upon redemption may be more or less than the amount
invested depending upon a share's net asset value at the time of redemption. If
an investor redeems all the shares in his account, all dividends and
distributions declared up to and including the date of redemption are paid along
with the proceeds of the redemption.
EXCHANGE OF SHARES. An Institution may exchange Advisor Shares of the Fund for
Advi-sor Shares of the other Warburg Pincus Advisor Funds at their respective
net asset values. Exchanges may be effected in the manner described under
"Redemption of Shares" above. If an exchange request is received by Warburg
Pincus Advisor Funds prior to 4:00 p.m. (Eastern time), the exchange will be
made at each fund's net asset value determined on the same business day.
Exchanges may be effected without a sales charge. The exchange privilege may be
modified or terminated at any time upon 60 days" notice to shareholders.
The exchange privilege is available to shareholders residing in any state in
which the Advisor Shares being acquired may legally be sold. When an investor
effects an exchange of shares, the exchange is treated for federal income tax
purposes as a redemption. Therefore, the investor may realize a taxable gain or
loss in connection with the exchange. Investors wishing to exchange Advisor
Shares of the Fund for Advisor Shares in another Warburg Pincus Advisor Fund
should review the prospectus of the other fund prior to making an exchange. For
further information regarding the exchange privilege or to obtain a current
prospectus for another Warburg Pincus Advisor Fund, an investor should contact
Warburg Pincus Advisor Funds at (800) 888-6878.
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<PAGE>
NET ASSET VALUE
The net asset value per class of the Fund is calculated as of 4:00 p.m.
Eastern Time on each day the NYSE is open. The net asset value of the Advisor
Shares of the Fund is calculated by adding the Advisor Shares' pro rata share of
the value of the Fund's securities, cash and other assets, deducting the Advisor
Shares' pro rata share of the actual and accrued liabilities and the liabilities
specifically allocated to the Advisor Shares, and dividing by the total number
of Advisor Shares outstanding.
Valuation of securities held by the Fund is as follows: securities traded on
a national securities exchange or on the NASDAQ National Market System are
valued at the last reported sale price that day; securities traded on a national
securities exchange or on the NASDAQ National Market System for which there were
no sales on that day and securities traded on other over-the-counter markets for
which market quotations are readily available are valued at the mean of the bid
and asked prices; and securities for which market quotations are not readily
available are valued at fair market value as determined in good faith by or
under the direction of RBB's 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.
With the approval of RBB's Board of Directors, the Fund may use a pricing
service, bank or broker-dealer experienced in such matters to value the Fund's
securities. A more detailed discussion of net asset value and security valuation
is contained in the Statement of Additional Information.
DIVIDENDS AND DISTRIBUTIONS
The Fund will distribute substantially all of the net investment income and
net realized capital gains, if any, of the Fund to the Fund's shareholders. All
distributions are reinvested in the form of additional full and fractional
Advisor Shares unless a shareholder elects otherwise.
The Fund will declare and pay dividends, if any, from net investment income
quarterly, near the end of each quarter. Net realized capital gains (including
net short-term capital gains), if any, will be distributed at least annually.
TAXES
The following discussion is only a brief summary of some of the important
tax considerations generally affecting the Fund and its shareholders and is not
intended as a substitute for careful tax planning. Accordingly, investors in the
Fund should consult their tax advisers with specific reference to their own tax
situation.
The Fund has elected to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended. So long as the
Fund continues to qualify for this tax treatment, the Fund will be relieved of
Federal income tax on amounts distributed to shareholders, but shareholders,
unless otherwise exempt, will pay income or capital gains taxes on amounts so
distributed (except distributions that constitute "exempt interest dividends" or
that are treated as a return of capital) regardless of whether such
distributions are paid in cash or reinvested in additional Series 2 Shares.
Distributions out of the "net capital gain" (the excess of net long-term
capital gain over net short-term capital loss), if any, of the Funds will be
taxed to shareholders as long-term capital gain regardless of the length of time
a shareholder has held his Advisor Shares, whether such gain was reflected in
the price paid for the Advi-sor Shares, or whether such gain was attributable to
bonds bearing tax-exempt interest. All other distributions, to the extent they
are taxable, are taxed to shareholders as ordinary income. The maximum marginal
rate on ordinary income for individuals, trusts and estates is
17
<PAGE>
generally 31% while the maximum rate imposed on net capital gain of such
taxpayers is 28%. Corporate taxpayers are taxed at the same rates on both
ordinary income and capital gains.
The Fund anticipates that dividends paid by the Fund will be eligible for
the 70% dividends received deduction allowed to certain corporations to the
extent of the gross amount of qualified dividends received by the Fund for the
year. However, corporate shareholders will have to take into account the entire
amount of any dividend received in determining their adjusted current earnings
adjustment for alternative minimum tax purposes. The dividends received
deduction is not available for capital gain dividends.
The Fund will send written notices to shareholders annually regarding the
tax status of distributions made by the Fund. Dividends declared in October,
November or December of any year payable to shareholders of record on a
specified date in such a month will be deemed to have been received by the
shareholders on December 31, provided such dividends are paid during January of
the following year. The Fund intends to make sufficient actual or deemed
distributions prior to the end of each calendar year to avoid liability for
Federal excise tax.
Investors should be careful to consider the tax implications of buying
Advisor Shares just prior to a distribution. The price of shares purchased at
that time will reflect the amount of the forthcoming distribution. Those
investors purchasing just prior to a distribution will nevertheless be taxed on
the entire amount of the distribution received.
Shareholders who exchange Advisor Shares representing interests in the Fund
for Advisor Shares representing interests in another fund will generally
recognize capital gain or loss for Federal income tax purposes.
Shareholders who are nonresident alien individuals, foreign trusts or
estates, foreign corporations or foreign partnerships may be subject to
different U.S. Federal income tax treatment.
An investment in any RBB portfolio is not intended to constitute a balanced
investment program.
Future legislative or administrative changes or court decisions may
materially affect the tax consequences of investing in the Fund. Shareholders
are also urged to consult their tax advisers concerning the application of state
and local income taxes to investments in the Fund which may differ from the
Federal income tax consequences described above.
SHAREHOLDER SERVICING
The Fund is authorized to offer Advisor Shares exclusively to Institutions
whose clients or customers (or participants in the case of retirement plans)
("Customers") are beneficial owners of Advisor Shares. Either those Institutions
or companies providing certain services to them (together, "Service
Organizations") will enter into service agreements ("Agreements") related to the
sale of the Advisor Shares with Counsellors Securities pursuant to a
Distribution Plan as described below. Pursuant to the terms of an Agreement, the
Service Organization agrees to perform certain distribution, shareholder
servicing, administrative and accounting services for its Customers.
Distribution services would be marketing or other services in connection with
the promotion and sale of Advisor Shares. Shareholder services that may be
provided include responding to Customer inquiries, providing information on
Customer investments and providing other shareholder liaison services.
Administrative and accounting services related to the sale of the Advisor Shares
may include (i) aggregating and processing purchase and redemption requests from
Customers and placing net purchase and redemption orders with the Fund's
transfer agent, (ii) processing dividend payments
18
<PAGE>
from the Fund on behalf of Customers and (iii) providing sub-accounting relating
to the sale of Advisor Shares beneficially owned by Customers or the information
to RBB necessary for sub-accounting. Service Organizations may be subject to
various state laws regarding the services described above, and may be required
to register as dealers pursuant to state law. The Board of Directors of RBB has
approved a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the 1940
Act under which Counsellors Securities may pay each participating Service
Organization a negotiated fee on an annual basis not to exceed .75% of the value
of the average daily net assets of its Customers invested in the Advisor Shares.
However, under the current Distribution Agreement between Counsellors Securities
and RBB on behalf of the Fund, this fee shall not exceed .50% of average daily
net assets of Customers. The Fund may, in the future, enter into additional
Agreements with Service Organizations. The Board of Directors of RBB will
evaluate the appropriateness of the Plan on a continuing basis.
DESCRIPTION OF SHARES
RBB has authorized capital of thirty billion shares of Common Stock, $.001
par value per share, of which 12.2 billion shares are currently classified into
63 different classes of Common Stock. See "Description of Shares" in the State-
ment of Additional Information.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED
HEREIN RELATE PRIMARILY TO THE THE WARBURG PINCUS BALANCED FUND ADVISOR CLASS
AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS
AND OTHER MATTERS RELATING TO SUCH CLASS.
MULTI-CLASS STRUCTURE. The Fund offers a separate class of shares (the "Common
Shares") pursuant to a separate prospectus. Shares of each class represent equal
pro rata interests in the Fund and accrue dividends and calculate net asset
value and performance quotations in the same manner. The Fund quotes performance
of Common Shares separately from Advisor Shares. Because of different fees paid
by the Advisor Shares, the total return and yield on such shares can be
expected, at any time, to be different from the total return and yield on Common
Shares. Investors may obtain information concerning the Common Shares by calling
Counsellors Securities at (800) 888-6878, or by call-ing the Institution through
which Advisor Shares are purchased.
VOTING RIGHTS. Each share that represents an interest in an investment portfolio
of RBB (including each Fund Share) has an equal proportionate interest in the
assets belonging to such portfolio with each other share that represents an
interest in such portfolio, even where a share has a different class designation
than another share representing an interest in the Fund. Shares of RBB do not
have preemptive or conversion rights. When issued for payment as described in
this Prospectus, Advisor Shares will be fully paid and non-assessable.
RBB currently does not intend to hold annual meetings of shareholders except
as required by the 1940 Act or other applicable law. The law under certain
circumstances provides shareholders with the right to call for a meeting of
shareholders to consider the removal of one or more directors. To the extent
required by law, RBB will assist in shareholder communication in such matters.
Shareholders of all investment portfolios of RBB (including the Fund) will
vote in the aggregate and not by portfolio except as otherwise required by law
or when the Board of Directors determines that the matter to be voted upon
affects only the interests of the shareholders of a particular investment
portfolio or class within a portfolio. (See the Statement of Additional
Information under "Additional Information
19
<PAGE>
Concerning Fund Shares" for examples when the 1940 Act requires voting by
investment portfolio or by class.) Shareholders of RBB are entitled to one vote
for each full share held (irrespective of class or portfolio) and fractional
votes for fractional shares held. Voting rights are not cumulative and,
accordingly, the holders of more than 50% of the aggregate shares of Common
Stock of RBB may elect all of the directors.
RECORD OWNERSHIP. As of November 6, 1995, to RBB's knowledge, no person held of
record 25% or more of the outstanding shares of all classes of RBB.
OTHER INFORMATION
REPORTS AND INQUIRIES. Shareholders will receive unaudited semi-annual reports
describing the Fund's investment operations and annual financial statements
audited by independent accountants. Shareholder inquiries can be made by
contacting Warburg Pincus Advisor Funds at (800) 888-6878, or by writing to
Warburg Pincus Advisor Funds, P.O. Box 9030, Boston, Massachusetts 02205-9030.
SHARE CERTIFICATES. Share certificates are not available for Shares purchased
through Warburg Pincus Advisor Funds.
PERFORMANCE INFORMATION. From time to time, the Fund may advertise its
performance, including comparisons to other mutual funds with similar investment
objectives and to stock or other relevant indices. All such advertisements will
show the average annual total return, net of the Fund's maximum sales charge,
over one, five and ten year periods or, if such periods have not yet elapsed,
shorter periods corresponding to the life of the Fund. Such total return
quotations will be computed by finding the compounded average annual total
return for each time period that would equate the assumed initial investment of
$1,000 to the ending redeemable value, according to a required standardized
calculation. The standard calculation is required by the Securities and Exchange
Commission to provide consistency and comparability in investment company
advertising. The Fund 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 standardized formula in order to compare more accurately the
Fund's performance with other measures of investment return. For example, a
portfolio's total return may be compared with data published by Lipper
Analytical Services, Inc., CDA Investment Technologies, Inc. or Weisenberger
Investment Company Service, or with the performance of the Standard & Poor's 500
Stock Index or the Dow Jones Industrial Average. 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 Advisor Shares, when
redeemed, may be worth more or less than their original cost. Warburg Pincus
Advisor Funds separately list the Advisor Shares in The Wall Street Journal each
business day.
From time to time, the Fund may also advertise its "30-day yield." The yield
refers to the income generated by an investment in a Fund over the 30-day period
identified in the advertisement, and is computed by dividing the net investment
income per share during the period by the maximum public offering price per
share of the last day of the period. This income is "annualized" by assuming
that the amount of income is generated each month over a one-year period and is
compounded semi-annually. The annualized income is then shown as a percentage of
the net asset value.
The yield on Advisor Shares of the Fund will fluctuate and are not
necessarily representative of future results. Shareholders should remember that
yield is generally a function of portfolio quality and maturity, type of
instrument, operating expenses and market conditions.
20
<PAGE>
Any fees charged by broker/dealers directly to their customers in connection
with investments in the Fund are not reflected in the yields on the Fund's
Advisor Shares, and such fees, if charged, will reduce the actual return
received by shareholders on their investments.
In reports or other communications to investors or in advertising, the Fund
may also describe the general biography or work experience of the portfolio
managers of the Fund and may include quotations attributable to the portfolio
managers describing approaches taken in managing the Fund's investments,
research methodology underlying stock selection or the Fund's investment
objective. The Fund may also discuss 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. In addition, the Fund may
from time to time compare its expense ratio to that of investment companies with
similar objectives and policies, based on data generated by Lipper Analytical
Services, Inc. or similar investment services that monitor mutual funds.
-------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY RBB OR ITS DISTRIBUTOR.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY RBB OR BY THE DISTRIBUTOR IN
ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.
21
<PAGE>
APPENDIX A
RATINGS OF DEBT SECURITIES
STANDARD & POOR'S CORPORATION
<TABLE>
<S> <C>
AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's. Capacity to
pay interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay principal and
differs from the highest rated issues only in a small degree.
A Debt rated "A" has a strong capacity to pay interest and repay principal although
it is somewhat more susceptible to the adverse effects of changes in circumstances
and economic conditions than debt in higher rated categories.
BBB Debt rated "BBB" is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay interest and repay principal for debt in this category
than in higher rated categories.
BB Debt rated "BB", "B", "CCC", or "CC" is regarded, on balance, as predominantly
B speculative with respect to capacity to pay interest and repay principal in
CCC accordance with the terms of the obligation. "BB" indicates the lowest degree of
CC speculation and "CC" the highest degree of speculation. While such debt will likely
have some quality and protective characteristics, these are outweighed by large
uncertainties or major risk exposures to adverse conditions.
C This rating is reserved for income bonds on which no interest is being paid.
D Debt rated "D" is in default, and payment of interest and/or repayment of principal
is in arrears.
(+) or (-) The ratings from "AAA" or "CCC" may be modified by the addition of a plus or minus
sign to show relative standing or within the major rating categories.
* Continuance of the rating is contingent upon S&P's receipt of an executed copy of
the escrow agreement or closing documentation confirming investments and cash
flows.
NR Indicates no rating has been requested, that there is insufficient information on
which to base a rating, or that S&P does not rate a particular type of obligation
as a matter of policy.
DEBT OBLIGATIONS OF ISSUERS OUTSIDE THE UNITED STATES AND ITS TERRITORIES are rated
on the same basis as domestic corporate and municipal issues. The ratings measure
the creditworthiness of the obligor but do not take into account currency exchange
and related uncertainties.
p PROVISIONAL RATINGS: The letter "p" indicates that the rating is provisional. A
provisional rating assumes the successful completion of the project being financed
by the debt being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful and timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of. or the risk of
default upon failure of, such completion. The investor should exercise judgment
with respect to such likelihood and risk.
</TABLE>
A-1
<PAGE>
NOTES
Note rating symbols are as follows:
<TABLE>
<S> <C>
SP-1 Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus (+)
designation.
SP-2 Satisfactory capacity to pay principal and interest.
SP-3 Speculative capacity to pay principal and interest.
</TABLE>
COMMERCIAL PAPER
A Standard & Poor's 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.
Ratings are graded into four categories, ranging from 'A' for the highest
quality obligations to 'D' for the lowest. The four categories are as follows:
<TABLE>
<S> <C>
A Issues assigned this highest rating are regarded as having the greatest capacity
for timely payment. Issues in this category are delineated with the numbers 1, 2,
and 3 to indicate the relative degree of safety.
A-1 This designation indicates that the degree of safety regarding timely payment is
either overwhelming or very strong. Those issues determined to possess overwhelming
safety characteristics are denoted with a plus (+) sign designation.
A-2 Capacity for timely payment on issues with this designation is strong. However, the
relative degree of safety is not as high as for issues designated "A-1".
A-3 Issues carrying this designation have a satisfactory capacity for timely payment.
They are, however, somewhat more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B Issues rated "B" are regarded as having only an adequate capacity for timely
payment. However, such capacity may be damaged by changing conditions or short-term
adversities.
C This rating is assigned to short-term debt obligations with a doubtful capacity for
payment.
D This rating indicates that the issue is either in default or is expected to be in
default upon maturity.
</TABLE>
VARIABLE RATE DEMAND BONDS
Standard & Poor's assigns "dual" ratings to all long-term debt issues that
have as part of their provisions a long-term rating and a variable rate demand
rating. The first rating addresses the likelihood of repayment of principal and
interest due and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols are used to denote the put
option (for example, "AAA/A-1 +"). If the nominal maturity is short (three years
or less), a note rating is assigned.
A-2
<PAGE>
MOODY'S INVESTORS SERVICE, INC. RATINGS
CORPORATE BONDS
Aaa
Bonds which are rated AAA are judged to be the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt edge."
Interest payments are protected by a large or 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 which are rated AA are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A
Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa
Bonds which are rated BAA are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly scecured. Interest payment and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba
Bonds which are rated BA are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
A-3
<PAGE>
B
Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa
Bonds which are rated CAA are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca
Bonds which are rated CA represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C
Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Moody's bond ratings, where specified, are also applied to senior bank
obligations with an original maturity in excess of one year. Among the bank
obligations covered are bank deposits, bankers acceptance and obligations to
deliver foreign exchange. Obligations relying upon support mechanisms such as
letters-of-credit are excluded unless explicitly rated.
NOTE: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
SHORT-TERM NOTES AND VARIABLE RATE DEMAND OBLIGATIONS
The following summarizes the ratings used by Moody's for short-term notes
and variable rate demand obligations:
MIG-1/VMIG-1. Obligations bearing these designations are of the 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. Obligations bearing these designations are of high quality
with margins of protection ample although not as large as in the preceding
group.
MIG-3/VMIG-3. Obligations bearing these designations are of favorable
quality. All security elements are accounted for but there is a lacking the
undeniable strength of the preceding grades. Liquidity and cash flow
protection may be narrow and market access for refinancing is hereby to be
less well established.
A-4
<PAGE>
COMMERCIAL PAPER RATINGS
The rating PRIME-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated PRIME-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of senior short-term debt
obligations. Issuers rated PRIME-2 (or related supporting institutions) are
considered to have strong capacity for repayment of senior short-term debt
obligations. This will normally be evidenced by many of the characteristics of
issuers rated PRIME-1 but to a lesser degree. Earnings trends and coverage
ratios, while sound, will be more subject to variation. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained. Issuers PRIME-3 (or
supporting institutions) have an acceptable capacity rated for repayment of
senior short-term debt obligations. The effect of industry characteristics and
market composition 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. Issuers rated NOT PRIME do not fall within any of the Prime
rating categories.
A-5
<PAGE>
WPGBF-1-1294
Warburg Pincus Advisor Funds
Counsellors Securities Inc., distributor
Table of Contents
3 FINANCIAL HIGHLIGHTS
4 INVESTMENT OBJECTIVES AND POLICIES
11 INVESTMENT LIMITATIONS
11 MANAGEMENT
14 HOW TO PURCHASE SHARES
15 HOW TO REDEEM AND EXCHANGE SHARES
17 NET ASSET VALUE [ PHOTO ]
17 DIVIDENDS AND DISTRIBUTIONS
17 TAXES
18 SHAREHOLDER SERVICING
19 DESCRIPTION OF SHARES
20 OTHER INFORMATION
WARBURG PINCUS
Advisor
Funds
<PAGE>
WARBURG PINCUS BALANCED FUND
(Investment Portfolio of The RBB Fund, Inc.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary
information pertaining to shares of the Series 2 Class (the "Advisor
Shares") representing interests in the Warburg Pincus Balanced Fund (the
"Balanced Fund" or "Fund") of The RBB Fund, Inc. ("RBB"). This Statement of
Additional Information is not a prospectus, and should be read only in
conjunction with the Warburg Pincus Advisor Funds Prospectus dated December
29, 1995, as revised August 31, 1995 (the "Prospectus"). A copy of the
Prospectus may be obtained from the Funds' distributor by calling toll-free
(800) 888-9723. This Statement of Additional Information is dated December
29, 1995, as revised August 31, 1995.
CONTENTS
Prospectus
Page Page
---- -----------
General........................................ 2 1
Investment Objectives and Policies ............ 2 4
Directors and Officers ........................ 14 N/A
Investment Advisory, Distribution
and Servicing Arrangements ................... 17 11
Fund Transactions ............................. 21 14
Purchase and Redemption Information ........... 23 14
Valuation of Shares ........................... 24 17
Performance Information....................... 24 20
Taxes.......................................... 27 17
Description of Shares.......................... 31 19
Additional Information Concerning Fund Shares.. 33 20
Miscellaneous ................................. 34 N/A
Financial Statements .......................... F-1 N/A
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 Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by RBB or its distributor. The Statements of Additional Information does
not constitute an offering by RBB or by the distributor in any jurisdiction in
which such offering may not lawfully be made.
<PAGE>
GENERAL
The RBB Fund, Inc. ("RBB") is an open-end management investment
company currently operating or proposing to operate seventeen separate
investment portfolios. RBB is an open-end investment company registered under
the Investment Company Act of 1940 (the "1940 Act") and was organized as a
Maryland corporation on February 29, 1988. This Statement of Additional
Information pertains to the Series 2 Class of shares ("Advisor Shares")
representing interests in the Warburg Pincus Balanced Fund (the "Balanced
Fund" or "Fund") of RBB. The Shares are offered by the Prospectus dated
December 29, 1995.
Capitalized terms used herein and not otherwise defined have the same
meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the Prospectus
concerning the investment objectives and policies of the Fund. A
description of ratings of certain instruments the Fund may purchase is set forth
in the Appendix to the Prospectus.
Additional Information on Fund Investments
Reverse Repurchase Agreements. Reverse repurchase agreements involve
the sale of securities held by the Fund pursuant to the Fund's agreement to
repurchase the securities at an agreed upon price, date and rate of interest.
Such agreements are considered to be borrowings under the Investment Company Act
of 1940, as amended (the "1940 Act"), and may be entered into only for temporary
or emergency purposes. While reverse repurchase transactions are outstanding, a
Fund will maintain in a segregated account with the RBB's custodian or a
qualified sub-custodian, cash, U.S. Government securities or other liquid,
high-grade debt securities of an amount at least equal to the market value of
the securities, plus accrued interest, subject to the agreement and will monitor
the account to ensure that such value is maintained. Reverse repurchase
agreements involve the risk that the market value of the securities sold by
the Fund may decline below the price of the securities the Fund is obligated to
Repurchase.
Foreign Securities. Although the Fund generally intends to
invest in securities of companies and governments of developed, stable nations,
the value of the Fund's 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, imposition of (or
change in) exchange control regulations in those foreign nations and difficulty
in enforcing judgments. In addition, changes in government administrations,
economies or monetary policies in the U.S. or abroad could result in
appreciation or depreciation of those portfolio securities. Furthermore, the
economies of individual foreign nations may differ from the U.S. economy,
whether favorably or unfavorably, in areas such as growth of gross national
product, rate of inflation, capital reinvestment,
2
<PAGE>
resource self-sufficiency and balance of payments position. Any foreign
investments made by the Fund must be made in compliance with U.S. and
foreign currency restrictions and tax laws restricting the amounts and types of
foreign investments.
In addition, while the volume of transactions effected on foreign
stock exchanges has increased in recent years, it remains appreciably below that
of the New York Stock Exchange. Accordingly, the Fund's foreign investments
may be less liquid and their prices may be more volatile than comparable
investments in securities of U.S. companies. In buying and selling securities
on foreign exchanges, the Fund will normally pay fixed commissions that are
generally higher than the negotiated commissions charged in the U.S. Moreover,
the Fund's expenses may be higher due to the additional cost of custody of
foreign securities. In addition, there is generally less government supervision
and regulation of securities exchanges, brokers and issuers in foreign countries
than in the U.S.
Dollar-Denominated Debt Obligations of Foreign Issuers. U.S.
dollar-denominated debt securities issued by foreign corporations held by a Fund
may not be registered with the Securities and Exchange Commission ("SEC"), and
the issuers thereof may not be subject to its reporting requirements.
Accordingly, there may be less publicly available information concerning foreign
issuers of debt securities held by the Fund than is available concerning
U.S. issuers. Foreign companies 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. Securities of
many foreign companies may be less liquid and their prices more volatile than
those of securities of comparable U.S. companies. In addition, with respect to
certain foreign countries, there is the possibility of expropriation,
confiscatory taxation, limitations on the use or removal of funds or the assets
of the Fund, and political or social instability or diplomatic developments
which could affect investments in those countries. Moreover, individual foreign
economies may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position.
Mortgage-Related Debt Securities. Mortgage-related debt securities
represent ownership interests in individual pools of residential mortgage loans.
These securities are designed to provide monthly payments of interest and
principal to the investor. Each mortgagor's monthly payment to his lending
institution on his residential mortgage is "passed-through" to investors.
Mortgage pools consist of whole mortgage loans or participations in loans. The
terms and characteristics of the mortgage instruments are generally uniform
within a pool but may vary among pools. Lending institutions which originate
mortgages for the pools are subject to certain standards, including credit and
underwriting criteria for individual mortgages included in the pools.
Since the inception of the mortgage-related pass-through security in
1970, the market for these securities has expanded considerably. The size of
the primary issuance market, and active participation in the secondary
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market by securities dealers and many types of investors, historically have made
interests in government and government-related pass-through pools highly liquid,
although no guarantee regarding future market conditions can be made. The
average life of pass-through pools varies with the maturities of the underlying
mortgage instruments. In addition, a pool's term may be shortened by
unscheduled or early payments of principal and interest on the underlying
mortgages. The occurrence of mortgage prepayments is affected by factors
including the level of interest rates, general economic conditions, the location
and age of the mortgages and various social and demographic conditions. Because
prepayment rates of individual pools vary widely, it is not possible to predict
accurately the average life of a particular pool. For pools of fixed rate 30
year mortgages, common industry practice is to assume that prepayments will
result in a 12 year average life. Pools of mortgages with other maturities or
different characteristics will have varying assumptions concerning average life.
