<PAGE>
As filed with the Securities and Exchange Commission on June 25, 1998
Securities Act File No. 33-20827
Investment Company Act File No. 811-5518
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /X/
Pre-Effective Amendment No. / /
----
Post-Effective Amendment No. 56 /X/
----
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 58 /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
Advisor Class; BEA U.S. Core Equity Portfolio: BEA Class and BEA Advisor Class;
BEA U.S. Core Fixed Income Portfolio: BEA Class and Advisor Class; BEA Strategic
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; BEA Long-Short Market Neutral Fund: BEA Class and BEA Advisor
Class; BEA Long-Short Equity Fund: BEA Class and BEA Advisor Class; BEA Select
Economic Value Equity Fund: BEA Class and BEA Advisor Class; NI Micro Cap Fund:
NI Class; NI Growth Fund: NI Class; NI Growth & Value Fund: NI Class; NI Larger
Cap Value Fund: NI Class; Boston Partners Large Cap Value Fund: Boston Partners
Advisor Class, Boston Partners Institutional Class and Boston Partners Investor
Class; Boston Partners Mid Cap Value Fund: Boston Partners Institutional Class
and Boston Partners Investor Class; Boston Partners Bond Fund: Boston Partners
Institutional Class and Boston Partners Investor Class; Boston Partners Micro
Cap Value Fund: Boston Partners Institutional Class and Boston Partners Investor
Class; Schneider Capital Management Value Fund; 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)
<PAGE>
- --------------------------------------------------------------------------------
(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 MICHAEL P. MALLOY, ESQUIRE
PNC Bank, National Association Drinker Biddle & Reath LLP
1600 Market Street, 28th Floor 1100 PNB Building
Philadelphia, PA 19103 1345 Chestnut Street
(NAME AND ADDRESS OF AGENT FOR SERVICE) Philadelphia, PA 19107-3496
It is proposed that this filing will become effective (check appropriate
box)
/ / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/X/ 60 days after filing pursuant to paragraph (a)(1)
/ / on (date) pursuant to paragraph (a)(1)
/ / 75 days after filing pursuant to paragraph (a)(2)
/ / on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
/ / This post-effective amendment designates a new effective date
for a previously filed post-effective amendment.
Title of Securities Being Registered:
Class HHH Common Stock
The purpose of this Post-Effective Amendment is to register shares of a
new share class of an existing portfolio of Registrant.
<PAGE>
THE RBB FUND, INC.
(BEA ADVISOR CLASS OF THE U.S CORE EQUITY FUND)
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
under the Securities Act of 1933
<TABLE>
<CAPTION>
Form N-1A Item Location
- -------------- --------
<S> <C>
Part A Prospectus
1. Cover Page Cover Page
2. Synopsis Annual Fund Operating Expenses
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Cover Page; The Company; Investment
Objectives and Policies; Investment
Limitations; Risk Factors
5. Management of the Fund Management
5A. Management's Discussion of Fund Not Applicable
Performance
6. Capital Stock and Other Securities Cover Page; Dividends and
Distributions; Taxes; Multi-Class
Structure; Description of Shares
7. Purchase of Securities Being Offered How to Purchase Shares; Net Asset
Value
8. Redemption or Repurchase How to Redeem and Exchange Shares;
Net Asset Value
9. Pending Legal Proceedings Not Applicable
</TABLE>
<PAGE>
THE RBB FUND, INC.
(BEA ADVISOR CLASS OF THE BEA U.S CORE EQUITY FUND)
CROSS REFERENCE SHEET
Pursuant to Rule 495(a)
under the Securities Act of 1933
<TABLE>
<CAPTION>
Form N-1A Item Location
- -------------- --------
<S> <C>
Part B Statement of Additional Information
10. Cover Page Cover Page
11. Table of Contents Contents
12. General Information and History General; Directors and Officers;
Additional Information Concerning Fund
Shares; Miscellaneous; see Prospectus -
"The Fund"
13. Investment Objectives and Policies Investment Policies; Investment
Limitations; Risk Factors
14. Management of the Fund Directors and Officers; Investment
Advisory and Servicing Arrangements
15. Control Persons and Principal Holders Miscellaneous
of Securities
16. Investment Advisory and Other Services Investment Advisory and Servicing
Arrangements; See Prospectus -
"Management"
17. Brokerage Allocation and Other Portfolio Transactions
Practices
18. Capital Stock and Other Securities Additional Information Concerning Fund
Shares; See Prospectus - "Dividends and
Distributions" "Multi-Class Structure"
19. Purchase, Redemption and Pricing of Purchase and Redemption Information;
Securities Being Offered Valuation of Shares; See Prospectus - "How
to Purchase Shares" and "How to Redeem
Shares"
20. Tax Status Taxes; See Prospectus - "Taxes"
21. Underwriters Not Applicable
22. Calculation of Performance Data Performance and Yield Information
23. Financial Statements Miscellaneous
</TABLE>
<PAGE>
B E A
ADVISOR FUND
U.S. CORE EQUITY FUND
PROSPECTUS - __________, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
ANNUAL FUND OPERATING EXPENSES . . . . . . . . . . . . . . . . . . . . . . . 3
FINANCIAL HIGHLIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
INVESTMENT OBJECTIVES AND POLICIES . . . . . . . . . . . . . . . . . . . . . 6
INVESTMENT LIMITATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .10
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
HOW TO PURCHASE SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . .16
HOW TO REDEEM AND EXCHANGE SHARES. . . . . . . . . . . . . . . . . . . . . .19
NET ASSET VALUE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
DIVIDENDS AND DISTRIBUTIONS. . . . . . . . . . . . . . . . . . . . . . . . .22
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
MULTI-CLASS STRUCTURE. . . . . . . . . . . . . . . . . . . . . . . . . . . .24
DESCRIPTION OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . . .24
OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
-i-
<PAGE>
BEA ADVISOR FUND
THE BEA ADVISOR FUNDS CONSIST OF EIGHT CLASSES OF COMMON STOCK OF THE RBB FUND,
INC. (THE "COMPANY"), AN OPEN-END MANAGEMENT INVESTMENT COMPANY. SHARES
(COLLECTIVELY, THE "ADVISOR SHARES" OR "SHARES") OF THE ADVISOR CLASS OF THE
U.S. CORE EQUITY FUND ARE OFFERED BY THIS PROSPECTUS AND ARE DESCRIBED IN THIS
PROSPECTUS. The BEA U.S. Core Equity Fund seeks to provide long-term
appreciation of capital by investing primarily in U.S. equity securities.
There can be no assurance that the Fund's investment objective will be
achieved. Investments in the Fund involves certain risks. See "Risk Factors."
BEA Associates is an investment adviser managing 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 December 31, 1997, BEA
Associates managed approximately $34.2 billion in assets.
The minimum initial investment in the Fund is $2,500 and the minimum
subsequent investment is $250. The minimum initial investment for Individual
Retirement Accounts, Uniform Gifts to Minors and Automatic Investment Plans is
$1,000 and the minimum subsequent investment in each of these plans is $100.
This Prospectus contains information that a prospective investor needs to
know before investing. Please keep it for future reference. A Statement of
Additional Information, dated __________, 1998, has been filed with the
Securities and Exchange Commission (the "SEC") and is incorporated by reference
in this Prospectus. It may be obtained free of charge by calling (800)
401-2230. The Prospectus and Statement of Additional Information are also
available for reference, along with related material, on the SEC website
(http://www.sec.gov).
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 U.S.
Government, the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other governmental 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
- 1 -
<PAGE>
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PROSPECTUS __________, 1998
- 2 -
<PAGE>
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)(1)
<TABLE>
<CAPTION>
BEA
U.S. Core
Equity Fund
(Advisor Class)
<S> <C>
Management Fees (after waivers)(2) . . . . . . . . . . .71%
12b-1 Fees . . . . . . . . . . . . . . . . . . . . . . .25%
Other Expenses (after waivers and
reimbursements)(2) . . . . . . . . . . . . . . . . . .29%
----
Total Fund Operating Expenses (after
waivers and reimbursements)(2) . . . . . . . . . . . 1.25%
----
----
</TABLE>
- -------------------------
(1) The annual operating expenses for the Fund are based on expenses incurred
by the Institutional Shares of the Fund (after expected fee waivers and
expense reimbursements) during the fiscal year ended August 31, 1997,
restated to reflect the 12b-1 Fees that the Fund expects to incur during
the fiscal year with respect to its Advisor Shares.
(2) Before expense waivers and expense reimbursements, Management Fees would be
0.75%, Other Expenses would be .43%, and Total Fund Operating Expenses
would be 1.43%.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment in the Fund,
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 U.S. Core Equity Fund. . . . . . . . . . . . $13 $40 $69 $151
(Advisor Class)
</TABLE>
The Example in this fee table assumes that all dividends and distributions are
reinvested and that the amounts listed under "Annual Fund Operating Expenses"
remain the same in the years shown. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES AND ACTUAL EXPENSES MAY BE GREATER OR
LESS THAN THOSE SHOWN.
- 3 -
<PAGE>
This fee table is designed to assist an investor in understanding the
various costs and expenses that an investor in the Fund will bear directly or
indirectly. (for more complete descriptions of various costs and expenses, see
"Management" below.) Actual expenses may be greater than such costs and fees of
the Institutional Shares set forth above. The fee table reflects expected
expense reimbursements and voluntary waivers of management fees and
administration fees. The Adviser and Administrators are under no obligation
with respect to such fee waivers and reimbursements, however, and there can be
no assurance that any future waivers of management and administration fees (if
any) will not vary from the figures reflected in this fee table.
FINANCIAL HIGHLIGHTS
The tables below set forth certain information concerning the investment
results of Institutional Shares of the Fund for the years and periods indicated.
During the years and periods shown, the Fund did not offer Advisor Class Shares.
Actual costs and fees and investment results of the Advisor Class Shares may be
different. The financial data included in this table for each of the periods
ended August 31, 1997, 1996 and 1995 are a part of the Company's Financial
Statements for the Institutional Shares of the Fund which have been audited by
Coopers & Lybrand L.L.P., the Company's independent accountants. The financial
data included in this table for the six-month period ended February 28, 1998
are a part of the Company's Financial Statements for the Institutional Shares
of the Fund, although they have not been audited by the Company's independent
accountants. The financial data included in this table should be read in
conjunction with the financial statements and related notes. Further
information about the performance of the Institutional Shares of the Fund is
available in the Fund's Semi-Annual Report to Shareholders. Both the Statement
of Additional Information and the Semi-Annual Report to Shareholders may be
obtained from the BEA Funds free of charge by calling (800) 401-2230.
- 4 -
<PAGE>
BEA U.S. CORE EQUITY FUND OF
THE RBB FUND, INC.
(INSTITUTIONAL CLASS)
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
BEA U.S. CORE EQUITY FUND (INSTITUTIONAL CLASS)
------------------------------------------------------------------------------
FOR THE SIX
MONTHS ENDED FOR THE FOR THE FOR THE PERIOD
FEBRUARY 28, 1998 YEAR ENDED YEAR ENDED SEPTEMBER 1, 1994*TO
(UNAUDITED) AUGUST 31, 1997 AUGUST 31, 1996 AUGUST 31, 1995
----------------- --------------- --------------- --------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD. . . . . . . . . . . . . . $24.40 $19.05 $17.86 $15.00
------ ------ ------ ------
Income from investment operations
Net investment income . . . . . . . . 0.06 0.14 0.20 0.22
Net realized and unrealized gains
(losses) on securities and foreign
currency transactions. . . . . . . 3.86 6.82 2.81 2.72
------ ------ ------ ------
Total from investment operations. . . 3.92 6.96 3.01 2.94
------ ------ ------ ------
LESS DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment
income . . . . . . . . . . . . . . (0.13) (0.20) (0.21) (0.08)
Distributions from capital gains. . . (3.43) (1.41) (1.61) --
------ ------ ------ ------
Total Dividends and Distributions . . (3.56) (1.61) (1.82) (0.08)
------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD. . . . $24.76 $24.40 $19.05 $17.86
------ ------ ------ ------
------ ------ ------ ------
Total return. . . . . . . . . . . . . 17.57%(c) 38.32% 17.59% 19.75%
RATIO/SUPPLEMENTAL DATA
Net assets, end of period (000's
omitted) . . . . . . . . . . . . . $109.142 $86,182 $59,015 $31,644
Ratio of expenses to average net
assets . . . . . . . . . . . . . . 1.00%(a)(d) 1.00%(a) 1.00%(a) 1.00%(a)
Ratio of net investment income to
average net assets . . . . . . . . 0.42%(d) 0.67% 1.25% 1.59%
PORTFOLIO TURNOVER RATE . . . . . . . 78%(c) 93% 127% 123%
Average commission rate(b). . . . . . $0.0568 $0.0592 $0.0614 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
Institutional Class would have been 1.15% annualized for the six months
ended February 28, 1998, 1.18% and 1.34% for the years ended August
31, 1997 and 1996, respectively, and 1.51% annualized for the period
ended August 31, 1995.
(b) 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.
(c) Not annualized
(d) Annualized
* Commencement of operations.
- 5 -
<PAGE>
THE COMPANY
The Company is an open-end management investment company that currently
operates or proposes to operate twenty-seven separate investment portfolios.
Each BEA Advisor Fund represents an interest in a separate portfolio. The Fund
is non-diversified. The Company was incorporated in Maryland on February 29,
1988.
The Fund is designed primarily for individual investors and is available
through financial intermediaries, including broker-dealers, investment advisers,
financial planners, banks and insurance companies. Investment professionals
such as those listed above may purchase Shares for discretionary or
non-discretionary accounts maintained by individuals.
INVESTMENT OBJECTIVES AND POLICIES
The investment objective of the 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 the Fund will achieve its
investment objective. The Fund should be considered as a specialized investment
portfolio and not as a balanced investment program by itself. The Statement of
Additional Information contains a more detailed description of the various
investments and investment techniques used by the Fund.
BEA U.S. CORE EQUITY FUND
The BEA U.S. Core Equity Fund will seek to provide long-term appreciation
of capital by investing primarily in U.S. equity securities. Under normal
market conditions, the BEA U.S. Core Equity Fund will invest 65% of the value of
its total assets in U.S. 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") of
foreign issuers 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.
INVESTMENT POLICIES
This section describes certain investment policies of the Fund. These
policies are described in more detail in the Statement of Additional
Information.
- 6 -
<PAGE>
TEMPORARY INVESTMENTS. For defensive purposes or during temporary periods
in which BEA believes changes in economic, financial or political conditions
make it advisable, the 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, "Investment Policies
- -- Temporary Investments." To the extent permitted by its investment objective
and policies, the Fund may hold cash or cash equivalents pending investment.
BORROWING. The 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,
"Investment Policies -- Reverse Repurchase Agreements" and" -- Borrowing."
LENDING OF PORTFOLIO SECURITIES. The Fund may also lend its portfolio
securities with an aggregate value up to 33 1/3 of its total assets (including
the value of the collateral for the loans) to financial institutions against
collateral consisting of cash, U.S. Government securities or irrevocable bank
letters of credit, which are equal at all times to at least 102% of the value of
the securities loaned. Such loans would involve risks of delay in receiving
additional collateral in the event the value of the collateral decreased below
the value of the securities loaned or of delay in recovering the securities
loaned or even loss of rights in the collateral should the borrower of the
securities fail financially. However, loans will be made only to borrowers
deemed by the Fund's investment adviser to be of good standing and only when, in
the adviser's judgment, the income to be earned from the loans justifies the
attendant risks. Any loans of the Fund's securities will be fully
collateralized and marked to market daily.
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. The 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. The Fund may invest in securities issued by other
investment companies to the extent permitted by the 1940 Act. As a shareholder
of another investment company, the 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 the Fund bears directly in connection with its own
operations.
PORTFOLIO TURNOVER. BEA will effect portfolio transactions in the Fund
without regard to holding periods if, in its judgment, such transactions are
advisable in light of general market, economic or financial conditions.
Portfolio turnover may vary greatly from year to year as well as within a
particular year. High portfolio turnover rates (100% or more) will generally
result in
- 7 -
<PAGE>
higher transaction costs to the Fund and may result in the realization of
short-term capital gains that are taxable to shareholders as ordinary income.
The amount of portfolio activity will not be a limiting factor when making
portfolio decisions. See the Statement of Additional Information, "Portfolio
Transactions" and "Taxes."
FOREIGN CURRENCY TRANSACTIONS. BEA may seek to hedge against a decline in
value of the Fund's non-dollar denominated portfolio securities resulting from
currency devaluations or fluctuations. Unless the Fund engages in currency
hedging transactions, it will be subject to the risk of changes in relation to
the U.S. dollar of the value of the foreign currencies in which their assets are
denominated. The Fund 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 Fund may also enter into contracts to purchase and sell forward foreign
currency exchange contracts to seek to enhance total return. A forward foreign
currency exchange contract is a negotiated agreement to exchange currency at a
future time at a rate or rates that may be higher or lower than those available
on a "spot" (or cash) basis. The Fund may enter into these contracts for
purposes of increasing exposure to a foreign currency or to shift exposure to
foreign currency fluctuations from one country to another. To the extent that
such contracts are entered into to enhance total return, they are considered
speculative. If the Fund enters into such a contract for any purpose, the Fund
will be required to maintain cash or liquid assets in an amount equal to the
value of the Fund's total assets committed to the consummation of the contract.
The Fund will not invest more than 50% of its respective total assets in such
contracts for the purpose of enhancing total return. There is no limit on the
amount of assets that the Fund may invest in such transactions for hedging
purposes.
Currency exchange rates may fluctuate significantly over short periods of
time. They generally are determined by the forces of supply and demand in the
foreign exchange markets and the relative merits of investments in different
countries, actual or perceived changes in interest rates and other complex
factors as seen from an international perspective. Currency exchange rates also
can be affected unpredictably by intervention by U.S. or foreign governments or
central banks, or the failure to intervene, or by currency controls or political
developments in the United States or abroad. The foreign currency market offers
less protection against defaults in the forward trading of currencies than is
available when trading in currencies occurs on an exchange. Since a forward
currency contract is not guaranteed by an exchange or clearinghouse, a default
on the contract would deprive the Fund of unrealized profits or force the Fund
to cover its commitments for purchase or resale, if any, at the current market
price.
The Fund will incur costs in connection with conversions between various
currencies. The Fund may hold foreign currency received in connection with
investments in foreign securities when, in the judgment of BEA, it would be
beneficial to convert such currency into
- 8 -
<PAGE>
U.S. dollars at a later date, based on anticipated changes in the relevant
exchange rate. See "Risk Factors" for a discussion of the risks of foreign
forward currency exchange contracts.
MORTGAGE-RELATED PASS-THROUGHS AND DERIVATIVES. The Fund may invest in
mortgage-related securities. Purchasable mortgage-related securities are
represented by pools of mortgage loans assembled for sale to investors by
various governmental agencies such as the Government National Mortgage
Association and government-related organizations such as the Federal National
Mortgage Association and the Federal Home Loan Mortgage Corporation, as well as
by private issuers such as commercial investment banks, savings and loan
institutions, mortgage bankers and private mortgage insurance companies. As
with other interest-bearing securities, the prices of such securities are
inversely affected by changes in interest rates. However, though the value of a
mortgage-related security may decline when interest rates rise, the converse is
not necessarily true because in periods of declining interest rates mortgages
underlying securities are prone to prepayment. For this and other reasons, a
mortgage-related security's stated maturity may be shortened by an unscheduled
prepayment on underlying mortgages and, therefore, it is not possible to predict
accurately the security's return to the Fund.
Mortgage-related securities acquired by the Fund may include collateralized
mortgage obligations ("CMOs") issued by FNMA, FHLMC or other U.S. Government
agencies or instrumentalities, as well as by private issuers. These securities
may be considered mortgage derivatives. CMOs provide an investor with a
specified interest in the cash flow of a pool of underlying mortgages or other
mortgage-related securities.
ASSET-BACKED SECURITIES. The Fund may purchase asset-backed securities,
which represent a participation in, or are secured by and payable from, a stream
of payments generated by particular assets, most often a pool of assets similar
to one another. Assets generating such payments will consist of instruments
such as motor vehicle installment purchase obligations, credit card receivables
and home equity loans.
Asset-backed securities may involve certain risks arising primarily from
the nature of the underlying assets (i.e., credit card and automobile loan
receivables as opposed to real estate mortgages). For example, credit card
receivables are generally unsecured and may require the repossession of personal
property upon the default of the debtor which may be difficult or impracticable
in some cases. Asset-backed securities are considered an industry for industry
concentration purposes, and the Fund will therefore not purchase any
asset-backed securities which would cause 25% or more of the Fund's total assets
at the time of purchase to be invested in asset-backed securities.
CONVERTIBLE SECURITIES. A convertible security is a bond, debenture, note,
preferred stock 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
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generally higher yields than those of common stocks of the same or similar
issuers. The Fund will invest in convertible securities without regard to their
credit ratings. See "Risk Factors - Lower Rated Securities" below.
AMERICAN DEPOSITORY RECEIPTS. The Fund may invest in ADRs. ADRs are
typically issued by a U.S. bank or trust evidencing ownership of the underlying
foreign securities. Generally, ADRs, in registered form, are designed for use
in U.S. securities markets. ADRs may be listed on a national securities
exchange or may be traded in the over-the-counter market. ADRs traded in the
over-the-counter market which do not have an active or substantial secondary
market will be considered illiquid and therefore will be subject to the Fund's
respective limitations with respect to such securities. ADRs may be denominated
in U.S. dollars although the underlying securities may be denominated in a
foreign currency. Investments in ADRs involve risks similar to those
accompanying direct investments in foreign securities. Certain of these risks
are described above under "Foreign Investments."
The Statement of Additional Information contains additional investment
policies and strategies of the Fund.
INVESTMENT LIMITATIONS
The Fund is subject to the following fundamental investment limitations,
which may not be changed with respect to the Fund without shareholder approval.
A complete list of the Fund's fundamental investment limitations is set forth in
the Statement of Additional Information under "Investment Limitations."
The Fund may not:
Borrow money or issue senior securities, except that the 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.
The Fund will not purchase securities while its aggregate borrowings
(including reverse repurchase agreements, dollar rolls and borrowings from
banks) are in excess of 5% of its total assets. 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.
Any investment policy or limitation which involves a maximum or minimum
percentage of securities or assets shall not be considered to be violated unless
an excess over or a deficiency under the percentage occurs immediately after,
and is caused by, an acquisition or disposition of securities or utilization of
assets by the Fund (except with respect to any restrictions that may
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apply to borrowings or senior securities issued by the Fund).
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 Fund 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 Fund's 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 Fund's 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 Fund's 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 Fund 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 Fund's 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 generally 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.
FOREIGN CURRENCY TRANSACTIONS. The over the counter market in forward
foreign currency exchange contracts offers less protection against defaults by
the other party to such instruments than is available for currency instruments
traded on an exchange. Such contracts are subject to the risk that the
counterparty to the contract will default on its obligations. Since these
contracts are not guaranteed by an exchange or clearinghouse, a default on the
contract would deprive the Fund of unrealized profits, transaction costs or the
benefits of a currency hedge or force the Fund to cover its purchase or sale
commitments, if any, at the current market price. The Fund will not enter into
forward foreign currency exchange contracts unless the credit quality of the
unsecured senior debt or the claims-paying ability of the counterparty is
considered
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to be investment grade by BEA.
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 the 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 the 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, the 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 the
Fund's assets. If the 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 the Fund's
expenses can be spread and possibly reducing the 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, which may have
an impact on BEA's ability both to value accurately lower-rated debt securities
and the Fund's assets, 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 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
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
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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.
GENERAL. Investment methods described in this Prospectus are among those
which the Fund has the power to utilize. Accordingly, reference to any
particular method or technique carries no implication that it will be utilized
or, if it is, that it will be successful.
MANAGEMENT
BOARD OF DIRECTORS
The business and affairs of the Company and the Fund are managed under the
direction of the Company's Board of Directors.
INVESTMENT ADVISER
BEA serves as the Investment Adviser for the Fund 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 Group, a
Swiss corporation. BEA is a registered investment adviser under the Investment
Advisers Act of 1940, as amended. BEA's principal offices are located at
Tower 49, 12 East 49th Street, New York, NY 10017.
BEA is a diversified investment adviser managing global equity,
fixed-income and derivative securities accounts for corporate pension and
profit-sharing plans, state pension funds, union funds, endowments and other
charitable institutions. As of December 31, 1997, BEA managed approximately
$34.2 billion in assets. BEA currently acts as investment adviser for eleven
other investment companies registered under the 1940 Act, and as sub-adviser to
certain portfolios of twelve other registered investment companies.
BEA will select investments for the Fund and will place purchase and sale
orders on behalf of the Fund. The Fund may use affiliates of Credit Suisse
Group 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.
The day-to-day portfolio management of the Fund is the responsibility of
the BEA Domestic Equity Management Team. The Team consists of the following
investment professionals: William W. Priest, Jr. (Chief Executive Officer and
Executive Director of BEA), John B. Hurford (Executive Director), James A. Abate
(Senior Vice President), Eric N. Remole
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(Managing Director), Marc Bothwell (Vice President) and Michael Welhoelter (Vice
President). Messrs. Priest and Hurford 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. Remole joined BEA in
1997, prior to which time he was Managing Director for fourteen years at
Citicorp Investment Management, Inc. (now Chancellor Capital Management, Inc.).
Mr. Bothwell joined BEA in 1997, prior to which time he was a vice president and
portfolio manager at Chancellor LGT Asset Management, Inc., where he was
involved in risk management and research on earnings and earnings surprise
modeling. Prior to 1994, he was a programmer and trader at Keane Dealer
Services, Inc. Mr. Welhoelter joined BEA in 1997, prior to which time he was a
portfolio manager and vice president for four years at Chancellor LGT Asset
Management, where he developed risk management and portfolio construction
strategies.
For the advisory services provided and expenses assumed by it, BEA is
entitled to receive a fee from the Fund computed at an annual rate of 0.75% of
average daily net assets, computed daily and payable quarterly.
BEA may, at its discretion from time to time agree to waive voluntarily all
or any portion of its advisory fee for the Fund.
BEA may assume additional expenses of the 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
the Fund's expense ratio and of decreasing return to investors.
The Advisory Agreement provides 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.
CO-ADMINISTRATORS
PFPC Inc. ("PFPC"), an indirect, wholly-owned subsidiary of PNC Bank Corp.,
serves as co-administrator for the Advisor Class of the Fund. As
co-administrator, PFPC will provide various services to the Advisor Class of the
Fund, including determining the net asset value of the Advisor Class of the
Fund, providing all accounting services for the Class and generally assisting in
all aspects of the operations of the Advisor Class of the Fund. As compensation
for administrative services, the Fund will pay PFPC a fee calculated at the
annual rate of .125% of the average daily net assets of the Advisor Class of the
Fund. PFPC has its principal offices at 400 Bellevue Parkway, Wilmington,
Delaware 19809.
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<PAGE>
The Company employs BEA as co-administrator. As co-administrator, BEA
generally assists the Advisor Class of the Fund in all aspects of its
administration and shareholder servicing. As compensation, the Company pays to
BEA a fee calculated at an annual rate of .05% of the average daily net assets
of the Advisor Class of the Fund for assets up to $125 million, and .10%
thereafter.
DISTRIBUTOR
Provident Distributors, Inc. ("PDI"), with a principal business address at
Four Falls Corporate Center, 6th Floor, West Conshohocken, Pennsylvania 19428,
acts as distributor for the Shares. PDI 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 PDI 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 PDI under the Company's 12b-1
Plan may be used by PDI to cover expenses that are related to (i) the
distribution of Advisor Shares of the Fund, (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 Fund, all as set forth in the Company's
12b-1 Plan. Payments under the 12b-1 Plan are not tied exclusively to the
expenses actually incurred. PDI may delegate some or all of these functions to
a Service Organization. See "How to Purchase Shares -- Purchases Through
Intermediaries."
BEA, PDI or an affiliate of either may, at its own expense, provide
promotional incentives for qualified recipients who support the sale of Shares
of the Fund, consisting of securities dealers who have sold Fund Shares or
others, including banks and other financial institutions, under special
arrangements. Incentives may include opportunities to attend business meetings,
conferences, sales or training programs for recipients' employees or clients and
other programs or events and may also include opportunities to participate in
advertising or sales campaigns and/or shareholder services and programs
regarding the Fund. BEA, PDI or an affiliate of either may pay for travel,
meals and lodging in connection with these promotional activities. In some
instances, these incentives may be offered only to certain institutions whose
representatives provide services in connection with the sale or expected sale of
significant amounts of the Fund's Shares.
TRANSFER AGENT
State Street Bank and Trust Company ("State Street") acts as transfer agent
for the Fund. It has delegated to Boston Financial Data Services, Inc.
("BFDS"), a 50% owned subsidiary, responsibility for most transfer agent
servicing functions. State Street's principal address is 225 Franklin Street,
Boston, MA 02110 and BFDS's principal address is 2 Heritage Drive, Quincy, MA
02171, telephone number (800) 401-2230.
CUSTODIAN
Brown Brothers Harriman & Co. serves as custodian for the Fund. The 1940
Act and the
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rules and regulations adopted thereunder permit the Fund to maintain its
securities and cash in the custody of certain eligible banks and securities
depositories. In compliance with such rules and regulations, the 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 the Fund are deducted from its total income before
dividends are paid. 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. The Advisor Class of the Fund
pays its own administration fees, and may pay a different share than the other
classes of other expenses (excluding advisory and custodial fees) if those
expenses are actually incurred in a different amount by the Advisor Class or if
it receives different services.
The expenses for the Fund are set forth in the tables entitled "Annual Fund
Operating Expenses," above.
HOW TO PURCHASE SHARES
Shares representing interests in the Fund are offered continuously for sale
by the Distributor and may be purchased without imposition of a sales charge
through the BEA Advisor Funds. Shares of the Fund may be purchased either by
mail or, with special advance instructions, by wire.
BY MAIL
If an investor desires to purchase Shares by mail, a check or money
order made payable to the "BEA Advisor Funds" (in U.S. currency) should be
sent along with the completed account application to the "BEA Advisor Funds"
at the address set forth below. Checks payable to the investor and endorsed
to the order of the "BEA Advisor Funds" will not be accepted as payment and
will be returned to sender. If payment is received by check in proper form
on or before the close of regular trading on the New York Stock Exchange,
Inc. ("NYSE") (generally 4:00 p.m. Eastern Time) on a day that the 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 the close of regular trading on the NYSE, the purchase will
be effected at the Fund's net asset value determined for the next Business
Day after payment has been received. Checks or money orders that are not in
proper form or that are not accompanied or preceded by a completed
application will be returned to sender. Shares purchased by check are
entitled to receive dividends and distributions beginning on the day after
payment has been received. Checks should be made payable to the "BEA Advisor
Funds" accompanied by the amount to be invested in the Fund. If a check used
for purchase does not clear, the Fund will cancel the purchase and the
investor may be liable for losses or fees incurred. For a description of the
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manner of calculating the Fund's net asset value, see "Net Asset Value" below.
SEND TO:
BEA ADVISOR FUND
P.O. Box 8500
Boston, MA 02266-8500
OVERNIGHT TO:
BFDS
ATTN: BEA ADVISOR FUND
2 Heritage Drive
North Quincy, MA 02171
BY WIRE
Investors may also purchase Shares by wiring funds from their banks.
Telephone orders will not be accepted until a completed account application in
proper form has been received and an account number has been established. After
telephoning (800) 401-2230 for instructions, an investor should then wire
Federal Funds to the BEA Advisor Funds, c/o BFDS using the following wire
address:
State Street Bank & Trust Company
ABA# 0110 000 28
ATTN: Mutual Fund/Custody Dept.
[BEA Advisor Fund Name]
DDA# 9905-227-6
For Further Credit: [ACCOUNT NUMBER AND
REGISTRATION]
If a telephone order is received by the close of regular trading on the
NYSE AND payment by wire is received on the same day in proper form (in
accordance with instructions stated above), the Shares will be priced according
to the net asset value of the Fund on that day and are entitled to dividends and
distributions beginning on that day. If payment by wire is received in proper
form by the close of the NYSE without a prior telephone order, the Shares will
be priced according to the net asset value of the Fund on that day and are
entitled to dividends and distributions beginning on that day. However, if a
wire received in proper form is not preceded by a telephone order AND is
received after the close of regular trading on the NYSE, the payment will be
held uninvested until the order is effected at the close of business on the next
Business Day. Payment for orders that are not accepted will be returned to the
prospective investor after prompt inquiry. If a telephone order is placed and
payment by wire is not received on the same day, the Fund will cancel the
purchase and the investor may be liable for losses or fees incurred.
Shares of the Fund are sold without a sales charge. The minimum initial
investment in
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the Fund is $2,500 and minimum subsequent investments must be $250, except that
subsequent minimum investments can be as low as $100 under the Automatic
Investment Plan, Uniform Gifts to Minors Act and through Individual Retirement
Accounts described below. The Fund reserves the right to change the initial and
subsequent minimum investment requirements at any time.
After an investor has made his initial investment, additional Shares may be
purchased at any time by mail or by wire in the manner outlined above. Wire
payments for initial and subsequent investments should clearly indicate the
investor's account number and the name in which Shares are being purchased. The
Fund reserves the right to suspend the offering of Shares for a period of time
or to reject any specific purchase order. In the interest of economy and
convenience, physical certificates representing Shares in the Fund are not
normally issued.
PURCHASE THROUGH INTERMEDIARIES
The Fund understands that some broker-dealers (other than PDI), financial
institutions, securities dealers and other industry professionals ("Service
Agents") impose certain conditions on their clients that invest in the Fund,
which are in addition to or different from those described in this Prospectus,
and, to the extent permitted by applicable regulatory authority, may charge
their clients direct fees. Certain features of the Fund, such as the minimum
initial or subsequent investments, redemption fees and certain trading
restrictions may be modified or waived by Service Agents, and administrative
charges or other direct fees may be imposed for the services rendered, which
charges or fees would not be imposed if Fund Shares were purchased directly from
the Fund. Therefore, a client or customer should contact the Service Agent
acting on his behalf concerning the fees (if any) charged in connection with a
purchase or redemption of the Fund's shares and should read this Prospectus in
light of the terms governing his accounts with Service Agents. Service Agents
or, if applicable, their designees, will be responsible for promptly
transmitting client or customer purchase and redemption orders to the Fund in
accordance with their agreements with clients or customers. Service Agents, or,
if applicable, their designees that have entered into agreements with the Fund
or its agent, may enter confirmed purchase orders on behalf of clients and
customers with payment to follow no later than the Fund's pricing on the
following Business Day. If payment is not received by such time the Service
Agents could be held liable for resulting fees or losses.
The Fund will be deemed to have received a purchase or redemption order
when a Service Agent, or, if applicable, its authorized designee, receives a
purchase or redemption order in good order. Orders received by the Fund in
proper form will be priced at the Fund's net asset value next computed after
they are accepted by the Service Agent or its authorized designee.
For administration, subaccounting, transfer agency and/or other services,
BEA, PDI or an affiliate of either may pay Service Agent and certain
recordkeeping organizations with whom they have entered into agreements a fee of
up to .35% (the "Service Fee") of the average annual value of accounts with the
Fund maintained by such Service Agent or recordkeepers. A portion of the
Service Fee may be borne by the Fund as a transfer agency fee. The Service Fee
payable to any one Service Agent or recordkeeper is determined based upon a
number of factors,
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including the nature and quality of the services provided, the operations
processing requirements of the relationship and the standardized fee schedule of
the Service Agent or recordkeeper.
AUTOMATIC INVESTMENT PLAN
Additional investments in Shares may be made automatically on a periodic
basis by authorizing the BEA Advisor Funds to withdraw funds from your bank
account through an Automatic Investment Plan. Investors desiring to participate
in an Automatic Investment Plan should call the BEA Advisor Funds, at
(800) 401-2230 to obtain the appropriate forms, or complete the appropriate
section of the Application included with this Prospectus. The minimum initial
investment for an Automatic Investment Plan is $1,000, with minimum monthly
payments of $100.
RETIREMENT PLANS AND UGMA/UTMA ACCOUNTS
Shares may be purchased in conjunction with Individual Retirement Accounts
("IRAs"), rollover IRAs, pension, profit-sharing or other employer benefit
plans, and under the Uniform Gifts to Minors Act ("UGMA") or Uniform Transfers
to Minors Act ("UTMA"). The minimum initial investment in conjunction with such
accounts is $1,000, and the minimum subsequent investment is $100. For further
information as to applications and annual fees, please contact the BEA Advisor
Funds. To determine whether the benefits of an IRA and other plans and UGMA and
UTMA accounts are available and/or appropriate, a shareholder should consult
with a tax adviser.
HOW TO REDEEM AND EXCHANGE SHARES
An investor of the Fund may redeem (sell) his Shares on any day that the
Fund's net asset value is calculated (see "Net Asset Value" below).
