<PAGE>
Registration No. 33-20827
Inv. Co. Act No. 811-5518
As filed with the Securities and Exchange Commission on OCTOBER 11, 1996
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
POST-EFFECTIVE AMENDMENT NO. 39 [X]
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
AMENDMENT NO. 41 [X]
__________________________________
THE RBB FUND, INC.
(Government Securities Portfolio: RBB Family Class; BEA International
Equity Portfolio: BEA Class, BEA Investor Class and BEA Advisor Class; BEA High
Yield Portfolio: BEA Class, BEA Investor Class and BEA Advisor Class; BEA
Emerging Markets Equity Portfolio: BEA Class, BEA Investor Class and BEA Avisor
Class; BEA U.S. Core Equity Portfolio: BEA Class; BEA U.S. Core Fixed Income
Portfolio; BEA Class; BEA Global Fixed Income Portfolio: BEA Class; BEA
Municipal Bond Fund Portfolio; BEA Class; BEA Balanced Fund Portfolio; BEA
Class; BEA Short Duration Portfolio: BEA Class; BEA Global Telecommunications
Portfolio: BEA Investor Class and BEA Advisor Class; ni Micro Cap Fund; ni
Class; ni Growth Fund; ni Class; ni Growth & Value Fund; ni Class; Boston
Partners Large Cap Value Fund; Boston Partners Investor Class, Boston Partners
Advisor Class and Boston Partners Institutional Class; Money Market Portfolio:
RBB Family Class, Cash Preservation Class, Sansom Street Class, Bedford Class,
Janney Class, Beta Class, Gamma Class, Delta Class, Epsilon Class, Zeta Class,
Eta Class and Theta Class; Municipal Money Market Portfolio: RBB Family Class,
Cash Preservation Class, Sansom Street Class, Bedford Class, Bradford Class,
Janney Class, Beta Class, Gamma Class, Delta Class, Epsilon Class, Zeta Class,
Eta Class and Theta Class; Government Obligations Money Market Portfolio: Sansom
Street Class, Bedford Class, Bradford Class, Janney Class, Beta Class, Gamma
Class, Delta Class, Epsilon Class, Zeta Class, Eta Class and Theta Class; New
York Municipal Money Market Portfolio: Bedford Class, Janney Class, Beta Class,
Gamma Class, Delta Class, Epsilon Class, Zeta Class, Eta Class and Theta Class)
________________________________________________________________________________
(Exact Name of Registrant as Specified in Charter)
Bellevue Park Corporate Center
400 Bellevue Parkway
Suite 100
Wilmington, DE 19809
(Address of Principal Executive Offices)
________________________________________
Registrant's Telephone Number: (302) 792-2555
Copies to:
GARY M. GARDNER, ESQUIRE JOHN N. AKE, ESQUIRE
PNC Bank, National Association Ballard Spahr Andrews & Ingersoll
1600 Market Street, 28th Floor 1735 Market Street, 51st Floor
Philadelphia, PA 19103 Philadelphia, PA 19103
(Name and Address of
Agent for Service)
Approximate Date of Proposed Public Offering: as soon as possible after
effective date of registration statement.
It is proposed that this filing will become effective (check appropriate
box)
immediately upon filing pursuant to paragraph (b)
------
X on October 15, 1996 pursuant to paragraph (b)
------
60 days after filing pursuant to paragraph (a)(1)
------
on ______________ pursuant to paragraph (a)(1)
------
75 days after filing pursuant to paragraph (a)(2)
------
on _______________ pursuant to paragraph (a)(2) of rule 485
------
If appropriate, check following box:
this post-effective amendment designates a new effective
------- date for a previously filed post-effective amendment.
______________________________
Pursuant to Rule 24f-2 under the Investment Company Act of 1940, Registrant
has elected to register an indefinite number of shares of common stock of each
of the sixty-six classes registered hereby under the Securities Act of 1933.
Registrant filed its notice pursuant to Rule 24f-2 for the fiscal year ended
August 31, 1995 on October 26, 1995.
<PAGE>
THE RBB FUND, INC.
(BEA Investor Classes of the BEA International Equity Fund,
Emerging Markets Equity Fund, BEA High Yield Fund
and BEA Global Telecommunications Fund)
Cross Reference Sheet
Form N-1A Item Location
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PART A PROSPECTUS
1. Cover Page............................ Cover Page
2. Synopsis.............................. Annual Portfolio
Operating Expenses
3. Financial Highlights Information...... Not Applicable
4. General Description of Registrant..... Cover Page; the Fund;
Investment Objectives and
Policies
5. Management of the Fund................ Management
6. Capital Stock and Other Securities.... Cover Page; Dividends and
Distributions; Shareholder
Servicing; Description of
Shares; Multi-Class Structure
7. Purchase of Securities Being Offered.. How to Purchase Shares; Net
Asset Value
8. Redemption or Repurchase.............. How to Redeem and Exchange
Privilege; Net Asset Value
9. Legal Proceedings..................... Inapplicable
PART B STATEMENT OF
ADDITIONAL INFORMATION
10. Cover Page............................ Cover Page
11. Table of Contents..................... Contents
12. General Information and History....... General; See Prospectus
- "The Fund"
13. Investment Objectives and Policies.... Common Investment Policies;
Common Investment Objectives
and Policies; Supplemental
Investment Objectives and
Policies
<PAGE>
14. Management of the Fund................ Directors and Officers;
Investment Advisory, and
Servicing Arrangements
15. Control Persons and Principal Holders
of Securities......................... Miscellaneous
16. Investment Advisory and Other
Services.............................. Investment Advisory, and
Servicing Arrangements; See
Prospectus - "Management"
17. Brokerage Allocation and Other
Practices............................. Portfolio Transactions
18. Capital Stock and Other Securities.... Additional Information
Concerning Fund Shares; See
Prospectus - "Dividends and
Distributions" ; "Description
of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered.............. Purchase and Redemption
Information; Valuation of
Shares; See Prospectus - "How
to Purchase Shares," "How to
Redeem and Exchange Privilege"
and "Shareholder Servicing"
20. Tax Status............................ Taxes; See Prospectus -
"Taxes"
21. Underwriters.......................... Not Applicable
22. Calculation of Performance Data....... Performance and Yield
Information
23. Financial Statements.................. Not Applicable
PART C OTHER INFORMATION
Information required to be included in Part C is set forth under the appropriate
item, so numbered in Part C of this Registration Statement.
THE RBB FUND, INC.
(BEA Advisor Classes of the BEA International Equity Fund,
Emerging Markets Equity Fund, BEA High Yield Fund
and BEA Global Telecommunications Fund)
Cross Reference Sheet
Form N-1A Item Location
-------------- --------
PART A PROSPECTUS
1. Cover Page............................ Cover Page
2
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2. Synopsis.............................. Annual Portfolio Operating
Expenses
3. Financial Highlights Information...... Not Applicable
4. General Description of Registrant..... Cover Page; The Fund;
Objectives and Policies
5. Management of the Fund................ Management
6. Capital Stock and Other Securities.... Cover Page; Dividends and
Distributions; Shareholder
Servicing; Description of
Shares; Multi-Class
Structure
7. Purchase of Securities Being Offered.. How to Purchase Shares; Net
Asset Value
8. Redemption or Repurchase.............. How to Redeem and Exchange
Privilege; Net Asset Value
9. Legal Proceedings..................... Inapplicable
PART B STATEMENT OF
ADDITIONAL INFORMATION
10. Cover Page............................ Cover Page
11. Table of Contents..................... Contents
12. General Information and History....... General; see Prospectus -
"The Fund"
13. Investment Objectives and Policies.... Common Investment Policies;
Common Investment Objectives
and Policies; Supplemental
Investment Objectives and
Policies
14. Management of the Fund................ Directors and Officers;
Investment Advisory, and
Servicing Arrangements
15. Control Persons and Principal Holders
of Securities......................... Miscellaneous
16. Investment Advisory and Other
Services.............................. Investment Advisory and
Servicing Arrangements; See
Prospectus - "Management"
17. Brokerage Allocation and Other
Practices............................. Portfolio Transactions
18. Capital Stock and Other Securities.... Description of Shares;
Additional Information
Concerning Fund Shares; See
Prospectus - "Dividends and
Distributions" "Description
of Shares"
3
<PAGE>
19. Purchase, Redemption and Pricing of
Securities Being Offered.............. Purchase and Redemption
Information; Valuation of
Shares; See Prospectus -
"How to Purchase Shares,"
"How to Redeem and Exchange
Privilege" and "Shareholder
Servicing"
20. Tax Status............................ Taxes; See Prospectus -
"Taxes"
21. Underwriters.......................... Not Applicable
22. Calculation of Performance Data....... Performance Yield
Information
23. Financial Statements.................. Not Applicable
PART C OTHER INFORMATION
Information required to be included in Part C is set forth under the appropriate
item, so numbered in Part C of this Registration Statement.
4
<PAGE>
THE RBB FUND, INC.
(BEA Shares of the BEA International Equity, BEA Emerging Markets Equity,
BEA U.S. Core Equity, BEA Balanced Fund, BEA U.S. Core Fixed Income,
BEA Global Fixed Income, BEA Strategic Fixed Income,
BEA Municipal Bond Fund and BEA Short Duration Funds)
Cross Reference Sheet
Form N-1A Item Location
-------------- --------
PART A PROSPECTUS
1. Cover Page............................ Cover Page
2. Synopsis.............................. Fee Table
3. Condensed Financial Information....... Financial Highlights
4. General Description of Registrant..... Cover Page; The Fund;
Investment Objectives and
Policies
5. Management of the Fund................ Management
6. Capital Stock and Other Securities.... Cover Page; Dividends and
Distributions
7. Purchase of Securities Being Offered.. How to Purchase Shares; Net
Asset Value
8. Redemption or Repurchase.............. How to Redeem Shares; Net
Asset Value
9. Legal Proceedings..................... Inapplicable
<PAGE>
PART B STATEMENT OF
ADDITIONAL
INFORMATION
10. Cover Page............................ Cover Page
11. Table of Contents..................... Contents
12. General Information and History....... General; See Prospectus
- "The Fund"
13. Investment Objectives and Policies.... Common Investment Policies;
Common Investmetn Objectives
and Policies; Supplemental
Investment Objectives and
Policies
14. Management of the Fund................ Directors and Officers;
Investment Advisory and
Servicing Arrangements
15. Control Persons and Principal Holders
of Securities......................... Miscellaneous
16. Investment Advisory and Other
Services.............................. Investment Advisory and
Servicing Arrangements; See
Prospectus - "Management"
17. Brokerage Allocation and Other
Practices............................. Portfolio Transactions
18. Capital Stock and Other Securities.... Additional Information
Concerning Fund Shares; See
Prospectus - "Dividends and
Distributions" and
"Description of Shares"
19. Purchase, Redemption and Pricing of
Securities Being Offered.............. Purchase and Redemption
Information; Valuation of
Shares; See Prospectus - "How
to Purchase Shares," "How to
Redeem Shares" and
"Distribution of Shares"
20. Tax Status............................ Taxes; See Prospectus -
"Taxes"
21. Underwriters.......................... Not Applicable
22. Calculation of Performance Data....... Performance and Yield
Information
23. Financial Statements Financial Statements
PART C Other Information
Information required to be included in Part C is set forth under the
appropriate item, so numbered in Part C of this Registration Statement.
<PAGE>
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BEA INVESTOR FUNDS
INTERNATIONAL EQUITY
EMERGING MARKETS EQUITY
GLOBAL TELECOMMUNICATIONS
HIGH YIELD
---------------------
PROSPECTUS
---------------------
NOVEMBER 1, 1996
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<PAGE>
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Annual Fund Operating Expenses............................................................................. 2
Financial Highlights....................................................................................... 3
The Company................................................................................................ 3
Investment Objectives and Policies......................................................................... 3
Investment Limitations..................................................................................... 6
Risk Factors............................................................................................... 7
Management................................................................................................. 8
Expenses................................................................................................... 10
How to Purchase Shares..................................................................................... 11
How to Redeem Shares....................................................................................... 12
Net Asset Value............................................................................................ 14
Dividends and Distributions................................................................................ 14
Taxes...................................................................................................... 14
Shareholder Servicing...................................................................................... 16
Multi-Class Structure...................................................................................... 16
Description of Shares...................................................................................... 16
Other Information.......................................................................................... 17
</TABLE>
<PAGE>
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BEA INVESTOR FUNDS
The Investor Classes of the BEA Family consist of four classes of common
stock of The RBB Fund, Inc. ("the Company"), an open-end management investment
company. Shares (collectively, the "Investor Shares" or "Shares") of such
classes (the "Investor Classes" or "Classes") are offered by this Prospectus and
represent interests in one of 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 -- 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 -- to provide long-term appreciation
of capital. The Fund will invest primarily in equity securities in emerging
country markets.
BEA GLOBAL TELECOMMUNICATIONS FUND -- 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 -- 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."
THE INVESTOR SHARES OF THE PORTFOLIOS ARE SOLD UNDER THE NAME "BEA INVESTOR
FUNDS." THE INVESTOR SHARES MAY NOT BE PURCHASED BY INDIVIDUALS DIRECTLY FROM
THE COMPANY'S DISTRIBUTOR, BUT OTHER BROKER-DEALERS, FINANCIAL INSTITUTIONS,
DEPOSITORY INSTITUTIONS, RETIREMENT PLANS AND OTHER FINANCIAL INTERMEDIARIES
("INSTITUTIONS") MAY PURCHASE INVESTOR SHARES FOR INDIVIDUALS. THE INVESTOR
SHARES IMPOSE A 12b-1 FEE OF UP TO .50% PER ANNUM, WHICH IS THE ECONOMIC
EQUIVALENT OF A SALES CHARGE.
BEA Associates ("BEA" or the "Adviser"), a U.S. investment advisory firm,
will act as the investment adviser to each Fund. BEA emphasizes a global
investment strategy and, as of September 30, 1996, acted as adviser for
approximately $29 billion of assets.
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 November 1, 1996, has been filed with the
Securities and Exchange Commission and is incorporated by reference in this
Prospectus. It may be obtained free of charge from the Company's transfer agent
by calling (800) 401-2230.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE 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 NOVEMBER 1, 1996
<PAGE>
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ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
BEA BEA U.S.
EMERGING GLOBAL
BEA MARKETS TELECOMMUN-
INTERNATIONAL EQUITY ICATIONS BEA HIGH
EQUITY FUND FUND FUND YIELD FUND
------------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Management Fees*.................. .80% 1.00% 1.00% .45%
12b-1 Fees........................ .50% .50% .50% .50%
Other Expenses.................... .39% .49% .40% .25%
--- --- --- ---
Total Fund
Operating Expenses............... 1.69% 1.99% 1.90% 1.20%
--- --- --- ---
--- --- --- ---
</TABLE>
- ----------------------------------
* Management fees are each based on average daily net assets and are calculated
daily and paid monthly.
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 YEAR THREE YEARS FIVE YEARS TEN YEARS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BEA International Equity
Fund......................... $ 17 $ 53 $ 92 $ 200
--- --- ----- -----
BEA Emerging Markets Equity
Fund......................... $ 20 $ 62 $ 107 $ 232
--- --- ----- -----
BEA Global Telecommunications
Fund......................... $ 19 $ 60 N/A N/A
--- --- ----- -----
BEA High Yield Fund........... $ 12 $ 38 $ 66 $ 145
--- --- ----- -----
</TABLE>
The Example in the Fee Table assumes that all dividends and distributions
are reinvested and that the amounts listed under "Annual Fund Operating
Expenses" remain the same 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.
The 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. The other expense figures are restated from fees and costs of the
Institutional Classes of the Funds as of August 31, 1996, except for BEA Global
Telecommunications Fund, for which Other Expenses are estimated for the current
fiscal year. Actual expenses may be greater or less than such costs and fees.
2
<PAGE>
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FINANCIAL HIGHLIGHTS
Financial highlights are not available for the Investor Classes of the Funds
because, as of the date of this prospectus, such classes had no operating
history.
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 four Classes of Shares offered by this Prospectus represents interests in
one of the four Funds. 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 advisory or other similar capacity, which may include the investment
of funds held or managed by broker-dealers, investment counselors and financial
planners. Investment professionals such as those listed above may purchase
Shares for discretionary or non-discretionary accounts maintained by
individuals.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each 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. The Fund will invest 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 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. The Fund will invest primarily in equity
securities of issuers in Emerging Markets. As used in this Prospectus, an
Emerging Market is any country which is generally considered to be an emerging
or developing country by the World Bank and the International Finance
Corporation, as well as countries that are classified by the United Nations as
emerging or developing, at the time of the 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
3
<PAGE>
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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. The Fund seeks to achieve its objective 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 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 non-equity securities or 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. The telecommunications industry is subject to extensive
governmental regulation, which could adversely affect the Fund's performance.
The nature and scope of such regulation generally is subject to political
4
<PAGE>
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forces and market considerations, the effect of which cannot be predicted.
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 new technologies and hamper efficient depreciation 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 capital appreciation potential rather than
income considerations.
BEA HIGH YIELD FUND
BEA High Yield Fund seeks to provide high total return. The Fund will invest
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.
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
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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.
FUND 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, Emerging Markets Equity and Global Telecommunications 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 portfolio turnover rate for BEA High Yield Fund is anticipated to
exceed 100%. The anticipated portfolio turnover rate for BEA High Yield Fund is
greater than that of many other investment companies. A higher than normal
portfolio turnover rate may affect the degree to which a Fund's net asset value
fluctuates. Higher portfolio turnover rates are likely to result in
comparatively greater brokerage commissions. In addition, short-term gains
realized from portfolio transactions are taxable to shareholders as ordinary
income. The amount of portfolio activity will not be a limiting factor when
making portfolio decisions. See Statement of Additional Information, "Fund
Transactions" and "Taxes."
CURRENCY HEDGING. BEA may seek to hedge against a decline in value of a
Fund's 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 that are common to the Funds.
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
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securities while its aggregate borrowings (including reverse repurchase
agreements, dollar rolls and borrowings from banks) in excess of 5% of its total
assets are outstanding. Securities held in escrow or separate accounts in
connection with the Fund's investment practices are not considered to be
borrowings or deemed to be pledged for purposes of this limitation.
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 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
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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 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.
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
Swiss, 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 advisor under the Investment
Advisors 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 asset manager, handling global equity, balanced, fixed
income and derivative securities accounts for private individuals, as well as
corporate pension and profit-sharing plans, state pension funds, union funds,
endowments and other charitable institutions. As of September 30, 1996, BEA
managed approximately $29 billion in assets. As an investment adviser, BEA
emphasizes a global investment strategy. BEA currently acts as investment
adviser for thirteen investment companies registered under the Investment
Company Act, and as sub-adviser to certain portfolios of six other registered
investment companies. BEA also acts as investment adviser for forty-two offshore
funds, twenty-two of which are equity funds and twenty of which are debt 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 and the valuation of
portfolio securities.
The day-to-day portfolio management of BEA International Equity, and BEA
Emerging Markets Equity Funds is the responsibility of the BEA International
Equities 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 he was head of
International Economics at Merrill Lynch & Company. Mr. Watt joined BEA in 1995,
prior to which he was head of emerging markets investments and research at
Gartmore Investment Limited in London. Prior to 1992, he was a director of
Kleinwort Benson
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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 he spent three years at Credit Suisse Asset
Management in London, where he was 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, on an individual basis, been engaged as an investment professional
with BEA for more than five years.
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 (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 Banker's Trust Company.
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 (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.
For the services provided and expenses assumed by it, BEA is entitled to
receive the following fees, computed daily and payable monthly based on a Fund's
average daily net assets:
<TABLE>
<CAPTION>
FUND ANNUAL RATE
- -------------------------------- --------------------
<S> <C>
BEA International Equity........ .80% of the average
daily net assets*
BEA Emerging Markets Equity..... 1.00% of the average
daily net assets*
BEA Global Telecommunications... 1.00% of the average
daily net assets*
BEA High Yield.................. .70% of the average
daily net assets
<FN>
- ------------------------------
* This fee is higher than that paid by most investment companies, although
the fees are within the range of fees of investment companies with similar
investment objectives.
</TABLE>
For the period ended August 31, 1996, the Company paid BEA investment
advisory fees, on annualized basis, with respect to the BEA International
Equity, BEA Emerging Markets Equity and BEA High Yield Funds .80%, 1.00% and
.59%, respectively, of the average net assets of the respective Funds, and BEA
waived, approximately 0%, 0% and .11%, respectively, of the average net assets
of each such Fund. BEA may, at its discretion, from time to time agree to waive
voluntarily all or any portion of its advisory fee for any 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
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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.
ADMINISTRATORS
PFPC Inc. ("PFPC"), an indirect, wholly-owned subsidiary of PNC Bank Corp.,
serves as administrator for the Funds. As 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 provides
shareholder liaison services to the Company, including responding to shareholder
inquiries and providing information on shareholder account. As compensation, the
Company pays to BEA a fee calculated at an annual rate of .05% of each Funds
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 .50% 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 sale of
Investor 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
Investor 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 distribution
expenses actually incurred. Counsellors Securities may delegate some or all of
these functions to a Service Organization. See "Shareholder Servicing." 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.
TRANSFER AGENT
Boston Financial Data Services, Inc. ("BFDS") serves as Transfer Agent for
the Funds. BFDS's address is Two Heritage Drive, Quincy, MA 02171.
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, administrator and co-administrator and fees
and expenses of officers and directors who are not affiliated with the Fund's
investment adviser or distributor, taxes, interest, legal fees, custodian fees,
auditing fees, brokerage fees and commissions, certain of the fees and expenses
of registering and qualifying the Funds and the Shares for distribution under
Federal and state securities laws, expenses of preparing prospectuses and
statements of additional information and of printing and distributing
prospectuses and statements of additional information annually to existing
shareholders, the expense of reports to shareholders, shareholders' meetings and
proxy solicitations, fidelity bond and directors and officers liability
insurance premiums,
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the expense of using independent pricing services and other expenses which are
not expressly assumed by the Adviser under its investment advisory agreement
with respect to a Fund. 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.
HOW TO PURCHASE SHARES
GENERAL
BEA Investor Shares are only available for investment through investment
professionals, financial institutions on behalf of their customers, retirement
plans that elect to make one or more Funds an option for participants in the
plans and other financial intermediaries. Individuals, including participants in
retirement plans, cannot invest directly in Investor Shares of the Funds, but
may do so only through a participating Institution. The Company reserves the
right to make Investor Shares available to other investors in the future.
References in this Prospectus to shareholders or investors are generally to
Institutions as the record holders of the Investor Shares.
Each Institution separately determines the rules applicable to its customers
investing in the Company, including minimum initial and subsequent investment
requirements and the procedures to be followed to effect purchases, redemptions
and exchanges of Investor Shares. There is no minimum amount of initial or
subsequent purchases of Investor Shares imposed on Institutions, although the
Company reserves the right to impose minimums in the future.
Orders for the purchase of Investor Shares are placed with an Institution by
its customers. The Institution is responsible for the prompt transmission of the
order to the Company.
Institutions may purchase Investor Shares by telephoning BEA Investor Funds
and sending payment by wire. After telephoning (800) 401-2230 for instructions,
an Institution should then wire federal funds to BFDS using the following wire
address:
State Street Bank & Trust Co.
225 Franklin Street
Boston MA 02101
Attn:Mutual Fund/Custody Dept.
BEA Investor Funds --
International Equity
Emerging Markets Equity
Global Telecommunications
High Yield
[SHAREOWNER NAME]
[SHAREHOLDER ACCOUNT NUMBER]
Orders by wire will not be accepted until a completed account application
has been received in proper form, and an account number has been established. If
a telephone order is received by the close of regular trading on the New York
Stock Exchange (the "NYSE") (currently 4:00 p.m., Eastern time) and payment by
wire is received on the same day in proper form in accordance with instructions
set forth above, the shares will be priced according to the net asset value of
the Company 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 Company on that day and is entitled to
dividends and distributions beginning on that day. However, if a wire received
in proper form is not preceded by a telephone order and is received after the
close of regular trading on the NYSE, the payment will be held uninvested until
the order is effected at the close of business on the next day that the Company
calculates its net asset value (a "business day"). Payment for orders that are
not accepted will be returned to the institution after prompt inquiry. Certain
organizations that have entered into agreements with the Company or its agent
may enter confirmed purchase orders on behalf of customers, with payment to
follow no later than the Company's pricing on the following business day. If
payment is not received by such time, the organization could be held liable for
resulting losses or fees incurred. Third party checks will not be accepted.
After an investor has made his initial investment, additional shares may be
purchased at any
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time in the manner outlined above. Payments for initial and subsequent
investments should be preceded by an order placed with the Company or its agent
and should clearly indicate the investor's account number. In the interest of
economy and convenience, physical certificates representing shares in the
Company are not normally issued.
The Company understands that some broker-dealers (other than Counsellors
Securities), financial institutions, securities dealers and other industry
professionals may impose certain conditions on their clients that invest in the
Company, which are in addition to or different than those described in this
Prospectus, and, to the extent permitted by applicable regulatory authority, may
charge their clients direct fees. Certain features of the Company may be
modified in these programs and administrative charges may be imposed for the
services rendered. Therefore, a client or customer should contact the
organization acting on his behalf concerning the fees (if any) charged in
connection with a purchase or redemption of the Company shares and should read
this Prospectus in light of the terms governing his accounts with the
organization.
RETIREMENT PLANS AND UNIFORM GIFTS TO MINORS
Shares may be purchased in conjunction with individual retirement accounts
("IRA's"), rollover IRAs, or pensions, profit-sharing or other employer benefit
plans, and under the Uniform Gifts to Minors Act. The minimum initial investment
in conjunction with such plans is $1,000, and the minimum subsequent investment
is $500. For further information as to applications and annual fees, please
contact BFDS. 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
GENERAL
An investor may redeem (sell) shares on any day that the Company's net asset
value is calculated (see "Net Asset Value" below). Requests for the redemption
(or exchange) of Investor Shares are placed with an Institution by its
customers. The Institution is responsible for the prompt transmission of its
customers' requests to the Company or its agent.
Institutions may redeem Investor Shares by calling BEA Investor Funds at
(800) 401-2230 between 9:00 a.m. and 4:00 p.m. (Eastern time) on any Business
Day. An investor making a telephone withdrawal should state (i) the name of the
Fund, (ii) the account number of the Fund, (iii) the name of the investor
appearing on the Fund's records, (iv) the amount to be withdrawn and (v) the
name of the person requesting the redemption.
After receipt of the redemption request, the redemption proceeds will be
wired to the investor's bank as indicated in the account application previously
filled out by the investor. The Company does not currently impose a service
charge for effecting wire transfers but the Company reserves the right to do so
in the future. During periods of significant economic or market change,
telephone redemptions may be difficult to implement. If an investor is unable to
contact BEA Investor Funds by telephone, an investor may deliver the redemption
request to BEA Investor Funds by mail at Two Heritage Drive, Quincy, MA 02171.
If a redemption order is received prior to the close of regular trading on
the NYSE, the redemption order will be effected at the net asset value per share
as determined on that day. If a redemption order is received after the close of
regular trading on the NYSE, the redemption order will be effected at the net
asset value as next determined. Redemption proceeds will normally be wired to an
investor on the next business day following the date a redemption order is
effected. If, however, in the judgment of BEA, immediate payment would adversely
affect the Company, the Company reserves the right to pay the redemption
proceeds within seven days after the redemption order is effected. Furthermore,
the Company may suspend the right of redemption or postpone the date of payment
upon redemption (as well as suspend or postpone the recordation of an exchange
of shares) for such periods as are permitted under the 1940 Act.
The proceeds paid upon redemption may be more or less than the amount
invested depending upon a share's net asset value at the time of redemption. If
an investor redeems all the shares in his account, all dividends and
distributions declared up to and including the date of
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redemption are paid along with the proceeds of the redemption. 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.
A request for redemption must be signed by all persons in whose names the
Shares are registered or by an authorized party. Signatures must conform exactly
to the account registration. If the proceeds of the redemption would exceed
$10,000, or if the proceeds are not to be paid to the record owner at the record
address, or if the shareholder is a corporation, partnership, trust or
fiduciary, signature(s) must be guaranteed by a bank, broker-dealer, credit
union, national securities exchange, savings association or any other
organization which qualifies as an "eligible guarantor institution" as that term
is defined in rules adopted by the Securities and Exchange Commission. In some
cases, however, other documents may be necessary.
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, 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 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.
Shareholders may be required to bear certain administrative or custodial costs
in effecting redemption in-kind.
EXCHANGE PRIVILEGE
An Institution may exchange Investor Shares of a Fund for Investor Shares of
any other BEA Investor 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 Investor 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 Investor Shares being acquired may legally be sold. When an investor
effects an exchange of shares, the exchange is treated for federal income tax
purposes as a redemption. Therefore, the investor may realize a taxable gain or
loss in connection with the exchange. For further information regarding the
exchange privilege, an investor should contact BEA Investor Funds at (800)
401-2230.
Shareholders are automatically provided with telephone exchange privileges
when opening an account, unless they indicate on the Application that they do
not wish to use this privilege. To add a telephone exchange feature to an
existing account that previously did not provide for this option, a Telephone
Exchange Authorization Form must be filed with BFDS. This form is available from
BFDS. Once this election has been made, the shareholder may simply contact BFDS
by telephone to request the exchange (800) 401-2230. The Company will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine, and if the Company does not employ such procedures, it may be liable
for any losses due to unauthorized or fraudulent telephone instructions. Neither
the Company nor BFDS will be liable for any loss, liability, cost or expense for
following the Company's telephone transaction procedures described below or for
following instructions communicated by telephone that it reasonably believes to
be genuine.
13
<PAGE>
- --------------------------------------------------------------------------------
The Company's telephone transaction procedures include the following
measures: (1) requiring the appropriate telephone transaction privilege forms;
(2) requiring the caller to provide the names of the account owners, the account
social security number and name of the Fund, all of which must match the
Company's records; (3) requiring the Company's service representative to
complete a telephone transaction form, listing all of the above caller
identification information; (4) permitting exchanges only if the two account
registrations are identical; (5) requiring that redemption proceeds be sent only
by check to the account owners of record at the address of record, or by wire
only to the owners of record at the bank account of record; (6) sending a
written confirmation for each telephone transaction to the owners of record at
the address of record within five (5) business days of the call; and (7)
maintaining tapes of telephone transactions for six months, if the Company
elects to record shareholder telephone transactions.
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, BEA Emerging Markets Equity and BEA Global
Telecommunications Funds annually. The Company will distribute net investment
income for the BEA High Yield Fund at least quarterly. All distributions will be
reinvested in the form of additional full and fractional Shares of the relevant
Fund unless a shareholder elects otherwise. If a shareholder desires to have
distributions paid out rather than reinvested, the shareholder should notify
BFDS 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 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.
14
<PAGE>
- --------------------------------------------------------------------------------
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.
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.
MISCELLANEOUS CONSIDERATIONS; EFFECT OF FUTURE LEGISLATION
Future legislative or administrative changes or court decisions may
materially affect the tax consequences of investing in one or more Funds of the
Company. Shareholders are also urged to consult their tax advisers concerning
the application of state and local income taxes to investments in the Company
which may differ from the Federal income tax consequences described above.
15
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICING
The Company is authorized to offer Investor Shares exclusively to
Institutions whose clients, customers or participants in retirement plans
("Customers") are beneficial owners of Investor Shares. Either those
Institutions or companies providing certain services to them (together, "Service
Organizations") may enter into service agreements ("Agreements") related to the
sale of the Investor Shares with Counsellors Securities pursuant to a
Distribution Plan, as described below. Pursuant to the terms of an Agreement,
the Service Organization agrees to perform certain distribution, shareholder
servicing, administrative and accounting services for its Customers.
Distribution services would be marketing or other services in connection with
the promotion and sale of Investor Shares. Shareholder services that may be
provided include responding to Customer inquiries, providing information on
Customer investments and providing other shareholder liaison services.
Administrative and accounting services related to the sale of the Investor
Shares may include (i) aggregating and processing purchase and redemption
requests from Customers and placing net purchase and redemption orders with the
Fund's transfer agent, (ii) processing dividend payments from the Company on
behalf of Customers and (iii) providing sub-accounting relating to the sale of
Investor Shares beneficially owned by Customers or the information to the
Company necessary for subaccounting. The Board of Directors of the Company has
approved a Distribution Plan (the "Plan") pursuant to Rule 12b-1 under the 1940
Act under which Counsellors Securities may pay each participating Service
Organization a negotiated fee on an annual basis not to exceed .75% of the value
of the average daily net assets of its Customers invested in the Investor
Shares. However, under the current Distribution Agreement between Counsellors
Securities and the Company on behalf of the Funds, this fee shall not exceed
.50% of average daily net assets of Customers. The Company may, in the future,
enter into additional Agreements with Service Organizations. The Board of
Directors of the Company will evaluate the appropriateness of the Plan on a
continuing basis.
MULTI-CLASS STRUCTURE
The Company offers other classes of shares of the Funds which are offered
directly to institutional investors and financial planners pursuant to separate
prospectuses. Shares of each class 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
Institutional and Advisor Shares separately from Investor Shares. Because of
different fees paid by the Investor Shares, the total return on such shares can
be expected, at any time, to be different than the total return on Institutional
and Advisor Shares. Information concerning these other classes may be obtained
by calling BFDS at 1-800-401-2230.
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 67 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 INVESTOR CLASSES REPRESENTING AN INTEREST IN
THE BEA INTERNATIONAL EQUITY, BEA EMERGING MARKETS EQUITY, BEA GLOBAL
TELECOMMUNICATIONS AND 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 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.
16
<PAGE>
- --------------------------------------------------------------------------------
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 should be addressed to BFDS, the
Fund's transfer agent.
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, 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 Institutions
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.
17
<PAGE>
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HISTORICAL PRO-FORMA INFORMATION
INSTITUTIONAL CLASS. The table below presents the prior performance history
of total return on an annualized basis for the Institutional Class of the BEA
International Equity, Emerging Markets Equity and High Yield Funds for period
ending August 31, 1996. The investment objectives, policies and strategies of
the Institutional Class of these Funds, as well as the investment management
teams are identical to those of the Investor
Class. The Institutional Class, which has a minimum investment of $3 million,
has lower fees and expenses than the Investor Class, so that the performance of
the Institutional Class will be greater than that of the Investor Class. In
addition, the past performance of the Institutional Class of these Funds is not
necessarily indicative of the of the future performance of each Fund. Listed
below the performance history for each Fund is a comparative index comprised of
securities similar to those in which the Funds invest.
<TABLE>
<CAPTION>
ONE SINCE
FUND YEAR THREE 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>
- ------------------------------
*BEA International Equity Fund commenced operations on October 1, 1992; BEA
Emerging Markets Equity Fund commenced operations on February 1, 1993; BEA High
Yield Fund commenced operations on March 31, 1993.
PRIVATE ACCOUNTS. The table below presents the composite performance
history on an annualized basis for private accounts managed by BEA for the
period ending September 30, 1996. The investment objectives, policies and
strategies of these private accounts are substantially similar to those of the
corresponding Fund, although the private accounts have significantly longer
operating histories than the corresponding Funds. The management teams for the
Funds and the respective private accounts are identical. The composites include
all accounts managed in the respective investment objectives, policies and
strategies, and show the entire period for which the private accounts were
managed by BEA in this manner. The performance information for the private
accounts include the reinvestment of dividends received in the underlying
securities. The private accounts, which require a minimum investment of $20
million and are only available to BEA's institutional advisory clients, have
lower fees and expenses than the Investor Class of the corresponding Funds. In
addition, the past performance of the private accounts is not indicative of the
of the future performance of each Fund. These 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 private account composites. Listed below the
performance history for each private account is a comparative index comprised of
securities similar to those in which the private accounts and the corresponding
Funds invest.
<TABLE>
<CAPTION>
ONE THREE FIVE SEVEN TEN
PRIVATE ACCOUNT/INDEX YEAR YEARS YEARS YEARS YEARS
- --------------------------------------------------------------- --------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
BEA International Equity Composite............................. 8.8% 6.0% 9.6% 6.1% 17.5%
Morgan Stanley Capital International Europe, Australia & Far
East Index.................................................... 8.9% 8.4% 8.5% 4.2% 9.0%
BEA Emerging Markets Equity Composite.......................... 5.3% 1.8% 11.2% 16.2% 31.7%
Morgan Stanley Capital International Emerging Markets Free
Index......................................................... 5.2% 7.4% 14.8% 14.2% n/a
BEA High Yield Composite....................................... 15.1% 12.7% 17.7% 16.5% n/a
CS First Boston High Yield Index............................... 10.7% 9.3% 12.7% 12.4% n/a
<CAPTION>
SINCE
PRIVATE ACCOUNT/INDEX INCEPTION*
- --------------------------------------------------------------- -------------
<S> <C>
BEA International Equity Composite............................. 19.4%
Morgan Stanley Capital International Europe, Australia & Far
East Index.................................................... 14.1%
BEA Emerging Markets Equity Composite.......................... 32.4%
Morgan Stanley Capital International Emerging Markets Free
Index......................................................... n/a
BEA High Yield Composite....................................... 15.9%
CS First Boston High Yield Index............................... 11.7%
</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.
18
<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.
"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 and
municipal 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.
"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.
A-1
<PAGE>
"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.
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.
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.
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.
"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-2
<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 INVESTOR FUNDS
INTERNATIONAL EQUITY
EMERGING MARKETS EQUITY
GLOBAL TELECOMMUNICATIONS
HIGH YIELD
(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 "Investor Shares" or the
"Shares") representing interests in four investment portfolios (the "Funds") of
The RBB Fund, Inc. (the "Company"): BEA International Equity, BEA Emerging
Markets Equity, BEA Global Telecommunications and 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 Investor Prospectus, dated
November 1, 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 November 1, 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
Fund Transactions ................................... 41 N/A
Purchase and Redemption Information ................. 44 12
Valuation of Shares ................................. 44 15
Performance and Yield Information.................... 46 18
Taxes ............................................... 48 15
Additional Information Concerning Fund Shares........ 57 18
Miscellaneous ....................................... 60 18
Appendix ............................................ N/A A-1
Financial Statements ................................ F-1 N/A
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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.
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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
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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.
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 portfolio securities subject to legal restrictions on resale,
will not exceed
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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.
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 Fund 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
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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.
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
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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
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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
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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
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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 total 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
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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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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. CMOs may
exhibit more
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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
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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 net 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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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
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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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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
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offering a lesser rate of exchange should a Fund desire to resell that currency
to the dealer.
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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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.
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
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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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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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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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<PAGE>
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. The Company 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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<PAGE>
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.
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
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<PAGE>
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.
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 a 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 brokers
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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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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 Funds 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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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 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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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:
Principal Occupation
Name, Address and Age Position with Fund 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
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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).
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Principal Occupation
Name, Address and Age Position with Fund 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 - 56 Secretary Chairman of the law firm of
1100 PNB Bank Building Drinker Biddle & Reath,
Broad and Chestnut Streets Philadelphia, Pennsylvania;
Philadelphia, PA 19107 Director, Rocking Horse Child
Care Centers of America, Inc.
_______________
* 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.
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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 of sub-advisor of the
Company or the Distributor $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:
DIRECTOR COMPENSATION
DIRECTOR COMPENSATION
Julian A. Brodsky $12,525
Francis J. McKay 15,975
Marvin E. Steinberg 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, BEA Emerging Markets Equity and BEA
High Yield Funds, dated July 10, 1996 for the BEA Global
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Telecommunications Fund. Such advisory agreements are hereinafter collectively
referred to as the "Advisory Contracts."
BEA Associates is a diversified asset manager, handling global
equity, balanced, fixed income and derivative securities accounts for private
individuals, as well as corporate pension and profit-sharing plans, state
pension funds, union funds, endowments and other charitable institutions. As of
September 30, 1996, BEA Associates managed approximately $29 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 advisor 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 investment
companies registered under the Investment Company Act. They are: Alpha
Government Securities Fund, 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 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, twenty-two of which are
equity funds and twenty of which are debt 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, BEA Emerging Markets Equity, BEA Global Telecommunications and BEA High
Yield Funds, BEA 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, BEA 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, received
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advisory fees (after waivers) in the amount of $5,993,072, $1,289,739, $0 and
$542,590, respectively.
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,
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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.
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 eachFund'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.
Boston Financial Data Services, Inc. ("BFDS"), an affiliate of State
Street Bank and Trust Company, serves as the transfer and dividend disbursing
agent for the Investor Classes pursuant to a Transfer Agency Agreement (the
"Transfer Agency Agreement"), under which BFDS (a) issues and redeems shares of
each of the Investor Classes, (b) addresses and mails all
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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 Investor Class. For its
services to the Company under the Transfer Agency Agreement, BFDS 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 .50% of the
respective average daily net assets of the Investor Shares of the Funds.
Services performed by Counsellors Securities include (a) the sale of the
Investor 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
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services, as set forth in the 12b-1 Plans ("Administrative Services" and
collectively with Selling Services and Administrative Services, "Services")
including, without limitation, (i) payments reflecting an allocation of overhead
and other office expenses of Counsellors Securities related to providing
Services; (ii) payments made to, and reimbursement of expenses of, persons who
provide support services in connection with the distribution of the Investor
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.
Fund 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")
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when BEA believes that the charge for the transaction does not exceed usual and
customary levels.
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),
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especially if interest rates have risen since acquisition of the particular
commercial paper.
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, BEA International Equity Fund
paid $3,192,274.36 of brokerage commissions, BEA Emerging Markets Equity Fund
paid $704,909.93 of brokerage commissions and for each other Fund no brokerage
commissions were paid during such period.
BEA International Equity, BEA Emerging Markets Equity and BEA Global
Telecommunications Funds expect that their annual Fund turnover rate should not
exceed 100% under normal market conditions. BEA High Yield Fund anticipates that
its portfolio turnover may exceed 100%. 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 Company 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
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advised by BEA to acquire jointly securities issued in private placements,
subject to the terms and conditions of the order. The Board of the Company 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
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
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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. 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.
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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.
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
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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 Fund (commencing October 1, 1992) was
8.98% (annualized), BEA Emerging Markets Equity Fund (commencing February 1,
1993) was 7.63% (annualized) and BEA High Yield Fund (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 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
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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.
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)
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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 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.
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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").
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.
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
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"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 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.
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."
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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
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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
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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.
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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.
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
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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.
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
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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
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
(Growth & Income), 100 million shares are classified as Class B Common Stock,
100 million shares are classified as Class C Common Stock (Balanced), 100
million shares are classified as Class D Common Stock (Tax-Free), 500 million
shares are classified as Class E Common Stock (Money), 500 million shares are
classified as Class F Common Stock (Municipal Money), 500 million shares are
classified as Class G Common Stock (Money), 500 million shares are classified as
Class H Common Stock (Municipal Money), 1 billion shares are classified as Class
I Common Stock (Money), 500 million shares are classified as Class J Common
Stock (Municipal Money), 500 million shares are classified as Class K Common
Stock (U.S. Government Money), 1,500 million shares are classified as Class L
Common Stock (Money), 500 million shares are classified as Class M Common Stock
(Municipal Money), 500 million shares are classified as Class N Common Stock
(U.S. Government Money), 500 million shares are classified as Class O Common
Stock (N.Y. Money), 100 million shares are classified as Class P Common Stock
(Government), 100 million shares are classified as Class Q Common Stock, 500
million shares are classified as Class R Common Stock (Municipal Money), 500
million shares are classified as Class S Common Stock (U.S. Government Money),
500 million shares are classified as Class T Common Stock (International), 500
million shares are classified as Class U Common Stock (High Yield), 500 million
shares are classified as Class V Common Stock (Emerging), 100 million shares are
classified as Class W Common Stock (Laffer/Canto Equity), 50 million shares are
classified as Class X Common Stock (U.S. Core Equity), 50 million shares are
classified as Class Y Common Stock (U.S. Core Fixed Income), 50 million shares
are classified as Class Z Common Stock (Global Fixed Income), 50 million shares
are classified as Class AA Common Stock (Municipal Bond), 50 million shares are
classified as Class BB Common Stock (BEA Balanced), 50 million shares are
classified as Class CC Common Stock (Short Duration), 100 million shares are
classified as Class DD Common Stock (Growth & Income Series 2), 100 million
shares are
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classified as Class EE Common Stock (Balanced Series 2), 50 million shares are
classified as Class FF (n/i Micro Cap), 50 million shares are classified as
Class GG (n/i Growth), 50 million shares are classified as Class HH (n/i Growth
& Value), 100 million shares are classified as Class II (BEA Investor
International), 100 million shares are classified as Class JJ (BEA Investor
Emerging), 100 million shares are classified as Class KK (BEA Investor High
Yield), 100 million shares are classified as Class LL (BEA Investor Global
Telecom), 100 million shares are classified as Class MM (BEA Advisor
International), 100 million shares are classified as Class NN (BEA Advisor
Emerging), 100 million shares are classified as Class OO (BEA Advisor High
Yield), 100 million shares are classified as Class PP (BEA Advisor Global
Telecom), 100 million shares are classified as Class QQ (Boston Partners
Institutional Large Cap), 100 million shares are classified as Class RR (Boston
Partners Investor Large Cap), 100 million shares are classified as Class SS
(Boston Partners Advisor Large Cap), 700 million shares are classified as Class
Janney Money Common Stock, 200 million shares are classified as Class Janney
Municipal Money Common Stock, 500 million shares are classified as Class Janney
U.S. Government Money Common Stock, 100 million shares are classified as Class
Janney N.Y. 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 II, JJ,
KK and LL Common Stock constitute the BEA Investor 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 ; the Cash Preservation Family represents interests in
the Money Market and Municipal Money Market ; the Sansom Street Family
represents interests in the Money Market, Municipal Money Market and
Government Obligations Money Market ; Bedford Family represents interests in
the Money Market, Municipal Money Market, Government Obligations Money Market
and New York Municipal Money Market ; the Bradford Family represents
interests in the Municipal Money Market and Government Obligations Money
Market ; the BEA Family represents interests in nine non-money market
portfolios; the n/i Family represents interests in three non-money market
portfolios; the Boston Partners Family represents interest 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
the Company 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 Investor 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.
Fund NAME AND ADDRESS PERCENT OWNED
- ------ ----------------------- -------------
RBB Money Market Fund
(Class E) Luanne M. Garvey and Robert J. 11.2
Garvey
2729 Woodland Avenue
Trooper, PA 19403
Harold T. Erfer 12.2
414 Charles Lane
Wynnewood, PA 19096
60
<PAGE>
Fund NAME AND ADDRESS PERCENT OWNED
- ------ ----------------------- -------------
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 Fund 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 Fund 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
Fund 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
61
<PAGE>
Fund NAME AND ADDRESS PERCENT OWNED
- ------ ----------------------- -------------
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
Gwendolyn Haynes 5.1
2757 Geyer
St. Louis, MO
Sansom Street Money Wasner & Co. 20.1
Market Fund 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 Blue Cross & Blue Shield of 5.1
Equity (Class T) Massachusetts Inc.
Retirement Income Trust
100 Summmer Street
Boston, MA 02310
62
<PAGE>
Fund NAME AND ADDRESS PERCENT OWNED
- ------ ----------------------- -------------
Invest comm of HAFCO Hold Inc. MT 5.0
625 Madison Ave., 4TH Flr
New York, NY 10022
BEA High Yield Fund Temple Inland Master Retirement 10.2
(Class U) Trust
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 13.5
Plan
1525 Howe Street
Racine, WI 53403
GCIU Employer 6.3
Retirement Fund
8650 Flair Dr.
E Monte, CA 96731-3011
BEA Emerging Markets Wachovia Bank North Carolina 13.9
Equity Fund Trust for Carolina Power & Light
(Class V) Co. Supplemental Retirement Trust
301 N. Main Street Winston-Salem, NC 27101
Wachovia Bank North Carolina NA 5.4
And for Fleming Companies Inc.
TRST Master Pension Trust
307 North Main 3099 St.
Winston-Salem, NC 27150
Hall Family Foundation 30.5
P.O. Box 419580
Kansas City, MO 64208
63
<PAGE>
Fund NAME AND ADDRESS PERCENT OWNED
- ------ ----------------------- -------------
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
BEA US Core Equity Bank of New York 45.3
Fund 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 14692-9000
BEA US Core Fixed New England UFCW & Employers' 24.5
Income Fund Pension Fund Board of Trustees
(Class Y) 161 Forbes Road, Suite 201
Braintree, MA 02184
W.M. Burke Rehabilitation Hospice Inc. 5.4
Burke Employees Pension Plan
795 Mamoroneck Ave.
White Plains, NY 10605
Patterson & Co. 8.9
P.O. Box 7829
Philadelphia, PA 19102
64
<PAGE>
Fund NAME AND ADDRESS PERCENT OWNED
- ------ ----------------------- -------------
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
Fund (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: Fund Management
BEA Municipal Bond Fund William A. Marquard 37.4
(Class AA) 2199 Maysville Rd.
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
65
<PAGE>
Fund NAME AND ADDRESS PERCENT OWNED
- ------ ----------------------- -------------
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 J&F Memorial Ranch Account
P.O. BOX 117
Vicksburg, MI 49097
n/i Growth Fund Charles Schwab & Co. Inc. 22.7
(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 Fund 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
66
<PAGE>
Fund NAME AND ADDRESS PERCENT OWNED
- ------ ----------------------- -------------
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 Fund 1801 Market Street
(Class Janney Money Philadelphia, PA 19103-1675
Market)
Janney Montgomery Scott Janney Montgomery Scott 100
Municipal Money Market 1801 Market Street
Fund (Class Janney Philadelphia, PA 19103-1675
Municipal Money Market)
Janney Montgomery Scott Janney Montgomery Scott 100
Government Obligations 1801 Market Street
Money Market Fund Philadelphia, PA 19103-1675
(Class Janney Government
Obligations Money)
Janney Montgomery Scott Janney Montgomery Scott 100
New York Municipal 1801 Market Street
Money Market Fund 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 RBB.
FINANCIAL STATEMENTS. No financial statements are supplied for the Investor
classes of the Funds because, as of the date of the Prospectus and this
Statement of Additional Information, the Investor classes of the Fund's had no
operating history. Financial Statements are provided for the Institutional
classes of the Funds representing interest in the BEA International Equity, BEA
Emerging Markets Equity and the BEA High Yield Funds.
67
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA International Equity Portfolio
STATEMENT OF NET ASSETS
August 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
COMMON AND CONVERTIBLE STOCKS, WARRANTS AND RIGHTS -- 96.4%
ARGENTINA -- 0.2%
Sodigas del Sur S.A.+...................... 403,923 $ 745,416
Sodigas Pampeana S.A.+..................... 558,962 844,809
------------
1,590,225
------------
AUSTRALIA -- 2.0%
Broken Hill Corp. Ltd...................... 240,546 3,273,168
CRA Ltd.................................... 224,900 3,415,701
News Corp. Ltd. ADR........................ 94,000 1,997,500
News Corp. Ltd. Pfd. ADR................... 46,900 832,475
WMC Ltd.................................... 564,500 3,925,398
------------
13,444,242
------------
BRAZIL -- 2.7%
Banco Bradesco S.A. PN..................... 556,077,084 4,705,099
Centrais Eletricas Brasileiras S.A. ON..... 63,836 16,957
Cia. Cervejaria Brahma PN Warrants Expire
9/30/96**................................ 369,916 134,660
Cia. Tecidos Norte de Minas Gerais PN...... 9,556,000 3,243,813
Cia. Vale do Rio Doce ADR.................. 196,900 3,825,570
Lojas Americanas S.A. PN................... 56,034,786 970,299
Telecomunicacoes de Sao Paulo S.A. PN...... 28,410,000 5,450,561
------------
18,346,959
------------
CANADA -- 0.6%
Magna International, Inc. Class A.......... 85,600 4,130,200
------------
DENMARK -- 0.3%
Unidanmark A/S 144A........................ 52,990 2,343,788
------------
FINLAND -- 1.3%
Nokia Corp. ADR............................ 24,000 1,014,000
Nokia Corp. Class A........................ 102,196 4,344,582
UPM-Kymmene Corp........................... 139,020 3,178,986
------------
8,537,568
------------
FRANCE -- 7.6%
Accor...................................... 24,025 2,908,814
AXA S.A.................................... 56,764 3,186,318
Bertrand Faure............................. 118,121 3,884,485
BIC S.A.................................... 35,620 5,199,127
Carrefour Super Marche..................... 14,214 7,184,204
Christian Dior S.A......................... 32,971 3,972,911
Compagnie Generale Des Eaux................ 39,100 3,771,764
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
FRANCE -- (CONTINUED)
Compagnie Generale Des Eaux Certificates... 1,002 $ 96,657
Credit Local de France..................... 52,111 4,291,978
G.T.M. Entrepose S.A....................... 67,182 4,040,474
G.T.M. Entrepose S.A. Certificates......... 1,912 114,992
Groupe Danone.............................. 6,733 929,561
L'Air Liquide.............................. 8,300 1,413,115
Legrand.................................... 9,764 1,459,875
Michelin Class B........................... 36,558 1,708,399
Technip S.A................................ 49,209 4,461,175
Valeo S.A.................................. 67,691 3,409,284
------------
52,033,133
------------
GERMANY -- 5.4%
Adidas AG.................................. 63,800 5,498,513
Commerzbank AG............................. 7,950 1,832,466
Degussa CN................................. 9,950 3,485,930
Deutsche Bank AG........................... 68,890 3,412,369
GEA AG Non Voting Pfd...................... 10,346 3,356,820
Hoechst AG................................. 172,450 6,026,541
Man AG..................................... 12,260 3,082,817
RWE AG..................................... 55,700 2,028,227
SAP AG..................................... 5,450 905,509
SAP AG 144A ADR............................ 61,500 3,361,959
Volkswagen AG.............................. 10,821 4,015,634
------------
37,006,785
------------
HONG KONG -- 4.5%
Cheung Kong Holdings Ltd................... 757,500 5,315,188
Citic Pacific Ltd.......................... 1,143,900 5,030,408
Hong Kong and China Gas.................... 2,409,000 3,894,781
HSBC Holdings PLC.......................... 409,408 7,069,381
New World Development Company.............. 858,000 4,161,547
Sun Hung Kai Properties Ltd................ 505,300 4,934,379
------------
30,405,684
------------
INDIA -- 0.7%
India Liberalisation Fund Class A 144A
**/****.................................. 276,532 1,960,612
Indian Opportunity Fund Ltd. **............ 320,156 2,958,241
------------
4,918,853
------------
INDONESIA -- 1.1%
PT Astra International***.................. 2,320,100 3,022,125
PT Telekomunikasi***....................... 2,177,500 3,068,866
PT Telekomunikasi Indonesia ADR............ 41,900 1,167,963
------------
7,258,954
------------
</TABLE>
See Accompanying Notes to Financial Statements.
4
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
ISRAEL -- 1.0%
Geotek Communications, Inc. Series M
Cumulative Convertible Pfd.+............. 600 $ 6,476,842
------------
ITALY -- 2.7%
Banca Fideuram S.p.A....................... 1,351,600 2,989,236
Edison S.p.A............................... 460,000 2,485,499
Istituto Mobiliare Italiano S.p.A.......... 746,500 5,882,234
Telecom Italia Mobile S.p.A**.............. 1,014,784 2,089,775
Telecom Italia Mobile Non-Convertible
Savings Shares**......................... 1,347,050 1,641,221
Telecom Italia Non-Convertible Savings
Shares................................... 1,347,050 2,163,022
Telecom Italia S.p.A....................... 724,984 1,423,373
------------
18,674,360
------------
JAPAN -- 22.2%
Aida Engineering Ltd....................... 78,000 580,278
Aoki International Company Ltd............. 58,000 1,121,444
Aoyama Trading Company..................... 79,000 2,087,561
Bank of Tokyo - Mitsubshi.................. 137,000 2,787,681
Chudenko Corp.............................. 15,000 480,619
Chugai Pharmaceutical Company Ltd.......... 173,000 1,537,105
Chugoku Bank, Ltd.......................... 98,000 1,570,021
Dai-Ichi Kangyo Bank Ltd................... 244,000 4,043,827
Daiichi Pharmaceutical Company Ltd......... 203,000 3,102,661
Daiwa House................................ 247,000 3,524,998
Daiwa Securities Company Ltd............... 107,000 1,211,767
Danto Corp................................. 47,000 532,271
Fuji Photo Film Company Ltd................ 163,000 4,907,559
Fujitsu Limited............................ 309,000 2,785,296
Higo Bank.................................. 203,000 1,463,484
Hitachi Cable.............................. 153,000 1,119,925
Hitachi Ltd................................ 529,000 4,860,897
Hitachi Metals Ltd......................... 93,000 856,275
Hokuetsu Paper Mills....................... 189,000 1,444,342
House Food Indl............................ 92,000 1,677,194
Industrial Bank of Japan Ltd............... 181,900 3,868,787
Industrial Bank of Japan Ltd. Rights....... 14,552 150,062
Kikkoman................................... 160,000 1,168,217
Kinden Corp................................ 83,000 1,268,576
Kirin Brewery Company Ltd.................. 127,000 1,309,640
Kyocera Corp............................... 25,000 1,698,739
Kyudenko Company Ltd....................... 53,000 678,298
Kyushu Electric Power...................... 171,000 3,668,447
Makita Electric Works...................... 85,000 1,220,882
Maruichi Steel Tube........................ 48,000 817,604
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
JAPAN -- (CONTINUED)
Matsushita Electric Works.................. 127,000 $ 1,262,867
Mitsubishi ElectricCorp.................... 463,000 2,971,283
Mitsubishi Estate Company Ltd.............. 188,000 2,302,182
Mitsubishi Gas and Chemical Company........ 286,000 1,179,707
Mitsubishi Steel Manufacturing **.......... 257,500 1,299,236
Mitsubishi Trust and Banking Corp.......... 101,000 1,515,790
Mitsui Petrochemical....................... 318,000 2,143,228
Murata Manufacturing Company Ltd........... 50,000 1,767,793
NEC Corp................................... 365,000 3,898,352
Nichicon................................... 212,000 2,908,388
Nippon Chemi-Con Corp...................... 123,000 765,565
Nippon Meat Packers........................ 153,000 2,127,152
Nippon Oil Company......................... 504,000 3,085,904
Nippon Paper Industries Co................. 463,000 2,770,923
Nisshin Steel Company Ltd.................. 504,000 1,832,980
Nomura Securities Company Ltd.............. 188,000 3,271,522
Ricoh Company Ltd.......................... 160,000 1,561,550
Rinnai..................................... 57,000 1,291,041
Sakura Bank Ltd............................ 289,000 2,740,724
Sanwa Bank................................. 214,000 3,783,077
Seino Transportation Company Ltd........... 198,000 2,916,858
Sekisui Chemical Co........................ 250,000 2,716,140
Sekisui House Ltd.......................... 463,000 4,902,403
Shimachu................................... 26,000 742,105
Shimano Inc................................ 76,000 1,406,500
Shin-Etsu Chemical Co...................... 171,000 3,022,926
Shionogi & Company Ltd..................... 193,000 1,508,673
Shiseido Company Ltd....................... 238,000 2,892,551
Sumitomo Bank Ltd.......................... 102,000 1,868,889
SXL Corp................................... 132,000 1,227,511
Takara Standard............................ 63,000 649,664
Tohoku Electric Power Company.............. 169,000 3,641,101
Tokai Bank Ltd............................. 163,000 1,936,010
Tokio Marine and Fire Insurance Company.... 206,000 2,351,901
Tokyo Style Corp. Ltd...................... 81,000 1,297,671
Toppan Printing............................ 341,000 4,301,353
Toshiba Corp............................... 526,000 3,399,797
UNY Company Ltd............................ 95,000 1,670,656
Yakult Honsha.............................. 22,000 1,595,065
Yamaguchi Bank............................. 102,000 1,549,581
Yamanouchi Pharmaceutical.................. 142,000 2,928,644
Yokogawa Bridge Corp....................... 51,000 638,615
------------
151,188,335
------------
MALAYSIA -- 2.3%
Diversified Resources Berhad............... 1,568,700 5,129,350
</TABLE>
See Accompanying Notes to Financial Statements.
5
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
MALAYSIA -- (CONTINUED)
Malayan Banking Berhad..................... 560,300 $ 5,327,627
Petronas Gas Berhad International.......... 955,000 3,984,754
YTL Corp. Berhad........................... 287,300 1,417,769
------------
15,859,500
------------
MEXICO -- 2.7%
Cementos Mexicanos CPO, S.A................ 1,134,500 4,147,232
Corparacion GEO S.A. de C.V. Class B **.... 691,600 3,486,522
Corporacion Industrial SanLuis S.A. de C.V.
CPO...................................... 601,894 3,570,457
Grupo Elektra S.A. de C.V. CPO............. 282,600 2,006,451
Grupo Modelo S.A. de C.V. Class C.......... 484,200 2,236,490
Kimberly Clark de Mexico S.A. de C.V. Class
A........................................ 160,600 2,950,250
Telefonos de Mexico S.A. de C.V.
Unsponsored ADR.......................... 4,400 6,875
------------
18,404,277
------------
NETHERLANDS -- 3.3%
Akzo Nobel................................. 36,200 4,209,658
Heineken N.V............................... 15,200 3,383,072
Internationale Nederlanden Groep N.V....... 115,100 3,587,334
Nutricia Verenigde Bedrijven N.V........... 26,100 3,493,007
VNU Verenigd Bezit......................... 15,000 262,659
Wolters Kluwer............................. 60,400 7,591,878
------------
22,527,608
------------
PHILIPPINES -- 1.0%
Ayala Corp. Class B........................ 2,940,600 3,428,452
Philippine Long Distance Telephone Company
ADR...................................... 53,050 3,176,369
------------
6,604,821
------------
PORTUGAL -- 0.6%
Portugal Telecom S.A. ADR **............... 52,380 1,394,617
Portugal Telecom S.A. Register............. 103,000 2,755,946
------------
4,150,563
------------
PUERTO RICO -- 0.5%
Cellular Communications of Puerto Rico,
Inc. ADR **.............................. 130,900 3,501,575
------------
RUSSIA -- 0.2%
PLD Telekom, Inc........................... 192,900 1,470,862
------------
SINGAPORE -- 2.2%
DBS Land Ltd............................... 470,600 1,565,878
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
SINGAPORE -- (CONTINUED)
Overseas-Chinese Banking Corp. Ltd.***..... 458,770 $ 5,512,416
Singapore Press Holdings***................ 168,400 2,921,408
United Overseas Bank Ltd.***............... 488,980 4,693,374
------------
14,693,076
------------
SOUTH AFRICA -- 2.2%
Amalgamated Banks of South Africa Ltd...... 602,443 2,779,886
Anglo American Industrial Corp. Ltd........ 80,658 2,984,670
Gencor Ltd................................. 910,500 3,206,844
South African Breweries Ltd................ 194,412 5,157,162
South African Breweries Ltd. ADR........... 22,813 604,955
------------
14,733,517
------------
SOUTH KOREA -- 1.5%
Korea Fund, Inc............................ 551,525 10,547,916
------------
SPAIN -- 2.3%
Banco Intercontinental Espanol............. 34,400 3,892,212
Banco Popular.............................. 20,000 3,470,334
Repsol S.A. ADR............................ 122,500 3,996,562
Telefonica de Espana ADR................... 81,700 4,524,137
------------
15,883,245
------------
SWEDEN -- 4.8%
Astra AB Fria Class A...................... 168,920 7,145,192
Autoliv AB................................. 140,800 4,647,602
Ericsson Telephone Company ADR Class B..... 249,460 5,753,171
Hennes & Mauritz Fria Class B.............. 70,004 7,275,890
Mo Och Domsjo AB - B Shares................ 138,200 3,998,081
Stora Kopparbergs Bergslags Aktiebolag A
Shares................................... 255,800 3,593,836
------------
32,413,772
------------
SWITZERLAND -- 5.1%
ABB AG..................................... 5,006 6,171,952
Ciba Geigy AG Registered................... 4,484 5,662,938
Holderbank Financiere Glaris AG Class B.... 5,507 4,214,260
Roche Holding AG........................... 665 5,069,544
Sandoz AG Registered....................... 3,250 3,868,790
Schweiz Bankgesellschaft B................. 3,627 3,522,387
Swiss Reinsurance Company Registered....... 6,010 6,497,974
------------
35,007,845
------------
</TABLE>
See Accompanying Notes to Financial Statements.
6
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
THAILAND*** -- 2.3%
Advanced Information Services Public
Company Ltd.............................. 214,900 $ 2,844,891
Krung Thai Bank Public Company Ltd......... 840,570 3,631,476
Phatra Thanakit Public Company Ltd......... 325,000 1,932,224
Siam Cement Company Ltd.................... 80,500 3,101,308
Thai Farmers Bank Public Company Ltd....... 405,300 4,305,208
Thai Farmers Bank Public Company Ltd.
Warrants Expire 09/15/2002............... 50,663 136,546
------------
15,951,653
------------
UNITED KINGDOM -- 13.1%
Berkeley Group PLC......................... 20,400 185,199
British Petroleum PLC...................... 463,446 4,489,515
British Sky Broadcasting Group PLC ADR**... 95,590 5,126,014
Burton Group PLC........................... 952,800 2,268,455
Dixons Group PLC........................... 294,921 2,490,930
EMI Group PLC.............................. 301,000 6,771,564
Flextech PLC **............................ 162,092 1,301,984
General Cable PLC **....................... 1,198,400 3,330,277
General Cable PLC ADR **................... 339,200 4,621,600
International Cabletel, Inc. **............ 182,842 4,433,918
Land Securities PLC........................ 364,000 3,872,806
Rank Organisation PLC...................... 116,100 812,024
Reuters Holdings PLC Class B............... 249,520 2,906,048
Reuters Holdings PLC ADR Class B........... 56,200 3,926,975
Rolls Royce PLC............................ 2,083,300 7,220,434
Scottish & Newcastle PLC................... 514,100 5,437,703
Standard Chartered Bank PLC................ 941,459 10,435,618
Unilever PLC............................... 104,800 2,077,077
United News & Media PLC.................... 275,000 3,076,149
WPP Group PLC.............................. 2,824,051 10,162,534
Zeneca Group PLC........................... 180,900 4,321,043
------------
89,267,867
------------
TOTAL COMMON AND CONVERTIBLE STOCKS,
WARRANTS AND RIGHTS (Cost
$610,436,063)........................... 657,374,025
------------
<CAPTION>
PAR
(000)
-----------
<S> <C> <C>
FOREIGN BONDS**** -- 0.4%
SOUTH AFRICA -- 0.4%
Sappi BVI Finance Ltd. Convertible 144A
7.500% 08/01/2002........................ $ 3,240 2,948,400
------------
TOTAL FOREIGN BONDS
(Cost $3,240,000)....................... 2,948,400
------------
SHORT-TERM INVESTMENT -- 2.7%
BBH Grand Cayman U.S. Dollar Time Deposit
4.750% 09/03/1996........................ 18,530 18,530,000
------------
TOTAL SHORT-TERM INVESTMENT
(Cost $18,530,000)...................... 18,530,000
------------
<CAPTION>
VALUE
------------
<S> <C> <C>
TOTAL INVESTMENTS AT VALUE -- 99.5%
(Cost $632,206,063)................................... $678,852,425
OTHER ASSETS IN EXCESS
OF LIABILITIES -- 0.5%................................ 3,418,376
------------
NET ASSETS (Applicable to
35,142,215 BEA Shares) -- 100.0%...................... $682,270,801
------------
------------
NET ASSET VALUE AND OFFERING
PRICE PER SHARE
($682,270,801 DIVIDED BY 35,142,215)................. $19.41
------------
------------
REDEMPTION PRICE PER SHARE
($19.41 X .9900)...................................... $19.22
------------
------------
</TABLE>
* Cost for Federal income tax purposes at August 31, 1996 is $632,398,515. The
gross appreciation (depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation.......... $ 81,589,602
Gross Depreciation.......... (35,135,692)
---------------
Net Appreciation............ $ 46,453,910
---------------
---------------
</TABLE>
** Non-income producing securities.
*** Denotes foreign shares.
**** Certain conditions for public sales may exist.
+ Not readily marketable securities.
See Accompanying Notes to Financial Statements.
7
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONCLUDED)
AUGUST 31, 1996
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
ADR........................... American Depository Receipts
</TABLE>
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
<TABLE>
<CAPTION>
PER
AMOUNT SHARE
------------ ------
<S> <C> <C>
Capital Paid-In............... $655,735,487 $18.66
Accumulated Net Investment
Income....................... 4,139,511 .12
Accumulated Net Realized Loss
on Security and Foreign
Exchange Transactions........ (24,260,422) (.69)
Net Unrealized Appreciation on
Investments and Other........ 46,656,225 1.32
- ----------------------------------------------------
NET ASSETS.................... $682,270,801 $19.41
- ----------------------------------------------------
</TABLE>
See Accompanying Notes to Financial Statements.
8
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA Emerging Markets Equity Portfolio
STATEMENT OF NET ASSETS
August 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
COMMON AND CONVERTIBLE STOCKS, WARRANTS AND RIGHTS -- 95.6%
BRAZIL -- 15.7%
Banco Bradesco S.A. PN..................... 321,471,549 $ 2,720,047
Centrais Eletricas de Santa Catarin PN
Class B.................................. 842,000 745,573
Cia. Energetica de Minas Gerais 144A
ADS****.................................. 183 5,509
Cia. Energetica de Minas Gerais ADR........ 23,673 712,628
Cia. Energetica de Minas Gerais PN......... 18,320,000 551,547
Cia. Paulista de Forca e Luz ON**.......... 14,527,220 1,307,793
Cia. Tecidos Norte de Minas Gerais PN...... 2,862,000 971,514
Lojas Americanas S.A. PN................... 10,047,000 173,974
Multibras Eletrodo S.A. PN................. 770,000 1,136,364
Refrigeracao Parana S.A. PN................ 573,223,000 1,483,251
Santista Alimentos S.A.**.................. 722,500 1,329,275
Telecomunicacoes de Minas Gerais PN Class
B........................................ 22,548,000 2,562,273
Telecomunicacoes de Minas Gerais S.A. ON... 280,905 25,150
Telecomunicacoes de Sao Paulo S.A. PN...... 3,430,928 658,236
Telecomunicacoes do Parna S.A. PN.......... 1,565,000 751,397
Telecomunicacoes do Rio de Janeiro S.A.
ON....................................... 2,260,000 240,142
Telecomunicacoes do Rio de Janeiro S.A.
PN....................................... 19,756,000 2,118,658
Usinas Siderurgica de Minas Gerais S.A.
PN....................................... 554,102,395 577,871
------------
18,071,202
------------
CHILE -- 2.8%
Chilectra S.A. 144A ADR****................ 14,849 804,549
Enersis S.A. ADR........................... 19,400 603,825
Madeco S.A. Sponsored ADR.................. 49,600 1,171,800
Maderas y Sinteticos ADR................... 46,500 656,813
------------
3,236,987
------------
COLOMBIA -- 2.0%
Banco Ganadero S.A. PFD ADR 8.75%.......... 19,100 386,775
Banco Industrial Colombiano S.A. ADR....... 19,500 363,187
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
COLOMBIA -- (CONTINUED)
Carrulla & CIA 144A S.A. ADR****........... 45,400 $ 244,252
Cementos Diamante S.A. 144A ADS****........ 42,300 444,150
Cementos Paz del Rio 144A ADR****.......... 34,200 410,400
Gran Cadena Almacenes ADR.................. 42,300 406,926
------------
2,255,690
------------
CROATIA -- 3.1%
Pliva D.D. GDR 144A****.................... 63,000 2,850,750
Zagrebacka Banka GDR....................... 55,000 704,055
------------
3,554,805
------------
ECUADOR -- 0.5%
Cemento Nacional Ecuador GDR............... 2,896 535,760
------------
GHANA -- 2.6%
Ashanti Goldfields Co. Ltd. Sponsored
GDR...................................... 159,500 2,970,687
------------
HONG KONG -- 9.5%
Cheung Kong Holdings Ltd................... 147,000 1,031,462
Citic Pacific Ltd.......................... 228,000 1,002,651
Hang Seng Bank Ltd......................... 96,000 984,026
Henderson Land Development Co. Ltd......... 130,000 1,017,267
HKR International Ltd...................... 1,153,600 1,454,776
HSBC Holdings PLC.......................... 60,000 1,036,021
Hutchinson Whampoa Ltd..................... 175,000 1,059,303
Sun Hung Kai Properties Ltd................ 90,000 878,872
Swire Pacific Ltd. Class A................. 106,500 947,019
Wharf Holdings Ltd......................... 383,000 1,446,498
------------
10,857,895
------------
INDIA -- 3.2%
Hindalco 144A GDR****...................... 17,900 595,175
India Fund Class B......................... 510,670 872,998
Larsen & Toubro Ltd. GDR Reg. S New........ 80,000 1,300,000
Morgan Stanley India Investment Fund,
Inc...................................... 105,200 959,950
------------
3,728,123
------------
INDONESIA*** -- 4.2%
Bank International Indonesia, PT........... 510,466 1,177,244
Matahari Putra Prima, PT................... 385,250 505,934
PT Astra International..................... 494,000 643,476
PT Bank Dagang Nasional.................... 1,071,000 754,709
</TABLE>
See Accompanying Notes to Financial Statements.
12
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA EMERGING MARKETS EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
INDONESIA*** -- (CONTINUED)
PT Hanjaya Mandala Sampoerna............... 82,500 $ 794,523
PT Telekomunikasi.......................... 637,000 897,758
------------
4,773,644
------------
ISRAEL -- 4.9%
ECI Telecom Ltd............................ 64,140 1,322,887
Elscint Ltd. ADR........................... 15,050 137,331
Geotek Communications, Inc.**.............. 167,400 1,527,525
Koor Industries Ltd. ADR**................. 67,300 1,160,925
Tecnomatix Technologies**.................. 38,200 759,225
Teva Pharmaceutical Industries Ltd. ADR.... 19,130 697,049
------------
5,604,942
------------
MALAYSIA -- 7.9%
Diversified Resources Berhad............... 210,000 686,660
Malayan Banking Berhad..................... 296,500 2,819,278
Malaysian Resources Corp. Berhad........... 414,000 1,312,177
New Straits Times Press Berhad............. 244,000 1,370,512
Renong Berhad Holding Company.............. 515,000 752,096
Time Engineering........................... 391,000 831,414
Time Engineering New Class A............... 195,500 415,707
United Engineers Malaysia Ltd.............. 128,000 908,967
------------
9,096,811
------------
MEXICO -- 9.9%
Apasco S.A. de C.V......................... 170,240 1,145,792
Cementos Mexicanos S.A. de C.V. Class B.... 395,000 1,636,820
Corporacion GEO S.A. de C.V. 144A ADR Class
B**/****................................. 38,100 767,334
Corporacion GEO S.A. de C.V. Class B**..... 140,780 709,706
Corporacion Industrial SanLuis S.A. de C.V.
