(LOGO)
VALLEY FORGE CAPITAL HOLDINGS, INC.
MONEY MARKET PORTFOLIO
February 27, 1995
Prospectus and Summary
Description
of the Money Market Portfolio
of The RBB FUND, INC.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO 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 INFORMATION OR 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.
INVESTMENT ADVISER
PNC Institutional Management
Corporation
Wilmington, Delaware
CUSTODIAN
PNC Bank, National Association
Philadelphia, Pennsylvania
TRANSFER AGENT
PFPC Inc.
Wilmington, Delaware
COUNSEL
Ballard Spahr Andrews & Ingersoll
Philadelphia, Pennsylvania
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
Philadelphia, Pennsylvania
<PAGE>
MONEY MARKET PORTFOLIO OF THE RBB FUND, INC.
PROSPECTUS - FEBRUARY 27, 1995
The class of common stock ("Bedford Shares" or the "Shares") of The RBB
Fund, Inc. (the "Fund"), an open-end management investment company,
offered by this Prospectus represent interests in the Fund's Money
Market Portfolio, (the "Money Market Portfolio").
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.
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. THERE CAN BE NO ASSURANCE THAT THE MONEY MARKET PORTFOLIO
WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
Counsellors Securities Inc. acts as distributor for the Fund. PNC
Institutional Management Corporation serves as investment adviser for
the Fund, PNC Bank, National Association serves as sub-advisor for the
Money Market Portfolio and custodian for the Fund and PFPC Inc. serves
as the transfer and dividend disbursing agent for the Fund.
This Prospectus contains concise information that a prospective investor
needs to know before investing. Please keep it for future reference. A
Statement of Additional Information, dated February 27, 1995, has been
filed with the Securities and Exchange Commission and is incorporated by
reference in this Prospectus. It may be obtained upon request 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.
<PAGE>
CONTENTS
Page
Introduction 3
Financial Highlights 6
The Fund 7
Investment Objectives and Policies 7
Purchase and Redemption of Shares 13
Net Asset Value 20
Management 21
Distribution of Shares 23
Dividends and Distributions 24
Taxes 24
Description of Shares 25
Other Information 29
<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. Shares of the class of the Fund (the "Bedford Class" or the
"Class") offered by this Prospectus represent interests in the Fund's
Money Market Portfolio (the "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 stability of principal. It seeks to achieve such objective
by investing in a diversified portfolio of U.S. dollar-denominated money
market instruments which meet certain ratings criteria and present
minimal credit risks. 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.
The Money Market Portfolio seeks to maintain a net asset value of $1.00
per share; however, there can be no assurance that the Money Market
Portfolio will be able to maintain a stable net asset value of $1.00 per
share.
The Fund's investment adviser is PNC Institutional Management
Corporation ("PIMC"). PNC Bank, National Association ("PNC Bank") serves
as sub-advisor to the Money Market Portfolio and custodian to the Fund
and PFPC Inc. ("PFPC") serves as the transfer and dividend disbursing
agent to the Fund. Counsellors Securities Inc. (the "Distributor") acts
as distributor of the Fund's Shares.
An investor may purchase and redeem Shares of the Money Market Portfolio
through his broker or by direct purchases or redemptions. See "Purchase
and Redemption of Shares."
An investment in the Shares is subject to certain risks, as set forth in
detail under "Investment Objectives and Policies." The Money Market
Portfolio, 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 and the lending of securities. All of these transactions
involve certain special risks, as set forth under "Investment Objectives
and Policies."
For more detailed information of how to purchase or redeem Bedford
Shares, please refer to the section of this Prospectus entitled
"Purchase and Redemption of Shares."
<PAGE> 3
FEE TABLE
Annual Fund Operating Expenses (Bedford Shares)After Expense
Reimbursements and Waivers
Money Market
Portfolio
____________
Management fees (after waivers)* .13%
12b-1 fees (after waivers)* .60
Other Expenses (after reimbursements) .24
---
Total Fund Operating Expenses (Bedford Class) .97%
===
* Management fees and 12b-1 fees are based on average daily net
assets and are calculated daily and paid monthly.
The caption "Other Expenses" does not include extraordinary expenses as
determined by use of generally accepted accounting principles.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the end of each time
period:
1 Year 3 Years 5 Years 10 Years
______ ______ ______ ________
Money Market* $10 $31 $54 $119
* Other classes of this Money Market Portfolio are sold with
different fees and expenses.
The Fee Table is designed to assist an investor in understanding the
various costs and expenses that an investor in the Bedford Shares of the
Fund will bear directly or indirectly. (For more complete descriptions
of the various costs and expenses, see "Management-Investment Adviser
and Sub-Advisor," and "Distribution of Shares" below.) The expense
figures are based on actual costs and fees charged to the Bedford
Shares. The Fee Table reflects a voluntary waiver of Management fees for
the Money Market Portfolio. However, there can be no assurance that any
future waivers of Management fees will not vary from the figure
reflected in the Fee Table. To the extent that any service providers
assume additional expenses of the Money Market Portfolio, such
assumption will have the effect of lowering the Money Market Portfolio's
overall expense ratio and increasing its yield to investors. Absent fee
waivers and reimbursements, expenses for the year ended August 31, 1994,
were as follows:
<PAGE> 4
ANNUAL FUND OPERATING EXPENSES (BEDFORD SHARES)
BEFORE EXPENSE REIMBURSEMENTS AND WAIVERS
Money Market
Portfolio
____________
Management fees .38%
12b-1 fees .60
Other Expenses .25
__
Total Fund Operating Expenses (Bedford Class) 1.23%
__
__
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 (Bedford Shares) 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.
From time to time the Money Market Portfolio advertises its "yield" and
"effective yield." Both yield figures are based on historical earnings
and are not intended to indicate future performance. The "yield" of the
Money Market Portfolio refers to the income generated by an investment
in the Money Market 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 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
the Money Market 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 yield of any investment is generally a function of portfolio quality
and maturity, type of investment and operating expenses. The yield on
Bedford Shares will fluctuate and is not necessarily representative of
future results. Any fees charged by broker/dealers directly to their
customers in connection with investments in Bedford Shares are not
reflected in the yields of the Bedford Shares, and such fees, if
charged, will reduce the actual return received by shareholders on their
investments. The yield on Shares of the Bedford Class may differ from
yields on shares of other classes of the Fund that also represent
interests in the same Money Market Portfolio depending on the allocation
of expenses to each class of the Money Market Portfolio. See "Expenses."
<PAGE> 5
FINANCIAL HIGHLIGHTS
The table below sets forth certain information concerning the investment
results of the Bedford Shares representing interests in the Money Market
Portfolio for the years indicated. The financial data included in this
table for each of the periods ended August 31, 1990 through 1994 are a
part of the Fund's financial statement for the Money Market Portfolio
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 statement.
The financial data for the period ending August 31, 1989 is a part of a
previous financial statement audited by Coopers & Lybrand L.L.P. The
financial data included in this table should be read in conjunction with
the financial statement and related notes included in the Statement of
Additional Information.
<TABLE>
FINANCIAL HIGHLIGHTS (C)
FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<CAPTION>
Money Market Portfolio
_________________________
For the For the For the
Year Ended Year Ended Year Ended
August 31, 1994 August 31, 1993 August 31, 1992
_______________ _______________ _______________
<S> <C> <C> <C>
Net asset value, beginning
of period $1.00 $1.00 $1.00
______ ______ ______
Income from investment
operations:
Net investment income 0.0278 0.0243 0.0375
Net gains on securities
(both realized
and unrealized) -- -- 0.0007
______ ______ ______
Total from investment
operations 0.0278 0.0243 0.0382
Less distributions
Dividends (from net
investment income) (0.0278) (0.0243) (0.0375)
Distributions (from
capital gains) -- -- (0.0007)
______ ______ ______
Total distributions (0.0278) (0.0243) (0.0382)
______ ______ ______
Net asset value, end
of period $1.00 $1.00 $1.00
______ ______ ______
______ ______ ______
Total return 2.81% 2.46% 3.89%
Ratios/Supplemental
Data Net assets,
end of period $710,737,481 $782,153,438 $736,841,928
Ratios of expenses to
average net assets .95%(a) .95%(a) .95%(a)
Ratios of net investment
income to average
net assets 2.78% 2.43% 3.75%
Money Market Portfolio
_________________________
For the Period
Sept. 30, 1988
For the For the (Commencement
Year Ended Year Ended of Operations) to
August 31, 1991 August 31, 1990 August 31, 1989
_______________ _______________ _______________
<S> <C> <C> <C>
Net asset value,
beginning of period $1.00 $1.00 $1.00
______ ______ ______
Income from investment
operations:
Net investment income 0.0629 0.0765 0.0779
Net gains on
securities
(both realized
and unrealized) -- -- --
______ ______ ______
Total from investment
operations 0.0629 0.0765 0.0779
Less distributions
Dividends (from net
investment income) (0.0629) (0.0765) (0.0779)
Distributions (from
capital gains) -- -- --
______ ______ ______
Total distributions (0.0629) (0.0765) (0.0779)
______ ______ ______
Net asset value, end
of period $1.00 $1.00 $1.00
______ ______ ______
______ ______ ______
Total return 6.48% 7.92% 8.81%(b)
Ratios/Supplemental
Data Net assets,
end of period $747,530,400 $709,757,157 $152,310,825
Ratios of expenses to
average net assets .92%(a) .92%(a) .93%(a)(b)
Ratios of net
investment income to
average net assets 6.29% 7.65% 8.61%(b)
<FN>
(a) Without the waiver of advisory 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 1.16%, 1.19%,
1.20%, 1.17% and 1.16% for the years ended August 31, 1994, 1993, 1992,
1991 and 1990, respectively, and 1.27% annualized for the period ended
August 31, 1989.
(b) Annualized.
(c) Financial Highlights relate solely to the Class of shares within
the Money Market Portfolio.
</FN>
</TABLE>
<PAGE> 6
THE FUND
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. The Bedford Class of
Shares offered by this Prospectus represent interests in the Fund's
Money Market Portfolio. The Fund was incorporated in Maryland on
February 29, 1988.
INVESTMENT OBJECTIVES AND POLICIES
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 stability of principal. Portfolio obligations held by the
Money Market Portfolio have remaining maturities of 397 calendar days or
less (exclusive of securities subject to repurchase agreements). 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 that meet certain
ratings criteria and present minimal credit risks to the Money Market
Portfolio. See "Eligible Securities." The following descriptions
illustrate the types of Money Market Instruments in which the Money
Market Portfolio invests.
Bank Obligations. The Money Market 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, including U.S. dollar-denominated instruments issued or
supported by the credit of U.S. or foreign banks or savings institutions
having total assets at the time of purchase in excess of $1 billion. The
Money Market Portfolio may invest substantially in obligations of
foreign banks or foreign branches of U.S. banks where the investment
adviser deems the instrument to present minimal credit risks. Such
investments may nevertheless entail risks that are different from those
of investments in domestic obligations of U.S. banks due to differences
in political, regulatory and economic systems and conditions. The Money
Market 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 Money Market 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 the
Statement of Additional Information ("SAI"). The Money Market Portfolio
may also purchase unrated commercial paper provided that such paper is
determined to be of comparable quality by the Money Market Portfolio's
investment adviser in accordance with guidelines approved by the Fund's
Board of Directors. Commercial paper issues in which the Money Market
Portfolio may invest include securities issued by 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 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
<PAGE> 7
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.
The Money Market Portfolio may invest in commercial paper and short-term
notes and corporate bonds that meet the Money Market Portfolio's quality
and maturity restrictions. Commercial paper purchased by the Money
Market 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 Money Market 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 Money Market
Portfolio will be able (at any time or during the 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 Money Market Portfolio might be unable to
dispose of the note because of the absence of an active secondary
market. For this or other reasons, the Money Market Portfolio might
suffer a loss to the extent of the default. The Money Market Portfolio
invests in variable rate demand notes only when the Money Market
Portfolio's investment adviser deems the investment to involve minimal
credit risk. The Money Market Portfolio's investment adviser also
monitors the continuing creditworthiness of issuers of such notes to
determine whether the Money Market Portfolio should continue to hold
such notes.
Repurchase Agreements. The Money Market 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 Money Market Portfolio may enter
into repurchase agreements will be banks which the Money Market
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 Money Market Portfolio's
investment adviser will consider, among other things, whether a
repurchase obligation of a seller involves minimal credit risk to the
Money Market Portfolio in determining whether to have the Money Market
Portfolio enter into a repurchase agreement. The seller under a
repurchase agree-
<PAGE> 8
ment 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 Money Market 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 Money Market Portfolio to possible
loss because of adverse market action or delays in connection with the
disposition of the underlying obligations.
U.S. Government Obligations. The Money Market Portfolio may purchase
obligations issued or guaranteed by the U.S. Government or its agencies
and instrumentalities. Obligations of certain agencies and
instrumentalities of the U.S. Government are backed by the full faith
and credit of the United States. Others are backed by the right of the
issuer to borrow from the U.S. Treasury or are backed only by the credit
of the agency or instrumentality issuing the obligation.
Asset-backed Securities. The Money Market 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 Money Market Portfolio since the remaining maturity of any
asset-backed security acquired will be 397 days or less. Asset-packed
securities are considered an industry for industry concentration
purposes. See "Investment Limitations."
Reverse Repurchase Agreements. The Money Market Portfolio may enter into
reverse repurchase agreements with respect to portfolio securities. At
the time the Money Market 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 Money Market Portfolio
may decline below the price of the securities the Money Market Portfolio
is obligated to repurchase. Reverse repurchase agreements are considered
to be borrowings by the Money Market Portfolio under the 1940 Act.
Municipal Obligations. In addition, the Money Market Portfolio may, when
deemed appropriate by its investment adviser in light of the Money
Market Portfolio's investment objective, invest without limitation in
high quality, short-term municipal obligations ("Municipal
<PAGE> 9
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 Statement of Additional Information under "Investment
Objectives and Policies."
Guaranteed Investment Contracts. The Money Market 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
issuance company and not a separate account. The Money Market
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.
Stand-by Commitments. The Money Market 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 Money Market 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 Money Market Portfolio
will acquire stand-by commitments solely to facilitate portfolio
liquidity and does not intend to exercise its rights thereunder for
trading purposes.
When-Issued Securities. The Money Market Portfolio may purchase
portfolio 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 Money Market 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 at the time 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 Money Market 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
Money Market Portfolio does not intend to purchase when-issued
securities for speculative purposes but only in furtherance of its
investment objective.
Eligible Securities. The Money Market Portfolio will only purchase
"eligible securities" that present minimal credit risks as determined by
the Money Market Portfolio's 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
<PAGE> 10
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 Money Market 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 Money
Market 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 market are not deemed illiquid for purposes of this
limitation. The Money Market 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 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 all outstanding Shares
representing interests in the Money Market Portfolio. Such changes may
result in the Money Market 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. The Money Market Portfolio may
not, however, change the investment limitations summarized below without
such a vote of shareholders. (A more detailed description of the
following investment limitations, together with other investment
limitations that cannot be changed without a vote of shareholders, is
contained in the Statement of Additional Information under "Investment
Objectives and Policies.")