REDEMPTION IN WRITING
Shareholders may redeem for cash some or all of their Fund Shares at any
time. To do so, a written request in proper form must be sent directly to the
BEA Advisor Funds c/o BFDS, P.O. Box 8500, Boston, MA 02266-8500. The
redemption price is the net asset value per share next determined after the
initial receipt of proper notice of a redemption. The value of Shares at the
time of redemption may be more or less than the shareholders' cost depending on
the market value of the securities held by the Fund at the 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 an agent or investment
adviser to the Shareholder. Signatures must conform exactly to the account
registration. Generally, a properly signed written request is all that is
required for a redemption. In some cases, however, other documents may be
necessary. Additional documentary evidence of authority is also required by the
BEA Advisor Funds in the event redemption is requested by a corporation,
partnership, trust,
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fiduciary, executor or administrator.
PAYMENT OF REDEMPTION PROCEEDS
Payment of the Redemption Price for Shares redeemed will be made by wire or
by check mailed within seven days after acceptance by the BEA Advisor Funds c/o
BFDS, of the request and any other necessary documents in proper order. Such
payment may be postponed or the right of redemption suspended as provided by the
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.
INVOLUNTARY REDEMPTION
The Company reserves the right to redeem an account in the Fund of a
shareholder at any time the net asset value of the account in the Fund falls
below $500 as the result of a redemption request. Shareholders will be notified
in writing that the value of their account in the Fund is less than $500 and
will be allowed 30 days to make additional investments before the redemption is
processed.
REDEMPTION IN-KIND
The Company reserves the right, at its discretion, to honor any request for
redemption of the 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 the 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 1940 Act so that the
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 the Fund. Redeeming shareholders will be required to bear
certain administrative or custodial costs in effecting redemptions in-kind.
EXCHANGE PRIVILEGE
An individual or Service Agent may exchange Advisor Shares of the Fund for
Advisor Shares of any other BEA Advisor Fund at the Fund's respective net asset
values. Exchanges will be effected in the manner described under "Redemption of
Shares" above. If an exchange request is received by BEA Advisor Funds prior to
the close of regular trading on the NYSE, the exchange will be made at the
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
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shareholder may realize a taxable gain or loss in connection with the exchange.
For further information regarding the exchange privilege, the shareholder should
contact the BEA Advisor Funds at (800) 401-2230.
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.
TELEPHONE TRANSACTIONS
In order to request redemptions or exchanges by telephone, investors must
have completed and returned to the BEA Advisor Funds an account application
containing a telephone election. Unless contrary instructions are elected, an
investor will be entitled to make redemptions or exchanges by telephone by
calling the BEA Advisor Funds at (800) 401-2230. To add a telephone redemption
or exchange feature to an existing account that previously did not provide for
this option, a Telephone Redemption or Exchange Authorization Form may be
obtained from the BEA Advisor Funds. Neither the Company, the Fund, the
Distributor, the Co-Administrators, the Transfer Agent nor any other Fund agent
will be liable for following instructions communicated by telephone that they
reasonably believe to be genuine. Reasonable procedures will be employed on
behalf of the Fund to confirm that instructions communicated by telephone are
genuine. Such procedures may include, among others, providing written
confirmation of telephone transactions, tape recording telephone instructions,
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, and requiring specific personal information prior to
acting upon telephone instructions.
NET ASSET VALUE
The net asset values for each class of the Fund are determined as of the
close of regular trading on the NYSE on each Business Day. The net asset values
of each class of the Fund are calculated by adding the value of the
proportionate interest of each class in the Fund's securities, cash and other
assets, deducting the actual and accrued liabilities of the class and dividing
the result by the total number of outstanding shares of the class.
Most securities held by the Fund are priced based on their market value as
determined by reported sales prices, or the mean between bid and asked prices
that are provided by securities dealers or pricing services. Fund securities
which are primarily traded on foreign securities exchanges are normally valued
at the preceding closing values of such securities on their respective
exchanges. Securities for which market quotations are not readily available are
valued at fair market value as determined in good faith under procedures
established by the Board of
- 21 -
<PAGE>
Directors. The amortized cost method of valuation will also be used with
respect to debt obligations with sixty days or less remaining to maturity unless
the Adviser under the supervision of the Board of Directors determines such
method does not represent fair value.
DIVIDENDS AND DISTRIBUTIONS
The Company will distribute substantially all of the net realized capital
gains, if any, of the Fund to the Fund's shareholders annually. The Company
will distribute all net investment income, if any, for the Fund annually. All
distributions will be reinvested in the form of additional full and fractional
shares of the Fund unless a contrary election is made on the application to have
distributions paid in cash. If in the future a shareholder desires to have
distributions paid out rather than reinvested, the shareholder should notify the
BEA Advisor Funds in writing.
TAXES
GENERAL
The following discussion is only a brief summary of some of the important
tax considerations generally affecting the Fund and its shareholders and is not
intended as a substitute for careful tax planning. Accordingly, investors in
the Fund should consult their tax advisers with specific reference to their own
tax situation.
The 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 the Fund qualifies for this tax treatment, it 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 the 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%, and the long-term capital gain rate is 28% (for the sale of
capital assets held more than 12 months but not more than 18 months) or 20% (for
the rate of capital assets held more than 18 months). For corporations,
however, the rates for both ordinary income and capital gains are the same.
Transactions in foreign currencies, forward contracts, options and futures
contracts (including options and futures contracts on foreign currencies) will
be subject to special
- 22 -
<PAGE>
provisions of the Code that, among other things, may affect the character (i.e.,
ordinary or capital) of gains or losses realized by the Fund, accelerate the
recognition of income by the Fund and defer the 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 Fund. In addition,
certain investments (such as zero coupon securities and shares of so-called
"passive foreign investment companies" or "PFICS") may cause the Fund to
recognize income without the receipt of cash. Each of these circumstances,
whether separately or in combination, may limit the 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 the 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. The 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 the 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 will be subject to
different U.S. federal income tax treatment.
FOREIGN INCOME TAXES
Investment income received by the Fund 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 Fund 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 the Fund's assets to be invested in various countries is not
known.
If more than 50% of the value of the Fund's total assets at the close of
each taxable year consists of the stock or securities of foreign corporations
(which is generally not expected to be the case, however), the Fund will be
eligible to elect to "pass through" to the Company's
- 23 -
<PAGE>
shareholders the amount of foreign income taxes paid by the 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 the Fund for the purpose of the foreign
tax credit limitation rules of the Code, shareholders will be required to treat
allocable portions of the Fund's distributions as foreign source income. No
deduction for foreign taxes may be claimed by a shareholder who does not itemize
deductions.
MULTI-CLASS STRUCTURE
The Company offers three classes of shares, Advisor, Institutional and
Investor Shares, which are offered directly to institutional investors and
financial intermediaries pursuant to separate prospectuses. Shares of the Fund
represent equal pro rata interests in the Fund and accrue dividends and
calculate net asset value and performance quotations in the same manner. The
Company quotes performance of each class of Shares separately. Because
different fees are paid by each class of shares, the total return on such shares
can be expected, at any time, to be different than the total return on another
class of Shares. Information concerning these other classes may be obtained by
calling the BEA Funds at (800) 401-2230.
DESCRIPTION OF SHARES
The Company has authorized capital of thirty billion shares of Common
Stock, $.001 par value per share, of which 14.83 billion shares are currently
classified into 91 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 CLASS REPRESENTING INTERESTS IN THE
BEA U.S. CORE EQUITY FUND AND DESCRIBE ONLY THE INVESTMENT OBJECTIVE AND
POLICIES, OPERATIONS, CONTRACTS AND OTHER MATTERS RELATING TO THAT FUND.
Each share that represents an interest in the Fund has an equal
proportionate interest in the assets belonging to the Fund with each other share
that represents an interest in the 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.
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
- 24 -
<PAGE>
communication in such matters.
Holders of shares of the Fund 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 ____________, 1998, 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 the Fund will receive unaudited semi-annual reports
describing the Fund's investment operations and annual financial statements
audited by independent accountants. Shareholder inquiries can be made by
contacting the BEA Funds at (800) 401-2230 or by writing to BEA Funds, P.O. Box
8500, Boston, MA 02266-8500.
PERFORMANCE INFORMATION
From time to time, the Fund 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 the 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. This standard
calculation is required by the SEC to provide consistency and comparability in
investment company advertising. The Fund 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 the Fund's performance with other measures of investment return. For
example, the Fund's total return or expense ratio may be compared with data
published by Lipper Analytical Services, Inc., CDA/Weisenberger Investment
Technologies, Inc., Mutual Fund Forecaster, or Morningstar, Inc., or with the
performance of the Standard & Poor's 500 Stock Index, national publications such
as MONEY, FORBES, BARRON'S, THE WALL STREET JOURNAL or the NEW YORK TIMES or
publications
- 25 -
<PAGE>
of a local or regional nature, and other industry publications. For these
purposes, the performance of the 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
the 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.
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 broker/dealers
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.
- 26 -
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE FUND'S STATEMENT OF
ADDITIONAL INFORMATION INCORPORATED HEREIN BY REFERENCE, IN CONNECTION WITH THE
OFFERING MADE BY THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH REPRESENTATIONS
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE 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.
- 27 -
<PAGE>
(This page has been left blank intentionally.)
- 28 -
<PAGE>
(This page has been left blank intentionally.)
- 29 -
<PAGE>
BEA ADVISOR FUND
QUICK REFERENCE GUIDE
BEA ADVISOR FUND
U.S. Core Equity Fund
WORLD WIDE WEB
Please visit our website at: www.beafunds.com.
FUND AND ACCOUNT INFORMATION
Shareholders and all interested investors
may direct their inquiries and requests
for information to the Funds' information
line at 1-800-401-2230.
AUTOMATIC REINVESTMENT PROGRAM
Dividend and capital gain distributions
are automatically reinvested in shares
of the same Fund at the current net
asset value.
EXCHANGE PRIVILEGES
Shareholders may sell fund shares and
buy shares of other BEA Advisor Funds
by telephone or in writing. Please
refer to the Prospectus section
entitled "Exchange Privilege."
STATEMENTS AND REPORTS
As a shareholder you will receive the following:
- - Confirmation Statements - after every
transaction that affects your account
balance or account registration
- - Account Statements - quarterly
- - Financial Reports - semi-annually
INVESTMENT ADVISER
BEA Associates
Tower 49
12 East 49th Street
New York, NY 10017
<PAGE>
DISTRIBUTOR
Provident Distributors, Inc.
Four Falls Corporate Center
6th Floor
West Conshohocken, PA 19428
CO-ADMINISTRATOR
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809
CO-ADMINISTRATOR
BEA Associates
Tower 49
12 East 49th Street
New York, NY 10017
CUSTODIAN
Brown Brothers Harriman & Co.
40 Water Street
Boston, MA 02109
TRANSFER AGENT
State Street Bank and Trust Co.
225 Franklin Street
Boston, MA 02110
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, PA 19103
LEGAL COUNSEL
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, PA 19107-3496
<PAGE>
BEA
ADVISOR SHARES
U.S. CORE EQUITY FUND
(INVESTMENT PORTFOLIO OF THE RBB FUND, INC.)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information provides supplementary
information pertaining to shares (the "Advisor Shares" or the "Shares")
representing interests in one investment portfolio (the "Fund") of The RBB Fund,
Inc. (the "Company"): the BEA U.S. Core Equity Fund. This Statement of
Additional Information is not a prospectus, and should be read only in
conjunction with the BEA Advisor Prospectus for the Fund, dated _______, 1998
(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 _______________, 1998.
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
<TABLE>
<CAPTION>
Prospectus
Page Page
---- ----------
<S> <C> <C>
General. . . . . . . . . . . . . . . . . . . . . . . . 3 3
Investment Policies. . . . . . . . . . . . . . . . . . 3 6
Investment Limitations . . . . . . . . . . . . . . . . 20 7
Risk Factors . . . . . . . . . . . . . . . . . . . . . 22 7
Directors and Officers . . . . . . . . . . . . . . . . 25 N/A
Investment Advisory and Servicing
Arrangements . . . . . . . . . . . . . . . . . . . . 37 9
Portfolio Transactions . . . . . . . . . . . . . . . . 43 N/A
Purchase and Redemption Information. . . . . . . . . . 46 12
Valuation of Shares. . . . . . . . . . . . . . . . . . 48 16
Performance and Yield Information. . . . . . . . . . . 49 19
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . 52 16
Additional Information Concerning Fund
Shares . . . . . . . . . . . . . . . . . . . . . . . 61 19
Miscellaneous. . . . . . . . . . . . . . . . . . . . . 64
Financial Statements . . . . . . . . . . . . . . . . . 75 N/A
Appendix A . . . . . . . . . . . . . . . . . . . . . . A-1
Appendix B . . . . . . . . . . . . . . . . . . . . . . B-1
</TABLE>
-2-
<PAGE>
GENERAL
The RBB Fund, Inc. (the "Company) is an open-end management investment
company currently operating or proposing to operate twenty-six 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.
INVESTMENT POLICIES
The following supplements the information contained in the Prospectus
concerning the investment objectives and policies of, and techniques used by,
the Fund.
NON-DIVERSIFIED STATUS. The Fund is classified as non-diversified
within the meaning of the Investment Company Act of 1940 (the "1940 Act") which
means that the Fund is not limited by such Act in the proportion of its assets
that it may invest in securities of a single issuer. The 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 (the
"Code"). See "Taxes." To qualify, the 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 the
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 the Fund's total assets will be invested in the
securities of a single issuer and the Fund will not own more than 10% of the
outstanding voting securities of a single issuer. To the extent that the Fund
assumes large positions in the securities of a small number of issuers, the
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 the 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.
REPURCHASE AGREEMENTS. The Fund may agree to purchase securities from
a bank or recognized securities dealer and simultaneously commit to resell the
securities to the
-3-
<PAGE>
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"). The 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 was 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 the Fund to possible loss because of adverse
market action, expenses and/or delays in connection with the disposition of the
underlying obligations. The financial institutions with which the Fund may
enter into repurchase agreements will be banks and non-bank dealers of U.S.
Government securities that are listed on the Federal Reserve Bank of New York's
list of reporting dealers, if such banks and non-bank dealers are deemed
creditworthy by the Fund's adviser. The Fund's adviser will continue to monitor
creditworthiness of the seller under a repurchase agreement, and will require
the seller to maintain during the term of the agreement the value of the
securities subject to the agreement to equal at least the repurchase price
(including accrued interest). In addition, the Fund's adviser will require that
the value of this collateral, after transaction costs (including loss of
interest) reasonably expected to be incurred on a default, be equal to or
greater than the repurchase price (including accrued premium) provided in the
repurchase agreement or the daily amortization of the difference between the
purchase price and the repurchase price specified in the repurchase agreement.
The Fund's adviser will mark-to-market daily the value of the securities. There
are no percentage limits on the Fund's ability to enter into repurchase
agreements. Repurchase agreements are considered to be loans by the Fund under
the 1940 Act.
REVERSE REPURCHASE AGREEMENTS AND DOLLAR ROLLS. The 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 the Fund pursuant to the Fund's agreement to repurchase them at a mutually
agreed upon date, price and rate of interest. At the time the Fund enters into
a reverse repurchase agreement, it will establish and maintain a segregated
account with an approved custodian containing cash or liquid 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). The 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 the 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 the Fund's obligation to repurchase the securities, and the Fund's use
of the proceeds of the reverse repurchase agreement may effectively be
restricted pending such decision. Reverse repurchase agreements are considered
to be borrowings under the 1940 Act. The Fund also may enter into "dollar
rolls," in which it sells fixed income securities for delivery in the current
month and simultaneously
-4-
<PAGE>
contracts to repurchase substantially similar (same type, coupon and maturity)
securities on a specified future date. During the roll period, the Fund would
forgo principal and interest paid on such securities. The 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. The Fund does 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. The 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 Fund has not established a limit on the
percentage of its assets that may be committed in connection with such
transactions, it will maintain segregated accounts with its custodian consisting
of cash or liquid 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. The 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 the 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 25% of its net
assets. The Fund does not intend to engage in when-issued purchases and forward
commitments for speculative purposes but only in furtherance of its investment
objectives.
STAND-BY COMMITMENT AGREEMENTS. The Fund may from time to time enter
into stand-by commitment agreements. Such agreements commit a Fund, for a
stated period of time, to purchase a stated amount of fixed-income securities
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. The 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 the Fund.
The Fund will not enter into a stand-by 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 10% of its assets taken at the time of acquisition of
such commitment or security. The Fund will at all times maintain a segregated
account with its custodian consisting of cash or liquid 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
-5-
<PAGE>
placed in such account on any day in which assets fall below the amount of the
purchase price. The 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 stand-by
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 stand-by 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 stand-by commitment. The Fund does not presently intend to invest
more than 5% of net assets in stand-by commitment agreements.
ILLIQUID SECURITIES. The Fund does not presently intend to invest
more than 15% 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. With respect to the Fund, repurchase agreements subject to demand
are deemed to have a maturity equal to the notice period.
Mutual funds do not typically hold a significant amount of 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.
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If otherwise consistent with its investment objectives and policies,
the Fund may purchase securities that are not registered under the Securities
Act but can be sold to "qualified institutional buyers" in accordance with Rule
144A under the Securities Act. These securities will not be considered illiquid
so long as it is determined by the Adviser, under guidelines approved by the
Board of Directors, that an adequate trading market exists for the securities.
The Fund's investment in Rule 144A securities could increase the level of
illiquidity during any period that qualified institutional buyers become
uninterested in purchasing these securities.
The Adviser will monitor the liquidity of restricted securities in the
Fund under the supervision of the Board of Directors. In reaching liquidity
decisions, the Adviser may consider, among others, 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).
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.
SECURITIES OF UNSEASONED ISSUERS. The 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 the 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, the 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. The Fund 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 the 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 Fund to possible loss
because of adverse market action, expenses and/or delays in connection with the
disposition of the underlying securities.
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BORROWING. The 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 the Fund's total assets. Although the principal of such borrowings
will be fixed, the Fund's assets may change in value during the time the
borrowing is outstanding. The 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.
U.S. GOVERNMENT SECURITIES. The U.S. Government securities in which
the 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 Fund 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
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adjusted by the Council of Ministers of the European Community to reflect
changes in relative values of the underlying currencies.
BRADY BONDS. The Fund may invest in so-called "Brady Bonds," which
are securities created through the exchange of existing commercial bank loans to
Latin American public and private entities for new bonds in connection with debt
restructurings under a debt restructuring plan announced by former U.S.
Secretary of the Treasury Nicholas F. Brady (the "Brady Plan"). Brady Bonds may
be collateralized or uncollateralized, are issued in various currencies
(primarily the U.S. dollar) and are currently actively traded in the
over-the-counter secondary market for Latin American debt instruments.
Dollar-denominated, collateralized Brady Bonds, which may be fixed
rate par bonds or floating rate discount bonds, are collateralized in full as to
principal by U.S. Treasury zero coupon bonds having the same maturity as the
bonds. Interest payments on these Brady Bonds generally are collateralized by
cash or securities in an amount that, in the case of fixed rate bonds, is equal
to at least one year of rolling interest payments or, in the case of floating
rate bonds, initially is equal to at least one year's rolling interest payments
based on the applicable interest rate at that time and is adjusted at regular
intervals thereafter.
All Mexican Brady Bonds issued to date, except New Money Bonds, have
principal repayments at final maturity fully collateralized by U.S. Treasury
zero coupon bonds (or comparable collateral in other currencies) and interest
coupon payments collateralized on an 18-month rolling-forward basis by funds
held in escrow by an agent for the bondholders. Approximately half of the
Venezuelan Brady Bonds issued to date have principal repayments at final
maturity collateralized by U.S. Treasury zero coupon bonds (or comparable
collateral in other currencies), while slightly more than half have interest
coupon payments collateralized on a 14-month rolling-forward basis by securities
held by the Federal Reserve Bank of New York as collateral agent.
Brady Bonds are often viewed as having three or four valuation
components: the collateralized repayment of principal at final maturity; the
collateralized interest payments; the uncollateralized interest payments; and
any uncollateralized repayment of principal at maturity (these uncollateralized
amounts constituting the "residual risk").
LOAN PARTICIPATIONS AND ASSIGNMENTS. The 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 the Fund having a contractual relationship only with the Lender,
not with the borrower. The 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 Fund
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
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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 Fund 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 Fund 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 Fund will acquire Participations only if the
Lender interpositioned between the Fund and the borrower is determined by BEA to
be creditworthy. The Fund currently anticipates that it will not invest more
than 5% of its net assets in Loan Participations and Assignments.
CONVERTIBLE SECURITIES. A convertible security is a bond, debenture,
note, preferred stock or other security that may be converted into or exchanged
for a prescribed amount of common stock of the same or a different issuer within
a particular period of time at a specified price or formula. A convertible
security entitles the holder to receive interest paid or accrued on debt or the
dividend paid on preferred stock until the convertible security matures or is
redeemed, converted or exchanged. Before conversion, convertible securities
have characteristics similar to nonconvertible debt securities in that they
ordinarily provide a stable stream of income with generally higher yields than
those of common stocks of the same or similar issuers. Convertible securities
rank senior to common stock in a corporation's capital structure but are usually
subordinated to comparable nonconvertible securities. While no 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
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investors place value on the right to acquire the underlying common stock while
holding a fixed-income security.
The Fund has no current intention of converting any convertible
securities it may own into equity securities or holding them as equity
securities 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. The Fund will invest in
convertible securities without regard to their credit rating. See "Risk Factors
- -- Lower Rated Securities" in the Prospectus.
MORTGAGE-BACKED SECURITIES. The Fund may invest in mortgage-backed
securities, such as those issued by the Government National Mortgage Association
("GNMA"), the Federal National Mortgage Association ("FNMA"), the Federal Home
Loan Mortgage Corporation ("FHLMC") or certain foreign issuers, as well as by
private issuers such as commercial investment banks, savings and loan
institutions, mortgage bankers 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 Fund purchases 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
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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 the 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 Fund. Mortgage-related securities provide regular
payments consisting of interest and principal. No assurance can be given as to
the return the Fund 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 Fund 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. These securities may be
considered mortgage derivatives. The Fund 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
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pools can also be divided into a principal only class and an interest only
class. In this case the principal only class will only receive principal cash
flows from the pool. All interest cash flows go to the interest only class.
The relative payment rights of the various CMO classes may be structured in many
ways, either sequentially or by other rules of priority. Generally, payments of
principal are applied to the CMO classes in the order of their respective stated
maturities, so that no principal payments will be made on a CMO class until all
other classes having an earlier stated maturity date are paid in full.
Sometimes, however, CMO classes are "parallel pay," I.E. payments of principal
are made to two or more classes concurrently. CMOs may exhibit more or less
price volatility and interest rate risk than other types of mortgaged-related
obligations.
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 receives 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 the Fund would have the same effect as the prepayment
of mortgages underlying a mortgage-backed pass-through security as described
above.
ASSET-BACKED SECURITIES. The 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 Fund 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 Fund
will therefore not purchase any asset-backed securities which would cause 25% or
more of the 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
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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 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.
ZERO COUPON SECURITIES. The 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. The 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. The 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 Fund 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 the 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.
ADDITIONAL INVESTMENT CONSIDERATIONS AND RISKS -- NON-INVESTMENT GRADE
FIXED-INCOME SECURITIES. When and if available, fixed-income securities may be
purchased by the Fund at a discount from face value. From time to time, the
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 Fund 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
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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 the 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 Fund
purchases 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 the Fund but
will be reflected in the net asset value of the Fund's shares. The Fund
attempts 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, the 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 maturity or payment date.
Therefore, in order to satisfy these distribution requirements, the 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 the 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, the 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. The Fund may engage in various hedging strategies. See
"Currency Hedging" in the Prospectus.
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FORWARD CURRENCY CONTRACTS. The Fund may use forward currency
contracts to protect against uncertainty in the level of future exchange rates
and to enhance total return. The Fund may also 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. The 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
the 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 the 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 the Fund to sustain losses on these
contracts and transaction costs. The 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 the Fund to deliver an amount of foreign currency in
excess of the value of the Fund's portfolio securities or other assets
denominated in that currency or (2) the Fund maintains cash or liquid 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 the Fund will be served.
At or before the maturity date of a forward contract requiring a
portfolio to sell a currency, the Fund 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 Fund may close out a forward contract requiring them to purchase
a specified currency by entering into a second contract entitling them to sell
the same amount of the same currency on the maturity date
-16-
<PAGE>
of the first contract. The 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 the 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 the 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 the Fund.
Although the 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 Fund 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 the Fund at one rate, while offering a lesser rate of
exchange should the Fund desire to resell that currency to the dealer.
OPTIONS AND FUTURES CONTRACTS. The 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.
The Fund 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. See Appendix "B" for a
description of futures contracts and options on futures contracts and the risks
thereof.
Options trading is a highly specialized activity which entails greater
than ordinary investment risks. Options on particular securities may be more
volatile than the underlying securities, and therefore, on a percentage basis,
an investment in the underlying securities themselves. The Fund will write call
options only if they are "covered." In the case of a call option on a security,
the option is "covered" if the Fund owns the security underlying the call or has
an absolute and immediate right to acquire that security without additional cash
consideration
-17-
<PAGE>
(or, if additional cash consideration is required, liquid assets in such amount
as are held in a segregated account by its custodian) upon conversion or
exchange of other securities held by it. For a call option on an index, the
option is covered if the Fund maintains with its custodian liquid assets equal
to the contract value. A call option is also covered if the Fund holds a call
on the same security or index as the call written where the exercise price of
the call held is (i) equal to or less than the exercise price of the call
written, or (ii) greater than the exercise price of the call written provided
the difference is maintained by the Fund in liquid assets in a segregated
account with its custodian.
When the Fund purchases a put option, the premium paid by it is
recorded as an asset of the Fund. When the Fund writes an option, an amount
equal to the net premium (the premium less the commission) received by the Fund
is included in the liability section of the Fund's statement of assets and
liabilities as a deferred credit. The amount of this asset or deferred credit
will be subsequently marked-to-market to reflect the current value of the option
purchased or written. The current value of the traded option is the last sale
price or, in the absence of a sale, the mean between the last bid and asked
prices. If an option purchased by the Fund expires unexercised the Fund
realizes a loss equal to the premium paid. If the Fund enters into a closing
sale transaction on an option purchased by it, the Fund will realize a gain if
the premium received by the Fund on the closing transaction is more than the
premium paid to purchase the option, or a loss if it is less. If an option
written by the Fund expires on the stipulated expiration date or if the Fund
enters into a closing purchase transaction, it will realize a gain (or loss if
the cost of a closing purchase transaction exceeds the net premium received when
the option is sold) and the deferred credit related to such option will be
eliminated. If an option written by the Fund is exercised, the proceeds of the
sale will be increased by the net premium originally received and the Fund will
realize a gain or loss.
There are several risks associated with transactions in options on
securities and indexes. For example, there are significant differences between
the securities and options markets that could result in an imperfect correlation
between these markets, causing a given transaction not to achieve its
objectives. In addition, a liquid secondary market for particular options,
whether traded over-the-counter or on a national securities exchange
("Exchange"), may be absent for reasons which include the following: there may
be insufficient trading interest in certain options; restrictions may be imposed
by an Exchange on opening transactions or closing transactions or both; trading
halts, suspensions or other restrictions may be imposed with respect to
particular classes or series of options or underlying securities; unusual or
unforeseen circumstances may interrupt normal operations on an Exchange; the
facilities of an Exchange or the Options Clearing Corporation may not at all
times be adequate to handle current trading volume; or one or more Exchanges
could, for economic or other reasons, decide or be compelled at some future date
to discontinue the trading of options (or a particular class or series of
options), in which event the secondary market on that Exchange (or in that class
or series of options) would cease to exist, although outstanding options that
had been issued by the Options Clearing Corporation as a result of trades on
that Exchange would continue to be exercisable in accordance with their terms.
-18-
<PAGE>
SHORT SALES "AGAINST THE BOX." In a short sale, the Fund sells a
borrowed security and has a corresponding obligation to the lender to return the
identical security. The 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 the 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.
The 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 possibly to defer recognition of gain or loss for federal income tax
purposes. (A short sale against the box will defer recognition of gain for
federal income tax purposes only if the Fund subsequently closes the short
position by making a purchase of the relevant securities no later than 30 days
after the end of the taxable year.) 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
Fund does 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. See
Appendix "A" for a list of commercial paper ratings.
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 the 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
-19-
<PAGE>
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
The Company 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 1940 Act). The 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;
2. Issue any senior securities, except as permitted under the 1940
Act;
3. Act as an underwriter of securities within the meaning of the
Securities Act, 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 the 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
the Fund may deal in forward foreign exchange transactions 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
-20-
<PAGE>
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.
For purposes of Investment Limitation No. 1, collateral
arrangements with respect to, if applicable, the writing of options, 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.
In addition to the fundamental investment limitations specified above,
the Fund may not:
1. Make investments for the purpose of exercising control or
management, but investments by the 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 the Fund 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 the 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 one-half 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.
Except as required by the 1940 Act with respect to the borrowing of
money, 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.
Securities held by the 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 1940 Act.
-21-
<PAGE>
RISK FACTORS
FOREIGN SECURITIES. Investments in foreign securities are subject to
certain risks, as 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 the 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.
In addition, substantial limitations may exist in certain countries
with respect to the Fund's ability to repatriate investment income, capital or
the proceeds of sales of securities by foreign investors. The Fund 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 Fund
of any restrictions on investments.
REPORTING STANDARDS. Most of the foreign securities held by the Fund
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 the 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 the Fund. If the value of a foreign currency rises against
the U.S. dollar, the value of the 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 the Fund's assets denominated in that currency
will decrease. The exchange rates between the U.S. dollar and
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<PAGE>
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 Fund may invest in these investment funds and
registered investment companies subject to the provisions of the 1940 Act. If
the Fund invests in such investment companies, it will bear its 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 the Fund are
uninvested and no return is earned thereon. The inability of the Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of a portfolio
security due to settlement problems could result either in losses to the Fund
due to subsequent declines in the value of such portfolio security or, if the
Fund has entered into a contract to sell the security, could result in possible
liability to the purchaser.
OPERATING EXPENSES. The costs attributable to foreign investing that
the 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 the 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 the Fund would be
subject.
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
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<PAGE>
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 the 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 Fund in a manner
that will minimize its exposure to such risks, there can be no assurance that
adverse political changes will not cause the 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 the 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. The 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, the
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 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. The lack of a liquid
secondary market for certain securities also may make it more difficult for the
Fund to obtain accurate market quotations for purposes of valuing the Fund's
portfolio and calculating its net asset value. When and if available, fixed
income securities may be purchased by the Fund at a discount from face value.
However, the 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, the 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.
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<PAGE>
DIRECTORS AND OFFICERS
The directors and executive officers of the Company, their ages,
business addresses and principal occupations during the past five years are:
Position Principal Occupation During
Name, Address and Age with the Company Past Five Years
- --------------------- ---------------- ---------------------------
Arnold M. Reichman - 49* Director Senior Managing Director,
466 Lexington Avenue Chief Operating Officer and
New York, NY 10017 Assistant Secretary, Warburg
Pincus Asset Management, Inc.;
Director and Executive
Officer, Counsellors
Securities Inc;
Director/Trustee of various
investment companies advised
by Warburg Pincus Asset
Management, Inc.
Robert Sablowsky - 59* Director Senior Vice President,
110 Wall Street Fahnestock & Co., Inc. (a
New York, NY 10005 registered broker-dealer);
prior to October 1996,
Executive Vice President of
Gruntal & Co., Inc. (a
registered broker-dealer).
Francis J. McKay - 62 Director Since 1963, Executive Vice
7701 Burholme Avenue President, Fox Chase Cancer
Philadelphia, PA 19111 Center (biomedical research
and medical care.)
Marvin E. Sternberg - 63 Director Since 1974, Chairman, Director
937 Mt. Pleasant Road and President, Moyco
Bryn Mawr, PA 19010 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
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<PAGE>
Position Principal Occupation During
Name, Address and Age with the Company Past Five Years
- --------------------- ---------------- ---------------------------
headwear).
Julian A. Brodsky - 64 Director Director and Vice Chairman,
Comcast Corporation Comcast Corporation since
1234 Market Street 1969, (cable television and
16th Floor communications); Director,
Philadelphia, PA 19107- Comcast Cablevision of
3723 Philadelphia (cable television
communications) and Nextel
(wireless communications).
Donald van Roden - 73 Director and Self-employed businessman.
1200 Old Mill Lane Chairman From February 1980 to March
Wyomissing, PA 19610 of the Board 1987, Vice Chairman, Smith
Kline Beecham Corporation
(pharmaceuticals); Director,
AAA Mid-Atlantic (auto
service); Director, Keystone
Insurance Co.
Edward J. Roach - 73 President and Certified Public Accountant;
Suite 100 Treasurer Vice Chairman of the of the
Bellevue Park Board, Fox Chase Cancer
Corporate Center Center; Trustee Emeritus,
400 Bellevue Parkway Pennsylvania School for the
Wilmington, DE 19809 Deaf; Trustee Emeritus,
Immaculata College; President
or Vice President and
Treasurer of various
investment companies advised
by BlackRock Institutional
Management Corporation;
Director, The Bradford Funds,
Inc.
Morgan R. Jones - 58 Secretary Chairman of the law firm of
Drinker Biddle & Reath LLP Drinker Biddle & Reath LLP;
1345 Chestnut Street Director, Nobel Education
Philadelphia, PA 19107- Dynamics, Inc.
3496
- ---------------------------
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<PAGE>
* 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., a registered broker-dealer.
* Mr. Sablowsky is an "interested person" of the Company, as that term is
defined in the 1940 Act, by virtue of his position with Fahnestock & Co., Inc.,
a registered 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 all persons to be nominated as directors of the Company.
The Company pays directors who are not "affiliated persons" (as that
term is defined in the 1940 Act) of any investment adviser or sub-adviser of the
Company or the Distributor and Mr. Sablowsky, who is considered to be an
affiliated person, $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. In
addition, the Chairman of the Board receives an additional $5,000 per year for
his services in this capacity. 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, 1997, each of the following members of
the Board of Directors received compensation from the Company in the following
amounts:
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<TABLE>
<CAPTION>
DIRECTORS' COMPENSATION
-----------------------
Pension or
Retirement
Benefits Estimated Total Compensation
Aggregate Accrued as Annual from Registrant and
Compensation Part of Fund Benefits Upon Fund Complex
Name of Person/Position from Registrant Expenses Retirement Paid(1) to Directors
- ----------------------- --------------- ------------ ------------- --------------------
<S> <C> <C> <C> <C>
Julian A. Brodsky, $16,000 N/A N/A $16,000
Director
Francis J. McKay, $19,000 N/A N/A $19,000
Director
Arnold M. Reichman, 0 N/A N/A 0
Director
Robert Sablowsky, $ 8,000 N/A N/A $ 8,000
Director
Marvin E. Sternberg, $19,000 N/A N/A $19,000
Director
Donald van Roden, $24,000 N/A N/A $24,000
Director and Chairman
</TABLE>
1. A Fund Complex means two or more investment companies that hold themselves
out to investors as related companies for purposes of investment and investor
services, or have a common investment adviser or have an investment adviser that
is an affiliated person of the investment adviser of any other investment
companies.
On October 24, 1990 the Company adopted, as a participating employer,
the Fund Office Retirement Profit-Sharing Plan and Trust Agreement, a retirement
plan for employees (currently Edward J. Roach is the Company's sole employee)
pursuant to which the Company will contribute on a quarterly basis amounts equal
to 10% of the quarterly 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. Drinker
Biddle & Reath, LLP, of which Mr. Jones is a partner, receives legal fees as
counsel to the Company. 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 (sometimes referred to as the
"Adviser") renders advisory and administrative services to the Fund pursuant to
an Investment Advisory Agreement. The Advisory Agreement relating to the Fund
is dated August 31, 1993 for the BEA U.S. Core Equity Fund.
-28-
<PAGE>
BEA Associates is an investment adviser managing global equity,
fixed-income and derivative securities accounts for corporate pension and
profit-sharing plans, state pension funds, union funds, endowments and other
charitable institutions. As of December 31, 1997, BEA Associates managed
approximately $34.2 billion in assets. BEA is a wholly-owned subsidiary of
Credit Suisse Group, a Swiss corporation. BEA Associates is a registered
investment advisor under the Investment Advisors Act of 1940, as amended.
BEA currently acts as investment adviser for eleven other investment
companies registered under the 1940 Act. They are: BEA Strategic Global Income
Fund, Inc., BEA Income Fund, Inc., 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 fifteen other registered investment companies: Frank
Russell Investment Company (Fixed Income III Fund and Multi-strategy 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, Touchstone Variable Annuity International
Equity Fund, American United Life Conservative Investor Fund, American United
Life Moderate Investor Fund, and American United Life Aggressive Investor Fund.
BEA Associates has sole investment discretion for the Fund and will
make all decisions affecting assets in the Fund under the supervision of the
Company's Board of Directors and in accordance with the Fund's stated policies.
BEA Associates will select investments for the Fund and will place purchase and
sale orders on behalf of the Fund. For its services to the Fund, BEA Associates
will be paid (before any voluntary waivers or reimbursements) a monthly fee
computed at an annual rate of .75% of average daily net assets, respectively.