CPO...................................... 414,574 2,459,268
Grupo Elektra S.A. de C.V. CPO............. 228,000 1,618,792
Grupo Financiero Banamex Accival S.A. de
C.V. Class B............................. 508,900 1,079,922
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
MEXICO -- (CONTINUED)
Grupo Modelo S.A. de C.V. Class C.......... 295,000 $ 1,362,587
Kimberly Clark de Mexico S.A. de C.V. Class
A........................................ 30,770 565,250
------------
11,345,471
------------
PERU -- 1.7%
Backus y Johnson........................... 476,231 476,231
Banco Wiese ADR............................ 54,900 384,300
Credicorp Ltd. ADR......................... 27,800 542,100
Southern Peru Copper Corp. ADR............. 32,800 500,200
------------
1,902,831
------------
PHILIPPINES -- 1.8%
Ayala Corp. Class B........................ 908,400 1,059,105
Philippine National Bank................... 59,000 986,716
------------
2,045,821
------------
PORTUGAL -- 3.0%
Banco Comercial Portugues PFD Series A..... 22,000 1,094,500
Portugal Telecom S.A. ADR**................ 17,300 460,613
Portugal Telecom S.A. Register**........... 27,000 722,432
Sonae Industria e Investimentos S.A........ 42,050 1,211,328
------------
3,488,873
------------
PUERTO RICO -- 0.7%
Cellular Communications of Puerto Rico,
Inc. ADR**............................... 30,700 821,225
------------
RUSSIA -- 0.7%
PLD Telekom, Inc.**........................ 101,900 776,988
------------
SINGAPORE -- 1.7%
Overseas-Chinese Banking Corp. Ltd.***..... 55,000 660,860
Straits Steamship Land Ltd................. 215,000 736,793
United Overseas Bank Ltd.***............... 61,280 588,183
------------
1,985,836
------------
SOUTH AFRICA -- 7.8%
Amalgamated Banks of South Africa Ltd...... 114,959 530,462
Anglo American Industrial Corp. Ltd........ 49,916 1,847,092
Barlow Ltd................................. 65,100 599,338
</TABLE>
See Accompanying Notes to Financial Statements.
13
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA EMERGING MARKETS EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONCLUDED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
SOUTH AFRICA -- (CONTINUED)
Gencor Ltd................................. 285,430 $ 1,005,304
Murray and Roberts Holdings................ 283,608 979,921
Nasionale Pers Beperk...................... 55,987 586,578
Nedcor Ltd. Warrants**..................... 7,300 12,775
Pepkor Ltd................................. 381,000 1,528,756
SA Iron & Steel Industrial Corp. Ltd....... 1,848,647 1,108,529
Samancor Ltd............................... 58,500 746,573
------------
8,945,328
------------
SOUTH KOREA -- 4.5%
Korea Asia Fund Ltd. IDR**................. 22,500 500,625
Korea Electric Power ADR New**............. 58,000 1,232,500
Korea Fund, Inc............................ 176,350 3,372,694
------------
5,105,819
------------
THAILAND*** -- 7.4%
Advanced Information Services Public
Company Ltd.............................. 53,700 710,892
Bangkok Bank Ltd........................... 152,000 1,927,864
Krung Thai Bank Public Company Ltd......... 349,980 1,512,002
Phatra Thanakit Public Company Ltd......... 300,700 1,787,753
PTT Exploration & Production Public Company
Ltd...................................... 50,600 693,920
Siam Cement Company Ltd.................... 19,800 762,806
Thai Farmers Bank Public Company Ltd....... 100,000 1,062,227
Thai Farmers Bank Public Company Ltd.
Warrants Expire 09/15/2002............... 12,500 33,690
------------
8,491,154
------------
TOTAL COMMON AND CONVERTIBLE STOCKS,
WARRANTS AND RIGHTS (Cost
$101,425,342)........................... 109,595,892
------------
<CAPTION>
PAR
(000)
-----------
<S> <C> <C>
FOREIGN BONDS**** -- 0.8%
COLOMBIA -- 0.8%
Banco de Colombia Convertible 144A
5.200% 02/01/1999........................ $ 1,100 968,000
------------
TOTAL FOREIGN BONDS
(Cost $1,218,096)......................... 968,000
------------
<CAPTION>
PAR
(000) VALUE
----------- ------------
<S> <C> <C>
SHORT-TERM INVESTMENT -- 2.1%
BBH Grand Cayman U.S. Dollar Time Deposit
4.750% 09/03/1996........................ $ 2,388 $ 2,388,000
------------
TOTAL SHORT-TERM INVESTMENT
(Cost $2,388,000)....................... 2,388,000
------------
TOTAL INVESTMENTS AT VALUE -- 98.5% (Cost
$105,031,438)......................................... $112,951,892
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.5%...........
1,739,317
------------
NET ASSETS (Applicable to 6,300,570 BEA Shares) --
100.0%................................................ $114,691,209
------------
------------
NET ASSET VALUE AND OFFERING PRICE PER
SHARE($114,691,209 DIVIDED BY 6,300,570)............. $18.20
------------
------------
REDEMPTION PRICE PER SHARE
($18.20 X .9850)...................................... $17.93
------------
------------
</TABLE>
* Cost for Federal income tax purposes at August 31, 1996 is $105,388,350.
The gross appreciation (depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation........................... $ 15,753,954
Gross Depreciation........................... (8,190,412)
-------------
Net Appreciation............................. $ 7,563,542
-------------
-------------
</TABLE>
** Non-income producing securities.
*** Denotes foreign shares.
**** Certain conditions for public sales may exist.
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
ADR........................... American Depository Receipts
ADS........................... American Depository Shares
GDR........................... Global Depository Receipts
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
<CAPTION>
AMOUNT
---------------
PER
SHARE
--
<S> <C>
Capital Paid-In.................... $ 129,649,735 $ 20.58
Accumulated Net Investment Loss.... (152,984) (.02)
Accumulated Net Realized Loss on
Security and Foreign Exchange
Transactions...................... (22,726,257) (3.61)
Net Unrealized Appreciation on
Investments and Other............. 7,920,715 1.25
- -------------------------------------------------------------
NET ASSETS $ 114,691,209 $ 18.20
- -------------------------------------------------------------
</TABLE>
See Accompanying Notes to Financial Statements.
14
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA U.S. Core Equity Portfolio
STATEMENT OF NET ASSETS
August 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
------------- -------------
<S> <C> <C>
COMMON AND CONVERTIBLE STOCKS -- 93.7%
AEROSPACE / DEFENSE -- 6.2%
Coltec Industries, Inc.**.................. 80,700 $ 1,210,500
Lockheed Martin Corp....................... 18,000 1,514,250
Raytheon Company........................... 15,000 772,500
Whittaker Corp.**.......................... 10,000 140,000
-------------
3,637,250
-------------
BROADCASTING -- 0.5%
Providence Journal Company**............... 16,000 310,000
-------------
310,000
-------------
BUSINESS SERVICES -- 5.0%
Automatic Data
Processing, Inc.......................... 35,000 1,456,875
DST Systems, Inc.**........................ 28,000 861,000
Equifax, Inc............................... 25,200 642,600
-------------
2,960,475
-------------
CHEMICALS -- 2.1%
Great Lakes Chemical Corp.................. 12,000 690,000
The Scotts Company Class A**............... 27,000 506,250
-------------
1,196,250
-------------
CONGLOMERATES -- 5.4%
Allied-Signal, Inc......................... 9,500 586,625
General Electric Co........................ 15,000 1,246,875
Philip Morris Companies, Inc............... 7,550 677,612
Whitman Corp............................... 30,000 671,250
-------------
3,182,362
-------------
CONSTRUCTION & BUILDING MATERIALS -- 2.9%
Fluor Corp................................. 10,000 640,000
Masco Corp................................. 20,000 582,500
USG Corporation**.......................... 16,000 456,000
-------------
1,678,500
-------------
CONSUMER PRODUCTS -- 4.1%
Clorox Co.................................. 7,000 655,375
Colgate-Palmolive Co....................... 7,200 585,000
Gillette Co................................ 10,000 637,500
Newell Co.................................. 17,000 529,125
-------------
2,407,000
-------------
ELECTRONICS -- 5.7%
Berg Electronics Corp.**................... 30,000 727,500
Electronic Data Systems Corp............... 11,000 599,500
Emerson Electric Co........................ 22,000 1,842,500
Intel Corp................................. 2,500 199,531
-------------
3,369,031
-------------
ENERGY -- 6.2%
Exxon Corporation.......................... 10,000 813,750
McDermott International, Inc............... 60,000 1,245,000
Mobil Corporation.......................... 6,000 676,500
<CAPTION>
NUMBER
OF SHARES VALUE
------------- -------------
<S> <C> <C>
ENERGY -- (CONTINUED)
Schlumberger, Ltd.......................... 11,000 $ 928,125
-------------
3,663,375
-------------
ENTERTAINMENT -- 3.3%
GTech Holdings Corporation**............... 70,000 1,942,500
-------------
FINANCIAL SERVICES -- 13.7%
ACE Limited Ordinary Shares................ 30,000 1,398,750
Allstate Corp.............................. 16,000 714,000
Associates First Capital Corp.............. 20,000 790,000
Citicorp................................... 6,900 574,425
EXEL Limited............................... 24,000 804,000
Federal National Mortgage
Association.............................. 15,000 465,000
H & R Block, Inc........................... 21,500 537,500
J.P. Morgan & Co.,
Incorporated............................. 9,000 788,625
NationsBank Corporation.................... 10,000 851,250
Southern National Corporation.............. 18,000 562,500
State Street Boston Corporation............ 11,400 617,025
-------------
8,103,075
-------------
FOOD & BEVERAGE -- 3.8%
Heinz H.J. Company......................... 55,000 1,732,500
Nabisco Holdings Corporation Class A....... 16,000 538,000
-------------
2,270,500
-------------
HEALTH CARE -- 5.9%
Amgen, Inc.**.............................. 10,200 594,150
Boston Scientific Corporation**............ 12,200 559,675
Humana, Inc.**............................. 46,200 866,250
McKesson Corporation....................... 35,000 1,491,875
-------------
3,511,950
-------------
INDUSTRIAL GOODS & MATERIALS -- 4.5%
Canadian Pacific Limited
Ordinary Shares.......................... 38,000 855,000
Dover Corporation.......................... 13,500 592,313
Illinois Tool Works Inc.................... 9,000 622,125
Tyco International Ltd..................... 14,200 599,950
-------------
2,669,388
-------------
MANUFACTURING -- 1.2%
Eastman Kodak Company...................... 10,000 725,000
-------------
PACKAGING -- 2.0%
Owens-Illinois, Inc.**..................... 75,000 1,153,125
-------------
PAPER & FOREST PRODUCTS -- 1.6%
Schweitzer-Mauduit
International, Inc....................... 30,000 960,000
-------------
</TABLE>
See Accompanying Notes to Financial Statements.
18
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA U.S. CORE EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONCLUDED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
------------- -------------
<S> <C> <C>
PHARMACEUTICALS -- 5.1%
Barr Laboratories, Inc.**.................. 27,000 $ 695,250
Pharmacia & Upjohn, Inc.**................. 20,000 840,000
Smithkline Beecham Plc ADR................. 25,000 1,456,250
-------------
2,991,500
-------------
PUBLISHING & INFORMATION SERVICES -- 3.2%
Hollinger International, Inc............... 85,000 924,375
Tribune Company............................ 13,000 934,375
-------------
1,858,750
-------------
REAL ESTATE -- 2.2%
Starwood Lodging Trust..................... 17,000 646,000
Trinet Corporate Realty Trust Inc.......... 20,000 630,000
-------------
1,276,000
-------------
RESTAURANTS HOTELS & GAMING -- 3.4%
Marriott International, Inc................ 20,000 1,097,500
McDonald's Corporation..................... 20,000 927,500
-------------
2,025,000
-------------
TELECOMMUNICATIONS -- 2.2%
AT&T Corp.................................. 12,600 661,500
Frontier Corp.............................. 22,000 649,000
-------------
1,310,500
-------------
TRANSPORTATION -- 3.5%
AMR Corporation**.......................... 9,000 738,000
Canadian National Railway
Company.................................. 35,000 669,375
Continental Airlines, Inc.
Class B**................................ 30,000 678,750
-------------
2,086,125
-------------
TOTAL COMMON AND
CONVERTIBLE STOCKS
(Cost $51,562,892)....................... 55,287,656
-------------
</TABLE>
<TABLE>
<CAPTION>
PAR
(000)
-------------
<S> <C> <C>
CORPORATE BONDS -- 1.5%
TRANSPORTATION -- 1.5%
Santa Fe Pacific Pipeline Partners L.P.
Conv. Debentures
(Baa3, BB)
11.000% 08/15/2010....................... $ 735 896,700
-------------
TOTAL CORPORATE BONDS
(Cost $952,300).......................... 896,700
-------------
<CAPTION>
PAR
(000) VALUE
------------- -------------
<S> <C> <C>
SHORT TERM INVESTMENT -- 4.7%
BBH Grand Cayman U.S. Dollar Time Deposit
4.750% 09/03/1996........................ $ 2,775 $ 2,775,000
-------------
TOTAL SHORT TERM
INVESTMENT
(Cost $2,775,000)....................... 2,775,000
-------------
TOTAL INVESTMENTS AT VALUE -- 99.9%
(Cost $55,290,192)...................................... $58,959,356
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.1%..................................... 56,078
-------------
NET ASSETS (Applicable to 3,098,175 BEA Shares) --
100.0%.................................................. $59,015,434
-------------
-------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE ($59,015,434 DIVIDED BY 3,098,175)............... $19.05
-------------
-------------
</TABLE>
* Cost for Federal income tax purposes at August 31, 1996 is $55,282,034. The
gross appreciation (depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation........................... $ 4,785,484
Gross Depreciation........................... (1,108,162)
-------------
Net Appreciation............................. $ 3,677,322
-------------
-------------
</TABLE>
** Non-income producing securities.
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
ADR........................... American Depository Receipts
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
<CAPTION>
AMOUNT
---------------
PER
SHARE
--
<S> <C>
Capital Paid-In.................... $ 50,559,008 $ 16.32
Accumulated Net Investment Income.. 410,275 .13
Accumulated Net Realized Gain on
Security Transactions............. 4,376,987 1.41
Net Unrealized Appreciation on
Investments and Other............. 3,669,164 1.19
- -------------------------------------------------------------
NET ASSETS $ 59,015,434 $ 19.05
- -------------------------------------------------------------
</TABLE>
See Accompanying Notes to Financial Statements.
19
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA U.S. CORE FIXED INCOME PORTFOLIO
STATEMENT OF NET ASSETS
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
CORPORATE BONDS -- 23.1%
BANKING -- 3.0%
Citicorp Medium Term Notes (A2, A)
6.750% 10/15/2007........................ $ 555 $ 517,538
Credit Lyonnais Perpetual Sub Variable Rate
Notes, Rule 144A (Baa2, NR)****/+/+++
6.625%................................... 300 290,055
First Nationwide (Parent) Holdings, Inc.
Sr. Notes (B2, B)
12.500% 04/15/2003....................... 435 451,313
Hongkong & Shanghai Banking Corp Ltd.
Perpetual Sub. FRN Series 1 (Baa1,
NR)+/+++
6.000%................................... 580 492,536
Hongkong & Shanghai Banking Corp Ltd.
Perpetual Sub. FRN Series 2 (Baa1,
NR)+/+++
5.813%................................... 60 50,619
Midland Bank Plc Perpetual Sub. FRN Series
2 (A1, A-)+/+++
5.750%................................... 390 334,523
National Westminster Bank PLC Perpetual
Sub. FRN Series B (Aa3, A+)+/+++
5.875%................................... 480 418,992
Santander Financial Issuances Perpetual
Sub. FRN
(A2, NR) +/+++
6.525%................................... 500 493,800
Swiss Bank Corp. New York Subordinated
Notes (Aa2, AA)
6.750% 07/15/2005........................ 580 554,625
-------------
3,604,001
-------------
CABLE -- 1.9%
Adelphia Communications Corporation Senior
Notes, Series B PIK Bonds (B3, B)
9.500% 02/15/2004........................ 15 12,209
Falcon Holding Group L.P. Senior
Subordinated Notes PIK Bonds (NR, NR)
11.000% 09/15/2003....................... 877 818,180
Kabelmedia Holding Gmbtt Yankee Senior
Discount Notes (B3, B-)++
13.625% 08/01/2006....................... 900 465,750
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
CABLE -- (CONTINUED)
Summit Communications Group, Inc. Senior
Subordinated Notes (Ba3, BB+)
10.500% 04/15/2005....................... $ 865 $ 939,606
-------------
2,235,745
-------------
CHEMICALS -- 0.9%
Reliance Industries Ltd. 144A Yankee Notes
(NR, NR)
10.500% 08/06/2046....................... 780 770,250
UCC Investors Holdings Inc. Subordinated
Discount Notes (B3, B-)++
12.000% 05/01/2005....................... 290 249,763
-------------
1,020,013
-------------
CONSTRUCTION & BUILDING MATERIALS -- 0.3%
J.M. Peters Company, Inc., Senior Notes
(B3, NR)
12.750% 05/01/2002....................... 440 404,800
-------------
ENERGY -- 1.3%
Gulf Canada Resources Ltd. Yankee Senior
Notes (Ba2, BB+)
8.350% 08/01/2006........................ 800 777,000
Gulf Canada Resources Yankee Subordinated
Debentures (Ba3, BB-)
9.625% 07/01/2005........................ 240 246,600
PDV America, Inc. Guaranteed Senior Notes
(Baa3, B)
7.875% 08/01/2003........................ 505 481,644
-------------
1,505,244
-------------
ENTERTAINMENT -- 2.1%
Six Flags Entertainment Notes (Baa3,
BBB-)++
5.293% 12/15/1999........................ 15 11,831
Time Warner, Inc. Debentures (Ba1, BBB-)
6.850% 01/15/2026........................ 2,570 2,451,138
-------------
2,462,969
-------------
ENVIRONMENTAL SERVICES -- 0.3%
EnviroSource, Inc. Senior Notes (B3, B-)
9.750% 06/15/2003........................ 390 361,725
-------------
FINANCIAL SERVICES -- 5.6%
AT&T Capital Corporation Medium Term Notes
Series 3 (Baa3, A)
6.030% 10/27/1997........................ 1,500 1,491,375
</TABLE>
See Accompanying Notes to Financial Statements.
23
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA U.S. CORE FIXED INCOME PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
FINANCIAL SERVICES -- (CONTINUED)
Fifth Mexican Acceptance Corp. Rule 144A
Notes Tranche A (NR, NR)****/++++
8.000% 12/15/1998........................ $ 760 $ 235,600
Ford Holdings, Inc. Guaranteed Notes (A1,
A+)
9.250% 03/01/2000........................ 10 10,638
General Motors Acceptance Corp. Medium Term
Notes (A3, A-)
7.250% 07/20/1998........................ 125 126,250
General Motors Acceptance Corp. Medium Term
Notes (A3, A-)
7.375% 04/15/1999........................ 1,120 1,134,000
General Motors Acceptance Corp. Medium Term
Notes (A3, A-)
6.625% 04/24/2000........................ 1,290 1,273,875
General Motors Acceptance Corp. Medium Term
Notes (A3, A-)
6.900% 06/06/2000........................ 140 139,300
General Motors Acceptance Corp. Medium Term
Notes (A3, A-)
6.900% 07/05/2000........................ 165 163,969
Gentra Inc. Subordinated Debentures (NR,
NR)
7.500% 12/31/2001........................ 800 667,982
L'Auxiliare du Credit Foncier de France
Guaranteed FRN (Ba1, NR)
5.332% 09/25/2002........................ 420 403,116
L'Auxiliare du Credit Foncier de France Sr.
Unsubordinated Notes (Baa1, A)
8.000% 01/14/2002........................ 930 960,806
-------------
6,606,911
-------------
FOOD & BEVERAGE -- 0.3%
Fresh del Monte Produce Senior Notes Series
B (Caa, CCC+)
10.000% 05/01/2003....................... 400 375,000
-------------
INDUSTRIAL GOODS & MATERIALS -- 0.9%
Specialty Equipment Companies Inc. Senior
Subordinated Note (B3, B-)
11.375% 12/01/2003....................... 300 317,250
Tenneco, Inc. Debentures (Baa2, BBB-)
7.250% 12/15/2025........................ 840 768,600
-------------
1,085,850
-------------
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
PACKAGING -- 0.4%
Crown Packaging 144A Units (NR, NR)++
14.000% 08/01/2006....................... $ 350 $ 136,500
Gaylord Container Corp. Senior Subordinated
Debentures (Caa, B-)
12.750% 05/15/2005....................... 300 321,750
Stone Container Corp. First Mortgage Notes
(B1, BB-)
10.750% 10/01/2002....................... 20 20,650
-------------
478,900
-------------
PAPER & FOREST PRODUCTS -- 0.7%
P.T. Indah Kiat Pulp & Paper Corp.
Guaranteed Notes, Series B (Ba2, BB)
11.875% 06/15/2002....................... 190 198,550
P.T. Indah Kiat Pulp & Paper Corp. Sr.
Secured Debentures (Ba2, BB)
8.875% 11/01/2000........................ 610 593,225
-------------
791,775
-------------
REAL ESTATE -- 0.6%
Chelsea GCA Realty Inc. Guaranteed Notes
(Ba2, BB+)
7.750% 01/26/2001........................ 750 741,563
-------------
RETAIL -- 0.5%
Hills Stores, Inc. Senior Notes Series B
(B1, NR)
12.500% 07/01/2003....................... 320 297,600
Pueblo Xtra International, Inc. Senior
Notes (B2, B-)
9.500% 08/01/2003........................ 275 247,500
-------------
545,100
-------------
STEEL -- 0.3%
Armco, Inc. Senior Notes (B2, B)
9.375% 11/01/2000........................ 330 326,287
-------------
326,287
-------------
TELECOMMUNICATIONS -- 2.0%
BellSouth Telecommunications, Inc.
Debentures (Aaa, AAA)
5.850% 11/15/2045........................ 1,495 1,444,544
Nippon Telegraph & Telephone Corp. Yankee
Notes (Aaa, AAA)
9.500% 07/27/1998........................ 70 73,587
Rogers Cantel Mobile Communications Inc.
Yankee Senior Secured Debentures (Ba3,
BB+)
9.375% 06/01/2008........................ 710 696,687
</TABLE>
See Accompanying Notes to Financial Statements.
24
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA U.S. CORE FIXED INCOME PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
TELECOMMUNICATIONS -- (CONTINUED)
Videotron Holdings Plc Yankee Senior
Discount Notes (B3, B+)++
11.000% 08/15/2005....................... $ 325 $ 214,094
-------------
2,428,912
-------------
TRANSPORTATION -- 0.7%
Delta Air Lines, Inc. Debentures (Ba1, BB)
10.375% 02/01/2011....................... 585 691,031
NWA Trust Mezzanine Aircraft Notes Series D
(Ba1, BB+)
13.875% 06/21/2008....................... 90 105,300
-------------
796,331
-------------
UTILITIES -- 1.3%
Long Island Lighting Co. Debentures (Ba3,
BB+)
9.000% 11/01/2022........................ 990 899,662
Niagara Mohawk Power Corp. First Mortgage
Bonds (Ba3, BB-)
5.875% 09/01/2002........................ 420 352,275
Niagara Mohawk Power Corp. First Mortgage
Bonds (Ba3, BB-)
7.375% 08/01/2003........................ 305 273,356
Toledo Edison Co. Debentures (B1, B+)
8.700% 09/01/2002........................ 45 41,175
-------------
1,566,468
-------------
TOTAL CORPORATE BONDS
(Cost $27,665,451)..................... 27,337,594
-------------
FOREIGN GOVERNMENT BONDS -- 2.2%
Federal Republic of Brazil Interest Due
Bonds FRN (B1, NR)+
6.688% 01/01/2001........................ 683 655,200
Republic of Argentina Step-Up Par Bonds
Non-U.S. Tranche Series L-G-P (B1, BB-)
5.250% 03/31/2023........................ 500 268,125
Republic of Colombia Yankee Notes (Baa3,
BBB-)
7.250% 02/15/2003........................ 410 381,813
Republic of Turkey Trust Series T-2 (Aaa,
AAA)
9.400% 11/15/1996........................ 1 528
The Polish People's Republic Discount Bonds
FRN
(Baa3, BBB-)+
6.438% 10/27/2024........................ 610 587,506
United Mexican States Par Bonds Series A
(Ba2, BB)
6.250% 12/31/2019........................ 1,000 662,500
-------------
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
FOREIGN GOVERNMENT BONDS -- (CONTINUED)
TOTAL FOREIGN GOVERNMENT BONDS (Cost
$2,386,785)............................ $ 2,555,672
-------------
AGENCY OBLIGATIONS -- 32.7%
FEDERAL HOME LOAN MORTGAGE CORP -- 9.6%
FHLMC
6.000% 06/01/1999........................ $ 20 19,522
6.000% 11/01/1999........................ 59 56,948
7.000% 08/01/2000........................ 101 99,898
6.000% 01/01/2001........................ 272 264,233
6.000% 02/01/2001........................ 214 207,922
7.000% 04/01/2008........................ 29 28,075
7.000% 08/01/2010........................ 267 262,750
7.000% 09/01/2010........................ 2,907 2,850,162
7.000% 11/01/2010........................ 208 204,324
7.000% 12/01/2010........................ 256 250,740
7.000% 01/01/2011........................ 351 344,491
7.000% 04/01/2011........................ 39 38,393
7.000% 05/01/2011........................ 743 728,772
7.000% 06/01/2011........................ 380 372,652
8.000% 04/01/2025........................ 967 968,109
8.000% 06/01/2025........................ 109 109,398
8.000% 08/01/2025........................ 122 121,979
8.000% 12/01/2025........................ 289 288,652
8.000% 01/01/2026........................ 369 369,231
6.000% 03/01/2026........................ 229 205,894
8.000% 05/01/2026........................ 378 378,717
8.000% 06/01/2026........................ 2,459 2,461,559
FHLMC Series 1014 Class E
7.950% 02/15/2020........................ 768 780,958
-------------
11,413,379
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 15.8%
FNMA
7.500% 01/01/2000........................ 54 54,274
7.500% 04/01/2000........................ 563 565,206
7.500% 07/01/2000........................ 68 68,247
5.500% 04/01/2001........................ 24 22,503
7.500% 06/01/2001........................ 101 101,692
7.500% 09/01/2001........................ 731 734,781
6.000% 10/01/2001........................ 1,727 1,652,415
7.500% 12/01/2001........................ 47 47,183
6.000% 10/01/2002........................ 177 169,246
7.500% 06/01/2003........................ 413 414,973
7.500% 07/01/2003........................ 733 735,970
10.00% 02/01/2005........................ 58 61,268
10.00% 01/01/2010........................ 9 9,211
6.000% 11/01/2010........................ 237 222,503
6.000% 01/01/2011........................ 1,356 1,271,683
6.000% 02/01/2025........................ 211 189,465
7.000% 07/01/2025........................ 26 24,616
7.000% 09/01/2025........................ 729 694,243
7.000% 10/01/2025........................ 728 692,838
</TABLE>
See Accompanying Notes to Financial Statements.
25
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA U.S. CORE FIXED INCOME PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- (CONTINUED)
6.000% 01/01/2026........................ $ 102 $ 91,170
6.000% 02/01/2026........................ 1,172 1,052,136
7.000% 04/01/2026........................ 7,087 6,748,205
7.000% 10/01/2026........................ 646 615,152
FNMA (TBA)**
7.000% 01/01/2003........................ 2,550 2,522,906
FNMA 1991-165 Class M
8.250% 12/25/2021........................ 13 13,307
-------------
18,775,193
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 5.0%
GNMA
8.250% 08/15/2004........................ 1 1,074
9.000% 11/15/2004........................ 2 1,838
9.000% 12/15/2004........................ 1 1,339
8.250% 04/15/2006........................ 2 2,265
7.000% 09/01/2008........................ 342 336,632
7.000% 11/15/2008........................ 296 291,533
7.000% 02/01/2009........................ 150 147,455
7.000% 03/15/2009........................ 368 361,754
7.000% 04/15/2009........................ 349 343,046
7.000% 05/01/2009........................ 273 268,765
7.000% 01/15/2011........................ 787 774,410
7.000% 02/15/2011........................ 529 520,033
13.50% 07/15/2014........................ 1 924
9.000% 06/15/2016........................ 105 109,845
8.000% 04/15/2017........................ 191 190,830
9.000% 10/15/2017........................ 483 504,247
9.000% 08/15/2021........................ 829 865,106
GNMA (TBA)**
8.000% 01/15/2025........................ 1,130 1,129,294
-------------
5,850,390
-------------
MISCELLANEOUS -- 2.3%
National Archive Facility Trust COP (Aaa,
AAA)
8.500% 09/01/2019........................ 436 468,688
Tennessee Valley Authority Debentures (NR,
AAA)
5.980% 04/01/2036........................ 2 2,289,262
-------------
2,757,950
-------------
TOTAL AGENCY OBLIGATIONS (Cost
$39,434,857)............................. 38,796,912
-------------
ASSET BACKED SECURITIES -- 3.0%
Fleetwood Credit Corporation Grantor Trust
Retail Installment Sale Contracts Series
1993-B, Class A (Aaa, AAA)
4.950% 08/15/2008........................ 8 7,514
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
ASSET BACKED SECURITIES -- (CONTINUED)
Fleetwood Credit Corporation Grantor Trust
Retail Installment Sale Contracts Series
1994-A, Class A (Aaa, AAA)
4.700% 07/15/2009........................ $ 8 $ 8,075
Fleetwood Credit Corporation Grantor Trust
Retail Installment Sale Contracts Series
1994-B, Class A (Aaa, AAA)
6.750% 03/15/2010........................ 89 88,329
Goldome Credit Corporation Home Equity
Trust Series 1990-1, Class A (Aa2, AA)
10.000% 07/15/2005....................... 22 22,313
Green Tree Financial Corporation
Manufactured Housing Contracts Series
1993-4, Class A-2 (Aa2, NR)
5.850% 01/15/2019........................ 105 103,348
Green Tree Financial Corporation
Manufactured Housing Contracts Series
1995-5, Class A-3 (Aaa, AAA)
6.250% 10/15/2025........................ 420 407,001
Green Tree Financial Corporation
Manufactured Housing Contracts Series
1995-6, Class A-2 (Aaa, AAA)
6.400% 08/15/2025........................ 1,210 1,201,315
Green Tree Financial Corporation
Manufactured Housing Contracts Series
1995-6, Class A-3 (Aaa, AAA)
6.650% 11/15/2025........................ 130 127,770
Green Tree Financial Corporation
Manufactured Housing Contracts Series
1995-7, Class A-2 (Aaa, AAA)
6.150% 11/15/2026........................ 165 164,250
Green Tree Financial Corporation
Manufactured Housing Contracts Series
1995-8, Class A-2 (Aaa, AAA)
6.150% 12/15/2026........................ 135 133,636
New York City Tax Lien Collateralized
Bonds, Series 1996-1, Class C (NR, A)
7.110% 02/25/2005........................ 1,212 1,209,096
</TABLE>
See Accompanying Notes to Financial Statements.
26
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA U.S. CORE FIXED INCOME PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
ASSET BACKED SECURITIES -- (CONTINUED)
World Omni Automobile Lease Securitization
Trust, Retail Closed-End Lease Contracts
Series 1995-A, Class A
(Aaa, AAA)
6.050% 11/25/2001........................ $ 125 $ 124,487
-------------
TOTAL ASSET BACKED SECURITIES (Cost
$3,629,688)............................ 3,597,134
-------------
COLLATERIZED MORTGAGED BACKED SECURITIES -- 4.3%
Asset Securitization Corporation Series
1995-MD4, Class A1 (NR, AAA)
7.100% 08/13/2029........................ 119 114,470
CBM Funding Corporation Series 1996-1,
Class B (NR, A)
7.480% 02/01/2008........................ 1,000 983,750
Carousel Center Finance Inc. Series, 1
Class C Rule 144A (NR, BBB+)
7.527% 11/15/2007........................ 463 450,368
Collateralized Mortgage Obligation Trust,
REMIC Series 54, Class C (Aaa, AAA)
9.250% 11/01/2013........................ 3 2,643
Kidder Peabody Acceptance Corporation
Series 1993-C1, Class A-3 (NR, NR)
6.800% 09/01/2006........................ 535 512,367
Kidder Peabody Acceptance Corporation
Series 1994-C1, Class B (NR, AA)
6.850% 02/01/2006........................ 790 775,033
PaineWebber Mortgage Acceptance Corp. IV
Multifamily Mortgage Pass-Throughs Series
1995-M1, Class A 144A (NR, NR)****
6.700% 01/15/2007........................ 1,200 1,170,750
PaineWebber Mortgage Acceptance Corp. IV
Multifamily Mortgage Pass-Throughs Series
1995-M1, Class D 144A (NR, NR)****
7.300% 12/15/2002........................ 420 404,742
Structured Asset Securities Corporation
Series 1996-CFL, Class A1C (NR, AAA)
5.944% 02/25/2028........................ 670 640,137
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
COLLATERIZED MORTGAGED BACKED SECURITIES -- (CONTINUED)
U.S. Dept. of Veterans Affairs, Vendee
Mortgage Trust REMIC, Series 1995-2B,
Class 2C (NR, NR)
7.500% 10/15/2015........................ $ 10 $ 9,921
-------------
TOTAL COLLATERIZED MORTGAGED BACKED
SECURITIES (Cost $5,256,450)........... 5,064,181
-------------
MUNICIPAL BONDS -- 0.0%
South Carolina State Public Service
Authority Revenue Bonds Series C (Aaa,
AAA)
5.125% 01/01/2021........................ 30 26,925
-------------
TOTAL MUNICIPAL BONDS (Cost $28,440)..... 26,925
-------------
U.S. TREASURY OBLIGATIONS--32.8%
U.S. TREASURY BONDS--11.4%
8.750% 08/15/2020.......................... 2,610 3,041,746
7.875% 02/15/2021.......................... 9,810 10,471,585
-------------
13,513,331
-------------
U.S. TREASURY NOTES -- 21.4%
5.375% 05/31/1998.......................... 100 98,516
6.750% 05/31/1999.......................... 30 30,182
7.750% 11/30/1999.......................... 16,050 16,592,329
7.250% 05/15/2004.......................... 4,645 4,745,704
7.500% 02/15/2005.......................... 3,765 3,902,723
-------------
25,369,454
-------------
TOTAL U.S. TREASURY OBLIGATIONS (Cost
$40,128,991)........................... 38,882,785
-------------
SHORT-TERM INVESTMENT -- 3.5%
BBH Grand Cayman U.S. Dollar Time Deposit
4.750% 09/03/1996........................ 4,179 4,179,000
-------------
TOTAL SHORT-TERM INVESTMENT
(Cost $4,179,000)...................... 4,179,000
-------------
</TABLE>
See Accompanying Notes to Financial Statements.
27
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA U.S. CORE FIXED INCOME PORTFOLIO
STATEMENT OF NET ASSETS (CONCLUDED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------- -------------
<S> <C> <C>
WARRANTS*** -- 0.0%
Capital Pacific Holdings Group, Inc.
Warrants expiring 05/01/02............... 1,817 1,181
-------------
TOTAL WARRANTS (Cost $1,000)............. 1,181
-------------
TOTAL INVESTMENTS AT VALUE -- 101.6%
(Cost $122,710,662*)................................... $120,441,384
LIABILITIES IN EXCESS OF OTHER ASSETS -- (1.6%)..........
(1,845,109)
-------------
NET ASSETS (Applicable to 7,873,570 BEA SHARES) --
100.0%................................................. $118,596,275
-------------
-------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
($118,596,275 DIVIDED BY 7,873,570)................... $15.06
-------------
-------------
</TABLE>
* Also cost for Federal income tax purposes at August 31, 1996. The gross
appreciation (depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation........................... $ 562,416
Gross Depreciation........................... (2,831,694)
-------------
Net Appreciation............................. $ (2,269,278)
-------------
-------------
</TABLE>
** Securites were acquired on a delayed delivery basis.
*** Non-income producing securities.
**** Certain conditions for public sales may exist.
+ Variable rate obligations -- The interest shown is the rate as of August
31, 1996.
++ Step Bond -- The interest rate as of August 31, 1996 is 0% and will reset
to interest shown at a future date.
+++ Securities have no stated final maturity date.
++++ Guaranteed by Grupo Sidek, S.A. de C.V. and Grupo Situr S.A. de C.V.
The Moody's Investors Service, Inc. and Standard & Poor's Corporations ratings
indicated are the most recent ratings available at August 31, 1996 and are
unaudited.
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
FRN........................... Floating Rate Note
PIK........................... Pay In Kind
TBA........................... To Be Announced
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
<CAPTION>
AMOUNT
-------------
PER
SHARE
--
<S> <C>
Capital Paid-In..................... $118,137,940 $ 15.00
Accumulated Net Investment Income... 1,925,440 .25
Accumulated Net Realized Gain on
Security and Foreign Exchange
Transactions....................... 795,189 .10
Net Unrealized Depreciation on
Investments and Other.............. (2,262,294) (.29)
- -------------------------------------------------------------
NET ASSETS $118,596,275 $ 15.06
- -------------------------------------------------------------
</TABLE>
See Accompanying Notes to Financial Statements.
28
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA Global Fixed Income Portfolio
STATEMENT OF NET ASSETS
August 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
------------- -------------
<S> <C> <C>
INTERNATIONAL BONDS -- 61.1%
ARGENTINA -- 1.0%
Republic of Argentina FRB
(B1, BB-)
6.313% 03/31/2005................... $ 495 $ 384,862
-------------
AUSTRALIA -- 2.9%
Queensland Treasury Corp. Guaranteed
Bonds
(NR, NR)
8.000% 07/14/1999................... AUD 630 506,896
Treasury Corporation of Victoria
Guaranteed Bonds
(Aa2, AA+)
8.250% 10/15/2003................... 770 614,158
-------------
1,121,054
-------------
BRAZIL -- 0.7%
Federal Republic of Brazil Interest
Due Bonds FRN Series A
(B1, NR)+
6.688% 01/01/2001................... $ 228 218,400
-------------
BULGARIA -- 0.3%
Republic of Bulgaria Discount Bonds
Tranche A
(B3, NR)+
6.688% 07/28/2004................... 250 127,500
-------------
CANADA -- 5.4%
Export Development Corporation Senior
Unsubordinated Eurobonds
(Aa2, AA+)
7.600% 02/14/2001................... ITL 800,000 501,258
Government of Canada Debentures
(Aa1, AAA)
8.750% 12/01/2005................... CND 1,960 1,565,651
-------------
2,066,909
-------------
FRANCE -- 2.0%
Republic of France Treasury Bonds --
O.A.T.
(Aaa, NR)
7.500% 04/25/2005................... FF 3,600 763,089
-------------
<CAPTION>
PAR
(000) VALUE
------------- -------------
<S> <C> <C>
GERMANY -- 8.8%
Federal Republic of Germany Eurobonds
(Aaa, NR)
7.250% 10/21/2002................... DEM 4,630 $ 3,371,882
-------------
ITALY -- 8.0%
Republic of Italy Debentures
(Aa3, AAA)
8.500% 01/01/2004................... ITL 4,775,000 3,063,184
-------------
MEXICO -- 1.3%
United Mexican States Par Bond Series
A
(Ba2, BB)
6.250% 12/31/2019................... $ 750 496,875
-------------
NETHERLANDS -- 6.0%
Netherlands Government Bonds
(NR, NR)
9.000% 05/15/2000................... NLG 3,360 2,307,114
-------------
SPAIN -- 3.3%
Kingdom of Spain Debentures
(NR, NR)
10.250% 11/30/1998.................. ESP 99,000 834,763
Kingdom of Spain Debentures
(NR, NR)
10.100% 02/28/2001.................. 49,800 427,995
-------------
1,262,758
-------------
SUPRANATIONAL -- 10.5%
International Bank for Reconstruction
& Development Japanese Yen Global
Bonds
(Aaa, AAA)
5.250% 03/20/2002................... JPY 379,500 4,044,482
-------------
SWEDEN -- 3.3%
Nordic Investment Bank Sr.
Unsubordinated
(Aaa, AAA)
6.250% 02/08/1999................... SEK 4,500 676,411
Swedish Government Debentures
(Aa1, NR)
11.000% 01/21/1999.................. 3,600 597,634
-------------
1,274,045
-------------
</TABLE>
See Accompanying Notes to Financial Statements.
32
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA GLOBAL FIXED INCOME PORTFOLIO
STATEMENT OF NET ASSETS (CONCLUDED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
------------- -------------
<S> <C> <C>
UNITED KINGDOM -- 7.6%
U.K. Treasury Gilt Bonds
(Aaa, NR)
8.500% 07/16/2007................... GBP 1,800 $ 2,913,574
-------------
TOTAL INTERNATIONAL BONDS
(Cost $22,947,330).................. 23,415,728
-------------
U.S. TREASURY OBLIGATIONS -- 22.0%
U.S. TREASURY BONDS -- 3.8%
7.875% 02/15/2021..................... $ 1,380 1,473,067
-------------
1,473,067
-------------
U.S. TREASURY NOTES -- 18.2%
5.375% 05/31/1998..................... 155 152,700
7.250% 05/15/2004..................... 2,610 2,666,585
7.500% 02/15/2005..................... 4,000 4,146,320
-------------
6,965,605
-------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $8,927,965)................... 8,438,672
-------------
SHORT-TERM INVESTMENT -- 15.4%
BBH Grand Cayman U.S. Dollar Time
Deposit
4.750% 09/03/1996................... 5,901 5,901,000
-------------
TOTAL SHORT-TERM INVESTMENT
(Cost $5,901,000)................... 5,901,000
-------------
TOTAL INVESTMENTS
AT VALUE -- 98.5%
(Cost $37,776,295*)................................ $37,755,400
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.5%........
592,100
-------------
NET ASSETS (Applicable to 2,434,762 BEA Shares) --
100.0%............................................. $38,347,500
-------------
-------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE
($38,347,500 DIVIDED BY 2,434,762)................ $15.75
-------------
-------------
</TABLE>
* Also cost for Federal income tax purposes at August 31, 1996. The gross
appreciation (depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation....................... $ 500,231
Gross Depreciation....................... (521,126)
----------
Net Appreciation......................... $ (20,895)
----------
----------
</TABLE>
+ Variable rate obligations -- The interest shown is the rate as of August 31,
1996.
The Moody's Investors Service, Inc. and Standard & Poor's Corporations ratings
indicated are the most recent ratings available at August 31, 1996 and are
unaudited.
CURRENCY ABBREVIATIONS
<TABLE>
<S> <C>
AUD........................... Australian Dollars
CND........................... Canadian Dollars
DEM........................... German Deutschemarks
ESP........................... Spanish Pesetas
FF............................ French Francs
GBP........................... United Kingdom Pounds
ITL........................... Italian Lira
JPY........................... Japanese Yen
NLG........................... Netherlands Guilder
SEK........................... Swedish Krona
</TABLE>
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
FRB........................... Floating Rate Bond
FRN........................... Floating Rate Note
</TABLE>
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
<TABLE>
<CAPTION>
AMOUNT PER SHARE
------------ ---------
<S> <C> <C>
Capital Paid-In..................... $ 37,442,838 $ 15.38
Accumulated Net Investment Income... 434,739 .18
Accumulated Net Realized Gain on
Security and Foreign Exchange
Transactions....................... 665,466 .27
Net Unrealized Depreciation on
Investments, Forward Currency
Contracts and Other................ (195,543) (.08)
- -------------------------------------------------------------
NET ASSETS $ 38,347,500 $ 15.75
- -------------------------------------------------------------
</TABLE>
See Accompanying Notes to Financial Statements.
33
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA High Yield Portfolio
STATEMENT OF NET ASSETS
August 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
CORPORATE BONDS -- 93.7%
BROADCASTING -- 7.3%
Allbritton Communications Company Senior
Subordinated Debentures 144A, Series B
(B3, B-)****
9.750% 11/30/2007........................ $ 700 $ 656,250
Australis Media Limited Unit Yankee
(CAA, CCC)+
14.000% 05/15/2003....................... 900 495,000
EchoStar Communications Corp. Gtd. Senior
Discount Notes
(B2, B)+
12.875% 06/01/2004....................... 1,100 797,500
Granite Broadcasting Corp. Senior
Subordinated Notes 144A
(B3, NR)****
9.375% 12/01/2005........................ 950 891,813
NWCG Holding Corp. Senior Discount Notes
Series B
(Caa, B)
8.555% 06/15/1999........................ 1,000 788,750
Park Broadcasting, Inc. 144A Senior Notes
(B2, B)
11.750% 05/15/2004....................... 500 569,375
Sinclair Broadcast Group Senior
Subordinated Notes (B2, B)
10.000% 09/30/2005....................... 700 691,250
Young Broadcasting, Inc. Senior
Subordinated Notes Series B 144A (B2,
B)****
9.000% 01/15/2006........................ 750 690,000
-------------
5,579,938
-------------
BUSINESS SERVICES -- 0.6%
Inter Act Systems Incorporated 144A Units
(NR, NR)****
14.000% 08/01/2003....................... 700 474,250
-------------
CABLE -- 13.6%
American Telecasting, Inc. Senior Discount
Notes
(Caa, CCC+)+
14.500% 06/15/2004....................... 900 639,000
Bell Cablemedia PLC Yankee Discount Bonds
(B2, BB-)+
11.950% 07/15/2004....................... 1,000 750,000
Cablevision Systems Corp. Senior
Subordinated Debentures
(B2, B)
9.875% 02/15/2013........................ 1,000 943,750
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
CABLE -- (CONTINUED)
Charter Communications Southeast, L.P.
Senior Notes (B3, B)
11.250% 03/15/2006....................... $ 900 $ 893,250
Comcast U.K. Cable Partners Ltd., Yankee
Senior Debentures
(B2, B)+
11.200% 11/15/2007....................... 1,000 625,000
DIVA Systems Corporation Units 144A (NR,
NR)
13.000% 05/15/2006....................... 2,250 1,203,750
Falcon Holdings Group L.P. Senior
Subordinated Notes PIK Bonds (NR, NR)
11.000% 09/15/2003....................... 1,202 1,121,072
Helicon Group Ltd. Senior Secured Notes
Series B
(B1, B)
9.000% 11/01/2003........................ 850 854,250
Marcus Cable Company Senior Discount Notes
(Caa, B)+
14.250% 12/15/2005....................... 950 611,563
People's Choice TV Corp. Units (Caa, CCC+)+
13.125% 06/01/2004....................... 950 555,750
Rifkin Acquisition Partners L.P. Senior
Subordinated Notes
(B3, B-)****
11.125% 01/15/2006....................... 500 502,500
Rogers Communications, Inc. Yankee Senior
Notes
(B2, BB-)
9.125% 01/15/2006........................ 550 517,688
United International Holdings,Inc. Senior
Secured Debentures, Series B (B3, B-)
9.454% 11/15/1999........................ 1,650 1,080,750
-------------
10,298,323
-------------
CHEMICALS -- 1.9%
Harris Chemical North America Senior
Secured Debentures
(B2, B+)
10.250% 07/15/2001....................... 400 399,500
Kaiser Aluminum & Chemical Corp. Senior
Subordinated Notes (B2, B-)
12.750% 02/01/2003....................... 1,000 1,078,750
-------------
1,478,250
-------------
</TABLE>
See Accompanying Notes to Financial Statements.
37
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA HIGH YIELD PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
COMPUTERS -- 1.0%
Advanced Micro Devices, Inc. Senior Secured
Notes
(Ba1, BB-)
11.000% 08/01/2003....................... $ 750 $ 761,250
-------------
CONSTRUCTION & BUILDING MATERIALS**** -- 1.2%
Southdown, Inc. 144A Senior Subordinated
Notes (B2, B+)
10.000% 03/01/2006....................... 500 498,125
Waxman Industries, Inc. 144A (Caa, CCC+)
12.750% 06/01/2004....................... 600 401,250
-------------
899,375
-------------
CONSUMER PRODUCTS -- 2.3%
Jordan Industries, Inc. Senior Notes (B3,
B+)
10.375% 08/01/2003....................... 700 675,500
Revlon Worldwide Corp. Senior Secured
Discount Notes Series B (B3, B-)
10.795% 03/15/1998....................... 1,250 1,062,500
-------------
1,738,000
-------------
ELECTRONICS -- 2.1%
Exide Electronics Group, Inc.
Units 144A (B3, B)****
11.500% 03/15/2006....................... 550 559,625
Unisys Corporation 144A Senior Notes (B1,
B+)
12.000% 04/15/2003....................... 1,000 1,025,000
-------------
1,584,625
-------------
ENERGY -- 2.7%
Cliffs Drilling Company 144A Senior Notes
(B1, B)****
10.250% 05/15/2003....................... 600 609,000
Mesa Operating Co. Senior Subordinated
Discount Notes (B2, B)
11.625% 07/01/2006....................... 750 469,687
Nuevo Energy Company Senior Subordinated
Notes (B2, B+)
9.500% 04/15/2006........................ 500 501,250
Plains Resources, Inc. 144A Senior
Subordinated Notes
(B2, B-)****
10.250% 03/15/2006....................... 500 512,500
-------------
2,092,437
-------------
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
ENTERTAINMENT -- 1.3%
American Skiing Company 144A Senior
Subordinated Notes
(B3, CCC+)
12.000% 07/15/2006....................... $ 400 $ 390,000
AMF Group Inc. Senior Subordinated Notes
144A
(B2, B-)****
10.875% 03/15/2006....................... 600 601,500
-------------
991,500
-------------
FINANCIAL SERVICES -- 0.4%
Fifth Mexican Acceptance Corp. Rule 144A
Notes
(NR, NR)**/****
8.000% 12/15/1998........................ 1,040 322,400
-------------
FOOD & BEVERAGES -- 2.2%
Foodbrands America, Inc. Senior
Subordinated Notes
(B3, B)
10.750% 05/15/2006....................... 250 252,812
Fresh Del Monte Produce Yankee Senior
Notes, Series B
(Caa, CCC+)
10.000% 05/01/2003....................... 1,500 1,406,250
-------------
1,659,062
-------------
HEALTH CARE -- 3.0%
General Medical Corp. Subordinated
Debentures, Series A PIK Bonds
(Caa, B-)
12.125% 08/15/2005....................... 1,061 1,061,951
Health O Meter Units (B3, B-)
13.000% 08/15/2002....................... 250 270,000
Paracelsus Healthcare Corp. Senior
Subordinated Notes
(B1, B)
10.000% 08/15/2006....................... 400 403,500
Regency Health Services, Inc. 144A
Subordinated Notes
(B3, B-)
12.250% 07/15/2003....................... 500 520,625
-------------
2,256,076
-------------
INDUSTRIAL GOODS & MATERIALS -- 5.7%
Alpine Group, Inc. Senior Notes, Series B
(B3, B)
12.250% 07/15/2003....................... 750 778,125
</TABLE>
See Accompanying Notes to Financial Statements.
38
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA HIGH YIELD PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
INDUSTRIAL GOODS & MATERIALS -- (CONTINUED)
Alvey Systems, Inc. 144A Senior
Subordinated Notes
(B3, B-)****
11.375% 01/31/2003....................... $ 100 $ 102,875
BPC Holding Corporation 144A Senior Secured
Notes
(Caa, NR)****
12.500% 06/15/2006....................... 500 508,125
Collins & Aikman Products Co. Gtd. Senior
Subordinated Notes (B3, B)
11.500% 04/15/2006....................... 700 721,000
Delco Remy International, Inc. 144A Senior
Subordinated Notes (B2, B-)****
10.625% 08/01/2006....................... 500 513,125
G-I Holdings, Inc. Senior Notes 144A (Ba3,
B+)
10.000% 02/15/2006....................... 389 378,789
Haynes International, Inc. Senior Notes
(B3, B-)
11.625% 09/01/2004....................... 500 495,000
Venture Holdings Trust Gtd. Senior
Subordinated Notes (B3, B)
9.750% 04/01/2004........................ 1,000 830,000
-------------
4,327,039
-------------
METALS & MINING -- 1.2%
Acme Metals, Inc. Senior Secured Debentures
(B1, B)+
13.500% 08/01/2004....................... 1,000 916,250
-------------
OFFICE EQUIPMENT & SUPPLIES -- 0.7%
Knoll Inc. 144A Senior Subordinated Notes
(B3, B+)****
10.875% 03/15/2006....................... 500 518,750
-------------
PAPER & FOREST PRODUCTS -- 7.5%
Crown Packaging 144A Units Senior Discount
Notes
(NR, NR)****
14.000% 08/01/2006....................... 775 302,250
Crown Packaging Holdings Senior
Subordinated Notes, Series B (Caa, NR)+
12.250% 11/01/2003....................... 3,300 1,278,750
Crown Paper Co. Senior Subordinated Notes
(B3, B)
11.000% 09/01/2005....................... 750 714,375
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
PAPER & FOREST PRODUCTS -- (CONTINUED)
Florida Coast Paper Company L.L.C. 144A
First Mortgage Notes (B3, B)
12.750% 06/01/2003....................... $ 700 $ 735,000
Gaylord Container Corp. Senior Subordinated
Debentures
(Caa, B-)+
12.750% 05/15/2005....................... 1,000 1,072,500
Printpack, Inc. 144A Senior Subordinated
Notes (B3, B+)
10.625% 08/15/2006....................... 600 609,000
Stone Container Corporation Senior Notes
(NR, NR)
11.500% 08/15/2006....................... 1,000 993,750
-------------
5,705,625
-------------
PUBLISHING & INFORMATION SERVICES -- 0.8%
Park Newspapers, Inc. 144A Senior Notes
(B2, B)****
11.875% 05/15/2004....................... 500 569,375
-------------
RESTAURANTS, HOTELS & CASINOS -- 12.4%
Argosy Gaming Company 144A First Mortgage
Notes
(B1, B+)****
13.250% 06/01/2004....................... 750 723,750
Bally's Casino Holdings Senior Discount
Notes (B2, B+)
7.640% 06/15/1998........................ 500 435,625
Casino America Senior Notes
(B1, B)
12.500% 08/01/2003....................... 200 200,500
Casino Magic Finance Corp. First Mortgage
Notes
(B1, B+)
11.500% 10/15/2001....................... 1,000 942,500
Coast Hotels and Casinos, Inc. 144A Gtd.
First Mortgage Notes (B3, B)****
13.000% 12/15/2002....................... 1,000 1,070,000
GNF Corp. First Mortgage Notes, Series B
(B1, BB)
10.625% 04/01/2003....................... 1,000 1,097,500
Griffin Games & Enertainment, Inc. Senior
Notes (NR, NR)
11.000% 09/15/2003....................... 750 804,375
The Majestic Star Casino, LLC 144A Senior
Secured Notes (NR, NR)****
12.750% 05/15/2003....................... 450 483,750
</TABLE>
See Accompanying Notes to Financial Statements.
39
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA HIGH YIELD PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
RESTAURANTS, HOTELS & CASINOS -- (CONTINUED)
Mohegan Tribal Gaming Authority Senior
Secured Notes, Series B 144A (NR, NR)****
13.500% 11/15/2002....................... $ 1,000 $ 1,237,500
Showboat Marina Casino Partnership 144A
First Mortgage Notes (B2, B)****
13.500% 03/15/2003....................... 450 484,875
Trump Atlantic City Associates, First
Mortgage Notes
(B1, BB-)
11.250% 05/01/2006....................... 1,000 960,000
Trump's Castle Funding, Inc. Mortgage Bonds
(Caa, NR)
11.750% 11/15/2003....................... 1,000 947,500
-------------
9,387,875
-------------
RETAIL TRADE -- 4.3%
Farm Fresh, Inc. Senior Notes
(B2, B-)
12.250% 10/01/2000....................... 1,100 844,250
Hills Stores Company Senior Notes (B1, NR)
12.500% 07/01/2003....................... 900 837,000
Jitney-Jungle Stores of America, Inc.
Senior Notes
(B2, B)
12.000% 03/01/2006....................... 1,000 1,051,250
Parisian, Inc. Senior Subordinated Notes
(Caa, B-)
9.875% 07/15/2003........................ 500 488,750
-------------
3,221,250
-------------
STEEL -- 0.8%
Weirton Steel Corporation 144A Senior Notes
(NR, B)****
11.375% 07/01/2004....................... 600 579,000
-------------
TELECOMMUNICATIONS -- 19.0%
American Communication Services, Inc. Unit
144A Notes (NR, NR)****/+
13.000% 11/01/2005....................... 1,500 802,500
Arch Communications Group, Inc. Senior
Discount Notes
(B3, B-)
10.875% 03/15/2008....................... 500 266,250
Brooks Fiber Properties, Inc. Senior
Discount Notes 144A
(NR, NR)****/+
10.875% 03/01/2006....................... 1,000 572,500
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
TELECOMMUNICATIONS -- (CONTINUED)
CAI Wireless Systems, Inc. Discount Notes
(B3, BB-)
12.250% 09/15/2002....................... $ 350 $ 363,125
CS Wireless Systems, Inc. Units 144A (NR,
NR)****/+
11.375% 03/01/2006....................... 1,000 490,000
Diamond Cable Communications Plc Senior
Discount Notes
(B3, B-)
11.750% 12/15/2005....................... 1,000 620,000
Geotek Communications, Inc. 144A
Convertible Senior Subordinated Notes
(Caa, NR)****
12.000% 02/15/2001....................... 1,600 1,816,000
IntelCom Group (U.S.A.), Inc. Senior
Discount Notes (NR, NR)
12.500% 05/01/2006....................... 1,000 558,750
InterCel, Inc. Units (B2, B-)+
12.000% 02/01/2006....................... 1,300 793,000
International CableTel, Inc. Senior Notes
(B3, B)+
12.750% 04/15/2005....................... 750 495,000
Metrocall, Inc. Senior Subordinated Notes
(B3, B-)
10.375% 10/01/2007....................... 500 382,500
Mobile Telecommunication Technologies Corp.
Senior Notes (B2, B-)
13.500% 12/15/2002....................... 675 688,500
Nextel Communications Inc. Senior Discount
Notes (B3, CCC-)+
9.750% 08/15/2004........................ 1,500 885,000
Pagemart Nationwide Senior Discount Notes
(NR, NR)+
15.000% 02/01/2005....................... 1,000 670,000
People's Telephone Co., Inc. Senior Notes
(B2, B-)
12.250% 07/15/2002....................... 450 452,250
Petersburg Long Distance, Inc. 144A
Convertible Subordinated Notes (NR,
NR)****
9.000% 06/01/2006........................ 230 276,000
Petersburg Long Distance, Inc. Units 144A
(NR, NR)****
9.000% 06/01/2004........................ 1,610 1,263,850
PriCellular Wireless Corp. Senior Discount
Notes (B3, CCC+)
12.250% 10/01/2003....................... 1,000 792,500
</TABLE>
See Accompanying Notes to Financial Statements.
40
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA HIGH YIELD PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
TELECOMMUNICATIONS -- (CONTINUED)
Sprint Spectrum L.P. Senior Notes
(B2, B+)
11.000% 08/15/2006....................... $ 500 $ 507,500
Teleport Communications Group, Inc. Senior
Discount Notes (B1, B)
11.125% 07/01/2007....................... 500 306,250
Teleport Communications Group, Inc. Senior
Notes
(B1, B)
9.875% 07/01/2006........................ 300 300,000
Vanguard Cellular Systems, Inc. Senior
Debentures (B1, B+)
9.375% 04/15/2006........................ 500 486,875
Videotron Holdings Yankee plc Senior
Discount Notes
(B3, B+)+
11.000% 08/15/2005....................... 1,000 658,750
-------------
14,447,100
-------------
TRANSPORTATION -- 1.7%
Consorscio G Grupo Dina S.A. / MCII
Holdings (USA), Inc. 144A Senior Secured
Notes
(NR, NR)+
12.000% 11/15/2002....................... 750 592,500
US Air, Inc. Senior Notes
(B3, CCC+)
10.000% 07/01/2003....................... 750 701,250
-------------
1,293,750
-------------
TOTAL CORPORATE BONDS
(Cost $72,057,715)........................ 71,101,500
-------------
ASSET-BACKED SECURITIES -- 0.8%
TRANSPORTATION -- 0.8%
Airplanes Pass Through Trust Series 1,
Class D (Ba2, BB)
10.875% 03/15/2019....................... 600 633,000
-------------
TOTAL ASSET-BACKED SECURITIES
(Cost $600,000)........................... 633,000
-------------
<CAPTION>
NUMBER
OF SHARES VALUE
------------ -------------
<S> <C> <C>
RIGHTS / WARRANTS*** -- 0.2%
CONSTRUCTION & BUILDING MATERIALS -- 0.0%
Capital Pacific Holdings Group, Inc........ $ 13,000 $ 8,216
-------------
INDUSTRIAL GOODS & MATERIALS -- 0.1%
Uniroyal Technology Corp. Warrants......... 44,000 78,844
-------------
ELECTRONICS -- 0.0%
Exide Electronic Warrants 144A............. 1,000 3,265
-------------
TELECOMMUNICATIONS -- 0.1%
American Communication Services, Inc.
Warrants................................. 2,000 97,500
-------------
TOTAL RIGHTS / WARRANTS
(Cost $104,467).......................... 187,825
-------------
PREFERRED STOCKS -- 3.0%
AEROSPACE / DEFENSE -- 1.4%
GPA Group plc Convertible Cumulative Second
Preference Shares........................ 27,500 1,045,000
-------------
CABLE -- 0.1%
DIVA Systems Corporation Series C.......... 5,945 49,997
-------------
CONSUMER PRODUCTS -- 0.7%
Renaissance Cosmetics 144A................. 500 500,000
-------------
RESTAURANTS, HOTELS & CASINOS -- 0.8%
Lady Luck Gaming Corporation Series A...... 20,000 587,000
-------------
TOTAL PREFERRED STOCKS
(Cost $2,076,947)...................... 2,181,997
-------------
<CAPTION>
PAR
(000)
------------
<S> <C> <C>
SHORT-TERM INVESTMENT -- 0.6%
BBH Grand Cayman U.S. Dollar Time Deposit
4.750% 09/03/1996........................ $ 433 433,000
-------------
TOTAL SHORT-TERM INVESTMENT
(Cost $433,000)........................ 433,000
-------------
</TABLE>
See Accompanying Notes to Financial Statements.
41
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA HIGH YIELD PORTFOLIO
STATEMENT OF NET ASSETS (CONCLUDED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
VALUE
-------------
<S> <C> <C>
TOTAL INVESTMENTS -- 98.3%
(Cost $75,272,129)..................................... $74,537,322
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 1.7%.................................... 1,311,236
-------------
NET ASSETS (Applicable to 4,713,739 BEA Shares) --
100.0%................................................. $75,848,558
-------------
-------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
($75,848,558 DIVIDED BY 4,713,739).................... $16.09
-------------
-------------
</TABLE>
* Cost for Federal income tax purposes at August 31, 1996 is $75,291,159. The
gross appreciation (depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation........................... $ 2,072,489
Gross Depreciation........................... (2,826,326)
-------------
Net Appreciation............................. $ (753,837)
-------------
-------------
</TABLE>
** Guaranteed by Grupo Sidek, S.A. de C.V. and Grupo Situr, S.A. de C.V.
*** Non-income Producing Securities.
**** Certain conditions for public sales may exist.
+ Step Bond -- The interest rate as of August 31, 1996 is 0% and will reset
to interest shown at a future date.
The Moody's Investors Service, Inc. and Standard & Poor's Corporations ratings
indicated are the most recent ratings available at August 31, 1996 and are
unaudited.
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
PIK........................... Pay In Kind
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
<CAPTION>
AMOUNT
---------------
PER
SHARE
--
<S> <C>
Capital Paid-In.................... $ 91,478,662 $ 19.40
Accumulated Net Investment Income.. 1,332,623 .28
Accumulated Net Realized Loss on
Security Transactions............. (16,227,920) (3.44)
Net Unrealized Depreciation on
Investments and Other............. (734,807) (.15)
- -------------------------------------------------------------
NET ASSETS $ 75,848,558 $ 16.09
- -------------------------------------------------------------
</TABLE>
See Accompanying Notes to Financial Statements.
42
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
PORTFOLIO MANAGER'S LETTER
AUGUST 31, 1996
BEA MUNICIPAL BOND FUND PORTFOLIO
, 1996
Dear Shareholders:
43
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
PORTFOLIO MANAGER'S LETTER--(CONTINUED)
AUGUST 31, 1996
44
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
PORTFOLIO MANAGER'S LETTER--(CONCLUDED)
AUGUST 31, 1996
BEA MUNICIPAL BOND FUND PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE BEA MUNICIPAL BOND
FUND PORTFOLIO AND THE LEHMAN BROTHERS
MUNICIPAL BOND INDEX FROM INCEPTION 6/20/94, PERIOD ENDED 7/31/94 AND AT EACH
QUARTER END.
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURN
One Year 2.27%
From Inception 4.98%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BEA MUNICIPAL BOND FUND PORTFOLIO
<S> <C> <C>
Total Returns and Graph Plot
Points
Lehman Brothers
BEA Municipal Bond Municipal Bond
Fund Portfolio Index
06/20/94 $ 10,000 $ 10,000
07/31/94 $ 10,040 $ 10,038
08/31/94 $ 10,040 $ 10,073
11/30/94 $ 9,647 $ 9,571
02/28/95 $ 10,350 $ 10,354
05/31/95 $ 10,846 $ 10,820
08/31/95 $ 10,886 $ 10,965
11/30/95 $ 11,193 $ 11,079
02/29/96 $ 11,216 $ 11,498
5/31/96 $ 10,937 $ 11,314
8/31/96 $ 11,134 $ 11,539
Average Annual Total Return
One Year 2.27%
From Inception 4.98%
</TABLE>
Note: Past performance is not predictive of future performance.
45
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA Municipal Bond Fund Portfolio
STATEMENT OF NET ASSETS
August 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
----------- ------------
<S> <C> <C>
MUNICIPAL BONDS -- 92.4%
ALABAMA -- 0.1%
Jefferson County AL Sanitation & Sewer
(Aaa, NR)
6.750% 03/01/2007........................ 15 $ 16,631
------------
CALIFORNIA -- 9.8%
California State GO
(Aaa, AAA)
5.125% 10/01/2017........................ 825 744,563
Los Angeles CA Department of Water & Power
Water Revenue (Aa, AA)
4.500% 05/15/2023........................ 705 553,425
Southern California Public Power Authority
Power Project Revenue Series A (AMBAC
Insured) (Aa, AA-)
5.000% 07/01/2017........................ 705 610,706
------------
1,908,694
------------
COLORADO -- 3.0%
Colorado Springs CO Utility Revenue (Aaa,
AAA)
5.875% 11/15/2017........................ 595 587,563
------------
FLORIDA -- 10.8%
Florida State Board of Education GO (Aa,
AA)
5.125% 06/01/2022........................ 30 26,925
Florida State GO (Aa, AA)
5.500% 10/01/2008........................ 710 710,000
Jacksonville FL Electric Authority Revenue
2nd Installment (Aaa, AAA)
6.000% 07/01/2012........................ 610 611,525
Tallahassee FL Electric Revenue First Lien
(Aaa, AAA)
6.100% 10/01/2006........................ 730 756,463
------------
2,104,913
------------
ILLINOIS -- 3.2%
Illinois State Sales Tax Revenue Series Q
(A1, AAA)
5.750% 06/15/2014........................ 650 629,688
------------
<CAPTION>
PAR
(000) VALUE
----------- ------------
<S> <C> <C>
INDIANA -- 0.1%
Indianapolis IN Public Improvement Board
Revenue (Aaa, AA+)
6.000% 01/10/2018........................ 25 $ 25,031
------------
LOUISIANA -- 3.4%
New Orleans LA Home Mortgage Authority SOB
(Aaa, AAA)
6.250% 01/15/2011........................ 635 674,687
------------
MARYLAND -- 4.7%
Maryland State Transportation Authority
Project Revenue (Aaa, AAA)
6.800% 07/01/2016........................ 850 922,250
------------
MASSACHUSETTS -- 3.0%
Massachusetts State Water Resources
Authority General Revenue Series 92A (A,
A)
6.500% 07/15/2019........................ 20 21,500
Massachusetts State Water Resources Revenue
(Aaa, AAA)
5.000% 12/01/2025........................ 660 569,250
------------
590,750
------------
NEW YORK -- 30.2%
New York NY Series D GO (Baa1, BBB+)
6.000% 02/15/2025........................ 15 13,969
New York NY Series H GO (Baa1, BBB+)
7.200% 02/01/2013........................ 600 637,500
New York State Dormitory Authority Revenue
(Episcopal Health Services) (GNMA Coll.)
(NR, AAA)
7.550% 08/01/2029........................ 435 468,713
New York State Dormitory Authority Revenue
(Judicial Facilities Lease) (MBIA
Insured) (Aaa, AAA)
7.375% 07/01/2016........................ 630 728,437
</TABLE>
See Accompanying Notes to Financial Statements.
46
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA MUNICIPAL BOND FUND PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
----------- ------------
<S> <C> <C>
NEW YORK -- (CONTINUED)
New York State Dormitory Authority Revenue
(Judicial Facilities Lease) (Aaa, AAA)
7.375% 07/01/2016........................ 40 $ 46,250
New York State Dormitory Authority Revenue
(Park Ridge Housing Inc. Project) (NR,
AA)
7.850% 02/01/2029........................ 530 570,412
New York State Medical Care Facility
Finance Agency Hospital & Nursing Home
Insured Mortgage Revenue (NR, AAA)
5.500% 02/15/2022........................ 795 758,231
New York State Medical Care Facility
Financial Agency Revenue (NR, AAA)
5.750% 08/15/2019........................ 60 57,900
New York State Power Authority Revenue &
General Purpose Electric Revenue Series R
(Aaa, AAA)
7.000% 01/01/2010........................ 360 411,750
New York State Power Authority Revenue &
General Purpose Series G (Aaa, AAA)
5.375% 01/01/2010........................ 40 39,900
New York State Power Authority Revenue
Series V (MBIA Insured) (NR, AAA)
7.875% 01/01/1998........................ 790 843,325
New York State Throughway Authority General
Revenue Series B (MBIA Ins.)
(Aaa, AAA)
5.000% 01/01/2020........................ 30 26,775
Suffolk County NY Water Authority
Waterworks Revenue Series V
(NR, AAA)
6.750% 06/01/2012........................ 580 641,625
<CAPTION>
PAR
(000) VALUE
----------- ------------
<S> <C> <C>
NEW YORK -- (CONTINUED)
Triborough Bridge & Tunnel Authority NY
Mortgage Recording Tax SOB
(Aaa, AAA)
7.125% 01/01/2000........................ 625 $ 678,125
------------
5,922,912
------------
PUERTO RICO -- 4.5%
Commonwealth of Puerto Rico GO (Baa1, A)
5.400% 07/01/2007........................ 730 728,175
Puerto Rico Electric Power Authority
Revenue Series N (Baa1, A-)
7.125% 07/01/2014........................ 135 143,944
------------
872,119
------------
SOUTH DAKOTA -- 5.6%
Heartland Consumers Power District SD
Electric Revenue (Aaa, AAA)
6.375% 01/01/2016........................ 30 30,375
Heartland Consumers Power District SD
Electric Revenue (Aaa, AAA)
7.000% 01/01/2016........................ 970 1,064,575
------------
1,094,950
------------
UTAH -- 2.9%
Utah State School District Finance
Cooperative Revenue (Capital Imp.
Financing Pool) (NR, AA+)
8.375% 08/15/1998........................ 535 567,769
------------
VIRGIN ISLANDS -- 3.8%
Virgin Islands Public Finance Authority
Revenue
(NR, BBB)
7.700% 10/01/2004........................ 690 746,925
------------
VIRGINIA -- 3.7%
Fairfax County VA Redevelopment & Housing
Authority Mortgage Revenue (FHA Insured)
(NR, AAA)
7.100% 04/01/2019........................ 630 726,862
------------
</TABLE>
See Accompanying Notes to Financial Statements.
47
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA MUNICIPAL BOND FUND PORTFOLIO
STATEMENT OF NET ASSETS (CONCLUDED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
----------- ------------
<S> <C> <C>
WASHINGTON -- 3.6%
King County WA Series A GO (Aa1, AA+)
6.200% 01/01/2024........................ 40 $ 40,900
Seattle WA Water System Revenue (Aa, AA)
5.250% 12/01/2023........................ 735 664,256
------------
705,156
------------
TOTAL MUNICIPAL BONDS
(Cost $17,599,756)...................... 18,096,900
------------
U.S. TREASURY
OBLIGATIONS -- 2.0%
U.S. Treasury Bonds
8.750% 08/15/2020........................ 335 390,205
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $408,315)........................ 390,205
------------
SHORT TERM INVESTMENT -- 4.4%
Smith Barney Tax Free Money Market Fund.... 867 867,178
------------
TOTAL SHORT TERM INVESTMENT
(Cost $867,178)........................ 867,178
------------
TOTAL INVESTMENT AT VALUE -- 98.8%
(Cost $18,875,249)......................... $ 19,354,283
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.2%.............
226,971
------------
NET ASSETS (Applicable to 1,336,820 BEA Shares) --
100.0%.................................................... $ 19,581,254
------------
------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
($19,581,254 DIVIDED BY 1,336,820)....................... $14.65
------------
------------
</TABLE>
* Cost for Federal income tax purposes at August 31, 1996 is $18,850,672. The
gross appreciation (depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation........................... $ 603,124
Gross Depreciation........................... (99,513)
-------------
Net Appreciation............................. $ 503,611
-------------
-------------
</TABLE>
The Moody's Investors Service, Inc. and Standard & Poor's Corporations ratings
indicated are the most recent ratings available at August 31, 1996 and are
unaudited.
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
GO............................ General Obligations
SOB........................... Special Obligations Bonds
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
<CAPTION>
AMOUNT
---------------
PER
SHARE
--
<S> <C>
Capital Paid-In.................... $ 18,602,539 $ 13.92
Accumulated Net Investment Income.. 42,930 .03
Accumulated Net Realized Gain on
Security Transactions............. 422,729 .32
Net Unrealized Appreciation on
Investments and Other............. 513,056 .38
- -------------------------------------------------------------
NET ASSETS $ 19,581,254 $ 14.65
- -------------------------------------------------------------
</TABLE>
See Accompanying Notes to Financial Statements.
48
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
Statement of Operations
For the Year Ended August 31, 1996
<TABLE>
<CAPTION>
BEA BEA EMERGING
INTERNATIONAL MARKETS BEA U.S.
