THE RBB FAMILY
PROSPECTUS SUPPLEMENT
Tax Free Portfolio
(a series of The RBB Fund, Inc.)
As a result of actions taken by the Board of Directors of The RBB
Fund, Inc. ("Company") at its meeting held on February 1, 1995, the following
proposed changes in the operation of the Tax Free Portfolio ("Portfolio") will
take place after a shareholders' meeting scheduled to be held on March 31, 1995.
Name Change. The Portfolio shall be known as Warburg Pincus Tax Free
Fund.
New Advisory Contract. At a shareholders' meeting scheduled to be held
on March 31, 1995, shareholders will be asked to approve a new advisory
agreement between Warburg, Pincus Counsellors, Inc. ("Warburg Pincus") and the
Company relating to the Portfolio; under such advisory contract, the Portfolio
will pay an advisory fee to Warburg Pincus of .50% of the Portfolio's average
daily net assets. Warburg Pincus will replace the current investment adviser,
PIMC.
Temporary Borrowing. At the shareholders' meeting, the shareholders
will also be asked to approve a change to the Portfolio's temporary borrowing
policy to permit the Portfolio to temporarily borrow for the purpose of meeting
redemptions up to 30% of the value of the Portfolio's total assets, and to
pledge securities in connection with such borrowing in an amount up to 125% of
the amount borrowed.
Modification of Investment Policy. In the event that shareholders
approve the new investment advisory agreement, Warburg Pincus will manage the
Portfolio consistent with the investment objective described on page 10 of the
Prospectus.
Elimination of Sales Charges and Reduction of Distribution Fees. Sales
charges are no longer imposed in connection with any purchase of shares of the
Portfolio. Thus, the full amount of the purchase price of Portfolio shares will
be invested at the time of purchase. In addition, the Portfolio has reduced its
distribution fee to an annual rate of .25% of average daily net assets. These
changes were instituted effective immediately after the Board meeting on
February 1, 1995.
Co-Administrative Services Contracts. The Board of Directors approved
a fee for co-administrative services to be
<PAGE>2
paid to PFPC, Inc. ("PFPC") at an annual rate of .15% of the Portfolio's average
daily net assets with a minimum annual fee of $75,000. The Board also approved a
fee for co-administrative services to be paid to Counsellors Funds Service,
Inc., an affiliate of Warburg Pincus, at an annual rate of .10% of average daily
net assets. These contracts will be effective concurrently with the
effectiveness of the proposed advisory agreement with Warburg Pincus.
Change in Shareholder Servicing Agent, Sub-Transfer Agent and Dividend
Disbursing Agent. The Board of Directors appointed State Street Bank & Trust
Company as shareholder servicing agent, sub-transfer agent and dividend
disbursing agent for the Portfolio, to become effective concurrently with
effectiveness of the prepared advisory agreement with Warburg Pincus.
Dividend Declaration Policy. The Portfolio currently declares and pays
dividends monthly. If shareholders approve the proposed advisory agreement with
Warburg Pincus, the Portfolio will declare dividends daily and pay monthly.
Supplement Dated February 17, 1995 To Prospectus Dated December 21,
1994.
<PAGE>
Rule 497(e)
Reg. No. 33-20827
THE RBB FAMILY
OF MUTUAL FUNDS
TAX-FREE PORTFOLIO,
GOVERNMENT SECURITIES PORTFOLIO,
MONEY MARKET PORTFOLIO,
MUNICIPAL MONEY MARKET PORTFOLIO
PROSPECTUS
December 21, 1994
<PAGE>
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 THE FUND OR ITS
DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE FUND OR BY
THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE
MADE.
TABLE OF CONTENTS
Page
INTRODUCTION ......................................................... 2
FINANCIAL HIGHLIGHTS ................................................. 7
THE FUND ............................................................. 12
INVESTMENT OBJECTIVES AND POLICIES ................................... 12
INVESTMENT LIMITATIONS ............................................... 28
MANAGEMENT ........................................................... 33
DISTRIBUTION OF SHARES ............................................... 37
HOW TO PURCHASE SHARES ............................................... 38
HOW TO REDEEM SHARES ................................................. 44
NET ASSET VALUE ...................................................... 47
DIVIDENDS AND DISTRIBUTIONS .......................................... 48
TAXES ................................................................ 48
DESCRIPTION OF SHARES ................................................ 51
OTHER INFORMATION .................................................... 56
APPENDIX A ........................................................... A-1
ACCOUNT APPLICATION .................................................. App.
Investment Adviser
PNC Bank Institutional Management Corporation
Wilmington, Delaware
Distributor
Counsellors Securities Inc.
New York, New York
Custodian
PNC Bank, National Association
Philadelphia, Pennsylvania
Administrator and Transfer Agent
PFPC Inc.
Wilmington, Delaware
Counsel
Ballard Spahr Andrews & Ingersoll
Philadelphia, Pennsylvania
Independent Accountants
Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania
<PAGE>
THE RBB FAMILY
of
The RBB Fund, Inc.
The RBB Family consists of four classes of common stock of The RBB
Fund, Inc. (the "Fund"), an open-end management investment company. The shares
of such classes (collectively, the "RBB Family Shares" or "Shares") offered by
this Prospectus represent interests in one of four investment portfolios of the
Fund and are designed to offer a variety of investment opportunities. The
investment objectives of each investment portfolio described in this Prospectus
are as follows:
Tax-Free Portfolio--to maximize current interest income which is
exempt from Federal income taxes, consistent with preservation of capital.
It seeks to achieve such objective by investing substantially all of its
assets in a diversified 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 Portfolio 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
preference for purposes of the Federal alternative minimum tax ("Tax-Exempt
Interest").
Government Securities Portfolio--to provide the highest level of
current income consistent with liquidity and a low risk to principal from a
portfolio of U.S. Government obligations. It seeks to achieve such
objective by investing in obligations issued or guaranteed by the U.S.
Treasury or other agencies or instrumentalities of the United States
Government.
Money Market Portfolio--to provide as high a level of current interest
income as is consistent with maintaining liquidity and relative stability
of principal. It seeks to achieve such objective by investing in a
diversified portfolio of U.S. dollar-denominated money market instruments.
Municipal Money Market Portfolio--to provide as high a level of
current interest income exempt from Federal income taxes as is consistent
with maintaining liquidity and relative stability of principal. It seeks to
achieve such objective by investing substantially all of its assets in a
diversified portfolio of short-term Municipal Obligations. During periods
of normal market conditions, at least 80% of the net assets of the
Portfolio will be invested in Municipal Obligations the interest on which
is exempt from regular Federal income tax, but which may constitute an item
of tax preference for purposes of the Federal alternative minimum tax.
Unlike the net asset value of shares of the Tax-Free Portfolio, which will
fluctuate, the Fund seeks to maintain a constant net asset value for shares
of the Municipal Money Market Portfolio.
Shares of the Fund are not deposits or obligations of, or guaranteed
or endorsed by, PNC Bank, National Association or any other 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 21, 1994, 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 the Fund's distributor by
calling (800) 888-9723.
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.
PROSPECTUS December 21, 1994
<PAGE>2
INTRODUCTION
The RBB Fund, Inc. (the "Fund") is an open-end management investment
company incorporated under the laws of the State of Maryland currently operating
or proposing to operate nineteen separate investment portfolios. Each of the
four classes of shares offered by this Prospectus (collectively, the "RBB Family
Classes" or the "Classes") represents interests in one of the following four
investment portfolios (collectively, the "Portfolios"): Tax-Free Portfolio;
Government Securities Portfolio; Money Market Portfolio; and Municipal Money
Market Portfolio (formerly, the Tax-Free Money Market Portfolio). The Fund was
incorporated in Maryland on February 29, 1988.
Fund Management
PNC Institutional Management Corporation ("PIMC"), a wholly owned
subsidiary of PNC Bank, National Association ("PNC Bank"), serves as the
investment adviser to the Portfolios. PNC Bank serves as the custodian to the
Fund and the sub-advisor to all Portfolios other than the Government Securities
Portfolio, which has no sub-adviser. PNC Bank and its predecessors have been in
the business of managing the investments of fiduciary and other accounts since
1847 and with its subsidiaries currently manages over $30 billion of assets, of
which approximately $28 billion are mutual funds.
PFPC Inc. ("PFPC") serves as the administrator to the Government
Securities Portfolio, and the Municipal Money Market Portfolio and as the
transfer and dividend disbursing agent to the Fund.
The Distributor
Counsellors Securities Inc. (the "Distributor"), a wholly owned
subsidiary of Warburg, Pincus Counsellors, Inc. ("Warburg"), serves as the
Fund's distributor.
Investment Portfolios
The investment objective of the Tax-Free Portfolio is to maximize
current interest income which is exempt from Federal income taxes, consistent
with preservation of capital. The Tax-Free Portfolio seeks to achieve its
objective by investing substantially all of its assets in a diversified
portfolio of Municipal Obligations. During periods of normal market conditions,
at least 80% of the net assets of the Portfolio will be invested in Municipal
Obligations the interest on which is Tax-Exempt Interest.
<PAGE>3
The investment objective of the Government Securities Portfolio is to
provide the highest level of current income consistent with liquidity and a low
risk to principal from a portfolio of U.S. Government obligations. The
Government Securities Portfolio seeks to achieve this objective by investing in
obligations issued or guaranteed by the United States Treasury or other agencies
and instrumentalities of the United States Government.
The investment objective of the Money Market Portfolio is to provide
as high a level of current interest income as is consistent with maintaining
liquidity and stability of principal. It seeks to achieve such objective by
investing in a diversified portfolio of U.S. dollar-denominated money market
instruments. In pursuing its investment objective, the Money Market Portfolio
invests in a broad range of government, bank and commercial obligations that may
be available in the money markets and that meet certain ratings criteria and
present minimal credit risks to the Money Market Portfolio.
The investment objective of the Municipal Money Market Portfolio is to
provide as high a level of current interest income exempt from Federal income
taxes as is consistent with maintaining liquidity and relative stability of
principal. To achieve this objective the Municipal Money Market Portfolio
invests substantially all of its assets in a diversified portfolio of short-term
Municipal Obligations that meet certain ratings criteria and present minimal
credit risks to the Municipal Money Market Portfolio. During periods of normal
market conditions, at least 80% of the net assets of the Portfolio will be
invested in Municipal Obligations the interest on which is exempt from regular
Federal income tax but which may be an item of tax preference for the purposes
of the Federal alternative minimum tax.
The net asset values per share of shares representing interests in the
Tax-Free and Government Securities Portfolios will fluctuate as the values of
their portfolios change in response to changing market rates of interest and
other factors. Each of the Money Market and Municipal Money Market Portfolios
seeks to maintain a net asset value of $1.00 per share; however, there can be no
assurance that the Money Market and Municipal Money Market Portfolios will be
able to maintain a stable net asset value of $1.00 per share.
<PAGE>4
Fee Table
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on Purchases 4.75%*
(as percentage of offering price)
Annual Fund Operating Expenses (RBB Family Classes)
After Expense Reimbursements and Waivers
<TABLE>
<CAPTION>
Municipal
Government Money Money
Tax-Free Securities Market Market
Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C>
Management fees
(after waivers)**.............. 0% 0% .13% 0%
12b-1 fees (after waivers)**..... .40 .40 .40 .40
Other Expenses
(after waivers and
reimbursements)............... (.25) .24 .47 .60
----- --- --- ---
Total Fund Operating Expenses
(RBB Family Classes) (after
waivers and reimbursements) .15% .64% 1.00% 1.00%
==== ==== ===== =====
<FN>
* No Sales Charge is imposed upon the acquisition of Shares representing
interests in the Money Market Portfolio or Municipal Money Market Portfolio
or upon any other exchange of Shares of one Portfolio for Shares in another
Portfolio if a Sales Charge was previously imposed with respect to the
Shares to be exchanged.
** Management fees and 12b-1 fees are each based on average daily net assets
and are calculated daily and paid monthly.
</FN>
</TABLE>
The caption "Other Expenses" does not include extraordinary expenses as
determined by use of generally accepted accounting principles.
<PAGE>5
Example
An investor would pay the following expenses on a $1,000 investment in
each of the Portfolios, 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>
Tax-Free..................... $49* $52* $56* $66*
Government Securities........ $54* $67* $81* $124*
Money Market**............... $10 $32 $55 $122
Municipal Money Market**..... $10 $32 $55 $122
<FN>
* Reflects the imposition of the maximum sales charge at the beginning of the
period.
** Other classes of these portfolios are sold with different fees and
expenses.
</FN>
</TABLE>
The Fee Table is designed to assist an investor in understanding the
various costs and expenses that an investor in any of the RBB Family Classes 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 Fee Table reflects a voluntary waiver of Management fees for each
Portfolio. However, there can be no assurance that any future waivers of
Management fees (if any) will not vary from the figures reflected in the Fee
Table. In addition, the investment adviser is currently voluntarily assuming
additional expenses of some of the Portfolios. There can be no assurance that
the investment adviser will continue to assume such expenses. Assumption of
additional expenses will have the effect of lowering a Portfolio's overall
expense ratio and increasing its yield to investors. Expenses for some of the
Portfolios have been restated from actual expenses paid by such Portfolios
during the year ended August 31, 1994, to reflect current expense levels. Absent
fee waivers or reimbursements, actual expenses paid by each Portfolio for the
year ended August 31, 1994 were as follows for the Tax-Free, Government
Securities, Money Market and Municipal Money Market Portfolios:
Annual Fund Operating Expenses (RBB Family Classes)
Before Expense Reimbursements and Waivers
<TABLE>
<CAPTION>
Municipal
Government Money Money
Tax-Free Securities Market Market
Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C>
Management fees.................. .50% .40% .38% .34%
12b-1 fees....................... .40% .40% .40% .40%
Other Expenses................... .94% .30% 13.84% 153.48%
</TABLE>
<PAGE>6
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 (RBB Family Classes) After Expense Reimbursements and
Waivers" remain the same in the years shown. THE EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY
BE GREATER OR LESS THAN THOSE SHOWN.