For the semi-annual period ended February 28, 1998, the
Institutional Class of the Fund paid BEA advisory fees and BEA waived fees
and/or reimbursed expenses of the Institutional Class of the Fund as follows:
<TABLE>
<CAPTION>
Fees Paid
(after waivers and
Fund reimbursements) Waivers Reimbursements
- ---- ------------------ ------- --------------
<S> <C> <C> <C>
U.S. Core Equity $346,175 $5,454 $ 0
(Institutional Class)
</TABLE>
For the fiscal year ended August 31, 1997 the Institutional Class of
the Fund paid BEA advisory fees and BEA waived fees and/or reimbursed expenses
of the Institutional Class of the Fund as follows:
<TABLE>
<CAPTION>
Fees Paid
(after waivers and
Fund reimbursements) Waivers Reimbursements
- ---- ------------------ ------- --------------
<S> <C> <C> <C>
U.S. Core Equity $537,237 $27,626 $ 0
(Institutional Class)
</TABLE>
For the fiscal year ended August 31, 1996, the Institutional Class of
the Fund paid BEA advisory fees and BEA waived fees and/or reimbursed expenses
of the Institutional Class of the Fund as follows:
-29-
<PAGE>
<TABLE>
<CAPTION>
Fees Paid
(after waivers and
Fund reimbursements) Waivers Reimbursements
- ---- ------------------ ------- --------------
<S> <C> <C> <C>
U.S. Core Equity $234,890 $93,430 $ 0
(Institutional Class)
</TABLE>
For the fiscal year ended August 31, 1995, the Institutional Class of
the Fund paid BEA advisory fees and BEA waived fees and/or reimbursed expenses
of the Institutional Class of the Fund as follows:
<TABLE>
<CAPTION>
Fees Paid
(after waivers and
Fund reimbursements) Waivers Reimbursements
- ---- ------------------ ------- --------------
<S> <C> <C> <C>
U.S. Core Equity $77,156 $88,725 $ 0
(Institutional Class)
</TABLE>
The 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 fair and accurate. The BEA Advisor Class of the Fund pays its own
administration fees, and may pay a different share than the other classes of the
Fund of other expenses (excluding advisory and custodial fees) if those expenses
are actually incurred in a different amount by the Advisor Class or if it
receives different services.
Under the Advisory Agreement, BEA Associates will not be liable for
any error of judgment or mistake of law or for any loss suffered by the Company
or the Fund in connection with the performance of the Advisory Agreement, 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
Agreement.
The Advisory Agreement was reapproved 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 Agreement or interested persons (as defined in the
1940 Act) of such parties. The Advisory Agreement was approved by the Fund's
initial shareholder. The Advisory Agreement 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 Fund, at any time without penalty, on 60 days' written
notice to BEA Associates. The Advisory Agreement may also be terminated by BEA
Associates on 60
-30-
<PAGE>
days' written notice to the Company. The Advisory Agreement terminates
automatically in the event of assignment thereof.
CUSTODIAN AND TRANSFER AGENCY AGREEMENTS. Brown Brothers Harriman &
Co. ("BBH") acts as the custodian for the Fund and also acts as the custodian
for the Fund's 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 the Fund, (b) holds and transfers
portfolio securities on account of the Fund, (c) accepts receipts and makes
disbursements of money on behalf of the Fund, (d) collects and receives all
income and other payments and distributions on account of the Fund's portfolio
securities, and (e) makes periodic reports to the Company's Board of Directors
concerning the 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 the
Fund's average daily gross assets, exclusive of transaction charges and
out-of-pocket expenses, which are also charged to the Company.
State Street Bank and Trust Company ("State Street") serves as
transfer agent for the Fund. It has delegated to Boston Financial Data
Services, Inc. ("BFDS"), a 50%-owned subsidiary, responsibility for most
transfer agent servicing functions. State Street serves as the transfer and
dividend disbursing agent for the Fund pursuant to a Transfer Agency Agreement
(the "Transfer Agency Agreement"), under which it (a) issues and redeems shares
of the Fund, (b) addresses and mails all communications by the Fund to record
owners of shares of the Fund, 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 the Fund. For its services to the Company under the Transfer Agency
Agreement, State Street receives a fee on a per transaction basis.
ADMINISTRATION AND ACCOUNTING SERVICES AGREEMENTS. PFPC Inc.
("PFPC"), an indirect, wholly-owned subsidiary of PNC Bank Corp., serves as the
administrator to the Advisor Class of the Fund pursuant to an Administration and
Accounting Services Agreement, dated _______________, 199___ (the "PFPC
Administration and Accounting Services Agreement"). PFPC has agreed to furnish
to the BEA Advisor Funds portfolio statistical and research data, clerical,
accounting and bookkeeping services and certain other services required by the
Fund.
The PFPC Administration and Accounting Services Agreement provides
that PFPC shall not be liable for any loss suffered by the Company or the Fund
in connection with the performance of services under the PFPC Administration and
Accounting Services Agreement, except a loss resulting from willful misfeasance,
gross negligence, or reckless disregard of its duties and obligations under the
PFPC Administration and Accounting Services. In consideration for providing
services pursuant to the PFPC Administration and Accounting
-31-
<PAGE>
Services Agreement, PFPC receives a fee calculated at an annual rate of .125% of
average daily net assets of the Advisor Class of the Fund, with a minimum annual
fee of $75,000.
For the semi-annual period ended February 28, 1998, the Institutional Class of
the Fund paid PFPC administration fees and PFPC waived fees and/or reimbursed
expenses as follows:
<TABLE>
<CAPTION>
Fees Paid
Portfolio (After Waivers) Waivers Reimbursements
- ---------- --------------- ------- --------------
<S> <C> <C> <C>
U.S. Core Equity $58,605 $0 $0
(Institutional Class)
</TABLE>
For the fiscal year ended August 31, 1997, the Institutional Class of the Fund
paid PFPC administration fees and PFPC waived fees and/or reimbursed expenses as
follows:
<TABLE>
<CAPTION>
Fees Paid
Portfolio (After Waivers) Waivers Reimbursements
- ---------- --------------- ------- --------------
<S> <C> <C> <C>
U.S. Core Equity $94,144 $0 $0
(Institutional Class)
</TABLE>
For the fiscal year ended August 31, 1996, the Institutional Class of
the Fund paid PFPC administration fees and PFPC waived fees and/or reimbursed
expenses as follows:
<TABLE>
<CAPTION>
Fees Paid
Portfolio (After Waivers) Waivers Reimbursements
- ---------- --------------- ------- --------------
<S> <C> <C> <C>
U.S. Core Equity $54,720 $0 $0
(Institutional Class)
</TABLE>
For the fiscal year ended August 31, 1995, the Institutional Class of
the Fund paid PFPC administration fees and PFPC waived fees and/or reimbursed
expenses as follows:
<TABLE>
<CAPTION>
Fees Paid
Portfolio (After Waivers) Waivers Reimbursements
- ---------- --------------- ------- --------------
<S> <C> <C> <C>
U.S. Core Equity $27,647 $0 $0
(Institutional Class)
</TABLE>
BEA serves as co-administrator to the Advisor Class of the Fund
pursuant to Co-Administration Agreement, dated ____________, 199_ (the "BEA
Co-Administration Agreement"). BEA has agreed to provide shareholder liaison
services to the Advisor Class of the Fund including responding to shareholder
inquiries and providing information on shareholder accounts. The BEA
Co-Administration Agreement 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 Fund 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 Agreement, BEA receives a fee calculated
at an annual rate of .05% of average daily net assets of the Advisor Class of
the Fund for assets up to $125 million and .10% thereafter.
-32-
<PAGE>
DISTRIBUTION AND SHAREHOLDER SERVICING
The Fund has entered into a Distribution Agreement with Provident
Distributors, Inc. ("PDI") pursuant to its Distribution Plan (the "12b-1 Plan")
under Rule 12b-1 of the 1940 Act. In consideration for Services (as defined
below), the Distribution Agreement provides that the Fund will pay PDI a fee
calculated at an annual rate of .25% of the average daily net assets of the
Advisor Shares of the Fund. Services performed by PDI include (a) the sale of
the Fund's Advisor Shares, as set forth in the 12b-1 Plan ("Selling Services"),
(b) ongoing servicing and/or maintenance of the accounts of shareholders of the
Advisor Class of the Fund, as set forth in the 12b-1 Plan ("Shareholder
Services"), and (c) sub-transfer agency services, subaccounting services or
administrative services, as set forth in the 12b-1 Plan ("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 PDI 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 Fund, 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 Fund to prospective shareholders of the Fund; and
(vi) costs involved in obtaining whatever information, analyses and reports with
respect to marketing and promotional activities that PDI may, from time to time,
deem advisable.
Mr. Sablowsky, a Director of the Fund, has an indirect interest in the
0operation of the Plan by virtue of his position with Fahnestock Co., Inc.
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 Fund. In executing portfolio
transactions, BEA Associates seeks to obtain the best net results for the Fund,
taking into account such factors as the price (including the applicable
brokerage commission or dealer spread), size of the order, difficulty of
execution and operational facilities of the firm involved. While BEA Associates
generally seeks reasonably competitive commission rates, payment of the lowest
commission or spread is not necessarily consistent with obtaining the best
results in particular transactions.
Portfolio transactions for the Fund may be effected on domestic or
foreign securities exchanges. In transactions for securities not actively
traded on a domestic or foreign securities exchange, the 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
-33-
<PAGE>
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 Fund has no obligation to deal with
any broker in the execution of transactions in portfolio securities. The Fund
may use affiliates of Credit Suisse, BEA's parent company, 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 Fund 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.
For the semi-annual period ended February 28, 1998, the
Institutional Class of the Fund paid brokerage commissions as follows:
<TABLE>
<CAPTION>
Fund Brokerage Commission
---- --------------------
<S> <C>
U.S. Core Equity $188,976
(Institutional Class)
</TABLE>
For the fiscal year ended August 31, 1997, the Institutional Class of
the Fund paid brokerage commissions as follows:
<TABLE>
<CAPTION>
Fund Brokerage Commission
---- --------------------
<S> <C>
U.S. Core Equity $181,354
(Institutional Class)
</TABLE>
For the fiscal year ended August 31, 1996, the Institutional Class of
the Fund paid brokerage commissions as follows:
<TABLE>
<CAPTION>
Fund Brokerage Commission
---- --------------------
<S> <C>
U.S. Core Equity $182,796
(Institutional Class)
</TABLE>
For the fiscal year ended August 31, 1995, the Institutional Class of
the Fund paid brokerage commissions as follows:
<TABLE>
<CAPTION>
Fund Brokerage Commission
---- --------------------
<S> <C>
-34-
<PAGE>
U.S. Core Equity $110,474
(Institutional Class)
</TABLE>
The Fund has no obligation to deal with any broker or group of brokers
in the execution of portfolio transactions. BEA Associates may, consistent with
the interests of the 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 the 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 its 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 the Fund and its other clients and that the
total commissions paid by the Fund will be reasonable in relation to the
benefits to the 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 Fund 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 the 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 the Fund's anticipated need for liquidity makes
such action desirable. Any such repurchase prior to maturity reduces the
possibility that the 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 the Fund and for other investment accounts
managed by BEA Associates are made independently of each other in 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 the Fund is concerned, in other cases it is
believed to be beneficial to the Fund. The 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.
-35-
<PAGE>
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.
A high rate of portfolio turnover (100% or more) involves
correspondingly greater brokerage commission expenses and other transaction
costs, which must be borne directly by the Fund. The Fund anticipates that its
annual portfolio turnover rate will vary from year to year. The portfolio
turnover rate is calculated by dividing the lesser of the 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 Fund has the benefit of an exemptive order issued by the SEC under
the 1940 Act authorizing the Fund and other investment companies advised by BEA
to acquire jointly securities issued in private placements, subject to the terms
and conditions of the order.
PURCHASE AND REDEMPTION INFORMATION
The Company reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption of the 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 the
Fund's net asset value. If payment is made in securities, a shareholder may
incur transaction costs in converting these securities into cash. Investors may
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 1940 Act so that the 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 the Fund.
Under the 1940 Act, the 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. (The
Fund may also suspend or postpone the recordation of the transfer of its shares
upon the occurrence of any of the foregoing conditions.)
VALUATION OF SHARES
The net asset values per share of each class of the Fund are
calculated separately from each other class as of the close of regular trading
of the NYSE on each Business Day. The net asset value per share, the value of
an individual share in the Fund, is computed by adding the
-36-
<PAGE>
value of the proportionate interest of each class of the Fund in the Fund's
securities, cash and other assets, subtracting the actual and accrued
liabilities of the class and dividing the result by the number of outstanding
shares of such class. "Business Day" means each weekday when the NYSE is open.
Currently, the NYSE is closed on New Year's Day, Dr. Martin Luther King Jr.,
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day and the preceding Friday or subsequent Monday
when one of these holidays falls on a Saturday or Sunday. 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 the Fund
is determined only on Business Days, the net asset value of shares of the 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 the close of regular trading (generally 4:00
p.m. Eastern time); 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 the 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
-37-
<PAGE>
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 INFORMATION
TOTAL RETURN. The Fund may advertise its "average annual total
return" by computing such return separately for each class of shares by
determining the average annual compounded rate of return during specified
periods that equates the initial amount invested to the ending redeemable value
of such investment according to the following formula:
ERV 1/n
T = [(-----) - 1]
P
Where: T = average annual total return;
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the l, 5 or 10 year (or other) periods at the
end of the applicable period (or a fractional portion thereof);
P = hypothetical initial payment of $1,000; and
n = period covered by the computation, expressed in years.
The Fund may advertise its "aggregate total return" by computing such
returns separately for each class of shares by determining the aggregate
compounded rates of return during specified periods that likewise equate the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating aggregate total return is as follows:
ERV
Aggregate Total Return = [(-----) - 1]
P
The calculations are made assuming that (1) all dividends and capital
gain distributions are reinvested on the reinvestment dates at the price per
share existing on the reinvestment date, (2) all recurring fees charged to all
shareholder accounts are included, and (3) for any account fees that vary with
the size of the account, a mean (or median) account size in the Fund during the
periods is reflected. The ending redeemable value (variable "ERV" in the
formula) is determined by assuming complete redemption of the hypothetical
investment after deduction of all nonrecurring charges at the end of the
measuring period.
-38-
<PAGE>
The Fund 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 the
Fund's performance with other measures of investment return. For example, in
comparing the Fund's total return with data published by Lipper Analytical
Services, Inc., or CDA/Weisenberger Investment Technologies, Inc. or with the
performance of the Standard & Poor's 500 Stock Index, the 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.
TAXES
GENERAL TAX CONSEQUENCES TO THE COMPANY AND ITS SHAREHOLDERS. The
following is only a summary of certain additional tax considerations generally
affecting the Fund and its 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 Fund or its 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.
The 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, the 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, if any, 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).
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In addition to satisfaction of the Distribution Requirement the 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").
Future Treasury regulations may provide that currency gains that are
not "directly related" to the 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 Requirement. 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 the 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 the 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 the 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. The 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.
The 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 (20% or 28% rate gain,
as the case may be), 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
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reinvested in shares. The aggregate amount of distributions designated by the
Fund as capital gain dividends may not exceed the net capital gain of the 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 the Fund's respective taxable year.
In the case of corporate shareholders, distributions (other than
capital gain dividends) of the 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 the 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 the 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 the 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 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."
Corporate shareholders will have to take into account (1) all exempt
interest dividends, if any, and (2) the full amount of all dividends from the
Fund that are treated as "qualifying dividends" for purposes of the dividends
received deduction in determining its
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"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%.
If for any taxable year the 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 the Fund's
current and accumulated earnings 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 the Fund will be disallowed to the extent an investor repurchases
shares of the 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
the 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 one-year period ending on October 31 of
such calendar year. The balance of such income must be distributed during the
next calendar year. For the foregoing purposes, a company is treated as having
distributed any amount on which it is subject to income tax for any taxable year
ending in such calendar year. Because the Fund intends to distribute all of its
taxable income currently, the Fund does not anticipate incurring any liability
for this excise tax. However, investors should note that the 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 prior
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 in effect on the date of
this Statement of Additional Information. Future legislative or administrative
changes or court decisions may significantly change the conclusions expressed
herein, and any such changes or decisions may have a retroactive effect with
respect to the transactions contemplated herein.
Although the 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, the Fund
may be subject to the tax laws of such states or localities.
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Certain states exempt from state income taxation dividends paid by a
regulated investment company that are derived from interest on U.S. Government
obligations. The 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
Fund. The ability of the Fund to engage in options, short sale and futures
activities will be somewhat limited by the requirements for its continued
qualification as regulated investment companies under the Code, in particular
the Distribution Requirement and the Asset Diversification Requirement.
STRADDLES. The options transactions that the Fund enters 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 Fund. In
addition, losses realized by the Fund 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
Fund 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 Fund must make in
order to avoid federal excise tax. Furthermore, in determining its investment
company taxable income and ordinary income, the Fund 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 Fund of holding straddle positions may be
further affected by various elections provided under the Code and Treasury
regulations, but at the present time the Fund is 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 Fund 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.
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 Fund enters into, as well as
futures transactions and transactions in forward foreign currency contracts that
are traded in the interbank market entered into by the Fund, 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.,
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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 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 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 the Fund must make to avoid federal excise tax
liability.
The Fund may elect not to have the year-end mark-to-market rule apply
to Section 1256 contracts that are part of a "mixed straddle" with other
investments of the Fund that are not Section 1256 contracts (the "Mixed Straddle
Election").
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.
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, the Fund may elect capital gain or loss treatment for such
transactions. Alternatively, the 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, the Fund will not be
able to make any ordinary dividend distributions, and any distributions made
before the losses were
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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 the Fund acquires shares in
certain foreign investment entities, called "passive foreign investment
companies" ("PFIC"), the 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 the Fund.
Additional charges in the nature of interest may also be imposed on the Fund in
respect of such deferred taxes. However, in lieu of sustaining the foregoing
tax consequences, the Fund may elect to have its investment in any PFIC taxed as
an investment in a "qualified electing fund" ("QEF"). If the Fund makes a QEF
election, it instead 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 the Fund for purposes of satisfying the Distribution Requirement and
the excise tax distribution requirement.
The Code permits the Fund to elect (in lieu of paying deferred tax or
making a QEF election) to mark-to-market annually any PFIC shares that it owns
and to include any gains (but not losses) that it was deemed to realize as
ordinary income. The 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.
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, the 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.
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ADDITIONAL INFORMATION CONCERNING THE COMPANY'S SHARES
The Company has authorized capital of thirty billion shares of Common
Stock, $.001 par value per share, of which 14.928 billion shares are currently
classified as follows: 100 million shares are classified as Class A Common
Stock, 100 million shares are classified as Class B Common Stock, 100 million
shares are classified as Class C Common Stock, 100 million shares are classified
as Class D Common Stock, 500 million shares are classified as Class E Common
Stock (Money), 500 million shares are classified as Class F Common Stock
(Municipal Money), 500 million shares are classified as Class G Common Stock
(Money), 500 million shares are classified as Class H Common Stock (Municipal
Money), 1 billion shares are classified as Class I Common Stock (Money), 500
million shares are classified as Class J Common Stock (Municipal Money), 500
million shares are classified as Class K Common Stock (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 (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 (Government Money), 500 million shares are classified as Class T
Common Stock (International), 500 million shares are classified as Class U
Common Stock (High Yield), 500 million shares are classified as Class V Common
Stock (Emerging), 100 million shares are classified as Class W Common Stock, 50
million shares are classified as Class X Common Stock (U.S. Core Equity), 50
million shares are classified as Class Y Common Stock (U.S. Core Fixed Income),
50 million shares are classified as Class Z Common Stock (Strategic Global Fixed
Income), 50 million shares are classified as Class AA Common Stock (Municipal
Bond), 50 million shares are classified as Class BB Common Stock (BEA Balanced),
50 million shares are classified as Class CC Common Stock (Short Duration), 100
million shares are classified as Class DD Common Stock, 100 million shares are
classified as Class EE Common Stock, 50 million shares are classified as Class
FF Common Stock (n/i Numeric Investors Micro Cap), 50 million shares are
classified as Class GG Common Stock (n/i Numeric Investors Growth), 50 million
shares are classified as Class HH Common Stock (n/i Numeric Investors Growth &
Value), 100 million shares are classified as Class II Common Stock (BEA Investor
International), 100 million shares are classified as Class JJ Common Stock (BEA
Investor Emerging), 100 million shares are classified as Class KK Common Stock
(BEA Investor High Yield), 100 million shares are classified as Class LL Common
Stock (BEA Investor Global Telecom), 100 million shares are classified as Class
MM Common Stock (BEA Advisor International), 100 million shares are classified
as Class NN Common Stock (BEA Advisor Emerging), 100 million shares are
classified as Class OO Common Stock (BEA Advisor High Yield), 100 million shares
are classified as Class PP Common Stock (BEA Advisor Global Telecom), 100
million shares are classified as Class QQ Common Stock (Boston Partners
Institutional Large Cap), 100 million shares are classified as Class RR Common
Stock (Boston Partners Investor Large Cap), 100 million shares are classified as
Class SS Common Stock (Boston Partners Advisor Large Cap), 100 million shares
are classified as Class TT Common Stock (Boston Partners Investor Mid Cap), 100
million shares are classified as Class UU Common Stock (Boston Partners
Institutional Mid Cap), 100 million shares are classified as
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Class VV Common Stock (Boston Partners Institutional Bond), 100 million shares
are classified as Class WW Common Stock (Boston Partners Investor Bond), 50
million are classified as Class XX Common Stock (n/i Numeric Investors Larger
Cap Value), 100 million shares are classified as Class YY Common Stock
(Schneider Capital Management Value); 100 million shares are classified as Class
ZZ Common Stock (BEA Class Long-Short Market Neutral), 100 million shares are
classified as Class AAA Common Stock (BEA Advisor Long-Short Market Neutral),
100 million shares are classified as Class BBB Common Stock (BEA Class
Long-Short Equity), 100 million shares are classified as Class CCC Common Stock
(BEA Advisor Long-Short Equity), 100 million shares are classified as Class DDD
Common Stock (Boston Partners Micro Cap Value), 100 million shares are
classified as Class EEE Common Stock (Boston Partners Investor Micro Cap Value),
100 million shares are classified as Class FFF Common Stock (BEA Class Select
Economic Value Equity), 100 million shares are classified as Class GGG Common
Stock (BEA Advisor Select Economic Value Equity), 100 million shares are
classified as Class HHH Common Stock (BEA Advisor U.S. Core Equity), 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 million shares are classified as Class Janney Government Obligations
Money Common Stock (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 (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 (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
(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 (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 (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
(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 (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, CC and FFF 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.
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The classes of Common Stock have been grouped into fifteen separate
"families:" the Cash Preservation Family, the Sansom Street Family, the
Bedford Family, the BEA Family, the Janney Montgomery Scott Money Family, the
n/i Numeric Investors Family, the Boston Partners Family, the Schneider
Capital Management Family, the Beta Family, the Gamma Family, the Delta
Family, the Epsilon Family, the Zeta Family, the Eta Family and the Theta
Family. The Cash Preservation Family represents interests in the Money
Market and Municipal Money Market Portfolios; the Sansom Street Family
represents interests in the Money Market, Municipal Money Market and
Government Obligations Money Market Portfolios; the Bedford Family represents
interests in the Money Market, Municipal Money Market, and Government
Obligations Money Market; the BEA Family represents interests in thirteen
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 Numeric Investors Family
represents interests in four non-money market funds and the Boston Partners
Family represents interest in four non-money market funds.
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 voting 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 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
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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 Drinker Biddle & Reath LLP, 1345 Chestnut
Street, Philadelphia, Pennsylvania 19107-3496, serves as counsel to the Company
and the non-interested directors.
INDEPENDENT ACCOUNTANTS. Coopers & Lybrand L.L.P., 2400 Eleven Penn
Center, Philadelphia, Pennsylvania 19103, serves as the Company's independent
accountants.
CONTROL PERSONS. As of May 31, 1998, 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.
-49-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
FUND NAME SHAREHOLDER NAME AND PERCENTAGE OF
ADDRESS FUND HELD
- ------------------------------------------------------------------------------------------
<S> <C> <C>
BEA INT'L EQUITY - Coats North America Pension Plan 5.00%
INSTITUTIONAL c/o Coats American Inc.
Attn: Alan W. Demello
4135 S. Stream Blvd.
Charlotte, NC 28217-4523
- ------------------------------------------------------------------------------------------
Employees Ret Plan Marshfield Clini 6.69%
1000 N. Oak Avenue
Marshfield, WI 54449-5772
- ------------------------------------------------------------------------------------------
Indiana University Foundation 5.19%
Attn: Walter L. Koon, Jr.
P.O. Box 500
Bloomington, IN 47402-0500
- ------------------------------------------------------------------------------------------
BEA EMERGING Wachovia Bank North Carolina 27.57%
MARKETS EQUITY - Trust Carolina Power & Light Co.
INSTITUTIONAL Supplemental Retirement Trust
P.O. Box 3073
301 N. Main Street, MC NC 31057
Winston-Salem, NC 27101-3819
- ------------------------------------------------------------------------------------------
Hall Family Foundation 39.74%
P.O. Box 419580
Kansas City, MO 64141-8400
- ------------------------------------------------------------------------------------------
Arkansas Public Emp. Retirement Syst. 19.27%
124 W. Capitol Ave.
Little Rock, AR 72201-3704
- ------------------------------------------------------------------------------------------
BEA U.S. CORE EQUITY Werner & Pfleiderer Pension Plan 6.49%
- - INSTITUTIONAL Employees
663 E. Crescent Ave.
Ramsey, NJ 07446-1287
- ------------------------------------------------------------------------------------------
Credit Suisse Private Banking 12.56%
Dividend Reinvest Plan
C/o Credit Suisse Pvt Bkg
12 E. 49th St., 40th Floor
New York, NY 10017-1028
- ------------------------------------------------------------------------------------------
Washington Hebrew Congregation 11.35%
3935 Macomb St., NW
Washington, DC 20016-3799
- ------------------------------------------------------------------------------------------
Fleet National Bank Trst. 5.93%
Hospital St. Raphael Malpractice
Attn: 1958875010
P.O. Box 92800
Rochester, NY 14692-8900
- ------------------------------------------------------------------------------------------
Patterson & Co. 45.34%
P.O. Box 7829
Philadelphia, PA 19101-7829
- ------------------------------------------------------------------------------------------
</TABLE>
-50-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
FUND NAME SHAREHOLDER NAME AND PERCENTAGE OF
ADDRESS FUND HELD
- ------------------------------------------------------------------------------------------
<S> <C> <C>
BEA U.S. CORE FIXED DCA Food Industries Inc. 6.31%
INCOME - 100 East Grand Ave.
INSTITUTIONAL Beloit, WI 53511-6255
- ------------------------------------------------------------------------------------------
Fidelity Investments Institutional 7.10%
Operations Co. Inc. (FIIOC) as Agent
for Credit Suisse First Boston
Employee's Savings PSP
100 Magellan Way #KWIC
Covington, KY 41015-1987
- ------------------------------------------------------------------------------------------
Local 239 Pension Fund 6.60%
R.J. Scheer, A.L. Miceli, H. Blomberg
R.T. Waldbauer, Jr, A. Evarieto,
I. Stockel TTEES DTD 04/01/1960
2380 Hempstead Tpke.
East Meadow, NY 11554-2030
- ------------------------------------------------------------------------------------------
The TJX Companies Inc. Retirement 5.75%
Pl.
State Street Bank & Trust Co TTEE
770 Cochituate Rd.
Framingham, MA 01701-4672
- ------------------------------------------------------------------------------------------
Winifred Masterson Burke Foundation 8.80%
785 Mamaroneck Ave.
White Plains, NY 10605-2593
- ------------------------------------------------------------------------------------------
New England UFCW & Employers' 17.33%
Pension Fund Board of Trustees
161 Forbes Rd, Ste. 201
Braintree, MA 02184-2606
- ------------------------------------------------------------------------------------------
BEA STRATEGIC Sunkist Master Trust 51.85%
GLOBAL FIXED 14130 Riverside Dr.
INCOME FUND Sherman Oaks, CA 91423-2392
- ------------------------------------------------------------------------------------------
Patterson & Co. 37.07%
P.O. Box 7829
Philadelphia, PA 19101-7829
- ------------------------------------------------------------------------------------------
State St. Bank & Trust TTEE 5.27%
Fenway Holdings LLC Master Trust
P.O. Box 470
Boston, MA 02102-0470
- ------------------------------------------------------------------------------------------
BEA HIGH YIELD- Carl F Besenbach 17.83%
INSTITUTIONAL Trst Michelin North American Inc.
Master Trust
P.O. Box 19001
Greenville, SC 29602-9001
- ------------------------------------------------------------------------------------------
</TABLE>
-51-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
FUND NAME SHAREHOLDER NAME AND PERCENTAGE OF
ADDRESS FUND HELD
- ------------------------------------------------------------------------------------------
<S> <C> <C>
Southdown Inc. Pension Pl 9.33%
Mac & Co A/C SDIF8575302
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
- ------------------------------------------------------------------------------------------
Edward J. Demske TTEE 5.50%
Miami University Foundation
202 Roudebush Hall
Oxford, OH 45056
- ------------------------------------------------------------------------------------------
Fidelity Investments Institutional 16.60%
Operations Co. Inc. as Agent for
Certain Employees Benefits Plan
100 Magellan Way #KWIC
Covington, KY 41015-1987
- ------------------------------------------------------------------------------------------
MAC & CO A/C CSBF8605082 5.03%
Mutual Fund Operations
P.O. Box 3198
Pittsburgh, PA 15230-3198
- ------------------------------------------------------------------------------------------
BEA MUNI BOND - Arnold Leon 12.46%
INSTITUTIONAL c/o Fiduciary Trust Company
P.O. Box 3199 Church Street Station
New York, NY 10008-3199
- ------------------------------------------------------------------------------------------
William A. Marquard 35.65%
2199 Maysville Rd.
Carlisle, KY 40311-9716
- ------------------------------------------------------------------------------------------
Leo Bogart 5.38%
135 Central Park West 9N
New York, NY 10023-2465
- ------------------------------------------------------------------------------------------
Howard Isermann 6.14%
9 Tulane Dr.
Livingston, NJ 07039-6212
- ------------------------------------------------------------------------------------------
BEA INT'L EQUITY- Transcorp 9.72%
ADVISOR FBO William E. Burns
P.O. Box 6535
Englewood, CA 80155-6535
- ------------------------------------------------------------------------------------------
Bob & Co. 78.64%
P.O. Box 1809
Boston, MA 02105-1809
- ------------------------------------------------------------------------------------------
BEA EMERGING Donald W. Allgood 14.40%
MARKETS EQUITY - 3106 Johannsen Dr.
ADVISOR Burlington, IA 52601-1541
- ------------------------------------------------------------------------------------------
</TABLE>
-52-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
FUND NAME SHAREHOLDER NAME AND PERCENTAGE OF
ADDRESS FUND HELD
- ------------------------------------------------------------------------------------------
<S> <C> <C>
NFSC FEBO # 114-623016 76.92%
Fmt Co Cust IRA
FBO Patricia F. Powell
5811 Valley Oak Dr.
Los Angeles, CA 90068-3650
- ------------------------------------------------------------------------------------------
BEA GLOBAL TELE- E. M. Warburg Pincus & Co. Inc. 14.23%
COMMUNICATIONS - Attn: Sandra Correale
ADVISOR 466 Lexington Ave.
New York, NY 10017-3140
- ------------------------------------------------------------------------------------------
Charles Schwab & Co. 6.32%
Special Custody Account for the
Exclusive Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
- ------------------------------------------------------------------------------------------
John B. Hurford 38.76%
153 E. 53rd St., Fl. 57
New York, NY 10022-4611
- ------------------------------------------------------------------------------------------
FTC & Co. 15.62%
Attn: DATALYNX #148
P.O. Box 173736
Denver, CO 80217-3736
- ------------------------------------------------------------------------------------------
BEA HIGH YIELD - Charles Schwab & Co. 97.02%
ADVISOR Special Custody Account for the
Exclusive Benefit of Customers
101 Montgomery St.
San Francisco, CA 94104-4122
- ------------------------------------------------------------------------------------------
CASH PRESERVATION Jewish Family and Children's Agency 42.5%
MONEY MARKET of Phil Capital Campaign
Attn: S. Ram
1610 Spruce Street
Philadelphia, PA 19103
- ------------------------------------------------------------------------------------------
Marian E. Kunz 12.3%
52 Weiss Ave.
Flourtown, PA 19031
- ------------------------------------------------------------------------------------------
John W. Powers and Jeannine P. 11.5%
Powers
Trst or Their Successors in Trust Under
John P. and Jeannine W. Powers RLT
DTD 12-08-97
2585 Bradwell
Florissant, MO 63033
- ------------------------------------------------------------------------------------------
</TABLE>
-53-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
FUND NAME SHAREHOLDER NAME AND PERCENTAGE OF
ADDRESS FUND HELD
- ------------------------------------------------------------------------------------------
<S> <C> <C>
SAMSON STREET Saxon and Co. 85.3%
MONEY MARKET FBO Paine Webber
A/C 32 32 400 4000038
P.O. Box 7780 1888
Phila., PA 19182
- ------------------------------------------------------------------------------------------
Wasner & Co. for Account of 13.7%
Paine Webber and Managed Assets
Sundry Holdings
Attn: Joe Domizio
76 A 260 ABC 200 Stevens Drive
Lester, PA 19113
- ------------------------------------------------------------------------------------------
N/I MICRO CAP FUND Charles Schwab & Co. Inc 14.7%
Special Custody Account for the
Exclusive Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
- ------------------------------------------------------------------------------------------
Janis Claflin, Bruce Fetzer and 5.1%
Winston Franklin, Robert Lehman Trst
the John E. Fetzer Institute, Inc.
U/A DTD 06-1992
Attn: Christina Adams
9292 West KL Ave.
Kalamazoo, MI 49009
- ------------------------------------------------------------------------------------------
Public Inst. For Social Security 7.2%
1001 195th St., N. 16th Flr.
Arlington, VA 22209
- ------------------------------------------------------------------------------------------
Portland General Holdings Inc. 16.3%
DTD 01/29/90
Attn: William J. Valach
121 S.W. Salmon St.
Portland, OR 97202
- ------------------------------------------------------------------------------------------
State Street Bank and Trust Company 8.3%
FBO Yale Univ. Ret. Pln for Staff Emp
State Street Bank & Tr Co. Master Tr.
Div
Attn: Kevin Sutton
Solomon Williard Bldg. One Enterprise
Dr.
North Quincy, MA 02171
- ------------------------------------------------------------------------------------------
</TABLE>
-54-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
FUND NAME SHAREHOLDER NAME AND PERCENTAGE OF
ADDRESS FUND HELD
- ------------------------------------------------------------------------------------------
<S> <C> <C>
N/I GROWTH FUND Charles Schwab & Co. Inc 19.6%
Special Custody Account for the
Exclusive Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
- ------------------------------------------------------------------------------------------
Citibank FSB 19.0%
Trst Sargent & Lundy Retirement Trust
DTD 06/01/96
c/o Citicorp Attn: D. Erwin, Jr.
1410 N. West Shore Blvd.
Tampa, FL 33607
- ------------------------------------------------------------------------------------------
U.S. Equity Investment Portfolio LP 5.8%
1001 N. US Hwy One Suite 800
Jupiter, FL 33477
- ------------------------------------------------------------------------------------------
N/I GROWTH AND Charles Schwab & Co. Inc. 21.6%
VALUE FUND Special Custody Account for the
Exclusive Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
- ------------------------------------------------------------------------------------------
The John E. Fetzer Institute Inc. 5.4%
Attn: Christina Adams
9292 W. KL Ave.
Kalamazoo, MI 49009
- ------------------------------------------------------------------------------------------
Bankers Trust Cust Pge-Enron 6.0%
Foundation
Attn: Procy Fernandez
300 S. Grand Ave. 40th Floor
Los Angeles, CA 90071
- ------------------------------------------------------------------------------------------
N/I LARGER CAP Charles Schwab & Co. Inc 35.7%
VALUE FUND Special Custody Account for the
Exclusive Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
- ------------------------------------------------------------------------------------------
Bank of America NT & SA 35.4%
FBO Community Hospital Central Cal
Pn Pl
A/C 10-35-155-2048506
Attn: Mutual Funds 38615
P.O. Box 513577
Los Angeles, CA 90051
- ------------------------------------------------------------------------------------------
</TABLE>
-55-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
FUND NAME SHAREHOLDER NAME AND PERCENTAGE OF
ADDRESS FUND HELD
- ------------------------------------------------------------------------------------------
<S> <C> <C>
BOSTON PARTNERS Dr. Janice B. Yost 18.0%
LARGE CAP FUND INST Trst Mary Black Foundation Inc.
SHARES Bell Hill - 945 E. Main St.