The assumed average life of pools of mortgages having terms of less than 30
years is less than 12 years, but typically not less than 5 years. Yields on
pass-through securities are typically quoted by investment dealers and vendors
based on the maturity of the underlying instruments and the associated average
life assumption. In periods of falling interest rates, the rate of prepayment
tends to increase, thereby shortening the actual average life of a pool of
underlying mortgage-related securities. Conversely, in periods of rising rates
the rate of prepayment tends to decrease, thereby lengthening the actual average
life of the pool. Historically, actual average life has been consistent with
the 12-year assumption referred to above. Actual prepayment experience may
cause the yield of mortgage-related securities to differ from the assumed
average life yield. In addition, as noted in the Prospectus, reinvestment of
prepayments may occur at higher or lower interest rates than the original
investment, thus affecting the yield of the Fund.
The coupon rate of interest on mortgage-related securities is lower
than the interest rates paid on the mortgages included in the underlying pool,
but only by the amount of the fees paid to the mortgage pooler, issuer, and/or
guarantor of payment of the securities for the guarantee of the services of
passing through monthly payments to investors. Actual yield may vary from the
coupon rate, however, if mortgage-related securities are purchased at a premium
or discount, traded in the secondary market at a premium or discount, or to the
extent that mortgages in the underlying pool are prepaid as noted above. In
addition, interest on mortgage-related securities is earned monthly, rather than
semi-annually as is the case for traditional bonds, and monthly compounding may
tend to raise the effective yield earned on such securities.
U.S. Government Obligations. Examples of types of U.S. Government
obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and
the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal
Land Banks, the Federal Housing Administration, Farmers Home Administration,
Export-Import Bank of the United States, Small Business Administration, Federal
National Mortgage Association, Government National Mortgage Association, General
Services Administration, Student Loan Marketing Association, Central Bank for
Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate
Credit Banks, Maritime Administration,
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International Bank for Reconstruction and Development (the "World Bank"), the
Asian-American Development Bank and the Inter-American Development Bank.
Futures Contracts. When the Fund purchases a futures contract, it
agrees to purchase a specified underlying instrument at a specified future date.
When the Fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and sale
will take place is fixed when the Fund enters into the contract. The
underlying instrument may be a specified type of security, such as U.S. Treasury
bonds or notes.
The majority of futures contracts are closed out by entering into an
offsetting purchase or sale transaction in the same contract on the exchange
where they are traded, rather than being held for the life of the contract.
Futures contracts are closed out at their current prices, which may result in a
gain or loss.
If the Fund holds a futures contract until the delivery date, it
will be required to complete the purchase and sale contemplated by the contract.
In the case of futures contracts on securities, the purchaser generally must
deliver the agreed-upon purchase price in cash, and the seller must deliver
securities that meet the specified characteristics of the contract.
The Fund may purchase futures contracts as an alternative to
purchasing actual securities. For example, if the Fund intended to
purchase bonds but had not yet done so, it could purchase a futures contract in
order to lock in current bond prices while deciding on particular investments.
This strategy is sometimes known as an anticipatory hedge. Alternatively,
the Fund could purchase a futures contract if it had cash and short-term
securities on hand that it wished to invest in longer-term securities, but at
the same time that Fund wished to maintain a highly liquid position in order to
be prepared to meet redemption requests or other obligations. In these
strategies the Fund would use futures contracts to attempt to achieve an
overall return --whether positive or negative -- similar to the return from
longer-term securities, while taking advantage of potentially greater liquidity
that futures contracts may offer. Although the Fund would hold cash and
liquid debt securities in a segregated account with a value sufficient to cover
its open futures obligations, the segregated assets would be available to
the Fund immediately upon closing out the futures position, while settlement
of securities transactions can take several days. However, because the
Fund's cash that would otherwise have been invested in higher-yielding bonds
would be held uninvested or invested in short-term securities so long as the
futures position remains open, the Fund's return would involve a smaller amount
of interest income and potentially a greater amount of capital gain or loss.
The Fund may sell futures contracts to hedge its other
investments against changes in value, or as an alternative to sales of
securities. For example, if the investment adviser anticipated a decline in
bond prices, but did not wish to sell bonds owned by the Fund, it could sell
a futures contract in order to lock in a current sale price. If prices
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subsequently fell, the future contract's value would be expected to rise and
offset all or a portion of the loss in the bonds that the Fund had hedged. Of
course, if prices subsequently rose, the futures contract's value could be
expected to fall and offset all or a portion of the benefit of the Fund. In
this type of strategy, the Fund's return will tend to involve a larger
component of interest income, because the Fund will remain invested in
longer-term securities rather than selling them and investing the proceeds in
short-term securities which generally provide lower yields.
Futures margin payments. The purchaser or seller of a futures
contract is not required to deliver or pay for the underlying instrument unless
the contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker (known as
a futures commission merchant, or FCM), when the contract is entered into.
Initial margin deposits are equal to a percentage of the contract's value, as
set by the exchange where the contract is traded, and may be maintained in cash
or high quality liquid securities. If the value of either party's position
declines, that party will be required to make additional "variation margin"
payments to settle the change in value on a daily basis. The party that has a
gain may be entitled to receive all or a portion of this amount. Initial and
variation margin payments are similar to good faith deposits or performance
bonds, unlike margin extended by a securities broker, and initial and variation
margin payments do not constitute purchasing securities on margin for purposes
of the Fund's investment limitations. In the event of the bankruptcy of an
FCM that holds margin on behalf of a Fund, that Fund may be entitled to
return of margin owed to it only in proportion to the amount received by the
FCM's other customers. The investment adviser will attempt to minimize this
risk by careful monitoring of the creditworthiness of the FCMs with which
the Fund does business.
Correlation of price changes. The prices of futures contracts depend
primarily on the value of their underlying instruments. Because there are a
limited number of types of futures contracts, it is likely that the standardized
futures contracts available to the Fund will not match that Fund's current
or anticipated investments. Futures prices can also diverge from the prices of
their underlying instruments, even if the underlying instruments match the
Fund's investments well. Futures prices are affected by such factors as current
and anticipated short-term interest rates, changes in volatility of the
underlying instrument, and the time remaining until expiration of the contract,
which may not affect security prices the same way. Imperfect correlation
between the Fund's investments and its futures positions may also result
from differing levels of demand in the futures markets and the securities
markets, from structural differences in how futures and securities are traded,
or from imposition of daily price fluctuation limits for futures contracts. The
Fund may purchase or sell futures contracts with a greater or lesser value
than the securities it wishes to hedge or intends to purchase in order
to attempt to compensate for differences in historical volatility between the
futures contract and the securities, although this may not be successful in all
cases. If price changes in the Fund's futures positions are poorly
correlated with its other investments, its futures positions may fail to produce
anticipated gains
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or result in losses that are not offset by the gains in the Fund's other
investments.
Liquidity of futures contracts. Because futures contracts are
generally settled within a day from the date they are closed out, compared with
a settlement period of seven days for some types of securities, the futures
markets can provide liquidity superior to the securities markets in many cases.
Nevertheless, there is no assurance a liquid secondary market will exist for any
particular futures contract at any particular time. In addition, futures
exchanges may establish daily price fluctuation limits for futures contracts,
and may halt trading if a contract's price moves upward or downward more than
the limit in a given day. On volatile trading days when the price fluctuation
limit is reached, it may be impossible for the Fund to enter into new
positions or close out existing positions. If the secondary market for a
futures contract is not liquid because of price fluctuation limits or otherwise,
it would prevent prompt liquidation of unfavorable futures positions, and
potentially could require the Fund to continue to hold a futures position
until the delivery date regardless of changes in its value. As a result,
the Fund's access to other assets held to cover its futures positions could also
be impaired.
Purchasing Put Options. By purchasing a put option, the Fund
obtains the right (but not the obligation) to sell the option's underlying
instrument at a fixed strike price. The option may give the Fund the right
to sell only on the option's expiration date, or may be exercisable at any time
up to and including that date. In return for this right, the Fund pays the
current market price for the option (known as the option premium). The option's
underlying instrument may be a security, or a futures contract.
The Fund may terminate its position in a put option it has
purchased by allowing it to expire or by exercising the option. If the option
is allowed to expire, the Fund will lose the entire premium it paid. If the
Fund exercises the option, it completes the sale of the underlying instrument at
the strike price. If the Fund exercises a put option on a futures contract,
it assumes a seller's position in the underlying futures contract. Purchasing
an option on a futures contract does not require the Fund to make futures
margin payments unless it exercises the option. A Fund may also terminate a put
option position by closing it out in the secondary market at its current price,
if a liquid secondary market exists.
Put options may be used by the Fund to hedge securities it owns,
in a manner similar to selling futures contracts, by locking in a minimum price
at which the Fund can sell. If security prices fall, the value of the put
option would be expected to rise and offset all or a portion of the Fund's
resulting losses. The put thus acts as a hedge against a fall in the price of
such securities. However, all other things being equal (including security
prices), option premiums tend to decrease over time as the expiration date
nears. Therefore, because of the cost of the option in the form of the premium
(and transaction costs), a Fund would expect to suffer a loss in the put option
if prices do not decline sufficiently to offset the deterioration in the value
of the option premium. This potential loss
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represents the cost of the hedge against a fall in prices. At the same time,
because the maximum the Fund has at risk is the cost of the option,
purchasing put options does not eliminate the potential for the Fund to
profit from an increase in the value of the securities hedged to the same extent
as selling a futures contract.
Purchasing Call Options. The features of call options are essentially
the same as those of put options, except that the purchaser of a call option
obtains the right to purchase, rather than sell, the underlying instrument at
the option's strike price (call options on futures contracts are settled by
purchasing the underlying futures contract). By purchasing a call option,
the Fund would attempt to participate in potential price increases of the
underlying instrument, with results similar to those obtainable from purchasing
a futures contract, but with risk limited to the cost of the option if security
prices fell. At the same time, a Fund can expect to suffer a loss if security
prices do not rise sufficiently to offset the cost of the option.
The Fund will purchase call options only in connection with
"closing purchase transactions." The Fund may terminate its position in a
call option by entering into a closing purchase transaction. A closing purchase
transaction is the purchase of a call option on the same security with the same
exercise price and call period as the option previously written by the Fund.
If the Fund is unable to enter into a closing purchase transaction, the Fund
may be required to hold a security that it might otherwise have sold to protect
against depreciation.
Writing Put Options. When the Fund writes a put option, it takes
the opposite side of the transaction from the option's purchaser. In return for
receipt of the premium, the Fund assumes the obligation to pay the strike
price for the option's underlying instrument if the other party to the option
chooses to exercise it. When writing an option on a futures contract the
Fund will be required to make margin payments to an FCM as described above for
futures contracts. The Fund may seek to terminate its position in a put
option it writes before exercise by closing out the option in the secondary
market at its current price. If the secondary market is not liquid for an
option the Fund has written, however, the Fund must continue to be prepared
to pay the strike price while the option is outstanding, regardless of price
changes, and must continue to set aside assets to cover its position.
The Fund may write put options as an alternative to purchasing
actual securities. If security prices rise, the Fund would expect to profit
from a written put option, although its gain would be limited to the amount of
the premium it received. If security prices remain the same over time, it is
likely that the Fund will also profit, because it should be able to close out
the option at a lower price. If security prices fall, the Fund would expect to
suffer a loss. This loss should be less than the loss the Fund would have
experienced from purchasing the underlying instrument directly, however, because
the premium received for writing the option should mitigate the effects of the
decline. As with other futures and options strategies used as alternatives for
purchasing securities, the Fund's return from writing put options generally
will involve a smaller amount of interest income than
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purchasing longer-term securities directly, because the Fund's cash will be
invested in shorter-term securities which usually offer lower yields.
Writing Call Options. Writing a call option obligates the Fund to
sell or deliver the option's underlying instrument, in return for the strike
price, upon exercise of the option. The characteristics of writing call options
are similar to those of writing put options, as described above, except that
writing covered call options generally is a profitable strategy if prices remain
the same or fall. Through receipt of the option premium, the Fund would
seek to mitigate the effects of a price decline. At the same time, because
the Fund would have to be prepared to deliver the underlying instrument in
return for the strike price, even if its current value is greater, the Fund
would give up some ability to participate in security price increases when
writing call options.
Combined Option Positions. The Fund may purchase and write
options in combination with each other to adjust the risk and return
characteristics of the overall position. For example, the Fund may purchase
a put option and write a call option on the same underlying instrument, in order
to construct a combined position whose risk and return characteristics are
similar to selling a futures contract. Another possible combined position would
involve writing a call option at one strike price and buying a call option at a
lower price, in order to reduce the risk of the written call option in the event
of a substantial price increase. Because combined options positions involve
multiple trades, they result in higher transaction costs and may be more
difficult to open and close out.
Risks of Options Transactions. Options are subject to risks similar
to those described above with respect to futures contracts, including the risk
of imperfect correlation between the option and a Fund's other investments and
the risk that there might not be a liquid secondary market for the option. In
the case of options on futures contracts, there is also a risk of imperfect
correlation between the option and the underlying futures contract. Options are
also subject to the risks of an illiquid secondary market, particularly in
strategies involving writing options, which a Fund cannot terminate by exercise.
In general, options whose strike prices are close to their underlying
instruments' current value will have the highest trading volume, while options
whose strike prices are further away may be less liquid. The liquidity of
options may also be affected if options exchanges impose trading halts,
particularly when markets are volatile.
Asset Coverage for Futures and Options Positions. A Fund will not use
leverage in its options and futures strategies. Such investments will be
made for hedging purposes only. The Fund will hold securities or other options
or futures positions whose values are expected to offset its obligations under
the hedge strategies. The Fund will not enter into an option or futures
position that exposes the Fund to an obligation to another party unless it owns
either (i) an offsetting position in securities or other options or futures
contracts or (ii) cash, receivables and short-term debt securities with a value
sufficient to cover its potential obligations. A Fund will comply with
guidelines established by the SEC with respect to coverage of options and
futures strategies by mutual funds, and if the guidelines so
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require will set aside cash and high grade liquid debt securities in a
segregated account with its custodian bank in the amount prescribed. Securities
held in a segregated account cannot be sold while the futures or option strategy
is outstanding, unless they are replaced with similar securities. As a result,
there is a possibility that segregation of a large percentage of the Fund's
assets could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.
Limitations on Futures and Options Transactions. RBB on behalf
of the Fund has filed a notice of eligibility for exclusion from the
definition of the term "commodity pool operator" with the Commodity Futures
Trading Commission ("CFTC") and the National Futures Association, which regulate
trading in the futures markets. Pursuant to Section 4.5 of the regulations
under the Commodity Exchange Act, the notice of eligibility includes the
representation that the Fund will not enter into any commodity futures contract
or option on a commodity futures contract if, as a result, the sum of initial
margin deposits on commodity futures contracts and related commodity
options and premiums paid for options on commodity futures contracts the
Fund has purchased, after taking into account unrealized profits and losses
on such contracts, would exceed 5% of the Fund's total assets.
In addition, the Fund will not enter into any futures contract and
into any option if, as a result, the sum of (i) the current value of assets
hedged in the case of strategies involving the sale of securities, and (ii) the
current value of securities or other instruments underlying the respective
Fund's other futures or options positions, would exceed 50% of the Fund's
net assets.
The Fund's limitations on investments in futures contracts and
its policies regarding futures contracts and the limitations on investments in
options and its policies regarding options discussed above in this Statement of
Additional Information, are not fundamental policies and may be changed as
regulatory agencies permit. The Fund will not modify the above limitations
to increase its permissible futures and options activities without supplying
additional information in a current Prospectus or Statement of Additional
Information that has been distributed or made available to the Fund's
shareholders.
Various exchanges and regulatory authorities have recently undertaken
reviews of options and futures trading in light of market volatility. Among the
possible actions that have been presented are proposals to adopt new or more
stringent daily price fluctuation limits for futures or options transactions,
and proposals to increase the margin requirements for various types of
strategies. It is impossible to predict what actions, if any, will result from
these reviews at this time.
Short Sales "Against the Box." In a short sale, the Fund sells a
borrowed security and has a corresponding obligation to the lender to return the
identical security. The 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
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investment technique is known as a short sale "against the box." In a short
sale, a seller does not immediately deliver the securities sold and is said to
have a short position in those securities until delivery occurs. If the
Fund engages in a short sale, the collateral for the short position will be
maintained by the Fund's custodian or a qualified sub-custodian. While the
short sale is open, the Fund will maintain in a segregated account an amount of
securities equal in kind and amount to the securities sold short or securities
convertible into or exchangeable for such equivalent securities. These
securities constitute the Fund's long position. The Fund will not
engage in short sales against the box for speculative purposes. The Fund
may, however, make a short sale as a hedge, when it believes that the price of a
security may decline, causing a decline in the value of a security owned by the
Fund (or a security convertible or exchangeable for such security), or when the
Fund wants to sell the security at an attractive current price, but also wishes
to defer recognition of gain or loss for federal income tax purposes and for
purposes of satisfying certain tests applicable to regulated investment
companies under the Internal Revenue Code. In such case, any future losses in
the Fund's long position should be reduced by a gain in the short position.
Conversely, any gain in the long position should be reduced by a loss in the
short position. The extent to which such gains or losses are reduced will
depend upon the amount of the security sold short relative to the amount the
Fund owns. There will be certain additional transaction costs associated with
short sales against the box, but the Fund will endeavor to offset these
costs with the income from the investment of the cash proceeds of short sales.
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 RBB 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" below.
Repurchase Agreements. The repurchase price under the repurchase
agreements described in the Prospectus generally equals the price paid by the
Fund involved plus interest negotiated on the basis of current short-term rates
(which may be more or less than the rate on the securities underlying the
repurchase agreement). Securities subject to repurchase agreements will be held
by the RBB's custodian in the Federal Reserve/Treasury book-entry system or by
another authorized securities depository. Repurchase agreements are considered
to be loans by the Fund involved under the 1940 Act.
Rights Offerings and Purchase Warrants. Rights offerings and purchase
warrants are privileges issued by a corporation which enable the owner to
subscribe to and purchase a specified number of shares of the corporation at a
specified price during a specified period of time. Subscription rights normally
have a short lifespan to expiration. The
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purchase of rights or warrants involves the risk that the Fund could lose
the purchase value of a right or warrant if the right to subscribe to additional
shares is not executed prior to the rights and warrants expiration. Also, the
purchase of rights and/or warrants involves the risk that the effective price
paid for the right and/or warrant added to the subscription price of the related
security may exceed the value of the subscribed security's market price such as
when there is no movement in the level of the underlying security.
Illiquid Securities. The Fund may not invest more than 15% of its
total assets in illiquid securities, including repurchase agreements which
have a maturity of longer than seven days and securities that are illiquid by
virtue of the absence of a readily available market or legal or contractual
restrictions on resale. Securities that have legal or contractual restrictions
on resale but have a readily available market are not considered illiquid for
purposes of this limitation. The Fund's investment adviser will monitor the
liquidity of such restricted securities under the supervision of the Board of
Directors. Repurchase agreements subject to demand are deemed to have a
maturity equal to the notice period.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. The Board has adopted a policy that the Fund will not
purchase private placements (i.e. restricted securities other than Rule 144A
Securities). Mutual funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential for delays on
resale and uncertainty in valuation. Limitations on resale may have an adverse
effect on the marketability of portfolio securities and a mutual fund might be
unable to dispose of restricted or other illiquid securities promptly or at
reasonable prices and might thereby experience difficulty satisfying redemptions
within seven days. A mutual fund might also have to register such restricted
securities in order to dispose of them resulting in additional expense and
delay. Adverse market conditions could impede such a public offering of
securities.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities Act
including repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to
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the general public or to certain institutions may not be indicative of the
liquidity of such investments.
The SEC adopted Rule 144A which allows for a broader institutional
trading market for securities otherwise subject to restriction on resale to the
general public. Rule 144A establishes a "safe harbor" from the registration
requirements of the Securities Act for resales of certain securities to
qualified institutional buyers. The investment adviser anticipates that the
market for certain restricted securities such as institutional commercial paper
will expand further as a result of this relatively new regulation and the
development of automated systems for the trading, clearance and settlement of
unregistered securities of domestic and foreign issuers, such as the PORTAL
System sponsored by the NASD.
The Advisor will monitor the liquidity of restricted securities in
the Fund under the supervision of the Board of Directors. In reaching
liquidity decisions, the Advisor may consider, inter alia, 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).
Additional Investment Considerations
Normally, RBB will issue shares representing an interest in the
Balanced Fund only for cash or cash equivalents. Transactions involving the
issuance of shares representing an interest in the Balanced Fund for securities
or assets other than cash will be limited to bona fide reorganizations,
statutory mergers and to other acquisitions of portfolio securities (except for
municipal debt securities issued by state political subdivisions or their
agencies or instrumentalities) which (a) meet the Balanced Fund's investment
objectives and policies; (b) are acquired for investment and not for resale; (c)
are liquid securities which are not restricted as to transfer either by law or
liquidity of market; and (d) have a readily ascertainable value as evidenced by
a listing on the American Stock Exchange, the NYSE or NASDAQ.
Investment Limitations
The Fund has adopted the following fundamental investment
limitations which may not be changed without the affirmative vote of the holders
of a majority of the Fund's outstanding shares (as defined in Section
2(a)(42) of the Investment Company Act). The Fund may not:
1. Borrow money, except from banks or by entering into reverse
repurchase agreements for temporary purposes and then in amounts not in excess
of 30% of the value of the Fund's total assets at the time of such borrowing,
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 or reverse repurchase agreement and
in amounts not in excess of 125% of the dollar amounts borrowed; or purchase
portfolio securities while borrowings and reverse repurchase agreements in
excess of 5% of the Balanced Fund's net assets are outstanding. (This borrowing
provision is not for investment leverage, but solely to facilitate management of
the Balanced Fund's securities by enabling the Balanced Fund to meet redemption
requests where the liquidation of portfolio securities is deemed to be
disadvantageous or inconvenient.)
2. Purchase securities of any one issuer, other than securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, if immediately after and as a result of such purchase more
than 5% of the Fund's total assets would be invested in the securities of
such issuer, or more than 10% of the outstanding voting securities of such
issuer would be owned by the Fund, except that up to 25% of the value of
the Fund's assets may be invested without regard to this 5% limitation;
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3. Purchase securities on margin, except for short-term credit
necessary for clearance of portfolio transactions, except that the Fund may
establish margin accounts in connection with its use of options, futures
contracts and options on futures contracts;
4. Underwrite securities of other issuers, except to the extent
that, in connection with the disposition of portfolio securities, the Fund
may be deemed an underwriter under Federal securities laws, and except to the
extent that the purchase of Municipal Obligations directly from the issuer
thereof in accordance with the Fund's investment objective, policies and
limitations may be deemed to be an underwriting;
5. Make short sales of securities or maintain a short position or
write or sell puts, calls, straddles, spreads or combinations thereof, except
that the Fund may purchase and sell puts and call options on securities,
stock indices and currencies and may purchase and sell options on futures
contracts;
6. Purchase or sell real estate (including interests in real
estate limited partnerships), provided that the Fund may invest in readily
marketable interests in real estate investment trusts or in securities secured
by real estate or interests therein or issued by companies which invest in real
estate or interests therein;
7. Purchase or sell commodities or commodity contracts, except that
the Fund may purchase and sell futures contracts and related options;
8. Invest in oil, gas or mineral-related programs or leases;
9. Make loans except that the Fund may purchase or hold debt
obligations in accordance with its investment objective, policies and
limitations and except that the Fund may enter into repurchase agreements;
10. Purchase any securities issued by any other investment company
except in connection with the merger, consolidation or acquisition of all the
securities or assets of such an issuer; or
11. Make investments for the purpose of exercising control or
management.
In addition to the foregoing enumerated investment limitations,
the Fund may not (a) invest more than 5% of its total assets (taken at the time
of purchase) in securities of issuers (including their predecessors) with less
than three years of continuous operations, (b) invest more than 5% of its total
assets (taken at the time of purchase) in equity securities that are not readily
marketable, and (c) purchase any securities which would cause, at the time of
purchase, more than 25% of the value of the total assets of the Fund to be
invested in the obligations of issuers in any industry (exclusive of the U.S.
Government and its agencies and instrumentalities).
DIRECTORS AND OFFICERS
The directors and executive officers of RBB, their business addresses
and principal occupations during the past five years are:
14
<PAGE>
<TABLE><CAPTION>
Name, Address and Age Position with Principal Occupation
----------------------- RBB During Past ---------------------
Five Years
--------------
<S> <C> <C>
Arnold M. Reichman*-47 Director Since 1984, Managing Director and Assistant
466 Lexington Avenue Secretary, E.M. Warburg, Pincus & Co., Inc.;
New York, NY 10017 Since 1984 Managing Director, Warburg Pincus
Counsellors, Inc.; Since 1985, Vice President
and Secretary, Counsellors Securities Inc;
Officer of various investment companies
advised by Warburg, Pincus Counsellors, Inc.
----
Robert Sablowsky**-57 Director Since 1985, Executive Vice President of
14 Wall Street Gruntal & Co., Inc., Director, Gruntal &
New York, NY 10005 Co., Inc. and Gruntal Financial Corp.
Francis J. McKay-60 Director Since 1963, Executive Vice President, Fox
7701 Burholme Avenue Chase Cancer Center (Biomedical research
Philadelphia, PA 19111 and medical care.)
Marvin E. Sternberg-61 Director Since 1974, Chairman, Director and President,
937 Mt. Pleasant Road Moyco Industries, Inc. (manufacturer of
Bryn Mawr, PA 19010 dental supplies and precision coated
abrasives); Since 1968, Director and
President, Mart MMM, Inc. (formerly
Montgomeryville Merchandise Mart Inc.) and
Mart PMM, Inc. (formerly Pennsauken
Merchandise Mart, Inc.) (Shopping Centers);
and Since 1975, Director and Executive Vice
President, Cellucap Mfg. Co., Inc.
(manufacturer of disposable headwear).
-
<PAGE>
<CAPTION>
Name, Address and Age Position with Principal Occupation
----------------------- RBB During Past --------------------
Five Years
---------------
Julian A. Brodsky-62 Director Director, and Vice Chairman Comcast
1234 Market Street Corporation; Director, Comcast Cablevision
16th Floor of Philadelphia (cable television and
Philadelphia, PA 19107-3723 communications) and Nextel (wireless
communications).
Donald van Roden-71 Director Self-employed businessman. From February 1980
1200 Old Mill Lane to march 1987, Vice Chairman, SmithKline
Wyomissing, PA 19610 Beckman Corporation (pharmaceuticals);
Director, AAA Mid-Atlantic (auto service);
Director, Keystone Insurance Co.