Offering Prices
Shares that represent interests in the Tax-Free Portfolio, and the
Government Securities Portfolio (collectively, the "Non-Money Market
Portfolios") will be offered to the public at the next determined net asset
value after receipt by PFPC Inc. ("PFPC"), the Fund's transfer agent, of an
order plus a maximum sales charge of 4.75% of the offering price on single
purchases of less than $100,000. The sales charge is reduced on a graduated
scale on single purchases of $100,000 or more.
Shares that represent interests in the Money Market Portfolio and the
Municipal Money Market Portfolio (collectively, the "Money Market Portfolios")
are offered to the public at their net asset value of $1.00 per share with no
sales charge. There can be no assurance that the net asset value per share of
each of the Money Market Portfolios will always be maintained at $1.00.
Minimum Initial and Subsequent Investments
The minimum initial investment for each Portfolio is $1,000.
Subsequent investments must be $100 or more. See "How to Purchase Shares."
Exchanges
Shares of one RBB Family Class may be exchanged for Shares of any
other RBB Family Class at their net asset value (plus any applicable sales
charges in the case of exchanges for Shares of the Non-Money Market Portfolios
unless a sales charge has already been paid with respect to such shares) next
determined after receipt by PFPC of an exchange request. No exchange fee is
currently charged for exchanges; however, the Fund reserves the right to impose
a $5 administrative charge for each exchange. See "How to Purchase
Shares--Exchange Privilege."
<PAGE>7
Redemption Price
Shares may be redeemed at any time at their net asset value next
determined after receipt by PFPC of a redemption request. The Fund reserves the
right, upon 30 days written notice, to redeem an account in any of the Classes
if the net asset 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 Shares--Involuntary Redemption."
Certain Factors to Consider
An investment in any of the Classes 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 Portfolio will achieve its
objective. Some or all of the Portfolios, to the extent set forth under
"Investment Objectives and Policies," may engage in the following investment
practices: the use of repurchase agreements and reverse repurchase agreements,
the purchase of mortgage-related securities, the purchase of securities on a
"when-issued" or "forward commitment" basis; the purchase of stand-by
commitments, the lending of portfolio securities and engaging in options and
futures transactions. 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 PFPC, Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809, toll-free (800) 447-1139 (in Delaware call collect
(302) 791-1149).
FINANCIAL HIGHLIGHTS
The table below sets forth certain information concerning the
investment results of the RBB Family Classes representing interests in the
Tax-Free, Government Securities, Money Market and Municipal Money Market
Portfolios for the periods indicated. The financial data included in this table
for each of the periods ended August 31, 1990 through August 31, 1994, are a
part of the Funds's financial statements for each of the above Portfolios which
have been audited by Coopers & Lybrand L.L.P., the Fund's independent
accountants, whose current report thereon appears in the Statement of Additional
Information along with the financial statements. The financial data for each
such Portfolio for the periods ending August 31, 1989 are a part of previous
financial statements audited by Coopers & Lybrand L.L.P. 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.
<PAGE>8
RBB Family Classes
THE RBB FAMILY
THE RBB FUND, INC.
Financial Highlights(d)
(For a Share Outstanding Throughout each Period)
<TABLE>
<CAPTION>
Tax-Free Portfolio
For the Period
October 18,
1988
For the For the For the For the For the Commencement of
Year Ended Year Ended Year Ended Year Ended Year Ended Operations) to
August 31, August 31, August 31, August 31, August 31, August 31,
1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Net asset Value, beginning
of period 11.53 $11.04 $10.46 $10.05 $10.28 $10.00
----- ------ ------ ------ ------ ------
Income from Investment
operations
Net investment income .6026 .6385 .6771 .6027 .5940 .5273
Net gains (losses) on
Securities (both realized
and unrealized) (.6259) .8654 .6145 .4402 (.1741) .2047
------ ----- ----- ----- ------ -----
Total from investment
operations (.0233) 1.5039 1.2916 1.0429 .4199 .7320
------ ------ ------ ------ ----- -----
Less distributions
Dividends (from net investment
income) (.6092) (.6725) (.6345) (.6212) (.6499) (.4549)
------
Distributions (in excess of net
investment income) (.0135) -- -- -- -- --
Distributions (from capital
gains) (.4886) (.3414) (.0771) (.0117) -- --
------ ------ ------ ------
Total distributions (1.1113) (1.0139) (.7116) (.6329) (.6499) (.4549)
------- ------- ------ ------ ------ ------
Net asset value, end of period $10.40 $11.53 $11.04 $10.46 $10.05 $10.28
====== ====== ====== ====== ====== ======
Total Return (0.30%)(b) 14.45%(e) 12.77%(e) 10.66%(e) 4.00%(e) 7.49%(c)(e)
Ratios/Supplemental Data
Net assets, end of period $5,464,959 $6,631,085 $6,490,832 $8,839,913 $1,187,045 $1,095,434
Ratios of expenses to average
net assets .15%(a) .17%(a) .33%(a) .83%(a) 1.25%(a) 1.25%(a)(b)
Ratios of net investment income
to average net assets 5.51% 5.71% 6.21% 6.02% 5.74% 6.01%(b)
Portfolio Turnover Rate 20% 70% 78% 63% 10% 175%(c)
<FN>
(a) Without the waiver of advisory and custody fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Tax-Free Portfolio would have been 1.84%,
1.76%, 1.61%, 3.06% and 3.75% for the years ended August 31, 1994,
1993, 1992, 1991 and 1990, respectively, and 2.48% annualized for the
period ended August 31, 1989.
(b) Annualized.
(c) Not Annualized.
(d) Financial Highlights relate solely to the RBB Class of Shares within
each portfolio.
(e) Sales Load not reflected in total return.
</FN>
</TABLE>
<PAGE>9
RBB Family Classes
THE RBB FAMILY
THE RBB FUND, INC.
Financial Highlights(d)
(For a Share Outstanding Throughout each Period)
<TABLE>
<CAPTION>
Government Securities Portfolio
For the Period
August 1, 1991
For the For the For the (Commencement of
Year Ended Year Ended Year Ended Operations) to
August 31, 1994 August 31, 1993 August 31, 1992 August 31, 1991
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning
of Period $10.73 $10.46 $10.12 $10.00
------ ------ ------ ------
Income from investment
operations
Net investment income .5931 .7080 .8002 .0737
Net gains (losses) on
Securities (both realized
and unrealized) (.8651) .3300 .3408 .1213
------ ----- ----- -----
Total from investment
operations (.2720) 1.0380 1.1410 .1950
------ ------ ------ -----
Less distributions
Dividends (from net investment
income) (.5901) (.7080) (.8010) (.0750)
------
Distribution (in excess of net
investment income) (.0235) -- -- --
------
Return of Capital (.1544) (.0600) -- --
------ ------
Total distributions (.7680) (.7680) (.8010) (.0750)
------ ------ ------ ------
Net asset value, end of period $9.69 $10.73 $10.46 $10.12
===== ====== ====== ======
Total Return (2.60%)(e) 10.36%(e) 11.73%(e) 1.95%(c)(e)
Ratios/Supplemental Data
Net assets, end of period $54,938,277 $36,295,834 $25,603,528 $28,225,227
Ratios of expenses to average
net assets .64%(a) .66%(a) .83%(a) 1.10%(a)(b)
Ratios of net investment income
to average net Assets 5.86% 6.70% 7.81% 8.50%(b)
Portfolio Turnover Rate 65% 47% 21% 3%(c)
<FN>
(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 Government Securities Portfolio would have
been 1.10%, 1.22% and 1.22%, for the years ended August 31, 1994, 1993
and 1992, respectively, and 1.28% annualized for the period ended
August 31, 1991.
(b) Annualized.
(c) Not Annualized.
(d) Financial Highlights relate solely to the RBB Class of Shares within
each portfolio.
(e) Sales load not reflected in total return.
</FN>
</TABLE>
<PAGE>10
RBB Family Classes
THE RBB FAMILY
THE RBB FUND, INC.
Financial Highlights(c)
(For a Share Outstanding Throughout each Period)
<TABLE>
<CAPTION>
Money Market Portfolio
For the Period
Sept. 30, 1988
Commencement
of
For the For the For the For the For the (Operations)
Year Ended Year Ended Year Ended Year Ended Year Ended to
August 31, August 31, August 31, August 31, August 31, August 31,
1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- -----
Income from Investment
operations
Net investment income .0273 .0238 .0370 .0621 .0757 .0775
Net gains (losses) on
securities (both realized
and unrealized) -- -- .0007 -- -- --
-----
Total from investment
operations .0273 .0238 .0377 .0621 .0757 .0775
----- ----- ----- ----- ----- -----
Less distributions
Dividends (from net investment
income) (.0273) (.0238) (.0370) (.0621) (.0757) (.0775)
------ ------ ------ ------ ------ ------
Distributions (from capital
gains) -- -- (.0007) -- -- --
------
Total distributions..... (.0273) (.0238) (.0377) (.0621) (.0757) (.0775)
------ ---------- ---------- --------- ---------- ------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
Total Return 2.76% 2.41% 3.84% 6.40% 7.84% 8.74%(b)
Ratios/Supplemental Data
Net assets, end of period $45,314 $57,866 $74,176 $108,525 $436,959 $39,347
Ratios of expenses to average
net assets 1.00%(a) 1.00%(a) 1.00%(a) 1.00%(a) 1.00%(a) .98%(a)(b)
Ratios of net investment income
to average net assets 2.73% 2.38% 3.70% 6.21% 7.57% 8.57%(b)
<FN>
(a) Without the waiver of advisory, and transfer agency fees and without the
reimbursement of certain operating expenses, the ratios of expenses to
average net assets for the Money Market Portfolio would have been 14.62%,
10.62%, 4.81%, 6.48% and 4.13% for the years ended August 31, 1994, 1993,
1992, 1991 and 1990, respectively and 52.80% annualized for the period
ended August 31, 1989.
(b) Annualized.
(c) Financial Highlights relate solely to the RBB Class of Shares within each
portfolio.
</FN>
</TABLE>
<PAGE>11
RBB Family Classes
THE RBB FAMILY
THE RBB FUND, INC.
Financial Highlights(c)
(For a Share Outstanding Throughout each Period)
<TABLE>
<CAPTION>
Municipal Money Market Portfolio
For the Period
Sept. 30, 1988
Commencement
of
For the For the For the For the For the (Operations)
Year Ended Year Ended Year Ended Year Ended Year Ended to
August 31, August 31, August 31, August 31, August 31, August 31,
1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- ----- -----
Income from investment
operations
Net investment income .0172 .0172 .0264 .0406 .0504 .0603
Net gains (losses) on
securities (both realized
and unrealized) -- -- -- -- -- --
Total from investment
operations .0172 .0172 .0264 .0406 .0504 .0603
----- ----- ----- ----- ----- -----
Less distributions
Dividends (from net
investment income) (.0172) (.0172) (.0264) (.0406) (.0504) (.0603)
------
Distributions (from capital
gains) -- -- -- -- -- --
Total distributions (.0172) (.0172) (.0264) (.0406) (.0504) (.0603)
------ ------ ------ ------ ------ ------
Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== ===== =====
Total Return 1.73% 1.73% 2.67% 4.14% 5.16% 6.74%(b)
Ratios/Supplemental Data
Net assets, end of period $4,861 $5,273 $4,166 $2,192 $8,745 $106
Ratios of expenses to average
net assets 1.00%(a) 1.00%(a) 1.00%(a) .99%(a) 1.00%(a) __%(a)(b)
Ratios of net investment
income to average net
assets 1.72% 1.72% 2.64% 4.06% 5.04% 7.48%(b)
<FN>
(a) Without the waiver of advisory, administration and transfer agency fees and
without the reimbursement of certain operating expenses, the ratios of
expenses to average net assets for the Municipal Money Market Portfolio
would have been 154.22%, 191.54%, 250.95%, 131.15% and 509.05%, for the
years ended August 31, 1994, 1993, 1992, 1991 and 1990, respectively. The
ratio of expenses to average net assets for the Municipal Money Market
Portfolio was not reported during the fiscal period ended August 31, 1989
as no shares of the RBB Class of that portfolio had been sold to the
public.
(b) Annualized.
(c) Financial Highlights relate solely to the RBB Class of Shares within each
portfolio.
</FN>
</TABLE>
<PAGE>12
THE FUND
The Fund is an open-end management investment company that currently
operates or proposes to operate nineteen separate investment portfolios. Each of
the four Classes of Shares offered by this Prospectus represents interests in
one of four Portfolios. The Fund was incorporated in Maryland on February 29,
1988.
The investment philosophy of the Fund is based on the premise that the
long-term goals of most investors can be achieved by having the opportunity to
invest in major segments of the securities markets through conservatively
managed portfolios. The Government Securities and Money Market Portfolios
described in this Prospectus represent major segments of the securities markets.
Each of these Portfolios seeks to achieve a reasonable total rate of return
consistent with minimal levels of risk. Risk is managed in such Portfolios by
careful analysis of economic conditions and of the securities held and through
proper diversification within a Portfolio. The Tax-Free and Municipal Money
Market Portfolios provide a tax-exempt alternative to the Money Market
Portfolio.
INVESTMENT OBJECTIVES AND POLICIES
Tax-Free Portfolio
The Tax-Free Portfolio's investment objective is to maximize current
interest income which is exempt from Federal income taxes, consistent with
preservation of capital. The Tax-Free Portfolio intends to meet its investment
objective by investing substantially all of its assets in a diversified
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 exempt from the
regular Federal income tax. During periods of normal market conditions, at least
80% of the net assets of the Tax-Free Portfolio will be invested in Municipal
Obligations, the interest on which is Tax-Exempt Interest.
Municipal Obligations. The Portfolio invests in Municipal Obligations
which are determined by the Fund's investment adviser to present minimal credit
risks pursuant to guidelines established by the Fund'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
<PAGE>13
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 Portfolio 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 Portfolio's investment adviser. The
Portfolio 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
Portfolio's investment adviser pursuant to guidelines approved by the Fund's
Board of Directors. The applicable Municipal Obligations ratings are described
in the Appendix to this Prospectus.