Spartanburg, SC 29302
- ------------------------------------------------------------------------------------------
Shady Side Academy Endowment 5.1%
423 Fox Chapel Rd.
Pittsburgh, PA 15238
- ------------------------------------------------------------------------------------------
Saxon And Co. 6.5%
FBO UJF Equity Funds
AC 10-01-001-0578481
P.O. Box 7780-1888
Philadelphia, PA 19182
- ------------------------------------------------------------------------------------------
Irving Fireman's Relief & Ret Fund 7.1%
Attn: Edith Auston
825 W. Irving Blvd.
Irvin, TX 75060
- ------------------------------------------------------------------------------------------
Wells Fargo Bank 7.2%
Trst Stoel Rives
Tr 008125
P.O. Box 9800
Calabasas, CA 91308
- ------------------------------------------------------------------------------------------
James B. Beam 6.8%
Trst World Publishing Co Pft Shr Trust
P.O. Box 1511
Wenatchee, WA 98807
- ------------------------------------------------------------------------------------------
Swanee Hunt and Charles Ansbacher 8.3%
Trst The Swanee Hunt Family Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
- ------------------------------------------------------------------------------------------
Swanee Hunt and Charles Ansbacher 6.7%
Trst The Hunt Alternatives Fund
C/o Elizabeth Alberti
168 Brattle St.
Cambridge, MA 02138
- ------------------------------------------------------------------------------------------
Samuel Gary and Ronald Williams 7.6%
And David Younggren
Trst Gary Tax Advantaged PRO+ PSP
370 17th St. Suite 5300
Denver, CO 80202
- ------------------------------------------------------------------------------------------
</TABLE>
-56-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
FUND NAME SHAREHOLDER NAME AND PERCENTAGE OF
ADDRESS FUND HELD
- ------------------------------------------------------------------------------------------
<S> <C> <C>
BOSTON PARTNERS National Financial Services Corp. 69.0%
LARGE CAP FUND For the Exclusive Bene of Our
INVESTOR SHARES Customers
Attn: Mutual Funds 5th Floor
200 Liberty St I World Financial
Center
New York, NY 10281
- ------------------------------------------------------------------------------------------
Charles Schwab & Co. Inc. 7.7%
Special Custody Account for the
Benefit of Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
- ------------------------------------------------------------------------------------------
BOSTON PARTNERS U.S. Bank National Association as Cust 5.9%
MID CAP VALUE FUND Jean Vollum
INST. SHARES P.O. Box 64010
St. Paul, MN 55164-0010
- ------------------------------------------------------------------------------------------
Donaldson Lufkin & Jenrette 15.0%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
- ------------------------------------------------------------------------------------------
North American Trst. Co. 7.6%
FBO Cooley Godward
P.O. Box 84419
San Diego, CA 92138
- ------------------------------------------------------------------------------------------
John Carroll University 8.8%
20700 N. Park Blvd.
University Heights, OH 44118
- ------------------------------------------------------------------------------------------
Firstar Trust Company 5.3%
Trst Edmunson Art Foundation
P.O. Box 1787
Milwaukee, WI 53201-1787
- ------------------------------------------------------------------------------------------
ISTCO 8.8%
P.O. Box 523
Belleville, IL 62222-0523
- ------------------------------------------------------------------------------------------
Coastal Insurance Enterprises Inc. 11.4%
Attn: Chris Baldwin
P.O. Box 240429
Montgomery AL 36124
- ------------------------------------------------------------------------------------------
Healthcare Workers Compensation 7.9%
Fund
Attn: Chris Baldwin
P.O. Box 240429
Montgomery AL 36124
- ------------------------------------------------------------------------------------------
</TABLE>
-57-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
FUND NAME SHAREHOLDER NAME AND PERCENTAGE OF
ADDRESS FUND HELD
- ------------------------------------------------------------------------------------------
<S> <C> <C>
BOSTON PARTNERS National Financial Svcs Corp. for 12.7%
MID CAP VALUE FUND Exclusive Bene of Our Customers Sal
INV SHARES Vella
200 Liberty St.
New York, NY 10281
- ------------------------------------------------------------------------------------------
Charles Schwab & Co. Inc. 45.9%
Special Custody Account for Benefit of
Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
- ------------------------------------------------------------------------------------------
George B. Smithy, Jr 6.2%
38 Greenwood Rd.
Wellesley, MA 02181
- ------------------------------------------------------------------------------------------
BOSTON PARTNERS Boston Partners Asset Mgmt LP 79.3%
BOND FUND One Financial Center 43rd Fl.
INSTITUTIONAL Boston, MA 02111
SHARES
- ------------------------------------------------------------------------------------------
Chiles Foundation 20.7%
111 S.W. Fifth Ave.
4010 US Bancorp Tower
Portland, OR 97204
- ------------------------------------------------------------------------------------------
BOSTON PARTNERS Charles Schwab & Co. Inc. 90.8%
BOND FUND INVESTOR Special Custody Account for Benefit of
SHARES Customers
Attn: Mutual Funds
101 Montgomery St.
San Francisco, CA 94104
- ------------------------------------------------------------------------------------------
Donaldson Lufkin & Jenrette 6.0%
Securities Corporation
Attn: Mutual Funds
P.O. Box 2052
Jersey City, NJ 07303
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
</TABLE>
As of the above date, directors and officers as a group owned less
than one percent of the shares of the Company.
-58-
<PAGE>
APPENDIX A
COMMERCIAL PAPER RATINGS
A Standard & Poor's ("S&P") commercial paper rating is a current
assessment of the likelihood of timely payment of debt having an original
maturity of no more than 365 days. The following summarizes the rating
categories used by Standard and Poor's for commercial paper:
"A-1" - Obligations are rated in the highest category indicating that
the obligor's capacity to meet its financial commitment is strong. Within this
category, certain obligations are designated with a plus sign (+). This
indicates that the obligor's capacity to meet its financial commitment on these
obligations is extremely strong.
"A-2" - Obligations are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations
rated "A-1". However, the obligor's capacity to meet its financial commitment on
the obligation is satisfactory.
"A-3" - Obligations exhibit adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
"B" - Obligations are regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.
"C" - Obligations are currently vulnerable to nonpayment and are
dependent on favorable business, financial, and economic conditions for the
obligor to meet its financial obligation.
"D" - Obligations are in payment default. The "D" rating category is
used when payments on an obligation are not made on the date due, even if the
applicable grace period has not expired, unless S&P believes such payments will
be made during such grace period. The "D" rating will also be used upon the
filing of a bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.
Moody's commercial paper ratings are opinions of the ability of
issuers to repay punctually senior debt obligations not having an original
maturity in excess of one year, unless explicitly noted. The following
summarizes the rating categories used by Moody's for commercial paper:
"Prime-1" - Issuers (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be
<PAGE>
evidenced by many of the following characteristics: leading market positions in
well-established industries; high rates of return on funds employed;
conservative capitalization structure with moderate reliance on debt and ample
asset protection; broad margins in earnings coverage of fixed financial charges
and high internal cash generation; and well-established access to a range of
financial markets and assured sources of alternate liquidity.
"Prime-2" - Issuers (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
"Prime-3" - Issuers (or supporting institutions) have an acceptable
ability for repayment of senior short-term debt obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
"Not Prime" - Issuers do not fall within any of the Prime rating
categories.
The three rating categories of Duff & Phelps for investment grade
commercial paper and short-term debt are "D-1," "D-2" and "D-3." Duff & Phelps
employs three designations, "D-1+," "D-1" and "D-1-," within the highest rating
category. The following summarizes the rating categories used by Duff & Phelps
for commercial paper:
"D-1+" - Debt possesses the highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.
"D-1" - Debt possesses very high certainty of timely payment.
Liquidity factors are excellent and supported by good fundamental protection
factors. Risk factors are minor.
"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.
"D-2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good. Risk
factors are small.
"D-3" - Debt possesses satisfactory liquidity and other protection
factors qualify issues as investment grade. Risk factors are larger and subject
to more variation. Nevertheless, timely payment is expected.
A-2
<PAGE>
"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.
"D-5" - Issuer has failed to meet scheduled principal and/or interest
payments.
Fitch IBCA short-term ratings apply to debt obligations that have time
horizons of less than 12 months for most obligations, or up to three years for
U.S. public finance securities. The following summarizes the rating categories
used by Fitch IBCA for short-term obligations:
"F1" - Securities possess the highest credit quality. This
designation indicates the strongest capacity for timely payment of financial
commitments and may have an added "+" to denote any exceptionally strong credit
feature.
"F2" - Securities possess good credit quality. This designation
indicates a satisfactory capacity for timely payment of financial commitments,
but the margin of safety is not as great as in the case of securities rated
"F1."
"F3" - Securities possess fair credit quality. This designation
indicates that the capacity for timely payment of financial commitments is
adequate; however, near-term adverse changes could result in a reduction to
non-investment grade.
"B" - Securities possess speculative credit quality. this designation
indicates minimal capacity for timely payment of financial commitments, plus
vulnerability to near-term adverse changes in financial and economic conditions.
"C" - Securities possess high default risk. This designation
indicates that the capacity for meeting financial commitments is solely reliant
upon a sustained, favorable business and economic environment.
"D" - Securities are in actual or imminent payment default.
Thomson BankWatch short-term ratings assess the likelihood of an
untimely payment of principal and interest of debt instruments with original
maturities of one year or less. The following summarizes the ratings used by
Thomson BankWatch:
"TBW-1" - This designation represents Thomson BankWatch's highest
category and indicates a very high likelihood that principal and interest will
be paid on a timely basis.
"TBW-2" - This designation represents Thomson BankWatch's
second-highest category and indicates that while the degree of safety regarding
timely repayment of principal and interest is strong, the relative degree of
safety is not as high as for issues rated "TBW-1."
"TBW-3" - This designation represents Thomson BankWatch's lowest
investment-grade category and indicates that while the obligation is more
susceptible to adverse
A-3
<PAGE>
developments (both internal and external) than those with higher ratings, the
capacity to service principal and interest in a timely fashion is considered
adequate.
"TBW-4" - This designation represents Thomson BankWatch's lowest
rating category and indicates that the obligation is regarded as non-investment
grade and therefore speculative.
CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS
The following summarizes the ratings used by Standard & Poor's for
corporate and municipal debt:
"AAA" - An obligation rated "AAA" has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.
"AA" - An obligation rated "AA" differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
"A" - An obligation rated "A" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rated categories. However, the obligor's capacity to meet
its financial commitment on the obligation is still strong.
"BBB" - An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
"BB," "B," "CCC," "CC" and "C" - Debt is regarded as having
significant speculative characteristics. "BB" indicates the least degree of
speculation and "C" the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.
"BB" - Debt is less vulnerable to non-payment than other speculative
issues. However, it faces major ongoing uncertainties or exposure to adverse
business, financial or economic conditions which could lead to the obligor's
inadequate capacity to meet its financial commitment on the obligation.
"B" - Debt is more vulnerable to non-payment than obligations rated
"BB," but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
A-4
<PAGE>
"CCC" - Debt is currently vulnerable to non-payment, and is dependent
upon favorable business, financial and economic conditions for the obligor to
meet its financial commitment on the obligation. In the event of adverse
business, financial or economic conditions, the obligor is not likely to have
the capacity to meet its financial commitment on the obligation.
"CC" - An obligation rated "CC" is currently highly vulnerable to
non-payment.
"C" - The "C" rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
"D" - An obligation rated "D" is in payment default. This rating is
used when payments on an obligation are not made on the date due, even if the
applicable grace period has not expired, unless S & P believes that such
payments will be made during such grace period. "D" rating is also used upon
the filing of a bankruptcy petition or the taking of similar action if payments
on an obligation are jeopardized.
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.
"r" - This rating is attached to highlight derivative, hybrid, and
certain other obligations that S & P believes may experience high volatility or
high variability in expected returns due to non-credit risks. Examples of such
obligations are: securities whose principal or interest return is indexed to
equities, commodities, or currencies; certain swaps and options; and
interest-only and principal-only mortgage securities. The absence of an "r"
symbol should not be taken as an indication that an obligation will exhibit no
volatility or variability in total return.
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
edged." 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-5
<PAGE>
"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 are considered as medium-grade obligations, (i.e., they
are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of these
ratings provide questionable protection of interest and principal ("Ba"
indicates speculative elements; "B" indicates a general lack of characteristics
of desirable investment; "Caa" are of 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.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's
believes possess the strongest investment attributes are designated by the
symbols, Aa1, A1, Baa1, Ba1 and B1.
The following summarizes the long-term debt ratings used by Duff &
Phelps for corporate and municipal long-term debt:
"AAA" - Debt is considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.
"AA" - Debt is considered of high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.
"A" - Debt possesses protection factors which are average but
adequate. However, risk factors are more variable and greater in periods of
economic stress.
"BBB" - Debt possesses below-average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.
A-6
<PAGE>
"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these
ratings is considered to be below investment grade. Although below investment
grade, debt rated "BB" is deemed likely to meet obligations when due. Debt
rated "B" possesses the risk that obligations will not be met when due. Debt
rated "CCC" is well below investment grade and has considerable uncertainty as
to timely payment of principal, interest or preferred dividends. Debt rated
"DD" is a defaulted debt obligation, and the rating "DP" represents preferred
stock with dividend arrearages.
To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.
The following summarizes the ratings used by Fitch IBCA for corporate
and municipal bonds:
"AAA" - Bonds considered to be investment grade and of the highest
credit quality. These ratings denote the lowest expectation of investment risk
and are assigned only in case of exceptionally strong capacity for timely
payment of financial commitments. This capacity is very unlikely to be
adversely affected by foreseeable events.
"AA" - Bonds considered to be investment grade and of very high credit
quality. These ratings denote a very low expectation of investment risk and
indicate very strong capacity for timely payment of financial commitments. This
capacity is not significantly vulnerable to foreseeable events.
"A" - Bonds considered to be investment grade and of high credit
quality. These ratings denote a low expectation of investment risk and indicate
strong capacity for timely payment of financial commitments. This capacity may,
nevertheless, be more vulnerable to adverse changes in circumstances or in
economic conditions than bonds with higher ratings.
"BBB" - Bonds considered to be investment grade and of good credit
quality. These ratings denote that there is currently a low expectation of
investment risk. The capacity for timely payment of financial commitments is
adequate, but adverse circumstances and in economic conditions are more likely
to impair this category.
"BB" - Bonds considered to be speculative. These ratings indicate
that there is a possibility of credit risk developing, particularly as the
result of adverse economic changes over time; however, business or financial
alternatives may be available to allow financial commitments to be met.
Securities rated in this category are not investment grade.
"B" - Bonds are considered highly speculative. these ratings indicate
that significant credit risk is present, but a limited margin of safety remains.
Financial commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and economic
environment.
A-7
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"CCC", "CC", "C" - Bonds have high default risk. Capacity for meeting
financial commitments is reliant upon sustained, favorable business or economic
developments. "CC" ratings indicate that default of some kind appears probable,
and "C" ratings signal imminent default.
"DDD," "DD" and "D" - Bonds are in default. Securities are not
meeting obligations and are extremely speculative. "DDD" designates the highest
potential for recovery on these securities, and "D" represents the lowest
potential for recovery.
To provide more detailed indications of credit quality, the Fitch IBCA
ratings from and including "AA" to "B" may be modified by the addition of a plus
(+) or minus (-) sign to show relative standing within these major rating
categories.
Thomson BankWatch assesses the likelihood of an untimely repayment of
principal or interest over the term to maturity of long term debt and preferred
stock which are issued by United States commercial banks, thrifts and non-bank
banks; non-United States banks; and broker-dealers. The following summarizes
the rating categories used by Thomson BankWatch for long-term debt ratings:
"AAA" - This designation represents the highest category assigned by
Thomson BankWatch to long-term debt and indicates that the ability to repay
principal and interest on a timely basis is extremely high.
"AA" - This designation indicates a very strong ability to repay
principal and interest on a timely basis with limited incremental risk compared
to issues rated in the highest category.
"A" - This designation indicates that the ability to repay principal
and interest is strong. Issues rated "A" could be more vulnerable to adverse
developments (both internal and external) than obligations with higher ratings.
"BBB" - This designation represents Thomson BankWatch's lowest
investment-grade category and indicates an acceptable capacity to repay
principal and interest. Issues rated "BBB" are, however, more vulnerable to
adverse developments (both internal and external) than obligations with higher
ratings.
"BB," "B," "CCC," and "CC" - These designations are assigned by
Thomson BankWatch to non-investment grade long-term debt. Such issues are
regarded as having speculative characteristics regarding the likelihood of
timely payment of principal and interest. "BB" indicates the lowest degree of
speculation and "CC" the highest degree of speculation.
"D" - This designation indicates that the long-term debt is in
default.
A-8
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PLUS (+) OR MINUS (-) - The ratings from "AAA" through "CC" may
include a plus or minus sign designation which indicates where within the
respective category the issue is placed.
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 Ratings Group for municipal
notes:
"SP-1" - The issuers of these municipal notes exhibit a strong
capacity to pay principal and interest. Those issues determined to possess very
strong characteristics are given a plus (+) designation.
"SP-2" - The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest, with some vulnerability to adverse
financial and economic changes over the term of the notes.
"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" - This designation denotes 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" - This designation denotes high quality, with margins
of protection ample although not so large as in the preceding group.
"MIG-3"/"VMIG-3" - This designation denotes 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" - This designation denotes adequate quality, carrying
specific risk but having protection commonly regarded as required of an
investment security and not distinctly or predominantly speculative.
"SG" - This designation denotes speculative quality and lack of
margins of protection.
A-9
<PAGE>
Fitch IBCA and Duff & Phelps use the short-term ratings described
under Commercial Paper Ratings for municipal notes.
A-10
<PAGE>
APPENDIX B
As stated in the Prospectus, the Funds may enter into certain futures
transactions. Such transactions are described in this Appendix.
I. INTEREST RATE FUTURES CONTRACTS
USE OF INTEREST RATE FUTURES CONTRACTS. Bond prices are established
in both the cash market and the futures market. In the cash market, bonds are
purchased and sold with payment for the full purchase price of the bond being
made in cash, generally within five business days after the trade. In the
futures market, only a contract is made to purchase or sell a bond in the future
for a set price on a certain date. Historically, the prices for bonds
established in the futures markets have tended to move generally in the
aggregate in concert with the cash market prices and have maintained fairly
predictable relationships. Accordingly, a Fund may use interest rate futures
contracts as a defense, or hedge, against anticipated interest rate changes. As
described below, this would include the use of futures contract sales to protect
against expected increases in interest rates and futures contract purchases to
offset the impact of interest rate declines.
A Fund could accomplish a similar result to that which it hopes to
achieve through the use of futures contracts by selling bonds with long
maturities and investing in bonds with short maturities when interest rates are
expected to increase, or conversely, selling short-term bonds and investing in
long-term bonds when interest rates are expected to decline. However, because
of the liquidity that is often available in the futures market, the protection
is more likely to be achieved, perhaps at a lower cost and without changing the
rate of interest being earned by the Fund, by using futures contracts.
DESCRIPTION OF INTEREST RATE FUTURES CONTRACTS. An interest rate
futures contract sale would create an obligation by a Fund, as seller, to
deliver the specific type of financial instrument called for in the contract at
a specific future time for a specified price. A futures contract purchase would
create an obligation by a Fund, as purchaser, to take delivery of the specific
type of financial instrument at a specific future time at a specific price. The
specific securities delivered or taken, respectively, at settlement date, would
not be determined until at or near that date. The determination would be in
accordance with the rules of the exchange on which the futures contract sale or
purchase was made.
Although interest rate futures contracts by their terms call for
actual delivery or acceptance of securities, in most cases the contracts are
closed out before the settlement date without the making or taking of delivery
of securities. Closing out a futures contract sale is effected by a Fund
entering into a futures contract purchase for the same aggregate amount of the
specific type of financial instrument and the same delivery date. If the price
of the sale exceeds the price of the offsetting purchase, the Fund is
immediately paid the difference and thus realizes a gain. If the offsetting
purchase price exceeds the sale price, the Fund pays the difference and realizes
a loss. Similarly, the closing out of a futures contract purchase is effected
by the Fund entering into a futures contract sale. If the offsetting sale price
exceeds the purchase price, the
<PAGE>
Fund realizes a gain, and if the purchase price exceeds the offsetting sale
price, the Fund realizes a loss.
Interest rate futures contracts are traded in an auction environment
on the floors of several exchanges -- principally, the Chicago Board of Trade,
the Chicago Mercantile Exchange and the New York Futures Exchange. Each
exchange guarantees performance under contract provisions through a clearing
corporation, a nonprofit organization managed by the exchange membership.
A public market now exists in futures contracts covering various
financial instruments including long-term U.S. Treasury Bonds and Notes;
Government National Mortgage Association (GNMA) modified pass-through mortgage
backed securities; three-month U.S. Treasury Bills; and ninety-day commercial
paper. The Funds may trade in any interest rate futures contracts for which
there exists a public market, including, without limitation, the foregoing
instruments.
With regard to the Fund, the Adviser also anticipates engaging in
transactions, from time to time, in foreign stock index futures such as the
ALL-ORDS (Australia), CAC-40 (France), TOPIX (Japan) and the FTSE-100 (United
Kingdom).
II. INDEX FUTURES CONTRACTS
GENERAL. A stock or bond index assigns relative values to the stocks
or bonds included in the index, which fluctuates with changes in the market
values of the stocks or bonds included. Some stock index futures contracts are
based on broad market indexes, such as Standard & Poor's 500 or the New York
Stock Exchange Composite Index. In contrast, certain exchanges offer futures
contracts on narrower market indexes, such as the Standard & Poor's 100 or
indexes based on an industry or market indexes, such as Standard & Poor's 100 or
indexes based on an industry or market segment, such as oil and gas stocks.
Futures contracts are traded on organized exchanges regulated by the Commodity
Futures Trading Commission. Transactions on such exchanges are cleared through
a clearing corporation, which guarantees the performance of the parties to each
contract. With regard to the Fund, to the extent consistent with its investment
objective, the Adviser anticipates engaging in transactions, from time to time,
in foreign stock index futures such as the ALL-ORDS (Australia), CAC-40
(France), TOPIX (Japan) and the FTSE-100 (United Kingdom).
A Fund might sell index futures contracts in order to offset a
decrease in market value of its portfolio securities that might otherwise result
from a market decline. A Fund might do so either to hedge the value of its
portfolio as a whole, or to protect against declines, occurring prior to sales
of securities, in the value of the securities to be sold. Conversely, a Fund
might purchase index futures contracts in anticipation of purchases of
securities. A long futures position may be terminated without a corresponding
purchase of securities.
In addition, a Fund might utilize index futures contracts in
anticipation of changes in the composition of its portfolio holdings. For
example, in the event that a Fund expects to narrow the range of industry groups
represented in its holdings it may, prior to making purchases
B-2
<PAGE>
of the actual securities, establish a long futures position based on a more
restricted index, such as an index comprised of securities of a particular
industry group. A Fund may also sell futures contracts in connection with this
strategy, in order to protect against the possibility that the value of the
securities to be sold as part of the restructuring of the portfolio will decline
prior to the time of sale.
III. FUTURES CONTRACTS ON FOREIGN CURRENCIES
A futures contract on foreign currency creates a binding obligation on
one party to deliver, and a corresponding obligation on another party to accept
delivery of, a stated quantity of foreign currency, for an amount fixed in U.S.
dollars (or another currency). Foreign currency futures may be used by a Fund
to hedge against exposure to fluctuations in exchange rates between different
currencies arising from multinational transactions.
IV. MARGIN PAYMENTS
Unlike purchase or sales of portfolio securities, no price is paid or
received by a Fund upon the purchase or sale of a futures contract. Initially,
a Fund will be required to deposit with the broker or in a segregated account
with a custodian an amount of liquid assets known as initial margin, based on
the value of the contract. The nature of initial margin in futures transactions
is different from that of margin in security transactions in that futures
contract margin does not involve the borrowing of funds by the customer to
finance the transactions. Rather, the initial margin is in the nature of a
performance bond or good faith deposit on the contract which is returned to the
Fund upon termination of the futures contract assuming all contractual
obligations have been satisfied. Subsequent payments, called variation margin,
to and from the broker, will be made on a daily basis as the price of the
underlying instruments fluctuates making the long and short positions in the
futures contract more or less valuable, a process known as
marking-to-the-market. For example, when a particular Fund has purchased a
futures contract and the price of the contract has risen in response to a rise
in the underlying instruments, that position will have increased in value and
the Fund will be entitled to receive from the broker a variation margin payment
equal to that increase in value. Conversely, where the Fund has purchased a
futures contract and the price of the future contract has declined in response
to a decrease in the underlying instruments, the position would be less valuable
and the Fund would be required to make a variation margin payment to the broker.
Prior to expiration of the futures contract, the Adviser may elect to close the
position by taking an opposite position, subject to the availability of a
secondary market, which will operate to terminate the Fund's position in the
futures contract. A final determination of variation margin is then made,
additional cash is required to be paid by or released to the Fund, and the Fund
realizes a loss or gain.
V. RISKS OF TRANSACTIONS IN FUTURES CONTRACTS
There are several risks in connection with the use of futures by a
Fund. One risk arises because of the imperfect correlation between movements in
the price of the futures and movements in the price of any instruments which are
the subject of a hedge. The price of the futures may move more than or less
than the price of the instruments being hedged. If the price
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<PAGE>
of the futures moves less than the price of the instruments which are the
subject of the hedge, the hedge will not be fully effective but, if the price of
the instruments being hedged has moved in an unfavorable direction, the Fund
would be in a better position than if it had not hedged at all. If the price of
the instruments being hedged has moved in a favorable direction, this advantage
will be partially offset by the loss on the futures. If the price of the
futures moves more than the price of the hedged instruments, the Fund involved
will experience either a loss or gain on the futures which will not be
completely offset by movements in the price of the instruments which are the
subject of the hedge. To compensate for the imperfect correlation of movements
in the price of instruments being hedged and movements in the price of futures
contracts, a Fund may buy or sell futures contracts in a greater dollar amount
than the dollar amount of instruments being hedged if the volatility over a
particular time period of the prices of such instruments has been greater than
the volatility over such time period of the future, or if otherwise deemed to be
appropriate by the Adviser. Conversely, a Fund may buy or sell fewer futures
contracts if the volatility over a particular time period of the prices of the
instruments being hedged is less than the volatility over such time period of
the futures contract being used, or if otherwise deemed to be appropriate by the
Adviser. It is also possible that, where a Fund has sold futures to hedge its
portfolio against a decline in the market, the market may advance and the value
of instruments held in the Fund may decline. If this occurred, the Fund would
lose money on the futures and also experience a decline in value in its
portfolio securities.
When futures are purchased to hedge against a possible increase in the
price of securities or a currency before a Fund is able to invest its cash (or
cash equivalents) in an orderly fashion, it is possible that the market may
decline instead; if the Fund then concludes not to invest its cash at that time
because of concern as to possible further market decline or for other reasons,
the Fund will realize a loss on the futures contract that is not offset by a
reduction in the price of the instruments that were to be purchased.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the futures and any
instruments being hedged, the price of futures may not correlate perfectly with
movement in the cash market due to certain market distortions. Rather than
meeting additional margin deposit requirements, investors may close futures
contracts through off-setting transactions which could distort the normal
relationship between the cash and futures markets. Second, with respect to
financial futures contracts, the liquidity of the futures market depends on
participants entering into off-setting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced thus producing distortions. Third, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price distortion in the
futures market, and because of the imperfect correlation between the movements
in the cash market and movements in the price of futures, a correct forecast of
general market trends or interest rate movements by the adviser may still not
result in a successful hedging transaction over a short time frame.
Positions in futures may be closed out only on an exchange or board of
trade which provides a secondary market for such futures. Although the Funds
intend to purchase or
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<PAGE>
sell futures only on exchanges or boards of trade where there appear to be
active secondary markets, there is no assurance that a liquid secondary market
on any exchange or board of trade will exist for any particular contract or at
any particular time. In such event, it may not be possible to close a futures
investment position, and in the event of adverse price movements, a Fund would
continue to be required to make daily cash payments of variation margin.
However, in the event futures contracts have been used to hedge portfolio
securities, such securities will not be sold until the futures contract can be
terminated. In such circumstances, an increase in the price of the securities,
if any, may partially or completely offset losses on the futures contract.
However, as described above, there is no guarantee that the price of the
securities will in fact correlate with the price movements in the futures
contract and thus provide an offset on a futures contract.
Further, it should be noted that the liquidity of a secondary market
in a futures contract may be adversely affected by "daily price fluctuation
limits" established by commodity exchanges which limit the amount of fluctuation
in a futures contract price during a single trading day. Once the daily limit
has been reached in the contract, no trades may be entered into at a price
beyond the limit, thus preventing the liquidation of open futures positions.
The trading of futures contracts is also subject to the risk of trading halts,
suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal activity, which could at times make it difficult or
impossible to liquidate existing positions or to recover excess variation margin
payments.
Successful use of futures by a Fund is also subject to the Adviser's
ability to predict correctly movements in the direction of the market. For
example, if a particular Fund has hedged against the possibility of a decline in
the market adversely affecting securities held by it and securities prices
increase instead, the Fund will lose part or all of the benefit to the increased
value of its securities which it has hedged because it will have offsetting
losses in its futures positions. In addition, in such situations, if the Fund
has insufficient cash, it may have to sell securities to meet daily variation
margin requirements. Such sales of securities may be, but will not necessarily
be, at increased prices which reflect the rising market. A Fund may have to
sell securities at a time when it may be disadvantageous to do so.
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 (as well as gain) to the investor. For example, if at the time
of purchase, 10% of the value of the futures contract is deposited as margin, a
subsequent 10% decrease in the value of the futures contract would result in a
total loss of the margin deposit, before any deduction for the transaction
costs, if the account were then closed out. A 15% decrease would result in a
loss equal to 150% of the original margin deposit, before any deduction for the
transaction costs, if the contract were closed out. Thus, a purchase or sale of
a futures contract may result in losses in excess of the amount invested in the
contract.
B-5
<PAGE>
VI. OPTIONS ON FUTURES CONTRACTS
A Fund may purchase and write options on the futures contracts
described above. A futures option gives the holder, in return for the premium
paid, the right to buy (call) from or sell (put) to the writer of the option a
futures contract at a specified price at any time during the period of the
option. Upon exercise, the writer of the option is obligated to pay the
difference between the cash value of the futures contract and the exercise
price. Like the buyer or seller of a futures contract, the holder, or writer,
of an option has the right to terminate its position prior to the scheduled
expiration of the option by selling, or purchasing an option of the same series,
at which time the person entering into the closing transaction will realize a
gain or loss. A Fund will be required to deposit initial margin and variation
margin with respect to put and call options on futures contracts written by it
pursuant to brokers' requirements similar to those described above. Net option
premiums received will be included as initial margin deposits. As an example,
in anticipation of a decline in interest rates, a Portfolio may purchase call
options on futures contracts as a substitute for the purchase of futures
contracts to hedge against a possible increase in the price of securities which
the Fund intends to purchase. Similarly, if the value of the securities held by
a Fund is expected to decline as a result of an increase in interest rates, the
Fund might purchase put options or sell call options on futures contracts rather
than sell futures contracts.
Investments in futures options involve some of the same considerations
that are involved in connection with investments in futures contracts (for
example, the existence of a liquid secondary market). In addition, the purchase
or sale of an option also entails the risk that changes in the value of the
underlying futures contract will not correspond to changes in the value of the
option purchased. Depending on the pricing of the option compared to either the
futures contract upon which it is based, or upon the price of the underlying
securities or currencies, an option may or may not be less risky than ownership
of the futures contract or such securities or currencies. In general, the
market prices of options can be expected to be more volatile than the market
prices on the underlying futures contract. Compared to the purchase or sale of
futures contracts, however, the purchase of call or put options on futures
contracts may frequently involve less potential risk to a Fund because the
maximum amount at risk is the premium paid for the options (plus transaction
costs). The writing of an option on a futures contract involves risks similar
to those risks relating to the sale of futures contracts.
VII. OTHER MATTERS
Accounting for futures contracts will be in accordance with generally
accepted accounting principles.
The Funds intend to comply with the regulations of the Commodity
Futures Trading Commission exempting the Funds from registration as a
"commodity pool operator."
B-6
<PAGE>
FINANCIAL STATEMENTS
The audited financial statements and notes thereto in the Fund's
Annual Report to Shareholders for the fiscal year ended August 31, 1997 (the
"1997 Annual Report"), and the unaudited financial statements and notes
thereto in the Fund's Semi-Annual Report to Shareholders for the six-month
period ended February 28, 1998 (the "February 1998 Semi-Annual Report") are
incorporated by reference into this Statement of Additional Information. No
other parts of the 1997 Annual Report or February 1998 Semi-Annual Report are
incorporated by reference herein. The financial statements included in the
1997 Annual Report have been audited by the Fund's independent accountants,
Coopers & Lybrand L.L.P. The reports of Coopers & Lybrand L.L.P. are
incorporated herein by reference. Such financial statements have been
incorporated herein in reliance upon such reports given upon their authority
as experts in accounting and auditing. The financial statements included in
the February 1998 Semi-Annual Report have not been audited by Coopers &
Lybrand L.L.P. Copies of the 1997 Annual Report and the February 1998
Semi-Annual Report may be obtained at no charge by telephoning the Transfer
Agent at the telephone number appearing on the front page of this Statement
of Additional Information.
B-7
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PART C
OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
(1) Included in Part A of the Registration Statement:
Financial Highlights for the BEA U.S. Core Equity Fund for the
period September 1, 1994 (commencement of operations) to August
31, 1995, the fiscal years ended August 31, 1996 and August 31,
1997, and the six-month period ended February 28, 1998 (unaudited).
(2) Incorporated by reference into Part B of the Registration
Statement are the following unaudited financial statements contained
in the Semi-Annual Report of Registrant for the six-month period
ended February 28, 1998:
(a) For the BEA U.S. Core Equity Fund:
Portfolio of Investments - February 28, 1998.
Statement of Operations - for the six-month period ended
February 28, 1998.
Statement of Changes in Net Assets - for the six-month
period ended February 28, 1998.
Notes to Financial Statements.
<TABLE>
<S><C>
(b) Exhibits:
SEE NOTE #
----------
(1) (a) Articles of Incorporation of Registrant 1
(b) Articles Supplementary of Registrant. 1
(c) Articles of Amendment to Articles of 2
Incorporation of Registrant.
(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. 25
(r) Articles Supplementary of Registrant. 27
(s) Articles of Amendment to Charter of the 28
Registrant.
(t) Articles Supplementary of Registrant. 28
(u) Form of Articles Supplementary relating to 33
the BEA Long-Short Market Neutral and BEA
Long-Short Equity Funds.
(v) Form of Articles Supplementary relating to 34
the Boston Partners Micro Cap Value Fund
(Institutional and Investor Classes).
(w) Form of Articles Supplementary relating to 35
the BEA Select Economic Value Equity Fund
(Institutional and Advisor Classes).
<PAGE>
(b) Exhibits:
SEE NOTE #
----------
(x) Form Of Articles Supplementary relating to the BEA U.S. Core
Equity Fund.
(2) By-Laws, as amended 28
(3) None.
(4) (a) See Articles VI, VII, VIII, IX and XI of 1
Registrant's Articles of Incorporation
dated February 17, 1988.
(b) See Articles II, III, VI, XIII, and XIV of 23
Registrant's By-Laws as amended through
April 26, 1996.
(5) (a) Investment Advisory Agreement (Money Market) 3
between Registrant and Provident Institutional
Management Corporation, dated as of August 16,
1988.
(b) Sub-Advisory Agreement (Money Market) between 3
Provident Institutional Management Corporation
and Provident National Bank, dated as of August
16, 1988.
(c) Investment Advisory Agreement (Tax-Free Money 3
Market) between Registrant and Provident
Institutional Management Corporation, dated as
of August 16, 1988.
(d) Sub-Advisory Agreement (Tax-Free Money Market) 3
between Provident Institutional Management
Corporation and Provident National Bank, dated
as of August 16, 1988.
(e) Investment Advisory Agreement (Government 3
Obligations Money Market) between Registrant
and Provident Institutional Management
Corporation, dated as of August 16, 1988.
(f) Sub-Advisory Agreement (Government Obligations 3
Money Market) between Provident Institutional
Management Corporation and Provident National
Bank, dated as of August 16, 1988.
(g) Investment Advisory Agreement (Government 8
Securities) between Registrant and Provident
Institutional Management Corporation dated as
of April 8, 1991.
(h) Investment Advisory Agreement (New York 9
Municipal Money Market) between Registrant and
Provident Institutional Management Corporation
dated November 5, 1991.
(i) Investment Advisory Agreement (Tax-Free Money 10
Market) between Registrant and Provident
Institutional Management Corporation dated
April 21, 1992.
(j) Investment Advisory Agreement (BEA 11
International Equity Portfolio) between
Registrant and BEA Associates.
-2-
<PAGE>
(b) Exhibits:
SEE NOTE #
----------
(k) Investment Advisory Agreement (BEA Strategic 11
Fixed Income Portfolio) between Registrant and
BEA Associates.
(l) Investment Advisory Agreement (BEA Emerging 11
Markets Equity Portfolio) between Registrant
and BEA Associates.
(m) Investment Advisory Agreement (BEA U.S. Core 15
Equity Portfolio) between Registrant and BEA
Associates, dated as of October 27, 1993.