The Money Market Portfolio may not:
1. Purchase any securities other than Money Market Instruments,some
of which may be subject to repurchase agreements, but the Money Market
Portfolio may make interest-bearing savings deposits in amounts not in
excess of 5% of the value of the Money Market Portfolio's assets and may
make time deposits.
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 Money Market Portfolio's assets at the time of
such borrowing, and only if after
<PAGE> 11
such borrowing there is asset coverage of at least 300% for all
borrowings of the Money Market 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 Money
Market Portfolio's assets at the time of such borrowing; or purchase
portfolio securities while borrowings in excess of 5% of the Money
Market Portfolio's net assets are outstanding. (This borrowing provision
is not for investment leverage, but solely to facilitate management of
the Money Market Portfolio's securities by enabling the Money Market
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 Money
Market 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 Money Market 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 securities of any one issuer, other than securities
issued or guaranteed by the U.S. Government or its agencies and
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 Money Market Portfolio,
except that up to 25% of the value of the Money Market Portfolio's total
assets may be invested without regard to such 5% limitation.
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 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
<PAGE> 12
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.
PURCHASE AND REDEMPTION OF SHARES
Purchase Procedures
General. Shares are sold without a sales load on a continuous basis by
the Fund's Distributor. The Distributor is located at 466 Lexington
Avenue, New York, New York. Investors may purchase Shares through an
account maintained by the investor with his brokerage firm (the
"Account") and may also purchase Shares directly by mail or bank wire.
The minimum initial investment is $1,000, and the minimum subsequent
investment is $100. The Fund in its sole discretion may accept or reject
any order for purchases of Shares.
All payments for initial and subsequent investments should be in U.S.
dollars. Purchases will be effected at the net asset value next
determined after PFPC, the Fund's transfer agent, has received a
purchase order in proper form and the Fund's custodian has Federal Funds
immediately available to it. In those cases where payment is made by
check, Federal Funds will generally become available two Business Days
after the check is received. Orders which are accompanied by Federal
Funds, and received by the Fund by 12:00 noon Eastern Time, and orders
as to which payment has been converted into Federal Funds by 12:00 noon
Eastern Time, will be executed as of 12:00 noon that Business Day.
Orders which are accompanied by Federal Funds and received by the Fund
after 12:00 noon Eastern Time but prior to 4:00 p.m. Eastern Time, and
orders as to which payment has been converted into Federal Funds after
12:00 noon Eastern Time but prior to 4:00 p.m. Eastern Time on any
Business Day of the Fund, will be executed as of 4:00 p.m. Eastern Time
on that Business Day but will not be entitled to receive dividends
declared on such Business Day. Orders which are accompanied by Federal
Funds and received by the Fund as of 4:00 p.m. Eastern Time or later,
and orders as to which payment has been converted to Federal Funds as of
4:00 p.m. Eastern Time or later on a Business Day will be processed as
of 12:00 noon Eastern Time on the following Business Day. A "Business
Day" is any day that both the New York Stock Exchange (the "NYSE") and
the Federal Reserve Bank of Philadelphia (the "FRB") are open.
Currently, the NYSE or the FRB are closed on weekends and New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day (observed), Labor Day, Columbus Day, Veterans Day,
Thanksgiving Day and Christmas Day (observed).
<PAGE> 13
Purchases through an Account. Purchases of Shares may be effected
through an investor's Account with his broker through procedures
established in connection with the requirements of Accounts at such
broker. In such event, beneficial ownership of Bedford Shares will be
recorded by the broker and will be reflected in the Account statements
provided by the broker to such investors. A broker may impose minimum
investor Account requirements. Although a broker does not impose a sales
charge for purchases of Shares, depending on the terms of an investor's
Account with his broker, the broker may charge an investor's Account
fees for automatic investment and other services provided to the
Account. Information concerning Account requirements, services and
charges should be obtained from an investor's broker. This Prospectus
should be read in conjunction with any information received from a
broker. Shareholders whose shares are held in the street name account of
a broker/dealer and who desire to transfer such shares to the street
name account of another broker/dealer should contact their current
broker/dealer.
A broker may offer investors maintaining Accounts the ability to
purchase Shares under an automatic purchase program (a "Purchase
Program") established by a participating broker. An investor who
participates in a Purchase Program will have his "free-credit" cash
balances in his Account automatically invested in Shares of the Bedford
Class designated by the investor as the "Primary Bedford Class" for his
Purchase Program. The frequency of investments and the minimum
investment requirement will be established by the broker and the Fund.
In addition, the broker may require a minimum amount of cash and/or
securities to be deposited in an Account for participants in its
Purchase Program. The description of the particular broker's Purchase
Program should be read for details, and any inquiries concerning an
Account under a Purchase Program should be directed to the broker. A
participant in a Purchase Program may change the designation of the
Primary Bedford Class at any time by so instructing his broker.
If a broker makes special arrangements under which orders for Shares are
received by PFPC prior to 12:00 noon Eastern Time, and the broker
guarantees that payment for such Shares will be made in Federal Funds to
the Fund's custodian prior to 4:00 p.m. Eastern Time, on the same day,
such purchase orders will be effective and Shares will be purchased at
the offering price in effect as of 12:00 noon Eastern Time on the date
the purchase order is received by PFPC.
The Money Market Portfolio is also available through Valley Forge
Distributors, Inc. ("Valley Forge Distributors"), a registered broker-
dealer that has entered into a dealer agreement with the Fund's
Distributor. For distribution services with respect to shares of the
Money Market Portfolio held by this firm, the Fund's Distributor pays
Valley Forge Distributors up to .50% of the annual average value of such
accounts. Purchases made through this program do not require customers
to pay a transaction fee.
Direct Purchases. An investor may also make direct investments at any
time in Shares through any broker that has entered into a dealer
agreement with the Distributor (a "Dealer"). An
<PAGE> 14
investor may make an initial investment in Shares by mail by fully
completing and signing an application obtained from a Dealer (the
"Application"), specifying the Valley Forge Money Market Portfolio, and
mailing it, together with a check payable to "The Valley Forge Money
Market Portfolio" c/o PFPC, P.O. Box 8926, Wilmington, Delaware 19899.
An Application will be returned to the investor unless it contains the
name of the Dealer from whom it was obtained. Subsequent purchases may
be made through a Dealer or by forwarding payment to the Fund's transfer
agent at the foregoing address.
Provided that the investment is at least $2,500, an investor may also
purchase Shares by having his bank or Dealer wire Federal Funds to the
Fund's Custodian, PNC Bank. An investor's bank or Dealer may impose a
charge for this service. In order to ensure prompt receipt of an
investor's Federal Funds wire, for an initial investment, it is
important that an investor follows these steps:
A. Telephone the Fund's transfer agent, PFPC, toll-free (800) 797-
6706, and provide them with your name, address, telephone number, Social
Security or Tax Identification Number, the Shares selected, the amount
being wired, and by which bank. PFPC will then provide an investor with
a Fund account number. (Investors with existing accounts should also
notify the Fund's transfer agent prior to wiring funds.)
B. Instruct your bank or Dealer to wire the specified amount,
together with your assigned account number, to the Custodian:
PNC Bank, N.A., Philadelphia, PA
ABA-031000053
FROM: (name of investor)
ACCOUNT NUMBER: (investor's account number with the Money Market
Portfolio)
FOR PURCHASE OF: (name of the portfolio)
AMOUNT: (amount to be invested)
C. Fully complete and sign the Application and mail it to the address
shown thereon. PFPC will not process redemptions until it receives a
fully completed and signed Application.
For subsequent investments, an investor should follow steps A and B
above.
Retirement Plans. 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 your broker. To determine whether the
benefits of an IRA are available and/or appropriate, a shareholder
should consult with a tax adviser.
<PAGE> 15
Redemption Procedures
Redemption orders are effected at the net asset value per share next
determined after receipt of the order in proper form by the Fund's
transfer agent, PFPC. Investors may redeem all or some of their Shares
in accordance with one of the procedures described below.
Redemption of Shares in an Account. An investor who beneficially owns
Shares may redeem Shares in his Account in accordance with instructions
and limitations pertaining to his Account by contacting his broker. If
such notice is received by PFPC from the broker by 12:00 noon Eastern
Time on any Business Day, the redemption will be effective as of 12:00
noon Eastern Time on that day. Payment of the redemption proceeds will
be made after 12:00 noon Eastern Time on the day the redemption is
effected, provided that the Fund's custodian is open for business. If
the custodian is not open, payment will be made on the next bank
business day. If the redemption request is received between 12:00 noon
and 4:00 p.m. Eastern Time on a Business Day, the redemption will be
effective as of 4:00 p.m. Eastern Time on such Business Day and payment
will be made on the next bank business day following receipt of the
redemption request. If all shares are redeemed, all accrued but unpaid
dividends on those shares will be paid with the redemption proceeds.
An investor's brokerage firm will also redeem each day a sufficient
number of Shares of the Primary Bedford Class to cover debit balances
created by transactions in the Account or instructions for cash
disbursements. Shares will be redeemed on the same day that a
transaction occurs that results in such a debit balance or charge.
Each brokerage firm reserves the right to waive or modify criteria for
participation in an Account or to terminate participation in an Account
for any reason.
Redemption of Shares Owned Directly. A direct investor may redeem any
number of Shares by sending a written request to The Valley Forge Money
Market Portfolio c/o PFPC, P.O. Box 8926, Wilmington, Delaware 19899.
Redemption requests must be signed by each shareholder in the same
manner as the Shares are registered. Redemption requests for joint
accounts require the signature of each joint owner. On redemption
requests of $5,000 or more, a signature guarantee is required. 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) 797-6706 to determine whether the entity that will guarantee the
signature is an eligible guarantor. Guarantees must be signed by an
authorized signatory of STAMP Program and "Signature Guaranteed" must
appear with the signature.
Direct investors may redeem shares without charge by telephone if they
have checked the appropriate box and supplied the necessary information
on the Application, or have filed a Telephone Authorization with the
Fund's transfer agent. An investor may obtain a Telephone Authorization
from PFPC or by calling Account Services at (800) 797-6706. The Fund
will
<PAGE> 16
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. The proceeds will be mailed by check
to an investor's registered address unless he has designated in his
Application or Telephone Authorization that such proceeds are to be sent
by wire transfer to a specified checking or savings account. If proceeds
are to be sent by wire transfer, a telephone redemption request received
prior to 4:00 p.m. will result in redemption proceeds being wired to the
investor's bank account on the next day that a wire transfer can be
effected. The minimum redemption for proceeds sent by wire transfer is
$2,500. There is no maximum for proceeds sent by wire transfer. The Fund
may modify this redemption service at any time or charge a service fee
upon prior notice to shareholders. No fee is currently contemplated.
Neither PFPC nor the Fund will be liable for any loss, liability, cost
or expense for following the procedures 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) 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; (5) 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 (6) 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.
Redemption by Check. Upon request, the Fund will provide any direct
investor and any investor who does not have check writing privileges for
his Account with forms of drafts ("checks") payable through PNC Bank.
These checks may be made payable to the order of anyone. The minimum
amount of a check is $100; however, a broker/dealer may establish a
higher minimum. An investor wishing to use this check writing redemption
procedure should complete specimen signature cards, and then forward
such signature cards to PFPC. PFPC will then arrange for the checks to
be honored by PNC Bank. Investors who own shares through an Account
should contact their brokers for signature cards. Investors of joint
accounts may elect to have checks honored with a single signature. Check
redemptions will be subject to PNC Bank's rules governing checks. An
investor will be able to stop payment on a check redemption. The
<PAGE> 17
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.
When a check is presented to PNC Bank for clearance, PNC Bank, as the
investor's agent, will cause the Fund to redeem a sufficient number of
full and fractional shares owned by the investor to cover the amount of
the check. This procedure enables the investor to continue to receive
dividends on those Shares equalling the amount being redeemed by check
until such time as the check is presented to PNC Bank. Checks may not be
presented for cash payment at the offices of PNC Bank because, under
1940 Act rules, redemptions may be effected only at the redemption price
next determined after the redemption request is presented to PFPC. This
limitation does not affect checks used for the payment of bills or cash
at other banks.
Additional Redemption Information. The Fund ordinarily will make payment
for all Shares redeemed within seven days after receipt by PFPC of a
redemption request in proper form. However, Shares purchased by check
will not be redeemed, for a period of up to fifteen days after their
purchase, pending a determination that the check has cleared. This
procedure does not apply to Shares purchased by wire payment. During the
period prior to the time Shares are redeemed, dividends on such Shares
will accrue and be payable.
The Fund imposes no charge when Shares are redeemed. The Fund reserves
the right to redeem any account in a Bedford Class involuntarily, on
thirty days' notice, if such account falls below $500 and during such
30-day period the amount invested in such account is not increased to at
least $500. Payment for Shares redeemed may be postponed or the right of
redemption suspended as provided by the rules of the Securities and
Exchange Commission.
Exchange of Shares
Exchange Privilege. The exchange privilege enables an investor to
purchase shares of the Money Market Portfolio in exchange for shares of
the other mutual funds sponsored by Valley Forge Capital Holdings, Inc.,
to the extent such shares are offered for sale in the investor's state
of residence. These funds have different investment objectives which may
be of interest to investors. To use this Privilege, investors should
consult Valley Forge Distributors or the Transfer Agent to determine if
it is available and whether any conditions are imposed on its use.
<PAGE> 18
Valley Forge Capital Holdings Total Return Fund
To use this Privilege, exchange instructions must be given to the
Transfer Agent in writing or by telephone. A shareholder wishing to make
an exchange may do so by sending a written request to the Transfer Agent
at: PFPC Inc., Attention: The Valley Forge Funds - Money Market
Portfolio, P.O. Box 8926, Wilmington, Delaware 19899. Shareholders are
automatically provided with telephone exchange privileges when opening
an account, unless they indicate on the account application that they do
not wish to use this privilege. Shareholders holding share certificates
are not eligible to exchange shares of the Money Market Portfolio by
phone because share certificates must accompany all exchange requests.
To add this feature to an existing account that previously did not
provide for this option, a Telephone Exchange Authorization Form must be
filed with the Transfer Agent. This form is available from the Transfer
Agent. Once this election has been made, the shareholder may contact the
Transfer Agent by telephone at (800) 797-6706 to request the exchange.
During periods of substantial economic or market change, telephone
exchanges may be difficult to complete and shareholders may have to
submit exchange requests to the Transfer Agent in writing.
If the exchanging shareholder does not currently own shares of the Money
Market Portfolio or fund 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 an eligible guarantor
institution as defined above. To participate in the Systematic
Investment Plan or establish automatic withdrawal 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 on 60 days' notice to affected portfolio
or fund shareholders. The Fund, PFPC, the Fund's Transfer Agent, Valley
Forge Distributors and Valley Forge Capital Holdings and its affiliates
will not be liable for any loss, liability, cost or expense for acting
upon telephone instructions that are reasonably believed to be genuine.
