RBB FUND INC, 497, 1996-11-08

RBB FUND INC
497, 1996-11-08

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[LOGO] B E A
ADVISOR FUNDS

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INTERNATIONAL EQUITY FUND

EMERGING MARKETS EQUITY FUND

GLOBAL TELECOMMUNICATIONS FUND

HIGH YIELD FUND

PROSPECTUS - OCTOBER 15, 1996

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TABLE OF CONTENTS

<TABLE>
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PAGE
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<S> <C>
Annual Fund Operating Expenses..................................................................................... P-2
Financial Highlights............................................................................................... P-3
The Company........................................................................................................ P-3
Investment Objectives and Policies................................................................................. P-3
Investment Limitations............................................................................................. P-7
Risk Factors....................................................................................................... P-7
Management......................................................................................................... P-9
Expenses........................................................................................................... P-12
How to Purchase Shares............................................................................................. P-12
How to Redeem Shares............................................................................................... P-14
Net Asset Value.................................................................................................... P-16
Dividends and Distributions........................................................................................ P-16
Taxes.............................................................................................................. P-16
Multi-Class Structure.............................................................................................. P-18
Description of Shares.............................................................................................. P-18
Other Information.................................................................................................. P-19
</TABLE>

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BEA ADVISOR FUNDS

THE BEA ADVISOR FUNDS CONSIST OF FOUR CLASSES OF COMMON STOCK OF THE RBB FUND,
INC. (THE "COMPANY"), AN OPEN-END MANAGEMENT INVESTMENT COMPANY. SHARES
(COLLECTIVELY, THE "ADVISOR SHARES" OR "SHARES") OF SUCH CLASSES (THE "ADVISOR
CLASSES" OR "CLASSES") ARE OFFERED BY THIS PROSPECTUS AND REPRESENT INTERESTS IN
ONE OF THE FOUR OF THE INVESTMENT PORTFOLIOS OF THE COMPANY DESCRIBED IN THIS
PROSPECTUS (COLLECTIVELY, THE "FUNDS"). THE INVESTMENT OBJECTIVE OF EACH FUND
DESCRIBED IN THIS PROSPECTUS IS AS FOLLOWS:

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

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

BEA GLOBAL TELECOMMUNICATIONS FUND -- seeks to provide long-term
appreciation of capital. The Fund will invest primarily in equity securities
of telecommunications companies, both foreign and domestic.

BEA HIGH YIELD FUND -- seeks to provide a high total return. The Fund
will invest primarily in high yield fixed income securities (also known as
"junk bonds") issued by corporations, governments and agencies, both
domestic and foreign. The Fund will invest without regard to maturity or
credit quality limitations.

There can be, of course, no assurance that a Fund's investment objective
will be achieved. Investments in the Funds involve certain risks. See "Risk
Factors."

THE BEA HIGH YIELD FUND 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 THIS FUND. SEE "RISK FACTORS."

BEA Associates ("BEA" or the "Adviser"), a U.S. investment advisory firm,
will act as the investment adviser to each Fund. BEA maintains a global
investment strategy and, as of September 30, 1996, served as adviser for
approximately $31.3 billion in assets.

The minimum initial investment in a Fund is $2,500 and the minimum
subsequent investment is $250. The minimum initial investment for Individual
Retirement Accounts, Uniform Gifts to Minors and Automatic Investment Plans are
$1,000 and minimum subsequent investments in these Plans are $100.

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 October 15, 1996, has been filed with the
Securities and Exchange Commission (the "SEC") and is incorporated by reference
in this Prospectus. The Statement of Additional Information is available for
reference, along with related materials, on the SEC website
(http://www.sec.gov). It may also be obtained free of charge by calling (800)
401-2230.

Shares of the Funds are not deposits or obligations of, or guaranteed or
endorsed by, any bank and shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
Investments in Shares of the Funds involve investment risks, including the
possible loss of principal.

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 OCTOBER 15, 1996

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ANNUAL FUND OPERATING EXPENSES (AFTER WAIVERS)

<TABLE>
<CAPTION>
BEA
BEA EMERGING BEA
INTERNATIONAL MARKETS GLOBAL BEA
EQUITY EQUITY TELECOMMUNICATIONS HIGH YIELD
FUND FUND FUND FUND
------------- -------- --------------------- -------------
<S> <C> <C> <C> <C>
Management Fees (after waivers)(1)................ .80% 1.00% 1.00% .45%(2)
12b-1 Fees........................................ .25% .25% .25% .25%
Other Expenses (after waivers)(3)................. .39% .49% .40% .25%
--- --- --- ---
Total Fund Operating Expenses (after
waivers)(3)...................................... 1.44% 1.74% 1.65% .95%
--- --- --- ---
--- --- --- ---
</TABLE>

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(1) Management fees are based on average daily net assets of each Fund and are
calculated daily and paid monthly.

(2) Before expense waivers, management fees would be .70%.

(3) Based upon estimated amounts for the current fiscal year after expense
waivers. Before expense waivers, Other Expenses would be .42%, .62% and .41%
for the BEA International Equity, the BEA Emerging Markets Equity, and the
BEA High Yield Funds, respectively, and Total Fund Operating Expenses would
be 1.47%, 1.87% and 1.36%.

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EXAMPLE

An investor would pay the following expenses on a $1,000 investment in each of
the Funds, assuming (1) a 5% annual return, and (2) redemption at the end of
each time period.

The Example in this fee table assumes that all dividends and distributions are
reinvested and that the amounts listed under "Annual Fund Operating Expenses"
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.

This fee table is designed to assist an investor in understanding the various
costs and expenses that an investor in each of the Funds will bear directly or
indirectly. For more complete descriptions of various costs and expenses see
"Management" below. The "Other Expense" figures are restated from fees and costs
of the Institutional Classes of the Funds as of August 31, 1996, except for the
BEA Global Telecommunications Fund, for which Other Expenses are estimated for
the current fiscal year. Actual expenses of the Advisor Shares may be greater or
less than such costs and fees of the Institutional Shares. 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 this fee table. To the extent
any service providers assume additional expenses of any Fund, such assumptions
of additional expenses will have the effect of lowering a Fund's overall expense
ratio and increasing its return to investors.

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BEA ADVISOR FUNDS

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FINANCIAL HIGHLIGHTS

Financial Highlights are not applicable to a new class of shares such as the
Advisor Shares offered by this Prospectus.

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THE COMPANY

The Company is an open-end management investment company that currently operates
or proposes to operate nineteen separate investment portfolios. Each of the BEA
Advisor Funds represent interests in a separate portfolio. Each Fund is
non-diversified. The Company was incorporated in Maryland on February 29, 1988.

The Funds are designed primarily for individual investors and are available
through financial intermediaries, including broker-dealers, investment advisers,
financial planners, banks and insurance companies. Investment professionals such
as those listed above may purchase Shares for discretionary or non-discretionary
accounts maintained by individuals.

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INVESTMENT OBJECTIVES AND POLICIES

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

The BEA International Equity Fund's investment objective is to seek long-term
appreciation of capital by investing primarily in equity securities of non-U.S.
issuers. The Fund defines equity securities of non-U.S. issuers as securities of
issuers whose principal activities are outside the United States. The Fund
expects that its investments will be concentrated in 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 Fund may invest in securities
of issuers in Emerging Markets, as defined below under "Investment Objectives
and Policies -- BEA Emerging Markets Equity Fund," but does not expect to invest
more than 40% of its total assets in securities of issuers in Emerging Markets.
The Fund will invest in securities of issuers from at least three countries
outside the United States.

Under normal market conditions, the Fund will invest a minimum of 80% of its
total assets in equity securities of non-U.S. issuers. Such equity securities
include common stock and preferred stock (including convertible preferred
stock); bonds, notes and debentures convertible into

P-3
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common or preferred stock; stock purchase warrants and rights; equity interests
in trusts and partnerships; and depositary receipts of companies.

The Fund may invest up to 20% of its total assets in debt securities issued by
U.S. or foreign governments or corporations, although it does not currently
intend to invest more than 5% of its net assets in debt securities. The Fund has
no limitation on the maturity or the credit quality of the debt securities in
which it invests, which may include lower-quality, high yielding securities,
commonly known as "junk bonds." See "Risk Factors -- Lower-Rated Securities."
BEA EMERGING MARKETS EQUITY FUND

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

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

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 Fund's assets are not invested as described above, the
remainder of the assets may be invested in government or corporate debt
securities of Emerging Market or developed countries, although the Fund does not
presently intend to invest more than 5% of its net assets in debt securities.
Debt securities may include lower-rated debt securities (commonly known as "junk
bonds"). See "Risk Factors -- Lower-Rated Securities."
BEA GLOBAL TELECOMMUNICATIONS FUND

The BEA Global Telecommunications Fund's investment objective is long term
capital appreciation by investing primarily in equity securities of
telecommunications companies, both foreign and domestic. It is the policy of the
Fund under normal market conditions to invest not less than

P-4
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65% of its total assets in equity securities (including common and preferred
stocks, convertible securities and warrants to acquire such equity securities)
of telecommunications companies. The Fund will invest in convertible securities
based on their underlying equity characteristics without regard to the credit
rating of such securities. Such convertible securities may include lower-quality
high yielding securities commonly known as "junk bonds." See "-- Risk Factors --
Lower Rated Securities". As a Fund investing in global markets, at least 65% of
the Fund's investments will be made in at least three different countries. The
Fund considers telecommunications companies to be those which are engaged
primarily in designing, developing, operating, financing, manufacturing or
providing the following activities, products and services: communications
equipment and services (including equipment and services for both data and voice
transmission); electronic components and equipment; broadcast (including
television and radio, satellite, microwave and cable television); computer
equipment, mobile communications and cellular radio and paging; electronic mail;
local and wide area networking and linkage of word and data processing systems;
publishing and information systems; video and telex; and emerging technologies
combining telephone, television and/or computer systems (collective
"telecommunication activity"). A "telecommunications" company is an entity in
which (i) at least 50% of either its revenue or earnings was derived from
telecommunications activity, or (ii) at least 50% of its assets was devoted to
telecommunications activity based on the company's most recent fiscal year. The
remainder of the assets of the BEA Global Telecommunications Fund may be
invested in equity or non-equity securities issued by companies that are not
primarily engaged in telecommunications activities.

Because the Fund will concentrate its investments in the telecommunications
industry, its investments may be subject to greater risk and market fluctuation
than a fund that has securities representing a broader range of investment
alternatives.

Telecommunications industries may be subject to greater governmental regulation
than many other industries and changes in governmental policies and the need for
regulatory approvals may have a material effect on the products and services of
this industry. Telephone operating companies in the United States, for example,
are subject to both federal and state regulation affecting permitted rates of
return and the kinds of services that may be offered. Certain types of companies
represented in the Fund are engaged in competition for market share. In recent
years, these have been companies providing goods and services such as private
and local area networks and telephone set equipment.

BEA HIGH YIELD FUND

BEA High Yield Fund seeks to provide high total return by investing primarily in
high yield fixed income securities (commonly known as "junk bonds") issued by
corporations, governments and agencies, both U.S. and foreign. Under normal
market conditions, the Fund will invest a minimum of 65% of its total assets in
such high yield fixed income securities, with the remainder invested in fixed
income securities which may have equity characteristics, such as convertible
bonds. The Fund is not limited in the extent to which it can invest in junk
bonds (i.e., securities rated below investment grade by recognized rating
agencies or in comparable unrated securities). See "Risk Factors -- Lower-Rated
Securities." The portion of the Fund's assets invested in various countries will
vary from time to time depending on BEA's assessment of market opportunities.

P-5
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The value of the securities held by the Fund, and thus the net asset value of
the shares of the Fund, generally will vary inversely in relation to changes in
prevailing interest rates. Also, the value of such securities may be affected by
changes in real or perceived creditworthiness of the issuers. The Fund is not
restricted to any maximum or minimum time to maturity in purchasing portfolio
securities, and the average maturity of the Fund's assets will vary based upon
BEA's assessment of economic and market conditions.

COMMON INVESTMENT POLICIES

This section describes certain investment policies that are common to each Fund.
These policies are described in more detail in the Statement of Additional
Information.

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

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

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

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

PORTFOLIO TURNOVER. BEA will effect portfolio transactions in each Fund
without regard to holding period, if, in its judgment, such transactions are
advisable in light of general market, economic or financial conditions. The BEA
International Equity, the BEA Emerging Markets Equity, the BEA Global
Telecommunications and the BEA High Yield Funds anticipate that their annual
portfolio turnover rate should not exceed 100% under normal conditions. However,
it is impossible to predict portfolio turnover rates. The amount of portfolio
activity will not be a limiting factor when making portfolio decisions. See the
Statement of Additional Information, "Portfolio Transactions" and "Taxes."

CURRENCY HEDGING. BEA may seek to hedge against a decline in value of a
Fund's

P-6
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non-dollar denominated portfolio securities resulting from currency devaluations
or fluctuations. Unless the BEA Funds engage in currency hedging transactions,
they will be subject to the risk of changes in relation to the U.S. dollar of
the value of the foreign currencies in which their assets are denominated. These
Funds 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.

The Statement of Additional Information contains additional investment policies
and strategies of the Funds.

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INVESTMENT LIMITATIONS

Each Fund is subject to the following fundamental investment limitation, which
may not be changed with respect to a Fund except upon the affirmative vote of
the holders of a majority of that Fund's outstanding shares. A complete list of
the Funds' fundamental investment limitations is set forth in the Statement of
Additional Information under "Investment Limitations." Each Fund may not:

Borrow money or issue senior securities, except that each Fund 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 Fund's total
assets at the time of such borrowing. Each Fund will not purchase securities
while its aggregate borrowings (including reverse repurchase agreements,
dollar rolls and borrowings from banks) are in excess of 5% of its total
assets are outstanding. Securities held in escrow or separate accounts in
connection with the Fund's investment practices are not considered to be
borrowings or deemed to be pledged for purposes of this limitation.

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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 Funds may hold from time to time various
foreign currencies pending their investment in foreign securities or their
conversion into U.S. dollars, the value of the Funds' assets as measured in U.S.
dollars may be affected favorably or unfavorably by changes in exchange rates.
In addition, investors should realize that the value of the Funds' investments
may be adversely affected by changes in political or social conditions,
diplomatic relations, confiscatory taxation, expropriation, limitation on the
removal of funds or assets, or imposition of (or change in) exchange control
regulations in those foreign nations. In addition, changes in

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government administrations or economic or monetary policies in the U.S. or
abroad could result in appreciation or depreciation of portfolio securities and
could favorably or adversely affect the Funds' operations. Furthermore, the
economies of individual foreign nations may differ from that of the United
States, whether favorably or unfavorably, in areas such as growth of gross
national product, rate of inflation, capital reinvestment, resource
self-sufficiency and balance of payments position. Any foreign investments made
by the Funds must be made in compliance with U.S. and foreign currency
restrictions and tax laws restricting the amounts and types of foreign
investments.

In general, less information is publicly available with respect to foreign
issuers than is available with respect to U.S. companies. Most foreign companies
are also not subject to the uniform accounting and financial reporting
requirements applicable to issuers in the United States. The Funds' foreign
investments may be less liquid and their prices may be more volatile than
comparable investments in securities in U.S. companies. Expenses relating to
foreign investments are 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.

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 Fund defaulted, the Fund
could incur additional expenses in seeking recovery with no guaranty of
recovery. In addition, periods of economic uncertainty and changes can be
expected to result in increased volatility of market prices of lower-rated debt
securities and a Fund's net asset value. Lower-rated debt securities also
present risks based on payment expectations. For example, lower-rated debt
securities may contain redemption or call provisions. If an issuer exercises
these provisions in a declining interest rate market, a Fund would have to
replace the security with a lower yielding security, resulting in a decreased
return for investors. Conversely, a lower-rated debt security's value will
decrease in a rising interest rate market, as will the value of a Fund's assets.
If a Fund experiences unexpected net redemptions, this may force it to

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sell its lower-rated debt securities, without regard to their investment merits,
thereby decreasing the asset base upon which a Fund's expenses can be spread and
possibly reducing a Fund's rate of return.

In addition, to the extent that there is no established retail secondary market,
there may be thin trading of lower-rated debt securities, and this may have an
impact on both BEA's ability to value accurately lower-rated debt securities and
the Fund'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
traded market.
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MANAGEMENT

BOARD OF DIRECTORS

The business and affairs of the Company and each investment portfolio are
managed under the direction of the Company's Board of Directors.

INVESTMENT ADVISER

BEA serves as the Investment Adviser for each of the Funds pursuant to
investment advisory agreements (the "Advisory Agreements"). BEA is a general
partnership organized under the laws of the State of New York in December 1990
and, together with its predecessor firms, has been engaged in the investment
advisory business for over 60 years. BEA is a wholly-owned subsidiary of Credit
Suisse, the second largest Swiss bank which in turn is a subsidiary of CS
Holding, a Swiss Corporation. Active employees of BEA have a long-term equity
incentive plan. BEA is a Registered Investment Adviser under the Investment
Advisers Act of 1940, as amended. BEA's principal offices are located at One
Citicorp Center, 153 East 53rd Street, New York, New York 10022.

BEA is a diversified Investment Adviser, managing global equity, fixed income
and derivative securities accounts for corporate pension and profit-sharing
plans, state pension funds, union funds, endowments and other charitable
institutions. As of September 30, 1996, BEA managed approximately $31.3 billion
in assets. BEA currently acts as Investment Adviser for twenty investment
companies registered under the Investment Company Act, and as sub-adviser to
certain portfolios of twelve other registered investment companies. BEA also
acts as Investment Adviser for forty-two offshore funds.

BEA will select investments for each of the Funds and will place purchase and
sale orders on behalf of each of the Funds. The Funds may use affiliates of
Credit Suisse in connection with the purchase or sale of securities in
accordance with the 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. BEA is also responsible
for providing to the Funds' and the Company's service providers prompt and
accurate data with respect to the Funds' transactions.

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Company. Mr. Watt joined BEA in 1995, prior to which time he was the head of
emerging markets investments and research at Gartmore Investment Limited in
London. Prior to 1992, he was a director of Kleinwort Benson International
Investment in London and was a portfolio manager with Lorithan Regional Council,
a public pension plan sponsor in Scotland. Mr. Swift joined BEA in 1995, prior
to which time he spent three years at Credit Suisse Asset Management in London,
where he was the head of Global Equities and portfolio manager for the CS Tiger
Fund. For the previous 15 years he was with Wardley Investment Services, a Hong
Kong-based subsidiary of the Hong Kong and Shanghai Bank. Mr. Bleiberg has been
engaged as an investment professional with BEA for more than five years.

The day to day portfolio management of the BEA Global Telecommunications Fund is
the responsibility of the BEA Global Telecommunications Management Team. The
Team consists of the following investment professionals: Richard Watt (Managing
Director), William P. Sterling (Managing Director), Todd M. Rice (Senior Vice
President) and Stephen Waite (Vice President). Mr. Rice has been engaged as an
investment professional with BEA for more than five years. Mr. Waite joined BEA
in 1995, prior to which he was Vice President and Senior European Economist for
Merrill Lynch & Company in London.

The day-to-day portfolio management of the BEA High Yield Fund is the
responsibility of the BEA High Yield Management Team. The Team consists of the
following investment professionals: Richard Lindquist (Managing Director), Misia
Dudley (Senior Vice President), Marianne Rossi (Senior Vice President), and John
Tobin (Vice President). Mr. Lindquist, Ms. Dudley, Ms. Rossi and Mr. Tobin
joined BEA in 1995 as a result of BEA's acquisition of CS First Boston
Investment Management. Prior to joining CS First Boston, Mr. Lindquist and Ms.
Rossi were with Prudential Insurance Company of America. Prior to joining CS
First Boston, Ms. Dudley was with Stockbridge Partners, and prior to that had
spent five years with E.F. Hutton. Prior to joining CS First Boston, Mr. Tobin
managed portfolios for Integrated Resources and prior to that was Vice President
and industry analyst with Bankers Trust Company.

For the advisory services provided and expenses assumed by it, BEA is entitled
to receive a fee from the BEA International Equity Fund, the BEA Emerging
Markets Equity Fund, the BEA Global Telecommunications Fund and the BEA High
Yield Fund at an annual rate of .80%, 1.00%, 1.00% and .70%, respectively, of
average daily net assets, computed daily and payable monthly.

BEA may, at its discretion from time to time agree to waive voluntarily all or
any portion of its advisory fee for any Fund. BEA has agreed to reimburse each
Fund for the amount, if any, by which the total operating and management
expenses of such Fund for any fiscal year exceed the most restrictive state blue
sky expense limitation in effect from time to time, to the extent required by
such limitation. BEA may assume additional expenses of a Fund from time to time.
In certain circumstances, BEA may assume such expenses on the condition that it
is reimbursed by the Fund for such amounts prior to the end of a fiscal year. In
such event, the reimbursement of such amounts will have the effect of increasing
a Fund's expense ratio and of decreasing return to investors.

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

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Company 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.

CO-ADMINISTRATORS

PFPC Inc. ("PFPC"), an indirect, wholly-owned subsidiary of PNC Bank Corp.,
serves as co-administrator for the Funds. As co-administrator, PFPC will provide
various services to each Fund, including determining each of the Fund's net
asset value, providing all accounting services for the Funds and generally
assisting in all aspects of each Fund's operations. As compensation for
administrative services, the Company will pay PFPC a fee calculated at the
annual rate of .125% of each Fund's average daily net assets. PFPC has its
principal offices at 400 Bellevue Parkway, Wilmington, Delaware 19809.

The Company employs BEA as co-administrator. As co-administrator, BEA generally
assists each of the Funds in all aspects of their administration and shareholder
servicing. As compensation, the Company pays to BEA a fee calculated at an
annual rate of .05% of each Fund's average daily net assets for assets up to
$125 million, and .10% thereafter.

DISTRIBUTOR

Counsellors Securities Inc. ("Counsellors Securities") serves as the Company's
distributor. Counsellors Securities is located at 466 Lexington Avenue, New
York, New York 10017-3147. Counsellors Securities receives a fee at an annual
rate equal to .25% of the Fund's average daily net assets for distribution
services, pursuant to a distribution agreement between Counsellor's Securities
and the Company in accordance with a distribution plan (the "12b-1 Plan")
adopted by the Company pursuant to Rule 12b-1 under the 1940 Act. Amounts paid
to Counsellors Securities under the Company's 12b-1 Plan may be used by
Counsellors Securities to cover expenses that are related to (i) the
distribution of Advisor Shares of the Funds, (ii) ongoing servicing and/or
maintenance of the accounts of shareholders of the Fund, and (iii) sub-transfer
agency services, subaccounting services or administrative services related to
the sale of the Advisor Shares of the Funds, all as set forth in the Company's
12b-1 Plan. Payments under the 12b-1 Plan are not tied exclusively to the
expenses actually incurred. Counsellors Securities may delegate some or all of
these functions to a Service Organization. See "How to Purchase Shares --
Purchases Through Intermediaries." The Company's Board of Directors will
evaluate the appropriateness of the 12b-1 Plan on a continuing basis and in
doing so will consider all relevant factors, including expenses borne by
Counsellors Securities and amounts received under the 12b-1 Plan.

Counsellors Securities or its affiliates may, at their own expense, provide
promotional incentives to parties who support the sale of shares of a Fund,
consisting of securities dealers who have sold Fund shares or others, including
banks and other financial institutions, under special arrangements. In some
instances, these incentives may be offered only to certain institutions whose
representatives provide services in connection with the sale or expected sale of
significant amounts of Fund Shares.

TRANSFER AGENT

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<PAGE>

Franklin Street, Boston, MA 02110 and BFDS's principal address is 2 Heritage
Drive, Quincy, MA 02171, telephone number (800) 401-2230.

CUSTODIAN

Brown Brothers Harriman & Co. serves as custodian for the Funds. The 1940 Act
and the rules and regulations adopted thereunder permit a Fund to maintain its
securities and cash in the custody of certain eligible banks and securities
depositories. In compliance with such rules and regulations, a Fund'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 Fund are deducted from its total income before dividends
are paid. These expenses include, but are not limited to, fees paid to the
investment adviser, distributor, co-administrators, fees and expenses of
officers and directors who are not affiliated with the Fund's investment adviser
or distributor, taxes, interest, legal fees, custodian fees, auditing fees,
brokerage fees and commissions and certain other fees and expenses. Any general
expenses of the Company that are not readily identifiable as belonging to a
particular investment portfolio of the Company will be allocated among all
investment portfolios of the Company 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; and registration fees and other costs identified as belonging to a
particular class, are allocated to such class.

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

HOW TO PURCHASE SHARES

Shares representing interests in the Funds are offered continuously for sale by
the Distributor and may be purchased without imposition of a sales charge.
Shares of a Fund may be purchased either by mail or, with special advance
instructions, by wire.

BY MAIL

If an investor desires to purchase shares by mail, a check or money order made
payable to the "BEA Advisor Funds" (in U.S. currency) should be sent along with
the completed account application to the "BEA Advisor Funds" at the address set
forth below. Checks payable to the investor and endorsed to the order of the
"BEA Advisor Funds" will not be accepted as payment and will be returned to
sender. If payment is received by check in proper form on or before 4:00 p.m.
(Eastern time) on a day that a Fund calculates its net asset value (a "Business
Day") the purchase will be made at the Fund's net asset value calculated at the
end of that day. If payment is received after 4:00 p.m., the purchase will be
effected at the Fund's net asset value determined for the next Business Day
after payment has been received. Checks or money orders that are not in proper
form or that are not accompanied or preceded by a complete application will be
returned to sender. Shares purchased by check are entitled to receive dividends
and distributions beginning on the day after payment has been received. Checks
should be made payable to the "BEA Advisor Funds" accompanied by a breakdown of
amounts to be invested in each Fund. If a check used for purchase does not
clear, the Funds will cancel the purchase and the investor may be liable for
losses or fees incurred. For a description of the manner of calculating a Fund's
net asset value, see "Net Asset Value" below.

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<PAGE>

SEND TO:
BEA ADVISOR FUNDS
P.O. Box 8500
Boston, MA 02266-8500

OVERNIGHT TO:
BFDS
ATTN: BEA ADVISOR FUNDS
2 Heritage Drive
North Quincy, MA 02171

BY WIRE

An investor may also purchase shares in a Fund by wiring funds from their banks.
Telephone orders will not be accepted until a complete account application in
proper form has been received and an account number has been established. After
telephoning (800) 401-2230 for instructions, an investor should then wire
federal funds to the BEA Advisors Funds c/o BFDS using the following wire
address:

State Street Bank & Trust Company
ABA# 0110 000 28
ATTN: Mutual Fund/Custody Dept.
[BEA Advisor Fund Name]
DDA# 9905-227-6
For Further Credit: [ACCOUNT NUMBER AND REGISTRATION]

If a telephone order is received by the close of regular trading on the New York
Stock exchange (the "NYSE") (currently 4:00 p.m., Eastern time), AND payment by
wire is received on the same day in proper form (in accordance with instructions
stated above), the shares will be priced according to the net asset value of the
Fund on that day and are entitled to dividends and distributions beginning on
that day. If payment by wire is received in proper form by the close of the NYSE
without a prior telephone order, the purchase will be priced according to the
net asset value of the Fund on that day and are entitled to dividends and
distributions beginning on that day. However, if a wire received in proper form
is not preceded by a telephone order AND is received after the close of regular
trading on the NYSE, the payment will be held uninvested until the order is
effected at the close of business on the next business day. Payment for orders
that are not accepted will be returned to the prospective investor after prompt
inquiry. If a telephone order is placed and payment by wire is not received on
the same day, the Fund will cancel the purchase and the investor may be liable
for losses or fees incurred.

Shares of a Fund are sold without a sales charge. The minimum investment in a
Fund is $2,500 and the minimum subsequent investments must be $250, except that
subsequent minimum investments can be as low as $100 under the Automatic
Investment Plan, Uniform Gifts to Minors Act and through Individual Retirement
Accounts described below. The Funds reserve the right to change the initial and
subsequent minimum investment requirements at any time.

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

PURCHASE THROUGH INTERMEDIARIES

The Funds understand that some broker-dealers (other than Counsellors
Securities), financial institutions, securities dealers and other industry

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<PAGE>

professionals ("Service Agents") impose certain conditions on their clients that
invest in the Funds, which are in addition to or different from those described
in this Prospectus, and, to the extent permitted by applicable regulatory
authority, may charge their clients direct fees. Certain features of the Funds,
such as the minimum initial or subsequent investments, redemption fees and
certain trading restrictions may be modified or waived by Service Agents, and
administrative charges or other direct fees may be imposed. Therefore, a client
or customer should contact the Service Agent acting on his behalf concerning the
fees (if any) charged in connection with a purchase or redemption of a Fund's
shares and should read this Prospectus in light of the terms governing his
accounts with Service Agents. Service Agents will be responsible for promptly
transmitting client or customer purchase and redemption orders to the Funds in
accordance with their agreements with clients or customers. Service Agents that
have entered into agreements with a Fund or its agent may enter confirmed
purchase orders on behalf of clients and customers with payment to follow no
later than the Fund's pricing on the following Business Day. If payment is not
received by such date the Service Agents could be held liable for resulting fees
or losses.

For administration, subaccounting, transfer agency and/or other services,
Service Agents may be paid fees up to .35% of the annual average value of
accounts maintained by such Service Agents with a Fund.

AUTOMATIC INVESTMENT PLAN

Additional investments in Shares of the Funds may be made automatically by
authorizing the BEA Advisor Funds to withdraw funds from your bank account
through an Automatic Investment Plan. Investors desiring to participate in an
Automatic Investment Plan should call the BEA Advisor Funds, at (800) 401-2230
to obtain the appropriate forms, or complete the appropriate section of the
Application included with this Prospectus. The minimum initial investment for an
Automatic Investment Plan is $1,000 with minimum monthly payments of $100.

RETIREMENT PLANS AND UNIFORM GIFTS TO MINORS ACT

Shares may be purchased in conjunction with Individual Retirement Accounts
("IRA's"), rollover IRA's, pension, profit-sharing or other employer benefit
plans, and under the Uniform Gifts to Minors Act. The minimum initial investment
in conjunction with such accounts is $1,000, and the minimum subsequent
investment is $100. For further information as to applications and annual fees,
please contact the BEA Advisor Funds. To determine whether the benefits of an
IRA are available and/or appropriate, a shareholder should consult with a tax
adviser.

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

HOW TO REDEEM SHARES

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

REDEMPTION IN WRITING

Shareholders may redeem for cash some or all of their Fund Shares at any time.
To do so, a written request in proper form must be sent directly to the BEA
Advisor Funds c/o BFDS, P.O. Box 8500, Boston, MA 02266-8500. A request for
redemption must be signed by all persons in whose names the Shares are
registered. Signatures must conform exactly to the account registration.
Generally, a properly signed written request is all that is required for a
redemption. In some cases, however, other

P-14
<PAGE>

documents may be necessary. Additional documentary evidence of authority is also
required by the BEA Advisor Funds in the event redemption is required by a
corporation, partnership, trust, fiduciary, executor or administrator.

REDEMPTION BY TELEPHONE

In order to request redemptions by telephone, investors must have completed and
returned to the BEA Advisor Funds an account application containing a telephone
election. Unless contrary instructions are elected, an investor will be entitled
to make redemptions by telephone by calling the BEA Advisor Funds at (800)
401-2230. To add a telephone redemption feature to an existing account that
previously did not provide for this option, a Telephone Redemption Authorization
form may be obtained from the BEA Advisor Funds. Neither a Fund nor its agents
will be liable for following instructions communicated by telephone that it
reasonably believes to be genuine. Reasonable procedures will be employed on
behalf of the Funds to confirm that instructions communicated by telephone are
genuine. Such procedures include providing written confirmation of telephone
transactions, tape recording telephone instructions and requiring specific
personal information prior to acting upon telephone instructions. If these or
other reasonable procedures are not followed, the Funds may be liable for any
losses due to unauthorized or fraudulent instructions.

INVOLUNTARY REDEMPTION

The Company reserves the right to redeem an account in any Fund of a shareholder
at any time the net asset value of the account in such Fund falls below $500 as
the result of a redemption request. Shareholders will be notified in writing
that the value of their account in a Fund is less than $500 and will be allowed
30 days to make additional investments before the redemption is processed.

REDEMPTION IN-KIND

The Company reserves the right, at its discretion, to honor any request for
redemption of a Fund's Shares by making payment in whole or in part in
securities chosen by the Company and valued in the same way as they would be
valued for purposes of computing a Fund's net asset value. If payment is made in
securities, a shareholder may incur transaction costs in converting these
securities into cash after they have redeemed their Shares. The Company 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 Fund. Redeeming shareholders will be required to bear
certain administrative or custodial costs in effecting a redemption in-kind.

EXCHANGE PRIVILEGE

An Individual or Intermediary may exchange Advisor Shares of a Fund for Advisor
Shares of any other BEA Advisor Fund at their respective net asset values.
Exchanges may be effected in the manner described under "Redemption of Shares"
above. If an exchange request is received by BEA Advisor Funds prior to 4:00
p.m. (Eastern time), the exchange will be made at each Fund's net asset value
determined on the same business day. The exchange privilege may be modified or
terminated at any time upon 60 days' notice to shareholders.

The exchange privilege is available to shareholders residing in any state in
which the Advisor Shares being acquired may legally be sold. When a shareholder
effects an exchange of shares, the exchange is treated for federal

P-15
<PAGE>

income tax purposes as a redemption. Therefore, the shareholder may realize a
taxable gain or loss in connection with the exchange. For further information
regarding the exchange privilege, the shareholder should contact the BEA Advisor
Funds at (800) 401-2230.

In order to request exchanges by telephone, investors must have completed and
returned to the BEA Advisor Funds an account application containing a telephone
election. Unless contrary instructions are elected, an investor will be entitled
to make exchanges by telephone by calling the BEA Advisor Funds at (800)
401-2230. To add a telephone exchange feature to an existing account that
previously did not provide for this option, a Telephone Exchange Authorization
Form may be obtained from the BEA Advisor Funds. The Funds will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine as described above under "Redemption by Telephone."

If the exchanging shareholder does not currently own Shares of the Fund whose
Shares are being acquired, a new account will be established with the same
registration, dividend and capital gain options and authorized dealer of record
as the account from which shares are exchanged, unless otherwise specified in
writing by the shareholder with all signatures guaranteed by an eligible
guarantor institution. 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 Fund.
- ----------------------------------------------

NET ASSET VALUE

The net asset value for each Fund is determined daily as of the close of regular
trading on the NYSE on each Business Day. The net asset value of a Fund is
calculated by adding the value of all its securities to cash and other assets,
deducting its actual and accrued liabilities and dividing by the total number of
its Shares outstanding.
- ----------------------------------------------

DIVIDENDS AND DISTRIBUTIONS

The Company will distribute substantially all of the net realized capital gains,
if any, of each of the Funds to each Fund's shareholders annually. The Company
will distribute all net investment income, if any, for the BEA International
Equity, the BEA Emerging Markets Equity and the BEA Global Telecommunications
Funds annually. The Company will distribute net investment income for the BEA
High Yield Fund, if any, at least quarterly. All distributions will be
reinvested in the form of additional full and fractional Shares of the relevant
Fund unless a contrary election is made on the application to have distributions
paid in cash. If in the future a shareholder desires to have distributions paid
out rather than reinvested, the shareholder should notify the BEA Advisor Funds
in writing.

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

TAXES

GENERAL

The following discussion is only a brief summary of some of the important tax
considerations generally affecting the Funds and their shareholders and is not
intended as a substitute for careful tax planning. Accordingly, investors in the
Funds should consult their tax advisers with specific reference to their own tax
situation.

Each Fund 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 Fund qualifies for this tax treatment, such Fund will be relieved of
Federal income tax on amounts distributed to

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<PAGE>
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 a Fund 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
generally 39.6%. 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.

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

The Company will send written notices to shareholders annually regarding the tax
status of distributions made by each Fund. Dividends declared in October,
November or December of any year payable to shareholders of record on a
specified date in such a month will be deemed to have been received by the
shareholders on December 31, provided such dividends are paid during January of
the following year. Each Fund intends to make sufficient actual or deemed
distributions prior to the end of each calendar year to avoid liability for
Federal excise tax.

Investors should be careful to consider the tax implications of buying 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 Fund for Shares
representing interests in another Fund 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 Fund is not intended to constitute a balanced investment
program.

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<PAGE>
FOREIGN INCOME TAXES

Investment income received by the Funds 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
Funds 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 Fund's assets to be invested in various countries is not known.

If more than 50% of the value of a Fund's total assets at the close of each
taxable year consists of the stock or securities of foreign corporations, such
Fund will be eligible to elect to "pass through" to the Company's shareholders
the amount of foreign income taxes paid by each Fund (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 Fund 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 Fund for the purpose of the foreign tax credit
limitation rules of the Code, shareholders will be required to treat allocable
portions of a Fund's distributions as foreign source income. No deduction for
foreign taxes may be claimed by a shareholder who does not itemize deductions.

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

MULTI-CLASS STRUCTURE

The Company offers other classes of shares, the Institutional and Investor
Shares, of the Funds which are offered directly to institutional investors and
financial intermediaries pursuant to separate prospectuses. Shares of a Fund
represent equal pro rata interests in the Fund and accrue dividends and
calculate net asset value and performance quotations in the same manner. The
Company quotes performance of the Institutional and Investor Shares separately
from Advisor Shares. Because of different fees paid by the Advisor Shares, the
total return on such shares can be expected, at any time, to be different than
the total return on Institutional and Investor Shares. Information concerning
these other classes may be obtained by calling the BEA Advisor Funds at (800)
401-2230.