(n) Investment Advisory Agreement (BEA U.S. Core 15
Fixed Income Portfolio) between Registrant and
BEA Associates, dated as of October 27, 1993.
(o) Investment Advisory Agreement (BEA Global Fixed 15
Income Portfolio) between Registrant and BEA
Associates, dated as of October 27, 1993.
(p) Investment Advisory Agreement (BEA Municipal 15
Bond Fund Portfolio) between Registrant and BEA
Associates, dated as of October 27, 1993.
(q) Investment Advisory Agreement (BEA Balanced) 16
between Registrant and BEA Associates.
(r) Investment Advisory Agreement (BEA Short 16
Duration Portfolio) between Registrant and BEA
Associates.
(s) Investment Advisory Agreement (n/i Micro Cap 23
Fund) between Registrant and Numeric Investors,
L.P.
(t) Investment Advisory Agreement (n/i Growth Fund) 23
between Registrant and Numeric Investors, L.P.
(u) Investment Advisory Agreement (n/i Growth & 23
Value Fund) between Registrant and Numeric
Investors, L.P.
(v) Investment Advisory Agreement (BEA Global
Telecommunications Portfolio) between 24
Registrant and BEA Associates.
(w) Investment Advisory Agreement (Boston Partners 26
Large Cap Value Fund) between Registrant and
Boston Partners Asset Management, L.P.
(x) Investment Advisory Agreement (Boston Partners 28
Mid Cap Value Fund) between Registrant and
Boston Partners Asset Management, L.P.
(y) Investment Advisory Agreement (n/i Larger Cap 31
Value Fund) between Registrant and Numeric
Investors, L.P. dated December 1, 1997.
(z) Investment Advisory Agreement (Boston Partners 31
Bond Fund) between Registrant and Boston
Partners Asset Management, L.P. dated December
1, 1997.
(aa) Form of Investment Advisory Agreement 32
(Schneider Capital Management Value Fund)
between Registrant and Schneider Capital
Management Company.
-3-
<PAGE>
(b) Exhibits:
SEE NOTE #
----------
(bb) Form of Investment Advisory Agreement (BEA 33
Long-Short Market Neutral Fund) between
Registrant and BEA Associates.
(cc) Form of Investment Advisory Agreement (BEA 33
Long-Short Equity Fund) between Registrant and
BEA Associates.
(dd) Form of Investment Advisory Agreement (Boston 34
Partners Micro Cap Value Fund) between
Registrant and Boston Partners Asset
Management, L.P.
(ee) Form of Investment Advisory Agreement (BEA 35
Select Economic Value Equity Fund) between
Registrant and BEA Associates.
(6) (a) Distribution Agreement between Registrant and
Provident Distributors, Inc. dated as of May
29, 1998.
(7) Fund Office Retirement Profit-Sharing and Trust 29
Agreement, dated as of October 24, 1990, as amended.
(8) (a) Custodian Agreement between Registrant and 3
Provident National Bank dated as of August 16,
1988.
(b) Sub-Custodian Agreement among The Chase 10
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 dated 9
August 16, 1988.
(f) Agreement between Brown Brothers Harriman & Co. 10
and Registrant on behalf of BEA International
Equity Portfolio, dated September 18, 1992.
(g) Agreement between Brown Brothers Harriman & Co. 10
and Registrant on behalf of BEA Strategic Fixed
Income Portfolio, dated September 18, 1992.
(h) Agreement between Brown Brothers Harriman & Co. 10
and Registrant on behalf of BEA Emerging
Markets Equity Portfolio, dated September 18,
1992.
(i) Agreement between Brown Brothers Harriman & Co. 15
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.
(j) Agreement between Brown Brothers Harriman & Co. 15
and Registrant on behalf of BEA U.S. Core
Equity and BEA U.S. Core Fixed Income
Portfolios dated as of November 29, 1993.
(k) Custodian Contract between Registrant and State 18
Street Bank and Trust Company.
(l) Custody Agreement between Registrant and 23
Custodial Trust Company on behalf of n/i Micro
Cap Fund, n/i Growth Fund and n/i Growth &
Value Fund Portfolios of the Registrant.
-4-
<PAGE>
(b) Exhibits:
SEE NOTE #
----------
(m) Custodian Agreement Supplement Between 26
Registrant and PNC Bank, National Association
dated October 16, 1996.
(n) Custodian Agreement Supplement between 27
Registrant and Brown Brothers Harriman & Co. on
behalf of the BEA Municipal Bond Fund.
(o) Custodian Agreement Supplement between 28
Registrant and PNC Bank, National Association,
on behalf of the Boston Partners Mid Cap Value
Fund.
(p) Custody Agreement between Registrant and 31
Custodial Trust Company on behalf of the n/i
Larger Cap Value Fund.
(q) Custodian Agreement Supplement between
Registrant and PNC Bank, N.A. on behalf of the 31
Boston Partners Bond Fund.
(r) Form of Custodian Agreement Supplement between 32
Registrant and PNC Bank, N.A. on behalf of the
Schneider Capital Management Value Fund.
(s) Form of Custodian Agreement between Registrant 33
and Custodial Trust Company on behalf of the
BEA Long-Short Market Neutral and the BEA Long-
Short Equity Funds.
(t) Form of Custodian Agreement Supplement between 34
Registrant and PNC Bank, N.A. on behalf of the
Boston Partners Micro Cap Value Fund.
(u) Form of Custodian Agreement Supplement between 35
Registrant and Brown Brothers Harriman & Co. on
behalf of the BEA Select Economic Value Equity
Fund.
(v) Form of Custodian Agreement Supplement between
Registrant and Brown Brothers Harriman & Co. on
behalf of the BEA U.S. Core Equity Fund Advisor
Class.
(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 Preservation) 3
between Registrant and Provident Financial
Processing Corporation, dated as of August 16,
1988.
(c) Shareholder Servicing Agreement (Sansom Street 3
Money Market).
(d) Shareholder Servicing Agreement (Sansom Street 3
Tax-Free Money Market).
(e) Shareholder Servicing Agreement (Sansom Street 3
Government Obligations Money Market).
(f) Shareholder Services Plan (Sansom Street Money 3
Market).
(g) Shareholder Services Plan (Sansom Street Tax- 3
Free Money Market).
-5-
<PAGE>
(b) Exhibits:
SEE NOTE #
----------
(h) Shareholder Services Plan (Sansom Street 3
Government Obligations Money Market).
(i) Transfer Agency Agreement (Bedford) between 3
Registrant and Provident Financial Processing
Corporation, dated as of August 16, 1988.
(j) Administration and Accounting Services
Agreement between Registrant and Provident 8
Financial Processing Corporation, relating to
Government Securities Portfolio, dated as of
April 10, 1991.
(k) 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.
(l) Administration and Accounting Services 10
Agreement between Registrant and Provident
Financial Processing Corporation (BEA
International Equity) dated September 18, 1992.
(m) Administration and Accounting Services 10
Agreement between Registrant and Provident
Financial Processing Corporation (BEA Strategic
Fixed Income) dated September 18, 1992.
(n) Administration and Accounting Services 10
Agreement between Registrant and Provident
Financial Processing Corporation (BEA Emerging
Markets Equity) dated September 18, 1992.
(o) Transfer Agency Agreement and Supplements 9
(Bradford, Alpha (now known as Janney), Beta,
Gamma, Delta, Epsilon, Zeta, Eta and Theta)
between Registrant and Provident Financial
Processing Corporation dated as of November 5,
1991.
(p) Transfer Agency Agreement Supplement (BEA) 10
between Registrant and Provident Financial
Processing Corporation dated as of September
19, 1992.
(r) 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.
(s) Transfer Agency Agreement Supplement (BEA U.S. 15
Core Equity, BEA U.S. Core Fixed Income, BEA
Global Fixed Income and BEA Municipal Bond Fund
Portfolios) between Registrant and PFPC Inc.
dated as October 27, 1993.
(t) Administration and Accounting Services 15
Agreement between Registrant and PFPC Inc.
relating to BEA U.S. Core Equity Portfolio
dated as of October 27, 1993.
(u) Administration and Accounting Services 15
Agreement between Registrant and PFPC Inc. (BEA
U.S. Core Fixed Income Portfolio) dated October
27, 1993.
(v) Administration and Accounting Services 15
Agreement between Registrant and PFPC Inc.
(International Fixed Income Portfolio) dated
October 27, 1993.
-6-
<PAGE>
(b) Exhibits:
SEE NOTE #
----------
(w) Administration and Accounting Services 15
Agreement between Registrant and PFPC Inc.
(Municipal Bond Fund Portfolio) dated
October 27, 1993.
(x) Transfer Agency Agreement Supplement (BEA 18
Balanced and Short Duration Portfolios) between
Registrant and PFPC Inc. dated October 26,
1994.
(y) Administration and Accounting Services 18
Agreement between Registrant and PFPC Inc. (BEA
Balanced Portfolio) dated October 26, 1994.
(z) Administration and Accounting Services 18
Agreement between Registrant and PFPC Inc. (BEA
Short Duration Portfolio) dated October 26,
1994.
(bb) Transfer Agency and Service Agreement between 21
Registrant and State Street Bank and Trust
Company and PFPC, Inc. dated February 1, 1995.
(cc) Supplement to Transfer Agency and Service 21
Agreement between Registrant, State Street Bank
and Trust Company, Inc. and PFPC dated April
10, 1995.
(dd) Amended and Restated Credit Agreement dated 22
December 15, 1994.
(ee) Transfer Agency Agreement Supplement (n/i Micro 23
Cap Fund, n/i Growth Fund and n/i Growth &
Value Fund) between Registrant and PFPC, Inc.
dated April 14, 1996.
(ff) Administration and Accounting Services 23
Agreement between Registrant and PFPC, Inc.
(n/i Micro Cap Fund) dated April 24, 1996.
(gg) Administration and Accounting Services 23
Agreement between Registrant and PFPC, Inc.
(n/i Growth Fund) dated April 24, 1996.
(hh) Administration and Accounting Services 23
Agreement between Registrant and PFPC, Inc.
(n/i Growth & Value Fund) dated April 24, 1996.
(jj) Administration and Accounting Services 24
Agreement between Registrant and PFPC, Inc.
(BEA Global Telecommunications Portfolio).
(kk) Co-Administration Agreement between Registrant 24
Investor and BEA Associates (BEA International
Equity Investor Portfolio).
(ll) Co-Administration Agreement between Registrant
and BEA Associates (BEA International Equity 24
Advisor Portfolio).
(mm) Co-Administration Agreement between Registrant 24
and BEA Associates (BEA Emerging Markets Equity
Investor Portfolio).
(nn) Co-Administration Agreement between Registrant 24
and BEA Associates (BEA Emerging Markets Equity
Advisor Portfolio).
(oo) Co-Administration Agreement between Registrant 24
and BEA Associates (BEA High Yield Investor
Portfolio).
-7-
<PAGE>
(b) Exhibits:
SEE NOTE #
----------
(pp) Co-Administration Agreement between Registrant 24
and BEA Associates (BEA High Yield Advisor
Portfolio).
(qq) Co-Administration Agreement between Registrant 24
and BEA Associates (BEA Global
Telecommunications Investor Portfolio).
(rr) Co-Administration Agreement between Registrant 24
and BEA Associates (BEA Global
Telecommunications Advisor Portfolio).
(ss) Transfer Agreement and Service Agreement 24
between Registrant and State Street Bank and
Trust Company.
(tt) Administration and Accounting Services 27
Agreement between the Registrant and PFPC Inc.
dated October 16, 1996 (Boston Partners Large
Cap Value Fund).
(uu) Transfer Agency Agreement Supplement between 26
Registrant and PFPC Inc. (Boston Partners Large
Cap Value Fund, Institutional Class).
(vv) Transfer Agency Agreement Supplement between 26
Registrant and PFPC Inc. (Boston Partners Large
Cap Value Fund, Investor Class).
(ww) Transfer Agency Agreement Supplement between 26
Registrant and PFPC Inc. (Boston Partners Large
Cap Value Fund, Advisor Class).
(xx) Transfer Agency Agreement Supplement between 28
Registrant and PFPC Inc., (Boston Partners Mid
Cap Value Fund, Institutional Class).
(yy) Transfer Agency Agreement Supplement between 28
Registrant and PFPC Inc., (Boston Partners Mid
Cap Value Fund, Investor Class).
(zz) Administration and Accounting Services 28
Agreement between Registrant and PFPC Inc.
dated, May 30, 1997 (Boston Partners Mid Cap
Value Fund).
(aaa) Transfer Agency Agreement Supplement (n/i
Larger Cap Value Fund) between Registrant and 31
PFPC, Inc. dated December 1, 1997.
(bbb) Administration and Accounting Services 31
Agreement between Registrant and PFPC, Inc.
dated December 1, 1997 (n/i Larger Cap Value
Fund).
(ccc) Co-Administration Agreement between Registrant 31
and Bear Stearns Funds Management, Inc. dated
December 1, 1997 (n/i Larger Cap Value Fund).
(eee) Transfer Agency Agreement Supplement between 31
Registrant and PFPC, Inc. dated December 1,
1997 (Boston Partners Bond Fund, Institutional
Class).
(fff) Transfer Agency Agreement Supplement between 31
Registrant and PFPC, Inc. dated December 1,
1997 (Boston Partners Bond Fund, Investor
Class).
(ggg) Administration and Accounting Services 31
Agreement between Registrant and PFPC, Inc.
dated December 1, 1997 (Boston Partners Bond
Fund).
-8-
<PAGE>
(b) Exhibits:
SEE NOTE #
----------
(hhh) Form of Administration and Accounting Services 32
Agreement between Registrant and PFPC Inc.
(Schneider Capital Management Value Fund).
(iii) Form of Transfer Agency Agreement Supplement 32
between Registrant and PFPC Inc. (Schneider
Capital Management Value Fund).
(kkk) Form of Administration and Accounting Services 33
Agreement between Registrant and PFPC Inc. (BEA
Long-Short Market Neutral Fund).
(lll) Form of Administration and Accounting Services 33
Agreement between Registrant and PFPC Inc. (BEA
Long-Short Equity Fund).
(mmm) Form of Co-Administration Agreement between 33
Registrant and BEA Associates (BEA Long-Short
Market Neutral Fund).
(nnn) Form of Co-Administration Agreement between 33
Registrant and BEA Associates (BEA Long-Short
Equity Fund).
(ooo) Form of Transfer Agency Agreement Supplement 33
between Registrant and State Street Bank &
Trust Company (BEA Long-Short Market Neutral
Fund Institutional Class).
(ppp) Form of Transfer Agency Agreement Supplement
between Registrant and State Street Bank & 33
Trust Company (BEA Long-Short Market Neutral
Fund Advisor Class).
(qqq) Form of Transfer Agency Agreement Supplement 33
between Registrant and State Street Bank &
Trust Company (BEA Long-Short Equity Fund
Institutional Class).
(rrr) Form of Transfer Agency Agreement Supplement 33
between Registrant and State Street Bank &
Trust Company (BEA Long-Short Equity Fund
Advisor Class).
(uuu) Form of Transfer Agency Agreement Supplement 34
between Registrant and PFPC, Inc. (Boston
Partners Micro Cap Value Fund, Institutional
Class).
(vvv) Form of Transfer Agency Agreement Supplement 34
between Registrant and PFPC, Inc. (Boston
Partners Micro Cap Value Fund, Investor Class).
(www) Form of Administration and Accounting Services 34
Agreement between Registrant and PFPC, Inc.
(Boston Partners Micro Cap Value Fund).
(xxx) Form of Transfer Agency Agreement Supplement 35
between Registrant and State Street Bank and
Trust Company (BEA Select Economic Value Equity
Fund Institutional Class).
(yyy) Form of Transfer Agency Agreement Supplement 35
between Registrant and State Street Bank and
Trust Company (BEA Select Economic Value Equity
Fund Advisor Class).
-9-
<PAGE>
<CAPTION>
(b) Exhibits: SEE NOTE #
----------
(zzz) Form of Administrative and Accounting Services 35
Agreement between Registrant and PFPC, Inc.
(BEA Select Economic Value Equity Fund).
(aaaa) Form of Co-Administrative Agreement between 35
Registrant and BEA Associates (BEA Select
Economic Value Equity Fund Advisor Class).
(cccc) Form of Transfer Agency Agreement Supplement
between Registrant and State Street Bank and
Trust Company (BEA U.S. Core Equity Fund
Advisor Class).
(dddd) Form of Co-Administration Agreement between
Registrant and BEA Associates (BEA U.S. Core
Equity Fund Advisor Class).
(eeee) Administrative Services Agreement between
Registrant and Provident Distributors, Inc.
dated as of May 29, 1998 and relating to the
n/i funds, Schneider Capital Management Value
Fund, and Institutional Shares of the Boston
Partners and BEA Funds.
(10) Opinion of Counsel
(11) (a) Consent of Drinker Biddle & Reath LLP.
(11) (b) Consent of Coopers and Lybrand LLP.
(12) None.
(13) (a) Subscription Agreement (relating to Classes A 2
through N).
(b) Subscription Agreement between Registrant and 7
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 and 9
Counsellors Securities Inc. relating to Classes
R, S, and Alpha 1 through Theta 4.
(e) Subscription Agreement between Registrant and 10
Counsellors Securities Inc. relating to Classes
T, U and V.
(f) Subscription Agreement between Registrant and 18
Counsellor's Securities Inc. relating to
Classes BB and CC.
(g) Purchase Agreement between Registrant and 23
Numeric Investors, L.P. relating to Class FF
(n/i Micro Cap Fund).
(h) Purchase Agreement between Registrant and 23
Numeric Investors, L.P. relating to Class GG
(n/i Growth Fund).
-10-
<PAGE>
<CAPTION>
(b) Exhibits: SEE NOTE #
----------
(i) Purchase Agreement between Registrant and 23
Numeric Investors, L.P. relating to Class HH
(n/i Growth & Value Fund).
(j) Subscription Agreement between Registrant and 24
Counsellors Securities, Inc. relating to
Classes II through PP.
(k) Purchase Agreement between Registrant and 27
Boston Partners Asset Management, L.P. relating
to Classes QQ, RR and SS (Boston Partners Large
Cap Value Fund).
(l) Purchase Agreement between Registrant and 28
Boston Partners Asset Management, L.P. relating
to Classes TT and UU (Boston Partners Mid Cap
Value Fund).
(m) Purchase Agreement between Registrant and 31
Boston Partners Asset Management L.P. relating
to Classes VV and WW (Boston Partners Bond
Fund).
(n) Purchase Agreement between Registrant and 31
Numeric Investors, L.P. relating to Class XX
(n/i Larger Cap Value Fund).
(o) Form of Purchase Agreement between Registrant 33
and BEA Associates relating to Classes ZZ and
AAA (BEA Long-Short Market Neutral Fund).
(p) Form of Purchase Agreement between Registrant 33
and BEA Associates relating to Classes BBB and
CCC (BEA Long-Short Equity Fund).
(q) Form of Purchase Agreement between Registrant 34
and Boston Partners Asset Management, L.P.
relating to Classes DDD and EEE (Boston
Partners Micro Cap Value Fund).
(r) Form of Purchase Agreement between Registrant 35
and BEA Associates relating to Classes FFF and
GGG (BEA Select Economic Value Equity Fund).
(s) Form of Purchase Agreement between Registrant
and BEA Associates relating to Class HHH (BEA
U.S. Core Equity Fund).
(14) None.
(15) (a) Plan of Distribution (Sansom Street Money 3
Market).
(b) Plan of Distribution (Sansom Street Tax-Free 3
Money Market).
(c) Plan of Distribution (Sansom Street Government 3
Obligations Money Market).
(d) Plan of Distribution (Cash Preservation Money). 3
(e) Plan of Distribution (Cash Preservation Tax- 3
Free Money Market).
(f) Plan of Distribution (Bedford Money Market). 3
(g) Plan of Distribution (Bedford Tax-Free Money 3
Market).
(h) Plan of Distribution (Bedford Government 3
Obligations Money Market).
-11-
<PAGE>
<CAPTION>
(b) Exhibits: SEE NOTE #
----------
(i) Plan of Distribution (Income Opportunities High 7
Yield).
(j) Amendment No. 1 to Plans of Distribution 8
(Classes A through Q).
(k) Plan of Distribution (Alpha (now known as 9
Janney) Money Market).
(l) Plan of Distribution (Alpha (now known as 9
Janney) Tax-Free Money Market (now known as the
Municipal Money Market)).
(m) Plan of Distribution (Alpha (now known as 9
Janney) Government Obligations Money Market).
(n) Plan of Distribution (Alpha (now known as 9
Janney) New York Municipal Money Market).
(o) Plan of Distribution (Beta Money Market). 9
(p) Plan of Distribution (Beta Tax-Free Money 9
Market).
(q) Plan of Distribution (Beta Government 9
Obligations Money Market).
(r) Plan of Distribution (Beta New York Money 9
Market).
(s) Plan of Distribution (Gamma Money Market). 9
(t) Plan of Distribution (Gamma Tax-Free Money 9
Market).
(u) Plan of Distribution (Gamma Government 9
Obligations Money Market).
(v) Plan of Distribution (Gamma New York Municipal 9
Money Market).
(w) Plan of Distribution (Delta Money Market). 9
(x) Plan of Distribution (Delta Tax-Free Money 9
Market).
(y) Plan of Distribution (Delta Government 9
Obligations Money Market).
(z) Plan of Distribution (Delta New York Municipal 9
Money Market).
(aa) Plan of Distribution (Epsilon Money Market). 9
(bb) Plan of Distribution (Epsilon Tax-Free Money 9
Market).
(cc) Plan of Distribution (Epsilon Government 9
Municipal Money Market).
(dd) Plan of Distribution (Epsilon New York
Municipal Money Market). 9
(ee) Plan of Distribution (Zeta Money Market). 9
(ff) Plan of Distribution (Zeta Tax-Free Money 9
Market).
(gg) Plan of Distribution (Zeta Government 9
Obligations Money Market).
(hh) Plan of Distribution (Zeta New York Municipal 9
Money Market).
(ii) Plan of Distribution (Eta Money Market). 9
(jj) Plan of Distribution (Eta Tax-Free Money 9
Market).
(kk) Plan of Distribution (Eta Government 9
Obligations Money Market).
(ll) Plan at Distribution (Eta New York Municipal 9
Money Market).
-12-
<PAGE>
<CAPTION>
(b) Exhibits: SEE NOTE #
----------
(mm) Plan of Distribution (Theta Money Market). 9
(nn) Plan of Distribution (Theta Tax-Free Money 9
Market).
(oo) Plan of Distribution (Theta Government 9
Obligations Money Market).
(pp) Plan of Distribution (Theta New York Municipal 9
Money Market).
(qq) Plan of Distribution (BEA International Equity 24
Investor).
(rr) Plan of Distribution (BEA International Equity 24
Advisor).
(ss) Plan of Distribution (BEA Emerging Markets 24
Equity Investor).
(tt) Plan of Distribution (BEA Emerging Markets 24
Equity Advisor).
(uu) Plan of Distribution (BEA High Yield Investor). 24
(vv) Plan of Distribution (BEA High Yield Advisor). 24
(ww) Plan of Distribution (BEA Global 24
Telecommunications Investor).
(xx) Plan of Distribution (BEA Global 24
Telecommunications Advisor).
(yy) Plan of Distribution (Boston Partners Large Cap
Value Fund Institutional Class) 26
(zz) Plan of Distribution (Boston Partners Large Cap 27
Value Fund Investor Class)
(aaa) Plan of Distribution (Boston Partners Large Cap 27
Value Fund Advisor Class)
(bbb) Plan of Distribution (Boston Partners Mid Cap 27
Value Fund Investor Class)
(ccc) Plan of Distribution (Boston Partners Mid Cap 27
Value Fund Institutional Class)
(ddd) Plan of Distribution (Boston Partners Bond Fund 31
Institutional Class).
(eee) Plan of Distribution (Boston Partners Bond Fund 31
Investor Class).
(fff) Form of Plan of Distribution Pursuant to Rule 33
12b-1 (BEA Long-Short Equity Fund Advisor
Class).
(ggg) Form of Plan of Distribution Pursuant to Rule 33
12b-1 (BEA Long-Short Market Neutral Fund
Advisor Class).
(hhh) Form of Plan of Distribution (Boston Partners 34
Micro Cap Value Fund Institutional Class).
(iii) Form of Plan of Distribution (Boston Partners 34
Micro Cap Value Fund Investor Class).
(jjj) Form of Plan of Distribution pursuant to Rule 35
12b-1 (BEA Select Economic Value Equity Fund
Advisor Class).
(kkk) Form of Plan of Distribution pursuant to Rule
12b-1 (BEA U.S. Core Equity Fund Advisor
Class).
-13-
<PAGE>
<CAPTION>
(b) Exhibits: SEE NOTE #
----------
(16) (a) Schedule for Computation of Performance 29
Quotations for the Money Market and
Boston Partners Portfolios.
(b) Schedule for Computation of Performance 30
Quotations for the BEA Portfolios.
(c) Schedule for Computation of Performance 31
Quotations for the n/i Portfolios.
(17) Financial Data Schedules for Institutional shares of
the BEA U.S. Core Equity Fund
(18) Form of Amended Rule 18f-3 Plan.
</TABLE>
NOTE #
- ------
1 Incorporated herein by reference to the same exhibit number of
Registrant's Registration Statement (No. 33-20827) filed on March 24,
1988.
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.
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.
-14-
<PAGE>
12 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 11 to the Registrant's Registration 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 an December 19, 1994.
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.
25 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 39 to the Registrant's Registration Statement
(No. 33-20827) filed on October 11, 1996.
26 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 41 to the Registrant's Registration Statement
(No. 33-20827) filed on November 27, 1996.
27 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 45 to the Registrant's Registration Statement
(No. 33-20827) filed on May 9, 1997.
28 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 46 to the Registrant's Registration Statement
(33-20827) filed on September 25, 1997.
29 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 49 to the Registrant's Registration Statement
(33-20827) filed on December 1, 1997.
-15-
<PAGE>
30 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 50 to the Registrant's Registration Statement
(33-20827) filed on December 8, 1997.
31 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 51 to the Registrant's Registration Statement
(33-20827) filed on December 8, 1997.
32 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 52 to the Registrant's Registration Statement
(33-20827) filed on January 23, 1998.
33 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 53 to the Registrant's Registration Statement
(33-20827) filed on April 10, 1998.
34 Incorporated herein by reference to the same exhibit number of
Post-Effective Amendment No. 54 to the Registrant's Registration Statement
(33-20827) filed on April 17, 1998.
35 Incorporated herein by reference to the same exhibit number of Post-
Effective Amendment No. 55 to the Registrant's Registration Statement
(33-20827) filed on April 28, 1998.
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 May 31, 1998.
<TABLE>
<CAPTION>
TITLE OF CLASS OF COMMON STOCK NUMBER OF RECORD HOLDERS
- ------------------------------ ------------------------
<S> <C> <C>
a) Cash Preservation Money Market 39
b) Cash Preservation Municipal Money Market 56
c) Sansom Street Money Market 3
d) Sansom Street Municipal Money Market 0
e) Sansom Street Government Obligations Money Market 0
f) Bedford Money Market 46382
g) RBB Government Securities 489
h) Bedford Municipal Money Market 5138
i) Bedford Government Obligations Money Market 10128
j) BEA International Equity - Institutional Class 367
k) BEA International Equity - Investor Class 0
l) BEA International Equity - Advisor Class 14
m) BEA High Yield - Institutional Class 72
n) BEA High Yield - Investor Class 0
o) BEA High Yield - Advisor Class 11
p) BEA Emerging Markets Equity - Institutional Class 23
q) BEA Emerging Markets Equity - Investor Class 0
r) BEA Emerging Markets Equity - Advisor Class 9
s) BEA U.S. Core Equity - Institutional Class 59
t) BEA U.S. Core Equity - Advisor Class 0
u) BEA U.S. Core Fixed Income 63
v) BEA Strategic Global Fixed Income 15
w) BEA Municipal Bond Fund 37
x) BEA Short Duration 0
y) BEA Balanced 0
z) BEA Global Telecommunications - Investor Class 0
aa) BEA Global Telecommunications - Advisor Class 29
-16-
<PAGE>
<CAPTION>
bb) BEA Long-Short Market Neutral - Institutional Class 0
cc) BEA Long-Short Market Neutral - Advisor Class 0
dd) BEA Long-Short Equity - Institutional Class 0
ee) BEA Long-Short Equity - Advisor Class 0
ff) BEA Select Economic Value Equity - Institutional Class 0
gg) BEA Select Economic Value Equity - Advisor Class 0
hh) Janney Montgomery Scott
Money Market 106501
ii) Janney Montgomery Scott
Municipal Money Market 4346
jj) Janney Montgomery Scott
Government Obligations Money Market 33718
kk) Janney Montgomery Scott
New York Municipal Money Market 1409
ll) ni Micro Cap 3479
mm) ni Growth 3365
nn) ni Growth & Value 5991
oo) ni Larger Cap Value 613
pp) Boston Partners Large Cap Value Fund - Institutional
Class 39
qq) Boston Partners Large Cap Value Fund - Investor Class 43
rr) Boston Partners Large Cap Value Fund - Advisor Class 0
ss) Boston Partners Mid Cap Value Fund - Investor Class 46
tt) Boston Partners Mid Cap Value Fund - Institutional Class 62
uu) Boston Partners Premium Bond - Institutional Class 4
vv) Boston Partners Premium Bond - Investor Class 4
ww) Boston Partners Micro Cap Value - Institutional Class 0
xx) Boston Partners Micro Cap Value - Investor Class 0
</TABLE>
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 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 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
-17-
<PAGE>
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
substantial nature in which any directors and officers of BIMC, BEA, Numeric,
Boston Partners and Schneider Capital Management 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 BIMC's FORM ADV (File No. 801-13304) filed on
February 23, 1998, Schedules B and D of BEA Form ADV (File No. 801-37170) filed
on March 31, 1998, Schedules B and D of Numeric's FORM ADV (File No. 801-35649)
filed on March 26, 1998, Schedules of Boston Partners' FORM ADV (File No.
801-49059) filed on March 31, 1998, and Schedules B and D of Schneider Capital
Management's FORM ADV (File No. 801-55439) filed on April 25, 1998,
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.
-18-
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
DIRECTORS
<TABLE>
<CAPTION>
POSITION WITH NAME OTHER BUSINESS CONNECTIONS TYPE OF BUSINESS
PNC BANK
<S> <C> <C> <C>
Director Paul W. Chellgren Chairman and Chief Executive Officer Energy Company
Ashland Inc.
P.O. 391
Ashland, KY 41114
Director Robert N. Clay President and Chief Executive Officer Investments
Clay Holding Company
Three Chimneys Farm
Versailles. KY 40383
Director George A. Davidson, Chairman and Chief Executive Officer Public Utility Holding
Jr. Consolidated Natural Gas Company
CNG Tower, 625 Liberty Avenue
Pittsburgh, PA 15222-3199
Director David F. Girard- Managing Partner Law Firm
diCarlo Blank Rome Comisky & McCauley LLP
One Logan Square
Philadelphia, PA 19103-6998
Director Walter Emmor Gregg, One PNC Plaza, P1-POPP-30-1 Diversified Financial
Jr. 249 Fifth Street Services
Pittsburgh, PA 15222-2707
Director William R. Johnson President and Chief Executive Officer Food Products Company
H.J. Heinz Company
600 Grant Street
Pittsburgh, PA 15219-2857
Director Bruce C. Lindsey Chairman and Managing Director Advisory Company
Brind-Lindsey & Co.
1520 Locust Street, Suite 1100
Philadelphia, PA 19102
Director W. Craig McClelland Chairman and Chief Executive Officer Paper Manufacturing and
Union Camp Corporation Land Resources
1600 Valley Road
Wayne, NJ 07470
Director Thomas Henry Chairman and Chief Executive Officer Diversified Financial
O'Brien PNC Bank Corp. Services
One PNC Plaza, 249 Fifth Avenue
Pittsburgh, PA 15222-2707
</TABLE>
-19-
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH
PNC BANK NAME OTHER BUSINESS CONNECTIONS TYPE OF BUSINESS
<S> <C> <C> <C>
Director Jane G. Pepper President Nonprofit Horticultural
Pennsylvania Horticultural Society Membership Organization
100 N. 20th Street -5th Floor
Philadelphia, PA 19103-1495
Director Jackson H. Randolph Chairman Public Utility Holding
Cinergy Corp. Company
221 East Fourth Street, Suite 3004
Cincinnati, OH 45202
Director James Edward Rohr President & Chief Operating Officer Diversified Financial
PNC Bank N.A. Services
One PNC Plaza- 30th Floor
Pittsburgh PA 15625
Director Roderic H. Ross Chairman and Chief Executive Officer Insurance Company
Keystone State Life Insurance Co.