In attempting to confirm that telephone instructions are genuine, the
Fund will use such procedures as are considered reasonable, including
recording those instructions and requesting information as to account
registration (such as the name in which an account is registered, the
account number, recent transactions in the account, and the account
holder's Social Security number, address and/or bank).
Before any exchange, the investor must obtain and should review a copy
of the current prospectus of the portfolio or fund into which the
exchange is being made. Prospectuses may be obtained from Valley Forge
Distributors. Except in the case of Personal Retirement Plans, the
shares being exchanged must have a current value of at least $250;
furthermore, when establishing a new account by exchange, the shares
being exchanged must have a value of at least the minimum initial
investment required for the portfolio or fund into which the exchange is
being made; if marking an exchange to an existing account, the dollar
value must equal or exceed the applicable minimum for subsequent
investments. If any amount remains in the investment portfolio from
which the exchange is being made, such amount must not be below the
minimum account value required by the portfolio or fund.
<PAGE> 19
Shares will be exchanged at the next determined net asset value plus any
applicable sales charges. Any such qualification is subject to
confirmation of the investor's holdings through a check of appropriate
records. No fees currently are charged shareholders directly in
connection with exchanges, although the Fund reserves the right, upon
not less than 60 days' written notice, to charge shareholders a $5.00
fee in accordance with rules promulgated by the Securities and Exchange
Commission. The Fund reserves the right to reject any exchange request
in whole or in part. The Exchange Privilege may be modified or
terminated at any time upon notice to shareholders.
The exchange of shares of one portfolio or fund for shares of another is
treated for Federal income tax purposes as a sale of the shares given in
exchange by the shareholder and, therefore, an exchanging shareholder
may realize a taxable gain or loss.
Redirected Dividend Option
The Redirected Dividend Option enables a shareholder to invest
automatically dividends or dividends and capital gain distributions, if
any, paid by the Money Market Portfolio in shares of another portfolio
or a fund advised or sponsored by Valley Forge Capital Holdings, Inc. of
which the shareholder is an investor. Shares of the other portfolio or
fund will be purchased at the then-current net asset value; however, a
sales load may be charged with respect to investments in shares of a
portfolio or fund sold with a sales load. If the shareholder is
investing in a fund that charges a sales load, such shareholder may
qualify for share prices which do not include the sales load or which
reflect a reduced sales load.
This Privilege is available only for existing accounts and may not be
used to open new accounts. Minimum subsequent investments do not apply.
The Fund may modify or terminate this Privilege at any time or charge a
service fee. No such fee currently is contemplated.
NET ASSET VALUE
The net asset value per share of the Money Market Portfolio for the
purpose of pricing purchase and redemption orders is determined twice
each day, once as of 12:00 noon Eastern Time and once as of 4:00 p.m.
Eastern Time on each weekday with the exception of those holidays on
which either the NYSE or the FRB is closed. Currently, the NYSE or the
FRB, or both, are closed on the customary national business holidays of
New Year's Day, Martin Luther King, Jr. Day, President's Day, Good
Friday, Memorial Day, Independence Day (observed), Labor Day, Columbus
Day, Veterans Day, Thanksgiving Day and Christmas Day (observed). The
Money Market Portfolio's net asset value per share is calculated by
adding the value of all securities and other assets of the Money Market
Portfolio, subtracting its liabilities and dividing the result by the
number of its outstanding shares. The net asset value per share of the
Money Market Portfolio is determined independently of any of the Fund's
other investment portfolios.
The Fund seeks to maintain the Money Market Portfolio a net asset value
of $1.00 per share for purposes 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
<PAGE> 20
under the heading "Valuation of Shares." There can be no assurance that
net asset value per share will not vary.
With the approval of the Board of Directors, the Money Market Portfolio
may use a pricing service, bank or broker-dealer experienced in such
matters to value the Money Market Portfolio's securities. A more
detailed discussion of net asset value and security valuation is
contained in the Statement of Additional Information.
MANAGEMENT
Board of Directors
Investment Adviser and Sub-Advisor
PIMC, a wholly owned subsidiary of PNC Bank, serves as the investment
adviser for the Money Market Portfolio. 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-advisor
for the Money Market Portfolio. 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 investment adviser to the Money Market Portfolio, PIMC manages such
Money Market Portfolio and is responsible for all purchases and sales of
portfolio securities. PIMC also assists generally in supervising the
operations of the Money Market Portfolio, and maintains the Money Market
Portfolio's financial accounts and records. PNC Bank, as sub-advisor,
provides research and credit analysis and provides PIMC with certain
other services. In entering into Money Market Portfolio transactions for
the Money Market Portfolio with a broker, PIMC may take into account the
sale by such broker of shares of the Fund, subject to the requirements
of best execution.
For the services provided to and expenses assumed by it for the benefit
of the Money Market Portfolio, PIMC is entitled to receive the following
fees, computed daily and payable monthly based on the Money Market
Portfolio's average daily net assets: .45% of the first $250 million;
.40% of the next $250 million; and .35% 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 the Money Market Portfolio.
For its sub-advisory services, PNC Bank
<PAGE> 21
is entitled to receive from PIMC an amount equal to 75% of the advisory
fees paid by the Fund to PIMC with respect to the Money Market Portfolio
(subject to certain adjustments). Such sub-advisory fees have no effect
on the advisory fees payable by the Money Market 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 the Money Market Portfolio. Any such
arrangement would have no effect on the advisory fees payable by the
Money Market Portfolio to PIMC.
For the Fund's fiscal year ended August 31, 1994, the Fund paid
investment advisory fees aggregating .18% of the average net assets of
the Money Market Portfolio. For that same year, PIMC waived
approximately .20% of average net assets of the Money Market Portfolio.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND CUSTODIAN
PNC Bank also serves as the Fund's custodian and PFPC, an indirect
wholly owned subsidiary of PNC Bank Corp, 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 for the provision of certain
shareholder support services to customers of such broker/dealers who are
shareholders of the Money Market Portfolio. 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 the Money Market Portfolio are deducted from the total
income of the Money Market Portfolio before dividends are paid. These
expenses include, but are not limited to, organizational costs, fees
paid to the investment adviser, fees and expenses of officers and
directors who are not affiliated with the Money Market 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 Money Market
Portfolio and its shares for distribution under Federal and state
securities laws, expenses of preparing prospectuses and statements of
additional information and of printing and distributing prospectuses and
statements of additional information annually to existing shareholders
that are not attributable to a particular class, the expense of reports
to shareholders, shareholders' meetings and proxy solicitations that are
not attributable to a particular class, 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 Money Market Portfolio's investment adviser under its advisory
agreement with the Money Market 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 were accrued. In
addition, distribution expenses, transfer agency expenses, expenses of
preparing, 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 the class.
<PAGE> 22
The investment adviser has agreed to reimburse the Money Market
Portfolio for the amount, if any, by which the total operating and
management expenses of such Money Market 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 Money
Market Portfolio from time to time. In certain circumstances, it may
assume such expenses on the condition that it is reimbursed by the Money
Market Portfolio for such amounts prior to the end of a fiscal year. In
such event, the reimbursement of such amounts will have the effect of
increasing the Money Market 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 1.16% of the average net assets with respect to the
Bedford Class of the Money Market Portfolio (not taking into account
waivers and reimbursements of .21%).
DISTRIBUTION OF SHARES
Counsellors Securities Inc. (the "Distributor"), a wholly-owned
subsidiary of Warburg, Pincus Counsellors, Inc. (formerly E.M. Warburg,
Pincus & Co., Inc., with an address at 466 Lexington Avenue, New York,
New York, acts as distributor of the Shares of the Bedford Class of the
Fund pursuant to a distribution contract (the "Distribution Contract")
with the Fund on behalf of the Bedford Class.
The Board of Directors of the Fund approved and adopted the Distribution
Contract and separate Plan of Distribution for the Class (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the
Distributor is entitled to receive from the Bedford 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 Bedford Class.
Under the Distribution Contract, the Distributor has agreed to accept
compensation for its services thereunder and under the Plan in the
amount of .60% of the average daily net assets of the Bedford Class on
an annualized basis in any year. The actual amount of such compensation
is agreed upon from time to time by the Fund's Board of Directors and
the Distributor. Pursuant to the conditions of an exemptive order
granted by the Securities and Exchange Commission, the Distributor has
agreed to waive its fee with respect to the Bedford Class on any day to
the extent necessary to assure that the fee required to be accrued by
the Bedford Class does not exceed the income of the Bedford Class on
that day. In addition, the Distributor may, in its discretion,
voluntarily waive from time to time all or any portion of its
distribution fee.
Under the Distribution Contract and the Plan, the Distributor may
reallocate an amount up to the full fee that it receives to financial
institutions, including broker/dealers, based upon the aggregate
investment amounts maintained by and services provided to shareholders
of the Bedford Class serviced by such financial institutions. The
Distributor may also reimburse broker/dealers for other expenses
incurred in the promotion of the sale of Fund shares. The Distributor
and/or broker/dealers pay for the cost of printing (excluding
typesetting) and mailing
<PAGE> 23
to prospective investors prospectuses and other materials relating to
the Fund as well as for related direct mail, advertising and promotional
expenses.
The Plan obligates the Fund, during the period it is in effect, to
accrue and pay to the Distributor on behalf of the Bedford Class the fee
agreed to under the Distribution Contract. The Plan does not obligate
the Fund to reimburse the Distributor for the actual expenses the
Distributor may incur in fulfilling its obligations under the Plan on
behalf of the Bedford Class. Thus, under the Plan, 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 actual expenses are less than the
fee it receives, the Distributor will retain the full amount of the fee.
The Plan has been approved by the shareholders of the Bedford 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"). The Plan 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 Bedford
Class. The fee set forth above will be paid by the Fund on behalf of the
Bedford Class to the Distributor unless and until the Plan is terminated
or not renewed.
DIVIDENDS AND DISTRIBUTIONS
The Fund will distribute substantially all of the net investment income
and net realized capital gains, if any, of the Money Market Portfolio to
the Money Market Portfolio's shareholders. All distributions are
reinvested in the form of additional full and fractional Shares of the
Bedford Class unless a shareholder elects otherwise.
The net investment income (not including any net short-term capital
gains) earned by the Money Market Portfolio will be declared as a
dividend on a daily basis and paid monthly. Dividends are payable to
shareholders of record immediately prior to the determination of net
asset value made as of 4:00 p.m. Eastern Time. 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 Money Market
Portfolio and its shareholders and is not intended as a substitute for
careful tax planning. Accordingly, investors in the Money Market
Portfolio should consult their tax advisers with specific reference to
their own tax situation.
The Money Market Portfolio will elect to be taxed as a regulated
investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). So long as the Money Market Portfolio
qualifies for this tax treatment, the Money Market Portfolio will
<PAGE> 24
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. The Money Market Portfolio does
not intend to make distributions that will be eligible for the corporate
dividends received deduction.
Distributions out of the "net capital gain" (the excess of net long-term
capital gain over net short-term capital loss), if any, of the Money
Market 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 securities 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 Fund will send written notices to shareholders annually regarding
the tax status of distributions made by the Money Market 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.
The Money Market Portfolio intend to make sufficient actual or deemed
distributions prior to the end of each calendar year to avoid liability
for Federal excise tax.
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 the Money Market Portfolio is not intended to
constitute a balanced investment program.
Future legislative or administrative changes or court decisions may
materially affect the tax consequences of investing in 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 12.2 billion shares are
currently classified as follows: 100 million shares are classified as
Class A Common Stock (Growth & Income), 100 million shares are
classified as Class B Common Stock, 100 million shares are
<PAGE> 25
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), 1 billion shares
are classified as Class G Common Stock (Money), 500 million shares are
classified as Class H Common Stock (Municipal Money), 500 million 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 Common Stock
(BEA Balanced), 50 million shares are classified as CC Common Stock
(BEA-Short Duration), 100 million shares are classified as Class DD
Common Stock (Growth & Income Series 2), 100 million shares are
classified as Class EE Common Stock (Balanced Series 2),
700 million shares are classified as Class Alpha 1 Common Stock (Money),
200 million shares are classified as Class Alpha 2 Common Stock
(Municipal Money), 500 million shares are classified as Class Alpha 3
Common Stock (U.S. Government Money), 100 million shares are classified
as Class Alpha 4 Common Stock (N.Y. Money), 1 million shares are
classified as Class Beta 1 Common Stock (Money), 1 million shares are
classified as Class Beta 2 Common Stock (Municipal Money), 1 million
shares are classified as Class Beta 3 Common Stock (U.S. Government
Money), 1 million shares are classified as Class Beta 4 Common Stock
(N.Y. Money), 1 million shares are classified as Gamma 1 Common Stock
(Money), 1 million shares are classified as Gamma 2 Common Stock
(Municipal Money), 1 million shares are classified as Gamma 3 Common
Stock (U.S. Government Money), 1 million shares are classified as Gamma
4 Common Stock (N.Y. Money), 1 million shares are classified as Delta 1
Common Stock (Money), 1 million shares are classified as Delta 2 Common
Stock (Municipal Money), 1 million shares are classified as Delta 3
Common Stock (U.S. Government Money), 1 million shares are classified as
Delta 4 Common Stock (N.Y. Money), 1 million shares are classified as
Epsilon 1 Common Stock (Money), 1 million shares are classified as
Epsilon 2 Common Stock (Municipal Money), 1 million shares are
classified as Epsilon 3 Common Stock (U.S. Government Money), 1 million
shares are classified as Epsilon 4 Common Stock (N.Y. Money), 1 million
shares are classified as Zeta 1 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),
<PAGE> 26
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 L Common Stock, constitute the shares
offered by this Prospectus. 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, the Laffer/Canto Family, the Janney
Montgomery Scott Money Funds, the Beta Family, the Gamma Family, the
Delta Family, the Epsilon Family, the Zeta Family, the Eta Family, the
Theta Family. The RBB Family represents interests in two non-money
market portfolios as well as the Money Market and Municipal Money Market
Portfolios; the Warburg Pincus Family represents interests in the Growth
& Income Fund and the 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 and Government Obligations Money Market
Portfolios as well as the New York Municipal Money Market Portfolio; 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 Equity represents interests in the Laffer/Canto Equity Fund
Portfolio; and the Janney, 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 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
various families a distribution fee based on average daily net assets in
the following amounts: The RBB Family Money Market Portfolio: .40%, Cash
Preservation Family Money Market Portfolio: .40%, Sansom Street Family,
Money Market Portfolio up to .20% and each of the Additional Families
Money Market Portfolio: .60%. A salesperson or any other person entitled
to receive
<PAGE> 27
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 RBB, Cash Preservation and Sansom Street Classes in the Money Market
Portfolio, taking into account fee waivers and reimbursement of
expenses, was as follows: RBB: 1.00% (reflecting waivers of 13.62%),
Cash Preservation: .95% (reflecting waivers of 1.57%) and Sansom Street:
.39% (reflecting waivers of .21%). No expense ratio is given for the
Alpha, Beta, Gamma, Delta, Epsilon, Zeta, Eta and Theta Classes of the
Money Market Portfolio as no shares of such classes had been sold to the
public during the year ended August 31, 1994. The ratio of net
investment income to average net assets for each of the RBB, Cash
Preservation and Sansom Street Classes in the Money Market Portfolio,
was as follows: RBB: 2.73%, Cash Preservation: 2.78% and Sansom Street:
3.34%.