Edward J. Roach-71 President and Certified Public Accountant; Vice Chairman of
Bellevue Park Corporate Treasurer the Board, Fox Chase Cancer Center; Vice
Center
400 Bellevue Parkway President and Trustee, Pennsylvania School
Wilmington, DE 19809 for the Deaf; Trustee, Immaculata
College; Vice President and Treasurer of
various investment companies advised by PNC
Institutional Management Corporation.
Morgan R. Jones-56 Secretary Chairman of the law firm of Drinker Biddle &
1100 PNB Bank Building Reath, Philadelphia, Pennsylvania; Director,
Broad and Chestnut Streets Rocking Horse Child Care Centers of America,
Philadelphia, PA 19107 Inc.
</TABLE>
- -------------------------
* Mr. Reichman is an "interested person" of RBB as that term is defined in
the 1940 Act by virtue of his position with Counsellors Securities Inc.,
RBB's distributor.
** Mr. Sablowsky is an "interested person" of RBB as that term is defined in
the 1940 Act by virtue of his position with Gruntal & Co., Inc., a
broker-dealer which sells RBB's shares.
Messrs. McKay, Sternberg and Brodsky are members of the Audit
Committee of the Board of Directors. The Audit Committee, among other things,
16
<PAGE>
reviews results of the annual audit and recommends to RBB the firm to be
selected as independent auditors.
Messrs. Reichman, McKay and van Roden are members of the Executive
Committee of the Board of Directors. The Executive Committee may generally
carry on and manage the business of RBB when the Board of Directors is not in
session.
Messrs. McKay, Sternberg, Brodsky and van Roden are members of the
Nominating Committee of the Board of Directors. The Nominating Committee
recommends to the Board annually all persons to be nominated as directors of
RBB.
RBB pays directors who are not "affiliated persons" (as that term is
defined in the 1940 Act) of the Fund $9,500 annually and $700 per
meeting of the Board or any committee thereof that is not held in conjunction
with a Board meeting. Directors who are not affiliated persons of RBB are
reimbursed for any expenses incurred in attending meetings of the Board of
Directors or any committee thereof. The Chairman (currently Donald Van Roden)
receives an additional $5,000 for his services. For the year ended August 31,
1995, each of the following members of the Board of Directors received
compensation from the Fund in the following amounts: Julian A. Brodsky in
the aggregate amount of $9,425; Francis J. McKay in the aggregate amount of
$12,025; Marvin E. Sternberg in the aggregate amount of $12,675; Donald van
Roden in the aggregate amount of $14,675. On October 24, 1990, RBB adopted, as
a participating employer, RBB Office Retirement Profit-Sharing Plan and Trust
Agreement, a retirement plan for employees (currently Edward J. Roach) pursuant
to which RBB will contribute on a monthly basis amounts equal to 10% of the
monthly compensation of each eligible employee. By virtue of the services
performed by WPC, the Fund's adviser, and Counsellors Securities, the
Fund's distributor, RBB itself requires only one part-time employee. No
officer, director or employee of WPC currently receives any compensation
from RBB.
INVESTMENT ADVISORY, DISTRIBUTION AND SERVICING ARRANGEMENTS
Advisory Agreements
WPC renders advisory services to the Fund pursuant to an
Investment Advisory Agreement. The Advisory Agreement relating to the
Balanced Fund is dated September 30, 1994 ("Advisory Contract"). Prior to
October 1, 1994, PIMC and WPC rendered advisory and sub-advisory services,
respectively, to the Balanced Fund pursuant to Advisory and Sub-Advisory
Agreements dated August 16, 1988. For the year ended August 31, 1995,
WPC waived advisory fees with respect to the Balanced Fund in the amount of
$14,367 under the Advisory Contract, and PIMC waived advisory fees in the
amount of $362. During the same period, WPC received advisory fees (after
waivers) in the amount of $0, and PIMC received advisory fees (after
waivers) in the amount of $5,824,947.
17
<PAGE>
As required by various state regulations, WPC will reimburse RBB
or the Fund (as applicable) if and to the extent that the aggregate
operating expenses of RBB or the Fund exceeds applicable state limits for
the fiscal year, to the extent required by such state regulations. Currently,
the most restrictive of such applicable limits is believed to be 2 1/2% of the
first $30 million of average annual net assets, 2% of the next $70 million of
average annual net assets and 1 1/2% of the remaining average annual net assets.
Certain expenses, such as brokerage commissions, taxes, interest and
extraordinary items, are excluded from this limitation. Whether such expense
limitations apply to RBB as a whole or to the Fund depends upon the
particular regulations of such states.
The Fund bears all of its own expenses not specifically
assumed by WPC. General expenses of RBB not readily identifiable as
belonging to a portfolio of RBB are allocated among all investment portfolios by
or under the direction of RBB's Board of Directors in such manner as the Board
determines to be fair and equitable. Expenses borne by the Fund include,
but are not limited to, the following (or the Fund's share of the
following): (a) the cost (including brokerage commissions) of securities
purchased or sold by the Fund and any losses incurred in connection
therewith; (b) fees payable to and expenses incurred on behalf of the Fund
by WPC; (c) expenses of organizing RBB that are not attributable to a class
of RBB; (d) certain of the filing fees and expenses relating to the registration
and qualification of RBB and the Fund's shares under Federal and/or state
securities laws and maintaining such registrations and qualifications; (e) fees
and salaries payable to RBB's directors and officers; (f) taxes (including any
income or franchise taxes) and governmental fees; (g) costs of any liability and
other insurance or fidelity bonds; (h) any costs, expenses or losses arising out
of a liability of or claim for damages or other relief asserted against RBB or
the Fund for violation of any law; (i) legal, accounting and auditing
expenses, including legal fees of special counsel for the independent directors;
(j) charges of custodians and other agents; (k) expenses of setting in type and
printing prospectuses, statements of additional information and supplements
thereto for existing shareholders, reports, statements, and confirmations to
shareholders and proxy material that are not attributable to a class; (l) costs
of mailing prospectuses, statements of additional information and supplements
thereto to existing shareholders, as well as reports to shareholders and proxy
material that are not attributable to a class; (m) any extraordinary expenses;
(n) fees, voluntary assessments and other expenses incurred in connection with
membership in investment company organizations; (o) costs of mailing and
tabulating proxies and costs of shareholders' and directors' meetings; (p) costs
of PFPC's use of independent pricing services to value a portfolio's securities;
and (q) the cost of investment company literature and other publications
provided by RBB to its directors and officers. Distribution expenses, transfer
agency expenses, expenses of preparation, printing and mailing prospectuses,
statements of additional information, proxy statements and reports to
shareholders, and organizational expenses and registration fees, identified as
belonging to a particular class of RBB, are allocated to such class.
Under the Advisory Contract, WPC will not be liable for any error
of judgment or mistake of law or for any loss suffered by RBB or the
18
<PAGE>
Fund in connection with the performance of the Advisory Contract, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
WPC in the performance of its duties or from reckless disregard of its
duties and obligations thereunder.
The Advisory Contract was approved on July 26, 1995, by vote
of RBB's Board of Directors, including a majority of those directors who are not
parties to the Advisory Contract or interested persons (as defined in the
1940 Act) of such parties. The Advisory Contract is terminable by vote of
RBB's Board of Directors or by the holders of a majority of the outstanding
voting securities of the Fund, at any time without penalty, on 60 days'
written notice to WPC. The Balanced Fund Advisory Contract became
effective on October 1, 1994 and was approved by shareholders at a special
meeting held September 30, 1994. The Advisory Contract terminates
automatically in the event of assignment thereof.
Custodian Agreements
PNC Bank is custodian of RBB's assets pursuant to a custodian
agreement dated August 16, 1988, as amended (the "Custodian Agreement"). Under
the Custodian Agreement, PNC Bank (a) maintains a separate account or accounts
in the name of the Fund (b) holds and transfers portfolio securities on
account of the Fund, (c) accepts receipts and makes disbursements of money
on behalf of the Fund, (d) collects and receives all income and other
payments and distributions on account of the Fund's portfolio securities
and (e) makes periodic reports to the RBB's Board of Directors concerning the
Fund's operations. PNC Bank is authorized to select one or more banks or
trust companies to serve as sub-custodian on behalf of RBB, provided that
PNC Bank remains responsible for the performance of all its duties under the
Custodian Agreement and holds RBB harmless from the acts and omissions of any
sub-custodian. For its services to RBB under the Custodian Agreement, PNC
Bank receives a fee which is calculated based upon the Fund's average daily
gross assets as follows: $.25 per $1,000 on the first $50 million of average
daily gross assets; $.20 per $1,000 on the next $50 million of average daily
gross assets; and $.15 per $1,000 on average daily gross assets over $100
million, with a minimum monthly fee of $1,000 per Fund, exclusive of transaction
charges and out-of-pocket expenses, which are also charged to RBB.
State Street Bank and Trust Company ("State Street") is co-custodian
of the Fund's foreign securities pursuant to a sub-custodian agreement dated
October 26, 1994 (the "Foreign Custodian Agreement"). Under the Foreign
Custodian Agreement, State Street performs custodial functions with respect to
the Fund's non-U.S. portfolio holdings, including appointment of non-U.S.
custodians and agents.
Transfer Agency and Sub-Transfer Agency Agreements
PFPC, Inc. ("PFPC"), an affiliate of PNC Bank, serves as the transfer
and dividend disbursing agent for the Shares pursuant to a Transfer Agency
Agreement dated August 16, 1988 (the "Transfer Agency Agreement"). State
Street Bank and Trust Company ("State Street") acts as
19
<PAGE>
shareholder servicing agent, sub-transfer agent and dividend disbursing agent
for the Fund, under which it (a) issues and redeems Shares, (b) addresses
and mails all communications by the Fund to record owners of Shares,
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 RBB's Board of
Directors concerning the operations of the class . For its services to the
Fund under the Sub-Transfer Agency Agreement, State Street receives a fee at the
annual rate of $8.00 per account for the Funds, plus $5.00 per new account
establishment, exclusive of out-of-pocket expenses, and also receives
reimbursement of its out-of-pocket expenses.
Co-Administration Agreements
Counsellors Funds Service, Inc. ("Counsellors Service") serves as
co-administrator to the Fund pursuant to a Co-Administration Agreement
dated August 4, 1994 (the "Counsellors Service Co-Administration
Agreement"). Counsellors Service has agreed to provide shareholder liaison
services to the Fund including responding to shareholder inquiries and
providing information on shareholder accounts. The Counsellors Service
Co-Administration Agreement provides that Counsellors Service shall not be
liable for any error of judgment or mistake of law or any loss suffered by RBB
or the Fund in connection with the performance of the agreement, except a
loss resulting from willful misfeasance, bad faith or negligence, or reckless
disregard of its duties and obligations thereunder. In consideration for
providing services pursuant to the Counsellors Service Co-Administration
Agreement, Counsellors Services receives a fee with respect to the Balanced
Fund calculated at an annual rate of .10% of average daily net assets. Under
the Counsellors Service Co-Administration Agreements, the Balanced Fund paid
Counselors Service $1,597 for the fiscal year ended August 31, 1995.
PFPC also serves as co-administrator to the Fund pursuant to a
Co-Administration Agreements dated August 4, 1994 (the "PFPC Co-Administration
Agreement"). PFPC has agreed to calculate the Fund's net asset values,
provide all accounting services for the Fund, and assist in related aspects
of the Fund's operations. The PFPC Co-Administration Agreement provides
that PFPC shall not be liable for any error of judgment or mistake of law or any
loss suffered by RBB or the Fund in connection with the performance of the
agreement, except a loss resulting from willful misfeasance, bad faith or
negligence, or reckless disregard of its duties and obligations thereunder. In
consideration for providing services pursuant to the PFPC Co-Administration
Agreement, PFPC receives a fee with respect to the Balanced Fund calculated
at an annual rate of .15% of average daily net assets, with a minimum annual fee
of $75,000. Under the PFPC Co-Administration Agreements, the Balanced Fund paid
PFPC $0 (after waivers) for the fiscal year ended August 31, 1995.
20
<PAGE>
Distribution and Shareholder Servicing
Counsellors Securities has entered into a Servicing Agreement with
Service Organizations with respect to the Balanced Fund pursuant to which
support services are provided to the holders of Advisor Shares in consideration
of the Funds' payment of up to .50%, on an annualized basis of the average daily
net assets of the Advisor Shares held of record of each Fund. See
Prospectus, "Shareholder Servicing." Counsellors Securities may, in the future,
enter into additional Servicing Agreements with Service Organizations to perform
certain distribution, shareholder servicing, administrative and accounting
services for their Customers who are beneficial owners of the Fund's shares.
A Service Organization with which Counsellors Securities has entered
into Servicing Agreements on behalf of the Fund may charge a Customer one or
more of the following types of fees, as agreed upon by the Service Organization
and the Customer, with respect to the cash management or other services provided
by the Service Organization: (a) account fees (a fixed amount per month or per
year); (b) transaction fees (a fixed amount per transaction processed); (c)
compensation balance requirements (a minimum dollar amount a Customer must
maintain in order to obtain the services offered); or (d) account maintenance
fees (a periodic charge based upon the percentage of assets in the account or of
the dividend paid on those assets). Services provided by a Service Organization
to Customers are in addition to, and not duplicative of, the services to be
provided under Servicing Agreements. A Customer of a Service Organization
should read the Fund's Prospectus and Statement of Additional Information in
conjunction with the Servicing Agreement and other literature describing the
services and related fees that would be provided by the Service Organization to
its Customers prior to any purchase of shares of the Fund. Service
Organizations and other interested investors may obtain Prospectuses from the
Fund's distributor upon request. No preference will be shown in the
selection of the Fund's portfolio investments for the instruments of Service
Organizations.
There are currently unresolved issues with respect to existing laws
and regulations relating to the permissible activities of banks and trust
companies, including the extent to which certain Service Organizations may
perform shareholder and administrative services. A judicial or administrative
decision or interpretation with respect to those laws and regulations, as well
as future changes in such laws and regulations, could prevent certain Service
Organizations from performing these services or from receiving payments for
performing such services. If a Service Organization was prohibited from
performing these services, it is expected that all arrangements between
Counsellors Securities or behalf of the Fund and the Service Organization
would be terminated and that Customers of the Service Organization who seek to
invest in the Fund would have to purchase and redeem shares directly through
the Fund's distributor or transfer agent.
Counsellors Securities' agreements with Service Organizations is
governed by a Distribution Plan (the "Plan"). The Plan requires PFPC and
Counsellors Service, the Fund's co-administrators, to provide the Board of
Directors, at least quarterly, with written reports of amounts expended under
21
<PAGE>
the Plan and the purpose for which such expenditures were made. The Plan will
continue in effect for so long as their continuance is specifically approved at
least annually by the Board of Directors, including a majority of the Directors
who are not interested persons of RBB and who have no direct or indirect
financial interest in the operation of the Plan ("Independent Directors"). Any
material amendment of the Plan would require the approval of the Board of
Directors in the manner described above. The Plan may be terminated at any
time, without penalty, by vote of a majority of the Independent Directors or by
a vote of a majority of the outstanding voting securities of the relevant class
of shares of the Fund.
FUND TRANSACTIONS
Subject to policies established by the Board of Directors, WPC is
responsible for the execution of portfolio transactions and the allocation of
brokerage transactions for the Fund. In executing portfolio transactions,
WPC seeks to obtain the best net results for the 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 WPC 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.
No Fund has any obligation to deal with any broker or group of brokers
in the execution of portfolio transactions. WPC may, consistent with the
interests of the 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 the Fund and other clients of WPC. Information and
research received from such brokers will be in addition to, and not in lieu of,
the services required to be performed by WPC 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 WPC, as applicable, determines in good faith that such commission is
reasonable in terms either of the transaction or the overall responsibility of
or WPC, as applicable, 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.
WPC may seek to obtain an undertaking from issuers of commercial
paper or dealers selling commercial paper to consider the repurchase of such
securities from the Fund prior to their maturity at
22
<PAGE>
their original cost plus interest (sometimes adjusted to reflect the actual
maturity of the securities), if it believes that the Fund's anticipated need
for liquidity makes such action desirable. Any such repurchase prior to
maturity reduces the possibility that the 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 the Fund and for other investment
accounts managed by WPC are made independently of each other in the light of
differing conditions. However, the same investment decision may occasionally 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 beneficial to the Fund. The Fund will not purchase
securities during the existence of any underwriting or selling group relating to
such security of which WPC or any affiliated person (as defined in the 1940
Act) thereof is a member except pursuant to procedures adopted by the RBB's
Board of Directors pursuant to Rule 10f-3 under the 1940 Act. Among other
things, these procedures, which will be reviewed by the RBB's directors as
deemed necessary from time to time, require that the commission paid in
connection with such a purchase be reasonable and fair, that the purchase be at
not more than the public offering price prior to the end of the first business
day after the date of the public offer, and that WPC not participate in or
benefit from the sale to the Fund.
In no instance will portfolio securities be purchased from or sold to
Counsellors Securities, PNC Bank or WPC or any affiliated person of the
foregoing entities except as permitted by SEC exemptive order or by applicable
law.
During the year ended August 31, 1995, the Balanced Fund paid
$9,437 of brokerage commissions.
A high rate of portfolio turnover involves correspondingly greater
brokerage commission expenses and other transaction costs, which must be borne
directly by the Fund. Federal income tax laws may restrict the extent to
which the Fund may engage in short term trading of securities. See
"Taxes". For the year or period ended August 31, 1995, the Balanced
Fund had a portfolio turnover rate of 107%. The Fund anticipates that its
annual portfolio turnover rate will vary from year to year. The portfolio
turnover rate is calculated by dividing the lesser of the 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 portfolio during the year.
23
<PAGE>
PURCHASE AND REDEMPTION INFORMATION
The Fund reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption or repurchase of
the Fund's shares by making payment in whole or in part in securities chosen by
RBB and valued in the same way as they would be valued for purposes of computing
the Fund's net asset value. If payment is made in securities, a shareholder
may incur transaction costs in converting these securities into cash. RBB has
elected, however, to be governed by Rule 18f-1 under the 1940 Act so that
the 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 the Fund.
Under the 1940 Act, the 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 (the "NYSE") is closed (other than customary weekend and
holiday closings), or during which trading on the NYSE is restricted, or
during which (as determined by the SEC by rule or regulation) an emergency
exists as a result of which disposal or valuation of portfolio securities is not
reasonably practicable, or for such other periods as the SEC may permit.
(The Fund may also suspend or postpone the recordation of the transfer of its
shares upon the occurrence of any of the foregoing conditions.)
VALUATION OF SHARES
The net asset value per share of the Fund is calculated as of 4:00
p.m. Eastern Time on each Business Day. "Business Day" means each weekday when
the NYSE is open. Currently, the NYSE is closed on New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day (observed), Labor Day,
Thanksgiving Day and Christmas Day (observed). Securities which are listed on
stock exchanges 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 evaluation. 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 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 4:00 p.m.; 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 RBB's 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.
In determining the approximate market value of portfolio investments,
the Fund 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
24
<PAGE>
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 Fund's books at their
face value. Other assets, if any, are valued at fair value as determined in
good faith or under the direction of RBB's Board of Directors.
PERFORMANCE INFORMATION
Total Return. For purposes of quoting and comparing the performance
of the Fund to that of other mutual funds and to stock or other relevant
indices in advertisements or in reports to shareholders, performance may be
stated in terms of total return. Under the rules of the Securities and Exchange
Commission, the Fund's advertising performance must include total return
quotes calculated according to the following formula:
P(1 + T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value at the end of the 1, 5 or 10 year
periods (or fractional portion thereof) of a hypothetical $1,000 payment made at
the beginning of the 1, 5 or 10 year periods.
Under the foregoing formula, the time periods used in advertising will
be based on rolling calendar quarters, updated to the last day of the most
recent quarter prior to submission of the advertisement for publication, and
will cover one, five and ten year periods or a shorter period dating from the
effectiveness of the Fund's registration statement. In calculating the
ending redeemable value, the maximum sales load is deducted from the initial
$1,000 payment and all dividends and distributions by the Fund are assumed
to have been reinvested at net asset value, as described in the Prospectus, on
the reinvestment dates during the period. Total return, or "T" in the formula
above, is computed by finding the average annual compounded rates of return over
the 1, 5 and 10 year periods (or fractional portion thereof) that would equate
the initial amount invested to the ending redeemable value. Any sales loads
that might in the future be made applicable at the time to reinvestments would
be included as would any recurring account charges that might be imposed by the
Fund.
Calculated according to the SEC rules, for the period from July
31, 1995 (commencement of operations) to August 31, 1995, both the average
total return and the aggregate total return was 3.82% (annualized) for the
Balanced Fund.
Performance. From time to time, the Fund may advertise
25
<PAGE>
its average annual total return over various periods of time. These total
return figures show the average percentage change in value of an investment in
the Fund from the beginning of the measuring period to the end of the
measuring period. The figures reflect changes in the price of the Fund's
shares assuming that any income dividends and/or capital gain distributions made
by the Fund during the period were reinvested in 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 Fund's annual total return for
one year in the period might have been grater or less than the average for the
entire period. When considering total return figures for periods shorter than
one year, investors should bear in mind that the Fund seeks long-term
appreciation and that such return may not be representative of the Fund's
return over a longer market cycle. The Fund may also advertise aggregate
total return figures for various periods, representing the cumulative change in
value of an investment in the Fund for the specific period (again reflecting
changes in the Fund's share prices and assuming reinvestment of dividends
and distributions). Aggregate and average total returns may be shown by means
of schedules, charts or graphs, may indicate various components of total return
(i.e., change in value of initial investment, income dividends and capital gain
distributions) and would be quoted separately for each class of the Fund's
shares.
Investors should note that total return figures are based on
historical earnings and are not intended to indicate future performance.
In reports or other communications to investors or in advertising
material, the Fund may describe general economic and market conditions
affecting the Fund and may compare their performance with (1) that of other
mutual funds as listed in the rankings prepared by Lipper Analytical Services,
Inc. or similar investment services that monitor the performance of mutual funds
or as set forth in the publications listed below; (2) with the S&P 500, which is
an unmanaged indexes of common stocks prepared by Standard & Poor's Corporation
or (3) other appropriate indices of investment securities or with data developed
by Counsellors derived from such indices. The Fund may also include
evaluations published by nationally recognized ranking services and by financial
publications that are nationally recognized, such as The Wall Street Journal,
Investor's Daily, Money, Inc., Institutional Investor, Barron's, Fortune, Forbes
Business Week, Morningstar, Inc. and Financial Times.
In reports or other communications to investors or in advertising, the
Fund may also describe the general biography or work experience of the
portfolio managers of the Fund and may include quotations attributable to
the portfolio managers describing approaches taken in managing the Fund's
investments, research methodology, underlying stock selection or the Fund's
investment objective. The Fund may also discuss the continuum of risk and
return relating to different investments, and the potential impact of
26
<PAGE>
foreign stock on a portfolio otherwise composed of domestic securities. In
addition, the Fund may from time to time compare their expense ratios to
those of investment companies with similar objective and policies, as advertised
by Lipper Analytical Services, Inc. or similar investment services that monitor
mutual funds.
Yield. The Fund may also advertise its yield. Under the
rules of the SEC, the Fund advertising yield must calculate yield using the
following formula:
YIELD = 2 [(a-b+1)6 - 1]
---
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursement).
c = the average daily number of shares outstanding during the
period that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the
period.
Under the foregoing formula, yield is computed by compounding
semi-annually, the net investment income per share earned during a 30 day period
divided by the maximum offering price per share on the last day of the period.
For the purpose of determining the interest earned (variable "a" in the formula)
on debt obligations that were purchased by the Fund at a discount or
premium, the formula generally calls for amortization of the discount or
premium; the amortization schedule will be adjusted monthly to reflect changes
in the market values of the debt obligations.
The yield for the 30 day period ended August 31, 1995 was 0.85%
for the Balanced Fund.
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yields will fluctuate, they cannot be compared with
yields on savings account or other investment alternatives that provide an
agreed to or guaranteed fixed yield for a stated period of time. However, yield
information may be useful to an investor considering temporary investments in
money market instruments. In comparing the yield of one fund to another,
consideration should be given to each fund's investment policies, including the
types of investments made, lengths of maturities of the portfolio securities,
the method used by each fund to compute the yield (methods may differ) and
whether there are any special account charges which may reduce the effective
yield.
The yields on certain obligations are dependent on a variety of
factors, including general market conditions, conditions in the particular
market for the obligation, the financial condition of the issuer, the size of
the offering, the maturity of the obligation and the rates on the issue. The
27
<PAGE>
ratings of Moody's Investors Service, Inc. and Standard & Poor's Corporation
represent their respective opinions as to the quality of the obligations they
undertake to rate. Ratings, however, are general and are not absolute standards
of quality. Consequently, obligations with the same rating, maturity and
interest rate may have different market prices. In addition, subsequent to its
purchase by the Fund, an issue may cease to be rated or may have its rating
reduced below the minimum required for purchase. In such an event, the Fund's
investment adviser or sub-adviser will consider whether the Fund should continue
to hold the obligation.
From time to time, in advertisements or in reports to shareholders
with respect to the Fund, the yields of the Fund may be quoted and
compared to those o other mutual funds with similar investment objectives and to
stock or other relevant indices. For example, the yield of the Fund may be
compared to the Donoghue's Money RRB Report(R) of Holliston, MA, 10746, a widely
recognized independent publication that monitors the performance of money market
funds, or to the data prepared by Lipper Analytical Services, Inc., a
widely-recognized independent service that monitors the performance of mutual
funds.
TAXES
The following is only a summary of certain additional tax
considerations generally affecting the Fund and their shareholders that are
not described in the Prospectus. No attempt is made to present a detailed
explanation of the tax treatment of the Fund or their shareholders, and the
discussion here and in the RBB's Prospectus 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.
The 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, the Fund is
exempt from Federal income tax on its net investment income and realized
capital gains which it distributes to shareholders, provided that it
distributes an amount equal to the sum of (a) 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 (b) at least 90% of its net tax-exempt interest income, if any, for the
year (the "Distribution Requirement") and 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,
28
<PAGE>
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") and derive less than 30% of
its gross income from the sale or other disposition of any of the following
investments, if such investments were held for less than three months: (a) stock
or securities (as defined in Section 2(a)(36) of the 1940 Act); (b) options,
futures, or forward contracts (other than options, futures or forward contracts
on foreign currencies); and (c) foreign currencies (or options, futures or
forward contracts on foreign currencies) but only if such currencies (or
options, futures or forward contracts) are not directly related to the regulated
investment company's principal business of investing in stock or securities (or
options and futures with respect to stocks or securities) (the "Short-Short Gain
Test"). Interest (including accrued original issue discount and, in the case of
debt securities bearing taxable interest income, "accrued market discount")
received by the Fund at maturity or on disposition of a security held for
less than three months will not be treated as gross income derived from the sale
or other disposition of such security for purposes of the Short-Short Gain Test.