1401 Walnut Street, 10th Floor
Philadelphia, PA 19102-3122
Director Richard P. Simmons Chairman, President & CEO Specialty Metals and
Allegheny Teledyne Incorporated Diversified Business
1000 Six PPG Place
Pittsburgh, PA 15222-5479
Director Thomas J. Usher Chairman and Chief Executive Officer Energy, Steel and
USX Corporation Diversified Business
600 Grant Street - Room 6170
Pittsburgh, PA 15219-4776
Director Milton A. Washington President and Chief Executive Officer Housing Rehabilitation and
AHRCO Construction
5604 Baum Boulevard
Pittsburgh, PA 15206
</TABLE>
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
James C. Altman Senior Vice President
Terry D. Amore Senior Vice President
Edward V. Arbaugh, III Senior Vice President
Robert Jones Arnold Senior Vice President
James N. Atteberry Senior Vice President
Lila M. Bachelier Senior Vice President
-20-
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
James C. Baker Senior Vice President
James R. Bartholomew Senior Vice President
Peter R. Begg Senior Vice President
Constance A. Bentzen Senior Vice President
Donald G. Berdine Senior Vice President
Ben Berzin, Jr. Senior Vice President
James H. Best Senior Vice President
Paul A. Best Senior Vice President
Michael J. Beyer Senior Vice President
R. Bruce Bickel Senior Vice President
Karen E. Blair Senior Vice President
Ronald R. Blankenbuehler Senior Vice President
Ronald L. Bovill Senior Vice President
George Brikis Executive Vice President
Dennis P. Brenckle President, Central PA Market
Michael Brundage Senior Vice President
Donna L. Burge Senior Vice President
Jane Wilson Burks Senior Vice President
Douglas H. Burr Senior Vice President
David D. Burrow Senior Vice President
James P. Burzotta Senior Vice President
Anthony J. Cacciatore Senior Vice President
Craig T. Campbell Senior Vice President
-21-
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
William L. Campbell Senior Vice President
J. Richard Carnall Executive Vice President
Donald R. Carroll Senior Vice President
Edward V. Caruso Executive Vice President
Kevin J. Cecil Senior Vice President
Rhonda S. Chatzkel Senior Vice President
Chaomei Chen Senior Vice President
Sandra Chickeletti Assistant Secretary
Thomas P. Ciak Assistant Secretary
Peter K. Classen President, Northeast PA Market
James P. Conley Senior Vice President
Andra D. Cochran Senior Vice President
William Harvey Coggin Senior Vice President
John F. Colligan Senior Vice President
C. David Cook Senior Vice President
Robert F. Crouse Senior Vice President
Peter M. Crowley Senior Vice President
Keith P. Crytzer Senior Vice President
John J. Daggett Senior Vice President
Peter J. Danchak Senior Vice President
Richard G. DePaul Executive Vice President
Helen A. DePrisco Executive Vice President
Richard Devore Senior Vice President
James N. Devries Senior Vice President
Anuj Dhanda Senior Vice President
-22-
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
Frank H. Dilenschneider Senior Vice President
Thomas C. Dilworth Senior Vice President
Alfred J. DiMatties Senior Vice President
Robert D. Edwards Senior Vice President
Tawana L. Edwards Senior Vice President
David J. Egan Senior Vice President
Richard M. Ellis Senior Vice President
Orlando C. Esposito Senior Vice President
Lynn Fox Evans Senior Vice President & Controller
William E. Fallon Senior Vice President
James M. Ferguson, III Senior Vice President
Charles J. Ferrero Senior Vice President
John Fox Executive Vice President
Frederick C. Frank, III Executive Vice President
William J. Friel Executive Vice President
John F. Fulgoncy Senior Counsel and Secretary
Brian K. Garlock Senior Vice President
Leigh Gerstenberger Senior Vice President
Donald W. Giffin, Jr. Senior Vice President
James G. Graham Executive Vice President
Craig Davidson Grant Senior Vice President
Barbara J. Griec Senior Vice President
Frederick J. Gronbacher Executive Vice President, National Consumer
Bank
Thomas M. Groneman Senior Vice President
-23-
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
Thomas Grundman Senior Vice President
Neil F. Hall Executive Vice President
John C. Haller President, Ohio Market
Michael J. Hannon Senior Vice President
Michael N. Harreld President, Kentucky Market
Michael J. Harrington Senior Vice President
Maurice H. Hartigan, II Executive Vice President
G. Thomas Hewes Senior Vice President
Susan G. Holt Senior Vice President
Sylvan M. Holzer President, Pittsburgh Market
William D. Hummel Senior Vice President
Wayne P. Hunley Senior Vice President
John M. Infield Senior Vice President
Philip C. Jackson Senior Vice President
Lawrence W. Jacobs Senior Vice President
Robert Greg Jenkins Senior Vice President
William J. Johns Chief Financial Officer
Craig M. Johnson Senior Vice President, Comptroller
Eric C. Johnson Senior Vice President
William R. Johnson Audit Director
Robert D. Kane, Jr. Senior Vice President
Jack Kelly Senior Vice President
Michael D.Kelsey Chief Compliance Counsel
Geoffrey R. Kimmel Senior Vice President
-24-
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
Randall C. King Senior Vice President
James M. Kinsman, Jr. Senior Vice President
Christopher M. Knoll Senior Vice President
William Kosis Executive Vice President
Richard C. Krauss Senior Vice President
Frank R. Krepp Senior Vice President & Chief Credit Policy
Officer
Thomas F. Lamb Senior Vice President
Kenneth P. Leckey Senior Vice President & Cashier
Marilyn R. Levins Senior Vice President
Carl J. Lisman Executive Vice President
Richard J. Lovett Senior Vice President
Stephen F. Lugarich Senior Vice President
Brian S. MacConnell Senior Vice President
Jane E. Madio Senior Vice President
Linda R. Manfredonia Senior Vice President
Nicholas M. Marsini, Jr. Senior Vice President
John A. Martin Senior Vice President
David O. Matthews Senior Vice President
Dennis McChesney Executive Vice President
Walter B. McClellan Senior Vice President
James F. McGowan Senior Vice President
Timothy McInerney Senior Vice President
Charlotte B. McLaughlin Senior Vice President
Kim D. McNeil Senior Vice President
Charles R. McNutt Senior Vice President
James W. Meighen Senior Vice President
-25-
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
James C. Mendelson Senior Vice President
Theodore Lang Merhoff Senior Vice President
Darryl Metzger Senior Vice President
Scott C. Meves Senior Vice President
Ralph S. Michael, III Executive Vice President, Corporate Banking
James P. Mikula Senior Vice President
Robert J. Miller, Jr. Senior Vice President
Melanie Millican Senior Vice President
Robert G. Mills Assistant Secretary
J. William Mills, III Senior Vice President
Francine Miltenberger Senior Vice President
Chester A. Misbach Senior Vice President
Barbara A. Misner Senior Vice President
D. Bryant Mitchell, II Executive Vice President
Michael D. Moll Senior Vice President
Christopher N. Moravec Senior Vice President
Thomas R. Moore Vice President and Assistant Secretary
Marlene D. Mosco President, Northwest PA Market
Peter F. Moylan Senior Vice President
Ronald J. Murphy Executive Vice President
Saiyid T. Naqvi Executive Vice President
Michael B. Nelson Executive Vice President
Jill V. Niedweske Senior Vice President
Thomas J. Nist Senior Vice President
John L. Noelcke Senior Vice President
Thomas H. O'Brien Chairman and CEO
-26-
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
Cynthia G. Osofsky Senior Vice President
Thomas E. Paisley, III Senior Vice President, Corporate Credit
Policy
Samuel R. Patterson Senior Vice President and Controller
Daniel J. Pavlick Senior Vice President
David M. Payne Senior Vice President
John Pendergrass Senior Vice President
W. David Pendl Senior Vice President
Stephen D. Penn Senior Vice President
John J. Peters Senior Vice President
Frank Pomor Senior Vice President
Helen P. Pudlin Senior Vice President, and General Counsel
Wayne Pulliam Senior Vice President
Arthur F. Radman, III Senior Vice President
Gordon L. Ragan Senior Vice President
Edward E. Randall Senior Vice President
Robert Q. Reilly Senior Vice President
Jesse S. Reinhardt Senior Vice President
Ronald J. Retzler Senior Vice President
Richard C. Rhoades Senior Vice President
Charles M. Rhodes, Jr. Senior Vice President
Rodger L. Rickenbrode Senior Vice President
Bryan W. Ridley Senior Vice President
Bruce E. Robbins Executive Vice President, Secured Lending
W. Alton Roberts Senior Vice President
James E. Rohr President and Chief Operating Officer
James C. Rooks Senior Vice President
Peter M. Ross Senior Vice President
-27-
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
Suzanne C. Ross Senior Vice President
Gerhard Royer Senior Vice President
Robert T. Saltarelli Senior Vice President
Robert V. Sammartino Senior Vice President
William Sayre, Jr. Senior Vice President
Stephen C. Schatterman Senior Vice President
Jeffrey W. Schmidt Senior Vice President
Peter H. Schryver Senior Vice President
Richard A. Seymour Senior Vice President
Timothy G. Shack Executive Vice President, Chief Information
Officer
Douglas E. Shaffer Senior Vice President
Donald Shauger Senior Vice President
Bruce Shipley Senior Vice President
Alfred A. Silva Executive Vice President
George R. Simon Senior Vice President
J. Max Smith Senior Vice President
Richard L. Smoot President and CEO of PNC Bank,
Philadelphia/S. Jersey Region
Timothy N. Smyth Senior Vice President
Richard R. Soeder Senior Vice President
Darcel H. Steber Senior Vice President
Melvin A. Steele Senior Vice President
Richard Stegemeier Senior Vice President
Ted K. Stirgwolt Senior Vice President
Connie Bond Stuart Senior Vice President
Lon E. Susak Senior Vice President
-28-
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
Stephen L. Swanson Executive Vice President
Ronald L. Tassone Senior Vice President
Frank A. Taucher Senior Vice President
John T. Taylor Senior Vice President
Peter W. Thompson Senior Vice President
Jane B. Tompkins Senior Vice President
Alex T. Topping Senior Vice President
Kevin M. Tucker Senior Vice President
William H. Turner President, Northern New Jersey Market
William Thomps Tyrrell Senior Vice President
Alan P. Vail Senior Vice President
Michael B. Vairin Senior Vice President
Ellen G. Vander Horst Executive Vice President
Ronald H. Vicari Senior Vice President
Patrick M. Wallace Senior Vice President
Bruce E. Walton Executive Vice President
Annette M. Ward-Kredel Senior Vice President
Leonard A. Watkins Senior Vice President
Frances A. Wilkinson Assistant Secretary
Robert S. Warth Senior Vice President
Mark F. Wheeler Senior Vice President
Thomas K. Whitford Executive Vice President, Private Bank
George Whitmer Senior Vice President
Gary G. Wilson Senior Vice President
Nancy B. Wolcott Executive Vice President
Arlene M. Yocum Senior Vice President
Carole Yon Senior Vice President
-29-
<PAGE>
PNC BANK, NATIONAL ASSOCIATION
OFFICERS
George L. Ziminski, Jr. Senior Vice President
(1) PNC Bank, National Association, 120 S. 17th Street, Philadelphia, PA 19103
1600 Market Street, Philadelphia, PA 19103
17th and Chestnut Streets, Philadelphia, PA 19103
(2) PNC National Bank, 103 Bellevue Parkway, Wilmington, DE 19809.
(3) PFPC Inc., 103 Bellevue Parkway, Wilmington, DE 19809.
(4) PNC Service Corp, 103 Bellevue Parkway, Wilmington, DE 19809.
(5) Provident Capital Management, Inc., 30 S. 17th Street, Suite 1500,
Philadelphia, PA 19103.
(6) PNC Investment Corp., Broad and Chestnut Street, 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., 222 Delaware Avenue, 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) PNC Bank, New Jersey, National Association, Woodland Falls Corporate Park,
210 Lake Drive East, Cherry Hill, NJ 08002.
(16) PNC Capital Corp, 5th Avenue and Woods Streets, Pittsburgh, PA 15265.
(17) PNC Holding Corp, 222 Delaware Avenue, P.O. Box 791, Wilmington, DE 19899.
(18) PNC Venture Corp, 5th Avenue and Woods Streets, Pittsburgh, PA 15265.
(19) PNC Bank, Delaware, 300 Delaware Avenue, Wilmington, DE 19801.
(20) Bank of Delaware Corp., 300 Delaware Avenue, Wilmington, DE 19801.
(21) Del-Vest, Inc., 300 Delaware Avenue, Wilmington, DE 19801.
(22) Marand Corp., 222 Delaware Avenue, Wilmington, DE 19801.
(23) Millsboro Insurance Agency, 300 Delaware Avenue, Wilmington, DE 19801.
-30-
<PAGE>
(24) Roney-Richards, Inc., 300 Delaware Avenue, Wilmington, DE 19801.
Item 29. PRINCIPAL UNDERWRITER
(a) Provident Distributors, Inc. (the "Distributor") acts as
principal underwriter for the following investment companies:
Pacific Horizon Funds, Inc.
Time Horizon Funds
World Horizon Funds, Inc.
Pacific Innovations Trust
International Dollar Reserve Fund I, Ltd.
Municipal Fund for Temporary Investment
Municipal Fund for New York Investors, Inc.
Municipal Fund for California Investors, Inc.
Temporary Investment Fund, Inc.
Trust for Federal Securities
Columbia Common Stock Fund, Inc.
Columbia Growth Fund, Inc.
Columbia International Stock Fund, Inc.
Columbia Special Fund, Inc.
Columbia Small Cap Fund, Inc.
Columbia Real Estate Equity Fund, Inc.
Columbia Balanced Fund, Inc.
Columbia Daily Income Company
Columbia U.S. Government Securities Fund, Inc.
Columbia Fixed Income Securities Fund, Inc.
Columbia Municipal Bond Fund, Inc.
Columbia High Yield Fund, Inc.
The BlackRock Funds, Inc. (Distributed by BlackRock Distributors,Inc.
a wholly owned subsidiary of Provident Distributors, Inc.)
The OffitBank Investment Fund, Inc.
The OffitBank Variable Insurance Fund, Inc.
CVO Greater China Fund, Inc. (Distributed by Offit Funds Distributors,
Inc. a wholly owned subsidiary of Provident Distributors, Inc.
The Brazos Mutual Funds
Kiewit Mutual Fund
Kalmar Pooled Investment Trust
(b) The information required by this item 29(b) is incorporated by
reference to Form BD (SEC File No. 8-46564) filed by the Distributor with
the Securities and Exchange Commission pursuant to the Securities Exchange
Act of 1934.
Item 30. LOCATION OF ACCOUNTS AND RECORDS
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<PAGE>
(1) PNC Bank, National Association (successor by merger to Provident
National Bank), 1600 Market Street, Philadelphia, PA 19103 (records
relating to its functions as sub-adviser and custodian).
(2) Provident Distributors, Inc., Four Falls Corporate Center, 6th Floor,
West Conshohocken, PA 19428 (records relating to its functions as
distributor).
(3) Blackrock 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., Bellevue Corporate Center, 400 Bellevue Parkway,
Wilmington, Delaware 19809 (records relating to its functions as
transfer agent and dividend disbursing agent).
(5) Drinker Biddle & Reath LLP, Philadelphia National Bank Building, 1345
Chestnut Street, Philadelphia, Pennsylvania 19107-3496 (Registrant's
Articles of Incorporation, By-Laws and Minute Books).
(6) BEA Associates, Tower 49, 12 East 49th Street, New York, NY 10017
(records relating to its function as investment adviser).
(7) Numeric Investors, L.P., 1 Memorial Drive, Cambridge, Massachusetts
02142 (records relating to its function as investment adviser).
(8) Boston Partners Asset Management, L.P., One Financial Center, 43rd
Floor, Boston, Massachusetts 02111 (records relating to its function
as investment adviser).
(9) Schneider Capital Management Co., 460 East Swedesford Road, Suite
1080, Wayne, Pennsylvania 19087 (records relating to its function 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 furnish each person to whom a
prospectus is delivered a copy of Registrant's latest annual
report to shareholders upon request and without charge.
-32-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this Post-Effective
Amendment No. 56 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 the 24th day of June, 1998.
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 Executive June 24, 1998
- ----------------------- Officer) and Treasurer (Principal
Edward J. Roach Financial and Accounting Officer)
*/s/Donald van Roden Director June 24, 1998
Donald van Roden
*/s/Francis J. McKay Director June 24, 1998
- -----------------------
Francis J. McKay
*/s/Marvin E. Sternberg Director June 24, 1998
- -----------------------
Marvin E. Sternberg
*/s/Julian A. Brodsky Director June 24, 1998
- -----------------------
Julian A. Brodsky
*/s/Arnold M. Reichman Director June 24, 1998
- -----------------------
Arnold M. Reichman
*/s/Robert Sablowsky Director June 24, 1998
- -----------------------
Robert Sablowsky
*By:/s/ Edward J. Roach June 24, 1998
-------------------
Edward J. Roach
Attorney-in-Fact
-33-
<PAGE>
THE RBB FUND, INC.
(the "Company")
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Donald van
Roden, hereby constitutes and appoints Edward J. Roach and Michael P. Malloy,
his true and lawful attorneys, to execute in his name, place, and stead, in his
capacity as Director or officer, or both, of the Company, the Registration
Statement and any amendments thereto and all instruments necessary or incidental
in connection therewith, and to file the same with the Securities and Exchange
Commission; and said attorneys shall have full power and authority to do and
perform in his name and on his behalf, in any and all capacities, every act
whatsoever requisite or necessary to be done in the premises, as fully and to
all intents and purposes as he might or could do in person, said acts of said
attorneys being hereby ratified and approved.
DATED: April 23, 1997
/s/ Donald van Roden
- ------------------------------
Donald van Roden
<PAGE>
THE RBB FUND, INC.
(the "Company")
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Marvin E.
Sternberg, hereby constitutes and appoints Edward J. Roach and Michael P.
Malloy, his true and lawful attorneys, to execute in his name, place, and stead,
in his capacity as Director or officer, or both, of the Company, the
Registration Statement and any amendments thereto and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission; and said attorneys shall have full power and authority
to do and perform in his name and on his behalf, in any and all capacities,
every act whatsoever requisite or necessary to be done in the premises, as fully
and to all intents and purposes as he might or could do in person, said acts of
said attorneys being hereby ratified and approved.
DATED: April 23, 1997
/s/ Marvin E. Sternberg
- ------------------------------
Marvin E. Sternberg
<PAGE>
THE RBB FUND, INC.
(the "Company")
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Arnold Reichman,
hereby constitutes and appoints Edward J. Roach and Michael P. Malloy, his true
and lawful attorneys, to execute in his name, place, and stead, in his capacity
as Director or officer, or both, of the Company, the Registration Statement and
any amendments thereto and all instruments necessary or incidental in connection
therewith, and to file the same with the Securities and Exchange Commission; and
said attorneys shall have full power and authority to do and perform in his name
and on his behalf, in any and all capacities, every act whatsoever requisite or
necessary to be done in the premises, as fully and to all intents and purposes
as he might or could do in person, said acts of said attorneys being hereby
ratified and approved.
DATED: April 23, 1997
/s/ Arnold Reichman
- ------------------------------
Arnold Reichman
<PAGE>
THE RBB FUND, INC.
(the "Company")
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Francis J.
McKay, hereby constitutes and appoints Edward J. Roach and Michael P. Malloy,
his true and lawful attorneys, to execute in his name, place, and stead, in his
capacity as Director or officer, or both, of the Company, the Registration
Statement and any amendments thereto and all instruments necessary or incidental
in connection therewith, and to file the same with the Securities and Exchange
Commission; and said attorneys shall have full power and authority to do and
perform in his name and on his behalf, in any and all capacities, every act
whatsoever requisite or necessary to be done in the premises, as fully and to
all intents and purposes as he might or could do in person, said acts of said
attorneys being hereby ratified and approved.
DATED: April 23, 1997
/s/ Francis J. McKay
- ------------------------------
Francis J. McKay
<PAGE>
THE RBB FUND, INC.
(the "Company")
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Julian Brodsky,
hereby constitutes and appoints Edward J. Roach and Michael P. Malloy, his true
and lawful attorneys, to execute in his name, place, and stead, in his capacity
as Director or officer, or both, of the Company, the Registration Statement and
any amendments thereto and all instruments necessary or incidental in connection
therewith, and to file the same with the Securities and Exchange Commission; and
said attorneys shall have full power and authority to do and perform in his name
and on his behalf, in any and all capacities, every act whatsoever requisite or
necessary to be done in the premises, as fully and to all intents and purposes
as he might or could do in person, said acts of said attorneys being hereby
ratified and approved.
DATED: April 23, 1997
/s/ Julian Brodsky
- ------------------------------
Julian Brodsky
<PAGE>
THE RBB FUND, INC.
(the "Company")
POWER OF ATTORNEY
Know All Men by These Presents, that the undersigned, Robert
Sablowsky, hereby constitutes and appoints Edward J. Roach and Michael P.
Malloy, his true and lawful attorneys, to execute in his name, place, and stead,
in his capacity as Director or officer, or both, of the Company, the
Registration Statement and any amendments thereto and all instruments necessary
or incidental in connection therewith, and to file the same with the Securities
and Exchange Commission; and said attorneys shall have full power and authority
to do and perform in his name and on his behalf, in any and all capacities,
every act whatsoever requisite or necessary to be done in the premises, as fully
and to all intents and purposes as he might or could do in person, said acts of
said attorneys being hereby ratified and approved.
DATED: April 23, 1997
/s/ Robert Sablowsky
- ------------------------------
Robert Sablowsky
<PAGE>
THE RBB FUND, INC.
EXHIBIT INDEX
Exhibits
--------
(x) Form of Articles Supplementary relating to the BEA U.S. Core
Equity Fund (Advisor Class).
6(a) Distribution Agreement between Registrant and Provident
Distributors, Inc. dated as of May 29, 1998.
8(v) Form of Custodian Agreement Supplement between Registrant and
Brown Brothers Harriman & Co. on behalf of the BEA U.S. Core
Equity Fund Advisor Class.
9(cccc) Form of Transfer Agency Agreement Supplement between Registrant
and State Street Bank and Trust Company (BEA U.S. Core Equity
Fund Advisor Class).
9(dddd) Form of Co-Administration Agreement between Registrant and BEA
Associates (BEA U.S. Core Equity Fund Advisor Class).
9(eeee) Administrative Services Agreement between Registrant and
Provident Distributors, Inc. dated as of May 29, 1998 and
relating to the n/i Funds, Schneider, and Institutional Shares of
the Boston Partners and BEA Funds.
10 Opinion of Counsel.
11(a) Consent of Drinker Biddle & Reath LLP.
11(b) Consent of Coopers and Lybrand LLP.
13(s) Form of Purchase Agreement between Registrant and BEA Associates
relating to Class HHH (BEA U.S. Core Equity Fund).
15(kkk) Form of Plan of Distribution pursuant to Rule 12b-1 (BEA U.S.
Core Equity Fund Advisor Class).
17 Financial Data Schedules for Institutional Shares of the BEA
U.S. Core Equity Fund.
18 Form of Amended Rule 18f-3 Plan.
<PAGE>
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:
(1) 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 HHH Common Stock (BEA U.S.
Core Equity Fund Advisor Class)
SECOND: A description of the shares so classified with the
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption as set or changed by the Board
<PAGE>
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.
The shares of Class HHH Common Stock will be issued without stock
certificates.
The shares of Class HHH Common Stock and previously classified Class Y
shall be invested in a common investment portfolio, with shares of Class Y
Common Stock representing the Institutional Class of such portfolio and shares
of Class HHH Common Stock representing the Advisor Class of such portfolio.
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
-2-
<PAGE>
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;
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;
-3-
<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 $.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
-4-
<PAGE>
share;
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 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;
-5-
<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 TT - one hundred million (100,000,000), par value $.001 per share;
Class UU - one hundred million (100,000,000), par value $.001 per share;
Class VV - one hundred million (100,000,000), par value $.001 per share;
Class WW - one hundred million (100,000,000), par value $.001 per share;
Class XX - fifty million (50,000,0000), par value $.001 per share;
Class YY - one hundred million (100,000,000), par value $.001
Class ZZ - one hundred million (100,000,000), par value $.001
Class AAA - one hundred million (100,000,000), par value $.001
Class BBB - one hundred million (100,000,000), par value $.001
Class CCC - one hundred million (100,000,000), par
-6-
<PAGE>
value $.001
Class DDD - one hundred million (100,000,000), par value $.001
Class EEE - one hundred million (100,000,000), par value $.001
Class FFF - one hundred million (100,000,000), par value $.001
Class GGG - one hundred million (100,000,000), par value $.001
Class Janney Money - seven hundred million (700,000,000), par value $.001
per share;
Class Janney - two hundred million (200,000,000), par
Municipal Money value $.001 per share;
Class Janney - five hundred million (500,000,000), par
Government Money value $.001 per share;
Class Janney N.Y. - one hundred million (100,000,000), par
Municipal Money 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;
Class Gamma 1 - one million (1,000,000), par value $.001 per share;
-7-
<PAGE>
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;
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
-8-
<PAGE>
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; and
Class Theta 4 - one million (1,000,000), par value $.001 per share;
for a total of fourteen billion eight hundred twenty-eight million
(14,828,000,000) 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
-9-
<PAGE>
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;
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;
-10-
<PAGE>
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;
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
-11-
<PAGE>
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;
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;
-12-
<PAGE>
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;
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 TT - one hundred million (100,000,000), par value $.001 per
share;
Class UU - one hundred million (100,000,000), par value $.001 per
share;
Class VV - one hundred million (100,000,000), par value $.001 per
share;
Class WW - one hundred million (100,000,000), par value $.001 per
share;
Class XX - fifty million (50,000,000), par value $.001 per share;
Class YY - one hundred million (100,000,000), par value $.001
Class ZZ - one hundred million (100,000,000), par value $.001
Class AAA - one hundred million (100,000,000), par
-13-
<PAGE>
value $.001
Class BBB - one hundred million (100,000,000), par value $.001
Class CCC - one hundred million (100,000,000), par value $.001
Class DDD - one hundred million (100,000,000), par value $.001
Class EEE - one hundred million (100,000,000), par value $.001
Class FFF - one hundred million (100,000,000), par value $.001
Class GGG - one hundred million (100,000,000), par value $.001
Class HHH - one hundred million (100,000,000, par value $.001
Class Janney Money - seven hundred million (700,000,000), par value $.001
per share;
Class Janney - two hundred million (200,000,000), par
Municipal Money value $.001 per share;
Class Janney - five hundred million (500,000,000), par
Government Money value $.001 per share;
Class Janney - one hundred million (100,000,000), par
N.Y. Municipal value $.001 per share;
Money
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
-14-
<PAGE>
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;
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;
-15-
<PAGE>
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 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;
-16-
<PAGE>
for a total of fourteen billion nine hundred twenty-eight million
(14,928,000,000) shares classified into separate classes of common stock.
-17-
<PAGE>
IN WITNESS WHEREOF, The RBB Fund, Inc. has caused these presents to be
signed in its name and on its behalf by its President and witnessed Secretary on
______, 1998.
THE RBB FUND, INC.
WITNESS:
- ------------------------------ ------------------------------
Morgan R. Jones Edward J. Roach
Secretary President
-18-
<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 that the foregoing
Articles Supplementary are the act of the 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
-19-
<PAGE>
DISTRIBUTION AGREEMENT
AGREEMENT, made as of May 29, 1998 by and between THE RBB FUND, INC.,
a Maryland corporation (the "Fund"), and PROVIDENT DISTRIBUTORS, INC., a
Delaware corporation (the "Distributor")
BACKGROUND
The Fund is registered as an open-end management investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"). The
Fund's shares of Common Stock, par value $.001 per share, have been classified
into 92 classes, and represent interests in 26 investment portfolios of the
Fund.
The Fund desires to appoint the Distributor as the distributor of the
Fund's shares of Common Stock, and the Distributor wishes to become the
distributor of shares of the Fund's Common Stock.
NOW, THEREFORE, in consideration of the premises above and of other
good and valuable consideration by each of the parties hereto to the other party
paid and of the agreements, covenants and obligations herein contained, the
parties hereto, intending to be legally bound, agree as follows:
1. APPOINTMENT. The Fund appoints the Distributor as the
distributor of each existing class of Common Stock, as designated on Exhibit A
attached herewith, as well as any future class of Common Stock, as to which the
Fund and the Distributor have entered into a Distribution Agreement Supplement
(individually, a "Class," and collectively, the "Classes") for the period and on
the terms set forth in this Agreement. The Distributor accepts such appointment
and agrees to render the services herein set forth for the compensation herein
provided. Each investment portfolio in which the shares of one or more Classes
("Class Shares") represent interests is herein called a "Portfolio." The
Distributor shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided herein or authorized
by the Fund's Board of Directors from time to time, have no authority to act for
or represent the Fund in any way or otherwise be deemed its agent. The services
furnished by the Distributor hereunder are not deemed exclusive, and the
Distributor shall be free to furnish similar services to others so long as its
services under this Agreement are not impaired thereby.
2. DUTIES OF THE FUND. The Fund shall use its best efforts in
maintaining registration of itself and its securities under the 1940 Act and the
Securities Act of 1933, as amended (the "1933 Act") and shall bear all expenses
in connection therewith.
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The Fund shall cooperate in the qualification by the investment
adviser of the Fund of Class Shares under the laws of such states and other
jurisdictions of the United States as it shall determine and shall execute and
deliver such documents as may reasonably be required for such purpose, but the
Fund shall not be required to qualify as a foreign business entity in any
jurisdiction, nor effect any modification of its policies or practices without
prior approval of the Fund's Directors. The Fund's officers, subject to the
direction of the Board of Directors of the Fund and with the advice of the
Distributor, shall determine whether it is desirable to qualify or continue to
offer Class Shares in any jurisdiction. The Distributor shall have no
obligation to assist in the qualification of Class Shares in any jurisdiction or
in the maintenance of any qualification other than its obligation to serve as
registered agent to the Fund and execute required filings.
The Fund shall provide to the Distributor copies of the Fund's
Articles of Incorporation and all amendments thereto ("Charter") on file with
the Department of Assessments and Taxation of the State of Maryland, the Fund's
then current By-laws and all amendments thereto ("By-laws"), the Fund's current
prospectus and statement of additional information (including supplements
thereto) which relate to the Class Shares (the "Prospectus" and "SAI"), and the
Fund's current Registration Statement on Form N-1A as filed under the 1940 Act,
as such shall be amended from time to time (the "Registration Statement").
The Fund shall provide to the Distributor such additional copies of the current
Prospectus and SAI and annual, semi-annual and other reports and communications
to shareholders which relate to the Class Shares as the Distributor may
reasonably require for sales purposes. The Fund shall also furnish the
Distributor, with respect to a Class: (a) annual audit reports of the Fund's
books and accounts made by independent public accountants regularly retained by
the Fund, (b) semi-annual unaudited financial statements pertaining to the Fund,
or one or more of the Portfolios, (c) quarterly earnings statements prepared by
the Fund, (d) a monthly itemized list of the securities held by the Portfolios,
(e) monthly balance sheets as soon as practicable after the end of each month,
(f) a survey indicating the states and jurisdictions in which each Class is
qualified for sale or exempt from the requirements of the securities laws of
such state or jurisdiction and the amounts of shares that may be sold in such
states and jurisdictions, as such may be amended from time to time ("Blue Sky
Report"), and (g) from time to time such additional information regarding the
Fund's or the Portfolios' financial condition as the Distributor may reasonably
request.
3. DUTIES AS DISTRIBUTOR. The Distributor agrees to use appropriate
efforts to solicit orders for the sale of Class Shares, and will undertake such
advertising and promotion as it believes is reasonable in connection with such
solicitation. The Distributor agrees that all solicitations for subscriptions
to Class Shares shall be made in accordance with the Charter, the Registration
Statement and the By-Laws, to the extent such documents have been provided to
the Distributor, and in accordance with the Prospectus and the SAI, and shall
not at any time or in any manner violate any provisions of the laws of the
United States or of any state or other jurisdiction in which solicitations are
then being made, or of any rules and regulations made or
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adopted by duly authorized agencies thereunder, including without limitation
those promulgated by the Securities and Exchange Commission (the "SEC");
provided that the Distributor shall not be deemed to have violated any state
securities laws if it has acted in good faith and in accordance with the Blue
Sky Report. In carrying out its obligations hereunder, the Distributor shall:
(a) provide to the Fund's Board of Directors, at least
quarterly, a written report of the amounts expended in connection with all
distribution services rendered pursuant to this Agreement, including an
explanation of the purposes (such as commissions, advertising, printing,
interest, carrying charges and any allocated overhead expenses) for which such
expenditures were made;
(b) monitor the arrangements pertaining to the Fund's
Shareholder Servicing Agreements ("Servicing Agreements") with shareholders of
record, other than broker/dealers, that are banks that are affiliated with PNC
Financial Corp ("Service Organizations"), including among other things,
reviewing the qualifications of Service Organizations wishing to enter into
Servicing Agreements with the Fund to ensure that such entities are banks
affiliated with PNC Financial Corp and that they are capable of performing their
duties as set forth in the Servicing Agreements, assisting in the execution and
delivery of Servicing Agreements, reporting to the Board of Directors with
respect to the amounts paid or payable by the Fund from time to time under its
Servicing Agreements and the nature of the services provided by Service
Organizations, and maintaining appropriate records in connection with its
monitoring duties; and
(c) take, on behalf of the Fund, all actions which appear to the
Fund necessary to carry into effect the distribution of the Class Shares.
4. DISTRIBUTION OF CLASS SHARES. The price at which Class Shares
may be sold shall be the net asset value per share, plus any applicable sales
commission, computed in the manner set forth in the Fund's Prospectus and SAI in
effect at the time of sale of such Class Shares.
It is mutually understood and agreed that the Distributor does not
undertake to sell all or any specific portion of the Class Shares. The Fund
shall not sell any Class Shares except through the Distributor, except that:
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(a) the Fund may issue Class Shares at their net asset value to
any shareholder of the Fund purchasing Class Shares with dividends or other
distributions received from the Fund pursuant to an offer made to all
shareholders;
(b) the Distributor may, and when requested by the Fund shall,
suspend its efforts to effectuate sales of Class Shares at any time when in the
opinion of the Distributor or of the Fund no sales should be made because of
market or other economic considerations or abnormal circumstances of any kind;
and
(c) the Fund may withdraw the offering of its Class Shares (i)
at any time with the consent of the Distributor, or (ii) without such consent
when so required by the provisions of any statute or of any order, rule or
regulation of any governmental body having jurisdiction.
Whenever in the judgment of the Fund's officers such action is warranted by
unusual market, economic or political conditions, or by abnormal circumstances
of any kind, the Fund's officers may, after notice to the Distributor, decline
to accept any orders for, or make any sales of the Class Shares until such time
as those officers deem it advisable to accept such orders and to make such
sales. In the event of such suspension of sales and until the Distributor
receives written notification from the Fund that the Distributor may resume
accepting orders for and making sales of the Class Shares, the Distributor's
duty to distribute Class Shares shall be suspended but the Fund shall continue
to remain obligated to compensate the Distributor under the terms of paragraph 7
hereof.
5. Effectiveness of Registration. None of the Class Shares shall be
offered by either the Distributor or the Fund under any of the provisions of
this Agreement and no orders for the purchase or sale of the Class Shares shall
be accepted by the Fund if and so long as the effectiveness of the Registration
Statement then in effect or any necessary amendments thereto shall be suspended
under any of the provisions of the 1933 Act or if and so long as a current
prospectus as required by Section 5(b)(2) of the 1933 Act is not on file with
the SEC; provided, however, that nothing contained in this paragraph 5 shall in
any way restrict or have an application to or bearing upon the Fund's obligation
to repurchase its Class Shares from any shareholder in accordance with the
provisions of the Prospectus, SAI or Charter.
The Fund agrees to advise the Distributor immediately in writing:
(a) of any request by the SEC for amendments to the Registration
Statement, Prospectus or SAI then in effect or for additional information;
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(b) in the event of the issuance by the SEC of any stop order
suspending the effectiveness of the Registration Statement, Prospectus or SAI
then in effect or the initiation of any proceeding for that purpose;
(c) of the happening of any event that makes untrue any
statement of a material fact made in the Registration Statement, Prospectus or
SAI then in effect or that requires the making of a change in such Registration
Statement, Prospectus or SAI in order to make the statements therein not
misleading; and
(d) of all actions of the SEC with respect to any amendment to
any Registration Statement, Prospectus or SAI which may from time to time be
filed with the SEC.
For the purposes of this paragraph 5, informal requests by, or acts of the staff
of the SEC shall not be deemed actions of or requests by the SEC.
6. DEALER AGREEMENTS. The Distributor may enter into dealer
agreements ("Dealer Agreements") with any securities dealer who is registered
under the Securities Exchange Act of 1934 (the "1934 Act") and who is a member
in good standing of the National Association of Securities Dealers, Inc., who
may wish to assist in the distribution of the Class Shares. All such Dealer
Agreements shall be either in substantially the form of the agreement attached
hereto as Exhibit B or in a form that has been reviewed by counsel to the Fund.
The Distributor may negotiate the compensation to be paid pursuant to Dealer
Agreements. Such payments shall be borne by the Distributor and may not exceed
the sums paid to the Distributor under paragraph 7 of this Agreement. The
actual payments made by the Distributor and the basis for calculating such
payments shall be reported quarterly to the Board of Directors of the Fund.
7. COMPENSATION.
(a) As compensation for its services, the Distributor will be
paid fees with respect to a Class as set forth in Exhibit A opposite the name of
such Class or as set forth in any applicable Distribution Agreement Supplement.
(b) The Distributor shall waive its fee with respect to each
Class representing interests in Portfolios of the Fund that declare a daily
dividend on any day (and, with respect only to a Class that has adopted a
Shareholder Services Plan, on a pro rata basis with Servicing Organizations
under their Servicing Agreements) to the extent necessary to ensure that the fee
required to be accrued does not exceed the income accrued by the Class Shares on
such day.
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(c) If this Agreement becomes effective with respect to a Class
subsequent to the first day of a month or shall terminate before the last day of
a month, the compensation of the Distributor with respect to such Class under
this Paragraph 7 for that part of the month this Agreement is in effect shall be
prorated in a manner consistent with the calculations of the fees as set forth
in the applicable Distribution Agreement Supplement. Payment of the
Distributor's compensation for the preceding month shall be made as promptly as
possible after completion of the computations contemplated in this paragraph.
8. EXPENSES. The expenses connected with the Fund shall be
allocable between the Fund and the Distributor as follows:
(a) The Distributor shall furnish, at its expense and without
cost to the Fund, the services of personnel to the extent that such services are
required to carry out its obligations under this Agreement.
(b) The Distributor shall bear the expenses of any promotional
or sales literature used by the Distributor or furnished by the Distributor in
connection with the public offering of the Fund's Class Shares, the expenses of
printing (exclusive of typesetting) and distributing Prospectuses and SAIs to
prospective shareholders, the expenses of advertising in connection with the
public offering of the Fund's Class Shares and all legal expenses in connection
with the foregoing.
(c) The Fund assumes and shall pay or cause to be paid all other
expenses of the Fund, including, without limitation: the fees of the Fund's
investment adviser and Distributor; the charges and expenses of any registrar,
any custodian or depository appointed by the Fund for the safekeeping of its
cash, portfolio securities and other property, and any stock transfer, dividend
or accounting agent or agents appointed by the Fund; brokers' commissions
chargeable to the Fund in connection with portfolio securities transactions to
which the Fund is a party; all taxes, including securities issuance and transfer
taxes, and corporate fees payable by the Fund to federal, state or other
governmental agencies; the cost and expense of engraving or printing of stock
certificates representing shares of the Fund; all costs and expenses in
connection with the organization of the Fund and the registration of shares of
the Fund with the SEC and under state securities laws and in connection with
maintenance of registration of the Fund and its shares with the SEC and various
states and other jurisdictions (including filing fees and legal fees and
disbursements of counsel); except as provided in subparagraph (b) above, the
expenses of printing, including typesetting, and distributing prospectuses of
the Fund and supplements thereto to the Fund's shareholders; all expenses of
shareholders' and Directors' meetings and of preparing, printing and mailing of
proxy statements and reports to shareholders; fees and travel expenses of
directors who are not interested persons (as such term is defined in the 1940
Act) of
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the Fund ("Non-Interested Directors") or members of any advisory board or
committee established by the Non-Interested Directors; all expenses incident to
the payment of any dividend, distribution, withdrawal or redemption, whether in
shares or in cash; charges and expenses of any outside service used for pricing
of the Fund's stares; charges and expenses of legal counsel, including counsel
to the Non-Interested Directors, and of independent accountants, in connection
with any matter relating to the Fund; membership dues of industry associations;
interest payable on Fund borrowings; postage; insurance premiums on property or
personnel (including officers and directors) of the Fund which inure to its
benefit; extraordinary expenses (including, but not limited to, legal claims and
liabilities and litigation costs and any indemnification related thereto); and
all other charges and costs of the Fund's operation unless otherwise explicitly
provided herein.
9. STANDARD OF CARE; INDEMNITY BY FUND. The Distributor shall not
be liable for any error of judgment or mistake of law or for any act or omission
for any loss suffered by the Fund or any Class or Portfolio thereof in
connection with the matters to which this Agreement relates, provided that
nothing herein shall be deemed to protect or purport to protect the Distributor
against any liability to the Fund or its shareholders to which the Distributor
would otherwise be subject by reason of breach of this Agreement, willful
misfeasance, bad faith or negligence on its part in the performance of its
duties or from reckless disregard by it of its obligations and duties under this
Agreement ("Disabling Conduct").