The Portfolio may hold uninvested cash reserves pending investment
during temporary defensive periods or if, in the opinion of the Portfolio'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.
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 Portfolio will have been determined by the Portfolio's
investment adviser to be of comparable quality at the time of the purchase to
rated instruments purchasable by the Portfolio pursuant to guidelines adopted by
the Fund's Board of Directors. Where necessary to ensure that a note is of "high
quality," the Portfolio will
<PAGE>14
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 a Portfolio, the Portfolio 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 Portfolio to dispose of a variable rate demand
note if the issuer defaulted on its payment obligation or during the periods
that the Portfolio is not entitled to exercise its demand rights. The Portfolio
could, for this or other reasons, suffer a loss to the extent of the default.
The Portfolio invests in variable rate demand notes only when the Portfolio's
investment adviser deems the investment to involve minimal credit risk. The
Portfolio's investment adviser also monitors the continuing creditworthiness of
issuers of such notes to determine whether the Portfolio 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. 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 (as defined below).
Although the Tax-Free Portfolio 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 Portfolio'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, such
<PAGE>15
Portfolio will be subject to the peculiar risks presented by the laws and
economic conditions relating to such states or projects to a greater extent than
it would be if its assets were not so concentrated.
"When-Issued" Securities. The Portfolio 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
Portfolio 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 Portfolio expects that commitments to purchase when-issued
securities will not exceed 25% of the value of its total assets absent unusual
market conditions. The Portfolio does not intend to purchase when-issued
securities for speculative purposes but only in furtherance of its investment
objective.
Stand-by Commitments. The Portfolio may acquire "stand-by commitments"
with respect to Municipal Obligations held in its portfolio. Under a stand-by
commitment, a dealer would agree to purchase at the Portfolio's option specified
Municipal Obligations at a specified price. The acquisition of a stand-by
commitment may increase the cost, and thereby reduce the yield, of the Municipal
Obligation to which such commitment relates. The Portfolio will acquire stand-by
commitments solely to facilitate portfolio liquidity and does not intend to
exercise its rights thereunder for trading purposes.
Illiquid Securities. The Tax-Free Portfolio 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 Portfolio's investment 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.
Tax-Exempt Derivative Securities. The Tax-Free Portfolio 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
<PAGE>16
Portfolio 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 evidencing 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 Portfolio from such derivative securities are rendered by counsel to the
respective sponsors of such derivatives and relied upon by the Portfolio in
purchasing such securities. Neither the Portfolio 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 Portfolio's investment objective and the policies
described above may be changed by the Fund's Board of Directors without the
affirmative vote of the holders of a majority of outstanding Shares of the Fund
representing interests in the Portfolio. Such changes may result in the
Portfolio 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 Portfolio will be achieved.
Government Securities Portfolio
The objective of the Government Securities Portfolio is to provide the
highest level of current income consistent with liquidity and a low risk to
principal from a portfolio of U.S. Government obligations. To attain its
objective, the Portfolio intends to invest in obligations issued or guaranteed
by the U.S. Treasury or the agencies or instrumentalities of the U.S.
Government.
U.S. Government Obligations. The Portfolio may purchase U.S.
Government agency and instrumentality obligations which are debt securities
issued by U.S. Government-sponsored enterprises and Federal agencies. Some
obligations of agencies and instrumentalities of the U.S. Government are
supported by the full faith and credit of the U.S. or by U.S. Treasury
guarantees, such as
<PAGE>17
securities of the Government National Mortgage Association and the Federal
Housing Authority; others, by the right of the issuer to borrow from the U.S.
Treasury, such as securities of the Federal Home Loan Mortgage Corporation and
others, 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.
During ordinary market conditions, at least 90% of the Portfolio's net
assets will be invested in obligations issued or guaranteed by the U.S. Treasury
or the agencies or instrumentalities of the U.S. Government, including options
and futures on such obligations. The maturities of U.S. Government securities
usually range from three months to thirty years. The Portfolio will at all times
invest at least 65% of its assets in such obligations, not including options and
futures on such obligations. The Portfolio's investment adviser may adjust the
average maturity of the Portfolio from time to time depending on its assessment
of relative yields of securities of different maturities and its expectations of
future changes in interest rates. Thus, at certain times the average maturity of
the Portfolio may be relatively short (under one year to five years, for
example) and at other times may be relatively long (more than 10 years, for
example). The obligations in which the Portfolio invests may not yield as high a
level of current income as lower grade obligations.
Hedging Investments. At such times as the Portfolio's investment
adviser deems it appropriate and consistent with the investment objective of the
Portfolio, the Portfolio may write covered call options on U.S. Government
obligations which are traded on a national securities exchange. The Portfolio
may also purchase and sell (i) options on U.S. Government obligations, (ii)
interest rate futures contracts, and (iii) options on interest rate futures
contracts. The purpose of such transactions is to hedge against changes in the
market value of securities in the Portfolio caused by fluctuating interest
rates, and to close out or offset its existing positions in such futures
contracts or options as described below. Such instruments will not be used for
speculation.
Options. The Portfolio may purchase options issued by the Options
Clearing Corporation on U.S. Treasury bonds, notes and bills. Such options give
the Portfolio the right for a fixed period of time to sell (in the case of the
purchase of a put option) or to buy (in the case of the purchase of a call
option) the number of units of the underlying obligation covered by the option
at a fixed or determinable exercise price. Buying a put hedges against the risk
of rising interest rates. Buying a call hedges against a market advance when the
Portfolio is not fully invested. Prior to its expiration, a put call option may
be sold in a closing sale transaction. Gain or loss from the sale will
<PAGE>18
depend on whether the amount received is more or less than the premium paid for
the option plus the related transaction costs.
The Portfolio also may write (sell) put or call options but only if
such options are covered, and such options remain covered so long as the
Portfolio is obligated as a writer of the option (seller). A call option is
"covered" if the Portfolio owns the underlying security covered by the call. A
put option is "covered" if the Portfolio maintains in a segregated account with
its custodian cash, U.S. Treasury bills or other high-grade short-term
obligations with a value equal to the exercise price. If a "covered" call or put
option expires unexercised, the writer realizes a gain in the amount of the
premium received. If the covered call is exercised, the writer realizes a gain
or loss from the sale or purchase of the underlying security with the proceeds
to the writer being increased by the amount of the premium. If the covered put
is exercised, the writer's cost of purchasing the underlying security is reduced
by the amount of the premium. Prior to its expiration, a put or call option may
be purchased in a closing sale transaction and gain or loss from the sale will
depend on whether the amount paid is more or less than the premium received for
the option plus the related transaction costs.
Options are subject to certain risks, including the risk of imperfect
correlation between the option and the Portfolio's other investments and the
risk that there might not be a liquid secondary market for the option. 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.
Futures Contracts. As noted above, the Portfolio may invest in
financial futures contracts. Financial futures contracts obligate the seller to
deliver a specific type of security called for in the contract, at a specified
future time, and for a specified price. Financial futures contracts may be
satisfied by actual delivery of the securities or, more typically, by entering
into an offsetting transaction. There are risks that are associated with the use
of futures contracts for hedging purposes. In certain market conditions, as in a
rising interest rate environment, sales of futures contracts may not completely
offset a decline in value of the portfolio securities against which the futures
contracts are being sold. In the futures market, it may not always be possible
to execute a buy or sell order at the desired price, or to close out an open
position due to market conditions, limits on open positions, and/or daily price
fluctuations. Risks in the use of futures contracts also
<PAGE>19
result from the possibility that changes in the market interest rates may differ
substantially from the changes anticipated by the Portfolio's investment adviser
when hedge positions were established.
Options on Futures. The Portfolio may purchase and write call and put
options on futures contracts which are traded on a U.S. exchange or board of
exchange and enter into closing transactions with respect to such options to
terminate an existing position. An option on a futures contract gives the
purchaser the right, in return for the premium paid, to assume a position in a
futures contract. The Portfolio may use options on futures contracts in
connection with hedging strategies. The purchase of put options on futures
contracts is a means of hedging against the risk of rising interest rates. The
purchase of call options on futures contracts is a means of hedging against a
market advance when the Portfolio is not fully invested.
There is no assurance that the Portfolio will be able to close out its
financial futures positions at any time, in which case it would be required to
maintain the margin deposits on the contract. There can be no assurance that
hedging transactions will be successful, as there may be imperfect correlations
(or no correlations) between movements in the prices of the futures contracts
and of the debt securities being hedged, or price distortions due to market
conditions in the futures markets. Such imperfect correlations could have an
impact on the Portfolio's ability to effectively hedge its securities.
The Portfolio will not enter into financial futures contracts or
related options contracts (valued at market value) if, immediately thereafter,
more than 50% of the value of the Portfolio's total assets would be so hedged.
The 50% investment restriction is not a fundamental policy of the Portfolio and
may be changed without a shareholder vote by the Board of Directors.
Restrictions imposed by the Internal Revenue Code may also limit the Portfolio's
ability to engage in hedging transactions.
Short Sales. The Portfolio may engage in short sales. In a short sale,
the Portfolio sells a borrowed security and has a corresponding obligation to
the lender to return the identical security. The Portfolio may engage in short
sales only 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." The Portfolio
will not engage in short sales against the box to enhance the Portfolio's yield
or to increase the Portfolio's income. The Portfolio may, however, make a short
sale against the box as a hedge. The Portfolio will engage in
<PAGE>20
short sales against the box when it believes that the price of a security may
decline, causing a decline in the value of a security owned by the Portfolio (or
a security convertible or exchangeable for such security), or when the Portfolio
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
certain purposes of satisfying certain tests applicable to regulated investment
companies under the Internal Revenue Code. In a short sale, the seller does not
immediately deliver the securities sold and is said to have a short position in
those securities until delivery occurs. If the Portfolio engages in a short
sale, the collateral for the short position will be maintained by the
Portfolio's custodian or a qualified sub-custodian. While the short sale is
open, the Portfolio 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.
When-Issued Securities. The Portfolio may purchase portfolio
securities on a "when-issued" basis such as described under "Investment
Objectives and Policies--Tax-Free Portfolio."
Repurchase Agreements. The Portfolio may agree to purchase securities
from financial institutions subject to the seller's agreement to repurchase them
at an agreed-upon time and price ("repurchase agreements"). The securities held
subject to a repurchase agreement may have stated maturities exceeding 397
calendar days, provided the repurchase agreement itself matures in less than 397
calendar days. The financial institutions with whom the Portfolio may enter into
repurchase agreements will be banks which the Portfolio's investment adviser
considers creditworthy pursuant to criteria approved by the Board of Directors
and non-bank dealers of U.S. Government securities that are listed on the
Federal Reserve Bank of New York's list of reporting dealers. The Portfolio's
investment adviser will consider the creditworthiness of a seller in determining
whether to have the Portfolio enter into a repurchase agreement. The seller
under a repurchase agreement will be required to maintain the value of the
securities subject to the agreement at not less than the repurchase price plus
accrued interest. The Portfolio's investment adviser will mark to market daily
the value of the securities, and will, if necessary, require the seller to
maintain additional securities, to ensure that the value is not less than the
repurchase price. Default by or bankruptcy of the seller would, however, expose
the Portfolio to possible loss because of adverse market action or delays in
connection with the disposition of the underlying obligations.
Lending of Portfolio Securities. The Portfolio may also lend its
portfolio securities to financial institutions in
<PAGE>21
accordance with the investment restrictions described below. Such loans would
involve risks of delay in receiving additional collateral in the event the value
of the collateral decreased below the value of the securities loaned or of delay
in recovering the securities loaned or even loss of rights in the collateral
should the borrower of the securities fail financially. However, loans will be
made only to borrowers deemed by the Portfolio's investment adviser to be of
good standing and only when, in the adviser's judgment, the income to be earned
from the loans justifies the attendant risks.
Portfolio Turnover. The Portfolio will actively use trading to benefit
from yield disparities among different issues of U.S. Government securities or
otherwise to achieve its investment objective and policies. The Portfolio,
therefore, may be subject to a greater degree of turnover and, thus, a higher
incidence of short-term capital gains taxable as ordinary income than might be
expected from portfolios which invest substantially all of their funds on a
long-term basis, and correspondingly larger mark-up charges can be expected to
be borne by the Portfolio. Federal income tax law may restrict the extent to
which the Portfolio may engage in short-term trading activities. See "Taxes" in
the Statement of Additional Information for a discussion of such federal income
tax law restrictions. The Portfolio anticipates that the annual turnover in the
Portfolio will not be in excess of 200%. A 200% turnover rate is greater than
that of many other investment companies.
Illiquid Securities. The Government Securities Portfolio will not
invest more than 15% of its net assets in illiquid securities, including
repurchase agreements which have a maturity of longer than seven days and other
securities that are illiquid by virtue of the absence of a readily available
market or legal or contractual restrictions on resale. Repurchase agreements
subject to demand are deemed to have a maturity equal to the notice period.
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 Portfolio's investment 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.
The Government Securities Portfolio's investment objective and
policies described above may be changed by the Fund's Board of Directors without
the affirmative vote of the holders of a majority of outstanding Shares of the
Fund representing interests in the Portfolio. Such changes may result in the
Portfolio having investment objectives which differ from those an investor may
have considered at the time of investment.
<PAGE>22
There is no assurance that the investment objective of the Government Securities
Portfolio will be achieved.
Money Market Portfolio
The Money Market Portfolio's investment objective is to provide as
high a level of current interest income as is consistent with maintaining
liquidity and relative stability of principal. Portfolio obligations held by the
Money Market Portfolio have remaining maturities of 397 calendar days or less
(except that portfolio securities which are subject to repurchase agreements may
bear maturities exceeding 397 calendar days). In pursuing its investment
objective, the Money Market Portfolio invests in a diversified portfolio of U.S.
dollar-denominated instruments, such as government, bank and commercial
obligations, that may be available in the money markets ("Money Market
Instruments") and which meet certain ratings criteria and present minimal credit
risks as determined by the investment adviser pursuant to guidelines adopted by
the Board of Directors. See "Eligible Securities." The following descriptions
illustrate the types of Money Market Instruments in which the Money Market
Portfolio invests.