EQUITY EQUITY CORE EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends.................................................................. $ 14,577,259 $2,544,973 $ 781,813
Interest................................................................... 1,714,487 403,084 201,977
Foreign taxes withheld..................................................... (1,099,411) (226,107) --
-------------- ------------ ------------
Total Investment Income.................................................. 15,192,335 2,721,950 983,790
-------------- ------------ ------------
EXPENSES
Investment advisory fees................................................... 5,993,072 1,289,739 328,320
Administration service fees................................................ 1,123,701 193,461 65,664
Administration fees........................................................ 936,418 161,218 54,720
Custodian fees............................................................. 776,762 320,568 57,798
Audit fees................................................................. 73,807 12,000 4,201
Miscellaneous fees......................................................... 45,000 32,000 2,750
Printing fees.............................................................. 37,722 8,000 2,500
Registration fees.......................................................... 35,000 27,337 38,361
Legal fees................................................................. 33,125 1,950 1,500
Transfer agent fees........................................................ 21,129 22,113 22,241
Insurance expense.......................................................... 18,931 2,700 776
Directors fees............................................................. 12,500 2,200 796
Organization expense....................................................... 10,665 10,665 5,208
-------------- ------------ ------------
9,117,832 2,083,951 584,835
Less fees waived........................................................... (200,151) (168,635) (147,075)
-------------- ------------ ------------
Total Expenses........................................................... 8,917,681 1,915,316 437,760
-------------- ------------ ------------
Net Investment Income........................................................ 6,274,654 806,634 546,030
-------------- ------------ ------------
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency
Transactions:
Net realized gain (loss) from:
Security transactions.................................................... 34,300,823 (8,165,330) 5,046,088
Foreign exchange transactions............................................ 1,834,308 (101,733) --
-------------- ------------ ------------
36,135,131 (8,267,063) 5,046,088
-------------- ------------ ------------
Net unrealized appreciation(depreciation):
Investments.............................................................. 7,908,456 11,411,914 322,074
Translation of assets and liabilities in foreign currencies.............. 16,741 (357) --
-------------- ------------ ------------
7,925,197 11,411,557 322,074
-------------- ------------ ------------
Net Gain On Investments And Foreign Currency Transactions.................... 44,060,328 3,144,494 5,368,162
-------------- ------------ ------------
Net Increase In Net Assets Resulting From Operations......................... $ 50,334,982 $3,951,128 $5,914,192
-------------- ------------ ------------
-------------- ------------ ------------
</TABLE>
See Accompanying Notes to Financial Statements.
49
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1996
<TABLE>
<CAPTION>
BEA U.S. BEA GLOBAL BEA
CORE FIXED BEA HIGH MUNICIPAL
FIXED INCOME INCOME YIELD BOND FUND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends....................................................... $ -- $ -- $ 42,222 $ --
Interest........................................................ 8,335,642 2,079,874 8,967,348 1,297,791
------------ ----------- ------------ ------------
Total Investment Income....................................... 8,335,642 2,079,874 9,009,570 1,297,791
------------ ----------- ------------ ------------
EXPENSES
Investment advisory fees........................................ 450,786 157,059 643,353 161,784
Administration service fees..................................... 180,314 47,118 137,861 34,668
Administration fees............................................. 150,262 39,265 114,885 28,890
Custodian fees.................................................. 66,892 39,448 40,862 19,545
Audit fees...................................................... 9,200 3,250 5,000 5,731
Miscellaneous fees.............................................. 12,000 1,110 4,750 9,000
Printing fees................................................... 1,162 236 10,058 5,357
Registration fees............................................... 39,323 22,754 22,000 31,384
Legal fees...................................................... 2,500 544 1,878 2,158
Transfer agent fees............................................. 21,643 20,701 19,603 19,850
Insurance expense............................................... 1,600 450 2,737 750
Directors fees.................................................. 875 250 2,173 700
Organization expense............................................ 4,136 5,409 10,665 7,433
------------ ----------- ------------ ------------
940,693 337,594 1,015,825 327,250
Less fees waived................................................ (339,645) (102,006) (206,745) (96,130)
------------ ----------- ------------ ------------
Total Expenses.............................................. 601,048 235,588 809,080 231,120
------------ ----------- ------------ ------------
Net Investment Income............................................. 7,734,594 1,844,286 8,200,490 1,066,671
------------ ----------- ------------ ------------
Realized and Unrealized Gain (Loss) on Investments and Foreign
Currency Transactions:
Net realized gain (loss) from:
Security transactions......................................... 1,269,541 746,851 (524,984) 908,389
Foreign exchange transactions................................. 16,937 523,986 -- --
------------ ----------- ------------ ------------
1,286,478 1,270,837 (524,984) 908,389
------------ ----------- ------------ ------------
Net unrealized appreciation(depreciation):
Investments................................................... (4,182,075) (278,160) 2,587,803 (1,524,506)
Translation of assets and liabilities in foreign currencies... (13,236) (255,028) -- --
------------ ----------- ------------ ------------
(4,195,311) (533,188) 2,587,803 (1,524,506)
------------ ----------- ------------ ------------
Net Gain (Loss) On Investments And Foreign Currency Transactions.. (2,908,833) 737,649 2,062,819 (616,117)
------------ ----------- ------------ ------------
Net Increase In Net Assets Resulting From Operations.............. $4,825,761 $2,581,935 $ 10,263,309 $ 450,554
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
</TABLE>
See Accompanying Notes to Financial Statements.
50
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
BEA INTERNATIONAL BEA EMERGING MARKETS
EQUITY PORTFOLIO EQUITY PORTFOLIO
------------------------------ ------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED AUGUST ENDED AUGUST ENDED AUGUST ENDED AUGUST
31, 1996 31, 1995 31, 1996 31, 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income................................... $ 6,274,654 $ 2,606,678 $ 806,634 $ 26,113
Net gain (loss) on investments and foreign currency
transactions........................................... 44,060,328 (67,759,705) 3,144,494 (32,385,113)
-------------- -------------- -------------- --------------
Net increase (decrease) in net assets resulting from
operations............................................. 50,334,982 (65,153,027) 3,951,128 (32,359,000)
-------------- -------------- -------------- --------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
BEA shares.............................................. (2,649,123) -- (401,495) (394,002)
Distributions to shareholders from net realized capital
gains:
BEA shares.............................................. -- (32,112,690) -- (5,374,023)
-------------- -------------- -------------- --------------
Total distributions to shareholders....................... (2,649,123) (32,112,690) (401,495) (5,768,025)
-------------- -------------- -------------- --------------
Net capital share transactions............................ (138,669,688) 103,330,556 (17,180,987) 25,774,209
-------------- -------------- -------------- --------------
Total increase (decrease) in net assets................... (90,983,829) 6,064,839 (13,631,354) (12,352,816)
Net Assets:
Beginning of year....................................... 773,254,630 767,189,791 128,322,563 140,675,379
-------------- -------------- -------------- --------------
End of year............................................. $ 682,270,801 $773,254,630 $114,691,209 $128,322,563
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
See Accompanying Notes to Financial Statements.
51
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BEA U.S. CORE EQUITY PORTFOLIO BEA U.S. CORE FIXED INCOME
---------------------------------- PORTFOLIO
FOR THE PERIOD ------------------------------
FOR THE YEAR SEPTEMBER 1, FOR THE YEAR FOR THE YEAR
ENDED AUGUST 1994(1) TO AUGUST ENDED AUGUST ENDED AUGUST
31, 1996 31, 1995 31, 1996 31, 1995
-------------- ------------------ -------------- --------------
<S> <C> <C> <C> <C>
Increase in net assets:
Operations:
Net investment income............................... $ 546,030 $ 351,583 $ 7,734,594 $ 4,392,275
Net gain (loss) on investments and foreign currency
transactions....................................... 5,368,162 4,351,342 (2,908,833) 3,524,378
-------------- ------------------ -------------- --------------
Net increase in net assets resulting from
operations......................................... 5,914,192 4,702,925 4,825,761 7,916,653
-------------- ------------------ -------------- --------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
BEA shares.......................................... (384,500) (102,838) (7,217,136) (3,353,829)
Distributions to shareholders from net realized
capital gains:
BEA shares.......................................... (2,961,757) -- (1,598,598) --
-------------- ------------------ -------------- --------------
Total distributions to shareholders................... (3,346,257) (102,838) (8,815,734) (3,353,829)
-------------- ------------------ -------------- --------------
Net capital share transactions........................ 24,803,723 27,043,539 23,336,409 64,671,197
-------------- ------------------ -------------- --------------
Total increase in net assets.......................... 27,371,658 31,643,626 19,346,436 69,234,021
Net Assets:
Beginning of year................................... 31,643,776 150 99,249,839 30,015,818
-------------- ------------------ -------------- --------------
End of year......................................... $ 59,015,434 $ 31,643,776 $118,596,275 $ 99,249,839
-------------- ------------------ -------------- --------------
-------------- ------------------ -------------- --------------
</TABLE>
(1) Commencement of Operations.
See Accompanying Notes to Financial Statements.
52
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BEA GLOBAL FIXED INCOME
PORTFOLIO BEA HIGH YIELD PORTFOLIO
------------------------------ ------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED AUGUST ENDED AUGUST ENDED AUGUST ENDED AUGUST
31, 1995 31, 1996 31, 1995 31, 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income................................... $ 1,844,286 $ 1,270,820 $ 8,200,490 $ 13,411,565
Net gain (loss) on investments and foreign currency
transactions........................................... 737,649 566,554 2,062,819 (2,367,436)
-------------- -------------- -------------- --------------
Net increase in net assets resulting from operations.... 2,581,935 1,837,374 10,263,309 11,044,129
-------------- -------------- -------------- --------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
BEA shares.............................................. (2,322,498) (924,756) (10,165,849) (12,388,703)
Distributions to shareholders from net realized capital
gains:
BEA shares.............................................. (267,603) -- -- --
-------------- -------------- -------------- --------------
Total distributions to shareholders....................... (2,590,101) (924,756) (10,165,849) (12,388,703)
-------------- -------------- -------------- --------------
Net capital share transactions............................ 18,790,839 12,351,849 (77,869,859) 11,448,059
-------------- -------------- -------------- --------------
Total increase (decrease) in net assets................... 18,782,673 13,264,467 (77,772,399) 10,103,485
Net Assets:
Beginning of year....................................... 19,564,827 6,300,360 153,620,957 143,517,472
-------------- -------------- -------------- --------------
End of year............................................. $ 38,347,500 $ 19,564,827 $ 75,848,558 $153,620,957
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
See Accompanying Notes to Financial Statements.
53
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BEA MUNICIPAL BOND FUND
PORTFOLIO
------------------------------
FOR THE YEAR FOR THE YEAR
ENDED AUGUST ENDED AUGUST
31, 1996 31, 1995
-------------- --------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income.................................................................... $ 1,066,671 $ 2,273,373
Net gain (loss) on investments and foreign currency transactions......................... (616,117) 1,835,066
-------------- --------------
Net increase in net assets resulting from operations..................................... 450,554 4,108,439
-------------- --------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
BEA shares............................................................................... (1,137,175) (2,400,128)
Distributions to shareholders from net realized capital gains:
BEA shares............................................................................... (629,414) (174,436)
-------------- --------------
Total distributions to shareholders........................................................ (1,766,589) (2,574,564)
-------------- --------------
Net capital share transactions............................................................. (28,080,548) 5,134,026
-------------- --------------
Total increase (decrease) in net assets.................................................... (29,396,583) 6,667,901
Net Assets:
Beginning of year........................................................................ 48,977,837 42,309,936
-------------- --------------
End of year.............................................................................. $ 19,581,254 $ 48,977,837
-------------- --------------
-------------- --------------
</TABLE>
See Accompanying Notes to Financial Statements.
54
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
BEA INTERNATIONAL EQUITY PORTFOLIO
-----------------------------------------------------------------------------
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.......... 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
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
Portfolio would have been 1.22%, 1.26% and 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
(c) Not 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.
See Accompanying Notes to Financial Statements.
55
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
BEA EMERGING MARKETS EQUITY PORTFOLIO
---------------------------------------------------------------------
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 Portfolio 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
(c) Not 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.
See Accompanying Notes to Financial Statements.
56
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
BEA U.S. CORE EQUITY PORTFOLIO
--------------------------------- BEA U.S. CORE FIXED INCOME PORTFOLIO
---------------------------------------------------
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
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 (e).... $ .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 Portfolio would
have been 1.34% and 1.51% for the years 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 Portfolio
would have been .78% and .84% for the years ended August 31, 1996 and 1995,
respectively, and .99% annualized for the period ended August 31, 1994.
(b) Annualized.
(c) Not annualized.
(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
See Accompanying Notes to Financial Statements.
57
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
BEA GLOBAL FIXED INCOME PORTFOLIO
---------------------------------------------------
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
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 Global Fixed Income Portfolio 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.
(c) Not annualized.
* Commencement of operations
See Accompanying Notes to Financial Statements.
58
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
BEA HIGH YIELD PORTFOLIO
---------------------------------------------------------------------
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
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 Portfolio
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.
(c) Not annualized.
(d) Redemption fees not reflected in total return.
* Commencement of operations
See Accompanying Notes to Financial Statements.
59
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
BEA MUNICIPAL BOND FUND PORTFOLIO
---------------------------------------------------
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
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
Portfolio 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.
(c) Not annualized.
* Commencement of operations
See Accompanying Notes to Financial Statements.
60
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
Notes to Financial Statements
August 31, 1996
NOTE 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The RBB Fund, Inc. (the "Fund") is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company. The Fund
was incorporated in Maryland on February 29, 1988, and currently has seventeen
investment Portfolios, seven of which are included in these financial
statements.
The Fund has authorized capital of thirty billion shares of common stock of
which 12.35 billion are currently classified into sixty-six classes. Each class
represents an interest in one of seventeen investment portfolios of the Fund.
The classes have been grouped into fifteen separate "families", eight of which
have begun investment operations. The BEA Family represents interests in seven
portfolios which are covered by this report.
A) SECURITY VALUATION -- Portfolio securities for which market
quotations are readily available are valued at market value, which is
currently determined using the last reported sales price. If no sales are
reported, as in the case of some securities traded over-the-counter,
portfolio securities are valued at the mean between the last reported bid
and asked prices. All other securities and assets are valued as determined
in good faith by the Board of Directors. Short-term obligations with
maturities of 60 days or less are valued at amortized cost which
approximates market value.
B) FOREIGN CURRENCY TRANSACTIONS -- Transactions denominated in
foreign currencies are recorded in the Portfolio's records at the current
prevailing exchange rates. Asset and liability accounts that are denominated
in a foreign currency are adjusted daily to reflect current exchange rates.
Transaction gains or losses resulting from changes in exchange rates during
the reporting period or upon settlement of the foreign currency transaction
are reported in operations for the current period. It is not practical to
isolate that portion of both realized and unrealized gains and losses on
investments in the statement of operations that result from fluctuations in
foreign currency exchange rates. The Fund reports certain foreign currency
related transactions as components of realized gains for financial reporting
purposes, whereas such components are treated as ordinary income (loss) for
Federal income tax purposes.
C) SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security
transactions are accounted for on the trade date. The cost of investments
sold is determined by use of the specific identification method for both
financial reporting and income tax purposes. Interest income is recorded on
the accrual basis. Dividends are recorded on the ex-dividend date. Certain
expenses, principally transfer agent and printing, are class specific
expenses and vary by class. Expenses not directly attributable to a specific
portfolio or class are allocated based on relative net assets of each
portfolio and class, respectively.
D) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net
investment income and net realized capital gains will be declared and paid
at least annually. The character of distributions made during the year for
net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes due to GAAP/tax differences
in the character of income and expense recognition. These differences are
primarily due to differing treatments for net operating losses,
mortgage-backed securities, passive foreign investment companies, and
forward foreign currency contracts.
E) FEDERAL INCOME TAXES -- No provision is made for Federal taxes as
it is the Fund's intention to have each portfolio qualify for and elect the
tax treatment applicable to regulated investment companies under the
Internal Revenue Code and make the requisite distributions to its
shareholders which will be sufficient to relieve it from Federal income and
excise taxes.
F) OTHER -- Securities denominated in currencies other than U.S.
dollars are subject to changes in value due to fluctuations in exchange
rates.
G) USE OF ESTIMATES -- The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
61
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996
NOTE 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Some countries in which the portfolios invest require governmental approval
for the repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if there is a deterioration in a
country's balance of payments or for other reasons, a country may impose
temporary restrictions on foreign capital remittances abroad.
The securities exchanges of certain foreign markets are substantially
smaller, less liquid and more volatile than the major securities markets in the
United States. Consequently, acquisition and disposition of securities by the
portfolios may be inhibited. In addition, a significant proportion of the
aggregate market value of equity securities listed on the major securities
exchanges in emerging markets are held by a smaller number of investors. This
may limit the number of shares available for acquisition or disposition by the
Fund.
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. 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.
In addition, periods of economic uncertainty and changes can be expected to
result in increased volatility of market prices of lower-rated debt securities
and a Portfolio's net asset value.
NOTE 2.TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Pursuant to Investment Advisory Agreements, BEA Associates ("BEA"), a U.S.
investment advisory firm, serves as investment advisor for each of the seven
portfolios described herein.
For its advisory services, BEA is entitled to receive the following fees,
computed daily and payable monthly on a portfolio's average daily net assets:
<TABLE>
<CAPTION>
PORTFOLIO ANNUAL RATE
- -------------------------------------- --------------------------------------
<S> <C>
BEA International Equity Portfolio 0.80% of average daily net assets
BEA Emerging Markets Equity Portfolio 1.00% of average daily net assets
BEA U.S. Core Equity Portfolio 0.75% of average daily net assets
BEA U.S. Core Fixed Income Portfolio 0.375% of average daily net assets
BEA Global Fixed Income Portfolio 0.50% of average daily net assets
BEA High Yield Portfolio 0.70% of average daily net assets
BEA Municipal Bond Fund Portfolio 0.70% of average daily net assets
</TABLE>
BEA may, at its discretion, voluntarily waive all or any portion of its
advisory fee for either of the portfolios. For the year ended August 31, 1996,
advisory fees and waivers for each of the seven investment portfolios were as
follows:
<TABLE>
<CAPTION>
GROSS NET
ADVISORY FEE WAIVER ADVISORY FEE
-------------- -------------- --------------
<S> <C> <C> <C>
BEA International Equity Portfolio $ 5,993,072 $ -- $ 5,993,072
BEA Emerging Markets Equity
Portfolio 1,289,739 -- 1,289,739
BEA U.S. Core Equity Portfolio 328,320 (93,430) 234,890
BEA U.S. Core Fixed Income
Portfolio 450,786 (134,639) 316,147
BEA Global Fixed Income Portfolio 157,059 (53,915) 103,144
BEA High Yield Portfolio 643,353 (100,763) 542,590
BEA Municipal Bond Fund Portfolio 161,784 (68,790) 92,994
</TABLE>
PFPC Inc. ("PFPC"), an indirect wholly owned subsidiary of PNC Bank Corp.,
serves as each portfolio's transfer and dividend disbursing agent. In addition,
PFPC serves as administrator for each of the seven portfolios. PFPC's
administration fee is computed daily and payable monthly at an annual rate of
.125% of each Portfolio's average daily net assets.
62
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996
NOTE 2.TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED)
PFPC may, at its discretion, voluntarily waive all or any portion of its
administration fee for any of the portfolios. For the year ended August 31,
1996, administration fees for each of the seven investment portfolios were as
follows:
<TABLE>
<CAPTION>
GROSS NET
ADMINISTRATION ADMINISTRATION
FEE WAIVER FEE
-------------- -------------- --------------
<S> <C> <C> <C>
BEA International Equity Portfolio $ 936,418 $(5,204) $ 931,214
BEA Emerging Markets Equity
Portfolio 161,218 (8,509) 152,709
BEA U.S. Core Equity Portfolio 54,720 -- 54,720
BEA U.S. Core Fixed Income
Portfolio 150,262 (48,084) 102,178
BEA Global Fixed Income Portfolio 39,265 (7,853) 31,412
BEA High Yield Portfolio 114,885 (12,483) 102,402
BEA Municipal Bond Fund Portfolio 28,890 -- 28,890
</TABLE>
Counsellors Funds Service, Inc. ("Counsellors Service"), a wholly-owned
subsidiary of Counsellors Securities Inc., serves as administrative services
agent. An administrative service fee is computed daily and payable monthly at an
annual rate of .15% of each portfolio's average daily net assets.
NOTE 3.PURCHASES AND SALES OF SECURITIES
For the year ended August 31, 1996, purchases and sales of investment
securities (other than short-term investments) were as follows:
<TABLE>
<CAPTION>
INVESTMENT SECURITIES U.S. GOVERNMENT OBLIGATIONS
----------------------------- ---------------------------
PURCHASES SALES PURCHASES SALES
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
BEA International Equity Portfolio $620,162,213 $730,006,726 $ -- $ --
BEA Emerging Markets Equity Portfolio 96,948,942 111,827,920 -- --
BEA U.S. Core Equity Portfolio 72,478,392 52,344,258 -- --
BEA U.S. Core Fixed Income Portfolio 162,070,786 121,353,161 113,926,558 105,129,232
BEA Global Fixed Income Portfolio 20,983,511 9,433,901 16,996,868 14,091,064
BEA High Yield Portfolio 115,438,832 181,333,821 8,941,087 21,682,861
BEA Municipal Bond Fund Portfolio 6,047,590 36,230,309 1,525,89 1,090,739
</TABLE>
For the year ended August 31, 1996, purchases include $6,926,876, $753,018,
$13,122,108, and $992,174 of investment securities received from shareholders in
exchange for 413,792 shares, 40,650 shares, 833,800 shares, and 68,007 shares
sold by the BEA Emerging Markets Equity Portfolio, BEA U.S. Core Equity
Portfolio, BEA U.S. Core Fixed Income Portfolio and BEA Municipal Bond Fund
Portfolio, respectively. For the year ended August 31, 1996, sales include
$93,483,064, and $22,092,445 of investment securities delivered to shareholders
in exchange for 4,928,316 shares, and 1,470,868 shares redeemed by the BEA
International Equity Portfolio and BEA U.S. Core Fixed Income Portfolio,
respectively. This resulted in a gain of $8,745,063 for the BEA International
Equity Portfolio and a loss of $371,989 for the BEA U.S. Core Fixed Income
Portfolio.
63
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996
NOTE 4.CAPITAL SHARES
Transactions in capital shares for each period were as follows:
<TABLE>
<CAPTION>
BEA INTERNATIONAL EQUITY BEA EMERGING MARKETS EQUITY
PORTFOLIO PORTFOLIO
----------------------------------------------------- ----------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
AUGUST 31, 1996 AUGUST 31, 1995 AUGUST 31, 1996 AUGUST 31, 1995
-------------------------- ------------------------- ------------------------- -------------------------
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
----------- ------------- ----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 8,492,355 $ 158,914,042 7,555,790 $141,210,504 1,930,842 $ 33,432,364 2,740,756 $ 45,977,774
Shares issued in
reinvestment of
dividends 137,894 2,523,456 1,783,551 31,977,179 19,043 323,156 290,750 5,614,374
Shares
repurchased, net
of redemption
fees (15,886,499) (300,107,186) (3,955,727) (69,857,127) (2,909,721) (50,936,507) (1,493,908) (25,817,939)
----------- ------------- ----------- ------------ ----------- ------------ ----------- ------------
Net increase
(decrease) (7,256,250) $(138,669,688) 5,383,614 $103,330,556 (959,836) $(17,180,987) 1,537,598 $ 25,774,209
----------- ------------- ----------- ------------ ----------- ------------ ----------- ------------
----------- ------------- ----------- ------------ ----------- ------------ ----------- ------------
BEA Shares
Authorized 500,000,000 500,000,000 500,000,000 500,000,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
BEA U.S. CORE EQUITY BEA U.S. CORE FIXED INCOME
PORTFOLIO PORTFOLIO
-------------------------------------------------- ---------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
AUGUST 31, 1996 AUGUST 31, 1995 AUGUST 31, 1996 AUGUST 31, 1995
------------------------ ------------------------ ------------------------- ------------------------
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
----------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 1,435,791 $27,128,776 1,883,469 $28,923,460 4,441,435 $ 68,996,273 4,372,374 $64,282,193
Shares issued in
reinvestment of
dividends 188,415 3,346,258 7,112 102,838 576,935 8,756,243 229,407 3,338,279
Shares
repurchased, net
of redemption
fees (298,285) (5,671,311) (118,327) (1,982,759) (3,583,115) (54,416,107) (195,402) (2,949,275)
----------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
Net increase 1,325,921 $24,803,723 1,772,254 $27,043,539 1,435,255 $ 23,336,409 4,406,379 $64,671,197
----------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
----------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
BEA Shares
Authorized 500,000,000 500,000,000 500,000,000 500,000,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
64
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996
NOTE 4.CAPITAL SHARES (CONTINUED)
<TABLE>
<CAPTION>
BEA GLOBAL FIXED INCOME BEA HIGH YIELD
PORTFOLIO PORTFOLIO
-------------------------------------------------- -----------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
AUGUST 31, 1996 AUGUST 31, 1995 AUGUST 31, 1996 AUGUST 31, 1995
------------------------ ------------------------ -------------------------- -------------------------
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
----------- ----------- ----------- ----------- ----------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 1,105,942 $17,551,485 766,650 $11,427,093 3,372,093 $ 54,558,056 580,982 $ 8,824,836
Shares issued in
reinvestment of
dividends 162,519 2,519,968 61,519 924,756 629,920 9,902,559 825,245 12,285,993
Shares
repurchased, net
of redemption
fees (81,878) (1,280,614) -- -- (9,062,440) (142,330,474) (632,837) (9,662,770)
----------- ----------- ----------- ----------- ----------- ------------- ------------ -----------
Net increase
(decrease) 1,186,583 $18,790,839 828,169 $12,351,849 (5,060,427) $ (77,869,859) 773,390 $11,448,059
----------- ----------- ----------- ----------- ----------- ------------- ------------ -----------
----------- ----------- ----------- ----------- ----------- ------------- ------------ -----------
BEA Shares
Authorized 500,000,000 500,000,000 500,000,000 500,000,000
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
</TABLE>
<TABLE>
<CAPTION>
BEA MUNICIPAL BOND
PORTFOLIO
-------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
AUGUST 31, 1996 AUGUST 31, 1995
-------------------------- --------------------------
SHARES VALUE SHARES VALUE
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 315,445 $ 4,700,422 935,296 $ 13,666,897
Shares issued in reinvestment of dividends 109,160 1,656,622 123,547 1,831,054
Shares repurchased, net of redemption fees (2,256,456) (34,437,592) (699,839) (10,363,925)
----------- ------------ ----------- ------------
Net increase (decrease) (1,831,851) $(28,080,548) 359,004 $ 5,134,026
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
BEA Shares Authorized 500,000,000 500,000,000
----------- -----------
----------- -----------
</TABLE>
NOTE 5.RESTRICTED SECURITIES
Certain of the BEA International Equity Portfolio's investments are
restricted as to resale and are valued at the direction of the Fund's Board of
Directors in good faith, at fair value, after taking into consideration
appropriate indications of value available. The table below shows the number of
shares held, the acquisition date, value as of August 31, 1996, percentage of
net assets which the securities comprise, aggregate cost and unit value of the
securities.
<TABLE>
<CAPTION>
NUMBER OF ACQUISITION 08/31/96 FAIR PERCENTAGE OF VALUE PER
SHARES DATE VALUE NET ASSETS SECURITY COST UNIT
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sodigas Pampeana 558,962 1/14/93 $ 844,809 0.1% $ 566,038 $ 1.511
Sodigas del Sur 403,923 1/14/93 745,416 0.1% 384,038 1.845
Geotek Communications,
Inc. 600 5/26/95 6,476,842 0.8% 6,000,000 10,795
------------- -------------
$ 8,067,067 $ 6,950,076
------------- -------------
------------- -------------
</TABLE>
NOTE 6.CAPITAL LOSS CARRYOVER
At August 31, 1996, capital loss carryovers were available to offset future
realized gains as follows: $26,922,032 in the BEA International Equity Portfolio
which expires in 2003, $22,315,875 in the Emerging Markets Equity Portfolio
which expires in 2004
65
<PAGE>
NOTE 6.CAPITAL LOSS CARRYOVER (CONTINUED)
and $13,514,163 in the BEA High Yield Portfolio of which $8,528,142 expires in
2001 and $4,986,021 expires in 2003. In addition, deferred post-October 31, 1995
losses were available to offset future net capital gains through August 31, 1996
as follows: $2,694,725 in the BEA High Yield Portfolio.
NOTE 7.FORWARD FOREIGN CURRENCY CONTRACTS
The Funds will generally enter into forward foreign currency exchange
contracts as a way of managing foreign exchange rate risk. A Fund may enter into
these contracts to fix the U.S. dollar value of a security that it has agreed to
buy or sell for the period between the date the trade was entered into and the
date the security is delivered and paid for. A Fund may also use these contracts
to hedge the U.S. dollar value of securities it already owns denominated in
foreign currencies.
Forward foreign currency contracts are valued at the forward rate, and are
marked-to-market daily. The change in market value is recorded by the Fund as an
unrealized gain or loss. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
The use of forward foreign currency contracts does not eliminate
fluctuations in the underlying prices of the Fund's Portfolio Securities, but it
does establish a rate of exchange that can be achieved in the future. Although
forward foreign currency contracts limit the risk of loss due to a decline in
the value of the hedged currency, they also limit any potential gain that might
result should the value of the currency increase. In addition, the Funds could
be exposed to risks if the counterparties to the contracts are unable to meet
the terms of their contracts. During the year ended August 31, 1996, the BEA
International Equity Portfolio, the BEA U.S. Core Fixed Income Portfolio and the
BEA Global Fixed Income Portfolio entered into forward foreign currency
contracts.
The BEA U.S. Core Fixed Income Portfolio's open Forward Foreign Currency
Contract at August 31, 1996 was as follows:
<TABLE>
<CAPTION>
UNREALIZED
FOREIGN FOREIGN
FORWARD CURRENCY EXPIRATION CURRENCY CONTRACT CONTRACT EXCHANGE
CONTRACT DATE TO BE SOLD AMOUNT VALUE GAIN/(LOSS)
- --------------------- --------- ---------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C>
Canadian Dollars 09/17/96 932,000 $ 678,852 $ 681,586 $ (2,734)
German Deutschemarks 09/17/96 350,000 229,358 236,823 (7,465)
--------- --------- ---------------
$ 908,210 $ 918,409 $ (10,199)
--------- --------- ---------------
--------- --------- ---------------
<CAPTION>
FOREIGN UNREALIZED
CURRENCY FOREIGN
FORWARD CURRENCY EXPIRATION TO BE CONTRACT CONTRACT EXCHANGE
CONTRACT DATE PURCHASED AMOUNT VALUE GAIN/(LOSS)
- --------------------- --------- ---------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C>
German Deutschemarks 09/17/96 350,000 $ 237,649 $ 236,823 $ (826)
--------- --------- ---------------
--------- --------- ---------------
</TABLE>
The BEA Global Fixed Income Portfolio's open Forward Foreign Currency
Contracts at August 31, 1996 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
FOREIGN FOREIGN
FORWARD CURRENCY EXPIRATION CURRENCY CONTRACT CONTRACT EXCHANGE
CONTRACT DATE TO BE SOLD AMOUNT VALUE GAIN/LOSS
- --------------------- --------- -------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
Australian Dollars 09/17/96 355,000 $ 280,450 $ 280,495 $ (45)
Australian Dolars 09/17/96 1,005,000 793,649 794,077 (428)
Canadian Dollars 09/17/96 740,000 543,970 541,173 2,797
German Deutschemarks 09/17/96 94,000 61,599 63,604 (2,005)
German Deutschemarks 09/17/96 1,900,000 1,250,000 1,285,608 (35,608)
German Deutschemarks 09/17/96 4,424,000 2,897,753 2,993,437 (95,684)
Italian Lira 09/17/96 1,562,000,000 1,009,110 1,032,495 (23,385)
Italian Lira 09/17/96 1,880,000,000 1,214,550 1,189,815 24,735
Japanese Yen 09/17/96 163,620,000 1,500,000 1,509,660 (9,660)
Netherlands Guilder 09/17/96 611,500 358,577 369,081 (10,504)
Netherlands Guilder 09/17/96 6,204,000 3,634,446 3,744,523 (110,077)
Swedish Krona 09/17/96 368,000 54,498 55,572 (1,074)
------------ ------------ ---------------
$ 13,598,602 $ 13,859,540 $ (260,938)
------------ ------------ ---------------
------------ ------------ ---------------
</TABLE>
66
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
AUGUST 31, 1996
NOTE 7.FORWARD FOREIGN CURRENCY CONTRACTS (CONTINUED)
<TABLE>
<CAPTION>
FOREIGN UNREALIZED
CURRENCY FOREIGN
FORWARD CURRENCY EXPIRATION TO BE CONTRACT CONTRACT EXCHANGE
CONTRACT DATE PURCHASED AMOUNT VALUE GAIN/LOSS
- --------------------- --------- -------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
French Francs 09/17/96 273,000 $ 52,665 $ 53,963 $ 1,298
French Francs 09/17/96 4,250,000 820,622 840,080 19,458
French Francs 09/17/96 5,987,000 1,155,792 1,183,427 27,635
German Deutschemarks 09/17/96 94,000 62,499 63,604 1,105
German Deutschemarks 09/17/96 1,800,000 1,196,188 1,217,944 21,756
Great Britain Pounds 09/17/96 220,000 336,600 343,449 6,849
Italian Lira 09/17/96 1,880,000,000 1,203,046 1,189,815 (13,231)
Japanese Yen 09/17/96 175,000,000 1,638,960 1,614,659 (24,301)
Netherlands Guilder 09/17/96 611,500 362,983 369,081 6,098
Netherlands Guilder 09/17/96 1,950,000 1,150,266 1,176,953 26,687
Spanish Pesetas 09/17/96 52,200,000 401,322 416,860 15,538
----------- ----------- ---------------
$ 8,380,943 $ 8,469,835 $ 88,892
----------- ----------- ---------------
----------- ----------- ---------------
</TABLE>
67
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF THE RBB FUND, INC:
We have audited the accompanying statements of net assets of the BEA
International Equity, BEA Emerging Markets Equity, BEA U.S. Core Equity, BEA
U.S. Core Fixed Income, BEA Global Fixed Income, BEA High Yield and BEA
Municipal Bond Portfolios of The RBB Fund Inc., as of August 31, 1996 and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments held by the
custodian and brokers as of August 31, 1996. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
BEA International Equity, BEA Emerging Markets Equity, BEA U.S. Core Equity, BEA
U.S. Core Fixed Income, BEA Global Fixed Income, BEA High Yield and BEA
Municipal Bond Portfolios of The RBB Fund Inc., as of August 31, 1996 and the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and their financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
October 11, 1996
68
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BEA ADVISOR FUNDS
INTERNATIONAL EQUITY
EMERGING MARKETS EQUITY
GLOBAL TELECOMMUNICATIONS
HIGH YIELD
---------------------
PROSPECTUS
---------------------
NOVEMBER 1, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Annual Fund Operating Expenses............................................................................. 2
Financial Highlights....................................................................................... 4
The Company................................................................................................ 4
Investment Objectives and Policies......................................................................... 4
Investment Limitations..................................................................................... 7
Risk Factors............................................................................................... 8
Management................................................................................................. 9
Expenses................................................................................................... 11
How to Purchase Shares..................................................................................... 12
How to Redeem Shares....................................................................................... 13
Net Asset Value............................................................................................ 15
Dividends and Distributions................................................................................ 15
Taxes...................................................................................................... 15
Shareholder Servicing...................................................................................... 17
Multi-Class Structure...................................................................................... 17
Description of Shares...................................................................................... 17
Other Information.......................................................................................... 18
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
BEA ADVISOR FUNDS
The Advisor Classes of the BEA Family consist of four classes of common
stock of the Company 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 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 -- 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 -- provide long-term appreciation of
capital. The Fund will invest primarily in equity securities in emerging
country markets.
BEA GLOBAL TELECOMMUNICATIONS FUND -- 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 -- 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 Portfolios 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 emphasizes a global
investment strategy and, as of September 30, 1996, acted as adviser for
approximately $29 billion of assets.
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 November 1, 1996, has been filed with the
Securities and Exchange Commission and is incorporated by reference in this
Prospectus. It may be obtained free of charge from the Company's transfer agent
by calling (800) 401-2230.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE 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 NOVEMBER 1, 1996
<PAGE>
- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES
<TABLE>
<CAPTION>
BEA
BEA EMERGING BEA U.S.
INTERNATIONAL MARKETS GLOBAL BEA
EQUITY EQUITY TELECOMMUNICATIONS HIGH YIELD
FUND FUND FUND FUND
------------- -------- --------------------- -------------
<S> <C> <C> <C> <C>
Management Fees*.................................. .80% 1.00% 1.00% .45%
12b-1 Fees........................................ .25% .25% .25% .25%
Other Expenses.................................... .39% .49% .40% .25%
--- --- --- ---
Total Fund Operating Expenses..................... 1.44% 1.74% 1.65% .95%
--- --- --- ---
--- --- --- ---
</TABLE>
- ------------------------
* Management fees are each based on average daily net assets and are
calculated daily and paid monthly.
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......................................... $15 $46 $ 79 $172
BEA Emerging Markets Equity Fund...................................... $18 $55 $ 94 $205
BEA Global Telecommunications Fund.................................... $17 $52 N/A N/A
BEA High Yield Fund................................................... $10 $30 $ 52 $115
</TABLE>
The Example in the Fee Table assumes that all dividends and distributions
are reinvested and that the amounts listed under "Annual Fund Operating
Expenses" remain the same 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.
The 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. The Other Expense figures are restated from fees and costs of the
Institutional Classes of the Funds as of August 31, 1996, except for BEA Global
Telecommunications Fund, for which Other Expenses are estimated for the current
fiscal year. Actual expenses may be greater or less than such costs and fees.
3
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FINANCIAL HIGHLIGHTS
Financial highlights are not available for the Advisor Classes of the Funds
because, as of the date of this prospectus, such classes had no operating
history.
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 four Classes of Shares offered by this Prospectus represents interests in
one of the four Funds. 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 advisory or other similar capacity, which may include the investment
of funds held or managed by broker-dealers, investment counselors and financial
planners. Investment professionals such as those listed above may purchase
Shares for discretionary or non-discretionary accounts maintained by
individuals.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of each 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. The Fund will invest 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 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. The Fund will invest primarily in equity
securities of issuers in Emerging Markets. As used in this Prospectus, an
Emerging Market is any country which is generally considered to be an emerging
or developing country by the World Bank and the International Finance
Corporation, as well as countries that are classified by the United Nations as
emerging or developing, at the time of the Fund's investment. The countries that
will not be considered Emerging Markets include: Australia, Austria, Belgium,
Canada, Denmark, Finland, France, Germany,
4
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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. The Fund seeks to achieve its objective 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 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 non-equity securities or 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. The telecommunications industry is subject to extensive
governmental regulation, which could adversely affect the
5
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Fund's performance. The nature and scope of such regulation generally is subject
to political forces and market considerations, the effect of which cannot be
predicted. 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 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 capital appreciation potential rather than
income considerations.
BEA HIGH YIELD FUND
BEA High Yield Fund seeks to provide high total return. The Fund will invest
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.
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.
6
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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.
FUND 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, Emerging Markets Equity and Global Telecommunications 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 portfolio turnover rate for BEA High Yield Fund is anticipated to
exceed 100%. The anticipated portfolio turnover rate for BEA High Yield Fund is
greater than that of many other investment companies. A higher than normal
portfolio turnover rate may affect the degree to which a Fund's net asset value
fluctuates. Higher portfolio turnover rates are likely to result in
comparatively greater brokerage commissions. In addition, short-term gains
realized from portfolio transactions are taxable to shareholders as ordinary
income. The amount of portfolio activity will not be a limiting factor when
making portfolio decisions. See Statement of Additional Information, "Fund
Transactions" and "Taxes."
CURRENCY HEDGING. BEA may seek to hedge against a decline in value of a
Fund's 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 that are common to the Funds.
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
7
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time of such borrowing. Each Fund will not purchase securities while its
aggregate borrowings (including reverse repurchase agreements, dollar rolls
and borrowings from banks) in excess of 5% of its total assets are
outstanding. Securities held in escrow or separate accounts in connection
with the Fund's investment practices are not considered to be borrowings or
deemed to be pledged for purposes of this limitation.
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 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
8
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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 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.
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 advisor under the Investment
Advisors 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 asset manager, handling global equity, balanced, fixed
income and derivative securities accounts for private individuals, as well as
corporate pension and profit-sharing plans, state pension funds, union funds,
endowments and other charitable institutions. As of September 30, 1996, BEA
managed approximately $29 billion in assets. As an investment adviser, BEA
emphasizes a global investment strategy. BEA currently acts as investment
adviser for thirteen investment companies registered under the Investment
Company Act, and as sub-adviser to certain portfolios of six other registered
investment companies. BEA also acts as investment adviser for forty-two offshore
funds, twenty-two of which are equity funds and twenty of which are debt 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 and the valuation of
portfolio securities.
The day-to-day portfolio management of BEA International Equity, and BEA
Emerging Markets Equity Funds is the responsibility of the BEA International
Equities Management Team. The Team consists of the following investment
professionals: William P. Sterling (Managing Director), Richard Watt (Managing
Director), Stephen M. Swift (Managing Director), Steven D. Bleiberg (Senior Vice
President). Mr. Sterling joined BEA in 1995, prior to which he was head of
International Economics at Merrill Lynch & Company. Mr. Watt joined BEA in
9
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1995, prior to which he was 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 he spent three years at Credit Suisse
Asset Management in London, where he was 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, on an individual basis, been engaged as an investment
professional with BEA for more than five years.
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 (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.
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 (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.
For the services provided and expenses assumed by it, BEA is entitled to
receive the following fees, computed daily and payable monthly based on a Fund's
average daily net assets:
<TABLE>
<CAPTION>
FUND ANNUAL RATE
- -------------------------------- --------------------
<S> <C>
BEA International Equity........ .80% of the average
daily net assets*
BEA Emerging Markets Equity..... 1.00% of the average
daily net assets*
BEA Global Telecommunications... 1.00% of the average
daily net assets*
BEA High Yield.................. .70% of the average
daily net assets
<FN>
- ------------------------------
* This fee is higher than that paid by most investment companies, although the
fees are within the range of fees of investment companies with similar
investment objectives.
</TABLE>
For the period ended August 31, 1996, the Company paid BEA investment
advisory fees, on annualized basis, with respect to the BEA International
Equity, BEA Emerging Markets Equity and BEA High Yield Funds .80%, 1.00% and
.59%, respectively, of the average net assets of the respective Funds, and BEA
waived, approximately 0%, 0% and .11%, respectively, of the average net assets
of each such Fund. BEA may, at its discretion, from time to time agree to waive
voluntarily all or any portion of its advisory fee for any 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
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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.
ADMINISTRATORS
PFPC Inc. ("PFPC"), an indirect, wholly-owned subsidiary of PNC Bank Corp.,
serves as administrator for the Funds. As 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 provides
shareholder liaison services to the Company, including responding to shareholder
inquiries and providing information on shareholder account. 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 sale 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 distribution
expenses actually incurred. Counsellors Securities may delegate some or all of
these functions to a Service Organization. See "Shareholder Servicing." 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.
TRANSFER AGENT
Boston Financial Data Services, Inc. ("BFDS") serves as Transfer Agent for
the Funds. BFDS's address is Two Heritage Drive, Quincy, MA 02171.
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, administrator and co-administrator and fees
and expenses of officers and directors who are not affiliated with the Fund's
investment adviser or distributor, taxes, interest, legal fees, custodian fees,
auditing fees, brokerage fees and commissions, certain of the fees and expenses
of registering and qualifying the Funds and the Shares for distribution under
Federal and state securities laws, expenses of preparing prospectuses and
statements of additional information and of printing and distributing
prospectuses and statements of additional information annually to existing
shareholders, the expense of reports to shareholders, shareholders' meetings and
proxy solicitations, fidelity bond and directors and officers liability
insurance premiums, the expense of using independent pricing services and other
expenses which are not expressly assumed by the Adviser under its investment
advisory agreement with respect to
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a Fund. 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.
HOW TO PURCHASE SHARES
BEA Advisor Shares are available for investment by individual investors
("Individuals") and through investment professionals such as broker-dealers,
financial planners and other financial intermediaries ("Intermediaries"). The
Company reserves the right to make Advisor Shares available to other investors
in the future. The minimum initial investment is $2,500. The minimum subsequent
investment is $250.
Shares of the Funds may be purchased either by mail, or with special advance
instructions, by wire. If an Individual or Intermediary desires to purchase
Shares by mail, a check or money order made payable to "The BEA Family" in U.S.
currency should be sent along with a completed account application to
Counsellors Securities, the Company's distributor, at the address set forth
above. Checks payable to the Individual or Intermediary and endorsed to the
Company will not be accepted as payment and will be returned. 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 preceeded by a complete application will be returned to sender.
Shares purchased by check are entitled to receive dividends and distributions
beginning the day after payment has been received. Checks for investments in
more than one Fund should be accompanied by a breakdown of amount to be invested
in the Funds. If a check used for purchase does not clear, the Funds will cancel
the purchase and the Individual or Intermediary may be liable for losses and
fees incurred. For a description of the manner of calculating a Fund's net asset
value, see "Net Asset Value."
Individuals and Intermediaries may also purchase Advisor Shares by
telephoning BEA Advisor Funds and sending payment by wire. After telephoning
(800) 401-2230 for instructions, an Individual or Intermediary should then wire
federal funds to BFDS using the following wire address:
State Street Bank & Trust Co.
225 Franklin Street
Boston, MA 02101
ATTN:Mutual Fund/Custody Dept.
BEA Advisor Funds -- International Equity, Emerging Markets Equity, Global
Telecommunications and High Yield
[SHAREOWNER NAME]
[SHAREHOLDER ACCOUNT NUMBER]
Orders by wire will not be accepted until a completed account application
has been received in proper form, and an account number has been established. If
a telephone order is received by the close of regular trading on the New York
Stock Exchange (the "NYSE") (currently 4:00 p.m., Eastern time) AND payment by
wire is received on the same day in proper form in accordance with instructions
set forth above, the shares will be priced according to the net asset value of
the Company 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 Company on that day and is entitled to
dividends and distributions beginning on that day. However, if a wire received
in proper form is not preceded by a telephone order AND is received after the
close of regular trading on the NYSE, the payment will be held uninvested until
the order is effected at the close of business on the next day that the Company
calculates its net asset value (a "business day"). Payment for orders that are
not accepted will be returned to
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the institution after prompt inquiry. Certain organizations that have entered
into agreements with the Company or its agent may enter confirmed purchase
orders on behalf of customers, with payment to follow no later than the
Company's pricing on the following business day. If payment is not received by
such time, the organization could be held liable for resulting losses or fees
incurred. Third party checks will not be accepted.
After a shareholder has made an initial investment, additional shares may be
purchased at any time in the manner outlined above. Payments for initial and
subsequent investments should be preceded by an order placed with the Company or
its agent and should clearly indicate the shareholder's account number. In the
interest of economy and convenience, physical certificates representing shares
in the Company are not normally issued.
The Company understands that some broker-dealers (other than Counsellors
Securities), financial planners and other Intermediaries may impose certain
conditions on their clients that invest in the Company, which are in addition to
or different than those described in this Prospectus, and, to the extent
permitted by applicable regulatory authority, may charge their clients direct
fees. Certain features of the Company may be modified in these programs and
administrative charges may be imposed for the services rendered. Therefore, a
client or customer should contact the organization acting on his behalf
concerning the fees (if any) charged in connection with a purchase or redemption
of the Company shares and should read this Prospectus in light of the terms
governing his accounts with the organization. Each Intermediary separately
determines the rules applicable to its customers investing in the Company,
including minimum initial and subsequent investment requirements and the
procedures to be followed to effect purchases, redemptions and exchanges of
Advisor Shares. Orders for the purchase of Advisor Shares through an
Intermediary are placed with the Intermediary by its customers. The Intermediary
is responsible for the prompt transmission of the order to the Company.
RETIREMENT PLANS AND UNIFORM GIFTS TO MINORS
Shares may be purchased in conjunction with individual retirement accounts
("IRA's"), rollover IRAs, or pension, profit-sharing or other employer benefit
plans, and under the Uniform Gifts to Minors Act. The minimum initial investment
in conjunction with such plans is $1,000, and the minimum subsequent investment
is $500. For further information as to applications and annual fees, please
contact BFDS. 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
GENERAL
A shareholder may redeem (sell) shares on any day that the Company's net
asset value is calculated (see "Net Asset Value" below).
Shareholders may redeem Advisor Shares by calling BEA Advisor Funds at (800)
401-2230 between 9:00 a.m. and 4:00 p.m. (Eastern time) on any Business Day. A
shareholder making a telephone withdrawal should state (i) the name of the Fund,
(ii) the account number of the Fund, (iii) the name of the shareholder appearing
on the Fund's records, (iv) the amount to be withdrawn and (v) the name of the
person requesting the redemption. Requests for the redemption (or exchange) of
Advisor Shares are placed with an Intermediary by its customers. The
Intermediary is responsible for the prompt transmission of its customers'
requests to the Company or its agent.
After receipt of the redemption request, the redemption proceeds will, at
the option of the shareholder, be paid by check and mailed to the shareholder of
record or be wired to the shareholder's bank as indicated in the account
application previously filled out by the shareholder. The Company does not
currently impose a service charge for effecting wire transfers but the Company
reserves the right to do so in the future. During periods of significant
economic or market change, telephone redemptions may be difficult to implement.
If a shareholder is unable to contact BEA Advisor Funds by telephone, the
shareholder may deliver the redemption request to BEA Advisor Funds by mail at
Two Heritage Drive, Quincy, MA 02171.
If a redemption order is received prior to the close of regular trading on
the NYSE, the
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redemption order will be effected at the net asset value per share as determined
on that day. If a redemption order is received after the close of regular
trading on the NYSE, the redemption order will be effected at the net asset
value as next determined. Redemption proceeds will normally be mailed or wired
to a shareholder on the next business day following the date a redemption order
is effected. If, however, in the judgment of BEA, immediate payment would
adversely affect the Company, the Company reserves the right to pay the
redemption proceeds within seven days after the redemption order is effected.
Furthermore, the Company may suspend the right of redemption or postpone the
date of payment upon redemption (as well as suspend or postpone the recordation
of an exchange of shares) for such periods as are permitted under the 1940 Act.
The proceeds paid upon redemption may be more or less than the amount
invested depending upon a share's net asset value at the time of redemption. If
a shareholder redeems all the shares in his account, all dividends and
distributions declared up to and including the date of redemption are paid along
with the proceeds of the redemption. If 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.
A request for redemption must be signed by all persons in whose names the
Shares are registered or by an authorized party. Signatures must conform exactly
to the account registration. If the proceeds of the redemption would exceed
$10,000, or if the proceeds are not to be paid to the record owner at the record
address, or if the shareholder is a corporation, partnership, trust or
fiduciary, signature(s) must be guaranteed by a bank, broker-dealer, credit
union, national securities exchange, savings association or any other
organization which qualifies as an "eligible guarantor institution" as that term
is defined in rules adopted by the Securities and Exchange Commission. In some
cases, however, other documents may be necessary.
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, 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 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.
Shareholders may be required to bear certain administrative or custodial costs
in effecting 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 income tax
purposes as a redemption. Therefore, the shareholder may realize a taxable gain
or
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loss in connection with the exchange. For further information regarding the
exchange privilege, the shareholder should contact BEA Advisor Funds at (800)
401-2230.
Shareholders are automatically provided with telephone exchange privileges
when opening an account, unless they indicate on the Application that they do
not wish to use this privilege. To add a telephone exchange feature to an
existing account that previously did not provide for this option, a Telephone
Exchange Authorization Form must be filed with BFDS. This form is available from
BFDS. Once this election has been made, the shareholder may simply contact BFDS
by telephone to request the exchange (800) 401-2230. The Company will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine, and if the Company does not employ such procedures, it may be liable
for any losses due to unauthorized or fraudulent telephone instructions. Neither
the Company nor BFDS will be liable for any loss, liability, cost or expense for
following the Company's telephone transaction procedures described below or for
following instructions communicated by telephone that it reasonably believes to
be genuine.
The Company's telephone transaction procedures include the following
measures: (1) requiring the appropriate telephone transaction privilege forms;
(2) requiring the caller to provide the names of the account owners, the account
social security number and name of the Fund, all of which must match the
Company's records; (3) requiring the Company's service representative to
complete a telephone transaction form, listing all of the above caller
identification information; (4) permitting exchanges only if the two account
registrations are identical; (5) requiring that redemption proceeds be sent only
by check to the account owners of record at the address of record, or by wire
only to the owners of record at the bank account of record; (6) sending a
written confirmation for each telephone transaction to the owners of record at
the address of record within five (5) business days of the call; and (7)
maintaining tapes of telephone transactions for six months, if the Company
elects to record shareholder telephone transactions.
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, BEA Emerging Markets Equity and BEA Global
Telecommunications Funds annually. The Company will distribute net investment
income for the BEA High Yield Fund at least quarterly. All distributions will be
reinvested in the form of additional full and fractional Shares of the relevant
Fund unless a shareholder elects otherwise. If a shareholder desires to have
distributions paid out rather than reinvested, the shareholder should notify
BFDS 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
15
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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 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.
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.
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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.
MISCELLANEOUS CONSIDERATIONS; EFFECT OF FUTURE LEGISLATION
Future legislative or administrative changes or court decisions may
materially affect the tax consequences of investing in one or more Funds of the
Company. Shareholders are also urged to consult their tax advisers concerning
the application of state and local income taxes to investments in the Company
which may differ from the Federal income tax consequences described above.
SHAREHOLDER SERVICING
The Company is authorized to offer Advisor Shares to Intermediaries whose
clients or customers ("Customers") are beneficial owners of Advisor Shares.
Those Intermediaries may enter into service agreements ("Agreements") related to
the sale of the Advisor Shares with Counsellors Securities pursuant to a
Distribution Plan, as described below. Pursuant to the terms of an Agreement,
the Intermediary agrees to perform certain distribution, shareholder servicing,
administrative and accounting services for its Customers. Distribution services
would be marketing or other services in connection with the promotion and sale
of Advisor Shares. Shareholder services that may be provided include responding
to Customer inquiries, providing information on Customer investments and
providing other shareholder liaison services. Administrative and accounting
services related to the sale of the Advisor Shares may include (i) aggregating
and processing purchase and redemption requests from Customers and placing net
purchase and redemption orders with the Fund's transfer agent, (ii) processing
dividend payments from the Company on behalf of Customers and (iii) providing
sub-accounting relating to the sale of Advisor Shares beneficially owned by
Customers or the information to the Company necessary for subaccounting. The
Board of Directors of the Company has approved a Distribution Plan (the "Plan")
pursuant to Rule 12b-1 under the 1940 Act under which Counsellors Securities may
pay each participating Intermediary a negotiated fee on an annual basis not to
exceed .25% of the value of the average daily net assets of its Customers
invested in the Advisor Shares. The Company may, in the future, enter into
additional Agreements with Intermediaries. The Board of Directors of The Company
will evaluate the appropriateness of the Plan on a continuing basis.
MULTI-CLASS STRUCTURE
The Company offers other classes of shares of the Funds which are offered
directly to institutional investors and financial institutions pursuant to
separate prospectuses. Shares of each class 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
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 BFDS at 1-800-401-2230.
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
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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, BEA EMERGING MARKETS EQUITY, BEA GLOBAL
TELECOMMUNICATIONS AND 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 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 should be addressed to BFDS, the
Fund's transfer agent.
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
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Company Service, or with the performance of the Standard & Poor's 500 Stock
Index, Standard & Poor's MidCap 400 Index, Moody's Bond Survey Bond Index,
Wilshire 5000 Index, Lehman Brothers Bond Indexes, Consumer Price Index, Bond
Buyer's 20-Bond Index, Dow Jones Industrial Average, national publications such
as Money, Forbes, Barron's, the Wall Street Journal or the New York Times or
publications of a local or regional nature, and other industry publications.
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 PRO-FORMA INFORMATION
INSTITUTIONAL CLASS. The table below presents the prior performance history
of total return on an annualized basis for the Institutional Class of the BEA
International Equity, Emerging Markets Equity and High Yield Funds for period
ending August 31, 1996. The investment objectives, policies and strategies of
the Institutional Class of these Funds, as well as the investment management
teams are identical to those of the Advisor Class. 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 be
greater than that of the Advisor Class. In addition, the past performance of the
Institutional Class of these Funds is not necessarily indicative of the of the
future performance of each Fund. Listed below the performance history for each
Fund is a comparative index comprised of securities similar to those in which
the Funds invest.
<TABLE>
<CAPTION>
ONE THREE SINCE
FUND 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>
- ------------------------------
*BEA International Equity Fund commenced operations on October 1, 1992; BEA
Emerging Markets Equity Fund commenced operations on February 1, 1993; BEA High
Yield Fund commenced operations on March 31, 1993.
PRIVATE ACCOUNTS. The table below presents the composite performance
history on an annualized basis for private accounts managed by BEA for the
period ending September 30, 1996. The investment objectives, policies and
strategies of these private accounts are substantially similar to those of the
corresponding Fund, although the private accounts have significantly longer
operating histories than the corresponding Funds. The management teams for the
Funds and the respective private accounts are identical. The composites include
all accounts managed in the respective investment objectives, policies and
strategies, and show the entire period for which the private accounts were
managed by BEA in this manner. The performance information for the private
accounts include the reinvestment of dividends received in the underlying
securities. The private accounts, which require a minimum investment of $20
million and are only available to BEA's institutional advisory clients, have
lower fees and expenses than the Advisor Class of the corresponding Funds. In
addition, the past performance of the private accounts is not indicative of the
of the future performance of each Fund.
19
<PAGE>
- --------------------------------------------------------------------------------
These 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 private account composites. Listed below the performance history for each
private account is a comparative index comprised of securities similar to those
in which the private accounts and the corresponding Funds invest.
<TABLE>
<CAPTION>
ONE THREE FIVE SEVEN TEN SINCE
PRIVATE ACCOUNT/INDEX YEAR YEARS YEARS YEARS YEARS INCEPTION*
- ----------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
BEA International Equity
Composite......................... 8.8% 6.0% 9.6% 6.1% 17.5% 19.4%
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......................... 5.3% 1.8% 11.2% 16.2% 31.0% 32.4%
Morgan Stanley Capital
International Emerging Markets
Free Index........................ 5.2% 7.4% 14.8% 14.2% n/a n/a
BEA High Yield Composite........... 15.1% 12.7% 17.7% 16.5% n/a 15.9%
CS First Boston High Yield Index... 10.7% 9.3% 12.7% 12.4% n/a 11.7%
</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.
20
<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.
"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 and
municipal 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.
"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.
A-1
<PAGE>
"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.
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.
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.
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.
"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-2
<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
INTERNATIONAL EQUITY
EMERGING MARKETS EQUITY
GLOBAL TELECOMMUNICATIONS
HIGH YIELD
(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"): BEA International Equity, BEA Emerging
Markets Equity, BEA Global Telecommunications and 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 November 1, 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 November 1, 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.
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 portfolio securities subject to legal restrictions on resale,
will not exceed
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.
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 Fund 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
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
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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
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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
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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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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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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
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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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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
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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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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
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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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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.
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
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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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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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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.
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
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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.
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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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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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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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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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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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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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:
Principal Occupation
Name, Address and Age Position with RBB 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
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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).
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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 - 56 Secretary Chairman of the law firm of
1100 PNB Bank Building Drinker Biddle & Reath,
Broad and Chestnut Streets Philadelphia, Pennsylvania;
Philadelphia, PA 19107 Director, Rocking Horse Child
Care Centers of America, Inc.
- ---------------
* 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.
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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 of sub-advisor of the
Company or the Distributor $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:
Director 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, BEA Emerging Markets Equity
and 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."
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<PAGE>
BEA Associates is a diversified asset manager, handling global equity,
balanced, fixed income and derivative securities accounts for private
individuals, as well as corporate pension and profit-sharing plans, state
pension funds, union funds, endowments and other charitable institutions. As
of September 30, 1996, BEA Associates managed approximately $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 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 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, twenty-two of which are equity funds and twenty of
which are debt 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, BEA Emerging Markets Equity, BEA Global Telecommunications and 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.
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<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.
Boston Financial Data Services, Inc. ("BFDS"), an affiliate of State
Street Bank and Trust Company, serves as the transfer and dividend disbursing
agent for the Advisor Classes pursuant to a Transfer Agency Agreement (the
"Transfer Agency Agreement"), under which BFDS (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
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<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, BFDS 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")
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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.
Fund 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.
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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.
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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, BEA International Equity
Portfolio paid $3,192,274.36 of brokerage commissions, 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.
BEA International Equity, BEA Emerging Markets Equity and BEA Global
Telecommunications Portfolios expect that their annual Fund turnover rate should
not exceed 100% under normal market conditions. BEA High Yield Portfolio
anticipates that its portfolio turnover may exceed 100%. 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.
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 the Company
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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
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
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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.
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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.
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
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<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 Portfolio (commencing October 1, 1992)
was 8.98% (annualized), BEA Emerging Markets Equity Portfolio (commencing
February 1, 1993) was 7.63% (annualized) and BEA High Yield Portfolio
(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 BEA Emerging Markets Equity Portfolios 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
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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.
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
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<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
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<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.
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
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<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."
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<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
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<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
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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.
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
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.
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
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
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
(Growth & Income), 100 million shares are classified as Class B Common Stock,
100 million shares are classified as Class C Common Stock (Balanced), 100
million shares are classified as Class D Common Stock (Tax-Free), 500 million
shares are classified as Class E Common Stock (Money), 500 million shares are
classified as Class F Common Stock (Municipal Money), 500 million shares are
classified as Class G Common Stock (Money), 500 million shares are classified as
Class H Common Stock (Municipal Money), 1 billion shares are classified as Class
I Common Stock (Money), 500 million shares are classified as Class J Common
Stock (Municipal Money), 500 million shares are classified as Class K Common
Stock (U.S. Government Money), 1,500 million shares are classified as Class L
Common Stock (Money), 500 million shares are classified as Class M Common Stock
(Municipal Money), 500 million shares are classified as Class N Common Stock
(U.S. Government Money), 500 million shares are classified as Class O Common
Stock (N.Y. Money), 100 million shares are classified as Class P Common Stock
(Government), 100 million shares are classified as Class Q Common Stock, 500
million shares are classified as Class R Common Stock (Municipal Money), 500
million shares are classified as Class S Common Stock (U.S. Government Money),
500 million shares are classified as Class T Common Stock (International), 500
million shares are classified as Class U Common Stock (High Yield), 500 million
shares are classified as Class V Common Stock (Emerging), 100 million shares are
classified as Class W Common Stock (Laffer/Canto Equity), 50 million shares are
classified as Class X Common Stock (U.S. Core Equity), 50 million shares are
classified as Class Y Common Stock (U.S. Core Fixed Income), 50 million shares
are classified as Class Z Common Stock (Global Fixed Income), 50 million shares
are classified as Class AA Common Stock (Municipal Bond), 50 million shares are
classified as Class BB Common Stock (BEA Balanced), 50 million shares are
classified as Class CC Common Stock (Short Duration), 100 million shares are
classified as Class DD Common Stock (Growth & Income Series 2), 100 million
shares are
57
<PAGE>
classified as Class EE Common Stock (Balanced Series 2), 50 million shares are
classified as Class FF (n/i Micro Cap), 50 million shares are classified as
Class GG (n/i Growth), 50 million shares are classified as Class HH (n/i Growth
& Value), 100 million shares are classified as Class II (BEA Investor
International), 100 million shares are classified as Class JJ (BEA Investor
Emerging), 100 million shares are classified as Class KK (BEA Investor High
Yield), 100 million shares are classified as Class LL (BEA Investor Global
Telecom), 100 million shares are classified as Class MM (BEA Advisor
International), 100 million shares are classified as Class NN (BEA Advisor
Emerging), 100 million shares are classified as Class OO (BEA Advisor High
Yield), 100 million shares are classified as Class PP (BEA Advisor Global
Telecom), 100 MILLION SHARES ARE CLASSIFIED AS CLASS QQ (BOSTON PARTNERS
INSTITUTIONAL LARGE CAP), 100 MILLION SHARES ARE CLASSIFIED AS CLASS RR (BOSTON
PARTNERS INVESTOR LARGE CAP), 100 MILLION SHARES ARE CLASSIFIED AS CLASS SS
(BOSTON PARTNERS ADVISOR LARGE CAP), 700 million shares are classified as Class
Janney Money Common Stock, 200 million shares are classified as Class Janney
Municipal Money Common Stock, 500 million shares are classified as Class Janney
U.S. Government Money Common Stock, 100 million shares are classified as Class
Janney N.Y. 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 Family represents interests in nine 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
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<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
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<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
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<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
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<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
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<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
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<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.
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<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>
THE BEA FAMILY
THE RBB FUND, INC.
BEA International Equity Portfolio
STATEMENT OF NET ASSETS
August 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
COMMON AND CONVERTIBLE STOCKS, WARRANTS AND RIGHTS -- 96.4%
ARGENTINA -- 0.2%
Sodigas del Sur S.A.+...................... 403,923 $ 745,416
Sodigas Pampeana S.A.+..................... 558,962 844,809
------------
1,590,225
------------
AUSTRALIA -- 2.0%
Broken Hill Corp. Ltd...................... 240,546 3,273,168
CRA Ltd.................................... 224,900 3,415,701
News Corp. Ltd. ADR........................ 94,000 1,997,500
News Corp. Ltd. Pfd. ADR................... 46,900 832,475
WMC Ltd.................................... 564,500 3,925,398
------------
13,444,242
------------
BRAZIL -- 2.7%
Banco Bradesco S.A. PN..................... 556,077,084 4,705,099
Centrais Eletricas Brasileiras S.A. ON..... 63,836 16,957
Cia. Cervejaria Brahma PN Warrants Expire
9/30/96**................................ 369,916 134,660
Cia. Tecidos Norte de Minas Gerais PN...... 9,556,000 3,243,813
Cia. Vale do Rio Doce ADR.................. 196,900 3,825,570
Lojas Americanas S.A. PN................... 56,034,786 970,299
Telecomunicacoes de Sao Paulo S.A. PN...... 28,410,000 5,450,561
------------
18,346,959
------------
CANADA -- 0.6%
Magna International, Inc. Class A.......... 85,600 4,130,200
------------
DENMARK -- 0.3%
Unidanmark A/S 144A........................ 52,990 2,343,788
------------
FINLAND -- 1.3%
Nokia Corp. ADR............................ 24,000 1,014,000
Nokia Corp. Class A........................ 102,196 4,344,582
UPM-Kymmene Corp........................... 139,020 3,178,986
------------
8,537,568
------------
FRANCE -- 7.6%
Accor...................................... 24,025 2,908,814
AXA S.A.................................... 56,764 3,186,318
Bertrand Faure............................. 118,121 3,884,485
BIC S.A.................................... 35,620 5,199,127
Carrefour Super Marche..................... 14,214 7,184,204
Christian Dior S.A......................... 32,971 3,972,911
Compagnie Generale Des Eaux................ 39,100 3,771,764
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
FRANCE -- (CONTINUED)
Compagnie Generale Des Eaux Certificates... 1,002 $ 96,657
Credit Local de France..................... 52,111 4,291,978
G.T.M. Entrepose S.A....................... 67,182 4,040,474
G.T.M. Entrepose S.A. Certificates......... 1,912 114,992
Groupe Danone.............................. 6,733 929,561
L'Air Liquide.............................. 8,300 1,413,115
Legrand.................................... 9,764 1,459,875
Michelin Class B........................... 36,558 1,708,399
Technip S.A................................ 49,209 4,461,175
Valeo S.A.................................. 67,691 3,409,284
------------
52,033,133
------------
GERMANY -- 5.4%
Adidas AG.................................. 63,800 5,498,513
Commerzbank AG............................. 7,950 1,832,466
Degussa CN................................. 9,950 3,485,930
Deutsche Bank AG........................... 68,890 3,412,369
GEA AG Non Voting Pfd...................... 10,346 3,356,820
Hoechst AG................................. 172,450 6,026,541
Man AG..................................... 12,260 3,082,817
RWE AG..................................... 55,700 2,028,227
SAP AG..................................... 5,450 905,509
SAP AG 144A ADR............................ 61,500 3,361,959
Volkswagen AG.............................. 10,821 4,015,634
------------
37,006,785
------------
HONG KONG -- 4.5%
Cheung Kong Holdings Ltd................... 757,500 5,315,188
Citic Pacific Ltd.......................... 1,143,900 5,030,408
Hong Kong and China Gas.................... 2,409,000 3,894,781
HSBC Holdings PLC.......................... 409,408 7,069,381
New World Development Company.............. 858,000 4,161,547
Sun Hung Kai Properties Ltd................ 505,300 4,934,379
------------
30,405,684
------------
INDIA -- 0.7%
India Liberalisation Fund Class A 144A
**/****.................................. 276,532 1,960,612
Indian Opportunity Fund Ltd. **............ 320,156 2,958,241
------------
4,918,853
------------
INDONESIA -- 1.1%
PT Astra International***.................. 2,320,100 3,022,125
PT Telekomunikasi***....................... 2,177,500 3,068,866
PT Telekomunikasi Indonesia ADR............ 41,900 1,167,963
------------
7,258,954
------------
</TABLE>
See Accompanying Notes to Financial Statements.
4
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
ISRAEL -- 1.0%
Geotek Communications, Inc. Series M
Cumulative Convertible Pfd.+............. 600 $ 6,476,842
------------
ITALY -- 2.7%
Banca Fideuram S.p.A....................... 1,351,600 2,989,236
Edison S.p.A............................... 460,000 2,485,499
Istituto Mobiliare Italiano S.p.A.......... 746,500 5,882,234
Telecom Italia Mobile S.p.A**.............. 1,014,784 2,089,775
Telecom Italia Mobile Non-Convertible
Savings Shares**......................... 1,347,050 1,641,221
Telecom Italia Non-Convertible Savings
Shares................................... 1,347,050 2,163,022
Telecom Italia S.p.A....................... 724,984 1,423,373
------------
18,674,360
------------
JAPAN -- 22.2%
Aida Engineering Ltd....................... 78,000 580,278
Aoki International Company Ltd............. 58,000 1,121,444
Aoyama Trading Company..................... 79,000 2,087,561
Bank of Tokyo - Mitsubshi.................. 137,000 2,787,681
Chudenko Corp.............................. 15,000 480,619
Chugai Pharmaceutical Company Ltd.......... 173,000 1,537,105
Chugoku Bank, Ltd.......................... 98,000 1,570,021
Dai-Ichi Kangyo Bank Ltd................... 244,000 4,043,827
Daiichi Pharmaceutical Company Ltd......... 203,000 3,102,661
Daiwa House................................ 247,000 3,524,998
Daiwa Securities Company Ltd............... 107,000 1,211,767
Danto Corp................................. 47,000 532,271
Fuji Photo Film Company Ltd................ 163,000 4,907,559
Fujitsu Limited............................ 309,000 2,785,296
Higo Bank.................................. 203,000 1,463,484
Hitachi Cable.............................. 153,000 1,119,925
Hitachi Ltd................................ 529,000 4,860,897
Hitachi Metals Ltd......................... 93,000 856,275
Hokuetsu Paper Mills....................... 189,000 1,444,342
House Food Indl............................ 92,000 1,677,194
Industrial Bank of Japan Ltd............... 181,900 3,868,787
Industrial Bank of Japan Ltd. Rights....... 14,552 150,062
Kikkoman................................... 160,000 1,168,217
Kinden Corp................................ 83,000 1,268,576
Kirin Brewery Company Ltd.................. 127,000 1,309,640
Kyocera Corp............................... 25,000 1,698,739
Kyudenko Company Ltd....................... 53,000 678,298
Kyushu Electric Power...................... 171,000 3,668,447
Makita Electric Works...................... 85,000 1,220,882
Maruichi Steel Tube........................ 48,000 817,604
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
JAPAN -- (CONTINUED)
Matsushita Electric Works.................. 127,000 $ 1,262,867
Mitsubishi ElectricCorp.................... 463,000 2,971,283
Mitsubishi Estate Company Ltd.............. 188,000 2,302,182
Mitsubishi Gas and Chemical Company........ 286,000 1,179,707
Mitsubishi Steel Manufacturing **.......... 257,500 1,299,236
Mitsubishi Trust and Banking Corp.......... 101,000 1,515,790
Mitsui Petrochemical....................... 318,000 2,143,228
Murata Manufacturing Company Ltd........... 50,000 1,767,793
NEC Corp................................... 365,000 3,898,352
Nichicon................................... 212,000 2,908,388
Nippon Chemi-Con Corp...................... 123,000 765,565
Nippon Meat Packers........................ 153,000 2,127,152
Nippon Oil Company......................... 504,000 3,085,904
Nippon Paper Industries Co................. 463,000 2,770,923
Nisshin Steel Company Ltd.................. 504,000 1,832,980
Nomura Securities Company Ltd.............. 188,000 3,271,522
Ricoh Company Ltd.......................... 160,000 1,561,550
Rinnai..................................... 57,000 1,291,041
Sakura Bank Ltd............................ 289,000 2,740,724
Sanwa Bank................................. 214,000 3,783,077
Seino Transportation Company Ltd........... 198,000 2,916,858
Sekisui Chemical Co........................ 250,000 2,716,140
Sekisui House Ltd.......................... 463,000 4,902,403
Shimachu................................... 26,000 742,105
Shimano Inc................................ 76,000 1,406,500
Shin-Etsu Chemical Co...................... 171,000 3,022,926
Shionogi & Company Ltd..................... 193,000 1,508,673
Shiseido Company Ltd....................... 238,000 2,892,551
Sumitomo Bank Ltd.......................... 102,000 1,868,889
SXL Corp................................... 132,000 1,227,511
Takara Standard............................ 63,000 649,664
Tohoku Electric Power Company.............. 169,000 3,641,101
Tokai Bank Ltd............................. 163,000 1,936,010
Tokio Marine and Fire Insurance Company.... 206,000 2,351,901
Tokyo Style Corp. Ltd...................... 81,000 1,297,671
Toppan Printing............................ 341,000 4,301,353
Toshiba Corp............................... 526,000 3,399,797
UNY Company Ltd............................ 95,000 1,670,656
Yakult Honsha.............................. 22,000 1,595,065
Yamaguchi Bank............................. 102,000 1,549,581
Yamanouchi Pharmaceutical.................. 142,000 2,928,644
Yokogawa Bridge Corp....................... 51,000 638,615
------------
151,188,335
------------
MALAYSIA -- 2.3%
Diversified Resources Berhad............... 1,568,700 5,129,350
</TABLE>
See Accompanying Notes to Financial Statements.
5
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
MALAYSIA -- (CONTINUED)
Malayan Banking Berhad..................... 560,300 $ 5,327,627
Petronas Gas Berhad International.......... 955,000 3,984,754
YTL Corp. Berhad........................... 287,300 1,417,769
------------
15,859,500
------------
MEXICO -- 2.7%
Cementos Mexicanos CPO, S.A................ 1,134,500 4,147,232
Corparacion GEO S.A. de C.V. Class B **.... 691,600 3,486,522
Corporacion Industrial SanLuis S.A. de C.V.
CPO...................................... 601,894 3,570,457
Grupo Elektra S.A. de C.V. CPO............. 282,600 2,006,451
Grupo Modelo S.A. de C.V. Class C.......... 484,200 2,236,490
Kimberly Clark de Mexico S.A. de C.V. Class
A........................................ 160,600 2,950,250
Telefonos de Mexico S.A. de C.V.
