<PAGE>
THE BEA FAMILY OF MUTUAL FUNDS
SUPPLEMENT DATED FEBRUARY 16, 1995 TO
PROSPECTUS DATED DECEMBER 28, 1994
The following paragraphs replace the fourth and fifth full paragraphs on
page 27.
The day-to-day portfolio management of BEA International Equity and BEA
Emerging Markets Equity Portfolios is the responsibility of the BEA
International Equities Management Team. The Team consists of the following
investment professionals: Emilio Bassini (Managing Director), Piers Playfair
(Senior Vice President), and Steven D. Bleiberg (Vice President. Mr. Bassini has
been engaged as an investment professional with BEA for more than five years.
Mr. Bleiberg rejoined BEA in 1991, he spent two years as a portfolio manager at
Matrix Capital Management, prior to Matrix, Mr. Bleiberg spent five years at BEA
in the equity research department. Mr. Playfair joined BEA in 1990, prior to
joining BEA he was a manager in the corporate finance division of Samuel
Montagu, London and a Director of Equity Capital Markets Group at Salomon
Brothers.
The day-to-day portfolio management of the BEA U.S. Core Equity Portfolio
and the equity portion of the BEA Balanced Portfolio is the responsibility of
the BEA Domestic Equity Management Team. The Team consists of the following
investment professionals: William W. Priest, Jr. (Chief Executive Officer and
Managing Director of BEA), John B. Hurford (Vice Chairman of the Executive
Committee and Managing Director), Albert L. Zesiger (Managing Director), and
Todd M. Rice (Vice President). Messrs. Priest, Hurford, and Zesiger have, on an
individual basis, been engaged as investment professionals with BEA for more
than five years. Mr. Rice joined BEA in 1990; previously, he was employed as an
investment professional at Salomon Brothers.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE BEA FAMILY OF MUTUAL FUNDS
BEA INTERNATIONAL EQUITY PORTFOLIO
BEA EMERGING MARKETS EQUITY PORTFOLIO
BEA U.S. CORE EQUITY PORTFOLIO
BEA BALANCED PORTFOLIO
BEA U.S. CORE FIXED INCOME PORTFOLIO
BEA GLOBAL FIXED INCOME PORTFOLIO
BEA STRATEGIC FIXED INCOME PORTFOLIO
BEA MUNICIPAL BOND FUND PORTFOLIO
BEA SHORT DURATION PORTFOLIO
---------------------
PROSPECTUS
---------------------
DECEMBER 28, 1994
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Fee Table.................................................................................................. 2
Financial Highlights....................................................................................... 4
The Fund................................................................................................... 8
Investment Objectives and Policies......................................................................... 8
Investment Limitations..................................................................................... 23
Risk Factors............................................................................................... 23
Management................................................................................................. 26
Expenses................................................................................................... 29
How to Purchase Shares..................................................................................... 30
How to Redeem Shares....................................................................................... 31
Net Asset Value............................................................................................ 32
Dividends and Distributions................................................................................ 33
Taxes...................................................................................................... 33
Description of Shares...................................................................................... 35
Other Information.......................................................................................... 37
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
The BEA Family consists of nine classes of common stock of The RBB Fund,
Inc. (the "Fund"), an open-end management investment company. Shares
(collectively, the "BEA Shares" or "Shares") of such classes (the "BEA Classes"
or "Classes") are offered by this Prospectus and represent interests in one of
nine of the investment portfolios of the Fund described in this Prospectus
(collectively, the "Portfolios"). The investment objective of each Portfolio
described in this Prospectus is as follows:
BEA INTERNATIONAL EQUITY PORTFOLIO -- to provide long-term appreciation
of capital. The Portfolio will invest primarily in equity securities of
non-U.S. issuers.
BEA EMERGING MARKETS EQUITY PORTFOLIO -- to provide long-term
appreciation of capital. The Portfolio will invest primarily in equity
securities in emerging country markets.
BEA U.S. CORE EQUITY PORTFOLIO -- to provide long term appreciation of
capital. The Portfolio will invest primarily in U.S. equity securities.
BEA BALANCED PORTFOLIO -- to maximize total return consistent with
preservation of capital through both income and capital appreciation.
BEA U.S. CORE FIXED INCOME PORTFOLIO -- to provide high total return.
The Portfolio will invest primarily in domestic fixed-income securities
consistent with comparable broad market fixed income indices, such as the
Lehman Brothers Aggregate Bond Index.
BEA STRATEGIC FIXED INCOME PORTFOLIO -- to provide a high total return.
The Portfolio will invest primarily in fixed income securities issued by
corporations, governments and agencies, both domestic and foreign. The
Portfolio will invest without regard to maturity or credit quality
limitations.
BEA GLOBAL FIXED INCOME PORTFOLIO -- to provide high total return. The
Portfolio will invest primarily in both foreign and domestic fixed income
securities.
BEA MUNICIPAL BOND FUND PORTFOLIO -- to provide high total return. The
Portfolio will invest primarily in municipal bonds issued by state and local
authorities.
BEA SHORT DURATION PORTFOLIO -- to provide investors with as high a
level of current income as is consistent with the preservation of capital.
There can be, of course, no assurance that a Portfolio's investment
objective will be achieved. Investments in the Portfolios involve certain risks.
See "Risk Factors."
THE BEA INTERNATIONAL EQUITY, BEA EMERGING MARKETS EQUITY, BEA STRATEGIC
FIXED INCOME, BEA U.S. CORE FIXED INCOME, BEA GLOBAL FIXED INCOME AND BEA
MUNICIPAL BOND FUND PORTFOLIOS MAY INVEST ITS ASSETS WITHOUT LIMITATION IN
SECURITIES WHICH MAY INCLUDE BELOW INVESTMENT-GRADE QUALITY SECURITIES COMMONLY
KNOWN AS "JUNK BONDS." INVESTMENTS OF THIS TYPE ARE SUBJECT TO GREATER RISKS,
INCLUDING THE RISK OF LOSS OF PRINCIPAL AND INTEREST, THAN THOSE INVOLVED WITH
INVESTMENT GRADE SECURITIES. PURCHASERS SHOULD CAREFULLY ASSESS THE RISKS
ASSOCIATED WITH AN INVESTMENT IN THESE PORTFOLIOS. SEE "RISK FACTORS."
THE PORTFOLIOS MAY ENGAGE IN SHORT-TERM TRADING AND MAY INVEST IN PUT AND
CALL OPTIONS. SUCH ACTIVITY CONSTITUTES SPECULATIVE ACTIVITY AND INVOLVES
GREATER RISKS OR COST TO THE PORTFOLIOS.
THE PORTFOLIOS MAY INVEST UP TO 10% OF NET ASSETS IN ILLIQUID SECURITIES.
SUCH INVESTMENTS CONSTITUTE SPECULATIVE ACTIVITY AND INVOLVE GREATER RISKS OR
COSTS TO THE PORTFOLIOS. SEE "RISK FACTORS."
BEA Associates ("BEA" or the "Adviser"), a U.S. investment advisory firm,
will act as the investment adviser to each Portfolio. BEA emphasizes a global
investment strategy and, as of September 30, 1994, acted as adviser for
approximately $22.2 billion of assets.
Generally, the minimum initial investment in a Portfolio is $1,000,000 and
the minimum subsequent investment is $100,000.
This Prospectus contains information that a prospective investor needs to
know before investing. Please keep it for future reference. A Statement of
Additional Information, dated December 28, 1994, has been filed with the
Securities and Exchange Commission and is incorporated by reference in this
Prospectus. It may be obtained free of charge from the Fund's distributor by
calling (800) 888-9723.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS DECEMBER 28, 1994
<PAGE>
- --------------------------------------------------------------------------------
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<CAPTION>
BEA BEA
BEA EMERGING STRATEGIC
INTERNATIONAL MARKETS FIXED
EQUITY EQUITY INCOME
PORTFOLIO PORTFOLIO PORTFOLIO
------------- -------- ---------
<S> <C> <C> <C>
Redemption Fees (Payable to the Fund) (as a
percentage of amount redeemed)................... 1.00% 1.50% .25%
</TABLE>
ANNUAL PORTFOLIO OPERATING EXPENSES AFTER EXPENSE REIMBURSEMENTS AND WAIVERS*
<TABLE>
<CAPTION>
BEA BEA
BEA EMERGING U.S. CORE
INTERNATIONAL MARKETS BEA U.S. BEA FIXED
EQUITY EQUITY CORE EQUITY BALANCED INCOME
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- -------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Management fees
(after waivers)**................................ .78% .64% .68% .50% .05%
Other Expenses
(after reimbursements)........................... .47% .86% .32% .40% .45%
--- --- --- --- ---
Total Portfolio
Operating Expenses (after waivers and
reimbursements).................................. 1.25% 1.50% 1.00% .90% .50%
--- --- --- --- ---
--- --- --- --- ---
</TABLE>
<TABLE>
<CAPTION>
BEA
BEA STRATEGIC BEA BEA
GLOBAL FIXED FIXED MUNICIPAL SHORT
INCOME INCOME BOND FUND DURATION
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Management fees
(after waivers)**................................ -- .63% .47% .15%
Other Expenses
(after reimbursements)........................... .75% .37% .53% .40%
--- --- --- ---
Total Portfolio
Operating Expenses (after waivers and
reimbursements).................................. .75% 1.00% 1.00% .55%
--- --- --- ---
--- --- --- ---
<FN>
- ---------
* The operating expenses for the BEA International Equity, BEA Emerging
Markets Equity, and BEA Strategic Fixed Income Portfolios are based on
actual expenses for the year ended August 31, 1994. The operating expenses
for the BEA U.S. Core Fixed Income, BEA Global Fixed Income, and BEA
Municipal Bond Fund Portfolios are based on actual expenses for the period
between the commencement dates of April 1, June 28 and June 20, 1994,
respectively, and August 31, 1994. The anticipated operating expenses for
the other Portfolios which were not then in existence represent estimates
of costs and fees for the current fiscal year.
** Management fees are each based on average daily net assets and are
calculated daily and paid monthly.
</TABLE>
2
<PAGE>
- --------------------------------------------------------------------------------
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in each
of the Portfolios, assuming (1) a 5% annual return, and (2) redemption at the
end of each time period.
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
------ ------ ------- -------
<S> <C> <C> <C> <C>
BEA International Equity Portfolio.................................... $23* $51* $ 81* $166*
BEA Emerging Markets Equity Portfolio................................. $31** $64** $100** $200**
BEA U.S. Core Equity Portfolio........................................ $10 $32 **** ****
BEA Balanced Portfolio . $ 9 $29 **** ****
BEA U.S. Core Fixed Income Portfolio.................................. $ 5 $16 **** ****
BEA Global Fixed Income Portfolio..................................... $ 8 $24 **** ****
BEA Strategic Fixed Income Portfolio.................................. $13*** $35*** $ 58*** $126***
BEA Municipal Bond Fund Portfolio..................................... $10 $32 **** ****
BEA Short Duration Portfolio.......................................... $ 6 $18 **** ****
<FN>
- ------------
* Reflects a 1.00% redemption fee
** Reflects a 1.50% redemption fee
*** Reflects a .25% redemption fee
**** N/A
</TABLE>
An investor would pay the following expenses on the same investment,
assuming no redemption:
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
---- ----- ----- -----
<S> <C> <C> <C> <C>
BEA International Equity Portfolio.......................... $13 $40 $69 $151
BEA Emerging Markets Equity Portfolio....................... $15 $47 $82 $179
BEA Strategic Fixed Income Portfolio........................ $10 $32 $55 $122
</TABLE>
The Fee Table is designed to assist an investor in understanding the various
costs and expenses that an investor in each of the Portfolios will bear directly
or indirectly. (For more complete descriptions of the various costs and
expenses, see "Management" below.) The expense figures are based upon fees and
costs of the BEA International Equity, BEA Emerging Markets Equity, BEA
Strategic Fixed Income, BEA U.S. Core Fixed Income, BEA Global Fixed Income and
BEA Municipal Bond Fund Portfolios as of August 31, 1994. For Portfolios not
then in operation, the expense figures, including "Other Expenses," represent
estimated costs and fees to be charged in the current fiscal year, taking into
account anticipated fee waivers and expense reimbursements for the current
fiscal year. Thus, actual expenses may be greater or less than such costs and
fees. The Fee Table reflects waiver of Management and Administration Fees equal
to .05%, .51%, .07%, .49%, 1.17%, .13%, .34%, .24% and .05% for the BEA
International Equity, BEA Emerging Markets Equity, BEA U.S. Core Equity, BEA
U.S. Core Fixed Income, BEA Global Fixed Income, BEA Strategic Fixed Income, BEA
Municipal Bond Fund, BEA Balanced and BEA Short Duration Portfolios
respectively. However, there can be no assurance that any future waivers of
Management and Administration Fees (if any) will not vary from the figures
reflected in the Fee Table. To the extent any service providers assume
additional expenses of any Portfolio, such assumption of additional expenses
will have the effect of lowering a Portfolio's overall expense ratio and
increasing its return to investors. Absent anticipated fee waivers or
reimbursements, estimated expenses for the current fiscal year are as follows:
ANNUAL PORTFOLIO OPERATING EXPENSES BEFORE EXPENSE REIMBURSEMENTS AND WAIVERS
<TABLE>
<CAPTION>
BEA
BEA BEA U.S.
Inter- Emerging BEA U.S. Core
national Markets Core BEA Fixed
Equity Equity Equity Balanced Income
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Management fees............................................. .80% 1.00% .75% .60% .375%
Other Expenses.............................................. .50% 1.01% .32% .54% .615%
--- --- --- --- ---
Total Portfolio Operating Expenses.......................... 1.30% 2.01% 1.07% 1.14% .99%
--- --- --- --- ---
--- --- --- --- ---
</TABLE>
<TABLE>
<CAPTION>
BEA BEA BEA
Global Strategic Municipal BEA
Fixed Fixed Bond Short
Income Income Fund Duration
Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Management fees............................................. .50% .70% .70% .15%
Other Expenses.............................................. 1.42% .43% .64% .45%
--- --- --- ---
Total Portfolio Operating Expenses.......................... 1.92% 1.13% 1.34% .60%
--- --- --- ---
--- --- --- ---
</TABLE>
The Example in the Fee Table assumes that all dividends and distributions
are reinvested and that the amounts listed under "Annual Portfolio Operating
Expenses 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.
3
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The table below sets forth certain information concerning the investment
results of the BEA Classes representing interests in the BEA International
Equity, BEA Emerging Markets Equity, BEA Strategic Fixed Income, BEA U.S. Core
Fixed Income, BEA Global Fixed Income and BEA Municipal Bond Fund Portfolios for
each of the periods indicated. The financial data included in this table for
each of the periods ended August 31, 1994 and August 31, 1993 are a part of the
Fund's Financial Statements for each of the above Portfolios which have been
audited by Coopers & Lybrand L.L.P., the Fund's independent accountants, whose
report thereon appears in the Statement of Additional Information along with the
financial statements. The financial data included in this table should be read
in conjunction with the financial statements and related notes included in the
Statement of Additional Information. No financial data for the period ended
August 31, 1994 is included for the BEA Classes relating to the BEA U.S. Core
Equity, BEA Balanced and BEA Short Duration Portfolios, as such classes had not
commenced a public offering of their securities as of that date.
4
<PAGE>
- --------------------------------------------------------------------------------
THE BEA FAMILY
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
BEA INTERNATIONAL BEA EMERGING MARKETS
EQUITY PORTFOLIO EQUITY PORTFOLIO
------------------------------------- --------------------------------------
For the Year For the Period For the Year For the Period
Ended October 1, 1992* to Ended February 1, 1993* to
August 31, 1994 August 31, 1993 August 31, 1994 August 31, 1993
--------------- ------------------- --------------- --------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period......... $ 18.73 $ 15.00 $ 18.38 $ 15.00
--------------- ------------------- --------------- --------------------
Income from investment operations
Net investment income (loss)............. .05 .04 (.03) .02
Net gains on securities
(both realized and unrealized).......... 2.60 3.69 6.64 3.36
--------------- ------------------- --------------- --------------------
Total from investment operations......... 2.65 3.73 6.61 3.38
--------------- ------------------- --------------- --------------------
Less Distributions
Dividends from net investment income..... (.05) -- (.09) --
Distributions from capital gains......... (.60) -- (.32) --
--------------- ------------------- --------------- --------------------
Total distributions...................... (.65) -- (.41) --
--------------- ------------------- --------------- --------------------
Net asset value, end of period........... $ 20.73 $ 18.73 $ 24.58 $ 18.38
--------------- ------------------- --------------- --------------------
--------------- ------------------- --------------- --------------------
Total Return................................. 14.23%(d) 24.87%(c)(d) 35.99%(d) 22.53%(c)(d)
Ratio/Supplemental Data
Net assets, end of period.................. $ 767,189,791 $268,403,524 $ 140,675,379 $21,988,062
Ratio of expenses to average net assets.... 1.25%(a) 1.25%(a)(b) 1.50%(a) 1.50%(a)(b)
Ratio of net investment income (loss) to
average net assets........................ .33% .41%(b) (.02)% .28%(b)
Portfolio turnover rate.................... 104% 106%(c) 54% 38%(c)
<FN>
- ---------
(a) Without the waiver of advisory fees and administration fees, the ratios of
expenses to average net assets for the BEA International Equity Portfolio
would have been 1.30% for the period ended August 31, 1994 and 1.46%
annualized for the period ended August 31, 1993. Without the waiver of
advisory fees and administration fees and without the reimbursement of
operating expenses, the ratios of expenses to average net assets for the
BEA Emerging Markets Equity Portfolio would have been 2.01% for the year
ended August 31, 1994 and 3.23% annualized for the period ended August 31,
1993.