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 BEDFORD CLASS AND DESCRIBE ONLY THE
INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER
MATTERS RELATING TO THE BEDFORD CLASS.
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 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 the Money Market Portfolio 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"
<PAGE> 28
for examples of 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 January 27, 1995, 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 25% of the outstanding shares of the Warburg
Pincus Family Class representing an interest in the Warburg Pincus
Growth & Income 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; Eric Levine and Linda & Howard
Levine owned more than 25% of the outstanding shares of the RBB Family
Class representing an interest in the 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 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 representing an interest in
the BEA U.S. Core Equity Portfolio; New England UFCW & Employers Pension
Fund Board of Trustees and Bankers Trust Pechiney 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) 976-6706.
<PAGE> 29
Money Market Portfolio,
(Investment Portfolio of The RBB Fund, Inc.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary
information pertaining to shares of a class (the "Bedford Shares" or "Shares")
representing interests in the Money Market Portfolio (the "Money Market
Portfolio") of The RBB Fund, Inc. (the "Fund"). This Statement of Additional
Information is not a prospectus, and should be read only in conjunction with the
Money Market Portfolio Prospectus of the Fund, dated February 27, 1995 (the
"Prospectus"). A copy of the Prospectus may be obtained through the Fund's
distributor by calling toll-free (800) 888-9723. This Statement of Additional
Information is dated February 27, 1995.
CONTENTS
<TABLE>
<CAPTION>
Prospectus
Page Page
<S> <C> <C>
General ....................................... 2 3
Investment Objectives and Policies ............ 2 6
Directors and Officers ........................ 13 N/A
Investment Advisory, Distribution and Servicing
Arrangements ............................... 16 21
Portfolio Transactions ........................ 20 N/A
Purchase and Redemption Information ........... 22 13
Valuation of Shares ........................... 22 20
Taxes ......................................... 25 24
Additional Information Concerning Fund Shares.. 29 25
Miscellaneous ................................. 30 N/A
Financial Statements (Audited)................. F-1 N/A
Appendix ...................................... A-1 N/A
</TABLE>
No person has been authorized to give any information or to make any
representations not contained in this Statement of Additional Information in
connection with the offering made by the Prospectus and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Fund or its distributor. The 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.
<PAGE>1
GENERAL
The RBB Fund, Inc. (the "Fund") is an open-end management investment
company currently operating or proposing to operate nineteen separate investment
portfolios. This Statement of Additional Information pertains to shares of the
class of common stock of the Fund (the "Bedford Shares" or the "Shares")
representing interests in the Money Market Portfolio of the Fund. The Shares are
offered by the Prospectus dated February 27, 1995. The Fund was organized as a
Maryland corporation on February 29, 1988.
Capitalized terms used herein and not otherwise defined have the same
meanings as are given to them in the Prospectus.
INVESTMENT OBJECTIVES AND POLICIES
The following supplements the information contained in the Prospectus
concerning the investment objectives and policies of the Portfolio. A
description of ratings of municipal obligations and commercial paper is set
forth in the Appendix hereto.
Additional Information on Portfolio Investments.
Reverse Repurchase Agreements. Reverse repurchase agreements involve
the sale of securities held by the Money Market Portfolio pursuant to the Money
Market Portfolio's agreement to repurchase the securities at an agreed upon
price, date and rate of interest. Such agreements are considered to be
borrowings under the Investment Company Act of 1940 (the "1940 Act"), and may be
entered into only for temporary or emergency purposes. While reverse repurchase
transactions are outstanding, the Money Market Portfolio will maintain in a
segregated account with the Fund's custodian or a qualified sub-custodian, cash,
U.S. Government securities or other liquid, high-grade debt securities of an
amount at least equal to the market value of the securities, plus accrued
interest, subject to the agreement.
Variable Rate Demand Instruments. Variable rate demand instruments
held by the Money Market Portfolio may have maturities of more than 397 calendar
days, provided: (i) the Money Market Portfolio is entitled to the payment of
principal at any time, or during specified intervals not exceeding 397 calendar
days, upon giving the prescribed notice (which may not exceed 30 days), and (ii)
the rate of interest on such instruments is adjusted at periodic intervals which
may extend up to 397 calendar days. In determining the average weighted maturity
of the Money Market Portfolio and whether a variable rate demand instrument has
a remaining maturity of 397 calendar days or less, each instrument will be
deemed by the Money Market Portfolio to have a maturity equal to the longer of
the period remaining until its next interest rate adjustment or the period
remaining until the principal amount can be recovered through demand. In
determining whether an unrated variable rate demand instrument is an eligible
security, the Money Market
<PAGE>2
Portfolio's investment adviser will follow guidelines adopted by the Fund's
Board of Directors.
Firm Commitments. Firm commitments for securities include "when
issued" and delayed delivery securities purchased for delivery beyond the normal
settlement date at a stated price and yield. While the Money Market Portfolio
has firm commitments outstanding, the Money Market Portfolio will maintain in a
segregated account with the Fund's custodian or a qualified sub-custodian, cash,
U.S. government securities or other liquid, high grade debt securities of an
amount at least equal to the purchase price of the securities to be purchased.
Normally, the custodian for the Money Market Portfolio will set aside portfolio
securities to satisfy a purchase commitment and, in such a case, the Money
Market Portfolio may be required subsequently to place additional assets in the
separate account in order to ensure that the value of the account remains equal
to the amount of the Money Market Portfolio's commitment. It may be expected
that the Money Market Portfolio's net assets will fluctuate to a greater degree
when it sets aside portfolio securities to cover such purchase commitments than
when it sets aside cash. Because the Money Market Portfolio's liquidity and
ability to manage its portfolio might be affected when it sets aside cash or
portfolio securities to cover such purchase commitments, the Money Market
Portfolio expects that commitments to purchase "when issued" securities will not
exceed 25% of the value of its total assets absent unusual market conditions.
When the Money Market Portfolio engages in when-issued transactions, it relies
on the seller to consummate the trade. Failure of the seller to do so may result
in the Money Market Portfolio's incurring a loss or missing an opportunity to
obtain a price considered to be advantageous.
Stand-by Commitments. The Money Market Portfolio may enter into
stand-by commitments with respect to obligations issued by or on behalf of
states, territories, and possessions of the United States, the District of
Columbia, and their political subdivisions, agencies, instrumentalities and
authorities (collectively, "Municipal Obligations") held in its portfolio. Under
a stand-by commitment, a dealer would agree to purchase at the Money Market
Portfolio's option a specified Municipal Obligation at its amortized cost value
to the Money Market Portfolio plus accrued interest, if any. Stand-by
commitments may be exercisable by the Money Market Portfolio at any time before
the maturity of the underlying Municipal Obligations and may be sold,
transferred or assigned only with the instruments involved.
The Money Market Portfolio expects that stand-by commitments will
generally be available without the payment of any direct or indirect
consideration. However, if necessary or advisable, the Money Market Portfolio
may pay for a stand-by commitment either separately in cash or by paying a
higher price for portfolio securities which are acquired subject to the
commitment (thus reducing the yield to maturity otherwise available for the same
securities). The total amount paid in either manner for outstanding stand-by
commitments held by the Money Market Portfolio will not exceed 1/2 of 1% of the
value of the Money Market Portfolio's total assets calculated immediately after
each stand-by commitment is acquired.
<PAGE>3
The Money Market Portfolio intends to enter into stand-by commitments
only with dealers, banks and broker-dealers which, in the investment adviser's
opinion, present minimal credit risks. Either such Money Market Portfolio's
reliance upon the credit of these dealers, banks and broker-dealers will be
secured by the value of the underlying Municipal Obligations that are subject to
the commitment.
The Money Market Portfolio will acquire stand-by commitments solely to
facilitate portfolio liquidity and do not intend to exercise their rights
thereunder for trading purposes. The acquisition of a stand-by commitment will
not affect the valuation or assumed maturity of the underlying Municipal
Obligation which will continue to be valued in accordance with the amortized
cost method. The actual stand-by commitment will be valued at zero in
determining net asset value. Accordingly, where the Money Market Portfolio pays
directly or indirectly for a stand-by commitment, its cost will be reflected as
an unrealized loss for the period during which the commitment is held by the
Money Market Portfolio and will be reflected in realized gain or loss when the
commitment is exercised or expires.
Municipal Obligations. The Money Market Portfolio invests in
short-term Municipal Obligations which are determined by the Money Market
Portfolio's investment adviser to present minimal credit risks and that meet
certain ratings criteria pursuant to guidelines established by the Fund's Board
of Directors. The Money Market Portfolio may also purchase Unrated Securities
provided that such securities are determined to be of comparable quality to
eligible rated securities. The applicable Municipal Obligations ratings are
described in the Appendix to the Statement of Additional Information.
The Money Market Portfolio may hold uninvested cash reserves pending
investment during temporary defensive periods or if, in the opinion of the Money
Market 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.
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
<PAGE>4
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 Money Market Portfolio will have been determined by the Money
Market Portfolio's investment adviser to be of comparable quality at the time of
the purchase to rated instruments purchasable by the Money Market Portfolio.
Where necessary to ensure that a note is of eligible quality, the Money Market
Portfolio will require that the issuer's obligation to pay the principal of the
note is 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 Money Market Portfolio,
the Money Market 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 397 calendar days, depending upon the instrument involved. The absence
of such an active secondary market, however, could make it difficult for the
Money Market Portfolio to dispose of a variable rate demand note if the issuer
defaulted on its payment obligation or during the periods that the Money Market
Portfolio is not entitled to exercise its demand rights. The Money Market
Portfolio could, for this or other reasons, suffer a loss to the extent of the
default. The Money Market Portfolio invests in variable rate demand notes only
when the Money Market Portfolio's investment adviser deems the investment to
involve minimal credit risk. The Money Market Portfolio's investment adviser
also monitors the continuing creditworthiness of issuers of such notes to
determine whether the Money Market 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 Alternative Minimum Tax Securities 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.
Obligations of Domestic Banks, Foreign Banks and Foreign Branches of
U.S. Banks. For purposes of the Money Market Portfolio's investment policies
with respect to bank obligations, the assets of a bank or savings
<PAGE>5
institution will be deemed to include the assets of its domestic and foreign
branches. Investments in bank obligations will include obligations of domestic
branches of foreign banks and foreign branches of domestic banks. Such
investments may involve risks that are different from investments in securities
of domestic branches of U.S. banks. These risks may include future unfavorable
political and economic developments, possible withholding taxes on interest
income, seizure or nationalization of foreign deposits, currency controls,
interest limitations, or other governmental restrictions which might affect the
payment of principal or interest on the securities held in the Money Market
Portfolio. Additionally, these institutions may be subject to less stringent
reserve requirements and to different accounting, auditing, reporting and
recordkeeping requirements than those applicable to domestic branches of U.S.
banks. The Money Market Portfolio will invest in obligations of domestic
branches of foreign banks and foreign branches of domestic banks only when its
investment adviser believes that the risks associated with such investment are
minimal.
U.S. Government Obligations. Examples of types of U.S. Government
obligations include U.S. Treasury Bills, Treasury Notes and Treasury Bonds and
the obligations of Federal Home Loan Banks, Federal Farm Credit Banks, Federal
Land Banks, the Federal Housing Administration, Farmers Home Administration,
Export-Import Bank of the United States, Small Business Administration, Federal
National Mortgage Association, Government National Mortgage Association, General
Services Administration, Student Loan Marketing Association, Central Bank for
Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate
Credit Banks, Maritime Administration, International Bank for Reconstruction and
Development (the "World Bank"), the Asian-American Development Bank and the
Inter-American Development Bank.
Section 4(2) Paper. "Section 4(2) paper" is commercial paper which is
issued in reliance on the "private placement" exemption from registration which
is afforded by Section 4(2) of the Securities Act of 1933. Section 4(2) paper is
restricted as to disposition under the Federal securities laws and is generally
sold to institutional investors such as the Fund which agree that they are
purchasing the paper for investment and not with a view to public distribution.
Any resale by the purchaser must be in an exempt transaction. Section 4(2) paper
normally is resold to other institutional investors through or with the
assistance of investment dealers who make a market in the Section 4(2) paper,
thereby providing liquidity. See "Illiquid Securities" below.
Repurchase Agreements. The repurchase price under the repurchase
agreements described in the Prospectus generally equals the price paid by the
Money Market Portfolio plus interest negotiated on the basis of current
short-term rates (which may be more or less than the rate on the securities
underlying the repurchase agreement). Securities subject to repurchase
agreements will be held by the Fund's custodian in the Federal Reserve/Treasury
book-entry system or by another authorized securities depository. Repurchase
agreements are considered to be loans by the Money Market Portfolio under the
1940 Act.
<PAGE>6
Mortgage-Related Debt Securities. Mortgage-related debt securities
represent ownership interests in individual pools of residential mortgage loans.
These securities are designed to provide monthly payments of interest and
principal to the investor. Each mortgagor's monthly payment to his lending
institution on his residential mortgage is "passed-through" to investors.
Mortgage pools consist of whole mortgage loans or participations in loans. The
terms and characteristics of the mortgage instruments are generally uniform
within a pool but may vary among pools. Lending institutions which originate
mortgages for the pools are subject to certain standards, including credit and
underwriting criteria for individual mortgages included in the pools.
Since the inception of the mortgage-related pass-through security in
1970, the market for these securities has expanded considerably. The size of the
primary issuance market, and active participation in the secondary market by
securities dealers and many types of investors, historically have made interests
in government and government-related pass-through pools highly liquid, although
no guarantee regarding future market conditions can be made. The average life of
pass-through pools varies with the maturities of the underlying mortgage
instruments. In addition, a pool's term may be shortened by unscheduled or early
payments of principal and interest on the underlying mortgages. The occurrence
of mortgage prepayments is affected by factors including the level of interest
rates, general economic conditions, the location and age of the mortgages and
various social and demographic conditions. Because prepayment rates of
individual pools vary widely, it is not possible to predict accurately the
average life of a particular pool. For pools of fixed rate 30 year mortgages,
common industry practice is to assume that prepayments will result in a 12 year
average life. Pools of mortgages with other maturities or different
characteristics will have varying assumptions concerning average life. The
assumed average life of pools of mortgages having terms of less than 30 years is
less than 12 years, but typically not less than 5 years. Yields on pass-through
securities are typically quoted by investment dealers and vendors based on the
maturity of the underlying instruments and the associated average life
assumption. In periods of falling interest rates, the rate of prepayment tends
to increase, thereby shortening the actual average life of a pool of underlying
mortgage-related securities. Conversely, in periods of rising rates the rate of
prepayment tends to decrease, thereby lengthening the actual average life of the
pool. Historically, actual average life has been consistent with the 12-year
assumption referred to above. Actual prepayment experience may cause the yield
of mortgage-related securities to differ from the assumed average life yield. In
addition, as noted in the Prospectus, reinvestment of prepayments may occur at
higher or lower interest rates than the original investment, thus affecting the
yield of the Money Market Portfolio involved.