Unsponsored ADR.......................... 4,400 6,875
------------
18,404,277
------------
NETHERLANDS -- 3.3%
Akzo Nobel................................. 36,200 4,209,658
Heineken N.V............................... 15,200 3,383,072
Internationale Nederlanden Groep N.V....... 115,100 3,587,334
Nutricia Verenigde Bedrijven N.V........... 26,100 3,493,007
VNU Verenigd Bezit......................... 15,000 262,659
Wolters Kluwer............................. 60,400 7,591,878
------------
22,527,608
------------
PHILIPPINES -- 1.0%
Ayala Corp. Class B........................ 2,940,600 3,428,452
Philippine Long Distance Telephone Company
ADR...................................... 53,050 3,176,369
------------
6,604,821
------------
PORTUGAL -- 0.6%
Portugal Telecom S.A. ADR **............... 52,380 1,394,617
Portugal Telecom S.A. Register............. 103,000 2,755,946
------------
4,150,563
------------
PUERTO RICO -- 0.5%
Cellular Communications of Puerto Rico,
Inc. ADR **.............................. 130,900 3,501,575
------------
RUSSIA -- 0.2%
PLD Telekom, Inc........................... 192,900 1,470,862
------------
SINGAPORE -- 2.2%
DBS Land Ltd............................... 470,600 1,565,878
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
SINGAPORE -- (CONTINUED)
Overseas-Chinese Banking Corp. Ltd.***..... 458,770 $ 5,512,416
Singapore Press Holdings***................ 168,400 2,921,408
United Overseas Bank Ltd.***............... 488,980 4,693,374
------------
14,693,076
------------
SOUTH AFRICA -- 2.2%
Amalgamated Banks of South Africa Ltd...... 602,443 2,779,886
Anglo American Industrial Corp. Ltd........ 80,658 2,984,670
Gencor Ltd................................. 910,500 3,206,844
South African Breweries Ltd................ 194,412 5,157,162
South African Breweries Ltd. ADR........... 22,813 604,955
------------
14,733,517
------------
SOUTH KOREA -- 1.5%
Korea Fund, Inc............................ 551,525 10,547,916
------------
SPAIN -- 2.3%
Banco Intercontinental Espanol............. 34,400 3,892,212
Banco Popular.............................. 20,000 3,470,334
Repsol S.A. ADR............................ 122,500 3,996,562
Telefonica de Espana ADR................... 81,700 4,524,137
------------
15,883,245
------------
SWEDEN -- 4.8%
Astra AB Fria Class A...................... 168,920 7,145,192
Autoliv AB................................. 140,800 4,647,602
Ericsson Telephone Company ADR Class B..... 249,460 5,753,171
Hennes & Mauritz Fria Class B.............. 70,004 7,275,890
Mo Och Domsjo AB - B Shares................ 138,200 3,998,081
Stora Kopparbergs Bergslags Aktiebolag A
Shares................................... 255,800 3,593,836
------------
32,413,772
------------
SWITZERLAND -- 5.1%
ABB AG..................................... 5,006 6,171,952
Ciba Geigy AG Registered................... 4,484 5,662,938
Holderbank Financiere Glaris AG Class B.... 5,507 4,214,260
Roche Holding AG........................... 665 5,069,544
Sandoz AG Registered....................... 3,250 3,868,790
Schweiz Bankgesellschaft B................. 3,627 3,522,387
Swiss Reinsurance Company Registered....... 6,010 6,497,974
------------
35,007,845
------------
</TABLE>
See Accompanying Notes to Financial Statements.
6
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
THAILAND*** -- 2.3%
Advanced Information Services Public
Company Ltd.............................. 214,900 $ 2,844,891
Krung Thai Bank Public Company Ltd......... 840,570 3,631,476
Phatra Thanakit Public Company Ltd......... 325,000 1,932,224
Siam Cement Company Ltd.................... 80,500 3,101,308
Thai Farmers Bank Public Company Ltd....... 405,300 4,305,208
Thai Farmers Bank Public Company Ltd.
Warrants Expire 09/15/2002............... 50,663 136,546
------------
15,951,653
------------
UNITED KINGDOM -- 13.1%
Berkeley Group PLC......................... 20,400 185,199
British Petroleum PLC...................... 463,446 4,489,515
British Sky Broadcasting Group PLC ADR**... 95,590 5,126,014
Burton Group PLC........................... 952,800 2,268,455
Dixons Group PLC........................... 294,921 2,490,930
EMI Group PLC.............................. 301,000 6,771,564
Flextech PLC **............................ 162,092 1,301,984
General Cable PLC **....................... 1,198,400 3,330,277
General Cable PLC ADR **................... 339,200 4,621,600
International Cabletel, Inc. **............ 182,842 4,433,918
Land Securities PLC........................ 364,000 3,872,806
Rank Organisation PLC...................... 116,100 812,024
Reuters Holdings PLC Class B............... 249,520 2,906,048
Reuters Holdings PLC ADR Class B........... 56,200 3,926,975
Rolls Royce PLC............................ 2,083,300 7,220,434
Scottish & Newcastle PLC................... 514,100 5,437,703
Standard Chartered Bank PLC................ 941,459 10,435,618
Unilever PLC............................... 104,800 2,077,077
United News & Media PLC.................... 275,000 3,076,149
WPP Group PLC.............................. 2,824,051 10,162,534
Zeneca Group PLC........................... 180,900 4,321,043
------------
89,267,867
------------
TOTAL COMMON AND CONVERTIBLE STOCKS,
WARRANTS AND RIGHTS (Cost
$610,436,063)........................... 657,374,025
------------
<CAPTION>
PAR
(000)
-----------
<S> <C> <C>
FOREIGN BONDS**** -- 0.4%
SOUTH AFRICA -- 0.4%
Sappi BVI Finance Ltd. Convertible 144A
7.500% 08/01/2002........................ $ 3,240 2,948,400
------------
TOTAL FOREIGN BONDS
(Cost $3,240,000)....................... 2,948,400
------------
SHORT-TERM INVESTMENT -- 2.7%
BBH Grand Cayman U.S. Dollar Time Deposit
4.750% 09/03/1996........................ 18,530 18,530,000
------------
TOTAL SHORT-TERM INVESTMENT
(Cost $18,530,000)...................... 18,530,000
------------
<CAPTION>
VALUE
------------
<S> <C> <C>
TOTAL INVESTMENTS AT VALUE -- 99.5%
(Cost $632,206,063)................................... $678,852,425
OTHER ASSETS IN EXCESS
OF LIABILITIES -- 0.5%................................ 3,418,376
------------
NET ASSETS (Applicable to
35,142,215 BEA Shares) -- 100.0%...................... $682,270,801
------------
------------
NET ASSET VALUE AND OFFERING
PRICE PER SHARE
($682,270,801 DIVIDED BY 35,142,215)................. $19.41
------------
------------
REDEMPTION PRICE PER SHARE
($19.41 X .9900)...................................... $19.22
------------
------------
</TABLE>
* Cost for Federal income tax purposes at August 31, 1996 is $632,398,515. The
gross appreciation (depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation.......... $ 81,589,602
Gross Depreciation.......... (35,135,692)
---------------
Net Appreciation............ $ 46,453,910
---------------
---------------
</TABLE>
** Non-income producing securities.
*** Denotes foreign shares.
**** Certain conditions for public sales may exist.
+ Not readily marketable securities.
See Accompanying Notes to Financial Statements.
7
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONCLUDED)
AUGUST 31, 1996
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
ADR........................... American Depository Receipts
</TABLE>
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
<TABLE>
<CAPTION>
PER
AMOUNT SHARE
------------ ------
<S> <C> <C>
Capital Paid-In............... $655,735,487 $18.66
Accumulated Net Investment
Income....................... 4,139,511 .12
Accumulated Net Realized Loss
on Security and Foreign
Exchange Transactions........ (24,260,422) (.69)
Net Unrealized Appreciation on
Investments and Other........ 46,656,225 1.32
- ----------------------------------------------------
NET ASSETS.................... $682,270,801 $19.41
- ----------------------------------------------------
</TABLE>
See Accompanying Notes to Financial Statements.
8
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA Emerging Markets Equity Portfolio
STATEMENT OF NET ASSETS
August 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
COMMON AND CONVERTIBLE STOCKS, WARRANTS AND RIGHTS -- 95.6%
BRAZIL -- 15.7%
Banco Bradesco S.A. PN..................... 321,471,549 $ 2,720,047
Centrais Eletricas de Santa Catarin PN
Class B.................................. 842,000 745,573
Cia. Energetica de Minas Gerais 144A
ADS****.................................. 183 5,509
Cia. Energetica de Minas Gerais ADR........ 23,673 712,628
Cia. Energetica de Minas Gerais PN......... 18,320,000 551,547
Cia. Paulista de Forca e Luz ON**.......... 14,527,220 1,307,793
Cia. Tecidos Norte de Minas Gerais PN...... 2,862,000 971,514
Lojas Americanas S.A. PN................... 10,047,000 173,974
Multibras Eletrodo S.A. PN................. 770,000 1,136,364
Refrigeracao Parana S.A. PN................ 573,223,000 1,483,251
Santista Alimentos S.A.**.................. 722,500 1,329,275
Telecomunicacoes de Minas Gerais PN Class
B........................................ 22,548,000 2,562,273
Telecomunicacoes de Minas Gerais S.A. ON... 280,905 25,150
Telecomunicacoes de Sao Paulo S.A. PN...... 3,430,928 658,236
Telecomunicacoes do Parna S.A. PN.......... 1,565,000 751,397
Telecomunicacoes do Rio de Janeiro S.A.
ON....................................... 2,260,000 240,142
Telecomunicacoes do Rio de Janeiro S.A.
PN....................................... 19,756,000 2,118,658
Usinas Siderurgica de Minas Gerais S.A.
PN....................................... 554,102,395 577,871
------------
18,071,202
------------
CHILE -- 2.8%
Chilectra S.A. 144A ADR****................ 14,849 804,549
Enersis S.A. ADR........................... 19,400 603,825
Madeco S.A. Sponsored ADR.................. 49,600 1,171,800
Maderas y Sinteticos ADR................... 46,500 656,813
------------
3,236,987
------------
COLOMBIA -- 2.0%
Banco Ganadero S.A. PFD ADR 8.75%.......... 19,100 386,775
Banco Industrial Colombiano S.A. ADR....... 19,500 363,187
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
COLOMBIA -- (CONTINUED)
Carrulla & CIA 144A S.A. ADR****........... 45,400 $ 244,252
Cementos Diamante S.A. 144A ADS****........ 42,300 444,150
Cementos Paz del Rio 144A ADR****.......... 34,200 410,400
Gran Cadena Almacenes ADR.................. 42,300 406,926
------------
2,255,690
------------
CROATIA -- 3.1%
Pliva D.D. GDR 144A****.................... 63,000 2,850,750
Zagrebacka Banka GDR....................... 55,000 704,055
------------
3,554,805
------------
ECUADOR -- 0.5%
Cemento Nacional Ecuador GDR............... 2,896 535,760
------------
GHANA -- 2.6%
Ashanti Goldfields Co. Ltd. Sponsored
GDR...................................... 159,500 2,970,687
------------
HONG KONG -- 9.5%
Cheung Kong Holdings Ltd................... 147,000 1,031,462
Citic Pacific Ltd.......................... 228,000 1,002,651
Hang Seng Bank Ltd......................... 96,000 984,026
Henderson Land Development Co. Ltd......... 130,000 1,017,267
HKR International Ltd...................... 1,153,600 1,454,776
HSBC Holdings PLC.......................... 60,000 1,036,021
Hutchinson Whampoa Ltd..................... 175,000 1,059,303
Sun Hung Kai Properties Ltd................ 90,000 878,872
Swire Pacific Ltd. Class A................. 106,500 947,019
Wharf Holdings Ltd......................... 383,000 1,446,498
------------
10,857,895
------------
INDIA -- 3.2%
Hindalco 144A GDR****...................... 17,900 595,175
India Fund Class B......................... 510,670 872,998
Larsen & Toubro Ltd. GDR Reg. S New........ 80,000 1,300,000
Morgan Stanley India Investment Fund,
Inc...................................... 105,200 959,950
------------
3,728,123
------------
INDONESIA*** -- 4.2%
Bank International Indonesia, PT........... 510,466 1,177,244
Matahari Putra Prima, PT................... 385,250 505,934
PT Astra International..................... 494,000 643,476
PT Bank Dagang Nasional.................... 1,071,000 754,709
</TABLE>
See Accompanying Notes to Financial Statements.
12
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA EMERGING MARKETS EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
INDONESIA*** -- (CONTINUED)
PT Hanjaya Mandala Sampoerna............... 82,500 $ 794,523
PT Telekomunikasi.......................... 637,000 897,758
------------
4,773,644
------------
ISRAEL -- 4.9%
ECI Telecom Ltd............................ 64,140 1,322,887
Elscint Ltd. ADR........................... 15,050 137,331
Geotek Communications, Inc.**.............. 167,400 1,527,525
Koor Industries Ltd. ADR**................. 67,300 1,160,925
Tecnomatix Technologies**.................. 38,200 759,225
Teva Pharmaceutical Industries Ltd. ADR.... 19,130 697,049
------------
5,604,942
------------
MALAYSIA -- 7.9%
Diversified Resources Berhad............... 210,000 686,660
Malayan Banking Berhad..................... 296,500 2,819,278
Malaysian Resources Corp. Berhad........... 414,000 1,312,177
New Straits Times Press Berhad............. 244,000 1,370,512
Renong Berhad Holding Company.............. 515,000 752,096
Time Engineering........................... 391,000 831,414
Time Engineering New Class A............... 195,500 415,707
United Engineers Malaysia Ltd.............. 128,000 908,967
------------
9,096,811
------------
MEXICO -- 9.9%
Apasco S.A. de C.V......................... 170,240 1,145,792
Cementos Mexicanos S.A. de C.V. Class B.... 395,000 1,636,820
Corporacion GEO S.A. de C.V. 144A ADR Class
B**/****................................. 38,100 767,334
Corporacion GEO S.A. de C.V. Class B**..... 140,780 709,706
Corporacion Industrial SanLuis S.A. de C.V.
CPO...................................... 414,574 2,459,268
Grupo Elektra S.A. de C.V. CPO............. 228,000 1,618,792
Grupo Financiero Banamex Accival S.A. de
C.V. Class B............................. 508,900 1,079,922
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
MEXICO -- (CONTINUED)
Grupo Modelo S.A. de C.V. Class C.......... 295,000 $ 1,362,587
Kimberly Clark de Mexico S.A. de C.V. Class
A........................................ 30,770 565,250
------------
11,345,471
------------
PERU -- 1.7%
Backus y Johnson........................... 476,231 476,231
Banco Wiese ADR............................ 54,900 384,300
Credicorp Ltd. ADR......................... 27,800 542,100
Southern Peru Copper Corp. ADR............. 32,800 500,200
------------
1,902,831
------------
PHILIPPINES -- 1.8%
Ayala Corp. Class B........................ 908,400 1,059,105
Philippine National Bank................... 59,000 986,716
------------
2,045,821
------------
PORTUGAL -- 3.0%
Banco Comercial Portugues PFD Series A..... 22,000 1,094,500
Portugal Telecom S.A. ADR**................ 17,300 460,613
Portugal Telecom S.A. Register**........... 27,000 722,432
Sonae Industria e Investimentos S.A........ 42,050 1,211,328
------------
3,488,873
------------
PUERTO RICO -- 0.7%
Cellular Communications of Puerto Rico,
Inc. ADR**............................... 30,700 821,225
------------
RUSSIA -- 0.7%
PLD Telekom, Inc.**........................ 101,900 776,988
------------
SINGAPORE -- 1.7%
Overseas-Chinese Banking Corp. Ltd.***..... 55,000 660,860
Straits Steamship Land Ltd................. 215,000 736,793
United Overseas Bank Ltd.***............... 61,280 588,183
------------
1,985,836
------------
SOUTH AFRICA -- 7.8%
Amalgamated Banks of South Africa Ltd...... 114,959 530,462
Anglo American Industrial Corp. Ltd........ 49,916 1,847,092
Barlow Ltd................................. 65,100 599,338
</TABLE>
See Accompanying Notes to Financial Statements.
13
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA EMERGING MARKETS EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONCLUDED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
SOUTH AFRICA -- (CONTINUED)
Gencor Ltd................................. 285,430 $ 1,005,304
Murray and Roberts Holdings................ 283,608 979,921
Nasionale Pers Beperk...................... 55,987 586,578
Nedcor Ltd. Warrants**..................... 7,300 12,775
Pepkor Ltd................................. 381,000 1,528,756
SA Iron & Steel Industrial Corp. Ltd....... 1,848,647 1,108,529
Samancor Ltd............................... 58,500 746,573
------------
8,945,328
------------
SOUTH KOREA -- 4.5%
Korea Asia Fund Ltd. IDR**................. 22,500 500,625
Korea Electric Power ADR New**............. 58,000 1,232,500
Korea Fund, Inc............................ 176,350 3,372,694
------------
5,105,819
------------
THAILAND*** -- 7.4%
Advanced Information Services Public
Company Ltd.............................. 53,700 710,892
Bangkok Bank Ltd........................... 152,000 1,927,864
Krung Thai Bank Public Company Ltd......... 349,980 1,512,002
Phatra Thanakit Public Company Ltd......... 300,700 1,787,753
PTT Exploration & Production Public Company
Ltd...................................... 50,600 693,920
Siam Cement Company Ltd.................... 19,800 762,806
Thai Farmers Bank Public Company Ltd....... 100,000 1,062,227
Thai Farmers Bank Public Company Ltd.
Warrants Expire 09/15/2002............... 12,500 33,690
------------
8,491,154
------------
TOTAL COMMON AND CONVERTIBLE STOCKS,
WARRANTS AND RIGHTS (Cost
$101,425,342)........................... 109,595,892
------------
<CAPTION>
PAR
(000)
-----------
<S> <C> <C>
FOREIGN BONDS**** -- 0.8%
COLOMBIA -- 0.8%
Banco de Colombia Convertible 144A
5.200% 02/01/1999........................ $ 1,100 968,000
------------
TOTAL FOREIGN BONDS
(Cost $1,218,096)......................... 968,000
------------
<CAPTION>
PAR
(000) VALUE
----------- ------------
<S> <C> <C>
SHORT-TERM INVESTMENT -- 2.1%
BBH Grand Cayman U.S. Dollar Time Deposit
4.750% 09/03/1996........................ $ 2,388 $ 2,388,000
------------
TOTAL SHORT-TERM INVESTMENT
(Cost $2,388,000)....................... 2,388,000
------------
TOTAL INVESTMENTS AT VALUE -- 98.5% (Cost
$105,031,438)......................................... $112,951,892
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.5%...........
1,739,317
------------
NET ASSETS (Applicable to 6,300,570 BEA Shares) --
100.0%................................................ $114,691,209
------------
------------
NET ASSET VALUE AND OFFERING PRICE PER
SHARE($114,691,209 DIVIDED BY 6,300,570)............. $18.20
------------
------------
REDEMPTION PRICE PER SHARE
($18.20 X .9850)...................................... $17.93
------------
------------
</TABLE>
* Cost for Federal income tax purposes at August 31, 1996 is $105,388,350.
The gross appreciation (depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation........................... $ 15,753,954
Gross Depreciation........................... (8,190,412)
-------------
Net Appreciation............................. $ 7,563,542
-------------
-------------
</TABLE>
** Non-income producing securities.
*** Denotes foreign shares.
**** Certain conditions for public sales may exist.
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
ADR........................... American Depository Receipts
ADS........................... American Depository Shares
GDR........................... Global Depository Receipts
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
<CAPTION>
AMOUNT
---------------
PER
SHARE
--
<S> <C>
Capital Paid-In.................... $ 129,649,735 $ 20.58
Accumulated Net Investment Loss.... (152,984) (.02)
Accumulated Net Realized Loss on
Security and Foreign Exchange
Transactions...................... (22,726,257) (3.61)
Net Unrealized Appreciation on
Investments and Other............. 7,920,715 1.25
- -------------------------------------------------------------
NET ASSETS $ 114,691,209 $ 18.20
- -------------------------------------------------------------
</TABLE>
See Accompanying Notes to Financial Statements.
14
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA U.S. Core Equity Portfolio
STATEMENT OF NET ASSETS
August 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
------------- -------------
<S> <C> <C>
COMMON AND CONVERTIBLE STOCKS -- 93.7%
AEROSPACE / DEFENSE -- 6.2%
Coltec Industries, Inc.**.................. 80,700 $ 1,210,500
Lockheed Martin Corp....................... 18,000 1,514,250
Raytheon Company........................... 15,000 772,500
Whittaker Corp.**.......................... 10,000 140,000
-------------
3,637,250
-------------
BROADCASTING -- 0.5%
Providence Journal Company**............... 16,000 310,000
-------------
310,000
-------------
BUSINESS SERVICES -- 5.0%
Automatic Data
Processing, Inc.......................... 35,000 1,456,875
DST Systems, Inc.**........................ 28,000 861,000
Equifax, Inc............................... 25,200 642,600
-------------
2,960,475
-------------
CHEMICALS -- 2.1%
Great Lakes Chemical Corp.................. 12,000 690,000
The Scotts Company Class A**............... 27,000 506,250
-------------
1,196,250
-------------
CONGLOMERATES -- 5.4%
Allied-Signal, Inc......................... 9,500 586,625
General Electric Co........................ 15,000 1,246,875
Philip Morris Companies, Inc............... 7,550 677,612
Whitman Corp............................... 30,000 671,250
-------------
3,182,362
-------------
CONSTRUCTION & BUILDING MATERIALS -- 2.9%
Fluor Corp................................. 10,000 640,000
Masco Corp................................. 20,000 582,500
USG Corporation**.......................... 16,000 456,000
-------------
1,678,500
-------------
CONSUMER PRODUCTS -- 4.1%
Clorox Co.................................. 7,000 655,375
Colgate-Palmolive Co....................... 7,200 585,000
Gillette Co................................ 10,000 637,500
Newell Co.................................. 17,000 529,125
-------------
2,407,000
-------------
ELECTRONICS -- 5.7%
Berg Electronics Corp.**................... 30,000 727,500
Electronic Data Systems Corp............... 11,000 599,500
Emerson Electric Co........................ 22,000 1,842,500
Intel Corp................................. 2,500 199,531
-------------
3,369,031
-------------
ENERGY -- 6.2%
Exxon Corporation.......................... 10,000 813,750
McDermott International, Inc............... 60,000 1,245,000
Mobil Corporation.......................... 6,000 676,500
<CAPTION>
NUMBER
OF SHARES VALUE
------------- -------------
<S> <C> <C>
ENERGY -- (CONTINUED)
Schlumberger, Ltd.......................... 11,000 $ 928,125
-------------
3,663,375
-------------
ENTERTAINMENT -- 3.3%
GTech Holdings Corporation**............... 70,000 1,942,500
-------------
FINANCIAL SERVICES -- 13.7%
ACE Limited Ordinary Shares................ 30,000 1,398,750
Allstate Corp.............................. 16,000 714,000
Associates First Capital Corp.............. 20,000 790,000
Citicorp................................... 6,900 574,425
EXEL Limited............................... 24,000 804,000
Federal National Mortgage
Association.............................. 15,000 465,000
H & R Block, Inc........................... 21,500 537,500
J.P. Morgan & Co.,
Incorporated............................. 9,000 788,625
NationsBank Corporation.................... 10,000 851,250
Southern National Corporation.............. 18,000 562,500
State Street Boston Corporation............ 11,400 617,025
-------------
8,103,075
-------------
FOOD & BEVERAGE -- 3.8%
Heinz H.J. Company......................... 55,000 1,732,500
Nabisco Holdings Corporation Class A....... 16,000 538,000
-------------
2,270,500
-------------
HEALTH CARE -- 5.9%
Amgen, Inc.**.............................. 10,200 594,150
Boston Scientific Corporation**............ 12,200 559,675
Humana, Inc.**............................. 46,200 866,250
McKesson Corporation....................... 35,000 1,491,875
-------------
3,511,950
-------------
INDUSTRIAL GOODS & MATERIALS -- 4.5%
Canadian Pacific Limited
Ordinary Shares.......................... 38,000 855,000
Dover Corporation.......................... 13,500 592,313
Illinois Tool Works Inc.................... 9,000 622,125
Tyco International Ltd..................... 14,200 599,950
-------------
2,669,388
-------------
MANUFACTURING -- 1.2%
Eastman Kodak Company...................... 10,000 725,000
-------------
PACKAGING -- 2.0%
Owens-Illinois, Inc.**..................... 75,000 1,153,125
-------------
PAPER & FOREST PRODUCTS -- 1.6%
Schweitzer-Mauduit
International, Inc....................... 30,000 960,000
-------------
</TABLE>
See Accompanying Notes to Financial Statements.
18
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA U.S. CORE EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONCLUDED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
------------- -------------
<S> <C> <C>
PHARMACEUTICALS -- 5.1%
Barr Laboratories, Inc.**.................. 27,000 $ 695,250
Pharmacia & Upjohn, Inc.**................. 20,000 840,000
Smithkline Beecham Plc ADR................. 25,000 1,456,250
-------------
2,991,500
-------------
PUBLISHING & INFORMATION SERVICES -- 3.2%
Hollinger International, Inc............... 85,000 924,375
Tribune Company............................ 13,000 934,375
-------------
1,858,750
-------------
REAL ESTATE -- 2.2%
Starwood Lodging Trust..................... 17,000 646,000
Trinet Corporate Realty Trust Inc.......... 20,000 630,000
-------------
1,276,000
-------------
RESTAURANTS HOTELS & GAMING -- 3.4%
Marriott International, Inc................ 20,000 1,097,500
McDonald's Corporation..................... 20,000 927,500
-------------
2,025,000
-------------
TELECOMMUNICATIONS -- 2.2%
AT&T Corp.................................. 12,600 661,500
Frontier Corp.............................. 22,000 649,000
-------------
1,310,500
-------------
TRANSPORTATION -- 3.5%
AMR Corporation**.......................... 9,000 738,000
Canadian National Railway
Company.................................. 35,000 669,375
Continental Airlines, Inc.
Class B**................................ 30,000 678,750
-------------
2,086,125
-------------
TOTAL COMMON AND
CONVERTIBLE STOCKS
(Cost $51,562,892)....................... 55,287,656
-------------
</TABLE>
<TABLE>
<CAPTION>
PAR
(000)
-------------
<S> <C> <C>
CORPORATE BONDS -- 1.5%
TRANSPORTATION -- 1.5%
Santa Fe Pacific Pipeline Partners L.P.
Conv. Debentures
(Baa3, BB)
11.000% 08/15/2010....................... $ 735 896,700
-------------
TOTAL CORPORATE BONDS
(Cost $952,300).......................... 896,700
-------------
<CAPTION>
PAR
(000) VALUE
------------- -------------
<S> <C> <C>
SHORT TERM INVESTMENT -- 4.7%
BBH Grand Cayman U.S. Dollar Time Deposit
4.750% 09/03/1996........................ $ 2,775 $ 2,775,000
-------------
TOTAL SHORT TERM
INVESTMENT
(Cost $2,775,000)....................... 2,775,000
-------------
TOTAL INVESTMENTS AT VALUE -- 99.9%
(Cost $55,290,192)...................................... $58,959,356
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.1%..................................... 56,078
-------------
NET ASSETS (Applicable to 3,098,175 BEA Shares) --
100.0%.................................................. $59,015,434
-------------
-------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE ($59,015,434 DIVIDED BY 3,098,175)............... $19.05
-------------
-------------
</TABLE>
* Cost for Federal income tax purposes at August 31, 1996 is $55,282,034. The
gross appreciation (depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation........................... $ 4,785,484
Gross Depreciation........................... (1,108,162)
-------------
Net Appreciation............................. $ 3,677,322
-------------
-------------
</TABLE>
** Non-income producing securities.
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
ADR........................... American Depository Receipts
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
<CAPTION>
AMOUNT
---------------
PER
SHARE
--
<S> <C>
Capital Paid-In.................... $ 50,559,008 $ 16.32
Accumulated Net Investment Income.. 410,275 .13
Accumulated Net Realized Gain on
Security Transactions............. 4,376,987 1.41
Net Unrealized Appreciation on
Investments and Other............. 3,669,164 1.19
- -------------------------------------------------------------
NET ASSETS $ 59,015,434 $ 19.05
- -------------------------------------------------------------
</TABLE>
See Accompanying Notes to Financial Statements.
19
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA U.S. CORE FIXED INCOME PORTFOLIO
STATEMENT OF NET ASSETS
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
CORPORATE BONDS -- 23.1%
BANKING -- 3.0%
Citicorp Medium Term Notes (A2, A)
6.750% 10/15/2007........................ $ 555 $ 517,538
Credit Lyonnais Perpetual Sub Variable Rate
Notes, Rule 144A (Baa2, NR)****/+/+++
6.625%................................... 300 290,055
First Nationwide (Parent) Holdings, Inc.
Sr. Notes (B2, B)
12.500% 04/15/2003....................... 435 451,313
Hongkong & Shanghai Banking Corp Ltd.
Perpetual Sub. FRN Series 1 (Baa1,
NR)+/+++
6.000%................................... 580 492,536
Hongkong & Shanghai Banking Corp Ltd.
Perpetual Sub. FRN Series 2 (Baa1,
NR)+/+++
5.813%................................... 60 50,619
Midland Bank Plc Perpetual Sub. FRN Series
2 (A1, A-)+/+++
5.750%................................... 390 334,523
National Westminster Bank PLC Perpetual
Sub. FRN Series B (Aa3, A+)+/+++
5.875%................................... 480 418,992
Santander Financial Issuances Perpetual
Sub. FRN
(A2, NR) +/+++
6.525%................................... 500 493,800
Swiss Bank Corp. New York Subordinated
Notes (Aa2, AA)
6.750% 07/15/2005........................ 580 554,625
-------------
3,604,001
-------------
CABLE -- 1.9%
Adelphia Communications Corporation Senior
Notes, Series B PIK Bonds (B3, B)
9.500% 02/15/2004........................ 15 12,209
Falcon Holding Group L.P. Senior
Subordinated Notes PIK Bonds (NR, NR)
11.000% 09/15/2003....................... 877 818,180
Kabelmedia Holding Gmbtt Yankee Senior
Discount Notes (B3, B-)++
13.625% 08/01/2006....................... 900 465,750
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
CABLE -- (CONTINUED)
Summit Communications Group, Inc. Senior
Subordinated Notes (Ba3, BB+)
10.500% 04/15/2005....................... $ 865 $ 939,606
-------------
2,235,745
-------------
CHEMICALS -- 0.9%
Reliance Industries Ltd. 144A Yankee Notes
(NR, NR)
10.500% 08/06/2046....................... 780 770,250
UCC Investors Holdings Inc. Subordinated
Discount Notes (B3, B-)++
12.000% 05/01/2005....................... 290 249,763
-------------
1,020,013
-------------
CONSTRUCTION & BUILDING MATERIALS -- 0.3%
J.M. Peters Company, Inc., Senior Notes
(B3, NR)
12.750% 05/01/2002....................... 440 404,800
-------------
ENERGY -- 1.3%
Gulf Canada Resources Ltd. Yankee Senior
Notes (Ba2, BB+)
8.350% 08/01/2006........................ 800 777,000
Gulf Canada Resources Yankee Subordinated
Debentures (Ba3, BB-)
9.625% 07/01/2005........................ 240 246,600
PDV America, Inc. Guaranteed Senior Notes
(Baa3, B)
7.875% 08/01/2003........................ 505 481,644
-------------
1,505,244
-------------
ENTERTAINMENT -- 2.1%
Six Flags Entertainment Notes (Baa3,
BBB-)++
5.293% 12/15/1999........................ 15 11,831
Time Warner, Inc. Debentures (Ba1, BBB-)
6.850% 01/15/2026........................ 2,570 2,451,138
-------------
2,462,969
-------------
ENVIRONMENTAL SERVICES -- 0.3%
EnviroSource, Inc. Senior Notes (B3, B-)
9.750% 06/15/2003........................ 390 361,725
-------------
FINANCIAL SERVICES -- 5.6%
AT&T Capital Corporation Medium Term Notes
Series 3 (Baa3, A)
6.030% 10/27/1997........................ 1,500 1,491,375
</TABLE>
See Accompanying Notes to Financial Statements.
23
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA U.S. CORE FIXED INCOME PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
FINANCIAL SERVICES -- (CONTINUED)
Fifth Mexican Acceptance Corp. Rule 144A
Notes Tranche A (NR, NR)****/++++
8.000% 12/15/1998........................ $ 760 $ 235,600
Ford Holdings, Inc. Guaranteed Notes (A1,
A+)
9.250% 03/01/2000........................ 10 10,638
General Motors Acceptance Corp. Medium Term
Notes (A3, A-)
7.250% 07/20/1998........................ 125 126,250
General Motors Acceptance Corp. Medium Term
Notes (A3, A-)
7.375% 04/15/1999........................ 1,120 1,134,000
General Motors Acceptance Corp. Medium Term
Notes (A3, A-)
6.625% 04/24/2000........................ 1,290 1,273,875
General Motors Acceptance Corp. Medium Term
Notes (A3, A-)
6.900% 06/06/2000........................ 140 139,300
General Motors Acceptance Corp. Medium Term
Notes (A3, A-)
6.900% 07/05/2000........................ 165 163,969
Gentra Inc. Subordinated Debentures (NR,
NR)
7.500% 12/31/2001........................ 800 667,982
L'Auxiliare du Credit Foncier de France
Guaranteed FRN (Ba1, NR)
5.332% 09/25/2002........................ 420 403,116
L'Auxiliare du Credit Foncier de France Sr.
Unsubordinated Notes (Baa1, A)
8.000% 01/14/2002........................ 930 960,806
-------------
6,606,911
-------------
FOOD & BEVERAGE -- 0.3%
Fresh del Monte Produce Senior Notes Series
B (Caa, CCC+)
10.000% 05/01/2003....................... 400 375,000
-------------
INDUSTRIAL GOODS & MATERIALS -- 0.9%
Specialty Equipment Companies Inc. Senior
Subordinated Note (B3, B-)
11.375% 12/01/2003....................... 300 317,250
Tenneco, Inc. Debentures (Baa2, BBB-)
7.250% 12/15/2025........................ 840 768,600
-------------
1,085,850
-------------
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
PACKAGING -- 0.4%
Crown Packaging 144A Units (NR, NR)++
14.000% 08/01/2006....................... $ 350 $ 136,500
Gaylord Container Corp. Senior Subordinated
Debentures (Caa, B-)
12.750% 05/15/2005....................... 300 321,750
Stone Container Corp. First Mortgage Notes
(B1, BB-)
10.750% 10/01/2002....................... 20 20,650
-------------
478,900
-------------
PAPER & FOREST PRODUCTS -- 0.7%
P.T. Indah Kiat Pulp & Paper Corp.
Guaranteed Notes, Series B (Ba2, BB)
11.875% 06/15/2002....................... 190 198,550
P.T. Indah Kiat Pulp & Paper Corp. Sr.
Secured Debentures (Ba2, BB)
8.875% 11/01/2000........................ 610 593,225
-------------
791,775
-------------
REAL ESTATE -- 0.6%
Chelsea GCA Realty Inc. Guaranteed Notes
(Ba2, BB+)
7.750% 01/26/2001........................ 750 741,563
-------------
RETAIL -- 0.5%
Hills Stores, Inc. Senior Notes Series B
(B1, NR)
12.500% 07/01/2003....................... 320 297,600
Pueblo Xtra International, Inc. Senior
Notes (B2, B-)
9.500% 08/01/2003........................ 275 247,500
-------------
545,100
-------------
STEEL -- 0.3%
Armco, Inc. Senior Notes (B2, B)
9.375% 11/01/2000........................ 330 326,287
-------------
326,287
-------------
TELECOMMUNICATIONS -- 2.0%
BellSouth Telecommunications, Inc.
Debentures (Aaa, AAA)
5.850% 11/15/2045........................ 1,495 1,444,544
Nippon Telegraph & Telephone Corp. Yankee
Notes (Aaa, AAA)
9.500% 07/27/1998........................ 70 73,587
Rogers Cantel Mobile Communications Inc.
Yankee Senior Secured Debentures (Ba3,
BB+)
9.375% 06/01/2008........................ 710 696,687
</TABLE>
See Accompanying Notes to Financial Statements.
24
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA U.S. CORE FIXED INCOME PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
TELECOMMUNICATIONS -- (CONTINUED)
Videotron Holdings Plc Yankee Senior
Discount Notes (B3, B+)++
11.000% 08/15/2005....................... $ 325 $ 214,094
-------------
2,428,912
-------------
TRANSPORTATION -- 0.7%
Delta Air Lines, Inc. Debentures (Ba1, BB)
10.375% 02/01/2011....................... 585 691,031
NWA Trust Mezzanine Aircraft Notes Series D
(Ba1, BB+)
13.875% 06/21/2008....................... 90 105,300
-------------
796,331
-------------
UTILITIES -- 1.3%
Long Island Lighting Co. Debentures (Ba3,
BB+)
9.000% 11/01/2022........................ 990 899,662
Niagara Mohawk Power Corp. First Mortgage
Bonds (Ba3, BB-)
5.875% 09/01/2002........................ 420 352,275
Niagara Mohawk Power Corp. First Mortgage
Bonds (Ba3, BB-)
7.375% 08/01/2003........................ 305 273,356
Toledo Edison Co. Debentures (B1, B+)
8.700% 09/01/2002........................ 45 41,175
-------------
1,566,468
-------------
TOTAL CORPORATE BONDS
(Cost $27,665,451)..................... 27,337,594
-------------
FOREIGN GOVERNMENT BONDS -- 2.2%
Federal Republic of Brazil Interest Due
Bonds FRN (B1, NR)+
6.688% 01/01/2001........................ 683 655,200
Republic of Argentina Step-Up Par Bonds
Non-U.S. Tranche Series L-G-P (B1, BB-)
5.250% 03/31/2023........................ 500 268,125
Republic of Colombia Yankee Notes (Baa3,
BBB-)
7.250% 02/15/2003........................ 410 381,813
Republic of Turkey Trust Series T-2 (Aaa,
AAA)
9.400% 11/15/1996........................ 1 528
The Polish People's Republic Discount Bonds
FRN
(Baa3, BBB-)+
6.438% 10/27/2024........................ 610 587,506
United Mexican States Par Bonds Series A
(Ba2, BB)
6.250% 12/31/2019........................ 1,000 662,500
-------------
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
FOREIGN GOVERNMENT BONDS -- (CONTINUED)
TOTAL FOREIGN GOVERNMENT BONDS (Cost
$2,386,785)............................ $ 2,555,672
-------------
AGENCY OBLIGATIONS -- 32.7%
FEDERAL HOME LOAN MORTGAGE CORP -- 9.6%
FHLMC
6.000% 06/01/1999........................ $ 20 19,522
6.000% 11/01/1999........................ 59 56,948
7.000% 08/01/2000........................ 101 99,898
6.000% 01/01/2001........................ 272 264,233
6.000% 02/01/2001........................ 214 207,922
7.000% 04/01/2008........................ 29 28,075
7.000% 08/01/2010........................ 267 262,750
7.000% 09/01/2010........................ 2,907 2,850,162
7.000% 11/01/2010........................ 208 204,324
7.000% 12/01/2010........................ 256 250,740
7.000% 01/01/2011........................ 351 344,491
7.000% 04/01/2011........................ 39 38,393
7.000% 05/01/2011........................ 743 728,772
7.000% 06/01/2011........................ 380 372,652
8.000% 04/01/2025........................ 967 968,109
8.000% 06/01/2025........................ 109 109,398
8.000% 08/01/2025........................ 122 121,979
8.000% 12/01/2025........................ 289 288,652
8.000% 01/01/2026........................ 369 369,231
6.000% 03/01/2026........................ 229 205,894
8.000% 05/01/2026........................ 378 378,717
8.000% 06/01/2026........................ 2,459 2,461,559
FHLMC Series 1014 Class E
7.950% 02/15/2020........................ 768 780,958
-------------
11,413,379
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 15.8%
FNMA
7.500% 01/01/2000........................ 54 54,274
7.500% 04/01/2000........................ 563 565,206
7.500% 07/01/2000........................ 68 68,247
5.500% 04/01/2001........................ 24 22,503
7.500% 06/01/2001........................ 101 101,692
7.500% 09/01/2001........................ 731 734,781
6.000% 10/01/2001........................ 1,727 1,652,415
7.500% 12/01/2001........................ 47 47,183
6.000% 10/01/2002........................ 177 169,246
7.500% 06/01/2003........................ 413 414,973
7.500% 07/01/2003........................ 733 735,970
10.00% 02/01/2005........................ 58 61,268
10.00% 01/01/2010........................ 9 9,211
6.000% 11/01/2010........................ 237 222,503
6.000% 01/01/2011........................ 1,356 1,271,683
6.000% 02/01/2025........................ 211 189,465
7.000% 07/01/2025........................ 26 24,616
7.000% 09/01/2025........................ 729 694,243
7.000% 10/01/2025........................ 728 692,838
</TABLE>
See Accompanying Notes to Financial Statements.
25
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA U.S. CORE FIXED INCOME PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- (CONTINUED)
6.000% 01/01/2026........................ $ 102 $ 91,170
6.000% 02/01/2026........................ 1,172 1,052,136
7.000% 04/01/2026........................ 7,087 6,748,205
7.000% 10/01/2026........................ 646 615,152
FNMA (TBA)**
7.000% 01/01/2003........................ 2,550 2,522,906
FNMA 1991-165 Class M
8.250% 12/25/2021........................ 13 13,307
-------------
18,775,193
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 5.0%
GNMA
8.250% 08/15/2004........................ 1 1,074
9.000% 11/15/2004........................ 2 1,838
9.000% 12/15/2004........................ 1 1,339
8.250% 04/15/2006........................ 2 2,265
7.000% 09/01/2008........................ 342 336,632
7.000% 11/15/2008........................ 296 291,533
7.000% 02/01/2009........................ 150 147,455
7.000% 03/15/2009........................ 368 361,754
7.000% 04/15/2009........................ 349 343,046
7.000% 05/01/2009........................ 273 268,765
7.000% 01/15/2011........................ 787 774,410
7.000% 02/15/2011........................ 529 520,033
13.50% 07/15/2014........................ 1 924
9.000% 06/15/2016........................ 105 109,845
8.000% 04/15/2017........................ 191 190,830
9.000% 10/15/2017........................ 483 504,247
9.000% 08/15/2021........................ 829 865,106
GNMA (TBA)**
8.000% 01/15/2025........................ 1,130 1,129,294
-------------
5,850,390
-------------
MISCELLANEOUS -- 2.3%
National Archive Facility Trust COP (Aaa,
AAA)
8.500% 09/01/2019........................ 436 468,688
Tennessee Valley Authority Debentures (NR,
AAA)
5.980% 04/01/2036........................ 2 2,289,262
-------------
2,757,950
-------------
TOTAL AGENCY OBLIGATIONS (Cost
$39,434,857)............................. 38,796,912
-------------
ASSET BACKED SECURITIES -- 3.0%
Fleetwood Credit Corporation Grantor Trust
Retail Installment Sale Contracts Series
1993-B, Class A (Aaa, AAA)
4.950% 08/15/2008........................ 8 7,514
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
ASSET BACKED SECURITIES -- (CONTINUED)
Fleetwood Credit Corporation Grantor Trust
Retail Installment Sale Contracts Series
1994-A, Class A (Aaa, AAA)
4.700% 07/15/2009........................ $ 8 $ 8,075
Fleetwood Credit Corporation Grantor Trust
Retail Installment Sale Contracts Series
1994-B, Class A (Aaa, AAA)
6.750% 03/15/2010........................ 89 88,329
Goldome Credit Corporation Home Equity
Trust Series 1990-1, Class A (Aa2, AA)
10.000% 07/15/2005....................... 22 22,313
Green Tree Financial Corporation
Manufactured Housing Contracts Series
1993-4, Class A-2 (Aa2, NR)
5.850% 01/15/2019........................ 105 103,348
Green Tree Financial Corporation
Manufactured Housing Contracts Series
1995-5, Class A-3 (Aaa, AAA)
6.250% 10/15/2025........................ 420 407,001
Green Tree Financial Corporation
Manufactured Housing Contracts Series
1995-6, Class A-2 (Aaa, AAA)
6.400% 08/15/2025........................ 1,210 1,201,315
Green Tree Financial Corporation
Manufactured Housing Contracts Series
1995-6, Class A-3 (Aaa, AAA)
6.650% 11/15/2025........................ 130 127,770
Green Tree Financial Corporation
Manufactured Housing Contracts Series
1995-7, Class A-2 (Aaa, AAA)
6.150% 11/15/2026........................ 165 164,250
Green Tree Financial Corporation
Manufactured Housing Contracts Series
1995-8, Class A-2 (Aaa, AAA)
6.150% 12/15/2026........................ 135 133,636
New York City Tax Lien Collateralized
Bonds, Series 1996-1, Class C (NR, A)
7.110% 02/25/2005........................ 1,212 1,209,096
</TABLE>
See Accompanying Notes to Financial Statements.
26
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA U.S. CORE FIXED INCOME PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
ASSET BACKED SECURITIES -- (CONTINUED)
World Omni Automobile Lease Securitization
Trust, Retail Closed-End Lease Contracts
Series 1995-A, Class A
(Aaa, AAA)
6.050% 11/25/2001........................ $ 125 $ 124,487
-------------
TOTAL ASSET BACKED SECURITIES (Cost
$3,629,688)............................ 3,597,134
-------------
COLLATERIZED MORTGAGED BACKED SECURITIES -- 4.3%
Asset Securitization Corporation Series
1995-MD4, Class A1 (NR, AAA)
7.100% 08/13/2029........................ 119 114,470
CBM Funding Corporation Series 1996-1,
Class B (NR, A)
7.480% 02/01/2008........................ 1,000 983,750
Carousel Center Finance Inc. Series, 1
Class C Rule 144A (NR, BBB+)
7.527% 11/15/2007........................ 463 450,368
Collateralized Mortgage Obligation Trust,
REMIC Series 54, Class C (Aaa, AAA)
9.250% 11/01/2013........................ 3 2,643
Kidder Peabody Acceptance Corporation
Series 1993-C1, Class A-3 (NR, NR)
6.800% 09/01/2006........................ 535 512,367
Kidder Peabody Acceptance Corporation
Series 1994-C1, Class B (NR, AA)
6.850% 02/01/2006........................ 790 775,033
PaineWebber Mortgage Acceptance Corp. IV
Multifamily Mortgage Pass-Throughs Series
1995-M1, Class A 144A (NR, NR)****
6.700% 01/15/2007........................ 1,200 1,170,750
PaineWebber Mortgage Acceptance Corp. IV
Multifamily Mortgage Pass-Throughs Series
1995-M1, Class D 144A (NR, NR)****
7.300% 12/15/2002........................ 420 404,742
Structured Asset Securities Corporation
Series 1996-CFL, Class A1C (NR, AAA)
5.944% 02/25/2028........................ 670 640,137
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
COLLATERIZED MORTGAGED BACKED SECURITIES -- (CONTINUED)
U.S. Dept. of Veterans Affairs, Vendee
Mortgage Trust REMIC, Series 1995-2B,
Class 2C (NR, NR)
7.500% 10/15/2015........................ $ 10 $ 9,921
-------------
TOTAL COLLATERIZED MORTGAGED BACKED
SECURITIES (Cost $5,256,450)........... 5,064,181
-------------
MUNICIPAL BONDS -- 0.0%
South Carolina State Public Service
Authority Revenue Bonds Series C (Aaa,
AAA)
5.125% 01/01/2021........................ 30 26,925
-------------
TOTAL MUNICIPAL BONDS (Cost $28,440)..... 26,925
-------------
U.S. TREASURY OBLIGATIONS--32.8%
U.S. TREASURY BONDS--11.4%
8.750% 08/15/2020.......................... 2,610 3,041,746
7.875% 02/15/2021.......................... 9,810 10,471,585
-------------
13,513,331
-------------
U.S. TREASURY NOTES -- 21.4%
5.375% 05/31/1998.......................... 100 98,516
6.750% 05/31/1999.......................... 30 30,182
7.750% 11/30/1999.......................... 16,050 16,592,329
7.250% 05/15/2004.......................... 4,645 4,745,704
7.500% 02/15/2005.......................... 3,765 3,902,723
-------------
25,369,454
-------------
TOTAL U.S. TREASURY OBLIGATIONS (Cost
$40,128,991)........................... 38,882,785
-------------
SHORT-TERM INVESTMENT -- 3.5%
BBH Grand Cayman U.S. Dollar Time Deposit
4.750% 09/03/1996........................ 4,179 4,179,000
-------------
TOTAL SHORT-TERM INVESTMENT
(Cost $4,179,000)...................... 4,179,000
-------------
</TABLE>
See Accompanying Notes to Financial Statements.
27
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA U.S. CORE FIXED INCOME PORTFOLIO
STATEMENT OF NET ASSETS (CONCLUDED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------- -------------
<S> <C> <C>
WARRANTS*** -- 0.0%
Capital Pacific Holdings Group, Inc.
Warrants expiring 05/01/02............... 1,817 1,181
-------------
TOTAL WARRANTS (Cost $1,000)............. 1,181
-------------
TOTAL INVESTMENTS AT VALUE -- 101.6%
(Cost $122,710,662*)................................... $120,441,384
LIABILITIES IN EXCESS OF OTHER ASSETS -- (1.6%)..........
(1,845,109)
-------------
NET ASSETS (Applicable to 7,873,570 BEA SHARES) --
100.0%................................................. $118,596,275
-------------
-------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
($118,596,275 DIVIDED BY 7,873,570)................... $15.06
-------------
-------------
</TABLE>
* Also cost for Federal income tax purposes at August 31, 1996. The gross
appreciation (depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation........................... $ 562,416
Gross Depreciation........................... (2,831,694)
-------------
Net Appreciation............................. $ (2,269,278)
-------------
-------------
</TABLE>
** Securites were acquired on a delayed delivery basis.
*** Non-income producing securities.
**** Certain conditions for public sales may exist.
+ Variable rate obligations -- The interest shown is the rate as of August
31, 1996.
++ Step Bond -- The interest rate as of August 31, 1996 is 0% and will reset
to interest shown at a future date.
+++ Securities have no stated final maturity date.
++++ Guaranteed by Grupo Sidek, S.A. de C.V. and Grupo Situr S.A. de C.V.
The Moody's Investors Service, Inc. and Standard & Poor's Corporations ratings
indicated are the most recent ratings available at August 31, 1996 and are
unaudited.
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
FRN........................... Floating Rate Note
PIK........................... Pay In Kind
TBA........................... To Be Announced
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
<CAPTION>
AMOUNT
-------------
PER
SHARE
--
<S> <C>
Capital Paid-In..................... $118,137,940 $ 15.00
Accumulated Net Investment Income... 1,925,440 .25
Accumulated Net Realized Gain on
Security and Foreign Exchange
Transactions....................... 795,189 .10
Net Unrealized Depreciation on
Investments and Other.............. (2,262,294) (.29)
- -------------------------------------------------------------
NET ASSETS $118,596,275 $ 15.06
- -------------------------------------------------------------
</TABLE>
See Accompanying Notes to Financial Statements.
28
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA Global Fixed Income Portfolio
STATEMENT OF NET ASSETS
August 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
------------- -------------
<S> <C> <C>
INTERNATIONAL BONDS -- 61.1%
ARGENTINA -- 1.0%
Republic of Argentina FRB
(B1, BB-)
6.313% 03/31/2005................... $ 495 $ 384,862
-------------
AUSTRALIA -- 2.9%
Queensland Treasury Corp. Guaranteed
Bonds
(NR, NR)
8.000% 07/14/1999................... AUD 630 506,896
Treasury Corporation of Victoria
Guaranteed Bonds
(Aa2, AA+)
8.250% 10/15/2003................... 770 614,158
-------------
1,121,054
-------------
BRAZIL -- 0.7%
Federal Republic of Brazil Interest
Due Bonds FRN Series A
(B1, NR)+
6.688% 01/01/2001................... $ 228 218,400
-------------
BULGARIA -- 0.3%
Republic of Bulgaria Discount Bonds
Tranche A
(B3, NR)+
6.688% 07/28/2004................... 250 127,500
-------------
CANADA -- 5.4%
Export Development Corporation Senior
Unsubordinated Eurobonds
(Aa2, AA+)
7.600% 02/14/2001................... ITL 800,000 501,258
Government of Canada Debentures
(Aa1, AAA)
8.750% 12/01/2005................... CND 1,960 1,565,651
-------------
2,066,909
-------------
FRANCE -- 2.0%
Republic of France Treasury Bonds --
O.A.T.
(Aaa, NR)
7.500% 04/25/2005................... FF 3,600 763,089
-------------
<CAPTION>
PAR
(000) VALUE
------------- -------------
<S> <C> <C>
GERMANY -- 8.8%
Federal Republic of Germany Eurobonds
(Aaa, NR)
7.250% 10/21/2002................... DEM 4,630 $ 3,371,882
-------------
ITALY -- 8.0%
Republic of Italy Debentures
(Aa3, AAA)
8.500% 01/01/2004................... ITL 4,775,000 3,063,184
-------------
MEXICO -- 1.3%
United Mexican States Par Bond Series
A
(Ba2, BB)
6.250% 12/31/2019................... $ 750 496,875
-------------
NETHERLANDS -- 6.0%
Netherlands Government Bonds
(NR, NR)
9.000% 05/15/2000................... NLG 3,360 2,307,114
-------------
SPAIN -- 3.3%
Kingdom of Spain Debentures
(NR, NR)
10.250% 11/30/1998.................. ESP 99,000 834,763
Kingdom of Spain Debentures
(NR, NR)
10.100% 02/28/2001.................. 49,800 427,995
-------------
1,262,758
-------------
SUPRANATIONAL -- 10.5%
International Bank for Reconstruction
& Development Japanese Yen Global
Bonds
(Aaa, AAA)
5.250% 03/20/2002................... JPY 379,500 4,044,482
-------------
SWEDEN -- 3.3%
Nordic Investment Bank Sr.
Unsubordinated
(Aaa, AAA)
6.250% 02/08/1999................... SEK 4,500 676,411
Swedish Government Debentures
(Aa1, NR)
11.000% 01/21/1999.................. 3,600 597,634
-------------
1,274,045
-------------
</TABLE>
See Accompanying Notes to Financial Statements.
32
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA GLOBAL FIXED INCOME PORTFOLIO
STATEMENT OF NET ASSETS (CONCLUDED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
------------- -------------
<S> <C> <C>
UNITED KINGDOM -- 7.6%
U.K. Treasury Gilt Bonds
(Aaa, NR)
8.500% 07/16/2007................... GBP 1,800 $ 2,913,574
-------------
TOTAL INTERNATIONAL BONDS
(Cost $22,947,330).................. 23,415,728
-------------
U.S. TREASURY OBLIGATIONS -- 22.0%
U.S. TREASURY BONDS -- 3.8%
7.875% 02/15/2021..................... $ 1,380 1,473,067
-------------
1,473,067
-------------
U.S. TREASURY NOTES -- 18.2%
5.375% 05/31/1998..................... 155 152,700
7.250% 05/15/2004..................... 2,610 2,666,585
7.500% 02/15/2005..................... 4,000 4,146,320
-------------
6,965,605
-------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $8,927,965)................... 8,438,672
-------------
SHORT-TERM INVESTMENT -- 15.4%
BBH Grand Cayman U.S. Dollar Time
Deposit
4.750% 09/03/1996................... 5,901 5,901,000
-------------
TOTAL SHORT-TERM INVESTMENT
(Cost $5,901,000)................... 5,901,000
-------------
TOTAL INVESTMENTS
AT VALUE -- 98.5%
(Cost $37,776,295*)................................ $37,755,400
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.5%........
592,100
-------------
NET ASSETS (Applicable to 2,434,762 BEA Shares) --
100.0%............................................. $38,347,500
-------------
-------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE
($38,347,500 DIVIDED BY 2,434,762)................ $15.75
-------------
-------------
</TABLE>
* Also cost for Federal income tax purposes at August 31, 1996. The gross
appreciation (depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation....................... $ 500,231
Gross Depreciation....................... (521,126)
----------
Net Appreciation......................... $ (20,895)
----------
----------
</TABLE>
+ Variable rate obligations -- The interest shown is the rate as of August 31,
1996.
The Moody's Investors Service, Inc. and Standard & Poor's Corporations ratings
indicated are the most recent ratings available at August 31, 1996 and are
unaudited.
CURRENCY ABBREVIATIONS
<TABLE>
<S> <C>
AUD........................... Australian Dollars
CND........................... Canadian Dollars
DEM........................... German Deutschemarks
ESP........................... Spanish Pesetas
FF............................ French Francs
GBP........................... United Kingdom Pounds
ITL........................... Italian Lira
JPY........................... Japanese Yen
NLG........................... Netherlands Guilder
SEK........................... Swedish Krona
</TABLE>
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
FRB........................... Floating Rate Bond
FRN........................... Floating Rate Note
</TABLE>
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
<TABLE>
<CAPTION>
AMOUNT PER SHARE
------------ ---------
<S> <C> <C>
Capital Paid-In..................... $ 37,442,838 $ 15.38
Accumulated Net Investment Income... 434,739 .18
Accumulated Net Realized Gain on
Security and Foreign Exchange
Transactions....................... 665,466 .27
Net Unrealized Depreciation on
Investments, Forward Currency
Contracts and Other................ (195,543) (.08)
- -------------------------------------------------------------
NET ASSETS $ 38,347,500 $ 15.75
- -------------------------------------------------------------
</TABLE>
See Accompanying Notes to Financial Statements.
33
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA High Yield Portfolio
STATEMENT OF NET ASSETS
August 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
CORPORATE BONDS -- 93.7%
BROADCASTING -- 7.3%
Allbritton Communications Company Senior
Subordinated Debentures 144A, Series B
(B3, B-)****
9.750% 11/30/2007........................ $ 700 $ 656,250
Australis Media Limited Unit Yankee
(CAA, CCC)+
14.000% 05/15/2003....................... 900 495,000
EchoStar Communications Corp. Gtd. Senior
Discount Notes
(B2, B)+
12.875% 06/01/2004....................... 1,100 797,500
Granite Broadcasting Corp. Senior
Subordinated Notes 144A
(B3, NR)****
9.375% 12/01/2005........................ 950 891,813
NWCG Holding Corp. Senior Discount Notes
Series B
(Caa, B)
8.555% 06/15/1999........................ 1,000 788,750
Park Broadcasting, Inc. 144A Senior Notes
(B2, B)
11.750% 05/15/2004....................... 500 569,375
Sinclair Broadcast Group Senior
Subordinated Notes (B2, B)
10.000% 09/30/2005....................... 700 691,250
Young Broadcasting, Inc. Senior
Subordinated Notes Series B 144A (B2,
B)****
9.000% 01/15/2006........................ 750 690,000
-------------
5,579,938
-------------
BUSINESS SERVICES -- 0.6%
Inter Act Systems Incorporated 144A Units
(NR, NR)****
14.000% 08/01/2003....................... 700 474,250
-------------
CABLE -- 13.6%
American Telecasting, Inc. Senior Discount
Notes
(Caa, CCC+)+
14.500% 06/15/2004....................... 900 639,000
Bell Cablemedia PLC Yankee Discount Bonds
(B2, BB-)+
11.950% 07/15/2004....................... 1,000 750,000
Cablevision Systems Corp. Senior
Subordinated Debentures
(B2, B)
9.875% 02/15/2013........................ 1,000 943,750
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
CABLE -- (CONTINUED)
Charter Communications Southeast, L.P.
Senior Notes (B3, B)
11.250% 03/15/2006....................... $ 900 $ 893,250
Comcast U.K. Cable Partners Ltd., Yankee
Senior Debentures
(B2, B)+
11.200% 11/15/2007....................... 1,000 625,000
DIVA Systems Corporation Units 144A (NR,
NR)
13.000% 05/15/2006....................... 2,250 1,203,750
Falcon Holdings Group L.P. Senior
Subordinated Notes PIK Bonds (NR, NR)
11.000% 09/15/2003....................... 1,202 1,121,072
Helicon Group Ltd. Senior Secured Notes
Series B
(B1, B)
9.000% 11/01/2003........................ 850 854,250
Marcus Cable Company Senior Discount Notes
(Caa, B)+
14.250% 12/15/2005....................... 950 611,563
People's Choice TV Corp. Units (Caa, CCC+)+
13.125% 06/01/2004....................... 950 555,750
Rifkin Acquisition Partners L.P. Senior
Subordinated Notes
(B3, B-)****
11.125% 01/15/2006....................... 500 502,500
Rogers Communications, Inc. Yankee Senior
Notes
(B2, BB-)
9.125% 01/15/2006........................ 550 517,688
United International Holdings,Inc. Senior
Secured Debentures, Series B (B3, B-)
9.454% 11/15/1999........................ 1,650 1,080,750
-------------
10,298,323
-------------
CHEMICALS -- 1.9%
Harris Chemical North America Senior
Secured Debentures
(B2, B+)
10.250% 07/15/2001....................... 400 399,500
Kaiser Aluminum & Chemical Corp. Senior
Subordinated Notes (B2, B-)
12.750% 02/01/2003....................... 1,000 1,078,750
-------------
1,478,250
-------------
</TABLE>
See Accompanying Notes to Financial Statements.
37
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA HIGH YIELD PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
COMPUTERS -- 1.0%
Advanced Micro Devices, Inc. Senior Secured
Notes
(Ba1, BB-)
11.000% 08/01/2003....................... $ 750 $ 761,250
-------------
CONSTRUCTION & BUILDING MATERIALS**** -- 1.2%
Southdown, Inc. 144A Senior Subordinated
Notes (B2, B+)
10.000% 03/01/2006....................... 500 498,125
Waxman Industries, Inc. 144A (Caa, CCC+)
12.750% 06/01/2004....................... 600 401,250
-------------
899,375
-------------
CONSUMER PRODUCTS -- 2.3%
Jordan Industries, Inc. Senior Notes (B3,
B+)
10.375% 08/01/2003....................... 700 675,500
Revlon Worldwide Corp. Senior Secured
Discount Notes Series B (B3, B-)
10.795% 03/15/1998....................... 1,250 1,062,500
-------------
1,738,000
-------------
ELECTRONICS -- 2.1%
Exide Electronics Group, Inc.
Units 144A (B3, B)****
11.500% 03/15/2006....................... 550 559,625
Unisys Corporation 144A Senior Notes (B1,
B+)
12.000% 04/15/2003....................... 1,000 1,025,000
-------------
1,584,625
-------------
ENERGY -- 2.7%
Cliffs Drilling Company 144A Senior Notes
(B1, B)****
10.250% 05/15/2003....................... 600 609,000
Mesa Operating Co. Senior Subordinated
Discount Notes (B2, B)
11.625% 07/01/2006....................... 750 469,687
Nuevo Energy Company Senior Subordinated
Notes (B2, B+)
9.500% 04/15/2006........................ 500 501,250
Plains Resources, Inc. 144A Senior
Subordinated Notes
(B2, B-)****
10.250% 03/15/2006....................... 500 512,500
-------------
2,092,437
-------------
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
ENTERTAINMENT -- 1.3%
American Skiing Company 144A Senior
Subordinated Notes
(B3, CCC+)
12.000% 07/15/2006....................... $ 400 $ 390,000
AMF Group Inc. Senior Subordinated Notes
144A
(B2, B-)****
10.875% 03/15/2006....................... 600 601,500
-------------
991,500
-------------
FINANCIAL SERVICES -- 0.4%
Fifth Mexican Acceptance Corp. Rule 144A
Notes
(NR, NR)**/****
8.000% 12/15/1998........................ 1,040 322,400
-------------
FOOD & BEVERAGES -- 2.2%
Foodbrands America, Inc. Senior
Subordinated Notes
(B3, B)
10.750% 05/15/2006....................... 250 252,812
Fresh Del Monte Produce Yankee Senior
Notes, Series B
(Caa, CCC+)
10.000% 05/01/2003....................... 1,500 1,406,250
-------------
1,659,062
-------------
HEALTH CARE -- 3.0%
General Medical Corp. Subordinated
Debentures, Series A PIK Bonds
(Caa, B-)
12.125% 08/15/2005....................... 1,061 1,061,951
Health O Meter Units (B3, B-)
13.000% 08/15/2002....................... 250 270,000
Paracelsus Healthcare Corp. Senior
Subordinated Notes
(B1, B)
10.000% 08/15/2006....................... 400 403,500
Regency Health Services, Inc. 144A
Subordinated Notes
(B3, B-)
12.250% 07/15/2003....................... 500 520,625
-------------
2,256,076
-------------
INDUSTRIAL GOODS & MATERIALS -- 5.7%
Alpine Group, Inc. Senior Notes, Series B
(B3, B)
12.250% 07/15/2003....................... 750 778,125
</TABLE>
See Accompanying Notes to Financial Statements.
38
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA HIGH YIELD PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
INDUSTRIAL GOODS & MATERIALS -- (CONTINUED)
Alvey Systems, Inc. 144A Senior
Subordinated Notes
(B3, B-)****
11.375% 01/31/2003....................... $ 100 $ 102,875
BPC Holding Corporation 144A Senior Secured
Notes
(Caa, NR)****
12.500% 06/15/2006....................... 500 508,125
Collins & Aikman Products Co. Gtd. Senior
Subordinated Notes (B3, B)
11.500% 04/15/2006....................... 700 721,000
Delco Remy International, Inc. 144A Senior
Subordinated Notes (B2, B-)****
10.625% 08/01/2006....................... 500 513,125
G-I Holdings, Inc. Senior Notes 144A (Ba3,
B+)
10.000% 02/15/2006....................... 389 378,789
Haynes International, Inc. Senior Notes
(B3, B-)
11.625% 09/01/2004....................... 500 495,000
Venture Holdings Trust Gtd. Senior
Subordinated Notes (B3, B)
9.750% 04/01/2004........................ 1,000 830,000
-------------
4,327,039
-------------
METALS & MINING -- 1.2%
Acme Metals, Inc. Senior Secured Debentures
(B1, B)+
13.500% 08/01/2004....................... 1,000 916,250
-------------
OFFICE EQUIPMENT & SUPPLIES -- 0.7%
Knoll Inc. 144A Senior Subordinated Notes
(B3, B+)****
10.875% 03/15/2006....................... 500 518,750
-------------
PAPER & FOREST PRODUCTS -- 7.5%
Crown Packaging 144A Units Senior Discount
Notes
(NR, NR)****
14.000% 08/01/2006....................... 775 302,250
Crown Packaging Holdings Senior
Subordinated Notes, Series B (Caa, NR)+
12.250% 11/01/2003....................... 3,300 1,278,750
Crown Paper Co. Senior Subordinated Notes
(B3, B)
11.000% 09/01/2005....................... 750 714,375
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
PAPER & FOREST PRODUCTS -- (CONTINUED)
Florida Coast Paper Company L.L.C. 144A
First Mortgage Notes (B3, B)
12.750% 06/01/2003....................... $ 700 $ 735,000
Gaylord Container Corp. Senior Subordinated
Debentures
(Caa, B-)+
12.750% 05/15/2005....................... 1,000 1,072,500
Printpack, Inc. 144A Senior Subordinated
Notes (B3, B+)
10.625% 08/15/2006....................... 600 609,000
Stone Container Corporation Senior Notes
(NR, NR)
11.500% 08/15/2006....................... 1,000 993,750
-------------
5,705,625
-------------
PUBLISHING & INFORMATION SERVICES -- 0.8%
Park Newspapers, Inc. 144A Senior Notes
(B2, B)****
11.875% 05/15/2004....................... 500 569,375
-------------
RESTAURANTS, HOTELS & CASINOS -- 12.4%
Argosy Gaming Company 144A First Mortgage
Notes
(B1, B+)****
13.250% 06/01/2004....................... 750 723,750
Bally's Casino Holdings Senior Discount
Notes (B2, B+)
7.640% 06/15/1998........................ 500 435,625
Casino America Senior Notes
(B1, B)
12.500% 08/01/2003....................... 200 200,500
Casino Magic Finance Corp. First Mortgage
Notes
(B1, B+)
11.500% 10/15/2001....................... 1,000 942,500
Coast Hotels and Casinos, Inc. 144A Gtd.
First Mortgage Notes (B3, B)****
13.000% 12/15/2002....................... 1,000 1,070,000
GNF Corp. First Mortgage Notes, Series B
(B1, BB)
10.625% 04/01/2003....................... 1,000 1,097,500
Griffin Games & Enertainment, Inc. Senior
Notes (NR, NR)
11.000% 09/15/2003....................... 750 804,375
The Majestic Star Casino, LLC 144A Senior
Secured Notes (NR, NR)****
12.750% 05/15/2003....................... 450 483,750
</TABLE>
See Accompanying Notes to Financial Statements.
39
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA HIGH YIELD PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
RESTAURANTS, HOTELS & CASINOS -- (CONTINUED)
Mohegan Tribal Gaming Authority Senior
Secured Notes, Series B 144A (NR, NR)****
13.500% 11/15/2002....................... $ 1,000 $ 1,237,500
Showboat Marina Casino Partnership 144A
First Mortgage Notes (B2, B)****
13.500% 03/15/2003....................... 450 484,875
Trump Atlantic City Associates, First
Mortgage Notes
(B1, BB-)
11.250% 05/01/2006....................... 1,000 960,000
Trump's Castle Funding, Inc. Mortgage Bonds
(Caa, NR)
11.750% 11/15/2003....................... 1,000 947,500
-------------
9,387,875
-------------
RETAIL TRADE -- 4.3%
Farm Fresh, Inc. Senior Notes
(B2, B-)
12.250% 10/01/2000....................... 1,100 844,250
Hills Stores Company Senior Notes (B1, NR)
12.500% 07/01/2003....................... 900 837,000
Jitney-Jungle Stores of America, Inc.
Senior Notes
(B2, B)
12.000% 03/01/2006....................... 1,000 1,051,250
Parisian, Inc. Senior Subordinated Notes
(Caa, B-)
9.875% 07/15/2003........................ 500 488,750
-------------
3,221,250
-------------
STEEL -- 0.8%
Weirton Steel Corporation 144A Senior Notes
(NR, B)****
11.375% 07/01/2004....................... 600 579,000
-------------
TELECOMMUNICATIONS -- 19.0%
American Communication Services, Inc. Unit
144A Notes (NR, NR)****/+
13.000% 11/01/2005....................... 1,500 802,500
Arch Communications Group, Inc. Senior
Discount Notes
(B3, B-)
10.875% 03/15/2008....................... 500 266,250
Brooks Fiber Properties, Inc. Senior
Discount Notes 144A
(NR, NR)****/+
10.875% 03/01/2006....................... 1,000 572,500
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
TELECOMMUNICATIONS -- (CONTINUED)
CAI Wireless Systems, Inc. Discount Notes
(B3, BB-)
12.250% 09/15/2002....................... $ 350 $ 363,125
CS Wireless Systems, Inc. Units 144A (NR,
NR)****/+
11.375% 03/01/2006....................... 1,000 490,000
Diamond Cable Communications Plc Senior
Discount Notes
(B3, B-)
11.750% 12/15/2005....................... 1,000 620,000
Geotek Communications, Inc. 144A
Convertible Senior Subordinated Notes
(Caa, NR)****
12.000% 02/15/2001....................... 1,600 1,816,000
IntelCom Group (U.S.A.), Inc. Senior
Discount Notes (NR, NR)
12.500% 05/01/2006....................... 1,000 558,750
InterCel, Inc. Units (B2, B-)+
12.000% 02/01/2006....................... 1,300 793,000
International CableTel, Inc. Senior Notes
(B3, B)+
12.750% 04/15/2005....................... 750 495,000
Metrocall, Inc. Senior Subordinated Notes
(B3, B-)
10.375% 10/01/2007....................... 500 382,500
Mobile Telecommunication Technologies Corp.
Senior Notes (B2, B-)
13.500% 12/15/2002....................... 675 688,500
Nextel Communications Inc. Senior Discount
Notes (B3, CCC-)+
9.750% 08/15/2004........................ 1,500 885,000
Pagemart Nationwide Senior Discount Notes
(NR, NR)+
15.000% 02/01/2005....................... 1,000 670,000
People's Telephone Co., Inc. Senior Notes
(B2, B-)
12.250% 07/15/2002....................... 450 452,250
Petersburg Long Distance, Inc. 144A
Convertible Subordinated Notes (NR,
NR)****
9.000% 06/01/2006........................ 230 276,000
Petersburg Long Distance, Inc. Units 144A
(NR, NR)****
9.000% 06/01/2004........................ 1,610 1,263,850
PriCellular Wireless Corp. Senior Discount
Notes (B3, CCC+)
12.250% 10/01/2003....................... 1,000 792,500
</TABLE>
See Accompanying Notes to Financial Statements.
40
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA HIGH YIELD PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
TELECOMMUNICATIONS -- (CONTINUED)
Sprint Spectrum L.P. Senior Notes
(B2, B+)
11.000% 08/15/2006....................... $ 500 $ 507,500
Teleport Communications Group, Inc. Senior
Discount Notes (B1, B)
11.125% 07/01/2007....................... 500 306,250
Teleport Communications Group, Inc. Senior
Notes
(B1, B)
9.875% 07/01/2006........................ 300 300,000
Vanguard Cellular Systems, Inc. Senior
Debentures (B1, B+)
9.375% 04/15/2006........................ 500 486,875
Videotron Holdings Yankee plc Senior
Discount Notes
(B3, B+)+
11.000% 08/15/2005....................... 1,000 658,750
-------------
14,447,100
-------------
TRANSPORTATION -- 1.7%
Consorscio G Grupo Dina S.A. / MCII
Holdings (USA), Inc. 144A Senior Secured
Notes
(NR, NR)+
12.000% 11/15/2002....................... 750 592,500
US Air, Inc. Senior Notes
(B3, CCC+)
10.000% 07/01/2003....................... 750 701,250
-------------
1,293,750
-------------
TOTAL CORPORATE BONDS
(Cost $72,057,715)........................ 71,101,500
-------------
ASSET-BACKED SECURITIES -- 0.8%
TRANSPORTATION -- 0.8%
Airplanes Pass Through Trust Series 1,
Class D (Ba2, BB)
10.875% 03/15/2019....................... 600 633,000
-------------
TOTAL ASSET-BACKED SECURITIES
(Cost $600,000)........................... 633,000
-------------
<CAPTION>
NUMBER
OF SHARES VALUE
------------ -------------
<S> <C> <C>
RIGHTS / WARRANTS*** -- 0.2%
CONSTRUCTION & BUILDING MATERIALS -- 0.0%
Capital Pacific Holdings Group, Inc........ $ 13,000 $ 8,216
-------------
INDUSTRIAL GOODS & MATERIALS -- 0.1%
Uniroyal Technology Corp. Warrants......... 44,000 78,844
-------------
ELECTRONICS -- 0.0%
Exide Electronic Warrants 144A............. 1,000 3,265
-------------
TELECOMMUNICATIONS -- 0.1%
American Communication Services, Inc.
Warrants................................. 2,000 97,500
-------------
TOTAL RIGHTS / WARRANTS
(Cost $104,467).......................... 187,825
-------------
PREFERRED STOCKS -- 3.0%
AEROSPACE / DEFENSE -- 1.4%
GPA Group plc Convertible Cumulative Second
Preference Shares........................ 27,500 1,045,000
-------------
CABLE -- 0.1%
DIVA Systems Corporation Series C.......... 5,945 49,997
-------------
CONSUMER PRODUCTS -- 0.7%
Renaissance Cosmetics 144A................. 500 500,000
-------------
RESTAURANTS, HOTELS & CASINOS -- 0.8%
Lady Luck Gaming Corporation Series A...... 20,000 587,000
-------------
TOTAL PREFERRED STOCKS
(Cost $2,076,947)...................... 2,181,997
-------------
<CAPTION>
PAR
(000)
------------
<S> <C> <C>
SHORT-TERM INVESTMENT -- 0.6%
BBH Grand Cayman U.S. Dollar Time Deposit
4.750% 09/03/1996........................ $ 433 433,000
-------------
TOTAL SHORT-TERM INVESTMENT
(Cost $433,000)........................ 433,000
-------------
</TABLE>
See Accompanying Notes to Financial Statements.