(b) Annualized.
(c) Not annualized.
(d) Redemption fees not reflected in total return.
* Commencement of operations.
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
THE BEA FAMILY
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
BEA U.S. CORE BEA GLOBAL
FIXED INCOME FIXED INCOME
PORTFOLIO PORTFOLIO
----------------- -----------------
For the Period For the Period
April 1, 1994* to June 28, 1994* to
August 31, 1994 August 31, 1994
----------------- -----------------
<S> <C> <C>
Net asset value, beginning of period............................................ $ 15.00 $ 15.00
----------------- -----------------
Income from investment operations
Net investment income....................................................... .42 .15
Net loss on securities (both realized and unrealized)....................... (.41) (.15)
----------------- -----------------
Total from investment operations............................................ .01 --
----------------- -----------------
Less Distributions
Dividends from net investment income........................................ (.24) --
Distributions from capital gains............................................ -- --
----------------- -----------------
Total distributions......................................................... (.24) --
----------------- -----------------
Net asset value, end of period.............................................. $ 14.77 $ 15.00
----------------- -----------------
----------------- -----------------
Total Return.................................................................... .17%(c) .00%(c)
Ratio/Supplemental Data
Net assets, end of period..................................................... $30,015,818 $6,300,360
Ratio of expenses to average net assets....................................... .50%(a)(b) .75%(a)(b)
Ratio of net investment income to average net assets.......................... 6.04%(b) 5.64%(b)
Portfolio turnover rate....................................................... 186%(c) 0%(c)
<FN>
- ---------
(a) Without the waiver of advisory fees and administration fees, the ratio of
expenses to average net assets for the BEA U.S. Core Fixed Income Portfolio
would have been .99% annualized for the period ended August 31, 1994.
Without the waiver of advisory fees and administration fees and without the
reimbursement of operating expenses, the ratio of expenses to average net
assets for the BEA Global Fixed Income Portfolio would have been 1.92%
annualized for the period ended August 31, 1994.
(b) Annualized.
(c) Not annualized.
* Commencement of operations.
</TABLE>
6
<PAGE>
- --------------------------------------------------------------------------------
THE BEA FAMILY
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
BEA MUNICIPAL
BEA STRATEGIC FIXED BOND FUND
INCOME PORTFOLIO PORTFOLIO
------------------------------------ -----------------
For the Year For the Period For the Period
Ended March 31, 1993* to June 20, 1994* to
August 31, 1994 August 31, 1993 August 31, 1994
--------------- ------------------ -----------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 16.94 $ 15.00 $ 15.00
--------------- ------------------ -----------------
Income from investment operations
Net investment income................................... 1.20 .52 .09
Net gains (loss) on securities
(both realized and unrealized)......................... (.77) 1.42 (.03)
--------------- ------------------ -----------------
Total from investment operations...................... .43 1.94 .06
--------------- ------------------ -----------------
Less Distributions
Dividends from net investment income.................... (1.43) -- --
Distributions from capital gains........................ -- -- --
--------------- ------------------ -----------------
Total distributions..................................... (1.43) -- --
--------------- ------------------ -----------------
Net asset value, end of period.......................... $ 15.94 $ 16.94 $ 15.06
--------------- ------------------ -----------------
--------------- ------------------ -----------------
Total Return................................................ 2.24%(d) 12.93%(c)(d) .40%(c)
Ratio/Supplemental Data
Net assets, end of period................................. $ 143,517,472 $ 98,356,591 $42,309,936
Ratio of expenses to average net assets................... 1.00%(a) 1.00%(a)(b) 1.00%(a)(b)
Ratio of net investment income to average net assets...... 7.73% 7.56%(b) 3.27%(b)
Portfolio turnover rate................................... 121% 72%(c) 9%(c)
<FN>
- ---------
(a) Without the waiver of advisory fees and administration fees, the ratios of
expenses to average net assets for the BEA Strategic Fixed Income Portfolio
would have been 1.13% for the year ended August 31, 1994 and 1.17%
annualized for the period ended August 31, 1993. Without the waiver of
advisory fees and administration fees, the ratio of expenses to average net
assets for the BEA Municipal Bond Fund Portfolio would have been 1.34%
annualized for the period ended August 31, 1994.
(b) Annualized.
(c) Not annualized.
(d) Redemption fees not reflected in total return.
* Commencement of operations.
</TABLE>
7
<PAGE>
- --------------------------------------------------------------------------------
THE FUND
The Fund is an open-end management investment company that currently
operates or proposes to operate nineteen separate investment portfolios. Each of
the nine classes of shares offered by this Prospectus represents interests in
one of the nine Portfolios. Each Portfolio is non-diversified. The Fund was
incorporated in Maryland on February 29, 1988.
The Portfolios are designed primarily for investors seeking investment of
funds held in an institutional, fiduciary, advisory, agency, custodial or other
similar capacity, which may include the investment of funds held or managed by
broker-dealers, investment counselors, insurance companies, employee benefit
plans, colleges, churches, charities, corporations and other institutions.
Shares are currently available for purchase by investors who have entered into
an investment management agreement with BEA. In addition, Shares may be
purchased directly by certain individuals described in "How to Purchase Shares."
Institutional investors such as those listed above may purchase Shares for
discretionary or non-discretionary accounts maintained by individuals.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each Portfolio may not be changed without the
affirmative vote of a majority of the Portfolio's outstanding shares (as defined
in the Investment Company Act of 1940, as amended (the "1940 Act")). As with
other mutual funds, there can be no assurance that any Portfolio will achieve
its investment objective. The Statement of Additional Information contains a
more detailed description of the various investments and investment techniques
used by the Portfolios.
BEA INTERNATIONAL EQUITY PORTFOLIO
The BEA International Equity Portfolio's investment objective is to seek
long-term appreciation of capital. The Portfolio will invest primarily in equity
securities of non-U.S. issuers. The Portfolio defines equity securities of non-
U.S. issuers as securities of issuers whose principal activities are outside the
United States. The Portfolio expects that its investments will be concentrated
in Argentina, Australia, Austria, Brazil, Canada, Chile, Colombia, Denmark,
England, Finland, France, Germany, Greece, Hong Kong, Hungary, Italy, Japan,
Malaysia, Mexico, The Netherlands, New Zealand, Norway, Portugal, Singapore,
South Africa, Spain, Sweden, Switzerland, Thailand and Venezuela. The Portfolio
may invest in securities of issuers in Emerging Markets, as defined below under
"Investment Objectives and Policies -- BEA Emerging Markets Equity Portfolio",
but does not expect to invest more than 40% of its total assets in securities of
issuers in Emerging Markets. The Portfolio will invest in securities of issuers
from at least three countries outside the United States.
Under normal market conditions, the Portfolio will invest a minimum of 80%
of its total assets in equity securities of non-U.S. issuers. Such equity
securities include common stock and preferred stock (including convertible
preferred stock); bonds, notes and debentures convertible into common or
preferred stock; stock purchase warrants and rights; equity interests in trusts
and partnerships; and depositary receipts of companies.
The Portfolio may invest up to 20% of its total assets in debt securities
issued by U.S. or foreign banks, corporations or the following: other business
organizations, or by U.S. or foreign governments or governmental entities
(including supranational organizations such as the International Bank for
Reconstruction and Development (more commonly referred to as the "World Bank"),
the Asian Development Bank, the InterAmerican Development Bank and the European
Coal and Steel Community), mortgage-backed securities, asset-backed securities,
zero-coupon securities, when-issued securities, repurchase and reverse
repurchase agreements and dollar rolls and may lend portfolio securities to
broker-dealers or institutional investors. The Portfolio may choose to take
advantage of opportunities for capital appreciation from debt securities, by
reason of anticipated changes in such factors as interest rates, currency
relationships, or credit standing of individual issuers. The Portfolio has no
limitation on the maturity or the credit quality of the debt securities in which
it invests, which may include lower-quality, high yielding securities, commonly
known as "junk bonds."
8
<PAGE>
- --------------------------------------------------------------------------------
The Portfolio normally will not emphasize dividend or interest income in
choosing securities, unless BEA believes the income will contribute to the
securities' appreciation potential.
In accordance with the above-mentioned investment policies, the Portfolio
may also invest in U.S. and foreign government securities, convertible
securities, mortgage-backed securities, asset-backed securities, zero-coupon
securities, when-issued securities, repurchase and reverse repurchase agreements
and dollar rolls and may lend portfolio securities to broker-dealers or
institutional investors. See "Investment Objectives and Policies -- Common
Investment Policies" and the Statement of Additional Information.
BEA EMERGING MARKETS EQUITY PORTFOLIO
The BEA Emerging Markets Equity Portfolio's investment objective is to seek
long-term appreciation of capital. The Portfolio will invest primarily in equity
securities of issuers in Emerging Markets. As used in this Prospectus, an
Emerging Market is any country which is generally considered to be an emerging
or developing country by the World Bank and the International Finance
Corporation, as well as countries that are classified by the United Nations as
emerging or developing, at the time of the Portfolio's investment. The countries
that will not be considered Emerging Markets include: Australia, Austria,
Belgium, Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan,
Luxembourg, the Netherlands, New Zealand, Spain, Norway, Switzerland, the United
Kingdom and the United States. Under normal market conditions, the Portfolio
will invest a minimum of 80% of its total assets in equity securities of issuers
in Emerging Markets. The Portfolio will not necessarily seek to diversify
investments on a geographical basis or on the basis of the level of economic
development of any particular country. The Portfolio will at all times, except
during defensive periods, maintain investments in at least three Emerging
Markets.
The Portfolio normally will not emphasize dividend or interest income in
choosing securities, unless BEA believes the income will contribute to the
securities' appreciation potential.
An equity security of an issuer in an Emerging Market is defined as common
stock and preferred stock (including convertible preferred stock); bonds, notes
and debentures convertible into common or preferred stock; stock purchase
warrants and rights; equity interests in trusts and partnerships; and depositary
receipts of companies: (i) the principal securities trading market for which is
in an Emerging Market; (ii) whose principal trading market is in any country,
provided that, alone or on a consolidated basis, they derive 50% or more of
their annual revenue from either goods produced, sales made or services
performed in Emerging Markets; or (iii) that are organized under the laws of,
and with a principal office in, an Emerging Market. Determinations as to
eligibility will be made by BEA based on publicly available information and
inquiries made to the companies.
To the extent that the Portfolio's assets are not invested as described
above, the remainder of the assets may be invested in (i) debt securities
denominated in the currency of an Emerging Market or issued or guaranteed by an
Emerging Market company or the government of an Emerging Market, (ii) equity or
debt securities of corporate or governmental issuers located in developed
countries, and (iii) short-term and medium-term debt securities of the type
described below under "Common Investment Policies -- Temporary Investments."
Debt securities in (i) or (ii) above may include, without limitation,
lower-rated debt securities (commonly known as "junk bonds"). See "Risk Factors
- -- Lower-Rated Securities."
In accordance with the above-mentioned investment policies, the Portfolio
may also invest in convertible securities, mortgage-backed securities,
asset-backed securities, zero-coupon securities, when-issued securities,
repurchase and reverse repurchase agreements and dollar rolls and may lend
portfolio securities to broker-dealers or institutional investors, as more fully
described in "Investment Objectives and Policies -- Common Investment Policies"
and the Statement of Additional Information.
BEA U.S. CORE EQUITY PORTFOLIO
The BEA U.S. Core Equity Portfolio will seek to provide long-term
appreciation of capital. The Portfolio will invest primarily in U.S.
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equity securities. Under normal market conditions, the BEA U.S. Core Equity
Portfolio will invest 65% of the value of its total assets in equity securities.
Equity securities include common stocks, preferred stocks, and securities which
are convertible into common stock and readily marketable securities, such as
rights and warrants, which derive their value from common stock. The BEA U.S.
Core Equity Portfolio may also purchase without limitation dollar-denominated
American Depository Receipts ("ADRs") and similar securities. For defensive
purposes, the BEA U.S. Core Equity Portfolio may invest in fixed income
securities and in money market instruments.
The BEA U.S. Core Equity Portfolio normally will not emphasize dividend or
interest income in choosing securities, unless BEA believes the income will
contribute to the securities' appreciation potential.
BEA BALANCED PORTFOLIO
The BEA Balanced Portfolio's investment objective is to maximize total
return consistent with preservation of capital through both income and capital
appreciation.
The Portfolio will invest in domestic equity and debt securities and cash
equivalent instruments. The proportion of the Portfolio's assets to be invested
in each type of security will vary from time to time in accordance with BEA's
assessment of economic conditions and investment opportunities. The asset
allocation strategy is based on the premise that, from time to time, certain
asset classes are more attractive long-term investments than others. Timely
shifts among equity securities, debt securities and cash equivalent instruments,
as determined by their relative over-valuation or under-valuation, should
produce superior investment returns over the long term. In general, the
Portfolio will not attempt to predict short-term market movements or interest
rate changes, focusing instead upon a longer-term outlook. BEA anticipates that
under normal market conditions between 35% and 65% of the Portfolio's total
assets will be invested in equity securities, and between 35% and 65% will be
invested in debt securities.
The Portfolio will be managed by teams of BEA managers, each dedicated to
managing a portion of the Portfolio's assets. The BEA Domestic Equity Management
Team will manage the Equity portion of the Portfolio, which will primarily
invest in common stocks, preferred stocks, securities which are convertible into
common stocks, and rights and warrants which derive their value from common
stocks. The BEA Fixed Income Management Team will manage the Fixed-Income
portion of the Portfolio, which will invest primarily in domestic fixed-income
securities consistent with comparable broad market fixed-income indices, such as
the Lehman Brothers Aggregate Bond Index. Debt securities include, without
limitation, bonds, debentures, notes, equipment leases and trust certificates,
mortgage-related securities, and obligations issued or guaranteed by the U.S.
Government or its agencies or instrumentalities, or by states or municipalities.
Under normal market conditions, the Portfolio will seek to maintain an average
weighted quality of its debt and convertible securities comparable to the AA
rating of S&P. Subject to this condition, the Portfolio may invest in
lower-rated debt securities (commonly known as "junk bonds"). See "Risk Factors
- -- Lower-Rated Securities." For more information on the Management Teams, see
"Management -- Investment Adviser."
Under normal market conditions, at least 35% of the Portfolio's total assets
will be invested in fixed-income securities and at least 35% will be invested in
equity securities. The actual percentage of assets invested in equity and
fixed-income securities will vary from time to time in accordance with BEA's
analysis of economic conditions and the underlying values of securities.
BEA U.S. CORE FIXED INCOME PORTFOLIO
The BEA U.S. Core Fixed Income Portfolio will seek to provide high total
return. The Portfolio will invest at least 65% of the value of its total assets
in domestic fixed income securities consistent with comparable broad market
fixed-income indices, such as the Lehman Brothers Aggregate Bond Index. Debt
securities may include, without limitation, bonds, debentures, notes, equipment
lease and trust certificates, mortgage-related securities, and obligations
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities. The BEA U.S. Core Fixed Income Portfolio may invest up to
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35% of the value of its total assets in debt securities of foreign issuers. With
respect to 35% of the Portfolio's total assets, the Portfolio may also invest in
other securities including but not limited to equity and equity-related
securities. Under normal market conditions, the Portfolio will seek to maintain
an average weighted quality comparable to the AA rating of Standard & Poor's
Corporation ("S&P"). Subject to this condition, however, the Portfolio may
invest in lower-rated debt securities (commonly known as "junk bonds"). See
"Risk Factors -- Lower-Rated Securities." The Adviser estimates that the average
weighted maturity of the Portfolio will range between 5 and 15 years.