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

DESCRIPTION OF SHARES

The Company has authorized capital of thirty billion shares of Common Stock,
$.001 par value per share, of which 13.47 billion shares are currently
classified into 77 different classes of Common Stock (as described in the
Statement of Additional Information).

THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN
RELATE PRIMARILY TO THE BEA ADVISOR CLASSES REPRESENTING AN INTEREST IN THE BEA
INTERNATIONAL EQUITY, THE BEA EMERGING MARKETS EQUITY, THE BEA GLOBAL
TELECOMMUNICATIONS AND THE BEA HIGH YIELD FUNDS AND DESCRIBE ONLY THE INVESTMENT
OBJECTIVE AND POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO SUCH
CLASSES.

Each share that represents an interest in a Fund has an equal proportionate
interest in the assets belonging to such Fund with each other share that
represents an interest in such Fund. Shares

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<PAGE>
of the Company do not have preemptive or conversion rights. When issued for
payment as described in this Prospectus, Shares will be fully paid and
non-assessable. This Prospectus combines offering information with respect to
four Funds; there is a possibility that one Fund might become liable for any
misstatement, inaccuracy, or incomplete disclosure in the Prospectus concerning
another Fund.

The Company currently does not intend to hold annual meetings of shareholders
except as required by the 1940 Act or other applicable law. The law under
certain circumstances provides shareholders with the right to call for a meeting
of shareholders to consider the removal of one or more directors. To the extent
required by law, the Company will assist in shareholder communication in such
matters.

Holders of shares of each of the Funds will vote in the aggregate and not by
class on all matters, except where otherwise required by law. Furthermore,
shareholders of all investment portfolios of the Company 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 the
Company Shares" for examples of when the 1940 Act requires voting by investment
portfolio or by class.) Shareholders of the Company 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
Company may elect all of the directors.

As of October 1, 1996, to the Company's knowledge, no person held of record or
beneficially 25% or more of the outstanding shares of all classes of the
Company.
- ----------------------------------------------

OTHER INFORMATION

REPORTS AND INQUIRIES

Shareholders of a Fund will receive unaudited semi-annual reports describing the
Fund's investment operations and annual financial statements audited by
independent accountants. Shareholder inquiries can be made by contacting the BEA
Advisor Funds at (800) 401-2230 or by writing to the BEA Advisor Funds P.O. Box
8500, Boston, MA 02266-2500.

PERFORMANCE INFORMATION

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<PAGE>

Fund's total return or expense ratio 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, Morgan Stanley Composite Index EAFE, Morgan Stanley
Composite Index-Free Emerging Markets, JP Morgan Global Government Bond Index
(Unhedged), First Boston High Yield Index. Consumer Price Index, Bond Buyer's
20-Bond Index, Dow Jones Industrial Average, 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.

From time to time, the BEA High Yield Fund may also advertise its "30-day
yield." The yield refers to the income generated by an investment in the Fund
over the 30-day period identified in the advertisement, and is computed by
dividing the net investment income per share during the period by the maximum
public offering price per share of the last day of the period. This income is
"annualized" by assuming that the amount of income is generated each month over
a one-year period and is compounded semi-annually. The annualized income is then
shown as a percentage of the net asset value.

The yield on Shares of the Fund 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 Intermediaries
directly to their customers in connection with investments in the Fund are not
reflected in the yields on the Fund's Shares, and such fees, if charged, will
reduce the actual return received by shareholders on their investments.

HISTORICAL PERFORMANCE INFORMATION

INSTITUTIONAL CLASS. The table below presents the prior total return
history on an annualized basis for the Institutional Class of the BEA
International Equity, the BEA Emerging Markets Equity and the BEA High Yield
Funds for period ended September 30, 1996. The investment objectives, policies
and strategies of the Funds underlying the Institutional and Advisor Classes are
identical. The Institutional Class, which has a minimum investment of $3
million, has lower fees and expenses than the Advisor Class, so that the
performance of the Institutional Class will differ from that of the Advisor
Class. In addition, the past performance of the Institutional Class of each Fund
is not indicative of the future performance of the Fund. Listed below the
performance history for each Fund is a comparative index comprised of securities
similar to those in which the Funds invest.

P-20
<PAGE>

FOR THE PERIOD ENDED SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
ONE THREE SINCE
FUND/INDEX (ANNUALIZED) YEAR YEARS INCEPTION*
- ------------------------------------------------------------------------------------------ --------- --------- -----------
<S> <C> <C> <C>
BEA International Equity.................................................................. 8.4% 5.0% 9.4%
Morgan Stanley Capital International-Europe, Australia & Far East Index**................. 8.9% 8.4% 12.7%
BEA Emerging Markets Equity............................................................... 5.4% 1.4% 7.9%
Morgan Stanley Capital International-Emerging Markets Free Index**........................ 5.2% 7.4% 13.6%
BEA High Yield............................................................................ 15.3% 9.3% 11.8%
CS First Boston High Yield Index***....................................................... 10.7% 9.3% 10.3%
</TABLE>

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

* The BEA International Equity Fund commenced operations on October 1, 1992;
the BEA Emerging Markets Equity Fund commenced operations on February 1,
1993; the BEA High Yield Fund commenced operations on March 31, 1993.

** These indices are composites of equity securities considered to be
representative of equity performance in the specified countries. These
indices are not actively managed, and cannot be invested in directly.
Historical performance of these market indices does not guarantee future
performance of the Fund.

*** The index is a composite of fixed income securities considered to be
representative of fixed income performance in the high yield fixed income
market. The index is not actively managed, and cannot be invested in
directly. Historical performance of the market index does not guarantee
future performance of the Fund.

BEA COMPOSITES. The table below presents the Composite performance history
of BEA International Equity and Emerging Markets Equity on an annualized basis
for the period ended September 30, 1996. Each BEA Composite presented is
comprised of mutual funds, institutional accounts and other privately managed
accounts. The investment objectives, policies and strategies of the funds and
accounts included in the Composites are substantially similar to those of the
corresponding Fund, although certain accounts have significantly longer
operating histories than the corresponding Funds. The Composites include funds
and accounts managed in the respective investment objectives, policies and
strategies, and show the entire period for which the funds and accounts were
managed by BEA in this manner. The Composite performance information includes
the reinvestment of dividends received in the underlying securities and is net
of management fees and expenses. The mutual funds and privately managed accounts
in the Composite require a minimum investment of $3 million and $20 million,
respectively, and are only available to BEA's institutional advisory clients.
These accounts have lower fees and expenses than the Advisor Funds. In addition,
the past performance of the funds and accounts which comprise the Composites is
not indicative of the future performance of each Fund. Certain private accounts
are not subject to the same investment limitations, diversification requirements
and other restrictions which are imposed upon mutual funds under the Investment
Company Act of 1940 and the Internal Revenue Code, which, if applicable, may
have adversely affected the performance results of the Composites. Listed below
the performance history for each account included in the Composite is a
comparative index comprised of securities similar to those in which the funds
and accounts contained in the Composites and the corresponding Funds invest.

P-21
<PAGE>

FOR THE PERIOD ENDED SEPTEMBER 30, 1996

<TABLE>
<CAPTION>
ONE THREE FIVE SEVEN TEN SINCE
BEA COMPOSITE/INDEX (ANNUALIZED) YEAR YEARS YEARS YEARS YEARS INCEPTION*
- -------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BEA International Equity Composite.......... 8.5% 5.6% 9.3% 5.8% 16.8% 18.6%
Morgan Stanley Capital International Europe,
Australia & Far East Index***.............. 8.9% 8.4% 8.5% 4.2% 9.0% 14.1%

BEA Emerging Markets Equity Composite....... 4.8% 1.4% 10.4% 15.1% 30.5% 31.2%
Morgan Stanley Capital International
Emerging Markets Free Index***............. 5.2% 7.4% 14.8% 14.2% N/A** N/A**
</TABLE>

- ------------------------
* The BEA International Equity Composite dates from January 1, 1981; the BEA
Emerging Markets Equity Composite dates from July 1, 1985; the BEA High
Yield Composite dates from July 1, 1989.

** Not available.

*** These indices are composites of equity securities considered to be
representative of equity performance in the specified countries. These
indices are not actively managed, and cannot be invested in directly.
Historical performance of these market indices does not guarantee future
performance of the Fund.

P-22
<PAGE>

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE FUNDS' STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ITS
DISTRIBUTOR. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE COMPANY OR
BY THE DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY
BE MADE.

<PAGE>

BEA ADVISOR FUNDS
QUICK REFERENCE GUIDE

BEA ADVISOR FUNDS
International Equity Fund
Emerging Markets Equity Fund
Global Telecommunications Fund
High Yield Fund

WORLD WIDE WEB

Please visit our website at: www.beafunds.com.

FUND AND ACCOUNT INFORMATION
Shareholders and all interested investors may direct
their inquiries and requests for information to the
Funds' information line at 1-800-401-2230.

AUTOMATIC REINVESTMENT PROGRAM
Dividend and capital gain distributions are
automatically reinvested in shares of the same
Fund at the current net asset value.

EXCHANGE PRIVILEGES
Shareholders may sell fund shares and buy shares
of other BEA Advisor Funds by telephone or in
writing. Please refer to the Prospectus section
entitled "Exchange Privilege."

STATEMENTS AND REPORTS
As a shareholder you will receive the following:
- - Confirmation Statements - after every transaction
that affects your account balance or account
registration
- - Account Statements - quarterly
- - Financial Reports - semi-annually

INVESTMENT ADVISER
BEA Associates
One Citicorp Center
153 East 53rd Street
New York, NY 10022

DISTRIBUTOR
Counsellors Securities Inc.
466 Lexington Avenue
New York, NY 10017

ADMINISTRATOR
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809

CUSTODIAN
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02190

TRANSFER AGENT
State Street Bank and Trust Co.
225 Franklin Street
Boston, MA 02101

INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, PA 19103

LEGAL COUNSEL
Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, PA 19103

<PAGE>

BEA ADVISOR FUNDS

INTERNATIONAL EQUITY FUND
EMERGING MARKETS EQUITY FUND
GLOBAL TELECOMMUNICATIONS FUND
HIGH YIELD FUND
(INVESTMENT PORTFOLIOS OF THE RBB FUND, INC.)

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information provides supplementary
information pertaining to shares of four classes (the "Advisor Shares" or the
"Shares") representing interests in four investment portfolios (the "Funds")
of The RBB Fund, Inc. (the "Company"): the BEA International Equity, the BEA
Emerging Markets Equity, the BEA Global Telecommunications and the BEA High
Yield (collectively, the "Funds"). This Statement of Additional Information
is not a prospectus, and should be read only in conjunction with the BEA
Advisor Prospectus, the Funds, dated October 15, 1996 (the "Prospectus"). A
copy of the Prospectus may be obtained from the Fund's transfer agent by
calling toll-free (800) 401-2230. This Statement of Additional Information is
dated October 15, 1996.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS STATEMENT OF ADDITIONAL INFORMATION IN
CONNECTION WITH THE OFFERING MADE BY THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ITS DISTRIBUTOR. THE STATEMENT OF ADDITIONAL INFORMATION DOES
NOT CONSTITUTE AN OFFERING BY THE COMPANY OR BY THE DISTRIBUTOR IN ANY
JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE.

<PAGE>

CONTENTS
Prospectus
Page Page
---- ----------

General .................................................. 2 4
Common Investment Policies -- All Funds .................. 2 4
Supplemental Investment Objectives and Policies --
BEA International Equity, BEA Emerging
Markets Equity and BEA Global Telecommunications
Funds................................................... 26 6
Investment Limitations ................................... 26 7
Risk Factors ............................................. 29 8
Directors and Officers ................................... 33 N/A
Investment Advisory and Servicing Arrangements............ 36 9
Portfolio Transactions ................................... 41 N/A
Purchase and Redemption Information ...................... 44 12
Valuation of Shares ...................................... 44 15
Performance and Yield Information......................... 46 15
Taxes .................................................... 48 15
Additional Information Concerning Fund Shares............. 57 18
Miscellaneous ............................................ 60 18
Appendix ................................................. N/A A-1
Financial Statements ..................................... F-1 N/A

<PAGE>

GENERAL

The RBB Fund, Inc. (the "Company") is an open-end management
investment company currently operating or proposing to operate nineteen
separate investment portfolios. The Company was organized as a Maryland
corporation on February 29, 1988.

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

COMMON INVESTMENT POLICIES -- ALL FUNDS

The following supplements the information contained in the Prospectus
concerning the investment objectives and policies of, and techniques used by,
the Funds.

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

TEMPORARY INVESTMENTS. The short-term and medium-term debt securities
in which a Fund may invest for temporary defensive purposes consist of:
(a) obligations of the United States or foreign governments, their respective
agencies or instrumentalities; (b) bank deposits and bank obligations (including
certificates of deposit, time deposits and bankers' 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.

2
<PAGE>

REPURCHASE AGREEMENTS. Each Fund may agree to purchase securities
from a bank or recognized securities dealer and simultaneously commit to resell
the securities to the bank or dealer at an agreed-upon date and price reflecting
a market rate of interest unrelated to the coupon rate or maturity of the
purchased securities ("repurchase agreements"). Such Fund would maintain
custody of the underlying securities prior to their repurchase; thus, the
obligation of the bank or dealer to pay the repurchase price on the date agreed
to would be, in effect, secured by such securities. If the value of such
securities were less than the repurchase price, plus interest, the other party
to the agreement would be required to provide additional collateral so that at
all times the collateral is at least equal to the repurchase price plus accrued
interest. Default by or bankruptcy of a seller would expose a Fund to possible
loss because of adverse market action, expenses and/or delays in connection with
the disposition of the underlying obligations. The Adviser will consider the
creditworthiness of a seller in determining whether to have a Fund enter into a
repurchase agreement. There are no percentage limits on a Fund's ability to
enter into repurchase agreements. Each Fund does not presently intend to invest
more than 5% of its net assets in repurchase agreements. Repurchase agreements
are considered to be loans by the Fund under the Investment Company Act of 1940
(the "Investment Company Act" or the "1940 Act").

REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. Each Fund may enter
into reverse repurchase agreements with respect to portfolio securities for
temporary purposes (such as to obtain cash to meet redemption requests when the
liquidation of portfolio securities is deemed disadvantageous or inconvenient by
the Adviser). Reverse repurchase agreements involve the sale of securities held
by a Fund pursuant to such Fund's agreement to repurchase them at a mutually
agreed upon date, price and rate of interest. At the time a Fund enters into a
reverse repurchase agreement, it will establish and maintain a segregated
account with an approved custodian containing cash or liquid high-grade debt
securities having a value not less than the repurchase price (including accrued
interest). The assets contained in the segregated account will be
marked-to-market daily and additional assets will be placed in such account on
any day in which the assets fall below the repurchase price (plus accrued
interest). A Fund's liquidity and ability to manage its assets might be
affected when it sets aside cash or portfolio securities to cover such
commitments. Reverse repurchase agreements involve the risk that the market
value of the securities retained in lieu of sale may decline below the price of
the securities a Fund has sold but is obligated to repurchase. In the event the
buyer of securities under a reverse repurchase agreement files for bankruptcy or
becomes insolvent, such buyer or its trustee or receiver may receive an
extension of time to determine whether to enforce a Fund's obligation to
repurchase the securities, and a Fund's use of the proceeds of the reverse
repurchase agreement may effectively be restricted pending such decision. Each
Fund also may enter into "dollar rolls," in which it sells fixed income
securities for delivery in the current month and simultaneously contract to
repurchase substantially similar (same type, coupon and maturity) securities on
a specified future date. During the roll period, a Fund would forgo principal
and interest paid on such

3
<PAGE>

securities. A Fund would be compensated by the difference between the current
sales price and the forward price for the future purchase, as well as by the
interest earned on the cash proceeds of the initial sale. Reverse repurchase
agreements are considered to be borrowings under the Investment Company Act. The
Funds do not presently intend to invest more than 5% of net assets in reverse
repurchase agreements or dollar rolls.

WHEN-ISSUED SECURITIES, DELAYED DELIVERY TRANSACTIONS AND FORWARD
COMMITMENTS. Each Fund may purchase securities on a when-issued basis, and it
may purchase or sell securities for delayed delivery or on a forward commitment
basis. These transactions occur when securities are purchased or sold by a Fund
with payment and delivery taking place in the future to secure what is
considered an advantageous yield and price to a Fund at the time of entering
into the transaction. Although the Funds have not established a limit on the
percentage of its assets that may be committed in connection with such
transactions, it will maintain a segregated account with its custodian of cash,
cash equivalents, U.S. Government securities or other high grade liquid debt
securities denominated in U.S. dollars or non-U.S. currencies in an aggregate
amount equal to the amount of its commitment in connection with such purchase
transactions. The assets contained in the segregated account will be
marked-to-market daily and additional assets will be placed in such account on
any day in which assets fall below the amount of its commitment. Each Fund's
liquidity and ability to manage its assets might be affected when it sets aside
cash or portfolio securities to cover such commitments. When a Fund engages in
when-issued transactions, it relies on the seller to consummate the trade.
Failure of the seller to do so may result in the Fund incurring a loss or
missing an opportunity to obtain a price considered to be advantageous.
When-issued and forward commitment transactions involve the risk 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. The Fund
currently anticipates that when-issued securities will not exceed 5% of its net
assets. Each Fund does not intend to engage in when-issued purchases and
forward commitments for speculative purposes but only in furtherance of their
investment objectives.

4
<PAGE>

5% of its assets taken at the time of acquisition of such commitment or
security. Such Fund will at all times maintain a segregated account with its
custodian of cash, cash equivalents, U.S. Government securities or other high
grade liquid debt securities denominated in U.S. dollars or non-U.S. currencies
in an aggregate amount equal to the purchase price of the securities underlying
the commitment. The assets contained in the segregated account will be
marked-to-market daily and additional assets will be placed in such account on
any day in which assets fall below the amount of the purchase price. A Fund's
liquidity and ability to manage its assets might be affected when it sets aside
cash or portfolio securities to cover such commitments.

There can be no assurance that the securities subject to a standby
commitment will be issued and the value of the security, if issued, on the
delivery date may be more or less than its purchase price. Because the issuance
of the security underlying the commitment is at the option of the issuer, a Fund
may bear the risk of a decline in the value of such security and may not benefit
from an appreciation in the value of the security during the commitment period.

The purchase of a security subject to a standby commitment agreement
and the related commitment fee will be recorded on the date on which the
security can reasonably be expected to be issued, and the value of the security
will be adjusted by the amount of the commitment fee. In the event the security
is not issued, the commitment fee will be recorded as income on the expiration
date of the standby commitment. The Funds do not presently intend to invest more
than 5% of net assets in standby commitment agreements.

5
<PAGE>

Company. Where there are no readily available market quotations, the security
shall be valued at fair value as determined in good faith by the Board of
Directors of the Company. The Board has adopted a policy that the Funds will
not purchase private placements (i.e. restricted securities other than Rule 144A
securities). With respect to each Fund, repurchase agreements subject to demand
are deemed to have a maturity equal to the notice period.

Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. The Board has adopted a policy that the Funds will not
purchase private placements (i.e., restricted securities other than Rule 144A
securities). Mutual funds do not typically hold a significant amount of these
restricted or other illiquid securities because of the potential for delays on
resale and uncertainty in valuation. Limitations on resale may have an adverse
effect on the marketability of portfolio securities and a mutual fund might be
unable to dispose of restricted or other illiquid securities promptly or at
reasonable prices and might thereby experience difficulty satisfying redemptions
within seven days. A mutual fund might also have to register such restricted
securities in order to dispose of them resulting in additional expense and
delay. Adverse market conditions could impede such a public offering of
securities.

In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities Act
including repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.

The SEC has recently adopted Rule 144A which allows for a broader
institutional trading market for securities otherwise subject to restriction on
resale to the general public. Rule 144A establishes a "safe harbor" from the
registration requirements of the Securities Act for resales of certain
securities to qualified institutional buyers. The Adviser anticipates that the
market for certain restricted securities such as institutional commercial paper
will expand further as a result of this new regulation and the development of
automated systems for the trading, clearance and settlement of unregistered
securities of domestic and foreign issuers, such as the PORTAL System sponsored
by the National Association of Securities Dealers, Inc.

The Adviser will monitor the liquidity of restricted securities in a
Fund under the supervision of the Board of Directors. In reaching

6
<PAGE>

liquidity decisions, the Adviser may consider, INTER ALIA, the following
factors: (1) the unregistered nature of the security; (2) the frequency of
trades and quotes for the security; (3) the number of dealers wishing to
purchase or sell the security and the number of other potential purchasers; (4)
dealer undertakings to make a market in the security and (5) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers and the mechanics of
the transfer).

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

LENDING OF PORTFOLIO SECURITIES. To increase income on its
investments, a Fund may lend its portfolio securities with an aggregate value of
up to 30% of its total assets to broker/dealers and other institutional
investors. Although each Fund does not currently intend to do so, it may lend
its portfolio securities on a short or long term basis to broker-dealers or
institutional investors that the Adviser deems qualified, but only when the
borrower maintains with a Fund's custodian, collateral either in cash or money
market instruments, in an amount at least equal to the market value of the
securities loaned, plus accrued interest and dividends, determined on a daily
basis and adjusted accordingly. Collateral for such loans may include cash,
securities of the U.S. Government or its agencies or instrumentalities or an
irrevocable letter of credit issued by a bank which is deemed creditworthy by
the Adviser. In determining whether to lend securities to a particular
broker-dealer or institutional investor, the Adviser will consider, and during
the period of the loan will monitor, all relevant facts and circumstances,
including the creditworthiness of the borrower. Such loans would involve risks
of delay in receiving additional collateral in the event the value of the
collateral decreased below the value of the securities loaned or of delay in
recovering the securities loaned or even the loss of rights in the collateral
should the borrower of the securities fail financially. Default by or bankruptcy
of a borrower would expose the Funds to possible loss because of adverse market
action, expenses and/or delays in connection with the disposition of the
underlying securities.

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

7
<PAGE>

arrangements will be made with a suitable subcustodian, which may include the
lender.

U.S. GOVERNMENT SECURITIES. The U.S. government securities in which a
Fund may invest include direct obligations of the U.S. Treasury (such as
Treasury bills, notes and bonds) and obligations issued by U.S. government
agencies and instrumentalities, including securities that are supported by the
full faith and credit of the United States and securities that are supported
primarily or solely by the creditworthiness of the issuer (such as securities of
the Federal Home Loan Banks, the Student Loan Marketing Association and the
Tennessee Valley Authority). The Funds do not presently intend to invest more
than 5% of net assets in U.S. government securities.

FOREIGN DEBT SECURITIES. The returns on foreign debt securities
reflect interest rates and other market conditions prevailing in those countries
and the effect of gains and losses in the denominated currencies against the
U.S. dollar, which have had a substantial impact on investment in foreign fixed
income securities. The relative performance of various countries' fixed income
markets historically has reflected wide variations relating to the unique
characteristics of each country's economy. Year-to-year fluctuations in certain
markets have been significant, and negative returns have been experienced in
various markets from time to time.

The foreign government securities in which the Funds may invest
generally consist of obligations issued or backed by national, state or
provincial governments or similar political subdivisions or central banks in
foreign countries. Foreign government securities also include debt obligations
of supranational entities, which include international organizations designated,
or backed by governmental entities to promote economic reconstruction or
development, international banking institutions and related government agencies.
Examples include the International Bank for Reconstruction and Development (the
"World Bank"), the European Coal and Steel Community, the Asian Development Bank
and the InterAmerican Development Bank.

Foreign government securities also include debt securities of
"quasi-governmental agencies" and debt securities denominated in multinational
currency units of an issuer (including supranational issuers). Debt securities
of quasi-governmental agencies are issued by entities owned by either a
national, state or equivalent government or are obligations of a political unit
that is not backed by the national government's full faith and credit and
general taxing powers. An example of a multinational currency unit is the
European Currency Unit ("ECU"). An ECU represents specified amounts of the
currencies of certain member states of the European Economic Community. The
specific amounts of currencies comprising the ECU may be adjusted by the Council
of Ministers of the European Community to reflect changes in relative values of
the underlying currencies.

BRADY BONDS. Each Fund may invest in so-called "Brady Bonds," which
have recently been issued by Costa Rica, Mexico, Uruguay and Venezuela and which
may be issued by other Latin American countries. Brady Bonds are

8
<PAGE>

issued as part of a debt restructuring in which the bonds are issued in exchange
for cash and certain of the country's outstanding commercial bank loans.
Investors should recognize that Brady Bonds have been issued only recently, and
accordingly, they do not have a long payment history. Brady Bonds may be
collateralized or uncollateralized, are issued in various currencies (primarily
the U.S. dollar) and are actively traded in the over-the-counter ("OTC")
secondary market for debt of Latin American issuers. The Funds do not presently
intend to invest more than 5% of net assets in Brady Bonds.

LOAN PARTICIPATIONS AND ASSIGNMENTS. Each Fund may invest in fixed
and floating rate loans ("Loans") arranged through private negotiations between
a foreign government and one or more financial institutions ("Lenders"). The
majority of the Fund's investments in Loans in Latin America are expected to be
in the form of participations in Loans ("Participations") and assignments of
portions of Loans from third parties ("Assignments"). Participations typically
will result in each Fund having a contractual relationship only with the Lender,
not with the borrower. Each Fund will have the right to receive payments of
principal, interest and any fees to which it is entitled only from the Lender
selling the Participation and only upon receipt by the Lender of the payments
from the borrower. In connection with purchasing Participations, the Funds
generally will have no right to enforce compliance by the borrower with the
terms of the loan agreement relating to the Loan ("Loan Agreement"), nor any
rights of set-off against the borrower, and the Fund may not directly benefit
from any collateral supporting the Loan in which it has purchased the
Participation. As a result, the Funds will assume the credit risk of both the
borrower and the Lender that is selling the Participation. In the event of the
insolvency of the Lender selling a Participation, the Funds may be treated as a
general creditor of the Lender and may not benefit from any set-off between the
Lender and the borrower. The Funds will acquire Participations only if the
Lender interpositioned between the Funds and the borrower is determined by BEA
to be creditworthy. Each Fund currently anticipates that it will not invest
more than 5% of its net assets in Loan Participations and Assignments.

CONVERTIBLE SECURITIES. The Funds do not presently intend to invest
more than 5% of their net assets in convertible securities. A convertible
security is a bond, debenture, note, preferred stock or other security that may
be converted into or exchanged for a prescribed amount of common stock of the
same or a different issuer within a particular period of time at a specified
price or formula. A convertible security entitles the holder to receive
interest paid or accrued on debt or the dividend paid on preferred stock until
the convertible security matures or is redeemed, converted or exchanged. Before
conversion, convertible securities have characteristics similar to
nonconvertible debt securities in that they ordinarily provide a stable stream
of income with generally higher yields than those of common stocks of the same
or similar issuers. Convertible securities rank senior to common stock in a
corporation's capital structure but are usually subordinated to comparable
nonconvertible securities. While no securities investment is completely without
risk, investments in convertible

9
<PAGE>

securities generally entail less risk than the corporation's common stock,
although the extent to which such risk is reduced depends in large measure upon
the degree to which the convertible security sells above its value as a fixed
income security. Convertible securities have unique investment characteristics
in that they generally (1) have higher yields than common stocks, but lower
yields than comparable non-convertible securities, (2) are less subject to
fluctuation in value than the underlying stock since they have fixed income
characteristics and (3) provide the potential for capital appreciation if the
market price of the underlying common stock increases. Most convertible
securities currently are issued by U.S. companies, although a substantial
Eurodollar convertible securities market has developed, and the markets for
convertible securities denominated in local currencies are increasing.

The value of a convertible security is a function of its "investment
value" (determined by its yield in comparison with the yields of other
securities of comparable maturity and quality that do not have a conversion
privilege) and its "conversion value" (the security's worth, at market value, if
converted into the underlying common stock). The investment value of a
convertible security is influenced by changes in interest rates, with investment
value declining as interest rates increase and increasing as interest rates
decline. The credit standing of the issuer and other factors also may have an
effect on the convertible security's investment value. The conversion value of
a convertible security is determined by the market price of the underlying
common stock. If the conversion value is low relative to the investment value,
the price of the convertible security is governed principally by its investment
value. Generally the conversion value decreases as the convertible security
approaches maturity. To the extent the market price of the underlying common
stock approaches or exceeds the conversion price, the price of the convertible
security will be increasingly influenced by its conversion value. A convertible
security generally will sell at a premium over its conversion value by the
extent to which investors place value on the right to acquire the underlying
common stock while holding a fixed income security.

The Funds have no current intention of converting any convertible
securities it may own into equity or holding them as equity upon conversion,
although it may do so for temporary purposes. A convertible security might be
subject to redemption at the option of the issuer at a price established in the
convertible security's governing instrument. If a convertible security held by
the Fund is called for redemption, the Fund will be required to permit the
issuer to redeem the security, convert it into the underlying common stock or
sell it to a third party.

MORTGAGE-BACKED SECURITIES. The Funds do not presently intend to
invest more than 5% of their net assets in mortgage-backed securities, such as
those issued by the Government National Mortgage Association ("GNMA"), the
Federal National Mortgage Association, the Federal Home Loan Mortgage
Corporation or certain foreign issuers, as well as by private issuers such as
commercial investment banks, savings and loan institutions, mortgage bankers

10
<PAGE>

and private mortgage insurance companies. Mortgage-backed securities represent
direct or indirect participations in, or are secured by and payable from,
mortgage loans secured by real property. The mortgages backing these securities
include, among other mortgage instruments, conventional 30-year fixed rate
mortgages, 15-year fixed rate mortgages, graduated payment mortgages and
adjustable rate mortgages. The government or the issuing agency typically
guarantees the payment of interest and principal of these securities. However,
the guarantees do not extend to the securities' yield or value, which are likely
to vary inversely with fluctuations in interest rates, nor do the guarantees
extend to the yield or value of the Fund's shares. These securities generally
are "pass-through" instruments, through which the holders receive a share of all
interest and principal payments from the mortgages underlying the securities,
net of certain fees.

Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average life assumption. The average life of pass-through pools
varies with the maturities of the underlying mortgage loans. A pool's term may
be shortened by unscheduled or early payments of principal on the underlying
mortgages. The occurrence of mortgage prepayments is affected by various
factors, including the level of interest rates, general economic conditions, the
location, scheduled maturity and age of the mortgage and other social and
demographic conditions. Because prepayment rates of individual pools vary
widely, it is not possible to predict accurately the average life of a
particular pool. For pools of fixed rate 30-year mortgages, a common industry
practice in the U.S. has been to assume that prepayments will result in a
12-year average life. At present, pools, particularly those with loans with
other maturities or different characteristics, are priced on an assumption of
average life determined for each pool.

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 the Funds 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. In periods of falling interest
rates, the rate of prepayment tends to increase, thereby shortening the actual
average life of a pool of mortgage-related securities. Conversely, in periods
of rising rates the rate of prepayment tends to decrease, thereby lengthening
the actual average life of the pool. However, these effects may not be present,
or may differ in degree, if the mortgage loans in the pools have adjustable
interest rates or other special payment terms, such as a prepayment charge.
Actual prepayment experience may cause the yield of mortgage-backed securities
to differ from the assumed average life yield. Reinvestment of prepayments may
occur at higher or lower interest

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<PAGE>

rates than the original investment, thus affecting a Fund's yield. For this and
other reasons, a mortgage-related security's stated maturity may be shortened by
an unscheduled prepayment on underlying mortgages and, therefore, it is not
possible to predict accurately the security's return to the Funds.
Mortgage-related securities provide regular payments consisting of interest and
principal. No assurance can be given as to the return the Funds will receive
when these amounts are reinvested.

The rate of interest on mortgage-backed securities is lower than the
interest rates paid on the mortgages included in the underlying pool due to the
annual fees paid to the servicer of the mortgage pool for passing through
monthly payments to certificate holders and to any guarantor, such as GNMA, and
due to any yield retained by the issuer. Actual yield to the holder may vary
from the coupon rate, even if adjustable, if the mortgage-backed securities are
purchased or traded in the secondary market at a premium or discount. In
addition, there is normally some delay between the time the issuer receives
mortgage payments from the servicer and the time the issuer makes the payments
on the mortgage-backed securities, and this delay reduces the effective yield to
the holder of such securities.

COLLATERALIZED MORTGAGE OBLIGATIONS. The Funds may also purchase
collateralized mortgage obligations ("CMOs") issued by a U.S. Government
instrumentality which are backed by a portfolio of mortgages or mortgage-backed
securities. The issuer's obligations to make interest and principal payments is
secured by the underlying portfolio of mortgages or mortgage-backed securities.
These securities may be considered mortgage derivatives. The Funds may only
invest in CMOs issued by FHLMC, FNMA or other agencies of the U.S. Government or
instrumentalities established or sponsored by the U.S. Government.

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 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.

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<PAGE>

CMOs may exhibit more or less price volatility and interest rate risk than other
types of mortgaged-related obligations.

The CMO structure returns principal to investors sequentially, rather
than according to the pro rata method of a pass-through. In the traditional CMO
structure, all classes (called tranches) receive interest at a stated rate, but
only one class at a time received principal. All principal payments received on
the underlying mortgages or securities are first paid to the "fastest pay"
tranche. After this tranche is retired, the next tranche in the sequence
becomes the exclusive recipient of principal payments. This sequential process
continues until the last tranche is retired. In the event of sufficient early
repayments on the underlying mortgages, the "fastest-pay" tranche generally will
be retired prior to its maturity. Thus the early retirement of a particular
tranche of a CMO held by a Fund would have the same effect as the prepayment of
mortgages underlying a mortgage-backed pass-through security as described above.
The Funds do not presently intend to invest more than 5% of net assets in
collateralized mortgage obligations.

ASSET-BACKED SECURITIES. Each Fund may invest in asset-backed
securities, which represent participations in, or are secured by and payable
from, assets such as motor vehicle installment sales, installment loan
contracts, leases of various types of real and personal property and receivables
from revolving credit (credit card) agreements. The Funds may also invest in
other types of asset-backed securities that may be available in the future. Such
assets are securitized through the use of trusts and special purpose
corporations. Payments or distributions of principal and interest may be
guaranteed up to certain amounts and for a certain time period by a letter of
credit or a pool insurance policy issued by a financial institution unaffiliated
with the trust or corporation. 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 above. Asset-backed securities
are considered an industry for industry concentration purposes, and the Funds
will therefore not purchase any asset-backed securities which would cause 5% or
more of a Fund's net assets at the time of purchase to be invested in
asset-backed securities.

Asset-backed securities present certain risks that are not presented
by other securities in which the Fund may invest. Automobile receivables
generally are secured by automobiles. Most issuers of automobile receivables
permit the loan servicers to retain possession of the underlying obligations. If
the servicer were to sell these obligations to another party, there is a risk
that the purchaser would acquire an interest superior to that of the holders of
the asset-backed securities. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile receivables may not have a
proper security interest in the underlying

13
<PAGE>

automobiles. Therefore, there is the possibility that recoveries on repossessed
collateral may not, in some cases, be available to support payments on these
securities. Credit card receivables are generally unsecured, and the debtors
are entitled to the protection of a number of state and federal consumer credit
laws, many of which give such debtors the right to set off certain amounts owed
on the credit cards, thereby reducing the balance due. Because asset-backed
securities are relatively new, the market experience in these securities is
limited, and the market's ability to sustain liquidity through all phases of the
market cycle has not been tested.

ZERO COUPON SECURITIES. Each Fund may invest in "zero coupon" U.S.
Treasury, foreign government and U.S. and foreign corporate debt securities,
which are bills, notes and bonds that have been stripped of their unmatured
interest coupons and receipts or certificates representing interests in such
stripped debt obligations and coupons. Each Fund currently anticipates that
zero coupon securities will not exceed 5% of its net assets. A zero coupon
security pays no interest to its holder prior to maturity. Accordingly, such
securities usually trade at a deep discount from their face or par value and
will be subject to greater fluctuations of market value in response to changing
interest rates than debt obligations of comparable maturities that make current
distributions of interest. A Fund anticipates that it will not normally hold
zero coupon securities to maturity. Federal tax law requires that a holder of a
zero coupon security accrue a portion of the discount at which the security was
purchased as income each year, even though the holder receives no interest
payment on the security during the year.

STRUCTURED NOTES. The Funds may invest in structured notes. The
distinguishing feature of a structured note is that the amount of interest
and/or principal payable on the notes is based on the performance of a benchmark
asset or market other than fixed-income securities or interest rates. Examples
of a benchmark include stock prices, currency exchange rates and physical
commodity prices. Investing in a structured note allows a Fund to gain exposure
to the benchmark market while fixing the maximum loss that the Fund may
experience in the event that the market does not perform as expected. The
performance tie can be a straight relationship or leveraged, although BEA
generally will not use leverage in its structured note strategies. Normally,
these bonds are issued by U.S. government agencies and investment banks arrange
the structuring. Depending on the terms of the note, the Fund may forego all or
part of the interest and principal that would be payable on a comparable
conventional note; the Fund's loss cannot exceed this foregone interest and/or
principal. An investment in a structured note involves risks similar to those
associated with a direct investment in the benchmark asset. Structured notes
will be treated as illiquid securities for investment limitation purposes. The
Funds do not presently intend to invest more than 5% of their assets in
structured notes.