41
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA HIGH YIELD PORTFOLIO
STATEMENT OF NET ASSETS (CONCLUDED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
VALUE
-------------
<S> <C> <C>
TOTAL INVESTMENTS -- 98.3%
(Cost $75,272,129)..................................... $74,537,322
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 1.7%.................................... 1,311,236
-------------
NET ASSETS (Applicable to 4,713,739 BEA Shares) --
100.0%................................................. $75,848,558
-------------
-------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
($75,848,558 DIVIDED BY 4,713,739).................... $16.09
-------------
-------------
</TABLE>
* Cost for Federal income tax purposes at August 31, 1996 is $75,291,159. The
gross appreciation (depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation........................... $ 2,072,489
Gross Depreciation........................... (2,826,326)
-------------
Net Appreciation............................. $ (753,837)
-------------
-------------
</TABLE>
** Guaranteed by Grupo Sidek, S.A. de C.V. and Grupo Situr, S.A. de C.V.
*** Non-income Producing Securities.
**** Certain conditions for public sales may exist.
+ Step Bond -- The interest rate as of August 31, 1996 is 0% and will reset
to interest shown at a future date.
The Moody's Investors Service, Inc. and Standard & Poor's Corporations ratings
indicated are the most recent ratings available at August 31, 1996 and are
unaudited.
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
PIK........................... Pay In Kind
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
<CAPTION>
AMOUNT
---------------
PER
SHARE
--
<S> <C>
Capital Paid-In.................... $ 91,478,662 $ 19.40
Accumulated Net Investment Income.. 1,332,623 .28
Accumulated Net Realized Loss on
Security Transactions............. (16,227,920) (3.44)
Net Unrealized Depreciation on
Investments and Other............. (734,807) (.15)
- -------------------------------------------------------------
NET ASSETS $ 75,848,558 $ 16.09
- -------------------------------------------------------------
</TABLE>
See Accompanying Notes to Financial Statements.
42
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
PORTFOLIO MANAGER'S LETTER
AUGUST 31, 1996
BEA MUNICIPAL BOND FUND PORTFOLIO
, 1996
Dear Shareholders:
43
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
PORTFOLIO MANAGER'S LETTER--(CONTINUED)
AUGUST 31, 1996
44
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
PORTFOLIO MANAGER'S LETTER--(CONCLUDED)
AUGUST 31, 1996
BEA MUNICIPAL BOND FUND PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE BEA MUNICIPAL BOND
FUND PORTFOLIO AND THE LEHMAN BROTHERS
MUNICIPAL BOND INDEX FROM INCEPTION 6/20/94, PERIOD ENDED 7/31/94 AND AT EACH
QUARTER END.
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURN
One Year 2.27%
From Inception 4.98%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BEA MUNICIPAL BOND FUND PORTFOLIO
<S> <C> <C>
Total Returns and Graph Plot
Points
Lehman Brothers
BEA Municipal Bond Municipal Bond
Fund Portfolio Index
06/20/94 $ 10,000 $ 10,000
07/31/94 $ 10,040 $ 10,038
08/31/94 $ 10,040 $ 10,073
11/30/94 $ 9,647 $ 9,571
02/28/95 $ 10,350 $ 10,354
05/31/95 $ 10,846 $ 10,820
08/31/95 $ 10,886 $ 10,965
11/30/95 $ 11,193 $ 11,079
02/29/96 $ 11,216 $ 11,498
5/31/96 $ 10,937 $ 11,314
8/31/96 $ 11,134 $ 11,539
Average Annual Total Return
One Year 2.27%
From Inception 4.98%
</TABLE>
Note: Past performance is not predictive of future performance.
45
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA Municipal Bond Fund Portfolio
STATEMENT OF NET ASSETS
August 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
----------- ------------
<S> <C> <C>
MUNICIPAL BONDS -- 92.4%
ALABAMA -- 0.1%
Jefferson County AL Sanitation & Sewer
(Aaa, NR)
6.750% 03/01/2007........................ 15 $ 16,631
------------
CALIFORNIA -- 9.8%
California State GO
(Aaa, AAA)
5.125% 10/01/2017........................ 825 744,563
Los Angeles CA Department of Water & Power
Water Revenue (Aa, AA)
4.500% 05/15/2023........................ 705 553,425
Southern California Public Power Authority
Power Project Revenue Series A (AMBAC
Insured) (Aa, AA-)
5.000% 07/01/2017........................ 705 610,706
------------
1,908,694
------------
COLORADO -- 3.0%
Colorado Springs CO Utility Revenue (Aaa,
AAA)
5.875% 11/15/2017........................ 595 587,563
------------
FLORIDA -- 10.8%
Florida State Board of Education GO (Aa,
AA)
5.125% 06/01/2022........................ 30 26,925
Florida State GO (Aa, AA)
5.500% 10/01/2008........................ 710 710,000
Jacksonville FL Electric Authority Revenue
2nd Installment (Aaa, AAA)
6.000% 07/01/2012........................ 610 611,525
Tallahassee FL Electric Revenue First Lien
(Aaa, AAA)
6.100% 10/01/2006........................ 730 756,463
------------
2,104,913
------------
ILLINOIS -- 3.2%
Illinois State Sales Tax Revenue Series Q
(A1, AAA)
5.750% 06/15/2014........................ 650 629,688
------------
<CAPTION>
PAR
(000) VALUE
----------- ------------
<S> <C> <C>
INDIANA -- 0.1%
Indianapolis IN Public Improvement Board
Revenue (Aaa, AA+)
6.000% 01/10/2018........................ 25 $ 25,031
------------
LOUISIANA -- 3.4%
New Orleans LA Home Mortgage Authority SOB
(Aaa, AAA)
6.250% 01/15/2011........................ 635 674,687
------------
MARYLAND -- 4.7%
Maryland State Transportation Authority
Project Revenue (Aaa, AAA)
6.800% 07/01/2016........................ 850 922,250
------------
MASSACHUSETTS -- 3.0%
Massachusetts State Water Resources
Authority General Revenue Series 92A (A,
A)
6.500% 07/15/2019........................ 20 21,500
Massachusetts State Water Resources Revenue
(Aaa, AAA)
5.000% 12/01/2025........................ 660 569,250
------------
590,750
------------
NEW YORK -- 30.2%
New York NY Series D GO (Baa1, BBB+)
6.000% 02/15/2025........................ 15 13,969
New York NY Series H GO (Baa1, BBB+)
7.200% 02/01/2013........................ 600 637,500
New York State Dormitory Authority Revenue
(Episcopal Health Services) (GNMA Coll.)
(NR, AAA)
7.550% 08/01/2029........................ 435 468,713
New York State Dormitory Authority Revenue
(Judicial Facilities Lease) (MBIA
Insured) (Aaa, AAA)
7.375% 07/01/2016........................ 630 728,437
</TABLE>
See Accompanying Notes to Financial Statements.
46
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA MUNICIPAL BOND FUND PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
----------- ------------
<S> <C> <C>
NEW YORK -- (CONTINUED)
New York State Dormitory Authority Revenue
(Judicial Facilities Lease) (Aaa, AAA)
7.375% 07/01/2016........................ 40 $ 46,250
New York State Dormitory Authority Revenue
(Park Ridge Housing Inc. Project) (NR,
AA)
7.850% 02/01/2029........................ 530 570,412
New York State Medical Care Facility
Finance Agency Hospital & Nursing Home
Insured Mortgage Revenue (NR, AAA)
5.500% 02/15/2022........................ 795 758,231
New York State Medical Care Facility
Financial Agency Revenue (NR, AAA)
5.750% 08/15/2019........................ 60 57,900
New York State Power Authority Revenue &
General Purpose Electric Revenue Series R
(Aaa, AAA)
7.000% 01/01/2010........................ 360 411,750
New York State Power Authority Revenue &
General Purpose Series G (Aaa, AAA)
5.375% 01/01/2010........................ 40 39,900
New York State Power Authority Revenue
Series V (MBIA Insured) (NR, AAA)
7.875% 01/01/1998........................ 790 843,325
New York State Throughway Authority General
Revenue Series B (MBIA Ins.)
(Aaa, AAA)
5.000% 01/01/2020........................ 30 26,775
Suffolk County NY Water Authority
Waterworks Revenue Series V
(NR, AAA)
6.750% 06/01/2012........................ 580 641,625
<CAPTION>
PAR
(000) VALUE
----------- ------------
<S> <C> <C>
NEW YORK -- (CONTINUED)
Triborough Bridge & Tunnel Authority NY
Mortgage Recording Tax SOB
(Aaa, AAA)
7.125% 01/01/2000........................ 625 $ 678,125
------------
5,922,912
------------
PUERTO RICO -- 4.5%
Commonwealth of Puerto Rico GO (Baa1, A)
5.400% 07/01/2007........................ 730 728,175
Puerto Rico Electric Power Authority
Revenue Series N (Baa1, A-)
7.125% 07/01/2014........................ 135 143,944
------------
872,119
------------
SOUTH DAKOTA -- 5.6%
Heartland Consumers Power District SD
Electric Revenue (Aaa, AAA)
6.375% 01/01/2016........................ 30 30,375
Heartland Consumers Power District SD
Electric Revenue (Aaa, AAA)
7.000% 01/01/2016........................ 970 1,064,575
------------
1,094,950
------------
UTAH -- 2.9%
Utah State School District Finance
Cooperative Revenue (Capital Imp.
Financing Pool) (NR, AA+)
8.375% 08/15/1998........................ 535 567,769
------------
VIRGIN ISLANDS -- 3.8%
Virgin Islands Public Finance Authority
Revenue
(NR, BBB)
7.700% 10/01/2004........................ 690 746,925
------------
VIRGINIA -- 3.7%
Fairfax County VA Redevelopment & Housing
Authority Mortgage Revenue (FHA Insured)
(NR, AAA)
7.100% 04/01/2019........................ 630 726,862
------------
</TABLE>
See Accompanying Notes to Financial Statements.
47
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA MUNICIPAL BOND FUND PORTFOLIO
STATEMENT OF NET ASSETS (CONCLUDED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
----------- ------------
<S> <C> <C>
WASHINGTON -- 3.6%
King County WA Series A GO (Aa1, AA+)
6.200% 01/01/2024........................ 40 $ 40,900
Seattle WA Water System Revenue (Aa, AA)
5.250% 12/01/2023........................ 735 664,256
------------
705,156
------------
TOTAL MUNICIPAL BONDS
(Cost $17,599,756)...................... 18,096,900
------------
U.S. TREASURY
OBLIGATIONS -- 2.0%
U.S. Treasury Bonds
8.750% 08/15/2020........................ 335 390,205
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $408,315)........................ 390,205
------------
SHORT TERM INVESTMENT -- 4.4%
Smith Barney Tax Free Money Market Fund.... 867 867,178
------------
TOTAL SHORT TERM INVESTMENT
(Cost $867,178)........................ 867,178
------------
TOTAL INVESTMENT AT VALUE -- 98.8%
(Cost $18,875,249)......................... $ 19,354,283
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.2%.............
226,971
------------
NET ASSETS (Applicable to 1,336,820 BEA Shares) --
100.0%.................................................... $ 19,581,254
------------
------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
($19,581,254 DIVIDED BY 1,336,820)....................... $14.65
------------
------------
</TABLE>
* Cost for Federal income tax purposes at August 31, 1996 is $18,850,672. The
gross appreciation (depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation........................... $ 603,124
Gross Depreciation........................... (99,513)
-------------
Net Appreciation............................. $ 503,611
-------------
-------------
</TABLE>
The Moody's Investors Service, Inc. and Standard & Poor's Corporations ratings
indicated are the most recent ratings available at August 31, 1996 and are
unaudited.
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
GO............................ General Obligations
SOB........................... Special Obligations Bonds
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
<CAPTION>
AMOUNT
---------------
PER
SHARE
--
<S> <C>
Capital Paid-In.................... $ 18,602,539 $ 13.92
Accumulated Net Investment Income.. 42,930 .03
Accumulated Net Realized Gain on
Security Transactions............. 422,729 .32
Net Unrealized Appreciation on
Investments and Other............. 513,056 .38
- -------------------------------------------------------------
NET ASSETS $ 19,581,254 $ 14.65
- -------------------------------------------------------------
</TABLE>
See Accompanying Notes to Financial Statements.
48
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
Statement of Operations
For the Year Ended August 31, 1996
<TABLE>
<CAPTION>
BEA BEA EMERGING
INTERNATIONAL MARKETS BEA U.S.
EQUITY EQUITY CORE EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends.................................................................. $ 14,577,259 $2,544,973 $ 781,813
Interest................................................................... 1,714,487 403,084 201,977
Foreign taxes withheld..................................................... (1,099,411) (226,107) --
-------------- ------------ ------------
Total Investment Income.................................................. 15,192,335 2,721,950 983,790
-------------- ------------ ------------
EXPENSES
Investment advisory fees................................................... 5,993,072 1,289,739 328,320
Administration service fees................................................ 1,123,701 193,461 65,664
Administration fees........................................................ 936,418 161,218 54,720
Custodian fees............................................................. 776,762 320,568 57,798
Audit fees................................................................. 73,807 12,000 4,201
Miscellaneous fees......................................................... 45,000 32,000 2,750
Printing fees.............................................................. 37,722 8,000 2,500
Registration fees.......................................................... 35,000 27,337 38,361
Legal fees................................................................. 33,125 1,950 1,500
Transfer agent fees........................................................ 21,129 22,113 22,241
Insurance expense.......................................................... 18,931 2,700 776
Directors fees............................................................. 12,500 2,200 796
Organization expense....................................................... 10,665 10,665 5,208
-------------- ------------ ------------
9,117,832 2,083,951 584,835
Less fees waived........................................................... (200,151) (168,635) (147,075)
-------------- ------------ ------------
Total Expenses........................................................... 8,917,681 1,915,316 437,760
-------------- ------------ ------------
Net Investment Income........................................................ 6,274,654 806,634 546,030
-------------- ------------ ------------
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency
Transactions:
Net realized gain (loss) from:
Security transactions.................................................... 34,300,823 (8,165,330) 5,046,088
Foreign exchange transactions............................................ 1,834,308 (101,733) --
-------------- ------------ ------------
36,135,131 (8,267,063) 5,046,088
-------------- ------------ ------------
Net unrealized appreciation(depreciation):
Investments.............................................................. 7,908,456 11,411,914 322,074
Translation of assets and liabilities in foreign currencies.............. 16,741 (357) --
-------------- ------------ ------------
7,925,197 11,411,557 322,074
-------------- ------------ ------------
Net Gain On Investments And Foreign Currency Transactions.................... 44,060,328 3,144,494 5,368,162
-------------- ------------ ------------
Net Increase In Net Assets Resulting From Operations......................... $ 50,334,982 $3,951,128 $5,914,192
-------------- ------------ ------------
-------------- ------------ ------------
</TABLE>
See Accompanying Notes to Financial Statements.
49
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1996
<TABLE>
<CAPTION>
BEA U.S. BEA GLOBAL BEA
CORE FIXED BEA HIGH MUNICIPAL
FIXED INCOME INCOME YIELD BOND FUND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends....................................................... $ -- $ -- $ 42,222 $ --
Interest........................................................ 8,335,642 2,079,874 8,967,348 1,297,791
------------ ----------- ------------ ------------
Total Investment Income....................................... 8,335,642 2,079,874 9,009,570 1,297,791
------------ ----------- ------------ ------------
EXPENSES
Investment advisory fees........................................ 450,786 157,059 643,353 161,784
Administration service fees..................................... 180,314 47,118 137,861 34,668
Administration fees............................................. 150,262 39,265 114,885 28,890
Custodian fees.................................................. 66,892 39,448 40,862 19,545
Audit fees...................................................... 9,200 3,250 5,000 5,731
Miscellaneous fees.............................................. 12,000 1,110 4,750 9,000
Printing fees................................................... 1,162 236 10,058 5,357
Registration fees............................................... 39,323 22,754 22,000 31,384
Legal fees...................................................... 2,500 544 1,878 2,158
Transfer agent fees............................................. 21,643 20,701 19,603 19,850
Insurance expense............................................... 1,600 450 2,737 750
Directors fees.................................................. 875 250 2,173 700
Organization expense............................................ 4,136 5,409 10,665 7,433
------------ ----------- ------------ ------------
940,693 337,594 1,015,825 327,250
Less fees waived................................................ (339,645) (102,006) (206,745) (96,130)
------------ ----------- ------------ ------------
Total Expenses.............................................. 601,048 235,588 809,080 231,120
------------ ----------- ------------ ------------
Net Investment Income............................................. 7,734,594 1,844,286 8,200,490 1,066,671
------------ ----------- ------------ ------------
Realized and Unrealized Gain (Loss) on Investments and Foreign
Currency Transactions:
Net realized gain (loss) from:
Security transactions......................................... 1,269,541 746,851 (524,984) 908,389
Foreign exchange transactions................................. 16,937 523,986 -- --
------------ ----------- ------------ ------------
1,286,478 1,270,837 (524,984) 908,389
------------ ----------- ------------ ------------
Net unrealized appreciation(depreciation):
Investments................................................... (4,182,075) (278,160) 2,587,803 (1,524,506)
Translation of assets and liabilities in foreign currencies... (13,236) (255,028) -- --
------------ ----------- ------------ ------------
(4,195,311) (533,188) 2,587,803 (1,524,506)
------------ ----------- ------------ ------------
Net Gain (Loss) On Investments And Foreign Currency Transactions.. (2,908,833) 737,649 2,062,819 (616,117)
------------ ----------- ------------ ------------
Net Increase In Net Assets Resulting From Operations.............. $4,825,761 $2,581,935 $ 10,263,309 $ 450,554
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
</TABLE>
See Accompanying Notes to Financial Statements.
50
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
BEA INTERNATIONAL BEA EMERGING MARKETS
EQUITY PORTFOLIO EQUITY PORTFOLIO
------------------------------ ------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED AUGUST ENDED AUGUST ENDED AUGUST ENDED AUGUST
31, 1996 31, 1995 31, 1996 31, 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income................................... $ 6,274,654 $ 2,606,678 $ 806,634 $ 26,113
Net gain (loss) on investments and foreign currency
transactions........................................... 44,060,328 (67,759,705) 3,144,494 (32,385,113)
-------------- -------------- -------------- --------------
Net increase (decrease) in net assets resulting from
operations............................................. 50,334,982 (65,153,027) 3,951,128 (32,359,000)
-------------- -------------- -------------- --------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
BEA shares.............................................. (2,649,123) -- (401,495) (394,002)
Distributions to shareholders from net realized capital
gains:
BEA shares.............................................. -- (32,112,690) -- (5,374,023)
-------------- -------------- -------------- --------------
Total distributions to shareholders....................... (2,649,123) (32,112,690) (401,495) (5,768,025)
-------------- -------------- -------------- --------------
Net capital share transactions............................ (138,669,688) 103,330,556 (17,180,987) 25,774,209
-------------- -------------- -------------- --------------
Total increase (decrease) in net assets................... (90,983,829) 6,064,839 (13,631,354) (12,352,816)
Net Assets:
Beginning of year....................................... 773,254,630 767,189,791 128,322,563 140,675,379
-------------- -------------- -------------- --------------
End of year............................................. $ 682,270,801 $773,254,630 $114,691,209 $128,322,563
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
See Accompanying Notes to Financial Statements.
51
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BEA U.S. CORE EQUITY PORTFOLIO BEA U.S. CORE FIXED INCOME
---------------------------------- PORTFOLIO
FOR THE PERIOD ------------------------------
FOR THE YEAR SEPTEMBER 1, FOR THE YEAR FOR THE YEAR
ENDED AUGUST 1994(1) TO AUGUST ENDED AUGUST ENDED AUGUST
31, 1996 31, 1995 31, 1996 31, 1995
-------------- ------------------ -------------- --------------
<S> <C> <C> <C> <C>
Increase in net assets:
Operations:
Net investment income............................... $ 546,030 $ 351,583 $ 7,734,594 $ 4,392,275
Net gain (loss) on investments and foreign currency
transactions....................................... 5,368,162 4,351,342 (2,908,833) 3,524,378
-------------- ------------------ -------------- --------------
Net increase in net assets resulting from
operations......................................... 5,914,192 4,702,925 4,825,761 7,916,653
-------------- ------------------ -------------- --------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
BEA shares.......................................... (384,500) (102,838) (7,217,136) (3,353,829)
Distributions to shareholders from net realized
capital gains:
BEA shares.......................................... (2,961,757) -- (1,598,598) --
-------------- ------------------ -------------- --------------
Total distributions to shareholders................... (3,346,257) (102,838) (8,815,734) (3,353,829)
-------------- ------------------ -------------- --------------
Net capital share transactions........................ 24,803,723 27,043,539 23,336,409 64,671,197
-------------- ------------------ -------------- --------------
Total increase in net assets.......................... 27,371,658 31,643,626 19,346,436 69,234,021
Net Assets:
Beginning of year................................... 31,643,776 150 99,249,839 30,015,818
-------------- ------------------ -------------- --------------
End of year......................................... $ 59,015,434 $ 31,643,776 $118,596,275 $ 99,249,839
-------------- ------------------ -------------- --------------
-------------- ------------------ -------------- --------------
</TABLE>
(1) Commencement of Operations.
See Accompanying Notes to Financial Statements.
52
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BEA GLOBAL FIXED INCOME
PORTFOLIO BEA HIGH YIELD PORTFOLIO
------------------------------ ------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED AUGUST ENDED AUGUST ENDED AUGUST ENDED AUGUST
31, 1995 31, 1996 31, 1995 31, 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income................................... $ 1,844,286 $ 1,270,820 $ 8,200,490 $ 13,411,565
Net gain (loss) on investments and foreign currency
transactions........................................... 737,649 566,554 2,062,819 (2,367,436)
-------------- -------------- -------------- --------------
Net increase in net assets resulting from operations.... 2,581,935 1,837,374 10,263,309 11,044,129
-------------- -------------- -------------- --------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
BEA shares.............................................. (2,322,498) (924,756) (10,165,849) (12,388,703)
Distributions to shareholders from net realized capital
gains:
BEA shares.............................................. (267,603) -- -- --
-------------- -------------- -------------- --------------
Total distributions to shareholders....................... (2,590,101) (924,756) (10,165,849) (12,388,703)
-------------- -------------- -------------- --------------
Net capital share transactions............................ 18,790,839 12,351,849 (77,869,859) 11,448,059
-------------- -------------- -------------- --------------
Total increase (decrease) in net assets................... 18,782,673 13,264,467 (77,772,399) 10,103,485
Net Assets:
Beginning of year....................................... 19,564,827 6,300,360 153,620,957 143,517,472
-------------- -------------- -------------- --------------
End of year............................................. $ 38,347,500 $ 19,564,827 $ 75,848,558 $153,620,957
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
See Accompanying Notes to Financial Statements.
53
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BEA MUNICIPAL BOND FUND
PORTFOLIO
------------------------------
FOR THE YEAR FOR THE YEAR
ENDED AUGUST ENDED AUGUST
31, 1996 31, 1995
-------------- --------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income.................................................................... $ 1,066,671 $ 2,273,373
Net gain (loss) on investments and foreign currency transactions......................... (616,117) 1,835,066
-------------- --------------
Net increase in net assets resulting from operations..................................... 450,554 4,108,439
-------------- --------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
BEA shares............................................................................... (1,137,175) (2,400,128)
Distributions to shareholders from net realized capital gains:
BEA shares............................................................................... (629,414) (174,436)
-------------- --------------
Total distributions to shareholders........................................................ (1,766,589) (2,574,564)
-------------- --------------
Net capital share transactions............................................................. (28,080,548) 5,134,026
-------------- --------------
Total increase (decrease) in net assets.................................................... (29,396,583) 6,667,901
Net Assets:
Beginning of year........................................................................ 48,977,837 42,309,936
-------------- --------------
End of year.............................................................................. $ 19,581,254 $ 48,977,837
-------------- --------------
-------------- --------------
</TABLE>
See Accompanying Notes to Financial Statements.
54
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
BEA INTERNATIONAL EQUITY PORTFOLIO
-----------------------------------------------------------------------------
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.......... 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
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
Portfolio would have been 1.22%, 1.26% and 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
(c) Not 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.
See Accompanying Notes to Financial Statements.
55
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
BEA EMERGING MARKETS EQUITY PORTFOLIO
---------------------------------------------------------------------
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 Portfolio 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
(c) Not 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.
See Accompanying Notes to Financial Statements.
56
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
BEA U.S. CORE EQUITY PORTFOLIO
--------------------------------- BEA U.S. CORE FIXED INCOME PORTFOLIO
---------------------------------------------------
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
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 (e).... $ .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 Portfolio would
have been 1.34% and 1.51% for the years 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 Portfolio
would have been .78% and .84% for the years ended August 31, 1996 and 1995,
respectively, and .99% annualized for the period ended August 31, 1994.
(b) Annualized.
(c) Not annualized.
(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
See Accompanying Notes to Financial Statements.
57
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
BEA GLOBAL FIXED INCOME PORTFOLIO
---------------------------------------------------
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
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 Global Fixed Income Portfolio 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.
(c) Not annualized.
* Commencement of operations
See Accompanying Notes to Financial Statements.
58
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
BEA HIGH YIELD PORTFOLIO
---------------------------------------------------------------------
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
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 Portfolio
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.
(c) Not annualized.
(d) Redemption fees not reflected in total return.
* Commencement of operations
See Accompanying Notes to Financial Statements.
59
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
BEA MUNICIPAL BOND FUND PORTFOLIO
---------------------------------------------------
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
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
Portfolio 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.
(c) Not annualized.
* Commencement of operations
See Accompanying Notes to Financial Statements.
60
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
Notes to Financial Statements
August 31, 1996
NOTE 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The RBB Fund, Inc. (the "Fund") is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company. The Fund
was incorporated in Maryland on February 29, 1988, and currently has seventeen
investment Portfolios, seven of which are included in these financial
statements.
The Fund has authorized capital of thirty billion shares of common stock of
which 12.35 billion are currently classified into sixty-six classes. Each class
represents an interest in one of seventeen investment portfolios of the Fund.
The classes have been grouped into fifteen separate "families", eight of which
have begun investment operations. The BEA Family represents interests in seven
portfolios which are covered by this report.
A) SECURITY VALUATION -- Portfolio securities for which market
quotations are readily available are valued at market value, which is
currently determined using the last reported sales price. If no sales are
reported, as in the case of some securities traded over-the-counter,
portfolio securities are valued at the mean between the last reported bid
and asked prices. All other securities and assets are valued as determined
in good faith by the Board of Directors. Short-term obligations with
maturities of 60 days or less are valued at amortized cost which
approximates market value.
B) FOREIGN CURRENCY TRANSACTIONS -- Transactions denominated in
foreign currencies are recorded in the Portfolio's records at the current
prevailing exchange rates. Asset and liability accounts that are denominated
in a foreign currency are adjusted daily to reflect current exchange rates.
Transaction gains or losses resulting from changes in exchange rates during
the reporting period or upon settlement of the foreign currency transaction
are reported in operations for the current period. It is not practical to
isolate that portion of both realized and unrealized gains and losses on
investments in the statement of operations that result from fluctuations in
foreign currency exchange rates. The Fund reports certain foreign currency
related transactions as components of realized gains for financial reporting
purposes, whereas such components are treated as ordinary income (loss) for
Federal income tax purposes.
C) SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security
transactions are accounted for on the trade date. The cost of investments
sold is determined by use of the specific identification method for both
financial reporting and income tax purposes. Interest income is recorded on
the accrual basis. Dividends are recorded on the ex-dividend date. Certain
expenses, principally transfer agent and printing, are class specific
expenses and vary by class. Expenses not directly attributable to a specific
portfolio or class are allocated based on relative net assets of each
portfolio and class, respectively.
D) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net
investment income and net realized capital gains will be declared and paid
at least annually. The character of distributions made during the year for
net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes due to GAAP/tax differences
in the character of income and expense recognition. These differences are
primarily due to differing treatments for net operating losses,
mortgage-backed securities, passive foreign investment companies, and
forward foreign currency contracts.
E) FEDERAL INCOME TAXES -- No provision is made for Federal taxes as
it is the Fund's intention to have each portfolio qualify for and elect the
tax treatment applicable to regulated investment companies under the
Internal Revenue Code and make the requisite distributions to its
shareholders which will be sufficient to relieve it from Federal income and
excise taxes.
F) OTHER -- Securities denominated in currencies other than U.S.
dollars are subject to changes in value due to fluctuations in exchange
rates.
G) USE OF ESTIMATES -- The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
61
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996
NOTE 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Some countries in which the portfolios invest require governmental approval
for the repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if there is a deterioration in a
country's balance of payments or for other reasons, a country may impose
temporary restrictions on foreign capital remittances abroad.
The securities exchanges of certain foreign markets are substantially
smaller, less liquid and more volatile than the major securities markets in the
United States. Consequently, acquisition and disposition of securities by the
portfolios may be inhibited. In addition, a significant proportion of the
aggregate market value of equity securities listed on the major securities
exchanges in emerging markets are held by a smaller number of investors. This
may limit the number of shares available for acquisition or disposition by the
Fund.
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. 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.
In addition, periods of economic uncertainty and changes can be expected to
result in increased volatility of market prices of lower-rated debt securities
and a Portfolio's net asset value.
NOTE 2.TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Pursuant to Investment Advisory Agreements, BEA Associates ("BEA"), a U.S.
investment advisory firm, serves as investment advisor for each of the seven
portfolios described herein.
For its advisory services, BEA is entitled to receive the following fees,
computed daily and payable monthly on a portfolio's average daily net assets:
<TABLE>
<CAPTION>
PORTFOLIO ANNUAL RATE
- -------------------------------------- --------------------------------------
<S> <C>
BEA International Equity Portfolio 0.80% of average daily net assets
BEA Emerging Markets Equity Portfolio 1.00% of average daily net assets
BEA U.S. Core Equity Portfolio 0.75% of average daily net assets
BEA U.S. Core Fixed Income Portfolio 0.375% of average daily net assets
BEA Global Fixed Income Portfolio 0.50% of average daily net assets
BEA High Yield Portfolio 0.70% of average daily net assets
BEA Municipal Bond Fund Portfolio 0.70% of average daily net assets
</TABLE>
BEA may, at its discretion, voluntarily waive all or any portion of its
advisory fee for either of the portfolios. For the year ended August 31, 1996,
advisory fees and waivers for each of the seven investment portfolios were as
follows:
<TABLE>
<CAPTION>
GROSS NET
ADVISORY FEE WAIVER ADVISORY FEE
-------------- -------------- --------------
<S> <C> <C> <C>
BEA International Equity Portfolio $ 5,993,072 $ -- $ 5,993,072
BEA Emerging Markets Equity
Portfolio 1,289,739 -- 1,289,739
BEA U.S. Core Equity Portfolio 328,320 (93,430) 234,890
BEA U.S. Core Fixed Income
Portfolio 450,786 (134,639) 316,147
BEA Global Fixed Income Portfolio 157,059 (53,915) 103,144
BEA High Yield Portfolio 643,353 (100,763) 542,590
BEA Municipal Bond Fund Portfolio 161,784 (68,790) 92,994
</TABLE>
PFPC Inc. ("PFPC"), an indirect wholly owned subsidiary of PNC Bank Corp.,
serves as each portfolio's transfer and dividend disbursing agent. In addition,
PFPC serves as administrator for each of the seven portfolios. PFPC's
administration fee is computed daily and payable monthly at an annual rate of
.125% of each Portfolio's average daily net assets.
62
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996
NOTE 2.TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED)
PFPC may, at its discretion, voluntarily waive all or any portion of its
administration fee for any of the portfolios. For the year ended August 31,
1996, administration fees for each of the seven investment portfolios were as
follows:
<TABLE>
<CAPTION>
GROSS NET
ADMINISTRATION ADMINISTRATION
FEE WAIVER FEE
-------------- -------------- --------------
<S> <C> <C> <C>
BEA International Equity Portfolio $ 936,418 $(5,204) $ 931,214
BEA Emerging Markets Equity
Portfolio 161,218 (8,509) 152,709
BEA U.S. Core Equity Portfolio 54,720 -- 54,720
BEA U.S. Core Fixed Income
Portfolio 150,262 (48,084) 102,178
BEA Global Fixed Income Portfolio 39,265 (7,853) 31,412
BEA High Yield Portfolio 114,885 (12,483) 102,402
BEA Municipal Bond Fund Portfolio 28,890 -- 28,890
</TABLE>
Counsellors Funds Service, Inc. ("Counsellors Service"), a wholly-owned
subsidiary of Counsellors Securities Inc., serves as administrative services
agent. An administrative service fee is computed daily and payable monthly at an
annual rate of .15% of each portfolio's average daily net assets.
NOTE 3.PURCHASES AND SALES OF SECURITIES
For the year ended August 31, 1996, purchases and sales of investment
securities (other than short-term investments) were as follows:
<TABLE>
<CAPTION>
INVESTMENT SECURITIES U.S. GOVERNMENT OBLIGATIONS
----------------------------- ---------------------------
PURCHASES SALES PURCHASES SALES
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
BEA International Equity Portfolio $620,162,213 $730,006,726 $ -- $ --
BEA Emerging Markets Equity Portfolio 96,948,942 111,827,920 -- --
BEA U.S. Core Equity Portfolio 72,478,392 52,344,258 -- --
BEA U.S. Core Fixed Income Portfolio 162,070,786 121,353,161 113,926,558 105,129,232
BEA Global Fixed Income Portfolio 20,983,511 9,433,901 16,996,868 14,091,064
BEA High Yield Portfolio 115,438,832 181,333,821 8,941,087 21,682,861
BEA Municipal Bond Fund Portfolio 6,047,590 36,230,309 1,525,89 1,090,739
</TABLE>
For the year ended August 31, 1996, purchases include $6,926,876, $753,018,
$13,122,108, and $992,174 of investment securities received from shareholders in
exchange for 413,792 shares, 40,650 shares, 833,800 shares, and 68,007 shares
sold by the BEA Emerging Markets Equity Portfolio, BEA U.S. Core Equity
Portfolio, BEA U.S. Core Fixed Income Portfolio and BEA Municipal Bond Fund
Portfolio, respectively. For the year ended August 31, 1996, sales include
$93,483,064, and $22,092,445 of investment securities delivered to shareholders
in exchange for 4,928,316 shares, and 1,470,868 shares redeemed by the BEA
International Equity Portfolio and BEA U.S. Core Fixed Income Portfolio,
respectively. This resulted in a gain of $8,745,063 for the BEA International
Equity Portfolio and a loss of $371,989 for the BEA U.S. Core Fixed Income
Portfolio.
63
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996
NOTE 4.CAPITAL SHARES
Transactions in capital shares for each period were as follows:
<TABLE>
<CAPTION>
BEA INTERNATIONAL EQUITY BEA EMERGING MARKETS EQUITY
PORTFOLIO PORTFOLIO
----------------------------------------------------- ----------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
AUGUST 31, 1996 AUGUST 31, 1995 AUGUST 31, 1996 AUGUST 31, 1995
-------------------------- ------------------------- ------------------------- -------------------------
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
----------- ------------- ----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 8,492,355 $ 158,914,042 7,555,790 $141,210,504 1,930,842 $ 33,432,364 2,740,756 $ 45,977,774
Shares issued in
reinvestment of
dividends 137,894 2,523,456 1,783,551 31,977,179 19,043 323,156 290,750 5,614,374
Shares
repurchased, net
of redemption
fees (15,886,499) (300,107,186) (3,955,727) (69,857,127) (2,909,721) (50,936,507) (1,493,908) (25,817,939)
----------- ------------- ----------- ------------ ----------- ------------ ----------- ------------
Net increase
(decrease) (7,256,250) $(138,669,688) 5,383,614 $103,330,556 (959,836) $(17,180,987) 1,537,598 $ 25,774,209
----------- ------------- ----------- ------------ ----------- ------------ ----------- ------------
----------- ------------- ----------- ------------ ----------- ------------ ----------- ------------
BEA Shares
Authorized 500,000,000 500,000,000 500,000,000 500,000,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
BEA U.S. CORE EQUITY BEA U.S. CORE FIXED INCOME
PORTFOLIO PORTFOLIO
-------------------------------------------------- ---------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
AUGUST 31, 1996 AUGUST 31, 1995 AUGUST 31, 1996 AUGUST 31, 1995
------------------------ ------------------------ ------------------------- ------------------------
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
----------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 1,435,791 $27,128,776 1,883,469 $28,923,460 4,441,435 $ 68,996,273 4,372,374 $64,282,193
Shares issued in
reinvestment of
dividends 188,415 3,346,258 7,112 102,838 576,935 8,756,243 229,407 3,338,279
Shares
repurchased, net
of redemption
fees (298,285) (5,671,311) (118,327) (1,982,759) (3,583,115) (54,416,107) (195,402) (2,949,275)
----------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
Net increase 1,325,921 $24,803,723 1,772,254 $27,043,539 1,435,255 $ 23,336,409 4,406,379 $64,671,197
----------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
----------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
BEA Shares
Authorized 500,000,000 500,000,000 500,000,000 500,000,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
64
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996
NOTE 4.CAPITAL SHARES (CONTINUED)
<TABLE>
<CAPTION>
BEA GLOBAL FIXED INCOME BEA HIGH YIELD
PORTFOLIO PORTFOLIO
-------------------------------------------------- -----------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
AUGUST 31, 1996 AUGUST 31, 1995 AUGUST 31, 1996 AUGUST 31, 1995
------------------------ ------------------------ -------------------------- -------------------------
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
----------- ----------- ----------- ----------- ----------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 1,105,942 $17,551,485 766,650 $11,427,093 3,372,093 $ 54,558,056 580,982 $ 8,824,836
Shares issued in
reinvestment of
dividends 162,519 2,519,968 61,519 924,756 629,920 9,902,559 825,245 12,285,993
Shares
repurchased, net
of redemption
fees (81,878) (1,280,614) -- -- (9,062,440) (142,330,474) (632,837) (9,662,770)
----------- ----------- ----------- ----------- ----------- ------------- ------------ -----------
Net increase
(decrease) 1,186,583 $18,790,839 828,169 $12,351,849 (5,060,427) $ (77,869,859) 773,390 $11,448,059
----------- ----------- ----------- ----------- ----------- ------------- ------------ -----------
----------- ----------- ----------- ----------- ----------- ------------- ------------ -----------
BEA Shares
Authorized 500,000,000 500,000,000 500,000,000 500,000,000
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
</TABLE>
<TABLE>
<CAPTION>
BEA MUNICIPAL BOND
PORTFOLIO
-------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
AUGUST 31, 1996 AUGUST 31, 1995
-------------------------- --------------------------
SHARES VALUE SHARES VALUE
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 315,445 $ 4,700,422 935,296 $ 13,666,897
Shares issued in reinvestment of dividends 109,160 1,656,622 123,547 1,831,054
Shares repurchased, net of redemption fees (2,256,456) (34,437,592) (699,839) (10,363,925)
----------- ------------ ----------- ------------
Net increase (decrease) (1,831,851) $(28,080,548) 359,004 $ 5,134,026
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
BEA Shares Authorized 500,000,000 500,000,000
----------- -----------
----------- -----------
</TABLE>
NOTE 5.RESTRICTED SECURITIES
Certain of the BEA International Equity Portfolio's investments are
restricted as to resale and are valued at the direction of the Fund's Board of
Directors in good faith, at fair value, after taking into consideration
appropriate indications of value available. The table below shows the number of
shares held, the acquisition date, value as of August 31, 1996, percentage of
net assets which the securities comprise, aggregate cost and unit value of the
securities.
<TABLE>
<CAPTION>
NUMBER OF ACQUISITION 08/31/96 FAIR PERCENTAGE OF VALUE PER
SHARES DATE VALUE NET ASSETS SECURITY COST UNIT
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sodigas Pampeana 558,962 1/14/93 $ 844,809 0.1% $ 566,038 $ 1.511
Sodigas del Sur 403,923 1/14/93 745,416 0.1% 384,038 1.845
Geotek Communications,
Inc. 600 5/26/95 6,476,842 0.8% 6,000,000 10,795
------------- -------------
$ 8,067,067 $ 6,950,076
------------- -------------
------------- -------------
</TABLE>
NOTE 6.CAPITAL LOSS CARRYOVER
At August 31, 1996, capital loss carryovers were available to offset future
realized gains as follows: $26,922,032 in the BEA International Equity Portfolio
which expires in 2003, $22,315,875 in the Emerging Markets Equity Portfolio
which expires in 2004
65
<PAGE>
NOTE 6.CAPITAL LOSS CARRYOVER (CONTINUED)
and $13,514,163 in the BEA High Yield Portfolio of which $8,528,142 expires in
2001 and $4,986,021 expires in 2003. In addition, deferred post-October 31, 1995
losses were available to offset future net capital gains through August 31, 1996
as follows: $2,694,725 in the BEA High Yield Portfolio.
NOTE 7.FORWARD FOREIGN CURRENCY CONTRACTS
The Funds will generally enter into forward foreign currency exchange
contracts as a way of managing foreign exchange rate risk. A Fund may enter into
these contracts to fix the U.S. dollar value of a security that it has agreed to
buy or sell for the period between the date the trade was entered into and the
date the security is delivered and paid for. A Fund may also use these contracts
to hedge the U.S. dollar value of securities it already owns denominated in
foreign currencies.
Forward foreign currency contracts are valued at the forward rate, and are
marked-to-market daily. The change in market value is recorded by the Fund as an
unrealized gain or loss. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
The use of forward foreign currency contracts does not eliminate
fluctuations in the underlying prices of the Fund's Portfolio Securities, but it
does establish a rate of exchange that can be achieved in the future. Although
forward foreign currency contracts limit the risk of loss due to a decline in
the value of the hedged currency, they also limit any potential gain that might
result should the value of the currency increase. In addition, the Funds could
be exposed to risks if the counterparties to the contracts are unable to meet
the terms of their contracts. During the year ended August 31, 1996, the BEA
International Equity Portfolio, the BEA U.S. Core Fixed Income Portfolio and the
BEA Global Fixed Income Portfolio entered into forward foreign currency
contracts.
The BEA U.S. Core Fixed Income Portfolio's open Forward Foreign Currency
Contract at August 31, 1996 was as follows:
<TABLE>
<CAPTION>
UNREALIZED
FOREIGN FOREIGN
FORWARD CURRENCY EXPIRATION CURRENCY CONTRACT CONTRACT EXCHANGE
CONTRACT DATE TO BE SOLD AMOUNT VALUE GAIN/(LOSS)
- --------------------- --------- ---------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C>
Canadian Dollars 09/17/96 932,000 $ 678,852 $ 681,586 $ (2,734)
German Deutschemarks 09/17/96 350,000 229,358 236,823 (7,465)
--------- --------- ---------------
$ 908,210 $ 918,409 $ (10,199)
--------- --------- ---------------
--------- --------- ---------------
<CAPTION>
FOREIGN UNREALIZED
CURRENCY FOREIGN
FORWARD CURRENCY EXPIRATION TO BE CONTRACT CONTRACT EXCHANGE
CONTRACT DATE PURCHASED AMOUNT VALUE GAIN/(LOSS)
- --------------------- --------- ---------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C>
German Deutschemarks 09/17/96 350,000 $ 237,649 $ 236,823 $ (826)
--------- --------- ---------------
--------- --------- ---------------
</TABLE>
The BEA Global Fixed Income Portfolio's open Forward Foreign Currency
Contracts at August 31, 1996 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
FOREIGN FOREIGN
FORWARD CURRENCY EXPIRATION CURRENCY CONTRACT CONTRACT EXCHANGE
CONTRACT DATE TO BE SOLD AMOUNT VALUE GAIN/LOSS
- --------------------- --------- -------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
Australian Dollars 09/17/96 355,000 $ 280,450 $ 280,495 $ (45)
Australian Dolars 09/17/96 1,005,000 793,649 794,077 (428)
Canadian Dollars 09/17/96 740,000 543,970 541,173 2,797
German Deutschemarks 09/17/96 94,000 61,599 63,604 (2,005)
German Deutschemarks 09/17/96 1,900,000 1,250,000 1,285,608 (35,608)
German Deutschemarks 09/17/96 4,424,000 2,897,753 2,993,437 (95,684)
Italian Lira 09/17/96 1,562,000,000 1,009,110 1,032,495 (23,385)
Italian Lira 09/17/96 1,880,000,000 1,214,550 1,189,815 24,735
Japanese Yen 09/17/96 163,620,000 1,500,000 1,509,660 (9,660)
Netherlands Guilder 09/17/96 611,500 358,577 369,081 (10,504)
Netherlands Guilder 09/17/96 6,204,000 3,634,446 3,744,523 (110,077)
Swedish Krona 09/17/96 368,000 54,498 55,572 (1,074)
------------ ------------ ---------------
$ 13,598,602 $ 13,859,540 $ (260,938)
------------ ------------ ---------------
------------ ------------ ---------------
</TABLE>
66
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
AUGUST 31, 1996
NOTE 7.FORWARD FOREIGN CURRENCY CONTRACTS (CONTINUED)
<TABLE>
<CAPTION>
FOREIGN UNREALIZED
CURRENCY FOREIGN
FORWARD CURRENCY EXPIRATION TO BE CONTRACT CONTRACT EXCHANGE
CONTRACT DATE PURCHASED AMOUNT VALUE GAIN/LOSS
- --------------------- --------- -------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
French Francs 09/17/96 273,000 $ 52,665 $ 53,963 $ 1,298
French Francs 09/17/96 4,250,000 820,622 840,080 19,458
French Francs 09/17/96 5,987,000 1,155,792 1,183,427 27,635
German Deutschemarks 09/17/96 94,000 62,499 63,604 1,105
German Deutschemarks 09/17/96 1,800,000 1,196,188 1,217,944 21,756
Great Britain Pounds 09/17/96 220,000 336,600 343,449 6,849
Italian Lira 09/17/96 1,880,000,000 1,203,046 1,189,815 (13,231)
Japanese Yen 09/17/96 175,000,000 1,638,960 1,614,659 (24,301)
Netherlands Guilder 09/17/96 611,500 362,983 369,081 6,098
Netherlands Guilder 09/17/96 1,950,000 1,150,266 1,176,953 26,687
Spanish Pesetas 09/17/96 52,200,000 401,322 416,860 15,538
----------- ----------- ---------------
$ 8,380,943 $ 8,469,835 $ 88,892
----------- ----------- ---------------
----------- ----------- ---------------
</TABLE>
67
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF THE RBB FUND, INC:
We have audited the accompanying statements of net assets of the BEA
International Equity, BEA Emerging Markets Equity, BEA U.S. Core Equity, BEA
U.S. Core Fixed Income, BEA Global Fixed Income, BEA High Yield and BEA
Municipal Bond Portfolios of The RBB Fund Inc., as of August 31, 1996 and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments held by the
custodian and brokers as of August 31, 1996. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
BEA International Equity, BEA Emerging Markets Equity, BEA U.S. Core Equity, BEA
U.S. Core Fixed Income, BEA Global Fixed Income, BEA High Yield and BEA
Municipal Bond Portfolios of The RBB Fund Inc., as of August 31, 1996 and the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and their financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
October 11, 1996
68
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BEA INSTITUTIONAL FUNDS
INTERNATIONAL EQUITY
EMERGING MARKETS EQUITY
U.S. CORE EQUITY
BALANCED
U.S. CORE FIXED INCOME
GLOBAL FIXED INCOME
HIGH YIELD
MUNICIPAL BOND
SHORT DURATION
---------------------
PROSPECTUS
---------------------
NOVEMBER 1, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Fee Table.................................................................................................. 2
Financial Highlights....................................................................................... 4
The Company................................................................................................ 10
Investment Objectives and Policies......................................................................... 10
Investment Limitations..................................................................................... 19
Risk Factors............................................................................................... 20
Management................................................................................................. 21
Expenses................................................................................................... 25
How to Purchase Shares..................................................................................... 26
How to Redeem Shares....................................................................................... 26
Net Asset Value............................................................................................ 27
Dividends and Distributions................................................................................ 27
Taxes...................................................................................................... 27
Multi-Class Structure...................................................................................... 29
Description of Shares...................................................................................... 29
Other Information.......................................................................................... 30
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
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 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 -- 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 -- 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 -- to provide long term appreciation of
capital. The Fund will invest primarily in U.S. equity securities.
BEA BALANCED FUND -- to maximize total return consistent with
preservation of capital through both income and capital appreciation.
BEA U.S. CORE FIXED INCOME FUND -- 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 HIGH YIELD FUND -- 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. This Fund was formerly known as the BEA Strategic Fixed Income
Fund.
BEA GLOBAL FIXED INCOME FUND -- to provide high total return. The Fund
will invest primarily in both foreign and domestic fixed income securities.
BEA MUNICIPAL BOND FUND -- to provide high total return. The Fund will
invest primarily in municipal bonds issued by state and local authorities.
BEA SHORT DURATION FUND -- 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."
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."
BEA Associates ("BEA" or the "Adviser"), a U.S. investment advisory firm,
will act as the investment adviser to each Fund. BEA emphasizes a global
investment strategy and, as of September 30, 1996, acted as adviser for
approximately $29 billion of assets.
Generally, the minimum initial investment in a Fund is $3,000,000 and the
minimum subsequent investment is $100,000.
This Prospectus contains information that a prospective investor needs to
know before investing. Please keep it for future reference. A Statement of
Additional Information, dated November 1, 1996, has been filed with the
Securities and Exchange Commission and is incorporated by reference in this
Prospectus. It may be obtained free of charge from the Fund's transfer Agent by
calling (800) 401-2230.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY ANY BANK AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
INVESTMENTS IN SHARES OF THE FUND INVOLVE INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE 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 NOVEMBER 1, 1996
<PAGE>
- --------------------------------------------------------------------------------
FEE TABLE
SHAREHOLDER TRANSACTION EXPENSES
ANNUAL FUND OPERATING EXPENSES AFTER EXPENSE REIMBURSEMENTS AND 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 reimbursements)........................... .39% .49% .46% .40% .24%
--- --- --- --- ---
Total Fund
Operating Expenses (after waivers and
reimbursements).................................. 1.19% 1.49% 1.00% .90% .50%
--- --- --- --- ---
--- --- --- --- ---
</TABLE>
<TABLE>
<CAPTION>
BEA 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 reimbursements)........................... .42% .25% .60% .40%
--- --- --- ---
Total Fund
Operating Expenses (after waivers and
reimbursements).................................. .75% .70% 1.00% .55%
--- --- --- ---
--- --- --- ---
<FN>
- ------------------------
(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 and reimbursements, Management Fees would be .80%,
1.00%, .75%, .60%, .375%, .50%, .70%, .70% and .15% for the BEA
International Equity, BEA Emerging Markets Equity, BEA U.S. Core Equity,
BEA Balanced, BEA U.S. Core Fixed Income, BEA Global Fixed Income, BEA High
Yield, BEA Municipal Bond and BEA Short Duration Funds, respectively. Other
expenses would be .42%, .62%, .59%, .54%, .405%, .57%, .41%, .72%, .45% for
the BEA International Equity, BEA Emerging Markets Equity, BEA U.S. Core
Equity, BEA Balanced, BEA U.S. Core Fixed Income, BEA Global Fixed Income,
BEA High Yield, BEA Municipal Bond and 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, BEA Emerging Markets Equity, BEA U.S. Core Equity, BEA Balanced,
BEA U.S. Core Fixed Income, BEA Global Fixed Income, BEA High Yield, BEA
Municipal Bond and BEA Short Duration Funds, respectively.
</TABLE>
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 * *
BEA U.S. Core Fixed Income Fund....................................... $ 5 $16 $ 28 $ 63
BEA 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 * *
<FN>
- ------------------------------
* --
</TABLE>
The Example in the Fee Table assumes that all dividends and distributions
are reinvested and that the amounts listed under "Annual Fund Operating Expenses
After Expense Reimbursements and Waivers" remain the same 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.
The 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 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. The Fee Table reflects
waiver of Management and Administration Fees equal to .04%, .13%, .34%, .24%,
.28%, .32%, .22%, .42% and .05% for the BEA International Equity, BEA Emerging
Markets Equity, BEA U.S. Core Equity, BEA Balanced, BEA U.S. Core Fixed Income,
BEA Global Fixed Income, BEA High Yield, BEA Municipal Bond Fund and 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 the 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, BEA Emerging Markets Equity, BEA High Yield, BEA U.S. Core
Fixed Income, BEA Global Fixed Income, 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 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) 0.00 (0.05) --
Distributions from capital
gains......................... 0.00 (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.
(c) Not 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......................... 0.00 (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%, 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.
(c) Not 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.
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 voluntary 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%, for the year ended August 31, 1996 and 1.51% for the
period ended August 31, 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.
(c) Not 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 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 Global Fixed Income Fund would have been
1.07%, 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.
(c) Not annualized.
* Commencement of operations.
7
<PAGE>
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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......................... 0.00 0.00 -- --
--------------- --------------- --------------- ---------------
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%, 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.
(c) Not annualized.
(d) Redemption fees not reflected in total return.
* Commencement of operations.
8
<PAGE>
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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.
(c) Not annualized.
* Commencement of operations.
9
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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 nine classes of shares offered by this Prospectus represents interests in
one of the nine Funds. 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
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. The Fund will invest 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 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 banks, corporations or the following: other business
organizations, or by U.S. or foreign governments or governmental entities
(including supranational organizations such as the International Bank for
Reconstruction and Development (more commonly referred to as the "World Bank"),
the Asian Development Bank, the InterAmerican Development Bank and the European
Coal and Steel Community), mortgage-backed securities, asset-backed securities,
zero-coupon securities, when-issued securities, repurchase and reverse
repurchase agreements and dollar rolls and may lend portfolio securities to
broker-dealers or institutional investors. The Fund may choose to take advantage
of opportunities for capital appreciation from debt securities, by reason of
anticipated changes in such factors as interest rates, currency relationships,
or credit standing of individual issuers. The 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
10
<PAGE>
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yielding securities, commonly known as "junk bonds." See "Risk Factors --
Lower-Rated Securities."
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.
In accordance with the above-mentioned investment policies, the Fund may
also invest in U.S. and foreign government securities, convertible securities,
mortgage-backed securities, asset-backed securities, zero-coupon securities,
when-issued securities, repurchase and reverse repurchase agreements and dollar
rolls and may lend portfolio securities to broker-dealers or institutional
investors. See "Investment Objectives and Policies -- Common Investment
Policies" and the Statement of Additional Information.
BEA EMERGING MARKETS EQUITY FUND
The BEA Emerging Markets Equity Fund's investment objective is to seek
long-term appreciation of capital. The Fund will invest primarily in equity
securities of issuers in Emerging Markets. As used in this Prospectus, an
Emerging Market is any country which is generally considered to be an emerging
or developing country by the World Bank and the International Finance
Corporation, as well as countries that are classified by the United Nations as
emerging or developing, at the time of the 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 (i) debt securities denominated
in the currency of an Emerging Market or issued or guaranteed by an Emerging
Market company or the government of an Emerging Market, (ii) equity or debt
securities of corporate or governmental issuers located in developed countries,
and (iii) short-term and medium-term debt securities of the type described below
under "Common Investment Policies -- Temporary Investments." Debt securities in
(i) or (ii) above may include, without limitation, lower-rated debt securities
(commonly known as "junk bonds"). See "Risk Factors -- Lower-Rated Securities."
In accordance with the above-mentioned investment policies, the Fund may
also invest in convertible securities, mortgage-backed securities, asset-backed
securities, zero-coupon securities, when-issued securities, repurchase and
reverse repurchase agreements and dollar rolls and may lend portfolio securities
to broker-dealers or institutional investors, as more fully described in
"Investment Objectives and Policies -- Common Investment Policies" and the
Statement of Additional Information.
BEA U.S. CORE EQUITY FUND
The BEA U.S. Core Equity Fund will seek to provide long-term appreciation of
capital. The Fund will invest primarily in U.S. equity securities. Under normal
market conditions, the BEA
11
<PAGE>
- --------------------------------------------------------------------------------
U.S. Core Equity Fund will invest 65% of the value of its total assets in equity
securities. Equity securities include common stocks, preferred stocks, and
securities which are convertible into common stock and readily marketable
securities, such as rights and warrants, which derive their value from common
stock. The BEA U.S. Core Equity 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.
The Fund will invest at least 65% of the value of its total assets in domestic
fixed income securities consistent with comparable broad market fixed-income
indices, such as the Lehman Brothers Aggregate Bond Index. Debt securities may
include, without limitation, bonds, debentures, notes, equipment lease and trust
certificates, mortgage-related securities, and obligations issued or guaranteed
by the U.S. Government or its agencies or instrumentalities. The BEA U.S. Core
Fixed Income 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
12
<PAGE>
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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 GLOBAL FIXED INCOME FUND
The BEA Global Fixed Income Fund will seek to provide high total return. The
Fund will invest 65% of the value of its total assets in fixed income securities
issued by foreign and domestic corporations, governments and agencies. Under
normal market conditions, the 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 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 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 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 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 Statement of Additional Information for a discussion of
these and other investment policies and strategies.
BEA HIGH YIELD FUND
BEA High Yield Fund seeks to provide high total return. The Fund will invest
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.
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. 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
13
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than its cost. Conversely, if interest rates have declined from the time such a
security was purchased, such security, if sold, might be sold at a price greater
than its cost. Also, the value of such securities may be affected by changes in
real or perceived creditworthiness of the issuers. Thus, if creditworthiness is
enhanced, the price may rise. Conversely, if creditworthiness declines, the
price may decline. The 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.
In addition to high yield fixed income securities issued by U.S. and foreign
corporations, the Fund may also invest in U.S. government securities, foreign
government securities ("sovereign bonds"), debt obligations of supranational
entities, Brady Bonds, loan participations and assignments, convertible
securities, mortgage-backed securities, asset-backed securities, zero-coupon
securities, when-issued securities, repurchase and reverse repurchase agreements
and dollar rolls, and the Fund may lend portfolio securities to broker-dealers
or institutional investors. See "Common Investment Policies -- All Funds" and
"Common Investment Objectives and Policies" in the Statement of Additional
Information for a discussion of these and other investment policies and
strategies.
BEA MUNICIPAL BOND FUND
The BEA Municipal Bond Fund seeks to provide high total return. The Fund
will invest at least 65% of the value of its total assets in fixed income
securities issued by state and local governments ("Municipal Obligations"),
although the BEA Municipal Bond Fund 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 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
14
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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 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.
15
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("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.
For a more detailed description of the investment policies of each Fund, see
"Common Investment Policies -- All Funds" below and "Common Investment Policies"
in the Statement of Additional Information.
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."
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.
FUND TURNOVER. BEA will effect portfolio transactions in each Fund without
regard to
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holding period, if, in its judgment, such transactions are advisable in light of
general market, economic or financial conditions. As a result of each Fund's
investment policies, each Fund may engage in a substantial number of portfolio
transactions. The Short Duration Fund anticipates that its annual portfolio
turnover rate should not exceed 500% under normal conditions, the International
Equity, Emerging Markets Equity, and High Yield Funds anticipate that their
annual portfolio turnover rate should not exceed 150% under normal conditions,
and the U.S. Core Equity, U.S. Core Fixed Income, Global Fixed Income and
Municipal Bond Funds anticipate that their 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 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. The anticipated portfolio turnover
rate for each Fund is greater than that of many other investment companies. A
higher than normal portfolio turnover rate may affect the degree to which a
Fund's net asset value fluctuates. Higher portfolio turnover rates are likely to
result in comparatively greater brokerage commissions. In addition, short-term
gains realized from portfolio transactions are taxable to shareholders as
ordinary income. The amount of portfolio activity will not be a limiting factor
when making portfolio decisions. See Statement of Additional Information, "Fund
Transactions" and "Taxes."
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
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 non-dollar denominated portfolio securities resulting from currency
devaluations or fluctuations. Unless the BEA International Equity, BEA Emerging
Markets Equity, BEA U.S. Core Equity, BEA Balanced, BEA U.S. Core Fixed Income,
BEA Global Fixed Income, BEA High Yield and 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.
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
17
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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-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
18
<PAGE>
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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 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.
PORTFOLIO TURNOVER. Using certain investment techniques may produce higher
than normal portfolio turnover and may affect the degree to which the Short
Duration Fund's net asset value fluctuates. Higher portfolio turnover rates
(100% annually or more) are likely to result in comparatively greater brokerage
commissions. In addition, short-term gains realized from portfolio transactions
are taxable to shareholders as ordinary income. The amount of portfolio activity
will not be a limiting factor when making portfolio decisions. Under normal
market conditions, the Fund's turnover rate generally will not exceed 500%.
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:
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) 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 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
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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 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.
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
Swiss, 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 advisor under the Investment
Advisors 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 asset manager, handling global equity, balanced, fixed
income and derivative securities accounts for private individuals, as well as
corporate pension and profit-sharing plans, state pension funds, union funds,
endowments and other charitable institutions. As of September 30, 1996, BEA
managed approximately $ billion in assets. As an investment adviser, BEA
emphasizes a global investment strategy. BEA currently acts as investment
adviser for thirteen investment companies registered under the Investment
Company Act and acts as sub-adviser to certain portfolios of six other
registered investment companies. BEA also acts as investment adviser for
forty-two offshore funds, twenty-two of which are equity funds and twenty of
which are debt 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
providing to the Funds' and the Company's service providers prompt and accurate
data with respect to the Funds' transactions and the valuation of portfolio
securities.
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The day-to-day portfolio management of BEA International Equity and BEA
Emerging Markets Equity Funds is the responsibility of the BEA International
Equities Management Team. The Team consists of the following investment
professionals: William P. Sterling (Managing Director), Richard Watt (Managing
Director), Stephen M. Swift (Managing Director), Steven D. Bleiberg (Senior Vice
President), Mr. Sterling joined BEA in 1995, prior to which he was head of
International Economics at Merrill Lynch & Company. Mr. Watt joined BEA in 1995,
prior to which he was 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 he spent three years at Credit Suisse
Asset Management in London, where he was 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, on an individual basis, 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 (Vice Chairman of the Executive Committee and
Managing Director), Todd M. Rice (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
year and one half 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, BEA
Municipal Bond, BEA Global Fixed Income and 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 Moore (Executive Director), William P. Sterling (Managing
Director), Gregg Diliberto (Managing Director), Mark Silverstein (Senior Vice
President), Robert Justich (Senior Vice President). Messrs. Moore and Diliberto
have, on an individual basis, been engaged as investment professionals with BEA
for more than five years. Mr. Silverstein joined BEA in 1991; prior to joining
BEA he was a vice president of First Boston. 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; (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 Banker's Trust Company.
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For the services provided and expenses assumed by it, BEA is entitled to
receive the following fees, computed daily and payable monthly based on a Fund's
average daily net assets:
<TABLE>
<CAPTION>
FUND ANNUAL RATE
- -------------------------------- --------------------
<S> <C>
BEA International Equity........ .80% of the average
daily net assets*
BEA Emerging Markets Equity..... 1.00% of the average
daily net assets*
BEA U.S. Core Equity............ .75% of the average
daily net assets*
BEA Balanced.................... .60% of the average
daily net assets
BEA U.S. Core Fixed Income...... .375% of the average
daily net assets
BEA Global Fixed Income......... .50% of the average
daily net assets
BEA High Yield.................. .70% of the average
daily net assets
BEA Municipal Bond.............. .70% of the average
daily net assets
BEA Short Duration.............. .15% of the average
daily net assets
<FN>
- ------------------------------
* This fee is higher than that paid by most investment companies, although
the fees for the BEA International Equity and Emerging Markets Equity Funds
are within the range of fees of investment companies with similar
investment objectives.
</TABLE>
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 period ended August 31, 1996, the Company paid BEA investment
advisory fees, on annualized basis, with respect to the BEA International
Equity, BEA Emerging Markets Equity, BEA U.S. Core Equity, BEA Balanced, BEA
High Yield, BEA U.S. Core Fixed Income, BEA Global Fixed Income, BEA Municipal
Bond and BEA Short Duration Funds .80%, 1.00%, .54%, .50%, .59%, .26%, .33%,
.40%, and .15%, respectively, of the average net assets of the respective Funds,
and BEA waived, approximately 0%, 0%, .21%, .10%, .11%, .115%, .17%, .30% and
0%, 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 AGENT
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.
ADMINISTRATIVE SERVICES AGENT
Counsellors Funds Service, Inc. ("Counsellors Service"), a wholly-owned
subsidiary of Counsellors Securities Inc. ("Counsellors" or the "Distributor"),
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.
DISTRIBUTOR
Counsellors serves as distributor of the Shares. Counsellors is a
wholly-owned subsidiary of Warburg, Pincus Counsellors, Inc. ("WPC") and is
located at 466 Lexington Avenue, New York, New York 10017-3147. WPC is a
wholly-owned subsidiary of Warburg, Pincus Counsellors, G.P. No compensation is
payable by the Company to Counsellors for distribution services with respect to
the Funds.
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TRANSFER AGENT
Boston Financial Data Services, Inc. ("BFDS") serves as Transfer Agent for
the Funds. BFDS's address is Two Heritage Drive, Quincy, MA 02171.
CUSTODIAN
PNC Bank, National Association serves as the custodian of the assets of the
BEA Municipal Bond Fund. Brown Brothers Harriman & Co. serves as custodian for
the remaining 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, 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, taxes, interest, legal fees,
custodian fees, auditing fees, brokerage fees and commissions, certain of the
fees and expenses of registering and qualifying the Funds and the Shares for
distribution under Federal and state securities laws, expenses of preparing
prospectuses and statements of additional information and of printing and
distributing prospectuses and statements of additional information annually to
existing shareholders, the expense of reports to shareholders, shareholders'
meetings and proxy solicitations, fidelity bond and directors and officers
liability insurance premiums, the expense of using independent pricing services
and other expenses which are not expressly assumed by the Adviser under its
investment advisory agreement with respect to a Fund. 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.
For the Company's fiscal year ended August 31, 1996, BEA International
Equity Fund's total expenses were 1.22% (annualized) of average net assets (not
taking into account waivers and reimbursements of .03% ), 1.62% (annualized) of
average net assets with respect to the BEA Emerging Markets Equity Fund (not
taking into account waivers and reimbursements of .13%), 1.34% (annualized) of
average net assets with respect to the BEA U.S. Core Equity Fund (not taking
into account waivers and reimbursements of .34%), 1.11% of average net assets
with respect to the BEA High Yield Fund (not taking into account waivers and
reimbursements of .23%), .78% (annualized) of average net assets with respect to
the BEA U.S. Core Fixed Income Fund (not taking into account waivers and
reimbursements of .28%), 1.07% (annualized) of average net assets with respect
to the BEA Global Fixed Income Fund (not taking into account waivers and
reimbursements of .32%), and 1.42% (annualized) of average net assets with
respect to the BEA Municipal Bond Fund (not taking into account waivers and
reimbursements of .40%).
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 Fund's transfer agent, BFDS. 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
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being purchased must also appear on the check or Federal Reserve Draft. Federal
Reserve Drafts are available at national banks or any state bank which is a
member of the Federal Reserve System. Initial investments in any Fund 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. The Company reserves
the right 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.
HOW TO REDEEM SHARES
GENERAL
Shareholders may redeem for cash some or all of their Shares at any time. To
do so, a written request in proper form must be sent directly to The BEA Family,
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. If the proceeds of the redemption would exceed $10,000, or if the
proceeds are not to be paid to the record owner at the record address, or if the
shareholder is a corporation, partnership, trust or fiduciary, signature(s) must
be guaranteed by a bank, broker-dealer, credit union, national securities
exchange, savings association or any other organization which qualifies as an
"eligible guarantor institution" as that term is defined in rules adopted by the
Securities and Exchange Commission. In some cases, however, other documents may
be necessary.
INVOLUNTARY REDEMPTION
The Company reserves the right to redeem an account in any Fund of a
shareholder (other than an officer or employee of BEA or any BEA pension or
profit sharing plan) at any time the net asset value of the account in such Fund
falls below $500 as the result of a redemption request. Shareholders will be
notified in writing
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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.
PAYMENT OF REDEMPTION PROCEEDS
Payment of the Redemption Price for Shares redeemed will be made by wire or
by check mailed within seven days after acceptance by the Fund's transfer agent,
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, 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 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. Shareholders may be
required to bear certain administrative or custodial costs in effecting
redemptions in-kind.
EXCHANGE PRIVILEGE
A Shareholder may exchange Shares of any one of the Institutional Classes
for Shares of any other of the Institutional Classes. Such exchange will be
effected at the net asset value of the exchanged Class (less any applicable
redemption fee) and the net asset value of the Class to be acquired next
determined after the transfer agent's receipt of a request for an exchange. The
exchange privilege is available to Shareholders residing in any state in which
the Institutional Shares being acquired may legally be sold. An exchange of
Shares will be treated as a sale for Federal income tax purposes.
An investor considering an exchange to any of the other BEA Funds should
refer to the prospectus and statement of additional information regarding such
Fund.
A shareholder wishing to make an exchange may do so by sending a written
request to the Fund's transfer agent. In the case of shareholders holding share
certificates, the certificates must accompany the request for an exchange.
Shareholders are automatically provided with telephone exchange privileges when
opening an account, unless they indicate on the Application that they do not
wish to use this privilege. Shareholders holding share certificates are not
eligible to exchange Shares by telephone because share certificates must
accompany all exchange requests. To add a telephone exchange feature to an
existing account that previously did not provide for this option, a Telephone
Exchange Authorization Form must be filed with BFDS. This form is available from
BFDS. Once this election has been made, the shareholder may simply contact BFDS
by telephone to request the exchange (800) 401-2230. The Company will employ
reasonable procedures to confirm that instructions communicated by telephone are
genuine, and if the Company does not employ such procedures, it may be liable
for any losses due to unauthorized or fraudulent telephone instructions. Neither
the Company nor BFDS will be liable for any loss, liability, cost or expense for
following the Company's telephone transaction procedures described below or for
following instructions communicated by telephone that it reasonably believes to
be genuine.
The Company's telephone transaction procedures include the following
measures: (1) requiring the appropriate telephone transaction privilege forms;
(2) requiring the caller to provide the names of the account owners, the account
social security number and name of the Fund, all of which must match the
Company's records; (3) requiring the Company's service representative to
complete a telephone transaction form, listing all of the above caller
identification information; (4) permitting exchanges
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only if the two account registrations are identical; (5) requiring that
redemption proceeds be sent only by check to the account owners of record at the
address of record, or by wire only to the owners of record at the bank account
of record; (6) sending a written confirmation for each telephone transaction to
the owners of record at the address of record within five (5) business days of
the call; and (7) maintaining tapes of telephone transactions for six months, if
the Company elects to record shareholder telephone transactions.
For accounts held of record by a broker-dealer, trustee, custodian or other
agent, additional documentation or information regarding the scope of a caller's
authority is required. Finally, for telephone transactions in accounts held
jointly, additional information regarding other account holders is required.
Telephone transactions will not be permitted in connection with IRA, other
retirement plan accounts, or accounts with attorney-in-fact under power of
attorney.
If the exchanging shareholder does not currently own Shares of the 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. The exchange privilege may be modified or terminated at
any time, or from time to time, by the Company, upon 60 days written notice to
shareholders.
If an exchange is to another BEA Fund, the dollar value of Shares acquired
must equal or exceed the Fund's minimum for a new account; if to an existing
account, the dollar value must equal or exceed the Fund's minimum for subsequent
investments. If any amount remains in the 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, BEA Emerging Markets Equity, and BEA U.S. Core Equity
Funds annually. The Company will distribute net investment income, if any, for
the BEA Balanced and BEA Short Duration Funds at least annually. The Company
will distribute net investment income for the BEA U.S. Core Fixed Income, BEA
Global Fixed Income, BEA High Yield and 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 shareholder elects
otherwise. If a shareholder desires to have distributions paid out rather than
reinvested, the shareholder should notify BFDS 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 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.
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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.
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.
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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
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.
MISCELLANEOUS CONSIDERATIONS; EFFECT OF FUTURE LEGISLATION
Future legislative or administrative changes or court decisions may
materially affect the tax consequences of investing in one or more Funds of the
Company. Shareholders are also urged to consult their tax advisers concerning
the application of state and local income taxes to investments in the Company
which may differ from the Federal income tax consequences described above.
MULTI-CLASS STRUCTURE
The Company offers other classes of shares of the Funds which are offered
directly to institutional investors and financial planners pursuant to separate
prospectuses. Shares of each class 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
Institutional and Advisor Shares separately from Investor Shares. Because of
different fees paid by the Investor Shares, the total return on such shares can
be expected, at any time, to be different than the total return on Institutional
and Advisor Shares. Information concerning these other classes may be obtained
by calling BFDS at 1-800-401-2230.
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).
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THIS PROSPECTUS AND THE STATEMENT OF ADDITIONAL INFORMATION INCORPORATED
HEREIN RELATE PRIMARILY TO THE BEA CLASSES REPRESENTING AN INTEREST IN THE BEA
INTERNATIONAL EQUITY, BEA EMERGING MARKETS EQUITY, BEA HIGH YIELD, BEA U.S. CORE
EQUITY, BEA BALANCED, BEA U.S. CORE FIXED INCOME, BEA GLOBAL FIXED INCOME, BEA
MUNICIPAL BOND AND 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.
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'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 (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 should be addressed to BFDS, the
Fund's transfer agent.
SHARE CERTIFICATES
The Company will issue share certificates for any of the Shares only upon
the written request of a shareholder sent to BFDS.
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
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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, 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 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.
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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.
"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 and
municipal 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.
"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.
A-1
<PAGE>
"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.
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.
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.
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.
"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-2
<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.
Investment Adviser
BEA Associates
New York, New York
<PAGE>
BEA INSTITUTIONAL FUNDS
INTERNATIONAL EQUITY
EMERGING MARKETS EQUITY
U.S. CORE EQUITY
BALANCED
U.S. CORE FIXED INCOME
GLOBAL FIXED INCOME
HIGH YIELD
MUNICIPAL BOND
SHORT DURATION
(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"): BEA International Equity , BEA
Emerging Markets Equity BEA, U.S. Core Equity BEA, Balanced BEA, U.S. Core Fixed
Income , Global Fixed Income , BEA High Yield, BEA Municipal Bond, and 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
November 1, 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 November 1, 1996.
<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 Global Fixed
Income and BEA Short Duration Funds.... ........... 8 16
Supplemental 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
Global Fixed Income and BEA Short Duration Funds... 20 N/A
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
Fund 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.
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. 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
3
<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 AND DELAYED DELIVERY TRANSACTIONS. 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. The
Fund currently anticipates that when-issued securities will not exceed 5% of its
net assets.
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.
4
<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.
5
<PAGE>
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 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
6
<PAGE>
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 arrangements will be made with a
suitable subcustodian, which may include the lender.
7
<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
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).
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
8
<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. The Funds do not presently intend to invest
more than 5% of its 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
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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.
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 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. Mortgage-backed securities represent
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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 rates than the original investment, thus
affecting a Fund's yield. For this
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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.
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.
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. CMOs may
exhibit more
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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 mortgaged 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 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
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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 net assets in
structured notes.