Depending upon prevailing market conditions, the BEA U.S. Core Fixed Income
Portfolio may purchase debt securities at a discount from face value, which
produces a yield greater than the coupon rate. Conversely, if debt securities
are purchased at a premium over face value, the yield will be lower than the
coupon rate. An increase in interest rates will generally reduce the value of
the fixed income investments in the Portfolio and a decline in interest rates
will generally increase the value of those investments.
BEA GLOBAL FIXED INCOME PORTFOLIO
The BEA Global Fixed Income Portfolio will seek to provide high total
return. The Portfolio will invest 65% of the value of its total assets in fixed
income securities issued by foreign and domestic corporations, governments and
agencies. Under normal market conditions, the Portfolio will seek to maintain an
average weighted quality comparable to the four highest bond ratings of S&P
(i.e., BBB or better, commonly referred to as "investment grade"). The Portfolio
may invest in fixed income securities which may have equity characteristics,
such as convertible bonds. The BEA Global Fixed Income Portfolio will not limit
its investments in securities rated below investment grade by recognized rating
agencies or in comparable unrated securities (such lower-rated securities are
commonly referred to as "junk bonds"). The portion of the Portfolio's assets
invested in various countries will vary from time to time depending on BEA's
assessment of market opportunities. There is no limit on investments in any
region, country or currency, although the BEA Global Fixed Income Portfolio will
normally invest in at least three different countries.
In addition to fixed income securities issued by foreign and domestic
corporations, the BEA Global Fixed Income Portfolio may also invest in foreign
government securities ("sovereign bonds"), U.S. government securities including
government agencies' securities, debt obligations of supranational entities,
Brady Bonds, loan participations and assignments, convertible securities,
mortgage-backed securities, asset-backed securities, zero-coupon securities,
when-issued securities, repurchase and reverse repurchase agreements and dollar
rolls and the BEA Global Fixed Income Portfolio may lend portfolio securities to
broker-dealers or institutional investors. For defensive purposes the Portfolio
may invest up to 100% of its assets in U.S. government securities including
government agencies' securities and Temporary Investments (as described below).
See "Common Investment Policies -- All Portfolios and Common Investment
Objectives and Policies" in Statement of Additional Information for a discussion
of these and other investment policies and strategies.
BEA STRATEGIC FIXED INCOME PORTFOLIO
BEA Strategic Fixed Income Portfolio seeks to provide high total return. The
Portfolio will invest primarily in fixed income securities issued by
corporations, governments and agencies, both U.S. and foreign. Under normal
market conditions, the Portfolio will invest a minimum of 65% of its total
assets in fixed income securities, with the remainder invested in fixed income
securities which may have equity characteristics, such as convertible bonds. The
Portfolio is not limited in the extent to which it can invest in securities
rated below investment grade by recognized rating agencies or in comparable
unrated securities. Such securities are commonly referred to as "junk bonds."
The portion of the Portfolio's assets invested in various countries will vary
from time to time depending on BEA's assessment of market opportunities.
The value of the securities held by the Portfolio, and thus the net asset
value of the shares of the Portfolio, generally will vary inversely in relation
to changes in prevailing interest rates. Thus, if interest rates have increased
from the
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time a debt or other fixed income security was purchased, such security, if
sold, might be sold at a price less than its cost. Conversely, if interest rates
have declined from the time such a security was purchased, such security, if
sold, might be sold at a price greater than its cost. Also, the value of such
securities may be affected by changes in real or perceived creditworthiness of
the issuers. Thus, if creditworthiness is enhanced, the price may rise.
Conversely, if creditworthiness declines, the price may decline. The Portfolio
is not restricted to any maximum or minimum time to maturity in purchasing
portfolio securities, and the average maturity of the Portfolio's assets will
vary based upon BEA's assessment of economic and market conditions.
In addition to fixed income securities issued by U.S. and foreign
corporations, the Portfolio may also invest in U.S. government securities,
foreign government securities ("sovereign bonds"), debt obligations of
supranational entities, Brady Bonds, loan participations and assignments,
convertible securities, mortgage-backed securities, asset-backed securities,
zero-coupon securities, when-issued securities, repurchase and reverse
repurchase agreements and dollar rolls and the Portfolio may lend portfolio
securities to broker-dealers or institutional investors. See "Common Investment
Policies -- All Portfolios" and "Common Investment Objectives and Policies" in
the Statement of Additional Information for a discussion of these and other
investment policies and strategies.
BEA MUNICIPAL BOND FUND PORTFOLIO
The BEA Municipal Bond Fund Portfolio seeks to provide high total return.
The Portfolio will invest at least 65% of the value of its total assets in fixed
income securities issued by state and local governments ("Municipal
Obligations"), although the BEA Municipal Bond Fund Portfolio may invest its
assets without limitation in securities of below investment-grade quality. The
BEA Municipal Bond Fund Portfolio may invest up to 40% of its assets in
municipal obligations the interest on which constitutes an item of tax
preference for purposes of the Federal alternative minimum tax ("Alterative
Minimum Tax Securities").
The two principal classifications of Municipal Obligations are "general
obligation" securities and "revenue" securities. General obligation securities
are secured by the issuer's pledge of its full faith, credit and taxing power
for the payment of principal and interest. Revenue securities are payable only
from the revenues derived from a particular facility or class of facilities or,
in some cases, from the proceeds of a special excise tax or other specific
revenue source such as the user of the facility being financed. Revenue
securities include private activity bonds which are not payable from the
unrestricted revenues of the issuer. Consequently, the credit quality of private
activity bonds is usually directly related to the credit standing of the
corporate user of the facility involved. Municipal Obligations may also include
"moral obligation" bonds, which are normally issued by special purpose public
authorities. If the issuer of moral obligation bonds is unable to meet its debt
service obligations from current revenues, it may draw on a reserve fund, the
restoration of which is a moral commitment but not a legal obligation of the
state or municipality which created the issuer.
Purchasable Municipal Obligations include debt obligations issued by
governmental entities to obtain funds for various public purposes, including the
construction of a wide range of public facilities, the refunding of outstanding
obligations, the payment of general operating expenses and the extension of
loans to public institutions and facilities. Private activity bonds issued by or
on behalf of public authorities to finance various privately operated facilities
are considered municipal obligations.
Also included within the general category of Municipal Obligations are
participation certificates in a lease, an installment purchase contract, or a
conditional sales contract ("lease obligations") entered into by a state or
political subdivision to finance the acquisition or construction of equipment,
land, or facilities. Although lease obligations do not constitute general
obligations of the issuer for which the lessee's unlimited taxing power is
pledged, certain lease obligations are backed by the lessee's covenant to
appropriate money to make the lease obligation payments. However, under certain
lease obligations, the lessee has no obligation to make these payments in future
years unless money is appropriated on a yearly basis. Although
"non-appropriation" lease obligations are secured by the leased property,
disposition of
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the property in the event of foreclosure might prove difficult. These securities
represent a relatively new type of financing that is not yet as marketable as
more conventional securities. Moreover, certain investments in lease obligations
may be illiquid and subject to the investment limitations described below.
BEA SHORT DURATION PORTFOLIO
The Short Duration Portfolio is a non-diversified mutual fund that seeks to
provide investors with as high a level of current income as is consistent with
the preservation of capital.
The Portfolio's investment objective cannot be changed without approval by
the holders of a majority (as defined in the Investment Company Act of 1940) of
the Portfolio's outstanding voting shares.
The Adviser will seek to maintain a duration of approximately one year, but
may vary the Portfolio's duration depending upon market conditions. Under normal
circumstances, the dollar-weighted average life of the Portfolio's investment
securities will be longer than six months and less than three years. The
Portfolio's duration, under normal circumstances, will not exceed 1.5 years.
Since the Portfolio ordinarily will invest in securities with longer maturities
than those found in money market funds, its total return is expected to be
higher and fluctuations in its net asset value are expected to be greater.
Unlike money market funds, however, the Portfolio does not seek to maintain a
stable net asset value and may not be able to return dollar-for-dollar the money
invested. Moreover, there can be no assurance that the Portfolio's investment
objective will be achieved.
The Short Duration Portfolio will invest primarily in U.S. Dollar and
foreign currency denominated debt securities and securities with debt-like
characteristics (e.g., bearing interest or having a stated principal), such as
bonds, debentures, notes, mortgage-related securities (including stripped
mortgage-backed securities), asset-backed securities, municipal obligations and
convertible debt obligations of domestic and foreign issuers throughout the
world, including supranational entities. These securities also include money
market instruments consisting of U.S. Government securities, certificates of
deposit, time deposits, bankers' acceptances, short-term investment grade
corporate bonds, participation interests and other short-term debt instruments,
and repurchase agreements. The Portfolio also may purchase shares of other
investment companies that invest in these securities to the extent permitted
under the Investment Company Act of 1940. The Adviser will endeavor to hedge
foreign currency denominated debt using various investment techniques in an
effort to minimize fluctuations in the Portfolio's net asset value resulting
from fluctuations in currency exchange rates relative to the U.S. dollar.
The maturity of any single instrument held by the Portfolio is not limited.
The duration of the Portfolio, however, under normal circumstances, will not
exceed 1.5 years. The Adviser will seek to maintain a duration of approximately
one year, but may vary the Portfolio's duration depending upon market
conditions. As a measure of a fixed-income security's cash flow, duration is an
alternative to the concept of "term to maturity" in assessing the price
volatility associated with changes in interest rates. Generally, the longer the
duration, the more volatility an investor should expect. For example, the market
price of a bond with a duration of two years would be expected to decline 2% if
interest rates rose 1%. Conversely, the market price of the same bond would be
expected to increase 2% if interest rates fell 1%. Duration is a way of
measuring a security's maturity in terms of the average time required to receive
the present value of all interest and principal payments as opposed to its term
to maturity. The maturity of a security measures only the time until final
payment is due; it does not take account of the pattern of a security's cash
flows over time, which would include how cash flow is affected by prepayments
and by changes in interest rates. Incorporating a security's yield, coupon
interest payments, final maturity and option features into one measure, duration
is computed by determining the weighted average maturity of a bond's cash flows,
where the present values of the cash flows serve as weights. In computing the
duration of the Portfolio, the Adviser will estimate the duration of obligations
that are subject to prepayment or redemption by the issuer, taking into account
the influence of interest rates on prepayments and coupon flows. This method of
computing duration is known as option-adjusted duration. Since the
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Portfolio ordinarily will invest in securities with longer maturities than those
found in money market funds, its total return is expected to be higher and
fluctuations in its net asset value are expected to be greater.
The average dollar-weighted credit rating of the securities held by the
Portfolio will be at least A- by Moody's Investors Service, Inc. ("Moody's"),
Standard & Poor's Corporation ("S&P"), Fitch Investors Service, Inc. ("Fitch")
or Duff & Phelps, Inc. ("Duff"). To attempt to further limit risk, each security
in which the Portfolio invests must be rated at least Baa by Moody's or BBB by
S&P, Fitch or Duff or, if unrated, deemed to be of comparable quality by the
Adviser. Debt securities in the lowest investment grade debt category (e.g.,
bonds rated BBB by Standard & Poor's Corporation or Baa by Moody's Investors
Service, Inc.) may have speculative characteristics, and changes in economic
conditions or other circumstances are more likely to lead to a weakened capacity
to make principal and interest payments than is the case with higher grade debt
securities. The average dollar-weighted portfolio credit rating will be measured
on the basis of the dollar value of the securities purchased and their credit
rating without reference to rating subcategories. Subject to the average
dollar-weighted portfolio credit rating condition, the Fund may retain a debt
security which was rated as investment grade at the time of purchase but whose
rating is subsequently downgraded below investment grade. Such lower-rated debt
securities are commonly referred to as "junk bonds." See "Risk Factors --
Lower-Rated Securities."
The Short Duration Portfolio may engage in currency exchange transactions to
attempt to protect against uncertainty in the level of future exchange rates. In
addition, the Portfolio may utilize various other investment techniques and
practices, such as options and futures transactions, buying and selling interest
rate and currency swaps, caps, floors and collars, and short sales to further
hedge against the overall risk to the Portfolio. The Portfolio also may engage
in leveraging, lending portfolio securities, purchasing securities on a
when-issued or forward commitment basis and purchasing illiquid securities.
For a more detailed description of the investment policies of each
Portfolio, see below "Common Investment Policies -- All Portfolios" and "Common
Investment Policies" and also the Statement of Additional Information.
COMMON INVESTMENT POLICIES -- ALL PORTFOLIOS
This section describes certain investment policies that are common to each
Portfolio. These policies are described in more detail in the Statement of
Additional Information.
TEMPORARY INVESTMENTS. For temporary purposes or during periods in which
BEA believes changes in economic, financial or political conditions make it
advisable, each Portfolio may reduce its holdings in equity and other securities
and invest up to 100% of its assets in certain short-term (less than twelve
months to maturity) and medium-term (not greater than five years to maturity)
debt securities or hold cash. The short-term and medium-term debt securities in
which a Portfolio may invest consist of: (a) obligations of the United States or
foreign governments, their respective agencies or instrumentalities; (b) bank
deposits and bank obligations (including certificates of deposit, time deposits
and bankers' acceptances) of U.S. or foreign banks denominated in any currency;
(c) floating rate securities and other instruments denominated in any currency
issued by international development agencies; (d) finance company and corporate
commercial paper and other short-term corporate debt obligations of U.S. and
foreign corporations; and (e) repurchase agreements with banks and
broker-dealers with respect to such securities.
BORROWING. A Portfolio may borrow up to 33 1/3 percent of its total assets
without obtaining shareholder approval. The Adviser intends to borrow only for
temporary or emergency purposes, or to engage in reverse repurchase agreements
or dollar roll transactions. See Statement of Additional Information "Common
Investment Policies -- All Portfolios -- Reverse Repurchase Agreements" and "--
Borrowing."
ILLIQUID SECURITIES. Each Portfolio may invest in illiquid securities up to
10% of its net assets. The term "illiquid securities" for this purpose means
securities that cannot be disposed of within seven days in the ordinary course
of business at approximately the amount
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at which the Portfolio has valued the securities. Such securities may include,
among other things, loan participations and assignments, options purchased in
the over-the-counter markets, repurchase agreements maturing in more than seven
days and restricted securities other than Rule 144A securities that BEA has
determined are liquid pursuant to guidelines established by the Fund's Board of
Directors. Because of the absence of any liquid trading market currently for
these investments, a Portfolio may take longer to liquidate these positions than
would be the case for publicly traded securities. Although these securities may
be resold in privately negotiated transactions, the prices realized on such
sales could be less than those originally paid by a Portfolio. Securities that
have legal or contractual restrictions on resale but have a readily available
market are not deemed illiquid for purposes of this limitation. BEA will monitor
the liquidity of restricted securities in each Portfolio's portfolio and report
periodically on such decisions to the Board of Directors of the Fund. Where
there are no readily available market quotations, the security shall be valued a
fair value as determined in good faith by the Board of Directors of the Fund.
The Board has adopted a policy that the Portfolios will not purchase private
placements (i.e. restricted securities other than Rule 144A securities). See
Statement of Additional Information "Common Investment Policies -- All
Portfolios -- Illiquid Securities."
SECURITIES OF UNSEASONED ISSUERS. Each Portfolio will not invest in
securities of unseasoned issuers (including their predecessors) and including
equity securities of issuers which are not readily marketable, if the aggregate
investment in such securities would exceed 5% of such Portfolio's net assets.
The term "unseasoned" refers to issuers which have been in operations for less
than three years.
REPURCHASE AGREEMENTS. Each Portfolio may agree to purchase debt securities
from financial institutions subject to the seller's agreement to repurchase them
at an agreed upon time and price ("Repurchase Agreements"). Repurchase
Agreements are in substance loans. Default by or bankruptcy of a seller would
expose a Portfolio to possible loss because of adverse market action, expenses
and/or delays in connection with the disposition of the underlying obligations.
CASH EQUIVALENTS. Each Portfolio may invest without limitation in
short-term, interest-bearing instruments or deposits of United States and
foreign issuers for temporary or defensive purposes to maintain liquidity or
pending investment. Such investments may include, but are not limited to,
commercial paper, certificates of deposit, variable or floating rate notes,
bankers' acceptances, time deposits, government securities and money market
deposit accounts.