NON-INVESTMENT GRADE FIXED INCOME SECURITIES. When and if available,
fixed income securities may be purchased by a Fund at a discount from face
value. From time to time a Fund may purchase securities in

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<PAGE>

default with respect to the paying of principal and/or interest at the time
acquired if, in the opinion of BEA, such securities have the potential for
future capital appreciation.

Debt securities purchased by the Funds may bear fixed, fixed and
contingent or variable rates of interest and may involve equity features such as
conversion or exchange rights or warrants for the acquisition of stock of the
same or a different issuer; participations based on revenues, sales or profits,
or the purchase of common stock in a unit transaction (where corporate debt
securities and common stock are offered as a unit). Conversion of certain debt
securities may reduce net income per share and net asset value per share. The
occurrence of any income dilution of previously outstanding shares of common
stock when debt securities are converted will depend upon whether a Fund can,
from the investments made with the proceeds of the debt securities, earn an
amount per share issuable upon conversion at least equal to the amount earned
with respect to shares of common stock outstanding prior to conversion. If debt
securities are converted at a time when the net asset value per share of common
stock is greater than the conversion price, the conversion will result in a
decrease or dilution in then current net asset value per share of common stock.

The value of the lower rated fixed income securities that the Funds
purchase may fluctuate more than the value of higher rated debt securities.
These lower rated fixed income securities generally tend to reflect short-term
corporate and market developments to a greater extent than higher rated
securities which react primarily to fluctuations in the general level of
interest rates. Changes in the value of securities subsequent to their
acquisition will not affect cash income or yields to maturity to a Fund but will
be reflected in the net asset value of a Fund's shares. The Funds attempt to
reduce risk through credit analysis and attention to current developments and
trends in both the economy and financial markets. There can be no assurance
that such attempts will be successful.

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 Fund 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

15
<PAGE>

maturity or payment date. Therefore, in order to satisfy these distribution
requirements, a Fund 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 Fund's
assets and may thereby increase its expense ratio and decrease its rate of
return. For additional information concerning these tax considerations, see
"Taxes" below. From time to time, a Fund may also purchase securities not
paying interest at the time acquired if, in the opinion of the Fund's Adviser,
such securities have the potential for future income or capital appreciation.

FORWARD CURRENCY CONTRACTS. Each Fund may use forward currency
contracts to protect against uncertainty in the level of future exchange rates.
The Fund may enter into forward currency contracts with respect to specific
transactions. For example, when a portfolio anticipates the receipt in a
foreign currency of interest payments on a security that it holds, a portfolio
may desire to "lock-in" the U.S. dollar price of the security or the U.S. dollar
equivalent of such payment, as the case may be, by entering into a forward
contract for the purchase or sale, for a fixed amount of U.S. dollars, of the
amount of foreign currency involved in the underlying transaction. A Fund will
thereby be able to protect itself against a possible loss resulting from an
adverse change in the relationship between the currency exchange rates during
the period between the date on which the security is purchased or sold, or on
which the payment is declared, and the date on which such payments are made or
received.

The precise matching of the forward contract amounts and the value of
the securities involved will not generally be possible because the future value
of such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. Accordingly, it may be necessary for a
Fund to purchase additional foreign currency on the spot (i.e., cash) market
(and bear the expense of such purchase) if the market value of the security is
less than the amount of foreign currency the Fund is obligated to deliver and if
a decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some of
the foreign currency received upon the sale of a Fund security if its market
value exceeds the amount of foreign currency a Fund is obligated to deliver. The
projection of short-term currency market movements is extremely difficult, and
the successful execution of a short-term hedging strategy is highly uncertain.
Forward contracts involve the risk that anticipated currency movements will not
be accurately predicted, causing a Fund to sustain losses on these contracts and
transaction costs. A Fund may enter into a forward contract and maintain a net
exposure on such contract only if (1) the consummation of the contract would not
obligate a Fund to deliver an amount of foreign currency in excess of the value
of a Fund's portfolio securities or other assets denominated in that currency or
(2) a Fund maintains cash, government securities or liquid, high-grade debt
securities in a segregated account in an amount not less than the value of a
Fund's total assets committed to the consummation of the contract which value

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<PAGE>

must be marked to market daily. A Fund will comply with guidelines
established by the SEC with respect to coverage of forward contracts entered
into by mutual funds and, if such guidelines so require, will set aside cash,
U.S. government securities or liquid, high-grade debt securities in a segregated
account with its custodian in the amount prescribed. Under normal
circumstances, consideration of the prospect for currency parities will be
incorporated into the longer term investment decisions made with regard to
overall diversification strategies. However, the Adviser believes that it is
important to have the flexibility to enter into such forward contracts when it
determines that the best interests of a Fund will be served.

At or before the maturity date of a forward contract requiring a
portfolio to sell a currency, the Funds may either sell a portfolio security and
use the sale proceeds to make delivery of the currency or retain the security
and offset its contractual obligation to deliver the currency by purchasing a
second contract pursuant to which the Fund will obtain, on the same maturity
date, the same amount of the currency that it is obligated to deliver.
Similarly, the Funds may close out a forward contract requiring it to purchase a
specified currency by entering into a second contract entitling it to sell the
same amount of the same currency on the maturity date of the first contract. A
Fund would realize a gain or loss as a result of entering into such an
offsetting forward currency contract under either circumstance to the extent the
exchange rate or rates between the currencies involved moved between the
execution dates of the first contract and the offsetting contract.

The cost to a Fund of engaging in forward currency contracts will vary
with factors such as the currencies involved, the length of the contract period
and the market conditions then prevailing. Because forward currency contracts
are usually entered into on a principal basis, no fees or commissions are
involved. The use of forward currency contracts will not eliminate fluctuations
in the prices of the underlying securities a Fund owns or intends to acquire,
but it will fix a rate of exchange in advance. In addition, although forward
currency contracts limit the risk of loss due to a decline in the value of the
hedged currencies, at the same time they limit any potential gain that might
result should the value of the currencies increase. 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 foreign currencies currently exists or that such
market may be closed to investment by a Fund.

Although a Fund will value its assets daily in terms of U.S. dollars,
it does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Funds may convert foreign currency from time to
time, and investors should be aware of the costs of currency conversion.
Although foreign exchange dealers do not charge a fee for conversion, they do
realize a profit based on the difference between the prices at which they are
buying and selling various currencies. Thus, a dealer may offer to sell a
foreign currency to a Fund at one rate, while

17
<PAGE>

offering a lesser rate of exchange should a Fund desire to resell that currency
to the dealer. The Funds do not presently intend to invest more than 5% of net
assets in forward currency contracts.

OPTIONS AND FUTURES CONTRACTS. The Funds may write covered call
options, buy put options, buy call options and write put options, without
limitation except as noted in this paragraph. Such options may relate to
particular securities or to various indexes and may or may not be listed on a
national securities exchange and issued by the Options Clearing Corporation. The
Funds may also invest in futures contracts and options on futures contracts
(index futures contracts or interest rate futures contracts, as applicable) for
hedging purposes (including currency hedging) or for other purposes so long as
aggregate initial margins and premiums required for non-hedging positions do not
exceed 5% of its net assets, after taking into account any unrealized profits
and losses on any such contracts it has entered into.

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 Funds will engage in unlisted over-the-counter options only with
broker/dealers deemed creditworthy by the Adviser. Closing transactions in
certain options are usually effected directly with the same broker/dealer that
effected the original option transaction. The Funds bear the risk that the
broker/dealer will fail to meet its obligations. There is no assurance that the
Funds 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 Funds 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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<PAGE>

The risks related to the use of options and futures contracts include:
(i) the correlation between movements in the market 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
Funds is subject to the Adviser's ability to correctly predict movements in the
direction of the market. For example, if a Fund uses future contracts as a hedge
against the possibility of a decline in the market adversely affecting
securities held by it and securities prices increase instead, such Fund will
lose part or all of the benefit of the increased value of its securities which
it has hedged because it will have approximately equal offsetting losses in its
futures positions. The risk of loss in trading futures contracts in some
strategies can be substantial, due both to the low margin deposits required, and
the extremely high degree of leverage involved in futures 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. These instruments and techniques are discussed in greater
detail below.

FUTURES CONTRACTS. When a Fund purchases a futures contract, it
agrees to purchase a specified underlying instrument at a specified future date.
When a Fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and sale
will take place is fixed when a Fund enters into the contract. The underlying
instrument may be a specified type of security, such as U.S. Treasury bonds or
notes.

The majority of futures contracts are closed out by entering into an
offsetting purchase or sale transaction in the same contract on the exchange
where they are traded, rather than being held for the life of the contract.
Futures contracts are closed out at their current prices, which may result in a
gain or loss.

If a Fund holds a futures contract until the delivery date, it will be
required to complete the purchase and sale contemplated by the contract. In the
case of futures contracts on securities, the purchaser generally must deliver
the agreed-upon purchase price in cash, and the seller must deliver securities
that meet the specified characteristics of the contract.

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<PAGE>

the same time that Fund wished to maintain a highly liquid position in order to
be prepared to meet redemption requests or other obligations. In these
strategies a Fund would use futures contracts to attempt to achieve an overall
return -- whether positive or negative -- similar to the return from longer-term
securities, while taking advantage of potentially greater liquidity that futures
contracts may offer. Although a Fund would hold cash and liquid debt securities
in a segregated account with a value sufficient to cover its open futures
obligations, the segregated assets would be available to a Fund immediately upon
closing out the futures position, while settlement of securities transactions
can take several days. However, because the Fund's cash that would otherwise
have been invested in higher-yielding bonds would be held uninvested or invested
in short-term securities so long as the futures position remains open, the
Fund's return would involve a smaller amount of interest income and potentially
a greater amount of capital gain or loss.

A Fund may sell futures contracts to hedge its other investments
against changes in value, or as an alternative to sales of securities. For
example, if the investment adviser anticipated a decline in bond prices, but did
not wish to sell bonds owned by a Fund, it could sell a futures contract in
order to lock in a current sale price. If prices subsequently fell, the future
contract's value would be expected to rise and offset all or a portion of the
loss in the bonds that Fund had hedged. Of course, if prices subsequently rose,
the futures contract's value could be expected to fall and offset all or a
portion of the benefit of the Fund. In this type of strategy, the Fund's return
will tend to involve a larger component of interest income, because the Fund
will remain invested in longer-term securities rather than selling them and
investing the proceeds in short-term securities which generally provide lower
yields.

FUTURES MARGIN PAYMENTS. The purchaser or seller of a futures
contract is not required to deliver or pay for the underlying instrument unless
the contract is held until the delivery date. However, both the purchaser and
seller are required to deposit "initial margin" with a futures broker (known as
a futures commission merchant, or FCM), when the contract is entered into.
Initial margin deposits are equal to a percentage of the contract's value, as
set by the exchange where the contract is traded, and may be maintained in cash
or high quality liquid securities. If the value of either party's position
declines, that party will be required to make additional "variation margin"
payments to settle the change in value on a daily basis. The party that has a
gain may be entitled to receive all or a portion of this amount. Initial and
variation margin payments are similar to good faith deposits or performance
bonds, unlike margin extended by a securities broker, and initial and variation
margin payments do not constitute purchasing securities on margin for purposes
of the Fund's investment limitations. In the event of the bankruptcy of an FCM
that holds margin on behalf of a Fund, that Fund may be entitled to return of
margin owed to it only in proportion to the amount received by the FCM's other
customers. The investment adviser will attempt to minimize this risk by careful
monitoring of the creditworthiness of the FCMs with which a Fund does business.

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<PAGE>

CORRELATION OF PRICE CHANGES. The prices of futures contracts depend
primarily on the value of their underlying instruments. Because there are a
limited number of types of futures contracts, it is likely that the standardized
futures contracts available to a Fund will not match that Fund's current or
anticipated investments. Futures prices can also diverge from the prices of
their underlying instruments, even if the underlying instruments match the
Fund's investments well. Futures prices are affected by such factors as current
and anticipated short-term interest rates, changes in volatility of the
underlying instrument, and the time remaining until expiration of the contract,
which may not affect security prices the same way. Imperfect correlation
between a Fund's investments and its futures positions may also result from
differing levels of demand in the futures markets and the securities markets,
from structural differences in how futures and securities are traded, or from
imposition of daily price fluctuation limits for futures contracts. A Fund may
purchase or sell futures contracts with a greater or lesser value than the
securities it wishes to hedge or intends to purchase in order to attempt to
compensate for differences in historical volatility between the futures contract
and the securities, although this may not be successful in all cases. If price
changes in a Fund's futures positions are poorly correlated with its other
investments, its futures positions may fail to produce anticipated gains or
result in losses that are not offset by the gains in that Fund's other
investments.

LIQUIDITY OF FUTURES CONTRACTS. Because futures contracts are
generally settled within a day from the date they are closed out, compared with
a settlement period of seven days for some types of securities, the futures
markets can provide liquidity superior to the securities markets in many cases.
Nevertheless, there is no assurance a liquid secondary market will exist for any
particular futures contract at any particular time. In addition, futures
exchanges may establish daily price fluctuation limits for futures contracts,
and may halt trading if a contract's price moves upward or downward more than
the limit in a given day. On volatile trading days when the price fluctuation
limit is reached, it may be impossible for a Fund to enter into new positions or
close out existing positions. If the secondary market for a futures contract is
not liquid because of price fluctuation limits or otherwise, it would prevent
prompt liquidation of unfavorable futures positions, and potentially could
require a Fund to continue to hold a futures position until the delivery date
regardless of changes in its value. As a result, a Fund's access to other
assets held to cover its futures positions could also be impaired.

PURCHASING PUT OPTIONS. By purchasing a put option, a Fund obtains
the right (but not the obligation) to sell the option's underlying instrument at
a fixed strike price. The option may give a Fund the right to sell only on the
option's expiration date, or may be exercisable at any time up to and including
that date. In return for this right, a Fund pays the current market price for
the option (known as the option premium). The option's underlying instrument
may be a security, or a futures contract.

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A Fund may terminate its position in a put option it has purchased by
allowing it to expire or by exercising the option. If the option is allowed to
expire, the Fund will lose the entire premium it paid. If the Fund exercises
the option, it completes the sale of the underlying instrument at the strike
price. If the Fund exercises a put option on a futures contract, it assumes a
seller's position in the underlying futures contract. Purchasing an option on a
futures contract does not require the Fund to make futures margin payments
unless it exercises the option. A Fund may also terminate a put option position
by closing it out in the secondary market at its current price, if a liquid
secondary market exists.

Put options may be used by a Fund to hedge securities it owns, in a
manner similar to selling futures contracts, by locking in a minimum price at
which the Fund can sell. If security prices fall, the value of the put option
would be expected to rise and offset all or a portion of the Fund's resulting
losses. The put thus acts as hedge against a fall in the price of such
securities. However, all other things being equal (including securities prices)
option premiums tend to decrease over time as the expiration date nears.
Therefore, because of the cost of the option in the form of the premium (and
transaction costs), a Fund would expect to suffer a loss in the put option if
prices do not decline sufficiently to offset the deterioration in the value of
the option premium. This potential loss represents the cost of the hedge
against a fall in prices. At the same time, because the maximum a Fund has at
risk is the cost of the option, purchasing put options does not eliminate the
potential for the Fund to profit from an increase in the value of the securities
hedged to the same extent as selling a futures contract.

PURCHASING CALL OPTIONS. The features of call options are essentially
the same as those of put options, except that the purchaser of a call option
obtains the right to purchase, rather than sell, the underlying instrument at
the option's strike price (call options on futures contracts are settled by
purchasing the underlying futures contract). By purchasing a call option, a
Fund would attempt to participate in potential price increases of the underlying
instrument, with results similar to those obtainable from purchasing a futures
contract, but with risk limited to the cost of the option if security prices
fell. At the same time, a Fund can expect to suffer a loss if security prices
do not rise sufficiently to offset the cost of the option.

The Funds may purchase call options in connection with "closing
purchase transactions." A Fund may terminate its position in a call option by
entering into a closing purchase transaction. A closing purchase transaction is
the purchase of a call option on the same security with the same exercise price
and call period as the option previously written by the Fund. If a Fund is
unable to enter into a closing purchase transaction, a Fund may be required to
hold a security that it might otherwise have sold to protect against
depreciation.

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<PAGE>

WRITING PUT OPTIONS. When a Fund writes a put option, it takes the
opposite side of the transaction from the option's purchaser. In return for
receipt of the premium, a Fund assumes the obligation to pay the strike price
for the option's underlying instrument if the other party to the option chooses
to exercise it. When writing an option on a futures contract the Fund will be
required to make margin payments to an FCM as described above for futures
contracts. A Fund may seek to terminate its position in a put option it writes
before exercise by closing out the option in the secondary market at its current
price. If the secondary market is not liquid for an option the Fund has
written, however, the Fund must continue to be prepared to pay the strike price
while the option is outstanding, regardless of price changes, and must continue
to set aside assets to cover its position.

A Fund may write put options as an alternative to purchasing actual
securities. If security prices rise, the Fund would expect to profit from a
written put option, although its gain would be limited to the amount of the
premium it received. If security prices remain the same over time, it is likely
that the Fund will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the Fund would expect to
suffer a loss. This loss should be less than the loss the Fund would have
experienced from purchasing the underlying instrument directly, however, because
the premium received for writing the option should mitigate the effects of the
decline. As with other futures and options strategies used as alternatives for
purchasing securities, the Fund's return from writing put options generally will
involve a smaller amount of interest income than purchasing longer-term
securities directly, because the Fund's cash will be invested in shorter-term
securities which usually offer lower yields.

WRITING CALL OPTIONS. Writing a call option obligates a Fund to sell
or deliver the option's underlying instrument, in return for the strike price,
upon exercise of the option. The characteristics of writing call options are
similar to those of writing put options, as described above, except that writing
covered call options generally is a profitable strategy if prices remain the
same or fall. Through receipt of the option premium, the Fund would seek to
mitigate the effects of a price decline. At the same time, because a Fund would
have to be prepared to deliver the underlying instrument in return for the
strike price, even if its current value is greater, the Fund would give up some
ability to participate in security price increases when writing call options.

COMBINED OPTION POSITIONS. A Fund may purchase and write options in
combination with each other to adjust the risk and return characteristics of the
overall position. For example, a Fund may purchase a put option and write a
call option on the same underlying instrument, in order to construct a combined
position whose risk and return characteristics are similar to selling a futures
contract. Another possible combined position would involve writing a call
option at one strike price and buying a call option at a lower price, in order
to reduce the risk of the written call option in the event of a substantial
price increase. Because combined options

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positions involve multiple trades, they result in higher transaction costs and
may be more difficult to open and close out.

RISKS OF OPTIONS TRANSACTIONS. Options are subject to risks similar
to those described above with respect to futures contracts, including the risk
of imperfect correlation between the option and a Fund's other investments and
the risk that there might not be a liquid secondary market for the option. In
the case of options on futures contracts, there is also a risk of imperfect
correlation between the option and the underlying futures contract. Options are
also subject to the risks of an illiquid secondary market, particularly in
strategies involving writing options, which a Fund cannot terminate by exercise.
In general, options whose strike prices are close to their underlying
instruments' current value will have the highest trading volume, while options
whose strike prices are further away may be less liquid. The liquidity of
options may also be affected if options exchanges impose trading halts,
particularly when markets are volatile.

ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. A Fund will not use
leverage in its options and futures strategies. Such investments will be made
for hedging purposes only. A Fund will hold securities or other options or
futures positions whose values are expected to offset its obligations under the
hedge strategies. A Fund will not enter into an option or futures position that
exposes the Fund to an obligation to another party unless it owns either (i) an
offsetting position in securities or other options or futures contracts or
(ii) cash, receivables and short-term debt securities with a value sufficient to
cover its potential obligations. A Fund will comply with guidelines established
by the SEC with respect to coverage of options and futures strategies by mutual
funds, and if the guidelines so require will set aside cash and high grade
liquid debt securities in a segregated account with its custodian bank in the
amount prescribed. Securities held in a segregated account cannot be sold while
the futures or option strategy is outstanding, unless they are replaced with
similar securities. As a result, there is a possibility that segregation of a
large percentage of the Fund's assets could impede portfolio management or the
Fund's ability to meet redemption requests or other current obligations.

LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. RBB on behalf of the
Funds has filed a notice of eligibility for exclusion from the definition of the
term "commodity pool operator" with the Commodity Futures Trading Commission
("CFTC") and the National Futures Association, which regulate trading in the
futures markets. Pursuant to Section 4.5 of the regulations under the Commodity
Exchange Act, the notice of eligibility includes the representation that the
Funds will not enter into any commodity futures contract or option on a
commodity futures contract if, as a result, the sum of initial margin deposits
on commodity futures contracts and related commodity options and premiums paid
for options on commodity futures contracts the Fund has purchased, after taking
into account unrealized profits and losses on such contracts, would exceed 5% of
a Fund's total assets.

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The Funds' limitations on investments in futures contracts and its
policies regarding futures contracts and the Funds' limitations on investments
in options and their policies regarding options discussed above in this
Statement of Additional Information, are not fundamental policies and may be
changed as regulatory agencies permit.

Various exchanges and regulatory authorities have recently undertaken
reviews of options and futures trading in light of market volatility. Among the
possible actions that have been presented are proposals to adopt new or more
stringent daily price fluctuation limits for futures or options transactions,
and proposals to increase the margin requirements for various types of
strategies. It is impossible to predict what actions, if any, will result from
these reviews at this time.

SHORT SALES "AGAINST THE BOX." In a short sale, a Fund sells a
borrowed security and has a corresponding obligation to the lender to return the
identical security. Each Fund may engage in short sales if at the time of the
short sale it owns or has the right to obtain, at no additional cost, an equal
amount of the security being sold short. This investment technique is known as
a short sale "against the box." In a short sale, a seller does not immediately
deliver the securities sold and is said to have a short position in those
securities until delivery occurs. If a Fund engages in a short sale, the
collateral for the short position will be maintained by the Fund's custodian or
a qualified sub-custodian. While the short sale is open, the Fund will maintain
in a segregated account an amount of securities equal in kind and amount to the
securities sold short or securities convertible into or exchangeable for such
equivalent securities. These securities constitute the Fund's long position. A
Fund may, however, make a short sale as a hedge, when it believes that the price
of a security may decline, causing a decline in the value of a security owned by
the Fund (or a security convertible or exchangeable for such security), or when
the Fund wants to sell the security at an attractive current price, but also
wishes to defer recognition of gain or loss for federal income tax purposes and
for purposes of satisfying certain tests applicable to regulated investment
companies under the Internal Revenue Code. In such case, any future losses in
the Fund's long position should be reduced by a gain in the short position.
Conversely, any gain in the long position should be reduced by a loss in the
short position. The extent to which such gains or losses are reduced will
depend upon the amount of the security sold short relative to the amount the
Fund owns. There will be certain additional transaction costs associated with
short sales against the box, but the Fund will endeavor to offset these costs
with the income from the investment of the cash proceeds of short sales. The
Funds do not presently intend to invest more than 5% of net assets in short
sales against the box.

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Company which agree that they are purchasing the paper for investment and not
with a view to public distribution. Any resale by the purchaser must be in an
exempt transaction. Section 4(2) paper normally is resold to other
institutional investors through or with the assistance of investment dealers who
make a market in the Section 4(2) paper, thereby providing liquidity. See
"Illiquid Securities" above.

SUPPLEMENTAL INVESTMENT OBJECTIVES AND POLICIES --
BEA INTERNATIONAL EQUITY, BEA EMERGING MARKETS EQUITY AND
BEA GLOBAL TELECOMMUNICATIONS FUNDS

RIGHTS OFFERINGS AND PURCHASE WARRANTS. Rights offerings and purchase
warrants are privileges issued by a corporation which enable the owner to
subscribe to and purchase a specified number of shares of the corporation at a
specified price during a specified period of time. Subscription rights normally
have a short lifespan to expiration. The purchase of rights or warrants
involves the risk that a Fund could lose the purchase value of a right or
warrant if the right to subscribe to additional shares is not executed prior to
the rights and warrants expiration. Also, the purchase of rights and/or
warrants involves the risk that the effective price paid for the right and/or
warrant added to the subscription price of the related security may exceed the
value of the subscribed security's market price such as when there is no
movement in the level of the underlying security.

SUPPLEMENTAL INVESTMENT OBJECTIVES AND POLICIES --
BEA GLOBAL TELECOMMUNICATIONS FUND

Telecommunications companies in both developed and emerging
countries are undergoing significant change due to varying and evolving
levels of governmental regulation or deregulation and other factors. As a
result, competitive pressures are intense and the securities of such
companies may be subject to rapid price volatility. Telecommunications
regulation typically limits rates charged, returns earned, providers of
services, types of services, ownership, areas served and terms for dealing
with competitors and customers. Telecommunications regulation generally has
tended to be less stringent for newer services than for traditional telephone
service, although there can be no assurances that such newer services will
not be heavily regulated in the future. Regulation may also limit the use of
a new technologies and hamper efficient deprecation of existing assets. If
regulation limits the use of new technologies by established carriers or
forces cross-subsidies, large private networks may emerge. Service providers
may also be subject to regulations regarding ownership and control, providers
of services, subscription rates and technical standards.

Companies offering telephone services are experiencing increasing
competition from cellular telephones, and the cellular telephone industry,
because it has a limited operating history, faces uncertainty concerning the
future of the industry and demand for cellular telephones. All
telecommunications companies in both developed and emerging countries are
subject to the additional risk that technological innovations will make their
products and services obsolete. While telephone companies in developed
countries and certain emerging countries may pay an above average dividend,
the Fund's investment decisions are based upon captial appreciation potential
rather than income considerations.

INVESTMENT LIMITATIONS

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

1. Borrow money, except from banks, and only if after such borrowing
there is asset coverage of at least 300% for all borrowings of the Fund; or
mortgage, pledge or hypothecate any of its assets except in connection with any
such borrowing and in amounts not in excess of the lesser of the dollar amounts
borrowed or 33 1/3% of the value of the Fund's total assets at the time of such
borrowing; (For the purpose of this restriction, collateral arrangements with
respect to, if applicable, the writing of options, and futures contracts,
options on futures contracts, forward currency contracts and collateral
arrangements with respect to initial and variation margin are not deemed to be a
pledge of assets and neither such arrangements nor the purchase or sale of
futures or related options are deemed to be the issuance of a senior security
for purposes of Investment Limitation No. 2);

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

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3. Act as an underwriter of securities within the meaning of the
Securities Act of 1933 except insofar as it might be deemed to be an underwriter
upon disposition of certain portfolio securities acquired within the limitation
on purchases of restricted securities;

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

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

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

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

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

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

2. Purchase securities on margin, except for short-term credits
necessary for clearance of portfolio transactions, and except that a Fund

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<PAGE>

may make margin deposits in connection with its use of options, futures
contracts, options on futures contracts and forward contracts;

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

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

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

In order to permit the sale of the Funds in certain states, the
Company on behalf of a Fund has undertaken to adhere to the following investment
policies, each of which may be changed without shareholder approval:

1. That the dollar amount of short sales at any one time shall not
exceed 25% of the net equity of a Fund, and the value of securities of any one
issuer in which a Fund is short may not exceed the lesser of 2.0% of the value
of a Fund's net assets or 2.0% of the securities of any class of any issuer.
Short sales may be made only in those securities which are fully listed on a
national securities exchange. This provision does not include the sale of
securities if the Fund contemporaneously owns or has the right to obtain
securities equivalent in kind and amount to those sold, i.e., short sales
against the box.

2. That the investment in warrants, valued at the lower of cost or
market, may not exceed 5.0% of the value of a Fund's net assets. Included
within that amount, but not to exceed 2.0% of the value of a Fund's net assets,
may be warrants which are not listed on the New York or American Stock Exchange.
Warrants acquired by a Fund in units or attached to securities may be deemed to
be without value.

3. The Funds will only purchase securities of any one company if, as
to 75% of the assets of any one company, at the time of purchase, not more than
10% of the voting securities of any one company would be held by such Fund,
except that up to 25% of the value of the Fund's assets may be invested without
regard to such limitation.

4. The Funds will only invest in securities of other investment
companies if such securities are purchased on the open market with no commission
or profit to a sponsor or dealer, other than the customary broker's

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<PAGE>

commission, or when the purchase is part of a plan of merger, consolidation,
reorganization or acquisition.

Except for the percentage restrictions applicable to the borrowing of
money and illiquid securities, if a percentage restriction is adhered to at the
time of investment, a later increase or decrease in percentage resulting from a
change in market values of portfolio securities or amount of total or net assets
will not be considered a violation of any of the foregoing restrictions.

In order to permit the sale of shares of a Fund in certain states, a
Fund may make commitments more restrictive than the investment policies and
limitations above. If a Fund determines that any such commitment is no longer
in its best interests, it will revoke the commitment by terminating sales of its
shares in the state involved. In addition, a Fund may be subject to investment
restrictions imposed by countries in which it invests directly or indirectly.

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

RISK FACTORS

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

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

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<PAGE>

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

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

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

INVESTMENT CONTROLS. In certain countries that currently prohibit
direct foreign investment in the securities of their companies, indirect foreign
investment in the securities of companies listed and traded on the stock
exchanges in these countries is permitted through investment funds which have
been specifically authorized. The BEA Portfolios may invest in these investment
funds and registered investment companies subject to the provisions of the 1940
Act. If these Funds invest in such investment companies, they will each bear
their proportionate share of the costs incurred by such companies, including
investment advisory fees.

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

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<PAGE>

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

LOWER- OR NON-RATED CRITERIA FOR DEBT SECURITIES. The BEA High Yield
Fund has established no rating criteria for the debt securities in which it may
invest. Issuers of low rated or non-rated securities ("high yield" securities,
commonly known as "junk bonds") may be highly leveraged and may not have
available to them more traditional methods of financing. Therefore, the risks
associated with acquiring the securities of such issuers generally is greater
than is the case with higher rated securities. For example, during an economic
downturn or a sustained period of rising interest rates, issuers of high yield
securities may be more likely to experience financial stress, especially if such
issuers are highly leveraged. During such periods, such issuers may not have
sufficient revenues to meet their interest payment obligations. The issuer's
ability to service its debt obligations also may be adversely affected by
specific issuer developments, or the issuer's inability to meet specific
projected business forecasts, or the unavailability of additional financing. The
risk of loss due to default by the issuer is significantly greater for the
holders of lower-rated securities because such securities may be unsecured and
may be subordinated to other creditors of the issuer.

Lower-rated securities frequently have call or redemption features
which would permit an issuer to repurchase the security from the Fund. If a
call were exercised by the issuer during a period of declining interest rates,
the Fund likely would have to replace such called security with a lower yielding
security, thus decreasing the net investment income to the Fund and dividends to
shareholders.

The Fund may have difficulty disposing of certain lower-rated
securities because there may be a thin trading market for such securities. The
secondary trading market for high yield securities is generally not as liquid as
the secondary market for higher rated securities. Reduced secondary market
liquidity may have an adverse impact on market price and the Fund's ability to
dispose of particular issues when necessary to meet the Fund's liquidity needs
or in response to a specific economic event such as a deterioration in the
creditworthiness of the issuer.

Adverse publicity and investor perceptions, which may not be based on
fundamental analysis, also may decrease the value and liquidity of lower-rated
securities, particularly in a thinly traded market. Factors adversely affecting
the market value of lower-rated securities are likely to adversely affect the
Fund's net asset value. In addition, the Fund may

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<PAGE>

incur additional expenses to the extent it is required to seek recovery upon a
default on a portfolio holding or participate in the restructuring of the
obligation.

Current laws may have an impact on the market for lower-rated debt
securities. The Financial Institutions Reform, Recovery and Enforcement Act of
1989 required 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.

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 the Fund 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 Fund
can meet redemption requests. BEA will not necessarily dispose of a portfolio
security when its ratings have been changed.

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

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

A sovereign debtor's willingness or ability to repay principal and pay
interest in a timely manner may be affected by, among other factors, its cash
flow situation, the extent of its foreign reserves, the availability of
sufficient foreign exchange on the date a payment is due, the relative size of
the debt service burden to the economy as a whole, the sovereign debtor's policy
toward principal international lenders and the political constraints to which a
sovereign debtor may be subject. Increased protectionism on the part of a
country's trading partners, or political changes in those countries, could also
adversely affect its exports. Such events could diminish a country's trade
account surplus, if any, or the credit standing of a particular local government
or agency.

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<PAGE>

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

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

DIRECTORS AND OFFICERS

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

Position with Principal Occupation
Name, Address and Age the Company During Past Five Years
- --------------------- ----------------- ----------------------

Arnold M. Reichman - 48* Director Since 1986, Managing
466 Lexington Avenue Director and Assistant
New York, NY 10017 Secretary, E. M. Warburg, Pincus
& Co., Inc.; Since 1990, Chief
Executive Officer and since 1991,
Secretary, Counsellors

<PAGE>

Securities, Inc; Officer of
various investment companies
advised by Warburg, Pincus
Counsellors, Inc.

Robert Sablowsky - 58** Director Since 1985, Executive
14 Wall Street Vice President of
New York, NY 10005 Gruntal & Co., Inc.,
a broker-dealer
Director, Gruntal & Co.,
Inc. and Gruntal Financial
Corp., its parent company.

Francis J. McKay - 60 Director Since 1963, Executive
7701 Burholme Avenue Vice President, Fox Chase
Philadelphia, PA 1911 Cancer Center (Biomedical
research and medical care.)

Marvin E. Sternberg -62 Director Since 1974, Chairman,
937 Mt. Pleasant Road Director and President,
Bryn Mawr, PA 19010 Moyco Industries, Inc.
(manufacturer of dental supplies
and precision coated abrasives);
Since 1968, Director and
President, Mart MMM, Inc.
(formerly Montgomeryville
Merchandise Mart Inc.) and Mart
PMM, Inc. (formerly Pennsauken
Merchandise Mart, Inc.) (Shopping
Centers); and Since 1975,
Director and Executive Vice
President, Cellucap Mfg. Co.,
Inc. (manufacturer of disposable
headwear).

34
<PAGE>

Principal Occupation
Name, Address and Age Position with RBB During Past Five Years
- --------------------- ----------------- ----------------------
Julian A. Brodsky -63 Director Director, Vice Chairman 1969 to
Comcast Corporation present, Comcast Corporation
1234 Market Street (cable television and
16th Floor communications); Director,
Philadelphia, PA 19107-3723 Comcast Cablevision of
Philadelphia (cable television
communications) and Nextel
(wireless communications).

Donald van Roden - 72 Director Self-employed
1200 Old Mill Lane businessman.
Wyomissing, PA 19610 From February 1980 to March 1987,
Vice Chairman, Smith Kline
Beckman Corporation
(pharmaceuticals); Director, AAA
Mid-Atlantic (auto service);
Director, Keystone Insurance Co.

Edward J. Roach - 72 President and Certified Public Accountant;
Bellevue Park Treasurer Vice Chairman of the
Corporate Center of the Board, Fox Chase
400 Bellevue Parkway Cancer Center; Vice President
Wilmington, DE 19809 and Trustee, Pennsylvania School
for the Deaf; Trustee, Immaculata
College; Vice President and
Treasurer of various investment
companies advised by PNC
Institutional Management
Corporation.

Morgan R. Jones - 57 Secretary Chairman of the law firm of
1100 PNB Bank Building Drinker Biddle & Reath,
Broad and Chestnut Streets Philadelphia, Pennsylvania;
Philadelphia, PA 19107 Director, Rocking Horse Child
Care Centers of America, Inc.

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

* Mr. Reichman is an "interested person" of the Company as that term is
defined in the 1940 Act by virtue of his position with Counsellors
Securities Inc., the Company's distributor.

** Mr. Sablowsky is an "interested person" of the Company as that term is
defined in the 1940 Act by virtue of his position with Gruntal & Co., Inc.,
a broker-dealer.

Messrs. McKay, Sternberg and Brodsky are members of the Audit
Committee of the Board of Directors. The Audit Committee, among other things,
reviews results of the annual audit and recommends to the Company the firm to be
selected as independent auditors.

35
<PAGE>

Messrs. Reichman, McKay and van Roden are members of the Executive
Committee of the Board of Directors. The Executive Committee may generally
carry on and manage the business of the Company when the Board of Directors is
not in session.

Messrs. McKay, Sternberg, Brodsky and van Roden are members of the
Nominating Committee of the Board of Directors. The Nominating Committee
recommends to the Board annually all persons to be nominated as directors of the
Company.

The Company pays directors who are not "affiliated persons" (as
that term is defined in the 1940 Act) of any Investment Adviser or
sub-adviser of the Company or the Distributor of the Company $12,000 annually
and $1,000 per meeting of the Board or any committee thereof that is not held
in conjunction with a Board meeting. Such Directors are reimbursed for any
expenses incurred in attending meetings of the Board of Directors or any
committee thereof. The Chairman (currently Donald von Roden) receives an
additional $5,000 for his services. For the year ended August 31, 1996, each
of the following members of the Board of Directors received compensation from
the Company in the following amounts:

Directors Compensation
--------- ------------
Julian A. Brodsky $12,525
Francis J. McKay 15,975
Marvin E. Sternberg 16,725
Donald van Roden 21,025

On October 24, 1990 the Company adopted, as a participating employer, the
Company Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement
plan for employees (currently Edward J. Roach) pursuant to which the Company
will contribute on a monthly basis amounts equal to 10% of the monthly
compensation of each eligible employee. By virtue of the services performed by
the Company's advisers, custodians, administrators and distributor, the Company
itself requires only one part-time employee. No officer, director or employee
of BEA or the Distributor currently receives any compensation from the Company.