Bank Obligations. The Portfolio may purchase obligations of issuers in
the banking industry, such as short-term obligations of bank holding companies,
certificates of deposit, bankers' acceptances and time deposits issued by U.S.
or foreign banks or savings institutions having total assets at the time of
purchase in excess of $1 billion. Investment in obligations of foreign banks or
foreign branches of U.S. banks may entail risks that are different from those of
investments in obligations of U.S. banks due to differences in political,
regulatory and economic systems and conditions. The Portfolio may also make
interest-bearing savings deposits in commercial and savings banks in amounts not
in excess of 5% of its total assets.
Commercial Paper. The Portfolio may purchase commercial paper rated
(at the time of purchase) in the two highest rating categories of a nationally
recognized statistical rating organization ("NRSRO"). These rating categories
are described in the Appendix to this Prospectus. The Portfolio may also
purchase unrated commercial paper provided that such paper is determined to be
of comparable quality by the Portfolio's investment adviser in accordance with
guidelines approved by the Fund's Board of Directors. Commercial paper issues in
which the Portfolio may invest include securities issued by major corporations
without registration under the Securities Act of 1933 (the "1933 Act") in
reliance on the exemption from such registration afforded by Section 3(a)(3)
thereof, and commercial
<PAGE>23
paper issued in reliance on the so-called "private placement" exemption from
registration which is afforded by Section 4(2) of the 1933 Act ("Section 4(2)
paper"). Section 4(2) paper is restricted as to disposition under the Federal
securities laws in that any resale must similarly be made in an exempt
transaction. Section 4(2) paper is normally resold to other institutional
investors through or with the assistance of investment dealers who make a market
in Section 4(2) paper, thus providing liquidity.
Commercial paper purchased by the Portfolio may include
instruments issued by foreign issuers, such as Canadian Commercial Paper
("CCP"), which is U.S. dollar-denominated commercial paper issued by a Canadian
corporation or a Canadian counterpart of a U.S. corporation, and in Europaper,
which is U.S. dollar-denominated commercial paper of a foreign issuer, subject
to the criteria stated above for other commercial paper issuers.
Variable Rate Demand Notes. The Portfolio may purchase variable rate
demand notes, which are unsecured instruments that permit the indebtedness
thereunder to vary and provide for periodic adjustment in the interest rate.
Although the notes are not normally traded and there may be no active secondary
market in the notes, the Portfolio will be able (at any time or during specified
periods not exceeding 397 calendar days, depending upon the note involved) to
demand payment of the principal of a note. The notes are not typically rated by
credit rating agencies, but issuers of variable rate demand notes must satisfy
the same criteria as set forth above for issuers of commercial paper. If an
issuer of a variable rate demand note defaulted on its payment obligation, the
Portfolio might be unable to dispose of the note because of the absence of an
active secondary market. For this or other reasons, the Portfolio might suffer a
loss to the extent of the default. The Portfolio invests in variable rate demand
notes only when the Portfolio's investment adviser deems the investment to
involve minimal credit risk. The Portfolio's investment adviser also monitors
the continuing creditworthiness of issuers of such notes to determine whether
the Portfolio should continue to hold such notes.
Repurchase Agreements. The Portfolio may agree to purchase securities
from financial institutions subject to the seller's agreement to repurchase them
at an agreed-upon time and price ("repurchase agreements"). For a description of
repurchase agreements, see "Investment Objectives and Policies--Government
Securities Portfolio."
U.S. Government Obligations. The Portfolio may purchase obligations
issued or guaranteed by the U.S. Government
<PAGE>24
or its agencies and instrumentalities. Obligations which may be so purchased are
described under "Investment Objectives and Policies--Government Securities
Portfolio."
Asset-backed Securities. The Portfolio may invest in 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. Asset-backed 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
Portfolio since the remaining maturity of any asset-backed security acquired
will be 397 days or less. Asset-backed securities are considered an industry for
industry concentration purpose. See "Investment Limitations."
Reverse Repurchase Agreements. The Portfolio may enter into reverse
repurchase agreements with respect to portfolio securities. At the time the
Portfolio enters into a reverse repurchase agreement, it will place in a
segregated custodial account with the Fund's custodian or a qualified
sub-custodian liquid assets such as U.S. Government securities or other liquid
debt securities having a value equal to or greater than the repurchase price
(including accrued interest) and will subsequently 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 Portfolio may decline below
the price of the securities the Portfolio is obligated to repurchase. Reverse
repurchase agreements are considered to be borrowings by the Portfolio under the
Investment Company Act of 1940 (the "1940 Act".)
Municipal Obligations. In addition, the Portfolio may, when deemed
appropriate by its investment adviser in light of the Portfolio's investment
objective, invest without limitation in short-term Municipal Obligations issued
by state and local governmental issuers, the interest on which may be taxable or
tax-exempt for Federal income tax purposes, provided that such obligations carry
yields that are competitive with those of other types of Money Market
Instruments of comparable quality. For a more complete discussion of Municipal
Obligations, see "Investment Objectives and Policies--Tax-Free Portfolio." In
addition, the Portfolio may acquire "stand-by commitments" with respect to
Municipal Obligations held by it. Under a stand-by commitment, a dealer would
agree to purchase, at the Portfolio's
<PAGE>25
option, specified Municipal Obligations at a specified price. The acquisition of
a stand-by commitment may increase the cost, and thereby reduce the yield, of
the Municipal Obligation to which such commitment relates. The Portfolio will
acquire stand-by commitments solely to facilitate portfolio liquidity and does
not intend to exercise its rights thereunder for trading purposes.
Guaranteed Investment Contracts. The Portfolio may make investments in
obligations, such as guaranteed investment contracts and similar funding
agreements (collectively "GICs"), issued by highly rated U.S. insurance
companies. A GIC is a general obligation of the issuing insurance company and
not a separate account. The Portfolio's investments in GICs are not expected to
exceed 5% of its total assets at the time of purchase absent unusual market
conditions. GIC investments are subject to the Fund's policy regarding
investment in illiquid securities.
When-Issued Securities. The Portfolio may purchase portfolio
securities on a "when-issued" basis such as described under "Investment
Objectives and Policies--Tax-Free Portfolio."
Eligible Securities. The Portfolio will only purchase "eligible
securities" that present minimal credit risks as determined by the Portfolios'
investment adviser pursuant to guidelines adopted by the Board of Directors.
Eligible securities generally include: (1) U.S. Government securities, (2)
securities that are rated at the time of purchase in the two highest rating
categories by one or more nationally recognized statistical rating organizations
("NRSROs") (e.g., commercial paper rated "A-1" or "A-2" by S&P, (3) securities
that are rated at the time of purchase by the only NRSRO rating the security in
one of its two highest rating categories for such securities and (4) securities
that are not rated and are issued by an issuer that does not have comparable
obligations rated by an NRSRO ("Unrated Securities"), provided that such
securities are determined to be of comparable quality to eligible rated
securities. For a more complete description of eligible securities, see
"Investment Objectives and Policies" in the Statement of Additional Information.
Illiquid Securities. The Portfolio will not invest more than 10% of
its net assets in illiquid securities, including repurchase agreements which
have a maturity of longer than seven days, time deposits with maturities in
excess of seven days, variable rate demand notes with demand periods in excess
of seven days unless the Portfolio's investment adviser determines that such
notes are readily marketable and could be sold promptly at the prices at which
they are valued, and other securities that are illiquid by virtue of the absence
of a readily available market or legal or contractual restrictions on resale.
Repurchase agreements subject to demand are deemed to have a maturity equal to
the notice period. Securities that have legal or contractual restrictions on
resale but have a readily available
<PAGE>26
market are not deemed illiquid for purposes of this limitation. The Portfolio's
investment 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.
The Money Market Portfolio's investment objectives and policies
described above may be changed by the Fund's Board of Directors without the
affirmative vote of the holders of a majority' of the Portfolio's outstanding
Shares. Such changes may result in the Portfolio 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 Money
Market Portfolio will be achieved.
Municipal Money Market Portfolio
The Municipal Money Market Portfolio's investment objective is to
provide as high a level of current interest income exempt from federal income
taxes as is consistent with maintaining liquidity and relative stability of
principal. The Municipal Money Market Portfolio invests substantially all of its
assets in a diversified portfolio of short-term Municipal Obligations, the
interest on which, in the opinion of bond counsel or counsel to the issuer, as
the case may be, is exempt from the regular Federal income tax. During periods
of normal market conditions, at least 80% of the net assets of the Municipal
Money Market Portfolio will be invested in Municipal Obligations. Municipal
Obligations include securities the interest on which is Tax-Exempt Interest,
although to the extent the Portfolio invests in certain private activity bonds
issued after August 7, 1986 ("Alternative Minimum Tax Securities"), a portion of
the interest earned by the Portfolio may constitute an item of tax preference
for purposes of the Federal alternative minimum tax ("AMT Interest").
Municipal Obligations. The Portfolio invests in short-term Municipal
Obligations which meet certain ratings criteria and are determined by the
Portfolio's investment adviser to present minimal credit risks pursuant to
guidelines established by the Fund's Board of Directors. The Portfolio may also
purchase Unrated Securities provided that such securities are determined to be
of comparable quality to eligible rated
<PAGE>27
securities. The applicable Municipal Obligation ratings are described in the
Appendix to this Prospectus. For a more complete discussion of Municipal
Obligations, see "Investment Objectives and Policies--Tax-Free Portfolio."
The Portfolio may hold uninvested cash reserves pending investment
during temporary defensive periods or if, in the opinion of the Portfolio's
investment adviser, suitable obligations bearing Tax-Exempt Interest or AMT
Interest 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.
Although the Municipal Money Market Portfolio 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 Municipal Money Market Portfolio'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, such Portfolio will be subject
to the peculiar risks presented by the laws and economic conditions relating to
such states or projects to a greater extent than it would be if its assets were
not so concentrated.
When-Issued Securities. The Portfolio may also purchase portfolio
securities on a "when-issued" basis such as described under "Investment
Objectives and Policies--Tax-Free Portfolio."
Stand-by Commitments. The Portfolio may acquire "stand-by commitments"
with respect to Municipal Obligations held in its portfolio. For a description
of stand-by commitments, see "Investment Objectives and Policies--Tax-Free
Portfolio."
Tax-Exempt Derivative Securities. The Municipal Money Market Portfolio
may invest in tax-exempt derivative securities such as tender option bonds,
custodial receipts, participations, beneficial interests in trusts and
partnership interests. For a more complete description of tax-exempt derivative
securities, see "Investment Objectives and Policies -- Tax-Free Portfolio".
Eligible Securities. The Municipal Money Market Portfolio will only
purchase "eligible securities" that present minimal credit risks as determined
by the Portfolio's investment adviser pursuant to guidelines adopted by the
Board of Directors. For a more complete description of eligible securities, see
<PAGE>28
"Investment Objectives and Policies -- Money Market Portfolio -- Eligible
Securities".
Illiquid Securities. The Municipal Money Market Portfolio will not
invest more than 10% 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 Portfolio's
investment 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.
The Municipal Money Market Portfolio's investment objective and the
policies described above may be changed by the Fund's Board of Directors without
the affirmative vote of the holders of a majority of the Portfolio's outstanding
Shares. Such changes may result in the Portfolio 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 Municipal
Money Market Portfolio will be achieved.
INVESTMENT LIMITATIONS
No Portfolio may change the following investment limitations (with
certain exceptions, as noted below) without the affirmative vote of the holders
of a majority of a Portfolio'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.")
Government Securities Portfolio. The Government Securities Portfolio
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 Portfolio'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 Portfolio, except
that up to 25% of the value of the
<PAGE>29
Portfolio's total assets may be invested without regard to such
limitations.
2. Borrow money, except from banks for temporary purposes and then in
amounts not in excess of 10% of the value of the Portfolio'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 Portfolio; or
mortgage, pledge or hypothecate any of its assets except in connection with
any such borrowing and in amounts not in excess of 10% of the value of the
Portfolio's total assets at the time of such borrowing; or purchase
portfolio securities while borrowings in excess of 5% of the Portfolio's
net assets are outstanding. (This borrowing provision is not for investment
leverage, but solely to facilitate management of the Portfolio's securities
by enabling the Portfolio to meet redemption requests where the liquidation
of portfolio securities is deemed to be disadvantageous or inconvenient.)
3. Purchase any securities which would cause, at the time of purchase,
25% or more of the value of the total assets of the Portfolio 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.
4. Make loans except that the Portfolio may purchase or hold debt
obligations in accordance with its investment objective, policies and
limitations, may enter into repurchase agreements for securities, and may
lend portfolio securities against collateral consisting of cash or
securities which are consistent with the Portfolio's permitted investments,
which is equal at all times to at least 100% of the value of the securities
loaned. There is no investment restriction on the amount of securities that
may be loaned, except that payments received on such loans, including
amounts received during the loan on account of interest on the securities
loaned, may not (together with all non-qualifying income) exceed 10% of the
Portfolio's annual gross income (without offset for realized capital gains)
unless, in the opinion of counsel to the Fund, such amounts are qualifying
income under Federal income tax provisions applicable to regulated
investment companies.
In determining whether the Government Securities Portfolio has
complied with limitation 3 above, such Portfolio will not take into account the
value of options and futures.
<PAGE>30
Money Market Portfolio. The Money Market Portfolio 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 its 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 Portfolio, except that up
to 25% of the value of the Portfolio's total assets may be invested without
regard to such limitations.
2. Borrow money, except from banks for temporary purposes and except
for reverse repurchase agreements and then in amounts not in excess of 10%
of the value of the Portfolio's 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 Portfolio; or mortgage, pledge or hypothecate any of
its assets except in connection with any such borrowing and in amounts not
in excess of 10% of the value of the Portfolio's assets at the time of such
borrowing; or purchase portfolio securities while borrowings in excess of
5% of the Portfolio's net assets are outstanding. (This borrowing provision
is not for investment leverage, but solely to facilitate management of the
Portfolio's securities by enabling the Portfolio to meet redemption
requests where the liquidation of portfolio securities is deemed to be
disadvantageous or inconvenient.)