The coupon rate of interest on mortgage-related securities is lower
than the interest rates paid on the mortgages included in the underlying pool,
but only by the amount of the fees paid to the mortgage pooler, issuer, and/or
guarantor of payment of the securities for the guarantee of the services of
passing through monthly payments to investors. Actual yield may
<PAGE>7
vary from the coupon rate, however, if mortgage-related securities are purchased
at a premium or discount, traded in the secondary market at a premium or
discount, or to the extent that mortgages in the underlying pool are prepaid as
noted above. In addition, interest on mortgage-related securities is earned
monthly, rather than semi-annually as is the case for traditional bonds, and
monthly compounding may tend to raise the effective yield earned on such
securities.
Eligible Securities. The Money Market Portfolio will only purchase
"eligible securities" that present minimal credit risks as determined by the
investment adviser pursuant to guidelines adopted by the Board of Directors.
Eligible securities generally include (1) U.S. government securities, (2)
securities that (a) are rated (at the time of purchase) by two or more
nationally recognized statistical rating organizations ("NRSROs") in the two
highest rating categories for such securities (e.g., commercial paper rated
"A-1" or "A-2" by S&P, or rated "Prime-1" or "Prime-2" by Moody's), or (b) 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; (3) short-term
obligations and long-term obligations that have remaining maturities of 397
calendar days or less, provided in each instance that such obligations have no
short-term rating and are comparable in priority and security to a class of
short-term obligations of the issuer that has been rated in accordance with
(2)(a) or (b) above ("comparable obligations"); (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 a security satisfying (2) or (3)
above; and (5) long-term obligations that have remaining maturities in excess of
397 calendar days that are subject to a demand feature or put (such as a
guarantee, a letter of credit or similar credit enhancement) ("demand
instrument") (a) that are unconditional (readily exercisable in the event of
default), provided that the demand feature satisfies (2), (3) or (4) above, or
(b) that are not unconditional, provided that the demand feature satisfies (2),
(3) or (4) above, and the demand instrument or long-term obligations of the
issuer satisfy (2) or (4) above for long-term debt obligations. The Board of
Directors will approve or ratify any purchases by the Money Market Portfolio of
securities that are rated by only one NRSRO or that are Unrated Securities.
Illiquid Securities. The Money Market Portfolio may not invest more
than 10% of its net assets in illiquid securities (including, repurchase
agreements which have a maturity of longer than seven days), including
securities that are illiquid by virtue of the absence of a readily available
market or legal or contractual restrictions on resale. Securities that have
legal or contractual restrictions on resale but have a readily available market
are not considered illiquid for purposes of this limitation. The Money Market
Portfolio's investment adviser will monitor the liquidity of such restricted
securities under the supervision of the Board of Directors. With respect to the
Money Market Portfolio, repurchase agreements subject to demand are deemed to
have a maturity equal to the notice period.
<PAGE>8
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
securities which are otherwise not readily marketable and, repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Mutual funds do not typically hold a significant amount of
these restricted or other illiquid securities because of the potential for
delays on resale and uncertainty in valuation. Limitations on resale may have an
adverse effect on the marketability of portfolio securities and a mutual fund
might be unable to dispose of restricted or other illiquid securities promptly
or at reasonable prices and might thereby experience difficulty satisfying
redemptions within seven days. A mutual fund might also have to register such
restricted securities in order to dispose of them resulting in additional
expense and delay. Adverse market conditions could impede such a public offering
of securities.
In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities Act
including repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.
SEC Rule 144A allows for a broader institutional trading market for
securities otherwise subject to restriction on resale to the general public.
Rule 144A establishes a "safe harbor" from the registration requirements of the
Securities Act for resales of certain securities to qualified institutional
buyers. The investment adviser anticipates that the market for certain
restricted securities such as institutional commercial paper will expand further
as a result of this relatively new regulation and the development of automated
systems for the trading, clearance and settlement of unregistered securities of
domestic and foreign issuers, such as the PORTAL System sponsored by the NASD.
The Money Market Portfolio's investment adviser will monitor the
liquidity of restricted securities in the Money Market Portfolio under the
supervision of the Board of Directors. In reaching liquidity decisions, the
investment adviser may consider, inter alia, the following factors: (1) the
unregistered nature of the security; (2) the frequency of trades and quotes for
the security; (3) the number of dealers wishing to purchase or sell the security
and the number of other potential purchasers; (4) dealer undertakings to make a
market in the security and (5) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of the transfer).
<PAGE>9
Investment Limitations.
The Money Market Portfolio may not:
(1) borrow money, except from banks for temporary purposes and
for reverse repurchase agreements and then in amounts not in excess of
10% of the value of the Money Market Portfolio's total assets at the
time of such borrowing, and only if after such borrowing there is
asset coverage of at least 300 percent for all borrowings of the Money
Market Portfolio; or mortgage, pledge, hypothecate any of its assets
except in connection with such borrowings and then, in amounts not in
excess of 10% of the value of the Money Market Portfolio's total
assets at the time of such borrowing; or purchase portfolio securities
while borrowings in excess of 5% of the Money Market Portfolio's net
assets are outstanding. (This borrowing provision is not for
investment leverage, but solely to facilitate management of the Money
Market Portfolio's securities by enabling the Money Market Portfolio
to meet redemption requests where the liquidation of portfolio
securities is deemed to be disadvantageous or inconvenient.);
(2) purchase securities of any one issuer, other than securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities, if immediately after and as a result of such
purchase more than 5% of the Money Market 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 Money Market Portfolio, except that up to 25% of the value of the
Money Market Portfolio's assets may be invested without regard to this
5% limitation;
(3) purchase securities on margin, except for short-term credit
necessary for clearance of portfolio transactions;
(4) underwrite securities of other issuers, except to the extent
that, in connection with the disposition of portfolio securities, a
portfolio may be deemed an underwriter under Federal securities laws
and except to the extent that the purchase of Municipal Obligations
directly from the issuer thereof in accordance with the Money Market
Portfolio's investment objective, policies and limitations may be
deemed to be an underwriting;
(5) make short sales of securities or maintain a short position
or write or sell puts, calls, straddles, spreads or combinations
thereof;
(6) purchase or sell real estate, provided that the Money Market
Portfolio may invest in securities secured by real estate or interests
therein or issued by companies which invest in real estate or
interests therein;
<PAGE>10
(7) purchase or sell commodities or commodity contracts;
(8) invest in oil, gas or mineral exploration or development
programs;
(9) make loans except that the Money Market Portfolio may
purchase or hold debt obligations in accordance with its investment
objective, policies and limitations and may enter into repurchase
agreements;
(10) purchase any securities issued by any other investment
company except in connection with the merger, consolidation,
acquisition or reorganization of all the securities or assets of such
an issuer; or
(11) make investments for the purpose of exercising control or
management.
In addition to the foregoing enumerated investment limitations, the
Money Market Portfolio may not:
(a) Purchase any securities other than Money-Market Instruments, some
of which may be subject to repurchase agreements, but the Money Market
Portfolio may make interest-bearing savings deposits in amounts not in
excess of 5% of the value of the Money Market Portfolio's assets and may
make time deposits;
(b) Purchase any securities which would cause, at the time of
purchase, less than 25% of the value of the total assets of the Money
Market 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 Money Market 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; and
(c) Invest more than 5% of its total assets (taken at the time of
purchase) in securities of issuers (including their predecessors) with less
than three years of continuous operations.
The foregoing investment limitations cannot be changed without the
affirmative vote of the lesser of (a) more than 50% of the outstanding shares of
the Money Market Portfolio or (b) 67% or more of the shares of the Money Market
Portfolio present at a shareholders' meeting if more than 50% of the outstanding
shares of the Money Market Portfolio are represented at the meeting in person or
by proxy.
With respect to limitation (b) above concerning industry concentration
(applicable to the Money Market Portfolio), the Money Market
<PAGE>11
Portfolio will consider wholly-owned finance companies to be in the industries
of their parents if their activities are primarily related to financing the
activities of the parents, and will divide utility companies according to their
services. For example, gas, gas transmission, electric and gas, electric and
telephone will each be considered a separate industry. The policy and practices
stated in this paragraph may be changed without the affirmative vote of the
holders of a majority of the affected Money Market Portfolio's outstanding
shares, but any such change may require the approval of the Securities and
Exchange Commission (the "SEC") and would be disclosed in the Prospectus prior
to being made.
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 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.
-------------------
In order to permit the sale of its shares in certain states, the Fund
may make commitments more restrictive than the investment limitations described
above. Should the Fund determine that any such commitment is no longer in its
best interest, it will revoke the commitment and terminate sales of its shares
in the state involved.
<PAGE>12
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund, their business
addresses and principal occupations during the past five years are:
<TABLE>
<CAPTION>
Principal Occupation
Name and Address Position with Fund During Past Five Years
<S> <C> <C>
Arnold M. Reichman* Director Since 1986, Managing
466 Lexington Avenue Director and Assistant
New York, NY 10017 Secretary, E.M. Warburg,
Pincus & Co., Inc.; Since
1990, Chief Executive Officer
and since 1991, Secretary,
Counsellors Securities Inc.;
Officer of various investment
companies advised by Warburg,
Pincus Counsellors, Inc.
Robert Sablowsky** Director Since 1985, Executive
14 Wall Street Vice President of Gruntal
New York, NY 10005 & Co., Inc., Director,
Gruntal & Co., Inc. and
Gruntal Financial Corp.
Francis J. McKay Director Since 1963, Executive
7701 Burholme Avenue Vice President, Fox
Philadelphia, PA 19111 Chase Cancer Center
(Biomedical research and
medical care).
Marvin E. Sternberg Director Since 1974, Chairman,
937 Mt. Pleasant Road Director and President,
Bryn Mawr, PA 19010 Moyco Industries, Inc.
(manufacturer of dental
supplies and precision coated
abrasives); Since 1968,
Director and President, Mart
MMM, Inc. (formerly
Montgomeryville Merchandise
Mart, Inc.) and Mart PMM, Inc.
(formerly Pennsauken
Merchandise Mart) (shopping
centers); and Since 1975,
Director and Executive Vice
President, Cellucap Mfg. Co.,
Inc. (manufacturer of
disposable headwear).
<PAGE>13
Principal Occupation
Name and Address Position with Fund During Past Five Years
Julian A. Brodsky Director Director, and Vice Chairman
1234 Market Street, 16th Fl. 1969 to Present, Comcast
Philadelphia, PA 19107-3723 Corporation; Director, Comcast
Cablevision of Philadelphia
(cable television and
communications) and Nextel
(Wireless Communication).
Donald van Roden Director Self-employed
1200 Old Mill Lane businessman. From
Wyomissing, PA 19610 February 1980 to March 1987,
Vice Chairman, SmithKline
Beckman Corporation
(pharmaceuticals); Director,
AAA Mid-Atlantic (auto
service); Director, Keystone
Auto Insurance Co.
Edward J. Roach President and Treasurer Certified Public
Suite 152 Accountant; Vice
Bellevue Park Corporate Chairman of the Board,
Center Fox Chase Cancer
400 Bellevue Parkway Center; Trustee
Wilmington, DE 19809 Emeritus, Pennsylvania School
for the Deaf; Trustee
Emeritus, Immaculata College;
Vice President and Treasurer
of various investment
companies advised by PNC
Institutional Management
Corporation.
Morgan R. Jones Secretary Chairman of the law firm of
1100 PNB Bank Building Drinker Biddle & Reath,
Broad and Chestnut Streets Philadelphia, Pennsylvania;
Philadelphia, PA 19107 Director, Rocking Horse Child
Care Centers of America, Inc.
</TABLE>
- -------------------------
* Mr. Reichman is an "interested person" of the Fund as that term is
defined in the 1940 Act by virtue of his position with Counsellors Securities
Inc., the Fund's distributor.
<PAGE>14
** Mr. Sablowsky is an "interested person" of the Fund as that term is
defined in the 1940 Act by virtue of his position with Gruntal & Co., Inc., a
broker-dealer.
Messrs. McKay, Sternberg and Brodsky are members of the Audit
Committee of the Board of Directors. The Audit Committee, among other things,
reviews results of the annual audit and recommends to the Fund the firm to be
selected as independent auditors.
Messrs. Reichman, McKay and van Roden are members of the Executive
Committee of the Board of Directors. The Executive Committee may generally carry
on and manage the business of the Fund when the Board of Directors is not in
session.
Messrs. McKay, Sternberg, Brodsky and van Roden are members of the
Nominating Committee of the Board of Directors. The Nominating Committee
recommends to the Board annually all persons to be nominated as directors of the
Fund.
The Fund pays directors who are not "affiliated persons" (as that term
is defined in the 1940 Act) of the Fund $5,000 annually and $650 per meeting of
the Board or any committee thereof that is not held in conjunction with a Board
meeting. Directors who are not affiliated persons of the Fund are reimbursed for
any expenses incurred in attending meetings of the Board of Directors or any
committee thereof. For the year ended August 31, 1994, Directors and officers of
the Fund received compensation and reimbursement of expenses in the aggregate
amount of $35,999. On October 24, 1990 the Fund adopted, as a participating
employer, the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a
retirement plan for employees (currently Edward J. Roach) pursuant to which the
Fund will contribute on a monthly basis amounts equal to 10% of the monthly
compensation of each eligible employee. By virtue of the services performed by
PNC Institutional Management Corporation ("PIMC"), the Fund's adviser, PNC Bank,
National Association ("PNC Bank"), the Money Market Portfolios' sub-advisor and
the Fund's custodian, PFPC Inc. ("PFPC"), and the Fund's transfer and dividend
disbursing agent, and Counsellors Securities Inc. (the "Distributor"), the
Fund's distributor, the Fund itself requires only one part-time employee. No
officer, director or employee of PIMC, PNC Bank, PFPC or the Distributor
currently receives any compensation from the Fund.
INVESTMENT ADVISORY, DISTRIBUTION AND SERVICING ARRANGEMENTS
Advisory and Sub-Advisory Agreements. The advisory and sub-advisory
services provided by PIMC and PNC Bank and the fees received by PIMC and PNC
Bank for such services are described in the Prospectus. PIMC renders advisory
services to the Money Market Portfolio and also renders administrative services
to the Money Market Portfolio pursuant to separate investment advisory
agreements and PNC Bank renders sub-advisory services to the Money Market
Portfolio pursuant to separate Sub-Advisory Agreement. The
<PAGE>15
Sub-Advisory Agreement is dated August 16, 1988. The advisory agreement relating
to the Money Market Portfolio is dated August 16, 1988. Such advisory and
sub-advisory agreements are hereinafter collectively referred to as the
"Advisory Contracts."