However, any other income which is attributable to realized market appreciation
will be treated as gross income from the sale or other disposition of securities
for this purpose.
Future Treasury regulations may provide that currency gains that are
not "directly related" to the 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 Requirements. Income derived by a
regulated investment company from a partnership or trust 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 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 the 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 the 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 the 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.
29
<PAGE>
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 RBB 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.
The 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,
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
the Fund for any taxable year, determined by excluding any net capital loss or
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 RBB to shareholders 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 generally qualify for
the 70% dividends received deduction to the extent of the gross amount of
"qualifying dividends" received by the Fund for the year. Generally, a
dividend will be treated as a "qualifying dividend" if it has been received from
a domestic corporation. However, 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. RBB will
designate the portion, if any, of the distribution made by the Fund that
qualifies for the dividends received deduction in a written notice mailed by RBB
to shareholders not later than 60 days after the close of the Fund's taxable
year.
Investors should note that changes made to the Code by the Tax Reform
Act of 1986 and subsequent legislation have not entirely eliminated distinctions
in the tax treatment of capital gain and ordinary income distributions. The
nominal maximum marginal rate on ordinary income for individuals, trusts and
estates is currently 31%, but for individual taxpayers whose adjusted gross
income exceeds certain threshold amounts (that differ depending on the
taxpayer's filing status) in taxable years beginning before 1996, provisions
phasing out personal exemptions and limiting itemized deductions may cause the
actual maximum marginal rate to exceed 31%. The
30
<PAGE>
maximum rate on the net capital gain of individuals, trusts and estates,
however, is in all cases 28%. Capital gains and ordinary income of corporate
taxpayers are taxed at a nominal maximum rate of 34% (an effective marginal rate
of 39% applies in the case of corporations having taxable income between
$100,000 and $335,000). 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.
Distributions of net investment income received by the Fund from
investments in debt securities will be taxable to shareholders as ordinary
income and will not be treated as "qualifying dividends" for purposes of the
dividends received deduction.
A shareholder will recognize gain or loss upon an exchange of shares
of the Fund for shares of another Warburg Pincus Advisor Fund upon
exercise of an exchange privilege. Shareholders may not include the initial
sales charge in the tax basis of the Shares exchanged for shares of another
Warburg Pincus Advisor Fund for the purpose of determining gain or loss on the
exchange, where the Shares exchanged have been held 90 days or less. The sales
charge will increase the basis of the shares acquired through exercise of the
exchange privilege (unless the shares acquired are also exchanged for shares of
another Warburg Pincus Advisor Fund within 90 days after the first
exchange).
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 1-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 the Fund intends to distribute all of
its taxable income currently, no Fund anticipates incurring any liability
for this excise tax. However, investors should note that the Fund may in
certain circumstances be required to liquidate investments in order to make
sufficient distributions to avoid excise tax liability.
RBB 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 failure
to report the receipt of interest or dividend income properly, or (3) who has
failed to certify to RBB that he is not subject to backup withholding or that he
is an "exempt recipient."
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
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<PAGE>
have a retroactive effect with respect to the transactions contemplated herein.
Although the 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, the Fund may be subject to the tax laws of such states or
localities.
DESCRIPTION OF SHARES
---------------------
The Fund has authorized capital of thirty billion shares of Common
Stock, $.001 par value per share, of which 12.2 billion shares are currently
classified as follows: 100 million shares are classified as Class A Common Stock
(Growth & Income), 100 million shares are classified as Class B Common Stock,
100 million shares are classified as Class C Common Stock (Balanced), 100
million shares are classified as Class D Common Stock (Tax-Free), 500 million
shares are classified as Class E Common Stock (Money), 500 million shares are
classified as Class F Common Stock (Municipal Money), 500 million shares are
classified as Class G Common Stock (Money), 500 million shares are classified as
Class H Common Stock (Municipal Money), 1 billion shares are classified as Class
I Common Stock (Money), 500 million shares are classified as Class J Common
Stock (Municipal Money), 500 million shares are classified as Class K Common
Stock (U.S. Government Money), 1,500 million shares are classified as Class L
Common Stock (Money), 500 million shares are classified as Class M Common Stock
(Municipal Money), 500 million shares are classified as Class N Common Stock
(U.S. Government Money), 500 million shares are classified as Class O Common
Stock (N.Y. Money), 100 million shares are classified as Class P Common Stock
(Government), 100 million shares are classified as Class Q Common Stock, 500
million shares are classified as Class R Common Stock (Municipal Money), 500
million shares are classified as Class S Common Stock (U.S. Government Money),
500 million shares are classified as Class T Common Stock (International), 500
million shares are classified as Class U Common Stock (High Yield), 500 million
shares are classified as Class V Common Stock (Emerging), 100 million shares are
classified as Class W Common Stock, 50 million shares are classified as Class X
Common Stock (U.S. Core Equity), 50 million shares are classified as Class Y
Common Stock (U.S. Core Fixed Income), 50 million shares are classified as Class
Z Common Stock (Global Fixed Income), 50 million shares are classified as Class
AA Common Stock (Municipal Bond), 50 million shares are classified as Class BB
Common Stock (BEA Balanced), 50 million shares are classified as Class CC Common
Stock (Short Duration), 100 million shares are classified as Class DD Common
Stock (Growth & Income Series 2), 100 million shares are classified as Class EE
Common Stock (Balanced Series 2), 700 million shares are classified as Class
Alpha 1 Common Stock (Money), 200 million shares are classified as Class Alpha 2
Common Stock (Municipal Money), 500 million shares are classified as Class Alpha
3 Common Stock (U.S. Government Money), 100 million shares are classified as
Class Alpha 4 Common Stock (N.Y. Money), 1 million shares are classified as
Class Beta 1 Common Stock (Money), 1 million shares are classified as Class Beta
2 Common Stock (Municipal Money), 1 million shares
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<PAGE>
are classified as Class Beta 3 Common Stock (U.S. Government Money), 1 million
shares are classified as Class Beta 4 Common Stock (N.Y. Money), 1 million
shares are classified as Gamma 1 Common Stock (Money), 1 million shares are
classified as Gamma 2 Common Stock (Municipal Money), 1 million shares are
classified as Gamma 3 Common Stock (U.S. Government Money), 1 million shares are
classified as Gamma 4 Common Stock (N.Y. Money), 1 million shares are classified
as Delta 1 Common Stock (Money), 1 million shares are classified as Delta 2
Common Stock (Municipal Money), 1 million shares are classified as Delta 3
Common Stock (U.S. Government Money), 1 million shares are classified as Delta 4
Common Stock (N.Y. Money), 1 million shares are classified as Epsilon 1 Common
Stock (Money), 1 million shares are classified as Epsilon 2 Common Stock
(Municipal Money), 1 million shares are classified as Epsilon 3 Common Stock
(U.S. Government Money), 1 million shares are classified as Epsilon 4 Common
Stock (N.Y. Money), 1 million shares are classified as Zeta 1 Common Stock
(Money), 1 million shares are classified as Zeta 2 Common Stock (Municipal
Money), 1 million shares are classified as Zeta 3 Common Stock (U.S. Government
Money), 1 million shares are classified as Zeta 4 Common Stock (N.Y. Money), 1
million shares are classified as Eta 1 Common Stock (Money), 1 million shares
are classified as Eta 2 Common Stock (Municipal Money), 1 million shares are
classified as Eta 3 Common Stock (U.S. Government Money), 1 million shares are
classified as Eta 4 Common Stock (N.Y. Money), 1 million shares are classified
as Theta 1 Common Stock (Money), 1 million shares are classified as Theta 2
Common Stock (Municipal Money), 1 million shares are classified as Theta 3
Common Stock (U.S. Government Money), and 1 million shares are classified as
Theta 4 Common Stock (N.Y. Money). Shares of the Class A, C and D Common Stock
constitute the No Load Classes of the Growth & Income, Balanced and Tax Free
Funds, respectively. Under RBB's charter, the Board of Directors has the power
to classify or reclassify any unissued shares of Common Stock from time to time.
The classes of Common Stock have been grouped into fifteen separate
"families": the RBB Family, the Warburg Pincus Family, the Cash Preservation
Family, the Sansom Street Family, the Bedford Family, the Bradford Family, the
BEA Family, the Janney Montgomery Scott Money Family, the Beta Family, the Gamma
Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family
and the Theta Family. The RBB Family represents interests in one non-money
market portfolio as well as the Money Market and Municipal Money Market
Portfolios; the Warburg Pincus Family represents interests in the Growth &
Income, Balanced, and Tax Free Funds; the Cash Preservation Family represents
interests in the Money Market and Municipal Money Market Portfolios; the Sansom
Street Family represents interests in the Money Market, Municipal Money Market
and Government Obligations Money Market Portfolios; Bedford Family represents
interests in the Money Market, Municipal Money Market, Government Obligations
Money Market and New York Municipal Money Market Portfolios; the Bradford Family
represents interests in the Municipal Money Market and Government Obligations
Money Market Portfolios; the BEA Family represents interests in nine non-money
market portfolios; the Janney Montgomery Scott Family and the Beta, Gamma,
Delta, Epsilon, Zeta, Eta and Theta Families represent interests in the Money
Market, Municipal Money Market, Government Obligations Money Market and New York
Municipal Money Market Portfolios.
33
<PAGE>
ADDITIONAL INFORMATION CONCERNING FUND SHARES
RBB does not currently intend to hold annual meetings of shareholders
except as required by the 1940 Act or other applicable law. RBB's amended
By-Laws provide that shareholders collectively owning at least ten percent of
the outstanding shares of all classes of Common Stock of RBB 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, RBB will assist in shareholder
communication in such matters.
As stated in the Prospectus, holders of shares of each class of RBB
will vote in the aggregate and not by class on all matters, except where
otherwise required by law. Further, shareholders of RBB will vote in the
aggregate and not by portfolio except as otherwise required by law or when the
Board of Directors determines that the matter to be voted upon affects only the
interests of the shareholders of a particular portfolio. Rule 18f-2 under the
1940 Act provides that any matter required to be submitted by the provisions of
such Act or applicable state law, or otherwise, to the holders of the
outstanding securities of an investment company such as RBB shall not be deemed
to have been effectively acted upon unless approved by the holders of a majority
of the outstanding shares of each portfolio affected by the matter. Rule 18f-2
further provides that a portfolio shall be deemed to be affected by a matter
unless it is clear that the interests of each portfolio in the matter are
identical or that the matter does not affect any interest of the portfolio.
Under the Rule, the approval of an investment advisory agreement or any change
in a fundamental investment policy would be effectively acted upon with respect
to a portfolio only if approved by the holders of a majority of the outstanding
voting securities of such portfolio. However, the Rule also provides that the
ratification of the selection of independent public accountants, the approval of
principal underwriting contracts and the election of directors are not subject
to the separate voting requirements and may be effectively acted upon by
shareholders of an investment company voting without regard to portfolio.
Notwithstanding any provision of Maryland law requiring a greater vote
of shares of RBB's common stock (or of any class voting as a class) in
connection with any corporate action, unless otherwise provided by law, (for
example by Rule 18f-2 discussed above) or by RBB's Articles of Incorporation,
RBB may take or authorize such action upon the favorable vote of the holders of
more than 50% of all of the outstanding shares of Common Stock voting without
regard to class (or portfolio).
MISCELLANEOUS
Counsel. The law firm of Ballard Spahr Andrews & Ingersoll, 1735
Market Street, 51st Floor, Philadelphia, Pennsylvania 19103 serves as counsel to
RBB, PIMC, PNC Bank and PFPC. The law firm of Drinker Biddle & Reath,
1100 Philadelphia National Bank Building, Broad and Chestnut Streets,
34
<PAGE>
Philadelphia, Pennsylvania 19107, serves as counsel to RBB's independent
directors.
Independent Accountants. Coopers & Lybrand L.L.P., 2400 Eleven Penn
Center, Philadelphia, Pennsylvania 19103, serves as RBB's independent
accountants. RBB's financial statements which appear in this Statement of
Additional Information have been audited by Coopers & Lybrand L.L.P., as set
forth in their report, which also appears in this Statement of Additional
Information, and have been included herein in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
Control Persons. As of November 6, 1995, to RBB's 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 RBB
indicated below. See "Description of Shares" above. RBB does not know
whether such persons also beneficially own such shares.
PORTFOLIO NAME AND ADDRESS PERCENT OWNED
------------- ---------------- -------------
Warburg Pincus Charles Schwab & Co., Inc. 32.97
Growth & Income Fund Reinvest Account
(Class A) Attn: Mutual Funds Dept.
101 Montgomery Street
San Francisco, CA 94104-4122
National Financial Services Corp. 12.78
FBO Customers
P.O. Box 3908
Church Street Station
New York, New York 10008-3908
Warburg Pincus Charles Schwab & Co., Inc. 39.41
Balanced Fund Reinvest Account
(Class C) Attn: Mutual Funds Dept.
101 Montgomery Street
San Francisco, CA 94104-4122
National Financial Services Corp. 19.15
FBO Customers
P.O. Box 3908
Church Street Station
New York, New York 10008-3908
Warburg Pincus Gruntal Co. 11.30
Tax Free Fund FBO 995-10702-19
(Class D) 14 Wall Street
New York, New York 10005-2176
Gruntal Co. 10.20
FBO 995-16852-14
14 Wall Street
New York, New York 10005-2176
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<PAGE>
PORTFOLIO NAME AND ADDRESS PERCENT OWNED
------------- ---------------- -------------
RBB Money Market Luanne M. Garvey and Robert J. 13.748
Portfolio Garvey
(Class E) 2729 Woodland Avenue
Trooper, PA 19403
PNC Bank, NA Custodian FBO 13.048
Harold T. Erfer
414 Charles Lane
Wynnewood, PA 19096
PNC Bank, NA Custodian FBO Karen 16.954
M. McElhinny and Contribution
Account
4943 King Arthur Drive
Erie, PA 16506
E.L. Haines Jr. and Betty J. 7.862
Haines
2341 Pinebluff Drive
Dallas, TX 75228
John Robert Estrada and 13.600
Shirley Ann Estrada
1700 Raton Drive
Arlington, TX 76018
Eric Levine and Linda & Howard 29.640
Levine
67 Lanes Pond Road
Howell, NJ 07731
RBB Municipal Money William B. Pettus Trust 12.614
Market Portfolio Augustine W. Pettus Trust
(Class F) 827 Winding Path Lane
St. Louis, MO 63021-6635
Seymour Fein 87.385
P.O. Box 486
Tremont Post Office
Bronx, NY 10457-0486
Cash Preservation Money Jewish Family and Children's 54.415
Market Portfolio Agency of Philadelphia
(Class G) Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103
Helen M. Ellenby 5.866
503 Falcon Lane
West Chester, PA 19382-5716
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<PAGE>
PORTFOLIO NAME AND ADDRESS PERCENT OWNED
------------- ---------------- -------------
Lynda R. Succ Trustee for in Trust 11.363
under The Lynda R. Campbell Caring
Trust
935 Rutger Street
St. Louis, MO 63104
Cash Preservation Kenneth Farwell and Valerie 7.020
Municipal Money Market Farwell Jt. Ten
Portfolio 3854 Sullivan
(Class H) St. Louis, MO 63107
Larnie Johnson and Mary Alice 6.449
Johnson
4927 Lee Avenue
St. Louis, MO 63115-1726
Deborah C. Brown of Trustee 60.191
for Barbara J.C. Custis
Trustee
The Crowe Trust
9921 West 128th Terrace
Overland Park, KS 66213
Sansom Street Money Wasner & Co. 14.119
Market Portfolio FAO Paine Webber and Managed
(Class I) Assets Sundry Holdings
Attn: Joe Domizio
200 Stevens Drive
Lester, PA 19113
Saxon and Co. 75.097
FBO Paine Webber
P.O. Box 7780 1888
Philadelphia, PA 19182
Robertson Stephens & Co. 10.432
FBO Exclusive Benefit Investors
555 California St./#2600
San Francisco, CA 94104
Bedford New York Laurel Holding Co. 7.7
Municipal Money Market P.O. Box 2021
(Class O) Jamesport, NY 11947
BEA High Yield Portfolio Chase Manhattan Bankers Trustee 17.943
(Class U) for Kendale Company Master Pension
Plan
Attn: Mark Tesoriero
3 Metrotech Center
6th Floor
Brooklyn, NY 11245
37
<PAGE>
PORTFOLIO NAME AND ADDRESS PERCENT OWNED
------------- ---------------- -------------
Temple Inland Master Retirement 5.902
Trust
303 South Temple Drive
Diboll, TX 75941
State of Oregon 55.342
Treasury Department
159 State Capital Building
Salem, OR 97310
BEA Emerging Markets Wachovia Bank North Carolina Trust 8.571
Equity Portfolio for Carolina Power & Light Co.
(Class V) Supplemental Retirement Trust
301 N. Main Street
Winston-Salem, NC 27101
Northern Trust Company Trustee for 19.696
Texas Instruments Employee Plan
P.O. Box 92956
Chicago, IL 60675-2956
Hall Family Foundation 19.836
P.O. Box 419580
Kansas City, MO 64208
Northern Trust 11.799
Trustee for Pillsbury
P.O. Box 92956
Chicago, IL 60675
Amherst H. Wilder Foundation 5.829
919 Lafond Avenue
St. Paul, MN 55104
BEA US Core Equity Bank of New York 61.989
Portfolio Trust APU Buckeye Pipeline
(Class X) One Wall Street
New York, NY 10286
Werner & Pfleiderer Pension 11.181
Plan Employees
663 E. Crescent Avenue
Ramsey, NJ 07446
BEA Associates 10.151
FAO Profit Sharing Trust
153 E. 53rd Street
New York, NY 10022
BEA Associates 6.023
FAO Pension Trust
153 E. 53rd Street
New York, NY 10022
38
<PAGE>
PORTFOLIO NAME AND ADDRESS PERCENT OWNED
------------- ---------------- -------------
BEA US Core Fixed Income New England UFCW & Employers' 31.493
Portfolio Pension Fund Board of Trustees
(Class Y) 161 Forbes Road, Suite 201
Braintree, MA 02184
Bankers Trust 24.555
Trust Pechniney Corp. Pension
Master Trust
34 Exchange Place
4th Floor
Jersey City, NJ 07302
Kollmorgen Corporation 5.773
Pension Trust
1601 Thapelo Road
Waltham, MA 02154
Patterson & Co. 21.176
P.O. Box 7829
Philadelphia, PA 19102
BEA Global Fixed Income Sunkist Master Trust 64.337
Portfolio 14130 Riverside Drive
(Class Z) Sherman Oaks, CA 91423
Key Trust Co. of Ohio 35.661
FBO Eastern Enterp. Collective
Inv. Trust
P.O. Box 901536
Cleveland, OH 44202-1559
BEA Municipal Bond Fund William A. Marquard 29.461
Portfolio 2199 Maysville Rd.
(Class AA) Carlisle, KY 40311
Arnold Leon 10.294
c/o Fiduciary Trust Company
P.O. Box 3199
Church Street Station
New York, NY 10008
Edgar E. Sharp 7.331
P.O. Box 8338
Longboat Key, FL 34228
John C. Cahill 13.513
c/o David Holmgren
30 White Birch Lane
Cots Cob, CT 06870
Irwin Bard 7.247
1750 North East 183rd St.
North Miami Beach, FL 33160
39
<PAGE>
PORTFOLIO NAME AND ADDRESS PERCENT OWNED
------------- ---------------- -------------
Warburg Pincus Growth & Connecticut General Life Ins. Co. 98.68
Income Series 2 on behalf of its separate accounts
(Class DD) 55E 55F 55G c/o Melissa Spencer
M110
CIGNA Corp. P.O. Box 2975
Hartford, CT 06104-2975
Warburg Pincus Balanced Warburg Pincus Counsellors Inc. 85.15
Fund Attn: Stephen Distler
Series 2 466 Lexington Avenue
(Class EE) 10th Floor
New York, New York 10017-3140
Janney Montgomery Scott Janney Montgomery Scott 100
Money Market Portfolio 1801 Market Street
(Class Alpha 1) Philadelphia, PA 19103-1675
Janney Montgomery Scott Janney Montgomery Scott 100
Municipal Money Market 1801 Market Street
Portfolio Philadelphia, PA 19103-1675
(Class Alpha 2)
Janney Montgomery Scott Janney Montgomery Scott 100
Government Obligations 1801 Market Street
Money Market Portfolio Philadelphia, PA 19103-1675
(Class Alpha 3)
Janney Montgomery Scott Janney Montgomery Scott 100
New York Municipal Money 1801 Market Street
Market Portfolio Philadelphia, PA 19103-1675
(Class Alpha 4)
As of such date, no person owned of record or, to RBB's knowledge,
beneficially, more than 25% of the outstanding shares of all classes of RBB.
As of the above date, directors and officers as a group owned less
than one percent of the shares of RBB.
Litigation. There is currently no material litigation affecting RBB.
40
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF NET ASSETS
August 31, 1995
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- --------------
COMMON STOCKS AND WARRANTS (82.2%)
Aerospace (1.3%)
Allied-Signal, Inc. 325,000 $ 14,421,875
--------------
Agriculture Production Corporations (0.4%)
Terra Industries, Inc. 320,300 4,284,013
--------------
Air Conditioning & Heating (0.9%)
Management Systems Johnson Controls, Inc. 170,000 10,348,750
--------------
Automobiles (1.3%)
Navistar International** 1,130,000 14,690,000
--------------
Banking (3.2%)
First Interstate Bancorp 368,000 35,144,000
--------------
Chemicals (1.4%)
PPG Industries, Inc. 355,000 15,176,250
--------------
Construction (2.2%)
Stone & Webster, Inc. 655,000 24,235,000
--------------
Electronic Computers (6.2%)
GRC International, Inc.** 667,000 16,341,500
Honeywell, Inc. 655,000 28,656,250
International Business Machines Corp. 221,000 22,845,875
--------------
67,843,625
--------------
Electronics (1.2%)
Motorola, Inc. 175,000 13,081,250
--------------
Entertainment (3.8%)
Acclaim Entertainment, Inc.** 1,420,000 35,855,000
Boardwalk Casino, Inc.** 525,000 4,528,125
Boardwalk Casino, Inc. Warrants
(expire 02/14/98)** 375,000 1,453,125
--------------
41,836,250
--------------
Financial Services (7.0%)
BankAmerica Corp. 655,000 37,007,500
Crestar Financial Corp. 270,000 15,221,250
Loyola Capital Corp. 247,500 8,662,500
Midlantic Corp. 302,000 15,553,000
--------------
76,444,250
--------------
Insurance (3.3%)
Chubb Corp. 150,000 13,687,500
USF&G Corp. 1,234,000 22,366,250
--------------
36,053,750
--------------
See Accompanying Notes to Financial Statements.
F-1
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- --------------
COMMON STOCKS AND WARRANTS (CONT'D)
Manufacturing (4.5%)
Corning Glass, Inc. 909,000 $ 29,656,125
Rauma OY Sponsored ADR** 102,900 2,443,875
Trinity Industries, Inc. 500,000 16,187,500
Whitman Corp. 50,000 1,006,250
--------------
49,293,750
--------------
Medical & Medical Services (1.9%)
Acuson Corp.** 210,000 2,756,250
Foxmeyer Health Corp.** 689,000 17,741,750
--------------
20,498,000
--------------
Metals & Mining (19.0%)
Echo Bay Mines Ltd. 500,000 5,187,500
Hecla Mining Co.** 1,940,000 22,310,000
Homestake Mining Co. 2,282,500 37,661,250
Inco Ltd. 985,000 34,475,000
Newmont Mining Corp. 903,000 39,280,500
Pegasus Gold, Inc.** 1,419,000 17,737,500
Placer Dome, Inc. 1,519,600 39,699,550
Prime Resources Group, Inc.** 1,400,000 11,210,360
--------------
207,561,660
--------------
Oil (1.0%)
Quaker State Corp. 715,000 10,725,000
--------------
Oil Services (4.4%)
Baker Hughes, Inc. 871,500 19,608,750
Halliburton Co. 521,000 22,077,375
Occidental Petroleum Corp. 280,000 6,090,000
--------------
47,776,125
--------------
Steel (13.0%)
AK Steel Holding Corp.** 454,000 14,471,250
Bethlehem Steel Corp.** 1,581,000 23,122,125
CBI Industries, Inc. 1,160,000 28,420,000
Inland Steel Industries, Inc. 585,000 16,014,375
LTV Corp.** 1,122,500 17,539,062
USX-US Steel Group 1,050,000 34,387,500
WHX Corp.** 623,000 7,865,376
--------------
141,819,688
--------------
Telecommunications (5.6%)
Airtouch Communications, Inc.** 363,400 11,810,500
Comcast Corp. Special Class A Non-Voting 1,000,000 21,375,000
Qualcomm, Inc.** 280,000 13,650,000
Tele-Communications, Inc. Class A** 800,000 14,800,000
--------------
61,635,500
--------------
See Accompanying Notes to Financial Statements.
F-2
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- ---------------------------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF NET ASSETS (CONCLUDED)
August 31, 1995
- ---------------------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- --------------
<S> <C> <C>
COMMON STOCKS AND WARRANTS (CONT'D)
Tire & Rubber (0.4%)
Cooper Tire & Rubber Co. 160,000 $ 4,160,000
--------------
Transportation (0.2%)
Consolidated Freightways, Inc. 100,000 2,587,500
--------------
TOTAL COMMON STOCKS AND WARRANTS (Cost $781,860,824) 899,616,236
--------------
</TABLE>
<TABLE>
<CAPTION>
MATURITY PAR (000)
-------- ---------
<S> <C> <C> <C>
UNITED STATES TREASURY OBLIGATIONS (2.7%)
U.S. Treasury Bills 5.40% (Cost $29,973,000) 09/07/95 $ 30,000 29,973,000
--------------
REPURCHASE AGREEMENTS (13.8%)
Greenwich Capital Markets Inc. 5.83% 09/01/95 151,138 151,138,000
(Agreement dated 08/31/95 to be repurchased at
$151,162,476, collateralized by $150,000,000 U.S.
Treasury Notes 7.50% due 01/31/97. Market value of
collateral is $154,312,500).