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
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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.
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
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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.
HEDGING. Each of the Funds may engaged in various hedging strategies.
See "Currency Hedging" in the Prospectus.
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 fund securities or other assets denominated in
that currency or (2) a Fund
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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.
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.
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 offering a lesser rate of exchange
should a Fund desire to resell that currency to the dealer.
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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.
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
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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.
FUTURES CONTRACTS. When a Fund purchases a futures contract, it
agrees to purchase a specified underlying instrument at a specified future date.
When a Fund sells a futures contract, it agrees to sell the underlying
instrument at a specified future date. The price at which the purchase and sale
will take place is fixed when a Fund enters into the contract. The underlying
instrument may be a specified type of security, such as U.S. Treasury bonds or
notes.
The majority of futures contracts are closed out by entering into an
offsetting purchase or sale transaction in the same contract on the exchange
where they are traded, rather than being held for the life of the contract.
Futures contracts are closed out at their current prices, which may result in a
gain or loss.
If a Fund holds a futures contract until the delivery date, it will be
required to complete the purchase and sale contemplated by the contract. In the
case of futures contracts on securities, the purchaser generally must deliver
the agreed-upon purchase price in cash, and the seller must deliver securities
that meet the specified characteristics of the contract.
A Fund may purchase futures contracts as an alternative to purchasing
actual securities. For example, if a Fund intended to purchase bonds but had
not yet done so, it could purchase a futures contract in order to lock in
current bond prices while deciding on particular investments. This strategy is
sometimes known as an anticipatory hedge. Alternatively, a Fund could purchase
a futures contract if it had cash and short-term securities on hand that it
wished to invest in longer-term securities, but at the same time that Fund
wished to maintain a highly liquid position in order to be prepared to meet
redemption requests or other obligations. In these strategies a Fund would use
futures contracts to attempt to achieve an
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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.
SUPPLEMENTAL INVESTMENT OBJECTIVES AND POLICIES --
BEA INTERNATIONAL EQUITY, BEA EMERGING MARKETS EQUITY,
BEA BALANCED, BEA U.S. CORE EQUITY, BEA U.S. CORE FIXED INCOME,
BEA GLOBAL FIXED INCOME, BEA HIGH YIELD AND BEA SHORT DURATION FUNDS.
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
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investment adviser will attempt to minimize this risk by careful monitoring of
the creditworthiness of the FCMs with which a Fund does business.
CORRELATION OF PRICE CHANGES. The prices of futures contracts depend
primarily on the value of their underlying instruments. Because there are a
limited number of types of futures contracts, it is likely that the standardized
futures contracts available to a Fund will not match that Fund's current or
anticipated investments. Futures prices can also diverge from the prices of
their underlying instruments, even if the underlying instruments match 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
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current market price for the option (known as the option premium). The option's
underlying instrument may be a security, or a futures contract.
A Fund may terminate its position in a put option it has purchased by
allowing it to expire or by exercising the option. If the option is allowed to
expire, the Fund will lose the entire premium it paid. If the Fund exercises
the option, it completes the sale of the underlying instrument at the strike
price. If 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
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Fund may be required to hold a security that it might otherwise have sold to
protect against depreciation.
WRITING PUT OPTIONS. When a Fund writes a put option, it takes the
opposite side of the transaction from the option's purchaser. In return for
receipt of the premium, a Fund assumes the obligation to pay the strike price
for the option's underlying instrument if the other party to the option chooses
to exercise it. When writing an option on a futures contract 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
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would involve writing a call option at one strike price and buying a call option
at a lower price, in order to reduce the risk of the written call option in the
event of a substantial price increase. Because combined options positions
involve multiple trades, they result in higher transaction costs and may be more
difficult to open and close out.
RISKS OF OPTIONS TRANSACTIONS. Options are subject to risks similar
to those described above with respect to futures contracts, including the risk
of imperfect correlation between the option and a Fund's other investments and
the risk that there might not be a liquid secondary market for the option. In
the case of options on futures contracts, there is also a risk of imperfect
correlation between the option and the underlying futures contract. Options are
also subject to the risks of an illiquid secondary market, particularly in
strategies involving writing options, which a Fund cannot terminate by exercise.
In general, options whose strike prices are close to their underlying
instruments' current value will have the highest trading volume, while options
whose strike prices are further away may be less liquid. The liquidity of
options may also be affected if options exchanges impose trading halts,
particularly when markets are volatile.
ASSET COVERAGE FOR FUTURES AND OPTIONS POSITIONS. A Fund will not
use leverage in its options and futures strategies. Such investments will be
made for hedging purposes only. 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
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unrealized profits and losses on such contracts, would exceed 5% of a Fund's
total assets.
In addition, the Funds will not enter into any futures contract and
into any option if, as a result, the sum of (i) the current value of assets
hedged in the case of strategies involving the sale of securities, and (ii) the
current value of securities or other instruments underlying the respective
Fund's other futures or options positions, would exceed 50% of such Fund's net
assets.
The Funds' limitations on investments in futures contracts and 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
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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
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assets in private activity bonds when added together with any taxable
investments held by the BEA Municipal Bond Fund Portfolio, they do not presently
intend to do so unless in the opinion of the Adviser the investment is
warranted. To the extent the BEA Municipal Bond Fund Portfolio's assets are
invested in Municipal Obligations payable from the revenues of similar projects
or are invested in private activity bonds, the BEA Municipal Bond Fund Portfolio
will be subject to the peculiar risks presented by the laws and economic
conditions relating to such projects and bonds to a greater extent than it would
be if its assets were not so invested.
SUPPLEMENTAL INVESTMENT OBJECTIVES AND POLICIES --
BEA INTERNATIONAL EQUITY, BEA EMERGING MARKETS EQUITY,
BEA U.S. CORE EQUITY AND BEA BALANCED 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.
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 fund 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. 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
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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 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
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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.
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 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.
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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.
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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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, BEA U.S.
Core Fixed Income, the BEA 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.
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
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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.
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.
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
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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:
Principal Occupation
Name, Address and Age Position with RBB During Past Five Years
- --------------------- ------------------- ----------------------f
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.)
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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.
35
<PAGE>
Principal Occupation
Name and Address Position with Fund During Past Five Years
- ---------------- ------------------ ----------------------
Morgan R. Jones - 56 Secretary Chairman of the law firm of
1100 PNB Bank Building Drinker Biddle & Reath,
Broad and Chestnut Streets Philadelphia, Pennsylvania;
Philadelphia, PA 19107 Director, Rocking Horse
Child Care Centers of
America, Inc.
- --------------------
* 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.
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 of sub-advisor of the
Company or the Distributor $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
Director 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
36
<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
PNC Institutional Management Corporation ("PIMC"), the Company's adviser to
certain investment portfolios of the Company, BEA Associates ("BEA Associates"),
the Company's adviser to the BEA Funds, Warburg Pincus Counsellors, Inc.
(Warburg"), the Company's adviser to the Warburg Pincus Funds, PNC Bank,
National Association ("PNC Bank"), the Company's custodian, and Counsellors
Securities Inc. (the "Distributor"), the Company's distributor, the Company
itself requires only one part-time employee. No officer, director or employee
of PIMC, BEA, PNC Bank 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, BEA Emerging Markets Equity and BEA
High Yield Funds, dated August 31, 1993 for the BEA U.S. Core Equity, BEA U.S.
Core Fixed Income, BEA Global Fixed Income and BEA Municipal Bond Funds, and
dated November 17, 1994 for the BEA Balanced and BEA Short Duration Funds. Such
advisory agreements are hereinafter collectively referred to as the "Advisory
Contracts."
BEA Associates is a diversified asset manager, handling global equity,
balanced, fixed income and derivative securities accounts for private
individuals, as well as corporate pension and profit-sharing plans, state
pension funds, union funds, endowments and other charitable institutions. As
of September 30, 1996, BEA Associates managed approximately $29 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.
As an investment adviser, BEA emphasizes a global investment strategy.
BEA currently acts as investment adviser for thirteen investment companies
registered under the Investment Company Act. They are: Alpha Government
Securities Fund, 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
37
<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, twenty-two of which are equity funds and twenty of which are
debt 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, BEA Emerging Markets Equity, BEA U.S. Core Equity, BEA U.S. Core Fixed
Income, BEA Global Fixed Income, BEA High Yield, BEA Municipal Bond Fund, BEA
Balanced and 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, 1995 BEA waived advisory fees with
respect to the BEA International Equity, BEA Emerging Markets Equity, BEA U.S.
Core Equity, BEA U.S. Core Fixed Income, BEA Global Fixed Income, BEA High Yield
and 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.
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
38
<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.
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 26, 1995, 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
39
<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.
BOSTON FINANCIAL DATA SERVICES, Inc. (" BFDS"), an affiliate of
State Street Bank and Trust Company, serves as 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 BFDS (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, BFDS receives a fee on a per
transaction basis.
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<PAGE>
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.
Fund 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.
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
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<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.
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.
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.
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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 Short Duration Fund expects that its annual portfolio turnover
rate will not exceed 500% under normal market conditions. International Equity,
Emerging Markets Equity and High Yield Funds expect that their annual Fund
turnover rate should not exceed 150% under normal market conditions. U.S. Core
Equity, U.S. Core Fixed Income, Global Fixed Income and Municipal Bond Fund
expect that their annual portfolio turnover rate should not exceed 100% under
normal market conditions. The 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
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<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.
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
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.
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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.
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)
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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.
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), BEA
Emerging Markets Equity Fund (commencing February 1, 1993), BEA U.S. Core Equity
Fund
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(commencing September 1, 1994), BEA High Yield Fund (commencing March 1, 1993),
BEA U.S. Core Fixed Income Fund (commencing April 1, 1994), BEA 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), 9.3% (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 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.
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
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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.
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.
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
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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
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").
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<PAGE>
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.
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
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<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.
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.
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
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<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.
Corporate taxpayers may be liable for alternative minimum tax, which
is imposed at the rate of 20% of "alternative minimum taxable income" (less, in
the case of corporate shareholders with "alternative minimum taxable income" of
less than $310,000, the applicable "exemption amount"), in lieu of the regular
corporate income tax. "Alternative minimum taxable income" is equal to "taxable
income" (as determined for corporate income regular tax purposes) with certain
adjustments. Although corporate taxpayers in determining "alternative minimum
taxable income" are allowed to exclude exempt interest dividends (other than
exempt interest dividends derived from certain private activity bonds ("AMT
Preference Dividends"), as explained in the Prospectus) and to utilize the 70%
dividends received deduction at the first level of computation, the Code
requires (as a second computational step) that "alternative minimum taxable
income" be increased by 75% of the excess of "adjusted current earnings" over
other "alternative minimum taxable income."
Corporate shareholders will have to take into account (1) all exempt
interest dividends and (2) the full amount of all dividends from 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.
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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.
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 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
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<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.
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 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.
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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.
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
55
<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.
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.
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.
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
56
<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.
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.
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.
57
<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
(Growth & Income), 100 million shares are classified as Class B Common Stock,
100 million shares are classified as Class C Common Stock (Balanced), 100
million shares are classified as Class D Common Stock (Tax-Free), 500 million
shares are classified as Class E Common Stock (Money), 500 million shares are
classified as Class F Common Stock (Municipal Money), 500 million shares are
classified as Class G Common Stock (Money), 500 million shares are classified as
Class H Common Stock (Municipal Money), 1 billion shares are classified as Class
I Common Stock (Money), 500 million shares are classified as Class J Common
Stock (Municipal Money), 500 million shares are classified as Class K Common
Stock (U.S. Government Money), 1,500 million shares are classified as Class L
Common Stock (Money), 500 million shares are classified as Class M Common Stock
(Municipal Money), 500 million shares are classified as Class N Common Stock
(U.S. Government Money), 500 million shares are classified as Class O Common
Stock (N.Y. Money), 100 million shares are classified as Class P Common Stock
(Government), 100 million shares are classified as Class Q Common Stock, 500
million shares are classified as Class R Common Stock (Municipal Money), 500
million shares are classified as Class S Common Stock (U.S. Government Money),
500 million shares are classified as Class T Common Stock (International), 500
million shares are classified as Class U Common Stock (High Yield), 500 million
shares are classified as Class V Common Stock (Emerging), 100 million shares are
classified as Class W Common Stock (Laffer/Canto Equity), 50 million shares are
classified as Class X Common Stock (U.S. Core Equity), 50 million shares are
classified as Class Y Common Stock (U.S. Core Fixed Income), 50 million shares
are classified as Class Z Common Stock (Global Fixed Income), 50 million shares
are classified as Class AA Common Stock (Municipal Bond), 50 million shares are
classified as Class BB Common Stock (BEA Balanced), 50 million shares are
classified as Class CC Common Stock (Short Duration), 100 million shares are
classified as Class DD Common Stock (Growth & Income Series 2), 100 million
shares are classified as Class EE Common Stock (Balanced Series 2), 50 million
shares are classified as Class FF (n/i MicroCap), 50 million shares are
classified as Class HH (n/i Growth & Value), 100 million shares are classified
as Class II (BEA Investor International), 100 million shares are classified as
Class JJ (BEA Investor Emerging), 100 million shares are classified as Class KK
(BEA Investor High Yield), 100 million shares are classified as Class LL (BEA
Investor Global Telecom), 100 million shares are classified as Class MM (BEA
Advisor International), 100 million shares are classified as Class NN (BEA
Advisor Emerging), 100 million shares are classified as Class OO (BEA Advisor
High Yield), 100 million shares are classified as Class PP (BEA Advisor Global
Telecom), 100 million shares are classified as Class QQ (Boston Partners
Institutional Large Cap), 100 million shares are classified as Class RR (Boston
Partners Investor Large Cap), 100 million shares are classified as Class SS
(Boston Partners Advisors Large Cap), 700 million shares are classified as Class
Janney Money Common Stock (Money), 200 million shares are classified as Class
Janney Municipal Money Common Stock (Municipal Money), 500
58
<PAGE>
million shares are classified as Class Janney U.S. Government Money Common Stock
(U.S. Government Money), 100 million shares are classified as Class Janney 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.
The classes of Common Stock have been grouped into sixteen separate
"families": the Company 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, the 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 fund as well as the Money Market and Municipal
Money Market Funds; the Cash Preservation Family represents interests in the
Money Market and Municipal Money Market Portfolios; the Sansom Street Family
represents interests in the Money Market, Municipal Money Market and Government
Obligations Money Market Portfolios; Bedford Family represents interests in the
Money Market, Municipal Money Market, Government Obligations Money Market and
New York Municipal Money Market Portfolios; the Bradford Family represents
interests in the Municipal Money Market and Government Obligations Money Market
Portfolios; the BEA
59
<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.
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
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 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).
60
<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
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<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
62
<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
63
<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
64
<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
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<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
66
<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
67
<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>
THE BEA FAMILY
THE RBB FUND, INC.
BEA International Equity Portfolio
STATEMENT OF NET ASSETS
August 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
COMMON AND CONVERTIBLE STOCKS, WARRANTS AND RIGHTS -- 96.4%
ARGENTINA -- 0.2%
Sodigas del Sur S.A.+...................... 403,923 $ 745,416
Sodigas Pampeana S.A.+..................... 558,962 844,809
------------
1,590,225
------------
AUSTRALIA -- 2.0%
Broken Hill Corp. Ltd...................... 240,546 3,273,168
CRA Ltd.................................... 224,900 3,415,701
News Corp. Ltd. ADR........................ 94,000 1,997,500
News Corp. Ltd. Pfd. ADR................... 46,900 832,475
WMC Ltd.................................... 564,500 3,925,398
------------
13,444,242
------------
BRAZIL -- 2.7%
Banco Bradesco S.A. PN..................... 556,077,084 4,705,099
Centrais Eletricas Brasileiras S.A. ON..... 63,836 16,957
Cia. Cervejaria Brahma PN Warrants Expire
9/30/96**................................ 369,916 134,660
Cia. Tecidos Norte de Minas Gerais PN...... 9,556,000 3,243,813
Cia. Vale do Rio Doce ADR.................. 196,900 3,825,570
Lojas Americanas S.A. PN................... 56,034,786 970,299
Telecomunicacoes de Sao Paulo S.A. PN...... 28,410,000 5,450,561
------------
18,346,959
------------
CANADA -- 0.6%
Magna International, Inc. Class A.......... 85,600 4,130,200
------------
DENMARK -- 0.3%
Unidanmark A/S 144A........................ 52,990 2,343,788
------------
FINLAND -- 1.3%
Nokia Corp. ADR............................ 24,000 1,014,000
Nokia Corp. Class A........................ 102,196 4,344,582
UPM-Kymmene Corp........................... 139,020 3,178,986
------------
8,537,568
------------
FRANCE -- 7.6%
Accor...................................... 24,025 2,908,814
AXA S.A.................................... 56,764 3,186,318
Bertrand Faure............................. 118,121 3,884,485
BIC S.A.................................... 35,620 5,199,127
Carrefour Super Marche..................... 14,214 7,184,204
Christian Dior S.A......................... 32,971 3,972,911
Compagnie Generale Des Eaux................ 39,100 3,771,764
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
FRANCE -- (CONTINUED)
Compagnie Generale Des Eaux Certificates... 1,002 $ 96,657
Credit Local de France..................... 52,111 4,291,978
G.T.M. Entrepose S.A....................... 67,182 4,040,474
G.T.M. Entrepose S.A. Certificates......... 1,912 114,992
Groupe Danone.............................. 6,733 929,561
L'Air Liquide.............................. 8,300 1,413,115
Legrand.................................... 9,764 1,459,875
Michelin Class B........................... 36,558 1,708,399
Technip S.A................................ 49,209 4,461,175
Valeo S.A.................................. 67,691 3,409,284
------------
52,033,133
------------
GERMANY -- 5.4%
Adidas AG.................................. 63,800 5,498,513
Commerzbank AG............................. 7,950 1,832,466
Degussa CN................................. 9,950 3,485,930
Deutsche Bank AG........................... 68,890 3,412,369
GEA AG Non Voting Pfd...................... 10,346 3,356,820
Hoechst AG................................. 172,450 6,026,541
Man AG..................................... 12,260 3,082,817
RWE AG..................................... 55,700 2,028,227
SAP AG..................................... 5,450 905,509
SAP AG 144A ADR............................ 61,500 3,361,959
Volkswagen AG.............................. 10,821 4,015,634
------------
37,006,785
------------
HONG KONG -- 4.5%
Cheung Kong Holdings Ltd................... 757,500 5,315,188
Citic Pacific Ltd.......................... 1,143,900 5,030,408
Hong Kong and China Gas.................... 2,409,000 3,894,781
HSBC Holdings PLC.......................... 409,408 7,069,381
New World Development Company.............. 858,000 4,161,547
Sun Hung Kai Properties Ltd................ 505,300 4,934,379
------------
30,405,684
------------
INDIA -- 0.7%
India Liberalisation Fund Class A 144A
**/****.................................. 276,532 1,960,612
Indian Opportunity Fund Ltd. **............ 320,156 2,958,241
------------
4,918,853
------------
INDONESIA -- 1.1%
PT Astra International***.................. 2,320,100 3,022,125
PT Telekomunikasi***....................... 2,177,500 3,068,866
PT Telekomunikasi Indonesia ADR............ 41,900 1,167,963
------------
7,258,954
------------
</TABLE>
See Accompanying Notes to Financial Statements.
4
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
ISRAEL -- 1.0%
Geotek Communications, Inc. Series M
Cumulative Convertible Pfd.+............. 600 $ 6,476,842
------------
ITALY -- 2.7%
Banca Fideuram S.p.A....................... 1,351,600 2,989,236
Edison S.p.A............................... 460,000 2,485,499
Istituto Mobiliare Italiano S.p.A.......... 746,500 5,882,234
Telecom Italia Mobile S.p.A**.............. 1,014,784 2,089,775
Telecom Italia Mobile Non-Convertible
Savings Shares**......................... 1,347,050 1,641,221
Telecom Italia Non-Convertible Savings
Shares................................... 1,347,050 2,163,022
Telecom Italia S.p.A....................... 724,984 1,423,373
------------
18,674,360
------------
JAPAN -- 22.2%
Aida Engineering Ltd....................... 78,000 580,278
Aoki International Company Ltd............. 58,000 1,121,444
Aoyama Trading Company..................... 79,000 2,087,561
Bank of Tokyo - Mitsubshi.................. 137,000 2,787,681
Chudenko Corp.............................. 15,000 480,619
Chugai Pharmaceutical Company Ltd.......... 173,000 1,537,105
Chugoku Bank, Ltd.......................... 98,000 1,570,021
Dai-Ichi Kangyo Bank Ltd................... 244,000 4,043,827
Daiichi Pharmaceutical Company Ltd......... 203,000 3,102,661
Daiwa House................................ 247,000 3,524,998
Daiwa Securities Company Ltd............... 107,000 1,211,767
Danto Corp................................. 47,000 532,271
Fuji Photo Film Company Ltd................ 163,000 4,907,559
Fujitsu Limited............................ 309,000 2,785,296
Higo Bank.................................. 203,000 1,463,484
Hitachi Cable.............................. 153,000 1,119,925
Hitachi Ltd................................ 529,000 4,860,897
Hitachi Metals Ltd......................... 93,000 856,275
Hokuetsu Paper Mills....................... 189,000 1,444,342
House Food Indl............................ 92,000 1,677,194
Industrial Bank of Japan Ltd............... 181,900 3,868,787
Industrial Bank of Japan Ltd. Rights....... 14,552 150,062
Kikkoman................................... 160,000 1,168,217
Kinden Corp................................ 83,000 1,268,576
Kirin Brewery Company Ltd.................. 127,000 1,309,640
Kyocera Corp............................... 25,000 1,698,739
Kyudenko Company Ltd....................... 53,000 678,298
Kyushu Electric Power...................... 171,000 3,668,447
Makita Electric Works...................... 85,000 1,220,882
Maruichi Steel Tube........................ 48,000 817,604
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
JAPAN -- (CONTINUED)
Matsushita Electric Works.................. 127,000 $ 1,262,867
Mitsubishi ElectricCorp.................... 463,000 2,971,283
Mitsubishi Estate Company Ltd.............. 188,000 2,302,182
Mitsubishi Gas and Chemical Company........ 286,000 1,179,707
Mitsubishi Steel Manufacturing **.......... 257,500 1,299,236
Mitsubishi Trust and Banking Corp.......... 101,000 1,515,790
Mitsui Petrochemical....................... 318,000 2,143,228
Murata Manufacturing Company Ltd........... 50,000 1,767,793
NEC Corp................................... 365,000 3,898,352
Nichicon................................... 212,000 2,908,388
Nippon Chemi-Con Corp...................... 123,000 765,565
Nippon Meat Packers........................ 153,000 2,127,152
Nippon Oil Company......................... 504,000 3,085,904
Nippon Paper Industries Co................. 463,000 2,770,923
Nisshin Steel Company Ltd.................. 504,000 1,832,980
Nomura Securities Company Ltd.............. 188,000 3,271,522
Ricoh Company Ltd.......................... 160,000 1,561,550
Rinnai..................................... 57,000 1,291,041
Sakura Bank Ltd............................ 289,000 2,740,724
Sanwa Bank................................. 214,000 3,783,077
Seino Transportation Company Ltd........... 198,000 2,916,858
Sekisui Chemical Co........................ 250,000 2,716,140
Sekisui House Ltd.......................... 463,000 4,902,403
Shimachu................................... 26,000 742,105
Shimano Inc................................ 76,000 1,406,500
Shin-Etsu Chemical Co...................... 171,000 3,022,926
Shionogi & Company Ltd..................... 193,000 1,508,673
Shiseido Company Ltd....................... 238,000 2,892,551
Sumitomo Bank Ltd.......................... 102,000 1,868,889
SXL Corp................................... 132,000 1,227,511
Takara Standard............................ 63,000 649,664
Tohoku Electric Power Company.............. 169,000 3,641,101
Tokai Bank Ltd............................. 163,000 1,936,010
Tokio Marine and Fire Insurance Company.... 206,000 2,351,901
Tokyo Style Corp. Ltd...................... 81,000 1,297,671
Toppan Printing............................ 341,000 4,301,353
Toshiba Corp............................... 526,000 3,399,797
UNY Company Ltd............................ 95,000 1,670,656
Yakult Honsha.............................. 22,000 1,595,065
Yamaguchi Bank............................. 102,000 1,549,581
Yamanouchi Pharmaceutical.................. 142,000 2,928,644
Yokogawa Bridge Corp....................... 51,000 638,615
------------
151,188,335
------------
MALAYSIA -- 2.3%
Diversified Resources Berhad............... 1,568,700 5,129,350
</TABLE>
See Accompanying Notes to Financial Statements.
5
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
MALAYSIA -- (CONTINUED)
Malayan Banking Berhad..................... 560,300 $ 5,327,627
Petronas Gas Berhad International.......... 955,000 3,984,754
YTL Corp. Berhad........................... 287,300 1,417,769
------------
15,859,500
------------
MEXICO -- 2.7%
Cementos Mexicanos CPO, S.A................ 1,134,500 4,147,232
Corparacion GEO S.A. de C.V. Class B **.... 691,600 3,486,522
Corporacion Industrial SanLuis S.A. de C.V.
CPO...................................... 601,894 3,570,457
Grupo Elektra S.A. de C.V. CPO............. 282,600 2,006,451
Grupo Modelo S.A. de C.V. Class C.......... 484,200 2,236,490
Kimberly Clark de Mexico S.A. de C.V. Class
A........................................ 160,600 2,950,250
Telefonos de Mexico S.A. de C.V.
Unsponsored ADR.......................... 4,400 6,875
------------
18,404,277
------------
NETHERLANDS -- 3.3%
Akzo Nobel................................. 36,200 4,209,658
Heineken N.V............................... 15,200 3,383,072
Internationale Nederlanden Groep N.V....... 115,100 3,587,334
Nutricia Verenigde Bedrijven N.V........... 26,100 3,493,007
VNU Verenigd Bezit......................... 15,000 262,659
Wolters Kluwer............................. 60,400 7,591,878
------------
22,527,608
------------
PHILIPPINES -- 1.0%
Ayala Corp. Class B........................ 2,940,600 3,428,452
Philippine Long Distance Telephone Company
ADR...................................... 53,050 3,176,369
------------
6,604,821
------------
PORTUGAL -- 0.6%
Portugal Telecom S.A. ADR **............... 52,380 1,394,617
Portugal Telecom S.A. Register............. 103,000 2,755,946
------------
4,150,563
------------
PUERTO RICO -- 0.5%
Cellular Communications of Puerto Rico,
Inc. ADR **.............................. 130,900 3,501,575
------------
RUSSIA -- 0.2%
PLD Telekom, Inc........................... 192,900 1,470,862
------------
SINGAPORE -- 2.2%
DBS Land Ltd............................... 470,600 1,565,878
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
SINGAPORE -- (CONTINUED)
Overseas-Chinese Banking Corp. Ltd.***..... 458,770 $ 5,512,416
Singapore Press Holdings***................ 168,400 2,921,408
United Overseas Bank Ltd.***............... 488,980 4,693,374
------------
14,693,076
------------
SOUTH AFRICA -- 2.2%
Amalgamated Banks of South Africa Ltd...... 602,443 2,779,886
Anglo American Industrial Corp. Ltd........ 80,658 2,984,670
Gencor Ltd................................. 910,500 3,206,844
South African Breweries Ltd................ 194,412 5,157,162
South African Breweries Ltd. ADR........... 22,813 604,955
------------
14,733,517
------------
SOUTH KOREA -- 1.5%
Korea Fund, Inc............................ 551,525 10,547,916
------------
SPAIN -- 2.3%
Banco Intercontinental Espanol............. 34,400 3,892,212
Banco Popular.............................. 20,000 3,470,334
Repsol S.A. ADR............................ 122,500 3,996,562
Telefonica de Espana ADR................... 81,700 4,524,137
------------
15,883,245
------------
SWEDEN -- 4.8%
Astra AB Fria Class A...................... 168,920 7,145,192
Autoliv AB................................. 140,800 4,647,602
Ericsson Telephone Company ADR Class B..... 249,460 5,753,171
Hennes & Mauritz Fria Class B.............. 70,004 7,275,890
Mo Och Domsjo AB - B Shares................ 138,200 3,998,081
Stora Kopparbergs Bergslags Aktiebolag A
Shares................................... 255,800 3,593,836
------------
32,413,772
------------
SWITZERLAND -- 5.1%
ABB AG..................................... 5,006 6,171,952
Ciba Geigy AG Registered................... 4,484 5,662,938
Holderbank Financiere Glaris AG Class B.... 5,507 4,214,260
Roche Holding AG........................... 665 5,069,544
Sandoz AG Registered....................... 3,250 3,868,790
Schweiz Bankgesellschaft B................. 3,627 3,522,387
Swiss Reinsurance Company Registered....... 6,010 6,497,974
------------
35,007,845
------------
</TABLE>
See Accompanying Notes to Financial Statements.
6
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
THAILAND*** -- 2.3%
Advanced Information Services Public
Company Ltd.............................. 214,900 $ 2,844,891
Krung Thai Bank Public Company Ltd......... 840,570 3,631,476
Phatra Thanakit Public Company Ltd......... 325,000 1,932,224
Siam Cement Company Ltd.................... 80,500 3,101,308
Thai Farmers Bank Public Company Ltd....... 405,300 4,305,208
Thai Farmers Bank Public Company Ltd.
Warrants Expire 09/15/2002............... 50,663 136,546
------------
15,951,653
------------
UNITED KINGDOM -- 13.1%
Berkeley Group PLC......................... 20,400 185,199
British Petroleum PLC...................... 463,446 4,489,515
British Sky Broadcasting Group PLC ADR**... 95,590 5,126,014
Burton Group PLC........................... 952,800 2,268,455
Dixons Group PLC........................... 294,921 2,490,930
EMI Group PLC.............................. 301,000 6,771,564
Flextech PLC **............................ 162,092 1,301,984
General Cable PLC **....................... 1,198,400 3,330,277
General Cable PLC ADR **................... 339,200 4,621,600
International Cabletel, Inc. **............ 182,842 4,433,918
Land Securities PLC........................ 364,000 3,872,806
Rank Organisation PLC...................... 116,100 812,024
Reuters Holdings PLC Class B............... 249,520 2,906,048
Reuters Holdings PLC ADR Class B........... 56,200 3,926,975
Rolls Royce PLC............................ 2,083,300 7,220,434
Scottish & Newcastle PLC................... 514,100 5,437,703
Standard Chartered Bank PLC................ 941,459 10,435,618
Unilever PLC............................... 104,800 2,077,077
United News & Media PLC.................... 275,000 3,076,149
WPP Group PLC.............................. 2,824,051 10,162,534
Zeneca Group PLC........................... 180,900 4,321,043
------------
89,267,867
------------
TOTAL COMMON AND CONVERTIBLE STOCKS,
WARRANTS AND RIGHTS (Cost
$610,436,063)........................... 657,374,025
------------
<CAPTION>
PAR
(000)
-----------
<S> <C> <C>
FOREIGN BONDS**** -- 0.4%
SOUTH AFRICA -- 0.4%
Sappi BVI Finance Ltd. Convertible 144A
7.500% 08/01/2002........................ $ 3,240 2,948,400
------------
TOTAL FOREIGN BONDS
(Cost $3,240,000)....................... 2,948,400
------------
SHORT-TERM INVESTMENT -- 2.7%
BBH Grand Cayman U.S. Dollar Time Deposit
4.750% 09/03/1996........................ 18,530 18,530,000
------------
TOTAL SHORT-TERM INVESTMENT
(Cost $18,530,000)...................... 18,530,000
------------
<CAPTION>
VALUE
------------
<S> <C> <C>
TOTAL INVESTMENTS AT VALUE -- 99.5%
(Cost $632,206,063)................................... $678,852,425
OTHER ASSETS IN EXCESS
OF LIABILITIES -- 0.5%................................ 3,418,376
------------
NET ASSETS (Applicable to
35,142,215 BEA Shares) -- 100.0%...................... $682,270,801
------------
------------
NET ASSET VALUE AND OFFERING
PRICE PER SHARE
($682,270,801 DIVIDED BY 35,142,215)................. $19.41
------------
------------
REDEMPTION PRICE PER SHARE
($19.41 X .9900)...................................... $19.22
------------
------------
</TABLE>
* Cost for Federal income tax purposes at August 31, 1996 is $632,398,515. The
gross appreciation (depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation.......... $ 81,589,602
Gross Depreciation.......... (35,135,692)
---------------
Net Appreciation............ $ 46,453,910
---------------
---------------
</TABLE>
** Non-income producing securities.
*** Denotes foreign shares.
**** Certain conditions for public sales may exist.
+ Not readily marketable securities.
See Accompanying Notes to Financial Statements.
7
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONCLUDED)
AUGUST 31, 1996
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
ADR........................... American Depository Receipts
</TABLE>
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
<TABLE>
<CAPTION>
PER
AMOUNT SHARE
------------ ------
<S> <C> <C>
Capital Paid-In............... $655,735,487 $18.66
Accumulated Net Investment
Income....................... 4,139,511 .12
Accumulated Net Realized Loss
on Security and Foreign
Exchange Transactions........ (24,260,422) (.69)
Net Unrealized Appreciation on
Investments and Other........ 46,656,225 1.32
- ----------------------------------------------------
NET ASSETS.................... $682,270,801 $19.41
- ----------------------------------------------------
</TABLE>
See Accompanying Notes to Financial Statements.
8
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA Emerging Markets Equity Portfolio
STATEMENT OF NET ASSETS
August 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
COMMON AND CONVERTIBLE STOCKS, WARRANTS AND RIGHTS -- 95.6%
BRAZIL -- 15.7%
Banco Bradesco S.A. PN..................... 321,471,549 $ 2,720,047
Centrais Eletricas de Santa Catarin PN
Class B.................................. 842,000 745,573
Cia. Energetica de Minas Gerais 144A
ADS****.................................. 183 5,509
Cia. Energetica de Minas Gerais ADR........ 23,673 712,628
Cia. Energetica de Minas Gerais PN......... 18,320,000 551,547
Cia. Paulista de Forca e Luz ON**.......... 14,527,220 1,307,793
Cia. Tecidos Norte de Minas Gerais PN...... 2,862,000 971,514
Lojas Americanas S.A. PN................... 10,047,000 173,974
Multibras Eletrodo S.A. PN................. 770,000 1,136,364
Refrigeracao Parana S.A. PN................ 573,223,000 1,483,251
Santista Alimentos S.A.**.................. 722,500 1,329,275
Telecomunicacoes de Minas Gerais PN Class
B........................................ 22,548,000 2,562,273
Telecomunicacoes de Minas Gerais S.A. ON... 280,905 25,150
Telecomunicacoes de Sao Paulo S.A. PN...... 3,430,928 658,236
Telecomunicacoes do Parna S.A. PN.......... 1,565,000 751,397
Telecomunicacoes do Rio de Janeiro S.A.
ON....................................... 2,260,000 240,142
Telecomunicacoes do Rio de Janeiro S.A.
PN....................................... 19,756,000 2,118,658
Usinas Siderurgica de Minas Gerais S.A.
PN....................................... 554,102,395 577,871
------------
18,071,202
------------
CHILE -- 2.8%
Chilectra S.A. 144A ADR****................ 14,849 804,549
Enersis S.A. ADR........................... 19,400 603,825
Madeco S.A. Sponsored ADR.................. 49,600 1,171,800
Maderas y Sinteticos ADR................... 46,500 656,813
------------
3,236,987
------------
COLOMBIA -- 2.0%
Banco Ganadero S.A. PFD ADR 8.75%.......... 19,100 386,775
Banco Industrial Colombiano S.A. ADR....... 19,500 363,187
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
COLOMBIA -- (CONTINUED)
Carrulla & CIA 144A S.A. ADR****........... 45,400 $ 244,252
Cementos Diamante S.A. 144A ADS****........ 42,300 444,150
Cementos Paz del Rio 144A ADR****.......... 34,200 410,400
Gran Cadena Almacenes ADR.................. 42,300 406,926
------------
2,255,690
------------
CROATIA -- 3.1%
Pliva D.D. GDR 144A****.................... 63,000 2,850,750
Zagrebacka Banka GDR....................... 55,000 704,055
------------
3,554,805
------------
ECUADOR -- 0.5%
Cemento Nacional Ecuador GDR............... 2,896 535,760
------------
GHANA -- 2.6%
Ashanti Goldfields Co. Ltd. Sponsored
GDR...................................... 159,500 2,970,687
------------
HONG KONG -- 9.5%
Cheung Kong Holdings Ltd................... 147,000 1,031,462
Citic Pacific Ltd.......................... 228,000 1,002,651
Hang Seng Bank Ltd......................... 96,000 984,026
Henderson Land Development Co. Ltd......... 130,000 1,017,267
HKR International Ltd...................... 1,153,600 1,454,776
HSBC Holdings PLC.......................... 60,000 1,036,021
Hutchinson Whampoa Ltd..................... 175,000 1,059,303
Sun Hung Kai Properties Ltd................ 90,000 878,872
Swire Pacific Ltd. Class A................. 106,500 947,019
Wharf Holdings Ltd......................... 383,000 1,446,498
------------
10,857,895
------------
INDIA -- 3.2%
Hindalco 144A GDR****...................... 17,900 595,175
India Fund Class B......................... 510,670 872,998
Larsen & Toubro Ltd. GDR Reg. S New........ 80,000 1,300,000
Morgan Stanley India Investment Fund,
Inc...................................... 105,200 959,950
------------
3,728,123
------------
INDONESIA*** -- 4.2%
Bank International Indonesia, PT........... 510,466 1,177,244
Matahari Putra Prima, PT................... 385,250 505,934
PT Astra International..................... 494,000 643,476
PT Bank Dagang Nasional.................... 1,071,000 754,709
</TABLE>
See Accompanying Notes to Financial Statements.
12
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA EMERGING MARKETS EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
INDONESIA*** -- (CONTINUED)
PT Hanjaya Mandala Sampoerna............... 82,500 $ 794,523
PT Telekomunikasi.......................... 637,000 897,758
------------
4,773,644
------------
ISRAEL -- 4.9%
ECI Telecom Ltd............................ 64,140 1,322,887
Elscint Ltd. ADR........................... 15,050 137,331
Geotek Communications, Inc.**.............. 167,400 1,527,525
Koor Industries Ltd. ADR**................. 67,300 1,160,925
Tecnomatix Technologies**.................. 38,200 759,225
Teva Pharmaceutical Industries Ltd. ADR.... 19,130 697,049
------------
5,604,942
------------
MALAYSIA -- 7.9%
Diversified Resources Berhad............... 210,000 686,660
Malayan Banking Berhad..................... 296,500 2,819,278
Malaysian Resources Corp. Berhad........... 414,000 1,312,177
New Straits Times Press Berhad............. 244,000 1,370,512
Renong Berhad Holding Company.............. 515,000 752,096
Time Engineering........................... 391,000 831,414
Time Engineering New Class A............... 195,500 415,707
United Engineers Malaysia Ltd.............. 128,000 908,967
------------
9,096,811
------------
MEXICO -- 9.9%
Apasco S.A. de C.V......................... 170,240 1,145,792
Cementos Mexicanos S.A. de C.V. Class B.... 395,000 1,636,820
Corporacion GEO S.A. de C.V. 144A ADR Class
B**/****................................. 38,100 767,334
Corporacion GEO S.A. de C.V. Class B**..... 140,780 709,706
Corporacion Industrial SanLuis S.A. de C.V.
CPO...................................... 414,574 2,459,268
Grupo Elektra S.A. de C.V. CPO............. 228,000 1,618,792
Grupo Financiero Banamex Accival S.A. de
C.V. Class B............................. 508,900 1,079,922
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
MEXICO -- (CONTINUED)
Grupo Modelo S.A. de C.V. Class C.......... 295,000 $ 1,362,587
Kimberly Clark de Mexico S.A. de C.V. Class
A........................................ 30,770 565,250
------------
11,345,471
------------
PERU -- 1.7%
Backus y Johnson........................... 476,231 476,231
Banco Wiese ADR............................ 54,900 384,300
Credicorp Ltd. ADR......................... 27,800 542,100
Southern Peru Copper Corp. ADR............. 32,800 500,200
------------
1,902,831
------------
PHILIPPINES -- 1.8%
Ayala Corp. Class B........................ 908,400 1,059,105
Philippine National Bank................... 59,000 986,716
------------
2,045,821
------------
PORTUGAL -- 3.0%
Banco Comercial Portugues PFD Series A..... 22,000 1,094,500
Portugal Telecom S.A. ADR**................ 17,300 460,613
Portugal Telecom S.A. Register**........... 27,000 722,432
Sonae Industria e Investimentos S.A........ 42,050 1,211,328
------------
3,488,873
------------
PUERTO RICO -- 0.7%
Cellular Communications of Puerto Rico,
Inc. ADR**............................... 30,700 821,225
------------
RUSSIA -- 0.7%
PLD Telekom, Inc.**........................ 101,900 776,988
------------
SINGAPORE -- 1.7%
Overseas-Chinese Banking Corp. Ltd.***..... 55,000 660,860
Straits Steamship Land Ltd................. 215,000 736,793
United Overseas Bank Ltd.***............... 61,280 588,183
------------
1,985,836
------------
SOUTH AFRICA -- 7.8%
Amalgamated Banks of South Africa Ltd...... 114,959 530,462
Anglo American Industrial Corp. Ltd........ 49,916 1,847,092
Barlow Ltd................................. 65,100 599,338
</TABLE>
See Accompanying Notes to Financial Statements.
13
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA EMERGING MARKETS EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONCLUDED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
----------- ------------
<S> <C> <C>
SOUTH AFRICA -- (CONTINUED)
Gencor Ltd................................. 285,430 $ 1,005,304
Murray and Roberts Holdings................ 283,608 979,921
Nasionale Pers Beperk...................... 55,987 586,578
Nedcor Ltd. Warrants**..................... 7,300 12,775
Pepkor Ltd................................. 381,000 1,528,756
SA Iron & Steel Industrial Corp. Ltd....... 1,848,647 1,108,529
Samancor Ltd............................... 58,500 746,573
------------
8,945,328
------------
SOUTH KOREA -- 4.5%
Korea Asia Fund Ltd. IDR**................. 22,500 500,625
Korea Electric Power ADR New**............. 58,000 1,232,500
Korea Fund, Inc............................ 176,350 3,372,694
------------
5,105,819
------------
THAILAND*** -- 7.4%
Advanced Information Services Public
Company Ltd.............................. 53,700 710,892
Bangkok Bank Ltd........................... 152,000 1,927,864
Krung Thai Bank Public Company Ltd......... 349,980 1,512,002
Phatra Thanakit Public Company Ltd......... 300,700 1,787,753
PTT Exploration & Production Public Company
Ltd...................................... 50,600 693,920
Siam Cement Company Ltd.................... 19,800 762,806
Thai Farmers Bank Public Company Ltd....... 100,000 1,062,227
Thai Farmers Bank Public Company Ltd.
Warrants Expire 09/15/2002............... 12,500 33,690
------------
8,491,154
------------
TOTAL COMMON AND CONVERTIBLE STOCKS,
WARRANTS AND RIGHTS (Cost
$101,425,342)........................... 109,595,892
------------
<CAPTION>
PAR
(000)
-----------
<S> <C> <C>
FOREIGN BONDS**** -- 0.8%
COLOMBIA -- 0.8%
Banco de Colombia Convertible 144A
5.200% 02/01/1999........................ $ 1,100 968,000
------------
TOTAL FOREIGN BONDS
(Cost $1,218,096)......................... 968,000
------------
<CAPTION>
PAR
(000) VALUE
----------- ------------
<S> <C> <C>
SHORT-TERM INVESTMENT -- 2.1%
BBH Grand Cayman U.S. Dollar Time Deposit
4.750% 09/03/1996........................ $ 2,388 $ 2,388,000
------------
TOTAL SHORT-TERM INVESTMENT
(Cost $2,388,000)....................... 2,388,000
------------
TOTAL INVESTMENTS AT VALUE -- 98.5% (Cost
$105,031,438)......................................... $112,951,892
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.5%...........
1,739,317
------------
NET ASSETS (Applicable to 6,300,570 BEA Shares) --
100.0%................................................ $114,691,209
------------
------------
NET ASSET VALUE AND OFFERING PRICE PER
SHARE($114,691,209 DIVIDED BY 6,300,570)............. $18.20
------------
------------
REDEMPTION PRICE PER SHARE
($18.20 X .9850)...................................... $17.93
------------
------------
</TABLE>
* Cost for Federal income tax purposes at August 31, 1996 is $105,388,350.
The gross appreciation (depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation........................... $ 15,753,954
Gross Depreciation........................... (8,190,412)
-------------
Net Appreciation............................. $ 7,563,542
-------------
-------------
</TABLE>
** Non-income producing securities.
*** Denotes foreign shares.
**** Certain conditions for public sales may exist.
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
ADR........................... American Depository Receipts
ADS........................... American Depository Shares
GDR........................... Global Depository Receipts
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
<CAPTION>
AMOUNT
---------------
PER
SHARE
--
<S> <C>
Capital Paid-In.................... $ 129,649,735 $ 20.58
Accumulated Net Investment Loss.... (152,984) (.02)
Accumulated Net Realized Loss on
Security and Foreign Exchange
Transactions...................... (22,726,257) (3.61)
Net Unrealized Appreciation on
Investments and Other............. 7,920,715 1.25
- -------------------------------------------------------------
NET ASSETS $ 114,691,209 $ 18.20
- -------------------------------------------------------------
</TABLE>
See Accompanying Notes to Financial Statements.
14
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA U.S. Core Equity Portfolio
STATEMENT OF NET ASSETS
August 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
------------- -------------
<S> <C> <C>
COMMON AND CONVERTIBLE STOCKS -- 93.7%
AEROSPACE / DEFENSE -- 6.2%
Coltec Industries, Inc.**.................. 80,700 $ 1,210,500
Lockheed Martin Corp....................... 18,000 1,514,250
Raytheon Company........................... 15,000 772,500
Whittaker Corp.**.......................... 10,000 140,000
-------------
3,637,250
-------------
BROADCASTING -- 0.5%
Providence Journal Company**............... 16,000 310,000
-------------
310,000
-------------
BUSINESS SERVICES -- 5.0%
Automatic Data
Processing, Inc.......................... 35,000 1,456,875
DST Systems, Inc.**........................ 28,000 861,000
Equifax, Inc............................... 25,200 642,600
-------------
2,960,475
-------------
CHEMICALS -- 2.1%
Great Lakes Chemical Corp.................. 12,000 690,000
The Scotts Company Class A**............... 27,000 506,250
-------------
1,196,250
-------------
CONGLOMERATES -- 5.4%
Allied-Signal, Inc......................... 9,500 586,625
General Electric Co........................ 15,000 1,246,875
Philip Morris Companies, Inc............... 7,550 677,612
Whitman Corp............................... 30,000 671,250
-------------
3,182,362
-------------
CONSTRUCTION & BUILDING MATERIALS -- 2.9%
Fluor Corp................................. 10,000 640,000
Masco Corp................................. 20,000 582,500
USG Corporation**.......................... 16,000 456,000
-------------
1,678,500
-------------
CONSUMER PRODUCTS -- 4.1%
Clorox Co.................................. 7,000 655,375
Colgate-Palmolive Co....................... 7,200 585,000
Gillette Co................................ 10,000 637,500
Newell Co.................................. 17,000 529,125
-------------
2,407,000
-------------
ELECTRONICS -- 5.7%
Berg Electronics Corp.**................... 30,000 727,500
Electronic Data Systems Corp............... 11,000 599,500
Emerson Electric Co........................ 22,000 1,842,500
Intel Corp................................. 2,500 199,531
-------------
3,369,031
-------------
ENERGY -- 6.2%
Exxon Corporation.......................... 10,000 813,750
McDermott International, Inc............... 60,000 1,245,000
Mobil Corporation.......................... 6,000 676,500
<CAPTION>
NUMBER
OF SHARES VALUE
------------- -------------
<S> <C> <C>
ENERGY -- (CONTINUED)
Schlumberger, Ltd.......................... 11,000 $ 928,125
-------------
3,663,375
-------------
ENTERTAINMENT -- 3.3%
GTech Holdings Corporation**............... 70,000 1,942,500
-------------
FINANCIAL SERVICES -- 13.7%
ACE Limited Ordinary Shares................ 30,000 1,398,750
Allstate Corp.............................. 16,000 714,000
Associates First Capital Corp.............. 20,000 790,000
Citicorp................................... 6,900 574,425
EXEL Limited............................... 24,000 804,000
Federal National Mortgage
Association.............................. 15,000 465,000
H & R Block, Inc........................... 21,500 537,500
J.P. Morgan & Co.,
Incorporated............................. 9,000 788,625
NationsBank Corporation.................... 10,000 851,250
Southern National Corporation.............. 18,000 562,500
State Street Boston Corporation............ 11,400 617,025
-------------
8,103,075
-------------
FOOD & BEVERAGE -- 3.8%
Heinz H.J. Company......................... 55,000 1,732,500
Nabisco Holdings Corporation Class A....... 16,000 538,000
-------------
2,270,500
-------------
HEALTH CARE -- 5.9%
Amgen, Inc.**.............................. 10,200 594,150
Boston Scientific Corporation**............ 12,200 559,675
Humana, Inc.**............................. 46,200 866,250
McKesson Corporation....................... 35,000 1,491,875
-------------
3,511,950
-------------
INDUSTRIAL GOODS & MATERIALS -- 4.5%
Canadian Pacific Limited
Ordinary Shares.......................... 38,000 855,000
Dover Corporation.......................... 13,500 592,313
Illinois Tool Works Inc.................... 9,000 622,125
Tyco International Ltd..................... 14,200 599,950
-------------
2,669,388
-------------
MANUFACTURING -- 1.2%
Eastman Kodak Company...................... 10,000 725,000
-------------
PACKAGING -- 2.0%
Owens-Illinois, Inc.**..................... 75,000 1,153,125
-------------
PAPER & FOREST PRODUCTS -- 1.6%
Schweitzer-Mauduit
International, Inc....................... 30,000 960,000
-------------
</TABLE>
See Accompanying Notes to Financial Statements.
18
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA U.S. CORE EQUITY PORTFOLIO
STATEMENT OF NET ASSETS (CONCLUDED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
------------- -------------
<S> <C> <C>
PHARMACEUTICALS -- 5.1%
Barr Laboratories, Inc.**.................. 27,000 $ 695,250
Pharmacia & Upjohn, Inc.**................. 20,000 840,000
Smithkline Beecham Plc ADR................. 25,000 1,456,250
-------------
2,991,500
-------------
PUBLISHING & INFORMATION SERVICES -- 3.2%
Hollinger International, Inc............... 85,000 924,375
Tribune Company............................ 13,000 934,375
-------------
1,858,750
-------------
REAL ESTATE -- 2.2%
Starwood Lodging Trust..................... 17,000 646,000
Trinet Corporate Realty Trust Inc.......... 20,000 630,000
-------------
1,276,000
-------------
RESTAURANTS HOTELS & GAMING -- 3.4%
Marriott International, Inc................ 20,000 1,097,500
McDonald's Corporation..................... 20,000 927,500
-------------
2,025,000
-------------
TELECOMMUNICATIONS -- 2.2%
AT&T Corp.................................. 12,600 661,500
Frontier Corp.............................. 22,000 649,000
-------------
1,310,500
-------------
TRANSPORTATION -- 3.5%
AMR Corporation**.......................... 9,000 738,000
Canadian National Railway
Company.................................. 35,000 669,375
Continental Airlines, Inc.
Class B**................................ 30,000 678,750
-------------
2,086,125
-------------
TOTAL COMMON AND
CONVERTIBLE STOCKS
(Cost $51,562,892)....................... 55,287,656
-------------
</TABLE>
<TABLE>
<CAPTION>
PAR
(000)
-------------
<S> <C> <C>
CORPORATE BONDS -- 1.5%
TRANSPORTATION -- 1.5%
Santa Fe Pacific Pipeline Partners L.P.
Conv. Debentures
(Baa3, BB)
11.000% 08/15/2010....................... $ 735 896,700
-------------
TOTAL CORPORATE BONDS
(Cost $952,300).......................... 896,700
-------------
<CAPTION>
PAR
(000) VALUE
------------- -------------
<S> <C> <C>
SHORT TERM INVESTMENT -- 4.7%
BBH Grand Cayman U.S. Dollar Time Deposit
4.750% 09/03/1996........................ $ 2,775 $ 2,775,000
-------------
TOTAL SHORT TERM
INVESTMENT
(Cost $2,775,000)....................... 2,775,000
-------------
TOTAL INVESTMENTS AT VALUE -- 99.9%
(Cost $55,290,192)...................................... $58,959,356
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 0.1%..................................... 56,078
-------------
NET ASSETS (Applicable to 3,098,175 BEA Shares) --
100.0%.................................................. $59,015,434
-------------
-------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE ($59,015,434 DIVIDED BY 3,098,175)............... $19.05
-------------
-------------
</TABLE>
* Cost for Federal income tax purposes at August 31, 1996 is $55,282,034. The
gross appreciation (depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation........................... $ 4,785,484
Gross Depreciation........................... (1,108,162)
-------------
Net Appreciation............................. $ 3,677,322
-------------
-------------
</TABLE>
** Non-income producing securities.
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
ADR........................... American Depository Receipts
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
<CAPTION>
AMOUNT
---------------
PER
SHARE
--
<S> <C>
Capital Paid-In.................... $ 50,559,008 $ 16.32
Accumulated Net Investment Income.. 410,275 .13
Accumulated Net Realized Gain on
Security Transactions............. 4,376,987 1.41
Net Unrealized Appreciation on
Investments and Other............. 3,669,164 1.19
- -------------------------------------------------------------
NET ASSETS $ 59,015,434 $ 19.05
- -------------------------------------------------------------
</TABLE>
See Accompanying Notes to Financial Statements.
19
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA U.S. CORE FIXED INCOME PORTFOLIO
STATEMENT OF NET ASSETS
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
CORPORATE BONDS -- 23.1%
BANKING -- 3.0%
Citicorp Medium Term Notes (A2, A)
6.750% 10/15/2007........................ $ 555 $ 517,538
Credit Lyonnais Perpetual Sub Variable Rate
Notes, Rule 144A (Baa2, NR)****/+/+++
6.625%................................... 300 290,055
First Nationwide (Parent) Holdings, Inc.
Sr. Notes (B2, B)
12.500% 04/15/2003....................... 435 451,313
Hongkong & Shanghai Banking Corp Ltd.
Perpetual Sub. FRN Series 1 (Baa1,
NR)+/+++
6.000%................................... 580 492,536
Hongkong & Shanghai Banking Corp Ltd.
Perpetual Sub. FRN Series 2 (Baa1,
NR)+/+++
5.813%................................... 60 50,619
Midland Bank Plc Perpetual Sub. FRN Series
2 (A1, A-)+/+++
5.750%................................... 390 334,523
National Westminster Bank PLC Perpetual
Sub. FRN Series B (Aa3, A+)+/+++
5.875%................................... 480 418,992
Santander Financial Issuances Perpetual
Sub. FRN
(A2, NR) +/+++
6.525%................................... 500 493,800
Swiss Bank Corp. New York Subordinated
Notes (Aa2, AA)
6.750% 07/15/2005........................ 580 554,625
-------------
3,604,001
-------------
CABLE -- 1.9%
Adelphia Communications Corporation Senior
Notes, Series B PIK Bonds (B3, B)
9.500% 02/15/2004........................ 15 12,209
Falcon Holding Group L.P. Senior
Subordinated Notes PIK Bonds (NR, NR)
11.000% 09/15/2003....................... 877 818,180
Kabelmedia Holding Gmbtt Yankee Senior
Discount Notes (B3, B-)++
13.625% 08/01/2006....................... 900 465,750
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
CABLE -- (CONTINUED)
Summit Communications Group, Inc. Senior
Subordinated Notes (Ba3, BB+)
10.500% 04/15/2005....................... $ 865 $ 939,606
-------------
2,235,745
-------------
CHEMICALS -- 0.9%
Reliance Industries Ltd. 144A Yankee Notes
(NR, NR)
10.500% 08/06/2046....................... 780 770,250
UCC Investors Holdings Inc. Subordinated
Discount Notes (B3, B-)++
12.000% 05/01/2005....................... 290 249,763
-------------
1,020,013
-------------
CONSTRUCTION & BUILDING MATERIALS -- 0.3%
J.M. Peters Company, Inc., Senior Notes
(B3, NR)
12.750% 05/01/2002....................... 440 404,800
-------------
ENERGY -- 1.3%
Gulf Canada Resources Ltd. Yankee Senior
Notes (Ba2, BB+)
8.350% 08/01/2006........................ 800 777,000
Gulf Canada Resources Yankee Subordinated
Debentures (Ba3, BB-)
9.625% 07/01/2005........................ 240 246,600
PDV America, Inc. Guaranteed Senior Notes
(Baa3, B)
7.875% 08/01/2003........................ 505 481,644
-------------
1,505,244
-------------
ENTERTAINMENT -- 2.1%
Six Flags Entertainment Notes (Baa3,
BBB-)++
5.293% 12/15/1999........................ 15 11,831
Time Warner, Inc. Debentures (Ba1, BBB-)
6.850% 01/15/2026........................ 2,570 2,451,138
-------------
2,462,969
-------------
ENVIRONMENTAL SERVICES -- 0.3%
EnviroSource, Inc. Senior Notes (B3, B-)
9.750% 06/15/2003........................ 390 361,725
-------------
FINANCIAL SERVICES -- 5.6%
AT&T Capital Corporation Medium Term Notes
Series 3 (Baa3, A)
6.030% 10/27/1997........................ 1,500 1,491,375
</TABLE>
See Accompanying Notes to Financial Statements.
23
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA U.S. CORE FIXED INCOME PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
FINANCIAL SERVICES -- (CONTINUED)
Fifth Mexican Acceptance Corp. Rule 144A
Notes Tranche A (NR, NR)****/++++
8.000% 12/15/1998........................ $ 760 $ 235,600
Ford Holdings, Inc. Guaranteed Notes (A1,
A+)
9.250% 03/01/2000........................ 10 10,638
General Motors Acceptance Corp. Medium Term
Notes (A3, A-)
7.250% 07/20/1998........................ 125 126,250
General Motors Acceptance Corp. Medium Term
Notes (A3, A-)
7.375% 04/15/1999........................ 1,120 1,134,000
General Motors Acceptance Corp. Medium Term
Notes (A3, A-)
6.625% 04/24/2000........................ 1,290 1,273,875
General Motors Acceptance Corp. Medium Term
Notes (A3, A-)
6.900% 06/06/2000........................ 140 139,300
General Motors Acceptance Corp. Medium Term
Notes (A3, A-)
6.900% 07/05/2000........................ 165 163,969
Gentra Inc. Subordinated Debentures (NR,
NR)
7.500% 12/31/2001........................ 800 667,982
L'Auxiliare du Credit Foncier de France
Guaranteed FRN (Ba1, NR)
5.332% 09/25/2002........................ 420 403,116
L'Auxiliare du Credit Foncier de France Sr.
Unsubordinated Notes (Baa1, A)
8.000% 01/14/2002........................ 930 960,806
-------------
6,606,911
-------------
FOOD & BEVERAGE -- 0.3%
Fresh del Monte Produce Senior Notes Series
B (Caa, CCC+)
10.000% 05/01/2003....................... 400 375,000
-------------
INDUSTRIAL GOODS & MATERIALS -- 0.9%
Specialty Equipment Companies Inc. Senior
Subordinated Note (B3, B-)
11.375% 12/01/2003....................... 300 317,250
Tenneco, Inc. Debentures (Baa2, BBB-)
7.250% 12/15/2025........................ 840 768,600
-------------
1,085,850
-------------
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
PACKAGING -- 0.4%
Crown Packaging 144A Units (NR, NR)++
14.000% 08/01/2006....................... $ 350 $ 136,500
Gaylord Container Corp. Senior Subordinated
Debentures (Caa, B-)
12.750% 05/15/2005....................... 300 321,750
Stone Container Corp. First Mortgage Notes
(B1, BB-)
10.750% 10/01/2002....................... 20 20,650
-------------
478,900
-------------
PAPER & FOREST PRODUCTS -- 0.7%
P.T. Indah Kiat Pulp & Paper Corp.
Guaranteed Notes, Series B (Ba2, BB)
11.875% 06/15/2002....................... 190 198,550
P.T. Indah Kiat Pulp & Paper Corp. Sr.
Secured Debentures (Ba2, BB)
8.875% 11/01/2000........................ 610 593,225
-------------
791,775
-------------
REAL ESTATE -- 0.6%
Chelsea GCA Realty Inc. Guaranteed Notes
(Ba2, BB+)
7.750% 01/26/2001........................ 750 741,563
-------------
RETAIL -- 0.5%
Hills Stores, Inc. Senior Notes Series B
(B1, NR)
12.500% 07/01/2003....................... 320 297,600
Pueblo Xtra International, Inc. Senior
Notes (B2, B-)
9.500% 08/01/2003........................ 275 247,500
-------------
545,100
-------------
STEEL -- 0.3%
Armco, Inc. Senior Notes (B2, B)
9.375% 11/01/2000........................ 330 326,287
-------------
326,287
-------------
TELECOMMUNICATIONS -- 2.0%
BellSouth Telecommunications, Inc.
Debentures (Aaa, AAA)
5.850% 11/15/2045........................ 1,495 1,444,544
Nippon Telegraph & Telephone Corp. Yankee
Notes (Aaa, AAA)
9.500% 07/27/1998........................ 70 73,587
Rogers Cantel Mobile Communications Inc.
Yankee Senior Secured Debentures (Ba3,
BB+)
9.375% 06/01/2008........................ 710 696,687
</TABLE>
See Accompanying Notes to Financial Statements.
24
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA U.S. CORE FIXED INCOME PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
TELECOMMUNICATIONS -- (CONTINUED)
Videotron Holdings Plc Yankee Senior
Discount Notes (B3, B+)++
11.000% 08/15/2005....................... $ 325 $ 214,094
-------------
2,428,912
-------------
TRANSPORTATION -- 0.7%
Delta Air Lines, Inc. Debentures (Ba1, BB)
10.375% 02/01/2011....................... 585 691,031
NWA Trust Mezzanine Aircraft Notes Series D
(Ba1, BB+)
13.875% 06/21/2008....................... 90 105,300
-------------
796,331
-------------
UTILITIES -- 1.3%
Long Island Lighting Co. Debentures (Ba3,
BB+)
9.000% 11/01/2022........................ 990 899,662
Niagara Mohawk Power Corp. First Mortgage
Bonds (Ba3, BB-)
5.875% 09/01/2002........................ 420 352,275
Niagara Mohawk Power Corp. First Mortgage
Bonds (Ba3, BB-)
7.375% 08/01/2003........................ 305 273,356
Toledo Edison Co. Debentures (B1, B+)
8.700% 09/01/2002........................ 45 41,175
-------------
1,566,468
-------------
TOTAL CORPORATE BONDS
(Cost $27,665,451)..................... 27,337,594
-------------
FOREIGN GOVERNMENT BONDS -- 2.2%
Federal Republic of Brazil Interest Due
Bonds FRN (B1, NR)+
6.688% 01/01/2001........................ 683 655,200
Republic of Argentina Step-Up Par Bonds
Non-U.S. Tranche Series L-G-P (B1, BB-)
5.250% 03/31/2023........................ 500 268,125
Republic of Colombia Yankee Notes (Baa3,
BBB-)
7.250% 02/15/2003........................ 410 381,813
Republic of Turkey Trust Series T-2 (Aaa,
AAA)
9.400% 11/15/1996........................ 1 528
The Polish People's Republic Discount Bonds
FRN
(Baa3, BBB-)+
6.438% 10/27/2024........................ 610 587,506
United Mexican States Par Bonds Series A
(Ba2, BB)
6.250% 12/31/2019........................ 1,000 662,500
-------------
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
FOREIGN GOVERNMENT BONDS -- (CONTINUED)
TOTAL FOREIGN GOVERNMENT BONDS (Cost
$2,386,785)............................ $ 2,555,672
-------------
AGENCY OBLIGATIONS -- 32.7%
FEDERAL HOME LOAN MORTGAGE CORP -- 9.6%
FHLMC
6.000% 06/01/1999........................ $ 20 19,522
6.000% 11/01/1999........................ 59 56,948
7.000% 08/01/2000........................ 101 99,898
6.000% 01/01/2001........................ 272 264,233
6.000% 02/01/2001........................ 214 207,922
7.000% 04/01/2008........................ 29 28,075
7.000% 08/01/2010........................ 267 262,750
7.000% 09/01/2010........................ 2,907 2,850,162
7.000% 11/01/2010........................ 208 204,324
7.000% 12/01/2010........................ 256 250,740
7.000% 01/01/2011........................ 351 344,491
7.000% 04/01/2011........................ 39 38,393
7.000% 05/01/2011........................ 743 728,772
7.000% 06/01/2011........................ 380 372,652
8.000% 04/01/2025........................ 967 968,109
8.000% 06/01/2025........................ 109 109,398
8.000% 08/01/2025........................ 122 121,979
8.000% 12/01/2025........................ 289 288,652
8.000% 01/01/2026........................ 369 369,231
6.000% 03/01/2026........................ 229 205,894
8.000% 05/01/2026........................ 378 378,717
8.000% 06/01/2026........................ 2,459 2,461,559
FHLMC Series 1014 Class E
7.950% 02/15/2020........................ 768 780,958
-------------
11,413,379
-------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- 15.8%
FNMA
7.500% 01/01/2000........................ 54 54,274
7.500% 04/01/2000........................ 563 565,206
7.500% 07/01/2000........................ 68 68,247
5.500% 04/01/2001........................ 24 22,503
7.500% 06/01/2001........................ 101 101,692
7.500% 09/01/2001........................ 731 734,781
6.000% 10/01/2001........................ 1,727 1,652,415
7.500% 12/01/2001........................ 47 47,183
6.000% 10/01/2002........................ 177 169,246
7.500% 06/01/2003........................ 413 414,973
7.500% 07/01/2003........................ 733 735,970
10.00% 02/01/2005........................ 58 61,268
10.00% 01/01/2010........................ 9 9,211
6.000% 11/01/2010........................ 237 222,503
6.000% 01/01/2011........................ 1,356 1,271,683
6.000% 02/01/2025........................ 211 189,465
7.000% 07/01/2025........................ 26 24,616
7.000% 09/01/2025........................ 729 694,243
7.000% 10/01/2025........................ 728 692,838
</TABLE>
See Accompanying Notes to Financial Statements.
25
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA U.S. CORE FIXED INCOME PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION -- (CONTINUED)
6.000% 01/01/2026........................ $ 102 $ 91,170
6.000% 02/01/2026........................ 1,172 1,052,136
7.000% 04/01/2026........................ 7,087 6,748,205
7.000% 10/01/2026........................ 646 615,152
FNMA (TBA)**
7.000% 01/01/2003........................ 2,550 2,522,906
FNMA 1991-165 Class M
8.250% 12/25/2021........................ 13 13,307
-------------
18,775,193
-------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 5.0%
GNMA
8.250% 08/15/2004........................ 1 1,074
9.000% 11/15/2004........................ 2 1,838
9.000% 12/15/2004........................ 1 1,339
8.250% 04/15/2006........................ 2 2,265
7.000% 09/01/2008........................ 342 336,632
7.000% 11/15/2008........................ 296 291,533
7.000% 02/01/2009........................ 150 147,455
7.000% 03/15/2009........................ 368 361,754
7.000% 04/15/2009........................ 349 343,046
7.000% 05/01/2009........................ 273 268,765
7.000% 01/15/2011........................ 787 774,410
7.000% 02/15/2011........................ 529 520,033
13.50% 07/15/2014........................ 1 924
9.000% 06/15/2016........................ 105 109,845
8.000% 04/15/2017........................ 191 190,830
9.000% 10/15/2017........................ 483 504,247
9.000% 08/15/2021........................ 829 865,106
GNMA (TBA)**
8.000% 01/15/2025........................ 1,130 1,129,294
-------------
5,850,390
-------------
MISCELLANEOUS -- 2.3%
National Archive Facility Trust COP (Aaa,
AAA)
8.500% 09/01/2019........................ 436 468,688
Tennessee Valley Authority Debentures (NR,
AAA)
5.980% 04/01/2036........................ 2 2,289,262
-------------
2,757,950
-------------
TOTAL AGENCY OBLIGATIONS (Cost
$39,434,857)............................. 38,796,912
-------------
ASSET BACKED SECURITIES -- 3.0%
Fleetwood Credit Corporation Grantor Trust
Retail Installment Sale Contracts Series
1993-B, Class A (Aaa, AAA)
4.950% 08/15/2008........................ 8 7,514
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
ASSET BACKED SECURITIES -- (CONTINUED)
Fleetwood Credit Corporation Grantor Trust
Retail Installment Sale Contracts Series
1994-A, Class A (Aaa, AAA)
4.700% 07/15/2009........................ $ 8 $ 8,075
Fleetwood Credit Corporation Grantor Trust
Retail Installment Sale Contracts Series
1994-B, Class A (Aaa, AAA)
6.750% 03/15/2010........................ 89 88,329
Goldome Credit Corporation Home Equity
Trust Series 1990-1, Class A (Aa2, AA)
10.000% 07/15/2005....................... 22 22,313
Green Tree Financial Corporation
Manufactured Housing Contracts Series
1993-4, Class A-2 (Aa2, NR)
5.850% 01/15/2019........................ 105 103,348
Green Tree Financial Corporation
Manufactured Housing Contracts Series
1995-5, Class A-3 (Aaa, AAA)
6.250% 10/15/2025........................ 420 407,001
Green Tree Financial Corporation
Manufactured Housing Contracts Series
1995-6, Class A-2 (Aaa, AAA)
6.400% 08/15/2025........................ 1,210 1,201,315
Green Tree Financial Corporation
Manufactured Housing Contracts Series
1995-6, Class A-3 (Aaa, AAA)
6.650% 11/15/2025........................ 130 127,770
Green Tree Financial Corporation
Manufactured Housing Contracts Series
1995-7, Class A-2 (Aaa, AAA)
6.150% 11/15/2026........................ 165 164,250
Green Tree Financial Corporation
Manufactured Housing Contracts Series
1995-8, Class A-2 (Aaa, AAA)
6.150% 12/15/2026........................ 135 133,636
New York City Tax Lien Collateralized
Bonds, Series 1996-1, Class C (NR, A)
7.110% 02/25/2005........................ 1,212 1,209,096
</TABLE>
See Accompanying Notes to Financial Statements.
26
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA U.S. CORE FIXED INCOME PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
ASSET BACKED SECURITIES -- (CONTINUED)
World Omni Automobile Lease Securitization
Trust, Retail Closed-End Lease Contracts
Series 1995-A, Class A
(Aaa, AAA)
6.050% 11/25/2001........................ $ 125 $ 124,487
-------------
TOTAL ASSET BACKED SECURITIES (Cost
$3,629,688)............................ 3,597,134
-------------
COLLATERIZED MORTGAGED BACKED SECURITIES -- 4.3%
Asset Securitization Corporation Series
1995-MD4, Class A1 (NR, AAA)
7.100% 08/13/2029........................ 119 114,470
CBM Funding Corporation Series 1996-1,
Class B (NR, A)
7.480% 02/01/2008........................ 1,000 983,750
Carousel Center Finance Inc. Series, 1
Class C Rule 144A (NR, BBB+)
7.527% 11/15/2007........................ 463 450,368
Collateralized Mortgage Obligation Trust,
REMIC Series 54, Class C (Aaa, AAA)
9.250% 11/01/2013........................ 3 2,643
Kidder Peabody Acceptance Corporation
Series 1993-C1, Class A-3 (NR, NR)
6.800% 09/01/2006........................ 535 512,367
Kidder Peabody Acceptance Corporation
Series 1994-C1, Class B (NR, AA)
6.850% 02/01/2006........................ 790 775,033
PaineWebber Mortgage Acceptance Corp. IV
Multifamily Mortgage Pass-Throughs Series
1995-M1, Class A 144A (NR, NR)****
6.700% 01/15/2007........................ 1,200 1,170,750
PaineWebber Mortgage Acceptance Corp. IV
Multifamily Mortgage Pass-Throughs Series
1995-M1, Class D 144A (NR, NR)****
7.300% 12/15/2002........................ 420 404,742
Structured Asset Securities Corporation
Series 1996-CFL, Class A1C (NR, AAA)
5.944% 02/25/2028........................ 670 640,137
<CAPTION>
PAR
(000) VALUE
---------- -------------
<S> <C> <C>
COLLATERIZED MORTGAGED BACKED SECURITIES -- (CONTINUED)
U.S. Dept. of Veterans Affairs, Vendee
Mortgage Trust REMIC, Series 1995-2B,
Class 2C (NR, NR)
7.500% 10/15/2015........................ $ 10 $ 9,921
-------------
TOTAL COLLATERIZED MORTGAGED BACKED
SECURITIES (Cost $5,256,450)........... 5,064,181
-------------
MUNICIPAL BONDS -- 0.0%
South Carolina State Public Service
Authority Revenue Bonds Series C (Aaa,
AAA)
5.125% 01/01/2021........................ 30 26,925
-------------
TOTAL MUNICIPAL BONDS (Cost $28,440)..... 26,925
-------------
U.S. TREASURY OBLIGATIONS--32.8%
U.S. TREASURY BONDS--11.4%
8.750% 08/15/2020.......................... 2,610 3,041,746
7.875% 02/15/2021.......................... 9,810 10,471,585
-------------
13,513,331
-------------
U.S. TREASURY NOTES -- 21.4%
5.375% 05/31/1998.......................... 100 98,516
6.750% 05/31/1999.......................... 30 30,182
7.750% 11/30/1999.......................... 16,050 16,592,329
7.250% 05/15/2004.......................... 4,645 4,745,704
7.500% 02/15/2005.......................... 3,765 3,902,723
-------------
25,369,454
-------------
TOTAL U.S. TREASURY OBLIGATIONS (Cost
$40,128,991)........................... 38,882,785
-------------
SHORT-TERM INVESTMENT -- 3.5%
BBH Grand Cayman U.S. Dollar Time Deposit
4.750% 09/03/1996........................ 4,179 4,179,000
-------------
TOTAL SHORT-TERM INVESTMENT
(Cost $4,179,000)...................... 4,179,000
-------------
</TABLE>
See Accompanying Notes to Financial Statements.
27
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA U.S. CORE FIXED INCOME PORTFOLIO
STATEMENT OF NET ASSETS (CONCLUDED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
NUMBER
OF SHARES VALUE
---------- -------------
<S> <C> <C>
WARRANTS*** -- 0.0%
Capital Pacific Holdings Group, Inc.
Warrants expiring 05/01/02............... 1,817 1,181
-------------
TOTAL WARRANTS (Cost $1,000)............. 1,181
-------------
TOTAL INVESTMENTS AT VALUE -- 101.6%
(Cost $122,710,662*)................................... $120,441,384
LIABILITIES IN EXCESS OF OTHER ASSETS -- (1.6%)..........