INVESTMENT ADVISORY AND SERVICING ARRANGEMENTS

ADVISORY AGREEMENTS. BEA Associates renders advisory and
administrative services to each of the Funds pursuant to Investment Advisory
Agreements. The Advisory Agreements relating to the Funds are dated
September 16, 1992 for the BEA International Equity, the BEA Emerging Markets
Equity and the BEA High Yield Funds, dated July 10, 1996 for the BEA Global
Telecommunications Fund. Such advisory agreements are hereinafter
collectively referred to as the "Advisory Contracts."

<PAGE>

BEA Associates is a diversified Investment Adviser, managing global
equity, fixed income and derivative securities accounts for corporate pension
and profit-sharing plans, state pension funds, union funds, endowments and
other charitable institutions. As of September 30, 1996, BEA Associates
managed approximately $31.3 billion in assets. BEA is a wholly-owned
subsidiary of Credit Suisse, the second largest Swiss bank, which in turn is
subsidiary of CS Holding, a Swiss corporation. Active employees of BEA have
a long-term equity incentive plan. BEA Associates is a registered as an
investment adviser under the Investment Advisers Act of 1940, as amended.

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

BEA Associates has sole investment discretion for the Funds and
will make all decisions affecting assets in the Funds under the supervision
of the Company's Board of Directors and in accordance with each Fund's stated
policies. BEA Associates will select investments for the Funds and will place
purchase and sale orders on behalf of the Funds. For its services to the BEA
International Equity, the BEA Emerging Markets Equity, the BEA Global
Telecommunications and also BEA High Yield Funds, Associates will be paid
(before any voluntary waivers or reimbursements) a monthly fee computed at an
annual rate of .80%, 1.00%, 1.00% and .70% of average daily net assets,
respectively.

For the year ended August 31, 1996, waived advisory fees with respect
to the BEA International Equity, BEA Emerging Markets Equity, BEA Global
Telecommunications and BEA High Yield Funds in the amount of $0, $0, $0 and
$100,763, respectively. During the same period, BEA received advisory fees
(after waivers) in the amount of $5,993,072, $1,289,739, $0 and $542,590,
respectively.

37
<PAGE>

As required by various state regulations, BEA Associates will
reimburse the Company or the Fund affected (as applicable) if and to the extent
that the aggregate operating expenses of the Company or the Fund affected exceed
applicable state limits for the fiscal year, to the extent required by such
state regulations. Currently, the most restrictive of such applicable limits is
believed to be 2-1/2% of the first $30 million of average annual net assets, 2%
of the next $70 million of average annual net assets and 1 1/2% of the remaining
average annual net assets. Certain expenses, such as brokerage commissions,
taxes, interest and extraordinary items, are excluded from this limitation.
Whether such expense limitations apply to the Company as a whole or to each Fund
on an individual basis depends upon the particular regulations of such states.

Each Fund bears all of its own expenses not specifically assumed by
the Adviser. General expenses of the Company not readily identifiable as
belonging to a Fund of the Company are allocated among all investment Funds by
or under the direction of the Company's Board of Directors in such manner as the
Board determines to be fair and equitable. Expenses borne by a Fund include,
but are not limited to, the following (or a Fund's share of the following): (a)
the cost (including brokerage commissions) of securities purchased or sold by a
Fund and any losses incurred in connection therewith; (b) fees payable to and
expenses incurred on behalf of a Fund by BEA Associates; (c) expenses of
organizing the Company that are not attributable to a class of the Company; (d)
certain of the filing fees and expenses relating to the registration and
qualification of the Company and a Fund's shares under Federal and/or state
securities laws and maintaining such registrations and qualifications; (e) fees
and salaries payable to the Company's directors and officers; (f) taxes
(including any income or franchise taxes) and governmental fees; (g) costs of
any liability and other insurance or fidelity bonds; (h) any costs, expenses or
losses arising out of a liability of or claim for damages or other relief
asserted against the Company or a Fund for violation of any law; (i) legal,
accounting and auditing expenses, including legal fees of special counsel for
the independent directors; (j) charges of custodians and other agents; (k)
expenses of setting in type and printing prospectuses, statements of additional
information and supplements thereto for existing shareholders, reports,
statements, and confirmations to shareholders and proxy material that are not
attributable to a class; (l) costs of mailing prospectuses, statements of
additional information and supplements thereto to existing shareholders, as well
as reports to shareholders and proxy material that are not attributable to a
class; (m) any extraordinary expenses; (n) fees, voluntary assessments and other
expenses incurred in connection with membership in investment company
organizations; (o) costs of mailing and tabulating proxies and costs of
shareholders' and directors' meetings; (p) costs of independent pricing services
to value a Fund's securities; and (q) the cost of investment company literature
and other publications provided by the Company to its directors and officers.
Transfer agency expenses, expenses of preparation, printing and mailing
prospectuses, statements of additional information, proxy statements and reports
to shareholders, organizational expenses and

38
<PAGE>

registration fees and other costs identified as belonging to a particular class
of the Company are allocated to such class.

Under the Advisory Contracts, BEA Associates will not be liable for
any error of judgment or mistake of law or for any loss suffered by the Company
or a Fund in connection with the performance of the Advisory Contracts, and
shall be indemnified for any losses and expenses in connection with any claim
relating thereto, except a loss resulting from willful misfeasance, bad faith or
gross negligence on the part of BEA Associates in the performance of its duties
or reckless disregard by it of its obligations and duties under the Advisory
Contracts.

The Advisory Contracts were approved on July 10, 1996, by vote of the
Company's Board of Directors, including a majority of those directors who are
not parties to the Advisory Contracts or interested persons (as defined in the
1940 Act) of such parties. The Advisory Contracts were approved by each Fund's
initial shareholder. Each Advisory Contract is terminable by vote of the
Company's Board of Directors or by the holders of a majority of the outstanding
voting securities of the relevant Fund, at any time without penalty, on 60 days'
written notice to BEA Associates. Each of the Advisory Contracts may also be
terminated by BEA Associates on 60 days' written notice to the Company. Each of
the Advisory Contracts terminates automatically in the event of assignment
thereof.

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

State Street Bank and Trust Company ("State Street") serves as
transfer agent for the Funds. It has delegated to Boston Financial Data
Services, Inc. ("BFDS"), a 50% owned subsidiary, responsibility for most
transfer agent servicing functions. State Street as the transfer and
dividend disbursing agent for the Advisor Classes pursuant to a Transfer
Agency Agreement (the "Transfer Agency Agreement"), under which it (a) issues
and redeems shares of each of the Advisor Classes, (b) addresses and mails
all communications by each Fund to record owners of shares of each such
Class, including reports to shareholders, dividend and distribution notices
and proxy

39
<PAGE>

materials for its meetings of shareholders, (c) maintains shareholder accounts
and, if requested, sub-accounts and (d) makes periodic reports to the Company's
Board of Directors concerning the operations of each Advisor Class. For its
services to the Company under the Transfer Agency Agreement, State Street
receives a fee on a per transaction basis.

ADMINISTRATION AGREEMENTS. PFPC Inc., an indirect, wholly owned
subsidiary of PNC Bank Corp., serves as administrator to the Funds pursuant to
an Administration and Accounting Services Agreement dated July 10, 1996 (the
"PFPC Administration Agreement"). PFPC has agreed to calculate the Funds' net
asset values, provide all accounting services for the Funds, and assist in
related aspects of the Funds' operations. The PFPC Administration Agreement
provides that PFPC shall not be liable for any error of judgment or mistake of
law or any loss suffered by the Company or the Funds in connection with the
performance of the agreement, except a loss resulting from willful misfeasance,
bad faith or negligence, or reckless disregard of its duties and obligations
thereunder. In consideration for providing services pursuant to the PFPC
Administration Agreement, PFPC receives a fee calculated at an annual rate of
.125% of each Fund's average daily net assets, with a minimum annual fee of
$75,000.

BEA serves as co-administrator to the Funds pursuant to
Co-Administration Agreements dated July 10, 1996 (the "BEA Co-Administration
Agreements"). BEA has agreed to provide shareholder liaison services to the
Funds including responding to shareholder inquiries and providing information on
shareholder accounts. The BEA Co-Administration Agreements provide that BEA
shall not be liable for any error of judgment or mistake of law or any loss
suffered by the Company or the Funds in connection with the performance of the
agreement, except a loss resulting from willful misfeasance, bad faith or
negligence, or reckless disregard of its duties and obligations thereunder. In
consideration for providing services pursuant to the BEA Co-Administration
Agreements, BEA receives a fee calculated at an annual rate of .05% of each of
the Funds' average daily net assets for assets up to $125 million and 10%
thereafter.

DISTRIBUTION AND SHAREHOLDER SERVICING

The Funds have each entered into Distribution Agreements with
Counsellors Securities pursuant to their Distribution Plans (the "12b-1 Plans")
under Rule 12b-1 of the 1940 Act. In consideration for Services (as defined
below), the Distribution Agreement provides that the Funds will each pay
Counsellors Securities a fee calculated at an annual rate of .25% of the
respective average daily net assets of the Advisor Shares of the Funds. Services
performed by Counsellors Securities include (a) the sale of the Advisor Shares,
as set forth in the 12b-1 Plans ("Selling Services"), (b) ongoing servicing
and/or maintenance of the accounts of shareholders of the Funds, as set forth in
the 12b-1 Plans ("Shareholder Services"), and (c) sub-transfer agency services,
subaccounting services or administrative services, as set forth in the 12b-1
Plans ("Administrative Services" and collectively with Selling Services and
Administrative Services, "Services")

40
<PAGE>

including, without limitation, (i) payments reflecting an allocation of overhead
and other office expenses of Counsellors Securities related to providing
Services; (ii) payments made to, and reimbursement of expenses of, persons who
provide support services in connection with the distribution of the Advisor
Shares including, but not limited to, office space and equipment, telephone
facilities, answering routine inquiries regarding the Funds, and providing any
other Shareholder Services; (iii) payments made to compensate selected dealers
or other authorized persons for providing any Services; (iv) costs relating to
the formulation and implementation of marketing and promotional activities,
including, but not limited to, direct mail promotions and television, radio,
newspaper, magazine and other mass media advertising, and related travel and
entertainment expenses; (v) costs of printing and distributing prospectuses,
statements of additional information and reports of the Funds to prospective
shareholders of the Funds; and (vi) costs involved in obtaining whatever
information, analyses and reports with respect to marketing and promotional
activities that Counsellors Securities may, from time to time, deem advisable.

PORTFOLIO TRANSACTIONS

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

Portfolio transactions for the Funds may be effected on domestic or
foreign securities exchanges. In transactions for securities not actively
traded on a domestic or foreign securities exchange, a Fund will deal
directly with the dealers who make a market in the securities involved,
except in those circumstances where better prices and execution are available
elsewhere. Such dealers usually are acting as principal for their own
account. On occasion, securities may be purchased directly from the issuer.
Such portfolio securities are generally traded on a net basis and do not
normally involve brokerage commissions. Securities firms may receive
brokerage commissions on certain portfolio transactions, including options,
futures and options on futures transactions and the purchase and sale of
underlying securities upon exercise of options. The Funds have no obligation
to deal with any broker in the execution of transactions in portfolio
securities. The Funds may use affiliates of Credit Suisse 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.

41
<PAGE>

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

In the case of over-the-counter issues, there is generally no stated
commission, but the price usually includes an undisclosed commission or markup,
and the Fund will normally deal with the principal market makers unless it can
obtain better terms elsewhere.

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

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

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

42
<PAGE>

Investment decisions for each Fund and for other investment accounts
managed by BEA Associates are made independently of each other in the light of
differing conditions. However, the same investment decision may be made for two
or more of such accounts. In such cases, simultaneous transactions are
inevitable. Purchases or sales are then averaged as to price and allocated as
to amount according to a formula deemed equitable to each such account. While
in some cases this practice could have a detrimental effect upon the price or
value of the security as far as a Fund is concerned, in other cases it is
believed to be beneficial to a Fund. A Fund will not purchase securities during
the existence of any underwriting or selling group relating to such security of
which BEA Associates or any affiliated person (as defined in the 1940 Act)
thereof is a member except pursuant to procedures adopted by the Company's Board
of Directors pursuant to Rule 10f-3 under the 1940 Act. Among other things,
these procedures, which will be reviewed by the Company's directors as deemed
necessary and appropriate require that the commission paid in connection with
such a purchase be reasonable and fair, that the purchase be at not more than
the public offering price prior to the end of the first business day after the
date of the public offer, and that BEA Associates not participate in or benefit
from the sale to a Fund.

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

During the year ended August 31, 1996, the BEA International Equity
Portfolio paid $3,192,274.36 of brokerage commissions, the BEA Emerging Markets
Equity Portfolio paid $704,909.93 of brokerage commissions and for each other
Fund no brokerage commissions were paid during such period.

The BEA International Equity, the BEA Emerging Markets Equity, the
BEA Global Telecommunications and the BEA High Yield Funds expect that their
annual portfolio turnover rate should not exceed 100% under normal market
conditions. A high rate of portfolio turnover involves correspondingly
greater brokerage commission expenses and other transaction costs, which must
be borne directly by a Fund. Federal income tax laws may restrict the extent
to which a Fund may engage in short term trading of securities. See "Taxes".
Each of the Funds anticipates that its annual portfolio turnover rate will
vary from year to year. The portfolio turnover rate is calculated by
dividing the lesser of a Fund's annual sales or purchases of portfolio
securities (exclusive of purchases or sales of securities whose maturities at
the time of acquisition were one year or less) by the monthly average value
of the securities in the Fund during the year.

43
<PAGE>

has adopted a policy that the Funds will not purchase private placements (i.e.
restricted securities other than Rule 144A securities).

PURCHASE AND REDEMPTION INFORMATION

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

Under the Investment Company Act, a Fund may suspend the right to
redemption or postpone the date of payment upon redemption for any period during
which the New York Stock Exchange, Inc. (the "NYSE") is closed (other than
customary weekend and holiday closings), or during which trading on said
Exchange is restricted, or during which (as determined by the SEC by rule or
regulation) an emergency exists as a result of which disposal or valuation of
Fund securities is not reasonably practicable, or for such other periods as the
SEC may permit. (A Fund may also suspend or postpone the recordation of the
transfer of its shares upon the occurrence of any of the foregoing conditions.)

Recently the staff of the SEC has recommended that the SEC consider
recommending to the United States Congress that the Investment Company Act be
amended to permit so-called "Interval Funds". Such Interval Funds may be
structured to permit redemptions less frequently than daily. In the event that
the SEC administratively or Congress legislatively permits the creation of such
Interval Funds, the Funds may consider appropriate changes in their structures
to conform with such provisions and to recognize the nature of the markets in
foreign securities.

VALUATION OF SHARES

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<PAGE>

foreign markets may be traded in such markets on days which are not Business
Days. Because net asset value per share of each Fund is determined only on
Business Days, the net asset value of shares of a Fund may be significantly
affected on days when an investor does not have access to the Fund. If on any
Business Day a foreign securities exchange or foreign market is closed, the
securities traded on such exchange or in such market will be valued at the last
sale price reported on the previous business day of such foreign exchange or
market. In cases where securities are traded on more than one exchange, the
securities are generally valued on the exchange designated by the Board of
Directors or its delegates as the primary market. Securities traded in the
over-the-counter market and listed on the National Association of Securities
Dealers Automatic Quotation System ("NASDAQ") are valued at the last trade price
listed on the NASDAQ at 4:00 p.m.; securities listed on NASDAQ for which there
were no sales on that day and other over-the-counter securities are valued at
the mean of the bid and asked prices available prior to valuation. Securities
for which market quotations are not readily available are valued at fair value
as determined in good faith by or under the direction of the Company's Board of
Directors. The amortized cost method of valuation may also be used with respect
to debt obligations with sixty days or less remaining to maturity. Any assets
which are denominated in a foreign currency are converted into U.S. dollars at
the prevailing market rates for purposes of calculating net asset value.

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

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

45
<PAGE>

PERFORMANCE AND YIELD INFORMATION

TOTAL RETURN. For purposes of quoting and comparing the performance
of the Funds to that of other mutual funds and to stock or other relevant
indices in advertisements or in reports to shareholders, performance may be
stated in terms of total return. Under the rules of the Securities and Exchange
Commission, funds advertising performance must include total return quotes
calculated according to the following formula:

n
P(1 + T) = ERV

Where: P = a hypothetical initial payment of $1,000

T = average annual total return

n = number of years (1, 5 or 10)

ERV = ending redeemable value at the end of the 1, 5 or 10
year periods (or fractional portion thereof) of a hypothetical $1,000 payment
made at the beginning of the 1, 5 or 10 year periods.

Under the foregoing formula, the time periods used in advertising will
be based on rolling calendar quarters, updated to the last day of the most
recent quarter prior to submission of the advertisement for publication, and
will cover one, five and ten year periods or a shorter period dating from the
effectiveness of the Company's registration statement. In calculating the
ending redeemable value, the maximum sales load is deducted from the initial
$1,000 payment and all dividends and distributions by the Company are assumed to
have been reinvested at net asset value, as described in the Prospectus, on the
reinvestment dates during the period. Total return, or "T" in the formula
above, is computed by finding the average annual compounded rates of return over
the 1, 5 and 10 year periods (or fractional portion thereof) that would equate
the initial amount invested to the ending redeemable value. Any sales loads
that might in the future be made applicable at the time to reinvestments would
be included as would any recurring account charges that might be imposed by the
Company.

46
<PAGE>

representing sales charges. The Fund will, however, disclose the maximum sales
charge and will also disclose that the performance data do not reflect sales
charges and that inclusion of sales charges would reduce the performance quoted.
Such alternative total return information will be given no greater prominence in
such advertising than the information prescribed under SEC rules, and all
advertisements containing performance data will include a legend disclosing that
such performance data represent past performance and that the investment return
and principal value of an investment will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.

Calculated according to the SEC rules for the period beginning on
the commencement of operations and ended August 31, 1996, the average annual
total return for the BEA International Equity (commencing October 1, 1992)
was 8.98% (annualized), the BEA Emerging Markets Equity (commencing February
1, 1993) was 7.63% (annualized) and the BEA High Yield (commencing March 1,
1993) was 7.40% (annualized). For the same period, the aggregate total
return for the Funds was 40.80%, 30.13% and 23.89%, respectively.

Calculated according to the non-standardized computation for the
period beginning on the commencement of operations of each of the BEA
International Equity and the BEA Emerging Markets Equity Fund and ending on
August 31, 1996, the average annual total return for the Funds was 8.98% and
7.63%, respectively. The aggregate total return for the Funds calculated
according to the non-standardized computation for the period beginning on the
commencement of operations of each of the Funds and ending August 31, 1996 was
40.08% and 30.13%, respectively.

YIELD. Certain Funds may also advertise their yield. Under the rules
of the SEC, a Fund advertising yield must calculate yield using the following
formula:

6
YIELD = 2[(a-b +1) - 1]
---
cd

Where: a = dividends and interest earned during the period.

b = expenses accrued for the period (net of reimbursement).

c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.

d = the maximum offering price per share on the last day of
the period.

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<PAGE>

period. For the purpose of determining the interest earned (variable "a" in the
formula) on debt obligations that were purchased by a Fund at a discount or
premium, the formula generally calls for amortization of the discount or
premium; the amortization schedule will be adjusted monthly to reflect changes
in the market values of the debt obligations.

Yield may fluctuate daily and does not provide a basis for determining
future yields. Because the yields will fluctuate, they cannot be compared with
yields on savings account or other investment alternatives that provide an
agreed to or guaranteed fixed yield for a stated period of time. However, yield
information may be useful to an investor considering temporary investments in
money market instruments. In comparing the yield of one money market fund to
another, consideration should be given to each fund's investment policies,
including the types of investments made, lengths of maturities of the portfolio
securities, the method used by each fund to compute the yield (methods may
differ) and whether there are any special account charges which may reduce the
effective yield.

The yields on certain obligations are dependent on a variety of
factors, including general money market conditions, conditions in the particular
market for the obligation, the financial condition of the issuer, the size of
the offering, the maturity of the obligation and the ratings of the issue. The
ratings of Moody's Investors Service and Standard & Poor's Corporation represent
their respective opinions as to the quality of the obligations they undertake to
rate. Ratings, however, are general and are not absolute standards of quality.
Consequently, obligations with the same rating, maturity and interest rate may
have different market prices. In addition, subsequent to its purchase by a
Fund, an issue may cease to be rated or may have its rating reduced below the
minimum required for purchase. In such an event, the Fund's investment adviser
will consider whether the Fund should continue to hold the obligation.

TAXES

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

48
<PAGE>

company taxable income (net taxable investment income and the excess of net
short-term capital gain over net long-term capital loss), if any, for the year
and (ii) at least 90% of its net tax-exempt interest income, if any, for the
year (the "Distribution Requirement"), and (b) satisfies certain other
requirements of the Code that are described below. Distributions of investment
company taxable income and net tax-exempt interest income made during the
taxable year or, under specified circumstances, within twelve months after the
close of the taxable year will satisfy the Distribution Requirement. The
Distribution Requirement for any year may be waived if a regulated investment
company establishes to the satisfaction of the Internal Revenue Service that it
is unable to satisfy the Distribution Requirement by reason of distributions
previously made for the purpose of avoiding liability for Federal excise tax
(discussed below).

In addition to satisfaction of the Distribution Requirement each Fund
must derive at least 90% of its gross income from dividends, interest, certain
payments with respect to securities loans and gains from the sale or other
disposition of stock or securities or foreign currencies, or from other income
derived with respect to its business of investing in such stock, securities, or
currencies (the "Income Requirement") and derive less than 30% of its gross
income from the sale or other disposition of any of the following investments,
if such investments were held for less than three months: (a) stock or
securities (as defined in Section 2(a)(36) of the 1940 Act); (b) options,
futures, or forward contracts (other than options, futures or forward contracts
on foreign currencies); and (c) foreign currencies (or options, futures or
forward contracts on foreign currencies) but only if such currencies (or
options, futures or forward contracts) are not directly related to the regulated
investment company's principal business of investing in stock or securities (or
in options and futures with respect to stocks or securities) (the "Short-Short
Gain Test"). Interest (including accrued original issue discount, "accrued
market discount") received by a Fund at maturity or on disposition of a security
held for less than three months will not be treated as gross income derived from
the sale or other disposition of such security for purposes of the Short-Short
Gain Test. However, any other income which is attributable to realized market
appreciation will be treated as gross income from the sale or other disposition
of securities for this purpose.

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

In addition to the foregoing requirements, at the close of each
quarter of its taxable year, at least 50% of the value of each Fund's assets

49
<PAGE>

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

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

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

Each Fund intends to distribute to shareholders its excess of net
long-term capital gain over net short-term capital loss ("net capital gain"), if
any, for each taxable year. Such gain is distributed as a capital gain dividend
and is taxable to shareholders as long-term capital gain, regardless of the
length of time the shareholder has held his shares, whether such gain was
recognized by the Fund prior to the date on which a shareholder acquired shares
of the Fund and whether the distribution was paid in cash or reinvested in
shares. The aggregate amount of distributions designated by any Fund as capital
gain dividends may not exceed the net capital gain of such Fund for any taxable
year, determined by excluding any net long-term capital loss attributable to
transactions occurring after October 31 of such year and by treating any such
loss as if it arose on the first day of the following taxable year. Such
distributions will be designated as capital gain dividends in a written notice
mailed by the Company to shareholders not later than 60 days after the close of
each Fund's respective taxable year.

50
<PAGE>

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

Investors should note that recent legislative changes made to the Code
have increased the significance of the distinction between capital gain and
ordinary income distributions for some individual investors. Under this
legislation, the maximum marginal rate on ordinary income for individuals,
trusts and estates has nominally been increased only from 28% to 31%. However,
due to the phase-out of personal exemptions and the enactment of limitations on
itemized deductions for individual taxpayers whose adjusted gross income exceeds
certain threshold amounts that depend on the taxpayer's filing status, the
actual maximum marginal rate may be significantly greater. By contrast, the
maximum rate on the net capital gain of individuals, trusts and estates remains
28%. Capital gains and ordinary income of corporate taxpayers will continue to
be taxed at a nominal maximum rate of 34% (an effective marginal rate of 39%
applies in the case of corporations having taxable income between $100,000 and
$335,000). Investors should be aware that any loss realized upon the sale,
exchange or redemption of shares held for six months or less will be treated as
a long-term capital loss to the extent any capital gain dividends have been paid
with respect to such shares.

Corporate taxpayers may be liable for alternative minimum tax, which
is imposed at the rate of 20% of "alternative minimum taxable income" (less, in
the case of corporate shareholders with "alternative minimum taxable income" of
less than $310,000, the applicable "exemption amount"), in lieu of the regular
corporate income tax. "Alternative minimum taxable income" is equal to "taxable
income" (as determined for corporate income regular tax purposes) with certain
adjustments. Although corporate taxpayers in determining "alternative minimum
taxable income" are allowed to exclude exempt interest dividends (other than
exempt interest dividends derived from certain private activity bonds ("AMT
Preference Dividends"), as explained in the Prospectus) and to utilize the 70%
dividends received deduction at the first level of computation, the Code
requires (as a second computational step) that "alternative minimum taxable
income" be increased by 75% of the excess of "adjusted current earnings" over
other "alternative minimum taxable income."

51
<PAGE>

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

Corporate investors should also note that the Superfund Amendments and
Reauthorization Act of 1986 imposes an environmental tax on corporate taxpayers
of 0.14% of the excess of "alternative minimum taxable income" (with certain
modifications) over $2,000,000 for taxable years beginning after 1986 and before
1996, regardless of whether such taxpayers are liable for alternative minimum
tax.

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

The Code imposes a non-deductible 4% excise tax on regulated
investment companies that do not distribute with respect to each calendar year
an amount equal to 98% of their ordinary income for the calendar year plus 98%
of their capital gain net income for the 1-year period ending on October 31 of
such calendar year. The balance of such income must be distributed during the
next calendar year. For the foregoing purposes, a company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year. Because each Fund intends to distribute all of
its taxable income currently, no Fund anticipates incurring any liability for
this excise tax. However, investors should note that a Fund may in certain
circumstances be required to liquidate investments in order to make sufficient
distributions to avoid excise tax liability.

The Company will be required in certain cases to withhold and remit to
the United States Treasury 31% of dividends paid to any shareholder (1) who has
provided either an incorrect tax identification number or no number at all, (2)
who is subject to backup withholding by the Internal Revenue Service for failure
to report the receipt of interest or dividend

52
<PAGE>

income properly, or (3) who has failed to certify to the Company that he is not
subject to backup withholding or that he is an "exempt recipient."

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

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

Certain states exempt from state income taxation dividends paid by a
regulated investment company that are derived from interest on U.S. Government
obligations. Each Fund will accordingly inform its shareholders annually of the
percentage, if any, of its ordinary dividends that is derived from interest on
U.S. Government obligations. Shareholders should consult with their tax
advisers as to the availability and extent of any applicable state income tax
exemption.

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

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

53
<PAGE>

elections provided under the Code and Treasury regulations, but at the present
time the Funds are uncertain which (if any) of these elections they will make.

Because only a few regulations implementing the straddle rules have
been promulgated by the U.S. Treasury, the tax consequences to the Funds of
engaging in options transactions are not entirely clear. Nevertheless, it is
evident that application of the straddle rules may substantially increase or
decrease the amount which must be distributed to shareholders in satisfaction of
the Distribution Requirement (or to avoid Federal excise tax liability) for any
taxable year in comparison to a fund that did not engage in options
transactions. For purposes of the Short-Short Gain Test, current Treasury
regulations provide that (except to the extent that the short sale rules
discussed below would otherwise apply) the straddle rules will have no effect on
the holding period of any straddle position. However, the U.S. Treasury has
announced that it is continuing to study the application of the straddle rules
for this purpose.

OPTIONS AND SECTION 1256 CONTRACTS. The writer of a covered put or
call option generally does not recognize income upon receipt of the option
premium. If the option expires unexercised or is closed on an exchange, the
writer generally recognizes short-term capital gain. If the option is
exercised, the premium is included in the consideration received by the writer
in determining the capital gain or loss recognized in the resultant sale.
However, certain options transactions that the Funds enter into, as well as
futures transactions and transactions in forward foreign currency contracts that
are traded in the interbank market entered into by the Funds, will be subject to
special tax treatment as "Section 1256 contracts." Section 1256 contracts are
treated as if they are sold for their fair market value on the last business day
of the taxable year (i.e., marked-to-market), regardless of whether a taxpayer's
obligations (or rights) under such contracts have terminated (by delivery,
exercise, entering into a closing transaction or otherwise) as of such date. Any
gain or loss recognized as a consequence of the year-end marking-to-market of
Section 1256 contracts is combined (after application of the straddle rules that
are described above) with any other gain or loss that was previously recognized
upon the termination of Section 1256 contracts during that taxable year. The
net amount of such gain or loss for the entire taxable year is generally treated
as 60% long-term capital gain or loss and 40% short-term capital gain or loss,
except in the case of marked-to-market forward foreign currency contracts for
which such gain or loss is treated as ordinary income or loss. Such short-term
capital gain (and, in the case of marked-to-market forward foreign currency
contracts, such ordinary income) would be included in determining the investment
company taxable income of the relevant Fund for purposes of the Distribution
Requirement, even if it were wholly attributable to the year-end
marking-to-market of Section 1256 contracts that the relevant Fund continued to
hold. Investors should also note that Section 1256 contracts will be treated as
having been sold on October 31 in calculating the "required distribution" that a
Fund must make to avoid Federal excise tax liability.

54
<PAGE>

Each of the Funds may elect not to have the year-end marking-to-market
rule apply to Section 1256 contracts that are part of a "mixed straddle" with
other investments of such Fund that are not Section 1256 contracts (the "Mixed
Straddle Election"). It is unclear under present law how certain gain that the
Funds may derive from trading in Section 1256 contracts for which a Mixed
Straddle Election is not made will be treated for purposes of the "Short-Short
Gain Test." The Funds may seek a ruling from the Internal Revenue Service in
order to resolve this issue.

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

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

55
<PAGE>

the foregoing tax consequences, a Fund may elect to have its investment in any
PFIC taxed as an investment in a "qualified electing fund" ("QEF"). A Fund
making a QEF election would be required to include in its income each year a
ratable portion, whether or not distributed, of the ordinary earnings and net
capital gain of the QEF. Any such QEF inclusions would have to be taken into
account by a Fund for purposes of satisfying the Distribution Requirement and
the excise tax distribution requirement.

The Internal Revenue Service has proposed regulations that would
permit a Fund to elect (in lieu of paying deferred tax or making a QEF election)
to mark-to-market annually any PFIC shares that it owned and to include any
gains (but not losses) that it was deemed to realize as ordinary income. A Fund
generally would not be subject to deferred Federal income tax on any gains that
it was deemed to realize as a consequence of making a mark-to-market election,
but such gains would be taken into account by the Fund for purposes of
satisfying the Distribution Requirement and the excise tax distribution
requirement. The proposed regulations would generally apply only prospectively,
to taxable years ending after their promulgation as final regulations.

SHORT-SHORT GAIN TEST. Because of the Short-Short Gain Test, the
Funds may have to limit the sale of appreciated (but not depreciated) securities
that they have held for less than three months. The short sale of (including
for this purpose the acquisition of a put option on) (1) securities held on the
date of the short sale or acquired after the short sale and on or before the
date of closing thereof or (2) securities which are "substantially identical" to
securities held on the date of the short sale or acquired after the short sale
and on or before the date of the closing thereof may reduce the holding period
of such securities for purposes of the Short-Short Gain Test.

Any increase in value of a position that is part of a "designated
hedge" will be offset by any decrease in value (whether realized or not) of the
offsetting hedging position during the period of such hedge for purposes of the
Short-Short Gain Test. Thus, only the net gain (if any) from the designated
hedge will be included in gross income for purposes of the Short-Short Gain
Test. Each of the Funds anticipates engaging in hedging transactions that
qualify as designated hedges. However, because of the failure of the U.S.
Treasury to promulgate regulations as authorized by the Code, it is not clear at
the present time whether this treatment will be available to all of the Funds'
hedging transactions. To the extent the Funds' transactions do not qualify as
designated hedges, the Funds' investments in short sales, options or other
transactions may be limited.

56
<PAGE>

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

ADDITIONAL INFORMATION CONCERNING FUND SHARES

57
<PAGE>

classified as Class EE Common Stock, 50 million shares are classified as
Class FF Common Stock (n/i Micro Cap), 50 million shares are classified as
Class GG Common Stock (n/i Growth), 50 million shares are classified as Class
HH Common Stock (n/i Growth & Value), 100 million shares are classified as
Class II Common Stock (BEA Investor International), 100 million shares are
classified as Class JJ Common Stock (BEA Investor Emerging), 100 million
shares are classified as Class KK Common Stock (BEA Investor High Yield), 100
million shares are classified as Class LL Common Stock (BEA Investor Global
Telecom), 100 million shares are classified as Class MM Common Stock (BEA
Advisor International), 100 million shares are classified as Class NN Common
Stock (BEA Advisor Emerging), 100 million shares are classified as Class OO
Common Stock (BEA Advisor High Yield), 100 million shares are classified as
Class PP Common Stock (BEA Advisor Global Telecom), 100 Million shares are
classified as Class QQ Common Stock (Boston Partners Institutional Large
Cap), 100 Million Shares are classified as Class RR Common Stock (Boston
Partners Investor Large Cap), 100 Million Shares are Classified as Class SS
Common Stock (Boston Partners Advisor Large Cap), 700 million shares are
classified as Class Janney Montgomery Money Common Stock, 200 million shares
are classified as Class Janney Montgomery Municipal Money Common Stock, 500
million shares are classified as Class Janney Montgomery Government
Obligations Money Common Stock, 100 million shares are classified as Class
Janney Montgomery Municipal Money Common Stock, 1 million shares are
classified as Class Beta 1 Common Stock (Money), 1 million shares are
classified as Class Beta 2 Common Stock (Municipal Money), 1 million shares
are classified as Class Beta 3 Common Stock (U.S. Government Money), 1
million shares are classified as Class Beta 4 Common Stock (N.Y. Money), 1
million shares are classified as Gamma 1 Common Stock (Money), 1 million
shares are classified as Gamma 2 Common Stock (Municipal Money), 1 million
shares are classified as Gamma 3 Common Stock (U.S. Government Money), 1
million shares are classified as Gamma 4 Common Stock (N.Y. Money), 1 million
shares are classified as Delta 1 Common Stock (Money), 1 million shares are
classified as Delta 2 Common Stock (Municipal Money), 1 million shares are
classified as Delta 3 Common Stock (U.S. Government Money), 1 million shares
are classified as Delta 4 Common Stock (N.Y. Money), 1 million shares are
classified as Epsilon 1 Common Stock (Money), 1 million shares are classified
as Epsilon 2 Common Stock (Municipal Money), 1 million shares are classified
as Epsilon 3 Common Stock (U.S. Government Money), 1 million shares are
classified as Epsilon 4 Common Stock (N.Y. Money), 1 million shares are
classified as Zeta 1 Common Stock (Money), 1 million shares are classified as
Zeta 2 Common Stock (Municipal Money), 1 million shares are classified as
Zeta 3 Common Stock (U.S. Government Money), 1 million shares are classified
as Zeta 4 Common Stock (N.Y. Money), 1 million shares are classified as Eta 1
Common Stock (Money), 1 million shares are classified as Eta 2 Common Stock
(Municipal Money), 1 million shares are classified as Eta 3 Common Stock
(U.S. Government Money), 1 million shares are classified as Eta 4 Common
Stock (N.Y. Money), 1 million shares are classified as Theta 1 Common Stock
(Money), 1 million shares are classified as Theta 2 Common Stock (Municipal
Money), 1 million shares are classified as Theta 3 Common Stock (U.S.
Government Money), and 1 million shares are classified as Theta 4 Common
Stock (N.Y. Money). Shares of the Class MM, NN, OO and PP Common Stock
constitute the BEA Advisor classes. Under the Company's charter, the Board
of Directors has the power to classify or reclassify any unissued shares of
Common Stock from time to time.

58
<PAGE>

The classes of Common Stock have been grouped into sixteen separate
"families": the RBB Family, the Cash Preservation Family, the Sansom Street
Family, the Bedford Family, the Bradford Family, the BEA Family, the Janney
Montgomery Scott Money Family, the n/i Family, Boston Partners Family, the
Beta Family, the Gamma Family, the Delta Family, the Epsilon Family, the Zeta
Family, the Eta Family and the Theta Family. The RBB Family represents
interests in one non-money market portfolio as well as the Money Market and
Municipal Money Market Portfolios; the Cash Preservation Family represents
interests in the Money Market and Municipal Money Market Portfolios; the
Sansom Street Family represents interests in the Money Market, Municipal
Money Market and Government Obligations Money Market Portfolios; Bedford
Family represents interests in the Money Market, Municipal Money Market,
Government Obligations Money Market and New York Municipal Money Market
Portfolios; the Bradford Family represents interests in the Municipal Money
Market and Government Obligations Money Market Portfolios; the BEA Funds
represents interests in ten non-money market portfolios; the n/i Family
represents interests in three non-money market portfolios; the Boston Partners
Family represents interests in one non-money market portfolio; the Janney
Montgomery Scott Family and the Beta, Gamma, Delta, Epsilon, Zeta, Eta and
Theta Families represent interests in the Money Market, Municipal Money
Market, Government Obligations Money Market and New York Municipal Money
Market Portfolios.