(Cost $151,138,000)
--------------
TOTAL INVESTMENTS AT VALUE (Cost $962,971,826*) (98.7%) 1,080,727,236
OTHER ASSETS IN EXCESS OF LIABILITIES (1.3%) 14,368,010
--------------
NET ASSETS (Applicable to 63,295,201 Common Shares and
3,472,875 Advisor Shares) (100.0%) $1,095,095,246
--------------
--------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
COMMON SHARE ($1,038,193,292 : 63,295,201) $16.40
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER ======
ADVISOR SHARE ($56,901,954 : 3,472,875) $16.38
======
</TABLE>
* Cost for Federal income tax purposes at August 31, 1995, is $963,365,013. The
gross appreciation (depreciation) on a tax basis is as follows:
Gross Appreciation $126,262,394
Gross Depreciation (8,900,171)
------------
Net Appreciation $117,362,223
------------
------------
** Non-income producing.
See Accompanying Notes to Financial Statements.
F-3
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF OPERATIONS
For the Year Ended August 31, 1995
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends $ 10,389,100
Interest 11,731,546
------------
Total investment income 22,120,646
------------
EXPENSES:
Investment advisory fees 5,824,947
Administration fees 1,941,649
Distribution fees 71,233
Custodian fees 162,248
Transfer agent fees 1,060,279
Legal fees 63,384
Audit fees 55,268
Registration fees 264,509
Insurance expense 23,560
Printing expense 86,973
Other expenses 26,827
------------
Total expenses 9,580,877
------------
Net investment income 12,539,769
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investment transactions 41,087,749
Futures contracts (2,798,582)
------------
38,289,167
------------
Net change in unrealized appreciation of investments 96,772,046
------------
Net gain on investments and future contracts 135,061,213
------------
Net increase in net assets resulting from operations $147,600,982
------------
------------
See Accompanying Notes to Financial Statements.
F-4
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- --------------------------------------------------------------------------------------------------
WARBURG PINCUS GROWTH & INCOME FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
August 31, 1995 August 31, 1994
--------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 12,539,769 $ 572,031
Net gain on investments and future contracts 135,061,213 17,971,937
--------------- ---------------
Net increase in net assets resulting from operations 147,600,982 18,543,968
--------------- ---------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
Common shares ($.1824 and $.0785, respectively,
per share) (9,949,389) (572,031)
Advisor shares ($.0459 per share for 1995) (137,213) --
Distributions to shareholders from net realized capital
gains:
Common shares ($.1834 and $3.9751, respectively,
per share) (8,067,592) (10,054,939)
--------------- ---------------
Total distributions to shareholders (18,154,194) (10,626,970)
--------------- ---------------
Net capital share transactions 554,990,830 342,051,251
--------------- ---------------
Total increase in net assets 684,437,618 349,968,249
Net assets:
Beginning of year 410,657,628 60,689,379
--------------- ---------------
End of year $ 1,095,095,246 $ 410,657,628
--------------- ---------------
--------------- ---------------
</TABLE>
See Accompanying Notes to Financial Statements.
F-5
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS
August 31, 1995
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----------
COMMON STOCKS (60.1%)
U.S. COMMON STOCKS
Aerospace (0.2%)
Allied-Signal, Inc. 300 $ 13,313
-----------
Banking (2.5%)
Bank of Boston Corp. 2,200 96,800
First Interstate Bancorp 400 38,200
-----------
135,000
-----------
Business Services (1.2%)
Paging Network, Inc.** 1,600 63,200
-----------
Chemicals (0.2%)
PPG Industries, Inc. 300 12,825
-----------
Communications & Media (1.1%)
Infinity Broadcast Corp.** 1,600 57,400
-----------
Computer & Office Equipment (2.1%)
Shared Medical Systems Corp. 1,800 66,375
Synopsys, Inc.** 800 46,400
-----------
112,775
-----------
Construction (0.7%)
Stone & Webster, Inc. 1,000 37,000
-----------
Electronic Computers (7.4%)
Cabletron Systems, Inc.** 500 26,438
GRC International, Inc.** 2,100 51,450
Honeywell, Inc. 800 35,000
International Business Machines Corp. 300 31,013
Linear Technology Corp. 400 32,400
Netscape Communications Corp.** 1,500 74,250
Platinum Technology, Inc. 2,400 56,700
System Software Associates, Inc. 800 25,250
Xilinx, Inc.** 1,500 64,312
-----------
396,813
-----------
See Accompanying Notes to Financial Statements.
F-6
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----------
COMMON STOCKS (CONT'D)
Electronics (1.5%)
Motorola, Inc. 200 $ 14,950
Thermospectra Corp.** 3,500 62,563
-----------
77,513
-----------
Entertainment (1.2%)
Acclaim Entertainment, Inc.** 1,500 37,875
Boardwalk Casino, Inc.** 3,000 25,875
-----------
63,750
-----------
Financial Services (5.2%)
BankAmerica Corp. 700 39,550
Citicorp Bank 800 53,100
Crestar Financial Corp. 500 28,188
Midlantic Corp. 300 15,450
Olympic Financial Ltd.** 3,300 75,488
United Companies Financial Corp. 1,100 68,475
-----------
280,251
-----------
Insurance (1.0%)
Chubb Corp. 300 27,375
USF&G Corp. 1,300 23,563
-----------
50,938
-----------
Manufacturing (3.8%)
Allied Products Corp. 1,500 32,438
Corning Glass, Inc. 800 26,100
Maxim Integrated Products, Inc. 1,000 76,250
Roper Industries, Inc. 1,500 51,000
Trinity Industries, Inc. 500 16,188
-----------
201,976
-----------
Medical & Medical Services (1.0%)
Foxmeyer Health Corp.** 2,000 51,500
-----------
See Accompanying Notes to Financial Statements.
F-7
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----------
COMMON STOCKS (CONT'D)
Metals & Mining (5.3%)
Coeur D'Alene Mines Corp. 2,100 $ 40,163
Hecla Mining Co.** 3,000 34,500
Homestake Mining Co. 2,100 34,650
Inco LTD. 1,000 35,000
Newmont Mining Corp. 1,000 43,500
Pegasus Gold, Inc.** 2,500 31,250
Placer Dome, Inc. 1,500 39,188
Prime Resources Group, Inc.** 3,000 24,022
-----------
282,273
-----------
Office Furniture (1.3%)
Viking Office Products, Inc.** 1,900 68,400
-----------
Oil (3.4%)
Barrett Resources Corp.** 2,500 53,750
Petroleum Geo Services** 2,500 64,063
Quaker State Corp. 500 7,500
Texas Meridian Resources Corp.** 5,000 55,000
-----------
180,313
-----------
Oil Services (0.8%)
Baker Hughes, Inc. 1,000 22,500
Halliburton Co. 500 21,188
-----------
43,688
-----------
Paper Mills (0.8%)
Champion International Corp. 800 45,300
-----------
Pharmaceuticals (1.8%)
Al Laboratories, Inc. Class A 2,000 42,000
Gilead Sciences, Inc.** 2,500 54,375
-----------
96,375
-----------
Retail--Retail Stores (1.1%)
Borders Group, Inc.** 3,000 60,750
-----------
Retail--Women's Clothing Stores (1.0%)
Talbots, Inc. 1,500 51,750
-----------
See Accompanying Notes to Financial Statements.
F-8
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----------
COMMON STOCKS (CONT'D)
Steel (3.0%)
Bethlehem Steel Corp.** 2,000 $ 29,250
CBI Industries, Inc. 1,000 24,500
LTV Corp. 1,500 23,438
Republic Engineered Steels** 3,000 20,625
USX-US Steel Group 1,300 42,575
WHX Corp.** 1,600 20,200
-----------
160,588
-----------
Telecommunications (3.2%)
Airtouch Communications, Inc.** 300 9,750
Comcast Corp. Special Class A Non-Voting 1,000 21,375
Mobile Telecommunications Technologies Corp.** 1,900 58,425
Qualcomm, Inc.** 300 14,625
Tele-Communications, Inc. Series A Liberty
Media Group** 2,000 53,125
Tele-Communications, Inc. Class A** 800 14,800
-----------
172,100
-----------
Textiles (0.6%)
Westpoint Stevens, Inc.** 1,500 33,562
-----------
FOREIGN COMMON STOCKS
Australia (0.4%)
BTR Nylex Limited 8,500 22,610
-----------
Austria (0.7%)
Va Technologie AG 330 36,446
-----------
Denmark (1.0%)
International Service System B 1,900 51,716
-----------
France (0.8%)
Bouygues 240 29,196
Compagnie Francaise de Petroleum Total 280 16,443
-----------
45,639
-----------
Hong Kong (0.6%)
Jardine Matheson Holdings LTD. 4,400 31,680
-----------
See Accompanying Notes to Financial Statements.
F-9
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- ---------------------------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- ---------------------------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
--------- -----------
COMMON STOCKS (CONT'D)
<S> <C> <C>
Israel (0.4%)
Clal Electronics Industries LTD.** 180 $ 21,505
-----------
Japan (1.9%)
Keyence Corp. 800 102,301
-----------
Malaysia (0.5%)
Westmont B. 6,000 25,496
-----------
Sweden (0.6%)
Astra B Free 960 31,180
-----------
United Kingdom (1.8%)
Central European Media Enterprises LTD.** ADR 2,700 67,837
Takare PLC 8,200 26,715
-----------
94,552
-----------
TOTAL COMMON STOCKS (Cost $2,772,251) 3,212,478
-----------
</TABLE>
<TABLE>
<CAPTION>
PAR
MATURITY (000) VALUE
-------- ----- ----------
<S> <C> <C> <C>
AGENCY OBLIGATIONS (0.2%)
Government National Mortgage Association 6.50% (Cost $12,661) 08/15/03 $ 13 $ 12,858
----------
UNITED STATES TREASURY OBLIGATIONS (26.4%)
U.S. Treasury Notes
5.875% 05/31/96 300 300,390
6.875% 10/31/96 200 202,572
8.125% 02/15/98 20 21,007
8.50% 11/15/00 800 885,536
----------
TOTAL U.S. TREASURY OBLIGATIONS (Cost $1,384,454) 1,409,505
----------
</TABLE>
See Accompanying Notes to Financial Statements.
F-10
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- --------------------------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF NET ASSETS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------------------------
PAR
MATURITY (000) VALUE
-------- ----- ----------
<S> <C> <C> <C>
REPURCHASE AGREEMENTS (8.8%)
State Street Bank & Trust Co. 5.78% 09/01/95 468 $ 468,000
(Agreement dated 08/31/95 to be repurchased at $468,081,
collateralized by $480,000 U.S Treasury Notes 6.25% due
08/31/96. Market value of collateral is $481,800.) (Cost
$468,000)
----------
TOTAL INVESTMENTS AT VALUE (Cost $4,637,366*) (95.6%) 5,102,841
OTHER ASSETS IN EXCESS OF LIABILITIES (4.4%) 239,008
----------
NET ASSETS (Applicable to 480,061 Common Shares and 110 Advisor Shares)
(100.0%) $5,341,849
----------
----------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
COMMON SHARE ($5,340,625 : 480,061) $11.12
======
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER
ADVISOR SHARE ($1,224 : 110) $11.13
======
</TABLE>
* Cost for Federal income tax purposes at August 31, 1995 is $4,641,506. The
gross appreciation (depreciation) on a tax basis is as follows:
Gross Appreciation $487,617
Gross Depreciation (26,282)
--------
Net Appreciation $461,335
--------
--------
** Non-income producing.
See Accompanying Notes to Financial Statements.
F-11
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF OPERATIONS
For the Year Ended August 31, 1995
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest $ 52,298
Dividends 11,828
Foreign taxes withheld (202)
--------
Total investment income 63,924
--------
EXPENSES:
Investment advisory fees 14,729
Administration fees 3,991
Distribution fees 4,155
Custodian fees 21,198
Transfer agent fees 27,158
Registration fees 15,075
Printing expense 10,393
Other expenses 4,330
--------
101,029
Less fees waived (17,123)
Less expense reimbursement by advisor (58,364)
--------
Total expenses 25,542
--------
Net investment income 38,382
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from:
Investment transactions 115,816
Foreign currency related transactions (679)
--------
115,137
--------
Net change in unrealized appreciation (depreciation) on:
Investments 380,862
Foreign currency related transactions (7)
--------
380,855
--------
Net gain on investments and foreign currency
transactions 495,992
--------
Net increase in net assets resulting from operations $534,374
--------
--------
See Accompanying Notes to Financial Statements.
F-12
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- -----------------------------------------------------------------------------------------------------
WARBURG PINCUS BALANCED FUND
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------
For the For the
Year Ended Year Ended
August 31, 1995 August 31, 1994
--------------- ---------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 38,382 $ 29,100
Net gain on investments 495,992 23,057
--------------- ---------------
Net increase in net assets resulting from operations 534,374 52,157
--------------- ---------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
Common shares ($.3136 and $.4586, respectively, per share) (38,909) (31,049)
Distributions to shareholders from net realized capital
gains:
Common shares ($1.5069 and $.9794, respectively, per
share) (111,945) (63,790)
--------------- ---------------
Total distributions to shareholders (150,854) (94,839)
--------------- ---------------
Net capital share transactions 4,150,301 88,893
--------------- ---------------
Total increase in net assets 4,533,821 46,211
Net Assets:
Beginning of year 808,028 761,817
--------------- ---------------
End of year $ 5,341,849 $ 808,028
--------------- ---------------
--------------- ---------------
</TABLE>
See Accompanying Notes to Financial Statements.
F-13
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- --------------------------------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR FUNDS
FINANCIAL HIGHLIGHTS (D)
(For a Share Outstanding Throughout Each Period)
- --------------------------------------------------------------------------------------------------------
Warburg Pincus Warburg Pincus
Growth & Income Balanced
Fund Fund
--------------- -----------------
<S> <C> <C>
For the Period
May 15, 1995 For the Period
(Commencement July 31, 1995
of Operations) (Commencement
to of Operations) to
August 31, 1995 August 31, 1995
--------------- -----------------
<CAPTION>
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $14.87 $10.72
Income From Investment Operations:
Net Investment Income 0.0236 0.0170
Net Gains (Losses) on Securities (both realized and
unrealized) 1.5323 0.3930
Total from Investment Operations 1.5559 0.4100
Less Distributions:
Dividends (from net investment income) (0.0459) 0.0000
------ -----
Total Distributions (0.0459) 0.0000
NET ASSET VALUE, END OF PERIOD $16.38 $11.13
Total Returns 10.49%(c) 3.82%(c)
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Period (000) $56,902 $1
Ratios of Expenses to Average Net Assets 1.92%(b) 1.76%(a)(b)
Ratios of Net Investment Income to Average Net Assets 0.43%(b) 2.00%(b)
Portfolio Turnover Rate 109%(b) 107%(b)
</TABLE>
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Balanced Fund would have been 628.47% annualized
for the period ended August 31, 1995.
(b) Annualized.
(c) Not Annualized.
(d) Financial Highlights relate solely to the Advisor Class of shares within the
Fund.
See Accompanying Notes to Financial Statements.
TAX STATUS OF 1995 DIVIDENDS (unaudited)
Dividends paid by the Warburg Pincus Growth & Income Fund Advisor shares
taxable as ordinary income amounted to $0.0459 per share. 100.0% of ordinary
income dividends qualify for the dividend received deduction available to
corporate shareholders for U.S. income tax purposes.
Because the Fund's fiscal year is not the calendar year, amounts to be used
by calendar year taxpayers on their Federal return will be reflected on Form
1099-DIV and will be mailed in January 1996.
F-14
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR FUNDS
NOTES TO FINANCIAL STATEMENTS
August 31, 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
The RBB Fund, Inc. (the "Company") is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The Company was incorporated in Maryland on February 29, 1988, and currently has
seventeen investment Portfolios, two of which are included in these financial
statements.
The Company has authorized capital of thirty billion shares of common stock
of which 12.2 billion are currently classified into sixty-one classes. Each
class represents an interest in one of seventeen investment portfolios of the
Company, fifteen of which are currently in operation. The classes have been
grouped into fifteen separate "families", eight of which have begun investment
operations including the Warburg Pincus Family. The Warburg Pincus Family
represents interests in three funds, two of which, the Warburg Pincus Growth &
Income Fund (the "Growth & Income Fund") and the Warburg Pincus Balanced Fund
(the "Balanced Fund"), are covered in this report. The Growth & Income Fund and
Balanced Fund each have two classes of shares: Common Class and Advisor Class.
The Advisor Class (also referred to as Series 2 shares) are sold by financial
institutions and operate under the name Warburg Pincus Advisor Funds.
The net asset value of each Fund is determined daily as of the close of
regular trading on the New York Stock Exchange. Each Fund's securities are
valued at market value, which is currently determined using the last reported
sales price. If no sales are reported, as in the case of some securities traded
over-the-counter, portfolio securities are valued at the mean between the last
reported bid and asked prices. Corporate bonds and government securities are
valued on the basis of quotations provided by an independent pricing service
which uses information with respect to transactions on bonds, quotations from
bond dealers, market transactions in comparable securities and various
relationships between securities in determining value. Short-term obligations
with maturities of 60 days or less are valued at amortized cost which
approximates market value.
Security transactions are accounted for on the trade date. The cost of
investments sold is determined by use of the specific identification method for
both financial reporting and income tax purposes. Interest income is recorded on
the accrual basis. Dividends are recorded on the ex-dividend date. Certain
expenses, principally distribution, transfer agent and printing, are class
specific expenses and vary by class. Expenses not directly attributable to a
specific portfolio or class are allocated based on relative net assets of each
Portfolio and class, respectively.
Dividends from net investment income, if any, are declared and paid at least
quarterly. Any net realized capital gains will be distributed at least annually.
Income distributions and capital gain distributions are determined in accordance
with income tax regulations which may differ from generally accepted accounting
principals.
No provision is made for Federal taxes as it is the Company's intention to
have each portfolio continue to qualify for and elect the tax treatment
applicable to regulated investment companies under the Internal Revenue Code and
make the requisite distributions to its shareholders which will be sufficient to
relieve it from Federal income and excise taxes.
F-15
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
Money market instruments may be purchased subject to the seller's agreement
to repurchase them at an agreed upon date and price. The seller will be required
on a daily basis to maintain the value of the securities subject to the
agreement at not less than the repurchase price. The agreements are conditioned
upon the collateral being deposited under the Federal Reserve book-entry system
or with the Fund's custodian or a third party sub-custodian.
2. INVESTMENT ADVISER, CO-ADMINISTRATORS AND DISTRIBUTOR
Warburg, Pincus Counsellors, Inc. ("Counsellors"), a wholly owned subsidiary
of Warburg, Pincus Counsellors G.P. ("Counsellors G.P.") serves as investment
advisor for the Growth & Income Fund. The advisory fee is computed daily and
payable monthly at the annual rate of .75% of the Growth & Income Fund's average
daily net assets.
Pursuant to a vote on September 30, 1994, shareholders approved a new
advisory contract between the Balanced Fund and Counsellors. Under the new
agreement, the Balanced Fund pays Counsellors an advisory fee at an annual rate
of .90% of the Fund's average daily net assets. The prior advisory agreement
between the Fund and PNC Institutional Management Corp. ("PIMC") was terminated
as of that date.
Counsellors may, at its discretion, voluntarily waive all or any portion of
its advisory fees for any of the Funds. For the year ended August 31, 1995,
investment advisory fees and waivers were as follows:
GROSS NET
ADVISORY FEE WAIVER ADVISORY FEE
------------ ------- ------------
Growth & Income Fund $ 5,824,947 $ -- $ 5,824,947
Balanced Fund 14,729 (14,729) --
PFPC Inc. ("PFPC"), an indirect wholly owned subsidiary of PNC Bank Corp.,
and Counsellors Fund Services, Inc. ("CFSI"), a wholly owned subsidiary of
Counsellors, serve as co-administrators for each of the Funds. For the Growth &
Income Fund, the co-administration fees are computed daily and payable monthly
at an annual rate of .20% of the first $125 million of average daily net assets
and .15% of average daily net assets in excess of $125 million for PFPC and .05%
of the first $125 million of average daily net assets and .10% of average daily
net assets in excess of $125 million for CFSI.
For the Balanced Fund, the co-administration fees are computed daily and
payable monthly at an annual rate of .15% of average daily net assets for PFPC
and .10% of average daily net assets for CFSI.
F-16
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- -----------------------------------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- -----------------------------------------------------------------------------------------------------------
CFSI and PFPC may, at their discretion, voluntarily waive all or any portion
of their co-administration fees for any of the Funds. For the year ended August
31, 1995, CFSI and PFPC's co-administration fees and waivers were as follows:
GROSS NET
CO-ADMINISTRATION FEES WAIVERS CO-ADMINISTRATION FEES
---------------------- ------- ----------------------
<S> <C> <C> <C>
Growth & Income Fund $1,941,649 $ -- $1,941,649
Balanced Fund 3,991 (2,394) 1,597
</TABLE>
The Company, on behalf of each class of shares within the investment
portfolios, has adopted Distribution Plans pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, and has entered into Distribution
contracts with Counsellors Securities Inc. ("CSI"), also a wholly owned
subsidiary of Counsellors, which provide for each class to make monthly
payments, based on average daily net assets to CSI. No compensation is payable
by the Growth & Income Fund's Common Shares. For distribution services with
respect to the Balanced Fund's Common Shares, CSI receives a fee at the annual
rate of .25%, computed daily and payable monthly, on average daily net assets.
For distribution services with respect to the Growth & Income and the Balanced
Funds' Advisor shares, CSI receives a fee of .25% and .50%, respectively,
computed daily and payable montly on average daily net assets. For the year
ended August 31, 1995, distribution fees and waivers were as follows:
DISTRIBUTION FEES
-----------------
Growth & Income Fund
Advisor Shares $71,233
--------
--------
Balanced Fund
Common Shares $ 4,155
Advisor Shares --
--------
$ 4,155
--------
--------
3. INVESTMENT IN SECURITIES
For the year ended August 31, 1995, purchases and sales of investment
securities (other than short-term investments) were as follows:
INVESTMENT SECURITIES
------------------------------
PURCHASES SALES
-------------- ------------
Growth & Income Fund $1,108,363,903 $617,767,292
Balanced Fund $ 5,047,134 $ 1,602,287
F-17
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- -------------------------------------------------------------------------------------------------------------------------
4. CAPITAL SHARES
Transactions in capital shares for each year were as follows:
GROWTH & INCOME FUND BALANCED FUND
---------------------------------------------------- ---------------------------------------------
For the For the For the For the
Year Ended Year Ended Year Ended Year Ended
August 31, 1995 August 31, 1994 August 31, 1995 August 31, 1994
------------------------- ------------------------- ----------------------- --------------------
<CAPTION>
Shares Value Shares Value Shares Value Shares Value
----------- ------------ ----------- ------------ ----------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares Sold
Common Shares 46,345,660 $670,088,619 29,256,806 $410,956,025 423,825 $4,348,625 609 $ 6,495
Advisor Shares 3,521,620 52,908,038 -- -- 110 1,180 -- --
Shares issued in
reinvestment of
dividends
Common Shares 6,891 96,291 67,788 894,152 16,171 148,491 8,690 93,303
Advisor Shares 9,051 137,213 -- -- -- -- -- --
Shares repurchased
Common Shares (11,270,725) (167,348,709) (4,741,678) (69,798,926) (33,364) (347,995) (982) (10,905)
Advisor Shares (57,795) (890,622) -- -- -- -- -- --
----------- ------------ ----------- ------------ ----------- ---------- ----------- -------
Net increase 38,554,702 $554,990,830 24,582,916 $342,051,251 406,792 $4,150,301 8,317 $88,893
----------- ------------ ----------- ------------ ----------- ---------- ----------- -------
----------- ------------ ----------- ------------ ----------- ---------- ----------- -------
Advisor shares
authorized 100,000,000 100,000,000 100,000,000 100,000,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
5. NET ASSETS
At August 31, 1995, net assets consisted of the following:
<TABLE>
<CAPTION>
GROWTH & INCOME FUND BALANCED FUND
-------------------- --------------
<S> <C> <C>
Capital paid-in.......................... $ 943,969,297 $4,808,416
Undistributed net investment income...... 2,435,167 7,138
Accumulated net realized gain (loss) on
investment transactions, futures
contracts and foreign exchange
transactions........................... 30,926,372 60,835
Unrealized appreciation on investments... 117,755,410 465,460
-------------------- --------------
$1,095,095,246 $5,341,849
-------------------- --------------
-------------------- --------------
</TABLE>
6. FUTURES CONTRACTS
The Growth & Income Fund may enter into futures contracts for hedging or
portfolio management strategy purposes to the extent permitted by its investment
policies and objectives. To enter into a futures contract, the Growth & Income
Fund must make a deposit of an initial margin with its custodian in a segregated
account. Subsequent payments, which are dependent on the daily fluctuations in
the value of the underlying instrument, are made or received by the Fund each
day (daily variation margin) and are recorded as unrealized gains or losses
until the contracts are closed. When the contract
F-18
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- --------------------------------------------------------------------------------
is closed, the Fund records a realized gain or loss equal to the difference
between the proceeds from (or cost of) the closing transactions and the Fund's
basis in the contract. Risks of entering into futures contracts include the
possibility that a change in the value of the contract may not correlate with
changes in the value of the underlying instruments. The Growth & Income Fund
entered into futures transactions during the year ended August 31, 1995.
However, the Warburg Pincus Growth & Income Fund had no futures contracts open
at August 31, 1995.
7. OTHER FINANCIAL HIGHLIGHTS
The Growth & Income and the Balanced Fund currently offer one other class of
shares, Common Shares, representing an additional interest in each of the Funds.
The financial highlights of each of the Common Shares are as follows:
F-19
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- -------------------------------------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- -------------------------------------------------------------------------------------------------------------
Growth and Income Fund
Common Class of Shares
For the Years Ended August 31,
-------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $14.56 $16.72 $11.99 $12.11 $11.00
Income From Investment
Operations:
Net Investment Income 0.2224 0.0785 0.0464 0.1912 0.3744
Net Gains on Securities (both
realized and unrealized) 1.9834 1.8151 4.8499 0.0402 1.6891
Total from Investment
Operations 2.2058 1.8936 4.8963 0.2314 2.0635
Less Distributions:
Dividends (from net investment
income) (0.1824) (0.0785) (0.0875) (0.1871) (0.4043)
Distributions (from capital
gains) (0.1834) (3.9751) (0.0788) (0.1643) (0.5492)
Total Distributions (0.3658) (4.0536) (0.1663) (0.3514) (0.9535)
NET ASSET VALUE, END OF YEAR $16.40 $14.56 $16.72 $11.99 $12.11
Total Return 15.62]% 14.41% 41.17% 1.99% 19.91%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (000) $1,038,193 $410,658 $60,689 $28,976 $24,726
Ratios of Expenses to Average Net
Assets 1.22% 1.28%(a) 1.14%(a) 1.25%(a) 1.30%(a)
Ratios of Net Investment Income to
Average Net Assets 1.64% 0.41% 0.30% 1.66% 3.42%
Portfolio Turnover Rate 109% 150% 344% 175% 41%
</TABLE>
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Growth & Income Fund would have been 1.28%,
1.14%, 1.28% and 2.17% for the years ended August 31, 1994, 1993, 1992 and
1991, respectively.