3. Purchase any securities which would cause, at the time of purchase,
less than 25% of the value of the total assets of the Portfolio to be
invested in the obligations of issuers in the banking industry, or in
obligations, such as repurchase agreements, secured by such obligations
(unless the Portfolio is in a temporary defensive position) or which would
cause, at the time of purchase, more than 25% of the value of its total
assets to be invested in the obligations of issuers in any other industry.
4. Purchase any securities other than Money Market Instruments, some
of which may be subject to repurchase agreements, but the Portfolio may
make interest-bearing savings deposits in amounts not in excess of 5% of
the value of the Portfolio's assets and may make time deposits.
So long as it values its portfolio securities on the basis of the
amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the
Money Market Portfolio will meet the
<PAGE>31
following limitations on its investments in addition to the fundamental
investment limitations described above. These limitations may be changed without
a vote of shareholders of the Money Market Portfolio.
1. The Money Market Portfolio will limit its purchases of the
securities of any one issuer, other than issuers of U.S. Government
securities, to 5% of its total assets, except that the Money Market
Portfolio may invest more than 5% of its total assets in First Tier
Securities of one issuer for a period of up to three business days. "First
Tier Securities" include eligible securities that (i) if rated by more than
one NRSRO, are rated (at the time of purchase) by two or more NRSROs in the
highest rating category for such securities, (ii) if rated by only one
NRSRO, are rated by such NRSRO in its highest rating category for such
securities, (iii) have no short-term rating and are comparable in priority
and security to a class of short-term obligations of the issuer of such
securities that have been rated in accordance with (i) or (ii) above, or
(iv) are Unrated Securities that are determined to be of comparable quality
to such securities. Purchases of First Tier Securities that come within
categories (ii) and (iv) above will be approved or ratified by the Board of
Directors.
2. The Money Market Portfolio will limit its purchases of Second Tier
Securities, which are eligible securities other than First Tier Securities,
to 5% of its total assets.
3. The Money Market Portfolio will limit its purchases of Second Tier
Securities of one issuer to the greater of 1% of its total assets or $1
million.
Tax-Free Portfolio and the Municipal Money Market Portfolio. Neither
the Tax-Free Portfolio nor the Municipal Money Market Portfolio may:
1. Purchase the securities of any 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 Portfolio's 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 Portfolio, except that up to 25% of the value
of the Portfolio's assets may be invested without regard to such
limitations.
<PAGE>32
2. Borrow money, except from banks for temporary purposes and then in
amounts not in excess of 10% of the value of the Portfolio's 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 Portfolio; or mortgage,
pledge or hypothecate any of its assets except in connection with any such
borrowing and in amounts not in excess of the lesser of the dollar amounts
borrowed or 10% of the value of the Portfolio's assets at the time of such
borrowing; or purchase portfolio securities while borrowings in excess of
5% of the Portfolio's net assets are outstanding. (This borrowing provision
is not for investment leverage, but solely to facilitate management of the
Portfolio's securities by enabling the Portfolio to meet redemption
requests where the liquidation of portfolio securities is deemed to be
disadvantageous or inconvenient.)
3. Purchase any securities which would cause, at the time of purchase,
more than 25% of the value of the total assets of the Portfolio to be
invested in the obligations of issuers in the same industry.
4. In addition, without the affirmative vote of the holders of a
majority of the affected Portfolio's outstanding Shares, neither the
Tax-Free Portfolio nor the Municipal Money Market Portfolio may 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.
So long as it values its portfolio securities on the basis of the
amortized cost method of valuation pursuant to Rule 2a-7 under the 1940 Act, the
Municipal Money Market Portfolio will meet the following limitation on its
investments in addition to the fundamental investment limitations described
above. This limitation may be changed without a vote of shareholders of the
Municipal Money Market Portfolio.
1. The Municipal Money Market Portfolio will not purchase any Put if
after the acquisition of the Put the Municipal Money Market Portfolio has
more than 5% of its total assets invested in instruments issued by or
subject to Puts from the same institution, except that the foregoing
condition shall only be applicable with respect to 75% of the Municipal
Money Market Portfolio's total assets. A "Put" means a right to sell a
specified underlying instrument within a specified period of time and at a
specified exercise price that may be sold, transferred or assigned only
with the underlying instrument.
<PAGE>33
MANAGEMENT
Board of Directors
The business and affairs of the Fund and each investment portfolio are
managed under the direction of the Fund's Board of Directors. The Fund currently
operates or proposes to operate nineteen separate investment portfolios. Each of
the RBB Family classes represents interests in one of the following such
investment portfolios: the Tax-Free Portfolio, the Government Securities
Portfolio, the Money Market Portfolio and the Municipal Money Market Portfolio.
Investment Adviser and Sub-Adviser
PIMC, a wholly owned subsidiary of PNC Bank, serves as the investment
adviser for each of the Portfolios. PIMC was organized in 1977 by PNC Bank to
perform advisory services for investment companies, and has its principal
offices at Bellevue Park Corporate Center, 400 Bellevue Parkway, Wilmington,
Delaware 19809. PNC Bank serves as the sub-adviser for all Portfolios other than
the Government Securities Portfolio, which has no sub-adviser. PNC Bank and its
predecessors have been in the business of managing the investments of fiduciary
and other accounts in the Philadelphia area since 1847. PNC Bank and its
subsidiaries currently manage over $30 billion of assets, of which approximately
$28 billion are mutual funds. PNC Bank, a national bank whose principal business
address is Broad and Chestnut Streets, Philadelphia, Pennsylvania 19101, is a
wholly owned subsidiary of PNC Bancorp, Inc. PNC Bancorp, Inc., is a bank
holding company and a wholly owned subsidiary of PNC Bank Corp., a multi-bank
holding company.
As adviser to the Portfolios, PIMC is responsible for overall
management of the Portfolios, and is responsible for all purchases and sales of
portfolio securities for all Portfolios other than the High Yield Portfolio.
PIMC also assists generally in supervising the operations of the Portfolios,
maintains the Portfolios' financial accounts and records, and computes the
Portfolios' net asset values and net income. PNC Bank, as sub-adviser for all
Portfolios other than the Government Securities Portfolio, provides research and
credit analysis and provides PIMC with certain other services.
W. Don Simmons is responsible for the day-to-day portfolio management
of the Tax Free Portfolio. Mr. Simmons is a Vice President and Senior Portfolio
Manager with PIMC, where he has been employed for more than five years.
<PAGE>34
Robert J. Morgan is responsible for the day-to-day portfolio
management of the Government Securities Portfolio. Mr. Morgan is Assistant Vice
President with PIMC, where he has been employed since 1988. Previously, he was a
Portfolio Manager with Core States.
For the services provided and expenses assumed by it, PIMC is entitled
to receive the following fees, computed daily and payable monthly based on a
Portfolio's average daily net assets:
Portfolio Annual Rate
Tax-Free.................... .50% of first $250 million of net
assets; .45% of next $250 million of net
assets; and .40% of net assets in excess
of $500 million
Money Market................ .45% of first $250 million of net
assets; .40% of next $250 million of net
assets; and .35% of net assets in excess
of $500 million
Municipal Money Market...... .35% of first $250 million of net
assets; .30% of next $250 million of net
assets; and .25% of net assets in excess
of $500 million.
Government Securities....... .40% of first $250 million of net
assets; .35% of next $250 million of net
assets; and .30% of net assets in excess
of $500 million
PIMC may in its discretion from time to time agree to waive voluntarily all or
any portion of its advisory fee for any Portfolio. For its sub-advisory
services, PNC Bank is entitled to receive from PIMC an amount equal to 75% of
the advisory fees paid by the Fund to PIMC with respect to a Portfolio. Such
sub-advisory fees have no effect on the advisory fees payable by a Portfolio to
PIMC. In addition, PIMC may from time to time enter into an agreement with one
of its affiliates pursuant to which it delegates some or all of its accounting
and administrative obligations under its advisory agreements with the Fund
relating to any Portfolio. Any such arrangement would have no effect on the
advisory fees payable by each Portfolio to PIMC.
For the Fund's fiscal year ended August 31, 1994, PIMC waived all
investment advisory fees payable to it with respect to the Tax-Free, Government
Securities and Municipal Money Market
<PAGE>35
Portfolios. For the same year ended August 31, 1994, the Fund paid PIMC
investment advisory fees with respect to the Money Market Portfolio aggregating
.18% of the average net assets of the Portfolio, and PIMC waived approximately
.20% of the average net assets of such Portfolio.
Administrator
PFPC serves as administrator to the Government Securities Portfolio,
and the Municipal Money Market Portfolio. PFPC is an indirect, wholly owned
subsidiary of PNC Bank Corp. PFPC generally assists each of the Government
Securities and Municipal Money Market Portfolios in all aspects of its
administration and operations, including matters relating to the maintenance of
financial records and accounting. PFPC is entitled to an administration fee,
computed daily and payable monthly at an annual rate of .10% of each such
Portfolio's average daily net assets.
Transfer Agent, Dividend Disbursing Agent, and Custodian
PNC Bank also serves as the Fund's custodian and PFPC serves as the
Fund's transfer agent and dividend disbursing agent. PFPC may enter into
shareholder servicing agreements with registered broker/dealers who have entered
into dealer agreements with the Distributor ("Authorized Dealers") for the
provision of certain shareholder support services to customers of such
Authorized Dealers who are shareholders of the Portfolios. The services provided
and the fees payable by the Fund for these services are described in the
Statement of Additional Information under "Investment Advisory, Distribution and
Servicing Arrangements."
Expenses
The expenses of each Portfolio 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 Portfolio'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
Portfolios 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
<PAGE>36
class of shares of the Fund, the expense of reports to shareholders,
shareholders' meetings and proxy solicitations that are not attributable to a
particular class of shares of the Fund, 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 adviser under its
investment advisory agreement with respect to a Portfolio. Any general expenses
of the Fund that are not readily identifiable as belonging to a particular
investment portfolio of the Fund will be allocated among all investment
portfolios of the Fund 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 each Portfolio for the
amount, if any, by which the total operating and management expenses of such
Portfolio 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
Portfolios from time to time. In certain circumstances, it may assume such
expenses on the condition that it is reimbursed by the Portfolios 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 Portfolio's expense ratio and
of decreasing yield to investors.
For the Fund's fiscal year ended August 31, 1994, the Fund's total
expenses were 1.84% of the average net assets of the RBB Family Class of the
Tax-Free Portfolio (not taking into account waivers and reimbursements of
1.69%), were 1.10% of the average net assets of the RBB Family Class of the
Government Securities Portfolio (not taking into account waivers and
reimbursements of .46%), were 14.62% of the average net assets of the RBB Family
Class of the Money Market Portfolio (not taking into account waivers and
reimbursements of 13.62%) and were 154.22% of the average net assets of the RBB
Family Class of the Municipal Money Market Portfolio (not taking into account
waivers and reimbursements of 153.22%).
Portfolio Transactions
A Portfolio's adviser may consider a number of factors in determining
which brokers to use in purchasing or selling a Portfolio's securities. These
factors, which are more fully discussed in the Statement of Additional
Information, include,
<PAGE>37
but are not limited to, research services, the reasonableness of commissions and
quality of services and execution. Transactions for the Portfolios may be
effected through Authorized Dealers, subject to the requirements of best
execution. A higher rate of turnover of a Portfolio's securities may involve
correspondingly higher transaction costs, which will be borne directly by the
Portfolio. A Portfolio 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.
DISTRIBUTION OF SHARES
Counsellors Securities Inc. (the "Distributor"), a wholly owned
subsidiary of Warburg, with offices at 466 Lexington Avenue, New York, New York,
acts as distributor for each of the Classes pursuant to separate distribution
contracts (collectively, the "Distribution Contracts") with the Fund on behalf
of each of the Classes.
The Board of Directors of the Fund approved and adopted the
Distribution Contracts and separate Plans of Distributions for each of the
Classes (collectively, the "Plans") pursuant to Rule 12b-1 under the 1940 Act.
Under each of the Plans, the Distributor is entitled to receive from the
relevant Class a distribution fee, which is accrued daily and paid monthly, of
up to .65% on an annualized basis of the average daily net assets of the
relevant Class. The actual amount of such compensation under the Plans is agreed
upon by the Fund's Board of Directors and by the Distributor. Under each of the
Distribution Contracts, the Distributor has agreed to accept compensation for
its services thereunder and under the relevant Plan in the amount of .40% of the
average daily net assets of the relevant Class on an annualized basis in any
year. Such compensation may be increased, up to the amount permitted in the
Plan, with the approval of the Fund's Board of Directors. Pursuant to the
conditions of an exemptive order granted by the Securities and Exchange
Commission (the "SEC"), the Distributor has agreed to waive its fee with respect
to a Class covered by such order on any day to the extent necessary to ensure
that the fee required to be accrued by such Class does not exceed the income of
such Class on such day. In addition, the Distributor may, in its discretion,
from time to time waive voluntarily all or any portion of its distribution fee.
Under the dealer agreements in effect with respect to the Classes, the
Distributor may reallocate up to all of the
<PAGE>38
compensation it receives for its services under the Distribution Contracts and
the Plans to Authorized Dealers, based upon the aggregate investment amounts
maintained by customers of such Authorized Dealers in each of the Portfolios.
The Distributor may also reimburse Authorized Dealers for other expenses
incurred in the promotion of the sale of Fund Shares. The Distributor and/or
Authorized Dealers pay for the cost of printing (excluding typesetting) and
mailing to prospective investors prospectuses and other materials relating to
the Portfolios of the Fund as well as for related direct mail, advertising and
promotional expenses.
Each of the Plans obligates the Fund, during the period it is in
effect, to accrue and pay to the Distributor on behalf of each Class the fee
agreed to under the relevant Distribution Contracts. None of the Plans obligates
the Fund to reimburse the Distributor for the actual expenses the Distributor
may incur in fulfilling its obligations under a Plan on behalf of the relevant
Class. Thus, under each of the Plans, even if the Distributor's actual expenses
exceed the fee payable to the Distributor thereunder at any given time, the Fund
will not be obligated to pay more than that fee. If the Distributor's expenses
are less than the fee it receives, the Distributor will retain the full amount
of the fee.