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

As stated in the Prospectus, holders of shares of each class of the
Company will vote in the aggregate and not by class on all matters, except where
otherwise required by law. Further, shareholders of the Company will vote in
the aggregate and not by portfolio except as otherwise required by law or when
the Board of Directors determines that the matter to be voted upon affects only
the interests of the shareholders of a particular portfolio. Rule 18f-2 under
the Investment Company Act provides that any matter required to be submitted by
the provisions of such Act or applicable state law, or otherwise, to the holders
of the outstanding securities of an investment company such as the Company shall
not be deemed to have been effectively acted upon unless approved by the holders
of a majority of the outstanding shares of each portfolio affected by the
matter. Rule 18f-2 further provides that a portfolio shall be deemed to be
affected by a matter unless it is clear that the interests of each portfolio in
the matter are identical or that the matter does not affect any interest of the
Fund. Under the Rule, the approval of an investment advisory agreement or any
change in a fundamental investment policy would be effectively acted upon with
respect to a portfolio only if approved by the holders of a majority of the
outstanding voting securities of such portfolio. However, the Rule also
provides that the ratification of the selection of independent public

59
<PAGE>

accountants, the approval of principal underwriting contracts and the election
of directors are not subject to the separate voting requirements and may be
effectively acted upon by shareholders of an investment company voting without
regard to portfolio.

Notwithstanding any provision of Maryland law requiring a greater vote
of shares of the Company's common stock (or of any class voting as a class) in
connection with any corporate action, unless otherwise provided by law, (for
example by Rule 18f-2 discussed above) or by the Company's Articles of
Incorporation, the Company may take or authorize such action upon the favorable
vote of the holders of more than 50% of all of the outstanding shares of Common
Stock voting without regard to class (or portfolio).

MISCELLANEOUS

COUNSEL. The law firm of Ballard Spahr Andrews & Ingersoll, 1735
Market Street, 51st Floor, Philadelphia, Pennsylvania 19103 serves as counsel to
RBB and PFPC. The law firm of Drinker Biddle & Reath, 1100 Philadelphia
National Bank Building, Broad and Chestnut Streets, Philadelphia, Pennsylvania
19107, serves as counsel to the Company's independent directors.

INDEPENDENT ACCOUNTANTS. Coopers & Lybrand L.L.P., 2400 Eleven Penn
Center, Philadelphia, Pennsylvania 19103, serves as the Company's independent
accountants. No financial statements appear in this Statement of Additional
Information because, as of the date hereof, the Advisor Class had no performance
history.

Control Persons. As of October 1, 1996, to the Company's knowledge,
the following named persons at the addresses shown below owned of record
approximately 5% or more of the total outstanding shares of the class of the
Company indicated below. See "Additional Information Concerning Fund Shares"
above. the Company does not know whether such persons also beneficially own
such shares.

60
<PAGE>

FUND NAME AND ADDRESS PERCENT OWNED
- ---- ---------------- -------------

RBB Money Market Luanne M. Garvey and Robert J. 11.2
Portfolio Garvey
(Class E) 2729 Woodland Avenue
Trooper, PA 19403

Harold T. Erfer 12.2
414 Charles Lane
Wynnewood, PA 19096

Karen M. McElhinny and 15.8
Contribution Account
4943 King Arthur Drive
Erie, PA 16506

John Robert Estrada and 22.5
Shirley Ann Estrada
1700 Raton Drive
Arlington, TX 76018

Eric Levine and Linda & Howard 27.6
Levine
67 Lanes Pond Road
Howell, NJ 07731

RBB Municipal Money William B. Pettus Trust 11.4
Market Portfolio Augustine W. Pettus Trust
(Class F) 827 Winding Path Lane
St. Louis, MO 63021-6635

Seymour Fein 88.6
P.O. Box 486
Tremont Post Office
Bronx, NY 10457-0486

Cash Preservation Money Jewish Family and Children's 56.8
Market Portfolio Agency of Philadelphia
(Class G) Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103

Lynda R. Succ Trustee for in 12.4
Trust under The Lynda R. Campbell
Caring Trust
935 Rutger Street
St. Louis, MO 63104

Theresa M. Palmer 7.8
5731 N. 4th Street
Philadelphia, PA 19120

61
<PAGE>

FUND NAME AND ADDRESS PERCENT OWNED
- ---- ---------------- -------------

Cash Preservation Kenneth Farwell and Valerie 10.8
Municipal Money Market Farwell Jt. Ten
Portfolio 3854 Sullivan
(Class H) St. Louis, MO 63107

Gary L. Lange and 15.2
Susan D. Lange JTTEN
13 Muirfield Ct North
St. Charles, MO 63309

Andrew Diederich and Doris 5.9
Diederich
1003 Lindenman
Des Peres, MO 63131

Marcella L. Haugh Caring Tr Dtd 14.8
8/12/91
40 Plaza Square
Apt. 202
St. Louis, MO 63101

Emil Hunter and Mary J. Hunter 7.5
428 W. Jefferson
Kirkwood, MO 63122

Gwendoyln Haynes 5.1
2757 Geyer
St. Louis, MO

Sansom Street Money Wasner & Co. 20.1
Market Portfolio FAO Paine Webber and Managed
(Class I) Assets Sundry Holdings
Attn: Joe Domizio
200 Stevens Drive
Lester, PA 19113

Saxon and Co. 73.3
FBO Paine Webber
P.O. Box 7780 1888
Philadelphia, PA 19182

Robertson Stephens & Co. 6.5
FBO Exclusive Benefit Investors
c/o Eric Moore
555 California Street/No. 2600
San Francisco, CA 94101

Bradford Municipal J.C. Bradford & Co. 100
Money (Class R) 330 Commerce Street
Nashville, TN 37201

62
<PAGE>

FUND NAME AND ADDRESS PERCENT OWNED
- ---- ---------------- -------------

Bradford Government J.C. Bradford & Co. 100
Obligations Money 330 Commerce Street
(Class S) Nashville, TN 37201

BEA International Blue Cross & Blue Shield of 5.1
Equity Massachusetts Inc.
(Class T) Retirement Income Trust
100 Summmer Street
Boston, MA 02310

Invest Comm of MAFCO Hold Inc. MT 5.0
625 Madison Ave., 4th Floor
New York, NY 10022

BEA High Yield Temple Inland Master Retirement 10.2
Portfolio Trust
(Class U) 303 South Temple Drive
Diboll, TX 75941

Guenter Full Trst Michelin North 16.7
America Inc.
Master Trust
P. O. Box 19001
Greenville, SC 29602-9001

Flour Corporation Master 9.4
Retirement Trust
2383 Michelson Drive
Irvine, CA 92730

C S First Boston Pension Fund 10.0
Park Avenue Plaza, 34th Floor
55 E. 52nd Street
New York, NY 10055
Attn: Steve Medici

SC Johnson & Son, Inc. Retirement 13.3
Plan
1525 Howe Street
Racine, WI 53403

GCIV Employer Retirement Fund 6.3
8650 Flair Drive
E. Monte, CA 96731-3011

BEA Emerging Markets Wachovia Bank North Carolina 15.7
Equity Portfolio Trust for Carolina Power & Light
(Class V) Co. Supplemental Retirement Trust
301 N. Main Street
Winston-Salem, NC 27101

63
<PAGE>

FUND NAME AND ADDRESS PERCENT OWNED
- ---- ---------------- -------------

Wachovia Bank of North Carolina 5.4
And For Fleming Companies Inc.
TRST _______ Pension Trust
307 North Main 3099 Street
Winston, Salem, NC 27150

Hall Family Foundation 30.5
P.O. Box 419580
Kansas City, MO 64208

Arkansas Public Emploees 10.8
Retirement System
124 W. Capitol Avenue
Little Rock, AR 72201

Northern Trust 12.9
Trustee for Pillsbury
P.O. Box 92956
Chicago, IL 60675

Amherst H. Wilder Foundation 5.9
919 Lafond Avenue
St. Paul, MN 55104

BEA US Core Equity Bank of New York 45.3
Portfolio Trust APU Buckeye Pipeline
(Class X) One Wall Street
New York, NY 10286

Werner & Pfleiderer Pension 7.5
Plan Employees
663 E. Crescent Avenue
Ramsey, NJ 07446

Washington Hebrew Congregation 11.1
3935 Macomb St. NW
Washington, DC 20016

Shamut Bank 6.3
TRST Hospital St. Raphael
Malpractice TR
Attn: DCRF Actions
P.O. Box 92800
Rochester, NY 14692-8900

BEA US Core Fixed New England UFCW & Employers' 24.5
Income Portfolio Pension Fund Board of Trustees
(Class Y) 161 Forbes Road, Suite 201
Braintree, MA 02184

64
<PAGE>

FUND NAME AND ADDRESS PERCENT OWNED
- ---- ---------------- -------------

W.M. Burke Rehabilitation 5.4
Hospital Inc.
Burke Employees Pension Plan
795 Mamaroneck Avenue
White Plains, NY 10605

Patterson & Co. 8.9
P.O. Box 7829
Philadelphia, PA 19102

MAC & Co 6.9
FAO 176-655
ROBF1766552
Mutual Funds Operations
P. O. Box 3198
Pittsburgh, PA 15230-3198

Bank of New York 9.6
Trst Fenway Partners Master Trust
One Wall Street, 12th floor
New York, NY 10286

Citibank NA 12.8
Trst CS First Boston Corp Emp S/P
Attn: Sheila Adams
111 Wall Street, 20th floor Z 1
New York, NY 10043

BEA Global Fixed Income Sunkist Master Trust 36.0
Portfolio (Class Z) 14130 Riverside Drive
Sherman Oaks, CA 91423

Patterson & Co. 25.7
P. O. Box 7829
Philadelphia, PA 19101

Key Trust Co. of Ohio 20.8
FBO Eastern Enterp. Collective
Inv. Trust
P.O. Box 901536
Cleveland, OH 44202-1559

Mary E. Morten 6.2
C/O Credit Suisse New York
12 E. 49th Street, 40th Floor
New York, NY 10017
Attn: Portfolio Management

BEA Municipal Bond Fund William A. Marquard 37.4
Portfolio 2199 Maysville Rd.
(Class AA) Carlisle, KY 40311

65
<PAGE>

FUND NAME AND ADDRESS PERCENT OWNED
- ---- ---------------- -------------

Arnold Leon 12.5
c/o Fiduciary Trust Company
P.O. Box 3199
Church Street Station
New York, NY 10008

Irwin Bard 6.2
1750 North East 183rd St. North
Miami Beach, FL 33160

Matthew M. Sloves and Diane 5.7
Decker Sloves
Tenants in Common
1304 Stagecoach Road, S.E.
Albuquerque, NM 87123

n/i Micro Cap Fund Charles Schwab & Co. Inc. 12.8
(Class FF) Special Custody Account for the
Exclusive Benefit of Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94101

Chase Manhattan Bank 30.5
Trst Collins Group Trust
940 Newport Center Drive
Newport Beach, CA 92660

Currie & Co. 6.4
c/o Fiduciary Trust Co. Intl
P. O. Box 3199
Church Street Station
New York, NY 10008

Bruce Feizer 5.3
TRST JEF Memorial Ranch Account
P.O. Box 117
Vicksburg, MI 49097

n/i Growth Fund Charles Schwab & Co. Inc. 20.7
(Class GG) Special Custody Account for the
Exclusive Benefit of Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94101

66
<PAGE>

FUND NAME AND ADDRESS PERCENT OWNED
- ---- ---------------- -------------

U S Equity Investment Portfolio LP 22.7
c/o Asset Management Advisors Inc.
1001 N. US Hwy
Suite 800
Jupiter, FL 33447

Bank of New York 10.2
Trst Sunkist Growers Inc.
14130 Riverside Drive
Sherman Oaks, CA 91423-2392

n/i Growth and Value Charles Schwab & Co. Inc. 31.6
Fund (Class HH) Special Custody Account for the
Exclusive Benefit of Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104

Janney Montgomery Scott Janney Montgomery Scott 100
Money Market Portfolio 1801 Market Street
(Class Janney Money Philadelphia, PA 19103-1675
Market)

Janney Montgomery Scott Janney Montgomery Scott 100
Municipal Money Market 1801 Market Street
Portfolio Philadelphia, PA 19103-167
(Class Janney Municipal
Money Market)

Janney Montgomery Scott Janney Montgomery Scott 100
Government Obligations 1801 Market Street
Money Market Portfolio Philadelphia, PA 19103-1675
(Class Janney
Government Obligations
Money)

Janney Montgomery Scott Janney Montgomery Scott 100
New York Municipal 1801 Market Street
Money Market Portfolio Philadelphia, PA 19103-1675
(Class Janney N.Y.
Municipal Money)

As of the above date, directors and officers as a group owned less than one
percent of the shares of RBB.

LITIGATION. There is currently no material litigation affecting the
Company.

67
<PAGE>

FINANCIAL STATEMENTS. No financial statements are supplied for the
Advisor Classes of the Funds because, as of the date of the Prospectus and this
Statement of Additional Information, the Advisor Classes of the Funds had no
operating history. Financial statements are provided for the Institutional
Classes of the Funds representing interests in the BEA International Equity, BEA
Emerging Markets Equity and the BEA High Yield Equity.

68
<PAGE>
APPENDIX

CORPORATE LONG-TERM DEBT RATINGS

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

"AAA" -- This designation represents the highest rating assigned by Standard &
Poor's to a debt obligation and indicates an extremely strong capacity to pay
interest and repay principal.

"AA" -- Debt is considered to have a very strong capacity to pay interest and
repay principal and differs from "AAA" issues only in small degree.

"A" -- Debt is considered to have a strong capacity to pay interest and repay
principal although such issues are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt in
higher-rated categories.

"BBB" -- Debt is regarded as having an adequate capacity to pay interest and
repay principal. Whereas such issues normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher-rated categories.

"BB," "B," and "CCC" -- Debt that possesses one of these ratings is regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of the obligation. "BB"
indicates the lowest degree of speculation and "CCC" the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.

"CC" -- This rating is reserved for issues that are currently in arrears on
dividends or sinking fund payments but that are currently paying.

"C" -- This rating is reserved for income bonds on which no interest is being
paid.

"D" -- Debt is in default, and payment of interest and/or repayment of principal
is in arrears.

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

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

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

A-1
<PAGE>
"Aa" -- Bonds are judged to be of high quality by all standards. Together with
the "Aaa" group they comprise what are generally known as high grade bonds. They
are rated lower than the best bonds because margins of protection may not be as
large as in "Aaa" securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the long-
term risks appear somewhat larger than in "Aaa" securities.

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

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

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

Moody's applies numerical modifiers 1, 2 and 3 in each generic classification
from "Aa" to "B" in its bond rating system. The modifier 1 indicates that the
company ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks
at the lower end of its generic rating category.

A-2
<PAGE>

B E A

INSTITUTIONAL FUNDS

INTERNATIONAL EQUITY FUND

EMERGING MARKETS EQUITY FUND

U.S. CORE EQUITY FUND

BALANCED FUND

U.S. CORE FIXED INCOME FUND

STRATEGIC GLOBAL FIXED INCOME FUND

HIGH YIELD FUND

MUNICIPAL BOND FUND

SHORT DURATION FUND

PROSPECTUS - OCTOBER 15, 1996

<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Annual Fund Operating Expenses......................................................................... 2
Financial Highlights................................................................................... 4
The Company............................................................................................ 10
Investment Objectives and Policies..................................................................... 10
Investment Limitations................................................................................. 21
Risk Factors........................................................................................... 21
Management............................................................................................. 23
Expenses............................................................................................... 26
How to Purchase Shares................................................................................. 27
How to Redeem Shares................................................................................... 28
Net Asset Value........................................................................................ 29
Dividends and Distributions............................................................................ 29
Taxes.................................................................................................. 29
Multi-Class Structure.................................................................................. 32
Description of Shares.................................................................................. 32
Other Information...................................................................................... 33
</TABLE>

i
<PAGE>
BEA INSTITUTIONAL FUNDS

THE BEA INSTITUTIONAL FUNDS CONSISTS OF NINE CLASSES OF COMMON STOCK OF THE RBB
FUND, INC. (THE "COMPANY"), AN OPEN-END MANAGEMENT INVESTMENT COMPANY. SHARES
(COLLECTIVELY, THE "INSTITUTIONAL SHARES" OR "SHARES") OF SUCH CLASSES (THE
"INSTITUTIONAL CLASSES" OR "CLASSES") ARE OFFERED BY THIS PROSPECTUS AND
REPRESENT INTERESTS IN ONE OF THE NINE OF THE INVESTMENT PORTFOLIOS OF THE
COMPANY DESCRIBED IN THIS PROSPECTUS (COLLECTIVELY, THE "FUNDS"). THE INVESTMENT
OBJECTIVE OF EACH FUND DESCRIBED IN THIS PROSPECTUS IS AS FOLLOWS:

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

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

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

BEA BALANCED FUND -- seeks to maximize total return consistent with
preservation of capital through both income and capital appreciation.

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

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

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

BEA SHORT DURATION FUND -- seeks 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 Fund's investment objective
will be achieved. Investments in the Funds involve certain risks. See "Risk
Factors."

THE BEA HIGH YIELD FUND 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 FUNDS. SEE "RISK FACTORS."

Generally, the minimum initial investment in the BEA Institutional Funds is
$3,000,000 and the minimum subsequent investment is $100,000.

SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENTS IN SHARES OF THE FUNDS INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.

PROSPECTUS OCTOBER 15, 1996

<PAGE>

ANNUAL OPERATING EXPENSES (AFTER WAIVERS(1)(3))

<TABLE>
<CAPTION>
BEA BEA
BEA EMERGING U.S. CORE
INTERNATIONAL MARKETS BEA U.S. BEA FIXED
EQUITY EQUITY CORE EQUITY BALANCED INCOME
FUND FUND FUND FUND FUND
------------- -------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Management fees
(after waivers)(2)............................... .80% 1.00% .54% .50% .26%
Other Expenses
(after waivers).................................. .39% .49% .46% .40% .24%
--- --- --- --- ---
Total Fund
Operating Expenses (after waivers)............... 1.19% 1.49% 1.00% .90% .50%
--- --- --- --- ---
--- --- --- --- ---
</TABLE>

<TABLE>
<CAPTION>
BEA
STRATEGIC BEA BEA
GLOBAL FIXED HIGH BEA SHORT
INCOME YIELD MUNICIPAL DURATION
FUND FUND BOND FUND FUND
------------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Management fees
(after waivers)(2)............................... .33% .45% .40% .15%
Other Expenses
(after waivers).................................. .42% .25% .60% .40%
--- --- --- ---
Total Fund
Operating Expenses (after waivers)............... .75% .70% 1.00% .55%
--- --- --- ---
--- --- --- ---
</TABLE>

- ------------------------
(1) The operating expenses for the Funds are based on actual expenses for the
year ended August 31, 1996.

(2) Management fees are each based on average daily net assets and are
calculated daily and paid monthly.

(3) Before expense waivers, Management Fees would be .80%, 1.00%, .75%, .60%,
.375%, .50%, .70%, .70% and .15% for the BEA International Equity, the BEA
Emerging Markets Equity, the BEA U.S. Core Equity, the BEA Balanced, the BEA
U.S. Core Fixed Income, the BEA Strategic Global Fixed Income, the BEA High
Yield, the BEA Municipal Bond and the BEA Short Duration Funds,
respectively. Other Expenses would be .42%, .62%, .59%, .54%, .405%, .57%,
.41%, .72%, .45% for the BEA International Equity, the BEA Emerging Markets
Equity, the BEA U.S. Core Equity, the BEA Balanced, the BEA U.S. Core Fixed
Income, the BEA Strategic Global Fixed Income, the BEA High Yield, the BEA
Municipal Bond and the BEA Short Duration Funds, respectively and Total Fund
Operating Expenses would be 1.22%, 1.62%, 1.34%, 1.14%, .78%, 1.07%, 1.11%,
1.42% and .60% for the BEA International Equity, the BEA Emerging Markets
Equity, the BEA U.S. Core Equity, the BEA Balanced, the BEA U.S. Core Fixed
Income, the BEA Global Fixed Income, the BEA High Yield, the BEA Municipal
Bond and the BEA Short Duration Funds, respectively.

2
<PAGE>
- --------------------------------------------------------------------------------

EXAMPLE

An investor would pay the following expenses on a $1,000 investment in each of
the Funds, assuming (1) a 5% annual return, and (2) redemption at the end of
each time period.

<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
------ ------ ------- -------
<S> <C> <C> <C> <C>
BEA International Equity Fund......................................... $12 $38 $ 65 $144
BEA Emerging Markets Equity Fund...................................... $15 $47 $ 81 $178
BEA U.S. Core Equity Fund............................................. $10 $32 $ 55 $122
BEA Balanced Fund..................................................... $ 9 $29 N/A N/A
BEA U.S. Core Fixed Income Fund....................................... $ 5 $16 $ 28 $ 63
BEA Strategic Global Fixed Income Fund................................ $ 8 $24 $ 42 $ 93
BEA High Yield Fund................................................... $ 9 $28 $ 49 $108
BEA Municipal Bond Fund............................................... $10 $32 $ 55 $122
BEA Short Duration Fund............................................... $ 6 $18 N/A N/A
<FN>
- ------------------------
</TABLE>

The Example in this fee table assumes that all dividends and distributions are
reinvested and that the amounts listed under "Annual Fund Operating Expenses
After 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.

This fee table is designed to assist an investor in understanding the various
costs and expenses that an investor in each of the Funds 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 Funds as of August 31, 1996, except for the BEA High Yield Fund which has
been restated to reflect anticipated fees for the current fiscal year. Actual
expenses may be greater or less than such costs and fees of the Institutional
Shares. This fee table reflects waiver of Management and Administration Fees
equal to .03%, .13%, .34%, .24%, .28%, .32%, .23%, .42% and .05% for the BEA
International Equity, the BEA Emerging Markets Equity, the BEA U.S. Core Equity,
the BEA Balanced, the BEA U.S. Core Fixed Income, the BEA Strategic Global Fixed
Income, the BEA High Yield, the BEA Municipal Bond Fund and the BEA Short
Duration Funds 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 this fee table. To the extent any service providers assume
additional expenses of any Fund, such assumption of additional expenses will
have the effect of lowering a Fund's overall expense ratio and increasing its
return to investors.

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

3
<PAGE>
FINANCIAL HIGHLIGHTS

The tables below set forth certain information concerning the investment results
of the BEA Institutional Classes representing interests in the BEA International
Equity, the BEA Emerging Markets Equity, the BEA High Yield, the BEA U.S. Core
Fixed Income, the BEA Strategic Global Fixed Income, and the BEA Municipal Bond
Funds for each of the periods indicated. The financial data included in this
table for each of the periods ended August 31, 1996, August 31, 1995, August 31,
1994 and August 31, 1993 are a part of the Company's Financial Statements for
each of the above Funds which have been audited by Coopers & Lybrand L.L.P., the
Company'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. Financial Highlights are not available for the BEA Institutional
classes representing interests in the BEA Balanced Fund and the BEA Short
Duration Fund because, as of the date of this Prospectus such Funds had no
operating history.

BEA INSTITUTIONAL FUNDS OF
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
BEA INTERNATIONAL EQUITY FUND
-----------------------------------------------------------------------------
FOR THE PERIOD
FOR THE FOR THE FOR THE OCTOBER 1, 1992*
YEAR ENDED YEAR ENDED YEAR ENDED TO
AUGUST 31, 1996 AUGUST 31, 1995 AUGUST 31, 1994 AUGUST 31, 1993
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 18.24 $ 20.73 $ 18.73 $ 15.00
----------------- ----------------- ----------------- -----------------
Income from investment operations
Net investment income (loss)... 0.19 0.06 0.05 0.04
Net gain (loss) on securities
(both realized and
unrealized)................... 1.05 (1.75) 2.60 3.69
----------------- ----------------- ----------------- -----------------
Total from investment
operations.................... 1.24 (1.69) 2.65 3.73
----------------- ----------------- ----------------- -----------------
Less Distributions
Dividends from net investment
income........................ (0.07) -- (0.05) --
Distributions from capital
gains......................... -- (0.80) (0.60) --
----------------- ----------------- ----------------- -----------------
Total distributions............ (0.07) (0.80) (0.65) --
----------------- ----------------- ----------------- -----------------
Net asset value, end of
period........................ $ 19.41 $ 18.24 $ 20.73 $ 18.73
----------------- ----------------- ----------------- -----------------
----------------- ----------------- ----------------- -----------------
Total return....................... 6.81%(d) (8.06%)(d) 14.23%(d) 24.87%(c)(d)
Ratio/Supplemental Data
Net assets, end of period...... $ 682,270,801 $ 773,254,630 $ 767,189,791 $ 268,403,524
Ratio of expenses to average
net assets.................... 1.19%(a) 1.25%(a) 1.25%(a) 1.25%(a)(b)
Ratio of net investment income
(loss) to average net
assets........................ 0.84% 0.35% 0.33% 0.41%(b)
Portfolio turnover rate........ 86% 78% 104% 106%(c)
Average commission rate(e)..... $ .0007 N/A N/A N/A
</TABLE>

(a) Without the voluntary waiver of advisory fees and administration fees, the
ratios of expenses to average net assets for the BEA International Equity
Fund would have been 1.22%, 1.26%, 1.30% for the years ended August 31,
1996, 1995 and 1994, respectively and 1.46% annualized for the period ended
August 31, 1993.

(b) Annualized.

(d) Redemption fees not reflected in total return.

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

* Commencement of operations.

4
<PAGE>
BEA INSTITUTIONAL FUNDS OF
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
BEA EMERGING MARKETS EQUITY FUND
---------------------------------------------------------------------
FOR THE PERIOD
FOR THE FOR THE FOR THE FEBRUARY 1,
YEAR ENDED YEAR ENDED YEAR ENDED 1993* TO
AUGUST 31, 1996 AUGUST 31, 1995 AUGUST 31, 1994 AUGUST 31, 1993
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 17.67 $ 24.58 $ 18.38 $ 15.00
--------------- --------------- --------------- ---------------
Income from investment operations
Net investment income (loss)... 0.10 0.02 (0.03) 0.02
Net gain (loss) on securities
(both realized and
unrealized)................... 0.48 (5.94) 6.64 3.36
--------------- --------------- --------------- ---------------
Total from investment
operations.................... 0.58 (5.92) 6.61 3.38
--------------- --------------- --------------- ---------------
Less Distributions
Dividends from net investment
income........................ (0.05) (0.07) (0.09) --
Distributions from capital
gains......................... -- (0.92) (0.32) --
--------------- --------------- --------------- ---------------
Total distributions............ (0.05) (0.99) (0.41) --
--------------- --------------- --------------- ---------------
Net asset value, end of
period........................ $ 18.20 $ 17.67 $ 24.58 $ 18.38
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
Total return....................... 3.33%(d) (24.42%)(d) 35.99%(d) 22.53%(c)(d)
Ratio/Supplemental Data
Net assets, end of period...... $ 114,691,209 $ 128,322,563 $ 140,675,379 $ 21,988,062
Ratio of expenses to average
net assets.................... 1.49%(a) 1.50%(a) 1.50%(a) 1.50%(a)(b)
Ratio of net investment income
(loss) to average net
assets........................ 0.63% 0.02% (0.02)% 0.28%(b)
Portfolio turnover rate........ 79% 79% 54% 38%(c)
Average commission rate(e)..... $ .0005 N/A N/A N/A
</TABLE>

(a) Without the voluntary waiver of advisory fees and administration fees and
without the reimbursement of operating expenses the ratios of expenses to
average net assets for the BEA Emerging Markets Equity Fund would have been
1.62%, 1.61%, and 2.01% for the years ended August 31, 1996, 1995, and 1994,
respectively and 3.23% annualized for the period ended August 31, 1993.

(b) Annualized.

(d) Redemption fees not reflected in total return.

* Commencement of operations.

5
<PAGE>
BEA INSTITUTIONAL FUNDS OF
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
BEA U.S. CORE EQUITY FUND
--------------------------------- BEA U.S. CORE FIXED INCOME FUND
---------------------------------------------------
FOR THE PERIOD FOR THE PERIOD
FOR THE SEPTEMBER 1, FOR THE FOR THE APRIL 1, 1994*
YEAR ENDED 1994* TO YEAR ENDED YEAR ENDED TO
AUGUST 31, 1996 AUGUST 31, 1995 AUGUST 31, 1996 AUGUST 31, 1995 AUGUST 31, 1994
--------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 17.86 $ 15.00 $ 15.42 $ 14.77 $ 15.00
--------------- --------------- --------------- --------------- ---------------
Income from investment operations
Net investment income.......... 0.20 0.22 0.95 0.88 0.42
Net gain (loss) on securities
(both realized and
unrealized)................... 2.81 2.72 (0.16) 0.61 (0.40)
--------------- --------------- --------------- --------------- ---------------
Total from investment
operations.................... 3.01 2.94 0.79 1.49 0.02
--------------- --------------- --------------- --------------- ---------------
Less Distributions
Dividends from net investment
income........................ (0.21) (0.08) (0.93) (0.84) (0.25)
Distributions from capital
gains......................... (1.61) -- (0.22) -- --
--------------- --------------- --------------- --------------- ---------------
Total distributions............ (1.82) (0.08) (1.15) (0.84) (0.25)
--------------- --------------- --------------- --------------- ---------------
Net asset value, end of
period........................ $ 19.05 $ 17.86 $ 15.06 $ 15.42 $ 14.77
--------------- --------------- --------------- --------------- ---------------
--------------- --------------- --------------- --------------- ---------------
Total return....................... 17.59% 19.75% 5.23% 10.60% 0.17%(c)
Ratio/Supplemental Data
Net assets, end of period...... $ 59,015,434 $ 31,643,776 $ 118,596,275 $ 99,249,839 $ 30,015,818
Ratio of expenses to average
net assets.................... 1.00%(a) 1.00%(a) 0.50%(a) 0.50%(a) 0.50%(a)(b)
Ratio of net investment income
(loss) to average net
assets........................ 1.25% 1.59% 6.43% 6.47% 6.04%(b)
Portfolio turnover rate........ 127% 123% 201% 304% 186%(c)
Average commission rate(d)..... $ .0614 N/A N/A N/A N/A
</TABLE>

(a) Without the waiver of advisory fees and administration fees, the ratios of
expenses to average net assets for the BEA U.S. Core Equity Fund would have
been 1.34% and 1.51%, for the year ended August 31, 1996 and 1995. Without
the waiver of advisory fees and administration fees, the ratios of expenses
to average net assets for the BEA U.S. Core Fixed Income Fund would have
been .78%, .84% for the years ended August 31, 1996 and 1995, respectively
and .99% annualized for the period ended August 31, 1994.

(b) Annualized.

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

* Commencement of operations.

6
<PAGE>
BEA INSTITUTIONAL FUNDS OF
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
BEA STRATEGIC GLOBAL FIXED INCOME FUND
---------------------------------------------------
FOR THE PERIOD
FOR THE FOR THE JUNE 28, 1994*
YEAR ENDED YEAR ENDED TO
AUGUST 31, 1996 AUGUST 31, 1995 AUGUST 31, 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Net asset value, beginning of
period............................ $ 15.67 $ 15.00 $ 15.00
--------------- --------------- ---------------
Income from investment operations
Net investment income.......... 0.87 1.06 0.15
Net gains (losses) on
securities (both realized and
unrealized)................... 0.58 0.49 (0.15)
--------------- --------------- ---------------
Total from investment
operations.................... 1.45 1.55 --
--------------- --------------- ---------------
Less Distributions
Dividends from net investment
income........................ (1.22) (0.88) --
Distributions from capital
gains......................... (0.15) -- --
--------------- --------------- ---------------
Total distributions............ (1.37) (0.88) --
--------------- --------------- ---------------
Net asset value, end of
period........................ $ 15.75 $ 15.67 $ 15.00
--------------- --------------- ---------------
--------------- --------------- ---------------
Total return....................... 9.65% 10.72% 0.00%(c)
Ratio/Supplemental Data
Net assets, end of period.......... $ 38,347,500 $ 19,564,827 $ 6,300,360
Ratio of expenses to average
net assets.................... 0.75%(a) 0.75%(a) 0.75%(a)(b)
Ratio of net investment income
(loss) to average net
assets........................ 7.37% 7.26% 5.64%(b)
Portfolio turnover rate........ 87% 91% 0%(c)
</TABLE>

(a) Without the voluntary waiver of advisory fees and administration fees and
without the reimbursement of operating expenses, the ratios of expenses to
average net assets for the BEA Strategic Global Fixed Income Fund would have
been 1.07% and 1.29% for the years ended August 31, 1996 and 1995,
respectively and 1.92% annualized, for the period ended August 31, 1994.

(b) Annualized.

* Commencement of operations.

7
<PAGE>
BEA INSTITUTIONAL FUNDS OF
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
BEA HIGH YIELD FUND
---------------------------------------------------------------------
FOR THE PERIOD
FOR THE FOR THE FOR THE MARCH 31, 1993*
YEAR ENDED YEAR ENDED YEAR ENDED TO
AUGUST 31, 1996 AUGUST 31, 1995 AUGUST 31, 1994 AUGUST 31, 1993
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period............................ $ 15.72 $ 15.94 $ 16.94 $ 15.00
--------------- --------------- --------------- ---------------
Income from investment operations
Net investment income.......... 1.47 1.42 1.20 0.52
Net gains (losses) on
securities (both realized and
unrealized)................... 0.40 (0.30) (0.77) 1.42
--------------- --------------- --------------- ---------------
Total from investment
operations.................... 1.87 1.12 0.43 1.94
--------------- --------------- --------------- ---------------
Less Distributions
Dividends from net investment
income........................ (1.50) (1.34) (1.43) --
Distributions from capital
gains......................... -- -- -- --
--------------- --------------- --------------- ---------------
Total distributions............ (1.50) (1.34) (1.43) --
--------------- --------------- --------------- ---------------
Net asset value, end of
period........................ $ 16.09 $ 15.72 $ 15.94 $ 16.94
--------------- --------------- --------------- ---------------
--------------- --------------- --------------- ---------------
Total return....................... 12.42% 7.79%(d) 2.24%(d) 12.93%(c)(d)
Ratio/Supplemental Data
Net assets, end of period.......... $ 75,848,558 $ 153,620,957 $ 143,517,472 $ 98,356,591
Ratio of expenses to average
net assets.................... 0.88%(a) 1.00%(a) 1.00%(a) 1.00%(a)(b)
Ratio of net investment income
(loss) to average net
assets........................ 8.92% 9.37% 7.73% 7.56%(b)
Portfolio turnover rate........ 143% 70% 121% 72%(c)
</TABLE>

(a) Without the voluntary waiver of advisory fees and administration fees, the
ratios of expenses to average net assets for the BEA High Yield Fund would
have been 1.11%, 1.08%, and 1.13% for the years ended August 31, 1996, 1995
and 1994, respectively and 1.17% annualized for the period ended August 31,
1993.

(b) Annualized.

(d) Redemption fees not reflected in total return.

* Commencement of operations.

8
<PAGE>
BEA INSTITUTIONAL FUNDS OF
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
BEA MUNICIPAL BOND FUND
---------------------------------------------------
FOR THE PERIOD
FOR THE FOR THE JUNE 20, 1994*
YEAR ENDED YEAR ENDED TO
AUGUST 31, 1996 AUGUST 31, 1995 AUGUST 31, 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Net asset value, beginning of
period............................ $ 15.46 $ 15.06 $ 15.00
--------------- --------------- ---------------
Income from investment operations
Net investment income.......... 0.73 0.71 0.09
Net gains (losses) on
securities (both realized and
unrealized)................... (0.37) 0.50 (0.03)
--------------- --------------- ---------------
Total from investment
operations.................... 0.36 1.21 0.06
--------------- --------------- ---------------
Less Distributions
Dividends from net investment
income........................ (0.74) (0.76) --
Distributions from capital
gains......................... (0.43) (0.05) --
--------------- --------------- ---------------
Total distributions............ (1.17) (0.81) --
--------------- --------------- ---------------
Net asset value, end of
period........................ $ 14.65 $ 15.46 $ 15.06
--------------- --------------- ---------------
--------------- --------------- ---------------
Total return....................... 2.27% 8.42% 0.40%(c)
Ratio/Supplemental Data
Net assets, end of period...... $ 19,581,254 $ 48,977,837 $ 42,309,936
Ratio of expenses to average
net assets.................... 1.00%(a) 1.00%(a) 1.00%(a)(b)
Ratio of net investment income
(loss) to average net
assets........................ 4.62% 4.76% 3.27%(b)
Portfolio turnover rate........ 34% 25% 9%(c)
</TABLE>

(a) Without the voluntary waiver of advisory fees and administration fees, the
ratios of expenses to average net assets for the BEA Municipal Bond Fund
would have been 1.42%, and 1.19% for the years ended August 31, 1996 and
1995, respectively and 1.34% annualized for the period ended August 31,
1994.

(b) Annualized.

* Commencement of operations.

9
<PAGE>

BEA INSTITUTIONAL FUNDS

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

THE COMPANY

The Company is an open-end management investment company that currently operates
or proposes to operate nineteen separate investment portfolios. Each of the BEA
Institutional Funds represent interests in a separate portfolio. Each Fund is
non-diversified. The Company was incorporated in Maryland on February 29, 1988.