For the year ended August 31, 1994, PIMC received (after waivers)
$1,947,768 in advisory fees with respect to the Money Market Portfolio. During
the same year, PIMC waived $2,255,986 of advisory fees with respect to the Money
Market Portfolio. For the year ended August 31, 1993, PIMC received (after
waivers) $1,461,628 in advisory fees with respect to the Money Market Portfolio
and waived all of the investment advisory fees payable to it of $978,352. During
the same year, PIMC waived $2,343,596 of advisory fees with respect to the Money
Market Portfolio. For the year ended August 31, 1992, PIMC received (after
waivers) $1,322,859 in advisory fees with respect to the Money Market Portfolio.
During that same year, PIMC waived $2,452,731 of advisory fees with respect to
the Money Market Portfolio. For the year ended August 31, 1991, PIMC received
(after waivers) $1,320,964 in advisory fees with respect to the Money Market
Portfolio. During that same year, PIMC waived $2,216,459 of advisory fees with
respect to the Money Market Portfolio. For the year ended August 31, 1990, PIMC
received (after waivers) $708,243 in advisory fees with respect to the Money
Market Portfolio. During that same period, PIMC waived $960,499 of advisory fees
with respect to the Money Market Portfolio. For the fiscal period ended August
31, 1989, PIMC received (after waivers) $140,961 in advisory fees with respect
to the Money Market Portfolio. During that same period, PIMC waived $392,226 of
advisory fees with respect to the Money Market Portfolio.
As required by various state regulations, PIMC will reimburse the Fund
or a portfolio affected (as applicable) if and to the extent that the aggregate
operating expenses of the Fund or a portfolio affected exceed applicable state
limits for the fiscal year, to the extent required by such state regulations.
Currently, the most restrictive of such applicable limits is 2.5% of the first
$30 million of average annual net assets, 2% of the next $70 million of average
annual net assets and 1 1/2% of the remaining average annual net assets. Certain
expenses, such as brokerage commissions, taxes, interest and extraordinary
items, are excluded from this limitation. Whether such expense limitations apply
to the Fund as a whole or to the Money Market Portfolio on an individual basis
depends upon the particular regulations of such states.
The Money Market Portfolio bears all of its own expenses not
specifically assumed by PIMC. General expenses of the Fund not readily
identifiable as belonging to a portfolio of the Fund are allocated among all
investment portfolios by or under the direction of the Fund's Board of Directors
in such manner as the Board determines to be fair and equitable. Expenses borne
by a portfolio include, but are not limited to, the following (or a portfolio's
share of the following): (a) the cost (including brokerage commissions) of
securities purchased or sold by a portfolio and any losses incurred in
connection therewith; (b) fees payable to and expenses incurred on behalf of a
portfolio by PIMC; (c) expenses of organizing the Fund that are
<PAGE>16
not attributable to a class of the Fund; (d) certain of the filing fees and
expenses relating to the registration and qualification of the Fund and a
portfolio's shares under Federal and/or state securities laws and maintaining
such registrations and qualifications; (e) fees and salaries payable to the
Fund's directors and officers; (f) taxes (including any income or franchise
taxes) and governmental fees; (g) costs of any liability and other insurance or
fidelity bonds; (h) any costs, expenses or losses arising out of a liability of
or claim for damages or other relief asserted against the Fund or a portfolio
for violation of any law; (i) legal, accounting and auditing expenses, including
legal fees of special counsel for the independent directors; (j) charges of
custodians and other agents; (k) expenses of setting in type and printing
prospectuses, statements of additional information and supplements thereto for
existing shareholders, reports, statements, and confirmations to shareholders
and proxy material that are not attributable to a class; (l) costs of mailing
prospectuses, statements of additional information and supplements thereto to
existing shareholders, as well as reports to shareholders and proxy material
that are not attributable to a class; (m) any extraordinary expenses; (n) fees,
voluntary assessments and other expenses incurred in connection with membership
in investment company organizations; (o) costs of mailing and tabulating proxies
and costs of shareholders' and directors' meetings; (p) costs of PIMC's use of
independent pricing services to value a portfolio's securities; and (q) the cost
of investment company literature and other publications provided by the Fund to
its directors and officers. Distribution expenses, transfer agency expenses,
expenses of preparation, printing and mailing prospectuses, statements of
additional information, proxy statements and reports to shareholders, and
organizational expenses and registration fees, identified as belonging to a
particular class of the Fund, are allocated to such class.
Under the Advisory Contracts, PIMC and PNC Bank will not be liable for
any error of judgment or mistake of law or for any loss suffered by the Fund or
a Money Market Portfolio in connection with the performance of the Advisory
Contracts, except a loss resulting from willful misfeasance, bad faith or gross
negligence on the part of PIMC or PNC Bank in the performance of their
respective duties or from reckless disregard of their duties and obligations
thereunder.
The Advisory Contracts were each most recently approved with respect
to the Money Market Portfolio on August 3, 1994 by a vote of the Fund's Board of
Directors, including a majority of those directors who are not parties to the
Advisory Contracts or "interested persons" (as defined in the 1940 Act) of such
parties. The Advisory Contracts were each approved respect to the Money Market
Portfolio by shareholders of the Money Market Portfolio at a special meeting
held December 22, 1989, as adjourned. Each Advisory Contract is terminable by
vote of the Fund's Board of Directors or by the holders of a majority of the
outstanding voting securities of the Money Market Portfolio, at any time without
penalty, on 60 days' written notice to PIMC or PNC Bank. The Advisory Contracts
may also be terminated by PIMC or PNC Bank, respectively, on 60 days' written
notice to the Fund. The Advisory Contracts terminates automatically in the event
of assignment thereof.
<PAGE>17
Custodian and Transfer Agency Agreements. PNC Bank is custodian of the
Fund's assets pursuant to a custodian agreement dated August 16, 1988, as
amended (the "Custodian Agreement"). Under the Custodian Agreement, PNC Bank (a)
maintains a separate account or accounts in the name of the Money Market
Portfolio (b) holds and transfers portfolio securities on account of the Money
Market Portfolio, (c) accepts receipts and makes disbursements of money on
behalf of the Money Market Portfolio, (d) collects and receives all income and
other payments and distributions on account of the Money Market Portfolio's
portfolio securities and (e) makes periodic reports to the Fund's Board of
Directors concerning each Money Market Portfolio's operations. PNC Bank is
authorized to select one or more banks or trust companies to serve as
sub-custodian on behalf of the Fund, provided that PNC Bank remains responsible
for the performance of all its duties under the Custodian Agreement and holds
the Fund harmless from the acts and omissions of any sub-custodian. For its
services to the Fund under the Custodian Agreement, PNC Bank receives a fee
which is calculated based upon the Money Market Portfolio's average daily gross
assets as follows: $.25 per $1,000 on the first $50 million of average daily
gross assets; $.20 per $1,000 on the next $50 million of average daily gross
assets; and $.15 per $1,000 on average daily gross assets over $100 million,
with a minimum monthly fee of $1,000, exclusive of transaction charges and
out-of-pocket expenses, which are also charged to the Fund.
PFPC, an affiliate of PNC Bank, serves as the transfer and dividend
disbursing agent for the Fund's Bedford Shares pursuant to a Transfer Agency
Agreement dated August 16, 1988 (the "Transfer Agency Agreement"), under which
PFPC (a) issues and redeems shares of the Bedford Shares, (b) addresses and
mails all communications by the Money Market Portfolio to record owners of
shares of such Bedford Class, including reports to shareholders, dividend and
distribution notices and proxy materials for its meetings of shareholders, (c)
maintains shareholder accounts and, if requested, sub-accounts and (d) makes
periodic reports to the Fund's Board of Directors concerning the operations of
the Bedford Class. PFPC may, on 30 days' notice to the Fund, assign its duties
as transfer and dividend disbursing agent to any other affiliate of PNC Bank
Corp. For its services to the Fund under the Transfer Agency Agreement, PFPC
receives a fee at the annual rate of $15.00 per account in the Money Market
Portfolio for orders which are placed by third parties and relayed
electronically to PFPC, and at an annual rate of $17.00 per account in the Money
Market Portfolio for all other orders, exclusive of out-of-pocket expenses and
also receives a fee for each redemption check cleared and reimbursement of its
out-of-pocket expenses.
PFPC has and in the future may enter into additional shareholder
servicing agreements ("Shareholder Servicing Agreements") with various dealers
("Authorized Dealers") for the provision of certain support services to
customers of such Authorized Dealers who are shareholders of the Money Market
Portfolio. Pursuant to the Shareholder Servicing Agreements, the Authorized
Dealers have agreed to prepare monthly account statements, process dividend
payments from the Fund on behalf of their customers and to provide sweep
processing for uninvested cash balances for customers participating in a cash
<PAGE>18
management account. In addition to the shareholder records maintained by PFPC,
Authorized Dealers may maintain duplicate records for their customers who are
shareholders of the Money Market Portfolio for purposes of responding to
customer inquiries and brokerage instructions. In consideration for providing
such services, Authorized Dealers may receive fees from PFPC. Such fees will
have no effect upon the fees paid by the Fund to PFPC.
Distribution Agreements. Pursuant to the terms of a distribution
contract, dated as of April 10, 1991, and supplements entered into by the
Distributor and the Fund on behalf of the Bedford Class (the "Distribution
Contract"), and the Plan of Distribution for the Bedford Class (the "Plan"),
which was adopted by the Fund in the manner prescribed by Rule 12b-1 under the
1940 Act, the Distributor will use its best efforts to distribute shares of the
Bedford Class. As compensation for its distribution services, the Distributor
will receive, pursuant to the terms of the Distribution Contract, a distribution
fee, to be calculated daily and paid monthly, at the annual rate set forth in
the Prospectus. The Distributor currently proposes to reallow up to all of its
distribution payments to broker/dealers for selling shares of the Money Market
Portfolio based on a percentage of the amounts invested by their customers.
The Plan as amended to reflect a change in the Fund's distributor in
accordance with Rule 12b-1 was most recently approved for continuation, with
respect to the Bedford Class on August 3, 1994 by the Fund's Board of Directors,
including the directors who are not "interested persons" of the Fund and who
have no direct or indirect financial interest in the operation of the Plan or
any agreements related to the Plan ("12b-1 Directors"). The Plan was approved by
shareholders of the Bedford Class at a special meeting held December 22, 1989,
as adjourned.
Among other things, the Plan provides that: (1) the Distributor shall
be required to submit quarterly reports to the directors of the Fund regarding
all amounts expended under the Plan and the purposes for which such expenditures
were made, including commissions, advertising, printing, interest, carrying
charges and any allocated overhead expenses; (2) the Plan will continue in
effect only so long as it is approved at least annually, and any material
amendment thereto is approved, by the Fund's directors, including the 12b-1
Directors, acting in person at a meeting called for said purpose; (3) the
aggregate amount to be spent by the Fund on the distribution of the Fund's
Shares of the Bedford Class under the Plan shall not be materially increased
without the affirmative vote of the holders of a majority of the Fund's Shares
in the affected Bedford Class; and (4) while the Plan remains in effect, the
selection and nomination of the Fund's directors who are not "interested
persons" of the Fund (as defined in the 1940 Act) shall be committed to the
discretion of the directors who are not interested persons of the Fund.
During the year ended August 31, 1994, the Fund paid distribution fees
to the Fund's Distributor under the Plan for the Shares of the Money Market
Portfolio, in the aggregate amount of $4,147,945 of which $4,069,861
<PAGE>19
was paid to dealers with whom the Distributor had entered into sales agreements,
and $78,054, was retained by the Distributor and used to pay certain advertising
and promotion, printing, postage, legal fees, travel and entertainment, sales
and marketing and administrative expenses. During the same period, the
Distributor waived no distribution fees for the Bedford Shares of the Money
Market Portfolio. The Fund believes that such Plan may benefit the Fund by
increasing sales of Shares. Mr. Reichman, a Director of the Fund, has an
indirect financial interest in the operation of the Plan by virtue of his
position as Chief Executive Officer and Secretary of the Distributor. Mr.
Sablowsky, a Director of the Fund, has an indirect interest in the operation of
the Plan by virtue of his position as Executive Vice President of Gruntal & Co.,
Inc., a broker-dealer which sells the Fund's shares.
MONEY MARKET PORTFOLIO TRANSACTIONS
The Money Market Portfolio intends to purchase securities with
remaining maturities of 397 calendar days or less, except for securities that
are subject to repurchase agreements (which in turn may have maturities of 397
calendar days or less), and except that the Money Market Portfolio may purchase
variable rate securities with remaining maturities of 397 calendar days or more
so long as such securities comply with conditions established by the SEC under
which they may be considered to have remaining maturities of 397 calendar days
or less. Because the Money Market Portfolio intend to purchase only securities
with remaining maturities of one year or less, their portfolio turnover rates
will be relatively high. However, because brokerage commissions will not
normally be paid with respect to investments made by the Money Market Portfolio,
the turnover rate should not adversely affect such Money Market Portfolio's net
asset value or net income. The Money Market Portfolio does not intend to seek
profits through short term trading.
Purchases of portfolio securities by the Money Market Portfolio are
made from dealers, underwriters and issuers; sales are made to dealers and
issuers. The Money Market Portfolio currently expect to incur any brokerage
commission expense on such transactions because money market instruments are
generally traded on a "net" basis with dealers acting as principal for their own
accounts without a stated commission. The price of the security, however,
usually includes a profit to the dealer. Securities purchased in underwritten
offerings include a fixed amount of compensation to the underwriter, generally
referred to as the underwriter's concession or discount. When securities are
purchased directly from or sold directly to an issuer, no commissions or
discounts are paid. It is the policy of the Money Market Portfolio to give
primary consideration to obtaining the most favorable price and efficient
execution of transactions. In seeking to implement the policies of the Money
Market Portfolio, PIMC will effect transactions with those dealers it believes
provide the most favorable prices and are capable of providing efficient
executions. In no instance will portfolio securities be purchased from or sold
to the Distributor, PIMC or PNC Bank or any affiliated person of the
<PAGE>20
foregoing entities except to the extent permitted by SEC exemptive order or by
applicable law.
PIMC may seek to obtain an undertaking from issuers of commercial
paper or dealers selling commercial paper to consider the repurchase of such
securities from the Money Market Portfolio prior to their maturity at their
original cost plus interest (sometimes adjusted to reflect the actual maturity
of the securities), if it believes that the Money Market Portfolio's anticipated
need for liquidity makes such action desirable. Any such repurchase prior to
maturity reduces the possibility that the Money Market Portfolio would incur a
capital loss in liquidating commercial paper (for which there is no established
market), especially if interest rates have risen since acquisition of the
particular commercial paper.