The Fund agrees to indemnify and hold the Distributor, its officers
and directors and each person (if any) who controls the Distributor within the
meaning of Section 15 of the 1933 Act harmless from and against any and all
losses, claims, damages and liabilities including but not limited to attorney
fees and investigative expenses) which the Distributor, its officers and
directors or any such controlling person may incur under the 1940 Act, or under
common law or otherwise, caused by or alleged to exist, including amounts paid
in satisfaction of judgments, in compromise or as fines or penalties arising out
of or based upon the Distributor's acting as such under this Agreement that do
not result from Disabling Conduct, error of judgment, mistake of law or any
negligent act or omission by the Distributor. Indemnification shall be made only
following: (i) a final decision on the merits by a court or other body before
whom the proceeding was brought that the Distributor was not liable by reason of
Disabling Conduct, error of judgment, mistake of law or any negligent act or
omission or (ii) in the absence of such a decision, a reasonable determination,
based upon a review of the facts, that the Distributor was not liable by reason
of Disability Conduct, error of judgment, mistake of law or any negligent act or
omission by (a) the vote of a majority of a quorum of directors of the Fund who
are neither "interested persons" of the Fund nor parties to the proceeding
("disinterested non-party directors") or (b) an independent legal counsel in a
written opinion. The Distributor, its officers, directors and control persons
shall be entitled to advances from the Fund for payment of the reasonable
expenses incurred by it or them in connection with the matter as to which it or
they are seeking indemnification in the manner and to the fullest extent
permissible under the Maryland General Corporation law. The Distributor shall
provide to the Fund a written
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affirmation of its good faith belief that the standard of conduct necessary for
indemnification by the Fund has been met and a written undertaking to repay any
such advance if it should ultimately be determined that the standard of conduct
has not been met. In addition, at least one of the following additional
conditions shall be met: (a) the Distributor shall provide a security in form
and amount acceptable to the Fund for its undertaking; (b) the Fund is insured
against losses arising by reason of the advance; or (c) a majority of a quorum
of disinterested non-party directors, or independent legal counsel selected by
the disinterested directors, in a written opinion, shall have determined, based
on a review of facts readily available to the Fund at the time the advance is
proposed to be made, that there is reason to believe that the Distributor will
ultimately be found to be entitled to indemnification.
The Distributor agrees that, promptly upon its receipt of notice of
the commencement of any action against the Distributor, its officers and/or
directors or against any person so controlling the Distributor, in respect of
which indemnity or reimbursement may be sought from the Fund on account of its
agreement in the preceding paragraph, notice in writing will be given to the
Fund within 10 days after the summons or other first legal process shall have
been served. The failure to notify the Fund of any such action shall not
relieve the Fund from any liability which the Fund may have to the person
against whom such action is brought by reason of any such alleged untrue
statement or any such liability that arises other than by reason of the
indemnity agreement contained in this paragraph. Thereupon, the Fund shall be
entitled to participate, to the extent that it shall wish (including the
selection of counsel with Distributor's reasonable approval), in the defense
thereof. In the event the Fund elects to assume the defense of any such suit
and retain counsel of good standing reasonably approved by the Distributor, the
defendant or defendants in such suit shall bear the expense of any additional
counsel retained by any of them; but in the case the Fund does not elect to
assume the defense of any such suit or in the case the Distributor does not
reasonably approve of counsel chosen by the Fund, the Fund will reimburse the
Distributor, its officers and directors or the controlling person or persons
named as defendant or defendants in such suit for the fees and expenses of only
one counsel or firm which may be retained on behalf of the Distributor, its
officers and directors and such controlling persons.
In the event that any such claim for indemnification is made by any
director or person in control of the Distributor within the meaning of Section
15 of the 1933 Act who is also an officer or director of the Fund, the Fund, at
its expense to the extent permitted by law, will submit to a court of
appropriate jurisdiction the question of whether or not indemnification by it is
against public policy as expressed in the 1933 Act, the 1934 Act, and the 1940
Act, and the Fund and the Distributor will be governed by the final adjudication
of such question.
The Fund's indemnification agreement contained in this paragraph and
the Fund's representations and warranties in this agreement shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of the Distributor, its offices and directors or any controlling
person and shall survive the sale of any of the Class Shares made pursuant to
this Agreement. This agreement of indemnity will inure exclusively to the
benefit of
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the Distributor, its officers, directors and control persons, and to the extent
permitted by the 1940 Act or any other applicable law consistent with the 1940
Act to the benefit of any of their successors and assigns. The Fund agrees
promptly to notify the Distributor of the commencement of any litigation or
proceeding against the Fund in connection with the issue and sale of any Class
Shares.
10. INDEMNITY BY THE DISTRIBUTOR. The Distributor agrees to
indemnify and hold harmless the Fund, its officers and directors and persons who
control the Fund within the meaning of Section 15 of the 1933 Act to the same
extent as in the foregoing indemnity from the Fund to the Distributor, but only
with respect to any untrue statement or omission or alleged untrue statement or
omission based upon information furnished in writing to the Fund by the
Distributor or by any person on behalf of or at the request of the Distributor,
excluding the Fund, expressly for use in the Registration Statement, Prospectus
or SAI. The Distributor also agrees to indemnify and hold harmless the Fund,
its officers and directors and persons who control the Fund within the meaning
of Section 15 of the 1933 Act from and against any and all losses, claims,
damages and liabilities arising by reason of any person acquiring any Class
Shares, which may be based upon the 1933 Act or any other statute or at common
law, on account of any wrongful sales activities of the Distributor or any of
its registered representatives, as defined under the By-Laws of the National
Association of Securities Dealers, Inc., including any failure to conform with
any requirement of any state and federal law relating to the sale of such Class
Shares. Notwithstanding anything contained herein to the contrary, the
Distributor shall not be responsible to the Fund for and shall not indemnify and
hold harmless the Fund, its officers and directors and persons who control the
Fund within the meaning of Section 15 of the 1933 Act from and against any such
losses, claims, damages or liabilities arising solely as a result of actions
taken or omitted by the Distributor in good faith reliance on, and in conformity
with, the Blue Sky Report.
The Distributor shall also indemnify and hold harmless the Fund, its
officers and directors and persons who control the Fund within the meaning of
Section 15 of the 1933 Act for any liability to the Fund or to the holders of
Class Shares by reason of the Distributor's willful misfeasance, bad faith or
negligence in the performance of its duties or by reason of its reckless
disregard of its obligations and duties under this Agreement. The Fund, its
officers, directors and control persons shall be entitled to advances from the
Distributor for payment of the reasonable expenses incurred by it or them in
connection with the matters as to which it or they are seeking indemnification
in the manner and to the fullest extent permissible under Maryland General
Corporation law. The Fund shall provide to the Distributor a written
confirmation of its good faith belief that the standard of conduct necessary for
indemnification by the Distributor has been met and a written undertaking to
repay any such advance if it should be determined that the standard of conduct
has not been met.
In case any action shall be brought against the Fund, its officers and
directors and persons who control the Fund within the meaning of Section 15 of
the 1933 Act in respect of
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which it may seek indemnity or reimbursement from the Distributor on account of
the agreement of the Distributor contained in this paragraph 10, the Distributor
shall have the rights and duties given to the Fund, and the Fund, its officers
and directors and persons who control the Fund within the meaning of Section 15
of the 1933 Act shall have the rights and duties given to the Distributor, in
the third and fourth paragraphs of paragraph 9.
11. TERM. This Agreement shall become effective at the close of
regular trading on the New York Stock Exchange on the date hereof and shall
continue in full force and effect, subject to paragraph 14 hereof, until August
16, 1999.
12. RENEWAL. Following the expiration of its initial term, this
Agreement shall continue in full force and effect from year to year with respect
to a Class, provided that such continuance is specifically approved at least
annually:
(a) (i) by the Fund's Board of Directors or (ii) by the vote
of a majority of the outstanding voting securities (as defined in section
2(a)(42) of the 1940 Act) that constitute Class Shares, and
(a) by the affirmative vote of a majority of the Non-Interested
Directors of the Fund by votes cast in person at a meeting specifically called
for the purpose of voting on such approval.
13. AMENDMENT. This Agreement may be amended by the parties hereto
with respect to a Class only if such amendment is specifically approved (i) by
the Board of Directors of the Fund or by the vote of a majority of outstanding
Class Shares, and (ii) by a majority of the Non-Interested Directors of the
Fund, which vote must be cast in person at a meeting called for the purpose of
voting on such approval.
14. TERMINATION. This Agreement may be terminated at any time,
without the payment of any penalty, by vote of the Fund's Board of Directors, by
a vote of a majority of the members of the Non-Interested Directors of the Fund
or by vote of a majority of outstanding Class Shares (as defined in section
2(a)(42) of the 1940 Act), or by the Distributor, on sixty (60) days' written
notice to the other party. The notice provided for herein may be waived by
either party. This Agreement shall automatically terminate in the event of its
assignment, the term "assignment" for this purpose having the meaning defined in
Section 2(a)(4) of the 1940 Act.
15. MISCELLANEOUS.
(a) The Distributor agrees on behalf of itself and its employees
to treat confidentially and as proprietary information of the Fund all records
and other information relative to the Fund and its prior, present or potential
shareholders, and not to use such records and information for any purpose other
than performance of its responsibilities and duties
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hereunder, except after prior notification to and approval in writing by the
Fund, which approval shall not be unreasonably withheld and may not be withheld
where the Distributor may be exposed to civil or criminal contempt proceedings
for failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Fund.
(b) Any question of interpretation of any term or provision of
this Agreement having a counterpart in or otherwise derived from a term or
provision of the 1940 Act shall be resolved by reference to such term or
provision of the 1940 Act and to interpretations thereof, if any, by the United
States courts or, in the absence of any controlling decision of any such court,
by rules, regulations or orders of the SEC issued pursuant to the 1940 Act. In
addition, where the effect of a requirement of the 1940 Act reflected in any
provision of this Agreement is revised by rule, regulation or order of the SEC,
such provision shall be deemed to incorporate the effect of such rule,
regulation or order. Otherwise, the provisions of this Agreement shall be
governed by the laws of the State of Maryland.
(c) All notices and other communications hereunder shall be in
writing or by confirming telegram, cable, telex or facsimile sending device.
Notices shall be addressed (a) if to the Distributor, at Provident Distributors,
Inc., Four Falls Corporate Center, 6th Floor, West Conshohocken, Pennsylvania
19428, Attention: Monroe Haegele and (b) if to the Fund, at the address of the
Fund, Attention: Treasurer. If notice is sent by first-class mail, it shall be
deemed to have been given three days after it is sent. If notice is sent by
messenger, it shall be deemed to have been given on the day it is delivered, or
if sent by confirming telegram, cable, telex or facsimile sending device, it
shall be deemed to have been given immediately.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed in duplicate by their respective officers as of the day and year
first above written.
THE RBB FUND, INC.
BY: /s/ Edward J. Roach
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PROVIDENT DISTRIBUTORS, INC.
BY: /s/ Monroe Haegele
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Exhibit A
RBB SHARE CLASSES TO WHICH DISTRIBUTION AGREEMENT RELATES
COMPENSATION
(BASIS POINTS)
Class A CLASS A COMMON STOCK --
Class B CLASS B COMMON STOCK --
Class C CLASS C COMMON STOCK --
Class D CLASS D COMMON STOCK --
Class E RBB Money Market --
Class F RBB Municipal Money Market --
Class G Cash Preservation Money Market 65
Class H Cash Preservation Municipal Money Market 65
Class I Sansom Street Municipal Money Market --
Class J Sansom Street Money Market 20
Class K Sansom Street Government Obligations
Money Market --
Class L Bedford Money Market 65
Class M Bedford Municipal Money Market 65
Class N Bedford Government Obligations Money Market 65
Class O Bedford New York Municipal Money Market 65
Class P RBB Government Securities 65
Class Q CLASS Q COMMON STOCK --
Class R Bradford Municipal Money Market --
Class S Bradford Government Obligations Money
Market --
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Class T BEA Institutional International Equity --
Class U BEA Institutional High Yield --
Class V BEA Institutional Emerging Markets Equity --
Class W CLASS W COMMON STOCK --
Class X BEA Institutional U.S. Core Equity --
Class Y BEA U.S. Core Fixed Income --
Class Z BEA Strategic Global Fixed Income --
Class AA BEA Municipal Bond --
Class BB BEA Short Duration --
Class CC BEA Balanced --
Class DD CLASS DD COMMON STOCK --
Class EE CLASS EE COMMON STOCK --
Class FF n/i Micro Cap --
Class GG n/i Growth --
Class HH n/i Growth and Value --
Class II BEA Investor International Equity 50
Class JJ BEA Investor Emerging Markets Equity 50
Class KK BEA Investor High Yield 50
Class LL BEA Investor Global Telecommunications 50
Class MM BEA Advisor International Equity 25
Class NN BEA Advisor Emerging Markets Equity 25
Class OO BEA Advisor High Yield 25
Class PP BEA Advisor Global Telecommunications 25
Class QQ Boston Partners Institutional Large Cap Value 15
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Class RR Boston Partners Investor Large Cap Value 25
Class SS Boston Partners Advisor Large Cap Value 75
Class TT Boston Partners Investor Mid Cap Value 25
Class UU Boston Partners Institutional Mid Cap Value 15
Class VV Boston Partners Institutional Bond 15
Class WW Boston Partners Investor Bond 25
Class XX n/i Larger Cap Value --
Class YY Schneider Capital Management Value Fund --
Class ZZ BEA Institutional Long-Short Market Neutral --
Class AAA BEA Advisor Long-Short Market Neutral 25
Class BBB BEA Institutional Long-Short Equity --
Class CCC BEA Advisor Long-Short Equity 25
Class DDD Boston Partners Institutional Micro Cap Value --
Class EEE Boston Partners Investor Micro Cap Value 25
Class FFF BEA Institutional Select Economic Value Equity --
Class GGG BEA Advisor Select Economic Value Equity 25
Class HHH BEA Advisor U.S. Core Equity 25
Class JANNEY Janney Montgomery Scott Money Market 65
MONTGOMERY MONEY
Class JANNEY Janney Montgomery Scott Municipal Money 65
MONTGOMERY MUNICIPAL Market
Class JANNEY Janney Montgomery Scott Government 65
MONTGOMERY GOVERNMENT Obligations Money Market
OBLIGATIONS MONEY
Class JANNEY Janney Montgomery Scott Municipal NY 65
MONTGOMERY N.Y. Money Market
MUNICIPAL MONEY
-3-
<PAGE>
Class BETA 1 Money Market --
Class BETA 2 Municipal Money Market --
Class BETA 3 Government Obligations Money Market --
Class BETA 4 New York Municipal Money Market --
Class GAMMA 1 Money Market --
Class GAMMA 2 Municipal Money Market --
Class GAMMA 3 Government Obligations Money Market --
Class GAMMA 4 New York Municipal Money Market --
Class DELTA 1 Money Market --
Class DELTA 2 Municipal Money Market --
Class DELTA 3 Government Obligations Money Market --
Class DELTA 4 New York Municipal Money Market --
Class EPSILON 1 Money Market --
Class EPSILON 2 Municipal Money Market --
Class EPSILON 3 Government Obligations Money Market --
Class EPSILON 4 New York Municipal Money Market --
Class ZETA 1 Money Market --
Class ZETA 2 Municipal Money Market --
Class ZETA 3 Government Obligations Money Market --
Class ZETA 4 New York Municipal Money Market --
Class ETA 1 Money Market --
Class ETA 2 Municipal Money Market --
Class ETA 3 Government Obligations Money Market --
Class ETA 4 New York Municipal Money Market --
-4-
<PAGE>
Class THETA 1 Money Market --
Class THETA 2 Municipal Money Market --
Class THETA 3 Government Obligations Money Market --
Class THETA 4 New York Municipal Money Market --
-5-
<PAGE>
Exhibit B
PROVIDENT DISTRIBUTORS, INC.
FOUR FALLS CORPORATE CENTER, 6TH FLOOR
WEST CONSHOHOCKEN, PENNSYLVANIA 19428
_______, 1998
[Insert Name of Dealer]
Ladies and Gentlemen:
We serve as distributor of the classes (individually, a "Class" and,
collectively, "Classes" of shares ("Shares") of the investment portfolios of The
RBB Fund, Inc. (the "Fund") listed on Schedule A attached to this Agreement.
The Fund offers Shares to the public in accordance with the terms and conditions
contained in the Prospectuses (and Statements of Additional Information ("SAIs")
incorporated by reference thereto) relating to those Classes of Shares.
In connection with the offering of Shares to the public, you agree to
assist in the distribution of Shares on the following terms and conditions:
1. You are hereby authorized to use your best efforts to offer and
sell the Classes of Shares appearing on Schedule A hereto as such Schedule shall
be amended from time to time consistent with the provisions of this Agreement.
In connection with those activities, you are also hereby authorized to
distribute the promotional and sales materials, Prospectuses, SAIs (upon request
by a purchaser), shareholder reports and other materials relevant to a
particular Class and to perform, if any, the shareholder services which you have
agreed to provide in respect of any such Class. All such activities shall be
performed in compliance with the conditions and procedures set forth in the
relevant Prospectuses and SAIs, including, without limitation, the public
offering price then in effect. If the services you agree to provide pursuant to
this Paragraph 1 are in respect of any _____ Class Shares, you hereby agree to
pay all direct and indirect expenses or costs we may incur under the
Distribution Agreement between us and the Fund arising in connection with any
promotional or sales literature (including Prospectuses and SAIs) furnished to
you in any offering of the _______ Class Shares, as well as expenses of
advertising and all legal expenses in connection with the matters covered by
this sentence.
2. No person is authorized to make any representation concerning the
Fund or the Shares of any Class except those contained in the Prospectuses and
related SAIs and in such printed information as we may subsequently prepare. No
person is authorized to distribute
-1-
<PAGE>
any sales literature or advertisements as those terms are defined under Section
2210 of the Conduct Rules of the National Association of Securities Dealers
Regulation, Inc. ("NASD") relating to the Fund without our prior written
approval.
3. Applicable selling commissions, concessions or other fees
(including, without limitation, fees paid to us under a Plan of Distribution
with respect to a Class pursuant to Rule 12b-1 under the 1940 Act and
reallocated to you) to which you are entitled for the provision of the services
to be rendered under this Agreement are those specified on attached Schedule A
to this Agreement and in the current Prospectus of the Fund, as such Schedule
and Prospectuses shall be amended from time to time. These amounts are subject
to change without notice by us and comply with any changes in regulatory
requirements.
4. You agree that in performing the services under this Agreement,
you at all times will comply with the Conduct Rules of the NASD, including,
without limitation, the provisions of Section 2830 of such Rules. You agree
that you will not combine customer orders to reach breakpoints in commissions
for any purposes whatsoever unless authorized by the then current Prospectus in
respect of Shares of a particular Class or by us in writing. You also agree
that you will place orders immediately upon their receipt and will not withhold
any order so as to profit therefrom. In determining the amount payable to you
hereunder, we reserve the right to exclude any sales which we reasonably
determine are not made in accordance with the terms of the relevant Prospectus
and provisions of this Agreement.
5. You agree to comply with the provisions contained in the
Securities Act of 1933 governing the distribution of Prospectuses to persons to
whom you offer Shares under this Agreement. You further agree to deliver, upon
our request, copies of any amended Prospectus to purchasers, if any, whose
Shares you are holding as record owner and to deliver to such customers copies
of the annual and interim reports and proxy solicitation materials of the Fund.
We agree to furnish to you as many copies of the Prospectuses and related SAIs,
annual and interim financial reports and proxy solicitation materials as you may
reasonably request.
6. You represent that you are a properly registered or licensed
broker or dealer under applicable federal and state law and a member in good
standing of the NASD). Your expulsion or suspension from the NASD will
automatically terminate this Agreement on the effective date of such expulsion
or suspension.
7. For all purposes of this Agreement you will be deemed to be an
independent contractor and will have no authority to act as agent for us or the
Fund in any manner or in any respect. You agree to and do release, indemnify
and hold us, the Fund and its transfer agent and our and their respective
officers, directors, agents, employees and affiliates harmless from and against
any and all direct or indirect liabilities, losses, claims, demands and expenses
(including, without limitation, reasonable attorneys' fees) resulting from
requests directions, actions, or inactions of or by you or your officers,
employees, or agents regarding your responsibilities under this Agreement or the
purchase, redemption, transfer or registration of Shares by or on behalf of
customers. This indemnification shall survive the termination of this
-2-
<PAGE>
Agreement.
8. You shall not make offers or sales of Shares in any state or
jurisdiction where the particular Shares are not qualified for sale under or
exempt from the requirements of the securities laws of the state or other
jurisdictions where the proposed offer or sale is to be made. You also agree
that you will not offer or sell any Shares to persons in any jurisdiction in
which you are not properly licensed and authorized to make such offers or sales.
9. The Fund shall have full authority to take such action as it
deems advisable in respect of all matters pertaining to the offering of the
Shares, including the right, in its discretion, to reject an order for Shares
and, without notice, to suspend sales or withdraw the offering of Shares of any
and all Classes entirely.
10. You will (i) maintain all records required by law (including
records detailing the services you provide in return for the fees to which you
are entitled under this Agreement) and, upon request by the Fund or us, promptly
make such of these records available to the Fund or us, as the case may be, as
the Fund or we may reasonably request in connection with its operations; and
(ii) promptly notice the Fund and us if you experience any difficulty in
maintaining the records described in the foregoing clauses in an accurate and
complete manner.
11. We and the Fund shall be under no liability to you except for
lack of good faith and for obligations expressly assumed by us hereunder. In
carrying out your obligations, you agree to act in good faith and without
negligence. Nothing contained in this Agreement is intended to operate as a
waiver by us or you of compliance with any provision of the NASD Conduct Rules,
or any federal or state securities laws or the rules and regulations adopted
thereunder.
12. This Agreement shall become effective only when accepted and
signed by you and may be amended only by a written instrument signed by you and
us. This Agreement may be terminated as provided above and by either party,
without penalty, upon notice to the other party.
13. All communications to us should be sent to:
Provident Distributors, Inc.
Four Falls Corporate Center, 6th Floor
West Conshohocken, Pennsylvania 19428
Any notice to you shall be duly given if mailed or telegraphed to you at the
address specified by you below.
14. You hereby represent and warrant that you are duly authorized by
all necessary action, approval or authorization to enter into this Agreement and
that, if a corporation, partnership or other entity, you are duly organized,
validly existing and in good standing under
-3-
<PAGE>
the laws of the jurisdiction in which you are organized.
15. This Agreement constitutes the entire agreement between the
parties hereto relating to the subject matter hereof and supersedes any and all
agreements between the parties relating to said subject matter. This Agreement
and all the rights and obligations of the parties hereunder shall be governed by
and construed under the laws of the State of New York.
PROVIDENT DISTRIBUTORS, INC.
Date:_______________ By:___________________________
-4-
<PAGE>
Accepted and Agreed to:
Name of Broker Dealer____________________________________________
Address__________________________________________________________
City__________________________ State____________ Zip___________
Telephone Number_________________________________________________
Name of Authorized Officer___________________ Title_____________
Date:_______________ Authorized Officer Signature_______________
-5-
<PAGE>
SCHEDULE A TO BROKER/DEALER AGREEMENT
You will assist in the distribution of the Classes of Shares of Common
Stock, par value $.001 of The RBB Fund, Inc. and, in addition to other fees to
which you may be entitled, shall receive fees at an annual rate set forth below
in respect of the following Shares payable pursuant to Rule 12b-1 under the
Investment Company Act of 1940.*
- --------------------
* Rule 12b-1 fees will be paid quarterly within one month following the end
of each calendar quarter after you supply services to your customers
who purchase Shares. These fees are based on the average daily net
asset value of the Shares during the period covered by the payment.
You will not receive payment of any fees for any quarterly period if
you are entitled to less than $1,000. To the extent that we are
required to waive any portion of the Rule 12b-1 fees payable to us by
The RBB Fund, Inc., you shall waive a proportionate share of the Rule
12b-1 fees payable to you hereunder.
A-1
<PAGE>
Exhibit 8(v)
BROWN BROTHERS HARRIMAN & CO.
APPENDIX "C" TO CUSTODIAN AGREEMENT BETWEEN
THE RBB FUND, INC. and BROWN BROTHERS HARRIMAN & CO.
Dated as of May , 1998
The following is a list of Portfolios for which the Custodian shall serve under
a Custodian Agreement dated as of November 29, 1993 (the "Agreement"):
BEA GLOBAL TELECOMMUNICATIONS FUND
BEA EMERGING MARKETS EQUITY FUND
BEA HIGH YIELD FUND
BEA INTERNATIONAL EQUITY FUND
BEA STRATEGIC GLOBAL FIXED INCOME FUND
BEA U.S. CORE FIXED INCOME FUND
BEA U.S. CORE EQUITY FUND
BEA MUNICIPAL BOND FUND
BEA SHORT DURATION FUND*
BEA BALANCED FUND*
BEA SELECT ECONOMIC VALUE EQUITY FUND
BEA U.S. CORE EQUITY FUND ADVISOR CLASS
* inactive
IN WITNESS WHEREOF, each of the parties hereto has caused this Appendix to be
executed in its name and on behalf of each such Fund.
THE RBB FUND, INC. BROWN BROTHERS HARRIMAN & CO.
By: By:
------------------------------- ------------------------------------
Name: Name:
Title: Title:
<PAGE>
Exhibit 9(cccc)
TRANSFER AGENCY AGREEMENT SUPPLEMENT
(BEA U.S. Core Equity Fund Advisor Class)
This supplemental agreement is entered into this day of ,
1998, by and between THE RBB FUND, INC. (the "Fund") and State Street Bank &
Trust Company, a Massachusetts trust company (the "Transfer Agent").
The Fund is a corporation organized under the laws of the State of
Maryland and is an open-end management investment company. The Fund and the
Transfer Agent have entered into a Transfer Agency Agreement, dated as of
October 15, 1996 (as from time to time amended and supplemented, the "Transfer
Agency Agreement"), pursuant to which the Transfer Agent has undertaken to act
as transfer agent, registrar and dividend disbursing agent for the Fund with
respect to the Shares of the Fund, as more fully set forth therein. Certain
capitalized terms used without definition in this Transfer Agency Agreement
Supplement have the meaning specified in the Transfer Agency Agreement.
The Fund agrees with the Transfer Agent as follows:
1. ADOPTION OF TRANSFER AGENCY AGREEMENT. The Transfer Agency
Agreement is hereby adopted for the BEA U.S. Core Equity Fund's (the "Fund")
Advisor Class of Common Stock (Class HHH). This shall constitute a "Class" as
referred to in the Transfer Agency Agreement and its shares shall be "Shares" as
referred to therein.
2. COMPENSATION. As compensation for the services rendered by the
Transfer Agent during the term of the Transfer Agency Agreement, the Fund will
pay to the Transfer Agent, with respect to each Class of the Fund, annual fees
that shall be agreed to from time to time by the Fund and the Transfer Agent,
plus certain of the Transfer Agent's expenses relating to such services, as
shall be agreed to from time to time by the Fund and the Transfer Agent.
3. COUNTERPARTS. This agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have entered into this Agreement,
intending to be legally bound hereby, as of the
date and year first above written.
THE RBB FUND, INC. STATE STREET BANK & TRUST
COMPANY
By: By:
-------------------------------- -------------------------------------
President
<PAGE>
Exhibit 9(dddd)
CO-ADMINISTRATION AGREEMENT
__________________, 1998
BEA Associates
153 East 53rd Street
58th Floor
New York, New York 10022
Dear Sirs:
The RBB Fund, Inc. (the "Company"), a corporation organized under the
laws of the State of Maryland, confirms its agreement with BEA Associates
("BEA") with respect to the BEA U.S Core Equity Fund Advisor Class (the "Fund"),
a portfolio of the Company, as follows:
I. INVESTMENT DESCRIPTION; APPOINTMENT
The Company desires to employ its capital by investing and reinvesting
in investments of the kind and in accordance with the limitations specified in
the Company's Articles of Incorporation, as amended from time to time (the
"Charter"), in the Company's By-laws, as amended from time to time (the "By-
laws"), in the Fund's prospectus (the "Prospectus") and statement of additional
information (the "Statement of Additional Information") as in effect from time
to time, and in such manner and to the extent as may from time to time be
approved by the Board of Directors of the Company. Copies of the Fund's
Prospectus and Statement of Additional Information and the Company's Charter and
By-laws have been submitted to BEA. The Fund employs BEA Associates (the
"Adviser") as its investment adviser. The Company desires to employ and hereby
appoints BEA as its co-administrator for the Fund with respect to the Advisor
class of shares. BEA accepts this appointment and agrees to furnish the
services for the compensation set forth below.
2. SERVICES AS CO-ADMINISTRATOR
Subject to the supervision and direction of the Board of Directors of
the Company, BEA will:
(a) assist in supervising all aspects of the Fund's operations,
except those performed by other parties pursuant to written agreements with the
Company;
(b) provide various shareholder liaison services including, but not
limited to, responding to inquiries of
<PAGE>
shareholders regarding the Fund, providing information on shareholder
investments, assisting shareholders of the Fund in changing dividend options,
account designations and addresses, and other similar services;
(c) provide certain administrative services including, but not
limited to, providing periodic statements showing the account balance of a Fund
shareholder and integrating the statements with those of other transactions and
balances in the shareholder's other accounts serviced by the Fund's custodian or
transfer agent;
(d) supply the Fund with office facilities (which may be BEA
Service's own offices), data processing services, clerical, internal executive
and administrative services, and stationery and office supplies;
(e) furnish corporate secretarial services, including assisting in
the preparation of materials for Board of Directors meetings and distributing
those materials and assisting in the preparation of minutes of meetings of the
Company's Board of Directors and any Committees thereof and of the Fund's
shareholders;
(f) coordinate the preparation of reports to the Fund's shareholders
of record and the Securities and Exchange Commission (the "SEC") including, but
not limited to, proxy statements; annual, semi-annual and quarterly reports to
shareholders; annual and semi-annual reports on Form N-SAR; and post-effective
amendments to the Fund's Registration Statement on Form N-1A (the "Registration
Statements");
(g) develop computer systems for the generation of consolidated
periodic reports to investors;
(h) assist in other regulatory filings as necessary;
(i) assist the Fund's investment adviser, at the investment adviser's
request, in monitoring and developing compliance procedures for the Fund which
will include, among other matters, procedures to assist the investment adviser
in monitoring compliance with the Fund's investment objective, policies,
restrictions, tax matters and applicable laws and regulations; and
(j) acting as liaison between the Fund and the Fund's independent
public accountants, counsel, custodian or custodians, transfer agent and co-
administrator and taking all reasonable action in the performance of its
obligations under this Agreement to assure that all necessary information is
made available to each of them.
2
<PAGE>
In performing all services under this Agreement, BEA shall act in
conformity with applicable law, the Company's Charter and By-Laws, and all
amendments thereto, and the investment objective, investment policies and other
practices and policies set forth in the Fund's Registration Statement, as such
Registration Statement and practices and policies may be amended from time to
time.
3. COMPENSATION
In consideration of services rendered pursuant to this Agreement,
the Fund will pay BEA on the first business day of each month a fee for the
previous month at an annual rate of .05% of the Advisor Class of the Fund's
average daily net assets for the first $125 million of average daily net
assets, and .10% of average daily net assets for Fund assets above $125
million. The fee for the period from the date BEA commences its operations
on behalf of the Fund to the end of the month during which BEA commences such
operations shall be prorated according to the proportion that such period
bears to the full monthly period. Upon any termination of this Agreement
before the end of any month, the fee for such part of a month shall be
prorated according to the proportion which such period bears to the full
monthly period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to BEA, fees shall be
calculated monthly and the value of the Fund's net assets shall be computed
at the times and in the manner specified in the Prospectus and Statement of
Additional Information as from time to time in effect.
4. EXPENSES
BEA will bear all expenses in connection with the
performance of its services under this Agreement; PROVIDED, HOWEVER, that the
Fund will reimburse BEA for the out-of-pocket expenses incurred by it on behalf
of the Fund. Such reimbursable expenses shall include, but not be limited to,
postage, telephone, telex and Federal Express charges. BEA will bill the Fund
as soon as practicable after the end of each calendar month for the expenses it
is entitled to have reimbursed.
The Fund will bear certain other expenses to be incurred in its
operation, including: taxes, interest, brokerage fees and commissions, if any;
fees of Directors of the Company who are not officers, directors, or employees
of the Adviser or BEA; Securities and Exchange Commission fees and state Blue
Sky qualification fees; charges of custodians and transfer and dividend
disbursing agents; certain insurance premiums; outside auditing and legal
expenses; costs of maintenance of corporate existence; except as otherwise
provided herein, costs attributable to investor services, including, without
limitation, telephone and personnel expenses; costs of preparing and printing
prospectuses and statements of additional information for
3
<PAGE>
regulatory purposes and for distribution to existing shareholders; costs of
shareholders' reports and meetings, and meetings of the officers of the Board of
Directors of the Company; costs of any pricing services; and any extraordinary
expenses.
5. STANDARD OF CARE
BEA shall exercise its best judgment in rendering the services listed
in paragraph 2 above. BEA shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Fund in connection with the
matters to which this Agreement relates provided that nothing in this Agreement
shall be deemed to protect or purport to protect BEA against liability to the
Fund or to its shareholders to which BEA would otherwise be subject by reason of
willful misfeasance, bad faith or negligence on its part in the performance of
its duties or by reason of BEA's reckless disregard of its obligations and
duties under this Agreement.
6. TERM OF AGREEMENT
This Agreement shall become effective on the day following approval by
the Board of Directors of the Company including a majority of the Board of
Directors who are not "interested persons" (as defined in the Investment Company
Act of 1940, as amended) of any party to this Agreement, and shall continue
until ______________, 1998 and shall continue automatically (unless terminated
as provided herein) for successive annual periods ending on _________________ of
each year, provided that such continuance is specifically approved at least
annually by the Board of Directors of the Company, including a majority of the
Board of Directors who are not "interested persons" of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. This Agreement is terminable, without penalty, on 60 days'
written notice, by the Board of Directors of the Company or by vote of holders
of a majority of the Fund's shares, or upon 60 days' written notice, by BEA.
7. SERVICE TO OTHER COMPANIES OR ACCOUNTS
The Company understands that BEA now acts, will continue to act and
may act in the future as administrator, co-administrator or administrative
services agent to one or more other investment companies, and the Company has no
objection to BEA's so acting. The Company understands that the persons employed
by BEA to assist in the performance of BEA's duties hereunder will not devote
their full time to such service and nothing contained in this Agreement shall be
deemed to limit or restrict the right of BEA or any affiliate of BEA to engage
in and devote time and attention to other businesses or to render services of
whatever kind or nature.
4
<PAGE>
8. LIMITATION OF LIABILITY
The Company and BEA agree that the obligations of the Company under
this Agreement will not be binding upon any of the directors, shareholders,
nominees, officers, employees or agents, whether past, present or future, of the
Company, individually, but are binding only upon the assets and property of the
Fund, as provided in the Company's Charter. The execution and delivery of this
Agreement has been authorized by the Board of Directors of the Company, and
signed by an authorized officer of the Company, acting as such, and neither the
authorization by the Board of Directors nor the execution and delivery by the
officer will be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but will bind only the property
of the Fund as provided in the Charter.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance hereof by signing and returning to us the enclosed copy
hereof.
Very truly yours,
RBB FUND, INC.
By:
-------------------------------------
Name:
Title:
Accepted:
BEA ASSOCIATES
By:
--------------------------------
Name:
Title:
5
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT
This Agreement is made as of the 29th day of May, 1998, by and between THE
RBB FUND, INC., a Maryland corporation (the "Fund"), and PROVIDENT DISTRIBUTORS,
INC. ("PDI"), a Delaware corporation.
W I T N E S S E T H
WHEREAS, the Fund is registered as an open-end, diversified management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Fund wishes to retain PDI to provide certain administrative
services to certain of its portfolios and classes of shares and PDI is willing
to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Fund hereby appoints PDI to provide certain
administrative services to the classes of shares designated on Schedule A (the
"Classes") for the period and on the terms set forth in this Agreement. PDI
accepts such appointment and agrees to furnish the services herein set forth in
return for the compensation as provided in Paragraph 6 of this Agreement. PDI
agrees to comply with all relevant provisions of the Securities Act of 1933, as
amended, the Securities Exchange Act of 1934, as amended, the 1940 Act, and
applicable rules and regulations thereunder and any laws, rules and regulations
of governmental authorities or self-regulatory organizations having
-1-
<PAGE>
jurisdiction with respect to the duties to be performed by PDI hereunder.