F-20
- --------------------------------------------------------------------------------
<PAGE>
<TABLE><CAPTION>
- -------------------------------------------------------------------------------------------------------------
WARBURG PINCUS ADVISOR FUNDS
NOTES TO FINANCIAL STATEMENTS (CONT'D)
August 31, 1995
- -------------------------------------------------------------------------------------------------------------
Balanced Fund
Common Class of Shares
For the Years Ended August 31,
---------------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF YEAR $11.01 $11.71 $12.04 $12.05 $10.60
Income From Investment Operations:
Net Investment Income 0.2080 0.4132 0.5555 0.4408 0.4213
Net Gains on Securities (both
realized and unrealized) 1.7225 0.3248 1.1253 0.5155 1.7196
Total from Investment Operations 1.9305 0.7380 1.6808 0.9563 2.1409
Less Distributions:
Dividends (from net investment
income) (0.3136) (0.4586) (0.5412) (0.3713) (0.4128)
Distributions (from capital gains) (1.5069) (0.9794) (1.4696) (0.5950) (0.2781)
Total Distributions (1.8205) (1.4380) (2.0108) (0.9663) (0.6909)
NET ASSET VALUE, END OF YEAR $11.12 $11.01 $11.71 $12.04 $12.05
Total Return 21.56% 6.86% 15.27% 8.07% 21.18%
RATIOS/SUPPLEMENTAL DATA
Net Assets, End of Year (000) $5,342 $808 $762 $1,026 $1,290
Ratios of Expenses to Average Net Assets 1.53%(a) 0%(a) 0%(a) .67%(a) 1.40%(a)
Ratios of Net Investment Income to
Average Net Assets 2.27% 3.76% 4.13% 3.68% 3.58%
Portfolio Turnover Rate 107% 32% 30% 93% 76%
</TABLE>
(a) Without the waiver of advisory and administration fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Balanced Fund would have been 6.04%, 5.46%,
5.37%, 3.88% and 3.89% for the years ended August 31, 1995, 1994, 1993, 1992
and 1991, respectively.
F-21
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------
Report of Independent Accountants
- --------------------------------------------------------------------------
To the Shareholders and Board of Directors of The RBB Fund, Inc..:
We have audited the accompanying statements of net assets of Warburg Pincus
Growth & Income Fund and Warburg Pincus Balanced Fund of The RBB Fund, Inc.,
as of August 31, 1995, and the related statements of operations for the year
then ended, the statements of changes in net assets for each of the two years
in the period then ended, and the financial highlights for each of the
periods presented. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
investments held as of August 31, 1995, by correspondence with the custodian
and brokers. Au audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above fairly present fairly, in all material respects, the financial position
of Warburg Pincus Growth & Income Fund and Warburg Pincus Balanced Fund of
The RBB Fund, Inc., as of August 31, 1995, and the results of their
operations for the year then ended, the changes in their net assets for each
of the two years in the period then ended, and their financial highlights for
each of the periods presented, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
October 16, 1995
F-22
- --------------------------------------------------------------------------
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
(1) Included in Part A of the Registration Statement:
Per Share Data and Ratios for the periods ended August 31, 1989
through August 31, 1995 for:
(a) Warburg Pincus Classes
(b) Warburg Pincus Advisor Classes
Included in Part B of the Registration Statement:
Warburg Pincus Growth & Income Fund
-----------------------------------
Report of Independent Accountants.
Statement of Net Assets as of August 31, 1995.
Statement of Operations for the period ended August 31,
1995.
Statement of Changes in Net Assets for the fiscal year ended
August 31, 1994 and for fiscal year ended August 31, 1995.
Selected Per Share Data and Ratios
Warburg Pincus Balanced Fund
----------------------------
Report of Independent Accountants.
Statement of Net Assets as of August 31, 1995.
Statement of Operations for the period ended August 31,
1995.
Statement of Changes in Net Assets for the fiscal year ended
August 31, 1994 and for fiscal year ended August 31, 1995.
Selected Per Share Data and Ratios
Warburg Pincus Tax Free Fund
----------------------------
Report of Independent Accountants.
Statement of Net Assets as of August 31, 1995.
Statement of Operations for the period ended August 31,
1995.
Statement of Changes in Net Assets for the fiscal year ended
August 31, 1994 and for fiscal year ended August 31, 1995.
Selected Per Share Data and Ratios
<PAGE>
Notes to Financial Statements
- -----------------------------
(b) Exhibits: See Note #
----------
(1) (a) Articles of Incorporation of Registrant 1
(b) Articles Supplementary of Registrant. 1
(c) Articles of Amendment to Articles of
Incorporation of Registrant. 2
(d) Articles Supplementary of Registrant. 2
(e) Articles Supplementary of Registrant. 5
(f) Articles Supplementary of Registrant. 6
(g) Articles Supplementary of Registrant. 9
(h) Articles Supplementary of Registrant. 10
(i) Articles Supplementary of Registrant. 14
(j) Articles Supplementary of Registrant. 14
(k) Articles Supplementary of Registrant. 19
(l) Articles Supplementary of Registrant. 19
(m) Articles Supplementary of Registrant. 19
(n) Articles Supplementary of Registrant. 19
(o) Articles Supplementary of Registrant 20
(2) Amended By-Laws adopted August 16, 1988. 3
(a) Amendment to By-Laws adopted July 25, 1989. 4
(b) By-Laws amended through October 24, 1989. 5
(3) None.
(4) Specimen Certificates
a) SafeGuard Equity Growth and Income Shares 3
b) SafeGuard Fixed Income Shares 3
c) SafeGuard Balanced Shares 3
d) SafeGuard Tax-Free Shares 3
e) SafeGuard Money Market Shares 3
f) SafeGuard Tax-Free Money Market Shares 3
2
<PAGE>
See Note #
----------
g) Cash Preservation Money Market Shares 3
h) Cash Preservation Tax-Free Money
Market Shares 3
i) Sansom Street Money Market Shares 3
j) Sansom Street Tax-Free Money Market Shares 3
k) Sansom Street Government Obligations Money 3
Market Shares
l) Bedford Money Market Shares 3
m) Bedford Tax-Free Money Market Shares 3
n) Bedford Government Obligations Money Market 3
Shares
o) Bedford New York Municipal Money
Market Shares 5
p) SafeGuard Government Securities Shares 5
q) Income Opportunities High Yield Bond Shares 6
r) Bradford Tax-Free Money Market Shares 8
s) Bradford Government Obligations Money Market 8
t) Alpha 1 Money Market Shares 8
u) Alpha 2 Tax-Free Money Market Shares 8
v) Alpha 3 Government Obligations Money Market 8
w) Alpha 4 New York Municipal Money Market 8
x) Beta 1 Money Market Shares 8
y) Beta 2 Tax-Free Money Market Shares 8
z) Beta 3 Government Obligations Money Market 8
aa) Beta 4 New York Municipal Money Market Shares 8
bb) Gamma 1 Money Market Shares 8
cc) Gamma 2 Tax-Free Money Market Shares 8
dd) Gamma 3 Government Obligations Money Market 8
ee) Gamma 4 New York Municipal Money Market Shares 8
ff) Delta 1 Money Market Shares 8
gg) Delta 2 Tax-Free Money Market Shares 8
hh) Delta 3 Government Obligations Money Market 8
ii) Delta 4 New York Municipal Money
Market Shares 8
jj) Epsilon 1 Money Market Shares 8
kk) Epsilon 2 Tax-Free Money Market Shares 8
ll) Epsilon 3 Government Obligations Money
Market Shares 8
mm) Epsilon 4 New York Municipal Money
Market Shares 8
nn) Zeta 1 Money Market Shares 8
oo) Zeta 2 Tax-Free Money Market Shares 8
pp) Zeta 3 Government Obligations Money
Market Shares 8
qq) Zeta 4 New York Municipal Money Market Shares
rr) Eta 1 Money Market Shares 8
3
<PAGE>
See Note #
----------
ss) Eta 2 Tax-Free Money Market Shares 8
tt) Eta 3 Government Obligations Money Market
Shares 8
uu) Eta 4 New York Municipal Money Market Shares 8
vv) Theta 1 Money Market Shares 8
ww) Theta 2 Tax-Free Money Market Shares 8
xx) Theta 3 Government Obligations Money Market
Shares 8
yy) Theta 4 New York Municipal Money Market
Shares 8
zz) BEA International Equity Shares 9
a1) BEA Strategic Fixed Income Shares 9
a2) BEA Emerging Markets Equity Shares 9
a3) Laffer/Canto Equity Shares 12
a4) BEA U.S. Core Equity Shares 13
a5) BEA U.S. Core Fixed Income Shares 13
a6) BEA Global Fixed Income Shares 13
a7) BEA Municipal Bond Shares 13
a8) BEA Balanced Shares 16
a9) BEA Short Duration Shares 16
a10) Warburg Growth & Income Shares 18
a11) Warburg Balanced Shares 18
(5) (a) Investment Advisory Agreement (Money) 3
between Registrant and Provident
Institutional Management Corporation,
dated as of August 16, 1988.
(b) Sub-Advisory Agreement (Money) between 3
Provident Institutional Management
Corporation and Provident National Bank,
dated as of August 16, 1988.
(c) Investment Advisory Agreement 3
(Tax -Free Money) between Registrant and
Provident Institutional Management
Corporation, dated as of August 16, 1988.
(d) Sub-Advisory Agreement (Tax-Free Money) 3
between Provident Institutional Management
Corporation and Provident National Bank,
dated as of August 16, 1988.
(e) Investment Advisory Agreement 3
(Government Money) between Registrant and
Provident Institutional Management
Corporation, dated as of August 16, 1988.
(f) Sub-Advisory Agreement (Government Money) 3
between Provident Institutional Management
Corporation and Provident National Bank,
4
<PAGE>
See Note #
----------
dated as of August 16, 1988.
(k) Investment Advisory Agreement (Balanced) 3
between Registrant and Provident
Institutional Management Corporation,
dated as of August 16, 1988.
(l) Sub-Advisory Agreement (Balanced) between 4
Provident Institutional Management
Corporation and Provident National Bank,
dated as of August 16, 1988.
(m) Investment Advisory Agreement (Tax-Free) 3
between Registrant and Provident
Institutional Management Corporation,
dated as of August 16, 1988.
(n) Sub-Advisory Agreement (Tax-Free) between 3
Provident Institutional Management
Corporation and Provident National Bank,
dated as of August 16, 1988.
(s) Investment Advisory Agreement 8
(Government Securities) between Registrant
and Provident Institutional Management
Corporation dated as of April 8, 1991.
(t) Investment Advisory Agreement 8
(High Yield Bond) between Registrant
and Provident Institutional Management
Corporation dated as of April 8, 1991.
(u) Sub-Advisory Agreement (High Yield Bond) 8
between Registrant and Warburg,
Pincus Counsellors, Inc.
dated as of April 8, 1991.
(v) Investment Advisory Agreement 9
(New York Municipal Money Market) between
Registrant and Provident Institutional
Management Corporation dated
November 5, 1991.
(w) Investment Advisory Agreement (Equity) 10
between Registrant and Provident
Institutional Management Corporation
dated November 5, 1991.
(x) Sub-Advisory Agreement (Equity) between 10
Registrant, Provident Institutional
Management Corporation and Warburg,
5
<PAGE>
See Note #
----------
Pincus Counsellors, Inc. dated
November 5, 1991.
(y) Investment Advisory Agreement 10
(Tax-Free Money Market) between
Registrant and Provident Institutional
Management Corporation dated
April 21, 1992.
(z) Investment Advisory Agreement 11
(BEA International Equity Portfolio)
between Registrant and BEA Associates.
(aa) Investment Advisory Agreement 11
(BEA Strategic Fixed Income Portfolio)
between Registrant and BEA Associates.
(bb) Investment Advisory Agreement 11
(BEA Emerging Markets Equity Portfolio)
between Registrant and BEA Associates.
(cc) Investment Advisory Agreement 14
(Laffer/Canto Equity Portfolio)
between Registrant and Laffer Advisors
Incorporated, dated as of July 21, 1993.
(dd) Sub-Advisory Agreement 12
(Laffer/Canto Sector Equity Portfolio)
between PNC Institutional Management
Corporation and Laffer Advisors
Incorporated, dated as of July 21, 1993.
(ee) Investment Advisory Agreement 15
(BEA U.S. Core Equity Portfolio) between
Registrant and BEA Associates, dated as
of October 27, 1993.
(ff) Investment Advisory Agreement 15
(BEA U.S. Core Fixed Income Portfolio)
between Registrant and BEA Associates,
dated as of October 27, 1993.
(gg) Investment Advisory Agreement 15
(BEA Global Fixed Income Portfolio)
between Registrant and BEA Associates,
dated as of October 27, 1993.
(hh) Investment Advisory Agreement 15
(BEA Municipal Bond Fund Portfolio)
between Registrant and BEA Associates,
dated as of October 27, 1993.
6
<PAGE>
See Note #
----------
(ii) Investment Advisory Agreement 14
(Warburg Pincus Growth and Income Fund)
between Registrant and Warburg,
Pincus Counsellors, Inc.
(jj) Investment Advisory Agreement 16
(Warburg Pincus Balanced Fund) between
Registrant and Warburg, Pincus Counsellors,
Inc.
(kk) Form of Investment Advisory Agreement 16
(BEA Balanced) between Registrant and
BEA Associates.
(ll) Form of Investment Advisory Agreement 16
(BEA Short Duration Portfolio) between
Registrant and BEA Associates.
(mm) Investment Advisory Agreement (Warburg 21
Pincus Tax Free Fund) between Registrant
and Warburg, Pincus Counsellors, Inc.
(6) (r) Distribution Agreement and Supplements 8
(Classes A through Q) between the
Registrant and Counsellors Securities Inc.
dated as of April 10, 1991.
(s) Distribution Agreement Supplement 9
(Classes L, M, N and O) between the
Registrant and Counsellors Securities
Inc. dated as of November 5, 1991.
(t) Distribution Agreement Supplements 9
(Classes R, S, and Alpha 1 through Theta 4)
between the Registrant and Counsellors
Securities Inc. dated as of November
5, 1991.
(u) Distribution Agreement Supplement 10
(Classes T, U and V) between the Registrant
and Counsellors Securities Inc.
dated as of September 18, 1992.
(v) Distribution Agreement Supplement 14
(Class W) between the Registrant and
Counsellors Securities Inc. dated as of
July 21, 1993.
(w) Distribution Agreement Supplement 14
(Classes X, Y, Z and AA) between the
Registrant and Counselors Securities Inc.
7
<PAGE>
See Note #
----------
(x) Distribution Agreement Supplement 18
(Classes BB and CC) between Registrant
and Counsellor's Securities Inc. dated
as of October 26, 1994.
(y) Distribution Agreement Supplement 18
(Classes DD and EE) between Registrant and
Counsellor's Securities Inc. dated as of
October 26, 1994.
(z) Form of Distribution Agreement Supplement 19
(Classes L, M, N and O) between the
Registrant and Counsellor's Securities
Inc.
(aa) Form of Distribution Agreement Supplement 19
(Classes R, S) between the Registrant and
Counsellor's Securities Inc.
(bb) Distribution Agreement Supplements 19
(Classes Alpha 1 through Theta 4) between
the Registrant and Counsellor's Securities
Inc.
(cc) Distribution Agreement Supplement Janney 20
Classes (Alpha 1, Alpha 2, Alpha 3 and
Alpha 4 between the Registrant and
Counsellor's Securities, Inc.
(7) Fund Office Retirement Profit-Sharing and 7
Trust Agreement, dated as of October 24, 1990.
(8) (a) Custodian Agreement between Registrant and 3
Provident National Bank dated as of
August 16, 1988.
(b) Sub-Custodian Agreement among 10
The Chase Manhattan Bank, N.A., the
Registrant and Provident National Bank,
dated as of July 13, 1992, relating to
custody of Registrant's foreign securities.
(e) Amendment No. 1 to Custodian Agreement 9
dated August 16, 1988.
(f) Agreement between Brown Brothers Harriman 10
& Co. and Registrant on behalf of
BEA International Equity Portfolio,
dated September 18, 1992.
(g) Agreement between Brown Brothers Harriman & 10
8
<PAGE>
See Note #
----------
Co. and Registrant on behalf of BEA
Strategic Fixed Income Portfolio, dated
September 18, 1992.
(h) Agreement between Brown Brothers Harriman 10
& Co. and Registrant on behalf of
BEA Emerging Markets Equity Portfolio,
dated September 18, 1992.
(i) Agreement between Brown Brothers Harriman 15
& Co. and Registrant on behalf of BEA
Emerging Markets Equity, BEA International
Equity, BEA Strategic Fixed Income and BEA
Global Fixed Income Portfolios,
dated as of November 29, 1993.
(j) Agreement between Brown Brothers Harriman 15
& Co. and Registrant on behalf of
BEA U.S. Core Equity and BEA U.S. Core
Fixed Income Portfolio dated as of
November 29, 1993.
(k) Custodian Contract between 18
Registrant and State Street Bank and
Trust Company.
(9) (a) Transfer Agency Agreement (Sansom Street) 3
between Registrant and Provident
Financial Processing Corporation,
dated as of August 16, 1988.
(b) Transfer Agency Agreement (Cash Preservation) 3
between Registrant and Provident Financial
Processing Corporation, dated as of
August 16, 1988.
(c) Shareholder Servicing Agreement 3
(Sansom Street Money).
(d) Shareholder Servicing Agreement 3
(Sansom Street Tax-Free Money).
(e) Shareholder Servicing Agreement 3
(Sansom Street Government Money).
(f) Shareholder Services Plan 3
(Sansom Street Money).
(g) Shareholder Services Plan 3
(Sansom Street Tax-Free Money).
9
<PAGE>
See Note #
----------
(h) Shareholder Services Plan 3
(Sansom Street Government Money).
(i) Transfer Agency Agreement (SafeGuard) 3
between Registrant and Provident Financial
Processing Corporation, dated as of
August 16, 1988.
(j) Transfer Agency Agreement (Bedford) 3
between Registrant and Provident
Financial Processing Corporation,
dated as of August 16, 1988.
(k) Transfer Agency Agreement 7
(Income Opportunities) between Registrant
and Provident Financial Processing
Corporation dated June 25, 1990.
(l) Administration and Accounting Services 8
Agreement between Registrant and
Provident Financial Processing
Corporation, relating to Government
Securities Portfolio, dated as of
April 10, 1991.
(m) Administration and Accounting Services 9
Agreement between Registrant and
Provident Financial Processing
Corporation, relating to
New York Municipal Money Market
Portfolio dated as of November 5, 1991.
(n) Administration and Accounting Services 9
Agreement between Registrant and Provident
Financial Processing Corporation, relating
to Equity Portfolio dated as of
November 5, 1991.
(o) Administration and Accounting Services 9
Agreement between Registrant and Provident
Financial Processing Corporation, relating
to High Yield Bond Portfolio,
dated as of April 10, 1991.
(p) Administration and Accounting Services 10
Agreement between Registrant and Provident
Financial Processing Corporation
(International) dated September 18, 1992.
10
<PAGE>
See Note #
----------
(q) Administration and Accounting Services 10
Agreement between Registrant and Provident
Financial Processing Corporation (Strategic)
dated September 18, 1992;
(r) Administration and Accounting Services 10
Agreement between Registrant and Provident
Financial Processing Corporation (Emerging)
dated September 18, 1992.
(s) Transfer Agency Agreement and Supplements 9
(Bradford, Alpha, Beta, Gamma, Delta,
Epsilon, Zeta, Eta and Theta) between
Registrant and Provident Financial
Processing Corporation dated as of
November 5, 1991.
(t) Transfer Agency Agreement Supplement 10
(BEA) between Registrant and Provident
Financial Processing Corporation
dated as of September 18, 1992.
(u) Administrative Services Agreement between 10
Registrant and Counsellor's Fund
Services, Inc. (BEA Portfolios)
dated September 18, 1992.
(v) Administration and Accounting Services 10
Agreement between Registrant and Provident
Financial Processing Corporation, relating
to Tax-Free Money Market Portfolio, dated
as of April 21, 1992.
(w) Transfer Agency Agreement Supplement 12
(Laffer) between Registrant and PFPC Inc.
dated as of July 21, 1993.
(x) Administration and Accounting Services 12
Agreement between Registrant and PFPC Inc.,
relating to Laffer/Canto Equity Fund,
dated July 21, 1993.
(y) Transfer Agency Agreement Supplement 15
(BEA U.S. Core Equity, BEA U.S.
Core Fixed Income, BEA Global Fixed Income
and BEA Municipal Bond Fund) between
Registrant and PFPC Inc. dated as of
October 27, 1993.
(z) Administration and Accounting Services 15
Agreement between Registrant and PFPC Inc.
11
<PAGE>
See Note #
----------
relating to (Core Equity) dated as of
October 27, 1993.
(aa) Administration and Accounting Services 15
Agreement between Registrant and PFPC Inc.
(Core Fixed Income) dated
October 27, 1993.
(bb) Administration and Accounting Services 15
Agreement between Registrant and
PFPC Inc. (International Fixed Income)
dated October 27, 1993
(cc) Administration and Accounting Services 15
Agreement between Registrant and PFPC Inc.
(Municipal Bond) dated October 27, 1993.
(dd) Transfer Agency Agreement Supplement 18
(BEA Balanced and Short Duration) between
Registrant and PFPC Inc. dated
October 26, 1994.
(ee) Administration and Accounting Services 18
Agreement between Registrant and PFPC Inc.
(BEA Balanced) dated October 26, 1994.
(ff) Administration and Accounting Services 18
Agreement between Registrant and PFPC Inc.
(BEA Short Duration) dated
October 26, 1994.
(gg) Co-Administration Agreement between 18
Registrant and PFPC Inc. (Warburg Pincus
Growth & Income Fund) dated
August 4, 1994.
(hh) Co-Administration Agreement between 18
Registrant and PFPC Inc. (Warburg Pincus
Balanced Fund) dated August 4, 1994.
(ii) Co-Administration Agreement between 18
Registrant and Counsellors Funds Services,
Inc. (Warburg Pincus Growth & Income Fund)
dated August 4, 1994.
(jj) Co-Administration Agreement between 18
Registrant and Counsellors Funds Services,
Inc. (Warburg Pincus Balanced Fund) dated
August 4, 1994.
(kk) Administrative Services Agreement Supplement 18
12
<PAGE>
See Note #
----------
between Registrant and Counsellor's Fund
Services, Inc. (BEA Classes) dated
October 26, 1994.
(ll) Co-Administration Agreement between 21
Registrant and PFPC Inc. (Warburg Pincus
Tax Free Fund) dated March 31, 1995.
(mm) Co-Administration Agreement between 21
Registrant and Counsellors Funds
Services, Inc. (Warburg Pincus Tax Free
Fund) dated March 31, 1995.
(nn) Transfer Agency and Service Agreement 21
between Registrant and State Street
Bank and Trust Company and PFPC, Inc.
dated February 1, 1995.
(oo) Supplement to Transfer Agency and Service 21
Agreement between Registrant, State Street
Bank and Trust Company, Inc. and PFPC
dated April 10, 1995.
(pp) Amended and Restated Credit Agreement dated 22
December 15, 1994
(10)(a) Opinion of Counsel.
Incorporated by reference herein to
Registrant's 24f-2 Notice for the fiscal
year ending August 31, 1995 filed
on October 26, 1995.
(b) Consent of Counsel.
(11) Consent of Independent Accountants.
(12) None.
(13)(a) Subscription Agreement (relating to 2
Classes A through N).
(b) Subscription Agreement between Registrant 7
and Planco Financial Services, Inc.,
relating to Classes O and P.
(c) Subscription Agreement between Registrant and 7
Planco Financial Services, Inc., relating to
Class Q.
(d) Subscription Agreement between Registrant 9
13
<PAGE>
See Note #
----------
and Counsellors Securities Inc. relating to
Classes R, S, and Alpha 1 through Theta 4.
(e) Subscription Agreement between Registrant 10
and Counsellors Securities Inc. relating to
Classes T, U and V.
(f) Subscription Agreement between Registrant 18
and Counsellor's Securities Inc. relating to
Classes BB and CC.
(g) Purchase Agreement between Registrant and 21
Counsellors Securities Inc. relating to
Class DD (Warburg Pincus Growth & Income
Fund Series 2).
(h) Purchase Agreement between Registrant and 21
Counsellors Securities Inc. relating to
Class EE (Warburg Pincus Balanced Fund
Series 2).
(14) None.
(15)(a) Plan of Distribution (Sansom Street Money). 3
(b) Plan of Distribution (Sansom Street Tax-Free 3
Money).
(c) Plan of Distribution (Sansom Street 3
Government Money).
(d) Plan of Distribution (Cash Preservation 3
Money).
(e) Plan of Distribution (Cash Preservation 3
Tax-Free Money).
(f) Plan of Distribution (SafeGuard Equity). 3
(g) Plan of Distribution 3
(SafeGuard Fixed Income).
(h) Plan of Distribution (SafeGuard Balanced). 3
(i) Plan of Distribution (SafeGuard Tax-Free). 3
(j) Plan of Distribution (SafeGuard Money). 3
(k) Plan of Distribution (SafeGuard Tax-Free
Money). 3
14
<PAGE>
See Note #
----------
(l) Plan of Distribution (Bedford Money). 3
(m) Plan of Distribution (Bedford Tax-Free 3
Money).
(n) Plan of Distribution (Bedford Government 3
Money).
(o) Plan of Distribution (Bedford New York 7
Municipal Money).
(p) Plan of Distribution (SafeGuard Government 7
Securities).
(q) Plan of Distribution (Income Opportunities 7
High Yield).
(r) Amendment No. 1 to Plans of Distribution 8
(Classes A through Q).
(s) Plan of Distribution (Bradford Tax-Free 9
Money).
(t) Plan of Distribution (Bradford Government 9
Money).
(u) Plan of Distribution (Alpha Money). 9
(v) Plan of Distribution (Alpha Tax-Free 9
Money).
(w) Plan of Distribution (Alpha Government 9
Money).
(x) Plan of Distribution (Alpha New York 9
Money).
(y) Plan of Distribution (Beta Money). 9
(z) Plan of Distribution (Beta Tax-Free 9
Money).
(aa) Plan of Distribution (Beta Government 9
Money).
(bb) Plan of Distribution (Beta New York 9
Money).
(cc) Plan of Distribution (Gamma Money). 9
(dd) Plan of Distribution (Gamma Tax-Free 9
Money).