(1,845,109)
-------------
NET ASSETS (Applicable to 7,873,570 BEA SHARES) --
100.0%................................................. $118,596,275
-------------
-------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
($118,596,275 DIVIDED BY 7,873,570)................... $15.06
-------------
-------------
</TABLE>
* Also cost for Federal income tax purposes at August 31, 1996. The gross
appreciation (depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation........................... $ 562,416
Gross Depreciation........................... (2,831,694)
-------------
Net Appreciation............................. $ (2,269,278)
-------------
-------------
</TABLE>
** Securites were acquired on a delayed delivery basis.
*** Non-income producing securities.
**** Certain conditions for public sales may exist.
+ Variable rate obligations -- The interest shown is the rate as of August
31, 1996.
++ Step Bond -- The interest rate as of August 31, 1996 is 0% and will reset
to interest shown at a future date.
+++ Securities have no stated final maturity date.
++++ Guaranteed by Grupo Sidek, S.A. de C.V. and Grupo Situr S.A. de C.V.
The Moody's Investors Service, Inc. and Standard & Poor's Corporations ratings
indicated are the most recent ratings available at August 31, 1996 and are
unaudited.
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
FRN........................... Floating Rate Note
PIK........................... Pay In Kind
TBA........................... To Be Announced
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
<CAPTION>
AMOUNT
-------------
PER
SHARE
--
<S> <C>
Capital Paid-In..................... $118,137,940 $ 15.00
Accumulated Net Investment Income... 1,925,440 .25
Accumulated Net Realized Gain on
Security and Foreign Exchange
Transactions....................... 795,189 .10
Net Unrealized Depreciation on
Investments and Other.............. (2,262,294) (.29)
- -------------------------------------------------------------
NET ASSETS $118,596,275 $ 15.06
- -------------------------------------------------------------
</TABLE>
See Accompanying Notes to Financial Statements.
28
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA Global Fixed Income Portfolio
STATEMENT OF NET ASSETS
August 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
------------- -------------
<S> <C> <C>
INTERNATIONAL BONDS -- 61.1%
ARGENTINA -- 1.0%
Republic of Argentina FRB
(B1, BB-)
6.313% 03/31/2005................... $ 495 $ 384,862
-------------
AUSTRALIA -- 2.9%
Queensland Treasury Corp. Guaranteed
Bonds
(NR, NR)
8.000% 07/14/1999................... AUD 630 506,896
Treasury Corporation of Victoria
Guaranteed Bonds
(Aa2, AA+)
8.250% 10/15/2003................... 770 614,158
-------------
1,121,054
-------------
BRAZIL -- 0.7%
Federal Republic of Brazil Interest
Due Bonds FRN Series A
(B1, NR)+
6.688% 01/01/2001................... $ 228 218,400
-------------
BULGARIA -- 0.3%
Republic of Bulgaria Discount Bonds
Tranche A
(B3, NR)+
6.688% 07/28/2004................... 250 127,500
-------------
CANADA -- 5.4%
Export Development Corporation Senior
Unsubordinated Eurobonds
(Aa2, AA+)
7.600% 02/14/2001................... ITL 800,000 501,258
Government of Canada Debentures
(Aa1, AAA)
8.750% 12/01/2005................... CND 1,960 1,565,651
-------------
2,066,909
-------------
FRANCE -- 2.0%
Republic of France Treasury Bonds --
O.A.T.
(Aaa, NR)
7.500% 04/25/2005................... FF 3,600 763,089
-------------
<CAPTION>
PAR
(000) VALUE
------------- -------------
<S> <C> <C>
GERMANY -- 8.8%
Federal Republic of Germany Eurobonds
(Aaa, NR)
7.250% 10/21/2002................... DEM 4,630 $ 3,371,882
-------------
ITALY -- 8.0%
Republic of Italy Debentures
(Aa3, AAA)
8.500% 01/01/2004................... ITL 4,775,000 3,063,184
-------------
MEXICO -- 1.3%
United Mexican States Par Bond Series
A
(Ba2, BB)
6.250% 12/31/2019................... $ 750 496,875
-------------
NETHERLANDS -- 6.0%
Netherlands Government Bonds
(NR, NR)
9.000% 05/15/2000................... NLG 3,360 2,307,114
-------------
SPAIN -- 3.3%
Kingdom of Spain Debentures
(NR, NR)
10.250% 11/30/1998.................. ESP 99,000 834,763
Kingdom of Spain Debentures
(NR, NR)
10.100% 02/28/2001.................. 49,800 427,995
-------------
1,262,758
-------------
SUPRANATIONAL -- 10.5%
International Bank for Reconstruction
& Development Japanese Yen Global
Bonds
(Aaa, AAA)
5.250% 03/20/2002................... JPY 379,500 4,044,482
-------------
SWEDEN -- 3.3%
Nordic Investment Bank Sr.
Unsubordinated
(Aaa, AAA)
6.250% 02/08/1999................... SEK 4,500 676,411
Swedish Government Debentures
(Aa1, NR)
11.000% 01/21/1999.................. 3,600 597,634
-------------
1,274,045
-------------
</TABLE>
See Accompanying Notes to Financial Statements.
32
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA GLOBAL FIXED INCOME PORTFOLIO
STATEMENT OF NET ASSETS (CONCLUDED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
------------- -------------
<S> <C> <C>
UNITED KINGDOM -- 7.6%
U.K. Treasury Gilt Bonds
(Aaa, NR)
8.500% 07/16/2007................... GBP 1,800 $ 2,913,574
-------------
TOTAL INTERNATIONAL BONDS
(Cost $22,947,330).................. 23,415,728
-------------
U.S. TREASURY OBLIGATIONS -- 22.0%
U.S. TREASURY BONDS -- 3.8%
7.875% 02/15/2021..................... $ 1,380 1,473,067
-------------
1,473,067
-------------
U.S. TREASURY NOTES -- 18.2%
5.375% 05/31/1998..................... 155 152,700
7.250% 05/15/2004..................... 2,610 2,666,585
7.500% 02/15/2005..................... 4,000 4,146,320
-------------
6,965,605
-------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $8,927,965)................... 8,438,672
-------------
SHORT-TERM INVESTMENT -- 15.4%
BBH Grand Cayman U.S. Dollar Time
Deposit
4.750% 09/03/1996................... 5,901 5,901,000
-------------
TOTAL SHORT-TERM INVESTMENT
(Cost $5,901,000)................... 5,901,000
-------------
TOTAL INVESTMENTS
AT VALUE -- 98.5%
(Cost $37,776,295*)................................ $37,755,400
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.5%........
592,100
-------------
NET ASSETS (Applicable to 2,434,762 BEA Shares) --
100.0%............................................. $38,347,500
-------------
-------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE
($38,347,500 DIVIDED BY 2,434,762)................ $15.75
-------------
-------------
</TABLE>
* Also cost for Federal income tax purposes at August 31, 1996. The gross
appreciation (depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation....................... $ 500,231
Gross Depreciation....................... (521,126)
----------
Net Appreciation......................... $ (20,895)
----------
----------
</TABLE>
+ Variable rate obligations -- The interest shown is the rate as of August 31,
1996.
The Moody's Investors Service, Inc. and Standard & Poor's Corporations ratings
indicated are the most recent ratings available at August 31, 1996 and are
unaudited.
CURRENCY ABBREVIATIONS
<TABLE>
<S> <C>
AUD........................... Australian Dollars
CND........................... Canadian Dollars
DEM........................... German Deutschemarks
ESP........................... Spanish Pesetas
FF............................ French Francs
GBP........................... United Kingdom Pounds
ITL........................... Italian Lira
JPY........................... Japanese Yen
NLG........................... Netherlands Guilder
SEK........................... Swedish Krona
</TABLE>
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
FRB........................... Floating Rate Bond
FRN........................... Floating Rate Note
</TABLE>
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
<TABLE>
<CAPTION>
AMOUNT PER SHARE
------------ ---------
<S> <C> <C>
Capital Paid-In..................... $ 37,442,838 $ 15.38
Accumulated Net Investment Income... 434,739 .18
Accumulated Net Realized Gain on
Security and Foreign Exchange
Transactions....................... 665,466 .27
Net Unrealized Depreciation on
Investments, Forward Currency
Contracts and Other................ (195,543) (.08)
- -------------------------------------------------------------
NET ASSETS $ 38,347,500 $ 15.75
- -------------------------------------------------------------
</TABLE>
See Accompanying Notes to Financial Statements.
33
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA High Yield Portfolio
STATEMENT OF NET ASSETS
August 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
CORPORATE BONDS -- 93.7%
BROADCASTING -- 7.3%
Allbritton Communications Company Senior
Subordinated Debentures 144A, Series B
(B3, B-)****
9.750% 11/30/2007........................ $ 700 $ 656,250
Australis Media Limited Unit Yankee
(CAA, CCC)+
14.000% 05/15/2003....................... 900 495,000
EchoStar Communications Corp. Gtd. Senior
Discount Notes
(B2, B)+
12.875% 06/01/2004....................... 1,100 797,500
Granite Broadcasting Corp. Senior
Subordinated Notes 144A
(B3, NR)****
9.375% 12/01/2005........................ 950 891,813
NWCG Holding Corp. Senior Discount Notes
Series B
(Caa, B)
8.555% 06/15/1999........................ 1,000 788,750
Park Broadcasting, Inc. 144A Senior Notes
(B2, B)
11.750% 05/15/2004....................... 500 569,375
Sinclair Broadcast Group Senior
Subordinated Notes (B2, B)
10.000% 09/30/2005....................... 700 691,250
Young Broadcasting, Inc. Senior
Subordinated Notes Series B 144A (B2,
B)****
9.000% 01/15/2006........................ 750 690,000
-------------
5,579,938
-------------
BUSINESS SERVICES -- 0.6%
Inter Act Systems Incorporated 144A Units
(NR, NR)****
14.000% 08/01/2003....................... 700 474,250
-------------
CABLE -- 13.6%
American Telecasting, Inc. Senior Discount
Notes
(Caa, CCC+)+
14.500% 06/15/2004....................... 900 639,000
Bell Cablemedia PLC Yankee Discount Bonds
(B2, BB-)+
11.950% 07/15/2004....................... 1,000 750,000
Cablevision Systems Corp. Senior
Subordinated Debentures
(B2, B)
9.875% 02/15/2013........................ 1,000 943,750
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
CABLE -- (CONTINUED)
Charter Communications Southeast, L.P.
Senior Notes (B3, B)
11.250% 03/15/2006....................... $ 900 $ 893,250
Comcast U.K. Cable Partners Ltd., Yankee
Senior Debentures
(B2, B)+
11.200% 11/15/2007....................... 1,000 625,000
DIVA Systems Corporation Units 144A (NR,
NR)
13.000% 05/15/2006....................... 2,250 1,203,750
Falcon Holdings Group L.P. Senior
Subordinated Notes PIK Bonds (NR, NR)
11.000% 09/15/2003....................... 1,202 1,121,072
Helicon Group Ltd. Senior Secured Notes
Series B
(B1, B)
9.000% 11/01/2003........................ 850 854,250
Marcus Cable Company Senior Discount Notes
(Caa, B)+
14.250% 12/15/2005....................... 950 611,563
People's Choice TV Corp. Units (Caa, CCC+)+
13.125% 06/01/2004....................... 950 555,750
Rifkin Acquisition Partners L.P. Senior
Subordinated Notes
(B3, B-)****
11.125% 01/15/2006....................... 500 502,500
Rogers Communications, Inc. Yankee Senior
Notes
(B2, BB-)
9.125% 01/15/2006........................ 550 517,688
United International Holdings,Inc. Senior
Secured Debentures, Series B (B3, B-)
9.454% 11/15/1999........................ 1,650 1,080,750
-------------
10,298,323
-------------
CHEMICALS -- 1.9%
Harris Chemical North America Senior
Secured Debentures
(B2, B+)
10.250% 07/15/2001....................... 400 399,500
Kaiser Aluminum & Chemical Corp. Senior
Subordinated Notes (B2, B-)
12.750% 02/01/2003....................... 1,000 1,078,750
-------------
1,478,250
-------------
</TABLE>
See Accompanying Notes to Financial Statements.
37
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA HIGH YIELD PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
COMPUTERS -- 1.0%
Advanced Micro Devices, Inc. Senior Secured
Notes
(Ba1, BB-)
11.000% 08/01/2003....................... $ 750 $ 761,250
-------------
CONSTRUCTION & BUILDING MATERIALS**** -- 1.2%
Southdown, Inc. 144A Senior Subordinated
Notes (B2, B+)
10.000% 03/01/2006....................... 500 498,125
Waxman Industries, Inc. 144A (Caa, CCC+)
12.750% 06/01/2004....................... 600 401,250
-------------
899,375
-------------
CONSUMER PRODUCTS -- 2.3%
Jordan Industries, Inc. Senior Notes (B3,
B+)
10.375% 08/01/2003....................... 700 675,500
Revlon Worldwide Corp. Senior Secured
Discount Notes Series B (B3, B-)
10.795% 03/15/1998....................... 1,250 1,062,500
-------------
1,738,000
-------------
ELECTRONICS -- 2.1%
Exide Electronics Group, Inc.
Units 144A (B3, B)****
11.500% 03/15/2006....................... 550 559,625
Unisys Corporation 144A Senior Notes (B1,
B+)
12.000% 04/15/2003....................... 1,000 1,025,000
-------------
1,584,625
-------------
ENERGY -- 2.7%
Cliffs Drilling Company 144A Senior Notes
(B1, B)****
10.250% 05/15/2003....................... 600 609,000
Mesa Operating Co. Senior Subordinated
Discount Notes (B2, B)
11.625% 07/01/2006....................... 750 469,687
Nuevo Energy Company Senior Subordinated
Notes (B2, B+)
9.500% 04/15/2006........................ 500 501,250
Plains Resources, Inc. 144A Senior
Subordinated Notes
(B2, B-)****
10.250% 03/15/2006....................... 500 512,500
-------------
2,092,437
-------------
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
ENTERTAINMENT -- 1.3%
American Skiing Company 144A Senior
Subordinated Notes
(B3, CCC+)
12.000% 07/15/2006....................... $ 400 $ 390,000
AMF Group Inc. Senior Subordinated Notes
144A
(B2, B-)****
10.875% 03/15/2006....................... 600 601,500
-------------
991,500
-------------
FINANCIAL SERVICES -- 0.4%
Fifth Mexican Acceptance Corp. Rule 144A
Notes
(NR, NR)**/****
8.000% 12/15/1998........................ 1,040 322,400
-------------
FOOD & BEVERAGES -- 2.2%
Foodbrands America, Inc. Senior
Subordinated Notes
(B3, B)
10.750% 05/15/2006....................... 250 252,812
Fresh Del Monte Produce Yankee Senior
Notes, Series B
(Caa, CCC+)
10.000% 05/01/2003....................... 1,500 1,406,250
-------------
1,659,062
-------------
HEALTH CARE -- 3.0%
General Medical Corp. Subordinated
Debentures, Series A PIK Bonds
(Caa, B-)
12.125% 08/15/2005....................... 1,061 1,061,951
Health O Meter Units (B3, B-)
13.000% 08/15/2002....................... 250 270,000
Paracelsus Healthcare Corp. Senior
Subordinated Notes
(B1, B)
10.000% 08/15/2006....................... 400 403,500
Regency Health Services, Inc. 144A
Subordinated Notes
(B3, B-)
12.250% 07/15/2003....................... 500 520,625
-------------
2,256,076
-------------
INDUSTRIAL GOODS & MATERIALS -- 5.7%
Alpine Group, Inc. Senior Notes, Series B
(B3, B)
12.250% 07/15/2003....................... 750 778,125
</TABLE>
See Accompanying Notes to Financial Statements.
38
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA HIGH YIELD PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
INDUSTRIAL GOODS & MATERIALS -- (CONTINUED)
Alvey Systems, Inc. 144A Senior
Subordinated Notes
(B3, B-)****
11.375% 01/31/2003....................... $ 100 $ 102,875
BPC Holding Corporation 144A Senior Secured
Notes
(Caa, NR)****
12.500% 06/15/2006....................... 500 508,125
Collins & Aikman Products Co. Gtd. Senior
Subordinated Notes (B3, B)
11.500% 04/15/2006....................... 700 721,000
Delco Remy International, Inc. 144A Senior
Subordinated Notes (B2, B-)****
10.625% 08/01/2006....................... 500 513,125
G-I Holdings, Inc. Senior Notes 144A (Ba3,
B+)
10.000% 02/15/2006....................... 389 378,789
Haynes International, Inc. Senior Notes
(B3, B-)
11.625% 09/01/2004....................... 500 495,000
Venture Holdings Trust Gtd. Senior
Subordinated Notes (B3, B)
9.750% 04/01/2004........................ 1,000 830,000
-------------
4,327,039
-------------
METALS & MINING -- 1.2%
Acme Metals, Inc. Senior Secured Debentures
(B1, B)+
13.500% 08/01/2004....................... 1,000 916,250
-------------
OFFICE EQUIPMENT & SUPPLIES -- 0.7%
Knoll Inc. 144A Senior Subordinated Notes
(B3, B+)****
10.875% 03/15/2006....................... 500 518,750
-------------
PAPER & FOREST PRODUCTS -- 7.5%
Crown Packaging 144A Units Senior Discount
Notes
(NR, NR)****
14.000% 08/01/2006....................... 775 302,250
Crown Packaging Holdings Senior
Subordinated Notes, Series B (Caa, NR)+
12.250% 11/01/2003....................... 3,300 1,278,750
Crown Paper Co. Senior Subordinated Notes
(B3, B)
11.000% 09/01/2005....................... 750 714,375
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
PAPER & FOREST PRODUCTS -- (CONTINUED)
Florida Coast Paper Company L.L.C. 144A
First Mortgage Notes (B3, B)
12.750% 06/01/2003....................... $ 700 $ 735,000
Gaylord Container Corp. Senior Subordinated
Debentures
(Caa, B-)+
12.750% 05/15/2005....................... 1,000 1,072,500
Printpack, Inc. 144A Senior Subordinated
Notes (B3, B+)
10.625% 08/15/2006....................... 600 609,000
Stone Container Corporation Senior Notes
(NR, NR)
11.500% 08/15/2006....................... 1,000 993,750
-------------
5,705,625
-------------
PUBLISHING & INFORMATION SERVICES -- 0.8%
Park Newspapers, Inc. 144A Senior Notes
(B2, B)****
11.875% 05/15/2004....................... 500 569,375
-------------
RESTAURANTS, HOTELS & CASINOS -- 12.4%
Argosy Gaming Company 144A First Mortgage
Notes
(B1, B+)****
13.250% 06/01/2004....................... 750 723,750
Bally's Casino Holdings Senior Discount
Notes (B2, B+)
7.640% 06/15/1998........................ 500 435,625
Casino America Senior Notes
(B1, B)
12.500% 08/01/2003....................... 200 200,500
Casino Magic Finance Corp. First Mortgage
Notes
(B1, B+)
11.500% 10/15/2001....................... 1,000 942,500
Coast Hotels and Casinos, Inc. 144A Gtd.
First Mortgage Notes (B3, B)****
13.000% 12/15/2002....................... 1,000 1,070,000
GNF Corp. First Mortgage Notes, Series B
(B1, BB)
10.625% 04/01/2003....................... 1,000 1,097,500
Griffin Games & Enertainment, Inc. Senior
Notes (NR, NR)
11.000% 09/15/2003....................... 750 804,375
The Majestic Star Casino, LLC 144A Senior
Secured Notes (NR, NR)****
12.750% 05/15/2003....................... 450 483,750
</TABLE>
See Accompanying Notes to Financial Statements.
39
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA HIGH YIELD PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
RESTAURANTS, HOTELS & CASINOS -- (CONTINUED)
Mohegan Tribal Gaming Authority Senior
Secured Notes, Series B 144A (NR, NR)****
13.500% 11/15/2002....................... $ 1,000 $ 1,237,500
Showboat Marina Casino Partnership 144A
First Mortgage Notes (B2, B)****
13.500% 03/15/2003....................... 450 484,875
Trump Atlantic City Associates, First
Mortgage Notes
(B1, BB-)
11.250% 05/01/2006....................... 1,000 960,000
Trump's Castle Funding, Inc. Mortgage Bonds
(Caa, NR)
11.750% 11/15/2003....................... 1,000 947,500
-------------
9,387,875
-------------
RETAIL TRADE -- 4.3%
Farm Fresh, Inc. Senior Notes
(B2, B-)
12.250% 10/01/2000....................... 1,100 844,250
Hills Stores Company Senior Notes (B1, NR)
12.500% 07/01/2003....................... 900 837,000
Jitney-Jungle Stores of America, Inc.
Senior Notes
(B2, B)
12.000% 03/01/2006....................... 1,000 1,051,250
Parisian, Inc. Senior Subordinated Notes
(Caa, B-)
9.875% 07/15/2003........................ 500 488,750
-------------
3,221,250
-------------
STEEL -- 0.8%
Weirton Steel Corporation 144A Senior Notes
(NR, B)****
11.375% 07/01/2004....................... 600 579,000
-------------
TELECOMMUNICATIONS -- 19.0%
American Communication Services, Inc. Unit
144A Notes (NR, NR)****/+
13.000% 11/01/2005....................... 1,500 802,500
Arch Communications Group, Inc. Senior
Discount Notes
(B3, B-)
10.875% 03/15/2008....................... 500 266,250
Brooks Fiber Properties, Inc. Senior
Discount Notes 144A
(NR, NR)****/+
10.875% 03/01/2006....................... 1,000 572,500
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
TELECOMMUNICATIONS -- (CONTINUED)
CAI Wireless Systems, Inc. Discount Notes
(B3, BB-)
12.250% 09/15/2002....................... $ 350 $ 363,125
CS Wireless Systems, Inc. Units 144A (NR,
NR)****/+
11.375% 03/01/2006....................... 1,000 490,000
Diamond Cable Communications Plc Senior
Discount Notes
(B3, B-)
11.750% 12/15/2005....................... 1,000 620,000
Geotek Communications, Inc. 144A
Convertible Senior Subordinated Notes
(Caa, NR)****
12.000% 02/15/2001....................... 1,600 1,816,000
IntelCom Group (U.S.A.), Inc. Senior
Discount Notes (NR, NR)
12.500% 05/01/2006....................... 1,000 558,750
InterCel, Inc. Units (B2, B-)+
12.000% 02/01/2006....................... 1,300 793,000
International CableTel, Inc. Senior Notes
(B3, B)+
12.750% 04/15/2005....................... 750 495,000
Metrocall, Inc. Senior Subordinated Notes
(B3, B-)
10.375% 10/01/2007....................... 500 382,500
Mobile Telecommunication Technologies Corp.
Senior Notes (B2, B-)
13.500% 12/15/2002....................... 675 688,500
Nextel Communications Inc. Senior Discount
Notes (B3, CCC-)+
9.750% 08/15/2004........................ 1,500 885,000
Pagemart Nationwide Senior Discount Notes
(NR, NR)+
15.000% 02/01/2005....................... 1,000 670,000
People's Telephone Co., Inc. Senior Notes
(B2, B-)
12.250% 07/15/2002....................... 450 452,250
Petersburg Long Distance, Inc. 144A
Convertible Subordinated Notes (NR,
NR)****
9.000% 06/01/2006........................ 230 276,000
Petersburg Long Distance, Inc. Units 144A
(NR, NR)****
9.000% 06/01/2004........................ 1,610 1,263,850
PriCellular Wireless Corp. Senior Discount
Notes (B3, CCC+)
12.250% 10/01/2003....................... 1,000 792,500
</TABLE>
See Accompanying Notes to Financial Statements.
40
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA HIGH YIELD PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
------------ -------------
<S> <C> <C>
TELECOMMUNICATIONS -- (CONTINUED)
Sprint Spectrum L.P. Senior Notes
(B2, B+)
11.000% 08/15/2006....................... $ 500 $ 507,500
Teleport Communications Group, Inc. Senior
Discount Notes (B1, B)
11.125% 07/01/2007....................... 500 306,250
Teleport Communications Group, Inc. Senior
Notes
(B1, B)
9.875% 07/01/2006........................ 300 300,000
Vanguard Cellular Systems, Inc. Senior
Debentures (B1, B+)
9.375% 04/15/2006........................ 500 486,875
Videotron Holdings Yankee plc Senior
Discount Notes
(B3, B+)+
11.000% 08/15/2005....................... 1,000 658,750
-------------
14,447,100
-------------
TRANSPORTATION -- 1.7%
Consorscio G Grupo Dina S.A. / MCII
Holdings (USA), Inc. 144A Senior Secured
Notes
(NR, NR)+
12.000% 11/15/2002....................... 750 592,500
US Air, Inc. Senior Notes
(B3, CCC+)
10.000% 07/01/2003....................... 750 701,250
-------------
1,293,750
-------------
TOTAL CORPORATE BONDS
(Cost $72,057,715)........................ 71,101,500
-------------
ASSET-BACKED SECURITIES -- 0.8%
TRANSPORTATION -- 0.8%
Airplanes Pass Through Trust Series 1,
Class D (Ba2, BB)
10.875% 03/15/2019....................... 600 633,000
-------------
TOTAL ASSET-BACKED SECURITIES
(Cost $600,000)........................... 633,000
-------------
<CAPTION>
NUMBER
OF SHARES VALUE
------------ -------------
<S> <C> <C>
RIGHTS / WARRANTS*** -- 0.2%
CONSTRUCTION & BUILDING MATERIALS -- 0.0%
Capital Pacific Holdings Group, Inc........ $ 13,000 $ 8,216
-------------
INDUSTRIAL GOODS & MATERIALS -- 0.1%
Uniroyal Technology Corp. Warrants......... 44,000 78,844
-------------
ELECTRONICS -- 0.0%
Exide Electronic Warrants 144A............. 1,000 3,265
-------------
TELECOMMUNICATIONS -- 0.1%
American Communication Services, Inc.
Warrants................................. 2,000 97,500
-------------
TOTAL RIGHTS / WARRANTS
(Cost $104,467).......................... 187,825
-------------
PREFERRED STOCKS -- 3.0%
AEROSPACE / DEFENSE -- 1.4%
GPA Group plc Convertible Cumulative Second
Preference Shares........................ 27,500 1,045,000
-------------
CABLE -- 0.1%
DIVA Systems Corporation Series C.......... 5,945 49,997
-------------
CONSUMER PRODUCTS -- 0.7%
Renaissance Cosmetics 144A................. 500 500,000
-------------
RESTAURANTS, HOTELS & CASINOS -- 0.8%
Lady Luck Gaming Corporation Series A...... 20,000 587,000
-------------
TOTAL PREFERRED STOCKS
(Cost $2,076,947)...................... 2,181,997
-------------
<CAPTION>
PAR
(000)
------------
<S> <C> <C>
SHORT-TERM INVESTMENT -- 0.6%
BBH Grand Cayman U.S. Dollar Time Deposit
4.750% 09/03/1996........................ $ 433 433,000
-------------
TOTAL SHORT-TERM INVESTMENT
(Cost $433,000)........................ 433,000
-------------
</TABLE>
See Accompanying Notes to Financial Statements.
41
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA HIGH YIELD PORTFOLIO
STATEMENT OF NET ASSETS (CONCLUDED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
VALUE
-------------
<S> <C> <C>
TOTAL INVESTMENTS -- 98.3%
(Cost $75,272,129)..................................... $74,537,322
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 1.7%.................................... 1,311,236
-------------
NET ASSETS (Applicable to 4,713,739 BEA Shares) --
100.0%................................................. $75,848,558
-------------
-------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
($75,848,558 DIVIDED BY 4,713,739).................... $16.09
-------------
-------------
</TABLE>
* Cost for Federal income tax purposes at August 31, 1996 is $75,291,159. The
gross appreciation (depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation........................... $ 2,072,489
Gross Depreciation........................... (2,826,326)
-------------
Net Appreciation............................. $ (753,837)
-------------
-------------
</TABLE>
** Guaranteed by Grupo Sidek, S.A. de C.V. and Grupo Situr, S.A. de C.V.
*** Non-income Producing Securities.
**** Certain conditions for public sales may exist.
+ Step Bond -- The interest rate as of August 31, 1996 is 0% and will reset
to interest shown at a future date.
The Moody's Investors Service, Inc. and Standard & Poor's Corporations ratings
indicated are the most recent ratings available at August 31, 1996 and are
unaudited.
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
PIK........................... Pay In Kind
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
<CAPTION>
AMOUNT
---------------
PER
SHARE
--
<S> <C>
Capital Paid-In.................... $ 91,478,662 $ 19.40
Accumulated Net Investment Income.. 1,332,623 .28
Accumulated Net Realized Loss on
Security Transactions............. (16,227,920) (3.44)
Net Unrealized Depreciation on
Investments and Other............. (734,807) (.15)
- -------------------------------------------------------------
NET ASSETS $ 75,848,558 $ 16.09
- -------------------------------------------------------------
</TABLE>
See Accompanying Notes to Financial Statements.
42
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
PORTFOLIO MANAGER'S LETTER
AUGUST 31, 1996
BEA MUNICIPAL BOND FUND PORTFOLIO
, 1996
Dear Shareholders:
43
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
PORTFOLIO MANAGER'S LETTER--(CONTINUED)
AUGUST 31, 1996
44
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
PORTFOLIO MANAGER'S LETTER--(CONCLUDED)
AUGUST 31, 1996
BEA MUNICIPAL BOND FUND PORTFOLIO
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN THE BEA MUNICIPAL BOND
FUND PORTFOLIO AND THE LEHMAN BROTHERS
MUNICIPAL BOND INDEX FROM INCEPTION 6/20/94, PERIOD ENDED 7/31/94 AND AT EACH
QUARTER END.
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURN
One Year 2.27%
From Inception 4.98%
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
BEA MUNICIPAL BOND FUND PORTFOLIO
<S> <C> <C>
Total Returns and Graph Plot
Points
Lehman Brothers
BEA Municipal Bond Municipal Bond
Fund Portfolio Index
06/20/94 $ 10,000 $ 10,000
07/31/94 $ 10,040 $ 10,038
08/31/94 $ 10,040 $ 10,073
11/30/94 $ 9,647 $ 9,571
02/28/95 $ 10,350 $ 10,354
05/31/95 $ 10,846 $ 10,820
08/31/95 $ 10,886 $ 10,965
11/30/95 $ 11,193 $ 11,079
02/29/96 $ 11,216 $ 11,498
5/31/96 $ 10,937 $ 11,314
8/31/96 $ 11,134 $ 11,539
Average Annual Total Return
One Year 2.27%
From Inception 4.98%
</TABLE>
Note: Past performance is not predictive of future performance.
45
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA Municipal Bond Fund Portfolio
STATEMENT OF NET ASSETS
August 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
----------- ------------
<S> <C> <C>
MUNICIPAL BONDS -- 92.4%
ALABAMA -- 0.1%
Jefferson County AL Sanitation & Sewer
(Aaa, NR)
6.750% 03/01/2007........................ 15 $ 16,631
------------
CALIFORNIA -- 9.8%
California State GO
(Aaa, AAA)
5.125% 10/01/2017........................ 825 744,563
Los Angeles CA Department of Water & Power
Water Revenue (Aa, AA)
4.500% 05/15/2023........................ 705 553,425
Southern California Public Power Authority
Power Project Revenue Series A (AMBAC
Insured) (Aa, AA-)
5.000% 07/01/2017........................ 705 610,706
------------
1,908,694
------------
COLORADO -- 3.0%
Colorado Springs CO Utility Revenue (Aaa,
AAA)
5.875% 11/15/2017........................ 595 587,563
------------
FLORIDA -- 10.8%
Florida State Board of Education GO (Aa,
AA)
5.125% 06/01/2022........................ 30 26,925
Florida State GO (Aa, AA)
5.500% 10/01/2008........................ 710 710,000
Jacksonville FL Electric Authority Revenue
2nd Installment (Aaa, AAA)
6.000% 07/01/2012........................ 610 611,525
Tallahassee FL Electric Revenue First Lien
(Aaa, AAA)
6.100% 10/01/2006........................ 730 756,463
------------
2,104,913
------------
ILLINOIS -- 3.2%
Illinois State Sales Tax Revenue Series Q
(A1, AAA)
5.750% 06/15/2014........................ 650 629,688
------------
<CAPTION>
PAR
(000) VALUE
----------- ------------
<S> <C> <C>
INDIANA -- 0.1%
Indianapolis IN Public Improvement Board
Revenue (Aaa, AA+)
6.000% 01/10/2018........................ 25 $ 25,031
------------
LOUISIANA -- 3.4%
New Orleans LA Home Mortgage Authority SOB
(Aaa, AAA)
6.250% 01/15/2011........................ 635 674,687
------------
MARYLAND -- 4.7%
Maryland State Transportation Authority
Project Revenue (Aaa, AAA)
6.800% 07/01/2016........................ 850 922,250
------------
MASSACHUSETTS -- 3.0%
Massachusetts State Water Resources
Authority General Revenue Series 92A (A,
A)
6.500% 07/15/2019........................ 20 21,500
Massachusetts State Water Resources Revenue
(Aaa, AAA)
5.000% 12/01/2025........................ 660 569,250
------------
590,750
------------
NEW YORK -- 30.2%
New York NY Series D GO (Baa1, BBB+)
6.000% 02/15/2025........................ 15 13,969
New York NY Series H GO (Baa1, BBB+)
7.200% 02/01/2013........................ 600 637,500
New York State Dormitory Authority Revenue
(Episcopal Health Services) (GNMA Coll.)
(NR, AAA)
7.550% 08/01/2029........................ 435 468,713
New York State Dormitory Authority Revenue
(Judicial Facilities Lease) (MBIA
Insured) (Aaa, AAA)
7.375% 07/01/2016........................ 630 728,437
</TABLE>
See Accompanying Notes to Financial Statements.
46
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA MUNICIPAL BOND FUND PORTFOLIO
STATEMENT OF NET ASSETS (CONTINUED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
----------- ------------
<S> <C> <C>
NEW YORK -- (CONTINUED)
New York State Dormitory Authority Revenue
(Judicial Facilities Lease) (Aaa, AAA)
7.375% 07/01/2016........................ 40 $ 46,250
New York State Dormitory Authority Revenue
(Park Ridge Housing Inc. Project) (NR,
AA)
7.850% 02/01/2029........................ 530 570,412
New York State Medical Care Facility
Finance Agency Hospital & Nursing Home
Insured Mortgage Revenue (NR, AAA)
5.500% 02/15/2022........................ 795 758,231
New York State Medical Care Facility
Financial Agency Revenue (NR, AAA)
5.750% 08/15/2019........................ 60 57,900
New York State Power Authority Revenue &
General Purpose Electric Revenue Series R
(Aaa, AAA)
7.000% 01/01/2010........................ 360 411,750
New York State Power Authority Revenue &
General Purpose Series G (Aaa, AAA)
5.375% 01/01/2010........................ 40 39,900
New York State Power Authority Revenue
Series V (MBIA Insured) (NR, AAA)
7.875% 01/01/1998........................ 790 843,325
New York State Throughway Authority General
Revenue Series B (MBIA Ins.)
(Aaa, AAA)
5.000% 01/01/2020........................ 30 26,775
Suffolk County NY Water Authority
Waterworks Revenue Series V
(NR, AAA)
6.750% 06/01/2012........................ 580 641,625
<CAPTION>
PAR
(000) VALUE
----------- ------------
<S> <C> <C>
NEW YORK -- (CONTINUED)
Triborough Bridge & Tunnel Authority NY
Mortgage Recording Tax SOB
(Aaa, AAA)
7.125% 01/01/2000........................ 625 $ 678,125
------------
5,922,912
------------
PUERTO RICO -- 4.5%
Commonwealth of Puerto Rico GO (Baa1, A)
5.400% 07/01/2007........................ 730 728,175
Puerto Rico Electric Power Authority
Revenue Series N (Baa1, A-)
7.125% 07/01/2014........................ 135 143,944
------------
872,119
------------
SOUTH DAKOTA -- 5.6%
Heartland Consumers Power District SD
Electric Revenue (Aaa, AAA)
6.375% 01/01/2016........................ 30 30,375
Heartland Consumers Power District SD
Electric Revenue (Aaa, AAA)
7.000% 01/01/2016........................ 970 1,064,575
------------
1,094,950
------------
UTAH -- 2.9%
Utah State School District Finance
Cooperative Revenue (Capital Imp.
Financing Pool) (NR, AA+)
8.375% 08/15/1998........................ 535 567,769
------------
VIRGIN ISLANDS -- 3.8%
Virgin Islands Public Finance Authority
Revenue
(NR, BBB)
7.700% 10/01/2004........................ 690 746,925
------------
VIRGINIA -- 3.7%
Fairfax County VA Redevelopment & Housing
Authority Mortgage Revenue (FHA Insured)
(NR, AAA)
7.100% 04/01/2019........................ 630 726,862
------------
</TABLE>
See Accompanying Notes to Financial Statements.
47
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
BEA MUNICIPAL BOND FUND PORTFOLIO
STATEMENT OF NET ASSETS (CONCLUDED)
AUGUST 31, 1996
<TABLE>
<CAPTION>
PAR
(000) VALUE
----------- ------------
<S> <C> <C>
WASHINGTON -- 3.6%
King County WA Series A GO (Aa1, AA+)
6.200% 01/01/2024........................ 40 $ 40,900
Seattle WA Water System Revenue (Aa, AA)
5.250% 12/01/2023........................ 735 664,256
------------
705,156
------------
TOTAL MUNICIPAL BONDS
(Cost $17,599,756)...................... 18,096,900
------------
U.S. TREASURY
OBLIGATIONS -- 2.0%
U.S. Treasury Bonds
8.750% 08/15/2020........................ 335 390,205
------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $408,315)........................ 390,205
------------
SHORT TERM INVESTMENT -- 4.4%
Smith Barney Tax Free Money Market Fund.... 867 867,178
------------
TOTAL SHORT TERM INVESTMENT
(Cost $867,178)........................ 867,178
------------
TOTAL INVESTMENT AT VALUE -- 98.8%
(Cost $18,875,249)......................... $ 19,354,283
OTHER ASSETS IN EXCESS OF LIABILITIES -- 1.2%.............
226,971
------------
NET ASSETS (Applicable to 1,336,820 BEA Shares) --
100.0%.................................................... $ 19,581,254
------------
------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
($19,581,254 DIVIDED BY 1,336,820)....................... $14.65
------------
------------
</TABLE>
* Cost for Federal income tax purposes at August 31, 1996 is $18,850,672. The
gross appreciation (depreciation) on a tax basis is as follows:
<TABLE>
<S> <C>
Gross Appreciation........................... $ 603,124
Gross Depreciation........................... (99,513)
-------------
Net Appreciation............................. $ 503,611
-------------
-------------
</TABLE>
The Moody's Investors Service, Inc. and Standard & Poor's Corporations ratings
indicated are the most recent ratings available at August 31, 1996 and are
unaudited.
INVESTMENT ABBREVIATIONS
<TABLE>
<S> <C>
GO............................ General Obligations
SOB........................... Special Obligations Bonds
AT AUGUST 31, 1996, NET ASSETS CONSISTED OF:
<CAPTION>
AMOUNT
---------------
PER
SHARE
--
<S> <C>
Capital Paid-In.................... $ 18,602,539 $ 13.92
Accumulated Net Investment Income.. 42,930 .03
Accumulated Net Realized Gain on
Security Transactions............. 422,729 .32
Net Unrealized Appreciation on
Investments and Other............. 513,056 .38
- -------------------------------------------------------------
NET ASSETS $ 19,581,254 $ 14.65
- -------------------------------------------------------------
</TABLE>
See Accompanying Notes to Financial Statements.
48
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
Statement of Operations
For the Year Ended August 31, 1996
<TABLE>
<CAPTION>
BEA BEA EMERGING
INTERNATIONAL MARKETS BEA U.S.
EQUITY EQUITY CORE EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO
-------------- ------------ ------------
<S> <C> <C> <C>
INVESTMENT INCOME
Dividends.................................................................. $ 14,577,259 $2,544,973 $ 781,813
Interest................................................................... 1,714,487 403,084 201,977
Foreign taxes withheld..................................................... (1,099,411) (226,107) --
-------------- ------------ ------------
Total Investment Income.................................................. 15,192,335 2,721,950 983,790
-------------- ------------ ------------
EXPENSES
Investment advisory fees................................................... 5,993,072 1,289,739 328,320
Administration service fees................................................ 1,123,701 193,461 65,664
Administration fees........................................................ 936,418 161,218 54,720
Custodian fees............................................................. 776,762 320,568 57,798
Audit fees................................................................. 73,807 12,000 4,201
Miscellaneous fees......................................................... 45,000 32,000 2,750
Printing fees.............................................................. 37,722 8,000 2,500
Registration fees.......................................................... 35,000 27,337 38,361
Legal fees................................................................. 33,125 1,950 1,500
Transfer agent fees........................................................ 21,129 22,113 22,241
Insurance expense.......................................................... 18,931 2,700 776
Directors fees............................................................. 12,500 2,200 796
Organization expense....................................................... 10,665 10,665 5,208
-------------- ------------ ------------
9,117,832 2,083,951 584,835
Less fees waived........................................................... (200,151) (168,635) (147,075)
-------------- ------------ ------------
Total Expenses........................................................... 8,917,681 1,915,316 437,760
-------------- ------------ ------------
Net Investment Income........................................................ 6,274,654 806,634 546,030
-------------- ------------ ------------
Realized and Unrealized Gain (Loss) on Investments and Foreign Currency
Transactions:
Net realized gain (loss) from:
Security transactions.................................................... 34,300,823 (8,165,330) 5,046,088
Foreign exchange transactions............................................ 1,834,308 (101,733) --
-------------- ------------ ------------
36,135,131 (8,267,063) 5,046,088
-------------- ------------ ------------
Net unrealized appreciation(depreciation):
Investments.............................................................. 7,908,456 11,411,914 322,074
Translation of assets and liabilities in foreign currencies.............. 16,741 (357) --
-------------- ------------ ------------
7,925,197 11,411,557 322,074
-------------- ------------ ------------
Net Gain On Investments And Foreign Currency Transactions.................... 44,060,328 3,144,494 5,368,162
-------------- ------------ ------------
Net Increase In Net Assets Resulting From Operations......................... $ 50,334,982 $3,951,128 $5,914,192
-------------- ------------ ------------
-------------- ------------ ------------
</TABLE>
See Accompanying Notes to Financial Statements.
49
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1996
<TABLE>
<CAPTION>
BEA U.S. BEA GLOBAL BEA
CORE FIXED BEA HIGH MUNICIPAL
FIXED INCOME INCOME YIELD BOND FUND
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends....................................................... $ -- $ -- $ 42,222 $ --
Interest........................................................ 8,335,642 2,079,874 8,967,348 1,297,791
------------ ----------- ------------ ------------
Total Investment Income....................................... 8,335,642 2,079,874 9,009,570 1,297,791
------------ ----------- ------------ ------------
EXPENSES
Investment advisory fees........................................ 450,786 157,059 643,353 161,784
Administration service fees..................................... 180,314 47,118 137,861 34,668
Administration fees............................................. 150,262 39,265 114,885 28,890
Custodian fees.................................................. 66,892 39,448 40,862 19,545
Audit fees...................................................... 9,200 3,250 5,000 5,731
Miscellaneous fees.............................................. 12,000 1,110 4,750 9,000
Printing fees................................................... 1,162 236 10,058 5,357
Registration fees............................................... 39,323 22,754 22,000 31,384
Legal fees...................................................... 2,500 544 1,878 2,158
Transfer agent fees............................................. 21,643 20,701 19,603 19,850
Insurance expense............................................... 1,600 450 2,737 750
Directors fees.................................................. 875 250 2,173 700
Organization expense............................................ 4,136 5,409 10,665 7,433
------------ ----------- ------------ ------------
940,693 337,594 1,015,825 327,250
Less fees waived................................................ (339,645) (102,006) (206,745) (96,130)
------------ ----------- ------------ ------------
Total Expenses.............................................. 601,048 235,588 809,080 231,120
------------ ----------- ------------ ------------
Net Investment Income............................................. 7,734,594 1,844,286 8,200,490 1,066,671
------------ ----------- ------------ ------------
Realized and Unrealized Gain (Loss) on Investments and Foreign
Currency Transactions:
Net realized gain (loss) from:
Security transactions......................................... 1,269,541 746,851 (524,984) 908,389
Foreign exchange transactions................................. 16,937 523,986 -- --
------------ ----------- ------------ ------------
1,286,478 1,270,837 (524,984) 908,389
------------ ----------- ------------ ------------
Net unrealized appreciation(depreciation):
Investments................................................... (4,182,075) (278,160) 2,587,803 (1,524,506)
Translation of assets and liabilities in foreign currencies... (13,236) (255,028) -- --
------------ ----------- ------------ ------------
(4,195,311) (533,188) 2,587,803 (1,524,506)
------------ ----------- ------------ ------------
Net Gain (Loss) On Investments And Foreign Currency Transactions.. (2,908,833) 737,649 2,062,819 (616,117)
------------ ----------- ------------ ------------
Net Increase In Net Assets Resulting From Operations.............. $4,825,761 $2,581,935 $ 10,263,309 $ 450,554
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
</TABLE>
See Accompanying Notes to Financial Statements.
50
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
BEA INTERNATIONAL BEA EMERGING MARKETS
EQUITY PORTFOLIO EQUITY PORTFOLIO
------------------------------ ------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED AUGUST ENDED AUGUST ENDED AUGUST ENDED AUGUST
31, 1996 31, 1995 31, 1996 31, 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income................................... $ 6,274,654 $ 2,606,678 $ 806,634 $ 26,113
Net gain (loss) on investments and foreign currency
transactions........................................... 44,060,328 (67,759,705) 3,144,494 (32,385,113)
-------------- -------------- -------------- --------------
Net increase (decrease) in net assets resulting from
operations............................................. 50,334,982 (65,153,027) 3,951,128 (32,359,000)
-------------- -------------- -------------- --------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
BEA shares.............................................. (2,649,123) -- (401,495) (394,002)
Distributions to shareholders from net realized capital
gains:
BEA shares.............................................. -- (32,112,690) -- (5,374,023)
-------------- -------------- -------------- --------------
Total distributions to shareholders....................... (2,649,123) (32,112,690) (401,495) (5,768,025)
-------------- -------------- -------------- --------------
Net capital share transactions............................ (138,669,688) 103,330,556 (17,180,987) 25,774,209
-------------- -------------- -------------- --------------
Total increase (decrease) in net assets................... (90,983,829) 6,064,839 (13,631,354) (12,352,816)
Net Assets:
Beginning of year....................................... 773,254,630 767,189,791 128,322,563 140,675,379
-------------- -------------- -------------- --------------
End of year............................................. $ 682,270,801 $773,254,630 $114,691,209 $128,322,563
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
See Accompanying Notes to Financial Statements.
51
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BEA U.S. CORE EQUITY PORTFOLIO BEA U.S. CORE FIXED INCOME
---------------------------------- PORTFOLIO
FOR THE PERIOD ------------------------------
FOR THE YEAR SEPTEMBER 1, FOR THE YEAR FOR THE YEAR
ENDED AUGUST 1994(1) TO AUGUST ENDED AUGUST ENDED AUGUST
31, 1996 31, 1995 31, 1996 31, 1995
-------------- ------------------ -------------- --------------
<S> <C> <C> <C> <C>
Increase in net assets:
Operations:
Net investment income............................... $ 546,030 $ 351,583 $ 7,734,594 $ 4,392,275
Net gain (loss) on investments and foreign currency
transactions....................................... 5,368,162 4,351,342 (2,908,833) 3,524,378
-------------- ------------------ -------------- --------------
Net increase in net assets resulting from
operations......................................... 5,914,192 4,702,925 4,825,761 7,916,653
-------------- ------------------ -------------- --------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
BEA shares.......................................... (384,500) (102,838) (7,217,136) (3,353,829)
Distributions to shareholders from net realized
capital gains:
BEA shares.......................................... (2,961,757) -- (1,598,598) --
-------------- ------------------ -------------- --------------
Total distributions to shareholders................... (3,346,257) (102,838) (8,815,734) (3,353,829)
-------------- ------------------ -------------- --------------
Net capital share transactions........................ 24,803,723 27,043,539 23,336,409 64,671,197
-------------- ------------------ -------------- --------------
Total increase in net assets.......................... 27,371,658 31,643,626 19,346,436 69,234,021
Net Assets:
Beginning of year................................... 31,643,776 150 99,249,839 30,015,818
-------------- ------------------ -------------- --------------
End of year......................................... $ 59,015,434 $ 31,643,776 $118,596,275 $ 99,249,839
-------------- ------------------ -------------- --------------
-------------- ------------------ -------------- --------------
</TABLE>
(1) Commencement of Operations.
See Accompanying Notes to Financial Statements.
52
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BEA GLOBAL FIXED INCOME
PORTFOLIO BEA HIGH YIELD PORTFOLIO
------------------------------ ------------------------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED AUGUST ENDED AUGUST ENDED AUGUST ENDED AUGUST
31, 1995 31, 1996 31, 1995 31, 1996
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income................................... $ 1,844,286 $ 1,270,820 $ 8,200,490 $ 13,411,565
Net gain (loss) on investments and foreign currency
transactions........................................... 737,649 566,554 2,062,819 (2,367,436)
-------------- -------------- -------------- --------------
Net increase in net assets resulting from operations.... 2,581,935 1,837,374 10,263,309 11,044,129
-------------- -------------- -------------- --------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
BEA shares.............................................. (2,322,498) (924,756) (10,165,849) (12,388,703)
Distributions to shareholders from net realized capital
gains:
BEA shares.............................................. (267,603) -- -- --
-------------- -------------- -------------- --------------
Total distributions to shareholders....................... (2,590,101) (924,756) (10,165,849) (12,388,703)
-------------- -------------- -------------- --------------
Net capital share transactions............................ 18,790,839 12,351,849 (77,869,859) 11,448,059
-------------- -------------- -------------- --------------
Total increase (decrease) in net assets................... 18,782,673 13,264,467 (77,772,399) 10,103,485
Net Assets:
Beginning of year....................................... 19,564,827 6,300,360 153,620,957 143,517,472
-------------- -------------- -------------- --------------
End of year............................................. $ 38,347,500 $ 19,564,827 $ 75,848,558 $153,620,957
-------------- -------------- -------------- --------------
-------------- -------------- -------------- --------------
</TABLE>
See Accompanying Notes to Financial Statements.
53
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
BEA MUNICIPAL BOND FUND
PORTFOLIO
------------------------------
FOR THE YEAR FOR THE YEAR
ENDED AUGUST ENDED AUGUST
31, 1996 31, 1995
-------------- --------------
<S> <C> <C>
Increase (decrease) in net assets:
Operations:
Net investment income.................................................................... $ 1,066,671 $ 2,273,373
Net gain (loss) on investments and foreign currency transactions......................... (616,117) 1,835,066
-------------- --------------
Net increase in net assets resulting from operations..................................... 450,554 4,108,439
-------------- --------------
Distributions to shareholders:
Dividends to shareholders from net investment income:
BEA shares............................................................................... (1,137,175) (2,400,128)
Distributions to shareholders from net realized capital gains:
BEA shares............................................................................... (629,414) (174,436)
-------------- --------------
Total distributions to shareholders........................................................ (1,766,589) (2,574,564)
-------------- --------------
Net capital share transactions............................................................. (28,080,548) 5,134,026
-------------- --------------
Total increase (decrease) in net assets.................................................... (29,396,583) 6,667,901
Net Assets:
Beginning of year........................................................................ 48,977,837 42,309,936
-------------- --------------
End of year.............................................................................. $ 19,581,254 $ 48,977,837
-------------- --------------
-------------- --------------
</TABLE>
See Accompanying Notes to Financial Statements.
54
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
BEA INTERNATIONAL EQUITY PORTFOLIO
-----------------------------------------------------------------------------
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.......... 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
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
Portfolio would have been 1.22%, 1.26% and 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
(c) Not 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.
See Accompanying Notes to Financial Statements.
55
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
BEA EMERGING MARKETS EQUITY PORTFOLIO
---------------------------------------------------------------------
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 Portfolio 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
(c) Not 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.
See Accompanying Notes to Financial Statements.
56
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
BEA U.S. CORE EQUITY PORTFOLIO
--------------------------------- BEA U.S. CORE FIXED INCOME PORTFOLIO
---------------------------------------------------
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
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 (e).... $ .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 Portfolio would
have been 1.34% and 1.51% for the years 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 Portfolio
would have been .78% and .84% for the years ended August 31, 1996 and 1995,
respectively, and .99% annualized for the period ended August 31, 1994.
(b) Annualized.
(c) Not annualized.
(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
See Accompanying Notes to Financial Statements.
57
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
BEA GLOBAL FIXED INCOME PORTFOLIO
---------------------------------------------------
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
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 Global Fixed Income Portfolio 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.
(c) Not annualized.
* Commencement of operations
See Accompanying Notes to Financial Statements.
58
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
BEA HIGH YIELD PORTFOLIO
---------------------------------------------------------------------
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
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 Portfolio
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.
(c) Not annualized.
(d) Redemption fees not reflected in total return.
* Commencement of operations
See Accompanying Notes to Financial Statements.
59
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
BEA MUNICIPAL BOND FUND PORTFOLIO
---------------------------------------------------
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
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
Portfolio 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.
(c) Not annualized.
* Commencement of operations
See Accompanying Notes to Financial Statements.
60
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
Notes to Financial Statements
August 31, 1996
NOTE 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The RBB Fund, Inc. (the "Fund") is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company. The Fund
was incorporated in Maryland on February 29, 1988, and currently has seventeen
investment Portfolios, seven of which are included in these financial
statements.
The Fund has authorized capital of thirty billion shares of common stock of
which 12.35 billion are currently classified into sixty-six classes. Each class
represents an interest in one of seventeen investment portfolios of the Fund.
The classes have been grouped into fifteen separate "families", eight of which
have begun investment operations. The BEA Family represents interests in seven
portfolios which are covered by this report.
A) SECURITY VALUATION -- Portfolio securities for which market
quotations are readily available are valued at market value, which is
currently determined using the last reported sales price. If no sales are
reported, as in the case of some securities traded over-the-counter,
portfolio securities are valued at the mean between the last reported bid
and asked prices. All other securities and assets are valued as determined
in good faith by the Board of Directors. Short-term obligations with
maturities of 60 days or less are valued at amortized cost which
approximates market value.
B) FOREIGN CURRENCY TRANSACTIONS -- Transactions denominated in
foreign currencies are recorded in the Portfolio's records at the current
prevailing exchange rates. Asset and liability accounts that are denominated
in a foreign currency are adjusted daily to reflect current exchange rates.
Transaction gains or losses resulting from changes in exchange rates during
the reporting period or upon settlement of the foreign currency transaction
are reported in operations for the current period. It is not practical to
isolate that portion of both realized and unrealized gains and losses on
investments in the statement of operations that result from fluctuations in
foreign currency exchange rates. The Fund reports certain foreign currency
related transactions as components of realized gains for financial reporting
purposes, whereas such components are treated as ordinary income (loss) for
Federal income tax purposes.
C) SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Security
transactions are accounted for on the trade date. The cost of investments
sold is determined by use of the specific identification method for both
financial reporting and income tax purposes. Interest income is recorded on
the accrual basis. Dividends are recorded on the ex-dividend date. Certain
expenses, principally transfer agent and printing, are class specific
expenses and vary by class. Expenses not directly attributable to a specific
portfolio or class are allocated based on relative net assets of each
portfolio and class, respectively.
D) DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net
investment income and net realized capital gains will be declared and paid
at least annually. The character of distributions made during the year for
net investment income or net realized gains may differ from their ultimate
characterization for federal income tax purposes due to GAAP/tax differences
in the character of income and expense recognition. These differences are
primarily due to differing treatments for net operating losses,
mortgage-backed securities, passive foreign investment companies, and
forward foreign currency contracts.
E) FEDERAL INCOME TAXES -- No provision is made for Federal taxes as
it is the Fund's intention to have each portfolio qualify for and elect the
tax treatment applicable to regulated investment companies under the
Internal Revenue Code and make the requisite distributions to its
shareholders which will be sufficient to relieve it from Federal income and
excise taxes.
F) OTHER -- Securities denominated in currencies other than U.S.
dollars are subject to changes in value due to fluctuations in exchange
rates.
G) USE OF ESTIMATES -- The preparation of financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
61
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996
NOTE 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Some countries in which the portfolios invest require governmental approval
for the repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. In addition, if there is a deterioration in a
country's balance of payments or for other reasons, a country may impose
temporary restrictions on foreign capital remittances abroad.
The securities exchanges of certain foreign markets are substantially
smaller, less liquid and more volatile than the major securities markets in the
United States. Consequently, acquisition and disposition of securities by the
portfolios may be inhibited. In addition, a significant proportion of the
aggregate market value of equity securities listed on the major securities
exchanges in emerging markets are held by a smaller number of investors. This
may limit the number of shares available for acquisition or disposition by the
Fund.
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. 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.
In addition, periods of economic uncertainty and changes can be expected to
result in increased volatility of market prices of lower-rated debt securities
and a Portfolio's net asset value.
NOTE 2.TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES
Pursuant to Investment Advisory Agreements, BEA Associates ("BEA"), a U.S.
investment advisory firm, serves as investment advisor for each of the seven
portfolios described herein.
For its advisory services, BEA is entitled to receive the following fees,
computed daily and payable monthly on a portfolio's average daily net assets:
<TABLE>
<CAPTION>
PORTFOLIO ANNUAL RATE
- -------------------------------------- --------------------------------------
<S> <C>
BEA International Equity Portfolio 0.80% of average daily net assets
BEA Emerging Markets Equity Portfolio 1.00% of average daily net assets
BEA U.S. Core Equity Portfolio 0.75% of average daily net assets
BEA U.S. Core Fixed Income Portfolio 0.375% of average daily net assets
BEA Global Fixed Income Portfolio 0.50% of average daily net assets
BEA High Yield Portfolio 0.70% of average daily net assets
BEA Municipal Bond Fund Portfolio 0.70% of average daily net assets
</TABLE>
BEA may, at its discretion, voluntarily waive all or any portion of its
advisory fee for either of the portfolios. For the year ended August 31, 1996,
advisory fees and waivers for each of the seven investment portfolios were as
follows:
<TABLE>
<CAPTION>
GROSS NET
ADVISORY FEE WAIVER ADVISORY FEE
-------------- -------------- --------------
<S> <C> <C> <C>
BEA International Equity Portfolio $ 5,993,072 $ -- $ 5,993,072
BEA Emerging Markets Equity
Portfolio 1,289,739 -- 1,289,739
BEA U.S. Core Equity Portfolio 328,320 (93,430) 234,890
BEA U.S. Core Fixed Income
Portfolio 450,786 (134,639) 316,147
BEA Global Fixed Income Portfolio 157,059 (53,915) 103,144
BEA High Yield Portfolio 643,353 (100,763) 542,590
BEA Municipal Bond Fund Portfolio 161,784 (68,790) 92,994
</TABLE>
PFPC Inc. ("PFPC"), an indirect wholly owned subsidiary of PNC Bank Corp.,
serves as each portfolio's transfer and dividend disbursing agent. In addition,
PFPC serves as administrator for each of the seven portfolios. PFPC's
administration fee is computed daily and payable monthly at an annual rate of
.125% of each Portfolio's average daily net assets.
62
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996
NOTE 2.TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (CONTINUED)
PFPC may, at its discretion, voluntarily waive all or any portion of its
administration fee for any of the portfolios. For the year ended August 31,
1996, administration fees for each of the seven investment portfolios were as
follows:
<TABLE>
<CAPTION>
GROSS NET
ADMINISTRATION ADMINISTRATION
FEE WAIVER FEE
-------------- -------------- --------------
<S> <C> <C> <C>
BEA International Equity Portfolio $ 936,418 $(5,204) $ 931,214
BEA Emerging Markets Equity
Portfolio 161,218 (8,509) 152,709
BEA U.S. Core Equity Portfolio 54,720 -- 54,720
BEA U.S. Core Fixed Income
Portfolio 150,262 (48,084) 102,178
BEA Global Fixed Income Portfolio 39,265 (7,853) 31,412
BEA High Yield Portfolio 114,885 (12,483) 102,402
BEA Municipal Bond Fund Portfolio 28,890 -- 28,890
</TABLE>
Counsellors Funds Service, Inc. ("Counsellors Service"), a wholly-owned
subsidiary of Counsellors Securities Inc., serves as administrative services
agent. An administrative service fee is computed daily and payable monthly at an
annual rate of .15% of each portfolio's average daily net assets.
NOTE 3.PURCHASES AND SALES OF SECURITIES
For the year ended August 31, 1996, purchases and sales of investment
securities (other than short-term investments) were as follows:
<TABLE>
<CAPTION>
INVESTMENT SECURITIES U.S. GOVERNMENT OBLIGATIONS
----------------------------- ---------------------------
PURCHASES SALES PURCHASES SALES
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
BEA International Equity Portfolio $620,162,213 $730,006,726 $ -- $ --
BEA Emerging Markets Equity Portfolio 96,948,942 111,827,920 -- --
BEA U.S. Core Equity Portfolio 72,478,392 52,344,258 -- --
BEA U.S. Core Fixed Income Portfolio 162,070,786 121,353,161 113,926,558 105,129,232
BEA Global Fixed Income Portfolio 20,983,511 9,433,901 16,996,868 14,091,064
BEA High Yield Portfolio 115,438,832 181,333,821 8,941,087 21,682,861
BEA Municipal Bond Fund Portfolio 6,047,590 36,230,309 1,525,89 1,090,739
</TABLE>
For the year ended August 31, 1996, purchases include $6,926,876, $753,018,
$13,122,108, and $992,174 of investment securities received from shareholders in
exchange for 413,792 shares, 40,650 shares, 833,800 shares, and 68,007 shares
sold by the BEA Emerging Markets Equity Portfolio, BEA U.S. Core Equity
Portfolio, BEA U.S. Core Fixed Income Portfolio and BEA Municipal Bond Fund
Portfolio, respectively. For the year ended August 31, 1996, sales include
$93,483,064, and $22,092,445 of investment securities delivered to shareholders
in exchange for 4,928,316 shares, and 1,470,868 shares redeemed by the BEA
International Equity Portfolio and BEA U.S. Core Fixed Income Portfolio,
respectively. This resulted in a gain of $8,745,063 for the BEA International
Equity Portfolio and a loss of $371,989 for the BEA U.S. Core Fixed Income
Portfolio.
63
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996
NOTE 4.CAPITAL SHARES
Transactions in capital shares for each period were as follows:
<TABLE>
<CAPTION>
BEA INTERNATIONAL EQUITY BEA EMERGING MARKETS EQUITY
PORTFOLIO PORTFOLIO
----------------------------------------------------- ----------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
AUGUST 31, 1996 AUGUST 31, 1995 AUGUST 31, 1996 AUGUST 31, 1995
-------------------------- ------------------------- ------------------------- -------------------------
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
----------- ------------- ----------- ------------ ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 8,492,355 $ 158,914,042 7,555,790 $141,210,504 1,930,842 $ 33,432,364 2,740,756 $ 45,977,774
Shares issued in
reinvestment of
dividends 137,894 2,523,456 1,783,551 31,977,179 19,043 323,156 290,750 5,614,374
Shares
repurchased, net
of redemption
fees (15,886,499) (300,107,186) (3,955,727) (69,857,127) (2,909,721) (50,936,507) (1,493,908) (25,817,939)
----------- ------------- ----------- ------------ ----------- ------------ ----------- ------------
Net increase
(decrease) (7,256,250) $(138,669,688) 5,383,614 $103,330,556 (959,836) $(17,180,987) 1,537,598 $ 25,774,209
----------- ------------- ----------- ------------ ----------- ------------ ----------- ------------
----------- ------------- ----------- ------------ ----------- ------------ ----------- ------------
BEA Shares
Authorized 500,000,000 500,000,000 500,000,000 500,000,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
BEA U.S. CORE EQUITY BEA U.S. CORE FIXED INCOME
PORTFOLIO PORTFOLIO
-------------------------------------------------- ---------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
AUGUST 31, 1996 AUGUST 31, 1995 AUGUST 31, 1996 AUGUST 31, 1995
------------------------ ------------------------ ------------------------- ------------------------
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
----------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 1,435,791 $27,128,776 1,883,469 $28,923,460 4,441,435 $ 68,996,273 4,372,374 $64,282,193
Shares issued in
reinvestment of
dividends 188,415 3,346,258 7,112 102,838 576,935 8,756,243 229,407 3,338,279
Shares
repurchased, net
of redemption
fees (298,285) (5,671,311) (118,327) (1,982,759) (3,583,115) (54,416,107) (195,402) (2,949,275)
----------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
Net increase 1,325,921 $24,803,723 1,772,254 $27,043,539 1,435,255 $ 23,336,409 4,406,379 $64,671,197
----------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
----------- ----------- ----------- ----------- ----------- ------------ ----------- -----------
BEA Shares
Authorized 500,000,000 500,000,000 500,000,000 500,000,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
64
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
AUGUST 31, 1996
NOTE 4.CAPITAL SHARES (CONTINUED)
<TABLE>
<CAPTION>
BEA GLOBAL FIXED INCOME BEA HIGH YIELD
PORTFOLIO PORTFOLIO
-------------------------------------------------- -----------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED
AUGUST 31, 1996 AUGUST 31, 1995 AUGUST 31, 1996 AUGUST 31, 1995
------------------------ ------------------------ -------------------------- -------------------------
SHARES VALUE SHARES VALUE SHARES VALUE SHARES VALUE
----------- ----------- ----------- ----------- ----------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shares sold 1,105,942 $17,551,485 766,650 $11,427,093 3,372,093 $ 54,558,056 580,982 $ 8,824,836
Shares issued in
reinvestment of
dividends 162,519 2,519,968 61,519 924,756 629,920 9,902,559 825,245 12,285,993
Shares
repurchased, net
of redemption
fees (81,878) (1,280,614) -- -- (9,062,440) (142,330,474) (632,837) (9,662,770)
----------- ----------- ----------- ----------- ----------- ------------- ------------ -----------
Net increase
(decrease) 1,186,583 $18,790,839 828,169 $12,351,849 (5,060,427) $ (77,869,859) 773,390 $11,448,059
----------- ----------- ----------- ----------- ----------- ------------- ------------ -----------
----------- ----------- ----------- ----------- ----------- ------------- ------------ -----------
BEA Shares
Authorized 500,000,000 500,000,000 500,000,000 500,000,000
----------- ----------- ----------- ------------
----------- ----------- ----------- ------------
</TABLE>
<TABLE>
<CAPTION>
BEA MUNICIPAL BOND
PORTFOLIO
-------------------------------------------------------
FOR THE YEAR ENDED FOR THE YEAR ENDED
AUGUST 31, 1996 AUGUST 31, 1995
-------------------------- --------------------------
SHARES VALUE SHARES VALUE
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Shares sold 315,445 $ 4,700,422 935,296 $ 13,666,897
Shares issued in reinvestment of dividends 109,160 1,656,622 123,547 1,831,054
Shares repurchased, net of redemption fees (2,256,456) (34,437,592) (699,839) (10,363,925)
----------- ------------ ----------- ------------
Net increase (decrease) (1,831,851) $(28,080,548) 359,004 $ 5,134,026
----------- ------------ ----------- ------------
----------- ------------ ----------- ------------
BEA Shares Authorized 500,000,000 500,000,000
----------- -----------
----------- -----------
</TABLE>
NOTE 5.RESTRICTED SECURITIES
Certain of the BEA International Equity Portfolio's investments are
restricted as to resale and are valued at the direction of the Fund's Board of
Directors in good faith, at fair value, after taking into consideration
appropriate indications of value available. The table below shows the number of
shares held, the acquisition date, value as of August 31, 1996, percentage of
net assets which the securities comprise, aggregate cost and unit value of the
securities.
<TABLE>
<CAPTION>
NUMBER OF ACQUISITION 08/31/96 FAIR PERCENTAGE OF VALUE PER
SHARES DATE VALUE NET ASSETS SECURITY COST UNIT
------------- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sodigas Pampeana 558,962 1/14/93 $ 844,809 0.1% $ 566,038 $ 1.511
Sodigas del Sur 403,923 1/14/93 745,416 0.1% 384,038 1.845
Geotek Communications,
Inc. 600 5/26/95 6,476,842 0.8% 6,000,000 10,795
------------- -------------
$ 8,067,067 $ 6,950,076
------------- -------------
------------- -------------
</TABLE>
NOTE 6.CAPITAL LOSS CARRYOVER
At August 31, 1996, capital loss carryovers were available to offset future
realized gains as follows: $26,922,032 in the BEA International Equity Portfolio
which expires in 2003, $22,315,875 in the Emerging Markets Equity Portfolio
which expires in 2004
65
<PAGE>
NOTE 6.CAPITAL LOSS CARRYOVER (CONTINUED)
and $13,514,163 in the BEA High Yield Portfolio of which $8,528,142 expires in
2001 and $4,986,021 expires in 2003. In addition, deferred post-October 31, 1995
losses were available to offset future net capital gains through August 31, 1996
as follows: $2,694,725 in the BEA High Yield Portfolio.
NOTE 7.FORWARD FOREIGN CURRENCY CONTRACTS
The Funds will generally enter into forward foreign currency exchange
contracts as a way of managing foreign exchange rate risk. A Fund may enter into
these contracts to fix the U.S. dollar value of a security that it has agreed to
buy or sell for the period between the date the trade was entered into and the
date the security is delivered and paid for. A Fund may also use these contracts
to hedge the U.S. dollar value of securities it already owns denominated in
foreign currencies.
Forward foreign currency contracts are valued at the forward rate, and are
marked-to-market daily. The change in market value is recorded by the Fund as an
unrealized gain or loss. When the contract is closed, the Fund records a
realized gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
The use of forward foreign currency contracts does not eliminate
fluctuations in the underlying prices of the Fund's Portfolio Securities, but it
does establish a rate of exchange that can be achieved in the future. Although
forward foreign currency contracts limit the risk of loss due to a decline in
the value of the hedged currency, they also limit any potential gain that might
result should the value of the currency increase. In addition, the Funds could
be exposed to risks if the counterparties to the contracts are unable to meet
the terms of their contracts. During the year ended August 31, 1996, the BEA
International Equity Portfolio, the BEA U.S. Core Fixed Income Portfolio and the
BEA Global Fixed Income Portfolio entered into forward foreign currency
contracts.
The BEA U.S. Core Fixed Income Portfolio's open Forward Foreign Currency
Contract at August 31, 1996 was as follows:
<TABLE>
<CAPTION>
UNREALIZED
FOREIGN FOREIGN
FORWARD CURRENCY EXPIRATION CURRENCY CONTRACT CONTRACT EXCHANGE
CONTRACT DATE TO BE SOLD AMOUNT VALUE GAIN/(LOSS)
- --------------------- --------- ---------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C>
Canadian Dollars 09/17/96 932,000 $ 678,852 $ 681,586 $ (2,734)
German Deutschemarks 09/17/96 350,000 229,358 236,823 (7,465)
--------- --------- ---------------
$ 908,210 $ 918,409 $ (10,199)
--------- --------- ---------------
--------- --------- ---------------
<CAPTION>
FOREIGN UNREALIZED
CURRENCY FOREIGN
FORWARD CURRENCY EXPIRATION TO BE CONTRACT CONTRACT EXCHANGE
CONTRACT DATE PURCHASED AMOUNT VALUE GAIN/(LOSS)
- --------------------- --------- ---------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C>
German Deutschemarks 09/17/96 350,000 $ 237,649 $ 236,823 $ (826)
--------- --------- ---------------
--------- --------- ---------------
</TABLE>
The BEA Global Fixed Income Portfolio's open Forward Foreign Currency
Contracts at August 31, 1996 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
FOREIGN FOREIGN
FORWARD CURRENCY EXPIRATION CURRENCY CONTRACT CONTRACT EXCHANGE
CONTRACT DATE TO BE SOLD AMOUNT VALUE GAIN/LOSS
- --------------------- --------- -------------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
Australian Dollars 09/17/96 355,000 $ 280,450 $ 280,495 $ (45)
Australian Dolars 09/17/96 1,005,000 793,649 794,077 (428)
Canadian Dollars 09/17/96 740,000 543,970 541,173 2,797
German Deutschemarks 09/17/96 94,000 61,599 63,604 (2,005)
German Deutschemarks 09/17/96 1,900,000 1,250,000 1,285,608 (35,608)
German Deutschemarks 09/17/96 4,424,000 2,897,753 2,993,437 (95,684)
Italian Lira 09/17/96 1,562,000,000 1,009,110 1,032,495 (23,385)
Italian Lira 09/17/96 1,880,000,000 1,214,550 1,189,815 24,735
Japanese Yen 09/17/96 163,620,000 1,500,000 1,509,660 (9,660)
Netherlands Guilder 09/17/96 611,500 358,577 369,081 (10,504)
Netherlands Guilder 09/17/96 6,204,000 3,634,446 3,744,523 (110,077)
Swedish Krona 09/17/96 368,000 54,498 55,572 (1,074)
------------ ------------ ---------------
$ 13,598,602 $ 13,859,540 $ (260,938)
------------ ------------ ---------------
------------ ------------ ---------------
</TABLE>
66
<PAGE>
THE BEA FAMILY
THE RBB FUND, INC.
NOTES TO FINANCIAL STATEMENTS (CONCLUDED)
AUGUST 31, 1996
NOTE 7.FORWARD FOREIGN CURRENCY CONTRACTS (CONTINUED)
<TABLE>
<CAPTION>
FOREIGN UNREALIZED
CURRENCY FOREIGN
FORWARD CURRENCY EXPIRATION TO BE CONTRACT CONTRACT EXCHANGE
CONTRACT DATE PURCHASED AMOUNT VALUE GAIN/LOSS
- --------------------- --------- -------------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
French Francs 09/17/96 273,000 $ 52,665 $ 53,963 $ 1,298
French Francs 09/17/96 4,250,000 820,622 840,080 19,458
French Francs 09/17/96 5,987,000 1,155,792 1,183,427 27,635
German Deutschemarks 09/17/96 94,000 62,499 63,604 1,105
German Deutschemarks 09/17/96 1,800,000 1,196,188 1,217,944 21,756
Great Britain Pounds 09/17/96 220,000 336,600 343,449 6,849
Italian Lira 09/17/96 1,880,000,000 1,203,046 1,189,815 (13,231)
Japanese Yen 09/17/96 175,000,000 1,638,960 1,614,659 (24,301)
Netherlands Guilder 09/17/96 611,500 362,983 369,081 6,098
Netherlands Guilder 09/17/96 1,950,000 1,150,266 1,176,953 26,687
Spanish Pesetas 09/17/96 52,200,000 401,322 416,860 15,538
----------- ----------- ---------------
$ 8,380,943 $ 8,469,835 $ 88,892
----------- ----------- ---------------
----------- ----------- ---------------
</TABLE>
67
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF THE RBB FUND, INC:
We have audited the accompanying statements of net assets of the BEA
International Equity, BEA Emerging Markets Equity, BEA U.S. Core Equity, BEA
U.S. Core Fixed Income, BEA Global Fixed Income, BEA High Yield and BEA
Municipal Bond Portfolios of The RBB Fund Inc., as of August 31, 1996 and the
related statements of operations for the year then ended, the statements of
changes in net assets for each of the two years in the period then ended, and
the financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments held by the
custodian and brokers as of August 31, 1996. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of the
BEA International Equity, BEA Emerging Markets Equity, BEA U.S. Core Equity, BEA
U.S. Core Fixed Income, BEA Global Fixed Income, BEA High Yield and BEA
Municipal Bond Portfolios of The RBB Fund Inc., as of August 31, 1996 and the
results of their operations for the year then ended, the changes in their net
assets for each of the two years in the period then ended, and their financial
highlights for each of the periods presented, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
October 11, 1996
68
<PAGE>
PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
(1) Included in Part A of the Registration Statement:
(I) Per Share Data and Ratios for the periods ended August 31, 1989
through August 31, 1996 for the BEA Institutional Classes:
representing interests in the International Equity, Emerging
Markets Equity, U.S. Core Equity, U.S. Core Fixed Income,
Global Fixed Income, High Yield, and Municipal Bond Funds.