2. SERVICES ON A CONTINUING BASIS. Subject to the supervision and
direction of the Board of Directors of the Fund, PDI undertakes to perform the
following administrative services for the Classes:
(a) Making available office facilities, as requested by the Fund,
(which may be in the offices of PDI or a corporate affiliate);
(b) Furnishing data processing services, clerical services and
certain internal quasi-legal, executive and administrative services;
(c) Furnish an 800 telephone line for shareholder inquiries and
otherwise assist in the preparation of shareholder communications and notices as
requested by the Fund or the investment adviser to the relevant Classes (the
"Investment Adviser").
(d) Assisting in coordinating the preparation of reports to the
Classes' shareholders of record and the Securities and Exchange Commission (the
"SEC") including, but not limited to, proxy statements; annual, semi-annual and
quarterly reports to Shareholders; annual and semi-annual reports on Form N-SAR;
and post-effective amendments to the Fund's Registration Statement on Form N-1A
(the "Registration Statement");
(e) Assisting the Investment Adviser, at the Investment Adviser's
request, in monitoring and developing compliance procedures which will include,
among other matters,
-2-
<PAGE>
procedures to assist the Investment Adviser in monitoring compliance with the
investment objective, policies, restrictions, tax matters and applicable laws
and regulations that relate to the portfolio corresponding to a Class (a
"Portfolio"); and
(f) Acting as liaison between the Fund and the Fund's independent
public accountants, counsel, custodian or custodians, transfer agent and
administrator and taking all reasonable action in the performance of its
obligations under this Agreement to assure that all necessary information is
made available to each of them.
In performing all services under this Agreement, PDI shall act in
conformity with applicable law, the Fund's Articles of Incorporation and
By-Laws, and all amendments thereto, and the Portfolio's investment objective,
investment policies and other practices and policies set forth in the Fund's
Registration Statement, as such Registration Statement and practices and
policies may be amended from time to time.
3. SUBCONTRACTORS. It is understood that PDI may from time to time
employ or associate with itself such person or persons as PDI may believe to be
particularly fitted to assist in the performance of this Agreement; provided,
however, that the compensation of such person or persons shall be paid by PDI
and that notwithstanding anything herein to the contrary PDI shall be as fully
responsible to the Fund for the acts and omissions of any subcontractor as PDI
is for its own acts and omissions. Without limiting the generality of the
foregoing, it is understood that PDI may enter into an agreement with
Counsellors
-3-
<PAGE>
Securities, Inc., PFPC Inc., any affiliate of PFPC Inc., or any other
subcontractor that PDI deems appropriate, under which such institution will
provide the Fund any or all of the services described herein.
4. BOOKS AND RECORDS. In connection with the services provided under
this Agreement, PDI shall maintain such books and records, as required by the
Fund, of the Fund's reports or filings with a Portfolio's shareholders, the SEC
authorities and other required reports and documents prepared, filed or
distributed on behalf of the Fund.
The books and records pertaining to the Fund or any Portfolio that are in
the possession of PDI shall be the property of the Fund. Such books and records
shall be prepared and maintained as required by the 1940 Act and other
applicable securities laws and rules and regulations. The Fund, or the Fund's
authorized representatives, shall have access to such books and records at all
times during PDI's normal business hours. Upon the reasonable request of the
Fund, copies of any such books and records shall be provided by PDI to the Fund
or the Fund's authorized representative at the Fund's expense.
5. CONFIDENTIALITY. PDI agrees on behalf of itself and its employees to
treat confidentially all records and other information relative to the Fund or
any Portfolio and its prior, present or potential shareholders and relative to
the Investment Adviser and its prior, present or potential customers, except,
after prior notification to and approval in writing by the Fund, which approval
shall not be unreasonably withheld and may not be
-4-
<PAGE>
withheld where PDI may be exposed to civil or criminal contempt proceedings for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Fund.
6. RIGHT TO RECEIVE ADVICE.
(a) ADVICE OF FUND. If PDI is in doubt as to any action to be taken
or omitted by it, it may request, and shall receive, directions or advice from
the Fund.
(b) ADVICE OF COUNSEL. If PDI is in doubt as to any question of law
involved in any action to be taken or omitted by PDI, it may request advice at
its own cost from counsel of its own choosing (who may be counsel for the
Investment Adviser, the Fund or PDI, at the option of PDI).
(c) CONFLICTING ADVICE. In case of conflict between directions or
advice received by PDI pursuant to subsection (a) of this paragraph and advice
received by PDI pursuant to subsection (b) of this paragraph, PDI shall be
entitled to rely on and follow the advice received pursuant to the latter
provision alone.
(d) PROTECTION OF PDI. PDI shall be protected in any action or
inaction which it takes in reliance on any directions or advice received
pursuant to subsections (a) or (b) of this paragraph which PDI, after receipt of
any such directions or advice in good faith believes to be consistent with such
directions or advice. However, nothing in this paragraph shall be construed as
imposing upon PDI any obligation (i) to seek such directions or advice or (ii)
to act in accordance with such
-5-
<PAGE>
directions or advice when received. Nothing in this subsection shall excuse PDI
when an action or omission on the part of PDI constitutes willful misfeasance,
bad faith, negligence or reckless disregard by PDI of its duties under this
Agreement.
7. COMPENSATION. As consideration for services rendered by PDI during
the term of and pursuant to this Agreement, the Fund will pay PDI on the first
business day of each month a fee for the previous month, calculated daily. The
Fund will also reimburse PDI for its out-of-pocket expenses incurred on behalf
of the Fund, including but not limited to, postage, telephone, telex and Federal
Express charges. The annual fee shall be .15% of the average daily net assets
(exclusive of out-of-pocket expenses) of the Portfolio for which the services
hereunder are being performed. Upon any termination of this Agreement before
the end of any month, the fee for such part of a month shall be prorated
according to the proportion which such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement. For the
purpose of determining fees payable to PDI, the value of the Portfolio's net
assets shall be computed at the times and in the manner specified in the Fund's
Prospectus and Statement of Additional Information as from time to time in
effect. The annual fee paid to PDI hereunder may be amended upon terms as may
be specifically agreed to in writing from time to time by the Fund and PDI.
8. INDEMNIFICATION. The Fund agrees to indemnify and hold harmless PDI
and its nominees from all taxes, charges, expenses, assessments, claims and
liabilities (including, without
-6-
<PAGE>
limitation, liabilities arising under federal securities and commodities laws
and any state and foreign securities and Blue Sky laws, all as or to be amended
from time to time) and expenses, including (without limitation) attorneys' fees
and disbursements, arising directly or indirectly from any action or thing which
PDI takes or does or omits to take or do pursuant to the terms of this Agreement
or otherwise at the request or on the direction of or in reliance on the advice
of the Fund, provided, that neither PDI nor any of its nominees shall be
indemnified against any liability to the Fund or to its Shareholders (or any
expenses incident to such liability) arising out of PDI's own willful
misfeasance, bad faith, negligence or reckless disregard of its duties and
obligations under this Agreement.
9. RESPONSIBILITY OF PDI. PDI shall be under no duty to take any action
on behalf of the Fund, except as specifically set forth herein or as may be
specifically agreed to by PDI in writing. In the performance of its duties
hereunder, PDI shall be obligated to exercise care and diligence and to act in
good faith and to use its best efforts within reasonable limits in performing
services provided for under this Agreement.
PDI shall be responsible for its own negligent failure to perform its
duties under this Agreement. Without limiting the generality of the foregoing
or of any other provision of this Agreement, PDI in connection with its duties
under this Agreement shall not be under any duty or obligation to inquire into
and shall not be liable for or in respect of (a) the validity or invalidity or
authority or lack thereof of any notice or other
-7-
<PAGE>
instrument which conforms to the applicable requirements of this Agreement, and
which PDI reasonably believes to be genuine; or (b) delays or errors or loss of
data occurring by reason of circumstances beyond PDI's control, including acts
of civil or military authority, national emergencies, labor difficulties, fire,
mechanical breakdown, flood or catastrophe, acts of God, insurrection, war,
riots or failure of the mails, transportation, communication or power supply.
10. DURATION AND TERMINATION. This Agreement shall become effective at
the close of regular trading on the New York Stock Exchange on the date hereof
and shall continue until terminated by the Fund or PDI on 60 days' prior written
notice to the other party.
11. NOTICES. All notices and other communications hereunder (collectively
referred to as "Notice" or "Notices" in this Paragraph), shall be in writing or
by confirming telegram, Cable, telex or facsimile sending device. Notices shall
be addressed (a) if to PDI at PDI's address, Four Falls Corporate Center, 6th
Floor, West Conshohocken, Pennsylvania 19428; (b) if to the Fund, at the address
of the Fund; or (c) if to neither of the foregoing, at such other address as
shall have been notified to the sender of any such Notice or other
communication. If the location of the sender of a Notice or other communication
and the address of the addressee thereof are, at the time of sending more than
100 miles apart, the Notice may be mailed, in which case it shall be deemed to
have been given three days after it is sent, or if sent by confirming telegram,
cable, telex, or facsimile
-8-
<PAGE>
sending device charges arising from the sending of a Notice hereunder shall be
paid by the sender.
12. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
13. AMENDMENTS. This Agreement or any part hereof may be changed or
waived only by an instrument in writing signed by the party against which
enforcement of such change or waiver is sought.
14. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15. MISCELLANEOUS. This Agreement embodies the entire agreement and
understanding between the parties thereto, and supersedes all prior agreements
and understandings, relating to the subject matter hereof. The captions in this
Agreement are included for convenience of reference only and in no way define or
delimit any of the provisions hereof or otherwise affect their construction or
effect. This Agreement shall be deemed to be a contract made in Pennsylvania
and governed by Pennsylvania law. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby. This Agreement shall
be binding and shall inure to the benefit of the parties hereto and their
respective successors.
-9-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below as of the day and year first above
written.
THE RBB FUND, INC.
By: /s/ Edward J. Roach
--------------------
Title:
PROVIDENT DISTRIBUTORS, INC.
By: /s/ Monroe Haegele
-------------------
Title:
-10-
<PAGE>
SCHEDULE A
The Administrative Services Agreement applies to the following share classes of
The RBB Fund, Inc.:
n/i Micro Cap Fund, n/i Growth Fund, n/i Growth and Value Fund and n/i Larger
Cap Value Fund;
(Classes FF, GG, HH, and XX)
Boston Partners Large Cap Fund, Boston Partners Mid Cap Fund, Boston Partners
Bond Fund and Boston Partners Micro Cap Fund; (Institutional Classes - Classes
QQ, UU, VV, and DDD)
BEA International Equity Fund, BEA Emerging Markets Equity Fund, BEA U.S. Core
Equity Fund, BEA Balanced Fund, BEA U.S. Core Fixed Income Fund, BEA Strategic
Global Fixed Income Fund, BEA High Yield Fund, BEA Municipal Bond Fund, BEA
Short Duration Fund, BEA Long-Short Market Neutral Fund, BEA Long-Short Equity
Fund, and BEA Select Economic Value Equity Fund;
(Institutional Classes - Classes T, V, X, BB, Y, Z, U, AA, CC, ZZ, BBB, and FFF)
Schneider Capital Management Value Fund; (Class YY)
-11-
<PAGE>
LAW OFFICES
DRINKER BIDDLE & REATH LLP
SUITE 900 PHILADELPHIA NATIONAL BANK BUILDING
901 FIFTEENTH STREET, N.W. 1345 CHESTNUT STREET
WASHINGTON, DC 20005-2333 PHILADELPHIA, PA 19107-3496
(302) 842-8800 TELEPHONE: (215) 988-2700
FAX (215) 988-2757
SUITE 300
105 COLLEGE ROAD EAST
P.O. BOX 627
PRINCETON, NJ 08542-0627
16091 716-6500
SUITE 300
1000 WESTLAKES DRIVE
BERWYN, PA 19312-2408
16101 993-2200
June 24, 1998
The RBB Fund, Inc.
Bellevue Park CorporateCenter
400 Bellevue Parkway, Suite 100
Wilmington, DE 19809
RE: SHARES REGISTERED BY POST-EFFECTIVE AMENDMENT NO. 56 TO
REGISTRATION STATEMENT ON FORM N-1A (FILE NO. 33-20827)
-------------------------------------------------------
Ladies and Gentlemen:
We have acted as counsel to The RBB Fund, Inc. (the "Company") in
connection with the preparation and filing with the Securities and Exchange
Commission of Post-Effective Amendment No. 56 (the "Amendment") to the
Company's Registration Statement on Form N-1A under the Securities Act of
1933, as amended. The Board of Directors of the Company has authorized
100,000,000 shares of Class HHH Common Stock, $.001 par value per share, to
be issued and sold by the Company (the "Shares"). Class HHH is the Advisor
Class of the BEA U.S. Core Equity Fund (the "Fund"). The Amendment seeks to
register an indefinite number of Shares.
We have reviewed the Company's Certificate of Incorporation, ByLaws,
resolutions of its Board of Directors, and such other legal and factual
matters as we have deemed appropriate. This opinion is based exclusively on
the Maryland General Corporation Law and the federal law of the United States
of America.
We assume that, prior to the effectiveness of the Amendment under the
1933 Act, the Company will have filed with the Maryland Department of
Assessments and Taxation all necessary documents (the "Documents") to
authorize, classify and establish the Shares.
Based upon and subject to the foregoing, it is our opinion that the
Shares, when issued for payment as described in the Company's Prospectus
relating to the Fund and in accordance with the Company's Articles of
Incorporation and the Documents for not less than $.001 per share, will be
legally issued, fully paid and non-assessable by the Company.
We hereby consent to the filing of this opinion as an exhibit to
Post-Effective Amendment No. 56 to the Company's Registration Statement.
Very truly yours,
/s/ Drinker Biddle & Reath LLP
-------------------------------
DRINKER BIDDLE & REATH LLP
<PAGE>
Exhibit 11(a)
CONSENT OF COUNSEL
We hereby consent to the use of our name and to the reference to our
firm under the captions "Management of the Company" and "Counsel" in the
Statement of Additional Information included in Post-Effective Amendment No. 56
to the Registration Statement (File Nos. 33-20827 and 811-5518) on Form N-1A of
The RBB Fund, Inc. under the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended. This consent does not constitute a
consent under Section 7 of the Securities Act of 1933, as amended, and in
consenting to the use of our name and the references to our firm under such
captions we have not certified any part of the Registration Statement and do not
otherwise come within the categories of persons whose consent is required under
Section 7 or the rules and regulations of the Securities and Exchange Commission
thereunder.
/s/ Drinker Biddle & Reath LLP
-----------------------------------
DRINKER BIDDLE & REATH LLP
Philadelphia, Pennsylvania
June 24, 1998
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment No. 56
to the Registration Statement of The RBB Fund, Inc.: BEA U.S. Core Equity Fund
(the "Fund"), on Form N-1A (File No. 33-20827) of our report dated October 17,
1997 on our audit of the financial statements and financial highlights of the
Fund, which report is included in the Annual Report to Shareholders for the year
ended August 31, 1997, which is incorporated by reference in the Post-Effective
Amendment to the Registration Statement. We also consent to the reference to
our firm under the caption "Financial Highlights" in the Prospectus and under
the captions "Miscellaneous-Independent Accountants" and "Financial Statements"
in the Statement of Additional Information.
Coopers & Lybrand L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
June 24, 1998
<PAGE>
Exhibit 13(s)
PURCHASE AGREEMENT
(BEA U.S. Core Equity Fund Advisor Class)
The RBB Fund, Inc. (the "Fund"), a Maryland corporation, and BEA
Associates ("BEA"), intending to be legally bound, hereby agree with each other
as follows:
1. The Fund hereby offers BEA and BEA hereby purchases $_____ worth
of shares of Class HHH Common Stock of the Fund (par value $.001 per share)
(such shares hereinafter sometimes collectively known as "Shares") at a price
per Share equivalent to the net asset value per share of the Shares of the Fund
as determined on _________, 1998.
The Fund hereby acknowledges receipt from BEA of funds in the amount of $_____
in full payment for the Shares.
2. BEA represents and warrants to the Fund that the Shares are being
acquired for investment purposes and not with a view to the distribution
thereof.
3. This agreement may be executed in counterparts, and all such
counterparts taken together shall be deemed to constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the ____ day of __________, 199_.
THE RBB FUND, INC.
By:
--------------------------------
President
BEA ASSOCIATES
By:
--------------------------------
General Counsel
<PAGE>
Exhibit 15(kkk)
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
OF
THE RBB FUND, INC.
(BEA U.S. Core Equity Portfolio Advisor Class)
WHEREAS, The RBB Fund, Inc. (the "Fund") intends to engage in business
as an open-end management investment company and is registered as such under the
Investment Company Act of 1940, as amended (the "Act"); and
WHEREAS, the Fund desires to adopt a Plan of Distribution pursuant to
Rule 12b-1 under the Act with respect to shares of its Class HHH Common Stock,
par value $.001 per share (the "Class HHH Shares") and the Board of Directors
has determined that there is a reasonable likelihood that adoption of this Plan
of Distribution will benefit the Fund and its stockholders; and
WHEREAS, the Fund intends to employ Provident Distributors Inc. (the
"Distributor") as distributor of the Class HHH Shares; and
WHEREAS, the Fund and the Distributor intend to enter into a separate
Distribution Agreement with the Fund for Class HHH Shares, pursuant to which the
Fund will employ the Distributor as distributor for the continuous offering of
Class HHH Shares;
NOW, THEREFORE, the Fund hereby adopts, and the Distributor hereby
agrees to the terms of, this Plan of Distribution (the "Plan") in accordance
with Rule 12b-1 under the Act on the following terms and conditions:
1. The Fund shall pay to the Distributor, as the distributor of the
Class HHH Shares, compensation for distribution of its shares at an annual rate
not to exceed .25% of the average daily net assets of the Class HHH Shares. The
amount of such compensation shall be agreed upon by the Board of Directors of
the Fund and by the Distributor and shall be calculated and accrued daily and
paid monthly or at such other intervals as the Board of Directors and the
Distributor shall mutually agree.
2. The amount set forth in paragraph 1 of this Plan shall be paid
for the Distributor's services as distributor of the Class HHH Shares. Such
amount may be spent by the Distributor on any activities or expenses primarily
intended to result in the sale of Class HHH Shares, including, but not limited
to: compensation to and expenses of employees of the Distributor who engage in
or support distribution of the Class HHH Shares, including overhead and
telephone expenses; printing
<PAGE>
of prospectuses and reports for other than existing shareholders; preparation,
printing and distribution of sales literature and advertising materials; and
compensation to certain financial institutions ("Service Organizations") who
sell Class HHH Shares.
The Distributor may negotiate with any such Service Organizations
the services to be provided by the Service Organization to shareholders in
connection with the sale of Class HHH shares ("Distribution Services"), and
all or any portion of the compensation paid to the Distributor under
paragraph 1 of this Plan may be reallocated by the Distributor to Service
Organizations who sell Class HHH Shares. The compensation paid to Service
Organizations with respect to Distribution Services will compensate Service
Organizations to cover certain expenses primarily intended to result in the
sale of Class HHH Shares, including, but not limited to: (a) costs of
payments made to employees that engage in the sale of Class HHH Shares; (b)
payments made to, and expenses of, persons who provide support services in
connection with the sale of Class HHH shares, including, but not limited to,
office space and equipment, telephone facilities, processing shareholder
transactions and providing any other shareholder services not otherwise
provided by the Fund's transfer agent; (c) 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; (d) costs of printing and
distributing prospectuses, statements of additional information and reports
relating to the Class HHH Shares to prospective shareholders of the Class HHH
Shares; (e) costs involved in preparing, printing and distributing sales
literature pertaining to the Class HHH shares; and (f) costs involved in
obtaining whatever information, analyses and reports with respect to
marketing and promotional activities that the Service Organization may, from
time to time, deem advisable. The compensation paid to Service Organizations
with respect to Shareholder Services will compensate Service Organizations
for personal service and/or the maintenance of shareholder accounts,
including but not limited to (a) responding to inquiries of customers or
clients of the Service Organization who beneficially own Class HHH Shares
("Customers"), (b) providing information on Customer investments and (c)
providing other shareholder liaison services. The compensation paid to
Service Organizations with respect to Administrative Services will compensate
Service Organizations for administrative and accounting services to their
Customers, including, but not limited to: (a) aggregating and processing
purchase and redemption requests from Customers and placing net purchase and
redemption orders with the Fund's distributor or transfer agent; (b)
providing Customers with a service that invests the assets of their accounts
in the Class HHH Shares; (c) processing dividend payments from the Class HHH
Shares on behalf of Customers; (d) providing information periodically to
Customers showing their positions in the Class HHH Shares; (e) arranging for
bank wires; (f) providing sub-accounting with respect to Class HHH Shares
beneficially owned by Customers or the information to the Fund
-2-
<PAGE>
necessary for sub-accounting; (g) forwarding shareholder communications from the
Fund (for example, proxies, shareholder reports, annual and semi-annual
financial statements and dividend, distribution and tax notices related to the
Class HHH Shares) to Customers, if required by law; and (h) providing other
similar services to the extent permitted under applicable statutes, rules and
regulations.
3. This plan shall not take effect until it has been approved by a
vote of at least a majority (as defined in the Act) of the outstanding Class HHH
Shares.
4. In addition to the approval required by paragraph 3 above, this
Plan shall not take effect until it has been approved, together with any related
agreements, by votes of a majority of both (a) the Board of Directors of the
Fund and (b) those directors of the Fund who are not "interested persons" of the
Fund (as defined in the Act) and have no direct or indirect financial interest
in the operation of this Plan or any agreements related to it (the "Rule 12b-1
Directors"), cast in person at a meeting (or meetings) called for the purpose of
voting on this Plan and such related agreements.
5. This Plan shall continue in effect until __________, 1998.
Thereafter, this Plan shall continue in effect for so long as such continuance
is specifically approved at least annually in the manner provided for approval
of this Plan in paragraph 4.
6. The Distributor shall provide to the Board of Directors of the
Fund and the Board of Directors shall review, at least quarterly, a written
report of the amounts expended pursuant to this Plan and the purposes for which
such expenditures were made, including commissions, advertising, printing,
interest, carrying charges and allocated overhead expenses.
7. This Plan may be terminated at any time by vote of a majority of
the Rule 12b-1 Directors, or by a vote of a majority of the outstanding Class
HHH Shares.
8. This Plan may not be amended to increase materially the amount of
compensation provided for in paragraph 1 hereof unless such amendment is
approved in the manner provided for initial approval in paragraph 3 hereof, and
no material amendment to the Plan of any kind, including an amendment which
would increase materially the amount of compensation, shall be made unless
approved in the manner provided for approval and annual renewal in paragraph 4
hereof.
9. While this Plan is in effect, the selection and nomination of
Directors who are not interested persons (as defined in the Act) of the Fund
shall be committed to the discretion of the then current Directors who are not
interested
-3-
<PAGE>
persons (as defined in the Act) of the Fund.
10. The Fund shall preserve copies of this Plan and any related
agreements and all reports made pursuant to paragraph 6 hereof for a period of
not less than six years from the date of this Plan, the agreements or such
reports, as the case may be, the first two years in an easily accessible place.
Date: _________________________, 1998
-4-
<PAGE>
Exhibit 18
FORM OF AMENDED RULE 18f-3 PLAN
RULE 18f-3 PLAN
1. A Portfolio of the Fund ("Portfolio") may issue more than one class of
voting stock ("Class"), provided that:
(a) Each such Class:
(1) (i) Shall have a different arrangement for shareholder
services or the distribution of securities or both, and shall pay all of the
expenses of that arrangement; and
(ii) May pay a different share of other expenses, not
including advisory or custodial fees or other expenses related to the management
of the Portfolio's assets, if those expenses are actually incurred in a
different amount by that Class, or if the Class receives services of a different
kind or to a different degree than other Classes;
(2) Shall have exclusive voting rights on any matter submitted
to shareholders that relates solely to its arrangement;
(3) Shall have separate voting rights on any matter submitted to
shareholders in which the interests of one Class differ from the interests of
any other Class; and
(4) Shall have in all other respects the same rights and
obligations as each other class.
(b) Expenses may be waived or reimbursed by the Portfolio's adviser,
underwriter, or any other provider of services to the Portfolio.
(c) (1) Any payments made under paragraph (a)(1)(i) of this Plan
shall conform to Appendix A to this Plan, as such Appendix A shall be amended
from time to time by the Board.
(2) Before any vote on the Plan or the Appendix, the Directors
shall be provided, and any agreement relating to a Class arrangement shall
require the parties thereto to furnish, such information as may be reasonably
necessary to evaluate the Plan.
(3) The provisions of the Plan in Appendix A are severable for
each Class, and whenever any action is to be taken with respect to the Plan in
Appendix A, that action will be taken separately for each Class.
1
<PAGE>
(d) A Portfolio may offer a Class with an exchange privilege
providing that securities of the Class may be exchanged for certain securities
of another Portfolio. Such exchange privileges are summarized in Appendix B, as
may be modified by the Board from time to time, and are set forth in greater
detail in the prospectuses of each of the Classes.
2
<PAGE>
APPENDIX A
RBB FUND
CURRENT DISTRIBUTION FEE LEVELS
JUNE __, 1998
--------------------------------------------------
<TABLE>
<CAPTION>
A. MONEY MARKET PORTFOLIO
Current Distribution
Class Fee Level Effective Date
----- -------------------- --------------
<S> <C> <C>
1. Sansom Street (Class I) fee 0.05% 4/10/91
Shareholder Service Fee 0.10% 8/16/88
2. Bedford (Class L) fee 0.60% 11/17/94
3. Cash Preservation fee 0.40% 4/10/91
(Class G)
4. RBB Family (Class E) fee 0.40% 4/10/91
5. Janney (Class Alpha 1) fee 0.60% 2/l/95
B. MUNICIPAL MONEY MARKET PORTFOLIO
Current Distribution
Class Fee Level Effective Date
----- -------------------- --------------
1. Sansom Street fee 0.05% 4/10/91
(Class G)
Shareholder Service Fee 0.10% 8/16/88
2. Bedford (Class M) fee 0.60% 11/17/94
3. Cash Preservation fee 0.40% 4/10/91
(Class H)
4. RBB Family (Class F) fee 0.40% 4/10/91
5. Janney (Class Alpha 2) fee 0.60% 2/l/95
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
C. GOVERNMENT OBLIGATION MONEY MARKET PORTFOLIO
Current Distribution
Class Fee Level Effective Date
----- -------------------- --------------
<S> <C> <C>
1. Sansom Street (Class K) fee 0.05% 4/10/91
Shareholder Service Fee 0.10% 8/16/88
2. Bedford (Class N) fee 0.60% 11/17/94
3. Janney (Class Alpha 3) fee 0.60% 2/l/95
D. GOVERNMENT SECURITIES PORTFOLIO
Current Distribution
Class Fee Level Effective Date
----- -------------------- --------------
1. RBB Family (Class P) fee 0.40% 4/10/91
E. NEW YORK MUNICIPAL MONEY MARKET PORTFOLIO
Current Distribution
Class Fee Level Effective Date
----- -------------------- --------------
1. Janney (Class Alpha 4) fee 0.60% 2/l/95
F. BEA INTERNATIONAL EQUITY PORTFOLIO
Current Distribution
Class Fee Level Effective Date
----- -------------------- --------------
1. BEA Institutional None None
Class T)
2. BEA Investor (Class II) fee .50% 7/10/96
3. BEA Advisor fee .25% 7/10/96
(Class MM)
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
G. BEA EMERGING MARKETS PORTFOLIO
Current Distribution
Class Fee Level Effective Date
----- -------------------- --------------
<S> <C> <C>
1. BEA Institutional None None
(Class V)
2. BEA Investor (Class JJ) fee .50% 7/10/96
3. Bea Advisor (Class NN) fee .25% 7/10/96
H. BEA HIGH YIELD PORTFOLIO
Current Distribution
Class Fee Level Effective Date
----- -------------------- --------------
1. BEA Institutional None None
(Class U)
2. BEA Investor (Class KK) fee .50% 7/10/96
3. BEA Advisor (Class OO) fee .25% 7/10/96
I. BEA U.S. CORE EQUITY PORTFOLIO
Current Distribution
Class Fee Level Effective Date
----- -------------------- --------------
1. BEA Institutional None None
(Class X)
2. BEA Advisor fee .25% ---------
(Class HHH)
J. BEA U.S. CORE FIXED INCOME PORTFOLIO
Current Distribution
Class Fee Level Effective Date
----- -------------------- --------------
1. BEA Institutional None None
(Class Y)
K. BEA STRATEGIC GLOBAL FIXED INCOME PORTFOLIO
Current Distribution
Class Fee Level Effective Date
----- -------------------- --------------
1. BEA Institutional None None
(Class Z)
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
L. BEA MUNICIPAL BOND FUND
Current Distribution
Class Fee Level Effective Date
----- -------------------- --------------
<S> <C> <C>
1. BEA Institutional None None
(Class A)
M. BEA SHORT DURATION PORTFOLIO
Current Distribution
Class Fee Level Effective Date
----- -------------------- --------------
1. BEA Institutional None None
(Class BB)
N. BEA BALANCED PORTFOLIO
Current Distribution
Class Fee Level Effective Date
----- -------------------- --------------
1. BEA Institutional None None
(Class CC)
O. BEA GLOBAL TELECOMMUNICATIONS PORTFOLIO
Current Distribution
Class Fee Level Effective Date
----- -------------------- --------------
1. BEA Investor (Class LL) fee .50% 7/10/96
2. BEA Advisor (Class PP) fee .25% 7/10/96
P. BEA LONG-SHORT MARKET NEUTRAL PORTFOLIO
Current Distribution
Class Fee Level Effective Date
----- -------------------- --------------
1. BEA Institutional None
(Class ZZ)
2. BEA Advisor fee .25%
(Class AAA)
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Q. BEA LONG-SHORT EQUITY PORTFOLIO
Current Distribution
Class Fee Level Effective Date
----- -------------------- --------------
<S> <C> <C>
1. BEA Institutional None
(Class BBB)
2. BEA Advisor fee .25%
(Class CCC)
R. BEA SELECT ECONOMIC VALUE EQUITY FUND
Current Distribution
Class Fee Level Effective Date
----- -------------------- --------------
1. BEA Institutional None
(Class FFF)
2. BEA Advisor fee .25%
(Class GGG)
S. BOSTON PARTNERS LARGE CAP VALUE FUND
Current Distribution
Class Fee Level Effective Date
----- -------------------- --------------
1. Institutional Class fee 0.04% 10/16/96
(Class QQ)
2. Advisor Class fee 0.50% 10/16/96
(Class SS)
3. Investor Class fee 0.25% 10/16/96
(Class RR)
T. BOSTON PARTNERS MID CAP VALUE FUND
Current Distribution
Class Fee Level Effective Date
----- -------------------- --------------
1. Institutional Class fee 0.04% 6/1/97
(Class TT)
2. Investor Class fee 0.25% 6/1/97
(Class UU)
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
U. BOSTON PARTNERS BOND FUND
Current Distribution
Class Fee Level Effective Date
----- -------------------- --------------
<S> <C> <C>
1. Institutional Class fee 0.04% 12/29/97
(Class VV)
2. Investor Class fee 0.25% 12/29/97
(Class WW)
V. BOSTON PARTNERS MICRO CAP VALUE FUND
Current Distribution
Fee Level Effective Date
-------------------- --------------
1. Institutional Class fee 0.25% 7/01/98
(Class DDD)
2. Investor Class fee 0.25% 7/01/98
(Class EEE)
W. SCHNEIDER CAPITAL MANAGEMENT VALUE FUND
Current Distribution
Class Fee Level Effective Date
----- -------------------- --------------
1. Investor (Class YY) None 4/6/98
</TABLE>
8
<PAGE>
APPENDIX B
EXCHANGE PRIVILEGES OF THE PORTFOLIOS
OF THE RBB FUND, INC.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
FAMILY EACH PORTFOLIO (CLASS) . . .
MAY BE EXCHANGED FOR ANY OF
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
BEA (Institutional Classes) International Equity (T)
High Yield (U) International Equity (T)
Emerging Markets Equity (V) Strategic Fixed Income (U)
U.S. Core Equity (X) Emerging Markets Equity (V)
U.S. Core Fixed Income (Y) U.S. Core Equity (X)
Strategic Global Fixed Income (Z) U.S. Core Fixed Income (Y)
Municipal Bond Fund (AA) Global Fixed Income (Z)
Balanced Fund (BB) Municipal Bond Fund (AA)
Short Duration Fund (CC) Balanced Fund (BB)
Long-Short Market Neutral (ZZ) Short Duration Fund (CC)
Long-Short Equity (BBB) Long-Short Market Neutral (ZZ)
Select Economic Value Equity (FFF) Long-Short Equity (BBB)
Select Economic Value Equity (FFF)
- ----------------------------------------------------------------------------------------------------------------------------------
BEA (Investor Classes) International Equity (II) International Equity (II)
Emerging Markets Equity (JJ) Emerging Markets Equity (JJ)
High Yield (KK) High Yield (KK)
Global Telecommunications (LL) Global Telecommunications (LL)
Investor Shares of other non-RBB funds Investor Shares of other non-RBB funds
advised by BEA Associates Advised by BEA Associates
- ----------------------------------------------------------------------------------------------------------------------------------
BEA (Advisor Classes) International Equity (MM)
Emerging Markets Equity (NN) International Equity (MM)
High Yield (OO) Emerging Markets Equity (NN)
Global Telecommunications (PP) High Yield (OO)
Long-Short Market Neutral (AAA) Global Telecommunications (PP)
Long-Short Equity (CCC) Long-Short Market Neutral (AAA)
Select Economic Value Equity (GGG) Long-Short Equity (CCC)
U.S. Core Equity (HHH) Select Economic Value Equity (GGG)
U.S. Core Equity (Class HHH)
Advisor Shares of other non-RBB funds
advised by BEA Associates Advisor Shares of other non-RBB funds
advised by BEA Associates
- ----------------------------------------------------------------------------------------------------------------------------------
Cash Preservation Money Market (G)
Municipal Money Market (H) Money Market (G)
Municipal Money Market (H)
- ----------------------------------------------------------------------------------------------------------------------------------
RBB Money Market (E)
Municipal Money Market (F) Money Market (E)
Government Securities (P) Municipal Money Market (F)
Government Securities (P)
- ----------------------------------------------------------------------------------------------------------------------------------
Bedford (Bear Stearns) Money Market (L)
Common Shares of other non-RBB funds
advised or sponsored by Bear, Stearns &
Co. Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
9
<PAGE>
- ----------------------------------------------------------------------------------------------------------------------------------
Money Market (L)
Bedford (Valley Forge) Common Shares of other non-RBB funds
advised or sponsored by Valley Forge
Capital Holdings, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
n/i Micro Cap (FF)
Growth (GG) Growth & Value (HH)
Growth & Value (HH) Larger Cap Value (XX)
Larger Cap Value (XX)
- ----------------------------------------------------------------------------------------------------------------------------------
Schneider Capital Management Schneider Management Value (YY) Schneider Management Value (YY)
- ----------------------------------------------------------------------------------------------------------------------------------
Boston Partners (Institutional Classes) Mid Cap Value (TT)
Large Cap Value (QQ) Mid Cap Value (TT)
Bond (VV) Large Cap Value (QQ)
Micro Cap Value (DDD) Bond (VV)
Micro Cap Value (DDD)
- ----------------------------------------------------------------------------------------------------------------------------------
Boston Partners (Investor Classes) Mid Cap Value (UU)
Large Cap Value (RR) Mid Cap Value (UU)
Bond (WW) Large Cap Value (RR)
Micro Cap Value (EEE) Bond (WW)
Micro Cap Value (EEE)
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000831114
<NAME> THE RBB FUND, INC.
<SERIES>
<NUMBER> 18
<NAME> BEA U.S. CORE EQUITY
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1998
<PERIOD-END> FEB-28-1998
<INVESTMENTS-AT-COST> 88765705
<INVESTMENTS-AT-VALUE> 109197132
<RECEIVABLES> 97099
<ASSETS-OTHER> 8292
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 109302523
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 160111
<TOTAL-LIABILITIES> 160111
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 79725198
<SHARES-COMMON-STOCK> 4407919
<SHARES-COMMON-PRIOR> 3532014
<ACCUMULATED-NII-CURRENT> (16087)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 9001874
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 20431427
<NET-ASSETS> 109142412
<DIVIDEND-INCOME> 513564
<INTEREST-INCOME> 154029
<OTHER-INCOME> 0
<EXPENSES-NET> 468839
<NET-INVESTMENT-INCOME> 198754
<REALIZED-GAINS-CURRENT> 14144702
<APPREC-INCREASE-CURRENT> 1311513
<NET-CHANGE-FROM-OPS> 15654969
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 472680
<DISTRIBUTIONS-OF-GAINS> 12679702
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12495791
<NUMBER-OF-SHARES-REDEEMED> 4816692
<SHARES-REINVESTED> 12778985
<NET-CHANGE-IN-ASSETS> 22960671
<ACCUMULATED-NII-PRIOR> 257839
<ACCUMULATED-GAINS-PRIOR> 7538682
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 351629
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 539930
<AVERAGE-NET-ASSETS> 94544910
<PER-SHARE-NAV-BEGIN> 24.40
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> 3.86
<PER-SHARE-DIVIDEND> (.13)
<PER-SHARE-DISTRIBUTIONS> (3.43)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 24.76
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