Investment decisions for the Money Market Portfolio and for other
investment accounts managed by PIMC or PNC Bank are made independently of each
other in the light of differing conditions. However, the same investment
decision may occasionally be made for two or more of such accounts. In such
cases, simultaneous transactions are inevitable. Purchases or sales are then
averaged as to price and allocated as to amount according to a formula deemed
equitable to each such account. While in some cases this practice could have a
detrimental effect upon the price or value of the security as far as the Money
Market Portfolio is concerned, in other cases it is believed to be beneficial to
the Money Market Portfolio. The Money Market Portfolio will not purchase
securities during the existence of any underwriting or selling group relating to
such security of which PIMC or PNC Bank or any affiliated person (as defined in
the 1940 Act) thereof is a member except pursuant to procedures adopted by the
Fund's Board of Directors pursuant to Rule 10f-3 under the 1940 Act. Among other
things, these procedures, which will be reviewed by the Fund's directors
annually, require that the commission paid in connection with such a purchase be
reasonable and fair, that the purchase be at not more than the public offering
price prior to the end of the first business day after the date of the public
offer, and that PIMC and PNC Bank not participate in or benefit from the sale to
the Money Market Portfolio.
PURCHASE AND REDEMPTION INFORMATION
The Fund reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption or repurchase of the
Money Market Portfolio's shares by making payment in whole or in part in
securities chosen by the Fund and valued in the same way as they would be valued
for purposes of computing the Money Market Portfolio's net asset value. If
payment is made in securities, a shareholder may incur transaction costs in
converting these securities into cash. The Fund has elected, however, to be
governed by Rule 18f-1 under the 1940 Act so that the Money Market Portfolio is
obligated to redeem its shares solely in cash up to the lesser of $250,000 or 1%
of its net asset value during any 90-day period for any one shareholder of the
Money Market Portfolio.
<PAGE>21
Under the 1940 Act, the Money Market Portfolio may suspend the right
of redemption or postpone the date of payment upon redemption for any period
during which the New York Stock Exchange (the "NYSE") is closed (other than
customary weekend and holiday closings), or during which trading on said
Exchange is restricted, or during which (as determined by the SEC by rule or
regulation) an emergency exists as a result of which disposal or valuation of
portfolio securities is not reasonably practicable, or for such other periods as
the SEC may permit. (The Money Market Portfolio may also suspend or postpone the
recordation of the transfer of its shares upon the occurrence of any of the
foregoing conditions.)
VALUATION OF SHARES
The Fund intends to use its best efforts to maintain the net asset
value of the Money Market Portfolio at $1.00 per share. Net asset value per
share, the value of an individual share in the Money Market Portfolio, is
computed by dividing the Money Market Portfolio's net assets by the number of
outstanding shares of the Money Market Portfolio. The Money Market Portfolio's
"net assets" equal the value of the Money Market Portfolio's investments and
other securities less its liabilities. The Fund's net asset value per share is
computed twice each day, as of 12:00 noon (Eastern Time) and as of 4:00 p.m.
(Eastern Time) on each Business Day. "Business Day" means each day, Monday
through Friday, when both the NYSE and the Federal Reserve Bank of Philadelphia
(the "FRB") are open. Currently, the NYSE or the FRB, or both, are closed on New
Year's Day, Martin Luther King Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day (observed), Labor Day, Columbus Day, Veterans Day, Thanksgiving
Day and Christmas Day (observed).
The Fund calculates the value of the portfolio securities of the Money
Market Portfolio by using the amortized cost method of valuation. Under this
method the market value of an instrument is approximated by amortizing the
difference between the acquisition cost and value at maturity of the instrument
on a straight-line basis over the remaining life of the instrument. The effect
of changes in the market value of a security as a result of fluctuating interest
rates is not taken into account. The market value of debt securities usually
reflects yields generally available on securities of similar quality. When such
yields decline, market values can be expected to increase, and when yields
increase, market values can be expected to decline. In addition, if a large
number of redemptions take place at a time when interest rates have increased,
the Money Market Portfolio may have to sell portfolio securities prior to
maturity and at a price which might not be as desirable.
The amortized cost method of valuation may result in the value of a
security being higher or lower than its market price, the price the Money Market
Portfolio would receive if the security were sold prior to maturity. The Fund's
Board of Directors has established procedures for the purpose of maintaining a
constant net asset value of $1.00 per share for the Money Market Portfolio,
which include a review of the extent of any deviation of net asset
<PAGE>22
value per share, based on available market quotations, from the $1.00 amortized
cost per share. Should that deviation exceed 1/2 of 1% for the Money Market
Portfolio, the Board of Directors will promptly consider whether any action
should be initiated to eliminate or reduce material dilution or other unfair
results to shareholders. Such action may include redeeming shares in kind,
selling portfolio securities prior to maturity, reducing or withholding
dividends, and utilizing a net asset value per share as determined by using
available market quotations.
The Money Market Portfolio will maintain a dollar-weighted average
portfolio maturity of 90 days or less, will not purchase any instrument with a
deemed maturity under Rule 2a-7 of the 1940 Act greater than 397 calendar days
will limit portfolio investments, including repurchase agreements (where
permitted), to those United States dollar-denominated instruments that PIMC
determines present minimal credit risks pursuant to guidelines adopted by the
Board of Directors, and PIMC will comply with certain reporting and
recordkeeping procedures concerning such credit determination. There is no
assurance that constant net asset value will be maintained. In the event
amortized cost ceases to represent fair value in the judgment of the Fund's
Board of Directors, the Board will take such actions as it deems appropriate.
In determining the approximate market value of portfolio investments,
the Fund may employ outside organizations, which may use a matrix or formula
method that takes into consideration market indices, matrices, yield curves and
other specific adjustments. This may result in the securities being valued at a
price different from the price that would have been determined had the matrix or
formula method not been used. All cash, receivables and current payables are
carried on the Fund's books at their face value. Other assets, if any, are
valued at fair value as determined in good faith by the Fund's Board of
Directors.
Performance Information. The Money Market Portfolio's current and
effective yields are computed using standardized methods required by the SEC.
The annualized yields for the Money Market Portfolio are computed by: (a)
determining the net change in the value of a hypothetical account having a
balance of one share at the beginning of a seven-calendar day period; (b)
dividing the net change by the value of the account at the beginning of the
period to obtain the base period return; and (c) annualizing the results (i.e.,
multiplying the base period return by 365/7). The net change in the value of the
account reflects the value of additional shares purchased with dividends
declared and all dividends declared on both the original share and such
additional shares, but does not include realized gains and losses or unrealized
appreciation and depreciation. Compound effective yields are computed by adding
1 to the base period return (calculated as described above), raising the sum to
a power equal to 365/7 and subtracting 1.
The yield for the seven (7) day period ending August 31, 1994 for the
Bedford Shares of the Money Market Portfolio, were 3.82%. The effective yield
for the same period for the same Shares was 3.89%.
<PAGE>23
Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yields of the Money Market Portfolio will fluctuate,
they cannot be compared with yields on savings account or other investment
alternatives that provide an agreed to or guaranteed fixed yield for a stated
period of time. However, yield information may be useful to an investor
considering temporary investments in money market instruments. In comparing the
yield of one money market fund to another, consideration should be given to each
fund's investment policies, including the types of investments made, lengths of
maturities of a portfolio securities, the method used by each fund to compute
the yield (methods may differ) and whether there are any special account charges
which may reduce the effective yield.
The yields on certain obligations, including the money market
instruments in which the Money Market Portfolio invests (such as commercial
paper and bank obligations), are dependent on a variety of factors, including
general money market conditions, conditions in the particular market for the
obligation, the financial condition of the issuer, the size of the offering, the
maturity of the obligation and the ratings of the issue. The ratings of Moody's
and S&P represent their respective opinions as to the quality of the obligations
they undertake to rate. Ratings, however, are general and are not absolute
standards of quality. Consequently, obligations with the same rating, maturity
and interest rate may have different market prices. In addition, subsequent to
its purchase by the Money Market Portfolio, an issue may cease to be rated or
may have its rating reduced below the minimum required for purchase. In such an
event, PIMC will consider whether a Money Market Portfolio should continue to
hold the obligation.
From time to time, in advertisements or in reports to shareholders,
the yields of the Money Market Portfolio may be quoted and compared to those of
other mutual funds with similar investment objectives and to stock or other
relevant indices. For example, the yield of the Money Market Portfolio may be
compared to the Donoghue's Money Fund Average, which is an average compiled by
IBC/Donoghue's MONEY FUND REPORT of Holliston, MA 01746, a widely recognized
independent publication that monitors the performance of money market funds, or
to the data prepared by Lipper Analytical Services, Inc., a widely-recognized
independent service that monitors the performance of mutual funds.
TAXES
The following is only a summary of certain additional tax
considerations generally affecting the Money Market Portfolio and its
shareholders that are not described in the Fund's Prospectus. No attempt is made
to present a detailed explanation of the tax treatment of the Money Market
Portfolio or their shareholders, and the discussion here and in the Prospectus
is not intended as a substitute for careful tax planning. Investors are urged to
consult their tax advisers with specific reference to their own tax situation.
<PAGE>24
The Money Market Portfolio has elected to be taxed as a regulated
investment company under Part I of Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). As a regulated investment company, the Money
Market Portfolio is exempt from Federal income tax on its net investment income
and realized capital gains which it distributes to shareholders, provided that
it distributes an amount equal to the sum of (a) at least 90% of its investment
company taxable income (net investment income and the excess of net short-term
capital gain over net long-term capital loss), if any, for the year and (b) at
least 90% of its net tax-exempt interest income, if any, for the year (the
"Distribution Requirement") and satisfies certain other requirements of the Code
that are described below. Distributions of investment company taxable income and
net tax-exempt interest income made during the taxable year or, under specified
circumstances, within twelve months after the close of the taxable year will
satisfy the Distribution Requirement. The Distribution Requirement for any year
may be waived if a regulated investment company establishes to the satisfaction
of the Internal Revenue Service that it is unable to satisfy the Distribution
Requirement by reason of distributions previously made for the purpose of
avoiding liability for Federal excise tax (discussed below).
In addition to satisfaction of the Distribution Requirement the Money
Market Portfolio must derive at least 90% of its gross income from dividends,
interest, certain payments with respect to securities loans and gains from the
sale or other disposition of stock or securities or foreign currencies, or from
other income derived with respect to its business of investing in such stock,
securities, or currencies (the "Income Requirement") and derive less than 30% of
its gross income from the sale or other disposition of any of the following
investments if such investments were held for less than three months: (a) stock
or securities (as defined in Section 2(a)(36) of the 1940 Act); (b) options,
futures or forward contracts (other than options, futures or forward contracts
on foreign currencies); and (c) foreign currencies (or options, futures or
forward contracts on foreign currencies) but only if such currencies (or
options, futures or forward contracts) are not directly related to the regulated
investment company's principal business of investing in stock or securities (or
options and futures with respect to stocks or securities) (the "Short-Short Gain
Test"). Interest (including original issue discount and, in the case of debt
securities bearing taxable interest income "accrued market discount") received
by the Money Market Portfolio at maturity or on disposition of a security held
for less than three months will not be treated as gross income derived from the
sale or other disposition of such security for purposes of the Short-Short Gain
Test. However, any other income which is attributable to realized market
appreciation will be treated as gross income from the sale or other disposition
of securities for this purpose.
Income derived by a regulated investment company from a partnership or
trust will satisfy the Income Requirement only to the extent such income is
attributable to items of income of the partnership or trust that would satisfy
the Income Requirement if they were realized by a regulated investment company
in the same manner as realized by the partnership or trust.
<PAGE>25
In addition to the foregoing requirements, at the close of each
quarter of its taxable year, at least 50% of the value of the Money Market
Portfolio's assets must consist of cash and cash items, U.S. Government
securities, securities of other regulated investment companies, and securities
of other issuers (as to which the Money Market Portfolio has not invested more
than 5% of the value of its total assets in securities of such issuer and as to
which the Money Market Portfolio does not hold more than 10% of the outstanding
voting securities of such issuer), and no more than 25% of the value of the
Money Market Portfolio's total assets may be invested in the securities of any
one issuer (other than U.S. Government securities and securities of other
regulated investment companies), or in two or more issuers which the Money
Market Portfolio controls and which are engaged in the same or similar trades or
businesses (the "Asset Diversification Requirement").
The Internal Revenue Service has taken the position, in informal
rulings issued to other taxpayers, that the issuer of a repurchase agreement is
the bank or dealer from which securities are purchased. The Money Market Money
Market Portfolio will not enter into repurchase agreements with any one bank or
dealer if entering into such agreements would, under the informal position
expressed by the Internal Revenue Service, cause either one of them to fail to
satisfy the Asset Diversification Requirement.
All shareholders required to file a Federal income tax return are
required to report the receipt of exempt interest dividends and other exempt
interest on their returns. Moreover, while such dividends and interest are
exempt from regular Federal income tax, they may be subject to alternative
minimum tax as described in the Prospectus. By operation of the adjusted current
earnings alternative minimum tax adjustment, exempt interest income received by
certain corporations may be taxed at an effective rate of 15%. In addition,
corporate investors should note that, under the Superfund Amendments and
Reauthorization Act of 1986, an environmental tax is imposed for taxable years
beginning after 1986 and before 1996 at the rate of 0.12% on the excess of the
modified alternative minimum taxable income of corporate taxpayers over $2
million, regardless of whether such taxpayers are liable for alternative minimum
tax. Receipt of exempt interest dividends may result in collateral Federal
income tax consequences to certain other taxpayers, including financial
institutions, property and casualty insurance companies, individual recipients
of Social Security or Railroad Retirement benefits, and foreign corporations
engaged in a trade or business in the United States. Prospective investors
should consult their own tax advisors as to such consequences.
The Money Market Portfolio may acquire standby commitments with
respect to Municipal Obligations held in its portfolio and will treat any
interest received on Municipal Obligations subject to such standby commitments
as tax-exempt income. In Rev. Rul. 82-144, 1982-2 C.B. 34, the Internal Revenue
Service held that a mutual fund acquired ownership of municipal obligations for
Federal income tax purposes, even though the fund simultaneously purchased "put"
agreements with respect to the same municipal obligations from the seller of the
obligations. The Fund will not engage in transactions involving the use of
standby commitments that differ materially
<PAGE>26
from the transaction described in Rev. Rul. 82-144 without first obtaining a
private letter ruling from the Internal Revenue Service or the opinion of
counsel.
Distributions of net investment income received by the Money Market
Portfolio from investments in debt securities (other than interest on tax-exempt
Municipal Obligations that is distributed as exempt interest dividends) and any
net realized short-term capital gains distributed by the Money Market Portfolio
will be taxable to shareholders as ordinary income and will not be eligible for
the dividends received deduction for corporations.