The Funds 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 or its affiliates. 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

10
<PAGE>
warrants and rights; equity interests in trusts and partnerships; and depositary
receipts of companies.

BEA EMERGING MARKETS EQUITY FUND

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

BEA U.S. CORE EQUITY FUND

The BEA U.S. Core Equity Fund will seek to provide long-term appreciation of
capital by investing primarily in U.S. equity securities. Under normal market
conditions, the BEA U.S. Core Equity Fund will invest 65% of the value of its
total assets in equity securities. Equity securities include common stocks,
preferred

11
<PAGE>
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 Fund may also purchase without
limitation dollar-denominated American Depository Receipts ("ADRs") and similar
securities. For defensive purposes, the BEA U.S. Core Equity Fund may invest in
fixed income securities and in money market instruments.

The BEA U.S. Core Equity Fund 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 FUND

The BEA Balanced Fund's investment objective is to maximize total return
consistent with preservation of capital through both income and capital
appreciation.

The Fund will invest in domestic equity and debt securities and cash equivalent
instruments. The proportion of the Fund'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 Fund 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 Fund's total assets will be invested in equity
securities, and between 35% and 65% will be invested in debt securities.

The Fund will be managed by teams of BEA managers, each dedicated to managing a
portion of the Fund's assets. The BEA Domestic Equity Management Team will
manage the Equity portion of the Fund, 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 Fund,
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 Fund 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 Fund 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 Fund'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 FUND

The BEA U.S. Core Fixed Income Fund will seek to provide high total return by
investing at

12
<PAGE>
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
Fund may invest up to 35% of the value of its total assets in debt securities of
foreign issuers. With respect to 35% of the Fund's total assets, the Fund may
also invest in other securities including but not limited to equity and
equity-related securities. Under normal market conditions, the Fund 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 Fund 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 Fund will range between 5 and 15 years.

Depending upon prevailing market conditions, the BEA U.S. Core Fixed Income Fund
may purchase debt securities at a discount from face value, which produces a
yield greater than the coupon rate. Conversely, if debt securities are purchased
at a premium over face value, the yield will be lower than the coupon rate. An
increase in interest rates will generally reduce the value of the fixed income
investments in the Fund and a decline in interest rates will generally increase
the value of those investments.

BEA STRATEGIC GLOBAL FIXED INCOME FUND

The BEA Strategic Global Fixed Income Fund will seek to provide high total
return by investing 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 Fund 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 Fund may
invest in fixed income securities which may have equity characteristics, such as
convertible bonds. The BEA Strategic Global Fixed Income Fund 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 Fund'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 Strategic Global Fixed Income Fund will normally
invest in at least three different countries.

In addition to fixed income securities issued by foreign and domestic
corporations, the BEA Strategic Global Fixed Income Fund may also invest in
foreign government securities ("sovereign bonds"), U.S. government securities
including government agencies' securities, debt obligations of supranational
entities, Brady Bonds, loan participations and assignments, convertible
securities, mortgage-backed securities, asset-backed securities, zero-coupon
securities, when-issued securities, repurchase and reverse repurchase agreements
and dollar rolls, and the BEA Strategic Global Fixed Income Fund may lend
portfolio securities to broker-dealers or institutional investors. For defensive
purposes the Fund 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 Funds" and "Common
Investment Objectives and Policies" in the

13
<PAGE>
Statement of Additional Information for a discussion of these and other
investment policies and strategies.
BEA HIGH YIELD FUND

The value of the securities held by the Fund, and thus the net asset value of
the shares of the Fund, generally will vary inversely in relation to changes in
prevailing interest rates. Also, the value of such securities may be affected by
changes in real or perceived creditworthiness of the issuers. The Fund is not
restricted to any maximum or minimum time to maturity in purchasing portfolio
securities, and the average maturity of the Fund's assets will vary based upon
BEA's assessment of economic and market conditions.

BEA MUNICIPAL BOND FUND

The BEA Municipal Bond Fund seeks to provide high total return by investing 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 may invest its assets without limitation in securities of
below investment-grade quality. The BEA Municipal Bond Fund 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

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<PAGE>
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 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 FUND

The Short Duration Fund seeks to provide investors with as high a level of
current income as is consistent with the preservation of capital. The Adviser
will seek to maintain a duration of approximately one year, but may vary the
Fund's duration depending upon market conditions. Under normal circumstances,
the dollar-weighted average life of the Fund's investment securities will be
longer than six months and less than three years. The Fund's duration, under
normal circumstances, will not exceed 1.5 years. Since the Fund 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
Fund 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 Fund's investment objective will be achieved.

The Short Duration Fund 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 Fund also may purchase shares of other investment
companies that invest in these securities to the extent permitted under the 1940
Act. The Adviser will endeavor to hedge foreign currency denominated debt using
various investment techniques in an effort to minimize fluctuations in the
Fund'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 Fund is not limited. The
duration of the Fund, 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 Fund's duration depending upon market conditions. As a measure
of a fixed-income security's cash flow, duration is an

15
<PAGE>
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 Fund, 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 Fund
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 Fund
will be at least the equivalent of 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 Fund 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 S&P or Baa by Moody's) 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. In addition, the Fund may invest
up to 5% of net assets in lower-rated debt securities. Such lower-rated debt
securities are commonly referred to as "junk bonds." See "Risk Factors -- Lower-
Rated Securities."

The Short Duration Fund may engage in currency exchange transactions to attempt
to protect against uncertainty in the level of future exchange rates. In
addition, the Fund 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 Fund. The Fund also may engage in
leveraging, lending portfolio securities, purchasing securities on a when-issued
or forward commitment basis and purchasing illiquid securities.

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<PAGE>
COMMON INVESTMENT POLICIES -- ALL FUNDS

This section describes certain investment policies that are common to each Fund.
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 Fund 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)
interest-bearing instruments or deposits of United States and foreign issuers.
Such investments may include, but are not limited to, commercial paper,
certificates of deposit, variable or floating rate notes, bankers' acceptance,
time deposits, government securities and money market deposit accounts. See
Statement of Additional Information, "Common Investment Policies -- Temporary
Investments." To the extent permitted by their investment objectives and
policies, the Funds may hold cash or cash equivalents pending investment.

BORROWING. A Fund 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 Funds -- Reverse Repurchase Agreements" and "--
Borrowing."

PORTFOLIO TURNOVER. BEA will effect portfolio transactions in each Fund
without regard to holding period, if, in its judgment, such transactions are
advisable in light of general market, economic or financial conditions. The
Short Duration Fund anticipates that its annual portfolio turnover rate should
not exceed 100% under normal conditions. The Balanced Fund 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 amount of portfolio activity will not be a
limiting factor when making portfolio decisions. See the Statement of Additional
Information, "Portfolio Transactions" and "Taxes."

The Statement of Additional Information contains additional investment policies
and strategies that are common to the Funds.

COMMON INVESTMENT POLICIES -- BEA INTERNATIONAL EQUITY, BEA EMERGING MARKETS
EQUITY, BEA U.S. CORE EQUITY, BEA BALANCED, BEA U.S. CORE FIXED INCOME, BEA
STRATEGIC GLOBAL FIXED INCOME, BEA HIGH YIELD, AND BEA SHORT DURATION FUNDS

CURRENCY HEDGING. BEA may seek to hedge against a decline in value of a
Fund's

17
<PAGE>

non-dollar denominated portfolio securities resulting from currency devaluations
or fluctuations. Unless the BEA International Equity, the BEA Emerging Markets
Equity, the BEA U.S. Core Equity, the BEA Balanced, the BEA U.S. Core Fixed
Income, the BEA Strategic Global Fixed Income, the BEA High Yield and the BEA
Short Duration Funds engage in currency hedging transactions, they will be
subject to the risk of changes in relation to the U.S. dollar of the value of
the foreign currencies in which their assets are denominated. These Funds 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.

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

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

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

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

CONVERTIBLE SECURITIES. A convertible security is a bond, debenture, note,
preferred stock

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<PAGE>

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

SUPPLEMENTAL INVESTMENT POLICIES -- BEA MUNICIPAL BOND FUND

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

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

The amount of information regarding the financial condition of issuers of
Municipal Obligations may not be as extensive as that which is made available by
public corporations and the secondary market for Municipal Obligations may be
less liquid than that for taxable fixed-

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<PAGE>
income securities. Accordingly, the ability of the BEA Municipal Bond Fund 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 FUND

INTEREST RATE SWAPS, CAPS, FLOORS AND COLLARS. The Short Duration Fund may
enter into interest rate swaps and may purchase or sell interest rate caps,
floors and collars. The Fund will enter into these transactions primarily to
preserve a return or spread on a particular investment or portion of its
portfolio. The Fund also may enter into these transactions to protect against
any increase in the price of securities the Fund anticipates purchasing at a
later date. Interest rate swaps involve the exchange by the Fund 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 Fund 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 Fund
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 Fund'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 Fund's Custodian. If
the Fund enters into an interest rate swap other than on a net basis, the Fund
would maintain a segregated account in the full amount accrued on a daily basis
of the Fund's obligations with respect to the swap. The Fund 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 transaction, the Fund
will have contractual remedies pursuant to the agreements related to the
transaction. To the extent the Fund 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 Fund'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 Fund would diminish compared with

20
<PAGE>

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 Fund. 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 Fund is contractually obligated to make. If the other
party to an interest rate swap defaults, the Fund's risk of loss consists of the
net amount of interest payments that the Fund contractually is entitled to
receive. The Fund 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 innovations for
which standardized documentation has not yet been developed and, accordingly,
they are less liquid than swaps.

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

INVESTMENT LIMITATIONS

Each Fund is subject to the following fundamental investment limitations, which
may not be changed with respect to a Fund except upon the affirmative vote of
the holders of a majority of that Fund's outstanding Shares. Each Fund may not:

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

RISK FACTORS

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<PAGE>
monetary policies in the U.S. or abroad could result in appreciation or
depreciation of portfolio securities and could favorably or adversely affect the
Funds' operations. Furthermore, the economies of individual foreign nations may
differ from that of the United States, whether favorably or unfavorably, in
areas such as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency and balance of payments position. Any
foreign investments made by the Funds must be made in compliance with U.S. and
foreign currency restrictions and tax laws restricting the amounts and types of
foreign investments.

22
<PAGE>
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 Fund'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
traded market.

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

MANAGEMENT

BOARD OF DIRECTORS

The business and affairs of the Company and of each Fund investment portfolio
are managed under the direction of the Company's Board of Directors.

INVESTMENT ADVISER

BEA serves as the Investment Adviser for each of the Funds pursuant to
investment advisory agreements (the "Advisory Agreements"). BEA is a general
partnership organized under the laws of the State of New York in December 1990
and, together with its predecessor firms, has been engaged in the investment
advisory business for over 60 years. BEA is a wholly-owned subsidiary of Credit
Suisse, the second largest Swiss bank, which in turn is a subsidiary of CS
Holding, a Swiss corporation. Active employees of BEA have a long-term equity
incentive plan. BEA is a registered investment adviser under the Investment
Advisers Act of 1940, as amended. BEA's principal offices are located at One
Citicorp Center, 153 East 53rd Street, New York, New York 10022.

BEA is a diversified investment adviser managing equity, fixed income and
derivative securities accounts for corporate pension and profit-sharing plans,
state pension funds, union funds, endowments and other charitable institutions.
As of September 30, 1996, BEA managed approximately $31.3 billion in assets. BEA
currently acts as investment adviser for twenty investment companies registered
under the Investment Company Act and acts as sub-adviser to certain portfolios
of twelve other registered investment companies. BEA also acts as investment
adviser for forty-two offshore funds.

BEA will select investments for each of the Funds and will place purchase and
sale orders on behalf of each of the Funds. The Funds 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. BEA is also responsible for

23
<PAGE>

providing to the Funds' and the Company's service providers prompt and accurate
data with respect to the Funds' transactions.

The day-to-day portfolio management of the BEA International Equity and the BEA
Emerging Markets Equity Funds is the responsibility of the BEA International
Equity Management Team. The Team consists of the following investment
professionals: William P. Sterling (Managing Director), Richard Watt (Managing
Director), Stephen M. Swift (Managing Director), and Steven D. Bleiberg (Senior
Vice President). Mr. Sterling joined BEA in 1995, prior to which time he was the
head of International Economics at Merrill Lynch & Company. Mr. Watt joined BEA
in 1995, prior to which time he was the head of emerging markets investments and
research at Gartmore Investment Limited in London. Prior to 1992, he was a
director of Kleinwort Benson International Investment in London and was a
portfolio manager with Lorithan Regional Council, a public pension plan sponsor
in Scotland. Mr. Swift joined BEA in 1995, prior to which time he spent three
years at Credit Suisse Asset Management in London, where he was the head of
Global Equities and portfolio manager for the CS Tiger Fund. For the previous 15
years he was with Wardley Investment Services, a Hong Kong-based subsidiary of
the Hong Kong and Shanghai Bank. Mr. Bleiberg has been engaged as an investment
professional with BEA for more than five years.

The day-to-day portfolio management of the BEA U.S. Core Equity Fund and the
equity portion of the BEA Balanced Fund is the responsibility of the BEA
Domestic Equity Management Team. The Team consists of the following investment
professionals: William W. Priest, Jr. (Chief Executive Officer and Executive
Director of BEA), John B. Hurford (Executive Director), Todd M. Rice (Senior
Vice President), James A. Abate (Vice President), Christopher C. Thompson (Vice
President). Messrs. Priest, Hurford and Rice have, on an individual basis, been
engaged as investment professionals with BEA for more than five years. Mr. Abate
joined BEA in 1995; previously, he was a Managing Director for Vert Independent
Capital Research. Prior to joining Vert, Mr. Abate was a Manager in Price
Waterhouse's Valuation/Corporate Finance Group. Mr. Thompson joined BEA in 1995
as a result of the acquisition by BEA Associates of CS First Boston Investment
Management Corporation. Prior to the one and one half years he spent at CS First
Boston Investment Management, Mr. Thompson spent six and one half years with
Brown Brothers Harriman & Company.

The day-to-day portfolio management of the BEA U.S. Core Fixed Income, the BEA
Municipal Bond, the BEA Global Fixed Income and the BEA Short Duration Funds, as
well as the fixed income portion of the BEA Balanced Fund, is the responsibility
of the BEA Fixed Income Management Team. The Team consists of the following
investment professionals: Robert J. Moore (Executive Director), Gregg Diliberto
(Managing Director), Mark Silverstein (Senior Vice President), Robert Justich
(Senior Vice President), William P. Sterling (Managing Director). Messrs. Moore,
Diliberto and Silverstein have, on an individual basis, been engaged as
investment professionals with BEA for more than five years. Mr. Justich joined
BEA in 1995, prior to which he worked at Merrill Lynch and as a Manager of
Financial Services with Arthur Young & Company.

The day to day portfolio management of the BEA High Yield Fund is the
responsibility of the BEA High Yield Management Team. The Team consists of the
following investment professionals: Richard Lindquist (Managing Director), Misia
Dudley (Senior Vice President), Marianne Rossi; (Senior Vice President) and

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<PAGE>
John Tobin (Vice President). Mr. Lindquist, Ms. Dudley, Ms. Rossi and Mr. Tobin
joined BEA in 1995 as a result of BEA's acquisition of CS First Boston
Investment Management. Prior to joining CS First Boston, Mr. Lindquist and Ms.
Rossi were with Prudential Insurance Company of America. Prior to joining CS
First Boston, Ms. Dudley was with Stockbridge Partners, and prior to that had
spent five years with E.F. Hutton. Prior to joining CS First Boston, Mr. Tobin
managed portfolios for Integrated Resources and prior to that was Vice President
and industry analyst with Banker's Trust Company.

For the advisory services provided and expenses assumed by it, BEA is entitled
to receive a fee from the BEA International Equity, the BEA Emerging Markets
Equity Fund, the BEA U.S. Core Equity Fund, the BEA Balanced Fund, the BEA U.S.
Core Fixed Income Fund, the BEA Strategic Global Fixed Income Fund, the BEA High
Yield Fund, the BEA Municipal Bond Fund, and the BEA Short Duration Fund, at an
annual rate of .80%, 1.00%, .75%, .60%, .375%, .50%, .70%, .70% and .15%,
respectively of the average net assets, computed daily and payable monthly.

BEA may, at its discretion, from time to time agree to waive voluntarily all or
any portion of its advisory fee for any Fund.

For the fiscal year ended August 31, 1996, the Company paid BEA investment
advisory fees, on an annualized basis, with respect to the BEA International
Equity, the BEA Emerging Markets Equity, the BEA U.S. Core Equity, the BEA High
Yield, the BEA U.S. Core Fixed Income, the BEA Strategic Global Fixed Income,
and the BEA Municipal Bond Funds .80%, 1.00%, .54%, .59%, .26%, .33%, and .40%,
respectively, of the average net assets of the respective Funds, and BEA waived,
approximately 0%, 0%, .21%, .11%, .115%, .17%, and .30%, respectively, of the
average net assets of each such Fund.

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 Company 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.

BEA has agreed to reimburse each Fund for the amount, if any, by which the total
operating and management expenses of such Fund for any fiscal year exceed the
most restrictive state blue sky expense limitation in effect from time to time,
to the extent required by such limitation. BEA may assume additional expenses of
a Fund from time to time. In certain circumstances, BEA may assume such expenses
on the condition that it is reimbursed by the Fund for such amounts prior to the
end of a fiscal year. In such event, the reimbursement of such amounts will have
the effect of increasing a Fund's expense ratio and of decreasing return to
investors.

ADMINISTRATOR

PFPC Inc. ("PFPC"), an indirect, wholly-owned subsidiary of PNC Bank Corp.,
serves as administrator for the Funds. As compensation for administrative
services, the Company will pay to PFPC a fee calculated at the annual rate of
.125% of each Fund's average daily net assets. PFPC has its principal offices at
400 Bellevue Parkway, Wilmington, Delaware 19809.

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<PAGE>
ADMINISTRATIVE SERVICES AGENT

Counsellors Funds Service, Inc. ("Counsellors Service"), a wholly-owned
subsidiary of Warburg, Pincus Counsellors, Inc., provides certain administrative
services to each of the Funds that are not provided by PFPC, subject to the
supervision and direction of the Board of Directors of the Company. As
compensation for such administrative services, the Company will pay to
Counsellors Service each month a fee for the previous month calculated at the
annual rate of .15% of each Fund's average daily net assets. Counsellors Service
is located at 466 Lexington Avenue, New York, New York 10017-3147.

DISTRIBUTOR

Counsellors Securities Inc. ("Counsellors Securities") serves as the Company's
distributor. Counsellors Securities is located at 466 Lexington Avenue, New
York, New York 10017-3147. No compensation is payable by the Company to
Counsellors Securities for distribution services with respect to the
Institutional Shares of Funds.

TRANSFER AGENT

State Street Bank and Trust Company ("State Street") acts as transfer agent for
the Funds. It has delegated to Boston Financial Data Services, Inc. ("BFDS"), a
50% owned subsidiary, responsibility for most transfer agent servicing
functions. State Street's principal address is 225 Franklin Street, Boston, MA
02110 and BFDS's principal address is 2 Heritage Drive, North Quincy, MA 02171,
telephone number (800) 401-2230.

CUSTODIAN

Brown Brothers Harriman & Co. serves as Custodian for all Funds except the BEA
Municipal Bond Fund, which uses PNC Bank, N.A. The 1940 Act and the rules and
regulations adopted thereunder permit a Fund to maintain its securities and cash
in the custody of certain eligible banks and securities depositories. In
compliance with such rules and regulations, a Fund'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 Fund are deducted from its total income before dividends
are paid. These expenses include, but are not limited to, fees paid to the
investment adviser, administrative services agent fees and administrator's fees
and fees and expenses of officers and directors who are not affiliated with the
Fund's investment adviser or distributor, custodian fees, auditing fees,
brokerage fees and commissions, and certain other fees and expenses. Any general
expenses of the Company that are not readily identifiable as belonging to a
particular investment portfolio of the Company will be allocated among all
investment portfolios of the Company 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.

The expenses for each Fund are set forth in the tables entitled "Annual Fund
Operating Expenses", above.

26
<PAGE>
- ----------------------------------------------

HOW TO PURCHASE SHARES

GENERAL

Shares representing interests in the Funds are offered continuously for sale by
the Distributor. Except as described below, BEA Institutional Class Shares are
currently available for purchase only by investors who have entered into an
investment management agreement with BEA or its affiliates. Shares may be
purchased initially by completing the application and forwarding the application
to the BEA Institutional Funds. Purchases of Shares may be effected by wire to
an account to be specified by BFDS or by mailing a check or Federal Reserve
Draft, payable to the order of "The BEA Institutional Funds", The BEA
Institutional Funds, P.O. Box 8500, Boston, MA 02266-8500. The name of the Fund
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 the BEA Institutional Funds must be at least $3,000,000, except shares may be
purchased by existing clients of BEA or its affiliates or by officers of such
existing clients (or those holding similar positions) with an initial investment
of at least $100,000; all subsequent investments for such persons must be at
least $1,000. Subsequent initial investments in any other Fund must be at least
$100,000. Each Fund reserves the right to suspend the offering of Shares for a
period of time or to reject any purchase order.

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

27
<PAGE>
- ----------------------------------------------

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
Institutional Funds, P.O. Box 8500, Boston, MA 02266-8500. The redemption price
is the net asset value per share next determined after the initial receipt of
proper notice of redemption. 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, such as the agent or investment
adviser for the Shareholder. Signatures must conform exactly to the account
registration. Generally, a properly signed written request is all that is
required for a redemption. In some cases, however, other documents may be
necessary. Additional documentary evidence of authority is also required by the
BEA Institutional Funds in the event redemption is required by a corporation,
partnership, trust, fiduciary, executor or administrator.

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

EXCHANGE PRIVILEGE

An Individual or Institution may exchange Institutional Shares of a Fund for
Institutional Shares of any other BEA Institutional Fund at their respective net
asset values. Exchanges may be effected in the manner described under
"Redemption of Shares" above. If an exchange request is received by BEA
Institutional Funds prior to 4:00 p.m. (Eastern time), the exchange will be made
at each Fund's net asset value determined on the same business day. The exchange
privilege may be modified or terminated at any time upon 60 days' notice to
shareholders.

The exchange privilege is available to shareholders residing in any state in
which the Institutional Shares being acquired may legally be sold. When a
shareholder effects an exchange of shares, the exchange is treated for federal
income tax purposes as a redemption. Therefore, the shareholder may realize a
taxable gain or loss in connection with the exchange. For

28
<PAGE>

further information regarding the exchange privilege, the shareholder should
contact the BEA Institutional Funds at (800) 401-2230.

In order to request exchanges by telephone, investors must have completed and
returned to the BEA Institutional Funds an account application containing a
telephone election. Unless contrary instructions are elected, an investor will
be entitled to make exchanges by telephone by calling the BEA Institutional
Funds at (800) 401-2230. To add a telephone exchange feature to an existing
account that previously did not provide for this option, a Telephone Exchange
Authorization Form may be obtained from the BEA Institutional Funds. The Funds
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine as described above under "Redemption by Telephone."

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

NET ASSET VALUE

DIVIDENDS AND DISTRIBUTIONS

The Company will distribute substantially all of the net realized capital gains,
if any, of each of the Funds to each Fund's shareholders annually. The Company
will distribute all net investment income, if any, for the BEA International
Equity, the BEA Emerging Markets Equity, and the BEA U.S. Core Equity Funds
annually. The Company will distribute net investment income, if any, for the BEA
Balanced and the BEA Short Duration Funds at least annually. The Company will
distribute net investment income for the BEA U.S. Core Fixed Income, the BEA
Strategic Global Fixed Income, the BEA High Yield and the BEA Municipal Bond
Funds at least quarterly. All distributions will be reinvested in the form of
additional full and fractional Shares of the relevant Fund unless a contrary
election is made on the application to have distributions paid in cash. If in
the future a shareholder desires to have distributions paid out rather than
reinvested, the shareholder should notify the BEA Institutional Funds in
writing.

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

TAXES

GENERAL

29
<PAGE>
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 a Fund 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 intends to pay substantially all of its dividends as
"exempt interest dividends." Investors in this Fund should note, however, that
taxpayers are required to report the receipt of tax-exempt interest and "exempt
interest dividends" in their Federal income tax returns and that in two
circumstances such amounts, while exempt from regular Federal income tax, are
subject to alternative minimum tax at a rate of 24% in the case of individuals,
trusts and estates, and 20% in the case of corporate taxpayers. First, tax-
exempt interest and "exempt interest dividends" derived from certain private
activity bonds issued after August 7, 1986, will generally constitute an item of
tax preference for corporate and noncorporate taxpayers in determining
alternative minimum tax liability. Depending upon market conditions, the BEA
Municipal Bond Fund 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 will determine annually the percentages of its net
investment income which are fully tax-exempt, which constitute an item of tax
preference for alternative minimum tax purposes, and which are fully taxable and
will apply such percentages uniformly to all distributions declared from net
investment income during that year. These percentages may differ significantly
from the actual percentages for any particular day.

30
<PAGE>
The Company will send written notices to shareholders annually regarding the tax
status of distributions made by each Fund. Dividends declared in October,
November or December of any year payable to shareholders of record on a
specified date in such a month will be deemed to have been received by the
shareholders on December 31, provided such dividends are paid during January of
the following year. Each Fund intends to make sufficient actual or deemed
distributions prior to the end of each calendar year to avoid liability for
Federal excise tax.

Shareholders who exchange Shares representing interests in one Fund for Shares
representing interests in another Fund 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 Fund is not intended to constitute a balanced investment
program. Shares of the BEA Municipal Bond Fund would not be suitable for
tax-exempt institutions and may not be suitable for retirement plans qualified
under Section 401 of the Internal Revenue Code, H.R. 10 plans and individual
retirement accounts since such plans and accounts are generally tax-exempt and,
therefore, not only would not gain any additional benefit from the Funds'
dividends being tax-exempt but also such dividends would be taxable when
distributed to the beneficiary.

FOREIGN INCOME TAXES

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<PAGE>
No deduction for foreign taxes may be claimed by a shareholder who does not
itemize deductions.
- ----------------------------------------------

MULTI-CLASS STRUCTURE

The Company offers other classes of shares, Investor and Advisor Shares of the
Funds which are offered directly to institutional investors and financial
intermediaries pursuant to separate prospectuses. Shares of a Fund represent
equal pro rata interests in the Funds and accrue dividends and calculate net
asset value and performance quotations in the same manner. The Company quotes
performance of the Investor and Advisor Shares separately from Institutional
Shares. Because of different fees paid by the Institutional Shares, the total
return on such shares can be expected, at any time, to be different than the
total return on Investor and Advisor Shares. Information concerning these other
classes may be obtained by calling the BEA Institutional Funds at (800)
401-2230.

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

DESCRIPTION OF SHARES

THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED HEREIN
RELATE PRIMARILY TO THE BEA CLASSES REPRESENTING AN INTEREST IN THE BEA
INTERNATIONAL EQUITY, THE BEA EMERGING MARKETS EQUITY, THE BEA HIGH YIELD, THE
BEA U.S. CORE EQUITY, THE BEA BALANCED, THE BEA U.S. CORE FIXED INCOME, THE BEA
STRATEGIC GLOBAL FIXED INCOME, THE BEA MUNICIPAL BOND AND THE BEA SHORT DURATION
FUNDS AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND POLICIES, OPERATIONS,
CONTRACTS AND OTHER MATTERS RELATING TO SUCH CLASSES.

Each share that represents an interest in a Fund has an equal proportionate
interest in the assets belonging to such Fund with each other share that
represents an interest in such Fund. Shares of the Company do not have
preemptive or conversion rights. When issued for payment as described in this
Prospectus, Shares will be fully paid and non-assessable. This Prospectus
combines offering information with respect to nine Funds; there is a possibility
that one Fund might become liable for any misstatement, inaccuracy, or
incomplete disclosure in the Prospectus concerning another Fund.

Holders of shares of each of the Funds will vote in the aggregate and not by
class on all matters, except where otherwise required by law. Furthermore,
shareholders of all investment portfolios of the Company 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 the
Company's Shares" for examples of when the 1940 Act requires voting by
investment portfolio or by class.) Shareholders of the Company are entitled to
one vote for each full share held

32
<PAGE>
(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 Company may elect all of
the directors.

OTHER INFORMATION

REPORTS AND INQUIRIES

Shareholders of a Fund will receive unaudited semi-annual reports describing the
Fund's investment operations and annual financial statements audited by
independent accountants. Shareholder inquiries can be made by contacting the BEA
Institutional Funds at (800) 401-2230 or by writing to BEA Institutional Funds,
P.O. Box 8500, Boston, MA 02266-8500.

SHARE CERTIFICATES

In the interest of economy and convenience, physical certificates representing
shares in the Company are not normally issued.

PERFORMANCE INFORMATION

From time to time, each of the Funds 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 Fund. Such total
return quotations will be computed by finding the compounded average annual
total return for each time period that would equate the assumed initial
investment of $1,000 to the ending redeemable value, 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 Funds may also from time to time include in
such advertising an aggregate total return figure or a total return figure that
is not calculated according to the standardized formula in order to compare more
accurately a Fund's performance with other measures of investment return. For
example, a Fund'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, Morgan Stanley Composite Index EAFE, Morgan Stanley
Composite Index-Free Emerging Markets, JP Morgan Global Government Bond Index
(Unhedged), First Boston High Yield Index, Consumer Price Index, Bond Buyer's
20-Bond Index, Dow Jones Industrial Average, national publications such as
Money, Forbes, Barron's, the Wall Street Journal or the New York Times or
publications of a local or regional nature, and other industry publications. For
these purposes, the performance of a Fund, as well as the performance published
by such services or experienced by such indices, will usually not reflect
redemption fees, the inclusion of which would reduce performance results. If a
Fund advertises non-standard computations, however, the Fund will disclose such
fees, and will also disclose that the performance data do not reflect such fees
and that inclusion of such fees would reduce the performance quoted.

From time to time, each of the Funds other than the BEA International Equity,
BEA Emerging Markets Equity and BEA U.S. Core Equity Funds may also advertise
its "30-day yield." The yield refers to the income generated

33
<PAGE>
by an investment in a Fund over the 30-day period identified in the
advertisement, and is computed by dividing the net investment income per share
during the period by the maximum public offering price per share of the last day
of the period. This income is "annualized" by assuming that the amount of income
is generated each month over a one-year period and is compounded semi-annually.
The annualized income is then shown as a percentage of the net asset value.

The yield on Shares of a Fund 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 Fund are not
reflected in the yields on a Fund's Shares, and such fees, if charged, will
reduce the actual return received by shareholders on their investments.

34
<PAGE>

<PAGE>

BEA
INSTITUTIONAL FUNDS

INTERNATIONAL EQUITY FUND
EMERGING MARKETS EQUITY FUND
U.S. CORE EQUITY FUND
BALANCED FUND
U.S. CORE FIXED INCOME FUND
STRATEGIC GLOBAL FIXED INCOME FUND
HIGH YIELD FUND
MUNICIPAL BOND FUND
SHORT DURATION FUND
(INVESTMENT PORTFOLIOS OF THE RBB FUND, INC.)

STATEMENT OF ADDITIONAL INFORMATION

This Statement of Additional Information provides supplementary
information pertaining to shares of nine classes (the "BEA Institutional
Shares" or the "Shares") representing interests in nine investment portfolios
(the "Funds") of The RBB Fund, Inc. (the "Company"): the BEA International
Equity, the BEA Emerging Markets Equity, the BEA U.S. Core Equity, the BEA
Balanced, the BEA U.S. Core Fixed Income, the BEA Strategic Global Fixed
Income, the BEA High Yield, the BEA Municipal Bond and the BEA Short Duration
Funds (collectively, the " Funds"). This Statement of Additional
Information is not a prospectus, and should be read only in conjunction with
the Prospectus of the Company relating to the Funds, dated October 1, 1996
(the "Prospectus"). A copy of the Prospectus may be obtained by calling
toll-free (800) 401-2230. This Statement of Additional Information is dated
October 15, 1996.

No person has been authorized to give any information or to make any
representations not contained in this Statement of Additional Information in
connection with the offering made by the Prospectus and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company or its distributor. The Statement of Additional
Information does not constitute an offering by the Company or by the
distributor in any jurisdiction in which such offering may not lawfully be
made.

<PAGE>

CONTENTS
Prospectus
Page Page
---- ----------

General ............................................. 2 10
Common Investment Policies -- All Funds ........ 2 10
Common Investment Objectives and Policies -- BEA
International Equity, BEA Emerging Markets Equity,
BEA U.S. Core Equity, BEA Balanced, BEA U.S. Core
Fixed Income, BEA High Yield, BEA Strategic Global
Fixed Income and BEA Short Duration Funds.......... 8 16
Supplemental Investment Objectives and Policies
BEA Municipal Bond Fund............................ 26 17
Supplemental Investment Objectives and Policies --
BEA International Equity, BEA Emerging
Markets Equity, BEA U.S. Core Equity and
BEA Balanced Funds................................. 27 N/A
Investment Limitations .............................. 27 19
Risk Factors ........................................ 30 20
Directors and Officers .............................. 34 N/A
Investment Advisory and Servicing Arrangements....... 37 21
Portfolio Transactions .............................. 41 N/A
Purchase and Redemption Information ................. 43 26
Valuation of Shares ................................. 44 28
Performance and Yield Information.................... 45 30
Taxes ............................................... 48 29
Additional Information Concerning RBB Shares........ 58 30
Miscellaneous ....................................... 61 30
Financial Statements ................................ F-1 N/A
Appendix ............................................ N/A A-1

<PAGE>

GENERAL

The RBB Fund, Inc. (the " Company") is an open-end management
investment company currently operating or proposing to operate nineteen separate
investment portfolios. The Company was organized as a Maryland corporation on
February 29, 1988.

COMMON INVESTMENT POLICIES -- ALL FUNDS

The following supplements the information contained in the Prospectus
concerning the investment objectives and policies of, and techniques used by the
Funds.

<PAGE>

REPURCHASE AGREEMENTS. Each Fund may agree to purchase securities
from a bank or recognized securities dealer and simultaneously commit to resell
the securities to the bank or dealer at an agreed-upon date and price reflecting
a market rate of interest unrelated to the coupon rate or maturity of the
purchased securities ("repurchase agreements"). Such Fund would maintain
custody of the underlying securities prior to their repurchase; thus, the
obligation of the bank or dealer to pay the repurchase price on the date agreed
to would be, in effect, secured by such securities. If the value of such
securities were less than the repurchase price, plus interest, the other party
to the agreement would be required to provide additional collateral so that at
all times the collateral is at least equal to the repurchase price plus accrued
interest. The Adviser will consider the creditworthiness of a seller in
determining whether to have a Fund enter into a repurchase agreement. There are
no percentage limits on a Fund's ability to enter into repurchase agreements.
Each Fund does not presently intend to invest more than 5% of its net assets in
repurchase agreements . Repurchase agreements are considered to be loans by
the Fund under the Investment Company Act of 1940 (the "Investment Company Act"
or the "1940 Act").

REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. Each Fund may also
enter into reverse repurchase agreements with the same parties with whom it may
enter into repurchase agreements. Reverse repurchase agreements involve the
sale of securities held by a Fund pursuant to such Fund's agreement to
repurchase them at a mutually agreed upon date, price and rate of interest. At
the time a Fund enters into a reverse repurchase agreement, it will establish
and maintain a segregated account with an approved custodian containing cash or
liquid high-grade debt securities having a value not less than the repurchase
price (including accrued interest). The assets contained in the segregated
account will be marked-to-market daily and additional assets will be placed in
such account on any day in which the assets fall below the repurchase price
(plus accrued interest). A Fund's liquidity and ability to manage its assets
might be affected when it sets aside cash or fund securities to cover such
commitments. Reverse repurchase agreements involve the risk that the market
value of the securities retained in lieu of sale may decline below the price of
the securities a Fund has sold but is obligated to repurchase. In the event the
buyer of securities under a reverse repurchase agreement files for bankruptcy or
becomes insolvent, such buyer or its trustee or receiver may receive an
extension of time to determine whether to enforce a Fund's obligation to
repurchase the securities, and a Fund's use of the proceeds of the reverse
repurchase agreement may effectively be restricted pending such decision. Each
Fund also may enter into "dollar rolls," in which it sells fixed income
securities for delivery in the current month and simultaneously contract to
repurchase substantially similar (same type, coupon and maturity) securities on
a specified future date. During the roll period, a Fund would forgo principal
and interest paid on such securities. A Fund would be compensated by the
difference between the current sales price and the forward price for the future
purchase, as well as by the interest earned on the cash proceeds of the initial
sale. Reverse repurchase agreements are considered to be borrowings under the
Investment

<PAGE>

Company Act. The Funds do not presently intend to invest more than 5% of net
assets in reverse repurchase agreements or dollar rolls.