15
<PAGE>
See Note #
----------
(ee) Plan of Distribution (Gamma Government 9
Money).
(ff) Plan of Distribution (Gamma New York 9
Money).
(gg) Plan of Distribution (Delta Money). 9
(hh) Plan of Distribution (Delta Tax-Free 9
Money).
(ii) Plan of Distribution (Delta Government 9
Money).
(jj) Plan of Distribution (Delta New York 9
Money).
(kk) Plan of Distribution (Epsilon Money). 9
(ll) Plan of Distribution (Epsilon Tax-Free 9
Money).
(mm) Plan of Distribution (Epsilon Government 9
Money).
(nn) Plan of Distribution (Epsilon New York 9
Money).
(oo) Plan of Distribution (Zeta Money). 9
(pp) Plan of Distribution (Zeta Tax-Free 9
Money).
(qq) Plan of Distribution (Zeta Government 9
Money).
(rr) Plan of Distribution (Zeta New York 9
Money).
(ss) Plan of Distribution (Eta Money). 9
(tt) Plan of Distribution (Eta Tax-Free Money). 9
(uu) Plan of Distribution (Eta Government 9
Money).
(vv) Plan of Distribution (Eta New York 9
Money).
16
<PAGE>
See Note #
----------
(ww) Plan of Distribution (Theta Money). 9
(xx) Plan of Distribution (Theta Tax-Free 9
Money).
(yy) Plan of Distribution (Theta Government 9
Money).
(zz) Plan of Distribution (Theta New York 9
Money).
(aaa) Plan of Distribution (Laffer Equity). 12
(bbb) Plan Distribution (Warburg Pincus Growth 18
& Income Series 2).
(ccc) Plan of Distribution (Warburg Pincus 18
Balanced Series 2).
(16) Schedule of Computation of Performance 3
Quotations.
(17) None.
(18) Rule 18f-3 Plan. 21
(19) Representation of Ballard Spahr Andrews
& Ingersoll pursuant to Rule 485(b) under
the Securities Act of 1933.
17
<PAGE>
_________________
Note #
- ------
1 Incorporated herein by reference to the same exhibit number of Registrant's
Registration Statement (No. 33-20827) filed on March 24, 1988.
2 Incorporated herein by reference to the same exhibit number of
Pre-Effective Amendment No. 2 to Registrant's Registration Statement (No.
33-20827) filed on July 12, 1988.
3 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 1 to Registrant's Registration Statement (No.
33-20827) filed on March 23, 1989.
4 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 2 to Registrant's Registration Statement (No.
33-20827) filed on October 25, 1989.
5 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 3 to the Registrant's Registration Statement
(No. 33-20827) filed on April 27, 1990.
6 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 4 to the Registrant's Registration Statement
(No. 33-20827) filed on May 1, 1990.
7 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 5 to the Registrant's Registration Statement
(No. 33-20827) filed on December 14, 1990.
8 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 6 to the Registrant's Registration Statement
(No. 33-20827) filed on October 24, 1991.
9 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 7 to the Registrant's Registration Statement
(No. 33-20827) filed on July 15, 1992.
10 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 8 to the Registrant's Registration Statement
(No. 33-20827) filed on October 22, 1992.
11 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 9 to the Registrant's Registration Statement
(No. 33-20827) filed on December 16, 1992.
12 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 11 to the Registrant's Registrant Statement
(No. 33-20827) filed on June 21, 1993.
18
<PAGE>
Note #
- ------
13 Incorporated herein by reference to the same exhibit number Post-Effective
Amendment No. 12 to the Registrant's Registration Statement (No. 33-20827)
filed on July 27, 1993.
14 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 13 to the Registrant's Registration Statement
(No. 33-20827) filed on October 29, 1993.
15 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 14 to the Registrant's Registration Statement
(No. 33-20827) filed on December 21, 1993.
16 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 19 to the Registrant's Registration Statement
(No. 33-20827) filed on October 14, 1994.
17 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 20 to the Registrant's Registration Statement
(No. 33-20827) filed on October 21, 1994.
18 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 21 to the Registrant's Registration Statement
(No. 33-20827) filed on October 28, 1994.
19 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 22 to the Registrant's Registration Statement
(No. 33-20827) filed on December 19, 1994.
20 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 27 to the Registrant's Registration Statement
(No. 33-20827) filed on March 31, 1995.
21 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 28 to the Registrant's Registration Statement
(No. 33-20827) filed on October 6, 1995.
22 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 29 to the Registrant's Registration Statement
(No. 33-20827) filed on October 25, 1995.
Item 25. Persons Controlled by or under Common Control with Registrant
None.
19
<PAGE>
Note #
- ------
Item 26. Number of Holders of Securities
-------------------------------
The following information is given as of September 29, 1995.
Title of Class of Common Stock Number of Record Holders
------------------------------ ------------------------
a) Warburg Pincus Growth & Income 36,122
b) Warburg Pincus Balanced 234
c) Warburg Pincus Tax-Free 155
d) RBB Money Market 12
e) RBB Municipal Money Market 2
f) Cash Preservation Money Market 37
g) Cash Preservation Municipal Money Market 74
h) Sansom Street Money Market 3
i) Sansom Street Municipal Money Market 0
j) Sansom Street Government Obligations 0
Money Market
k) Bedford Money Market 87,305
l) Bedford Municipal Money Market 4,488
m) Bedford Government Obligations Money 3,675
Market
n) Bedford New York Municipal Money Market 2,819
o) RBB Government Securities 661
p) Bradford Municipal Money Market 3,318
q) Bradford Government Obligations Money 1,811
Market
r) BEA International Equity 177
s) BEA Strategic Fixed Income 42
t) BEA Emerging Markets Equity 45
u) BEA U.S. Core Equity 30
v) BEA U.S. Core Fixed Income 28
w) BEA U.S. Global Fixed Income 1
x) BEA Municipal Bond fund 33
y) BEA Short Duration 0
z) BEA Balanced 0
aa) Janney Montgomery Scott 1
Money Market
bb) Janney Montgomery Scott 1
Municipal Money Market
cc) Janney Montgomery Scott 1
Government Obligations Money Market
dd) Janney Montgomery Scott 1
New York Municipal Money Market
ee) Warburg Pincus Growth & Income Series 2 8
ff) Warburg Pincus Balanced Series 2 5
Item 27. Indemnification
---------------
Sections 1, 2, 3 and 4 of Article VIII of Registrant's Articles of
Incorporation, as amended, incorporated herein by reference as Exhibits 1(a) and
1(c), provide as follows:
20
<PAGE>
Section 1. To the fullest extent that limitations on the
liability of directors and officers are permitted by the Maryland
General Corporation Law, no director or officer of the Corporation
shall have any liability to the Corporation or its shareholders for
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.
Section 2. The Corporation shall indemnify and advance
expenses to its currently acting and its former directors to the
fullest extent that indemnification of directors is permitted by
the Maryland General Corporation 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
law. The Board of Directors may by By-law, resolution or
agreement make further provision for indemnification of
directors, officers, employees and agents to the fullest extent
permitted by the Maryland General Corporation Law.
Section 3. No provision of this Article shall be effective
to 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.
Section 4. References to the Maryland General Corporation
Law in this Article are to the law as from time to time amended.
No further amendment to the Articles of Incorporation of the
Corporation shall decrease, but may expand, any right of any
person under this Article based on any event, omission or
proceeding prior to such amendment.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a director, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by
21
<PAGE>
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
Information as to any other business, profession, vocation or
employment of a substantial nature in which any directors and officers of PIMC,
BEA, and Warburg are, or at any time during the past two (2) years have been,
engaged for their own accounts or in the capacity of director, officer,
employee, partner or trustee is incorporated herein by reference to Schedules A
and D of PIMC's Form ADV (File No. 801-13304) filed on March 28, 1993,
Schedules B and D of BEA's Form ADV (File No. 801-37170) filed on March 30,
1993, and Schedules A and D of Warburg's Form ADV (File No. 801-07321) filed on
August 28, 1992, respectively.
There is set forth below information as to any other business,
profession, vocation or employment of a substantial nature in which each
director or officer of PNC Bank, National Association (successor by merger to
Provident National Bank) ("PNC Bank"), is, or at any time during the past two
years has been, engaged for his own account or in the capacity of director,
officer, employee, partner or trustee.
PNC BANK, NATIONAL ASSOCIATION
Directors and Officers
To the knowledge of Registrant, none of the directors or officers of
PNC except those set forth below, is or has been, at any time during the past
two years, engaged in any other business, profession, vocation or employment of
a substantial nature, except that certain directors and officers of PNC Bank
also hold various positions with, and engage in business for, PNC Bank Corp.
(formerly PNC Financial Corp), which owns all the outstanding stock of PNC Bank,
or other subsidiaries of PNC Bank Corp. Set forth below are the names and
principal businesses of the directors and certain of the senior executive
officers of PNC Bank who are engaged in any other business, profession, vocation
or employment of substantial nature.
22
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
<TABLE><CAPTION>
Position with
PNC Bank,
National Other Business Type of
Association Name Connections Business
- -------------- ---- -------------- --------
<S> <C> <C> <C>
Director B.R. Brown President and C.E.O. of Coal
Consol, Inc.
Pittsburgh, PA (22)
Director Constance E. Clayton Superintendent of Schools Educator
The School District of
Philadelphia
Philadelphia, PA (23)
Director F. Eugene Dixon, Jr. Private Trustee Trustee
Lafayette Hill, PA (24)
Director A. James Freeman Vice Chairman and C.E.O. Manufacturing
Lord Corporation
Erie, PA (25)
Director Banking
Marine Bank
Erie, PA (26)
Director Dr. Stuart Heydt President and C.E.O. Medical
Geisinger Foundation
Danville, PA (27)
Director Edward P. Junker, III Chairman and C.E.O. Banking
Marine Bank
Erie, PA (26)
Director Thomas A. McConomy President, C.E.O. and Manufacturing
Chairman, Calgon Carbon
Corporation
Pittsburgh, PA (28)
Director Robert C. Milsom Retired
Pittsburgh, PA*
Director Thomas H. O'Brien Chairman and C.E.O. Bank Holding
PNC Bank Corp. (14)
Director Dr. J. Dennis O'Connor Chancellor Education
University of Pittsburgh
Pittsburgh, PA (29)
23
<PAGE>
<CAPTION>
Position with
PNC Bank,
National Other Business Type of
Association Name Connections Business
-------------- ---- -------------- --------
<S> <C> <C> <C>
Director Rocco A. Ortenzio Chairman and C.E.O. Medical
Continental Medical Systems,
Inc.
Mechanicsburg, PA (30)
Director Robert C. Robb, Jr. Partner Financial and
Lewis, Eckert, Robb & Management
Company Consultants
Plymouth Meeting, PA (31)
Director Daniel M. Rooney President, Pittsburgh Football
Steelers Football Club
of the National Football
League
Pittsburgh, PA (32)
Director Seth E. Schofield Chairman, President and Airline
C.E.O.
USAir Group, Inc. and
USAir, Inc.
Arlington, VA (33)
Director Robert M. Valentini President and C.E.O. Bell of Communications
Pennsylvania and Chairman
Network Policy Council of Bell
Atlantic Corporation
Philadelphia, PA (34)
President and James E. Rohr President Bank
Chief Executive PNC Bank Corp. Holding
Officer (14) Company
President and Bruce E. Robbins None.
Chief Executive
Officer of PNC
Bank, National
Association,
Pittsburgh
Senior Executive Edward V. Randall, Jr. None.
Vice President
Executive J. Richard Carnall Director Banking
Vice President PNC National Bank (2)
Chairman and Director Financial-
PFPC Inc. (3) Related
Services
24
<PAGE>
<CAPTION>
Position with
PNC Bank,
National Other Business Type of
Association Name Connections Business
- -------------- ---- -------------- --------
<S> <C> <C> <C>
Director
PNC Trust Company Fiduciary
of New York (11) Activities
Director Equipment
Hayden Bolts, Inc.* Leasing
Director, Real Estate
Parkway Real Estate
Company*
Director Investment
Provident Capital Advisory
Management, Inc. (5)
Director Investment
Advanced Investment Advisory
Management, Inc. (15)
Executive Richard C. Caldwell Director Banking
Vice President PNC National Bank (2)
Director Investment
Provident Capital Advisory
Management, Inc. (5)
Director Fiduciary
PNC Trust Company Activities
of New York (11)
Executive Vice President Bank Holding
PNC Bank Corp. (14) Company
Director Investment
Advanced Investment Advisory
Management, Inc. (15)
Director Banking
PNC Bank, New Jersey,
New Jersey, National
Association (16)
Director Financial-
PFPC Inc. (3) Related
Services
Executive Vice Herbert G. None.
President Summerfield, Jr.
25
<PAGE>
<CAPTION>
Position with
PNC Bank,
National Other Business Type of
Association Name Connections Business
- -------------- ---- -------------- --------
<S> <C> <C> <C>
Executive Vice Joe R. Irwin None.
President
President and Richard L. Smoot Senior Vice President Banking
Chief Executive Operations
Officer of PNC PNC Bank Corp. (20)
Bank, National
Association, Director Fiduciary
Philadelphia PNC Trust Company of Activities
New York (11)
Director Investment
PNC Institutional Advisory
Management Corporation (28)
Director Financial
PFPC Inc. (3) Related
Services
Executive Vice W. Herbert Crowder, III None.
President
Executive Vice Walter L. West None.
President
Senior Vice George Lula None.
President
Secretary William F. Strome Director
International
PNC Bank International (35) Banking
Services
Managing General Counsel Bank Holding
and Senior Vice President Company
PNC Bank Corp.
Senior Vice James P. Conley None.
President/
Credit Policy
</TABLE>
____________________
* For more information, contact William F. Strome, PNC Bank,
National Association, Broad and Chestnut Streets, Philadelphia,
PA 19101.
(1) PNC Bank, National Association, 120 S. 17th Street,
Philadelphia, PA 19103.
(2) PNC National Bank, 103 Bellevue Parkway, Wilmington, DE 19809.
(3) PFPC Inc., 400 Bellevue Parkway, Wilmington, DE 19809.
26
<PAGE>
(4) PNC Service Corp, 103 Bellevue Parkway, Wilmington, DE 19809.
(5) Provident Capital Management, Inc., 30 S. 17th Street, Site 1500,
Philadelphia, PA 19103.
(6) PNC National Investment Corporation, Broad and Chestnut Streets,
Philadelphia, PA 19101.
(7) Provident Realty Management, Inc., Broad and Chestnut Streets,
Philadelphia, PA 19101.
(8) Provident Realty, Inc., Broad and Chestnut Streets, Philadelphia, PA
19101.
(9) PNC Bancorp, Inc. 3411 Silverside Park, Wilmington, DE 19810
(10) PNC New Jersey Credit Corp, 1415 Route 70 East, Suite 604, Cherry Hill,
NJ 08034.
(11) PNC Trust Company of New York, 40 Broad Street, New York, NY 10084.
(12) Provcor Properties, Inc., Broad and Chestnut Streets, Philadelphia, PA
19101.
(13) PNC Credit Corp, 103 Bellevue Parkway, Wilmington, DE 19809.
(14) PNC Bank Corp., 5th Avenue and Wood Streets, Pittsburgh, PA 15265.
(15) Advanced Investment Management, Inc., 27th Floor, One Oliver Plaza,
Pittsburgh, PA 15265.
(16) PNC Bank of New Jersey, National Association, Woodland Falls Corporate
Park, 210 Lake Drive East, Cherry Hill, NJ 08002.
(17) PNC Institutional Management Corporation, 400 Bellevue Parkway,
Wilmington, DE 19809.
(18) Provident National Leasing Corporation, Broad and Chestnut Streets,
Philadelphia, PA 19101
(19) Provident National Bank Corp. New Jersey, 1 Centennial Square,
Haddonfield, NJ 08033
(20) The Clayton Bank and Trust Company, Clayton, DE 19938
(21) Keystone Life Insurance Company, 1207 Chestnut Street, Philadelphia, PA
19107-4101
(22) Consol, Inc., Consol Plaza, Pittsburgh, PA 15241
(23) School District of Philadelphia, 21 Street and The Parkway,
Philadelphia, PA 19103-1099
(24) F. Eugene Dixon, Jr., Private Trustee, 665 Thomas Road, Lafayette Hill,
PA 19444-0178
(25) Lord Corporation, 2000 W. Grandview Boulevard, Erie, PA 16514
(26) Marine Bank, Ninth and State Streets, Erie, PA 16553
(27) Geisinger Foundation, 100 N. Academy Avenue, Danville, PA 17822
(28) Calgon Carbon Corporation, P.O. Box 717, Pittsburgh, PA 15230-0717
(29) University of Pittsburgh, 107 Cathedral of Learning, Pittsburgh, PA
15260
(30) Continental Medical Systems, Inc., P.O. Box 715, Mechanicsburg, PA
17055
(31) Lewis, Eckert, Robb & Company, 425 One Plymouth Meeting, Plymouth
Meeting, PA 19462
(32) Football Club of the National Football League, 300 Stadium Circle,
Pittsburgh, PA 15212
(33) USAir Group, Inc. and USAir, Inc., 2345 Crystal Drive, Arlington, VA
22227
(34) Bell of Pennsylvania, One Parkway, Philadelphia, PA 19102
(35) PNC Bank International, 5th and Wood Streets, Pittsburgh, PA 15222
27
<PAGE>
Item 29. Principal Underwriter
---------------------
(a) Counsellors Securities Inc. (the "Distributor") acts as
distributor for the following investment companies:
Warburg, Pincus Cash Reserve Fund
Warburg, Pincus New York Tax Exempt Fund
Warburg, Pincus New York Municipal Bond Fund
Warburg, Pincus Intermediate Maturity Government Fund
Warburg, Pincus Fixed Income Fund
Warburg, Pincus Global Fixed Income Fund
Warburg, Pincus Capital Appreciation Fund
Warburg, Pincus Emerging Growth Fund
Warburg, Pincus International Equity Fund
Warburg, Pincus Japan OTC Fund
Counsellors Tandem Securities Fund
Warburg Pincus Growth & Income Fund
Warburg Pincus Balanced Fund
Warburg Pincus Tax Free Fund
The Distributor acts as a principal underwriter, depositor or investment adviser
for the following investment companies: None other than Registrant and
companies listed above.
(b) Information for each director or officer of the Distributor
is set forth below:
Name and Principal Positions and Offices Positions and Offices
Business Address with the Distributor with Registrant
- ------------------ --------------------- ------------------
John L. Vogelstein Director
466 Lexington Avenue
New York, New York 10017
Lionel I. Pincus Director
466 Lexington Avenue
New York, New York 10017
Reuben S. Leibowitz Director,
466 Lexington Avenue President and Chief
New York, New York 10017 Financial Officer
John L. Furth Director
466 Lexington Avenue
New York, New York 10017
Arnold M. Reichman Vice President, Director
466 Lexington Avenue Secretary and
New York, New York 10017 Chief Operating Officer
28
<PAGE>
Roger Reinlieb Vice President
466 Lexington Avenue
New York, New York 10017
Karen Amato Assistant Secretary
466 Lexington Avenue
New York, New York 10017
Stephen Distler Treasurer
466 Lexington Avenue
New York, New York 10017
(c) Information as to commissions and other compensation
received by the principal underwriter is set forth below.
<TABLE><CAPTION>
Net
Name of Underwriting Compensation
Principal Discounts and on Redemption Brokerage Other
Underwriter Commissions and Repurchase Commissions Compensation
- ----------- ------------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Counsellors $ 0 $ 0 $ 0 $ 0
Securities
Inc.
</TABLE>
Item 30. Location of Accounts and Records
--------------------------------
(1) PNC Bank, National Association (successor by merger to Provident
National Bank), Broad and Chestnut Street, Philadelphia, PA 19101
(records relating to its functions as sub-adviser and custodian).
(2) Counsellors Securities Inc., 466 Lexington Avenue, New York, New
York 10017 (records relating to its functions as distributor).
(3) PNC Institutional Management Corporation (formerly Provident
Institutional Management Corporation), Bellevue Corporate Center,
103 Bellevue Parkway, Wilmington, Delaware 19809 (records
relating to its functions as investment adviser, sub-adviser and
administrator).
(4) PFPC Inc. (formerly Provident Financial Processing Corporation),
Bellevue Corporate Center, 400 Bellevue Parkway, Wilmington,
Delaware 19809 (records relating to its functions as transfer
agent and dividend disbursing agent).
(5) Ballard Spahr Andrews & Ingersoll, 1735 Market Street - 51st
Floor, Philadelphia, Pennsylvania 19103 (Registrant's Articles of
Incorporation, By-Laws and Minute Books).
29
<PAGE>
(6) BEA Associates, One Citicorp Center, 153 East 53rd Street, New
York, New York 10022 (records relating to its function as
investment adviser).
(7) Warburg, Pincus Counsellors, Inc., 466 Lexington Avenue, New
York, New York 10017-3147 (records relating to its functions as
investment adviser).
Item 31. Management Services
-------------------
None.
Item 32. Undertakings
------------
(a) Registrant hereby undertakes to hold a meeting of
shareholders for the purpose of considering the removal of
directors in the event the requisite number of shareholders
so request.
30
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Wilmington, and State of
Delaware, on November 30, 1995.
THE RBB FUND, INC.
By: /s/ Edward J. Roach
-----------------------
Edward J. Roach
President and
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to Registrant's Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Edward J. Roach President (Principal November 30, 1995
- ----------------------
Edward J. Roach Executive Officer) and
Treasurer (Principal
Financial and Accounting
Officer)
/s/ Donald van Roden Director November 30, 1995
- -----------------------
Donald van Roden
/s/ Francis J. McKay Director November 30, 1995
- -----------------------
Francis J. McKay
/s/ Marvin E. Sternberg Director November 30, 1995
- -----------------------
Marvin E. Sternberg
/s/ Julian A. Brodsky Director November 30, 1995
- -----------------------
Julian A. Brodsky
/s/ Arnold M. Reichman Director November 30, 1995
- -----------------------
Arnold M. Reichman
/s/ Robert Sablowsky Director November 30, 1995
- -----------------------
Robert Sablowsky
<PAGE>
THE RBB FUND, INC.
RBB CLASSES
WARBURG PINCUS CLASSES
WARBURG PINCUS SERIES 2 CLASSES
CASH PRESERVATION CLASSES
SANSOM STREET CLASSES
BEDFORD CLASSES
BRADFORD CLASSES
BEA CLASSES
JANNEY (ALPHA) CLASSES
BETA CLASSES
GAMMA CLASSES
DELTA CLASSES
EPSILON CLASSES
ZETA CLASSES
ETA CLASSES
THETA CLASSES
EXHIBIT INDEX
-------------
Exhibit Page See Note #
------- ---- ----------
(1)(a) Articles of Incorporation of 1
Registrant.
(b) Articles Supplementary of 1
Registrant.
(c) Articles of Amendment to Articles 2
of Incorporation of Registrant.
(d) Articles Supplementary of 2
Registrant.
(e) Articles Supplementary of 5
Registrant.
(f) Articles Supplementary of 6
Registrant.
(g) Articles Supplementary of 9
Registrant.
(h) Articles Supplementary of 10
Registrant.
(i) Articles Supplementary of 14
Registrant.
(j) Articles Supplementary of 14
Registrant.
(k) Articles Supplementary of 19
Registrant.
(l) Articles Supplementary of 19
Registrant.
(m) Articles Supplementary of 19
Registrant.
(n) Articles Supplementary of 19
Registrant.
<PAGE>
Exhibit Page See Note #
------- ---- ----------
(o) Articles Supplementary of 20
Registrant
(2) Amended By-Laws adopted August 3
16, 1988.
(a) Amendment to By-Laws adopted July 4
25, 1989.
(b) By-Laws amended through October 5
24, 1989.
(3) None.
(4) Specimen Certificates
(a) SafeGuard Equity Growth and 3
Income Shares
(b) SafeGuard Fixed Income Shares 3
(c) SafeGuard Balanced Shares 3
(d) SafeGuard Tax-Free Shares 3
(e) SafeGuard Money Market Shares 3
(f) SafeGuard Tax-Free Money Market 3
Shares
(g) Cash Preservation Money Market 3
Shares
(h) Cash Preservation Tax-Free Money 3
Market Shares
(i) Sansom Street Money Market Shares 3
(j) Sansom Street Tax-Free Money 3
Market Shares
(k) Sansom Street Government 3
Obligations Money
(l) Bedford Money Market Shares 3
(m) Bedford Tax-Free Money Market 3
Shares
(n) Bedford Government Obligations 3
Money Market Shares
(o) Bedford New York Municipal Money 5
Market Shares
33
<PAGE>
Exhibit Page See Note #
------- ---- ----------
(p) SafeGuard Government Securities 5
Shares
(q) Income Opportunities High Yield 6
Bond Shares
(r) Bradford Tax-Free Money Market 8
Shares
(s) Bradford Government Obligations 8
Money Market Shares
(t) Alpha 1 Money Market Shares 8
(u) Alpha 2 Tax-Free Money Market 8
Shares
(v) Alpha 3 Government Obligations 8
Money Market Shares
(w) Alpha 4 New York Municipal Money 8
Market Shares
(x) Beta 1 Money Market Shares 8
(y) Beta 2 Tax-Free Money Market 8
Shares
(z) Beta 3 Government Obligations 8
Money Market Shares
(aa) Beta 4 New York Municipal Money 8
Market Shares
(bb) Gamma 1 Money Market Shares 8
(cc) Gamma 2 Tax-Free Money Market 8
Shares
(dd) Gamma 3 Government Obligations 8
Money Market Shares
(ee) Gamma 4 New York Municipal Money 8
Market Shares
(ff) Delta 1 Money Market Shares 8
(gg) Delta 2 Tax-Free Money Market 8
Shares
(hh) Delta 3 Government Obligations 8
Money Market Shares
(ii) Delta 4 New York Municipal Money 8
Market Shares
(jj) Epsilon 1 Money Market Shares 8
34
<PAGE>
Exhibit Page See Note #
------- ---- ----------
(kk) Epsilon 2 Tax-Free Money Market 8
Shares
(ll) Epsilon 3 Government Obligations 8
Money Market Shares
(mm) Epsilon 4 New York Municipal 8
Money Market Shares
(nn) Zeta 1 Money Market Shares 8
(oo) Zeta 2 Tax-Free Money Market 8
Shares
(pp) Zeta 3 Government Obligations 8
Money Market Shares
(qq) Zeta 4 New York Municipal Money 8
Market Shares
(rr) Eta 1 Money Market Shares 8
(ss) Eta 2 Tax-Free Money Market 8
Shares
(tt) Eta 3 Government Obligations 8
Money Market Shares
(uu) Eta 4 New York Municipal Money 8
Market Shares
(vv) Theta 1 Money Market Shares 8
(ww) Theta 2 Tax-Free Money Market 8
Shares
(xx) Theta 3 Government Obligations 8
Money Market Shares
(yy) Theta 4 New York Municipal Money 8
Market Shares
(zz) BEA International Equity Shares 9
(a1) BEA Strategic Fixed Income Shares 9
(a2) BEA Emerging Markets Equity 9
Shares
(a3) Laffer/Canto Equity Shares 12
(a4) BEA U.S. Core Equity Shares 13
(a5) BEA U.S. Core Fixed Income Shares 13
(a6) BEA Global Fixed Income Shares 13
35
<PAGE>
Exhibit Page See Note #
------- ---- ----------
(a7) BEA Municipal Bond Fund Shares 13
(a8) BEA Balanced Shares 16
(a9) BEA Short Duration Shares 16
(a10) Warburg Growth & Income Shares 18
(a11) Warburg Balanced Shares 18
(5)(a) Investment Advisory Agreement 3
(Money) between Registrant and
Provident Institutional
Management Corporation, dated as
of August 16, 1988.