The Plans in effect with respect to the Classes have been approved by
shareholders of the relevant Class. Under the terms of Rule 12b-1, each will
remain in effect only if approved at least annually by the Fund's Board of
Directors, including those directors who are not "interested persons" of the
Fund as that term is defined in the 1940 Act and who have no direct or indirect
financial interest in the operation of the Plan or in any agreements related
thereto ("12b-1 Directors"). Each of the Plans may be terminated at any time by
vote of a majority of the 12b-1 Directors or by vote of a majority of the Fund's
outstanding voting securities of the relevant Class. The fee set forth above
will be paid by the Fund on behalf of the relevant Class to the Distributor
unless and until the relevant Plan is terminated or not renewed.
HOW TO PURCHASE SHARES
General
Shares representing interests in the Non-Money Market Portfolios
(collectively, "Non-Money Market Shares") and Shares representing interests in
the Money Market Portfolios (collectively, "Money Market Shares") are offered
continuously for sale by the Distributor and may be purchased through
<PAGE>39
Authorized Dealers. Both Non-Money Market Shares and Money Market Shares may be
purchased initially by completing the application included in this Prospectus
and forwarding the application, through the designated Authorized Dealer, to the
Fund's transfer agent, PFPC. Subsequent purchases of Non-Money Market Shares and
Money Market Shares may be effected through an Authorized Dealer or by mailing a
check or Federal Reserve Draft, payable to the order of "The RBB Family" c/o
PFPC, P.0. Box 8950, Wilmington, Delaware 19899. The name of the Portfolio for
which Shares are being purchased must also appear on the check or Federal
Reserve Draft. Federal Reserve Drafts are available at national banks or any
state bank which is a member of the Federal Reserve System. Initial investments
in any Portfolio must be at least $1,000 and subsequent investments must be at
least $100. The Fund reserves the right to reject any purchase order.
Non-Money Market Shares may be purchased on any Business Day. A
"Business Day" is any day that the New York Stock Exchange (the "NYSE") is open
for business. Currently, the NYSE is closed on weekends and New Year's Day,
President's Day, Good Friday, Memorial Day, Independence Day (observed), Labor
Day, Thanksgiving Day and Christmas Day (observed). Non-Money Market Shares are
offered at the next determined net asset value per share, plus a sales load as
described below. Money Market Shares may be purchased on any Money Market
Business Day. A "Money Market Business Day" is any day that both the NYSE and
the Federal Reserve Bank of Philadelphia (the "FRB") are open. The FRB is
currently closed on weekends and the same holidays on which the NYSE is closed
(except Christmas Day (observed)), as well as Martin Luther King's Birthday,
Veterans Day and Columbus Day. Money Market Shares are offered at the net asset
value per Share next determined after the transfer agent's receipt of a purchase
order, without the imposition of a sales charge.
The price paid for Non-Money Market Shares purchased initially or
acquired through the exercise of an exchange privilege is based on the net asset
value next computed (plus a sales charge, if no sales charge has been previously
imposed with respect to such Shares) after an order is received by the Fund's
transfer agent. See "Exchange Privilege." Such price will be the net asset value
next computed (plus any applicable sales charge) after an order is received by
an Authorized Dealer provided such order is transmitted to and received by the
Fund's transfer agent prior to its close of business on such day. It is the
responsibility of Authorized Dealers to transmit orders received by them to the
Fund's transfer agent so they will be received prior to such time. Orders
received by the Fund's transfer agent from an Authorized Dealer after its close
of business are priced at the net asset value next determined (plus any
applicable sales charge) on the following Business Day.
<PAGE>40
Orders of less than $500 are mailed by an Authorized Dealer. In those cases
where an investor pays for Shares by check, the purchase will be effected at the
net asset value (plus any applicable sales charge) next determined after the
Fund's transfer agent receives the order and Federal Funds are available to the
Fund, which is generally two Business Days after a purchase order is received.
Shareholders whose shares are held in the street name account of an
Authorized Dealer and who desire to transfer such shares to the street name
account of another Authorized Dealer should contact their current Authorized
Dealer.
Sales Charges -- General. The following table shows sales charges
generally applicable to Non-Money Market Shares at various investment levels.
Sales charges are reduced on a graduated scale on single purchases of Non-Money
Market Shares of $100,000 or more. Sales charges are imposed regardless of
whether Non-Money Market Shares are purchased through Authorized Dealers or by
direct investment. During special promotions, as much as the entire sales load
may be reallowed to Authorized Dealers, and at such times such Authorized
Dealers may, by virtue of such reallowance, be deemed to be "underwriters" under
the 1933 Act.
<TABLE>
<CAPTION>
Sales Sales Reallowance
Charge as Charge as to Authorized
Amount Percentage Percentage Dealers (as
of Transaction of Net of Offering % of Offering
at Offering Price Asset Value Price Price)
- ----------------- ----------- ----------- ---------
<S> <C> <C> <C>
Less than $100,000 4.99% 4.75% 4.25%
$ 100,000 but less than $250,000 4.17 4.00 3.50
$ 250,000 but less than $500,000 3.09 3.00 2.50
$ 500,000 but less than $1,000,000 2.04 2.00 1.60
$1,000,000 but less than $2,000,000 1.01 1.00 .80
$2,000,000 but less than $4,000,000 .50 .50 .40
$4,000,000 and above -0- -0- -0-
</TABLE>
The foregoing schedule of sales charges applies to purchases of
Non-Money Market Shares made at any one time by the following: (a) any
individual; (b) any individual, his or her spouse, and their children under the
age of 21; (c) a trustee or fiduciary of a single trust estate or single
fiduciary account; or (d) any organized group which has been in existence for
more than six months, provided that it is not organized for the purpose of
buying redeemable securities of a registered investment company, and provided
that the purchase is made through a central administration, or through a single
dealer, or by other means which result in economy of sales effort or expense. An
organized group does not include a group of
<PAGE>41
individuals whose sole organizational connection is participation as credit card
holders of a company, policyholders of an insurance company, customers of either
a bank or broker-dealer or clients of an investment adviser. Purchases made by
an organized group may include, for example, a trustee or other fiduciary
purchasing for a single fiduciary account or other employee benefit plan
purchases made through a payroll deduction plan.
The foregoing schedule applies to single purchases, concurrent
purchases of Non-Money Market Shares of two or more of the RBB Family Classes,
and to purchases made under a Letter of Intent or pursuant to the Right of
Accumulation, both of which plans are described below.
Right of Accumulation. Under the Right of Accumulation, the current
value of an investor's existing Non- Money Market Shares may be combined with
the amount of the investor's current purchase of Non-Money Market Shares in
determining the sales charge. In order to receive the cumulative quantity
reduction, previous purchases of Non-Money Market Shares must be called to the
attention of the Fund's transfer agent at the time of the current purchase.
Letter of Intent. An investor may qualify for a reduced sales charge
on a purchase of Non-Money Market Shares immediately by signing a nonbinding
Letter of Intent stating the investor's intention to invest in Non-Money Market
Shares during the next 13 months a specified amount which, if made at one time,
would qualify for a reduced sales charge. Any redemptions made during the
13-month period will be subtracted from the amount of purchases in determining
whether the Letter of Intent has been completed. During the term of a Letter of
Intent, the Fund's transfer agent will hold Non-Money Market Shares representing
5% of the indicated amount in escrow for payment of a higher sales load if the
full amount indicated in the Letter of Intent is not purchased. The escrowed
Non-Money Market Shares will be released when the full amount indicated has been
purchased. If the full amount indicated is not purchased within the 13-month
period, the investor will be required to pay an amount equal to the difference
in the dollar amount of sales charge actually paid and the amount of sales
charge the investor would have had to pay on his or her aggregate purchases if
the total of such purchases had been made at a single time.
The following persons associated with the Fund, the Distributor,
Warburg, or PIMC, PNC Bank or PFPC may buy Non-Money Market Shares without
paying a sales charge: (a) officers, directors and partners; (b) employees and
retirees; (c) registered representatives of Authorized Dealers and of the
Distributor; (d) spouses or children of any such persons; and (e)
<PAGE>42
any trust, pension, profit-sharing or other benefit plan for any of the persons
set forth in (a) through (d) above. The following persons may also buy Non-Money
Market Shares without paying a sales charge, provided any such person informs
the Portfolio's transfer agent at the time of purchase that it believes it
qualifies for a sales charge waiver: (a) a trust department of a bank or law
firm; (b) a 501(c)(3) organization and a charitable remainder trust or a life
income pool established for the benefit of a charitable organization; (c) a
registered investment adviser for its own account or on behalf of its clients;
(d) an employee benefit or retirement plan (including 401(k) plans, 403(b)
plans, 457 plans, profit-sharing plans, SEP-IRAs and qualified plans for
self-employed individuals, but excluding regular IRAs, IRA transfers, IRA
rollovers and non-working spousal IRAs); and (e) a financial planner that
charges a fee and makes the qualifying purchases through a financial
institution's net asset value purchase program (provided the purchase program is
recognized by the Fund, and the Portfolio whose shares are being purchased is
listed as part of the purchase program). In addition, Warburg may purchase
Non-Money Market Shares on behalf of the investment companies, employee benefit
plans, endowment funds, foundations and other institutions and individuals for
which it provides investment services without paying a sales charge.
Automatic Investing
Additional investments in Non-Money Market Shares may be made
automatically by authorizing the Fund's transfer agent to withdraw funds from
your bank account. Investors desiring to participate in the automatic investing
program should call the Fund's transfer agent, PFPC, at (800)447-1139 (in
Delaware call collect (302)791-1149) to obtain the appropriate forms.
Exchange Privilege
A shareholder may exchange Shares of any one of the RBB Family Classes
for Shares of any other of the RBB Family Classes. Such exchange will be
effected at the net asset value of the exchanged Class and the net asset value
(plus any applicable sales charges in the case of exchanges for Non-Money Market
Shares for which a sales charge has not previously been paid) of the Class to be
acquired next determined after the transfer agent's receipt of a request for an
exchange. Requests for exchanges between Non-Money Market Classes and Money
Market Classes will be honored only on Money Market Business Days. No exchange
fee is currently imposed on exchanges, although the Fund reserves the right to
impose a $5.00 administrative fee for each exchange. However, a sales charge is
currently imposed on exchanges of Money Market Shares for Non-Money Market
Shares when no sales charge has been previously imposed with respect to such
<PAGE>43
Shares. An exchange of Shares will be treated as a sale for Federal income tax
purposes. See "Taxes."
A shareholder wishing to make an exchange may do so by sending a
written request to the Fund's transfer agent. In the case of shareholders
holding share certificates, the certificates must accompany the request for an
exchange. Shareholders are automatically provided with telephone exchange
privileges when opening an account, unless they indicate on the Application that
they do not wish to use this privilege. Shareholders holding share certificates
are not eligible to exchange Shares by telephone because share certificates must
accompany all exchange requests. To add a telephone exchange feature to an
existing account that previously did not provide for this option, a Telephone
Exchange Authorization Form must be filed with PFPC. This form is available from
PFPC. Once this election has been made, the shareholder may simply contact PFPC
by telephone to request the exchange (800) 447-1139 (in Delaware call collect
(302) 791-1149). The Fund will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, and if the Fund does not
employ such procedures, it may be liable for any losses due to unauthorized or
fraudulent telephone instructions. Neither the Fund nor PFPC will be liable for
any loss, liability, cost or expense for following the Fund's telephone
transaction procedures described below or for following instructions
communicated by telephone that it reasonably believes to be genuine.
The Fund's telephone transaction procedures include the following
measures: (1) requiring the appropriate telephone transaction privilege forms;
(2) requiring the caller to provide the names of the account owners, the account
social security number and name of the fund, all of which must match the Fund's
records; (3) requiring the Fund's service representative to complete a telephone
transaction form, listing all of the above caller identification information;
(4) permitting exchanges only if the two account registrations are identical;
(5) requiring that redemption proceeds be sent only by check to the account
owners of record at the address of record, or by wire only to the owners of
record at the bank account of record; (6) sending a written confirmation for
each telephone transaction to the owners of record at the address of record
within five (5) business days of the call; and maintaining tapes of telephone
transactions for six months, if the fund elects to record shareholder telephone
transactions.
For accounts held of record by a broker-dealer, trustee, custodian or
other agent, additional documentation or information regarding the scope of a
caller's authority is required. Finally, for telephone transactions in accounts
held
<PAGE>44
jointly, additional information regarding other account holders is
required. Telephone transactions will not be permitted in connection with IRA or
other retirement plan accounts or by attorney-in-fact under power of attorney.
If the exchanging shareholder does not currently own Shares of the
Class whose Shares are being acquired, a new account will be established with
the same registration, dividend and capital gain options and Authorized Dealer
of record as the account from which shares are exchanged, unless otherwise
specified in writing by the shareholder with all signatures guaranteed by a
commercial bank or trust company or a member firm of a national securities
exchange. In order to establish a systematic withdrawal plan for the new
account, however, an exchanging shareholder must file a specific written
request. The exchange privilege may be modified or terminated at any time, or
from time to time, by the Fund, upon 60 days written notice to shareholders. If
an exchange is to a new RBB Family Class, the dollar value of Shares acquired
must equal or exceed the Fund's minimum for a new account; if to an existing
account, the dollar value must equal or exceed the Fund's minimum for subsequent
investments. If any amount remains in the RBB Class from which the exchange is
being made, such amount must not drop below the minimum account value required
by the Fund.
Retirement Plans
RBB Family Shares may be purchased in conjunction with individual
retirement accounts ("IRAs") and rollover IRAs where PNC Bank acts as custodian.
For further information as to applications and annual fees, contact the
Distributor or an Authorized Dealer. To determine whether the benefits of an IRA
are available and/or appropriate, a shareholder should consult with a tax
adviser.
HOW TO REDEEM SHARES
Normal Redemption
Shareholders may redeem for cash some or all of their Shares of the
Fund at any time. To do so, a written request in proper form must be sent
directly to The RBB Family c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899.
There is no charge for a redemption. Shareholders may also place redemption
requests through an Authorized Dealer, but such Authorized Dealer might charge a
fee for this service.