WHEN-ISSUED PURCHASERS AND FORWARD COMMITMENTS. Each Portfolio may purchase
securities on a "when-issued" basis and may purchase or sell securities on a
"forward commitment" basis. These transactions involve a commitment by a
Portfolio to purchase or sell particular securities with payment and delivery
taking place at a future date (perhaps one or two months later), and permit a
Portfolio to lock-in a price or yield on a security it owns or intends to
purchase, regardless of future changes in interest rates. When-issued and
forward commitment transactions involve the risk, however, that the price or
yield obtained in a transaction may be less favorable than the price or yield
available in the market when the securities delivery takes place. A Portfolio's
when-issued purchases and forward commitments are not expected to exceed 25% of
the value of its total assets absent unusual market conditions. Each Portfolio
does not intend to engage in when-issued purchases and forward commitments for
speculative purposes but only in furtherance of their investment objectives.
REVERSE REPURCHASE AGREEMENTS. Each Portfolio may enter into reverse
repurchase agreements with respect to portfolio securities for temporary
purposes (such as to obtain cash to meet redemption requests when the
liquidation of portfolio securities is deemed disadvantageous or inconvenient by
the Adviser). Reverse repurchase agreements involve the risk that the market
value of the securities sold by a Portfolio may decline below the price of the
securities a Portfolio is obligated to repurchase. Each Portfolio may also enter
into "dollar rolls," in which
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it sells fixed income securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar (same type, coupon
and maturity) securities on a specified future date. During the roll period, a
portfolio would forego principal and interest paid on such securities. Reverse
repurchase agreements and dollar rolls are considered to be borrowings by a
Portfolio under the 1940 Act.
SECURITIES LENDING. To increase income on its investments, the BEA
Portfolios may lend their portfolio securities with an aggregate value of up to
30% of its total assets to broker/ dealers and other institutional investors
pursuant to agreements requiring that the loans be continuously secured by
collateral equal at all times in value to at least the market value of the
securities loaned. Collateral for such loans may include cash securities of the
U.S. Government or its agencies or instrumentalities or an irrevocable letter of
credit issued by a bank which is deemed creditworthy by Adviser. Default by or
bankruptcy of a borrower would expose the Portfolios to possible loss because of
adverse market action, expenses and/or delays in connection with the disposition
of the underlying securities.
INVESTMENT COMPANIES. Each Portfolio may invest in securities issued by
other investment companies within the limit prescribed by the 1940 Act. Each
Portfolio currently intends to limit its investments so that, as determined
immediately after a securities purchase is made, (i) not more than 5% of the
value of its total assets will be invested in the securities of any one
investment company; (ii) not more than 10% of the value of its total assets will
be invested in the aggregate in securities of investment companies as a group;
and (iii) not more than 3% of the outstanding voting stock of any one investment
company will be owned by a Portfolio or by the Fund as a whole. As a shareholder
of another investment company, each Portfolio would bear, along with other
shareholders, its pro rata portion of the other investment company's expenses,
including advisory fees. These expenses would be in addition to the advisory and
other expenses that a Portfolio bears directly in connection with its own
operations.
PORTFOLIO TURNOVER. BEA will effect portfolio transactions in each
Portfolio without regard to holding period, if, in its judgment, such
transactions are advisable in light of general market, economic or financial
conditions. As a result of each Portfolio's investment policies, each Portfolio
may engage in a substantial number of portfolio transactions. The BEA Short
Duration Portfolio anticipates that its annual portfolio turnover rate should
not exceed 500% under normal conditions, the BEA International Equity, BEA
Emerging Markets Equity, and BEA Strategic Fixed Income Portfolios anticipate
that their annual portfolio turnover rate should not exceed 150% under normal
conditions, and the BEA U.S. Core Equity, BEA U.S. Core Fixed Income, BEA Global
Fixed Income and BEA Municipal Bond Fund anticipate that their annual portfolio
turnover rate should not exceed 100% under normal conditions. The BEA Balanced
Portfolio anticipates that, under normal conditions, the annual portfolio
turnover rate for the equity portion should not exceed 100%, and the annual
portfolio turnover rate for the fixed income portion should not exceed 100%.
However, it is impossible to predict portfolio turnover rates. The portfolio
turnover rate is calculated by dividing the lesser of a Portfolio's annual sales
or purchases of portfolio securities (exclusive of purchases or sales of
securities whose maturities at the time of acquisition were one year or less) by
the monthly average value of the securities in the Portfolio during the year.
The anticipated portfolio turnover rate for each Portfolio is greater than
that of many other investment companies. A higher than normal portfolio turnover
rate may affect the degree to which a Portfolio's net asset value fluctuates.
Higher portfolio turnover rates are likely to result in comparatively greater
brokerage commissions. In addition, short-term gains realized from portfolio
transactions are taxable to shareholders as ordinary income. The amount of
portfolio activity will not be a limiting factor when making portfolio
decisions. See Statement of Additional Information "Portfolio Transactions" and
"Taxes."
PORTFOLIO TRANSACTIONS. Portfolio transactions for the Portfolios may be
effected on domestic or foreign securities exchanges. In transactions for
securities not actively traded on a domestic or foreign securities exchange, a
Portfolio will deal directly with the dealers who make a market in the
securities involved, except
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in those circumstances where better prices and execution are available
elsewhere. Such dealers usually are acting as principal for their own account.
On occasion, securities may be purchased directly from the issuer. Such
portfolio securities are generally traded on a net basis and do not normally
involve brokerage commissions. Securities firms may receive brokerage
commissions on certain portfolio transactions, including options, futures and
options on futures transactions and the purchase and sale of underlying
securities upon exercise of options. The Portfolios have no obligation to deal
with any broker in the execution of transactions in portfolio securities. The
Portfolios may use affiliates of Credit Suisse in connection with the purchase
or sale of securities in accordance with rules or exemptive orders adopted by
the Securities and Exchange Commission (the "SEC") when BEA believes that the
charge for the transaction does not exceed usual and customary levels.
The Portfolios have the benefit of an exemptive order issued by the SEC
under the Investment Company Act authorizing the Portfolios and other investment
companies advised by BEA to acquire jointly securities issued in private
placements, subject to the terms and conditions of the order. The Board has
adopted a policy that the Portfolios will not purchase private placements (i.e.
restricted securities other than Rule 144A securities).
The Statement of Additional Information contains additional investment
policies and strategies that are common to Portfolios.
COMMON INVESTMENT POLICIES -- BEA INTERNATIONAL EQUITY, BEA EMERGING MARKETS
EQUITY, BEA U.S. CORE EQUITY, BEA BALANCED, BEA U.S. CORE FIXED INCOME, BEA
GLOBAL FIXED INCOME, BEA STRATEGIC FIXED INCOME, AND BEA SHORT DURATION
PORTFOLIOS
INVESTMENT CONTROLS. In certain countries that currently prohibit direct
foreign investment in the securities of their companies, indirect foreign
investment in the securities of companies listed and traded on the stock
exchanges in these countries is permitted through investment funds which have
been specifically authorized. The BEA International Equity, BEA Emerging Markets
Equity, BEA U.S. Core Equity, BEA Balanced, BEA U.S. Core Fixed Income, BEA
Global Fixed Income, BEA Strategic Fixed Income, and BEA Short Duration
Portfolios may invest in these investment funds and registered investment
companies subject to the provisions of the 1940 Act. If the BEA International
Equity, BEA Emerging Markets Equity, BEA U.S. Core Equity, BEA Balanced, BEA
U.S. Core Fixed Income, BEA Global Fixed Income, BEA Strategic Fixed Income and
BEA Short Duration Portfolios invest in such investment companies, such
Portfolios will each bear their proportionate share of the costs incurred by
such companies, including investment advisory fees.
CURRENCY HEDGING. BEA may seek to hedge against a decline in value of a
Portfolio's non-dollar denominated portfolio securities resulting from currency
devaluations or fluctuations. Unless the BEA International Equity, BEA Emerging
Markets Equity, BEA U.S. Core Equity, BEA Balanced, BEA U.S. Core Fixed Income,
BEA Global Fixed Income, BEA Strategic Fixed Income, and BEA Short Duration
Portfolios engages in currency hedging transactions, it will be subject to the
risk of changes in relation to the U.S. dollar of the value of the foreign
currencies in which its assets are denominated. The BEA International Equity,
BEA Emerging Markets Equity, BEA U.S. Core Equity, BEA Balanced, BEA U.S. Core
Fixed Income, BEA Global Fixed Income, BEA Strategic Fixed Income, and BEA Short
Duration Portfolios may also seek to protect, during the period prior to its
remittance, the value of the amount of interest, dividends and net realized
capital gains received or to be received in a local currency that it intends to
remit out of a foreign country by investing in high-quality short-term U.S.
dollar-denominated debt securities of such country and/or participating in the
forward currency market for the purchase of U.S. dollars in the country. There
can be no guarantee that suitable U.S. dollar-denominated investments will be
available at the time BEA wishes to use them to hedge amounts to be remitted.
Moreover, investors should be aware that dollar-denominated securities may not
be available in some or all foreign countries, that the forward currency market
for the purchase of U.S. dollars in many foreign countries is not highly
developed and that in certain countries no forward market for
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foreign currencies currently exists or that such market may be closed to
investment by a Portfolio.
OPTIONS AND FUTURES CONTRACTS. The BEA International Equity, BEA Emerging
Markets Equity, BEA U.S. Core Equity, BEA Balanced, BEA U.S. Core Fixed Income,
BEA Global Fixed Income, BEA Strategic Fixed Income, and BEA Short Duration
Portfolios may write covered call options, buy put options, buy call options and
write put options, without limitation except as noted in this paragraph. Such
options may relate to particular securities or to various indexes and may or may
not be listed on a national securities exchange and issued by the Options
Clearing Corporation. The BEA International Equity, BEA Emerging Markets Equity,
BEA U.S. Core Equity, BEA Balanced, BEA U.S. Core Fixed Income, BEA Global Fixed
Income, BEA Strategic Fixed Income, and BEA Short Duration Portfolios may also
invest in futures contracts and options on futures contracts (index futures
contracts or interest rate futures contracts, as applicable) for hedging
purposes or for other purposes so long as aggregate initial margins and premiums
required for non-hedging positions do not exceed 5% of its net assets, after
taking into account any unrealized profits and losses on any such contracts it
has entered into. However, the BEA International Equity, BEA Emerging Markets
Equity, BEA U.S. Core Equity, BEA Balanced, BEA U.S. Core Fixed Income, BEA
Global Fixed Income, BEA Strategic Fixed Income and BEA Short Duration
Portfolios may not write put options or purchase or sell futures contracts or
options on futures contracts to hedge more than its total assets unless
immediately after any such transaction the aggregate amount of premiums paid for
put options and the amount of margin deposits on its existing futures positions
do not exceed 5% of its total assets.
Options trading is a highly specialized activity which entails greater than
ordinary investment risks. A call option for a particular security gives the
purchaser of the option the right to buy, and a writer the obligation to sell,
the underlying security at the stated exercise price at any time prior to the
expiration of the option, regardless of the market price of the security. The
premium paid to the writer is in consideration for undertaking the obligations
under the option contract. A put option for a particular security gives the
purchaser the right to sell the underlying security at the stated exercise price
at any time prior to the expiration date of the option, regardless of the market
price of the security. In contrast to an option on a particular security, an
option on an index provides the holder with the right to make or receive a cash
settlement upon exercise of the option. The amount of this settlement will be
equal to the difference between the closing price of the index at the time of
exercise and the exercise price of the option expressed in dollars, times a
specified multiple.
The BEA International Equity, BEA Emerging Markets Equity, BEA U.S. Core
Equity, BEA Balanced, BEA U.S. Core Fixed Income, BEA Global Fixed Income, BEA
Strategic Fixed Income, and BEA Short Duration Portfolios will engage in
unlisted over-the-counter options only with broker/dealers deemed creditworthy
by Adviser. Closing transactions in certain options are usually effected
directly with the same broker/dealer that effected the original option
transaction. The BEA International Equity, BEA Emerging Markets Equity, BEA U.S.
Core Equity, BEA Balanced, BEA U.S. Core Fixed Income, BEA Global Fixed Income,
BEA Strategic Fixed Income, and BEA Short Duration Portfolios bear the risk that
the broker/ dealer will fail to meet its obligations. There is no assurance that
each of these Portfolios will be able to close an unlisted option position.
Furthermore, unlisted options are not subject to the protections afforded
purchasers of listed options by the Options Clearing Corporation, which performs
the obligations of its members who fail to do so in connection with the purchase
or sale of options.
To enter into a futures contract, the BEA International Equity, BEA Emerging
Markets Equity, BEA U.S. Core Equity, BEA Balanced, BEA U.S. Core Fixed Income,
BEA Global Fixed Income, BEA Strategic Fixed Income, and BEA Short Duration
Portfolios must make a deposit of initial margin with its custodian in a
segregated account in the name of its futures broker. Subsequent payments to or
from the broker, called variation margin, will be made on a daily basis as the
price of the underlying security or index fluctuates, making the long and short
positions in the futures contracts more or less valuable.
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The risks related to the use of options and futures contracts include: (i)
the correlation between movements in the markets price of a portfolio's
investments (held or intended for purchase) being hedged and in the price of the
futures contract or option may be imperfect; (ii) possible lack of a liquid
secondary market for closing out options or futures positions; (iii) the need
for additional portfolio management skills and techniques; and (iv) losses due
to unanticipated market movements. Successful use of options and futures by the
BEA International Equity, BEA Emerging Markets Equity, BEA U.S. Core Equity, BEA
Balanced, BEA U.S. Core Fixed Income, BEA Global Fixed Income, BEA Strategic
Fixed Income, and BEA Short Duration Portfolios is subject to the Adviser's
ability to correctly predict movements in the direction of the market. For
example, if such Portfolio uses future contracts as a hedge against the
possibility of a decline in the market adversely affecting securities held by it
and securities prices increase instead, such Portfolio will lose part or all of
the benefit of the increased value of its securities which it has hedged because
it will have approximately equal offsetting losses in its futures positions. The
risk of loss in trading futures contracts in some strategies can be substantial,
due both to the low margin deposits required, and the extremely high degree of
leverage involved in future pricing. As a result, a relatively small price
movement in a futures contract may result in immediate and substantial loss or
gain to the investor. Thus, a purchase or sale of a futures contract may result
in losses or gains in excess of the amount invested in the contract. For a
further discussion see "Investment Policies" in the Statement of Additional
Information.
SUPPLEMENTAL INVESTMENT POLICIES -- BEA INTERNATIONAL EQUITY, BEA EMERGING
MARKETS EQUITY, BEA BALANCED, BEA U.S. CORE FIXED INCOME, BEA GLOBAL FIXED
INCOME PORTFOLIO, BEA STRATEGIC FIXED INCOME AND BEA SHORT DURATION PORTFOLIOS
MORTGAGE-RELATED PASS-THROUGHS AND DERIVATIVES. The BEA International
Equity, BEA Emerging Markets Equity, BEA Balanced, BEA U.S. Core Fixed Income,
BEA Global Fixed Income, BEA Strategic Fixed Income, and BEA Short Duration
Portfolios may invest in mortgage-related securities. Purchasable mortgage-
related securities are represented by pools of mortgage loans assembled for sale
to investors by various governmental agencies such as the Government National
Mortgage Association and government-related organizations such as the Federal
National Mortgage Association and the Federal Home Loan Mortgage Corporation, as
well as by private issuers such as commercial investment banks, savings and loan
institutions, mortgage bankers and private mortgage insurance companies.
Although certain mortgage-related securities are guaranteed by a third party or
are otherwise similarly secured, the market value of the security, which may
fluctuate, is not so secured. If these Portfolios purchase a mortgage-related
security at a premium, that portion may be lost if there is a decline in the
market value of the security whether resulting from increases in interest rates
or prepayment of the underlying mortgage collateral. As with other
interest-bearing securities, the prices of such securities are inversely
affected by changes in interest rates. However, though the value of a
mortgage-related security may decline when interest rates rise, the converse is
not necessarily true because in periods of declining interest rates mortgages
underlying securities are prone to prepayment. For this and other reasons, a
mortgage-related security's stated maturity may be shortened by a unscheduled
prepayment on underlying mortgages and, therefore, it is not possible to predict
accurately the security's return to these Portfolios. Mortgage-related
securities provide regular payments consisting of interest and principal. No
assurance can be given as to the return these Portfolios will receive when these
amounts are reinvested.
Mortgaged-related securities acquired by these Portfolios may include
collateralized mortgage obligations ("CMOs") issued by FNMA, FHLMC or other U.S.