WHEN-ISSUED SECURITIES, DELAYED DELIVERY TRANSACTIONS AND FORWARD
COMMITMENTS. Each Fund may purchase securities on a when-issued basis, and
it may purchase or sell securities for delayed delivery. These transactions
occur when securities are purchased or sold by a Fund with payment and
delivery taking place in the future to secure what is considered an
advantageous yield and price to a Fund at the time of entering into the
transaction. Although the Funds have not established a limit on the
percentage of its assets that may be committed in connection with such
transactions, it will maintain a segregated account with its custodian of
cash, cash equivalents, U.S. Government securities or other high grade liquid
debt securities denominated in U.S. dollars or non-U.S. currencies in an
aggregate amount equal to the amount of its commitment in connection with
such purchase transactions. The assets contained in the segregated account
will be marked-to-market daily and additional assets will be placed in such
account on any day in which assets fall below the amount of its commitment.
Each Fund's liquidity and ability to manage its assets might be affected
when it sets aside cash or portfolio fund securities to cover such
commitments. When a Fund engages in when-issued transactions, it relies on
the seller to consummate the trade. Failure of the seller to do so may
result in the Fund incurring a loss or missing an opportunity to obtain a
price considered to be advantageous. When-issued and forward commitment
transactions involve the risk that the price or yield obtained in a
transaction may be less favorable than the price or yield available in the
market when the security delivery takes place. The Fund currently
anticipates that when-issued securities will not exceed 5% of its net assets.
Each Fund does not intend to engage in when-issued purchases and forward
commitments for speculative purposes but only for furtherance of their
investment objectives.

STANDBY COMMITMENT AGREEMENTS. Each Fund may from time to time enter
into standby commitment agreements. Such agreements commit such Fund, for a
stated period of time, to purchase a stated amount of a fixed income security
which may be issued and sold to the Fund at the option of the issuer. The price
and coupon of the security is fixed at the time of the commitment. At the time
of entering into the agreement a Fund is paid a commitment fee, regardless of
whether or not the security is ultimately issued. A Fund will enter into such
agreements only for the purpose of investing in the security underlying the
commitment at a yield and price that is considered advantageous to a Fund. Each
Fund will not enter into a standby commitment with a remaining term in excess of
45 days and it will limit its investment in such commitments so that the
aggregate purchase price of the securities subject to such commitments, together
with the value of fund securities subject to legal restrictions on resale, will
not exceed 5% of its assets taken at the time of acquisition of such commitment
or security. Such Fund will at all times maintain a segregated account with its
custodian of cash, cash equivalents, U.S. Government securities or other high
grade liquid debt securities denominated in U.S. dollars or non-U.S. currencies
in an aggregate amount equal to the purchase price of the securities underlying
the commitment. The assets contained in the segregated account will be
marked-to-market daily and additional assets will be placed in such account on
any day in which assets fall below the amount of the purchase price. A Fund's
liquidity and ability to manage its assets might be affected when it sets aside
cash or fund securities to cover such commitments.

<PAGE>

There can be no assurance that the securities subject to a standby
commitment will be issued and the value of the security, if issued, on the
delivery date may be more or less than its purchase price. Because the issuance
of the security underlying the commitment is at the option of the issuer, a
Fund may bear the risk of a decline in the value of such security and may not
benefit from an appreciation in the value of the security during the commitment
period.

The purchase of a security subject to a standby commitment agreement
and the related commitment fee will be recorded on the date on which the
security can reasonably be expected to be issued, and the value of the security
will be adjusted by the amount of the commitment fee. In the event the security
is not issued, the commitment fee will be recorded as income on the expiration
date of the standby commitment. The Funds do not presently intend to invest
more than 5% of net assets in standby commitment agreements

ILLIQUID SECURITIES. Each Fund does not presently intend to invest
more than 5% of its net assets in illiquid securities (including repurchase
agreements which have a maturity of longer than seven days), including
securities that are illiquid by virtue of the absence of a readily available
market or legal or contractual restrictions on resale. The term "illiquid
securities" for this purpose means securities that cannot be disposed of within
seven days in the ordinary course of business at approximately the amount at
which the Company 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, structured notes and restricted securities other than Rule 144A securities
that BEA has determined are liquid pursuant to guidelines established by the
Company's Board of Directors. Because of the absence of any liquid trading
market currently for these investments, a Fund may take longer to liquidate
these positions than would be the case for publicly traded securities. Although
these securities may be resold in privately negotiated transactions, the prices
realized on such sales could be less than those originally paid by a Fund.
Securities that have legal or contractual restrictions on resale but have a
readily available market are not considered illiquid for purposes of this
limitation. BEA will monitor the liquidity of restricted securities in each
Fund's portfolio and report periodically on such decisions to the Board of
Directors of the Company. Where there are no readily available market
quotations, the security shall be valued at fair value as determined in good
faith by the Board of Directors of the Company. The Board has adopted a policy
that funds will not purchase private placements (i.e. restricted securities
other than Rule 144A securities). With respect to each Fund, repurchase
agreements subject to demand are deemed to have a maturity equal to the notice
period. Securities that have legal or contractual restrictions on resale but
have a readily available market are not considered illiquid for purposes of this
limitation. With respect to each Fund, repurchase agreements subject to demand
are deemed to have a maturity equal to the notice period.

<PAGE>

The Adviser will monitor the liquidity of restricted securities in a
Fund under the supervision of the Board of Directors. In reaching liquidity
decisions, the Adviser may consider, inter alia, the following factors: (1) the
unregistered nature of the security; (2) the frequency of trades and quotes for
the security; (3) the number of dealers wishing to purchase or sell the security
and the number of other potential purchasers; (4) dealer undertakings to make a
market in the security and (5) the nature of the security and the nature of the
marketplace trades (e.g., the time needed

<PAGE>

to dispose of the security, the method of soliciting offers and the mechanics of
the transfer).

LENDING OF PORTFOLIO SECURITIES. To increase income on its
investments, a Fund may lend its portfolio securities with an aggregate value of
up to 30% of its total assets to broker/dealers and other institutional
investors. Although each Fund does not currently intend to do so, it may lend
its portfolio securities on a short or long term basis to broker-dealers or
institutional investors that the Adviser deems qualified, but only when the
borrower maintains with a Fund's custodian, collateral either in cash or money
market instruments, in an amount at least equal to the market value of the
securities loaned, plus accrued interest and dividends, determined on a daily
basis and adjusted accordingly. Collateral for such loans may include cash,
securities of the U.S. Government or its agencies or instrumentalities or an
irrevocable letter of credit issued by a bank which is deemed creditworthy by
the Adviser. In determining whether to lend securities to a particular
broker-dealer or institutional investor, the Adviser will consider, and during
the period of the loan will monitor, all relevant facts and circumstances,
including the creditworthiness of the borrower. Such loans would involve risks
of delay in receiving additional collateral in the event the value of the
collateral decreased below the value of the securities loaned or of delay in
recovering the securities loaned or even the loss of rights in the collateral
should the borrower of the securities fail financially. Default by or
bankruptcy of a borrower would expose the Funds to possible loss because of
adverse market action, expenses and/or delays in connection with the disposition
of the underlying securities.

<PAGE>

COMMON INVESTMENT OBJECTIVES AND POLICIES -- BEA INTERNATIONAL
EQUITY, BEA EMERGING MARKETS EQUITY, BEA U.S. CORE EQUITY, BEA
BALANCED, BEA U.S. CORE FIXED INCOME, BEA HIGH YIELD, BEA
STRATEGIC GLOBAL FIXED INCOME AND BEA SHORT DURATION FUNDS

U.S. GOVERNMENT SECURITIES. The U.S. government securities in which a
Fund may invest include direct obligations of the U.S. Treasury (such as
Treasury bills, notes and bonds) and obligations issued by U.S. government
agencies and instrumentalities, including securities that are supported by the
full faith and credit of the United States and securities that are supported
primarily or solely by the creditworthiness of the issuer (such as securities of
the Federal Home Loan Banks, the Student Loan Marketing Association and the
Tennessee Valley Authority). The Funds do not presently intend ot invest
more than 5% of net assets in U.S. government securities.

BRADY BONDS. Each Fund may invest in so-called "Brady Bonds," which
have recently been issued by Costa Rica, Mexico, Uruguay and Venezuela

<PAGE>

and which may be issued by other Latin American countries. Brady Bonds are
issued as part of a debt restructuring in which the bonds are issued in exchange
for cash and certain of the country's outstanding commercial bank loans.
Investors should recognize that Brady Bonds have been issued only recently, and
accordingly, they do not have a long payment history. Brady Bonds may be
collateralized or uncollateralized, are issued in various currencies (primarily
the U.S. dollar) and are actively traded in the over-the-counter ("OTC")
secondary market for debt of Latin American issuers. The Funds do not presently
intend to invest more than 5% of net assets in Brady Bonds.

LOAN PARTICIPATIONS AND ASSIGNMENTS. Each Fund may invest in fixed
and floating rate loans ("Loans") arranged through private negotiations between
a foreign government and one or more financial institutions ("Lenders"). The
majority of the Fund's investments in Loans in Latin America are expected to be
in the form of participations in Loans ("Participations") and assignments of
portions of Loans from third parties ("Assignments"). Participations typically
will result in each Fund having a contractual relationship only with the
Lender, not with the borrower. Each Fund will have the right to receive
payments of principal, interest and any fees to which it is entitled only from
the Lender selling the Participation and only upon receipt by the Lender of the
payments from the borrower. In connection with purchasing Participations, the
Funds generally will have no right to enforce compliance by the borrower with
the terms of the loan agreement relating to the Loan ("Loan Agreement"), nor any
rights of set-off against the borrower, and the Fund may not directly benefit
from any collateral supporting the Loan in which it has purchased the
Participation. As a result, the Funds will assume the credit risk of both the
borrower and the Lender that is selling the Participation. In the event of the
insolvency of the Lender selling a Participation, the Funds may be treated as a
general creditor of the Lender and may not benefit from any set-off between the
Lender and the borrower. The Funds will acquire Participations only if the
Lender interpositioned between the Funds and the borrower is determined by BEA
to be creditworthy. Each Fund currently anticipates that it will not invest
more than 5% of its net assets in Loan Participations and Assignments.

CONVERTIBLE SECURITIES. A convertible security is a bond,
debenture, note, preferred stock or other security that may be converted into
or exchanged for a prescribed amount of common stock of the same or a
different issuer within a particular period of time at a specified price or
formula. A convertible security entitles the holder to receive interest paid
or accrued on debt or the dividend paid on preferred stock until the
convertible security matures or is redeemed, converted or exchanged. Before
conversion, convertible securities have characteristics similar to
nonconvertible debt securities in that they ordinarily provide a stable
stream of income with generally higher yields than those of common stocks of
the same or similar issuers. Convertible securities rank senior to common
stock in a corporation's capital structure but are usually subordinated to
comparable nonconvertible securities. While no

<PAGE>

securities investment is completely without risk, investments in convertible
securities generally entail less risk than the corporation's common stock,
although the extent to which such risk is reduced depends in large measure upon
the degree to which the convertible security sells above its value as a fixed
income security. Convertible securities have unique investment characteristics
in that they generally (1) have higher yields than common stocks, but lower
yields than comparable non-convertible securities, (2) are less subject to
fluctuation in value than the underlying stock since they have fixed income
characteristics and (3) provide the potential for capital appreciation if the
market price of the underlying common stock increases. Most convertible
securities currently are issued by U.S. companies, although a substantial
Eurodollar convertible securities market has developed, and the markets for
convertible securities denominated in local currencies are increasing.

MORTGAGE-BACKED SECURITIES. The Funds may invest in mortgage-backed
securities, such as those issued by the Government National Mortgage
Association ("GNMA"), the Federal National Mortgage Association, the Federal
Home Loan Mortgage Corporation or certain foreign issuers. Mortgage-backed
securities represent

<PAGE>

direct or indirect participations in, or are secured by and payable from,
mortgage loans secured by real property. The mortgages backing these securities
include, among other mortgage instruments, conventional 30-year fixed rate
mortgages, 15-year fixed rate mortgages, graduated payment mortgages and
adjustable rate mortgages. The government or the issuing agency typically
guarantees the payment of interest and principal of these securities. However,
the guarantees do not extend to the securities' yield or value, which are likely
to vary inversely with fluctuations in interest rates, nor do the guarantees
extend to the yield or value of the Fund's shares. These securities generally
are "pass-through" instruments, through which the holders receive a share of all
interest and principal payments from the mortgages underlying the securities,
net of certain fees.

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 the Funds 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. In periods of falling interest
rates, the rate of prepayment tends to increase, thereby shortening the actual
average life of a pool of mortgage-related securities. Conversely, in periods
of rising rates the rate of prepayment tends to decrease, thereby lengthening
the actual average life of the pool. However, these effects may not be present,
or may differ in degree, if the mortgage loans in the pools have adjustable
interest rates or other special payment terms, such as a prepayment charge.
Actual prepayment experience may cause the yield of mortgage-backed securities
to differ from the assumed average life yield. Reinvestment of prepayments may
occur at higher or lower interest rates than the original investment, thus
affecting a Fund's yield. For this

<PAGE>

and other reasons, a mortgage-related security's stated maturity may be
shortened by an unscheduled prepayment on underlying mortgages and, therefore,
it is not possible to predict accurately the security's return to the Funds.
Mortgage-related securities provide regular payments consisting of interest and
principal. No assurance can be given as to the return the Funds will receive
when these amounts are reinvested.

COLLATERALIZED MORTGAGE OBLIGATIONS. The Funds may also purchase
collateralized mortgage obligations ("CMOs") issued by a U.S. Government
instrumentality which are backed by a portfolio of mortgages or mortgage-backed
securities. The issuer's obligations to make interest and principal payments is
secured by the underlying portfolio of mortgages or mortgage-backed securities.
Generally, CMOs are partitioned into several classes with a ranked priority by
which the classes of obligations are redeemed. The Funds may only invest in
CMOs issued by FHLMC, FNMA or other agencies of the U.S. Government or
instrumentalities established or sponsored by the U.S. Government.

<PAGE>

or less price volatility and interest rate risk than other types of
mortgaged-related obligations.

ASSET-BACKED SECURITIES. Each Fund may invest in asset-backed
securities, which represent participations in, or are secured by and payable
from, assets such as motor vehicle installment sales, installment loan
contracts, leases of various types of real and personal property and
receivables from revolving credit (credit card) agreements. The Funds may
also invest in other types of asset-backed securities that may be available
in the future. Such assets are securitized through the use of trusts and
special purpose corporations. Payments or distributions of principal and
interest may be guaranteed up to certain amounts and for a certain time
period by a letter of credit or a pool insurance policy issued by a financial
institution unaffiliated with the trust or corporation. 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 above. Asset-backed securities are considered an industry for
industry concentration purposes, and the Funds will therefore not purchase
any asset-backed securities which would cause 25% or more of its net assets
at the time of purchase to be invested in asset-backed securities.

Asset-backed securities present certain risks that are not presented
by other securities in which the Fund may invest. Automobile receivables
generally are secured by automobiles. Most issuers of automobile receivables
permit the loan servicers to retain possession of the underlying obligations.
If the servicer were to sell these obligations to another party, there is a risk
that the purchaser would acquire an interest superior to that of the holders of
the asset-backed securities. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile receivables may not have a
proper security interest in the underlying

<PAGE>

ADDITIONAL INVESTMENT CONSIDERATIONS AND RISKS--NON-INVESTMENT GRADE
FIXED INCOME SECURITIES. When and if available, fixed income securities may be
purchased by a Fund at a discount from face value. From time to time

<PAGE>

a Fund may purchase securities in default with respect to the paying of
principal and/or interest at the time acquired if, in the opinion of BEA, such
securities have the potential for future capital appreciation.

<PAGE>

HEDGING. Each of the Funds may engaged in various hedging strategies.
See "Currency Hedging" in the Prospectus.

The precise matching of the forward contract amounts and the value of
the securities involved will not generally be possible because the future value
of such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward contract
is entered into and the date it matures. Accordingly, it may be necessary for a
Fund to purchase additional foreign currency on the spot (i.e., cash) market
(and bear the expense of such purchase) if the market value of the security is
less than the amount of foreign currency the Fund is obligated to deliver and if
a decision is made to sell the security and make delivery of the foreign
currency. Conversely, it may be necessary to sell on the spot market some of
the foreign currency received upon the sale of a Fund security if its market
value exceeds the amount of foreign currency a Fund is obligated to deliver.
The projection of short-term currency market movements is extremely difficult,
and the successful execution of a short-term hedging strategy is highly
uncertain. Forward contracts involve the risk that anticipated currency
movements will not be accurately predicted, causing a Fund to sustain losses on
these contracts and transaction costs. A Fund may enter into a forward contract
and maintain a net exposure on such contract only if (1) the consummation of the
contract would not obligate a Fund to deliver an amount of foreign currency in
excess of the value of a Fund's fund securities or other assets denominated in
that currency or (2) a Fund

<PAGE>

maintains cash, government securities or liquid, high-grade debt securities in a
segregated account in an amount not less than the value of a Fund's total assets
committed to the consummation of the contract which value must be marked to
market daily. A Fund will comply with guidelines established by the SEC with
respect to coverage of forward contracts entered into by mutual funds and, if
such guidelines so require, will set aside cash, U.S. government securities or
liquid, high-grade debt securities in a segregated account with its custodian in
the amount prescribed. Under normal circumstances, consideration of the
prospect for currency parities will be incorporated into the longer term
investment decisions made with regard to overall diversification strategies.
However, the Adviser believes that it is important to have the flexibility to
enter into such forward contracts when it determines that the best interests of
a Fund will be served.

At or before the maturity date of a forward contract requiring a
portfolio to sell a currency, the Funds may either sell a fund security and use
the sale proceeds to make delivery of the currency or retain the security and
offset its contractual obligation to deliver the currency by purchasing a second
contract pursuant to which the Fund will obtain, on the same maturity date, the
same amount of the currency that it is obligated to deliver. Similarly, the
Funds may close out a forward contract requiring it to purchase a specified
currency by entering into a second contract entitling it to sell the same amount
of the same currency on the maturity date of the first contract. A Fund would
realize a gain or loss as a result of entering into such an offsetting forward
currency contract under either circumstance to the extent the exchange rate or
rates between the currencies involved moved between the execution dates of the
first contract and the offsetting contract.

<PAGE>

OPTIONS AND FUTURES CONTRACTS. The Funds, except Municipal Bond Fund,
may write covered call options, buy put options, buy call options and write put
options, without limitation except as noted in this paragraph. Such options may
relate to particular securities or to various indexes and may or may not be
listed on a national securities exchange and issued by the Options Clearing
Corporation. These Funds may also invest in futures contracts and options on
futures contracts (index futures contracts or interest rate futures contracts,
as applicable) for hedging purposes (including currency hedging) or for other
purposes so long as aggregate initial margins and premiums required for
non-hedging positions do not exceed 5% of its net assets, after taking into
account any unrealized profits and losses on any such contracts it has entered
into.

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.

These Funds will engage in unlisted over-the-counter options only with
broker/dealers deemed creditworthy by the Adviser. Closing transactions in
certain options are usually effected directly with the same broker/dealer that
effected the original option transaction. The Funds bear the risk that the
broker/dealer will fail to meet its obligations. There is no assurance that
these Funds 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, these Funds 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.

<PAGE>

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 these Funds is subject to the Adviser's ability to correctly predict
movements in the direction of the market. For example, if a Fund uses future
contracts as a hedge against the possibility of a decline in the market
adversely affecting securities held by it and securities prices increase
instead, such Fund will lose part or all of the benefit of the increased value
of its securities which it has hedged because it will have approximately equal
offsetting losses in its futures positions. The risk of loss in trading futures
contracts in some strategies can be substantial, due both to the low margin
deposits required, and the extremely high degree of leverage involved in futures
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. These instruments and techniques are
discussed in greater detail below.

A Fund may purchase futures contracts as an alternative to purchasing
actual securities. For example, if a Fund intended to purchase bonds but had
not yet done so, it could purchase a futures contract in order to lock in
current bond prices while deciding on particular investments. This strategy is
sometimes known as an anticipatory hedge. Alternatively, a Fund could purchase
a futures contract if it had cash and short-term securities on hand that it
wished to invest in longer-term securities, but at the same time that Fund
wished to maintain a highly liquid position in order to be prepared to meet
redemption requests or other obligations. In these strategies a Fund would use
futures contracts to attempt to achieve an

<PAGE>

overall return -- whether positive or negative -- similar to the return from
longer-term securities, while taking advantage of potentially greater liquidity
that futures contracts may offer. Although a Fund would hold cash and liquid
debt securities in a segregated account with a value sufficient to cover its
open futures obligations, the segregated assets would be available to a Fund
immediately upon closing out the futures position, while settlement of
securities transactions can take several days. However, because the Fund's cash
that would otherwise have been invested in higher-yielding bonds would be held
uninvested or invested in short-term securities so long as the futures position
remains open, the Fund's return would involve a smaller amount of interest
income and potentially a greater amount of capital gain or loss.

<PAGE>

investment adviser will attempt to minimize this risk by careful monitoring of
the creditworthiness of the FCMs with which a Fund does business.

<PAGE>

current market price for the option (known as the option premium). The option's
underlying instrument may be a security, or a futures contract.

<PAGE>

Fund may be required to hold a security that it might otherwise have sold to
protect against depreciation.

<PAGE>

would involve writing a call option at one strike price and buying a call option
at a lower price, in order to reduce the risk of the written call option in the
event of a substantial price increase. Because combined options positions
involve multiple trades, they result in higher transaction costs and may be more
difficult to open and close out.

ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. A Fund will not
use leverage in its options and futures strategies. Such investments will be
made for hedging purposes only. A Fund will hold securities or other options
or futures positions whose values are expected to offset its obligations under
the hedge strategies. A Fund will not enter into an option or futures position
that exposes the Fund to an obligation to another party unless it owns either
(i) an offsetting position in securities or other options or futures contracts
or (ii) cash, receivables and short-term debt securities with a value sufficient
to cover its potential obligations. A Fund will comply with guidelines
established by the SEC with respect to coverage of options and futures
strategies by mutual funds, and if the guidelines so require will set aside cash
and high grade liquid debt securities in a segregated account with its custodian
bank in the amount prescribed. Securities held in a segregated account cannot
be sold while the futures or option strategy is outstanding, unless they are
replaced with similar securities. As a result, there is a possibility that
segregation of a large percentage of the Fund's assets could impede portfolio
management or the Fund's ability to meet redemption requests or other current
obligations.

LIMITATIONS ON FUTURES AND OPTIONS TRANSACTIONS. The Company on
behalf of the Funds will file, if required, a notice of eligibility for
exclusion from the definition of the term "commodity pool operator" with the
Commodity Futures Trading Commission ("CFTC") and the National Futures
Association, which regulate trading in the futures markets. Pursuant to Section
4.5 of the regulations under the Commodity Exchange Act, the notice of
eligibility includes the representation that the Funds will not enter into any
commodity futures contract or option on a commodity futures contract if, as a
result, the sum of initial margin deposits on commodity futures contracts and
related commodity options and premiums paid for options on commodity futures
contracts the Fund has purchased, after taking into account

<PAGE>

unrealized profits and losses on such contracts, would exceed 5% of a Fund's
total assets.

In addition, the Funds will not enter into any futures contract and
into any option if, as a result, the sum of (i) the current value of assets
hedged in the case of strategies involving the sale of securities, and (ii) the
current value of securities or other instruments underlying the respective
Fund's other futures or options positions, would exceed 50% of such Fund's net
assets.

SHORT SALES "AGAINST THE BOX." In a short sale, a Fund sells a
borrowed security and has a corresponding obligation to the lender to return the
identical security. Each Fund may engage in short sales if at the time of the
short sale it owns or has the right to obtain, at no additional cost, an equal
amount of the security being sold short. This investment technique is known as
a short sale "against the box." In a short sale, a seller does not immediately
deliver the securities sold and is said to have a short position in those
securities until delivery occurs. If a Fund engages in a short sale, the
collateral for the short position will be maintained by the Fund's custodian or
a qualified sub-custodian. While the short sale is open, the Fund will
maintain in a segregated account an amount of securities equal in kind and
amount to the securities sold short or securities convertible into or
exchangeable for such equivalent securities. These securities constitute the
Fund's long position. A Fund may, however, make a short sale as a hedge, when
it believes that the price of a security may decline, causing a decline in the
value of a security owned by the Fund (or a security convertible or exchangeable
for such security), or when the Fund wants to sell the security at an attractive
current price, but also wishes to defer recognition of gain or loss for federal
income tax purposes and for purposes of satisfying certain tests applicable to
regulated investment companies under the Internal Revenue Code. In such case,
any future losses in the Fund's long position should be reduced by a gain in the
short position. Conversely, any gain in the long position should be reduced by
a loss in the short position. The extent to which such gains or losses are
reduced will depend upon the amount of the security sold short relative to the
amount the Fund owns. There will be certain additional transaction costs
associated

<PAGE>

with short sales against the box, but the Fund will endeavor to offset these
costs with the income from the investment of the cash proceeds of short sales.
The Funds do not presently intend to invest more than 5% of net assets in short
sales against the box.

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

Supplemental Investment Policies -- BEA Municipal Bond Fund Portfolio

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 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.

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 Statement of Additional
Information, 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

<PAGE>

assets in private activity bonds when added together with any taxable
investments held by the BEA Municipal Bond Fund, 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'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 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.

SUPPLEMENTAL INVESTMENT OBJECTIVES AND POLICIES --
BEA INTERNATIONAL EQUITY, BEA EMERGING MARKETS EQUITY,
BEA U.S. CORE EQUITY AND BEA BALANCED FUNDS

INVESTMENT LIMITATIONS

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

<PAGE>

3. Act as an underwriter of securities within the meaning of the
Securities Act of 1933 except insofar as it might be deemed to be an underwriter
upon disposition of certain fund securities acquired within the limitation on
purchases of restricted securities;

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

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

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

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

<PAGE>

options, futures contracts, options on futures contracts and forward
contracts;

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

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

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

(1) That the dollar amount of short sales at any one time shall
not exceed 25% of the net equity of a Fund, and the value of securities of
any one issuer in which a Fund is short may not exceed the lesser of 2.0%
of the value of a Fund's net assets or 2.0% of the securities of any class
of any issuer. Short sales may be made only in those securities which are
fully listed on a national securities exchange. This provision does not
include the sale of securities if the Fund contemporaneously owns or has
the right to obtain securities equivalent in kind and amount to those sold,
i.e., short sales against the box.

(2) That the investment in warrants, valued at the lower of cost
or market, may not exceed 5.0% of the value of a Fund's net assets.
Included within that amount, but not to exceed 2.0% of the value of a
Fund's net assets, may be warrants which are not listed on the New York or
American Stock Exchange. Warrants acquired by a Fund in units or attached
to securities may be deemed to be without value.

(3) The Funds will only purchase securities of any one company
if, as to 75% of the assets of any one company, at the time of purchase,
not more than 10% of the voting securities of any one company would be held
by such Fund, except that up to 25% of the Value of a Funds assets may be
invested without regard to such limitation.

(4) The Funds will only invest is securities of other investment
companies if such securities are purchased on the open market with no
commission or profit to a sponsor or dealer, other than the

<PAGE>

customary brokers commission, or when the purchase is part of a plan of
merger, consolidation, reorganization or acquisition.

Except for the percentage restrictions applicable to the borrowing of
money and illiquid securities, if a percentage restriction is adhered to at the
time of investment, a later increase or decrease in percentage resulting from a
change in market values of fund securities or amount of total or net assets will
not be considered a violation of any of the foregoing restrictions.

RISK FACTORS

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

POLITICAL, ECONOMIC AND MARKET FACTORS. Investments in foreign securities
involve risks relating to political and economic developments abroad, as well as
those that result from the differences between the regulations to which U.S. and
foreign issuers are subject. These risks may include expropriation, confiscatory
taxation, withholding taxes on dividends and interest, limitations on the use or
transfer of a 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.

<PAGE>

In addition, substantial limitations may exist in certain countries with
respect to the Funds' ability to repatriate investment income, capital or the
proceeds of sales of securities by foreign investors. The Portfolios 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
Portfolios of any restrictions on investments.

REPORTING STANDARDS. Most of the foreign securities held by the Portfolios 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 generally subject to
uniform accounting, auditing and financial reporting standards or to other
regulatory requirements comparable to those applicable to U.S. companies.

EXCHANGE RATE FLUCTUATIONS. Because foreign securities ordinarily
will be denominated in currencies other than the U.S. dollar, changes in foreign
currency exchange rates will affect a Portfolio's net asset value, the value of
interest and dividends earned, gains and losses realized on the sale of
securities and net investment income and capital gain, if any, to be distributed
to shareholders by a Portfolio. 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.

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 Portfolios may invest in these investment
funds and registered investment companies subject to the provisions of the 1940
Act. If these Portfolios invest in such investment companies, they will each
bear their proportionate share of the costs incurred by such companies,
including investment advisory fees.

<PAGE>

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

NO RATING CRITERIA FOR DEBT SECURITIES. The BEA High Yield, the
BEA U.S. Core Fixed Income, the BEA Strategic Global Fixed Income, and
Municipal Bond Funds have established no rating criteria for the debt
securities in which it may invest. Issuers of low rated or non-rated
securities ("high yield" securities, commonly known as "junk bonds") may be
highly leveraged and may not have available to them more traditional methods
of financing. Therefore, the risks associated with acquiring the securities
of such issuers generally is greater than is the case with higher rated
securities. For example, during an economic downturn or a sustained period
of rising interest rates, issuers of high yield securities may be more likely
to experience financial stress, especially if such issuers are highly
leveraged. During such periods, such issuers may not have sufficient
revenues to meet their interest payment obligations. The issuer's ability to
service its debt obligations also may be adversely affected by specific
issuer developments, or the issuer's inability to meet specific projected
business forecasts, or the unavailability of additional financing. The risk
of loss due to default by the issuer is significantly greater for the holders
of lower-rated securities because such securities may be unsecured and may be
subordinated to other creditors of the issuer.

Lower-rated securities frequently have call or redemption features
which would permit an issuer to repurchase the security from a Fund. If a call
were exercised by the issuer during a period of declining interest rates, a Fund
likely would have to replace such called security with a lower yielding
security, thus decreasing the net investment income to a Fund and dividends to
shareholders.

A Fund may have difficulty disposing of certain lower-rated securities
because there may be a thin trading market for such securities. The secondary
trading market for high yield securities is generally not as liquid as the
secondary market for higher rated securities. Reduced secondary market
liquidity may have an adverse impact on market price and a Fund's ability to
dispose of particular issues when necessary to meet a Fund's liquidity needs or
in response to a specific economic event such as a deterioration in the
creditworthiness of the issuer.

<PAGE>

adversely affect the Fund's net asset value. In addition, a Fund may incur
additional expenses to the extent it is required to seek recovery upon a default
on a portfolio holding or participate in the restructuring of the obligation.

<PAGE>

securities rated D by S&P or C by Moody's. A Fund may have difficulty disposing
of certain Sovereign Debt obligations because there may be a limited trading
market for such securities. Because there is no liquid secondary market for
many of these securities, a Fund anticipates that such securities could be sold
only to a limited number of dealers or institutional investors. The lack of a
liquid secondary market may have an adverse impact on the market price of such
securities and a Fund's ability to dispose of particular issues when necessary
to meet a Fund's liquidity needs or in response to a specific economic event,
such as a deterioration in the creditworthiness of the issuer. The lack of a
liquid secondary market for certain securities also may make it more difficult
for a Fund to obtain accurate market quotations for purposes of valuing a Fund's
portfolio and calculating its net asset value. When and if available, fixed
income securities may be purchased by a Fund at a discount from face value.
However, a Fund does not intend to hold such securities to maturity for the
purpose of achieving potential capital gains, unless current yields on these
securities remain attractive. From time to time a Fund may purchase securities
not paying interest at the time acquired if, in the opinion of the Adviser, such
securities have the potential for future income or capital appreciation.

DIRECTORS AND OFFICERS

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

Postion with Principal Occupation
Name, Address and Age the Company During Past Five Years
- --------------------- ------------------- -----------------------

Arnold M. Reichman - 48* Director Since 1986, Managing
466 Lexington Avenue Director and Assistant
New York, NY 10017 Secretary, E. M. Warburg,
Pincus & Co., Inc.; Since
1990, Chief Executive
Officer and since 1991,
Secretary, Counsellors
Securities, Inc; Officer of
various investment companies
advised by Warburg, Pincus
Counsellors, Inc.

Robert Sablowsky - 58** Director Since 1985, Executive
14 Wall Street Vice President of
New York, NY 10005 Gruntal & Co., Inc.,
a broker-dealer
Director, Gruntal & Co.,Inc.
and Gruntal Financial
Corp., its parent
company.

Francis J. McKay - 60 Director Since 1963, Executive
7701 Burholme Avenue Vice President, Fox Chase
Philadelphia, PA 1911 Cancer Center (Biomedical
research and medical care.)

<PAGE>

Marvin E. Sternberg - 62 Director Since 1974, Chairman,
937 Mt. Pleasant Road Director and President,
Bryn Mawr, PA 19010 Moyco Industries, Inc.
(manufacturer of dental
supplies and precision
coated abrasives); Since
1968, Director and
President, Mart MMM, Inc.
(formerly Montgomeryville
Merchandise Mart Inc.) and
Mart PMM, Inc. (formerly
Pennsauken Merchandise Mart,
Inc.) (Shopping Centers);
and Since 1975, Director and
Executive Vice President,
Cellucap Mfg. Co., Inc.
(manufacturer of disposable
headwear).

Julian A. Brodsky - 63 Director Director, Vice Chairman
Comcast Corporation 1969 to present, Comcast
1234 Market Street Corporation (cable
16th Floor Philadelphia, PA 19107-3723
television and
communications); Director,
Comcast Cablevision of
Philadelphia (cable
television communications)
and Nextel (wireless
communications).

Donald van Roden - 72 Director Self-employed
1200 Old Mill Lane businessman.
Wyomissing, PA 19610 From February 1980 to March
1987, Vice Chairman, Smith
Kline Beckman Corporation
(pharmaceuticals); Director,
AAA Mid-Atlantic (auto
service); Director, Keystone
Insurance Co.

Edward J. Roach - 72 President and Certified Public
Bellevue Park Treasurer Accountant;
Corporate Center Vice Chairman of the
400 Bellevue Parkway of the Board, Fox
ChaseWilmington, DE 19809 Cancer Center; Vice
President and Trustee,
Pennsylvania School for the
Deaf; Trustee, Immaculata
College; Vice President and
Treasurer of various
investment companies advised
by PNC Institutional
Management Corporation.

<PAGE>
Principal Occupation
Name and Address Position with Fund During Past Five Years
- ---------------- ------------------ ----------------------

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

* Mr. Reichman is an "interested person" of the Company as that term is
defined in the 1940 Act by virtue of his position with Counsellors
Securities Inc., the Company's distributor.

** Mr. Sablowsky is an "interested person" of the Company as that term is
defined in the 1940 Act by virtue of his position with Gruntal & Co., Inc.,
a broker-dealer.

The Company pays directors who are not "affiliated persons" (as
that term is defined in the 1940 Act) of any Investment Adviser or
sub-adviser of the Company or the Distributor of the Company $12,000 annually
and $1,000 per meeting of the Board or any committee thereof that is not held
in conjunction with a Board meeting. Such Directors are reimbursed for any
expenses incurred in attending meetings of the Board of Directors or any
committee thereof. For the year ended August 31, 1996, each of the
following members of the Board of Directors received compensation from the
Company in the following amounts:

DIRECTOR COMPENSATION

Directors Compensation
--------- ------------

Julian A. Brodsky $12,525
Francis J. McKay 15,975
Marvin E. Sternberg 16,725
Donald van Roden 21,025

On October 24, 1990 the Company adopted, as a participating employer, the
Company Office Retirement Profit-Sharing Plan and Trust Agreement, a

<PAGE>

retirement plan for employees (currently Edward J. Roach) pursuant to which
the Company will contribute on a monthly basis amounts equal to 10% of the
monthly compensation of each eligible employee. By virtue of the services
performed by the Company's advisers, custodians, administrators and
distributor, the Company itself requires only one part-time employee. No
officer, director or employee of BEA or the Distributor currently receives
any compensation from the Company.

INVESTMENT ADVISORY AND SERVICING ARRANGEMENTS

ADVISORY AGREEMENTS. BEA Associates renders advisory and
administrative services to each of the Funds pursuant to Investment Advisory
Agreements. The Advisory Agreements relating to the Funds are dated
September 16, 1992 for the BEA International Equity, the BEA Emerging Markets
Equity and the BEA High Yield Funds, dated August 31, 1993 for the BEA U.S.
Core Equity, the BEA U.S. Core Fixed Income, the BEA Strategic Global Fixed
Income and the BEA Municipal Bond Funds, and dated November 17, 1994 for the
BEA Balanced and the BEA Short Duration Funds. Such advisory agreements are
hereinafter collectively referred to as the "Advisory Contracts."

BEA Associates is a diversified Investment Adviser, managing global
equity, fixed income and derivative securities accounts for corporate pension
and profit-sharing plans, state pension funds, union funds, endowments and
other charitable institutions. As of September 30, 1996, BEA Associates
managed approximately $313 billion in assets. BEA is a wholly-owned
subsidiary of Credit Suisse, the second largest Swiss bank, which in turn is
subsidiary of CS Holding, a Swiss corporation. Active employees of BEA have
a long-term equity incentive plan. BEA Associates is a registered investment
adviser under the Investment Advisers Act of 1940, as amended.

<PAGE>

Indonesia Fund, Inc., The Latin America Equity Fund, Inc., The Latin America
Investment Fund, Inc., and The Portugal Fund, Inc. In addition, BEA acts as
sub-adviser to certain portfolios of six other registered investment companies:
Frank Russell Investment Company (Fixed Income III Fund and Multistrategy Bond
Fund), Oppenheimer (LifeSpan Balanced Fund, LifeSpan Income Fund and LifeSpan
Growth Fund), Panorama (LifeSpan Balanced Account, LifeSpan Capital Appreciation
Account and LifeSpan Diversified Income Account), SEI Institutional Managed
Trust (High Yield Bond Fund), WNL Series Trust (BEA Growth and Income Fund),
Touchstone International Equity Fund and Touchstone Variable Annuity
International Equity Fund. BEA also acts as investment adviser for forty-two
offshore funds.