<PAGE>45
A request for redemption must be signed by all persons in whose names
the Shares are registered. Signatures must conform exactly to the account
registration. If the proceeds of the redemption would exceed $10,000, or if the
proceeds are not to be paid to the record owner at the record address, or if the
shareholder is a corporation, partnership, trust or fiduciary, signature(s) must
be guaranteed. A signature guarantee verifies the authenticity of your signature
and the guarantor must be an eligible guarantor. In order to be eligible, the
guarantor must be a participant in a STAMP program (a Securities Transfer Agents
Medallion Program). You may call the Transfer Agent at (800) 447-1139 to
determine whether the entity that will guarantee the signature is an eligible
guarantor.
Generally, a properly signed written request with any required
signature guarantee is all that is required for a redemption. In some cases,
however, other documents may be necessary. For example, the Fund will issue
share certificates for any of the Classes if a written request has been made to
the Fund's transfer agent. In the case of shareholders holding share
certificates, the certificates for the shares being redeemed must accompany the
redemption request. Additional documentary evidence of authority is also
required by the Fund's transfer agent in the event redemption is requested by a
corporation, partnership, trust, fiduciary, executor or administrator.
Redemption by Check
An investor holding Shares of a Money Market Class may request that
the Fund provide redemption checks drawn on such Money Market Class.
Shareholders holding share certificates for Money Market Shares are not eligible
for check redemption privileges because share certificates must accompany all
redemption requests. Checks will be sent only to the registered owner(s) and
only to the address of record. Investors may issue checks made payable to the
order of any person in the amount of $100 or more. The redemption is not
effective until the check is processed and cleared by the transfer agent, and
dividends are earned until the redemption is effected. Because dividends accrue
daily, a check should not be used to close an account as a small balance is
likely to result. There is no charge to the investor for redemption by check. If
a shareholder who has check redemption privileges exchanges funds from one Money
Market Class into another Money Market Class, he or she will automatically
receive a checkbook for the new account (allow three to four weeks for
delivery). The Fund or PNC Bank may terminate this redemption service at any
time, and neither shall incur any liability for honoring checks, for effecting
redemptions to pay checks, or for returning checks which have not been accepted.
<PAGE>46
This check redemption privilege applies only to Shares of the Money Market
Portfolios.
Systematic Withdrawal Plan
If your account has a value of at least $10,000, you may establish a
Systematic Withdrawal Plan for any of the RBB Family Classes and receive regular
periodic payments. A request to establish a Systematic Withdrawal Plan must be
submitted in writing to the Fund's transfer agent, PFPC, P.O. Box 8950,
Wilmington, Delaware 19899. Shareholders holding share certificates are not
eligible to establish a Systematic Withdrawal Plan because share certificates
must accompany all withdrawal requests. Each withdrawal redemption will be
processed about the 25th of the month and mailed as soon as possible thereafter.
There are no service charges for maintenance; the minimum amount that you may
withdraw each period is $100. (This is merely the minimum amount allowed and
should not be mistaken for a recommended amount.) The holder of a Systematic
Withdrawal Plan will have any income dividends and any capital gains
distributions reinvested in full and fractional shares at net asset value. To
provide funds for payment, shares of the appropriate Class will be redeemed in
such amount as is necessary at the redemption price, which is net asset value
next determined after the Fund's receipt of a redemption request. Redemption of
shares may reduce or possibly exhaust the Shares in your account, particularly
in the event of a market decline. As with other redemptions, a redemption to
make a withdrawal payment is a sale for Federal income tax purposes. Payments
made pursuant to a Systematic Withdrawal Plan cannot be considered as actual
yield or income since part of such payments may be a return of capital.
The maintenance of a Systematic Withdrawal Plan for a Class
concurrently with purchases of additional shares of that Class would be
disadvantageous because of the sales commission involved in the additional
purchases. You will ordinarily not be allowed to make additional investments of
less than the aggregate annual withdrawals under the Systematic Withdrawal Plan
during the time you have the plan in effect and, while a Systematic Withdrawal
Plan is in effect, you may not make periodic investments under Automatic
Investing. You will receive a confirmation of each transaction showing the
sources of the payment and the share and cash balance remaining in your plan.
The plan may be terminated on written notice by the shareholder or by the Fund
with respect to the applicable Class and it will terminate automatically if all
Shares are liquidated or withdrawn from the account or upon the death or
incapacity of the shareholder. You may change the amount and schedule of
withdrawal payments or suspend such payments by giving written
<PAGE>47
notice to the Fund's transfer agent at least seven business days prior to the
end of the month preceding a scheduled payment.
Involuntary Redemption
The Fund reserves the right to redeem a shareholder's account in any
Class at any time the net asset value of the account in such Class falls below
$500 as the result of a redemption or an exchange request. Shareholders will be
notified in writing that the value of their account in a Class is less than $500
and will be allowed 30 days to make additional investments before the redemption
is processed.
Payment of Redemption Proceeds
In all cases, the redemption price is the net asset value per share
next determined after the request for redemption is received in proper form by
the Fund's transfer agent. Payment for Shares redeemed is made by check mailed
within seven days after acceptance by the Fund's transfer agent of the request
and any other necessary documents in proper order. Such payment may be postponed
or the right of redemption suspended as provided by the rules of the SEC. If the
Shares to be redeemed have been recently purchased by check, the Fund's transfer
agent may delay mailing a redemption check, which may be a period of up to 15
days, pending a determination that the check has cleared.
NET ASSET VALUE
The net asset value for each Portfolio is calculated by adding the
value of all its securities to cash and other assets, deducting its actual and
accrued liabilities and dividing by the total number of Shares outstanding. The
net asset value of each Non-Money Market Portfolio is calculated as of 4:00 p.m.
Eastern Time on each Business Day. The net asset value of each Money Market
Portfolio is determined twice each Money Market Business Day, once as of 12:00
noon Eastern Time and once as of 4:00 p.m. Eastern Time.
Valuation of securities held by each of the Non-Money Market
Portfolios 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
<PAGE>48
value as determined in good faith by or under the direction of the Fund'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.
The Fund seeks to maintain for each of the Money Market Portfolios a
net asset value of $1.00 per Share for purpose of purchases and redemptions and
values its portfolio securities on the basis of the amortized cost method of
valuation described in the Statement of Additional Information under the heading
"Valuation of Shares." There can be no assurance that net asset value per Share
of the Money Market Portfolios will not vary.
With the approval of the Board of Directors, a Portfolio may use a
pricing service, bank or broker-dealer experienced in such matters to value the
Portfolio'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 each of the Portfolios to each
Portfolio's shareholders. All distributions are reinvested in the form of
additional full and fractional Shares of the relevant Class unless a shareholder
elects otherwise.
The net investment income (not including any net short-term capital
gains) earned by each of the Money Market Portfolios will be declared as a
dividend on a daily basis and paid monthly, and are payable to shareholders of
record immediately prior to the determination of net asset value made as of 4:00
p.m. Eastern Time. Each of the Tax-Free and Government Securities Portfolios
will declare and pay dividends from net investment income monthly, generally
near the end of each month. 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 Portfolios and their
shareholders and is not intended as a substitute for careful tax planning.
Accordingly, investors in the Portfolios should consult their tax advisers with
specific reference to their own tax situation.
<PAGE>49
Each Portfolio will elect to be taxed as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as amended. So
long as a Portfolio qualifies for this tax treatment, such Portfolio 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 any
Portfolio 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 Tax-Free Portfolio and Municipal Money Market Portfolio intend to
pay substantially all of their dividends as "exempt interest dividends."
Investors in these Portfolios 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 Portfolio may invest up to 20% of
its net assets and the Municipal Money Market Portfolio may invest up to 100% 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
<PAGE>50
into account in determining the taxability of their benefit payments.
The Tax-Free Portfolio and Municipal Money Market Portfolio will
determine annually the percentages of their respective net investment income
which are fully tax-exempt, which constitute an item of tax preference for
alternative minimum tax purposes, and which are 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 Fund will send written notices to shareholders annually regarding
the tax status of distributions made by each Portfolio. 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. Each Portfolio 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
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. The foregoing considerations do not apply
to the purchase of Shares of the Money Market Portfolios that are offered at a
constant net asset value of $1.00 per share.
Shareholders who exchange Shares representing interests in one
Portfolio for Shares representing interests in another Portfolio 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 one Portfolio is not intended to constitute a
balanced investment program. Shares of the Tax-Free Portfolio and Municipal
Money Market Portfolio 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
<PAGE>51
the Portfolios' 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 one or more Portfolios of
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.
DESCRIPTION OF SHARES
The Fund has authorized capital of thirty billion shares of Common
Stock, $.001 par value per share, of which 10.7 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 (Strategic), 500 million
shares are classified as Class V Common Stock (Emerging), 100 million shares are
classified as Class W Common Stock (Laffer/Canto Equity), 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
<PAGE>52
Duration), 100 million shares are classified as Class DD (Growth & Income Series
2), 100 million shares are classified as Class EE Balanced Series 2), 1 million
shares are classified as Class Alpha 1 Common Stock (Money), 1 million shares
are classified as Class Alpha 2 Common Stock (Municipal Money), 1 million shares
are classified as Class Alpha 3 Common Stock (U.S. Government Money), 1 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 Class D Common Stock, Class E
Common Stock, Class F Common Stock and Class P Common Stock constitute the RBB
Family Classes. Under the Fund'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 sixteen 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,
<PAGE>53
Laffer/Canto Family, the Alpha Family, the Beta Family, the Gamma Family, the
Delta Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta
Family. The Warburg Pincus Family represents interests in the Growth & Income
Fund and Balanced Fund Portfolios; 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; the 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 Laffer/Canto Family
represents interests in Laffer/Canto Equity Fund Portfolio; and the Alpha, Beta,
Gamma, Delta, Epsilon, Zeta, Eta and Theta Families (collectively, the
"Additional Families") represent interests in the Money Market, Municipal Money
Market, Government Obligations Money Market and New York Municipal Money Market
Portfolios.
The Fund offers multiple classes of shares in each of its Money Market
Portfolio, Municipal Money Market Portfolio, Government Obligations Money Market
Portfolio and New York Municipal Money Market Portfolio to expand its marketing
alternatives and to broaden its range of services to different investors. The
expenses of the various classes within these Portfolios vary based upon the
services provided. For example, shareholders in the Sansom Street Family bear
non-12b-1 shareholder servicing fees in the amount of .10% of the daily net
asset value of their shares. Each class of Common Stock of the Fund has a
separate Rule 12b-1 distribution plan. Under the Distribution Contracts entered
into with the Distributor and pursuant to each of the distribution plans, the
Distributor is entitled to receive from the relevant Class as compensation for
distribution services provided to the various families a distribution fee based
on average daily net assets in the following amounts: Cash Preservation Family:
.40%, Sansom Street Family: Municipal Money Market and Government Obligations
Money Market Portfolios .05% and Money Market up to .20%, Bedford Family: .60%,
Bradford Family: .60% and Additional Families: .60%. A salesperson or any other
person entitled to receive compensation for servicing Fund shares may receive
different compensation with respect to different classes in a Portfolio of the
Fund. For the year ended August 31, 1994, the expense ratio of each of the Cash
Preservation Class, the Sansom Street Class and the Bedford Class of the Money
Market Portfolio, taking into account fee waivers and reimbursement of expenses,
was as follows: Cash Preservation: .95% (reflecting waivers of 1.57%), Sansom
Street: .39% (reflecting waivers of .21%), and Bedford:
<PAGE>54
.95% (reflecting waivers of .21%); and for each of the Cash Preservation, Sansom
Street, Bedford and Bradford Classes of the Municipal Money Market Portfolio,
taking into account fee waivers and reimbursement of expenses, was as follows:
Cash Preservation: .98% (reflecting waivers of 10.54%), Bedford: .77%
(reflecting waivers of .35%) and Bradford: .77% (reflecting waivers of .34%),
Sansom Street: no expense ratio is given for the Sansom Street Class of the
Municipal Money Market Portfolio as no shares of such class had been sold to the
public during the fiscal period ended August 31, 1994. The ratio of net
investment income to average net assets for each of the Cash Preservation Class,
the Sansom Street Class and the Bedford Class in the Money Market Portfolio, was
as follows: Cash Preservation: 2.78%, Sansom Street: 3.34% and Bedford: 2.78%;
for the Municipal Money Market Portfolio, was as follows: Cash Preservation:
1.74%, Bedford: 1.95% and Bradford: 1.95%, Sansom Street: no ratio of net
investment income to average net assets is given for the Sansom Street Class of
the Municipal Money Market Portfolio as no shares of such class had been sold to
the public during the fiscal period ended August 31, 1994. No expense ratio is
given for the Alpha, Beta, Gamma, Delta, Epsilon, Zeta, Eta and Theta Classes of
the Money Market and Municipal Money Market Portfolios as no shares of such
classes had been sold to the public during the year ended August 31, 1994.
Shares of a class of Common Stock in the Cash Preservation Family may
be exchanged for another class of Common Stock in such Family as well as for
shares of the Non-Money Market Classes of Common Stock of the RBB Family.
Otherwise, no exchanges between Families are permitted.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION
INCORPORATED HEREIN RELATE PRIMARILY TO THE RBB FAMILY CLASSES AND DESCRIBE ONLY
THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS
RELATING TO THE RBB FAMILY CLASSES.
Each share that represents an interest in a Portfolio 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
Portfolio. Shares of the Fund do not have preemptive or conversion rights. When
issued for payment as described in this Prospectus, shares of the Fund will be
fully paid and non-assessable.
The Fund 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
<PAGE>55
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,
the Fund will assist in shareholder communication in such matters.
Holders of shares of each of the Portfolios will vote in the aggregate
and not by class on all matters, except where otherwise required by law.
Further, shareholders of all investment portfolios of 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. (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 the Fund 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 the Fund
may elect all of the directors.