Government agencies or instrumentalities, as well as by private issuers. These
securities may be considered mortgage derivatives. CMOs provide an investor with
a specified interest in the cash flow of a pool of underlying mortgages or other
mortgage-related securities. Issuers of CMOs frequently elect to be taxed as
pass-through entities known as real estate mortgage investment conduits
("REMICs"). CMOs are issued in multiple classes, each with a specified fixed or
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floating interest rate and a final distribution date. Coupons can be fixed or
variable. If variable, they can move with or in the reverse direction of
interest rates. The coupon changes could be a multiple of the actual rate change
and there may be limitations on what the coupon can be. Cash flows of pools can
also be divided into a principal only class and an interest only class. In this
case the principal only class ("PO") will only receive principal cash flows from
the pool. All interest cash flows go to the interest only class. The relative
payment rights of the various CMO classes may be structured in many ways either
sequentially, or by other rules of priority. Generally, payments of principal
are applied to the CMO classes in the order of their respective stated
maturities, so that no principal payments will be made on a CMO class until all
other classes having an earlier stated maturity date are paid in full.
Sometimes, however, CMO classes are "parallel pay," i.e. payments of principal
are made to two or more classes concurrently. CMOs may exhibit more or less
price volatility and interest rate risk than other types of mortgaged-related
obligations.
ASSET-BACKED SECURITIES. The BEA International Equity, BEA Emerging Markets
Equity, BEA Balanced, BEA U.S. Core Fixed Income, BEA Strategic Fixed Income,
BEA Global Fixed Income, and BEA Short Duration Portfolios may purchase
asset-backed securities, which represent a participation in, or are secured by
and payable from, a stream of payments generated by particular assets, most
often a pool of assets similar to one another. Assets generating such payments
will consist of such instruments as motor vehicle installment purchase
obligations, credit card receivables and home equity loans. These Portfolios may
also invest in other types of asset-backed securities that may be available in
the future. Payment of principal and interest may be guaranteed up to certain
amounts and for a certain time period by a letter of credit issued by a
financial institution unaffiliated with entities issuing the securities. The
estimated life of an asset-backed security varies with the prepayment experience
with respect to the underlying debt instruments. The rate of such prepayments,
and hence the life of the asset-backed security, will be primarily a function of
current market rates, although other economic and demographic factors will be
involved. In certain circumstances, asset-backed securities may be considered
illiquid securities subject to the percentage limitations described below.
Asset-backed securities may involve certain risks that are not presented by
mortgage-backed securities arising primarily from the nature of the underlying
assets (i.e., credit card and automobile loan receivables as opposed to real
estate mortgages). For example, credit card receivables are generally unsecured
and may require the repossession of personal property upon the default of the
debtor which may be difficult or impracticable in some cases. Asset-backed
securities are considered an industry for industry concentration purposes. See
"Investment Limitations."
SUPPLEMENTAL INVESTMENT POLICIES -- BEA MUNICIPAL BOND FUND PORTFOLIO
TAX-EXEMPT DERIVATIVES AND OTHER MUNICIPAL OBLIGATIONS. The BEA Municipal
Bond Fund Portfolio may invest in tax-exempt derivative securities relating to
Municipal Obligations, including tender option bonds, participations, beneficial
interests in trusts and partnership interests. A typical tax-exempt derivative
security involves the purchase of an interest in a pool of Municipal Obligations
which interest includes a tender option, demand or other feature, allowing the
Portfolio to tender the underlying Municipal Obligation to a third party at
periodic intervals and to receive the principal amount thereof. A participation
interest gives the Portfolio an undivided interest in a Municipal Obligation in
the proportion the Portfolio's participation bears to the total principal amount
of the Municipal Obligation, and typically provides for a repurchase feature for
all or any part of the full principal amount of the participation interest, plus
accrued interest. Trusts and partnerships are typically used to convert
long-term fixed rate high quality bonds of a single state or municipal issuer
into variable or floating rate demand instruments.
Opinions relating to the validity of Municipal Obligations and to the
exemption of interest thereon from Federal income tax are rendered by bond
counsel to the respective issuers at the time of issuance, and opinions relating
to the validity of and the tax-exempt status of payments received by the Funds
from tax-exempt
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derivative securities are rendered by counsel to the respective sponsors of such
securities. The Fund and its investment adviser will rely on such opinions and
will not review independently the underlying proceedings relating to the
issuance of Municipal Obligations, the creation of any tax-exempt derivative
securities, or the basis for such opinions.
During normal market conditions, up to 20% of the BEA Municipal Bond Fund
Portfolio's net assets may be invested in securities which are not Municipal
Obligations; at least 80% of the BEA Municipal Bond Fund Portfolio's net assets
will be invested in Municipal Obligations the interest on which is exempt from
regular Federal income tax. During temporary defensive periods, the BEA
Municipal Bond Fund Portfolio may invest without limitation in obligations which
are not Municipal Obligations and may hold without limitation uninvested cash
reserves. Such securities may include, without limitation, bonds, notes,
variable rate demand notes and commercial paper, provided such securities are
rated within the relevant categories, applicable to Municipal Obligations set
forth above, or if unrated, are of comparable quality as determined by the
Adviser, and may also include, without limitation, other debt obligations, such
as bank obligations. The BEA Municipal Bond Fund Portfolio may acquire "stand-by
commitments" with respect to Municipal Obligations held by it. Under a stand-by
commitment, a dealer agrees to purchase at the BEA Municipal Bond Fund
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 BEA
Municipal Bond Fund Portfolio will acquire stand-by commitments solely to
facilitate portfolio liquidity and does not intend to exercise its rights
thereunder for trading purposes.
The Tax Reform Act of 1986 substantially revised provisions of prior law
affecting the issuance and use of proceeds of certain Municipal Obligations. A
new definition of private activity bonds applies to many types of bonds,
including those which were industrial development bonds under prior law.
Interest on private activity bonds issued after August 15, 1986 is tax-exempt
only if the bonds fall within certain defined categories of qualified private
activity bonds and meet the requirements specified in those respective
categories. In addition, interest on certain private activity bonds issued after
August 7, 1986 that is received by taxpayers subject to alternative minimum tax
is taxable. The Act has generally not changed the tax treatment of bonds issued
to finance governmental operations. As used in this Prospectus, the term
"private activity bonds" also includes industrial development revenue bonds
issued prior to the effective date of the provisions of the Tax Reform Act of
1986. Investors should also be aware of the possibility of state and local
alternative minimum or minimum income tax liability on interest from Alternative
Minimum Tax Securities.
Although the BEA Municipal Bond Fund Portfolio may invest 25% or more of its
net assets in Municipal Obligations the interest on which is paid solely from
revenues of similar projects, and may invest up to 40% of its total assets in
private activity bonds when added together with any taxable investments held by
the BEA Municipal Bond Fund Portfolio, they do not presently intend to do so
unless in the opinion of the Adviser the investment is warranted. To the extent
the BEA Municipal Bond Fund Portfolio's assets are invested in Municipal
Obligations payable from the revenues of similar projects or are invested in
private activity bonds, the BEA Municipal Bond Fund Portfolio will be subject to
the peculiar risks presented by the laws and economic conditions relating to
such projects and bonds to a greater extent than it would be if its assets were
not so invested. The amount of information regarding the financial condition of
issuers of Municipal Obligations may not be as extensive as that which is made
available by public corporations and the secondary market for Municipal
Obligations may be less liquid than that for taxable fixed-income securities.
Accordingly, the ability of the BEA Municipal Bond Fund Portfolio to buy and
sell tax-exempt securities may, at any particular time and with respect to any
particular securities, be limited.
SUPPLEMENTAL INVESTMENT POLICIES -- BEA SHORT DURATION PORTFOLIO
INTEREST RATE SWAPS, CAPS, FLOORS AND COLLARS. The Short Duration Portfolio
may enter
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into interest rate swaps and may purchase or sell interest rate caps, floors and
collars. The Portfolio will enter into these transactions primarily to preserve
a return or spread on a particular investment or portion of its portfolio. The
Portfolio also may enter into these transactions to protect against any increase
in the price of securities the Portfolio anticipates purchasing at a later date.
Interest rate swaps involve the exchange by the Portfolio with another party of
their respective commitments to pay or receive interest (for example, an
exchange of floating rate payments for fixed-rate payments). The exchange
commitments can involve payments to be made in the same currency or in different
currencies. The purchase of an interest rate cap entitles the purchaser, to the
extent that a specified index exceeds a predetermined interest rate, to receive
payments of interest on a contractually-based principal amount from the seller
of such interest rate cap. The purchase of an interest rate floor entitles the
purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments on a notional principal amount from the
seller of such interest rate floor. A collar has aspects of both a cap and a
floor.
The Short Duration Portfolio may enter into these transactions on either an
asset-based or liability-based basis depending on whether it is hedging its
assets or its liabilities, and will usually enter into interest rate swaps on a
net basis. In so doing, the two payment streams are netted out, with the
Portfolio receiving or paying, as the case may be, only the net amount of the
two payments. The net amount of the excess, if any, of the Short Duration
Portfolio's obligations over its entitlements with respect to each interest rate
swap will be accrued on a daily basis and an amount of cash or high-quality
liquid debt securities having an aggregate net asset value at least equal to the
accrued excess will be maintained in a segregated account by the Portfolio's
Custodian. If the Portfolio enters into an interest rate swap other than on a
net basis, the Portfolio would maintain a segregated account in the full amount
accrued on a daily basis of the Portfolio's obligations with respect to the
swap. The Portfolio will enter into swap, cap or floor transactions with its
Custodian, and with other counterparties, but only if: (i) for transactions with
maturities under one year, such other counterparty has outstanding short-term
paper rated at least A-1 by S&P, Prime-1 by Moody's, F-1 by Fitch or Duff-1 by
Duff, or (ii) for transactions with maturities greater than one year, the
counterparty has outstanding debt securities rated at least Aa by Moody's or AA
by S&P, Fitch or Duff. If there is a default by the other party to such a
transac-
tion, the Portfolio will have contractual remedies pursuant to the agreements
related to the transaction. To the extent the Portfolio sells (i.e., writes)
caps and floors, it will maintain in a segregated account cash or high-quality
liquid debt securities having an aggregate net asset value at least equal to the
full amount accrued on a daily basis, of the Portfolio's obligations with
respect to any caps or floors.
The use of interest rate swaps is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio security transactions. If the Adviser is incorrect in its
forecasts of market values, interest rates and other applicable factors, the
investment performance of the Portfolio would diminish compared with what it
would have been if these investment techniques were not used. Moreover, even if
the Adviser is correct in its forecasts, there is a risk that the swap position
may correlate imperfectly with the price of the asset or liability being hedged.
There is no limit on the amount of interest rate swap transactions that may be
entered into by the Portfolio. These transactions do not involve the delivery of
securities or other underlying assets or principal. Accordingly, the risk of
loss with respect to interest rate swaps is limited to the net amount of
interest payments that the Portfolio is contractually obligated to make. If the
other party to an interest rate swap defaults, the Portfolio's risk of loss
consists of the net amount of interest payments that the Portfolio contractually
is entitled to receive. The Portfolio may purchase and sell (i.e., write) caps
and floors without limitation, subject to the segregated account requirement
described above. The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as principals and
as agents utilizing standardized swap documentation. Caps and floors are more
recent
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innovations for which standardized documentation has not yet been developed and,
accordingly, they are less liquid than swaps.
PORTFOLIO TURNOVER. Using certain investment techniques may produce higher
than normal portfolio turnover and may affect the degree to which the Short
Duration Portfolio's net asset value fluctuates. Higher portfolio turnover rates
(100% annually or more) are likely to result in comparatively greater brokerage
commissions. In addition, short-term gains realized from portfolio transactions
are taxable to shareholders as ordinary income. The amount of portfolio activity
will not be a limiting factor when making portfolio decisions. Under normal
market conditions, the Portfolio's turnover rate generally will not exceed 500%.
INVESTMENT LIMITATIONS
Each Portfolio is subject to the following fundamental investment
limitations, which may not be changed with respect to a Portfolio except upon
the affirmative vote of the holders of a majority of that Portfolio's
outstanding Shares. Each Portfolio may not:
1. Purchase any securities which would cause 25% or more of the value
of the Portfolio's total assets at the time of purchase to be invested in
the securities of one or more issuers conducting their principal business
activities in the same industry, provided that (a) there is no limitation
with respect to (i) instruments issued or guaranteed by the United States,
any state, territory or possession of the United States, the District of
Columbia or any of their authorities, agencies, instrumentalities or
political subdivisions, and (ii) repurchase agreements secured by the
instruments described in clause (i); (b) wholly-owned finance companies will
be considered to be in the industries of their parents if their activities
are primarily related to financing the activities of the parents; and (c)
utilities will be divided according to their services, for example, gas, gas
transmission, electric and gas, electric and telephone will each be
considered a separate industry.
2. Borrow money or issue senior securities, except that each Portfolio
may borrow from institutions and enter into reverse repurchase agreements
and dollar rolls for temporary purposes in amounts up to one-third of the
value of its total assets at the time of such borrowing; or mortgage, pledge
or hypothecate any assets, except in connection with any such borrowing and
then in amounts not in excess of one-third of the value of the Portfolio's
total assets at the time of such borrowing. Each Portfolio will not purchase
securities while its aggregate borrowings (including reverse repurchase
agreements, dollar rolls and borrowings from banks) in excess of 5% of its
total assets are outstanding. Securities held in escrow or separate accounts
in connection with the Portfolio's investment practices are not considered
to be borrowings or deemed to be pledged for purposes of this limitation.
If a percentage limitation is satisfied at the time of investment, a later
increase or decrease in such percentage resulting from a change in the value of
the Portfolio's portfolio securities will not constitute a violation of such
limitation, except that any borrowing by the Portfolio that exceeds the
fundamental investment restrictions stated above must be reduced to meet such
restrictions within the period required by the 1940 Act (currently three days).
In order to permit the sale of a Portfolio shares in certain states, the
Fund may make commitments more restrictive than the investment policies and
limitations described in this Prospectus. Should the Fund determine that any
such commitment is no longer in the best interests of the Fund, it will revoke
the commitment by terminating sales of its shares in the state involved.
RISK FACTORS
FOREIGN SECURITIES. Investing in the securities of non-U.S. issuers
involves opportunities and risks that are different from investing in the
securities of U.S. issuers. The risks associated with investing in securities of
non-U.S. issuers are generally heightened for investments in securities of
issuers in Emerging Markets.
Because foreign securities generally are denominated and pay dividends or
interest in foreign currencies, and the Portfolios may hold
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from time to time various foreign currencies pending their investment in foreign
securities or their conversion into U.S. dollars, the value of the Portfolios'
assets as measured in U.S. dollars may be affected favorably or unfavorably by
changes in exchange rates. Although the Portfolios intend to invest in
securities of companies and governments of developed, stable nations, investors
should realize that the value of the Portfolios' investments may be adversely
affected by changes in political or social conditions, diplomatic relations,
confiscatory taxation, expropriation, limitation on the removal of funds or
assets, or imposition of (or change in) exchange control regulations in those
foreign nations. In addition, changes in government administrations or economic
or monetary policies in the U.S. or abroad could result in appreciation or
depreciation of portfolio securities and could favorably or adversely affect the
Portfolios' operations. Furthermore, the economies of individual foreign nations
may differ from that of the United States, whether favorably or unfavorably, in
areas such as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position. Any
foreign investments made by the Portfolios must be made in compliance with U.S.
and foreign currency restrictions and tax laws restricting the amounts and types
of foreign investments.
In general, less information is publicly available with respect to foreign
issuers than is available with respect to U.S. companies. Most foreign companies
are also not subject to the uniform accounting and financial reporting
requirements applicable to issuers in the United States. The Portfolios' foreign
investments may be less liquid and their prices may be more volatile than
comparable investments in securities in U.S. companies. Expenses relating to
foreign investments are higher than those relating to domestic securities. In
addition, there is generally less government supervision and regulation of
securities exchanges, brokers and issuers in foreign countries than in the
United States.
POLITICAL, ECONOMIC AND MARKET FACTORS. Investments in foreign securities
involve risks relating to political and economic developments abroad, as well as
those that result from the differences between the regulations to which U.S. and
foreign issuers are subject. These risks may include expropriation, confiscatory
taxation, withholding taxes on dividends and interest, limitations on the use or
transfer of a Portfolio's assets and political or social instability or
diplomatic developments. Moreover, individual foreign economies may differ
favorably or unfavorably from the U.S. economy in such respects as growth of
gross national product, rate of inflation, capital reinvestment, resource self-
sufficiency and balance of payments positions. Securities of many foreign
issuers may be less liquid, and their prices may be more volatile, than those of
securities of comparable U.S. issuers. Brokerage commissions, custodial services
and other costs relating to investment in foreign securities markets are
generally more expensive than in the United States. Such markets have different
clearance and settlement procedures and in certain markets there have been times
when settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. There is
generally less government supervision and regulation of exchanges, brokers and
issuers in foreign securities markets than there is in the United States.