BEA Associates has sole investment discretion for the Funds and
will make all decisions affecting assets in the Funds under the supervision
of the Company's Board of Directors and in accordance with each Fund's stated
policies. BEA Associates will select investments for the Funds and will place
purchase and sale orders on behalf of the Funds. For its services to the BEA
International Equity, the BEA Emerging Markets Equity, the BEA U.S. Core
Equity, the BEA U.S. Core Fixed Income, the BEA Strategic Global Fixed
Income, the BEA High Yield, the BEA Municipal Bond Fund, the BEA Balanced and
the BEA Short Duration Funds, BEA Associates will be paid (before any
voluntary waivers or reimbursements) a monthly fee computed at an annual rate
of .80%, 1.00%, .75%, .375%, .50%, .70%, .70%, .60% and .15% of average daily
net assets, respectively.

For the year ended August 31, 1996 BEA waived advisory fees with
respect to the BEA International Equity, the BEA Emerging Markets Equity, the
BEA U.S. Core Equity, the BEA U.S. Core Fixed Income, the BEA Strategic
Global Fixed Income, the BEA High Yield and the BEA Municipal Bond Funds in the
amount of $0, $0, $93,439, $134,630, $53,915, $100,763 and $68,790
respectively. During the same period, BEA received advisory fees (after
waivers) in the amount of $5,993,072, $1,289,739, $234,890, $316,147
$103,144, $542,590, and $92,994 respectively.

<PAGE>

Funds by or under the direction of the Company's Board of Directors in such
manner as the Board determines to be fair and equitable. Expenses borne by a
Fund include, but are not limited to, the following (or a Fund's share of the
following): (a) the cost (including brokerage commissions) of securities
purchased or sold by a Fund and any losses incurred in connection therewith; (b)
fees payable to and expenses incurred on behalf of a Fund by BEA Associates; (c)
expenses of organizing the Company that are not attributable to a class of the
Company; (d) certain of the filing fees and expenses relating to the
registration and qualification of the Company and a Fund's shares under Federal
and/or state securities laws and maintaining such registrations and
qualifications; (e) fees and salaries payable to the Company's directors and
officers; (f) taxes (including any income or franchise taxes) and governmental
fees; (g) costs of any liability and other insurance or fidelity bonds; (h) any
costs, expenses or losses arising out of a liability of or claim for damages or
other relief asserted against the Company or a Fund for violation of any law;
(i) legal, accounting and auditing expenses, including legal fees of special
counsel for the independent directors; (j) charges of custodians and other
agents; (k) expenses of setting in type and printing prospectuses, statements of
additional information and supplements thereto for existing shareholders,
reports, statements, and confirmations to shareholders and proxy material that
are not attributable to a class; (l) costs of mailing prospectuses, statements
of additional information and supplements thereto to existing shareholders, as
well as reports to shareholders and proxy material that are not attributable to
a class; (m) any extraordinary expenses; (n) fees, voluntary assessments and
other expenses incurred in connection with membership in investment company
organizations; (o) costs of mailing and tabulating proxies and costs of
shareholders' and directors' meetings; (p) costs of PFPC's use of independent
pricing services to value a Fund's securities; and (q) the cost of investment
company literature and other publications provided by the Company to its
directors and officers. Transfer agency expenses, expenses of preparation,
printing and mailing prospectuses, statements of additional information, proxy
statements and reports to shareholders, organizational expenses and registration
fees and other costs identified as belonging to a particular class of the
Company are allocated to such class.

<PAGE>

terminable by vote of the Company's Board of Directors or by the holders of a
majority of the outstanding voting securities of the relevant Fund, at any time
without penalty, on 60 days' written notice to BEA Associates. Each of the
Advisory Contracts may also be terminated by BEA Associates on 60 days' written
notice to the Company. Each of the Advisory Contracts terminates automatically
in the event of assignment thereof.

CUSTODIAN AND TRANSFER AGENCY AGREEMENTS. PNC Bank, National
Association ("PNC"), serves as custodian for the BEA Municipal Bond Fund
pursuant to a custodian agreement (the "PNC Custodian Agreement"). PNC's
principal business address is 17th and Chestnut Streets, Philadelphia,
Pennsylvania 19103. Brown Brothers Harriman & Co. ("BBH") acts as the custodian
for the remaining Funds and also acts as the custodian for the Funds' foreign
securities pursuant to a Custodian Agreement (the "BBH Custodian Agreement," and
together with the PNC Custodian Agreement, the "Custodian Agreements"). Under
the Custodian Agreements, PNC and BBH (the "Custodians") (a) maintain a separate
account or accounts in the name of each Fund, (b) hold and transfer fund
securities on account of each Fund, (c) accept receipts and make disbursements
of money on behalf of each Fund, (d) collect and receive all income and other
payments and distributions on account of each Fund's fund securities, and (e)
make periodic reports to the Company's Board of Directors concerning each Fund's
operations. The Custodians are authorized to select one or more banks or trust
companies to serve as sub-custodian on behalf of the Company, provided that the
Custodians remain responsible for the performance of all their duties under the
Custodian Agreements and hold the Company harmless from the negligent acts and
omissions of any sub-custodian. For their services to the Company under the
Custodian Agreements, each of the Custodians receive a fee which is calculated
based upon each Fund's average daily gross assets, exclusive of transaction
charges and out-of-pocket expenses, which are also charged to the Company.

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

<PAGE>

PORTFOLIO TRANSACTIONS

<PAGE>

addition to, and not in lieu of, the services required to be performed by BEA
Associates under his respective contracts. A commission paid to such brokers
may be higher than that which another qualified broker would have charged for
effecting the same transaction, provided that BEA Associates, as applicable,
determines in good faith that such commission is reasonable in terms either of
the transaction or the overall responsibility of BEA Associates to a Fund and
its other clients and that the total commissions paid by a Fund will be
reasonable in relation to the benefits to a Fund over the long-term.

<PAGE>

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

During the year ended August 31, 1996, BEA International Equity Fund
paid $3,192,274.36 of brokerage commissions, BEA Emerging Markets Equity Fund
paid $704,909.93 of brokerage commissions, BEA U.S. Core Equity Fund paid
$182,796.44 of brokerage commissions, and for each other Fund no brokerage
commissions were paid during such period.

The BEA Short Duration Fund expects that its annual portfolio
turnover rate will not exceed 100% under normal market conditions. The BEA
International Equity, the BEA Emerging Markets Equity and the BEA High Yield
Funds expect that their annual Fund turnover rate should not exceed 100%
under normal market conditions. The BEA U.S. Core Equity, the BEA U.S. Core
Fixed Income, the BEA Global Fixed Income and the BEA Municipal Bond Fund
expect that their annual portfolio turnover rate should not exceed 100% under
normal market conditions. The BEA Balanced Fund expects that its annual
portfolio turnover rate will not exceed 100% under normal market conditions
for the equity portion and 100% for the fixed income portion. A high rate of
portfolio turnover involves correspondingly greater brokerage commission
expenses and other transaction costs, which must be borne directly by a Fund.
Federal income tax laws may restrict the extent to which a Fund may engage
in short term trading of securities. See "Taxes". Each of the Funds
anticipates that its annual portfolio turnover rate will vary from year to
year. The portfolio turnover rate is calculated by dividing the lesser of a
Fund's annual sales or purchases of fund securities (exclusive of purchases
or sales of securities whose maturities at the time of acquisition were one
year or less) by the monthly average value of the securities in the Fund
during the year.

The Funds have the benefit of an exemptive order issued by the SEC
under the 1940 Act authorizing the Funds and other investment companies advised
by BEA to acquire jointly securities issued in private placements, subject to
the terms and conditions of the order. The Board of RBB has adopted a policy
that the Funds will not purchase private placements (i.e. restricted securities
other than Rule 144A securities).

PURCHASE AND REDEMPTION INFORMATION

The Company reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption of a Fund's shares by
making payment in whole or in part in securities chosen by the Company and
valued in the same way as they would be valued for purposes of computing a
Fund's net asset value. If payment is made in securities, a shareholder may
incur transaction costs in converting these securities into cash. The Company
has elected, however, to be governed by Rule 18f-1 under the Investment Company
Act so that a Fund is obligated to redeem its shares

<PAGE>

solely in cash up to the lesser of $250,000 or 1% of its net asset value during
any 90-day period for any one shareholder of a Fund.

VALUATION OF SHARES

The net asset value per share of each Fund is calculated separately as
of the close of regular trading of the NYSE on each Business Day. "Business
Day" means each weekday when the NYSE is open. Currently, the NYSE is closed on
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day
(observed), Labor Day, Thanksgiving Day and Christmas Day (observed).
Securities which are listed on stock exchanges, whether U.S. or foreign are
valued at the last sale price on the day the securities are valued or, lacking
any sales on such day, at the mean of the bid and asked prices available prior
to the valuation. Fund securities primarily traded in foreign markets may be
traded in such markets on days which are not Business Days. Because net asset
value per share of each Fund is determined only on Business Days, the net asset
value of shares of a Fund may be significantly affected on days when an investor
does not have access to the Fund. If on any Business Day a foreign securities
exchange or foreign market is closed, the securities traded on such exchange or
in such market will be valued at the last sale price reported on the previous
business day of such foreign exchange or market. In cases where securities are
traded on more than one exchange, the securities are generally valued on the
exchange designated by the Board of Directors or its delegates as the primary
market. Securities traded in the over-the-counter market and listed on the
National Association of Securities Dealers Automatic Quotation System ("NASDAQ")
are valued at the last trade price listed on the NASDAQ at 4:00 p.m.; securities
listed on NASDAQ for which there were no sales on that day and other
over-the-counter securities are valued at the mean of the bid and asked prices
available prior to valuation.

<PAGE>

Securities for which market quotations are not readily available are valued at
fair value as determined in good faith by or under the direction of the
Company's Board of Directors. The amortized cost method of valuation may also
be used with respect to debt obligations with sixty days or less remaining to
maturity. Any assets which are denominated in a foreign currency are converted
into U.S. dollars at the prevailing market rates for purposes of calculating net
asset value.

PERFORMANCE AND YIELD INFORMATION

n
P(1 + T) = ERV

Where: P = a hypothetical initial payment of $1,000

T = average annual total return

n = number of years (1, 5 or 10)

<PAGE>

ERV = ending redeemable value at the end of the 1, 5 or 10 year
periods (or fractional portion thereof) of a hypothetical $1,000 payment made at
the beginning of the 1, 5 or 10 year periods.

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

Calculated according to the SEC rules for the period beginning on
the commencement of operations and ending August 31, 1996, the average annual
total return for the BEA International Equity Fund (commencing October 1,
1992), the BEA Emerging Markets Equity Fund (commencing February 1, 1993),
the BEA U.S. Core Equity Fund

<PAGE>

(commencing September 1, 1994), the BEA High Yield Fund (commencing March 1,
1993), the BEA U.S. Core Fixed Income Fund (commencing April 1, 1994), the
BEA Strategic Global Fixed Income Fund (commencing June 28, 1994), and BEA
Municipal Bond Fund (commencing June 20, 1994), respectively was 8.98%
(annualized), 7.63% (annualized), 18.63% (annualized), 7.40% (annualized),
6.54% (annualized), 9.30% (annualized) and 4.98% (annualized). For the same
period, the aggregate total return for the Funds was 40.80%, 30.13%, 40.81%,
23.89%, 16.58%, 21.40%, and 11.33%, respectively.

Calculated according to the non-standardized computation for the
period beginning on the commencement of operations of each of the BEA
International Equity and the BEA Emerging Markets Equity Funds and ending on
August 31, 1996, the average annual total return for the Funds was 8.98% and
7.63%, respectively. The aggregate total return for the Funds calculated
according to the non-standardized computation for the period beginning on the
commencement of operations of each of the Funds and ending August 31, 1996
was 40.08% and 30.13%, respectively.

Yield. Certain Funds may also advertise their yield. Under the rules
of the SEC, a Fund advertising yield must calculate yield using the following
formula:

6
YIELD = 2[(a-b +1) - 1]
---
cd

Where: a = dividends and interest earned during the period.

b = expenses accrued for the period (net of
reimbursement).

c = the average daily number of shares outstanding during
the period that were entitled to receive dividends.

d = the maximum offering price per share on the last day
of the period.

Under the foregoing formula, yield is computed by compounding
semi-annually, the net investment income per share earned during a 30 day period
divided by the maximum offering price per share on the last day of the period.
For the purpose of determining the interest earned (variable "a" in the formula)
on debt obligations that were purchased by a Fund at a discount or premium, the
formula generally calls for amortization of the discount or premium; the
amortization schedule will be adjusted monthly to reflect changes in the market
values of the debt obligations.

<PAGE>

market fund to another, consideration should be given to each fund's investment
policies, including the types of investments made, lengths of maturities of the
fund securities, the method used by each fund to compute the yield (methods may
differ) and whether there are any special account charges which may reduce the
effective yield.

TAXES

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

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

<PAGE>

reason of distributions previously made for the purpose of avoiding liability
for Federal excise tax (discussed below).

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

<PAGE>

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

<PAGE>

similar or related property. The Company will designate the portion, if any, of
the distribution made by a Fund that qualifies for the dividends received
deduction in a written notice mailed by the Company to shareholders not later
than 60 days after the close of the Fund's taxable year.

The BEA Municipal Bond Fund is designed to provide investors with
current tax-exempt interest income. Exempt interest dividends distributed to
shareholders by this Fund are not included in the shareholder's gross income for
regular Federal income tax purpose. In order for the Municipal Bond Fund to
pay exempt interest dividends during any taxable year, at the close of each
fiscal quarter at least 50% of the value of the Fund must consist of exempt
interest obligations.

In addition, the BEA Municipal Bond Fund may not be an appropriate
investment for entities which are "substantial users" of facilities financed by
private activity bonds or "related persons" thereof. "Substantial user" is
defined under U.S. Treasury Regulations to include a nonexempt person who
regularly uses a part of such facilities in his trade or business and (a) whose
gross revenues are more than 5% of the total revenue derived by all users of
such facilities, (b) who occupies more than 5% of the entire usable area of such
facilities, or (c) for whom such facilities or a part thereof were specifically
constructed, reconstructed or acquired. "Related persons" include certain
related natural persons, affiliated corporations, a partnership and its partners
and an S corporation and its shareholder.

A Fund may acquire standby commitments with respect to Municipal
Obligations held in its portfolio and will treat any interest received on
Municipal Obligations subject to such standby commitments a tax-exempt income.
In Rev. Rul. 82-144, 1982-2 C.B. 34, the Internal Revenue Service held that a
mutual fund acquired ownership of municipal obligations for federal income tax
purposes, even though the fund simultaneously purchased "put" agreements with

<PAGE>

respect to the same municipal obligations from the seller of the obligations.
The Company will not engage in transactions involving the use of standby
commitments that differ materially from the transaction described in Rev. Rul.
82-144 without first obtaining a private letter ruling from the Internal Revenue
Service or the opinion of counsel.

Interest on indebtedness incurred by a shareholder to purchase or
carry shares of the BEA Municipal Bond Fund is not deductible for income tax
purposes of (as expected) the BEA Municipal Bond Fund distributes exempt
interest dividends during the shareholder's taxable year. Receipt of exempt
interest dividends may result in collateral Federal income tax consequences to
certain other taxpayers, including persons subject to alternative minimum tax
(see Prospectus and discussion below), financial institutions, property and
casualty insurance companies, individual recipients of Social Security or
Railroad Retirement benefits, and foreign corporations engaged in a trade or
business in the United States. Prospective investors should consult their own
tax advisers as to such consequences.

<PAGE>

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

<PAGE>

located or in which it is otherwise deemed to be conducting business, each Fund
may be subject to the tax laws of such states or localities.

<PAGE>

However, the U.S. Treasury has announced that it is continuing to study the
application of the straddle rules for this purpose.

OPTIONS AND SECTION 1256 CONTRACTS. The writer of a covered put or
call option generally does not recognize income upon receipt of the option
premium. If the option expires unexercised or is closed on an exchange, the
writer generally recognizes short-term capital gain. If the option is
exercised, the premium is included in the consideration received by the writer
in determining the capital gain or loss recognized in the resultant sale.
However, certain options transactions that the Funds enter into, as well as
futures transactions and transactions in forward foreign currency contracts that
are traded in the interbank market entered into by the Funds, will be subject to
special tax treatment as "Section 1256 contracts." Section 1256 contracts are
treated as if they are sold for their fair market value on the last business day
of the taxable year (i.e., marked-to-market), regardless of whether a taxpayer's
obligations (or rights) under such contracts have terminated (by delivery,
exercise, entering into a closing transaction or otherwise) as of such date.
Any gain or loss recognized as a consequence of the year-end marking-to-market
of Section 1256 contracts is combined (after application of the straddle rules
that are described above) with any other gain or loss that was previously
recognized upon the termination of Section 1256 contracts during that taxable
year. The net amount of such gain or loss for the entire taxable year is
generally treated as 60% long-term capital gain or loss and 40% short-term
capital gain or loss, except in the case of marked-to-market forward foreign
currency contracts for which such gain or loss is treated as ordinary income or
loss. Such short-term capital gain (and, in the case of marked-to-market
forward foreign currency contracts, such ordinary income) would be included in
determining the investment company taxable income of the relevant Fund for
purposes of the Distribution Requirement, even if it were wholly attributable to
the year-end marking-to-market of Section 1256 contracts that the relevant Fund
continued to hold. Investors should also note that Section 1256 contracts will
be treated as having been sold on October 31 in calculating the "required
distribution" that a Fund must make to avoid Federal excise tax liability.

<PAGE>

how foreign currency options, futures or forward foreign currency contracts will
be valued for purposes of the Asset Diversification Requirement. A Fund may
request a private letter ruling from the Internal Revenue Service for guidance
on some or all of these issues.

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

<PAGE>

Fund for purposes of satisfying the Distribution Requirement and the excise
tax distribution requirement. The proposed regulations would generally apply
only prospectively, to taxable years ending after their promulgation as final
regulations.

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

<PAGE>

ADDITIONAL INFORMATION CONCERNING THE COMPANY SHARES

The Company has authorized capital of thirty billion shares of
Common Stock, $.001 par value per share, of which 13.47 billion shares are
currently classified as follows: 100 million shares are classified as Class A
Common Stock, 100 million shares are classified as Class B Common Stock, 100
million shares are classified as Class C Common Stock, 100 million shares are
classified as Class D Common Stock, 500 million shares are classified as
Class E Common Stock (Money), 500 million shares are classified as Class F
Common Stock (Municipal Money), 500 million shares are classified as Class G
Common Stock (Money), 500 million shares are classified as Class H Common
Stock (Municipal Money), 1 billion shares are classified as Class I Common
Stock (Money), 500 million shares are classified as Class J Common Stock
(Municipal Money), 500 million shares are classified as Class K Common Stock
(U.S. Government Money), 1,500 million shares are classified as Class L
Common Stock (Money), 500 million shares are classified as Class M Common
Stock (Municipal Money), 500 million shares are classified as Class N Common
Stock (U.S. Government Money), 500 million shares are classified as Class O
Common Stock (N.Y. Money), 100 million shares are classified as Class P
Common Stock (Government), 100 million shares are classified as Class Q
Common Stock, 500 million shares are classified as Class R Common Stock
(Municipal Money), 500 million shares are classified as Class S Common Stock
(U.S. Government Money), 500 million shares are classified as Class T Common
Stock (International), 500 million shares are classified as Class U Common
Stock (High Yield), 500 million shares are classified as Class V Common Stock
(Emerging), 100 million shares are classified as Class W Common Stock, 50
million shares are classified as Class X Common Stock (U.S. Core Equity), 50
million shares are classified as Class Y Common Stock (U.S. Core Fixed
Income), 50 million shares are classified as Class Z Common Stock (Strategic
Global Fixed Income), 50 million shares are classified as Class AA Common
Stock (Municipal Bond), 50 million shares are classified as Class BB Common
Stock (BEA Balanced), 50 million shares are classified as Class CC Common
Stock (Short Duration), 100 million shares are classified as Class DD Common
Stock, 100 million shares are classified as Class EE Common Stock, 50 million
shares are classified as Class FF Common Stock (n/i MicroCap), 50 million
shares are classified as Class GG Common Stock (n/i Growth), 50 million
shares are classified as Class HH Common Stock (n/i Growth & Value), 100
million shares are classified as Class II Common Stock (BEA Investor
International), 100 million shares are classified as Class JJ Common Stock
(BEA Investor Emerging), 100 million shares are classified as Class KK Common
Stock (BEA Investor High Yield), 100 million shares are classified as Class
LL Common Stock (BEA Investor Global Telecom), 100 million shares are
classified as Class MM Common Stock (BEA Advisor International), 100 million
shares are classified as Class NN Common Stock (BEA Advisor Emerging), 100
million shares are classified as Class OO Common Stock (BEA Advisor High
Yield), 100 million shares are classified as Class PP Common Stock (BEA
Advisor Global Telecom), 100 million shares are classified as Class QQ Common
Stock (Boston Partners Institutional Large Cap), 100 million shares are
classified as Class RR Common Stock (Boston Partners Investor Large Cap), 100
million shares are classified as Class SS Common Stock (Boston Partners
Advisors Large Cap), 700 million shares are classified as Class Janney
Montgomery Money Common Stock (Money), 200 million shares are classified as
Class Janney Montgomery Municipal Money Common Stock (Municipal Money), 500

<PAGE>

million shares are classified as Class Janney Montgomery Government
Obligations Money Common Stock (Government Obligations Money), 100 million
shares are classified as Class Janney Montgomery N.Y. Municipal Money Common
Stock (N.Y. Money), 1 million shares are classified as Class Beta 1 Common
Stock (Money), 1 million shares are classified as Class Beta 2 Common Stock
(Municipal Money), 1 million shares are classified as Class Beta 3 Common
Stock (U.S. Government Money), 1 million shares are classified as Class Beta
4 Common Stock (N.Y. Money), 1 million shares are classified as Gamma 1
Common Stock (Money), 1 million shares are classified as Gamma 2 Common Stock
(Municipal Money), 1 million shares are classified as Gamma 3 Common Stock
(U.S. Government Money), 1 million shares are classified as Gamma 4 Common
Stock (N.Y. Money), 1 million shares are classified as Delta 1 Common Stock
(Money), 1 million shares are classified as Delta 2 Common Stock (Municipal
Money), 1 million shares are classified as Delta 3 Common Stock (U.S.
Government Money), 1 million shares are classified as Delta 4 Common Stock
(N.Y. Money), 1 million shares are classified as Epsilon 1 Common Stock
(Money), 1 million shares are classified as Epsilon 2 Common Stock (Municipal
Money), 1 million shares are classified as Epsilon 3 Common Stock (U.S.
Government Money), 1 million shares are classified as Epsilon 4 Common Stock
(N.Y. Money), 1 million shares are classified as Zeta 1 Common Stock (Money),
1 million shares are classified as Zeta 2 Common Stock (Municipal Money), 1
million shares are classified as Zeta 3 Common Stock (U.S. Government Money),
1 million shares are classified as Zeta 4 Common Stock (N.Y. Money), 1
million shares are classified as Eta 1 Common Stock (Money), 1 million shares
are classified as Eta 2 Common Stock (Municipal Money), 1 million shares are
classified as Eta 3 Common Stock (U.S. Government Money), 1 million shares
are classified as Eta 4 Common Stock (N.Y. Money), 1 million shares are
classified as Theta 1 Common Stock (Money), 1 million shares are classified
as Theta 2 Common Stock (Municipal Money), 1 million shares are classified as
Theta 3 Common Stock (U.S. Government Money), and 1 million shares are
classified as Theta 4 Common Stock (N.Y. Money). Shares of the Class T, U,
V, X, Y, Z, AA, BB and CC Common Stock constituted the BEA Institutional
classes. Under the Company's charter, the Board of Directors has the power
to classify or reclassify any unissued shares of Common Stock from time to
time.

<PAGE>

Family represents interests in ten non-money market funds ; the Janney
Montgomery Scott Family and the Beta, Gamma, Delta, Epsilon, Zeta, Eta and Theta
Families represent interests in the Money Market, Municipal Money Market,
Government Obligations Money Market and New York Municipal Money Market Funds.
The n/i Family represents interests in three non-money market funds and the
Boston Partners Family represents interest in one non-money market fund.

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

Notwithstanding any provision of Maryland law requiring a greater vote
of shares of the Company's common stock (or of any class voting as a class) in
connection with any corporate action, unless otherwise provided by law, (for
example by Rule 18f-2 discussed above) or by The RBB's Articles of
Incorporation, the Company may take or authorize such action upon the favorable
vote of the holders of more than 50% of all of the outstanding shares of Common
Stock voting without regard to class (or portfolio).

<PAGE>

MISCELLANEOUS

COUNSEL. The law firm of Ballard Spahr Andrews & Ingersoll, 1735
Market Street, 51st Floor, Philadelphia, Pennsylvania 19103 serves as counsel to
RBB, PIMC, PNC, PFPC and the Distributor. The law firm of Drinker Biddle &
Reath, 1100 Philadelphia National Bank Building, Broad and Chestnut Streets,
Philadelphia, Pennsylvania 19107, serves as counsel to the Company's independent
directors.

INDEPENDENT ACCOUNTANTS. Coopers & Lybrand L.L.P., 2400 Eleven Penn
Center, Philadelphia, Pennsylvania 19103, serves as the Company's independent
accountants. The Funds' financial statements which appear in this Statement of
Additional Information have been audited by Coopers & Lybrand L.L.P., as set
forth in their report, which also appears in this Statement of Additional
Information, and have been included herein in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.

CONTROL PERSONS. As of October 1, 1996, to the Company's knowledge,
the following named persons at the addresses shown below owned of record
approximately 5% or more of the total outstanding shares of the class of the
Company indicated below. See "Additional Information Concerning the Company
Shares" above. The Company does not know whether such persons also beneficially
own such shares.

PORTFOLIO NAME AND ADDRESS PERCENT OWNED
- --------- ---------------- -------------

RBB Money Market Luanne M. Garvey and Robert J. 11.2
Portfolio Garvey
(Class E) 2729 Woodland Avenue
Trooper, PA 19403

Harold T. Erfer 12.2
414 Charles Lane
Wynnewood, PA 19096

Karen M. McElhinny and 15.8
Contribution Account
4943 King Arthur Drive
Erie, PA 16506

John Robert Estrada and 22.5
Shirley Ann Estrada
1700 Raton Drive
Arlington, TX 76018

Eric Levine and Linda & Howard 27.6
Levine
67 Lanes Pond Road
Howell, NJ 07731

<PAGE>

PORTFOLIO NAME AND ADDRESS PERCENT OWNED
- --------- ---------------- -------------

RBB Municipal Money William B. Pettus Trust 11.4
Market Portfolio Augustine W. Pettus Trust
(Class F) 827 Winding Path Lane
St. Louis, MO 63021- 6635

Seymour Fein 88.6
P.O. Box 486
Tremont Post Office
Bronx, NY 10457- 0486

Cash Preservation Money Jewish Family and Children's 56.8
Market Portfolio Agency of Philadelphia
(Class G) Capital Campaign
Attn: S. Ramm
1610 Spruce Street
Philadelphia, PA 19103

Lynda R. Succ Trustee for in 12.4
Trust under The Lynda R. Campbell
Caring Trust
935 Rutger Street
St. Louis, MO 63104

Theresa M. Palmer 7.8
5731 N. 4th Street
Philadelphia, PA 19120

Cash Preservation Kenneth Farwell and Valerie 10.8
Municipal Money Market Farwell Jt. Ten
Portfolio 3854 Sullivan
(Class H) St. Louis, MO 63107

Gary L. Lange and Susan D. Lange 15.2
JTTEN
13 Muirfield Ct. North
St. Charles, MO 63309

Andrew Diederich and Doris Diederich 5.9
1003 Lindenman
Des Peres, MO 63131

Marcella L. Haugh Caring Tr Dtd 14.8
8/12/91
40 Plaza Square
Apt. 202
St. Louis, MO 63101

Emil Hunter and Mary J. Hunter 7.5
428 W. Jefferson
Kirkwood, MO 63122

<PAGE>

PORTFOLIO NAME AND ADDRESS PERCENT OWNED
- --------- ---------------- -------------

Gwendoyln Haynes 5.1
2757 Geyer
St. Louis, MO

Sansom Street Money Wasner & Co. 20.1
Market Portfolio FAO Paine Webber and Managed
(Class I) Assets Sundry Holdings
Attn: Joe Domizio
200 Stevens Drive
Lester, PA 19113

Saxon and Co. 73.3
FBO Paine Webber
P.O. Box 7780 1888
Philadelphia, PA 19182

Robertson Stephens & Co. 6.5
FBO Exclusive Benefit Investors
c/o Eric Moore
555 California Street/No. 2600
San Francisco, CA 94101

Bradford Municipal J.C. Bradford & Co. 100
Money (Class R) 330 Commerce Street
Nashville, TN 37201

Bradford Government J.C. Bradford & Co. 100
Obligations Money 330 Commerce Street
(Class S) Nashville, TN 37201

BEA International Equity Blue Cross & Blue Shield of 5.1
(Class T) Massachusetts Inc.
Retirement Income Trust
100 Summer Street
Boston, MA 02310

Invest Comm. of HAFCO Hold, Inc., 5.0
MT
625 Madison Avenue, 4th Floor
New York, NY 10022

BEA High Yield Portfolio Temple Inland Master Retirement 10.2
(Class U) Trust
303 South Temple Drive
Diboll, TX 75941

Guenter Full Trust Michelin 16.7
North America Inc.
Master Trust
P. O. Box 19001
Greenville, SC 29602-9001

<PAGE>
PORTFOLIO NAME AND ADDRESS PERCENT OWNED
- --------- ---------------- -------------

Flour Corporation Master 9.4
Retirement Trust
2383 Michelson Drive
Irvine, CA 92730

C S First Boston Pension Fund 10.0
Park Avenue Plaza, 34th Floor
55 E. 52nd Street
New York, NY 10055
Attn: Steve Medici

SC Johnson & Son, Inc. Retirement 13.5
Plan
1525 Howe Street
Racine, WI 53403

GCIU Employer Retirement Fund 6.3
9650 Flair Drive
El Monte, CA 91731-3011

BEA Emerging Markets Wachovia Bank North Carolina Trust 15.7
Equity Portfolio for Carolina Power & Light Co.
(Class V) Supplemental Retirement Trust
301 N. Main Street
Winston-Salem, NC 27101

Wachovia Bank, North Carolina, 5.4
N.A. and For Fleming Companies,
Inc.
TRST Master Pension Trust
307 North Main Street
Winston-Salem, NC 27150

Hall Family Foundation 30.5
P.O. Box 419580
Kansas City, MO 64208

Arkansas Public Employees 10.8
Retirement System
124 W. Capitol Avenue
Little Rock, AR 72201

Northern Trust 12.9
Trustee for Pillsbury
P.O. Box 92956
Chicago, IL 60675

Amherst H. Wilder Foundation 5.9
919 Lafond Avenue
St. Paul, MN 55104

<PAGE>
PORTFOLIO NAME AND ADDRESS PERCENT OWNED
- --------- ---------------- -------------

BEA US Core Equity Bank of New York 45.3
Portfolio Trust APU Buckeye Pipeline
(Class X) One Wall Street
New York, NY 10286

Werner & Pfleiderer Pension 7.5
Plan Employees
663 E. Crescent Avenue
Ramsey, NJ 07446

Washington Hebrew Congregation 11.1
3935 Macomb St. NW
Washington, DC 20016

Shammut Bank 6.3
TRSY Hospital St. Raphael
Malpractice TR
Attn: Corporations
P.O. Box 82600
Rochester, NY 14692-8900

BEA US Core Fixed New England UFCW & Employers' 24.5
Income Portfolio Pension Fund Board of Trustees
(Class Y) 161 Forbes Road, Suite 201
Braintree, MA 02184

W.M. Burke Rehabilitation 5.4
Hospital, Inc.
Burke Employee Pension
Plan 785
McKardneck Avenue
White Plains, NY 10605

Patterson & Co. 8.9
P.O. Box 7829
Philadelphia, PA 19102

MAC & Co 6.9
FAO 176-655
ROBF1766552
Mutual Funds Operations
P. O. Box 3198
Pittsburgh, PA 15230-3198

Bank of New York 9.6
Trust Fenway Partners Master Trust
One Wall Street, 12th floor
New York, NY 10286

<PAGE>

PORTFOLIO NAME AND ADDRESS PERCENT OWNED
- --------- ---------------- -------------

Citibank NA 12.8
Trust CS First Boston Corp Emp
S/P
Attn: Sheila Adams
111 Wall Street, 20th floor Z 1
New York, NY 10043

BEA Global Fixed Income Sunkist Master Trust 36.0
Portfolio (Class Z) 14130 Riverside Drive
Sherman Oaks, CA 91423

Patterson & Co. 25.7
P. O. Box 7829
Philadelphia, PA 19101

Key Trust Co. of Ohio 20.8
FBO Eastern Enterp. Collective
Inv. Trust
P.O. Box 901536
Cleveland, OH 44202- 1559

Mary E. Morten 6.2
C/O Credit Suisse New York
12 E. 49th Street, 40th Floor
New York, NY 10017
Attn: Portfolio Management

BEA Municipal Bond William A. Marquard 37.4
Fund Portfolio 2199 Maysville Rd.
(Class AA) Carlisle, KY 40311

Arnold Leon 12.5
c/o Fiduciary Trust Company
P.O. Box 3199
Church Street Station
New York, NY 10008

Irwin Bard 6.2
1750 North East 183rd St. North
Miami Beach, FL 33160

Matthew M. Sloves and Diane 5.7
Decker Sloves
Tenants in Common
1304 Stagecoach Road, S.E.
Albuquerque, NM 87123

<PAGE>
PORTFOLIO NAME AND ADDRESS PERCENT OWNED
- --------- ---------------- -------------

n/i Micro Cap Fund Charles Schwab & Co. Inc. 12.8
(Class FF) Special Custody Account for the
Exclusive Benefit of Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94101

Chase Manhattan Bank 30.5
Trust Collins Group Trust
940 Newport Center Drive
Newport Beach, CA 92660

Currie & Co. 6.4
c/o Fiduciary Trust Co. Intl
P. O. Box 3199
Church Street Station
New York, NY 10008

Bruce Feizer 5.3
TRST JEF Memorial Ronch Account
P.O. Box 117
Vicksburg, MI 49097

n/i Growth Fund Charles Schwab & Co. Inc. 20.7
(Class GG) Special Custody Account for the
Exclusive Benefit of Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94101

U S Equity Investment Portfolio LP 22.7
c/o Asset Management Advisors Inc.
1001 N. US Hwy
Suite 800
Jupiter, FL 33447

Bank of New York 10.2
Trust Sunkist Growers Inc.
14130 Riverside Drive
Sherman Oaks, CA 91423-2392

n/i Growth and Value Charles Schwab & Co. Inc. 31.6
Fund (Class HH) Special Custody Account for the
Exclusive Benefit of Customers
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104

<PAGE>
PORTFOLIO NAME AND ADDRESS PERCENT OWNED
- --------- ---------------- -------------

Janney Montgomery Scott Janney Montgomery Scott 100
Money Market Portfolio 1801 Market Street
(Class Janney Money Philadelphia, PA 19103-1675
Market)

Janney Montgomery Scott Janney Montgomery Scott 100
Municipal Money Market 1801 Market Street
Portfolio Philadelphia, PA 19103-1675
(Class Janney
Municipal Money Market)

Janney Montgomery Scott Janney Montgomery Scott 100
Government Obligations 1801 Market Street
Money Market Portfolio Philadelphia, PA 19103-1675
(Class Janney
Government Obligations
Money)

Janney Montgomery Janney Montgomery Scott 100
Scott New York Municipal 1801 Market Street
Money Market Portfolio Philadelphia, PA 19103-1675
(Class Janney N.Y.
Municipal Money)

As of the above date, directors and officers as a group owned less
than one percent of the shares of the Company.

LITIGATION. There is currently no material litigation affecting the
Company.

FINANCIAL STATEMENTS. The Financial Statements for the Institutional
classes of the Funds appear on the following page.

68
<PAGE>
APPENDIX

CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS

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

"AAA" -- This designation represents the highest rating assigned by Standard &
Poor's to a debt obligation and indicates an extremely strong capacity to pay
interest and repay principal.

"AA" -- Debt is considered to have a very strong capacity to pay interest and
repay principal and differs from "AAA" issues only in small degree.

"CC" -- This rating is reserved for issues that are currently in arrears on
dividends or sinking fund payments but that are currently paying.

"C" -- This rating is reserved for income bonds on which no interest is being
paid.

"D" -- Debt is in default, and payment of interest and/or repayment of principal
is in arrears.

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

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

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

MUNICIPAL NOTE RATINGS

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

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

"SP-2" -- The issuers of these municipal notes exhibit satisfactory capacity to
pay principal and interest.

A-2
<PAGE>
"SP-3" -- The issuers of these municipal notes exhibit speculative capacity to
pay principal and interest.

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

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

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

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

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

"SG" -- Loans bearing this designation are of speculative quality and lack
margins of protection.

A-3