(II) No Per Share Data and Ratios is given for the fiscal year ended
August 31, 1996, as no such shares had been sold to the public
for:
(A) BEA Institutional Class (Balanced Fund)
(B) BEA Institutional Class (Short Duration Fund)
(C) Bea Investor Classes (representing interests in
International Equity, Emerging Markets Equity, High Yield
and Global Telecommunications Funds)
(D) Bea Advisor Classes (representing interests in International
Equity, Emerging Markets Equity, High Yield and Global
Telecommunications Funds)
Included in Part B of the Registration Statement:
Bea International Equity Fund (Institutional Class)
Report of Independent Accountants.
Statement of Net Assets as of August 31, 1996.
Statement of Operations for the fiscal year ended
August 31, 1996.
Statement of Changes in Net Assets for the fiscal year ended
August 31, 1995 and for fiscal year ended August 31, 1996.
Selected Per Share Data and Ratios
Bea Emerging Markets Equity Fund (Institutional Class)
Report of Independent Accountants.
Statement of Net Assets as of August 31, 1996.
Statement of Operations for the fiscal year ended
August 31, 1996.
Statement of Changes in Net Assets for the fiscal year ended
August 31, 1995 and for fiscal year ended August 31, 1996.
Selected Per Share Data and Ratios
Bea U.S. Core Equity Fund (Institutional Class)
Report of Independent Accountants.
Statement of Net Assets as of August 31, 1996.
Statement of Operations for the fiscal year ended
August 31, 1996.
<PAGE>
See Note #
----------
Statement of Changes in Net Assets for the period September
1, 1994 (Commencement of Operations) to August 31, 1995 and
for fiscal year ended August 31, 1996.
Selected Per Share Data and Ratios
Bea U.S. Core Fixed Income Fund (Institutional Class)
Report of Independent Accountants.
Statement of Net Assets as of August 31, 1996.
Statement of Operations for the fiscal year ended
August 31, 1996.
Statement of Changes in Net Assets for the period April 1,
1994 (Commencement of Operations) to August 31, 1995 and for
fiscal year ended August 31, 1996.
Selected Per Share Data and Ratios
Bea Global Fixed Income Fund (Institutional Class)
Report of Independent Accountants.
Statement of Net Assets as of August 31, 1996.
Statement of Operations for the fiscal year ended
August 31, 1996.
Statement of Changes in Net Assets for the period June 28,
1994 (Commencement of Operations) to August 31, 1995 and for
fiscal year ended August 31, 1996.
Selected Per Share Data and Ratios
Bea High Yield Fund (Institutional Class)
Report of Independent Accountants.
Statement of Net Assets as of August 31, 1996.
Statement of Operations for the fiscal year ended
August 31, 1996.
Statement of Changes in Net Assets for the fiscal year ended
August 31, 1995 and for fiscal year ended August 31, 1996.
Selected Per Share Data and Ratios
Bea Municipal Bond Fund Fund (Institutional Class)
Report of Independent Accountants.
Statement of Net Assets as of August 31, 1996.
Statement of Operations for the fiscal year ended
August 31, 1996.
Statement of Changes in Net Assets for the period
June 30, 1994 (Commencement of Operations) to
August 31, 1995 and for fiscal year ended August 31, 1996.
Selected Per Share Data and Ratios
2
<PAGE>
Notes to Financial Statements
(b) Exhibits: See Note #
----------
(1) (a) Articles of Incorporation of Registrant 1
[cad 228]
(b) Articles Supplementary of Registrant. 1
(c) Articles of Amendment to Articles of
Incorporation of Registrant. 2
(d) Articles Supplementary of Registrant. 2
(e) Articles Supplementary of Registrant. 5
(f) Articles Supplementary of Registrant. 6
(g) Articles Supplementary of Registrant. 9
(h) Articles Supplementary of Registrant. 10
(i) Articles Supplementary of Registrant. 14
(j) Articles Supplementary of Registrant. 14
(k) Articles Supplementary of Registrant. 19
(l) Articles Supplementary of Registrant. 19
(m) Articles Supplementary of Registrant. 19
(n) Articles Supplementary of Registrant. 19
(o) Articles Supplementary of Registrant. 20
(p) Articles Supplementary of Registrant. 23
(q) Articles Supplementary of Registrant.
(2) Amended By-Laws adopted August 16, 1988. 3
(a) Amendment to By-Laws adopted July 25, 1989. 4
(b) By-Laws amended through October 24, 1989. 5
(c) By-Laws amended through April 24, 1996. 23
(3) None.
3
<PAGE>
See Note #
----------
(4) Specimen Certificates
a) SafeGuard Equity Growth and Income Shares 3
b) SafeGuard Fixed Income Shares 3
c) SafeGuard Balanced Shares 3
d) SafeGuard Tax-Free Shares 3
e) SafeGuard Money Market Shares 3
f) SafeGuard Tax-Free Money Market Shares 3
g) Cash Preservation Money Market Shares 3
h) Cash Preservation Tax-Free Money
Market Shares 3
i) Sansom Street Money Market Shares 3
j) Sansom Street Tax-Free Money Market Shares 3
k) Sansom Street Government Obligations Money 3
Market Shares
l) Bedford Money Market Shares 3
m) Bedford Tax-Free Money Market Shares 3
n) Bedford Government Obligations Money Market 3
Shares
o) Bedford New York Municipal Money
Market Shares 5
p) SafeGuard Government Securities Shares 5
q) Income Opportunities High Yield Bond Shares 6
r) Bradford Tax-Free Money Market Shares 8
s) Bradford Government Obligations Money Market 8
Shares
t) Alpha 1 Money Market Shares 8
u) Alpha 2 Tax-Free Money Market Shares 8
v) Alpha 3 Government Obligations Money Market 8
Shares
w) Alpha 4 New York Municipal Money Market 8
Shares
x) Beta 1 Money Market Shares 8
y) Beta 2 Tax-Free Money Market Shares 8
z) Beta 3 Government Obligations Money Market 8
Shares
aa) Beta 4 New York Municipal Money Market 8
Shares
bb) Gamma 1 Money Market Shares 8
cc) Gamma 2 Tax-Free Money Market Shares 8
dd) Gamma 3 Government Obligations Money 8
Market Shares
ee) Gamma 4 New York Municipal Money Market 8
Shares
ff) Delta 1 Money Market Shares 8
gg) Delta 2 Tax-Free Money Market Shares 8
hh) Delta 3 Government Obligations Money 8
Market Shares
ii) Delta 4 New York Municipal Money
Market Shares 8
jj) Epsilon 1 Money Market Shares 8
kk) Epsilon 2 Tax-Free Money Market Shares 8
ll) Epsilon 3 Government Obligations Money
Market Shares 8
4
<PAGE>
See Note #
----------
mm) Epsilon 4 New York Municipal Money
Market Shares 8
nn) Zeta 1 Money Market Shares 8
oo) Zeta 2 Tax-Free Money Market Shares 8
pp) Zeta 3 Government Obligations Money
Market Shares 8
qq) Zeta 4 New York Municipal Money Market
Shares
rr) Eta 1 Money Market Shares 8
ss) Eta 2 Tax-Free Money Market Shares 8
tt) Eta 3 Government Obligations Money
Market Shares 8
uu) Eta 4 New York Municipal Money Market
Shares 8
vv) Theta 1 Money Market Shares 8
ww) Theta 2 Tax-Free Money Market Shares 8
xx) Theta 3 Government Obligations Money
Market Shares 8
yy) Theta 4 New York Municipal Money Market
Shares 8
zz) BEA International Equity Shares 9
a1) BEA Strategic Fixed Income Shares 9
a2) BEA Emerging Markets Equity Shares 9
a3) Laffer/Canto Equity Shares 12
a4) BEA U.S. Core Equity Shares 13
a5) BEA U.S. Core Fixed Income Shares 13
a6) BEA Global Fixed Income Shares 13
a7) BEA Municipal Bond Shares 13
a8) BEA Balanced Shares 16
a9) BEA Short Duration Shares 16
a10) Warburg Growth & Income Shares 18
a11) Warburg Balanced Shares 18
(5) (a) Investment Advisory Agreement (Money) 3
between Registrant and Provident
Institutional Management Corporation,
dated as of August 16, 1988.
(b) Sub-Advisory Agreement (Money) between 3
Provident Institutional Management
Corporation and Provident National Bank,
dated as of August 16, 1988.
(c) Investment Advisory Agreement 3
(Tax -Free Money) between Registrant and
Provident Institutional Management
Corporation, dated as of August 16, 1988.
(d) Sub-Advisory Agreement (Tax-Free Money) 3
between Provident Institutional Management
Corporation and Provident National Bank,
dated as of August 16, 1988.
5
<PAGE>
See Note #
----------
(e) Investment Advisory Agreement 3
(Government Money) between Registrant and
Provident Institutional Management
Corporation, dated as of August 16, 1988.
(f) Sub-Advisory Agreement (Government Money) 3
between Provident Institutional Management
Corporation and Provident National Bank,
dated as of August 16, 1988.
(k) Investment Advisory Agreement (Balanced) 3
between Registrant and Provident
Institutional Management Corporation,
dated as of August 16, 1988.
(l) Sub-Advisory Agreement (Balanced) between 4
Provident Institutional Management
Corporation and Provident National Bank,
dated as of August 16, 1988.
(m) Investment Advisory Agreement (Tax-Free) 3
between Registrant and Provident
Institutional Management Corporation,
dated as of August 16, 1988.
(n) Sub-Advisory Agreement (Tax-Free) between 3
Provident Institutional Management
Corporation and Provident National Bank,
dated as of August 16, 1988.
(s) Investment Advisory Agreement 8
(Government Securities) between Registrant
and Provident Institutional Management
Corporation dated as of April 8, 1991.
(t) Investment Advisory Agreement 8
(High Yield Bond) between Registrant
and Provident Institutional Management
Corporation dated as of April 8, 1991.
(u) Sub-Advisory Agreement (High Yield Bond) 8
between Registrant and Warburg,
Pincus Counsellors, Inc.
dated as of April 8, 1991.
(v) Investment Advisory Agreement 9
(New York Municipal Money Market) between
Registrant and Provident Institutional
Management Corporation dated
November 5, 1991.
6
<PAGE>
See Note #
----------
(w) Investment Advisory Agreement (Equity) 10
between Registrant and Provident
Institutional Management Corporation
dated November 5, 1991.
(x) Sub-Advisory Agreement (Equity) between 10
Registrant, Provident Institutional
Management Corporation and Warburg,
Pincus Counsellors, Inc. dated
November 5, 1991.
(y) Investment Advisory Agreement 10
(Tax-Free Money Market) between
Registrant and Provident Institutional
Management Corporation dated
April 21, 1992.
(z) Investment Advisory Agreement 11
(BEA International Equity Portfolio)
between Registrant and BEA Associates.
(aa) Investment Advisory Agreement 11
(BEA Strategic Fixed Income Portfolio)
between Registrant and BEA Associates.
(bb) Investment Advisory Agreement 11
(BEA Emerging Markets Equity Portfolio)
between Registrant and BEA Associates.
(cc) Investment Advisory Agreement 14
(Laffer/Canto Equity Portfolio)
between Registrant and Laffer Advisors
Incorporated, dated as of July 21, 1993.
(dd) Sub-Advisory Agreement 12
(Laffer/Canto Sector Equity Portfolio)
between PNC Institutional Management
Corporation and Laffer Advisors
Incorporated, dated as of July 21, 1993.
(ee) Investment Advisory Agreement 15
(BEA U.S. Core Equity Portfolio) between
Registrant and BEA Associates, dated as
of October 27, 1993.
(ff) Investment Advisory Agreement 15
(BEA U.S. Core Fixed Income Portfolio)
between Registrant and BEA Associates,
dated as of October 27, 1993.
(gg) Investment Advisory Agreement 15
7
<PAGE>
See Note #
----------
(BEA Global Fixed Income Portfolio)
between Registrant and BEA Associates,
dated as of October 27, 1993.
(hh) Investment Advisory Agreement 15
(BEA Municipal Bond Fund Portfolio)
between Registrant and BEA Associates,
dated as of October 27, 1993.
(ii) Investment Advisory Agreement 14
(Warburg Pincus Growth and Income Fund)
between Registrant and Warburg,
Pincus Counsellors, Inc.
(jj) Investment Advisory Agreement 16
(Warburg Pincus Balanced Fund) between
Registrant and Warburg, Pincus Counsellors,
Inc.
(kk) Investment Advisory Agreement 16
(BEA Balanced) between Registrant and
BEA Associates.
(ll) Investment Advisory Agreement 16
(BEA Short Duration Portfolio) between
Registrant and BEA Associates.
(mm) Investment Advisory Agreement (Warburg 21
Pincus Tax Free Fund) between Registrant
and Warburg, Pincus Counsellors, Inc.
(nn) Investment Advisory Agreement (NI 23
Micro Cap Fund) between Registrant and
Numeric Investors, L.P.
(oo) Investment Advisory Agreement (NI 23
Growth Fund) between Registrant and
Numeric Investors, L.P.
(pp) Investment Advisory Agreement (ni 23
Growth & Value Fund) between Registrant
and Numeric Investors, L.P.
(qq) Form of Investment Advisory Agreement (BEA 24
Global Telecommunications Portfolio)
between Registrant and BEA Associates.
(6) (r) Distribution Agreement and Supplements 8
(Classes A through Q) between the
Registrant and Counsellors Securities Inc.
dated as of April 10, 1991.
8
<PAGE>
See Note #
----------
(s) Distribution Agreement Supplement 9
(Classes L, M, N and O) between the
Registrant and Counsellors Securities
Inc. dated as of November 5, 1991.
(t) Distribution Agreement Supplements 9
(Classes R, S, and Alpha 1 through Theta 4)
between the Registrant and Counsellors
Securities Inc. dated as of November
5, 1991.
(u) Distribution Agreement Supplement 10
(Classes T, U and V) between the Registrant
and Counsellors Securities Inc.
dated as of September 18, 1992.
(v) Distribution Agreement Supplement 14
(Class W) between the Registrant and
Counsellors Securities Inc. dated as of
July 21, 1993.
(w) Distribution Agreement Supplement 14
(Classes X, Y, Z and AA) between the
Registrant and Counselors Securities Inc.
(x) Distribution Agreement Supplement 18
(Classes BB and CC) between Registrant
and Counsellor's Securities Inc. dated
as of October 26, 1994.
(y) Distribution Agreement Supplement 18
(Classes DD and EE) between Registrant and
Counsellor's Securities Inc. dated as of
October 26, 1994.
(z) Distribution Agreement Supplement 19
(Classes L, M, N and O) between the
Registrant and Counsellor's Securities
Inc.
(aa) Distribution Agreement Supplement 19
(Classes R, S) between the Registrant and
Counsellor's Securities Inc.
(bb) Distribution Agreement Supplements 19
(Classes Alpha 1 through Theta 4) between
the Registrant and Counsellor's Securities
Inc.
(cc) Distribution Agreement Supplement Janney 20
Classes (Alpha 1, Alpha 2, Alpha 3 and
9
<PAGE>
See Note #
----------
Alpha 4 between the Registrant and
Counsellor's Securities, Inc.
(dd) Distribution Agreement Supplement NI 23
Classes (Classes FF, GG and HH)
(ee) Form of Distribution Agreement Supplement 24
(Classes II, JJ, KK, and LL)
(ff) Form of Distribution Agreement Supplement 24
(Classes MM, NN, OO, and PP)
(7) Fund Office Retirement Profit-Sharing and 7
Trust Agreement, dated as of
October 24, 1990.
(8) (a) Custodian Agreement between Registrant and 3
Provident National Bank dated as of
August 16, 1988.
(b) Sub-Custodian Agreement among 10
The Chase Manhattan Bank, N.A., the
Registrant and Provident National Bank,
dated as of July 13, 1992, relating to
custody of Registrant's foreign securities.
(e) Amendment No. 1 to Custodian Agreement 9
dated August 16, 1988.
(f) Agreement between Brown Brothers Harriman 10
& Co. and Registrant on behalf of
BEA International Equity Portfolio,
dated September 18, 1992.
(g) Agreement between Brown Brothers Harriman & 10
Co. and Registrant on behalf of BEA
Strategic Fixed Income Portfolio, dated
September 18, 1992.
(h) Agreement between Brown Brothers Harriman 10
& Co. and Registrant on behalf of
BEA Emerging Markets Equity Portfolio,
dated September 18, 1992.
(i) Agreement between Brown Brothers Harriman 15
& Co. and Registrant on behalf of BEA
Emerging Markets Equity, BEA International
Equity, BEA Strategic Fixed Income and BEA
Global Fixed Income Portfolios,
dated as of November 29, 1993.
10
<PAGE>
See Note #
----------
(j) Agreement between Brown Brothers Harriman 15
& Co. and Registrant on behalf of
BEA U.S. Core Equity and BEA U.S. Core
Fixed Income Portfolio dated as of
November 29, 1993.
(k) Custodian Contract between 18
Registrant and State Street Bank and
Trust Company.
(l) Form of Custody Agreement between the 23
Registrant and Custodial Trust Company on
behalf of NI Micro Cap Fund, NI Growth Fund
and NI Growth & Value Fund, Portfolios of
the Registrant.
(9) (a) Transfer Agency Agreement (Sansom Street) 3
between Registrant and Provident
Financial Processing Corporation,
dated as of August 16, 1988.
(b) Transfer Agency Agreement (Cash 3
Preservation) between Registrant and
Provident Financial Processing Corporation,
dated as of August 16, 1988.
(c) Shareholder Servicing Agreement 3
(Sansom Street Money).
(d) Shareholder Servicing Agreement 3
(Sansom Street Tax-Free Money).
(e) Shareholder Servicing Agreement 3
(Sansom Street Government Money).
(f) Shareholder Services Plan 3
(Sansom Street Money).
(g) Shareholder Services Plan 3
(Sansom Street Tax-Free Money).
(h) Shareholder Services Plan 3
(Sansom Street Government Money).
(i) Transfer Agency Agreement (SafeGuard) 3
between Registrant and Provident Financial
Processing Corporation, dated as of
August 16, 1988.
11
<PAGE>
See Note #
----------
(j) Transfer Agency Agreement (Bedford) 3
between Registrant and Provident
Financial Processing Corporation,
dated as of August 16, 1988.
(k) Transfer Agency Agreement 7
(Income Opportunities) between Registrant
and Provident Financial Processing
Corporation dated June 25, 1990.
(l) Administration and Accounting Services 8
Agreement between Registrant and
Provident Financial Processing
Corporation, relating to Government
Securities Portfolio, dated as of
April 10, 1991.
(m) Administration and Accounting Services 9
Agreement between Registrant and
Provident Financial Processing
Corporation, relating to
New York Municipal Money Market
Portfolio dated as of November 5, 1991.
(n) Administration and Accounting Services 9
Agreement between Registrant and Provident
Financial Processing Corporation, relating
to Equity Portfolio dated as of
November 5, 1991.
(o) Administration and Accounting Services 9
Agreement between Registrant and Provident
Financial Processing Corporation, relating
to High Yield Bond Portfolio,
dated as of April 10, 1991.
(p) Administration and Accounting Services 10
Agreement between Registrant and Provident
Financial Processing Corporation
(International) dated September 18, 1992.
(q) Administration and Accounting Services 10
Agreement between Registrant and Provident
Financial Processing Corporation (Strategic)
dated September 18, 1992;
(r) Administration and Accounting Services 10
Agreement between Registrant and Provident
Financial Processing Corporation (Emerging)
dated September 18, 1992.
12
<PAGE>
See Note #
----------
(s) Transfer Agency Agreement and Supplements 9
(Bradford, Alpha, Beta, Gamma, Delta,
Epsilon, Zeta, Eta and Theta) between
Registrant and Provident Financial
Processing Corporation dated as of
November 5, 1991.
(t) Transfer Agency Agreement Supplement 10
(BEA) between Registrant and Provident
Financial Processing Corporation
dated as of September 18, 1992.
(u) Administrative Services Agreement between 10
Registrant and Counsellor's Fund
Services, Inc. (BEA Portfolios)
dated September 18, 1992.
(v) Administration and Accounting Services 10
Agreement between Registrant and Provident
Financial Processing Corporation, relating
to Tax-Free Money Market Portfolio, dated
as of April 21, 1992.
(w) Transfer Agency Agreement Supplement 12
(Laffer) between Registrant and PFPC Inc.
dated as of July 21, 1993.
(x) Administration and Accounting Services 12
Agreement between Registrant and PFPC Inc.,
relating to Laffer/Canto Equity Fund,
dated July 21, 1993.
(y) Transfer Agency Agreement Supplement 15
(BEA U.S. Core Equity, BEA U.S.
Core Fixed Income, BEA Global Fixed Income
and BEA Municipal Bond Fund) between
Registrant and PFPC Inc. dated as of
October 27, 1993.
(z) Administration and Accounting Services 15
Agreement between Registrant and PFPC Inc.
relating to (Core Equity) dated as of
October 27, 1993.
(aa) Administration and Accounting Services 15
Agreement between Registrant and PFPC Inc.
(Core Fixed Income) dated
October 27, 1993.
13
<PAGE>
See Note #
----------
(bb) Administration and Accounting Services 15
Agreement between Registrant and
PFPC Inc. (International Fixed Income)
dated October 27, 1993
(cc) Administration and Accounting Services 15
Agreement between Registrant and PFPC Inc.
(Municipal Bond) dated October 27, 1993.
(dd) Transfer Agency Agreement Supplement 18
(BEA Balanced and Short Duration) between
Registrant and PFPC Inc. dated
October 26, 1994.
(ee) Administration and Accounting Services 18
Agreement between Registrant and PFPC Inc.
(BEA Balanced) dated October 26, 1994.
(ff) Administration and Accounting Services 18
Agreement between Registrant and PFPC Inc.
(BEA Short Duration) dated
October 26, 1994.
(gg) Co-Administration Agreement between 18
Registrant and PFPC Inc. (Warburg Pincus
Growth & Income Fund) dated
August 4, 1994.
(hh) Co-Administration Agreement between 18
Registrant and PFPC Inc. (Warburg Pincus
Balanced Fund) dated August 4, 1994.
(ii) Co-Administration Agreement between 18
Registrant and Counsellors Funds Services,
Inc. (Warburg Pincus Growth & Income Fund)
dated August 4, 1994.
(jj) Co-Administration Agreement between 18
Registrant and Counsellors Funds Services,
Inc. (Warburg Pincus Balanced Fund) dated
August 4, 1994.
(kk) Administrative Services Agreement Supplement 18
between Registrant and Counsellor's Fund
Services, Inc. (BEA Classes) dated
October 26, 1994.
(ll) Co-Administration Agreement between 21
Registrant and PFPC Inc. (Warburg Pincus
Tax Free Fund) dated March 31, 1995.
14
<PAGE>
See Note #
----------
(mm) Co-Administration Agreement between 21
Registrant and Counsellors Funds
Services, Inc. (Warburg Pincus Tax Free
Fund) dated March 31, 1995.
(nn) Transfer Agency and Service Agreement 21
between Registrant and State Street
Bank and Trust Company and PFPC, Inc.
dated February 1, 1995.
(oo) Supplement to Transfer Agency and Service 21
Agreement between Registrant, State Street
Bank and Trust Company, Inc. and PFPC
dated April 10, 1995.
(pp) Amended and Restated Credit Agreement dated 22
December 15, 1994.
(qq) Transfer Agency Agreement Supplement (ni 23
Micro Cap Fund, NI Growth Fund and
NI Growth & Value Fund) between
Registrant and PFPC, Inc. dated
April 24, 1996.
(rr) Administration and Accounting Services 23
Agreement between Registrant and PFPC, Inc.
(NI Micro Cap Fund) dated April 24, 1996.
(ss) Administration and Accounting Services 23
Agreement between Registrant and PFPC, Inc.
(NI Growth Fund) dated April 24, 1996.
(tt) Administration and Accounting Services 23
Agreement between Registrant and PFPC, Inc.
(NI Growth & Value Fund) dated
April 24, 1996.
15
<PAGE>
See Note #
----------
(uu) Administrative Services Agreement between 23
Registrant and Counsellors Fund Services,
Inc. (NI Micro Cap Fund, NI
Growth Fund and NI Growth &
Value Fund) dated April 24, 1996.
(vv) Form of Administration and Accounting Services 24
Agreement between REGISTRANT and PFPC, Inc.
(BEA Global Telecommunications).
(ww) Form of Co-Administration Agreement between 24
Registrant Investor and BEA Associates
(BEA International Equity Investor
Portfolio).
(xx) Form of Co-Administration Agreement between 24
Registrant and BEA Associates (BEA
International Equity Advisor Portfolio).
(yy) Form of Co-Administration Agreement between 24
Registrant and BEA Associates (BEA
Emerging Markets Equity Investor
Portfolio).
(zz) Form of Co-Administration Agreement between 24
Registrant and BEA Associates (BEA
Emerging Markets Equity Advisor
Portfolio).
(aaa) Form of Co-Administration Agreement between 24
Registrant and BEA Associates (BEA
High Yield Investor Portfolio).
(bbb) Form of Co-Administration Agreement between 24
Registrant and BEA Associates (BEA
High Yield Advisor Portfolio).
(ccc) Form of Co-Administration Agreement between 24
Registrant and BEA Associates (BEA
Global Telecommunications Investor
Portfolio).
(ddd) Form of Co-Administration Agreement between 24
Registrant and BEA Associates (BEA
Global Telecommunications Advisor
Portfolio).
(eee) Form of Transfer Agreement and Service 24
Agreement between Registrant and State
Street Bank and Trust Company.
16
<PAGE>
See Note #
----------
(10)(a) Incorporated by reference herein to
Registrant's 24f-2 Notice for the
fiscal year ended August 31, 1995
filed on October 26, 1995. Opinion
of Counsel.
(10)(b) Opinion and Consent of Counsel.
(11) Consent of Independent Accountants.
(12) None.
(13)(a) Subscription Agreement (relating to 2
Classes A through N).
(b) Subscription Agreement between Registrant 7
and Planco Financial Services, Inc.,
relating to Classes O and P.
(c) Subscription Agreement between Registrant and 7
Planco Financial Services, Inc., relating to
Class Q.
(d) Subscription Agreement between Registrant 9
and Counsellors Securities Inc. relating to
Classes R, S, and Alpha 1 through Theta 4.
(e) Subscription Agreement between Registrant 10
and Counsellors Securities Inc. relating to
Classes T, U and V.
(f) Subscription Agreement between Registrant 18
and Counsellor's Securities Inc. relating to
Classes BB and CC.
(g) Purchase Agreement between Registrant and 21
Counsellors Securities Inc. relating to
Class DD (Warburg Pincus Growth & Income
Fund Series 2).
(h) Purchase Agreement between Registrant and 21
Counsellors Securities Inc. relating to
Class EE (Warburg Pincus Balanced Fund
Series 2).
(i) Purchase Agreement between Registrant and 23
Numeric Investors, L.P. relating to
Class FF (NI Micro Cap Fund).
(j) Purchase Agreement between Registrant and 23
Numeric Investors, L.P. relating to
17
<PAGE>
See Note #
----------
Class GG (NI Growth Fund).
(k) Purchase Agreement between Registrant and 23
Numeric Investors, L.P. relating to
Class HH (NI Growth & Value Fund)
(l) Form of Subscription Agreement between 24
Registrant and Counsellors Securities,
Inc. relating to Classes II through PP.
(14) None.
(15)(a) Plan of Distribution (Sansom Street Money). 3
(b) Plan of Distribution (Sansom Street Tax-Free 3
Money).
(c) Plan of Distribution (Sansom Street 3
Government Money).
(d) Plan of Distribution (Cash Preservation 3
Money).
(e) Plan of Distribution (Cash Preservation 3
Tax-Free Money).
(f) Plan of Distribution (SafeGuard Equity). 3
(g) Plan of Distribution 3
(SafeGuard Fixed Income).
(h) Plan of Distribution (SafeGuard Balanced). 3
(i) Plan of Distribution (SafeGuard Tax-Free). 3
(j) Plan of Distribution (SafeGuard Money). 3
(k) Plan of Distribution (SafeGuard Tax-Free
Money). 3
(l) Plan of Distribution (Bedford Money). 3
(m) Plan of Distribution (Bedford Tax-Free 3
Money).
(n) Plan of Distribution (Bedford Government 3
Money).
(o) Plan of Distribution (Bedford New York 7
Municipal Money).
18
<PAGE>
See Note #
----------
(p) Plan of Distribution (SafeGuard Government 7
Securities).
(q) Plan of Distribution (Income Opportunities 7
High Yield).
(r) Amendment No. 1 to Plans of Distribution 8
(Classes A through Q).
(s) Plan of Distribution (Bradford Tax-Free 9
Money).
(t) Plan of Distribution (Bradford Government 9
Money).
(u) Plan of Distribution (Alpha Money). 9
(v) Plan of Distribution (Alpha Tax-Free 9
Money).
(w) Plan of Distribution (Alpha Government 9
Money).
(x) Plan of Distribution (Alpha New York 9
Money).
(y) Plan of Distribution (Beta Money). 9
(z) Plan of Distribution (Beta Tax-Free 9
Money).
(aa) Plan of Distribution (Beta Government 9
Money).
(bb) Plan of Distribution (Beta New York 9
Money).
(cc) Plan of Distribution (Gamma Money). 9
(dd) Plan of Distribution (Gamma Tax-Free 9
Money).
(ee) Plan of Distribution (Gamma Government 9
Money).
(ff) Plan of Distribution (Gamma New York 9
Money).
(gg) Plan of Distribution (Delta Money). 9
(hh) Plan of Distribution (Delta Tax-Free 9
19
<PAGE>
See Note #
----------
Money).
(ii) Plan of Distribution (Delta Government 9
Money).
(jj) Plan of Distribution (Delta New York 9
Money).
(kk) Plan of Distribution (Epsilon Money). 9
(ll) Plan of Distribution (Epsilon Tax-Free 9
Money).
(mm) Plan of Distribution (Epsilon Government 9
Money).
(nn) Plan of Distribution (Epsilon New York 9
Money).
(oo) Plan of Distribution (Zeta Money). 9
(pp) Plan of Distribution (Zeta Tax-Free 9
Money).
(qq) Plan of Distribution (Zeta Government 9
Money).
(rr) Plan of Distribution (Zeta New York 9
Money).
(ss) Plan of Distribution (Eta Money). 9
(tt) Plan of Distribution (Eta Tax-Free Money). 9
(uu) Plan of Distribution (Eta Government 9
Money).
(vv) Plan of Distribution (Eta New York 9
Money).
(ww) Plan of Distribution (Theta Money). 9
(xx) Plan of Distribution (Theta Tax-Free 9
Money).
(yy) Plan of Distribution (Theta Government 9
Money).
(zz) Plan of Distribution (Theta New York 9
Money).
20
<PAGE>
See Note #
----------
(aaa) Plan of Distribution (Laffer Equity). 12
(bbb) Plan Distribution (Warburg Pincus Growth 18
& Income Series 2).
(ccc) Plan of Distribution (Warburg Pincus 18
Balanced Series 2).
(ddd) Form of Plan of Distribution (BEA 24
International Equity Investor).
(eee) Form of Plan of Distribution (BEA 24
International Equity Advisor).
(fff) Form of Plan of Distribution (BEA Emerging 24
Markets Equity Investor).
(ggg) Form of Plan of Distribution (BEA Emerging 24
Markets Equity Advisor).
(hhh) Form of Plan of Distribution (BEA High Yield 24
Investor).
(iii) Form of Plan of Distribution (BEA High Yield 24
Advisor).
(jjj) Form of Plan of Distribution (BEA Global 24
Telecommunications Investor).
(kkk) Form of Plan of Distribution (BEA Global 24
Telecommunications Advisor).
(16) Schedule of Computation of Performance 3
Quotations.
(17) Financial Data Schedule
(18) Rule 18f-3 Plan. 21
(19) Representation of Ballard Spahr Andrews
& Ingersoll pursuant to Rule 485(b) under
the Securities Act of 1933.
_________________
Note #
- ------
1 Incorporated herein by reference to the same exhibit number of Registrant's
Registration Statement (No. 33-20827) filed on March 24, 1988.
21
<PAGE>
See Note #
----------
2 Incorporated herein by reference to the same exhibit number of
Pre-Effective Amendment No. 2 to Registrant's Registration Statement (No.
33-20827) filed on July 12, 1988.
3 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 1 to Registrant's Registration Statement (No.
33-20827) filed on March 23, 1989.
4 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 2 to Registrant's Registration Statement (No.
33-20827) filed on October 25, 1989.
5 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 3 to the Registrant's Registration Statement
(No. 33-20827) filed on April 27, 1990.
6 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 4 to the Registrant's Registration Statement
(No. 33-20827) filed on May 1, 1990.
7 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 5 to the Registrant's Registration Statement
(No. 33-20827) filed on December 14, 1990.
22
<PAGE>
Note #
- ------
8 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 6 to the Registrant's Registration Statement
(No. 33-20827) filed on October 24, 1991.
9 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 7 to the Registrant's Registration Statement
(No. 33-20827) filed on July 15, 1992.
10 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 8 to the Registrant's Registration Statement
(No. 33-20827) filed on October 22, 1992.
11 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 9 to the Registrant's Registration Statement
(No. 33-20827) filed on December 16, 1992.
12 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 11 to the Registrant's Registrant Statement
(No. 33-20827) filed on June 21, 1993.
13 Incorporated herein by reference to the same exhibit number Post-Effective
Amendment No. 12 to the Registrant's Registration Statement (No. 33-20827)
filed on July 27, 1993.
14 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 13 to the Registrant's Registration Statement
(No. 33-20827) filed on October 29, 1993.
15 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 14 to the Registrant's Registration Statement
(No. 33-20827) filed on December 21, 1993.
16 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 19 to the Registrant's Registration Statement
(No. 33-20827) filed on October 14, 1994.
17 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 20 to the Registrant's Registration Statement
(No. 33-20827) filed on October 21, 1994.
18 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 21 to the Registrant's Registration Statement
(No. 33-20827) filed on October 28, 1994.
19 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 22 to the Registrant's Registration Statement
(No. 33-20827) filed on December 19, 1994.
23
<PAGE>
20 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 27 to the Registrant's Registration Statement
(No. 33-20827) filed on March 31, 1995.
21 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 28 to the Registrant's Registration Statement
(No. 33-20827) filed on October 6, 1995.
22 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 29 to the Registrant's Registration Statement
(No. 33-20827) filed on October 25, 1995.
23 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 34 to the Registrant's Registration Statement
(No. 33-20827) filed on May 16, 1996.
24 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 37 to the Registrant's Registration
Statement (No. 33-20827) filed July 30, 1996.
Item 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
Item 26. NUMBER OF HOLDERS OF SECURITIES
The following information is given as of July 24, 1996.
Title of Class of Common Stock Number of Record Holders
------------------------------ ------------------------
a) RBB Money Market 11
b) RBB Municipal Money Market 2
c) Cash Preservation Money Market 35
d) Cash Preservation Municipal Money Market 67
e) Sansom Street Money Market 3
f) Sansom Street Municipal Money Market 0
g) Sansom Street Government Obligations 0
Money Market
h) Bedford Money Market 96,325
i) Bedford Municipal Money Market 4,495
j) Bedford Government Obligations Money 3,532
Market
k) Bedford New York Municipal Money Market 2,809
l) RBB Government Securities 536
m) Bradford Municipal Money Market 1
n) Bradford Government Obligations Money 1
Market
o) BEA International Equity 206
p) BEA High Yield 48
q) BEA Emerging Markets Equity 37
r) BEA U.S. Core Equity 70
24
<PAGE>
s) BEA U.S. Core Fixed Income 49
t) BEA U.S. Global Fixed Income 10
u) BEA Municipal Bond fund 35
v) BEA Short Duration 0
w) BEA Balanced 0
x) Janney Montgomery Scott 1
Money Market
y) Janney Montgomery Scott 1
Municipal Money Market
z) Janney Montgomery Scott 1
Government Obligations Money Market
aa) Janney Montgomery Scott 1
New York Municipal Money Market
bb) ni Micro Cap 346
cc) ni Growth 381
dd) ni Growth & Value 181
Item 27. INDEMNIFICATION
Sections 1, 2, 3 and 4 of Article VIII of Registrant's Articles of
Incorporation, as amended, incorporated herein by reference as Exhibits 1(a) and
1(c), provide as follows:
Section 1. To the fullest extent that limitations on the
liability of directors and officers are permitted by the Maryland
General Corporation Law, no director or officer of the
Corporation shall have any liability to the Corporation or its
shareholders for damages. This limitation on liability applies
to events occurring at the time a person serves as a director or
officer of the Corporation whether or not such person is a
director or officer at the time of any proceeding in which
liability is asserted.
Section 2. The Corporation shall indemnify and advance
expenses to its currently acting and its former directors to the
fullest extent that indemnification of directors is permitted by
the Maryland General Corporation Law. The Corporation shall
indemnify and advance expenses to its officers to the same extent
as its directors and to such further extent as is consistent with
law. The Board of Directors may by By-law, resolution or
agreement make further provision for indemnification of
directors, officers, employees and agents to the fullest extent
permitted by the Maryland General Corporation Law.
Section 3. No provision of this Article shall be effective
to protect or purport to protect any director or officer of the
Corporation against any liability to the Corporation or its
security holders to which he would otherwise be subject by reason
of willful misfeasance, bad
25
<PAGE>
faith, gross negligence or reckless disregard of the duties involved
in the conduct of his office.
Section 4. References to the Maryland General Corporation
Law in this Article are to the law as from time to time amended.
No further amendment to the Articles of Incorporation of the
Corporation shall decrease, but may expand, any right of any
person under this Article based on any event, omission or
proceeding prior to such amendment.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by Registrant of expenses incurred or
paid by a director, officer or controlling person of Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Information as to any other business, profession, vocation or
employment of a substantial nature in which any directors and officers of PIMC,
BEA, and Warburg are, or at any time during the past two (2) years have been,
engaged for their own accounts or in the capacity of director, officer,
employee, partner or trustee is incorporated herein by reference to Schedules A
and D of PIMC's Form ADV (File No. 801-13304) filed on March 28, 1993,
Schedules B and D of BEA's Form ADV (File No. 801-37170) filed on March 30,
1993, and Schedules A and D of Warburg's Form ADV (File No. 801-07321) filed on
August 28, 1992, respectively.
There is set forth below information as to any other business,
profession, vocation or employment of a substantial nature in which each
director or officer of PNC Bank, National Association (successor by merger to
Provident National Bank) ("PNC Bank"), is, or at any time during the past two
years has been, engaged for his own account or in the capacity of director,
officer, employee, partner or trustee.
26
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
Directors and Officers
To the knowledge of Registrant, none of the directors or officers of
PNC except those set forth below, is or has been, at any time during the past
two years, engaged in any other business, profession, vocation or employment of
a substantial nature, except that certain directors and officers of PNC Bank
also hold various positions with, and engage in business for, PNC Bank Corp.
(formerly PNC Financial Corp), which owns all the outstanding stock of PNC Bank,
or other subsidiaries of PNC Bank Corp. Set forth below are the names and
principal businesses of the directors and certain of the senior executive
officers of PNC Bank who are engaged in any other business, profession, vocation
or employment of substantial nature.
27
<PAGE>
<TABLE>
<CAPTION>
PNC BANK, NATIONAL ASSOCIATION
Position with
PNC Bank,
National Other Business Type of
Association Name Connections Business
- -------------- ---- -------------- --------
<S> <C> <C> <C>
Director B.R. Brown President and C.E.O. of Coal
Consol, Inc.
Pittsburgh, PA (22)
Director Constance E. Clayton Superintendent of Schools Educator
The School District of
Philadelphia
Philadelphia, PA (23)
Director F. Eugene Dixon, Jr. Private Trustee Trustee
Lafayette Hill, PA (24)
Director A. James Freeman Vice Chairman and C.E.O. Manufacturing
Lord Corporation
Erie, PA (25)
Director Banking
Marine Bank
Erie, PA (26)
Director Dr. Stuart Heydt President and C.E.O. Medical
Geisinger Foundation
Danville, PA (27)
Director Edward P. Junker, III Chairman and C.E.O. Banking
Marine Bank
Erie, PA (26)
Director Thomas A. McConomy President, C.E.O. and Manufacturing
Chairman, Calgon Carbon
Corporation
Pittsburgh, PA (28)
Director Robert C. Milsom Retired
Pittsburgh, PA*
Director Thomas H. O'Brien Chairman and C.E.O. Bank
PNC Bank Corp. (14) Holding
Director Dr. J. Dennis O'Connor Chancellor Education
University of Pittsburgh
Pittsburgh, PA (29)
28
<PAGE>
<CAPTION>
Position with
PNC Bank,
National Other Business Type of
Association Name Connections Business
- -------------- ---- -------------- --------
<S> <C> <C> <C>
Director Rocco A. Ortenzio Chairman and C.E.O. Medical
Continental Medical
Systems, Inc.
Mechanicsburg, PA (30)
Director Robert C. Robb, Jr. Partner Financial
Lewis, Eckert, Robb & and
Company Management
Plymouth Meeting, PA (31) Consultants
Director Daniel M. Rooney President, Pittsburgh Football
Steelers Football Club
of the National Football
League
Pittsburgh, PA (32)
Director Seth E. Schofield Chairman, President and Airline
C.E.O.
USAir Group, Inc. and
USAir, Inc.
Arlington, VA (33)
Director Robert M. Valentini President and C.E.O. Bell Communica-
of Pennsylvania and tions
Chairman Network Policy
Council of Bell
Atlantic Corporation
Philadelphia, PA (34)
President and James E. Rohr President Bank
Chief Executive PNC Bank Corp. Holding
Officer (14) Company
President and Bruce E. Robbins None.
Chief Executive
Officer of PNC
Bank, National
Association,
Pittsburgh
Senior Edward V. Randall, Jr. None.
Executive
Vice President
Executive J. Richard Carnall Director Banking
Vice President PNC National Bank (2)
Chairman and Director Financial-
PFPC Inc. (3) Related
Services
29
<PAGE>
<CAPTION>
Position with
PNC Bank,
National Other Business Type of
Association Name Connections Business
- -------------- ---- -------------- --------
<S> <C> <C> <C>
Director
PNC Trust Company Fiduciary
of New York (11) Activities
Director Equipment
Hayden Bolts, Inc.* Leasing
Director, Real Estate
Parkway Real Estate
Company*
Director Investment
Provident Capital Advisory
Management, Inc. (5)
Director Investment
Advanced Investment Advisory
Management, Inc. (15)
Executive Richard C. Caldwell Director Banking
Vice President PNC National Bank (2)
Director Investment
Provident Capital Advisory
Management, Inc. (5)
Director Fiduciary
PNC Trust Company Activities
of New York (11)
Executive Vice President Bank
PNC Bank Corp. (14) Holding
Company
Director Investment
Advanced Investment Advisory
Management, Inc. (15)
Director Banking
PNC Bank, New Jersey,
New Jersey, National
Association (16)
Director Financial-
PFPC Inc. (3) Related
Services
Executive Vice Herbert G. None.
President Summerfield, Jr.
30
<PAGE>
<CAPTION>
Position with
PNC Bank,
National Other Business Type of
Association Name Connections Business
- -------------- ---- -------------- --------
<S> <C> <C> <C>
Executive Vice Joe R. Irwin None.
President
President and Richard L. Smoot Senior Vice President Banking
Chief Executive Operations
Officer of PNC PNC Bank Corp. (20)
Bank, National
Association, Director Fiduciary
Philadelphia PNC Trust Company of Activities
New York (11)
Director Investment
PNC Institutional Advisory
Management Corporation (28)
Director Financial
PFPC Inc. (3) Related
Services
Executive Vice W. Herbert Crowder, III None.
President
Executive Vice Walter L. West None.
President
Senior Vice George Lula None.
President
Secretary William F. Strome Director International
PNC Bank International (35) Banking
Services
Managing General Counsel Bank Holding
and Senior Vice President Company
PNC Bank Corp.
Senior Vice James P. Conley None.
President/
Credit Policy
</TABLE>
____________________
* For more information, contact William F. Strome, PNC Bank, National
Association, Broad and Chestnut Streets, Philadelphia, PA 19101.
(1) PNC Bank, National Association, 120 S. 17th Street, Philadelphia, PA
19103.
(2) PNC National Bank, 103 Bellevue Parkway, Wilmington, DE 19809.
(3) PFPC Inc., 400 Bellevue Parkway, Wilmington, DE 19809.
31
<PAGE>
(4) PNC Service Corp, 103 Bellevue Parkway, Wilmington, DE 19809.
(5) Provident Capital Management, Inc., 30 S. 17th Street, Site 1500,
Philadelphia, PA 19103.
(6) PNC National Investment Corporation, Broad and Chestnut Streets,
Philadelphia, PA 19101.
(7) Provident Realty Management, Inc., Broad and Chestnut Streets,
Philadelphia, PA 19101.
(8) Provident Realty, Inc., Broad and Chestnut Streets, Philadelphia, PA 19101.
(9) PNC Bancorp, Inc. 3411 Silverside Park, Wilmington, DE 19810
(10) PNC New Jersey Credit Corp, 1415 Route 70 East, Suite 604, Cherry Hill, NJ
08034.
(11) PNC Trust Company of New York, 40 Broad Street, New York, NY 10084.
(12) Provcor Properties, Inc., Broad and Chestnut Streets, Philadelphia, PA
19101.
(13) PNC Credit Corp, 103 Bellevue Parkway, Wilmington, DE 19809.
(14) PNC Bank Corp., 5th Avenue and Wood Streets, Pittsburgh, PA 15265.
(15) Advanced Investment Management, Inc., 27th Floor, One Oliver Plaza,
Pittsburgh, PA 15265.
(16) PNC Bank of New Jersey, National Association, Woodland Falls Corporate
Park, 210 Lake Drive East, Cherry Hill, NJ 08002.
(17) PNC Institutional Management Corporation, 400 Bellevue Parkway, Wilmington,
DE 19809.
(18) Provident National Leasing Corporation, Broad and Chestnut Streets,
Philadelphia, PA 19101
(19) Provident National Bank Corp. New Jersey, 1 Centennial Square, Haddonfield,
NJ 08033
(20) The Clayton Bank and Trust Company, Clayton, DE 19938
(21) Keystone Life Insurance Company, 1207 Chestnut Street, Philadelphia, PA
19107-4101
(22) Consol, Inc., Consol Plaza, Pittsburgh, PA 15241
(23) School District of Philadelphia, 21 Street and The Parkway, Philadelphia,
PA 19103-1099
(24) F. Eugene Dixon, Jr., Private Trustee, 665 Thomas Road, Lafayette Hill, PA
19444-0178
(25) Lord Corporation, 2000 W. Grandview Boulevard, Erie, PA 16514
(26) Marine Bank, Ninth and State Streets, Erie, PA 16553
(27) Geisinger Foundation, 100 N. Academy Avenue, Danville, PA 17822
(28) Calgon Carbon Corporation, P.O. Box 717, Pittsburgh, PA 15230-0717
(29) University of Pittsburgh, 107 Cathedral of Learning, Pittsburgh, PA 15260
(30) Continental Medical Systems, Inc., P.O. Box 715, Mechanicsburg, PA 17055
(31) Lewis, Eckert, Robb & Company, 425 One Plymouth Meeting, Plymouth Meeting,
PA 19462
(32) Football Club of the National Football League, 300 Stadium Circle,
Pittsburgh, PA 15212
(33) USAir Group, Inc. and USAir, Inc., 2345 Crystal Drive, Arlington, VA 22227
(34) Bell of Pennsylvania, One Parkway, Philadelphia, PA 19102
(35) PNC Bank International, 5th and Wood Streets, Pittsburgh, PA 15222
32
<PAGE>
Item 29. PRINCIPAL UNDERWRITER
(a) Counsellors Securities Inc. (the "Distributor") acts as
distributor for the following investment companies:
Warburg, Pincus Cash Reserve Fund
Warburg, Pincus New York Tax Exempt Fund
Warburg, Pincus New York Municipal Bond Fund
Warburg, Pincus Intermediate Maturity Government Fund
Warburg, Pincus Fixed Income Fund
Warburg, Pincus Global Fixed Income Fund
Warburg, Pincus Capital Appreciation Fund
Warburg, Pincus Emerging Growth Fund
Warburg, Pincus International Equity Fund
Warburg, Pincus Japan OTC Fund
Counsellors Tandem Securities Fund
Warburg Pincus Growth & Income Fund
Warburg Pincus Balanced Fund
Warburg Pincus Tax Free Fund
The Distributor acts as a principal underwriter, depositor or investment adviser
for the following investment companies: None other than Registrant and
companies listed above.
(b) Information for each director or officer of the Distributor is
set forth below:
Name and Principal Positions and Offices Positions and Offices
Business Address with the Distributor with Registrant
- ----------------- --------------------- ---------------------
John L. Vogelstein Director
466 Lexington Avenue
New York, New York 10017
Lionel I. Pincus Director
466 Lexington Avenue
New York, New York 10017
Reuben S. Leibowitz Director,
466 Lexington Avenue President and Chief
New York, New York 10017 Financial Officer
John L. Furth Director
466 Lexington Avenue
New York, New York 10017
Arnold M. Reichman Vice President, Director
466 Lexington Avenue Secretary and
New York, New York 10017 Chief Operating Officer
33
<PAGE>
Roger Reinlieb Vice President
466 Lexington Avenue
New York, New York 10017
Karen Amato Assistant Secretary
466 Lexington Avenue
New York, New York 10017
Stephen Distler Treasurer
466 Lexington Avenue
New York, New York 10017
(c) Information as to commissions and other compensation received by
the principal underwriter is set forth below.
Net
Name of Underwriting Compensation
Principal Discounts and on Redemption Brokerage Other
Underwriter Commissions and Repurchase Commissions Compensation
- ----------- ------------- -------------- ----------- ------------
Counsellors $ 0 $ 0 $ 0 $ 0
Securities
Inc.
Item 30. LOCATION OF ACCOUNTS AND RECORDS
(1) PNC Bank, National Association (successor by merger to Provident
National Bank), Broad and Chestnut Street, Philadelphia, PA 19101
(records relating to its functions as sub-adviser and custodian).
(2) Counsellors Securities Inc., 466 Lexington Avenue, New York, New York
10017 (records relating to its functions as distributor).
(3) PNC Institutional Management Corporation (formerly Provident
Institutional Management Corporation), Bellevue Corporate Center, 103
Bellevue Parkway, Wilmington, Delaware 19809 (records relating to its
functions as investment adviser, sub-adviser and administrator).
(4) PFPC Inc. (formerly Provident Financial Processing Corporation),
Bellevue Corporate Center, 400 Bellevue Parkway, Wilmington, Delaware
19809 (records relating to its functions as transfer agent and
dividend disbursing agent).
(5) Ballard Spahr Andrews & Ingersoll, 1735 Market Street - 51st Floor,
Philadelphia, Pennsylvania 19103 (Registrant's Articles of
Incorporation, By-Laws and Minute Books).
34
<PAGE>
(6) BEA Associates, One Citicorp Center, 153 East 53rd Street, New York,
New York 10022 (records relating to its function as investment
adviser).
(7) Warburg, Pincus Counsellors, Inc., 466 Lexington Avenue, New York, New
York 10017-3147 (records relating to its functions as investment
adviser).
Item 31. MANAGEMENT SERVICES
None.
Item 32. UNDERTAKINGS
(a) Registrant hereby undertakes to hold a meeting of shareholders
for the purpose of considering the removal of directors in the
event the requisite number of shareholders so request.
(b) Registrant hereby undertakes to file a post-effective amendment,
using unaudited financial statements for RBB Boston Partners
Large Cap Value Fund (Investor Class, Advisor Class and
Institutional Class); n/i Micro Cap Fund, n/i Growth Fund and n/i
Growth & Value Fund; BEA International Equity, BEA Emerging
Markets Equity, BEA GLOBAL Telecommunications and BEA High Yield
Portfolios Investor Classes and Advisor Classes which need not be
certified, within four to six months from effective date of this
Registration Statement.
35
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this Post-Effective
Amendment to its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Wilmington, and State of
Delaware, on October 10, 1996.
THE RBB FUND, INC.
By: /s/ Edward J. Roach
-----------------------
Edward J. Roach
President and
Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to Registrant's Registration Statement has been signed
below by the following persons in the capacities and on the date indicated.
Signature Title Date
--------- ----- ----
/s/ Edward J. Roach President (Principal OCTOBER 10, 1996
- ------------------------- Executive Officer) and
Edward J. Roach Treasurer (Principal
Financial and Accounting
Officer)
/s/ Donald van Roden Director OCTOBER 10, 1996
- -------------------------
Donald van Roden
Director
- -------------------------
Francis J. McKay
/s/ Marvin E. Sternberg Director OCTOBER 10, 1996
- -------------------------
Marvin E. Sternberg
/s/ Julian A. Brodsky Director OCTOBER 10, 1996
- -------------------------
Julian A. Brodsky
/s/ Arnold M. Reichman Director OCTOBER 10, 1996
- -------------------------
Arnold M. Reichman
/s/ Robert Sablowsky Director OCTOBER 10, 1996
- -------------------------
Robert Sablowsky
<PAGE>
THE RBB FUND, INC.
RBB CLASSES
CASH PRESERVATION CLASSES
SANSOM STREET CLASSES
BEDFORD CLASSES
BRADFORD CLASSES
BEA INSTITUTIONAL CLASSES
BEA INVESTOR CLASSES
BEA ADVISOR CLASSES
BOSTON PARTNERS INSTITUTIONAL CLASSES
BOSTON PARTNERS INVESTOR CLASSES
BOSTON PARTNERS ADVISOR CLASSES
JANNEY (ALPHA) CLASSES
N/I CLASSES
BETA CLASSES
GAMMA CLASSES
DELTA CLASSES
EPSILON CLASSES
ZETA CLASSES
ETA CLASSES
THETA CLASSES
EXHIBIT INDEX
Exhibit
- -------
EX.-99B(1)(q) ARTICLES OF SUPPLEMENTARY
EX.-99B(10)(b) Consent of Counsel
EX.-99B(11) Consent of Independent Accountants
EX.-99B(19) REPRESENTATION OF BALLARD SPAHR ANDREWS & INGERSOLL
PURSUANT TO RULE 485(b) UNDER SECURITIES ACT OF 1933
EX.-27.1 BEA INTERNATIONAL EQUITY (Financial Data Schedule)
EX.-27.2 BEA EMERGENCY MALUTS EQUITY (Financial Data Schedule)
EX.-27.3 BEA U.S. CORE EQUITY (Financial Data Schedule)
EX.-27.4 BEA U.S. CORE FIXED INCOME (Financial Data Schedule)
EX.-27.5 BEA GLOBAL FIXED INCOME (Financial Data Schedule)
EX.-27.6 BEA HIGH YIELD (Financial Data Schedule)
EX.-27.7 BEA MUNICIPAL BOND (Financial Data Schedule)
<PAGE>
EXHIBIT (1)(Q)
THE RBB FUND, INC.
ARTICLES SUPPLEMENTARY TO THE
CHARTER
THE RBB FUND, INC., a Maryland corporation having its principal office
in Baltimore, Maryland (hereinafter called the "Corporation"), hereby certifies
to the State Department of Assessments and Taxation of Maryland that:
FIRST: The Board of Directors of the Corporation, an open-end
investment company registered under the Investment Company Act of 1940, as
amended, and having authorized capital of thirty billion (30,000,000,000) shares
of common stock, par value $.001 per share, has adopted a unanimous resolution
increasing the number of shares of common stock that are classified (but not
increasing the aggregate number of authorized shares) into separate classes by:
classifying an additional one hundred million (100,000,000) of
the previously authorized, unissued and unclassified shares of the
common stock, par value $.001 per share, with an aggregate par value
of one hundred thousand dollars ($100,000), as Class II Common Stock
(BEA International Equity Investor Fund);
classifying an additional one hundred million (100,000,000) of
the previously authorized, unissued and unclassified shares of the
common stock, par value
<PAGE>
$.001 per share, with an aggregate par value of one hundred thousand
dollars ($100,000), as Class JJ Common Stock (BEA Emerging Markets Equity
Investor Fund);
classifying an additional one hundred million (100,000,000) of
the previously authorized, unissued and unclassified shares of the
common stock, par value $.001 per share, with an aggregate par value
of one hundred thousand dollars ($100,000), as Class KK Common Stock
(BEA High Yield Investor Fund);
classifying an additional one hundred million (100,000,000) of
the previously authorized, unissued and unclassified shares of the
common stock, par value $.001 per share, with an aggregate par value
of one hundred thousand dollars ($100,000), as Class LL Common Stock
(BEA Global Telecommunications Investor Fund);
classifying an additional one hundred million (100,000,000) of
the previously authorized, unissued and unclassified shares of the
common stock, par value $.001 per share, with an aggregate par value
of one
2
<PAGE>
hundred thousand dollars ($100,000), as Class MM Common Stock (BEA
International Equity Advisor Fund);
classifying an additional one hundred million (100,000,000) of
the previously authorized, unissued and unclassified shares of the
common stock, par value $.001 per share, with an aggregate par value
of one hundred thousand dollars ($100,000), as Class NN Common Stock
(BEA Emerging Markets Equity Advisor Fund);
classifying an additional one hundred million (100,000,000) of
the previously authorized, unissued and unclassified shares of the
common stock, par value $.001 per share, with an aggregate par value
of one hundred thousand dollars ($100,000), as Class OO Common Stock
(BEA High Yield Advisor Fund);
classifying an additional one hundred million (100,000,000) of
the previously authorized, unissued and unclassified shares of the
common stock, par value $.001 per share, with an aggregate par value
of one hundred thousand dollars ($100,000), as Class PP Common Stock
(BEA Global Telecommunications Advisor Fund);
3
<PAGE>
classifying an additional one hundred million (100,000,000) of the
previously authorized, unissued and unclassified shares of the common
stock, par value $.001 per share, with an aggregate par value of one
hundred thousand dollars ($100,000), as Class QQ Common Stock (Boston
Partners Large Cap Value Fund Institutional Portfolio);
classifying an additional one hundred million (100,000,000) of the
previously authorized, unissued and unclassified shares of the common
stock, par value $.001 per share, with an aggregate par value of one
hundred thousand dollars ($100,000), as Class RR Common Stock (Boston
Partners Large Cap Value Fund Investor Portfolio);
classifying an additional one hundred million (100,000,000) of the
previously authorized, unissued and unclassified shares of the common
stock, par value $.001 per share, with an aggregate par value of one
hundred thousand dollars ($100,000), as Class SS Common Stock (Boston
Partners Large Cap Value Fund Advisor Portfolio);
SECOND: A description of the shares so classified with the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and
4
<PAGE>
terms and conditions of redemption as set or changed by the Board of Directors
of the Corporation is as follows:
A description of the preferences, conversion and other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms and
conditions or redemption of each class of common stock of the Corporation is set
forth in Article VI, Section (6) of the Corporation's Charter, and has not been
changed by the Board of Directors of the Corporation.
THIRD: The shares aforesaid have been duly classified by the Board of
Directors of the Corporation pursuant to authority and power contained in the
charter of the Corporation.
FOURTH: Immediately before the increase in the number of shares of
common stock that have been classified into separate classes:
(a) the Corporation had authority to issue thirty billion
(30,000,000,000) shares of its common stock and the aggregate par value of all
the shares of all classes was thirty million dollars ($30,000,000);
(b) the number of shares of each authorized class of common
stock was as follows:
Class A - one hundred million (100,000,000), par value $.001 per share;
Class B - one hundred million (100,000,000), par value $.001 per share;
5
<PAGE>
Class C - one hundred million (100,000,000), par value $.001 per share;
Class D - one hundred million (100,000,000), par value $.001 per share;
Class E - five hundred million (500,000,000), par value $.001 per share;
Class F - five hundred million (500,000,000), par value $.001 per share;
Class G - five hundred million (500,000,000), par value $.001 per share;
Class H - five hundred million (500,000,000), par value $.001 per share;
Class I - one billion (1,000,000,000), par value $.001 per share;
Class J - five hundred million (500,000,000), par value $.001 per share;
Class K - five hundred million (500,000,000), par value $.001 per share;
Class L - one billion five hundred million (1,500,000,000), par value $.001 per
share;
Class M - five hundred million (500,000,000), par value $.001 per share;
Class N - five hundred million (500,000,000), par value $.001 per share;
6
<PAGE>
Class O - five hundred million (500,000,000), par value $.001 per share;
Class P - one hundred million (100,000,000), par value $.001 per share;
Class Q - one hundred million (100,000,000), par value $.001 per share;
Class R - five hundred million (500,000,000), par value $.001 per share;
Class S - five hundred million (500,000,000), par value $.001 per share;
Class T - five hundred million (500,000,000), par value $.001 per share;
Class U - five hundred million (500,000,000), par value $.001 per share;
Class V - five hundred million (500,000,000), par value $.01 per share;
Class W - one hundred million (100,000,000), par value $.001 per share;
Class X - fifty million (50,000,000), par value $.001 per share;
Class Y - fifty million (50,000,000), par value $.001 per share;
Class Z - fifty million (50,000,000), par value $.001 per share;
Class AA - fifty million (50,000,000), par value $.001 per share;
Class BB - fifty million (50,000,000), par value $.001 per share;
7
<PAGE>
Class CC - fifty million (50,000,000), par value $.001 per share;
Class DD - one hundred million (100,000,000), par value $.001 per share;
Class EE - one hundred million (100,000,000), par value $.001 per share;
Class FF - fifty million (50,000,000), par value $.001 per share;
Class GG - fifty million (50,000,000), par value $.001 per share;
Class HH - fifty million (50,000,000), par value $.001 per share;
Class Alpha 1 - seven hundred million (700,000,000), par value $.001 per
share;
Class Alpha 2 - two hundred million (200,000,000), par value $.001 per
share;
Class Alpha 3 - five hundred million (500,000,000), par value $.001 per
share;
Class Alpha 4 - one hundred million (100,000,000), par value $.001 per
share;
Class Beta 1 - one million (1,000,000), par value $.001 per share;
Class Beta 2 - one million (1,000,000), par value $.001 per share;
8
<PAGE>
Class Beta 3 - one million (1,000,000), par value $.001 per share;
Class Beta 4 - one million (1,000,000), par value $.001 per share;
Class Gamma 1 - one million (1,000,000), par value $.001 per share;
Class Gamma 2 - one million (1,000,000), par value $.001 per share;
Class Gamma 3 - one million (1,000,000), par value $.001 per share;
Class Gamma 4 - one million (1,000,000), par value $.001 per share;
Class Delta 1 - one million (1,000,000), par value $.001 per share;
Class Delta 2 - one million (1,000,000), par value $.001 per share;
Class Delta 3 - one million (1,000,000), par value $.001 per share;
Class Delta 4 - one million (1,000,000), par value $.001 per share;
Class Epsilon 1 - five hundred million (1,000,000), par value $.001 per share;
Class Epsilon 2 - one million (1,000,000), par value $.001 per share;
9
<PAGE>
Class Epsilon 3 - one million (1,000,000), par value $.001 per share;
Class Epsilon 4 - one million (1,000,000), par value $.001 per share;
Class Zeta 1 - one million (1,000,000), par value $.001 per share;
Class Zeta 2 - one million (1,000,000), par value $.001 per share;
Class Zeta 3 - one million (1,000,000), par value $.001 per share;
Class Zeta 4 - one hundred million (1,000,000), par value $.001 per share;
Class Eta 1 - one million (1,000,000), par value $.001 per share;
Class Eta 2 - one million (1,000,000) par value $.001 per share;
Class Eta 3 - one million (1,000,000), par value $.001 per share;
Class Eta 4 - one million (1,000,000), par value $.001 per share;
Class Theta 1 - one million (1,000,000), par value $.001 per share;
Class Theta 2 - one million (1,000,000), par value $.001 per share;
10
<PAGE>
Class Theta 3 - one million (1,000,000), par value $.001 per share; and
Class Theta 4 - one million (1,000,000), par value $.001 per share,
for a total of twelve billion three hundred seventy-eight million
(12,378,000,000) shares classified into separate classes of common stock.
After the increase in the number of shares of common stock that have
been classified into separate classes:
(c) the Corporation has the authority to issue thirty billion
(30,000,000,000) shares of its common stock and the aggregate par value of all
the shares of all classes is now thirty million dollars ($30,000,000); and
(d) the number of authorized shares of each class is now as
follows:
Class A - one hundred million (100,000,000), par value $.001 per
share;
Class B - one hundred million (100,000,000), par value $.001 per share;
Class C - one hundred million (100,000,000), par value $.001 per share;
Class D - one hundred million (100,000,000), par value $.001 per share;
11
<PAGE>
Class E - five hundred million (500,000,000), par value $.001 per share;
Class F - five hundred million (500,000,000), par value $.001 per share;
Class G - five hundred million (500,000,000), par value $.001 per share;
Class H - five hundred million (500,000,000), par value $.001 per share;
Class I - one billion (1,000,000,000), par value $.001 per share;
Class J - five hundred million (500,000,000), par value $.001 per share;
Class K - five hundred million (500,000,000), par value $.001 per share;
Class L - one billion five hundred million (1,500,000,000), par value $.001 per
share;
Class M - five hundred million (500,000,000), par value $.001 per share;
Class N - five hundred million (500,000,000), par value $.001 per share;
Class O - five hundred million (500,000,000), par value $.001 per share;
Class P - one hundred million (100,000,000), par value $.001 per share;
12
<PAGE>
Class Q - one hundred million (100,000,000), par value $.001 per share;
Class R - five hundred million (500,000,000), par value $.001 per share;
Class S - five hundred million (500,000,000), par value $.001 per share;
Class T - five hundred million (500,000,000), par value $.001 per share;
Class U - five hundred million (500,000,000), par value $.001 per share;
Class V - five hundred million (500,000,000), par value $.001 per share;
Class W - one hundred million (100,000,000), par value $.001 per share;
Class X - fifty million (50,000,000), par value $.001 per share;
Class Y - fifty million (50,000,000), par value $.001 per share;
Class Z - fifty million (50,000,000), par value $.001 per share;
Class AA - fifty million (50,000,000), par value $.001 per share;
Class BB - fifty million (50,000,000), par value $.001 per share;
Class CC - fifty million (50,000,000), par value $.001 per share;
13
<PAGE>
Class DD - one hundred million (100,000,000), par value $.001 per share;
Class EE - one hundred million (100,000,000), par value $.001 per share;
Class FF - fifty million (50,000,000), par value $.001 per share;
Class GG - fifty million (50,000,000), par value $.001 per share;
Class HH - fifty million (50,000,000), par value $.001 per share;
Class II - one hundred million (100,000,000), par value $.001 per share;
Class JJ - one hundred million (100,000,000), par value $.001 per share;
Class KK - one hundred million (100,000,000), par value $.001 per share;
Class LL - one hundred million (100,000,000), par value $.001 per share;
Class MM - one hundred million (100,000,000), par value $.001 per share;
Class NN - one hundred million (100,000,000), par value $.001 per share;
Class OO - one hundred million (100,000,000), par value $.001 per share;
14
<PAGE>
Class PP - one hundred million (100,000,000), par value $.001 per share;
Class QQ - one hundred million (100,000,000), par value $.001 per share;
Class RR - one hundred million (100,000,000), par value $.001 per share;
Class SS - one hundred million (100,000,000), par value $.001 per share;
Class Alpha 1 - seven hundred million (700,000,000), par value $.001 per
share;
Class Alpha 2 - two hundred million (200,000,000), par value $.001 per
share;
Class Alpha 3 - five hundred million (500,000,000), par value $.001 per
share;
Class Alpha 4 - one hundred million (100,000,000), par value $.001 per
share;
Class Beta 1 - one million (1,000,000), par value $.001 per share;
Class Beta 2 - one million (1,000,000), par value $.001 per share;
Class Beta 3 - one million (1,000,000), par value $.001 per share;
Class Beta 4 - one million (1,000,000), par value $.001 per share;
15
<PAGE>
Class Gamma 1 - one million (1,000,000), par value $.001 per share;
Class Gamma 2 - one million (1,000,000), par value $.001 per share;
Class Gamma 3 - one million (1,000,000), par value $.001 per share;
Class Gamma 4 - one million (1,000,000), par value $.001 per share;
Class Delta 1 - one million (1,000,000), par value $.001 per share;
Class Delta 2 - one million (1,000,000), par value $.001 per share;
Class Delta 3 - one million (1,000,000), par value $.001 per share;
Class Delta 4 - one million (1,000,000), par value $.001 per share;
Class Epsilon 1 - one million (1,000,000), par value $.001 per share;
Class Epsilon 2 - one million (1,000,000), par value $.001 per share;
Class Epsilon 3 - one million (1,000,000), par value $.001 per share;
Class Epsilon 4 - one million (1,000,000), par value $.001 per share;
16
<PAGE>
Class Zeta 1 - one million (1,000,000), par value $.001 per share;
Class Zeta 2 - one million (1,000,000), par value $.001 per share;
Class Zeta 3 - one million (1,000,000), par value $.001 per share;
Class Zeta 4 - one million (1,000,000), par value $.001 per share;
Class Eta 1 - one million (1,000,000), par value $.001 per share; Class
Eta 2 - one million (1,000,000) par value $.001 per share;
Class Eta 3 - one million (1,000,000), par value $.001 per share;
Class Eta 4 - one million (1,000,000), par value $.001 per share;
Class Theta 1 - one million (1,000,000), par value $.001 per share;
Class Theta 2 - one million (1,000,000), par value $.001 per share;
Class Theta 3 - one million (1,000,000), par value $.001 per share;
Class Theta 4 - one million (1,000,000), par value $.001 per share;
17
<PAGE>
for a total of thirteen billion four hundred seventy-eight million
(13,478,000,000) shares classified into separate classes of common stock.
18
<PAGE>
IN WITNESS WHEREOF, The RBB Fund, Inc. has caused these presents to be
signed and attested in its name and on its behalf by its President and Secretary
on __________, 1996.
THE RBB FUND, INC.
ATTEST:
_________________________ By:_________________________
Morgan R. Jones Edward J. Roach
Secretary President
19
<PAGE>
THE UNDERSIGNED, President of The RBB Fund, Inc., who executed on
behalf of said corporation the foregoing Articles Supplementary to the Charter,
of which this certificate is made a part, hereby acknowledges, in the name and
on behalf of said Corporation, and further certifies that, to the best of his
knowledge, information and belief, the matters and facts set forth therein with
respect to the approval thereof are true in all material respects, under the
penalties of perjury.
______________________________
Edward J. Roach
President
20
<PAGE>
Exhibit (10)(b)
October 9, 1996
The RBB Fund, Inc.
Bellevue Park Corporate Center
400 Bellevue Parkway, Suite 100
Wilmington, DE 19809
Gentlemen:
We have acted as counsel for The RBB Fund, Inc. (the "Fund") in
connection with the registration of the Fund under the Investment Company Act of
1940 (the "1940 Act") and the registration of the Class T, U, V, X, Y, Z, AA,
BB, CC, II, JJ, KK, LL, MM, NN, OO and PP (BEA) shares of Common Stock, par
value $.001 per share, of the Fund ("Shares") under the Securities Act of 1933
(the "1933 Act"). In this regard, we have participated in the preparation of
the Post-Effective Amendment No. 39 to the Registration Statement on Form N-1A,
relating to the Fund and the Shares, which is filed by the Fund under the 1933
Act and the 1940 Act.
We are of the opinion that the Shares to be offered and sold by the
Fund, when issued and sold pursuant to the terms described in the Post-Effective
Amendment to the Registration Statement when it becomes effective and in
conformity with applicable Federal and state securities laws, will be legally
issued, fully paid and nonassessable.
We consent to the use of our name on the back page of the prospectus
and in the statement of additional information under the caption "Miscellaneous
- - Counsel" in the Post-Effective Amendment to the Registration Statement, and we
also consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours
/s/ Ballard Spahr Andrews & Ingersoll
<PAGE>
EXHIBIT (11)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the following with respect of Post-Effective Amendment No.
39 to the Registration Statement (No. 33-20827) on Form N-1A under the
Securities Act of 1933, as amended, of The RBB Fund, Inc.:
- The inclusion of our report dated October 11, 1996 on our audit
of financial statements and financial highlights of the BEA
Institutional Funds (consisting of BEA International Equity Fund,
BEA Emerging Markets Equity Fund, BEA U.S. Core Equity Fund, BEA
U.S. Core Fixed Income Fund, BEA Global Fixed Income Fund, BEA
Strategic Fixed Income Fund and BEA Municipal Bond Fund of The
RBB Fund, Inc., in the Statement of Additional Information.
- The reference to our Firm under the headings "Financial
Highlights" in the Prospectus and under the heading "Independent
Accountants" in the Statement of Additional Information.
COOPERS & LYBRAND L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
)ctober 11, 1996
<PAGE>
Exhibit (19)
REPRESENTATION OF COUNSEL PURSUANT TO RULE
485(b) UNDER THE SECURITIES ACT OF 1933
We hereby represent that Post-Effective Amendment No. 39 to the
Registration Statement on Form N-1A of the RBB Fund, Inc. (Registration No.
33-20827) filed with the Securities and Exchange Commission under the
Securities Act of 1933 and Amendment No. 41 under the Investment Company Act
of 1940 contains no disclosures which would render it ineligible to become
effective pursuant to paragraph (b) of Rule 485 under the Securities Act of
1933.
/s/Ballard Spahr Andrews & Ingersoll
----------------------------------------
Ballard Spahr Andrews & Ingersoll
October 10, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000831114
<NAME> THE RBB FUND, INC.
<SERIES>
<NUMBER> 11
<NAME> BEA INTERNATIONAL EQUITY PORTFOLIO
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<INVESTMENTS-AT-COST> 632206063
<INVESTMENTS-AT-VALUE> 678852425
<RECEIVABLES> 10820790
<ASSETS-OTHER> 103058
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 689776273
<PAYABLE-FOR-SECURITIES> 6036322
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1469150
<TOTAL-LIABILITIES> 7505472
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 655735487
<SHARES-COMMON-STOCK> 35142215
<SHARES-COMMON-PRIOR> 42398465
<ACCUMULATED-NII-CURRENT> 4139511
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<NET-INVESTMENT-INCOME> 6274654
<REALIZED-GAINS-CURRENT> 36135131
<APPREC-INCREASE-CURRENT> 7925197
<NET-CHANGE-FROM-OPS> 50334982
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2649123)
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 158914042
<NUMBER-OF-SHARES-REDEEMED> (300107186)
<SHARES-REINVESTED> 2523456
<NET-CHANGE-IN-ASSETS> (90983829)
<ACCUMULATED-NII-PRIOR> (1320328)
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<GROSS-EXPENSE> 9117832
<AVERAGE-NET-ASSETS> 749113810
<PER-SHARE-NAV-BEGIN> 18.24
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