Because of their investment emphases, each Portfolio should be considered as a
vehicle for diversification and not as a balanced investment program.
In addition, substantial limitations may exist in certain countries with
respect to BEA Global Fixed Income Portfolio's ability to repatriate investment
income, capital or the proceeds of sales of securities by foreign investors. BEA
Global Fixed Income Portfolio could be adversely affected by delays in, or a
refusal to grant, any required government approval for repatriation of capital,
as well as by the application to the Portfolio of any restrictions on
investments.
REPORTING STANDARDS. Most of the foreign securities held by the BEA Global
Fixed Income Portfolio will not be registered with the SEC, nor will the issuers
thereof be subject to SEC or other U.S. reporting requirements. Accordingly,
there will be less publicly available information concerning foreign issuers of
securities held by the Portfolio than will be available concerning U.S.
companies. Foreign companies, and in particular, companies in emerging markets,
are not
24
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generally subject to uniform accounting, auditing and financial reporting
standards or to other regulatory requirements comparable to those applicable to
U.S. companies.
EXCHANGE RATE FLUCTUATIONS. Because foreign securities ordinarily will be
denominated in currencies other than the U.S. dollar, changes in foreign
currency exchange rates will affect all of the Portfolios' net asset value, the
value of interest and dividends earned, gains and losses realized on the sale of
securities and net investment income and capital gain, if any, to be distributed
to shareholders by the Portfolios. If the value of a foreign currency rises
against the U.S. dollar, the value of a Portfolio's assets denominated in that
currency will increase; conversely, if the value of a foreign currency declines
against the U.S. dollar, the value of a Portfolio's assets denominated in that
currency will decrease. The exchange rates between the U.S. dollar and other
currencies are determined by supply and demand in the currency exchange markets,
international balances of payments, government intervention, speculation and
other economic and political conditions.
LOWER-RATED SECURITIES. The widespread expansion of government, consumer
and corporate debt within the economy has made the corporate sector, especially
cyclically sensitive industries, more vulnerable to economic downturns or
increased interest rates. Because lower-rated debt securities involve issuers
with weaker credit fundamentals (such as debt-to-equity ratios, interest charge
coverage, earnings history and the like), an economic downturn, or increases in
interest rates, could severely disrupt the market for lower-rated debt
securities and adversely affect the value of outstanding debt securities and the
ability of the issuers to repay principal and interest.
Lower-rated debt securities (commonly known as "junk bonds") possess
speculative characteristics and are subject to greater market fluctuations and
risk of lost income and principal than higher-rated debt securities for a
variety of reasons. The markets for and prices of lower-rated debt securities
have been found to be less sensitive to interest rate changes than higher-rated
investments, but more sensitive to adverse economic changes or individual
corporate developments. Also, during an economic downturn or substantial period
of rising interest rates, highly leveraged issuers may experience financial
stress which would adversely affect their ability to service their principal and
interest payment obligations, to meet projected business goals and to obtain
additional financing. If the issuer of a debt security owned by a Portfolio
defaulted, the Portfolio could incur additional expenses in seeking recovery
with no guaranty of recovery. In addition, periods of economic uncertainty and
changes can be expected to result in increased volatility of market prices of
lower-rated debt securities and a Portfolio's net asset value. Lower-rated debt
securities also present risks based on payment expectations. For example,
lower-rated debt securities may contain redemption or call provisions. If an
issuer exercises these provisions in a declining interest rate market, a
Portfolio would have to replace the security with a lower yielding security,
resulting in a decreased return for investors. Conversely, a lower-rated debt
security's value will decrease in a rising interest rate market, as will the
value of a Portfolio's assets. If a Portfolio experiences unexpected net
redemptions, this may force it to sell its lower-rated debt securities, without
regard to their investment merits, thereby decreasing the asset base upon which
a Portfolio's expenses can be spread and possibly reducing a Portfolio's rate of
return.
In addition, to the extent that there is no established retail secondary
market, there may be thin trading of lower-rated debt securities, and this may
have an impact on both BEA's ability to value accurately lower-rated debt
securities and the Portfolio's assets, as judgment plays a greater role when
reliable objective data are unavailable, and to dispose of the debt securities.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the value and liquidity of lower-rated debt securities,
especially in a thinly trade market.
Current laws may have an impact on the market for lower-rated debt
securities. The Financial Institutions Reform, Recovery and Enforcement Act of
1989 requires federally insured savings associations to divest substantially all
their holdings of lower-rated debt securities by July 1, 1994 and prohibits such
savings associations from acquiring lower-rated debt securities, except through
certain qualified affiliates.
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Lower-rated debt securities may include zero coupon securities or
pay-in-kind securities. A zero coupon security bears no interest but is issued
at a discount from its value at maturity. When held to maturity, its entire
return equals the difference between its issue price and its maturity value.
Pay-in-kind securities typically do not provide for cash interest payments but
instead provide for the issuance of additional debt securities of the issuer in
the face amount of the interest payment amount due in lieu of a cash payment.
The market prices of both of these securities are affected to a greater extent
by interest rate changes and thereby tend to be more volatile than securities
which pay interest periodically and in cash.
There are also special considerations associated with investing in
lower-rated debt securities structured as zero coupon or pay-in-kind securities.
For example, a Portfolio must include the interest ("original issue discount")
on these securities in determining the amount of its required distributions to
shareholders for federal income tax and federal excise tax purposes, even though
it receives no cash interest until the security's maturity or payment date.
Therefore, in order to satisfy these distribution requirements, a Portfolio may
have to sell some of its assets, without regard to their investment merit, to
obtain cash to distribute to shareholders. These actions may occur under
disadvantageous circumstances and are likely to reduce a Portfolio's assets and
may thereby increase its expense ratio and decrease its rate of return. For
additional information concerning these tax considerations, see "Taxes" in the
Statement of Additional Information. From time to time, a Portfolio may also
purchase securities not paying interest at the time acquired if, in the opinion
of the Portfolio's Adviser, such securities have the potential for future income
or capital appreciation.
Finally, there are risks involved in applying credit ratings as a method for
evaluating lower-rated debt securities. For example, credit ratings evaluate the
safety of principal and interest payments, not the market risks involved in
lower-rated debt securities. Since credit rating agencies may fail to change the
credit ratings in a timely manner to reflect subsequent events, BEA will monitor
the issuers of lower-rated debt securities in a Portfolio to determine if the
issuers will have sufficient cash flow and profits to meet required principal
and interest payments, and to assure the debt securities' liquidity so the
Portfolio can meet redemption requests. BEA will not necessarily dispose of a
portfolio security when its ratings have been changed.
FIXED INCOME SECURITIES. The value of the securities held by a Portfolio,
and thus the net asset value of the shares of a Portfolio, generally will vary
inversely in relation to changes in prevailing interest rates. Thus, if interest
rates have increased from the time a debt or other fixed income security was
purchased, such security, if sold, might be sold at a price less than its cost.
Conversely, if interest rates have declined from the time such a security was
purchased, such security, if sold, might be sold at a price greater than its
cost. Also, the value of such securities may be affected by changes in real or
perceived creditworthiness of the issuers. Thus, if creditworthiness is
enhanced, the price may rise. Conversely, if creditworthiness declines, the
price may decline. A Portfolio is not restricted to any maximum or minimum time
to maturity in purchasing portfolio securities, and the average maturity of the
Portfolio's assets will vary based upon BEA's assessment of economic and market
conditions.
MANAGEMENT
BOARD OF DIRECTORS
The business and affairs of the Fund and each investment portfolio are
managed under the direction of the Fund's Board of Directors.
INVESTMENT ADVISER
BEA serves as the investment adviser for each of the Portfolios pursuant to
investment advisory agreements (the "Advisory Agreements"). BEA is a general
partnership organized under the laws of the State of New York and, together with
its predecessor firms, has been engaged in the investment advisory business for
over 50 years. BEA's principal offices are located at One Citicorp Center, 153
East 53rd Street, New York, New York 10022. Credit Suisse Capital Corporation
("CS Capital") is an 80% partner and Basic Appraisals, Inc. is a 20% partner in
BEA. CS Capital is a wholly-owned subsidiary of Credit Suisse Investment
Corporation, which is a wholly-owned subsidiary of
26
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Credit Suisse, the second largest Swiss bank, which in turn is a subsidiary of
CS Holding, a Swiss corporation. No one person or entity possesses a controlling
interest in Basic Appraisals, Inc. BEA is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended.
BEA is a diversified asset manager, handling global equity, balanced, fixed
income and derivative securities accounts for private individuals, as well as
corporate pension and profit-sharing plans, state pension funds, union funds,
endowments and other charitable institutions. As of September 30, 1994, BEA
managed approximately $22.2 billion in assets.
As an investment adviser, BEA emphasizes a global investment strategy. BEA
currently acts as investment adviser for fourteen registered investment
companies under the Investment Company Act. They are: The Chile Fund, Inc., The
Indonesia Fund, Inc., The Portugal Fund, Inc., The Latin America Investment
Fund, Inc., The Latin America Equity Fund, Inc., The Brazilian Equity Fund,
Inc., The First Israel Fund, Inc., The Emerging Markets Telecommunications Fund,
Inc., The Emerging Markets Infrastructure Fund, Inc., The Bear Stearns Emerging
Markets Debt Fund, Inc., The BEA International Equity Fund, The BEA Emerging
Markets Equity Fund, The BEA Strategic Fixed Income Fund and The BEA U.S. Core
Fixed Income Fund. BEA also acts as investment adviser for nineteen offshore
funds, thirteen of which are equity funds: The South America Fund N.V., The
Mexican Investment Company, Latin America Capital Partners, Ltd., Brazilian
Equity Investments I Ltd., Argentine Equity Investments I Ltd., C.I. Global
Fund, C.I. Emerging Markets Fund, C.I. North America Fund, C.I. Global Equity
RSP Fund, C.I. Latin America Fund, Credit Suisse North America Fund, Credit
Suisse Equity Fund-Latin America and Credit Suisse Transatlantic Fund and six of
which focus on investments in fixed income securities: The Mexico Debt Fund, The
Bear Stearns Emerging Markets Fixed Income Fund, C.I. World Bond Fund, C.I.
Global Bond RSP Fund, and Credits Emerging Markets Debt Fund.
BEA has sole investment discretion for the Portfolios and will make all
decisions affecting assets of each Portfolio under the supervision of the Fund's
Board of Directors and in accordance with the Portfolio's stated policies. BEA
will select investments for each of the Portfolios and will place purchase and
sale orders on behalf of each of the Portfolios. BEA is also responsible for
providing to the Portfolios' and the Fund's service providers prompt and
accurate data with respect to the Portfolios' transactions and the valuation of
portfolio securities.
The day-to-day portfolio management of BEA International Equity and BEA
Emerging Markets Equity Portfolios is the responsibility of the BEA
International Equities Management Team. The Team consists of the following
investment professionals: Emilio Bassini (Managing Director), Piers Playfair
(Senior Vice President), Steven D. Bleiberg (Vice President), Margaret P.
Kendall (Vice President). Mr. Bassini and Ms. Kendall have, on an individual
basis, been engaged as investment professionals within BEA for more than five
years. Mr. Bleiberg rejoined BEA in 1991, he spent two years as a portfolio
manager at Matrix Capital Management, prior to Matrix, Mr. Bleiberg spent 5
years at BEA in the equity research department. Mr. Playfair joined BEA in 1990,
prior to joining BEA he was a manager in the corporate finance division of
Samuel Montagu, London and a Director of Equity Capital Markets Group at Salomon
Brothers.
The day-to-day portfolio management of the BEA U.S. Core Equity Portfolio
and the equity portion of the BEA Balanced Portfolio is the responsibility of
the BEA Domestic Equity Management Team. The Team consists of the following
investment professionals: William W. Priest, Jr. (Chief Executive Officer and
Managing Director of BEA), John B. Hurford (Vice Chairman of the Executive
Committee and Managing Director), Albert L. Zesiger (Managing Director), Michael
Takata (Senior Vice President), and Todd M. Rice (Vice President). Messrs.
Priest, Hurford, and Zesiger have, on an individual basis, been engaged as
investment professionals with BEA for more than five years. Mr. Takata has been
with BEA since 1991; prior to joining BEA he was a vice president of County
NatWest
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Securities. Mr. Rice joined BEA in 1990; previously, he was employed as an
investment professional at Salomon Brothers.
The day-to-day portfolio management of the BEA Strategic Fixed Income, BEA
U.S. Core Fixed Income, BEA Municipal Bond Fund, BEA Global Fixed Income and BEA
Short Duration Portfolios, as well as the fixed income portion of the BEA
Balanced Portfolio, is the responsibility of the BEA Fixed Income Management
Team. The Team consists of the following investment professionals: Mark Arnold
(Chief Operating Officer and Managing Director), Robert Moore (Managing
Director), Gregg Diliberto (Senior Vice President), and Mark Silverstein (Vice
President). Messrs. Arnold, Moore and Diliberto have, on an individual basis,
been engaged as investment professionals with BEA for more than five years. Mr.
Silverstein joined BEA in 1991; prior to joining BEA he was a vice president of
First Boston.
For the services provided and expenses assumed by it, BEA is entitled to
receive the following fees, computed daily and payable monthly based on a
Portfolio's average daily net assets:
<TABLE>
<CAPTION>
PORTFOLIO ANNUAL RATE
- -------------------------------- --------------------
<S> <C>
BEA International Equity........ .80% of the average
daily net assets*
BEA Emerging Markets Equity..... 1.00% of the average
daily net assets*
BEA U.S. Core Equity............ .75% of the average
daily net assets*
BEA Balanced.................... .60% of the average
daily net assets
BEA U.S. Core Fixed Income...... .375% of the average
daily net assets
BEA Global Fixed Income......... .50% of the average
daily net assets
BEA Strategic Fixed Income...... .70% of the average
daily net assets
BEA Municipal Bond Fund......... .70% of the average
daily net assets
BEA Short Duration.............. .15% of the average
daily net assets
<FN>
- ------------
* This fee is higher than that paid by most investment companies.
</TABLE>
BEA may, at its discretion, from time to time agree to waive voluntarily all
or any portion of its advisory fee for any Portfolio.
For the period ended August 31, 1994, the Fund paid BEA investment advisory
fees, on annualized basis, with respect to the BEA International Equity, BEA
Emerging Markets Equity, BEA Strategic Fixed Income, BEA U.S. Core Fixed Income,
BEA Global Fixed Income, and BEA Municipal Bond Fund Portfolios, aggregating
.78%, .64%, .63%, .05%, 0% and 47%, respectively, of the average net assets of
the respective Portfolios, and BEA waived, approximately .2%, .36%, .07%, .325%,
.50%, and .23%, respectively, of the average net assets of each such Portfolio.
The Advisory Agreements provide that BEA shall not be liable for any error
of judgment or mistake of law or for any loss suffered by the Fund in connection
with the matters to which the Advisory Agreement relates and shall be
indemnified for any losses and claims in connection with any claim relating
thereto, except liability resulting from willful misfeasance, bad faith or gross
negligence on BEA's part in the performance of its duties or from reckless
disregard of its obligations and duties under the Advisory Agreement.
ADMINISTRATOR AGENT
PFPC Inc. ("PFPC"), an indirect, wholly-owned subsidiary of PNC Bank Corp.,
serves as administrator and transfer agent for the Portfolios. As administrator,
PFPC will provide various services to each Portfolio, including determining each
of the Portfolio's net asset value, providing all accounting services for the
Portfolios and generally assisting in all aspects of each Portfolio's
operations. As compensation for administrative services, the Fund will pay to
PFPC a fee calculated at the annual rate of .125% of each Portfolio's average
daily net assets.
PFPC has its principal offices at 400 Bellevue Parkway, Wilmington, Delaware
19809. As of October 31, 1994, PFPC was performing accounting and/or
administrative services for 290 investment companies and investment
partnerships, with combined total assets of approximately $80.7 billion. PNC
Bank Corp. is a multi-bank holding company with its principal offices in
Pittsburgh, Pennsylvania.