While the Money Market Portfolio expect to realize long-term capital
gains, any net realized long-term capital gains, such as gains from the sale of
debt securities and realized market discount on tax-exempt Municipal
Obligations, will be distributed annually. The Money Market Portfolio will not
have tax liability with respect to such gains and the distributions will be
taxable to Money Market Portfolio shareholders as long-term capital gains,
regardless of how long a shareholder has held Money Market Portfolio shares. The
aggregate amount of distributions designated by the Money Market Portfolio as
capital gain dividends may not exceed the net capital gain of the Money Market
Portfolio for any taxable year, determined by excluding any net capital loss or
any net long-term capital loss attributable to transactions occurring after
October 31 of such year and by treating any such loss as if it arose on the
first day of the following taxable year. Such distributions will be designated
as a capital gains dividend in a written notice mailed by the Fund to
shareholders not later than 60 days after the close of the Money Market
Portfolio's respective taxable year.
Investors should note that changes made to the Code by the Tax Reform
Act of 1986 and subsequent legislation have not entirely eliminated the
distinction between the tax treatment of capital gain and ordinary income
distributions. The nominal maximum marginal rate on ordinary income for
individuals, trusts and estates is currently 31%, but for individual taxpayers
whose adjusted gross income exceeds certain threshold amounts (that differ
depending on the taxpayer's filing status) in taxable years beginning before
1996, provisions phasing out personal exemptions and limiting itemized
deductions may cause the actual maximum marginal tax rate to exceed 31%. The
maximum rate on the net capital gain of individuals, trusts and estates,
however, is in all cases 28%. Capital gains and ordinary income of corporate
taxpayers are taxed a nominal maximum rate of 34% (an effective marginal rate of
39% applies in the case of corporations having taxable income between $100,000
and $335,000).
If for any taxable year the Money Market Portfolio does not qualify as
a regulated investment company, all of its taxable income will be subject to tax
at regular corporate rates without any deduction for distributions to
shareholders, and all distributions will be taxable as ordinary dividends
(including amounts derived from interest on municipal obligations) to the extent
of the Money Market Portfolio's current and
<PAGE>27
accumulated earning and profits. Such distributions will be eligible for the
dividends received deduction in the case of corporate shareholders.
The Code imposes a non-deductible 4% excise tax on regulated
investment companies that do not distribute with respect to each calendar year
an amount equal to 98 percent of their ordinary income for the calendar year
plus 98 percent of their capital gain net income for the 1-year period ending on
October 31 of such calendar year. The balance of such income must be distributed
during the next calendar year. For the foregoing purposes, a company is treated
as having distributed any amount on which it is subject to income tax for any
taxable year ending in such calendar year. Because the Money Market Portfolio
intends to distribute all of its taxable income currently, it does not
anticipate incurring any liability for this excise tax.
The Fund will be required in certain cases to withhold and remit to
the United States Treasury 31% of dividends (other than exempt interest
dividends) paid to any shareholder (1) who has provided either an incorrect tax
identification number or no number at all, (2) who is subject to backup
withholding by the Internal Revenue Service for failure to report the receipt of
interest or dividend income properly, or (3) who has failed to certify to the
Fund that he is not subject to backup withholding or that he is an "exempt
recipient."
The foregoing general discussion of Federal income tax consequences is
based on the Code and the regulations issued thereunder as in effect on the date
of this Statement of Additional Information. Future legislative or
administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.
Although the Money Market Portfolio expects to qualify as a "regulated
investment company" and to be relieved of all or substantially all Federal
income taxes, depending upon the extent of its activities in states and
localities in which its offices are maintained, in which its agents or
independent contractors are located or in which it is otherwise deemed to be
conducting business, the Money Market Portfolio may be subject to the tax laws
of such states or localities.
ADDITIONAL INFORMATION CONCERNING FUND SHARES
The Fund does not currently intend to hold annual meetings of
shareholders except as required by the 1940 Act or other applicable law. The
Fund's amended By-Laws provide that shareholders owning at least ten percent of
the outstanding shares of all classes of Common Stock of the Fund have the right
to call for a meeting of shareholders to consider the removal of one or more
directors. To the extent required by law, the Fund will assist in shareholder
communication in such matters.
<PAGE>28
As stated in the Prospectus, holders of shares of each class of the
Fund will vote in the aggregate and not by class on all matters, except where
otherwise required by law. Further, shareholders 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 portfolio. Rule 18f-2 under the
1940 Act provides that any matter required to be submitted by the provisions of
such Act or applicable state law, or otherwise, to the holders of the
outstanding securities of an investment company such as the Fund shall not be
deemed to have been effectively acted upon unless approved by the holders of a
majority of the outstanding shares of each portfolio affected by the matter.
Rule 18f-2 further provides that a portfolio shall be deemed to be affected by a
matter unless it is clear that the interests of each portfolio in the matter are
identical or that the matter does not affect any interest of the portfolio.
Under the Rule the approval of an investment advisory agreement or any change in
a fundamental investment policy would be effectively acted upon with respect to
a portfolio only if approved by the holders of a majority of the outstanding
voting securities of such portfolio. However, the Rule also provides that the
ratification of the selection of independent public accountants, the approval of
principal underwriting contracts and the election of directors are not subject
to the separate voting requirements and may be effectively acted upon by
shareholders of an investment company voting without regard to portfolio.
Notwithstanding any provision of Maryland law requiring a greater vote
of shares of the Fund's common stock (or of any class voting as a class) in
connection with any corporate action, unless otherwise provided by law (for
example by Rule 18f-2 discussed above), or by the Fund's Articles of
Incorporation, the Fund may take or authorize such action upon the favorable
vote of the holders of more than 50% of all of the outstanding shares of Common
Stock voting without regard to class (or portfolio).
MISCELLANEOUS
Counsel. The law firm of Ballard Spahr Andrews & Ingersoll, 1735
Market Street, 51st Floor, Philadelphia, Pennsylvania 19103, serves as counsel
to the Fund, PIMC, PNC Bank and PFPC. The law firm of Drinker Biddle & Reath,
1100 Philadelphia National Bank Building, Broad and Chestnut Streets,
Philadelphia, Pennsylvania 19107, serves as counsel to the Fund's independent
directors.
Independent Accountants. Coopers & Lybrand L.L.P., 2400 Eleven Penn
Center, Philadelphia, Pennsylvania 19103, serves as the Fund's independent
accountants. The Fund's financial statements which appear in this Statement of
Additional Information have been audited by Coopers & Lybrand L.L.P., as set
forth in their report, which also appears in this Statement of Additional
Information, and have been included herein in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
<PAGE>29
Control Persons. As of January 27, 1995, to the Fund's knowledge, the
following named persons at the addresses shown below owned of record
approximately 5% or more of the total outstanding shares of the class of the
Fund indicated below. Such classes are described in the Prospectus. The Fund
does not know whether such persons also beneficially own such shares.
<PAGE>30
<TABLE>
<CAPTION>
Percent of
Outstanding
Names and Addresses Shares of
Class of Common Stock of Record Owners Class Owned
<S> <C> <C>
Class A Boston Financial Data Services 99%
(Growth & Income) Omnibus Account
Attn.: Warburg Pincus, 3rd Fl.
2 Heritage Drive
Quincy, MA 02171
Class D Gruntal Co. 8%
(Tax-Free) FBO 955-16852-14
14 Wall Street
New York, NY 10005
Class D Gruntal Co. 9%
(Tax-Free) FBO 955-10773-13
14 Wall Street
New York, NY 10005
Class D Gruntal Co. 9%
(Tax-Free) FBO 955-10702-19
14 Wall Street
New York, NY 10005
Class D Gruntal Co 5%
Tax-Free FBO 541-75585-16
14 Wall Street
New York, NY 10005
Class E PNC Bank, NA Custodian FBO 14%
(Money) Harold T. Erfer
414 Charles Lane
Wynnewood, PA 19096
</TABLE>
<PAGE>31
<TABLE>
<CAPTION>
Percent of
Outstanding
Names and Addresses Shares of
Class of Common Stock of Record Owners Class Owned
<S> <C> <C>
Class E PNC Bank, NA 18%
(Money) Custodian FBO
Karen M. McElhinny
and Contribution Acct.
4943 King Arthur Drive
Erie, PA 16506
Class E E. L. Haines Jr. and 8%
(Money) Betty J. Haines
2341 Pinebluff Drive
Dallas, TX 75228
Class E John Robert Estrada and 16%
(Money) Shirley Ann Estrada
3700 Raton Drive
Arlington, TX 76018
Class E Eric Levine and 31%
(Money) Linda & Howard Levine
J T Ten WROS
67 Lanes Pond Road
Howell, NJ 07731
Class F SEYMOUR FEIN 91%
(Municipal) P.O. 486 Tremont Post Office
Bronx, NY 10457-0848
Class F William B. Pettus & Augustine W. 9%
(Municipal) Pettus Trust
827 Winding Path Lane
St. Louis, MO 63021-6635
Class G Saver's Marketing Inc. 21%
(Money) c/o Planco
16 Industrial Blvd.
Paoli, PA 19301
Class G
(Money) Lynda R. Campbell Succ. Trustee 7%
For IN TR Under the Lynda R. Campbell
Caring Trust dtd. 10/19/92
935 Rutger Street
St. Louis, MO 63104
Class G
(Money) Jewish Family and Childrens Agency 42%
of Philadelphia Capital Campaign
1610 Spruce Street
Philadelphia, PA 19103
Attn: S. Ramm
Class H
(Municipal) Deborah C. Brown, Trustee 27%
Barbara J, C, Curtis, Trustee
The Crowe Trust dtd 11/23/88
9921 West 128th Terr
Overlond Dale, KS 662133
Class H
(Municipal) Kelly H. Vandelight 7%
Crystal C. Vandelight
P.O. Box 296
Belle, MO 65013
</TABLE>
<PAGE>32
<TABLE>
<CAPTION>
Percent of
Outstanding
Names and Addresses Shares of
Class of Common Stock of Record Owners Class Owned
<S> <C> <C>
Class H
(Municipal) Kenneth Farnell and 5%
Valerie Farnell
3854 Sullivan
St. Louis, MO 63107
Class H
(Municipal) Gary L. Lange 8%
Susan D. Lange
13 Muirfield Court North
St. Charles, MO 63304
Class H
(Municipal) Marcella L. Haugh 7%
Caring TR
DTD 8/12/91
40 Plaza Sq. Apt. 202
St. Louis, MO 63103
Class H
(Municipal) Larnie Johnson 8%
Mary Alice Johnson
4927 Lee Avenue
St. Louis, MO 63115-1726
Class I
(Money) Wasner & Co. 83%
For Account of Paine Webber
Managed Assets-Sundry
Holdings
Attn: Judy Guille 01-04-01
1632 Chestnut St.
Philadelphia, PA 19103
Class I
(Municipal) Wasner & Co. 13%
For Account of Paine Webber
Managed Assets - Sundry Holdings
Attn: Joe Domizio
200 Stevens Drive
Lester, PA 19113
Class P
(Government) Home Insurance Company 73%
Att. Edward F. Linekin
59 Maiden Lane
21st Floor
New York, NY 10038
Class P
(Government) Home Indemnity Company 6%
Att. Edward F. Linekin
59 Maiden Lane
21st Floor
New York, NY 10038
</TABLE>
<PAGE>33
<TABLE>
<CAPTION>
Percent of
Outstanding
Names and Addresses Shares of
Class of Common Stock of Record Owners Class Owned
<S> <C> <C>
Class U
(Strategic) State of Oregon 43%
Treasury Department
159 State Capital Building
Salem, Oregon 97310
Class U
(Strategic) The Chase Manhattan Bankers Trust 14%
For Kendale Company Master
Pension Plan
Attn: Mark Tesoriero
3 Metrotech Ctr. 6th Fl.
Brooklyn, NY 11245
Class V
(Emerging) Amherst H. Wilder Foundation 5%
919 Lafond Avenue
Saint Paul, MN 55104
Class V
(Emerging) Northern Trust Company TTEE 21%
Texas Instruments Employee Plan
P.O. Box 92956
AC 22-69966/2-059328
Chicago, IL 60675-2956
Class V
(Emerging) Wachovia Bank North Carolina 5%
Fleming Companies Inc.
Noster Pension Trust
307 North Hain St.
P. O. Box 3099
Winston Salem, NC 27150
Class V
(Emerging) Bryn Mawr College 11%
101 North Merion Avenue
Bryn Mawr, PA 19010-2899
Class V
(Emerging) Wachovia Bank North Carolina 9%
Carolina Power & Light Co.
Supplemental Retirement Trust
301 Main St.
Winston Salem, NC 27150
Class V
(Emerging) Northern Trust 7%
TRUST PILLSBURY
P O Box 92956
Chicago, IL 60675
Class W
(Equity) PNC Bank, N.A.Cust. FBO Victor 9%
A. Canto
P. O. Box 1471
Ranclo Santa Fe, CA
</TABLE>
<PAGE>34
<TABLE>
<CAPTION>
Percent of
Outstanding
Names and Addresses Shares of
Class of Common Stock of Record Owners Class Owned
<S> <C> <C>
Class W
(Equity) John Hancock Clearing 29%
Corporation
Special Custody Acct. and the
Exclusive Benefit of Customers
One WFC 200 Liberty St.
New York, NY 10281
Class W
Equity Lois G. Smith FBO 7%
Lois G. Smith Trust
12035 Hooiser CRT Apt. 103
Bayonne Point, FL 34667-3143
Class W
(Equity) Rauscher Pierce Refsnes 7%
FBO Charles Wright
Special Account
Route 1 Box 138
Coleman, TX 76834
Class X
(Core Equity) Bank of New York 87%
Trust APU Buckeye Pipeline
One Wall Street
New York, NY 10286
Class X
(Core Equity) Werner & Pfleiderer 9%
Pension Plan Employees
663 E. Crescent Avenue
Romsey, NU 07466
Class Y
(Core Fixed Income) New England UFCW & Employers 40%
Pension Fund Board of Trustees
161 Forbes Rd., Suite 201
Braintree, MA 02184
Class Y
(Core Fixed Income) Bankers Trust 35%
Pechiney Corporation Pension
Master Trust
34 Exchange Place, 4th Fl.
Jersey City, NJ 07302
Class Y
(Core Fixed Income) Kollhorgen Corporation Pension Trust 8%
1601 Thapelco Road
Waltham, MA 02154
Class Z
(Global Fixed Income) Bank of New York 36%
Eastern Enterprises
Retirement Plain Trust
One Wall Street, 8th Fl.
New York, NY 10286
</TABLE>
<PAGE>35
<TABLE>
<CAPTION>
Percent of
Outstanding
Names and Addresses Shares of
Class of Common Stock of Record Owners Class Owned
<S> <C> <C>
Class Z
(Global Fixed Income) Sunkist Master Trust 64%
14130 Riverside Drive
Sherman Oaks, CA 91423
Class AA
(Municipal Bond) William A. Marquard 13%
2199 Maysville Road
Carlisle, KY 40311
Class AA
(Municipal Bond) John C. Cahill 6%
c/o David Holmgren
30 White Birch Lane
Coss Cot, CT 06870
</TABLE>
<PAGE>36