As of September 30, 1994, to the Fund's knowledge, no person held of
record or beneficially 25% or more of the outstanding shares of all classes of
the Fund, although as of such date, Boston Financial Data Services owned more
than 24% of the outstanding shares of the Warburg Pincus Family Class
representing an interest in the Growth & Income Fund, Warburg, Pincus
Counsellors, Inc. owned more than 25% of the outstanding shares of the Warburg
Pincus Family Class representing an interest in the Balanced Fund; Seymour Fein
owned more than 25% of the outstanding shares of the RBB Family Class
representing an interest in the Municipal Money Market Portfolio; Jewish Family
and Childrens Agency of Philadelphia Capital Campaign owned more than 25% of the
outstanding shares of the Cash Preservation Family Class representing an
interest in the Money Market Portfolio; Deborah C. Brown Trustee/Barbara J.C.
Curtis, Trustee, the Crowe Trust owned more than 25% of the outstanding shares
of the Cash Preservation Family Class representing an interest in the Municipal
Money Market Portfolio; Wasner & Co. for the account of Paine Webber Managed
Assets - Sundry Holdings owned more than 25% of the outstanding shares of the
Sansom Street Class representing an interest in the Money Market Portfolio; John
Hancock Clearing Corporation owned more than 25% of the outstanding shares of
the Laffer/Canto Family Class representing an interest in the Laffer/Canto
Equity Fund Portfolio; Home Insurance Company owned more than 25% of the
outstanding shares of the RBB Family Class representing an interest in the
Government Securities Portfolio; State of Oregon owned more than 25% of the
outstanding shares of the BEA Family class representing an interest in the BEA
Strategic Fixed Income Portfolio; Bank of New York, Trust APU Buckeye Pipeline
owned more than 25% of the outstanding shares of the BEA Family class
<PAGE>56
representing an interest in the BEA U.S. Core Equity Portfolio; New England UFCW
& Employer's Pension Fund Board of Trustees and Bankers Trust Peckiney
Corporation Pension Master Trust each owned more than 25% of the outstanding
shares of the BEA Family class representing an interest in the BEA U.S. Core
Fixed Income Portfolio and Bank of New York Eastern Enterprises Retirement Plan
Trust owned more than 25% of the outstanding shares of the BEA Family class
representing an interest in the BEA Global Fixed Income Portfolio.
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 should be addressed to PFPC, the
Fund's transfer agent, Bellevue Park Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809, toll-free (800) 447-1139 (in Delaware call collect
(302) 791-1149).
Share Certificates
The Fund will issue share certificates for any of the Classes only
upon the written request of a shareholder sent to PFPC.
Performance Information
From time to time, each of the Non-Money Market Portfolios 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 a Non-Money
Market Portfolio'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 a Non-Money Market Portfolio. 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, net of the maximum sales charge and other fees, according to a required
standardized calculation. The standard calculation is required by the SEC to
provide consistency and comparability in investment company advertising. The
Non-Money Market Portfolios may also from time to time
<PAGE>57
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 Portfolio'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. For these
purposes, the performance of a Portfolio, as well as the performance published
by such services or experienced by such indices, will usually not reflect sales
charges, the inclusion of which would reduce performance results. 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. If a
Portfolio advertises non-standard computations, however, the Portfolio will
disclose the maximum sales charge and will also disclose that the performance
data do not reflect sales charges and that inclusion of sales charges would
reduce the performance quoted.
From time to time, each of the Non-Money Market Portfolios may also
advertise its "30-day yield." The yield of a Non-Money Market Portfolio refers
to the income generated by an investment in the Fund over the 30-day period
identified in the advertisement, and is computed by dividing the net investment
income per share earned by a Non-Money Market Portfolio 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 Tax-Free
Portfolio's "tax-equivalent yield" may also be quoted from time to time, which
shows the level of taxable yield needed to produce an after-tax equivalent to
such Portfolio's tax-free yield. This is done by increasing such Portfolio's
yield (calculated as above) by the amount necessary to reflect the payment of
Federal income tax at a stated tax rate.
From time to time each of the Money Market Portfolios may advertise
its "yield" and "effective yield." Both yield figures are based on historical
earnings and are not intended to indicate future performance. The "yield" of
either of the Money Market Portfolios refers to the income generated by an
investment in such a Portfolio over a seven-day period (which period will be
stated in the advertisement). This income is then "annualized." That is, the
amount of income generated by the investment during that week is assumed to be
generated each week over a 52-week
<PAGE>58
period and is shown as a percentage of the investment. The "effective yield" is
calculated similarly but, when annualized, the income earned by an investment in
such a Portfolio is assumed to be reinvested. The "effective yield" will be
slightly higher than the "yield" because of the compounding effect of this
assumed reinvestment. The Municipal Money Market Portfolio's "tax-equivalent
yield" may also be quoted from time to time, which shows the level of taxable
yield needed to produce an after-tax equivalent to such Portfolio's tax-free
yield. This is done by increasing such Portfolio's yield (calculated as above)
by the amount necessary to reflect the payment of Federal income tax at a stated
tax rate.
The yield on Shares of any of the Portfolios will fluctuate and is 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 a
Portfolio are not reflected in the yields on a Portfolio's Shares, and such
fees, if charged, will reduce the actual return received by shareholders on
their investments. The yield on Shares of the RBB Family Classes may differ from
yields on shares of other classes of the Fund that also represent interests in
the same Portfolio depending on the allocation of expenses to each of the
classes of that Portfolio. See "Expenses."
<PAGE>A-1
APPENDIX A
RATINGS OF DEBT SECURITIES
STANDARD & POOR'S CORPORATION
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
B predominantly speculative with respect to capacity to pay interest and
CCC repay principal in accordance with the terms of the obligation. 'BB'
CC indicates the lowest degree of 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.
<PAGE>A-2
(+) The ratings from 'AAA' or 'CCC' may be modified by the addition of a
or 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.
Notes
Note rating symbols are as follows:
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.
<PAGE>A-3
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:
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.
<PAGE>A-4
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.
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.
<PAGE>A-5
Baa
Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. 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.
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.
<PAGE>A-6
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.
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
<PAGE>A-7
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.
<PAGE>
THE RBB FAMILY NEW ACCOUNT APPLICATION
Mail completed application to:
PFPC - Attention: The RBB Family, P.O. Box 8950, Wilmington, DE 19899
1. REGISTRATION. Please Print
__________________________________________________ __Individual __Trust
Owner
__________________________________________________ __Joint Tenant __Corporation
Co-Owner*, minor, trust
__________________________________________________ __Custodian __Other _____
Street Address
__________________________________________________ __UGMA __(State)
City State Zip Code
* For joint registration, both must sign. The registration will be as joint
tenants with the right of survivorship and not as tenants in common, unless
otherwise stated.
- -------------------------------------------------------------------------------
2. INVESTMENTS. Enclosed is my check for $ ____ (minimum of $1,000 per
portfolio) made payable to "The RBB Family"
Government Securities
Portfolio $ __________
Money Market Portfolio $ __________
Tax-Free Portfolio $ __________
Municipal Money Market
Portfolio $ __________
My account being established with this application qualifies for a reduced sales
charge with one of the following privileges:
__ Right of Accumulation - I agree for Right of Accumulation reduced sales
charges based on the following accounts in the RBB Family Classes
---------- ---------- ---------- ----------
Portfolio Account No. Portfolio Account No.
__ Letter of Intent - I agree to the Letter of Intent provisions in the
prospectus.
I plan to invest during a 13-month period a dollar amount of at least $
________. ($100,000 minimum)
- --------------------------------------------------------------------------------
3. TAX IDENTIFICATION
Under penalties of perjury, I certify with my signature below that the number
shown in this section of the application is my correct taxpayer identification
number and that I am not subject to backup withholdings as a result of a failure
to report all interest or dividends, or the Internal Revenue Service has
notified me that I am no longer subject to backup withholding.
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If you are subject to backup withholding, check the box in front of the
following statement.
__ The Internal Revenue Service has notified me that I am subject to backup
withholding.
__________________________ or _____________________or ________________________
(Owner's Social Security #) (Tax Identification #) (Minor's Social Security #)
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4. OPTIONS
A. DIVIDEND ELECTION.
Unless you elect otherwise, all dividends and capital gains distributions will
be automatically reinvested in additional shares. If you prefer to be paid in
cash each month check the appropriate box below. Pay all:
___ dividends and capital gains in cash. ___ dividends in cash and reinvest
capital gains.
___ capital gains in cash and reinvest dividends.
___ I request the above distributions be sent to the special payee whose
address is specified in Section B below.
B. SYSTEMATIC WITHDRAWAL
___ Systematic withdrawal plan minimum account of $10,000 in shares at the
current offering price. Minimum withdrawal $100. Each withdrawal redemption will
be processed about the 25th of the month and mailed as soon as possible
thereafter. Shareholders holding share certificates are not eligible for the
Systematic Withdrawal Plan because share certificates must accompany all
withdrawal requests.
Start (month) _______ $(amount) ____
___Monthly ___Quarterly ___Semi-annually ___Annually
Provide the following information only if distribution or withdrawal checks are
to be payable to a person or organization different than as registered.
Name of Bank or Individual: ________________________
Bank Account # (if applicable)________
Street _______________________________ City __________________
State _________ Zip________
C. TELEPHONE EXCHANGE
Your account will automatically provide for telephone exchange of one RBB Family
Class for shares of another RBB Family Class. Then, when you wish to exchange
shares, all you need to do is call PFPC Inc. ("PFPC"), toll-free at (800)
447-1139 (in Delaware call collect (302) 791-1149). Shareholders holding share
certificates may not exchange shares by telephone because share certificates
must accompany all exchange requests. The same registration and address will be
used as listed on this form under "Registration." It is understood that neither
PFPC nor the Fund will be liable for any loss, liability, cost or expense for
following the procedures described below or for following instructions
communicated by telephone that it reasonably believes to be genuine. If you do
NOT wish this privilege, please check this box.
___
The Fund's telephone transaction procedures include the following measures:
(1) requiring the appropriate telephone transaction privilege forms; (2)
requiring the caller to provide the names of the account owners, the account
social security number and
<PAGE>
name of the fund, all of which must match the Fund's records; (3) requiring the
Fund's service representative to complete a telephone transaction form, listing
all of the above caller identification information; (4) permitting exchanges
only if the two account registrations are identical; (5) requiring that
redemption proceeds be sent only by check to the account owners of record at the
address of record, or by wire only to the owners of record at the bank account
of record; (6) sending a written confirmation for each telephone transaction to
the owners of record at the address of record within five (5) business days of
the call; and maintaining tapes of telephone transactions for six months, if the
fund elects to record shareholder telephone transactions.
For accounts held of record by a broker-dealer, trustee, custodian or other
agent, additional documentation or information regarding the scope of a caller's
authority is required. Finally, for telephone transactions in accounts held
jointly, additional information regarding other account holders is required.
Telephone transactions will not be permitted in connection with IRA or other
retirement plan accounts or by attorney-in-fact under power of attorney.
D. AUTOMATIC INVESTING
This program provides for investments to be made automatically, by authorizing
PFPC to withdraw funds from your bank account. An initial minimum investment of
$1,000, and subsequent investment of at least $100 are required. The program
requires additional information so that PFPC may contact your bank to make sure
the arrangement is properly established. This may not be used with a Systematic
Withdrawal Program.
___ Check here and the proper form will be sent to you.
E. FREE CHECK WRITING PRIVILEGE
___ Check box if you wish to take advantage of the Free Check-Writing Privilege.
Shareholders holding share certificates are not eligible for check-writing
privileges because share certificates must accompany all transaction requests.
This privilege applies only to shares of the Money Market Portfolios. If you
have checked the box above, please be sure to complete the signature card below.
Your checkbook should arrive within three to four weeks. A separate checkbook is
issued for each portfolio.
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5. SIGNATURES
Citizenship: ___ U.S. ___ Other ______________
Please provide Phone Number (___) __________
Sign below exactly as printed in Registration.
I (we) am (are) of legal age and have read the prospectus. I (we) hereby certify
that each of the persons listed below has been duly elected, and is now legally
holding the office set below his name and has the authority to make this
authorization.
Please print titles below if signing on behalf of a business or trust.
- ------------------------------------ -------------------------------
(Signature) (Signature)
- ---------------------------------------------- --------------------------------
(President, Trustee, General Partner or Agent) (Co-owner, Secretary of
Corporation, Co-trustee, etc).
Please turn over to complete Application
<PAGE>
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THE RBB FAMILY SIGNATURE CARD
Complete only if check-writing privilege is selected.
Registration ______________________________________________________________
______________________________________________________________
Please fill out exactly as in "Registration" in Section 1 of the New Account
Application
Authorizing signature(s)* Date Signed: _________________________
1. ___________________________ 2. ___________________________
___ Check if one signature is required. ___ Check if two signatures are
required.
* All owners must sign. If a corporation, a corporate resolution naming the
individual(s) authorized above must accompany this signature card.
For Internal Use of PFPC Inc. only: Act. # _____________
CHECK-WRITING CONDITIONS
I/we hereby authorize PNC Bank, N.A. ("PNC Bank") to honor checks drawn by me/us
on this (these) account(s). I/we fully understand that:
(1) if this card is signed by more than one person, all checks will require all
signatures unless indicated to the contrary on the reverse on this card;
(2) if any of the shares in this (these) account(s) is (are) represented by
share certificates, this privilege does not apply;
(3) this privilege applies only to shares of the Money Market Portfolios of the
RBB Family:
(4) checks must be drawn for $100 or more;
(5) this privilege may be terminated at any time by PNC Bank or the Fund, and
neither shall incur any liability to me/us for honoring such checks, for
effecting redemptions to pay such checks, or for returning checks which
have not been accepted; and
(6) this privilege is subject to the terms and conditions set forth in the
prospectus of the RBB Family.
For assistance in completing this Application call COUNSELLORS (800)
888-9723
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6. INVESTMENT DEALER MUST BE COMPLETED BY DEALER
- ----------------------------------- --------------------------------------------
Firm Name Representative's Name (print)
- ---------------------------------- --------------------------------------------
Branch Street Address Representative Number
- ---------------------------------- --------------------------------------------
Representative's Signature Date
For assistance in completing this Application call COUNSELLORS (800)
888-9723