ADMINISTRATIVE SERVICES AGENT
Counsellors Funds Service, Inc. ("Counsellors Service"), a wholly-owned
subsidiary of
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Counsellors Securities Inc. ("Counsellors" or the "Distributor"), provides
certain administrative services to each of the Portfolios that are not provided
by PFPC, subject to the supervision and direction of the Board of Directors of
the Fund. These services include furnishing certain internal quasi-legal,
executive and administrative services, acting as liaison between the Portfolios
and the Portfolios' various service providers, furnishing corporate secretarial
services, which include assisting in the preparation of materials for meetings
of the Board of Directors of the Fund, coordinating the preparation of proxy
statements and annual, semi-annual and quarterly reports and generally assisting
in monitoring and developing compliance procedures for the Portfolios. As
compensation for such administrative services, the Fund will pay to Counsellors
Service each month a fee for the previous month calculated at the annual rate of
.15% of each Portfolio's average daily net assets.
DISTRIBUTOR
Counsellors serves as distributor of the Shares. Counsellors is a
wholly-owned subsidiary of Warburg, Pincus Counsellors, Inc. ("WPC") and is
located at 466 Lexington Avenue, New York, New York 10017-3147. WPC is a
wholly-owned subsidiary of Warburg, Pincus Counsellors, G.P. No compensation is
payable by the Fund to Counsellors for distribution services with respect to the
Portfolios.
CUSTODIAN
PNC Bank, National Association serves as the domestic custodian of the
assets of the BEA U.S. Core Equity, BEA U.S. Core Fixed Income, BEA Global Fixed
Income, BEA Municipal Bond Fund, BEA Balanced and BEA Short Duration Portfolios.
With respect to foreign securities, Brown Brothers Harriman & Co. acts as the
global custodian.
The 1940 Act and the rules and regulations adopted thereunder permit a
Portfolio to maintain its securities and cash in the custody of certain eligible
banks and securities depositories. In compliance with such rules and
regulations, the Portfolio's portfolio of securities and cash, when invested in
securities of foreign issuers may be held by eligible foreign subcustodians
appointed by the custodian.
EXPENSES
The expenses of each Portfolio are deducted from its total income before
dividends are paid. These expenses include, but are not limited to, fees paid to
the investment adviser, administrative services agent fees and administrator's
fees and fees and expenses of officers and directors who are not affiliated with
the Portfolio's investment adviser or distributor, taxes, interest, legal fees,
custodian fees, auditing fees, brokerage fees and commissions, certain of the
fees and expenses of registering and qualifying the Portfolios and the 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, the expense of reports to shareholders, shareholders'
meetings and proxy solicitations, fidelity bond and directors and officers
liability insurance premiums, the expense of using independent pricing services
and other expenses which are not expressly assumed by the Adviser under its
investment advisory agreement with respect to a Portfolio. Any general expenses
of the Fund that are not readily identifiable as belonging to a particular
investment portfolio of the Fund will be allocated among all investment
portfolios of the Fund based upon the relative net assets of the investment
portfolios at the time such expenses are incurred. Transfer agency expenses,
expenses of preparation, printing and distributing prospectuses, statements of
additional information, proxy statements and reports to shareholders,
registration fees and other costs identified as belonging to a particular class,
are allocated to such class.
BEA has agreed to reimburse each Portfolio for the amount, if any, by which
the total operating and management expenses of such Portfolio for any fiscal
year exceed the most restrictive state blue sky expense limitation in effect
from time to time, to the extent required by such limitation.
BEA may assume additional expenses of a Portfolio from time to time. In
certain circumstances, BEA may assume such expenses on the condition that it is
reimbursed by the Portfolio for such amounts prior to the end of a fiscal year.
In such event, the reimbursement of such
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amounts will have the effect of increasing a Portfolio's expense ratio and of
decreasing return to investors.
For the Fund's fiscal year ended August 31, 1994, the Fund's total expenses
were 1.30% (annualized) of average net assets with respect to the BEA
International Equity Portfolio (not taking into account waiver's and
reimbursements of .05% ), 2.01% (annualized) of average net assets with respect
to the BEA Emerging Markets Equity Portfolio (not taking into account waivers
and reimbursements of .51%), 1.13% of average net assets with respect to the BEA
Strategic Fixed Income Portfolio (not taking into account waivers and
reimbursements of .13%), .99% (annualized) of average net assets with respect to
the BEA U.S. Core Fixed Income Portfolio (not taking into account waivers and
reimbursements of .49%), 1.92% (annualized) of average net assets with respect
to the BEA Global Fixed Income Portfolio (not taking into account waivers and
reimbursements of 1.17%), 1.34% (annualized) of average net assets with respect
to the BEA Municipal Bond Fund Portfolio (not taking into account waivers and
reimbursements of .34%. Total expenses as a percentage of average net assets for
the remaining BEA classes are not reported as no Shares of such classes had been
sold to the public during the period ended August 31, 1994.
HOW TO PURCHASE SHARES
GENERAL
Shares representing interests in the Portfolios are offered continuously for
sale by the Distributor. Except as described below, BEA Class Shares are
currently available for purchase only by investors who have entered into an
investment management agreement with BEA. Shares may be purchased initially by
completing the application and forwarding the application to the Fund's transfer
agent, PFPC. Purchases of Shares may be effected by wire to an account to be
specified by PFPC or by mailing a check or Federal Reserve Draft, payable to the
order of "The BEA Family" c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899.
The name of the Portfolio for which Shares are being purchased must also appear
on the check or Federal Reserve Draft. Federal Reserve Drafts are available at
national banks or any state bank which is a member of the Federal Reserve
System. Initial investments in any Portfolio must be at least $1,000,000, except
shares may be purchased by existing BEA clients or by officers of existing BEA
clients (or those holding similar positions) with an initial investment of at
least $100,000; all subsequent investments for such persons must be at least
$10,000. Subsequent investments in a Portfolio by other persons must be at least
$100,000. The Fund reserves the right to reject any purchase order.
Shares of the Portfolios may be purchased by officers and employees of BEA
and any BEA pension or profit-sharing plan, without being subject to the minimum
investment limitation or the requirement that investors enter into an investment
management agreement.
Shares may be purchased on any Business Day. A "Business Day" is any day
that the New York Stock Exchange (the "NYSE") is open for business. Currently,
the NYSE is closed on weekends and New Year's Day, President's Day, Good Friday,
Memorial Day, Independence Day (observed), Labor Day, Thanksgiving Day and
Christmas Day (observed).
The price paid for Shares purchased will be the net asset value next
computed after an order is received by the Fund's transfer agent prior to its
close of business on such day. Orders received by the Fund's transfer agent
after its close of business are priced at the net asset value next determined on
the following Business Day.
PURCHASES IN-KIND
Subject to the approval of the Adviser, investors may acquire Shares of any
of the Portfolios in exchange for portfolio securities that are eligible for
investment by the relevant Portfolio or Portfolios. Such portfolio securities
must (a) meet the investment objectives and policies of the Portfolios, (b) be
acquired for investment and not for resale, (c) be liquid securities which are
not restricted as to transfer either by law or liquidity of market, and (d) have
a value which is readily ascertainable. Generally an investor will recognize for
federal income tax purposes any gain or loss realized on an exchange of property
for Shares. Under certain circumstances, initial investors may not recognize
gain or loss on such
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<PAGE>
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an exchange. Investors, particularly initial investors, are urged to consult
their tax advisers in determining the particular federal income tax consequences
of their purchase in-kind. Such exchanges will be subject to each Portfolio's
minimum investment requirement.
HOW TO REDEEM SHARES
GENERAL
Shareholders may redeem for cash some or all of their Shares at any time. To
do so, a written request in proper form must be sent directly to The BEA Family
c/o PFPC, P.O. Box 8950, Wilmington, Delaware 19899. The redemption price is the
net asset value per share next determined after the initial receipt of proper
notice of redemption. Redemptions in the BEA International Equity Portfolio
incurs a redemption fee of 1.00%; the BEA Emerging Markets Equity Portfolio,
1.50%; and the BEA Strategic Fixed Income Portfolio, .25%. No redemption fee is
charge for redemptions involving a redemption in-kind (see below). The value of
Shares at the time of redemption may be more or less than the shareholder's
cost, depending on the market value of the securities held by the Fund at such
time.
A request for redemption must be signed by all persons in whose names the
Shares are registered or by an authorized party. Signatures must conform exactly
to the account registration. If the proceeds of the redemption would exceed
$10,000, or if the proceeds are not to be paid to the record owner at the record
address, or if the shareholder is a corporation, partnership, trust or
fiduciary, signature(s) must be guaranteed by a commercial bank or trust company
(not a savings bank), by a federally chartered savings and loan, or by a member
firm of a national securities exchange. In some cases, however, other documents
may be necessary.
INVOLUNTARY REDEMPTION
The Fund reserves the right to redeem an account in any Portfolio of a
shareholder (other than an officer or employee of BEA or any BEA pension or
profit sharing plan) at any time the net asset value of the account in such
Portfolio falls below $50,000 as the result of a redemption request.
Shareholders will be notified in writing that the value of their account in a
Portfolio is less than $50,000 and will be allowed 30 days to make additional
investments before the redemption is processed.
PAYMENT OF REDEMPTION PROCEEDS
Payment of the Redemption Price for Shares redeemed will be made by wire or
by check mailed within seven days after acceptance by the Fund's transfer agent,
PFPC, of the request and any other necessary documents in proper order. Such
payment may be postponed or the right of redemption suspended as provided by the
rules of the SEC. If the Shares to be redeemed have been recently purchased by
check, the Fund's transfer agent may delay mailing a redemption check, which may
be a period of up to 15 days from the date of purchase, pending a determination
that the check has cleared.
REDEMPTION IN-KIND
The Fund reserves the right, if conditions exist which make cash payments
undesirable, to honor any request for redemption of a 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 a Portfolio's
net asset value. If payment is made in securities, a shareholder may incur
transaction costs in converting these securities into cash after they have
redeemed their Shares. The Fund has elected, however, to be governed by Rule
18f-1 under the Investment Company Act so that a 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 a Portfolio.
EXCHANGE PRIVILEGE
A Shareholder may exchange Shares of any one of the BEA Family Classes for
Shares of any other of the BEA Family Classes. Such exchange will be effected at
the net asset value of the exchanged Class (less any applicable redemption fee)
and the net asset value of the Class to be acquired next determined after the
transfer agent's receipt of a request for an exchange. No exchange fee is
currently imposed on exchanges, although the Fund reserves the right to impose a
$5.00 administrative fee for each exchange. An exchange of Shares will be
treated as a sale for Federal income tax purposes.
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An investor considering an exchange to any of the other BEA portfolios
should refer to the prospectus and statement of additional information regarding
such portfolio.
A shareholder wishing to make an exchange may do so by sending a written
request to the Portfolio's transfer agent. In the case of shareholders holding
share certificates, the certificates must accompany the request for an exchange.
Shareholders are automatically provided with telephone exchange privileges when
opening an account, unless they indicate on the Application that they do not
wish to use this privilege. SHAREHOLDERS HOLDING SHARE CERTIFICATES ARE NOT
ELIGIBLE TO EXCHANGE SHARES BY TELEPHONE BECAUSE SHARE CERTIFICATES MUST
ACCOMPANY ALL EXCHANGE REQUESTS. To add a telephone exchange feature to an
existing account that previously did not provide for this option, a Telephone
Exchange Authorization Form must be filed with PFPC. This form is available from
PFPC. Once this election has been made, the shareholder may simply contact PFPC
by telephone to request the exchange (800)447-1139 (in Delaware call collect
(302)791-1031). The Portfolio will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine, and if the Portfolio does
not employ such procedures, it may be liable for any losses due to unauthorized
or fraudulent telephone instructions. Neither the Portfolio nor PFPC will be
liable for any loss, liability, cost or expense for following the Portfolio's
telephone transaction procedures described below or for following instructions
communicated by telephone that it reasonably believes to be genuine.
The Portfolio'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 fund, all of which must match the Fund's
records; (3) requiring the Portfolio's service representative to complete a
telephone transaction form, listing all of the above caller identification
information; (4) permitting exchanges only if the two account registrations are
identical; (5) requiring that redemption proceeds be sent only by check to the
account owners of record at the address of record, or by wire only to the owners
of record at the bank account of record; (6) sending a written confirmation for
each telephone transaction to the owners of record at the address of record
within five (5) business days of the call; and, maintaining tapes of telephone
transactions for six months, if the Portfolio 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, other
retirement plan accounts, or accounts with attorney-in-fact under power of
attorney.
If the exchanging shareholder does not currently own Shares of the Portfolio
whose Shares are being acquired, a new account will be established with the same
registration, dividend and capital gain options and Authorized Dealer of record
as the account from which shares are exchanged, unless otherwise specified in
writing by the shareholder with all signatures guaranteed by a commercial bank
or trust company or a member firm of a national securities exchange. The
exchange privilege may be modified or terminated at any time, or from time to
time, by the Portfolio, upon 60 days written notice to shareholders.
If an exchange is to another BEA portfolio, the dollar value of Shares
acquired must equal or exceed the Portfolio's minimum for a new account; if to
an existing account, the dollar value must equal or exceed the Portfolio's
minimum for subsequent investments. If any amount remains in the account from
which the exchange is being made, such amount must not drop below the minimum
account value required by the Portfolio.
NET ASSET VALUE
The net asset value for each Portfolio is determined daily as of the close
of regular trading on the NYSE on each Business Day. The net asset value of a
Portfolio is calculated by adding the value of all its securities to cash and
other
32
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assets, deducting its actual and accrued liabilities and dividing by the total
number of its Shares outstanding.
DIVIDENDS AND DISTRIBUTIONS
The Fund will distribute substantially net realized capital gains, if any,
of each of the Portfolios to each Portfolio's shareholders annually. The Fund
will distribute all net investment income, if any, for the BEA International
Equity, the BEA Emerging Markets Equity, and BEA U.S. Core Equity Portfolios
annually. The Fund will distribute net investment income, if any, for the BEA
Balanced and the BEA Short Duration Portfolios at least annually. The Fund will
distribute net investment income for the BEA U.S. Core Fixed Income, the BEA
Global Fixed Income, the BEA Strategic Fixed Income and the BEA Municipal Bond
Fund Portfolio at least quarterly. All distributions will be reinvested in the
form of additional full and fractional Shares of the relevant Portfolio unless a
shareholder elects otherwise. If a shareholder desires to have distributions
paid out rather than reinvested, the shareholder should notify PFPC in writing.
TAXES
GENERAL
The following discussion is only a brief summary of some of the important
tax considerations generally affecting the Portfolios and their shareholders and
is not intended as a substitute for careful tax planning. Accordingly, investors
in the Portfolios should consult their tax advisers with specific reference to
their own tax situation.
Each 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 a Portfolio qualifies for this tax treatment, such Portfolio
will be relieved of Federal income tax on amounts distributed to shareholders,
but shareholders, unless otherwise exempt, will pay income or capital gains
taxes on amounts so distributed (except distributions that are treated as a
return of capital or that are designated as exempt interest dividends)
regardless of whether such distributions are paid in cash or reinvested in
additional Shares.
Distributions out of the "net capital gain" (the excess of net long-term
capital gain over net short-term capital loss), if any, of either Portfolio will
be taxed to shareholders as long-term capital gain regardless of the length of
time a shareholder has held his Shares or whether such gain was reflected in the
price paid for the Shares. All other distributions, to the extent they are
taxable, are taxed to shareholders as ordinary income. The current nominal
maximum marginal rate on ordinary income for individuals, trusts and estates is
31%. However, 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 BEA Municipal Bond Fund Portfolio intends to pay substantially all of
their dividends as "exempt interest dividends." Investors in this Portfolio
should note, however, that taxpayers are required to report the receipt of tax-
exempt interest and "exempt interest dividends" in their Federal income tax
returns and that in two circumstances such amounts, while exempt from regular
Federal income tax, are subject to alternative minimum tax at a rate of 24% in
the case of individuals, trusts and estates, and 20% in the case of corporate
taxpayers. First, tax-exempt interest and "exempt interest dividends" derived
from certain private activity bonds issued after August 7, 1986, will generally
constitute an item of tax preference for corporate and noncorporate taxpayers in
determining alternative minimum tax liability. Depending upon market conditions,
the BEA Municipal Bond Fund Portfolio may invest up to 40% of its net assets in
such private activity bonds. Secondly, tax-exempt interest and "exempt interest
dividends" derived from all Municipal Obligations must be taken into account by
corporate taxpayers in determining their adjusted current earnings adjustment
for alternative minimum tax purposes. Shareholders who are recipients of Social
Security Act or Railroad Retirement Act benefits should further note that
tax-exempt interest and "exempt interest dividends" will be taken into account
in determining the taxability of their benefit payments.