(b) Sub-Advisory Agreement (Money) 3
between Provident Institutional
Management Corporation and
Provident National Bank, dated as
of August 16, 1988.
(c) Investment Advisory Agreement 3
(Tax-Free Money) between
Registrant and Provident
Institutional Management
Corporation, dated as of
August 16, 1988.
(d) Sub-Advisory Agreement (Tax-Free 3
Money) between Provident
Institutional Management
Corporation and Provident
National Bank, dated as of
August 16, 1988.
(e) Investment Advisory Agreement 3
(Government Money) between
Registrant and Provident
Institutional Management
Corporation, dated as of
August 16, 1988.
(f) Sub-Advisory Agreement 3
(Government Money) between
Provident Institutional
Management Corporation and
Provident National Bank, dated as
of August 16, 1988.
(k) Investment Advisory Agreement 3
(Balanced) between Registrant and
Provident Institutional
Management Corporation, dated as
of August 16, 1988.
36
<PAGE>
Exhibit Page See Note #
------- ---- ----------
(l) Sub-Advisory Agreement (Balanced) 3
between Provident Institutional
Management Corporation and
Provident National Bank, dated as
of August 16, 1988.
(m) Investment Advisory Agreement 3
(Tax-Free) between Registrant and
Provident Institutional
Management Corporation, dated as
of August 16, 1988.
(n) Sub-Advisory Agreement (Tax-Free) 3
between Provident Institutional
Management Corporation and
Provident National Bank, dated as
of August 16, 1988.
(s) Investment Advisory Agreement 8
(Government Securities) between
Registrant and Provident
Institutional Management
Corporation dated as of April 8,
1991.
(t) Investment Advisory Agreement 8
(High Yield Bond) between
Registrant and Provident
Institutional Management
Corporation dated as of April 8,
1991.
(u) Sub-Advisory Agreement (High 8
Yield Bond) between Registrant
and Warburg, Pincus Counsellors,
Inc. dated as of April 8, 1991.
(v) Investment Advisory Agreement 9
(New York Municipal Money Market)
between Registrant and Provident
Institutional Management
Corporation dated November 5,
1991.
(w) Investment Advisory Agreement 10
(Equity) between Registrant and
Provident Institutional
Management Corporation dated
November 5, 1991.
(x) Sub-Advisory Agreement (Equity) 10
between Registrant, Provident
Institutional Management
Corporation and Warburg, Pincus
Counsellors, Inc. dated November
5, 1991.
37
<PAGE>
Exhibit Page See Note #
------- ---- ----------
(y) Investment Advisory Agreement 10
(Tax-Free Money Market) between
Registrant and Provident
Institutional Management
Corporation dated April 21, 1992.
(z) Investment Advisory Agreement 11
(BEA International Equity
Portfolio) between Registrant and
BEA Associates.
(aa) Investment Advisory Agreement 11
(BEA Strategic Fixed Income
Portfolio) between Registrant and
BEA Associates.
(bb) Investment Advisory Agreement 11
(BEA Emerging Markets Equity
Portfolio) between Registrant and
BEA Associates.
(cc) Investment Advisory Agreement 14
(Laffer/Canto Equity Portfolio)
between Registrant and Laffer
Advisors, Incorporated, dated as
of July 21, 1993.
(dd) Sub-Advisory Agreement 12
(Laffer/Canto Portfolio) between
PNC Institutional Management
Corporation and Laffer Advisors,
Incorporated, dated as of July
21, 1993.
(ee) Investment Advisory Agreement 15
(BEA U.S. Core Equity Portfolio)
between Registrant and BEA
Associates, dated as of
October 27, 1993.
(ff) Investment Advisory Agreement 15
(BEA U.S. Core Fixed Income
Portfolio) between Registrant and
BEA Associates, dated as of
October 27, 1993.
(gg) Investment Advisory Agreement 15
(BEA Global Fixed Income
Portfolio) between Registrant and
BEA Associates, dated as of
October 27 1993.
(hh) Investment Advisory Agreement 15
(BEA Municipal Bond Fund
Portfolio) between Registrant and
BEA Associates, dated as of
October 27, 1993.
38
<PAGE>
Exhibit Page See Note #
------- ---- ----------
(ii) Investment Advisory Agreement 14
(Warburg Pincus Growth & Income
Fund) between Registrant and
Warburg, Pincus Counsellors, Inc.
(jj) Form of Investment Advisory 16
Agreement (Warburg Pincus
Balanced Fund) between Registrant
and Warburg, Pincus Counsellors,
Inc.
(kk) Form of Investment Advisory 16
Agreement (BEA Balanced) between
Registrant and BEA Associates.
(ll) Form of Investment Advisory 16
Agreement (BEA Short Duration)
between Registrant and BEA
Associates.
(mm) Investment Advisory Agreement 21
(Warburg Pincus Tax Free Fund)
between Registrant and Warburg,
Pincus Counsellors, Inc.
(6)(r) Distribution Agreement and 8
Supplements (Classes A through Q)
between the Registrant and
Counsellors Securities Inc. dated
as of April 10, 1991.
(s) Distribution Agreement Supplement 9
(Classes L, M, N and O) between
the Registrant and Counsellors
Securities Inc. dated as of
November 5, 1991.
(t) Distribution Agreement 9
Supplements (Classes R, S, and
Alpha 1 through Theta 4) between
the Registrant and Counsellors
Securities Inc. dated as of
November 5, 1991.
(u) Distribution Agreement Supplement 10
(Classes T, U and V) between the
Registrant and Counsellors
Securities Inc. dated as of
September 18, 1992.
(v) Distribution Agreement Supplement 14
(Class W) between the Registrant
and Counsellors Securities Inc.
dated as of July 21, 1993.
39
<PAGE>
Exhibit Page See Note #
------- ---- ----------
(w) Distribution Agreement Supplement 14
(Classes X, Y, Z and AA) between
the Registrant and Counsellors
Securities Inc.
(x) Distribution Agreement Supplement 18
(Classes BB and CC) between
Registrant and Counsellors
Securities Inc. dated as of
October 26, 1994.
(y) Distribution Agreement Supplement 18
(Classes DD and EE) between
Registrant and Counsellors
Securities Inc. dated as of
October 26, 1994.
(z) Form of Distribution Agreement 19
Supplement (Classes L, M, N, and
O) between the Registrant and
Counselor's Securities Inc.
(aa) Form of Distribution Agreement 19
Supplement (Classes R and S)
between the Registrant and
Counselor's Securities Inc.
(bb) Distribution Agreement 19
Supplements (Classes Alpha 1
through Theta 4) between
Registrant and Counsellor's
Securities Inc.)
(cc) Distribution Agreement 20
Supplement, Janney Classes (Alpha
1, Alpha 2, Alpha 3 and Alpha 4)
between Registrant and
Counsellor's Securities Inc.
(7) Fund Office Retirement 7
Profit-Sharing and Trust
Agreement, dated as of October
24, 1990.
(8)(a) Custodian Agreement between 3
Registrant and Provident National
Bank dated as of August 16, 1988.
(b) Sub-Custodian Agreement among The 10
Chase Manhattan Bank, N.A., the
Registrant and Provident National
Bank, dated as of July 13, 1992,
relating to custody of
Registrant's foreign securities.
(e) Amendment No. 1 to Custodian 9
Agreement dated August 16, 1988.
40
<PAGE>
Exhibit Page See Note #
------- ---- ----------
(f) Agreement between Brown Brothers 10
Harriman & Co. and Registrant on
behalf of BEA International
Equity Portfolio, dated September
18, 1992.
(g) Agreement between Brown Brothers 10
Harriman & Co. and Registrant on
behalf of BEA Strategic Fixed
Income Portfolio, dated September
18, 1992.
(h) Agreement between Brown Brothers 10
Harriman & Co. and Registrant on
behalf of BEA Emerging Markets
Equity Portfolio, dated September
18, 1992.
(i) Agreement between Brown Brothers 15
Harriman & Co. and Registrant on
behalf of BEA International
Equity, BEA Emerging Markets, BEA
Strategic Fixed Income and BEA
Global Fixed Income Portfolio,
dated as of November 29, 1993.
(j) Agreement between Brown Brothers 15
Harriman & Co. and Registrant on
behalf of BEA U.S. Core Equity
and BEA U.S. Core Fixed Income
Portfolios, dated as of
November 29, 1993.
(k) Custodian Contract between 18
Registrant and State Street Bank
and Trust Company.
(9)(a) Transfer Agency Agreement (Sansom 3
Street) between Registrant and
Provident Financial Processing
Corporation, dated as of
August 16, 1988.
(b) Transfer Agency Agreement (Cash 3
Preservation) between Registrant
and Provident Financial
Processing Corporation, dated as
of August 16, 1988.
(c) Shareholder Servicing Agreement 3
(Sansom Street Money).
(d) Shareholder Servicing Agreement 3
(Sansom Street Tax-Free Money).
41
<PAGE>
Exhibit Page See Note #
------- ---- ----------
(e) Shareholder Servicing Agreement 3
(Sansom Street Government Money).
(f) Shareholder Services Plan (Sansom 3
Street Money).
(g) Shareholder Services Plan (Sansom 3
Street Tax-Free Money).
(h) Shareholder Services Plan (Sansom 3
Street Government Money).
(i) Transfer Agency Agreement 3
(SafeGuard) between Registrant
and Provident Financial
Processing Corporation, dated as
of August 16, 1988.
(j) Transfer Agency Agreement 3
(Bedford) between Registrant and
Provident Financial Processing
Corporation, dated as of
August 16, 1988.
(k) Transfer Agency Agreement (Income 7
Opportunities) between Registrant
and Provident Financial
Processing Corporation dated
June 25, 1990.
(l) Administration and Accounting 8
Services Agreement between
Registrant and Provident
Financial Processing Corporation,
relating to Government Securities
Portfolio, dated as of April 10,
1991.
(m) Administration and Accounting 9
Services Agreement between
Registrant and Provident
Financial Processing Corporation,
relating to New York Municipal
Money Market Portfolio dated as
of November 5, 1991.
(n) Administration and Accounting 9
Services Agreement between
Registrant and Provident
Financial Processing Corporation,
relating to Equity Portfolio
dated as of November 5, 1991.
42
<PAGE>
Exhibit Page See Note #
------- ---- ----------
(o) Administration and Accounting 9
Services Agreement between
Registrant and Provident
Financial Processing Corporation,
relating to High Yield Bond
Portfolio, dated as of April 10,
1991.
(p) Administration and Accounting 10
Services Agreement between
Registrant and Provident
Financial Processing Corporation
(International) dated as of
September 18, 1992.
(q) Administration and Accounting 10
Services Agreement between
Registrant and Provident
Financial Processing Corporation
(Strategic) dated September 18,
1992.
(r) Administration and Accounting 10
Services Agreement between
Registrant and Provident
Financial Processing Corporation
(Emerging) dated September 18,
1992.
(s) Transfer Agency Agreement and 9
Supplements (Bradford, Alpha,
Beta, Gamma, Delta, Epsilon,
Zeta, Eta and Theta) between
Registrant and Provident
Financial Processing Corporation
dated as of November 5, 1991.
(t) Transfer Agency Agreement 10
Supplement (BEA) between
Registrant and Provident
Financial Processing Corporation.
(u) Administration Services Agreement 10
between Registrant and
Counsellor's Fund Services, Inc.
(BEA Portfolios) dated September
18, 1992.
(v) Administration and Accounting 10
Services Agreement between
Registrant and Provident
Financial Processing Corporation,
relating to Tax-Free Money Market
Portfolio, dated as of April 21,
1992.
(w) Transfer Agency Agreement 12
Supplement (Laffer) between
Registrant and PFPC Inc. dated as
of July 21, 1993.
43
<PAGE>
Exhibit Page See Note #
------- ---- ----------
(x) Administration and Accounting
Services Agreement between
Registrant and PFPC Inc.,
relating to Laffer/Canto Equity
Fund, dated July 21, 1993.
12
(y) Transfer Agency Agreement 15
Supplemental (BEA U.S. Core
Equity, BEA U.S. Core Fixed
Income, BEA Global Fixed Income
and BEA Municipal Bond Fund)
between Registrant and PFPC Inc.
dated as of October 27, 1993.
(z) Administration and Accounting 15
Services Agreement between
Registrant and PFPC Inc., (Core
Equity) dated October 27, 1993.
(aa) Administration and Accounting 15
Services Agreement between
Registrant and PFPC Inc. (Core
Fixed Income) dated October 27,
1993.
(bb) Administration and Accounting 15
Services Agreement between
Registrant and PFPC Inc.
(International Fixed Income)
dated October 27, 1993.
(cc) Administration and Accounting 15
Services Agreement between
Registrant and PFPC Inc. dated
October 27, 1993.
(dd) Transfer Agency Agreement 18
Supplement (BEA Balanced and
Short Duration) between
Registrant and PFPC Inc. dated
October 26, 1994.
(ee) Administration and Accounting 18
Services Agreement between
Registrant and PFPC Inc. (BEA
Balanced) dated October 26, 1994.
(ff) Administration and Accounting 18
Services Agreement between
Registrant and PFPC Inc. (BEA
Short Duration) dated October 26,
1994.
(gg) Co-Administration Agreement 18
between Registrant and PFPC Inc.
(Warburg Pincus Growth & Income
Fund) dated August 4, 1994.
44
<PAGE>
Exhibit Page See Note #
------- ---- ----------
(hh) Co-Administration Agreement 18
between Registrant and PFPC Inc.
(Warburg Pincus Balanced Fund)
dated August 4, 1994.
(ii) Co-Administration Agreement 18
between Registrant and
Counsellors Fund Service, Inc.
(Warburg Pincus Growth Income
Fund) dated August 4, 1994.
(jj) Co-Administration Agreement 18
between Registrant and
Counsellors Fund Service, Inc.
(Warburg Pincus Balanced Fund)
dated August 4, 1994.
(kk) Administrative Services Agreement 18
Supplement between Registrant and
Counsellor's Fund Services, Inc.
(BEA Classes) dated October 26,
1994.
(ll) Co-Administration Agreement 21
between Registrant and PFPC Inc.
(Warburg Pincus Tax Free Fund)
dated March 31, 1995.
(mm) Co-Administration Agreement 21
between Registrant and
Counsellors Funds Services, Inc.
(Warburg Pincus Tax Free Fund).
(nn) Transfer Agency and Service 21
Agreement between Registrant,
State Street Bank and Trust
Company and PFPC Inc. dated
February 1, 1995.
(oo) Supplement to Transfer Agency and 21
Service Agreement between
Registrant, State Street Bank and
Trust Company, Inc. and PFPC
dated April 10, 1995.
(pp) Amended and Restated Credit 22
Agreement dated December 15,
1994.
(10)(a) Opinion of Counsel.
Incorporated by reference herein
to Registrant's 24f-2 Notice for
the fiscal year ending August 31,
1995 filed on October
26, 1995.
(b) Consent of Counsel.
45
<PAGE>
Exhibit Page See Note #
------- ---- ----------
(11) Consent of Independent
Accountants.
(12) None.
(13)(a) Subscription Agreement (relating 2
to Classes A through N).
(b) Subscription Agreement between 7
Registrant and Planco Financial
Services, Inc., relating to
Classes O and P.
(c) Subscription Agreement between 7
Registrant and Planco Financial
Services, Inc., relating to Class
Q.
(d) Subscription Agreement between 9
Registrant and Counsellors
Securities Inc. relating to
Classes R, S, and Alpha 1 through
Theta 4.
(e) Subscription Agreement between 10
Registrant and Counsellors
Securities Inc. relating to
Classes T, U and V.
(f) Subscription Agreement between 18
Registrant and Counsellors
Securities Inc. relating to
Classes BB and CC.
(g) Purchase Agreement between 21
Registrant and Counsellors
Securities Inc. relating to
Classes DD (Warburg Pincus Growth
& Income Fund Series 2).
(h) Purchase Agreement between 21
Registrant and Counsellors
Securities Inc. relating to Class
EE (Warburg Pincus Balanced Fund
Series 2).
(14) None.
(15)(a) Plan of Distribution (Sansom 3
Street Money).
(b) Plan of Distribution (Sansom 3
Street Tax-Free Money).
(c) Plan of Distribution (Sansom 3
Street Government Money).
(d) Plan of Distribution (Cash 3
Preservation Money).
46
<PAGE>
Exhibit Page See Note #
------- ---- ----------
(e) Plan of Distribution (Cash 3
Preservation Tax-Free Money).
(f) Plan of Distribution (SafeGuard 3
Equity).
(g) Plan of Distribution (SafeGuard 3
Fixed Income).
(h) Plan of Distribution (SafeGuard 3
Balanced).
(i) Plan of Distribution (SafeGuard 3
Tax-Free).
(j) Plan of Distribution (SafeGuard 3
Money).
(k) Plan of Distribution (SafeGuard 3
Tax-Free Money).
(l) Plan of Distribution (Bedford 3
Money).
(m) Plan of Distribution (Bedford 3
Tax-Free Money).
(n) Plan of Distribution (Bedford 3
Government Money).
(o) Plan of Distribution (Bedford New 7
York Municipal Money).
(p) Plan of Distribution (SafeGuard 7
Government Securities).
(q) Plan of Distribution (Income 7
Opportunities High Yield).
(r) Amendment No. 1 to Plans of 8
Distribution (Classes A through Q).
(s) Plan of Distribution (Bradford 9
Tax-Free Money).
(t) Plan of Distribution (Bradford 9
Government Money).
(u) Plan of Distribution (Alpha 9
Money).
(v) Plan of Distribution (Alpha 9
Tax-Free Money).
47
<PAGE>
Exhibit Page See Note #
------- ---- ----------
(w) Plan of Distribution (Alpha 9
Government Money).
(x) Plan of Distribution (Alpha New 9
York Money).
(y) Plan of Distribution (Beta 9
Money).
(z) Plan of Distribution (Beta 9
Tax-Free Money).
(aa) Plan of Distribution (Beta 9
Government Money).
(bb) Plan of Distribution (Beta New 9
York Money).
(cc) Plan of Distribution (Gamma 9
Money).
(dd) Plan of Distribution (Gamma 9
Tax-Free Money).
(ee) Plan of Distribution (Gamma 9
Government Money).
(ff) Plan of Distribution (Gamma New 9
York Money).
(gg) Plan of Distribution (Delta 9
Money).
(hh) Plan of Distribution (Delta 9
Tax-Free Money).
(ii) Plan of Distribution (Delta 9
Government Money).
(jj) Plan of Distribution (Delta New 9
York Money).
(kk) Plan of Distribution (Epsilon 9
Money).
(ll) Plan of Distribution (Epsilon 9
Tax-Free Money).
(mm) Plan of Distribution (Epsilon 9
Government Money).
(nn) Plan of Distribution (Epsilon New 9
York Money).
(oo) Plan of Distribution (Zeta 9
Money).
48
<PAGE>
Exhibit Page See Note #
------- ---- ----------
(pp) Plan of Distribution (Zeta 9
Tax-Free Money).
(qq) Plan of Distribution (Zeta 9
Government Money).
(rr) Plan of Distribution (Zeta New 9
York Money).
(ss) Plan of Distribution (Eta Money). 9
(tt) Plan of Distribution (Eta 9
Tax-Free Money).
(uu) Plan of Distribution (Eta 9
Government Money).
(vv) Plan of Distribution (Eta New 9
York Money).
(ww) Plan of Distribution (Theta 9
Money).
(xx) Plan of Distribution (Theta 9
Tax-Free Money).
(yy) Plan of Distribution (Theta 9
Government Money).
(zz) Plan of Distribution (Theta New 9
York Money).
(aaa) Plan of Distribution (Laffer 12
Equity).
(bbb) Plan Distribution (Warburg Pincus 18
Growth & Income Series 2).
(ccc) Plan of Distribution (Warburg 18
Pincus Balanced Series 2).
(16) Schedule of Computation of 3
Performance Quotations.
(17) None.
(18) Rule 18f-3 Plan. 21
(19) Representation of Ballard Spahr
Andrews & Ingersoll pursuant to
Rule 485(b) under the Securities
Act of 1933.
_________________
49
<PAGE>
Note #
------
1 Incorporated herein by reference to the same
exhibit number of Registrant's Registration
Statement (No. 33-20827) filed on March 24,
1988.
2 Incorporated herein by reference to the same
exhibit number of Pre-Effective Amendment No.
2 to Registrant's Registration Statement (No.
33-20827) filed on July 12, 1988.
3 Incorporated herein by reference to the same
exhibit number of Post-Effective Amendment
No. 1 to Registrant's Registration Statement
(No. 33-20827) filed on March 23, 1989.
4 Incorporated herein by reference to the same
exhibit number of Post-Effective Amendment
No. 2 to Registrant's Registration Statement
(No. 33-20827) filed on October 25, 1989.
5 Incorporated herein by reference to the same
exhibit number of Post-Effective Amendment
No. 3 to the Registrant's Registration
Statement (No. 33-20827) filed on April 27,
1990.
6 Incorporated herein by reference to the same
exhibit number of Post-Effective Amendment
No. 4 to the Registrant's Registration
Statement (No. 33-20827) filed on May 1,
1990.
7 Incorporated herein by reference to the same
exhibit number of Post-Effective Amendment
No. 5 to the Registrant's Registration
Statement (No. 33-20827) filed on
December 14, 1990.
8 Incorporated herein by reference to the same
exhibit number of Post-Effective Amendment
No. 6 to the Registrant's Registration
Statement (No. 33-20827) filed on October 24,
1991.
9 Incorporated herein by reference to the same
exhibit number of Post-Effective Amendment
No. 7 to the Registrant's Registration
Statement (No. 33-20827) filed on July 15,
1992.
10 Incorporated herein by reference to the same
exhibit number of Post-Effective Amendment
No. 8 to the Registrant's Registration
Statement (No. 33-20827) filed on October 22,
1992.
11 Incorporated herein by reference to the same
exhibit number of Post-Effective Amendment
No. 9 to the Registrant's Registration
Statement (No. 33-20827) filed on December
16, 1992.
50
<PAGE>
Note #
------
12 Incorporated herein by reference to the same
exhibit number of Post Effective Amendment
No. 11 to the Registration Statement (No.
33-20827) filed on June 21, 1993.
13 Incorporated herein by reference to the same
exhibit number of Post-Effective Amendment
No. 12 to Registration Statement (No.
33-20827) filed on July 27, 1993.
14 Incorporated herein by reference to the same
exhibit number of Post-Effective Amendment
No. 13 to Registration Statement (No.
33-20827 filed on October 29, 1993.
15 Incorporated herein by reference to the same
exhibit number of Post-Effective Amendment
No. 14 to Registration Statement (No.
33-20827) filed on December 21, 1993.
16 Incorporated herein by reference to the same
exhibit number of Post-Effective Amendment
No. 19 to Registration Statement (No.
33-20827) filed on October 14, 1994.
17 Incorporated herein by reference to the same
exhibit number of Post-Effective Amendment
No. 20 to Registration Statement (No.
33-20827) filed on October 21, 1994.
18 Incorporated herein by reference to the same
exhibit number of Post-Effective Amendment
No. 21 to Registration Statement (No.
33-20827) filed on October 28, 1994.
19 Incorporated herein by reference to the same
exhibit number of Post-Effective Amendment
No. 22 to Registration Statement (No.
33-20827) filed on December 19, 1994.
20 Incorporated herein by reference to the same
exhibit number of Post-Effective Amendment
No. 20 to Registration Statement (No.
33-20827) filed on March 31, 1995.
21 Incorporated herein by reference to the same
exhibit number of Post-Effective Amendment
No. 28 to Registration Statement (No.
33-20827) filed on October 6, 1995.
22 Incorporated herein by reference to the same
exhibit number of Post-Effective Amendment
No. 29 to Registration Statement (No.
33-20827) filed on October 25, 1995.
51
Exhibit (10)(b)
CONSENT
-------
We hereby consent to the use of our name under the
caption "Miscellaneous-Counsel" in the Statement of Additional
Information of Post-Effective Amendment No. 31 to the
Registration Statement on Form N-1A of The RBB Fund, Inc.
(Registration No. 33-20827) filed under the Securities Act of
1933 and Amendment No. 33 under the Investment Company Act of
1940.
/s/ Ballard Spahr Andrews & Ingersoll
-------------------------------------
Ballard Spahr Andrews & Ingersoll
December 1, 1995
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the following with respect to Post-
Effective Amendment No. 31 to the Registration Statement (No. 33-
20827) on Form N-1A under the Securities Act of 1933, as amended, of
The RBB Fund, Inc.:
-The inclusion of our reports dated October 16, 1995 on our
audit of the financial statements and financial highlights
of the Warburg, Pincus Portfolios of The RBB Fund, Inc. in
the Statement of Additional Information.
-The reference to our Firm under the heading "Financial
Highlights" in the Prospectus and under the heading
"Independent Accountants" in the Statement of Additional
Information.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
November 30, 1995
Exhibit (19)
REPRESENTATION OF COUNSEL PURSUANT TO RULE
485(b) UNDER THE SECURITIES ACT OF 1933
We hereby represent that Post-Effective Amendment No. 31 to
the Registration Statement on Form N-1A of the RBB Fund, Inc.
(Registration No. 33-20827) filed with the Securities and Exchange
Commission under the Securities Act of 1933 and Amendment No.33 under
the Investment Company Act of 1940 contains no disclosures which would
render it ineligible to become effective pursuant to paragraph (b) of
Rule 485 under the Securities Act of 1933.
/s/Ballard Spahr Andrews & Ingersoll
------------------------------------
Ballard Spahr Andrews & Ingersoll
December 1, 1995