The BEA Municipal Bond Fund Portfolio will determine annually the
percentages of its net investment income which are fully tax-exempt, which
constitute an item of tax preference
33
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for alternative minimum tax purposes, and which are fully taxable and will apply
such percentages uniformly to all distributions declared from net investment
income during that year. These percentages may differ significantly from the
actual percentages for any particular day.
Transactions in foreign currencies, forward contracts, options and futures
contracts (including options and futures contracts on foreign currencies) will
be subject to special provisions of the Code that, among other things, may
affect the character (i.e., ordinary or capital) of gains or losses realized by
a Portfolio, accelerate the recognition of income by a Portfolio and defer a
Portfolio's losses. Exchange control regulations may restrict repatriations of
investment income and capital or of the proceeds of sales of securities by
investors such as the Portfolios. In addition, certain investments (such as zero
coupon securities and shares of so-called "passive foreign investment companies"
or "PFICS") may cause a Portfolio to recognize income without the receipt of
cash. Each of these circumstances, whether separately or in combination, may
limit a Portfolio's ability to pay sufficient dividends and to make sufficient
distributions to satisfy the Subchapter M and excise tax distributions
requirements.
The Fund will send written notices to shareholders annually regarding the
tax status of distributions made by each Portfolio. Dividends declared in
October, November or December of any year payable to shareholders of record on a
specified date in such a month will be deemed to have been received by the
shareholders on December 31, provided such dividends are paid during January of
the following year. Each Portfolio intends to make sufficient actual or deemed
distributions prior to the end of each calendar year to avoid liability for
Federal excise tax.
Investors should be careful to consider the tax implications of buying
Shares just prior to a distribution. The price of shares purchased at that time
will reflect the amount of the forthcoming distribution. Those investors
purchasing just prior to a distribution will nevertheless be taxed on the entire
amount of the distribution received.
Shareholders who exchange Shares representing interests in one Portfolio for
Shares representing interests in another Portfolio will generally recognize
capital gain or loss for Federal income tax purposes.
Under certain provisions of the Code, some shareholders may be subject to a
31% "backup" withholding tax on reportable dividends, capital gains
distributions and redemption payments.
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 one Portfolio is not intended to constitute a balanced
investment program. Shares of the BEA Municipal Bond Fund Portfolio would not be
suitable for tax-exempt institutions and may not be suitable for retirement
plans qualified under Section 401 of the Internal Revenue Code, H.R. 10 plans
and individual retirement accounts since such plans and accounts are generally
tax-exempt and, therefore, not only would not gain any additional benefit from
the Portfolios' dividends being tax-exempt but also such dividends would be
taxable when distributed to the beneficiary.
Future legislative or administrative changes or court decisions may
materially affect the tax consequences of investing in one or more Portfolios of
the Fund. Shareholders are also urged to consult their tax advisors 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.
FOREIGN INCOME TAXES
Investment income received by the Portfolios from sources within foreign
countries may be subject to foreign income taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Portfolios to a reduced rate of, or exemption from, taxes on such
income. It is impossible to determine the effective rate of foreign tax in
advance since the amount of each Portfolio's assets to be invested in various
countries is not known.
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If more than 50% of the value of a Portfolio's total assets at the close of
each taxable year consists of the stock or securities of foreign corporations,
such Portfolio will be eligible to elect to "pass through" to the Fund's
shareholders the amount of foreign income taxes paid by each Portfolio (the
"Foreign Tax Election"). Pursuant to the Foreign Tax Election, shareholders will
be required (i) to include in gross income, even though not actually received,
their respective pro-rata shares of the foreign income taxes paid by the
Portfolio that are attributable to any distributions they receive; and (ii)
either to deduct their pro-rata share of foreign taxes in computing their
taxable income, or to use it (subject to various Code limitations) as a foreign
tax credit against U.S. Federal income tax (but not both). In determining the
source and character of distributions received from a Portfolio for the purpose
of the foreign tax credit limitation rules of the Code, shareholders will be
required to treat allocable portions of a Portfolio's distributions as foreign
source income. No deduction for foreign taxes may be claimed by a shareholder
who does not itemize deductions.
MISCELLANEOUS CONSIDERATIONS; EFFECT OF FUTURE LEGISLATION
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. This
prospectus combines offering information with respect to four Portfolios; there
is a possibility that one Portfolio might become liable for any misstatement,
inaccuracy, or incomplete disclosure in the prospectus concerning another
Portfolio.
DESCRIPTION OF SHARES
The Fund has authorized capital of thirty billion shares of Common Stock,
$.001 par value per share, of which 10.7 billion shares are currently classified
into 61 different classes of Common Stock (as described in the Statement of
Additional Information).
The classes of Common Stock have been grouped into sixteen separate
"families": the RBB Family, Warburg Pincus, the Cash Preservation Family, the
Sansom Street Family, the Bedford Family, the Bradford Family, the BEA Family,
the Laffer/Canto Equity Fund, the Alpha Family, the Beta Family, the Gamma
Family, the Delta Family, the Epsilon Family, the Zeta Family, the Eta Family
and the Theta Family. The RBB Family represents interests in the Tax-Free,
Government Securities, Money Market and Municipal Money Market Portfolios;
Warburg Pincus represents interests in the Warburg Pincus Growth & Income and
Balanced Funds; the Cash Preservation Family represents interests in the Money
Market and Municipal Money Market Portfolios; the Sansom Street Family
represents interests in the Money Market, Municipal Money Market and Government
Obligations Money Market Portfolios; the Bedford Family represents interests in
the Money Market, Municipal Money Market, Government Obligations Money Market
and New York Municipal Money Market Portfolios; the Bradford Family represents
interests in the Municipal Money Market and Government Obligations Money Market
Portfolios; and the BEA Family represents interests in the BEA International
Equity, BEA Strategic Fixed Income, BEA Emerging Markets Equity, BEA U.S. Core
Equity, BEA U.S. Core Fixed Income, BEA Global Fixed Income, BEA Municipal Bond
Fund, BEA Balanced and BEA Short Duration Portfolios; and the Alpha, Beta,
Gamma, Delta, Epsilon, Zeta, Eta and Theta Families (collectively, the
"Additional Families") represent interests in the Money Market, Municipal Money
Market, Government Obligations Money Market and New York Municipal Money Market
Portfolios.
THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED
HEREIN RELATE PRIMARILY TO THE BEA CLASSES REPRESENTING AN INTEREST IN THE BEA
INTERNATIONAL EQUITY, BEA EMERGING MARKETS EQUITY, BEA STRATEGIC FIXED INCOME,
BEA U.S. CORE EQUITY, BEA BALANCED, BEA U.S. CORE FIXED INCOME, BEA GLOBAL FIXED
INCOME, BEA MUNICIPAL BOND FUND AND BEA SHORT DURATION PORTFOLIOS AND DESCRIBE
ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER
MATTERS RELATING TO SUCH CLASSES.
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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 will be fully paid
and non-assessable.
The Fund currently does not intend to hold annual meetings of shareholders
except as required by the Investment Company Act or other applicable law, but
does intend to hold a meeting of shareholders of each of the Portfolios after
such Portfolio's first fiscal year following the commencement of the public
offering of shares in the Portfolios. 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 each of the Portfolios will vote in the aggregate and
not by class on all matters, except where otherwise required by law. Further,
shareholders of all investment portfolios of the Fund will vote in the aggregate
and not by portfolio except as otherwise required by law or when the Board of
Directors determines that the matter to be voted upon affects only the interests
of the shareholders of a particular investment portfolio. (See the Statement of
Additional Information under "Additional Information Concerning Fund Shares" for
examples when the Investment Company Act requires voting by investment portfolio
or by class.) Shareholders of the Fund are entitled to one vote for each full
share held (irrespective of class or portfolio) and fractional votes for
fractional shares held. Voting rights are not cumulative and, accordingly, the
holders of more than 50% of the aggregate shares of Common Stock of the Fund may
elect all of the directors.
As of September 30, 1994, to the Fund's knowledge, no person held of record
or beneficially 25% or more of the outstanding shares of all classes of the
Fund, although as of such date Home Insurance Company owned more than 25% of the
outstanding shares of the RBB Family Classes representing interests in the
Government Securities Portfolio; Seymour Fein owned more than 25% of the
outstanding shares of the RBB Family Class representing an interest in the
Municipal Money Market; Boston Financial Data Services owned more than 25% of
the outstanding shares of Warburg Pincus Class representing interests in the
Growth & Income Fund; Planco Inc. Profit Sharing Plan Trust owned more than 25%
of the outstanding shares of Warburg Pincus Class representing interests in the
Balanced Fund; E. M. Warburg Pincus & Co., Inc. owned more than 25% of the
outstanding shares of Warburg Pincus representing interests in the Balanced
Fund; the Jewish Family and Children's Agency of Philadelphia Capital Campaign
owned more than 25% of the outstanding shares of the Cash Preservation Class
representing an interest in the Money Market Portfolio; the Crowe Trust owned
more than 25% of the outstanding shares of the Cash Preservation Class
representing an interest in the Municipal Money Market Portfolio; Wasner & Co
for account of Paine Webber Managed Assets -- Sundry Holding owned more than 25%
of the outstanding shares of the Sansom Street Family Class representing an
interest in the Money Market Portfolio; the State of Oregon, Treasury
Department, owned more than 25% of the outstanding Shares of the BEA Family
Class representing an interest in the BEA Strategic Fixed Income Portfolio; the
Bank of New York owned more than 25% of the outstanding Shares of the BEA Family
Class representing an interest in the BEA U.S. Core Equity Portfolio; the New
England UFCW and Employers' Pension Fund Board of Trustees 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; Bankers Trust on behalf of the
Pechiney Corporation Pension Master Trust 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; the Bank of New York as trustee for the 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; and John Hancock Clearing Corporation Special Custody Account for the
Exclusive Benefit of Customers
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owned more than 25% of the outstanding shares of the Laffer/Canto Equity Class
representing an interest in the Laffer/Canto Equity Portfolio.
OTHER INFORMATION
REPORTS AND INQUIRIES
Shareholders of a Portfolio will receive unaudited semi-annual reports
describing the Portfolio's investment operations and annual financial statements
audited by independent accountants. Shareholder inquiries should be addressed to
PFPC, the Fund's transfer agent, Bellevue Park Corporate Center, 400 Bellevue
Parkway, Wilmington, Delaware 19809, toll-free (800) 447-1139 (in Delaware call
collect (302) 791-1031).
SHARE CERTIFICATES
The Fund will issue share certificates for any of the Shares only upon the
written request of a shareholder sent to PFPC.
PERFORMANCE INFORMATION
From time to time, each of the Portfolios may advertise its performance,
including comparisons to other mutual funds with similar investment objectives
and to stock or other relevant indices. All such advertisements will show the
average annual total return over one, five and ten year periods or, if such
periods have not yet elapsed, shorter periods corresponding to the life of a
Portfolio. Such total return quotations will be computed by finding the
compounded average annual total return for each time period that would equate
the assumed initial investment, of $1,000 to the ending redeemable value, net of
any redemption and other fees, according to a required standardized calculation.
The standard calculation is required by the SEC to provide consistency and
comparability in investment company advertising. The Portfolios may also from
time to time include in such advertising an aggregate total return figure or a
total return figure that is not calculated according to the standardized formula
in order to compare more accurately a Portfolio's performance with other
measures of investment return. For example, a Portfolio's total return may be
compared with data published by Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Mutual Fund Forecaster, Morningstar, Inc. or Weisenberger
Investment Company Service, or with the performance of the Standard & Poor's 500
Stock Index, Standard & Poor's MidCap 400 Index, Moody's Bond Survey Bond Index,
Wilshire 5000 Index, Lehman Brothers Bond Indexes, Consumer Price Index, Bond
Buyer's 20-Bond Index, Dow Jones Industrial Average, national publications such
as Money, Forbes, Barron's, the Wall Street Journal or the New York Times or
publications of a local or regional nature, and other industry publications. For
these purposes, the performance of a Portfolio, as well as the performance
published by such services or experienced by such indices, will usually not
reflect redemption fees, the inclusion of which would reduce performance
results. If a Portfolio advertises non-standard computations, however, the
Portfolio will disclose such fees, and will also disclose that the performance
data do not reflect such fees and that inclusion of such fees would reduce the
performance quoted.
From time to time, each of the Portfolios other than the BEA International
Equity, BEA Emerging Markets Equity and BEA U.S. Core Equity Portfolios may also
advertise its "30-day yield." The yield refers to the income generated by an
investment in a Portfolio over the 30-day period identified in the
advertisement, and is computed by dividing the net investment income per share
during the period by the maximum public offering price per share of the last day
of the period. This income is "annualized" by assuming that the amount of income
is generated each month over a one-year period and is compounded semi-annually.
The annualized income is then shown as a percentage of the net asset value.
The yield on Shares of a Portfolio will fluctuate and is not necessarily
representative of future results. Shareholders should remember that yield is
generally a function of portfolio quality and maturity, type of instrument,
operating expenses and market conditions. Any fees charged by broker/dealers
directly to their customers in connection with investments in a Portfolio are
not reflected in the yields on a Portfolio's Shares, and such fees, if charged,
will reduce the actual return received by shareholders on their investments.
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No person has been authorized to give any information or make any
representations not contained in this prospectus or in the Portfolios' statement
of additional information incorporated herein by reference, in connection with
the offering made by this prospectus and, if given or made, such representations
must not be relied upon as having been authorized by the Fund or its
distributor. This prospectus does not constitute an offering by the Fund or by
the distributor in any jurisdiction in which such offering may not lawfully be
made.
Investment Adviser
BEA Associates
New York, New York
<PAGE>
THE BEA FAMILY NEW ACCOUNT APPLICATION
Mail completed application to:
PFPC - Attention: The BEA Family, P.O. Box 8950, Wilmington, DE 19899
1. REGISTRATION. PLEASE PRINT
<TABLE>
<S> <C> <C>
/ / Individual / / Trust
Owner
/ / Joint
Tenant / / Corporation
Co-Owner*, minor, trust
/ / Custodian / / Other ------
Street Address
/ / UGMA / / (State)
City State Zip Code
</TABLE>
* For joint registration, both must sign. The registration will be as joint
tenants with the right of survivorship and not as tenants in common, unless
otherwise stated.
- --------------------------------------------------------------------------------
2. INVESTMENTS. TOTAL AMOUNT INVESTED [(MINIMUM OF $1,000,000; $100,000 FOR
SUBSEQUENT INVESTMENTS)] $
- -------------------.
<TABLE>
<S> <C>
BEA International Equity Portfolio $ -------------------
BEA Emerging Markets Equity Portfolio $ -------------------
BEA U.S. Core Equity Portfolio $ -------------------
BEA Balanced Fund $ -------------------
BEA U.S. Core Fixed Income Portfolio $ -------------------
BEA Global Fixed Income Portfolio $ -------------------
BEA Strategic Fixed Income Portfolio $ -------------------
BEA Municipal Bond Fund Portfolio $ -------------------
BEA Short Duration Portfolio $ -------------------
</TABLE>
/ / BY CHECK. Make payable to "The BEA Family."
/ / BY WIRE. Call PFPC Inc. ("PFPC") directly at (800) 447-1139 (in Delaware
call collect (302) 791-1149) to obtain a Fund account number and for further
instructions. Then, fill in your new fund account number
----------------.
- --------------------------------------------------------------------------------
3. TAX IDENTIFICATION
Under penalties of perjury, I certify with my signature below that the number
shown in this section of the application is my correct taxpayer identification
number and that I am not subject to backup withholding because the Internal
Revenue Service has not notified me that I am subject to backup withholding as a
result of a failure to report all interest or dividends, or the Internal Revenue
Service has notified me that I am no longer subject to backup withholding. If
you are subject to backup withholding, check the box in front of the following
statement.
/ / The Internal Revenue Service has notified me that I am subject to backup
withholding.
<TABLE>
<C> <S> <C> <C> <C>
or or
(Minor's Social Security
(Owner's Social Security #) (Tax Identification #) #)
</TABLE>
- --------------------------------------------------------------------------------
4. SIGNATURES
Citizenship: / / U.S. / / Other
- -------------- Please provide Phone Number ( ) _______________________________
Sign below exactly as printed in Registration.
I (we) am (are) of legal age and have read the prospectus. I (we) hereby certify
that each of the persons listed below has been duly elected, and is now legally
holding the office set below his name and has the authority to make this
authorization.
Please print titles below if signing on behalf of a business or trust.
<TABLE>
<S> <C>
(Signature) (Signature)
(President, Trustee, General Partner or (Co-owner, Secretary of Corporation,
Agent) Co-trustee, etc).
</TABLE>
